November 2023 Newsletter

Financial Planning

Welcome to the November 2023 Newsletter. This month, we’re discussing the economy, employment, financial terminology, and more.


When we examine the big economic and stock market picture, this is what we see and conclude:

First, the stock market has suffered a correction. The all-time closing high of the S&P 500 Index was 4,796.56 on January 3, 2022 – almost two years ago! The correction low was 3,577.03 on October 12, 2022. This represented a 25.4% drop – a very unpleasant but typical correction.

Second, U.S. corporations had an earnings recession in the first and second quarters of 2023. See the two blue columns on the right.

U.S. Bureau of Economics Analysis


Third, if the typical economic pattern continues, there will be an economic contraction – likely mild in 2024.  This “recession” has been delayed due to the enormous federal government spending and annual deficits.

Note, the stock market is always anticipating what is coming so when we have the economic bottom due to the recession, the stock market will have hit its bottom six months or so earlier.  Therefore, the current declining stock market could be approaching its bottom if the next recession occurs in mid-2024.

We encourage everyone to continue to focus on the long-term where we know history is on our side for positive investment returns.  We remain optimistic about the long-term advantages of being invested in the U.S. stock market.

Okay, what else is going on in the “big picture”? We see four transformations underway in the U.S. economy.  Each one has varying degrees of “it’s a good buy right now."  These transformations are electric vehicles, artificial intelligence, cyber security, and medical advances. 

Examples of the latter are:

  • weight loss drugs
  • vaccination technologies
  • cancer treatments
  • heart disease treatments
  • dental implants
  • hearing aids with advanced technology


Electric vehicles are a tough investment right now, but the other three are investible.

We recommend employees continue to save every pay period in their employer’s retirement plan and in a Roth IRA to the maximum for their spouse and themself. Everyone should confirm they are at a minimum capturing 100% of their employer’s match. The maximum Roth IRA contribution in 2023 is $6,500 per person ($7,500 for those 50 or older). And most importantly of all, everyone should be spending less than they make and reducing debt.


Quote of the Day

Brown is the CEO of Ritholtz Wealth Management in New York City.

Josh Brown

Brown is the CEO of Ritholtz Wealth Management in New York City.

“It is widely accepted that anything that reduces short-term volatility must also reduce long-term returns.”


Pop Quiz

Why in 2002 did the “Big Five” accounting firms become the “Big Four”? Who screwed up?

The answer is at the bottom of the newsletter.


The Economy


Total U.S. nonfarm payroll employment rose spectacularly in September by 336,000 – twice the expected rate. The official unemployment rate, U-3, remained the same at 3.8%. The July 2023 and August 2023 combined employment numbers were revised up by 119,000.

The following chart is based on the Bureau of Labor Statistics official unemployment rate, U-3.

Unemployment rate, seasonally adjusted, September 2012-September 2023


In chart 2 below, it looks like we have a 3-month upward trend in employment. This is good for employment and family income, but it’s unlikely we will be able to get inflation back down to 2% with such a strong labor market.


Nonfarm payroll employment over-the-month change, seasonally adjusted, September 2021-September 2023


The Job Openings & Labor Turnover Survey (JOLTS) surprisingly jumped up to 9.6 million open jobs across the country as of the last business day in August.  This compares to 8.8 million open jobs the month before.  The 10-year chart below shows the recent downward trend in open jobs.


Job openings, hires, and separations levels, seasonally adjusted

The seasonally adjusted Total U.S. Unemployment Rate, U-6, decreased in September to 7.0% vs 7.1% last month. There were 6.0 million people unemployed in September, aged 16 and older. Last month it was 6.6 million people unemployed.



September Unemployment Rates by Education Level

Less Than High School Diploma 5.5%
High School Graduate, No College 4.1%
Some College, Associate's Degree, or Skilled Trade Degree 3.0%
Bachelor's Degree or Higher 2.1%

Average hourly earnings of all employees on private nonfarm payrolls were up 4.2% in August compared to a year ago. This was 0.1% lower than last month.


Leading Economic Indicators (LEI) sponsored by The Conference Board

The LEI for September continued its decline with another 0.7% drop.

With 18 consecutive monthly readings negative, the LEI continues to signal a recession in the near term. The Conference Board said, “So far, the U.S. economy has shown considerable resilience despite pressures from rising interest rates and high inflation. Nonetheless, The Conference Board forecasts this trend will not be sustained for much longer, and a shallow recession is likely in the first half of 2024.”


