**Tomorrow is Election Day, Please Vote!!!
The Markets
Special Note:
As the week wore on, the devastation from Hurricane Sandy
became ever more apparent. And, while we talk about the financial markets in
this commentary, we know that what happens on Wall Street pales in comparison
to the tragedy and hardship facing many people in the northeast. Our thoughts
and prayers go out to them.
**************
In addition to the human toll, Hurricane Sandy caused the
New York Stock Exchange to close for two days. This closure reminded us of a
quote from Warren Buffet who said, “I never attempt to make money on the stock
market. I buy on the assumption that they could close the market the next day
and not reopen it for five years.”
This quote contains a couple important lessons:
1)
Think long term.
Rather than flipping investments on a frequent basis, it makes sense to
approach investing with a five-year or longer time frame.
2)
Don’t check your investments daily.
Imagine you planted some tulip bulbs. Would you pull them out everyday to check
and see if their roots grew? Likewise, give your investments time to grow.
Keep in mind that stock prices tend to fluctuate much more
than changes in the intrinsic value of the underlying companies, according to
Investopedia. Unfortunately, these daily fluctuations often scare people into
making bad investment decisions. To overcome this tendency, try to ignore the
daily noise and take comfort in knowing we are focused on monitoring any
changes to the long-term, underlying value of your investments.
And, yes, it’s finally election week. The good news… no more
annoying robo calls and attack ads!
Data as of 11/2/12
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
0.2%
|
12.5%
|
14.2%
|
10.7%
|
-1.3%
|
4.5%
|
|
DJ
Global ex US (Foreign Stocks)
|
0.8
|
8.8
|
4.6
|
1.7
|
-7.0
|
7.0
|
|
10-year
Treasury Note (Yield Only)
|
1.7
|
N/A
|
2.0
|
3.4
|
4.3
|
4.1
|
|
Gold
(per ounce)
|
-1.8
|
7.0
|
-3.3
|
16.6
|
16.2
|
18.2
|
|
DJ-UBS
Commodity Index
|
-1.8
|
-0.2
|
-4.9
|
1.8
|
-5.3
|
3.1
|
|
DJ
Equity All REIT TR Index
|
2.0
|
16.7
|
19.3
|
22.3
|
3.4
|
11.8
|
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.
“TODAY, WE’RE LOOKING AT
SCIENCE FICTION BECOMING TOMORROW’S REALITY,” said
California Governor Jerry Brown in late September at Google’s headquarters in
Mountain View, CA. So, what “science fiction” was the governor referring to and
what are the investment implications?
About 120 years ago, a German mechanical engineer named Karl
Benz coupled an internal combustion engine with a chassis and four wheels.
Today, we know it as the automobile. While the internal combustion engine was
the transforming technology that made the modern automobile possible, we don’t
define, value, and think of cars in terms of how well they process gas.
Instead, we think of what cars can do for us.
Cars dramatically changed our lifestyle. They allowed the
rise of suburbs. They enhanced the family vacation. They played host to many
dates and first kisses. They created millions of jobs in road construction,
manufacturing, dealerships, repair shops, and, in fuel exploration, processing
and distribution.
Likewise, Governor Brown’s announcement of a new law making
it legal for driverless – yes, driverless – cars to travel on public roadways
in California could dramatically reshape the impact cars have on our lives.
Here are a few ways society could change with the driverless
car:
1)
With no need for steering wheels,
pedals, and other manual controls, manufacturers of those parts would be out of
luck.
2)
Since most road accidents are due to
human error – which driverless cars would eliminate – car bodies could be made
lighter, churned out quicker, and at lower cost.
3)
With no driver and very few road
accidents, say goodbye to car insurers and brokers.
4)
With few road accidents, say goodbye
to most of the roughly 2 million hospital visits in the U.S. caused by car
accidents (many lives saved!) and say goodbye to all the doctors, nurses,
staff, resources, and real estate devoted to helping these accident victims.
5)
Say goodbye to taxi drivers and limo
drivers and hello to a driverless “Zipcar” or similar type service.
6)
Say hello to electronics and
software companies who will provide the sensors and computing power needed by
these cars.
