Schwartz
Financial Weekly Commentary
June
2, 2014
The Markets
If you’re a fan of
home renovation TV shows then you’re probably familiar with the types of bad
news home inspections can uncover. Last week, the Commerce Department inspected
its previous estimate for real gross domestic product (GDP) growth during the
first quarter of 2014 and found some bad news. As it turns out, the rate of economic
growth in the United States declined by 1 percent rather than increasing
slightly, as previously thought.
The revision
sparked debate among economists and politicians about the health of the U.S.
economy. According to The Guardian,
some economists found the revised numbers difficult to reconcile because they
seem to contradict other first quarter economic data – such as expansion of
non-farm payrolls, healthy manufacturing activity, and stronger retail sales –
which indicate a more positive growth trend.
News that the U.S.
economy might have shrunk slightly didn’t deter investors at all. The Standard
& Poor’s 500 Index finished the week at a new record high. This could mean
investors are confident economic growth will rebound in the second quarter of
2014 or it may reflect a belief economic weakness in the United States will
encourage a more stimulative monetary policy.
The Wall Street Journal suggests signs of
slower growth in the United States and Europe are behind the resurgent
popularity of emerging markets. If you recall, investors pulled about $60
billion from emerging countries early in 2014 as they worried these markets
would be affected negatively by the U.S. Federal Reserve’s less stimulative
monetary policy. In May, a Reuters’
poll found 51 investment houses in the United States, Japan, and Europe had
reduced their cash positions to the lowest levels since last November and
invested the proceeds in emerging markets.
One expert cited by The Wall Street Journal called the rush
into emerging markets a “global chase for yield.” No matter what you call it,
last Friday, Morgan Stanley Capital International's emerging markets stock
index rose to its highest level since October 2013. It was up 3 percent for the
year.
Data as of
5/30/14
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
1.2%
|
4.1%
|
16.3%
|
12.7%
|
15.3%
|
5.6%
|
|
10-year
Treasury Note (Yield Only)
|
2.5
|
NA
|
2.1
|
3.1
|
3.7
|
4.7
|
|
Gold
(per ounce)
|
-3.2
|
4.1
|
-11.5
|
-6.6
|
5.0
|
12.2
|
|
DJ-UBS
Commodity Index
|
-1.4
|
6.4
|
1.9
|
-7.0
|
0.7
|
-1.5
|
|
DJ Equity
All REIT Total Return Index
|
0.9
|
8.0
|
10.3
|
21.3
|
10.0
|
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 Total Return 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.
how do you make a peanut butter and jelly sandwich? If you’ve ever been
asked to write clear instructions for a seemingly simple task, you know the
challenge is in the details. To illustrate how to make a PB&J, you start
with bread, peanut butter, jelly (in a squeezable bottle), and a knife. Then
you need to remember to tell the reader to open the bread bag, unscrew the top of
the peanut butter jar, and turn the jelly bottle upside down before squeezing
it. You have to provide a lot of very concise information.
Communicating
financial and investment ideas effectively also can be challenging. It appears
a significant number of Americans are not receiving all of the information they
may need. For several years, the Financial
Industry Regulatory Authority’s (FINRA) Investor
Education Foundation has employed a five-question quiz to evaluate
financial literacy. The questions include fundamental concepts related to
financial knowledge and decision-making. If you want to test yourself, take the
quiz at www.financialcapability.org.
In
2012, about 30 percent of Americans were able to answer three of the five quiz questions
correctly. That was about the same number of questions that were answered correctly
when the quiz was first offered in 2009. The percentage of respondents who were
able to answer four or five quiz questions correctly varied significantly by
generation:
·
24
percent of Millennials (born between early 1980s to early 2000s)
·
38
percent of Gen Xers (born between early 1960s to early 1980s)
·
48
percent of Baby Boomers (born between 1943 to early 1960s)
·
55
percent of the Silent Generation (born between 1925 to 1942)
When
a similar quiz was offered to people in countries throughout the world,
financial literacy was linked (in all countries) to retirement planning or
participation in private pension plans. In most countries, people who were
financially literate were more likely to plan for retirement which requires an
understanding of interest rates, risk, and diversification.
If
someone you care about would benefit by knowing more about financial matters,
please give us a call. We would be happy to sit down and talk with them about a
specific topic or recommend some good reading materials.
Weekly Focus – Think About It
“Courage is the most
important of all the virtues, because without courage you can't practice any
other virtue consistently. You can practice any virtue erratically, but nothing
consistently without courage.