Gross Domestic Product (GDP)

The Bureau of Economic Analysis said the advance estimate for GDP in the third quarter of 2023 rose at an annual rate of 4.9%. Gross Domestic Product for the first quarter 2023 was 2.2% and 2.1% in the second quarter.

Real GDP Percent change from preceding quarter

GDP saw a huge increase in the third quarter due to increases in consumer spending, increases in inventory, exports, and government spending at local, state, and federal levels.



Annual inflation remained the same in September at 3.4% as measured by the Personal Consumption Expenditures (PCE) index. The previous two months were also recorded at 3.4%. In June it was 3.2%. Core PCE index, which excludes food and energy, dropped to 3.7% in September from 3.8% the previous month.

The peak Core PCE inflation this cycle was 5.4% in February 2022.


Mortgage Rates and Existing Home Prices

On October 31, 2023, the average 30-year fixed-rate mortgage had an interest rate of 7.92% and the average 15-year fixed-rate mortgage had an interest rate of 7.27%

The median existing-home sale price in September dropped to $394,300 from $407,100 in August according to the National Association of Realtors.

According to a poll sponsored by the Wall Street Journal and, three of the top five housing markets in the country are in Indiana. Those areas are:

#2 Elkhart-Goshen
#4 Fort Wayne
#5 Lafayette-West Lafayette

The poll identifies metro areas where the housing market is appreciating and where strong local economies and appealing lifestyle amenities suggest the housing appreciation will continue.


The U.S. Public Debt as Issued by the Treasury Department as of October 31, 2023, was:


Last month it was $33,118,000,000,000.


Important Dates in November

October 15-December 7 – Medicare Open Enrollment for the selection of medical insurance to begin January 1, 2024.

October 31 and November 1 – The seventh Federal Open Market Committee (FOMC) meeting of 2023.

November 5 – Fall back! Set your clocks back one hour.

November 8 – Election Day.

November 11 – Veteran’s Day. This day was first celebrated in 1918 and was then called Armistice Day as it commemorated the cease fire that ended World War I. Hostilities ended at the 11th hour, on the 11th day of the 11th month. The actual peace treaty was negotiated and signed seven months later in France. The Japanese delegation was rudely ignored by the Europeans and American delegation during the negotiations. This resulted in Japan starting a massive military buildup prior to what was to become, World War II.

November 22, 1963 – John F. Kennedy, the 35th US President was assassinated in Dallas, Texas. The President was pronounced dead the same day. Kennedy was the fourth US President to be assassinated in office.

November 23 – Thanksgiving. The celebration first began in 1789.


The Stock Market


Stephanie Link, the Chief Investment Strategist and Portfolio Manager at Hightower's Investment Solutions Group

Stephanie Link

Link is the Chief Investment Strategist and Portfolio Manager at Hightower’s Investment Solutions Group based in New York City.

Link was asked on October 16, 2023, on CNBC, “Do we rally on from here or is this rally soon to fade?”

Link responded, “I think we rally on. First, the seasonality tells us we are in a strong position to go up from here.”

“Second, all the inflation indicators, especially CPI and PPI, have told us inflation has come down.”

“Third, interest rates are high but stabilizing and fourth, the Fed is talking much less about raising rates.”

“Also, we are seeing in the early numbers of corporate 3rd quarter results that revenues and margins are higher than expected.”


Stock Market Valuation

Meskin is the head of U.S. Macroeconomics Analysis at BNY Mellon Investment Management in New York City.

Sonia Meskin

Meskin is the head of U.S. Macroeconomics Analysis at BNY Mellon Investment Management in New York City.

Meskin said on CNBC on October 26, “Our baseline expectation is for the S&P 500 Index to head into the year-end at about 4,000.”






Oppenheimer & Co. reported on October 30, 2023, on CNBC, “We are revising our year-end price target for the S&P 500 Index to 4400 from 4900 to reflect the S&P 500’s three-month sell-off (August, September, October) pushing the benchmark last week into correction levels. But we remain constructive on equities going forward.”


Jim is the Chief Equity Strategist at Cerity Partners located in New York City.

Jim Lebenthal

 Jim is the Chief Equity Strategist at Cerity Partners located in New York City.

Jim said on CNBC on October 30, 2023, “I am sticking with my call on the S&P 500 Index to end the year at 4,450.”


The S&P 500 Index closed on October 31, 2023, at 4193.80.

