November 2021 Newsletter

White ceramic piggy bank with colorful autumn foliage

Welcome to the November 2021 Newsletter. This month, we’re discussing the economy, employment, financial terminology, COVID-19 vaccine updates, and more.



The latest non-farm payroll employment report from the Department of Labor shows there are approximately 5 million fewer workers today than in late 2019. Where did they all go? Recent data from the U.S. Census Bureau confirms that “COVID-19 caregiving” is a major root cause of absentee workers. In the report, over 4.6 million respondents indicated they are either still suffering from “long-COVID” or they are a caregiver for someone with COVID. The path for labor normalization, therefore, includes increased vaccinations.

The NAHB Housing Market Index, which measures single-family home builder confidence, gained four points in October, rising to the 80 level. Readings above 50 indicate favorable builder confidence. Builder challenges remain; they include a labor shortage and high prices for land and building materials.

The Conference Board of Leading Economic Index increased again in September. The 0.2% gain for the month follows an increase of 0.8% in August and 0.9% in July.

We remain optimistic for the economy and stock market for the rest of this year and look forward to continuing economic growth, increasing interest rates, and moderating inflation in 2022.

Quote of the Day

“In 1736 I lost one of my sons, a fine boy of four, to smallpox. I have long regretted that I had not given him a variolation (a successful type of smallpox vaccination at that time). This I mention for the sake of parents who omit this step, on the supposition that they should never forgive themselves if a child dies; my example showing that the regret may be the same either way and therefore, the safer option should have been chosen.”
Benjamin Franklin (1706–1790) 

Benjamin Franklin was a writer, publisher, scientist, inventor, statesman, diplomat, and political philosopher. Franklin was the fifteenth child of his father who was twice married.

In 1736, Franklin formed the first fire department in Philadelphia. In 1751, he became the first president of what later became the University of Pennsylvania. In the same year, Franklin obtained a charter to establish the first hospital in the colonies. In 1752, he formed the first homeowners’ insurance company.

Although Franklin’s formal education ended at age ten, by 1753 both Harvard and Yale awarded him honorary Master of Arts degrees. In addition, Oxford University awarded him an honorary doctorate in 1762. In 1756, Franklin organized the Pennsylvania militia and, in 1775, Franklin became the first Postmaster General of the new U.S. Postal System.

In 1776, Thomas Jefferson wrote the Declaration of Independence, but Franklin, as a member of the committee that proofread the document, suggested several changes that were incorporated into the document. In 1778, Franklin became the first minister (ambassador) to France.

We honor Franklin today by having his portrait on the U.S. hundred-dollar bill.


Pop Quiz


Today, Certificate of Deposit buyers are lucky to find an FDIC-insured bank willing to pay 1% annually. A few years ago, however, new issues of investment-grade bonds hit very high yields. For example, the 20-year U.S. Treasury was yielding 15.78% annually—and those bonds had no risk! With only a modest amount of risk, 20-year mortgage-backed bonds were yielding 18.75%. Who needs the stock market when you can buy bonds like that!

Question: In what year did existing-bond prices collapse while bond yields rose to historically high levels?

The answer is at the bottom of the newsletter.

The Economy

Coins with seedlings growing



Total U.S. nonfarm payroll employment rose by a token 194,000 in September while the unemployment rate dropped to 4.8% from last month’s 5.2%. The Job Openings & Labor Turnover Survey (JOLTS) said there were 10.4 million open jobs in the U.S. as of the last business day of August compared to 10.9 million openings the last day of July.

The seasonally adjusted, all-encompassing unemployment rate, U-6, declined in September to 8.5% from 8.8% last month. It was 12.8% in September 2020. There are 7.4 million people unemployed in the U.S. age 16 and older, compared to 8.6 million last month.

Unemployment Rates by Education Level, September 2021

Less Than High School Diploma7.9%
High School Graduate, No College5.8%
Some College or Associate’s Degree4.5%
Bachelor’s Degree or Higher2.5%

Average hourly earnings of all employees on private nonfarm payrolls were up 4.6% year over year.

Gross Domestic Product (GDP)


The Bureau of Economic Analysis said the Advance Estimate for GDP in the 2021 third quarter increased by a disappointing 2.0% compared to 6.7% in the second quarter and 6.3% in the first quarter.




