Schwartz Financial Weekly Commentary 12/16/13

 

The Markets

You really need to take predictions with a grain of salt. Consider these esteemed opinions:

 

• "I think there is a world market for maybe five computers." Thomas Watson, Chairman, IBM, 1943
• "Who wants to hear actors talk?" H. M. Warner, Founder, Warner Brothers, 1927
• "Everything that can be invented has been invented." Charles Duell, Commissioner, U.S. Office of Patents, 1899

 

It’s an important to remember the fallibility of experts as we head toward a new year and pundits begin pontificating about the events of the past and predicting what may be ahead.

 

Barron’s recently pointed out how well U.S. stock markets have performed this year: “Not since 1995, when stocks climbed 34 percent without as much as a 3 percent dip, have we enjoyed a year as agreeable as this. No pain, all gain has turned U.S. stocks into a consensus favorite, the People's Choice award winner, the king of the hill. But, it's no longer the road less traveled.”

 

The publication tweaked market optimists by pointing out economists’ consensus opinion the U.S. economy will grow by 2.6 percent – admittedly a pretty modest pace for growth – may not seem like a stretch, but it could be. The point was 2014 is almost certain to bring some jarring economic transitions like less monetary support through quantitative easing. Reduced liquidity could negatively affect economic growth (Gross Domestic Product growth in 2013 is projected to be just 1.7 percent).

 

In a separate article, Barron’s shared insights from 10 strategists – Wall Street professionals who acknowledged 2014 may offer investors a bumpy road. However, their consensus expectation is the Standard & Poor’s 500 will finish 2014 higher. “…Their mean prediction is 1977. The bullish consensus might trouble contrarians, but Wall Street's pros see ample reason for optimism, given their expectations of a stronger economy and rising corporate profits.” 

 

As you read conflicting opinions about where we’ve been and where we’re going, it’s critical to remember short-term macroeconomic and market predictions should not be given too much weight. You built your investment strategy to meet your long-term investment goals.   

 

Data as of 12/13/13	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	-1.7%	24.5%	25.1%	12.7%	15.4%	5.2%
10-year Treasury Note (Yield Only)	2.9	NA	1.7	3.3	2.5	4.3
Gold (per ounce)	-0.1	-27.3	-27.2	-4.2	8.3	11.7
DJ-UBS Commodity Index	0.6	-9.3	-9.7	-6.9	2.3	-0.8
DJ Equity All REIT TR Index	-2.3	0.5	3.4	10.1	19.5	8.6

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.

 

is that a drone? flying through my neighborhood? There may be a new entry on the list of military inventions that have been repurposed for commercial use: Unmanned Aerial Vehicles (a.k.a. UAVs or drones) may soon join global positioning systems (GPS), duct tape, EpiPens, cargo pants, microwaves, and a wealth of other goods Americans rely on in everyday domestic life.

 

Drones are remote-controlled flying robots. They may be as small as insects or as large as jumbo jets. Today, they’re most known for delivering stealth attacks on selected targets and military service which has included stints on domestic border surveillance and overseas reconnaissance. In the future, they may be thought of as handy tools that help manage a variety of tasks. While no one can be sure which opportunities will pan out and which won’t, there are a lot of potential applications including:

 

·         Information gathering. Journalism students at the University of Missouri in Columbia are learning to fly drones! They’re gathering pictures, videos, and other news-worthy information. Yes, there are some privacy issues. Already, 42 states are considering bills restricting drone use.

·         Improving agriculture. Students at Oklahoma State University are researching the roles drones could play in increasing yields and monitoring crops for blight and diseases.

·         Disaster relief. The Harvard-MIT Division of Health Sciences and Technology received a grant to develop drones to deliver vaccines and medicines to remote locations and disaster areas.

·         Wildlife research. The U.S. Geological Survey has been using a camera-equipped drone to complete aerial counts of sandhill cranes, and scientists in Indonesia are using drones to study endangered Sumatran orangutans from above the treetops.

·         Shipping goods. American internet retailers are experimenting with using drones to ship goods from fulfilment centers directly to customer’s doors. It may be 2015 before you receive a drone delivery because the Federal Aviation Administration still needs to issue some rules governing drone operations.

 

So, if you’ve been asking yourself, “What’s the next big thing?,” you might want to read up on drones. They could be it.

 

Weekly Focus – Think About It

 

“Peace is not absence of conflict, it is the ability to handle conflict by peaceful means.”

--Ronald Reagan, 40^th American President

Value vs. Growth Investing (12/13/13)

Name	1-Week	YTD	4-Week	13-Week	1-Year	3-Year	5-Year
US Market	-1.53	27.71	-0.19	5.61	28.68	15.25	18.53
Large Cap	-1.55	26.57	-0.09	5.83	27.09	15.20	16.97
Large Core	-1.99	29.77	-1.08	4.67	29.93	17.06	17.58
Large Growth	-1.34	26.76	1.11	8.21	27.32	15.36	20.46
Large Value	-1.34	23.65	-0.35	4.53	24.45	13.18	13.11
Mid Cap	-1.35	30.53	-0.44	4.88	32.48	15.49	22.55
Mid Core	-1.59	27.04	-0.82	5.26	28.53	16.14	23.22
Mid Growth	-0.84	28.38	0.25	3.31	30.62	13.55	22.33
Mid Value	-1.65	36.32	-0.77	6.13	38.43	16.71	21.98
Small Cap	-1.85	31.62	-0.53	5.50	34.78	14.84	23.04
Small Core	-1.99	30.61	0.02	6.06	33.97	13.80	22.60
Small Growth	-2.25	34.65	-2.08	3.27	38.16	15.38	23.21
Small Value	-1.26	29.80	0.65	7.44	32.40	15.40	23.28
US Core	-1.91	29.21	-0.95	4.89	29.86	16.67	19.06
US Growth	-1.31	27.55	0.70	6.82	28.61	15.02	21.07
US Value	-1.40	26.61	-0.36	5.07	27.79	14.05	15.56

 ©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:

 

 

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 and advisory services through Independent Financial Group, LLC., A Registered Broker/Dealer,  Member FINRA-SIPC. 

 

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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