The Markets
Singing the earnings song…
Each year, in January, April, July, and October, most publicly-traded
companies announce their corporate earnings results. These announcements can
have a dramatic effect on companies’ share prices – and markets – especially
when companies don’t meet analysts’ expectations.
The way a company’s share price moves after an earnings
announcement can strike a discordant note. For instance, a company can have a
great quarter, but if it earns a few pennies per share less than expected, its
share price may tumble. Likewise, a company can be in dire straits, but if it
produces a few cents more than expected, its share price may climb.
Last week’s earnings song was a bit melancholy. By the
end of the week, about one-fifth of the companies in the Standard & Poor’s
500 Index had submitted their reports and earnings were on track to grow by
about 1.5 percent year-to-year. That’s a bit lower than the 4.1 percent
earnings growth analysts had expected, but it was in positive territory.
Unfortunately, as The
Wall Street Journal pointed out, financial companies have exceptionally easy
year-to-year comparisons. When they were pulled out of the mix, earnings hit a
low note: down by almost 3 percent from last year, according to FactSet. That’s
worse than analysts expected at the start of the quarter.
Earnings were weak relative to expectations, but the
S&P 500 still finished higher for the week.
That may be because of the soothing refrain offered by Ben Bernanke
(monetary policy will remain accommodative… monetary policy will remain
accommodative). The important thing to remember is the Fed’s definition of
accommodative monetary policy doesn’t necessarily mean maintaining its quantitative
easing program.
Data as of 7/12/13
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
0.7%
|
18.6%
|
22.9%
|
16.5%
|
6.1%
|
5.6%
|
|
10-year
Treasury Note (Yield Only)
|
2.5
|
N/A
|
1.5
|
3.0
|
4.1
|
4.2
|
|
Gold
(per ounce)
|
1.3
|
-23.5
|
-18.2
|
3.1
|
6.2
|
14.0
|
|
DJ-UBS
Commodity Index
|
0.9
|
-6.8
|
-11.1
|
0.7
|
-9.5
|
1.1
|
|
DJ
Equity All REIT TR Index
|
1.2
|
11.0
|
13.9
|
18.9
|
8.3
|
11.3
|
Notes: S&P
500, 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.
there’s been an
innovation in measuring innovation. Innovation is one of those things. It’s
hard to fully describe, but it can be awfully important to countries and
economies.
In recent years,
there have been some remarkable innovations, such as car sharing and the Oakland
A’s use of sabermetrics; and some less remarkable ones, such as airline baggage
fees and the detachable dog sack (which allowed Fido to ride in a cloth carrier
attached to the outside of the car).
In March, panelists
at the Wharton Economic Summit 2013 discussed the concept of innovation. Although
they didn’t all define it in the same way, they suggested innovation is using
something new or known in a different way, different time, or a different place;
essential for companies to grow; useful; transformative; an approach that
addresses a major want or need; not always easy to spot.
It’s clear
innovation means different things to different people. Cornell University,
INSEAD, and the World Intellectual Property Organization, which collaborate on
the Global Innovation Index, said their benchmark, “recognizes the key role of
innovation as a driver of economic growth and prosperity, and adopts an
inclusive, horizontal vision of innovation applicable to both developed and
emerging economies.”
They refined the
index for 2013. According to The
Economist:
“Instead of
objectively counting the inputs and outputs, it relies on nuance. For example,
rather than ranking overall education, it looks at the top three universities,
since elite institutions may be more important than the average. Instead of
counting each patent, it tracks only those filed in at least three countries,
which suggests it is a more valuable technology. And, rather than look at
scientific journal articles en masse, the index includes how often they are
actually cited.”
So,
using these innovative metrics, which countries rank the highest in innovation?
Among rich countries, the United States, Britain, and Germany are one, two, and
three. In middle income countries, China, Brazil, and Russia take top honors.
Weekly Focus – Think
About It
“Health
is the greatest gift, contentment the greatest wealth, faithfulness the best
relationship.”
