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Independent Investor: Millennials The Misunderstood Generation

By Bill Schmick
iBerkshires Columnist

Millennials are feeling good about their financial future, says one survey. Another poll tells us that this same class of Americans is giving up on getting rich. Both can't be right and yet they are.

The first thing you have to understand is that attitudes change depending upon one's circumstances. In a recent poll by Bloomberg, for example, 47 percent of Americans between the ages of 18-35 believed that they do not expect to live better than their parents.

That is understandable if, for example, you happen to be living under your parent's roof (and 15 percent of millennials are). It is darn difficult to imagine living better than your folks under those circumstances. This is especially true if your own parents owned a home at your age. But is this a permanent situation or will higher income and a relaxation of strict mortgage lending standards change their perspective in the future?

Student debt can also impact a young person's attitude. How can one save for the future or put a down payment on a home when every spare cent you make is earmarked to pay off that student debt? However, over time, that debt will disappear, if and when it does, will the millennials attitude change as well?

While one poll paints doom and gloom, another, this one by Wells Fargo, "How America Buys and Borrows," came to the opposite conclusion. Their survey reflects optimism with 28 percent of millennials viewing their current financial situation favorably versus 24 percent of the general population. The survey goes on to say that nearly one-third of millennials plan to buy a home in the next three years compared to the general population's 19 percent.  In 2014, 84 percent of millennials said their financial situations were stable to strong and 94 percent expected their personal financial situation to get better or stay the same.

You can find the same contradictions throughout the workplace. Polls tell you that social media has turned these millennials into team players. At the same time, this same group hates to be managed and is allergic to ideas of careerism. Some research will tell you the opposite: that competition is their driving force and they do not have much faith in their co-workers.

I could go on and on, but what explains these contradictions, in my opinion, is trying to generalize about a generation when much of what is going on is simply part of the aging process. A generation whose birth dates span 20 years (from 1980-2000), will experience changes in attitudes as they grow older and acquire more experience, especially in the work world.

Today we all want to apply our modern behavior studies and technologically sophisticated marketing tools to pigeon-hole a demographic group that is changing all the time. Like generations before them, the Millennials who have been on the job 10 years will have a different perspective (and income) than those just starting out.

Does that explain away all the differences between the Baby Boomers, for example, and this Generation "Y," of course not? In prior columns, I have identified many differences, such as their reliance on social media to communicate and access knowledge and news. Consumption patterns are clearly different from choosing less than more in living space, in valuing experience over acquiring "stuff" and in many other attitudes involving everything from social values to raising children.

The point is to sort through fact from fiction and identify the generational differences, which may not be as large as we think, and the more transitory and age-related changes that every generation experiences.

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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@theMarket: October Should Be the Bottom

By Bill Schmick
iBerkshires Columnist

The third quarter was the worst for stocks in four years. Here we are in October and if history is any guide, investors should expect a bottom in the stock markets over the next three weeks.

That does not necessarily mean that history is a dependable guide. Historical data has proven to be less than helpful over the last few years. That is largely because the central bank's heavy hand in the financial markets since 2008 has skewed the data. Their intervention in both the bond and stock markets has made technical as well as fundamental tools of investing all but meaningless in valuing the markets.

I have been expecting the stock markets to re-test their lows made on Aug. 24, something we have yet to accomplish. Until we do, this correction will continue. Last week, we got close (within 4 points on the S&P 500 Index).  But markets tend to overshoot. It would not surprise me if we actually broke those lows and fell even further. That would create a panic among investors, in my opinion. And panic is what usually signals a bottom.

In addition, October is the perfect month for this to occur. The historical pattern indicates that this month should begin badly for the markets, but reverse course by the end of the month. The only problem with this scenario is that almost everyone is expecting the same thing. As a contrarian that worries me.

Certainly there is little evidence so far of the kind of reversal I am expecting. The news seems to go from bad to worse. Friday's unemployment number was much weaker than economists were expecting and triggered worries that the U.S. economy might be stalling. I don't believe you can base your assumptions on one data point, no matter what it is. The unemployment numbers have been notoriously unreliable when viewed week-to-week or even monthly.

But that didn't stop the algorithmic computers and day traders from hitting the sell button across the board on Friday morning. Investors can expect the wilds swings that we have been experiencing over the last two months to continue a bit longer. I know that most readers are worried. The tendency is to check your portfolios more and more frequently. As the stock market declines, commentators and the media always become more bearish and so will you.

