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Tricky Trends

January 17, 2019

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I know that many people do not like to look at numbers, but I want to make a point and using these numbers is the only way I can. However, my discussion is short and sweet. The point I want to make is that graphs and numbers do not always tell the whole story or present the entire picture. However, the charts serve my purposes very well since they reflect the long term trends I want to illustrate to my financial planning clients.

Discussion of NASDAQ index (highlighted above)
The index began 2000 at 4069. On March 10, 2000 the index closed at its all-time high to that point of 5408. That is an increase of 32.9% in less than 2½ months. It then plummeted to end 2000 at 2471. Its downward trend continued to a low point of 1108 on October 10, 2002 but closed that year at 1336. The trends are there, but because of the measurement dates that I used which were the last day of each year, the full extent of the major swings and changes are not indicated.

Looking at the above graph it shows a high point at December 31, 1999 of 4069 while the high point was actually 2½ months later. Using the high of 5408 as the benchmark it took until early 2017 for that index to get back to where it was in 2000. Since then it kept going up, until it didn’t at the end of 2018.

The same thing happened in 2009 where these indexes hit low points in March, but those are also not reflected in the charts. As an FYI, the Dow Jones Industrial Average on March 9, 2009 hit its low point of 6509 and from there it catapulted upward. Neither the 2008 or 2009 ending amounts come close to that 6509 amount.

Takeaway: Make sure you understand fully and that the right beginning point and appropriate intervals are used in any data you review.

Additional comment: It appears from the above 22 year record that the growth in three of the four indexes was quite similar. Only the NASDAQ was much different. Also all of these indexes paid cash dividends during this entire period that are not reflected in the index amounts making the returns greater than shown above, or in the charts posted on January 8, 2019.

Withum #SOTF19

January 15, 2019


Yesterday Withum’s annual State of the Firm (SOTF) event was attended by about 1000 of our 1100 people – from the five offices in New Jersey, and from Boston, New York, Philadelphia, Washington, Orlando and satellite offices in Aspen and Chicago. As we did last year it was held at the NJPAC from 1:00 to 5:30 followed by a tummy filling two hour cocktail reception. It was also great for networking and catching up with colleagues we work and interact with but don’t necessary see in person. Last January I spoke at the brand new Orlando office and was able to talk with many of the people I met last year.

Bill Hagaman, our managing partner/CEO gave his report of the state of the firm which is really great. A lot is going on and while most of the attendees are not partners, the program was more of a report to shareholders along with updates on new services, innovative growth initiatives, key metrics (we completed a string of 44 consecutive years of revenue growth), and our very popular strength awards with 75 staffers being nominated. Their very extraordinary accomplishments were highlighted and awards were presented for Administrative Strength, Client Service, Community Service, Innovative Strength, Marketing, and Outstanding Achievement. I am proud to say I know most of the nominees and they are all winners! A special award, determined by Bill, was also presented for extraordinary special service to the firm.

Part of Bill’s presentation was a projection of the need for promotion to partnership during the next eight years which showed a wide window of opportunity for our bright energetic staff. Also announced were six promotions to partner effective July 1, 2019. Of the six, two started their careers with either Withum or a predecessor firm that merged into Withum. Each has exceptional technical skills along with fantastic client service abilities, great mentoring capabilities and all exemplify the Withum Way culture.

The program began with the latest edition of the SOTF19 video with over 200 Withum-ers in it. A highlight was a new Withum song that was written and sung by one of us along with talented accompanists. Watch it at click here. The program ended with a presentation from NY Times bestselling author Andy Andrews, author of The Traveler’s Gift with everyone receiving an autographed copy of that book. I look forward to reading it, but if it is half as good as his presentation, it will be a great read.

We are not an accounting firm, but a professional services firm providing assistance to clients in many of the areas they need help in. Primarily tax, audit and accounting services, but also in the very fast growing advisory, digital and cybersecurity services we have available, and in the over two dozen industries we have specialists in. Withum is a true catalyst for growth and success.

The state of our firm is great; the future appears great; the opportunities for staff and clients are numerous and great; and I feel excited and great to be part of it. You can find out more at #SOTF19.

Explanations of the 2018 year end charts

January 10, 2019

Last year the stock market’s activity can be broken into three parts. One part was a big run up in stock prices. The second was the quick and sharp drop during December. The third is whether the net annual results followed a “normal” trend of the year in toto. Here are some explanations.