Annual inflation rose to 4.4% in September as measured by the Personal Consumption Expenditures (PCE) index. The core PCE index, which excludes food and energy, remained steady in September at 3.6%, where it has been since the first of June.

Long-term inflation expectations can be estimated by measuring the differences between Treasury bond yields & TIPS real yields of the same maturities. Results are:

Bond MaturitiesAnnual Inflation Expectations
5 Year2.89%
10 Year2.51%
30 Year2.23%

This month’s estimated annual inflation numbers are 16 basis points higher on average than last month.


Important Dates in November



November 7 Time falls back to standard time.

November 11 Veterans Day. Originally, Veterans Day hailed the end of WWI and was first celebrated in 1918. The treaty that ended WWI was signed on the 11th month, the 11th day, at the 11th hour.

November 22, 1963 President Kennedy, our 35th president, was assassinated in Dallas, Texas. He was the fourth U.S. president to be assassinated in office.

November 25 Thanksgiving


Stock Market



Mohamed El-Erian, President of Queens College Cambridge and Chief Economic Advisor to Allianz, said on October 4, 2021:

Here is where we are:

•  The nature of inflation is not as transitory as we had thought.

•  The Federal Reserve is becoming less dovish. (This means they are becoming more hawkish and likely to raise short-term interest rates sooner.)

•  The functioning of the labor market is chaotic. (Wages are rising rapidly. There are 10 million open jobs. Labor turnover is high. Job openings are not being filled as quickly as employers would like.)

•  The Chinese economy is slowing even as the central government is expanding its control to all parts of their economy and their military continues to threaten Taiwan.

•  The vast majority of supply chains are fractured. For too long we have worried about how to increase demand. But now the problem is insufficient supply.


We now have two open Federal Reserve Bank president positions: Boston and Dallas. There is still an open Federal Reserve Governor position and, for nine months nows, President Biden has not nominated anyone. Jay Powell is up for renomination in February 2022 as Chair of the Federal Reserve, but no word from the President on who he will nominate. These critically open positions in the Fed help to churn uncertainty, which is not healthy for the economy.


Recent Stock Market Noise


On September 2, 2021, the S&P 500 Index hit another all-time high of 4536.95. The market then slowly dropped for five weeks and closed at 4300.46 on October 4. This was a 5.2% decline on a closing basis. On October 21, a new all-time high was set, erasing the 5.2% decline. Congratulations to all investors who exhibited courage and patience and did not sell at the bottom.


Stock Market Valuations


As the Fed will begin tapering their asset purchases in the 4th quarter of 2021 and start to raise short-term interest rates in 2022, we are becoming a little less bullish on the stock market for 2022, even though the likelihood of a corporate income tax increase is now almost zero. As we have previously stated, we estimate S&P 500 operating earnings will be $207 this year and $220 next year.

YearEarnings/SharePE RatioApprox. S&P 500 Index High


If 2021 earnings reach $210, with a PE Ratio of 22.5, the S&P 500 Index could reach 4725 later this year.

In 2022, it is possible we will have a stock market correction where the S&P 500 Index PE ratio temporarily drops to 17 or 18 and the S&P 500 Index drops to 4,000. After the establishment of the correction low and likely a retest of that low, we are confident a stock market recovery will then follow and reach new highs. A recession is not on the horizon, but a correction can happen at any time.

The S&P 500 Index closed Friday, October 29, at 4605.38. That is up 6.91% since the close on Thursday, September 30 at 4307.54.


S&P 500 Index

Recent Monthly Performance







Recommended Action for Your Stock Portfolio


Let’s review the eleven sectors of the S&P 500 Index and which ones are recommended today. We strongly recommend the financial and cyclical sectors. The latter includes industrials, materials, consumer discretionary, and energy. Increasing interest rates will benefit financials. As supply chains and transportation improve, we believe the cyclical sectors will also improve. We recommend these five sectors be overweighted.

We recommend only a moderate or equal weight position in the following four sectors: technology, communication services, health care, and real estate. In the tech sector, we prefer semiconductor manufacturers (SMH), software developers, and those tech companies that are more value-oriented than growth-oriented. Some companies in the latter category still have no profits. 

