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The Independent Investor: Lost Art of the Third Reich
By Bill Schmick On: 02:48PM / Thursday November 07, 2013
Gen. Eisenhower looks through a cache of stolen Nazi art; below, an American soldier in a church full of loot in Germany. Both images from the National Archives.

This week the art world is abuzz by the revelation that a $1.3 billion cache of 1,500 stolen artworks has surfaced in Munich. European investigators are hunting for yet a second treasure trove right now. It could be just the tip of the iceberg given the extent of Nazi looting during World War II.

Approximately 20 percent of the art in Europe was stolen by the Nazis in a determined and methodical campaign that stretched from 1937 to 1945. Through a series of German laws, the Nazis devised an art strategy intended to destabilize nonconforming cultures, especially the Jewish, which justified and regulated the legal confiscation of cultural and personal property.

The Nazis' first "purified" their own museums, galleries and private collections, establishing a standard for what was acceptable art. They defined "acceptable" as art that was essentially of Germanic origin, while labeling most modern art as "degenerate." Degenerate art of every kind was to be sold off, traded or tossed on massive bonfires at Third Reich rallies.

The Nazis exported that policy in their conquest of Europe. It was a deliberate attempt by Adolph Hitler, aided by Hermann Goering, an avid art collector, and Goebbels, Hitler's propaganda minister, to pillage the very best in what they deemed to be acceptable European art and historical artifacts (think "Raiders of the Lost Ark").

No sooner had Hitler's army crossed the border into Poland, for example, than the Einsatzstab Reichsleter Rosenberg (ERR) and Hitler's private art outfit, the Sounderauftrag, spread out conducting a systematic pillaging of 13,512 paintings and 1,379 sculptures in Warsaw alone. As the German war machine invaded and annexed country after country, Europe's art treasures flowed the other way in boxcars headed for German fortresses, castles and even underground mines and bunkers.

After Germany's defeat, the U.S. and British Monuments, Fine Arts and Archives section worked to uncover the sites where the Germans had hidden their plunder. Artworks of every conceivable form, value and size were unearthed in barns, railroad cars, in attics and even under mattresses. Hundreds of thousands of pieces, a truly priceless collection of cultural treasures, were recovered and returned to their rightful owners but much, much more has never been found.

This week's revelation of a cache of "degenerate" art confiscated from Jewish owners was actually discovered two years ago but German authorities sat on it "pending the completion of their investigation." Paintings by Picasso, Matisse and Chagall are among the collection that experts believe was part of the Nazi-confiscated art during the purification of German culture prior and during WW II.

The paintings were discovered stacked between dirty plates and cans of food in a decrepit apartment owned by the 80-year-old son of a museum curator-turned-art dealer who worked for the Nazis. The son, Cornelius Gurlitt, has disappeared without a trace. Authorities presume that there is a second cache of artworks. They believe it is a source of funds that Gurlitt has been selling off piecemeal and stashing the money in a Swiss bank account.

How much more of this plundered art exists and how much could it be worth? No one knows, but it could easily amount to more than the gross domestic product of several countries. Take the disappearance of the Amber Room as just one example. This famous room, located within Catherine the Great's summer palace, was one of the largest works of jeweled art ever made. An entire room lined with of tons of high-quality amber, accented with diamonds, emeralds, jade, onyx and rubies. During the war, it was dismantled, crated and shipped back to Germany where it was placed on display. British air attacks in 1945 forced the Nazis to once again dismantle and pack the room into 27 crates. It remains hidden to this day.

Rest assured these treasures are there to be discovered.  Who knows, in the years to come, how many will be returned to us. And for everyone discovered, the world will be that much richer.

Editor's Note: For those interested in the subject, we highly recommend 1994's "The Rape of Europa: The Fate of Europe's Treasures in the Third Reich and the Second World War," by Lynn H. Nicholas. More locally, the late Williams College art professor S. Lane Faison was assigned to the OSS's Art Looting Investigation Unit and literally wrote the book on Hitler's stolen art, "Linz: Hitler's museum and library," which is available in the college's library.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at

The Independent Investor: A Rough Rollout for Obamacare
By Bill Schmick On: 10:48PM / Thursday October 31, 2013

Problems began on day one. Since then the controversy has escalated until just about everyone has something negative to say about the Affordable Care Act. Aside from the litany of computer glitches and misinformation that has greeted the uninsured millions who have attempted to access, there are now new questions arising over benefits and costs.

