Wednesday, October 01, 2014 10:22pm
North Adams, MA now: 57 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
SIGN IN | REGISTER NOW   

Home About Archives RSS Feed
The Independent Investor: Inequality in the Housing Market
By Bill Schmick On: 11:09PM / Thursday May 08, 2014
Important
1
Interesting
0
Funny
0
Awesome
0
Infuriating
1
Ridiculous
1

You, you said that they — What'd you say just a minute ago? They had to wait and save their money before they even thought of a decent home. Wait? Wait for what?! Until their children grow up and leave them? Until they're so old and broken-down that — You know how long it takes a workin' man to save five thousand dollars? Just remember this, Mr. Potter, that this rabble you're talking about, they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?

— George Bailey, "It's a Wonderful Life"

The most expensive home ever sold in America occurred over the weekend in "The Hamptons," Long Island's playground for the one percent. Just a week before that a Greenwich, Conn., estate sold for $120 million. At the same time, the percentage of America's first-time home buyers is at its lowest level since 2008. What does that say about homeownership in the United States?

American income inequality is taking on an even uglier caste as it impacts the real estate market. The recovery in housing over the past two years has been highly unusual. This time around, it has been led largely by institutional investors, hedge funds, private equity firms and wealthy individuals. These astute investors, flush with the cash they had made in the recovery of the financial markets, took advantage of the 35 percent decline in housing prices and the new rental demand of 5 million foreclosed homeowners who were forced to find a new place to live.

These entities spent more than $20 billion to buy up over 200,000 homes which they rented or resold (flipped) as the housing market climbed. All-cash sales have become so prevalent that in the first quarter of 2014 almost 43 percent of all residential property sales were transacted in this way. That's up from 38 percent in the previous quarter.

At this point the big money has been made and the institutions are winding down their purchases. Wealthy individuals, second-home buyers and the occasional owner-occupant buyer, who have the cash, are entering the market. Thanks to the Fed's tapering, mortgage rates have climbed, while stricter credit standards following the crash have shut out the rest of us from any hope of tapping the mortgage market.

As the American middle-class disappears, so too will homeownership at an accelerating pace and what's worse, there is little hope for the future. Consider, for example, those young, first-time homebuyers. Rest assured that "the kids are not OK."

Struggling with high college debt, low-paying jobs (if any) and high monthly rents, the younger generation has little chance of cobbling together the money needed for the 10-20 percent down payment required to purchase a home, even if they could get a bank loan. The reality is that the only borrowers most banks will lend to are those who don't really need to borrow in the first place.

Sure, prices have appreciated and in several locales, mainly along the nation's east and west coasts, sales of $1 million homes have spiked 7.8 percent over the past year. But at the same time, there has been a 7.5 percent drop in overall home buying during that same period.

One wonders who these new, all-cash buyers are going to sell these properties to in the years to come. By definition, there is only one percent of the population that can afford to buy or borrow. How many jumbo loans can banks make before borrowing dries up? Evidently, U.S. lenders are seeing the handwriting on the wall and are cutting jobs in their mortgage lending divisions in advance of further downside.

Clearly, the housing market is stalling and even Janet Yellen, the chairwoman of the Federal Reserve Bank, worries that "the flattening out in housing activity could prove more protracted than currently expected, rather than resuming its earlier pace of recovery."

As my readers know, almost all of the country's income gains from 2009 to 2012 flowed to the top one percent of earners. It is becoming clear that the same thing has happened in the real estate market. That leaves 99 percent of us who will either remain property-less or who will live in our present abode for the foreseeable future. Unfortunately for America, as housing falls prey to the growing trend of income inequality in this country, the future prospects for all of us continue to dim, especially among our young.

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.



     
The Independent Investor: When Should You File for Social Security Benefits?
By Bill Schmick On: 02:43PM / Thursday May 01, 2014
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

Many of us yearn for the day we can retire and live the good life. However, too many Americans plan to retire at age 62 simply because that is when they become eligible to collect Social Security. That might not be a good idea in the majority of cases.

The Social Security system was intended to be easily accessible, but like so many of our government organizations, it has become a nightmare of complexity. Rather than try and understand the system, many simply retire at 62 and lose out on valuable benefits because they retired too early.

