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The Independent Investor: Let's Have a Jewelry Party

By Bill Schmick
iBerkshires Columnist

Contrary to all the present and future trends in retailing, multilevel marketing (MLM) is still alive and well in this country. Exactly what is MLM and why are so many Americans enamored with hitting up their friends and relatives in an effort to succeed at personal retailing?

MLM is a marketing strategy in which the sales force is compensated not only for what they sell but for the sales of other people they recruit. These new recruits in the chain are referred to as the participant's "downline" and, if done right, can provide multiple streams of compensation.

Most readers are familiar with these companies. Amway, Avon and Mary Kay come to mind, as does Herbalife, a company most recently accused of being nothing more than a pyramid scheme. Many of these companies have been around since the late sixties and have never accounted for more than 1 percent of retail sales in the United States. And yet, every day hundreds, if not thousands, of new recruits are happy to shell out money, time and effort in order to win the golden ring of promise so aptly portrayed in MLM advertising.

A look at just one jewelry website gives one a flavor of the sales pitch. Not only will you create lasting friendships, make your own hours and get rewarded every step of the way, promises the company, but "a consultant holding just 1 average party a week, earns $850/month," while "a leader holding two parties a week with a team of three consultants will earn about $3,000/month,"

For someone sitting at home as a house spouse or looking to make some part-time money, these offers can be irresistible.

"I wanted to make some extra money," said one newly-minted saleswoman/social worker, who also happens to have a master's degree in psychotherapy and a private practice in the same field. "It is part time, a different kind of work and it's fun, besides I don't have to go back to school or retrain to sell jewelry."

She has only been doing it for a month and has already made $1,000 plus $700 in free jewelry. All she was required to invest was $139 for a starter kit of forms, brochures and jewelry. So far she has held four parties. The guests have been all her family and friends in the area, which is typically how new salespeople get started. But what happens when she runs out of people she knows?

"I haven't really thought that far ahead," she confesses. "I'm a little obsessed with it all. I'm having fun with it, but really haven't thought about how things will turn out down the road. I guess I could move out of my region if I wanted more clients."

Barbara, my wife and president of Berkshire Money Management, has attended four of these events and hosted one of them. Twelve of her friends showed up and bought over $1,500 in merchandise. She received $500 in free jewelry for hosting the event.

"It's really an excuse to get together with my women friends and have fun. I guess I've spent $100 per party so far, but for most of us who have attended there will come a time where we won't buy any more. For example, I am committed to attending four more parties but at most I plan to buy only one piece."

Granted, these are only anecdotal incidents, but clearly both buyers and sellers seem to be enjoying the process. It is these attractions which make the MLM business so enticing to so many. In my next column, we will look at the pitfalls to avoid if you are thinking of entering personal retailing on your own.

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: Traders Build a Wall of Worry

By Bill Schmick
iBerkshires Columnist

The markets are marking time. Earnings season is just about over. The lofty levels of the stock market survived those results largely because they were not quite as bad as expected. Now it is on to the next worry.

Pick your poison — uncertainty over this summer's political conventions, can oil prices sustain these price levels or how about the possibility of a Fed rate hike in June? No question, there is a wall of worry out there, but so far the markets have weathered everything the bears have thrown at them. That is quite impressive given that we have had a 13 percent gain from the lows and hovering just a percent or so below all-time highs.

We have been trading in a tight range on the S&P 500 between 2050 and 2080 for a week or two. Stocks overall are going up or down depending on that days company results. Now, we should see prices break to the downside or, more likely, to the upside unless something unexpected occurs.

For example, the dollar (also in a tight trading range) could climb higher. That would threaten oil prices as well as the recent commodity run. Usually, a stronger dollar has a negative correlation with commodities.

Then there is Trump versus Clinton with Bernie still in the race. Most clients I talk to are quite worried about the outcome of the elections. In addition, all of the candidates continue to bang the drum of unemployment and weak economy. People tend to believe what they hear on the television news, if it is repeated enough times. Although the evidence does not support these political claims, when has a politician ever worried about the facts?

Then there is the never-ending central bank production of "will they or won't they" that is playing to a sellout crowd. Never has there been so many who have worried so much over so small a rate hike. A new rumor or forecast over what the Fed will do next is always good for a 20-point move one way or the other.

Some readers have asked me if the year-long correlation between oil and stocks has been broken. That remains to be seen. As long as oil trades between $40-$45 a barrell, I think stock markets will focus on something else. However, if oil decides to move markedly lower, I am sure stocks will fall along with energy.

As I have written in the past, oil prices are notoriously hard to predict, but between now and mid-summer, demand for oil is usually stronger. So I suspect the risk of a waterfall decline in oil, if it were to occur, would likely be an August or September threat.