Today we do not recommend the utility and consumer staples sectors. These should be underweighted or at zero weighting in an investor’s portfolio. Utility stocks will very likely lose value as interest rates increase in 2022. We don’t like consumer staples as we believe they have already seen their recovery from the pandemic lows.

If an investor does not want to worry about which sectors to be in or out of, we recommend the total U.S. stock market index with the exchange-traded fund, VTI, or the mutual fund, VTSAX. These index funds are very low cost, very highly diversified, are tax-efficient, and will track the performance of the U.S. stock market.




desk with  paper labeled mutual fund and other papers


Just as the medical and legal fields have their own vocabulary, so do the financial markets. Each month we will offer various financial market definitions.


Target-Date Mutual Funds


Typically, target-date funds include a mix of stock funds and bond funds. Target-date funds create a glide path of converting stocks to bonds as the fund approaches its target year. The glide path is designed so the portfolio is growth-oriented during an employee’s younger years but changes its focus to capital preservation as retirement approaches. 

For example, for someone starting out today at age 22, they might invest in a 2070 Targe-Date Fund. The fund might start out with 95% in stocks and 5% in bonds and slowly reduce the stock exposure and increase the bond exposure as the year 2070 approaches.

At Lorenz Financial, we do not like target-date funds. The first problem an investor should ask is, “Does the glide path of the fund match my own glide path?” Very likely it does not. The fund’s glide path is determined by someone at the fund who has created what they think is an average investor’s expectation. But some people will be like Warren Buffett and want to be 100% in stocks even when they are 70 years old. Someone else at age 50 might have endured a tragic life event and want to be 70% in bonds, whereas the target-date fund’s glide path might still be 70% in stocks at age 50.

The second problem with target-date funds is cost. For example, Fidelity Freedom Funds have an expense ratio of 0.75% on average. The annual expense ratio of a target-date fund ought to be half that.

Lorenz Financial suggests investors determine their own risk tolerance and then reduce their stock exposure and increase their cash and bond exposure as the years roll by so their portfolio matches their risk tolerance.


Stock Market Corrections


The stock market goes up and down. Typically, 70% to 80% of the time the market goes up. When the market goes down 5% from a recent high, well, that is just noise. When the market is down 5% to 10%, some call that “a period of consolidation.” These types of market movements should be ignored by long-term investors. When the stock market drops 10% to 20% from a recent high, that is an official “correction.”

Frequently, a correction is caused by a totally unforeseen event. For example, on April 20, 2010, an explosion occurred on the Deepwater Horizon oil rig. On April 22, it sank into the Gulf of Mexico. On April 23, the S&P 500 hit an all-time high of 1217.28. The S&P 500 then spent the next ten weeks dropping a total of 15.99%. The S&P 500 bottomed out on July 2 at 1022.58. Because corrections are so unpredictable, they too should be ignored by long-term investors. Just ride them out, but if an investor has some cash, buy-in when prices are low.


Starting Next Month: A New Category

OK, Now What Do I Do?

Our Corporate Bad Boy This Month

Facebook (FB)

Sources: Page A1, The Wall Street Journal, October 4, 2021, and the October 3, 2021 television episode of 60 Minutes


Francis Haugen, a former product manager hired to help protect against 2020 election interference at Facebook, said she had grown frustrated by what she says is the company’s lack of openness about its platforms’ potential for harm and unwillingness to address its flaws. Haugen is now the government’s chief witness against Facebook and has sought Federal whistleblower protection from the SEC.

During the October 3, 2021 edition of 60 Minutes, Haugen said, “The thing I saw at Facebook over and over again was there was a conflict of interest between what was good for the public and what was good for Facebook. And Facebook over and over again chose to optimize for their own interest—to make more money (selling ads).”

The documents Haugen gathered and interviews with other former employees describe how the company’s algorithms foster discord and how drug cartels and human traffickers use its services openly. An article about Instagram’s negative effect on teenage girls’ mental health was the impetus for a Senate subcommittee hearing the week of October 4 in which lawmakers described the disclosures as a “bombshell.”

Ms. Haugen also said, “As long as Facebook’s goal is to create more engagement, optimize for ‘likes,’ reshares, and comments, Facebook is going to continue to prioritize polarization and hateful content.”

