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The Independent Investor: How 'Black' Will This Black Friday Be?

By Bill Schmick
iBerkshires Columnist

For retailers, the upcoming Thanksgiving holiday traditionally signals the beginning of the do-or-die holiday selling season. The question worrying Wall Street and retailers alike this year is will the results justify the hype?

Listening to the third-quarter earnings and revenue guidance from retailers last week, there was little to applaud. Department stores were especially downbeat on their expectations for the entire 2015 holiday shopping season. Big discount stores, like Walmart, were less negative, and argued consumers were simply keeping their powder dry, while waiting for next weekend's super deals.

Some analysts argue that the disappointing earnings most retailers posted had more to do with the exceptionally warm fall weather we have been experiencing than lack of shopper enthusiasm. October, after all, will go down in the history books as the warmest October on record. That had to hurt winter clothing and apparel sales.

You may have noticed that the usual sales hype we come to expect wherever we look about now has been somewhat muted over the last week. That may have more to do with the terrorist bombings in Paris than anything else. Promoting the latest gizmo for your dog, or a better hair curler to de-frizz your hair may not be as meaningful to you when Parisian cops are storming apartment buildings and Russian planes are blowing up over Syria.

Most pundits are expecting a 3.7 percent rise is retail sales, which is below last year's 4.1 percent gain. Is it the economy, the weather, geopolitical events or changing tastes really behind the slowdown, or is Black Friday losing its mojo?

Officially, Black Friday was an invention of the American retail sector wishing to goose their holiday sales. I remember back in the 1960s growing up in Philadelphia when the city's police department called the day after Thanksgiving "Black Friday," because of the traffic jams and crowded sidewalks that launched the holiday season. Retailers embraced the concept and attempted during the 1980s to transform the event into a family shopping tradition.

Over the years, however, as the numbers of “door busters” multiplied, and ad budgets skyrocketed,  it created some unanticipated results. Long lines, combined with a heightened mood of "get it first at any costs" led to some very un-Thanksgiving moments. Highly publicized damage to stores, fistfights among shoppers and other injuries, have led many to forsake this so-called tradition.

At the same time, retailers, in their drive to capture every available dollar of the consumer's money, pushed forward store opening times from early Friday morning to midnight to the recent decision to open their doors on Thanksgiving Day. For many, that latest move was the final straw that led to increased disenchantment with the entire idea. Labor organizations and social media campaigns have reacted by calling for consumers to boycott stores that have pushed the concept over the edge.

Then, too, some shoppers report a sense of fatigue as the holiday chatter escalates. The "only X days to Christmas" countdown has backfired on many of us. We find ourselves rejecting this pressure to spend, spend, and spend on the perfect gift that probably does not exist.

Then, too, the overall importance of the year-end holiday sales season is waning.

Competition among retailers is now so intense that some merchants are offering Black Friday-like sales in the middle of the summer. Others have been offering holiday discounts on merchandise for weeks and intend to keep offering it well after year-end. Shoppers now expect sale events on every major holiday. Not to be undone, stores are even inventing more holidays like "Single's Day" to lure shoppers. As a result, retail spending has become far more dispersed throughout the year.

If this is the case, why then do retailers continue to hype a concept that generates at least as much ill will as it does good will? For mass retailers, it is all about competition. Every dollar you spend elsewhere is a dollar they have lost. They are on a treadmill of their own making and haven't yet figured a way of getting off. When that occurs is up to us.

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 Bill@afewdollarsmore.com.


The Independent Investor: 'Bag Lady' Syndrome and You

By Bill Schmick
iBerkshires Columnist

Ladies, are you secretly terrified that you are going to end up penniless on the streets, begging for enough money to feed yourself? Well, join the crowd because almost 50 percent of women share your anxiety.

That's right, a high percentage of women, even those who make more than $30,000 per year (and 27 percent of women who have salaries over $200,000) are secretly (or not so secretly) worrying that they will become destitute in their old age. The study, conducted by Allianz, an insurance company, surveyed 2,200 women between the ages of 25 and 75.