"My wife says her company's health insurance rep told employees that their premiums could go up by 35 percent next year because of Obamacare," claimed one client, who wanted to know if we should get out of the stock market before all hell broke loose.

I did some research and did find that for many of the estimated 150 million Americans who receive health care insurance as a fringe benefit may get hit with increased premiums in 2014. However, most increases will be in the 5-7 percent range (not 35 percent), which is about average since health-care costs increase by about 6 percent a year. The difference this year is that health insurance companies now have a new whipping boy to blame for these annual cost increases.

The companies are claiming that new fees and design changes to their existing plans as a result of Obamacare will cost employers and employees more than ever. How convenient, especially when none of these companies will go into detail about just how much Obamacare is costing them and us versus other reasons.

The truth is that worker contributions to health care insurance has risen by 89 percent over the last decade and employer costs have risen by 77 percent. Sure some of those increases can be laid at the doorstep of higher medical charges, but most of the increase simply reflects the fact that our workforce is getting older. The older we get, the more we need health services. Think about it, how much more time do you now spend in doctor's offices, visiting pharmacies or other medical centers. When we were younger, we paid insurance but rarely used the benefits. Now things are the other way around and hurting insurance company profit margins. Insurers don’t like it. Thus, the premium increases.

Another issue that is catching the American public by surprise is the cancellation letters many underinsured Americans are receiving from their health providers. Under Obamacare, you can still keep your old insurance as long as it provides at least minimum health care coverage. It turns out that many existing plans fail to pass muster when it comes to supplying benefits. Pundits are crying foul and blaming the Obama administration for "keeping this a secret" over the last three years. Hogwash!

The facts are that the Affordable Care Act had set a minimum level of health benefits for all Americans, which was spelled out and available for anyone who cared to check. That includes things such as emergency services, outpatient care, hospitalization, health care before and after the birth of a baby, prescription drugs, lab services, pediatric care, preventive and wellness and mental health and substance abuse services among others. If your former health insurer did not cover any of the above, ask yourself how valuable was it in the first place?

If your health care premiums need to go up because now you can go to the hospital to get your fingers sewn back on, or so you can deliver your next child, then so be it. If you genuinely don't have the money to make up the difference then the government will pay the difference under the health care act.

Amid the furor and increasingly-heated partisan debate, Republicans and even some Democrats are having second thoughts. So should we soldier through or just scrub it? Scrubbing it just returns the nation to the status quo. What's wrong with that, you may ask.

What many of us fail to realize is that taxpayers are already footing the bill for America's uninsured and under-insured. When someone with no insurance waits until their diabetes condition is life-threatening before seeking medical attention, who do you think pays for that limb amputation? When an elderly person fails to take their prescribed medication because they are underinsured, resulting in a heart attack or other critical malady, it is you, the taxpayer, who foots the bill for that hospital bed and all the other medical costs that goes with it.

As long as you and I are unwilling to allow fellow Americans to die on the streets, unassisted and unintended, we will continue to pay those costs one way or another — unless all Americans are insured and have a minimum level of health care. How hard is that to understand?

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at

The Independent Investor: Predicting the Next Stock Market Crash
By Bill Schmick On: 08:33PM / Thursday October 24, 2013

As part of my job as a money manager, clients will often call or send me some doom and gloom report predicting the next financial meltdown. If I had a dollar for every time these author's predictions proved accurate, I might have just enough to buy a cup of coffee. Why then, do investors take them seriously?

The short answer is simple; the desire to know the future is a deep human psychic need. We Americans, as a country, are fairly gullible and a large number of us still believe divining the future is possible. In the case of finance, predicting the future can also mean the opportunity to gain (or lose) huge amounts of material wealth. Authors of these reports also know that fear and greed, along with the herd instinct, are the three main emotional motivators among stock market investors.  If you couple those traits with just the right amount of sensationalism, you have a formula for an extremely effective sales pitch.

After all, the objective of these end-of-the-world reports is not to inform or educate, but to get the recipient to dip into their pocket and subscribe to an investment service, a newsletter or purchase of someone’s next book. The formula works so well that an entire industry has grown up around the concept. Today there are thousands of newsletters promising to unlock the future for you and me. It rarely works.

