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@theMarket: Markets Are at an Important Level

By Bill Schmick
iBerkshires Columnist

Stocks spent the last week consolidating. It was a necessary exercise, since stocks were overbought. Now that condition is behind us, and markets climbed higher by the end of this week. We are now at an important level. Call it a moment of truth that will indicate to investors whether the correction is over.

Up until now, the majority of traders have considered the 11 percent rally we have enjoyed in the S&P 500 Index since February nothing more than a bear market rally. But breaking above the 200 Day Moving Average (200 DMA) would make this an entirely new ballgame.

As I have written in the past, the 200 DMA is a technical level. It is simply a security's average closing price over the last 200 days. In the case of an index, like the S&P, it is the average closing price of the 500 stocks that comprise that index.  

It is probably the most important and cleanest indicator that analysts use to determine whether stocks are in a bear, versus a bull market. This indicator has kept investors on the right side of a trade for decades. For those who follow it, as long as the stock market stays below the 200 DMA, then investors should remain cautious. Once above that level, markets are considered to be back in a bull market.

The 200 DMA for the S&P 500 Index is 2019 and the Dow's 200 DMA is 17,153. As of this writing, we are already above that level on the Dow and very close to it on the S&P. We need the markets to decisively break above those levels and stay there.

The impetus for Friday's major gains in the averages came as Mario Draghi, the head of Europe's central bank, announced additional efforts to foster growth within the European economy. Draghi announced further interest rates cuts. Europe, like Japan, is now in a negative interest rate environment and is stimulating their economy with massive amounts of quantitative easing.

As in the past, whenever central banks announce additional monetary stimulus, stock markets have been conditioned to rise in a knee-jerk fashion. In this case, European markets are higher by 3 percent or more in Germany and France, while U.S. markets are up over 1 percent.

Markets have also been helped by the continuation of oils' price rise. Crude is fast approaching $40 a barrel from a low of $26 a barrel just a few short weeks ago. As I predicted, the agreement to freeze production by some of the larger oil producers, as well as production declines by a number of global energy producers has kept the energy rally going.

Next week the U.S. Fed meets, as does the Bank of Japan. Investors may see diverging actions by both entities. Japan seeks to further their monetary stimulus and, at the same time, weaken their currency. Here in America, the Fed will be considering raising rates again at some point this year. Fed Heads are debating whether Janet Yellen, the head of our central bank, will lean towards another rate hike as early as April or wait until June.

Investors should buckle their seat belts because central bank decisions have a tendency to move markets in a big way.

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 Rise of the Robots in Banking

By Bill Schmick
iBerkshires Columnist

If you think the human factor is rapidly disappearing from the workplace, you may be surprised to know that Skynet has arrived and even C-3PO and R2-D2 are being left behind.

Nowhere is this change more apparent than in the nation's banking system.   

Automation, robots and artificial intelligence is on the rise. At the forefront of this change is the nation's banking system. One of the reasons I know this is because my sister, Cassie, is in the banking industry. No, she is not in the corner office or hanging out in the executive suites.

Since 1965, she has worked as a teller and other front office jobs in her bank's branch offices.

She knows the business from soup to nuts and regularly interfaces with her bank's retail

"Fortunately, I'm fairly senior, otherwise, I would have been phased out a long, long time ago," she says, "Tellers and practically any other jobs performed by humans today will be phased out in this business."

What is driving this change is the opportunity for the nation's banking system to reduce costs and at the same time (hopefully) improve the customer experience. Although robots and automation have long been a factor in the nation's factories and even in areas such as space exploration and other dangerous or difficult environments, the promise of more advances in intelligent robots and artificial intelligence has not kept pace with expectations — until recently.

Breakthroughs in information processing and digital sensors, among other technologies, have vastly improved the capabilities and future potential of intelligent robots. That's not to say that you can expect robots in human form greeting you at your local bank door anytime soon.

The frontline benefits thus far have been in automating processes where human error is high due to high volumes of repetitive transactions.

Speed, accuracy and the efficient handling of large volumes in areas like the processing of thousands of checks and ATM transactions on a daily basis is where robots and automation comes into its own. As time goes by, experts say that banking jobs that could be most susceptible to this wave of change are tellers, loan officers, mortgage brokers, insurance claims and underwriters as well as claims adjusters, bookkeepers, tax preparers and accounting clerks.

"Knowing bank culture as I do," says my sister, "makes me believe that some functions, like loaning money to customers, for example, will remain in the human domain."