  • While the stock market had a lot of action last year, the bond market was pretty quiet except for the Federal Reserve’s actions causing jumps in the short term Treasury rates. The long term rate, U.S. dollar and gold had minimal changes last year and not too great ten year changes. This shows stability in the markets. Some might call it stagnation or that there is not much growth. As far as I am concerned, stability is good. However, looking at these numbers does not seem to indicate the strong growing economy the Fed is suggesting. And if we don’t have indications of strong growth, it could portend some gloomy weather on the horizon. This small grouping doesn’t tell an entire story, but they are helpful in my discussions with financial planning clients – so in that regard they serve a valid purpose.
  • Sharp run ups create euphoria and an expectation they will continue. They are not normal, and there always will be some normalization. This normalization, and then some, took place is a two week period creating some alarm, but based on the people I spoke with, there was inaction, so while portfolios gave back its gains over the last year and a half, there did not seem to be any panic selling. I’ve written plenty about staying the course of your investment plan and the sudden drop did not look like it was anything so terrible to cause an abandonment of well thought out plans.
  • The 2018 drops in the top three indexes and the double digit drop in the Russell 2000 when looked at through a 365 day lens should not cause too much alarm. The markets cannot be expected to go up every year and over the last ten years we only had three down years and even these were not so terrible. What was terrible was its suddenness.
  • The ten year results for all four indexes were all exceptional. Three showed similar and very significant increases and the fourth was off the wall but it included the FANGs that went up significantly. The FANGs are Facebook, Amazon, Netflix and Google (Alphabet). The FANG prices seem to be primarily based on great expectations of future earnings rather than current or projected next year earnings.
  • The ten year results were great but they had a low starting point coming after the midst of the 2008/2009 market meltdown. However, the annual increases after then were also quite high and with small losses in the loss years, it seemed it would have been hard for anyone to have lost money in the market during the last ten years, no matter when they started. However, if they entered the market during the last few months of 2018, they would not be too happy right now. But people in the market should be taking a long term position on the future of the American economy and while their starting point hit a glitch, it should work itself out over the next seven to ten years.
  • This presents an argument about whether the stock market would actually reflect the economy’s growth. The P/E of the S&P 500 index with exception of some annual aberrations has been pretty steady during the last ten years as has been the DJIA. There doesn’t appear to have been any major changes in those index’ valuations. Further the dividend yields have been pretty consistent over all and the dividend payout percent seems to indicate some consistency. All of these indicate stability in the market and that the prices are driven somewhat by profits and dividends. This provides me with confidence in the market as of the present time.
  • This year I added the dividend payout percent. This indicates the percentage of earnings that are paid as dividends and looks to me like there is an upward drift in the dividends paid out. This is buoyed by the increasing profits and cash hoards by many of the larger companies. Last year’s corporate tax cut further increased the cash with many companies using the cash to buy back shares which serve to increase the P/E ratios because fewer shares end up being outstanding.
  • One comment about the American economy’s growth being reflected in the stock market: The stock market also reflects global economic activity since about 43 percent of the sales of the S&P 500 components are derived from outside the United States, so that index also reflects worldwide business activity. Because of this, I do not see the efficacy of balancing a portfolio by including foreign or emerging market funds.

I can go on with more, but I believe I’ve said enough to provide an understanding of the performance indicated by the charts. Obviously I like doing this. I also like presenting this explanation since it forces me, and hopefully you too, to really focus in on the results and how they might be used.

Enjoy the above. Thank you for reading my blogs; and I welcome your thoughts and comments, so email me at and include your phone number so I can call to discuss it with you.

Have a great year. Ed Mendlowitz

2018 Year End Financial Benchmark Charts and Graphs

January 8, 2019

These charts continue an annual tradition I started ages ago to use when I assist clients with their financial plans. The charts show the 10-year annual and cumulative percentage gains or losses of the major stock market indexes, interest rates, currencies and gold. The indexes include the dividends paid, the price to earnings ratio and this year I added the earnings percent and dividend payout ratio. Some of the amounts have been rounded or the calculations are rounded to facilitate review. These charts are provided for illustrative and educational purposes. No recommendations are made or should be inferred from the information presented. Also note that past results are no indicator of future performance. I will discuss these results in succeeding blogs.

10 year financial benchmark performance of major stock market indexes,
interest rates, currencies and gold

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“Top 10 Stock Picks” for 2019

January 3, 2019

Tis the season for “Top 10 Stock Picks.” Almost every financial publication and commentator provides top 10 picks. Many publications provide them from multiple “experts.” I have some opinions about this.