--Maya Angelou, American
author and poet
Value
vs. Growth Investing (5/31/14)
|
1.17
|
4.56
|
2.26
|
3.07
|
20.46
|
14.90
|
18.85
|
|
|
1.24
|
4.93
|
2.44
|
4.11
|
20.21
|
15.30
|
17.83
|
|
|
1.35
|
5.46
|
2.35
|
4.76
|
19.00
|
17.05
|
18.62
|
|
|
1.31
|
4.70
|
3.96
|
2.23
|
25.22
|
16.34
|
18.94
|
|
|
1.05
|
4.63
|
0.93
|
5.53
|
16.44
|
12.58
|
16.02
|
|
|
1.03
|
4.62
|
2.03
|
0.90
|
21.84
|
14.17
|
21.60
|
|
|
0.96
|
6.37
|
2.67
|
1.91
|
22.00
|
15.29
|
22.45
|
|
|
0.93
|
1.63
|
1.75
|
-2.89
|
18.79
|
10.98
|
19.93
|
|
|
1.21
|
6.25
|
1.72
|
4.20
|
25.13
|
16.35
|
22.42
|
|
|
0.77
|
0.38
|
1.03
|
-1.52
|
18.81
|
12.68
|
21.16
|
|
|
0.73
|
2.10
|
1.34
|
-0.15
|
19.19
|
11.96
|
20.51
|
|
|
0.57
|
-4.18
|
0.65
|
-5.83
|
17.70
|
11.31
|
20.05
|
|
|
1.01
|
3.16
|
1.07
|
1.35
|
19.42
|
14.79
|
22.88
|
|
|
1.23
|
5.40
|
2.34
|
3.84
|
19.59
|
16.36
|
19.57
|
|
|
1.19
|
3.50
|
3.31
|
0.66
|
23.41
|
14.89
|
19.28
|
|
|
1.08
|
4.84
|
1.09
|
4.96
|
18.41
|
13.50
|
17.77
|
©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:
A Kid With A Ball
A great
philanthropist once said, “You don’t have to be a celebrity or a certain age to
make a difference.” That
philanthropist’s name is Ethan King, and as of this writing, he is fourteen
years old.
Ethan is a kid
from Michigan who likes to play soccer.
He’s also the founder of a global charity, who decided to ignore the
fact that kids his age don’t normally found charities, and that people can’t
singlehandedly fix the world. Instead,
he decided to focus on what he could do,
what he can fix, and that the word normally means absolutely nothing.
As Ethan himself
tells it, it all started in 2009 in a village called Ntette in Mozambique.1 Ethan had traveled to the southern African
country with his Dad, who was working to repair water wells in the area. Before the trip started, Ethan decided to
bring a soccer ball along, thinking he might get the chance to play pick-up
games with local kids.
When he went out
into the street, little did he know that a simple kick-about with a ball would
lead to so much more.
“When we arrived
at the village of Ntette,” Ethan says, “I threw my ball and in a matter of
seconds, 50 kids were playing.”
Soccer is the
most popular sport in the world, but the irony is that there are thousands of
children all over the globe who don’t get a chance to play it. Kids in rural or impoverished countries often
don’t have the access to real soccer balls, or the money to pay for them. As a result, they’re forced to
improvise.
“I’ve discovered
that many kids in poor countries want to play soccer,” Ethan explains, “but
they can’t because they don’t have a ball.
If they do have a ball, it’s typically a bunch of plastic garbage bags
wadded up and wrapped with twine and it doesn’t last very long.” Even the legendary Pelé learned to play using
a rolled-up sock stuffed with rags, or by playing with a grapefruit. (Yes, a grapefruit.)
While playing
with the local kids, Ethan noticed how delighted they were to play with a real
ball. So when it was time to go, he
decided to leave the ball with them. “As
I watched the kids play, it was hard for me to think that I would be heading
back to the States where I had several soccer balls in my garage just sitting
there. These kids in the village had
none.”
So Ethan decided
to leave the ball as a gift.
As he walked
away, one of the boys took the ball and ran up to him, offering it back. “I said to him, ‘No, this is yours. I’ve given it to you.’ Immediately they ran, laughed, and cheered
like they had just won the lottery!” Ethan says. The gift of a simple, actual ball was enough to bring joy to their
lives.
So Ethan decided,
why stop at one?
When he returned
home, he personally began to call up corporations, asking for donations.2 He spoke to other kids and parents while at
soccer games. His own organization,
Charity Ball, was born. With a $25
donation, Charity Ball hand-delivers a brand new soccer ball to kids around the
world who can’t afford to buy one. In
the past four years, over 4,000 balls have been delivered in 22 countries.
Some people may
ask, “Why start a charity based on delivering soccer balls when there are so
many other causes that deserve attention?”
Ethan’s philosophy is simple: because it brings joy. And joy is a commodity the world can never
have too much of. Furthermore, the
children in many of these countries have to contend with disease, war, and
other hardships. While there are many
charities helping to combat these miseries, too few provide an escape from them. The simple act of playing soccer, of having
fun, is that escape.
Joy can’t remove
hardship. But it can help people cope with hardship. Sounds like a worthy cause to me.
Not all of us
will have the ability to start our own charity, but we can all follow this young man’s example. Spreading joy is as valuable an endeavor as
anything else we do in this life. And as
a wise philanthropist once said, “You don’t have to be a celebrity or a certain
age to make a difference.”
Words to live by.
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, a registered principal offering securities and
advisory services through Independent Financial Group, LLC., a registered
broker-dealer and investment advisor.
Member FINRA-SIPC. Schwartz Financial and Independent Financial Group
are unaffiliated entities.
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
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