Recently, thanks to the bankruptcy of one regional hospital and another local company's early retirement incentive offers, I have been fielding a lot of questions on the subject.

For most people, it makes more financial sense to wait until you reach full retirement age (FRA) which is 66 (for those who were born between 1943 and 1954). This is especially so in low-interest rate environments like the one we have now. The simple reason is that for every year you delay filing, your monthly benefit will increase between 6 and 8 percent. That is far higher than the present rate of interest, so you are getting paid to wait.

Life is too short to wait, say some, especially if death comes at an early age. You can't predict when you will die, but if you are healthy and longevity is a trait that runs in your family, chances are you will increase your lifetime benefits by waiting. Single women will benefit more than single men simply because women tend to live an average of five years longer than men.

Married couples stand to benefit more than singles by waiting as well. As a 62-year-old spouse, you can choose to either file for Social Security based on your own earnings (if you are working) or on a spousal benefit, based on your spouse's income. However, to receive the spousal benefit your partner must have already retired. The spousal benefit is up to 50 percent of the earner's benefit. If you both wait until FRA or later you will both collect higher benefits.

As a couple, there are all sorts of strategies that could work for you. The lower-earning spouse, for example, could take benefits as early as age 62 while the higher-earning spouse waits until age 70 to file. You will need to crunch the numbers (or have a financial planner do it) to discover what's best for you.

Remember, too, that if you file for Social Security benefits before your FRA and continue to work you need to be aware of how much you earn. If your earnings exceed a certain limit, some of your benefits will be withheld until you reach your FRA. As an example, if you file at age 62, $1 in benefits will be withheld for every $2 you earn above $15,120. If you make more than $40,080, then the government withholds $1 for every $3 you earn above the limit.

If you are a two-earner couple, you have to think about your tax situation. Up to 85 percent of your Social Security income could be taxed if your modified adjusted gross income reaches a certain level. You may be in the unenviable situation where one spouse retires only to see her hard-earned benefits taxed away by the higher income bracket of the spouse.

In certain situations you may have no choice but to file at 62. You may lose your job and you don’t have enough savings to cover the bare necessities, then you may need that Social Security income just to live. For most, early retirement is really just an emotional urge to get out of a bad or boring situation as early as possible. If so, think again. You may have spent the good part of your life at that company and working a few years more won't kill you, but it may make the difference between a great retirement and one that you might regret.

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.



     
The Independent Investor: What's up with Big Pharma?
By Bill Schmick On: 07:38PM / Thursday April 24, 2014
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

This week several multibillion deals were announced in the pharmaceutical sector. Merger and acquisitions on a global scale appears to be heating up in this sector with over $140 billion in transactions so far this year. What's behind this feeding frenzy?

We all know that the majority of baby boomers are getting older so the demand for health care of all kinds is growing. As a result, the health care sector overall is a great place to invest. While many other industries experienced a devastating drop in profits and revenues over the last five years, the pharmaceutical industry weathered the financial crisis fairly well.

But that's the good news. The bad news is that the cost of bringing a new drug to market has skyrocketed. The development time has lengthened as well while a drug’s patent expiration leaves companies open to low-cost competition. Today it is estimated that the cost of inventing and developing a new drug can be as much as $5 billion. The risk is even greater since 95 percent of the experimental medicines that are studied in human trials fail to be both effective and safe.

When you combine the astronomical costs involved, the lead time and a 5 percent chance of success, it is no wonder that pharmaceutical companies are searching for alternative ways to succeed and thrive in this kind of environment. A merger or acquisition, as opposed to years of in-house research and development, can make more economic sense.

Back in the day, big pharmaceutical companies used M&A activity to diversify. The concept was to be able to offer a lineup of drugs and treatments in various areas of medicine and treatment. That way, if one area did poorly, others would compensate. More categories of treatment, it was thought, would also improve the number of new drugs under development in the pipeline. The problem with that concept was that health care treatment has evolved differently over time. The trend in the industry is toward developing specialty drugs. Drug companies are thinking in terms of disease-related, treatment-specific portfolios and patient groups (such as cancer, diabetes, heart disease, etc.).