You might discount these findings, figuring that most of the women surveyed were stay-at-home wives or wealthy widows. You would be wrong. Sixty percent identified themselves as the "breadwinner" in their family and 54 percent were the household's appointed keeper of the purse strings. Fifty-three percent of single, divorced and widowed women admitted to the bag lady syndrome but so did 43 percent of all married women.

It appears that these fears are not relegated to American women. German, Russian, English, just about all women across the pond, identify with the syndrome (although the jury is still out in regards to Asian women). It is understandable why women in America should be concerned, given the facts.

Women are almost twice as likely as men to live below the poverty line during retirement. Single and minority women feel it the most. Women, who are 65 or older; make do with a median income of around $16,000 a year, or $11,000 less than men of the same age. Why would that be?

Women earn and save less over their lifetime than men. I have written numerous columns detailing why. From the continued inequity of receiving less pay for the same job as men, to the erroneous assumption that men are the breadwinners and women are the caretakers, the odds continue to be stacked against women in this country (and in Europe).

However, the bag lady syndrome goes far beyond these obvious facts. It seems that men have this attitude toward work that a job is their birthright. If one doesn't work out for whatever the reason, there is always another one. If more money is needed, they simply work harder or get two jobs or assume they can and will do whatever it takes. Women, in general, don't usually feel that way for the following reasons.

While job opportunities are better for women than ever before in this country, in order to succeed, women still need to "show" they can do the job. They need to work harder, outperform and get along with their male counterparts to an extent that male workers do not. The system has still not come to grips with all that we expect from our women. They need to be mothers, home managers, caregivers for dependent parents, as well as professionals. Employers and Social Security (and tax-deferred savings plans) penalize them for taking time off for rearing children or parent care. As a result, they save less.

Curious to see how my female clients and friends would respond, I did my own small informal survey. I asked them if they were affected with the Bag Lady syndrome. Here is what they said.

"Yes, I do," said the 57-year-old president of a local company, who owns two houses, has substantial retirement savings and money in the bank. "I feel like I only have a small window of time when I can live on my savings, but what's going to happen when I'm 90 and my money and my husband are gone?"

"I fear I won't have enough money to retire. I'm 43 and even though I have full faith in my husband, what would happen if he died, or the market crashes or something like that," answers a 43-year-old, part-owner of a successful firm.

"I am pretty close to that ... for me it's not a fear, it is very close to becoming a reality," answers a single, middle-aged women, who is not only hard-working but intelligent and a former business owner.

Yet, the younger the woman I asked, the less concerned they were with what would happen to them by the time they reached retirement age.

"No, but I have a modified version of that syndrome," explained a 35-year-old professional with two young children. "I am concerned that my children won't be as comfortable growing up as I was. As for me, I can get a job, any job, if I want it enough and I'll never be destitute."

And finally this is the answer from a working, twentysomething female professional.

"No, not me, that's too far away to even think about,"

I can only assume that the further one is from retirement, the less anxiety there is among women over how they will support themselves in their old age. In addition, the workplace experiences of women today are far different from those of a middle-aged or elderly women. That could also change feminine attitudes in the future. We will wait and see.

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 Bill@afewdollarsmore.com.


The Independent Investor: Social Security & the Budget, Part II

By Bill Schmick
iBerkshires Columnist

Now that President Obama has signed the budget deal passed by Congress last week, it is time to take a look at how retirees have fared under the new provisions. For the most part, the changes were positive for elderly Americans.

In last week's column, I warned that the demise of File and Suspend and Restricted Application, which are Social Security claiming strategies, was all but certain. The final legislation confirmed that, but fortunately the new rules do not take effect immediately, as many had feared.

Those who are already receiving benefits from these strategies will be grandfathered in, meaning their benefits will not be affected at all. In addition, those who will reach retirement age within the next six months (or who are already retired), will still be able to take advantage of these strategies, at least until April 30 of next year. Anyone born after 1953 (or before) can still do a Restricted Application for spousal benefits, even if the filing won't occur until years from now.