Monthly Performance of the S&P 500 Index



Recommended Action for Your Stock Portfolio

Are we on the cusp of a pending recession? Will it be deep and long-lasting or one we barely notice? Employment is hanging in, GDP grew at a very robust rate of 4.9% in the third quarter, and inflation is slowing. Therefore, it looks like we will not have a recession this year, but of course, there will always be the next recession.

Okay, so where are some good places to put your stock market money today? We believe the following four sectors will do well in the next 12 to 18 months: Technology (VGT), Energy (VDE or IEO), Health Care (VHT), and Industrials (VIS).

We are also okay with the following three sectors: Finance (VFH), Materials (VAW), and Consumer Discretionary (VCR).

With normal interest rates for longer, where should we not put our stock market money going forward? We believe those places are real estate (VNQ), utilities (VPU), communication services (VOX), and consumer staples (VDC).

An example of consumer staples and why to avoid that sector is what Kellogg’s did on October 2. They split the company in two. WK Kellogg Co. (KLG) will produce breakfast cereals in North America and Kellanova (K) will produce the snack division including wholesome foods Pop-Tarts and Pringles. We can not imagine that Americans and others around the world are going to continue to accelerate our diets towards these high salt, high sugar, high fat, and high carbohydrate food substitutes. Thank goodness, as a society we are slowly getting smarter about what we eat!

Even though the housing sector has dropped 14% recently, as a nation we desperately need more single and multi-family housing. The U.S. Home Construction exchange-traded fund, ITB, should benefit in the long term from this shortage.

Also, as government-backed militaries around the world have become more belligerent, the U.S. Aerospace & Defense ETF, ITA, should do well over the long term.

Financial Markets Vocabulary

Last month we recommended investors begin to put some money into bonds for the first time in years. Let’s explain some of the details of bond investing.

First, what is the primary difference between a stock and a bond? If an investor buys 100 shares of stock of a company that has 100,000,000 outstanding shares, the investor owns 0.0001% of the company’s buildings, land, factories, and any other assets the company has. The investor is a partial owner. However, the stockholder is taking risks and will endure stock price volatility up and down. Over the long term, the stock investor will earn more than a bondholder.

An investor who buys a bond is simply making a loan to a corporation or government. The bondholder does not own any assets but has the promise of the bond issuer to pay the dividends on time and to pay off the bond when it matures. Bonds are typically sold in increments of $1,000. Just like stocks, bonds can be purchased during the business day. The bond market is open from 9:30 AM to 4:00 PM, Monday through Friday, just like the stock market.

Typically bond prices fluctuate less than stock prices. For example, in 2022, both stocks and bonds lost money – very unusual! The S&P 500 Index lost 18% and the NASDAQ 100 lost 32%, while the typical bond fund lost 9%.

There are two ways to earn a return with bonds. First is the dividend. Individual bonds typically pay a dividend quarterly or semi-annually. Bond funds typically pay their dividends monthly or quarterly. The second way to make money in the bond market is to sell a bond after interest rates have declined. A bond that is paying 6% when purchased say two years earlier will now be worth more than its purchase price if interest rates have declined.


Bond Risks

Bond prices fluctuate as interest rates change. If interest rates go down, the price of existing bonds goes up, and vice versa. But as a bond approaches its maturity date, the bond price reverts to its face value. As interest rates give volatility to bond prices, long-term bonds will have much more price volatility than short-term bonds. This volatility is called interest rate risk.

Another bond risk is default risk. If a corporate bond goes bankrupt, the bondholders (and stockholders) could easily lose 100% of their money – think Lehman Bros in 2008. Who sold the most Lehman Bros bonds in the early 2000s? Edward Jones brokers.

Most bonds and bond funds come with a rating that describes their default risk (AAA is the highest and BBB is the lowest of “investment grade bonds”. Junk bonds are rated from BB to D.

A final risk of bonds is if the bond is callable. This means the bond issuer has the right to pay off the bond early.

There are many different types of bonds. Here are some categories:


US Treasuries

Bonds issued by other countries. Bonds issued by national governments are called sovereign bonds.

  • Bonds can be issued in a variety of currencies, not just US dollars.
  • There are callable bonds and non-callable bonds.
  • Taxable bonds and tax-free bonds.


Municipal bonds (as issued by city and state governments)

Muni bonds come in the form of revenue bonds with the revenue to pay off the bonds coming from a project, say a toll road. The other type of municipal bonds are general obligation bonds. These bonds are backed by the general revenue of the issuing municipality.

