Schwartz
Financial Weekly Commentary
October
13, 2014
The Markets
Keep Calm and Carry
On.
The slogan comes from
a United Kingdom Ministry of Information propaganda poster designed to boost
morale if the United Kingdom was invaded during World War II. Despite its
current popularity, the poster was never distributed.
The slogan offers some
sound advice for anyone who was unnerved by last week’s stock market volatility.
Investor optimism caught fire when Federal Open Market Committee meeting
minutes indicated economic growth might not proceed quickly:
“Most viewed the
risks to the outlook for economic activity and the labor market as broadly
balanced. However, a number of participants noted that economic growth over the
medium term might be slower than they expected if foreign economic growth came
in weaker than anticipated, structural productivity continued to increase only
slowly, or the recovery in residential construction continued to lag.”
Slower economic
growth could translate into delayed monetary policy tightening (lower interest
rates for a longer period of time), and that notion sparked the biggest rally
of the year on Wednesday with U.S. stock markets making significant gains.
What goes up must
come down. For every action, there is an equal and opposite reaction. Okay, the
laws of physics generally don’t apply to stock markets. That said, a lot of
folks saw Wednesday’s market highs as an opportunity to take gains off the
table, according to Barron’s. Consequently,
we saw steep stock market declines on Thursday with major U.S. markets losing 2
percent or more.
Yields on longer-term
Treasuries also fell last week. Reuters
reported weak economic data in Germany, which raised concerns about growth in
the Eurozone, and revised forecasts from the International Monetary Fund
indicating global growth may be lower than expected, caused investors to seek
the safety of U.S. Treasuries.
Data as of 10/10/14
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
-3.1%
|
3.1%
|
12.6%
|
16.8%
|
12.1%
|
5.4%
|
|
10-year Treasury Note (Yield Only)
|
2.3
|
NA
|
2.7
|
2.1
|
3.4
|
4.1
|
|
Gold (per ounce)
|
2.0
|
1.5
|
-6.1
|
-9.8
|
2.9
|
11.2
|
|
Bloomberg Commodity Index
|
0.2
|
-6.0
|
-7.8
|
-6.4
|
-2.2
|
-2.8
|
|
DJ Equity All REIT Total Return Index
|
1.4
|
15.6
|
13.8
|
16.5
|
16.4
|
8.5
|
S&P 500, Gold,
Bloomberg 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.
collaborative consumption is causing
creative destruction! Back in 1942, economist Joseph Schumpeter said creative
destruction is the way of the free market. It’s messy but as an entry in The Concise Encyclopedia of Economics explained:
“Lost jobs, ruined companies, and vanishing
industries are inherent parts of the growth system. The saving grace comes from
recognizing the good that comes from the turmoil. Over time, societies that
allow creative destruction to operate grow more productive and richer; their
citizens see the benefits of new and better products, shorter work weeks,
better jobs, and higher living standards. Herein lies the paradox of progress.
A society cannot reap the rewards of creative destruction without accepting
that some individuals might be worse off, not just in the short term, but
perhaps forever.”
At
first, the collaborative or sharing economy was thought to be a response to the
Great Recession. Some people needed to reduce costs and others needed to make
money, so they found ways to use resources more efficiently by making the most
of available time and assets. This is affecting companies in a variety of
industries:
·
Transportation: Ride-sharing apps
connect people who want rides with people who are willing to use their personal
cars to provide rides. (If you’ve wondered about autos sporting big pink
mustaches, they belong to a particular app’s drivers.) These apps are taking money
out of the pockets of cab companies.
·
Hotels: You can reduce
travel costs by renting someone’s spare bedroom, castle, or villa through an
online community marketplace. The downside, according to one study in Texas, is
traditional hotels have lost revenue as these communities have gained
popularity.
·
Finance: When banks and
traditional lenders made borrowing a challenge, peer-to-peer lending and
crowdfunding platforms provided individuals and entrepreneurs with a new way to
source capital. A report from the Cleveland Fed found, “Since the second
quarter of 2007, the total amount of money lent through bank-originated
consumer-finance loans has been declining on average 2 percent per quarter...
Meanwhile peer-to-peer lending has been growing rapidly at an average pace of
84 percent a quarter.”
Whether
you want to provide or consume goods or services – cooking meals or eating
them, running errands or having them run, hosting a pet or leaving one behind
while you vacation – there is probably someone out there who is willing to
share their resources.
Weekly Focus – Think About It
“Always remember that you are absolutely unique. Just like everyone
else.”