For those who fail to fall within the above age guidelines, these claiming strategies are now off the table for you.

There is, however, some good news for seniors. Social Security disability insurance, which has been in a financial crisis, has been rescued, at least for now. There are 11 million Americans receiving disability benefits. These beneficiaries were facing a 20 percent cut in their benefits by 2016, but now that has been put off for three years. Lawmakers found a stop gap solution. Congress is increasing the percentage share of Social Security taxes (from 1.8 percent to 2.37 percent) that are earmarked for disability, thereby averting a shortfall.

At the same time, retirees were bracing themselves for a substantial hike in Medicare Part B premiums. These hikes could have amounted to as much as 52 percent for some beneficiaries. The budget deal averts that by allowing the U.S. Treasury to lend $7.5 billion to the Medicare program.

Premiums will still rise, by about 15 percent, which is still a sharp hike, but better than the worst-case scenario. In two years, Medicare beneficiaries will have to start repaying that loan by paying roughly $3 per beneficiary, per month.

In the future, we can expect more changes like this to occur as legislatures grapple with the runaway costs of the U.S. entitlement programs. I am not a believer in the death of Social Security, as so many predict. Instead, retirees will continue to see compromises, adjustments and the grandfathering of existing beneficiaries of our entitlement programs as lawmakers come up with solutions.

Political analysts were surprised by the common sense approach to these latest Social Security and Medicare negotiations. Now that Paul Ryan has taken the reigns as House Speaker, expect to see the same kind of approach in resolving entitlements, as well as tax reform. I don't expect any "grand bargain" on either issue. Readers may recall that both the president, as well as former House Speaker John Boehner, had repeatedly (and unsuccessfully) attempted to achieve such all-encompassing deals.  

Instead, expect moderate changes, pragmatic bargaining and incremental fixes to these programs. That's what I call progress.

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 Bill@afewdollarsmore.com.


The Independent Investor: Budget Deal Craters Social Security Strategies

By Bill Schmick
iBerkshires Columnist

The congressional budget deal that was passed last night will have a dramatic impact on several Social Security strategies. If you have been using, or considering using, the file and suspend clause to increase your Social Security payments, think again.

Back in February of this year, I wrote a column on "How to make the most out of Social Security." I explained that you could improve your total social security benefits, as well as your spouse's, by almost 13 percent by the time you both reach the age of 70. It's called "file and suspend" and occurs when the Social Security claimant files for benefits and then suspends receiving them, while collecting benefits for a spouse.

The ability to file and suspend was granted under the Senior Citizens' Freedom to Work Act of 2000. Although at first the strategy for married couples was an obscure oddity, overtime, especially in the past couple of years, it has become almost main stream with a growing number of financial planners and accountants recommending the strategy to their clients.

The impetus to change these "unintended loopholes" came about in President Obama's budget proposal for fiscal year 2015. The administration argued that these loopholes were simply "aggressive Social Security claiming strategies which allow upper-income beneficiaries to manipulate the timing of collection of Social Security benefits in order to maximize delayed retirement credits."

Senate Majority Leader Mitch McConnell, a Republican from Kentucky, said closing the loopholes would result in $168 billion in long-term savings.

It is hard to dispute these allegations, although a study by the Center for Retirement Research at Boston College found that only 46 percent of the benefits flowed to the top 40 percent of wealthy households. A couple aged 66 years old that used the file and suspend strategy would potentially be able to make more than $200,000 combined in extra benefits over their lifetime.

With that kind of return, not only the wealthy but anyone who could was jumping on the bandwagon.

There are other changes as well in the legislation. It appears that anyone who turns 62 next year or later would lose the right to collect just spousal benefits, for example. Another provision of the legislation would place a surcharge on higher-income recipients of Medicare.

What has surprised most professionals about the legislation was the speed in which these provisions will be implemented. Normally, changes such as these would give taxpayers plenty of time to adjust. Many who were already claiming these benefits would expected to be grandfathered and only new claimants would be impacted.