Another variable of bonds is their duration. There are short-term bonds (1-3 years), intermediate-term bonds (4-9) years and long-term bonds (10-30 years). Typically, shorter-term bonds pay less than longer-term bonds. Long-term bonds have more price volatility than short-term bonds.

Also, there are investment grade bonds rated AAA down to BBB and high-yield bonds, also called junk bonds rated BB to D. Note D stands for “In Default”. The safer bonds pay a lower dividend rate than the riskier bonds.



Bonds and cash can help an investor diversify beyond stocks. An aggressive investor might be 85% stocks, 10% bonds, 5% cash. A conservative investor might be 50% stocks, 35% bonds, 15% cash. An investor can be anything in between. Keep in mind, bonds and cash will seldom keep an investor’s portfolio even after considering taxes and inflation. That is why we recommend the majority of an investor’s portfolio be in the stock market.



Stock investing costs have come down substantially in the past few decades, but not bond investing. The highest-cost method of bond investing is to buy individual bonds. For example, an investor decides he wants to buy 50 $1,000 bonds of a US company with their bonds rated single-A with a 6-to-8-year term. The investor cannot do this electronically. The investor calls his broker’s agent and describes what he wants to buy. The broker calls various bond trading firms to see what is available.

The answer might come back as:
Deere and Company has a 10-year unsecured, taxable, non-callable bond that was issued three years ago (so now it’s a seven-year bond) paying 5.5% annually. As interest rates in the past 3 years have gone up, the price of the bond has gone down, so it is now $980 per $1,000 bond.

The investor then says yes or no to his agent. If yes, the investor will see on his transaction statement he bought $50,000 worth of Deere bonds for $49,000 with no commission or transaction fees. What a deal! What the investor does not see is his broker was offered this bond at $960, marked up the price to $980, and sold it to his client.

Individual bond investors do not see this 2% markup. This is the typical fee when buying less than $100,000 of the same bond. One way to minimize this impact is, if an individual bond is purchased, never sell it, let it mature. Then there is no second commission for selling.

Bond mutual funds and bond exchange-traded funds do not have this cost, but they do have an annual expense ratio which will range from 0.9% to 0.05%.


Last note of caution

Bond investing can have lower volatility than stock investing but will have lower returns over the long term. Unfortunately, there are more ways to make mistakes in bond investing than in stock investing, so please be careful. Lorenz Financial recommends bond investing be done through bond mutual funds and bond exchange-traded funds.



OK, Now What Do I Do?

Let’s review the steps to building significant wealth over a lifetime.

1. Maintain a healthy emergency fund of 3 to 6 months of your family’s monthly expenses. Don’t let a blown car transmission or a hospital bill derail your financial life. Be prepared for the unexpected expense!

2. Do not maintain a credit card balance! Do not pay 24% interest on a credit card balance! You have better places to spend your money than the interest on a credit card! Pay off your credit cards every month!

3. Pay off all other debt including:

    • Auto loans
    • Student loans
    • Personal loans

Remember, all debt is bad debt except a fixed-rate, first mortgage on your home. Please don’t let yourself become accustomed to reeling in debt.

4. Have all the insurance you need to prevent a financial catastrophe.  See last month’s newsletter for details on insurance.

5. Before buying a new home, save for:

  • Repair and maintenance costs of your existing home prior to selling it
  • A 20% down payment on new home so you can avoid Private Mortgage Insurance (PMI)
  • Your share of the closing costs
  • Repair and maintenance costs of your new home prior to moving in

All without dipping into your emergency fund.

During every recession, interest rates drop significantly, including mortgage rates.  This is the time to refinance – during a recession.  Drop down to a 15-year mortgage as soon as you can.  Have your home paid off before retiring.

6. Start contributing to your retirement plan as soon as you start working.  Increase your contributions by 50% of every pay increase.  Contribute to a Roth IRA for you and your spouse.  Only one spouse needs to work to contribute to two Roth IRAs.

For example.  Invest $13,000 per year starting at age 25 (that is two Roth IRAs at $6,500 each) for 40 years with an average 8% return (the stock market long-term average is 10%).  By age 65 each spouse will have $1.6 million.  And because it’s in a Roth IRA, all the money is tax-free!

Wait until you are 40 years old to start saving and now you only have 25 years to grow your money.  With this scenario, each spouse at age 65 will only have $475,000.

