The Markets
The most important news last week may have actually happened
this past weekend.
On Sunday, voters went to the polls in France, Greece, and
Germany and the results could have a major impact on world markets. French
voters sent incumbent president Nicholas Sarkozy packing and, instead, elected
Socialist Party candidate Francois Hollande. Hollande “has pledged to shift the
burden of economic hardship onto the rich and to resolve the protracted euro
sovereign-debt crisis by softening the current prescription of austerity,” according
to The Wall Street Journal. While his strategy is debatable, it will likely
cause a rift with Germany and add uncertainty to recent eurozone agreements.
Greek voters also went to the polls and “delivered a
stinging rejection of the two incumbent parties, with many people casting
ballots for smaller, far-left and far-right parties,” according to the The Wall Street Journal. This, too, will
likely result in more political and economic uncertainty. And in Germany,
incumbent Angela Merkel’s party suffered some setbacks in state elections.
What’s leading to all the angst in Europe? Here are three
things:
1. Recession
fears – 11 European countries have now experienced two consecutive quarters of
economic contraction.
2. Unemployment
fears – the unemployment rate across the eurozone is at a record high.
3. Business
confidence fears – April’s read on the manufacturing PMI for the eurozone – a
measure of confidence among businesses – fell to the lowest since June 2009.
Sources: MarketWatch, The
Guardian
The bottom line is citizens are voting for change, but
“political realities will complicate even more what is an already delicate
economic and financial outlook for Europe, the world’s largest economic area,”
according to Mohamed El-Arian, CEO and Co-CIO of PIMCO, as reported by CNBC.
These elections show that the economic crisis that began in
2008 is still rippling throughout the world.
Data as of 5/4/12
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
-2.4%
|
8.9%
|
2.2%
|
14.7%
|
-1.9%
|
2.7%
|
|
DJ
Global ex US (Foreign Stocks)
|
-2.1
|
6.7
|
-15.7
|
9.6
|
-5.6
|
4.8
|
|
10-year
Treasury Note (Yield Only)
|
1.9
|
N/A
|
3.2
|
3.2
|
4.6
|
5.1
|
|
Gold
(per ounce)
|
-1.2
|
4.4
|
6.7
|
21.8
|
19.0
|
18.1
|
|
DJ-UBS
Commodity Index
|
-2.5
|
-2.5
|
-18.8
|
5.8
|
-4.7
|
3.5
|
|
DJ
Equity All REIT TR Index
|
-0.6
|
12.9
|
9.7
|
28.8
|
0.4
|
10.5
|
Notes: S&P 500, DJ Global ex US,
Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does
not pay a dividend) and the three-, five-, and 10-year returns are annualized;
the DJ Equity All REIT TR Index does include reinvested dividends and the
three-, five-, and 10-year returns are annualized; and the 10-year Treasury
Note is simply the yield at the close of the day on each of the historical time
periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London
Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested
into directly. N/A means not applicable.
WHAT DO DOTS HAVE TO DO
WITH BEING A BETTER INVESTOR? In his fascinating new book, Imagine: How Creativity Works, author
Jonah Lehrer describes the creative process and what steps we can all take to
be a little more creative. One of those steps is to talk to more people and
expose yourself to new situations. By “colliding” more often with people who
are not like you and throwing yourself into new environments (like a foreign
country), your mind will come up with more new ideas than you could have
thought of on your own.
And, while business owners may not like this, Lehrer’s research
suggests, “The most important place in every office is not the boardroom, or
the lab, or the library. It’s the coffee machine.” It’s those casual
conversations with colleagues that generate new interactions and spark ideas.
This leads to an important point about investing.
Brian Uzzi, a professor at the Kellog School of Management,
studied the instant messages (IM) sent by traders at a large hedge fund over an
eighteen-month period. As reported in Lehrer’s book, these traders sent more
than two million messages over that period and the average trader was involved
in 16 different IM conversations simultaneously – talk about multitasking!
Essentially, these traders were rapidly communicating with each other and
trying to make sense of the latest news so they could profitably trade on it.
As summarized by Lehrer, Uzzi concluded, “The best traders
were the most connected, and people who carried on more IM conversations and
sent more messages also made more money.” Further, Uzzi said, “The act of
investing is like solving a difficult puzzle. These traders are trying to
connect the dots. Because the traders are listening to their network, they
manage to accomplish what they could never have done by themselves.”