I am still worried, however, about a potential double-digit pullback in stocks sometime this summer. One scenario that could unfold might go something like this: the stock market climbs, surpassing the old highs. Even the bulls are surprised. That triggers a rush into the market. At that point, when most of the bears cover their shorts and talking heads are confidently predicting another 10 percent upside, we fail. The markets roll over as one of the fears outlined above comes true and down we go.

Could it happen that way? Sure it could. Stock markets can be extremely volatile during election campaigns. Add in the summer doldrums where there are fewer participants to lend sanity to the craziness of high frequency traders and you have a recipe for big market moves.

In any case, if this scenario plays out, I fully expect the stock market to recoup any losses and finish the year positive.

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: Giving Up Control in the Event You Need To

By Bill Schmick
iBerkshires Columnist

The more successful you are, the more difficulty you face in wrestling with one inescapable fact. In preparing to pass the torch to your heirs, you need to give them the power to decide what happens to you and your estate in the event you can't.

That's not an easy thing to get your arms around if you have been the go-to guy or gal that the family depends on when life's hard knocks come visiting. How do you entrust your own health and wealth to others? Even if you love them to death, are they really capable of taking care of you in your time of need?

No question, it is a problem that you need to deal with and resolve before that family meeting I have been writing about in this series. Specifically, there are three documents you must create and complete: a durable power of attorney (DPOA), a living will and a health-care proxy.

Let's begin with the DPOA.

This document allows someone to act on your behalf or allows you to act on someone else's behalf, such as your parents. That means you can sign checks for them and other legal documents like tax returns, etc. Bottom line: the DPOA allows someone to control your money, so you better be sure whoever you pick is trustworthy, responsible and knows something about managing money. It is best to name one person and have another as a back-up just in case.

In addition, it is important that you or your parents have a durable power of attorney for each other. I had a client who failed to do so and created for his wife endless problems. She could not change investments for him in his tax-deferred accounts when the markets took a dive, nor could she draw money from his checking account to pay bills.

A living will is different than a will, which I covered in a prior column. While a will explains to your heirs who gets what, the living will is all about advance directives. These are legal directions you want followed in the event you require serious medical care. Your living will would address questions such as the kind of medical treatment you want (or don't want), which person can make medical decisions for you when you can't, or how comfortable you want to be and what, if anything, you want your loved ones to know.

For those interested, you can actually purchase a copy of something called "Five Wishes" from Aging with Dignity based in Florida for a nominal sum. It addresses all of the above concerns and can act as a legal document as long as it is witnessed and notarized. Take a look at it on the Internet.

The second advance directive is familiar to many of us — the health care proxy, also called a health-care power of attorney. The person who holds this power is equally as important as whoever you trust with your DPOA. The health care proxy holder has the responsibility of making certain that the doctors and medical staff carry out your wishes specified in your living will.

In the event of a life and death decision, it is this person who has the authority to make that call. Your child may not be the best person for this job. I know my wife had that responsibility when her father became ill and it is not a pleasant task. You may want to select a close friend instead and never select more than one person.

I realize that this has not been the most uplifting of columns. The sober subject matter can certainly be a downer, but it is necessary. It will be a big elephant in the room when your family meeting gets started. You may even want to pass this column along to your prospective heirs before discussing you or your parents' thinking on these subjects. The point is to begin the conversations now rather than wait until it may be too late.

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: It May Be That Time Again

By Bill Schmick
iBerkshires Columnist

For traders, the old adage to "Sell in May" is now upon us. Over the past 40-plus years this recommendation has worked over 70 percent of the time. Should you go with the statistics or ignore them?

As regular readers know, the S&P 500 Index has already reached my target of 2,100. We did so over two weeks ago and until yesterday the bulls have been trying to break over that line and get back to the historical highs around 2,134.

The perfect excuse to do so should have occurred on Wednesday when the central bank's Federal Open Market Committee announced their latest decision to keep rates where they are.

The wording of the news release was almost identical to last month's statement. Rather than roar, (as stocks usually do after dovish words like that) the markets, instead, could barely eke out a gain for the day.

"Hmmm."

Notice, too, that despite an almost 17 percent increase in the price of oil thus far in April, stocks have done nothing. What, you may ask, has happened to the stock/oil price correlation that has been with us since the beginning of the year?

Then there is the dollar, specifically dollar weakness, which has dropped below 94 on the U.S. Dollar Index. That has been a line in the sand support for the greenback against a basket of foreign currencies all year. One would think that would be good for the economy — cheaper exports, better corporate earnings — but the markets are a fickle lot. They decided this week a weaker dollar might reflect a weaker economy. The slide in the dollar really accelerated this week when the Bank of Japan disappointed investors by failing to provide even more stimulus to their economy.

"Hmmm, Hmmm."