That may be so but replacing humans with robots, even in the front office has already started. At the flagship center of one of the Japan's largest banks, a customer service humanoid robot was introduced in April. The robot, developed by a French company, speaks 19 languages, employs various gestures, and analyzes facial expressions and behavior. It can and does deliver appropriate responses to typical client questions that a human receptionist would field.

In the U.S., two robots were introduced to local branches of Sterling Bank & Trust in the Los Angeles area. They are test models undergoing "training" as greeters. They also amuse customers by dancing, showing off some martial art moves and handing out banker's business cards to the delight of the bank's customers. In areas such as wealth management, investors can already opt to invest in robo-portfolios where software programs devise and invest money for reduced fees.

For Generation X and Millennials, who already do much of their banking via computer or mobile device, the age of robots may seem a logical and overdue development. For those of us who are still balancing our check books by hand, however, the era of robots in banking may be a bit of a jolt.

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: Markets Need a Break

By Bill Schmick
iBerkshires Columnist

The stock market has climbed 10 percent in the last three weeks from its February lows. That is a substantial gain, over a year's worth of historical performance for the S&P 500 index. And as such, it's time for a break.

That doesn't mean a sell-off will happen, but it never hurts to prepare one's mind set for a bout of profit-taking. The worst that can happen is that I'm wrong. If it doesn't occur, you can remain relieved (and possibly pleasantly surprised) that your portfolio is recovering the losses it incurred over the first two months of the year.

About the only investors that would be disgruntled by this turn of events, would be those who disregarded my advice and sold in a panic last month. For those in that category, I'm sure you are praying that markets do correct, so that you can get back in.

You may have noticed that while I expect a pullback, I'm not advising you to sell. That's because I don't see anything more than a small decline from, say, the 2,000 level to 1,940 or so on the S&P 500 Index. That's pocket change.

The reason I am hoping for a pause here is that, in the short-term, the markets are overbought and extended. They need to consolidate in order to climb higher. Tentatively, the next upside target on the S&P is between 2,050 and 2,100; if we do achieve that, than we may actually see the markets turn positive by the end of this month.  Wouldn't that be something?

Of course, the rebound in oil has much to do with the gains in the market. The two are still bound together at the hip. My expectations that the agreement between the Saudis and Russians to freeze production would at least put a floor under oil proved accurate. It has also triggered a "short-squeeze" among global traders. A short squeeze occurs when short sellers, in this case those who correctly predicted and profited from the oil price decline over the last year by selling oil short, cover their positions and in the process bid up the price of this commodity.

The recent economic data is also contributing to the more positive mood on Wall Street.

This week's non-farm payroll number saw a jump in employment to 242,000 jobs last month versus 190,000 expected. Economic statistics across the board appear to be improving, which has put a dent in the bear's recession case. For those who follow my columns, that should come as no surprise. I do not see a recession and have discounted this concern repeatedly.

But it has been politics that has mesmerized the Street this week. We had a sizable rally on Monday, in anticipation of the Super Tuesday results. I mentioned last week that a clearer picture of who would be the front runners in both parties would reduce uncertainty and rally markets. Hillary Clinton appears to be the "anointed one" among Democrats, while the Republicans are pulling out all the stops to destroy Trump's momentum.

The travesty of the latest GOP debate is not worth a comment. Thursday's televised anti-Trump speech by Mitt Romney, the ghost of elections past, was just as pitiful. This obvious GOP/Wall Street effort to sink Trump's potential presidential nomination could backfire badly.

If primary voters perceive the establishment is ganging up on their hero there could be an even greater rush into Trump's corner. It appears the Republican Party is dead-set on blowing itself up and giving the election to the Democrats. So be it.

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: Why Wall Street Is Worried About Trump

By Bill Schmick
iBerkshires Columnist

Normally, Wall Street loves GOP presidential candidates. Historically, Republican presidents have been good for business, tend to cut taxes, and slow the rate of government spending. So why does Donald Trump give them the willies?

For starters, the investment community worries that Trump is an unpredictable wild card. Remember, that investors can accommodate the good or the bad, as long as the future is articulated in clear terms. For example, Hillary Clinton, the Democratic front-runner, is going after predatory pricing in the biotech sector. That's bad for biotech so Wall Street sells or shorts biotech stocks until that risk factor is resolved. Another politician says we need a stronger defense capability. So investors buy aerospace stocks on that policy.

What investors can't accept is uncertainty. As such, some of Donald Trump's statements have been so outrageous, politically incorrect and economically dysfunctional that Wall Street does not know which way to turn. He cannot be pigeon-holed ideologically.