In essence, successful investing partly relies on
“connecting the dots” of information that bombard us. While we’re not day
traders like the people Uzzi studied at the hedge fund, the concept of
connecting the dots still applies – albeit on a much longer timeframe. And, to
connect the dots, we have a large network of colleagues who can help us
separate the daily noise from what’s truly meaningful.
Weekly Focus – Think About It
“Everyone who's ever
taken a shower has had an idea. It's the person who gets out of the shower,
dries off, and does something about it who makes a difference.”
--Nolan Bushnell, founder of Atari,
Inc. and Chuck E. Cheese’s Pizza-Time Theaters
Value vs. Growth Investing (5/4/12)
|
-2.54
|
9.83
|
-2.04
|
1.86
|
3.28
|
17.71
|
0.78
|
|
|
-2.38
|
9.84
|
-1.92
|
2.79
|
4.74
|
16.59
|
0.38
|
|
|
-1.95
|
9.94
|
-1.56
|
2.52
|
5.73
|
16.30
|
1.88
|
|
|
-3.32
|
14.27
|
-2.80
|
4.78
|
10.17
|
19.34
|
2.82
|
|
|
-1.96
|
5.69
|
-1.48
|
1.23
|
-1.67
|
14.21
|
-3.77
|
|
|
-2.81
|
10.23
|
-2.34
|
-0.02
|
-0.20
|
20.63
|
1.49
|
|
|
-2.43
|
11.02
|
-1.42
|
0.38
|
3.07
|
22.52
|
2.51
|
|
|
-3.00
|
11.63
|
-2.59
|
0.31
|
-0.78
|
20.79
|
2.51
|
|
|
-3.03
|
8.11
|
-3.05
|
-0.75
|
-2.94
|
18.45
|
-0.84
|
|
|
-3.43
|
8.58
|
-2.45
|
-2.45
|
-2.03
|
20.31
|
2.04
|
|
|
-3.67
|
9.15
|
-2.62
|
-2.24
|
-4.35
|
19.18
|
0.88
|
|
|
-3.49
|
8.60
|
-2.33
|
-2.75
|
-1.54
|
20.25
|
2.78
|
|
|
-3.13
|
7.97
|
-2.39
|
-2.39
|
0.00
|
21.42
|
2.16
|
|
|
-2.15
|
10.08
|
-1.60
|
1.78
|
4.54
|
17.83
|
2.10
|
|
|
-3.27
|
13.34
|
-2.72
|
3.32
|
7.11
|
19.78
|
2.82
|
|
|
-2.26
|
6.34
|
-1.87
|
0.55
|
-1.83
|
15.52
|
-2.75
|
©2004
Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is
proprietary to Morningstar; (2) is not warranted to be accurate, complete or
timely. Morningstar is not responsible for any damages or losses arising from
any use of this information and has not granted its consent to be considered or
deemed an “expert” under the Securities Act of 1933. Past performance is no
guarantee of future results. Indices are
unmanaged and while these indices can be invested in directly, this is neither
a recommendation nor an offer to purchase.
This can only be done by prospectus and should be on the recommendation
of a licensed professional.
Office Notes:
Beating the Ebola Virus
On the morning of October 7th,
2000, Dr. Matthew Lukiywa answered the phone.
Less than two months later, he was dead.
Between the phone call and his
death, “Dr. Matthew” became an icon and a hero.
He stood toe to toe with one of the worst viruses known to man, and
won. Though it would ultimately cost him
his life, Dr. Matthew’s courage and selflessness makes for one of the most
moving stories I have ever come across.
The phone call that morning was from
a woman named Cyprian Opira, who ran a hospital called St. Mary’s in northern
Uganda. She had terrifying news: some
kind of sickness was killing the hospital’s student nurses. Dr. Matthew didn’t hesitate. Married, with five children, he immediately
dropped everything and headed north from the capital to join his colleague at
St. Mary’s. When he got there, he found
a single word waiting for him: Ebola.
Almost everyone has heard of the
Ebola virus. Popular culture has turned
it into a cliché, but in Africa, the threat is real. There have been multiple outbreaks since the
first recorded case in 1976. Some
strains have a fatality rate of up to 90%.