In a written statement, Facebook spokesman Andy Stone said, “Every day our teams have to balance protecting the right of billions of people to express themselves openly with the need to keep our platform a safe and positive place. We continue to make significant improvements to tackle the spread of misinformation and harmful content. To suggest we encourage bad content and do nothing is just not true.”


Our Government Bad Boy This Month

President Biden Nominates a Red-Blooded Communist to lead the Office of the Comptroller of the Currency

Source: The Wall Street Journal, September 22, 2021


Cornell law professor Saule Omarova, who has endorsed government reforms that would “end banking as we know it,” was tapped by the Biden administration to lead the Office of the Comptroller of the Currency, which regulates the nation,s 1,200 banks with total assets of $14 trillion. 

OmarovaComrade Omarova was born in Kazakhstan under Soviet rule and graduated from the Moscow State University in 1989 where she received the Lenin Personal Academic Scholarship. In 2019, Omarova praised the Soviet Union over the United States, claiming, “Until I came to the U.S., I couldn’t imagine that things like gender pay gap still existed in today’s world. Say what you will about the old U.S.S.R., but there was no gender pay gap there.” Sen. Elizabeth Warren, D-Mass, applauded Omarova’s nomination, calling it “tremendous news.”

In her article, “The People’s Ledger: How to Democratize Money and Finance the Economy,” published in February 2021, Omarova recommended all individual and corporate bank accounts be closed and the deposits placed with the Federal Reserve. These would be called “Fed Accounts”. Allegedly the federal government would manage everyone’s money more efficiently than what banks do today. In this way, the federal government would be in charge of all deposits and lending—not the banks! Keep in mind communists demand “total government control” of everything!

When Mark was in Moscow in 1992, he found there were no groceries in the grocery stores—so now he asks, “How is the communist system of ‘total government control’ something to brag about?”


Social Security


blank social security card reading John Doe


The Social Security Administration announced a 5.9% increase in benefits beginning in January 2022. This is the highest increase in 39 years. Approximately 70 million Americans collect Social Security benefits.

Lorenz Financial has two broad recommendations regarding Social Security:

  • First, sometime after age 40, everyone ought to understand what their Social Security income benefits are forecasted to be. To do this, create an account at:
    • On this web page, click on “Create an Account.” After creating your “my Social Security” account, download and print out your Social Security 4-page summary document. For a married couple, each person will need to perform this process.
  • Second, when should seniors begin to collect Social Security income benefits? We tell clients, “Take Social Security at age 70, or when you need it, whichever occurs first.” Benefits at age 70 are 76% higher than at age 62 for those with a full retirement age of 66. For those with a full retirement age of 67, the benefits at age 70 are 77% greater than at age 62.

Of course, if you are or were a smoker or have a life-threatening condition, we recommend collecting benefits at age 62.


Vaccine Deployment

U.S. Data by the CDC – October 31, 2021

Percent of the Total U.S. Population Fully Vaccinated58.0%
September’s Fully Vaccinated Percentage55.6%
August’s Fully Vaccinated Percentage52.4%
July’s Fully Vaccinated Percentage49.5%
June’s Fully Vaccinated Percentage46.7%
May’s Fully Vaccinated Percentage40.7%
April’s Fully Vaccinated Percentage30.5%
March’s Fully Vaccinated Percentage15.0%

Colin Powell Dies from Complications of COVID-19



General Colin Powell, the first Black national security advisor under President Reagan, the youngest and first African American chairman of the Joint Chiefs of Staff under President George H.W. Bush and President Clinton, and the first Black secretary of state under President George W. Bush, died due to complications from COVID-19. He was 84.

General Powell was diagnosed with multiple myeloma, or cancer of plasma cells, in 2019. Plasma cells are an important part of the body’s production of white blood and T cells. As a result, multiple myeloma patients have a significant immune system deficiency. Even though General Powell was fully immunized against COVID-19, the disease overwhelmed his immune system and caused his death.



Source: page 2A, The Wall Street Journal, September 11-12, 2021


Why don’t COVID-19 vaccinations last longer? Measles shots are good for life, the Hepatitis A vaccine lasts 20 years, chickenpox immunizations protect for 10–20 years, and tetanus jabs last a decade or more. The goal of a vaccine is to provide the protection afforded by the natural infection, but without the risk of serious illness or death. The effectiveness of a vaccine depends on the initial magnitude of the immune response and how fast the levels of antibodies decay.