Of course none of this seems to faze the commodity speculators who blithely bid up the price of precious metals, agricultural products, base metals, energy and the kitchen sink. What, you might ask, is driving commodity prices higher? One word — China. That's right, now that the Chinese government has made it more difficult for the multitude to speculate in their stock markets, they have turned their attention to the commodity markets.

At its peak, as an example, iron ore prices have risen 73 percent and rebar 62 percent in Shanghai since the beginning of the year. Inveterate gamblers, both retail and professional, are now doing the same thing to global commodity prices that they did in their stock market last year. China's securities regulators started cracking down on the country's commodities futures exchanges this week to prevent further speculation.

I warned readers in my column last week not to chase commodities. I repeat that warning now. Recall what happened to the Chinese stock market when regulators curbed speculation last year? Stocks fell 40 percent and took global markets down with them. Could that happen again in the commodities markets? Is the Pope Catholic?

"Hmm, Hmmm, Hmmm."

I could go on and mention how corporate earnings this quarter are really turning out as bad as people feared, although there have been some notable exceptions. Then there is the devastation that is occurring on the NASDAQ. Could that index be foretelling a pullback in the overall market?

The answer is yes but don't worry, it is not Armageddon. It is simply a much-needed correction in a stock market that has gained 13 percent in less than two months. Remember how I warned readers to examine their risk tolerance a few weeks back? Well, welcome to the new stock market, which is just chock-full of volatility and will remain so for the foreseeable future.

I think we will see an up and down market throughout the summer. Remember that we still have the presidential conventions to contend with in June and July. Don't get me started on that subject! But I digress.

This pullback could see the S&P 500 fall to 2,140 or so, as a first stop. Of course, since it is hard to make short-term predictions like this, it could fall even further to the 200-day moving average. That would put us back to 2,114 on the index. If so, that would be a healthy sign in a market that has been overbought for weeks.

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: What Do Prince, You and a Will Have in Common?

By Bill Schmick
iBerkshires Columnist

What do Prince, you and a will have in common? The short answer is maybe nothing, unless, like so many of us, you still have not finalized such a document. If you haven't, get on the phone with a lawyer and get it done.

The passing of Prince was a sad day, but even sadder is the fact that this week his sister just opened a probate case in Carver County, Minn., the home of the late rock star.

"I do not know of the existence of a will and have no reason to believe that the Decedent executed testamentary documents in any form," Tyka Nelson wrote in her filing.

Prince had no spouse or children but he does have several siblings and an estate valued at $300 million. There is also the supposed treasure trove of unreleased musical material, a sizable estate tax bill (if no estate planning was in place) and who knows what else. One thing is sure; there will be plenty of time, effort, controversy and expense necessary to resolve a settlement through probate court. All of which was unnecessary if Prince had lived long enough to read this column.

You may not have the wealth of Prince, but you do have an estate. Don't leave the courts to decide who and how much of your assets your family members will receive. If you do, you are leaving your loved ones needless expense, confusion and possibly bad feelings. That is not the kind of legacy you want to leave.

If you don't leave a will, the courts will name an executor who will oversee the settling of your estate and they charge a large fee to do so. In addition, every state has its own rules and regulations covering estates and without a will, your assets are subject to the whims of whatever state you happen to be residing in when you pass.

For the most part, many of us never drafted a will. A document like that would force us to emotionally acknowledge that someday we are going to die. What we draft in that will, after all, is final. Then there are those among us who, like Prince "thought he'd live until he was one thousand nine hundred and ninety-nine years old," according to his former attorney and close friend, Londell McMillian.

Each of your parents and/or you and your spouse should draft individual wills because your spouse may have different personal desires than you. Every nitty-gritty object or item does not necessarily have to be spelled out, but rather your will should explain who receives what among your tangible property. A letter of instruction can be attached to your will outlining and identifying specific items that will go to certain individuals.

No one likes to pay lawyer's fees, but in this case I suggest you hire an attorney to help draft your will. It is imperative that the will is considered a legal document in the state where you claim residency. I would also look for a lawyer who is familiar with estate planning rather than real estate or some other area.

Not every asset you own needs to be included in the will. Life insurance policies, annuities, IRAs and other retirement plans, for example, should have had your heirs (beneficiaries) listed at the time you purchased or opened those investments. Those listed on the beneficiary statement of these investments takes precedence over anything you may direct in your will. If, for example, your insurance policy of 30 years ago lists your now-deceased parents as beneficiaries and your will states your spouse, sorry to say that your parent's estate receives the insurance money. If you haven't done it already, it would be a good idea to gather all your investment and insurance policies in one place and check that all the proper beneficiaries are in place.

In my next column, we will discuss additional tools you will need in order to pass from this world into the next without worrying about your heirs. In the meantime, take hold of your destiny today and call an estate planning attorney.

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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