Symptoms usually begin like the flu: fever, fatigue, pain and nausea. But in many cases, things get much worse. Vomiting and diarrhea appear. Patients can have difficulty breathing. Their mental state might be affected. Most disturbing of all, the worst patients
will hemorrhage, including both internal and external bleeding. Death is due to multiple organ failure.
Dr. Matthew (as he was most commonly
called) was a native Ugandan who previously ran St. Mary’s himself, before
taking leaves of absence to attend school in England and Kampala. Years before, he’d allowed himself to be
captured by rebels rather than allow the patients at St. Mary’s to be
harmed. Now, he immediately set to
creating a plan of action. He studied
all the existing literature on Ebola. He
learned how the virus is transmitted by close physical contact. He learned that the sicker a patient becomes,
the more infectious he is. He learned
that the dead were the most infectious of all.
(Which was a major problem in the area, as local customs demanded that
entire families wash their dead before burial.)
Seventeen patients had already died by the time he got there. He responded by establishing isolation wards
for the sick. He sent blood tests off to
laboratories in South Africa to confirm Ebola.
He contacted the WHO and the CDC and asked them for help. He forbade families from visiting infectious
patients, thereby diminishing the spread of the disease. Even handling the deceased—Dr. Matthew did it
all. When World Health Organization
officials arrived, they expected chaos.
They had every right to expect it, because with only a few volunteers to
help him, Dr. Matthew was already overwhelmed.
There were almost 60 Ebola patients in the hospital, and local leaders
were saying that entire families were being decimated by the disease. Instead, the WHO team found a hospital that
was clean, efficient, and organized. Dr.
Matthew had implemented the best response anyone could ask for. Dr. Simon Mardel, a doctor with WHO, said this:
“I had thought people would be
unwilling to work. I thought we would be facing a situation where patients were
totally neglected and an isolation ward to which people wouldn’t want to come
because it would just be a mortuary. But
they had implemented the manual—a very specialized recipe. They were giving
highly sophisticated care. It was remarkable. There was even a little wooden
device for pulling boots off they had made, exactly as the manual describes.”
This wasn’t the case in other
hospitals. At one, WHO officials found
bodies left in their beds.
But even the best efforts couldn’t
stop Ebola’s rampage. By now, the
hospital staff’s main problem wasn’t caring for patients. It was caring for themselves. They wore protective gear, and still they got
sick. They handled both the living and
the dead with the utmost care, and still they got sick. When Dr. Matthew told them to “Think with
your head, not with your heart,” they did their best to listen. And still they got sick. Some of them died.
Meanwhile, Dr. Matthew worked around
the clock. He led many of the inexperienced
workers by example. He cracked
jokes. According to another doctor, “He
didn’t seem as stressed as a lot of people would have been.” But when he wrote to his wife in the capital,
he said, “You should not come here. The
situation is very bad.”
Near the end of November, the
situation turned worse. Seven more
people died of Ebola during a single day, including two nurses who didn’t even
work in the Ebola ward. The nerve of the
beleaguered hospital staff, already strained to its limit, finally cracked. The virus, it seemed, would get them no
matter where they were, no matter what they did. So the next day, the day-shift refused to
show up for work. Nearly the entire
hospital gathered in the assembly hall to demand the hospital be closed. It was Dr. Matthew’s birthday.
Early in the outbreak, Dr. Matthew
gave a speech at the funeral of an Ebola victim. “It is our duty to save life,” he said. “It involves risk, but when we serve with
love, that is when the risk does not matter so much.” Now, facing down the entire hospital, he
explained to the staff that their duty was to live and die for their
patients. But if everyone left, so be
it. He would stay. He would continue to fight—alone, if
necessary.
Leading by example—that was the
key. His staff agreed to go back to
work.
A week before, during the middle of
the night, Dr. Matthew was woken from sleep.
There was another emergency to deal with. One of the Ebola patients had gotten out of
bed. He’d begun to hemorrhage. He kept coughing up blood. He staggered down the halls of the hospital,
ignoring the nurses’ pleas to go back to bed.
No one dared approach him.
Instead, they woke Dr. Matthew.
In his haste to help, perhaps still drowsy from sleep, he forgot to put
on goggles.