The atmosphere becomes charged with emotion. As more and more pundits turn negative, they try to outdo one another in painting "what if" scenarios. The markets "could" drop much further, they say, without explaining why that would be the case. These are the same jokesters who were screaming "buy, buy, buy" at the top of the market. My advice is to ignore the circus.

Focus on what is important. Yes, your portfolios are lower than at the beginning of the year, but that doesn't mean that by year-end those paper losses won't be paired or completely disappear. I still think we will end the year positive, if only by single digits. That's why I have not changed my forecasts. So far just about everything that has happened has gone according to my playbook. Keep the faith and keep invested.

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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The Independent Investor: The Stock Market & You

By Bill Schmick
iBerkshires Columnist

If one listens to the chatter throughout the financial media, you are most likely at your wits end in worry. No matter how much we may tell ourselves that this is not another 2008, the gnawing doubt in the pit of our stomach remains.

Let me say categorically that we are not entering another financial crisis. The stock market is not going to drop 50 percent from here, no matter what some strategists are saying. If you have been reading my columns since 2007, you know that when it's time to raise cash I say so. This is not one of those times.  You may not agree with me, (although you want to) so let me give you some food for thought.

Although the stock market and the economy do not necessarily perform in lock step, over time, they tend to trend in the same direction. The U.S. economy is growing moderately, employment is rising and there is nothing on the horizon that indicates that the economy is changing direction. This is decidedly different from 2008.

On the other hand, the stock market over the course of the last year or so may have gotten a bit ahead of itself. It is this discrepancy that is behind the present correction within the financial markets. As the economy continues to grow and interest rates begin to rise, investors are searching for a price level that more accurately reflects this new environment.

This adjustment period is almost over. The ultimate level in which investors finally agree that stocks represent "fair" value may be here or a 100 points lower on the S&P 500 Index. If your time horizon is anything longer than next week, that level should not be as important as the longer term direction of the market. To date, there is no evidence that the stock market has changed its long-term trend, which is up.

Over the past several years, most investors have experienced fairly good gains in their portfolios. To some extent, the market's stellar performance since the financial crisis has conditioned investors to expect more of the same. Anything less fills us with consternation. The problem is that expectation is not based in financial reality. Markets go up and markets go down.

It would be just wonderful if you (or your financial adviser) could time the market: selling at the top and buying at the bottom. Unfortunately, no one has been able to do that consistently in my experience. Investing is a process where no one catches the bottom (or the tops) but instead invests along the way. Normally, the best time to buy is in an environment like we are experiencing right now. Conversely, it is absolutely the worst time to sell (although emotionally that's just what you want to do).

How do you keep from making emotional decisions with your portfolio that you will regret later on? Stop looking at your account every day or week. Does knowing what you gained or lost on a daily basis help you make investment decisions for the long term?  Compare your attitude toward the stock market with how you look at the real estate market.

 Ask yourself this question, how much is your house worth today? You don't know, do you? And yet, for most of us, our house is worth more (in many cases several times more) than our financial portfolio. If your house were to fall by $10,000 by the end of this month, would you sell it? Of course not - because it is a long-term investment. In order to invest successfully, you must view your financial investments in the same way.

Don't get me wrong, losing money (even if it's only paper losses) hurts like the Bejeezus, The pain of losing is far worse than the jog of gaining. It's just how we humans are built. Just remember, we have all been here before and those who have stayed the course have benefited the most. This time will be no different.

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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The Independent Investor: How Cell Phones Hurt Your Productivity

By Bill Schmick
iBerkshires Columnist

Forty-two years ago, when the cell phone was first invented, the new device was hailed as a major tool in boosting everyone's productivity. Today, we are discovering that the opposite is true. The cell phone has become a major distraction.

Ever notice how many people on the job are making cell phone calls? Cops, clerks, nurses, brokers — it doesn't matter who they are — their dependence on their cell phone is almost an addiction. New research reveals that you don't even have to answer your phone to reduce your productivity.

A study by the Journal of Experimental Psychology discovered that subjects who needed intense focus in their daily routines performed poorly when they simply received notification of a text or call on their phone. Their productivity dropped dramatically even if they chose to ignore the notification. Researchers call it the "degree of distraction."

Recently, I tested this concept on myself. My friends and relations will attest to my lack of interest in all things cellular. I regularly forget my phone. Many times my wife will call me on my cell, only to hear it ring on the kitchen counter next to her.