7)
Say hello to an expanding suburb and
rising suburban housing prices as the driverless car will make a long commute
more palatable since you can work or play while the car goes on its merry way.
8)
Say hello to increased mobility for
people with certain disabilities.
Sources: The Economist; Forbes
The driverless car is no longer science fiction. Google
already has a fleet of them and some of its employees “drive” them to work.
Commercial launch of the driverless car could arrive within 5 to 10 years,
according to The Economist.
From an investment standpoint, this is a long-term trend
that could have profound implications for a number of industries and it’s an
example of the type of deep research and thinking we do on your behalf as we
strive to meet your goals and objectives.
Weekly Focus – Think About It…
“The best way to
predict the future is to create it.”
Peter Drucker, management
consultant, educator, author
Value vs. Growth Investing (11/2/12)
|
0.31
|
14.30
|
-1.88
|
4.53
|
16.32
|
13.55
|
1.35
|
|
|
0.14
|
14.83
|
-2.27
|
3.90
|
17.34
|
12.62
|
0.79
|
|
|
0.71
|
16.07
|
-0.68
|
5.11
|
19.92
|
13.08
|
2.21
|
|
|
-0.05
|
16.26
|
-4.38
|
1.52
|
15.78
|
13.48
|
1.43
|
|
|
-0.22
|
12.56
|
-1.53
|
5.28
|
16.59
|
11.33
|
-1.55
|
|
|
0.89
|
13.16
|
-0.42
|
6.23
|
13.48
|
15.72
|
2.34
|
|
|
1.38
|
13.94
|
0.23
|
6.42
|
15.79
|
17.66
|
3.58
|
|
|
0.85
|
12.16
|
-1.93
|
4.57
|
8.51
|
15.67
|
0.99
|
|
|
0.46
|
13.49
|
0.59
|
7.83
|
16.34
|
13.74
|
2.30
|
|
|
0.56
|
11.83
|
-1.86
|
6.59
|
13.51
|
16.08
|
3.53
|
|
|
1.10
|
11.63
|
-1.23
|
6.73
|
13.14
|
14.52
|
2.73
|
|
|
0.06
|
9.75
|
-4.02
|
4.67
|
9.89
|
16.51
|
2.04
|
|
|
0.53
|
14.17
|
-0.28
|
8.42
|
17.64
|
17.19
|
5.86
|
|
|
0.86
|
15.37
|
-0.55
|
5.48
|
18.70
|
14.21
|
2.67
|
|
|
0.13
|
14.96
|
-3.88
|
2.31
|
13.89
|
14.24
|
1.44
|
|
|
-0.03
|
12.87
|
-1.03
|
6.00
|
16.61
|
12.23
|
-0.26
|
©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:
Warning:
Notice of Impending Tax Bill
Will
you be subject to the 3.8% surtax in 2013. You now have less than 60 days to
take action to prevent this from happening. Here are two examples of the new
3.8% surtax set to take effect January 1, 2013:
Example #1:
Alan and Beth Carter have a MAGI of $300,000 in 2013 and file a joint
return. Their net investment income is
$20,000. Their MAGI threshold is
$250,000. Therefore, the Carters are
$50,000 over that amount. However, their
$20,000 of investment income is smaller than their $50,000 of excess MAGI. As a result, the 3.8% surtax will be imposed
on $20,000 – the lesser number of the two amounts – and the Carters will owe a
$760 surtax.
Example # 2:
Now let’s look at another couple, Dan and Eve Franklin. They also have $300,000 of MAGI, but the
Franklins’ income in 2013 includes $52,000 of net investment income.
Now, the Franklins’ $52,000 of net investment income exceeds the $50,000
amount that they are over the $250,000 joint filer threshold. For the Franklins, $50,000 is the lesser
number, so their surtax obligation is 3.8% of the $50,000 excess MAGI or
$1900.
Have a
Trust, your MAGI is $12,000.
Remember,
this Surtax is here to stay, you now have less than 60 days left to take
action. We have plans available to help,
is there a one-step plan for everyone, no, each individual situation is different.
Give the office a call to schedule a
meeting today.
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.