At times, he appears pro-business only to contradict that assumption by slamming the financial sector on other issues. His statements tend to worry those who believe he could lead the country into a new era of isolation. Attacks on China, Mexico and all things Muslim are just some of his agenda that have given Wall Street a fit.

Trump's strong populist message seems to resonate with those who are not part of this country's one percent. It is truly remarkable that a billionaire, real estate developer who resides in the city of one percenters, could dominate among voters in cities that are economically-challenged and where incomes are the lowest. Although the two are poles apart politically, the populist appeal of Donald Trump and Bernie Sanders is similar.

They appeal to a silent majority of voters who have suddenly found their voice. After decades of hopelessness, declining voter participation, and almost universal disgust for both Wall Street and our government, these two men have harnessed that sullen anger and the results have been both unexpected and unpredictable.

It also helps that neither candidate is beholden to either the traditional corridors of political influence or Wall Street money (Super PACS) that has become the basis for our political system. And what Wall Street cannot control, it abhors. Unlike Mrs. Clinton, a traditional (and predicable), slightly, left of center Democrat, Wall Street and Washington is threatened by Bernie Sanders, a self-proclaimed socialist and Donald Trump, an unorthodox deal-maker with little use for ideology or the status quo.

As the election draws closer, Trump's standing in the polls and wins among GOP delegates increases, the Wall Street/Washington cabal is pulling out all the stops to prevent Trump's ascendency. Mitt Romney, the GOP's quintessential "company man" and Washington insider, has now joined the fray in earnest. In a speech on Thursday in Utah, the erstwhile Republican candidate for president called Trump a "fraud and a phony" while exhorting Republicans to vote for anyone but the Donald.

Let me be clear, I am an independent so I'm not picking sides in these primaries. As for the individual policies of the Democratic and GOP candidates, there are some things I agree with and some I don't. But what I do approve of is the populist movement that Trump and Sanders have triggered in this country. Make no mistake, you may not agree or like Trump's racist statements or Bernie's arguments for wealth distribution, but a lot of Americans do. That is clear in the polls.

And that's part of what a democracy is all about. Granted, I wish every American could be just like me, rejecting prejudice of either religion or race, advocating the end of political and Wall Street influence, addressing the income inequality gap, etc., etc. but I am realistic enough to understand that our political system has always made room for every view and opinion. In a populist election, the best and worst of us come to the forefront.

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: Odds High That markets Will Continue to Climb

By Bill Schmick
iBerkshires Columnist

The S&P 500 Index broke through an important technical level this week. It is an encouraging sign and could mean that over the next few days that index could move even higher.

There are all sorts of technical levels that traders study. In the intermediate term, they usually look at the 50-day moving average. For the first time since the beginning of the year, we have broken up and through that level at 1,954 on the S&P. For those less inclined to worry about the charts, all you need to know is that traders are becoming bullish.

As I suggested in my last column, it was a week where markets first consolidated, and then climbed higher, supported by an oil price that refused to drop below $30 a barrel. It appears that OPEC and non-OPEC members have agreed to meet in March. Investors are hoping that a deal to freeze oil production will ultimately morph into an agreement to cut production. This is despite Saudi protests that there is no plan to cut production in the works. I guess hope springs eternal in the energy patch.

At the same time, investors are also hoping that this weekend's meeting of the G20 in Shanghai may result in a plan to spur global growth. At least that is what both the Organization of Economic Co-operation and Development and the International Monetary Fund are hoping to accomplish. Whether their call for "bold" action by the G20 will result in anything more than statements about working together, etc., etc., are doubtful.

Economic data this week were better than expected with GDP coming in at 1 percent over the last quarter (0.7 percent expected) while personal income (0.5 percent) and spending (0.5 percent) were also higher than estimates. These numbers fly in the face of those worrying that the country is falling into a recession.

Does that mean we are destined to go straight up from here and regain all the year's losses? Well, not quite yet. It is true that as of today the S&P 500 Index is only down 5 percent for the year. That's is an improvement from two weeks ago for sure. Still, we face a great deal of uncertainity even now.

Oil is still a wild card, as is this year's presidential elections. Super Tuesday ( March 1), is when 12 states hold primaries. In all, 595 Republican delegates — about 25 percent of the total number — are at stake. Republicans need 1,237 delegates to win the party's nomination.

Democrats need 2,383 with 1,004 Democrat delegates up for grabs next week.

The outcome may be an important boost for the markets, if there are clear winners in both parties. That would remove some of the uncertainty plaguing investors, and certainty is always preferable to the markets. We could possibly see a relief rally as a result that could take us up to the 2,000 level on the S&P 500 Index. At that point, things get trickier, and what happens after that is still uncertain.

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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