Preliminary indications are that in this case the changes would be enacted immediately and no one will be grandfathered but the situation is still fluid. The House passed the legislation 222-167 and now the bill moves to the Senate. Since Nov. 3 is the deadline on the debt ceiling, (when the government's borrowing authority runs out) this budget must be passed no later than next week.

There is still time for some backroom horse-trading in which retirees would be given more time, say six more months or so, before the changes went into effect. Clearly, if you are using one of these claiming strategies, a call to your financial planner or accountant is in order sometime soon to see what the fall out will be once the budget is passed.

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 Bill@afewdollarsmore.com.


The Independent Investor: Water Scarcity Not Only California's Problem

By Bill Schmick
iBerkshires Staff

Just about everyone is aware of the California water crisis. You may be tempted to simply dismiss this on-going event as a local problem, but it isn't. Our world is running out of water and we are on the brink of a freshwater shortage.

At least that is the conclusion of NASA, in a recent report that argues that even giant lakes are disappearing. The agency believes that sometime within the next 35 years the globe will be facing a long and protracted drought of epic proportions.

You might say, "So what? We have plenty of time to come up with solutions. Besides, the 'authorities' will handle it." A look at what is happening in California might dissuade you of that view. Take the Sierra Nevada snowpack, which supplies much of that state's water needs in places like Los Angeles, San Francisco and the Central Valley farms. The snowpack is at a 500-year low. It won't be rebuilt anytime soon.

California is the nation's largest agricultural producer and exporter. It grows more than a third of all our vegetables and two-thirds of our fruits and nuts. The Central Valley, an area roughly 450 miles long and 60 miles wide, is also the U.S.'s top dairy producing region. Thanks to the drought, the water bill for just one 10-acre farm was $33,000 last year versus $3,200 the year before. Farm losses this year could total $2.8 billion.

But it is not only the economic loss that must be calculated. The damage to wildlife is enormous. At least 18 species of fish, including salmon and trout, face extinction. Five million birds or more migrating along the Pacific Flyway are also at risk of starvation and disease.

You may or may not believe global warming is behind this crisis, but leaving aside this debate, both sides cannot dispute that the overuse of groundwater from aquifers is a leading factor worldwide in the coming crisis. Aquifers are underground layers of rocks, sand and silt that store fresh water. These natural wells can be thousands, if not millions, of years old. We have been pumping water out of these wells for eons. Entire cities have sprung up above these natural wells and that has become a problem.

Some aquifers are shallow enough to be refilled through precipitation over time. Unfortunately, for places like California, where the area is experiencing both record lows in rainfall and snow (in addition to record heat) that process is not occurring. And even if it was, the key word in replenishment is time.  Many cities, states and countries are running out of time. Even worse, many more aquifers are deep underground and once depleted are gone forever.

People in Iran, Brazil, and the United Arab Emirates, to name just a few affected areas, are already suffering from this water shortage. Without water, food becomes scarce, employment disappears and political unrest springs to the forefront. Some argue that the conflicts in Syria are more about the lack of water and all the hardship that it creates than it is about politics or religion. Scientists also point to groundwater contamination by pesticides, fertilizers and even hydraulic fracking as another cause of water shortage globally.

As for the "authorities", although California has known of their water shortage problem for decades, it was only this year that Gov. Jerry Brown implemented the state's first water-use restrictions. Restrictions, by the way, are not solutions. Combating this coming worldwide drought will require money, years of effort, and both radical and innovative responses by everyone.

Many solutions are already available. Solar-powered water purifiers, desalination plants, leak monitors, CO2 cleaners, even technologically innovative shower heads are available. What is lacking is the will to implement these solutions now.

Today's politicians are hoping that this year's El Nino will provide enough rain to break California's drought so that the water shortage problem will go away. This out-of-sight, out-of-mind approach to this impending challenge is about what we can expect from our "authorities."

In the meantime, while we wait for this crisis to develop, why don't you begin by doing your part? Go spend the money to at least buy a new water-efficient shower head. Over the course of the next decade, it could save the world thousands, if not hundreds of thousands, of liters of water every year.

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 Bill@afewdollarsmore.com.

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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 Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.




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