But I have grudgingly been attempting to join the 21st century in my electronic life. As such, I have a brand-new smart phone, a watch that tells me I have a call (as well as my heart rate) and an tablet at home. Over the last week, I've made sure my cell phone was on my desk, fully charged and "on" in my own experiment. I wanted to test my own level of distraction.

Money management requires a fair bit of focus; writing columns even more. Usually, I am under a deadline when I write. Producing readable copy regularly requires an enormous amount of concentration on my part. I try not to be disturbed during this process because it does throw off my focus.

This morning my cell phone was on and I received three calls and several text messages that I did not answer. Nonetheless, it took me an extra hour to complete this column. The same thing happened earlier in the week while writing another column. For me, simply the knowledge of receiving a message triggered a distracting stream of questions — who was calling me and why, was the message important, was it an emergency? Suffice it to say that I did check and see who had called just to put my mind at ease.

Granted, it was a most unscientific experiment, but it does support a growing volume of research on the subject. Although in this day and age multi-tasking is a daily chore, the facts are that human beings are really not that good at it. Workers think that they can text or access social media sites such as Facebook, Twitter or Snapchat and still maintain productivity. The facts are that the average office worker wastes over one-third of the day on these pursuits and that brings down their productivity level drastically.

Not only do cellphones create constant distractions, but they often interrupt important meetings. They can also represent a security risk, mixing personal and business applications on one phone. They can prove physically dangerous to those employees who believe they can multitask while performing physical work. Sometimes they can spread confidential information in the public, which is a big concern in my business.

All in all, while your cell phone can be a useful tool in your life, best practices in the work place would be to turn it off and put it a drawer until after the work day is done.

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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@theMarket: Back to the Future

By Bill Schmick
iBerkshires Columnist

The Federal Reserve Bank postponed hiking interest rates. Global stock markets swooned on what should have been good news. We are back to anticipating what the central bank will do in the future.

Investors are well equipped to handle both positive and negative scenarios, but they can't stand the unknown. And that is exactly what we face for the remainder of the year.

Last week, I predicted the Fed would not raise rates. I argued that based on their achieving only one of their objectives, job growth, the bank would hold off. The rate of inflation, their second objective, has yet to reach their target of 2 percent. There is little evidence that indicates that target rate will be reached any time soon.

Fed Chairwoman Janet Yellen, in her press conference after the FOMC meeting, also indicated that the state of global economies was a concern. Her words echoed the IMF's warnings (also mentioned last week) that now was not the time to raise U.S. interest rates.

In the past, whenever the Fed applied more stimuli to the economy, (or in this case failed to tighten), the markets took it positively. That is understandable given past financial history.

More stimuli equaled lower interest rates, equaled higher stock markets. However, that causal relationship might be wearing thin. Although central bankers have poured over $8 trillion into the global economies over the last few years, economic growth rates have remained stubbornly

The Fed would be the first one to tell you (and has continuously through the years) that monetary policy can only do so much. Without help from the government's fiscal side, (read increased spending) the impact of simply keeping interest rates low is dubious. Over the past seven years in this country, legislatures, led by the Republican Party, have rejected that concept.

Instead, they have done the opposite, with the help of politicians on the other side of the aisle. Even today, the same rhetoric of reduced spending is one of the main planks in every GOP candidate's platform. I vehemently disagree and have advocated the opposite since the onset of the financial crisis. But now is not the time to debate this subject. After all, this is a column about markets.

I maintain that markets will remain volatile for a few more weeks and that a re-test of the August lows is required before this period of correction is over. This past week the majority of traders, expecting that the Fed would not hike rates, bid the markets up to a technical level of resistance, in this case 2,020 on the S&P 500 Index, and then took profits. It was a classic exercise of "sell on the news," which happens quite often in markets like this.

Over the next few weeks, I expect we will fall back to the 1,860 level on the S&P 500 index and maybe a little below that. Selling will be fueled by the same set of circumstances that has bedeviled the markets since the beginning of the correction in August. In summary, we have returned to the pre-Fed meeting guessing game.

What will the Fed do in the future? Are rates off the table for this year? The Fed says no, but states that it is still dependent on the data. It is hard for me to see what is going to increase the rate of inflation to the Fed's target rate this year, ditto to expectations that we will see a lift-off in overseas economies that quickly.

In the meantime, traders are in charge and their time horizon is down to microseconds.

Your only recourse is to ignore the noise, because that is what most of this worry is about, and, look to November and December when the bulls take over again.

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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