As a result, many drug companies have reversed course and are attempting to sell-off what they deem are "noncore assets." Companies are shuffling their portfolios, selling some product groups while acquiring others. These purchases involve smaller companies and subsidiaries of various global companies as the race is on to build franchises in strategic disease areas.

But M&A is not the only road to success. Collaboration and partnerships among global companies is also increasing. While all of these companies have different visions, the dramatic changes they face on all fronts from global government regulation, to Obamacare in this country to the dynamic revolution of the life sciences industry, itself, is altering the way they manage risk and focus their business. Sharing costs and expertise is another new trend in the healthcare arena. As companies understand and become familiar with their partners’ core and noncore assets, deals are a natural outgrowth of this collaboration and being made with increasing regularly.

These agreements take on a new immediacy when the fast-growing emerging markets are taken into account. Regulations are usually less onerous in these developing markets, market share for new drugs is a wide open proposition and an exploding middle-class with purchasing power are an irresistible combination.  Smaller local drug makers in some of these markets, like Latin America and India, have become big enough to catch the eye of U.S. and European behemoths. I expect even more M&A activity there as well.

So the M&A activity that we are seeing is a natural outgrowth of the changes that are occurring in the health care sector worldwide. Those changes are expected to continue and with it so will the pharmaceutical sector.

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.



     
The Independent Investor: Good Friday and the Stock Market
By Bill Schmick On: 03:52PM / Thursday April 17, 2014
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
2
Ridiculous
0

This Friday the stock and bond markets will be closed to commemorate the crucifixion of Jesus Christ, or so the theory goes. But that is just one of the many myths involved in this holiday and its origins remain a mystery.

The fact that the New York Stock Exchange (NYSE) has a tradition of closing on Good Friday, one of nine holidays per year, has many traders and investors scratching their heads. After all, it is not a federal holiday and plenty of other businesses are open on that day. What makes Good Friday any more important than say, Columbus Day?

There is a story that during the 1890s there were three years in a row that the market suffered big drops on Good Friday. Superstitious traders took this to be a sign from God that "Thou shalt not trade on Good Friday." There is no evidence that is true. The Exchange was open for trading during Good Friday on three separate years (1898, 1906 and 1907). However, when the exchange did open for business in those years, the market was up two of those three Good Friday dates.

Another fable that many believe was that the market suffered through a Black Friday market crash in 1869. As a result, the Board of Governors of the Exchange swore never to open again on Good Friday. That seems a little hard to believe, since records indicate the exchange was closing on Good Friday as far back as 1864.

Art Cashin, the renowned trader at UBS, says there never was a stock market crash in 1869 but there was a crash in the gold markets back in September of that year. Easter week, however, is in April, not September, so go figure.

Although Good Friday is not a federal holiday, many states do recognize it as a state holiday with local governments, banks and other institutions closed this Friday. As a result, trading volumes are smaller, since fewer potential players are at work.  Businesses that normally stay open on Easter Sunday also tend to close on Good Friday so that their employees get a day off to compensate for working on Sunday.

Some think that the holiday was a nod to Jewish and Christian traders looking for a day off between Passover and Easter. Globally that makes some sense since already anemic trading volumes are even lower because Europe traditionally closes for Easter week. But as the original reason for this NYSE holiday, it does not square. Daily global trading is a relatively recent phenomenon on the stock exchanges.

There is some reason to believe that religion did play a role in the holiday. New York, a century ago, was the home of Irish immigrants. As such there was a preponderance of Irish Catholic officials in just about every walk of life in the city, including the NYSE. It is plausible that those officials could have lobbied for the closing of markets during this important Catholic holiday.  But no one can prove it.

So the origins of this stock exchange holiday remain mired in mystery. It is just one of the many quirky twists that amused and confuse Wall Street on slow holiday weeks. Whatever the reason, Friday is a day off for me, but never fear; I'll still be writing your market column as usual.

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.



     
The Independent Investor: Banks Face Tougher Regulations
By Bill Schmick On: 08:46PM / Thursday April 10, 2014
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

This week the eighth largest U.S. banks were told they need to increase capital by about $68 billion. In some ways it is too little, too late in the government's efforts to prevent another financial meltdown. Nonetheless, the regulations do provide an increased level of safety for taxpayers.