--Siddhartha Gautama, also known as Buddha
Value
vs. Growth Investing (7/19/13)
|
0.77
|
20.47
|
4.36
|
9.74
|
26.72
|
19.48
|
8.90
|
|
|
0.69
|
19.62
|
4.01
|
9.05
|
24.70
|
18.96
|
8.15
|
|
|
0.62
|
24.30
|
4.11
|
8.72
|
31.01
|
20.56
|
9.71
|
|
|
0.07
|
14.56
|
4.12
|
8.62
|
16.74
|
18.44
|
7.87
|
|
|
1.40
|
20.75
|
3.84
|
9.87
|
27.57
|
18.13
|
6.89
|
|
|
0.91
|
22.51
|
4.90
|
10.80
|
32.43
|
20.58
|
10.26
|
|
|
0.83
|
19.90
|
4.19
|
8.81
|
29.29
|
21.77
|
10.77
|
|
|
0.50
|
20.26
|
5.05
|
11.23
|
27.75
|
19.61
|
7.85
|
|
|
1.40
|
27.48
|
5.46
|
12.29
|
40.68
|
20.22
|
12.19
|
|
|
1.18
|
23.60
|
6.50
|
13.98
|
32.43
|
21.38
|
12.02
|
|
|
1.07
|
23.83
|
6.69
|
13.82
|
32.88
|
20.46
|
10.81
|
|
|
0.71
|
23.93
|
6.39
|
16.70
|
30.11
|
22.58
|
10.88
|
|
|
1.77
|
23.09
|
6.45
|
11.71
|
34.40
|
21.12
|
14.47
|
|
|
0.69
|
23.30
|
4.29
|
9.08
|
30.71
|
20.83
|
10.13
|
|
|
0.20
|
16.28
|
4.46
|
9.66
|
19.69
|
19.03
|
8.12
|
|
|
1.43
|
22.26
|
4.35
|
10.49
|
30.60
|
18.75
|
8.48
|
©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:
Way To Wealth
Every month, I send
my clients and friends small tips or ideas on how to ensure their personal
finances remain healthy and strong. But
this month, in honor of Independence Day, I’ve decided to turn to one of our
Founding Fathers for his advice:
Benjamin Franklin.
Long before I
started sending my letters, Franklin did something similar for people in
colonial America. Every year, he
published the Poor Richard’s Almanac,
a collection of proverbs, advice, and information on a variety of topics. One of these topics was—you guessed
it!—personal finance. After the almanac
ended in 1758, Franklin published an edited collection of all the financial
advice he’d given. He called it The Way to Wealth, and 255 years later,
it’s still worth reading.
Just for fun, here
are some excerpts from The Way to Wealth. I hope you enjoy reading them as much as I
did.
The Way to Wealth
by
Benjamin Franklin
“In
1732 I first published my Almanac; it was continued by me about twenty-five
years. I endeavored to make it both
entertaining and useful, and it accordingly came to be in such demand, that I
reaped considerable profit from it. And
observing that it was generally read, (scarce any neighborhood in the province
being without it,) I considered it as a proper vehicle for conveying
instruction among the common people, who bought Scarcely any other books. I therefore filled all the little spaces…with
proverbial sentences, chiefly such as inculcated industry and frugality, as the means of procuring wealth.”
---
“A
great number of people were collected…conversing on the badness of the times,
and one of the company called to a plain, clean old man, with locks. “Pray, Father Abraham, what do you think of
the times? Won’t these heavy taxes quite
ruin the country? How shall we ever be
able to pay them? What would you advise
us to do?”
Father
Abraham stood up. "Friends,” says he, “and neighbors, the taxes are
indeed very heavy, and if those laid on by the government were the only ones we
had to pay, we might more easily discharge them; but we have many others, and
much more grievous to some of us. We are taxed twice as much by our idleness, three
times as much by our pride, and four
times as much by our folly, and from these taxes the commissioners cannot
ease or deliver us by allowing an abatement. However let us hearken to good
advice, and something may be done for us; God helps them that help
themselves.”
---
If time be of all things the most precious, wasting time must be the greatest prodigality, since lost time is never found again, and
what we call time-enough, always
proves little enough.
---
He
that riseth late, must trot all day, and shall scarce overtake his business at
night. Laziness travels so slowly that
poverty soon overtakes him. Early to bed
and early to rise makes a man healthy, wealthy, and wise.
---
There
are no gains without pains.
---
At
the working man’s house, hunger looks in, but dares not enter.
---
One
today is worth two tomorrows.
---
If
you were a servant, would you not be ashamed that a good master should catch
you idle? [Since you are] your own
master, be ashamed to catch yourself idle.
---
If
you would be wealthy, think of saving as well as of getting.
---
Beware
of little expenses; a small leak will sink a great ship.
---
If
you would know the value of money, go and try to borrow some, for he that goes
a-borrowing goes a-sorrowing.
---
For
age and want, save while you may; no morning sun lasts a whole day.
---
Gain
may be temporary and uncertain, but ever while you live, expense is constant
and certain. Get what you can, and what you get, hold; 'Tis the stone that will turn all your lead
into gold.
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.
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