In last week's market column, I warned readers of an impending decline of as much as 5 percent in the stock markets. I realize that not everyone receives both my columns each week. The important thing to know is that 4 percent of that drop has occurred but we may still have a re-test of the lows. 

Over the last few days I have been making a lot of what I call "hand holding" calls. These conversations are meant to summarize the events in both Japan and the Middle East, explain how we are dealing with this crisis, and answer any questions people may have. I soon discovered that my clients (and people in general) have been subjected to a lot of misconceptions, misinformation and still have many unanswered questions surrounding these crises. So let's try to set the record straight.

"What's going to happen in the Middle East?" asked a local business owner from Pittsfield.

By now you know that the United Nations declared a no-fly zone over Libya on Friday. In response, Libya's foreign minister quickly declared a cease fire, but as of this writing, battles still rage within the country. On the news, both oil and precious metals declined from overnight highs. All three of those commodities have gyrated wildly all week in response to global events.

At the crux of this controversy, investors fear that while Libya is a small player in the oil markets, unrest in the region, whether in Gaddafi land, Bahrain or elsewhere, could spread to Saudi Arabia. Unrest within the Kingdom would jeopardize a much larger piece of the world's energy pie and could cripple global economic growth.

The ruler of Saudi Arabia, King Abdullah, has decided to short circuit any political unrest in his kingdom by buying off the people who count. Friday he announced a multibillion dollar boost in welfare benefits, bonuses for public-sector workers (including the army) and a massive program of new housing. This follows last month's $37 billion giveaway. Some of the money will also be spent on hiring, ahem, 60,000 new "security guards" at the interior ministry just in case this bribe does not appease all of the populace.

My belief is that tensions in the Middle East may continue, but their power to impact world equity markets is diminishing and as they do, the price of oil will slowly sink back to my target of $80-$90 a barrel, which seems a reasonable price for oil, given world economic growth.

Japan's crisis around the Fukushima nuclear plant, on the other hand, is still a wild card. No one knows what will happen in the days ahead. I maintain that, if the worst should occur, it will not have a substantial impact on the United States. The uncertainty, however, will keep world markets volatile for a bit longer.

If I measure this pullback from top to bottom, we have had a 7.01 percent decline. Over the last few days we have been experiencing a relief rally that has reclaimed about 3 percent of that fall. I am not certain that we have seen the lows yet on the S&P 500 Index. We could still test the 1,225-1,235 level if there were to be a nuclear meltdown at Fukushima or an air war with Libyan forces.

None of that changes my strategy and hopefully yours. This is a pull back to be bought. Don't try to catch the very bottom, simply add to your positions on down days. You should have been doing just that this week. I know I have.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles 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 e-mail him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.