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.

Like hucksters selling hot dogs in the ball park, the media is having a field day with the Japanese nuclear crisis. Americans, fearing for their safety, immediately bought out the nation's supply of potassium iodide tablets. Investors are panicking worldwide, dumping trillions in equities, commodity and currency investments indiscriminately. There are so many rumors, falsehoods and downright lies flying around the airways that I am astounded we continue to tune into this drivel. I believe we all need to calm down and turn our TVs off.

As a former Fulbright Fellow to Japan, who has lived and spent a great deal of time in that wonderful country, I pray for a successful end to this nuclear crisis and a speedy economic and social recovery for the Japanese people, as I'm sure we all do. Events around the Fukushima reactor in Japan are precarious as I write this. Yet the knee-jerk response of the world's governments, citizens and investors, as illustrated by the volatility in the financial markets, once again proves my point — the markets are not efficient, never will be and there, my reader, provides the opportunity for you to prosper.

The Efficient Market Hypothesis (EMH), a theory concocted by academicians and followed stringently by those on Wall Street, maintains the current prices of securities reflect all information known about the security. They argue that investors cannot expect to outperform the overall market consistently on a risk-adjusted basis. Day-to-day changes in the market prices of securities cannot be predicted with any reliable degree of accuracy. Therefore any trading, security analysis or buy and sell strategies are of no value.

If these same market participants took the time to analyze the information coming out of Japan this week, I can't see how even a countrywide nuclear disaster in Japan will impact stocks in the U.S. or Europe or numerous other countries throughout the world.

Assurances that the fallout from these reactors, in a worst-case scenario would not create a Chernobyl-type calamity, have fallen on deaf ears. Dire predictions that this catastrophe will set back economic growth in Japan for years do not square with history, nor do forecasts that Japan's problems will put an end to our own recovery.

Most studies of similar disasters throughout the last few decades indicate Japan may suffer a quarter or two of slower economic growth followed by a pickup in GDP as reconstruction spending takes hold. In addition, the disaster occurred in Sendai, in northern Japan, which accounts for less than 2 percent of Japanese output.

The risk of nuclear fallout floating to this side of the Pacific has such a low probability that buying up iodine tablets on eBay for over $200 (more than 10 times the usual price) may make sense if you lived 25 miles from the Fukushima reactors, but here in the U.S. it makes no sense.

It also makes little sense to talk of abandoning nuclear energy as an alternative fuel source. I find nothing wrong with checking the 104 reactors in this country for possible weaknesses. I think that should be done on a regular basis anyway. America has not built a new nuclear energy unit since the Three Mile Island disaster. It would be a shame to once again abandon this strategic energy source because of events in Japan.

So what are my recommendations in dealing with this debacle?

This sell-off has created so many buying opportunities in so many sectors that this should be called the great global giveaway in equities. In my opinion we are very close to a bottom. In last weekend's column I wrote that I expected no more than a 5 percent decline in the S&P 500. We have already dropped 3 percent of that total. Some obvious places where the selling appears to be overdone are the nuclear energy sector and, of course, Japan. For long term investors, I wish you happy hunting.

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.