It is all bull doody! The picks make for interesting reading and some of the explanations are clear and you can actually learn from them, but at the end of the day they are nothing more than guesses. Some provide “report cards” on the previous year’s results and few beat the indexes. Invariably some picks do very well, but in the aggregate, the indexes are rarely beat. Even if they beat the index, the portion of a portfolio allocated to the top picks is usually not significant so the appreciable effect on the total portfolio is not meaningful.

Further, the Top 10 picks seem to indicate that choosing individual stocks is a good way to invest. It might be, but I think a better way for most people and certainly nonprofessional investors is to invest through a broad based mutual fund. If you are not a do-it-yourselfer and use an investment manager, then these picks are meaningless unless the person doing the picking is that manager. Your manager is a professional entrusted by you to oversee and handle your portfolio based on criteria including your goals. As long as you employ them, let them do the picking. For everyone else, I suggest not picking individual stocks, or even the grouping of 10 suggested by the prognostications, but sticking to the larger broad based funds which include index and exchange traded funds.

One other comment is that if you put ten of the articles together I suggest that of the 100 stocks only about 20 might appear on most of the lists and that those 20 are likely to be included in the top 40 of the S&P 500 index and just a little fewer in the Dow Jones Industrial Average and the NASDAQ combined. If that‘s the case, why not invest in those indexes rather than the individual stocks? If you purchased every stock on the aggregate lists, you would then have your own mutual fund. Are you confident that this fund could beat out the larger mutual or index funds.

Other issues to consider are trading costs, timing if an investment no longer belongs on the Top 10 list if updates are provided, which they usually aren’t, and even the timing of the initial purchase which is already delayed from the time the article was written or picks made. In many cases the articles were written before the December drop into a bear market. Have the guesses been updated since then?

One other thing. If these are top 10 picks for the year, does it mean that they would have to be sold on the last day of the year so you would have cash available to acquire the next year’s top 10? And if the picks are right, you would have tax costs possibly at short term capital gain rates which doesn’t fully make sense to me. Of course the winners remaining on the new list would not be sold, but that can’t be for too many stocks since it would require continuous extraordinary growth, which is unlikely for most stocks.

There is still more, but it can really get nutsy. The above reflects some of my opinions about the ongoing annual asset manager and commentator sporting event. Take it for what it is – a sporting event!

Enjoy, and have a Happy, Healthy, Prosperous and Smart New Year!

Ed Mendlowitz

Records to get rid of, fiscal cliff diet and some checklists

December 31, 2018

I normally post on Tuesdays and Thursdays, but skip it if it is a holiday. This week I planned on only posting on Thursday, but I received many calls and emails asking me about my usual year end blog about what records to keep or get rid of, so this blog today. I also added links to other blogs that seem appropriate for the end of the year, or beginning of a new year. Click away!

I posted an updated blog about what records to keep or get rid of earlier this month on the Bottom Line Inc. site, and here is a link for you: While there, you can check out my other tax blogs and also the many cool blogs others post there, and you can sign up to receive them as posted for no charge. The tax blogs are usually written with Brian Lovett, my partner who is also my primary go-to person with tax issues.

Link to my Fiscal Cliff Diet (it works!) blog:

Reducing tax preparation clutter:

Some very good general rules:

Completing your resolutions:

And perennial checklists for any time:

Click away at this short and sweet blog, and may 2019 be a sweet year of calm peace and good health for you, your family and everyone dear to you.

Bear Market Reality

December 27, 2018

It stinks! However, we’ve been here before, and after the recovery, we’ll be here again. The markets go up and down, and unless our investments are skewed away from a reasonably diversified portfolio we will recover again.

I checked my archives and most recently wrote about the market tanking last February and here is a link:

On December 13th I posted a blog about some benefits of a falling market and while we would all prefer a rising market, there are some ways to take advantage of a stinky market. Here is a link to that: I might note that the market did much more terrible after that posting.

So here is the reality: If you have a well-diversified portfolio, the greatest risk you will have is that of the overall market. That is ubiquitous and cannot be avoided as long as you invest in the stock market, or any market for that matter.

People invest because they want the market to go up; but many need to have the dividends paid. From what I can see, there is no danger of dividends dropping. As long as the dividend payments are maintained, there will be no changes in cash flow to those that rely on it and if you are accumulating the dividends then reinvestments can occur at lower stock costs which will further increase future dividends and expectantly will lead to greater wealth when the market recovers.

Hopefully your investments were made as part of a well-considered plan. Unless your needs or goals have changed, or there is a major change in the underlying economy, I do not see any reason to deviate from them because of the recent drop into bear market territory.