A vaccine’s “threshold of protection” is the minimum level of immunity that is sufficient to keep a person from getting sick. For every virus and corresponding vaccine, the threshold of protection can be different. A threshold for measles was pinned down in 1985 after an outbreak in a college dorm. Researchers checked antibody concentrations in both sick and well students in the dorm and identified 0.02 IU per milliliter as the antibody level that prevents a measles infection.

People who initially were vaccinated with the Pfizer or Moderna shot can get any booster at least six months after their second dose. Anyone who got a J&J vaccine may get a booster from Pfizer or Moderna (or even another J&J shot) two months after the single-dose shot.


COVID-19 Vaccine for Children Ages 5 to 11


In their study, Pfizer and BioNTech enrolled 2,268 subjects, ages 5 to 11. Two-thirds of the subjects got two doses of the vaccine, three weeks apart, with the rest getting a placebo. Those children receiving the vaccine received a smaller, 10-microgram dosage per shot, compared to the 30-microgram dose per shot for adolescents and adults 12 and up.

There appear to be fewer side effects (such as fever and chills) among children ages 5 to 11 who got the vaccine compared with 16- to 25-year-olds. Also, the data suggests the younger children developed a strong antibody response—just as the 16- to 25-year-olds did with the higher doses.

Moderna has also produced and studied a children’s version of their vaccine. It has a dosage of 50 milligrams, half the dosage of their adult vaccine. Their data will soon be submitted to the FDA.


Bond Market

Federal reserve building exterior



The Federal Reserve announced a new set of rules that will prohibit the purchase of individual securities and restrict personal trading. Under the new rules, “senior Fed officials” will be limited to purchasing mutual funds. Officials will be required to provide 45 days of advance notice for any purchases or sales of securities, obtain prior written approval, and must hold investments for at least one year. Now, if only members of Congress will put these same rules in effect for themselves.

Federal Reserve


The Federal Open Market Committee meeting in early November is not expected to change short-term interest rates. But we do expect them to announce their plans to reduce their massive asset-purchase program. Today the Fed is buying $120 billion in bonds every month. We expect the taper to take eight months to bring additional asset purchases down to zero.

U.S. Treasury


The U.S. Treasury reported the budget deficiency was $2.77 trillion in the fiscal year 2021. The record deficit of $3.13 trillion was in the prior year. These figures reflect the immense fiscal support provided in response to the COViD-19 pandemic. The Congressional Budget Office expects the deficit in fiscal 2022 to be $1.15 trillion.

Recommended Action for Your Bond Portfolio


Most bonds are not appropriate today because it is expected, in the short- to mid-term, that interest rates will rise above today’s levels. As bond yields increase, existing bond prices decline. Our bond market mutual fund recommendations have not changed and only include:

  • Ultra-short-term U.S. bond funds
  • Short-term U.S. bond funds
  • U.S. savings I bonds

The most important aspect in selecting a bond fund in this market is to keep the bond fund’s average duration low. Lorenz Financial suggests keeping a bond fund’s duration under 2.5 years. The higher the bond fund’s duration, the faster the fund’s price will decline as interest rates rise.


Before Investing


Of course, everyone should maintain a safe and liquid emergency fund of at least six to nine months of family expenses in an FDIC insured bank or an NCUA insured credit union. An emergency fund should be kept in a checking account, savings account, or money market account—it should not be “invested or tied up in any way.” Every family should have an adequate, safe, and liquid emergency fund before investing in a stock and bond portfolio.


In what year did existing-bond prices collapse while bond yields rose to historically high levels?


Answer: Bond yields peaked on September 30, 1981. Obviously, these very high yields were a fantastic buying opportunity, but practically no one was buying them. Everyone was assuming existing bond prices would keep dropping and bond yields would keep going up. Remember, existing bond prices and bond yields always move in opposite directions.

Why were the 20-year U.S. Treasury bonds yielding 15.78 % and mortgage-backed bonds yielding 18.75% in 1981? Because inflation was out of control. Inflation in 1980 was 13.5%, and 10.3% in 1981. Did you know someone who bought a house in 1981 with a mortgage? If so, their mortgage interest rate was 16%. Oh, the good old days!