The news media often refers to this person or that person who "called the financial crash" or some other past market decline, but the evidence indicates otherwise. More often than not, that mythologized money manager or strategist may have voiced worry or concern over a specific issue — the housing market, easy lending, leveraged balance sheets — but not that the bond and stock markets would collapse as they did in 2008-2009.

In my own columns, for example, I voiced concerns back in 2007 and early 2008 that the stock markets were heading for trouble, but I never conceived of the extent of the problems or the magnitude of the declines. At most, I could and did correctly predict the short-term direction of the markets. Like everyone else, it was all I could do to keep up with the changing economic and political chaos as it unfolded.

No doubt someone got it right, but how useful is that? The laws of probability tell us that in a world where there are thousands of forecasts per day on everything from the weather to the number of new births in Bangladesh someone is bound to get a direct hit at some point. The question is whether that same person can do it consistently. The evidence says no. A lucky forecast by an individual or group on a specific event will be normally followed by a return to mediocrity (incorrect forecasts) in almost every case.

The forecasting track records for all kinds of experts are spectacularly poor no matter what the field. Despite all the advances in science, technology and computing, experts are no better at predication than they were in the days of Delphi. That's largely because modern science is proving that the deterministic view of the world, where the future is determined by a given set of rules and patterns, is naive. Rather, the future is fundamentally unpredictable and governed by the theories of chaos and complexity.

So the next time you receive one of these missives of misery my advice is to dump or delete it. The next crisis, whenever it occurs, will not be determined by events from our past. These writers usually rely on subjects that have already been discounted but are guaranteed to push your buttons. Things like the deficit, the debt level, the government (or lack thereof), hyperinflation or deflation, political chaos, the Chinese, the Middle East, oil, gold and the value of the dollar usually take center stage in their litany of reasons for the next Armageddon.

Remember this, it is not what we know, but what we don't know that will get us every time. If the writers truly know something we don't, why in the world would they need to write us for money?

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at

The Independent Investor: Washington, the Country's Worst Enemy
By Bill Schmick On: 12:12PM / Friday October 18, 2013

The nation has breathed a sigh of relief now that Congress has finally done what they were elected to do. The government is back in business and the debt ceiling has been raised. The damage to the country, however, will be long lasting.

Let us remember as well that the 11th hour deal between our dysfunctional officials is only a temporary solution. Congress voted to keep government open only until Jan. 15 and the debt ceiling will need to be extended once again on Feb. 7 of 2014. In the meantime, few have any faith that the bi-partisan budget talks headed by House Budget Committee Chairman Paul Ryan, R-Wis., and Senate Budget Committee Chairman Patty Murray, D-Wash., will bear fruit in the two months before the next deadline occurs.

The most recent estimates indicate that the government shutdown cost the economy $25 billion. But that's just the dollar and cents pricetag. The continued uncertainty of U.S. fiscal policy and the fear that the next time there truly will be a debt default could cost us $700 billion over the long term, according to estimates by Macroeconomic Advisers.

From California to Cape Cod, small-business owners have been hurt by the government shutdown. Over the Columbus Day holiday, for example, tourism was hurt by the closure of all the nation's federal parklands. Hundreds of thousands of mortgage applicants were held up as well since buyers could not get the information they needed from the IRS in order to close their purchases.

Retailers are in a quandary. Given the uncertainty, there is little confidence that the Christmas season will be a good one. Pessimism among small businesses, when asked about future economic activity, increased 10 percent in September and nothing about this latest debt deal inspires optimism. Yet, orders have to be filled now or it will be too late. Chances are retailers will trim their orders just to be on the safe side, reducing economic activity even further.

Consumer sentiment has been hurt badly by this circus we call Washington. In a recent trip to Provincetown, I noticed that whether at dinner, on a whale watch or just shopping around town, consumers were actively talking (and worrying) about this latest Beltway Brawl in D.C. Merchants told me shoppers were spending less and were visibly distracted.

Most recent estimates indicate that the pullback in domestic spending could impact the economy in the fourth quarter. Most economists were expecting GDP to grow in the fourth quarter by 2.2 percent, however, that forecast has been reduced to 1.6 percent. Clearly, the overall damage to the economy would have been far greater if we had defaulted on our debt.

In hindsight, the shutdown and debt ceiling debate was completely unnecessary. By now even staunch Republicans are admitting that the blame for this last bit of political insanity lies squarely with their party. Unless voters recognize this and act accordingly in the 2014 elections, we can expect that sometime soon we are all going to hit a brick wall.

