Schwartz Financial Weekly Commentary 10/1/12

The Markets

 

Despite all the concern about the fiscal cliff, the sovereign debt crisis, and saber-rattling in the Middle East, the U.S. stock market has posted a strong year-to-date gain.

 

With just three months left in the year, the Standard and Poor’s 500 index is up 14.6 percent, while the NASDAQ composite index, which measures more than 3,000 stocks on the NASDAQ exchange, is up 19.6 percent.

 

Drilling down to the U.S. economy, it’s like a tale of two cities.

 

In the “depressed” city, economic indicators such as orders for durable goods (e.g., cars, planes, machinery, and washing machines), GDP growth, and manufacturing activity are weak. In fact, last week the Commerce Department released its final report on second quarter GDP – the broadest measure of economic activity in the U.S. – and it wasn’t pretty. It was revised downward to show just 1.3 percent growth. That’s down from the previous estimate of 1.7 percent and is barely above stall speed.

 

Moving down the interstate to the “booming” city, we have other indicators showing a healthier economy. Housing prices and sales volume, for example, are both up in double-digit percentages from a year ago. Consumer confidence is at a four-month high. On the jobs front, unemployment is still unacceptably high, but the unemployment rate has declined this year as has the number of people filing for new weekly unemployment claims. And, the biggie – the stock market – has risen steadily and recently hit a nearly five-year high.

 

So, which “economic city” will overtake the other as we head into the final stretch of the year?

 

Well, to a large degree, the answer may reside in the hands of the Fed, Congress, and the political dealmakers in Europe. The Fed’s trying to do its part by greasing the economy with cheap money. Congress, on the other hand, has yet to step up to the plate and show it can prevent the fiscal cliff from tanking the economy. And, in Europe, Spain is in the crosshairs as market watchers nervously calculate the impact of each attempt – or non-attempt – to solve the country’s huge debt and unemployment crisis.

 

While Dickens’ Tale of Two Cities was a bit dark, we suspect the U.S. economy will eventually find a way to rise to the occasion, even if there are some additional bumps along the way.

 

Data as of 9/28/12	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	-1.3%	14.6%	25.2%	10.7%	-1.2%	5.9%
DJ Global ex US (Foreign Stocks)	-2.0	7.9	9.1	1.1	-6.4	7.7
10-year Treasury Note (Yield Only)	1.6	N/A	2.0	3.3	4.6	3.6
Gold (per ounce)	-0.5	12.8	8.1	21.4	19.0	18.6
DJ-UBS Commodity Index	0.6	5.6	3.7	6.3	-3.6	3.4
DJ Equity All REIT TR Index	-1.3	16.0	32.1	19.3	2.2	11.5

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.

 

HERE ARE A FEW STATS about wealth in the U.S. and in the world:

 

·         There are 2,160 billionaires in the world.

·         The combined wealth of these billionaires is $6.2 trillion.

·         There are 187,380 people in the world worth at least $30 million.

·         The combined wealth of the people worth $30 million or more is $25.8 trillion.

·          Eighteen of the 40 richest people in the world are from the United States.

·         The net worth of the median American family in 2010 was $77,300.

·         The net worth of the median American family in 2007 was $126,400. The majority of the decline in net worth between 2007 and 2010 was due to the crash in housing prices.

·         The top 10 percent of American households had an average income of $349,000 in 2010.

·         The average net worth of these top 10 percent households was $2.9 million.

Sources: CNBC, Bloomberg, New York Times

 

Do any of these numbers surprise you? No doubt they’ll be a hot topic for discussion as politicians negotiate the upcoming fiscal cliff situation.

 

Weekly Focus – Think About It…

 

“The most important thing in life is to stop saying ‘I wish’ and start saying ‘I will.’ Consider nothing impossible, then treat possibilities as probabilities.”

--Charles Dickens, English writer and social critic

 

Value vs. Growth Investing (9/28/12)

Name	1-Week	YTD	4-Week	13-Week	1-Year	3-Year	5-Year
US Market	-1.37	16.12	2.48	6.19	30.11	13.46	1.51
Large Cap	-1.22	17.04	2.58	6.56	30.75	13.05	1.02
Large Core	-1.07	16.52	2.00	5.61	30.66	12.91	2.36
Large Growth	-1.65	21.26	2.09	7.30	33.49	15.10	2.87
Large Value	-0.88	13.62	3.70	6.68	28.23	11.14	-2.46
Mid Cap	-1.74	13.52	2.12	5.30	27.42	14.35	2.24
Mid Core	-1.66	13.31	1.45	4.36	30.30	15.94	3.29
Mid Growth	-1.70	14.54	1.90	5.55	24.38	15.27	1.73
Mid Value	-1.85	12.62	2.98	5.92	27.31	11.71	1.43
Small Cap	-2.01	13.70	2.41	4.84	31.11	14.21	3.61
Small Core	-2.02	12.88	1.83	4.80	30.16	12.83	2.61
Small Growth	-1.81	14.41	2.50	5.08	29.88	15.51	3.06
Small Value	-2.19	13.83	2.90	4.66	33.27	14.26	5.06
US Core	-1.25	15.67	1.89	5.31	30.53	13.63	2.72
US Growth	-1.67	19.41	2.08	6.81	31.37	15.26	2.71
US Value	-1.16	13.44	3.51	6.39	28.42	11.47	-1.17

©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:

 

Can I Use More Than One Car For Business?

 

In years long gone, tax advisors told you to drive one vehicle for business and the other vehicle for personal purposes. This old advice made it easier to claim the one car as a business car because no business mileage log was required back then. But that’s no longer true.

 

Today, tax law requires you to keep a mileage log to prove business use. That changes the game. With today’s rules, you gain nothing by using only one car. But the new mileage log rule gives you a possible opportunity to increase your tax deductions.

 

First, you might ask: Will the IRS allow me to use more than one vehicle for business?

 

Yes! The IRS official method for computing business use of a single vehicle is to divide business miles by total miles driven. IRS Form 4562, which is filed by proprietorships and corporations, contains spaces for up to six vehicles. In other words, yes, the IRS recognizes that you can drive more than one vehicle.

 

Regards,

,

Michael L. Schwartz, RFC®, CWS®, CFS

 

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added. 

 

Michael L. Schwartz, RFC®, CWS®, CFS, offers securities through First Allied Securities, Inc., A Registered Broker/Dealer,  Member FINRA-SIPC.  Advisory Services offered through First Allied Advisory Services, A Registered Investment Advisor.

Schwartz Financial Service 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.

 

* To unsubscribe from our “market commentary” please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at “mike@schwartzfinancial.com”.