Save as much as you can, as early as you can!



Our First Financial Bad Boy This Month

Donors to Elite Universities Chafe Over Mideast Conflict

The Wall Street Journal, page A6, October 25, 2023

Top universities such as Harvard and the University of Pennsylvania are facing a backlash from alumni angry about the schools’ feeble reactions to the October 7 Hamas attacks against Israeli civilians.  The alumni say their schools didn’t move quickly and forcefully enough to condemn Hamas and denounce antisemitism.  Some say it was the final straw after years of growing alumni disenchantment with the schools over what they see as a leftward political shift.

For example, Leslie Wexner and his wife have donated more than $42 million to Harvard.  Their foundation said they were now cutting all financial ties with the university.

Marc Rowan, Apollo Global Management’s CEO, has donated more than $50 million to the University of Pennsylvania.  Rowan is also the Chair of the Board of Advisers at Penn’s Wharton School.  Rowan said he would not give any more money to Penn until the University President Liz Magill and the Board of Trustees Chair Scott Bok step down.

Some law firms have rescinded job offers to at least three Harvard law students who signed a letter to the university blaming Israel for Hamas’s violence.


The Bond Market


Above we have discussed at length bond market investing. Bonds can reduce the volatility of an investor’s portfolio, but also reduces the long-term results. Investing is all about diversification, keeping costs low, achieving returns greater than the rates of inflation plus taxes while not exceeding the investor’s risk tolerance. In today’s market, bonds and cash can help to achieve these objectives.

The Federal Reserve has said repeatedly, “Interest rates will be higher for longer”. But historically, today’s interest rates are not so much “high” as they are “normal” as compared to the last 50 years. So, we are now saying, “Interest rates will be normal for longer”.

With interest rates back to normal levels, corporate borrowing costs have increased compared to the costs over the past 10-15 years. Therefore, it should not be assumed the rate of growth of corporate profits will continue in the next 10 years as compared to the previous 10 years. What we are saying is the stock market returns of the past 10-15 years are unlikely to be repeated in the next 10 years.

Recommended Action for Your Safe Money

Our recommendations for an investor’s safest money now include short-term high-yield bond funds and Treasury bond funds. Our recommendations, in no particular order, are below.

  • Ultra-Short-Term U.S. Investment-Grade Corporate or Securitized bond funds
  • Short-Term U.S. Investment-Grade Corporate or Securitized bond funds
  • Intermediate-Term U.S. Investment-Grade Corporate or Securitized bond funds
  • Short-term high-yield bond funds
  • Short and intermediate-term U.S. Treasury bond funds
  • Cash (in a money market mutual fund paying 4.85% to 5.35% per year)
  • Bank or Credit Union Certificates of Deposit (only if FDIC or NCUA insured!)
  • U.S. Savings I-Bonds (max savings is $10,000 per account per year)





Pop Quiz Answer

Why in 2002 did the “Big Five” accounting firms become the “Big Four”? Who screwed up?


Arthur Andersen was the accounting firm for Enron. The end was quick for both firms. Why? Arthur Andersen failed to disclose to Enron shareholders and the SEC the massive financial fraud being committed by Enron.

In 1998 Andrew Fastow was promoted to Enron’s Chief Financial Officer (CFO) where he spearheaded the creation of a network of undisclosed new subsidiaries to hide Enron’s financial losses. Arthur Andersen auditors either “never found” or “found but never disclosed they found” these wholly owned subsidiaries where Enron’s losses were hidden.

In the year 2000, Enron’s stock price hit an all-time high of $90.56 a share. Eventually, the fraud began to unravel and in October 2001, Arthur Andersen’s legal counsel told the auditors to destroy all Enron financial files, except Enron’s most basic documents. In December 2001, Enron filed for Chapter 11 bankruptcy and its stock dropped to $0.26 a share. In June 2002 the Arthur Andersen firm was convicted of obstructing justice and the company disintegrated as the accounting firm was no longer trusted.

Enron Share Price, Jan 2000-Dec 2002

The remaining big four accounting firms are:

  • Ernst & Young Global Limited, based in London, England.
  • Deloitte Global incorporated in England and Wales.
  • PricewaterhouseCoopers International Limited, based in London, England.
  • KPMG is incorporated in London but headquartered in the Netherlands.

Each of these parent firms is then structured into smaller “member firms” that focus on an individual country as each country has its own accounting standards.