The tea party element within the GOP is bound and determined to create such a crisis in this country.

Democrats should also be held accountable for their own unwillingness to compromise in years past. It is clear to me that ever since 2010, both parties have done their absolute best to hamstring this economy and keep millions of Americans out of work. Instead of coming up with bipartisan economic programs to grow the economy, our leaders have focused wrongly, in my opinion, on cutting spending, reducing debt and raising taxes all in the name of their misguided attempt to reduce the deficit.

How any of those measures would achieve economic growth or more employment is beyond me.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at

The Independent Investor: Cashless Society, Think Again
By Bill Schmick On: 06:23PM / Friday October 11, 2013

While the government shuts down and the markets swoon over the debt ceiling drama and the future of the U.S. financial system, the U.S. Federal Reserve Bank issued a new version of the $100 bill this week. Demand for the new bill is quite brisk, thank you.

To some, this may come as a surprise. After all, we all know that the world is moving inexorably toward cashless transactions. The most recent report by McKinsey & Co. found that for households with income of more than $60,000 a year, cash accounted for only 2 percent of total payments, while credit cards (both credit and debit) represented 60 percent of all retail transactions. Only 7 percent of all transactions in the U.S. are done with cash and most of those are with small amounts of money.

Between credit cards, PayPal, mobile payments and other technologically digitalized methods the death of paper currency has been predicted for years. The problem is that this particular patient never dies and is, in fact, stronger than ever. This summer the amount of U.S. currency in circulation hit an all-time high of $1.19 trillion, according to the Fed. That equates to roughly $3,800 in cash per person, if one assumes all of it is held in America, but it is not.

Admittedly, international demand for American currency started to decline about the time the Euro was introduced back in 2002. It was a period of political stability, economic growth and financial stabilization but all that changed in 2008. The global financial crisis triggered renewed demand for our banknotes and still continues today. In times of crisis, the American currency still offers foreigners the safest haven for their savings.  And many Americans evidently feel the same way.

Our $100 bill, featuring the likeness of Benjamin Franklin, is the most widely sought after note of all. We have been printing more of these "Benjamin's" than any other denominations over the past 20 years  The most recent Fed statistics show that as of Dec. 31, 2012, there were 10.3 billion $1 bills in circulation, 8.6 billion $100 bills, and 7.4 billion $20 bills, followed by $5, $10s, $50s and $2s. A little more than 75 percent of the worth of all U.S. currency worldwide is in $100 bills.

The use of smaller denominations has plateaued, reflecting the use of alternative methods of payment for day-to-day transactions. In contrast, the demand for $100 bills is growing. It appears that in times of fear both domestic and foreign holders are eager to keep a stack of $100 bills under the mattress or in safety deposit boxes as opposed to in bank or brokerage accounts. And let's not forget the black markets, criminal syndicates, drug cartels and tax evaders, all of whom use cash extensively and for them, the bigger the bill the better.

The new $100 bill is long overdue. It was supposed to reach your local bank two years ago but there was a problem with the new security measures imbedded within the bill. The new note has several features that will make it easier to authenticate, yet more difficult for counterfeiters to copy. (The paper is made right here in the Berkshires, too.)

Although less than 0.01 percent of all U.S. currency in circulation is counterfeit, it still totals as much as $95 million and most of it is in $100 bills. Most countries use special Swiss presses (sold only to governments) to print their money.  So it is difficult for common ordinary crooks to forge our currency. However, rogue countries, such as North Korea, can acquire these presses and have been known to print U.S. bills, especially the $100 bill, which law enforcement called "Super-notes."

Some countries , most notably Belgium, France, Canada, the U.K., Sweden, Australia and the Netherlands, have neared the point of effective cashlessness. That makes the banks happy since they spend billions per year processing, storing and guarding that paper. Governments also like it. The annual cost, for example, of minting U.S. currency is $219,240,000.

But I suspect that cash will continue to be useful for any number of people in a great many places. And that’s not necessarily a bad thing. Psychological studies indicate that when we use physical notes and coins, we spend more sensibly. While cash may not be "king" anymore, I think the feel of a little cash in the pocket makes one's day a little bit brighter, don' you think?

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at

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Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Visit for more of Bill’s insights.




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