Two days after he’d convinced the
staff to go back to work, Dr. Matthew began coughing. He told his wife he had the flu. The next morning he had a fever. Still, he tried to work. When the fever worsened, he finally put down
his heavy burden and went to bed. But
still he weakened. Soon, the blood tests
came back with the news that everybody feared.
He had Ebola. Dr. Matthew’s
response was typical. “Oh, God, I think
I will die in thy service,” he prayed.
“If I die, let me be the last.”
Then, he told his staff to put him in the isolation ward with the
others. “Since I am the boss,” he said,
“I should show an example.”
By this time, the outbreak was
almost over. Very few new patients were
coming in. 50% of patients were
recovering, compared to 10% in other outbreaks.
But Dr. Matthew continued to show an example even when his wife came to
be with him. He refused to let her touch
him. He didn’t even want her to get
close. But when breathing became
difficult, his wife insisted. She sat as
close as possible, in protective gear with four surgical gloves on each
hand. She held his foot.
Eventually, Dr. Matthew’s lungs
hemorrhaged. He died on December 5th. When his body was buried, the very protocols
he developed were followed to the letter.
Two months later, on February 6th,
2001, the World Health Organization declared that the epidemic was over. There had been no new cases. The last man to die, in fact, was Dr.
Matthew. His wish was granted.
When I heard this story, I almost
couldn’t believe it. Have you ever heard
anything so inspiring? That one man
could do so much to fight an epidemic?
That one man could face down so many challenges, could stare down a
disease itself? Presented with one of
the most trying situations imaginable, Dr. Matthew responded with courage,
intelligence, persistence, and most of all … heart.
Despite succumbing to the virus, Dr.
Matthew lived the type of life he urged others to live: a life of sacrifice, of
example, of duty. 425 people contracted
Ebola that year, with 224 deaths.
There’s no telling how many people he saved, but experts believe Dr.
Matthew prevented the outbreak from spreading.
He brought some patients back from the brink of death. It was bad, but it could have been much, much
worse. It undoubtedly would have been,
if not for Dr. Matthew.
We’re all faced with trials in
life. I hope that we can use the example
of Dr. Matthew the way he would want us to—as inspiration. One person can make a difference, no matter how dire things seem. I hope the story of Dr. Matthew Lukiywa will
inspire you as much as it has inspired me.
P.S. If you
want to read the full account of Dr. Matthew’s heroism, here are the two
articles that inspired this letter. “Dr.
Matthew’s Passion” by Blaine Harden for the New York Times, and “The Death of
Dr. Matthew” by James Astill of the Guardian.
Find both articles here: http://tinyurl.com/c79tujg
and here: http://tinyurl.com/c6ewwn3.
Best
regards,
Michael L. Schwartz, RFC®, CWS®, CFS
P.S.
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Securities and advisory services
offered through First Allied Securities, Inc., Member
FINRA/SIPC
Schwartz Financial Service, Inc is
not an affiliate of First Allied Securities, Inc.
This
information is provided for informational purposes only and is not a
solicitation or recommendation that any particular investor should purchase or
sell any security. The information contained herein is obtained from sources
believed to be reliable but its accuracy or completeness is not guaranteed. Any opinions expressed herein are subject to
change without notice. An Index is a
composite of securities that provides a performance benchmark. Returns are presented for illustrative
purposes only and are not intended to project the performance of any specific
investment. Indexes are unmanaged, do
not incur management fees, costs and expenses and cannot be invested in
directly. Past performance is not a guarantee of future results.
* The Standard & Poor's 500 (S&P
500) is an unmanaged group of securities considered to be representative of the
stock market in general.
* The DJ Global ex US is an unmanaged group
of non-U.S. securities designed to reflect the performance of the global equity
securities that have readily available prices.
* The 10-year Treasury Note represents debt
owed by the United States Treasury to the public. Since the U.S. Government is
seen as a risk-free borrower, investors use the 10-year Treasury Note as a
benchmark for the long-term bond market.
* Gold represents the London afternoon gold
price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be
a highly liquid and diversified benchmark for the commodity futures market. The
Index is composed of futures contracts on 19 physical commodities and was
launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures
the total return performance of the equity subcategory of the Real Estate
Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any
reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change
without notice and are not intended as investment advice or to predict future
performance.
* Past performance does not guarantee
future results.
* You cannot invest directly in an index.
* Consult your financial professional
before making any investment decision.