Value
vs. Growth Investing (10/3/14)
|
|
|
|
|
|
|
|
|
|
|
|
-3.37
|
3.52
|
-5.13
|
-3.31
|
13.31
|
19.30
|
14.71
|
|||
|
-3.04
|
4.96
|
-4.12
|
-2.21
|
15.22
|
19.26
|
14.33
|
|||
|
-2.60
|
5.97
|
-3.13
|
-1.36
|
14.42
|
21.39
|
15.22
|
|||
|
-3.41
|
5.61
|
-4.86
|
-1.83
|
17.97
|
19.31
|
15.46
|
|||
|
-3.08
|
3.33
|
-4.32
|
-3.45
|
13.22
|
17.33
|
12.41
|
|||
|
-4.27
|
1.37
|
-7.60
|
-5.68
|
9.97
|
19.76
|
16.00
|
|||
|
-4.41
|
3.40
|
-7.59
|
-5.68
|
12.30
|
20.65
|
17.09
|
|||
|
-4.80
|
-1.08
|
-8.14
|
-5.05
|
6.71
|
16.36
|
15.13
|
|||
|
-3.56
|
2.10
|
-7.05
|
-6.29
|
11.25
|
22.41
|
15.77
|
|||
|
-4.48
|
-5.45
|
-8.97
|
-8.32
|
3.07
|
18.05
|
14.38
|
|||
|
-4.22
|
-3.83
|
-9.04
|
-8.60
|
4.67
|
18.16
|
13.81
|
|||
|
-5.61
|
-9.68
|
-9.37
|
-8.27
|
-2.24
|
15.97
|
14.37
|
|||
|
-3.61
|
-2.87
|
-8.54
|
-8.10
|
6.87
|
20.00
|
14.91
|
|||
|
-3.07
|
4.75
|
-4.45
|
-2.75
|
13.30
|
21.00
|
15.56
|
|||
|
-3.82
|
3.23
|
-5.79
|
-2.88
|
14.23
|
18.49
|
15.38
|
|||
|
-3.21
|
2.67
|
-5.15
|
-4.33
|
12.39
|
18.57
|
13.28
|
|||
©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:
Take No Social
Security payments
Until You’ve Learned How to Maximize Them
Over the past few months, I’ve
posted several articles about some of the critical mistakes people can make in
retirement. Another one of those
mistakes is failing to maximize your Social Security benefits.
Why is this a mistake? After all, you may have heard that Social
Security is broken, or that it won’t be around by the time you retire. But the truth is that Social Security is
nothing less than a guaranteed stream of income, something no retiree should ever neglect.
Even better? There are ways to
maximize your Social Security benefits.
In other words, you may have the ability to increase your
post-retirement income. For these
reasons, Social Security should and will play a large part in your retirement
plan. Failing to give your Social
Security benefits the attention they deserve is basically just a way of denying
yourself money for retirement.
To help you avoid this mistake, here
are …
Three
Ways to Potentially Increase Your Social Security Benefits
1. Delay collecting your benefits
Too many people rush to collect
their Social Security benefits as soon as they retire. This is sometimes a mistake, especially if
you retire early. Technically, you can
begin receiving benefits as early as age 62, but if you do so; your benefits
will be reduced significantly. For
example, if you were born between 1943 and 1954, your payouts would be reduced
by 25%. And the reduction isn’t
temporary. It’s permanent.
Waiting till your “full retirement
age” is probably a better option—it means you won’t face any reduction. What is your “full retirement age?” It’s the age at which a person may first
become entitled to “full” or “unreduced” retirement benefits. The following chart gives you the specifics:
|
Year of Birth
|
Full Retirement Age
|
|
1943-1954
|
66
|
|
1955
|
66 and 2 months
|
|
1956
|
66 and 4 months
|
|
1957
|
66 and 6 months
|
|
1958
|
66 and 8 months
|
|
1959
|
66 and 10 months
|
|
1960 and later
|
67
|
The
latest you can begin collecting benefits is at age 70, and there’s good reason
to hold off until then if you can afford it.
Benefit payments go up 8% for every
year you wait after you reach your full retirement age up to age 70. In other words, the longer you can keep your
hand out of the cookie jar, the more sweets you’ll eventually receive.
2. Claim spousal benefits
This topic is very intricate—too
intricate for a single letter. So for
now, it’s more important that you simply be aware of your options. Another way to potentially maximize your
Social Security is to claim a spousal benefit.
Married individuals can claim Social Security based on either their
personal earnings record (in other words, their own work history) or on their spouse’s earnings
record. If a married individual chooses
the latter, they would receive up to 50% of their spouse’s benefit.
Why would you choose to claim Social
Security based on 50% of your spouse’s earnings record rather than your
own? It’s simple: because you can claim
whichever number is higher. Be aware,
however, that you cannot claim a spousal benefit until your spouse has filed
their own claim.
3. Claim survivor benefits
Imagine a hypothetical couple, John
and Mary. Let’s say that both claimed
Social Security based on their own earnings records. Now let’s say that John dies of a heart
attack, leaving Mary behind. Under
certain circumstances, Mary can file to receive John’s benefit, or increase her own benefit to the same
amount that John enjoyed, if John’s number is greater.
There are other ways to potentially
maximize your Social Security benefits, too.
To learn about these, or more about the methods listed here, please feel
free to give my office a call at 215-886-2122, or e-mail me at
mike@schwartzfinancial.com. I’d be happy
to speak with you about your options.
Whatever you do, remember: Social
Security is a guaranteed stream of income, and should figure highly into your
retirement plan. Don’t deny yourself the
chance to earn more money for retirement!
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
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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