"Too big to fail" is a term that makes most of us grind our teeth. It was taxpayers, after all, who were required to pay trillions of dollars to rescue our financial sector after the 2008-2009 financial crisis precipitated by our largest banks. Ever since then, regulators have been looking at ways to prevent the same thing happening again.

Now, over five years later and despite massive lobbying efforts by these same banks, this week the Federal Deposit Insurance Corp., the Federal Reserve and the comptroller of the currency approved rules that would raise the ratio of capital required as percentage of total assets to 6 percent at our country's largest banks. That would require the top eight banks to raise an estimated $68 billion in capital by either selling off parts of their businesses or raising equity via the stock market.

The idea behind raising capital levels is simple. The more capital an institution has to put up in order to participate in a risky trade, the less profit they make. In the past, banks could borrow or leverage their existing capital through derivatives or short-term funds called "repos" and buy or sell things like credit default swaps, collateralized mortgage obligations and other exotic, poorly understood financial instruments. With little capital down, the bank's profits were tremendous — until they weren't.  The resulting house of cards they build practically buried us all.

Banks are blasting these new limits. Their spokesmen are arguing that it puts U.S. banks on an uneven playing field with their counterparts in Asia and Europe. These banks, they point out, are governed by the Basil III accord, which also takes into account both a leverage ratio and risk-based capital requirements. That Basil agreement, at 3 percent, they argue, is half the level now required for their American counterparts.

All the usual arguments have been trotted out — loss of competitiveness, less market liquidity, senseless regulations. Over-turning these rules will be the subject of intense lobbying within Washington's corridors of power. Although the lobbying will be fierce, many of these same banks have already taken steps to adjust their capital base higher. In addition, these new regulations, if approved, will only begin to take effect in 2018.

What none of the banks will say is that the old system, where banks themselves set capital levels based on their estimate of the perceived risks of their assets, failed miserably. They have also conveniently forgotten that it was neither European nor Asian banks that triggered the meltdown. It was our largest eight banks that disregarded their own risk assessments in the name of greed.

In many ways, regulating the banks at this late date is similar to closing the barn door after the horse has bolted. Still, the new rules are simple, straightforward and will make it harder for rogue traders and institutions to set off another financial Armageddon. These rules may and do create some unnecessary and nonsensical consequences such as holding large amounts of capital against safer assets like U.S. Treasury bonds. However, unfortunately, our banks have proven that they cannot regulate themselves in these areas. By their own actions, they have invited the devil, in this case, government regulators, to their door.

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.



     
Page 4 of 39 1  2  3  4  5  6  7  8  9  10  11  12  13  14 ... 39  
News Headlines
Cheshire Asks for Verizon Pole Cleanup, Hears Park Update
North Adams Vigil Celebrates Addiction Recovery, Mourns Loss
Longtime MCLA Staffer Degen Retiring
Does Your Plan Need A Makeover?
Girl Scouts to Host 'Geek Is Glam' STEM Expo
Williamstown Elementary Clothing Sale Benefits Classrooms
North Adams Happenings: Oct. 1-7
Edward Jones Announces New Financial Adviser for Pittsfield
Bank Employees Raise $13,000 for Alzheimer’s Association
Lisa Cunningham Joins True North Financial
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.

 

 

 



Categories:
@theMarket (145)
Independent Investor (197)
Archives:
September 2014 (5)
August 2014 (7)
July 2014 (2)
June 2014 (6)
May 2014 (9)
April 2014 (8)
March 2014 (6)
February 2014 (6)
January 2014 (7)
December 2013 (8)
November 2013 (7)
October 2013 (6)
Tags:
Stocks Stimulus Fiscal Cliff Crisis Currency Energy Markets Euro Banks Debt Rally Interest Rates Metals Jobs Greece Bailout Deficit Stock Market Taxes Commodities Retirement Election Japan Federal Reserve Selloff Oil Pullback Recession Europe Fed Debt Ceiling Housing Europe Congress Economy
Popular Entries:
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Don't Fight the Fed
The Independent Investor: Does Cash Mean Currencies?
@theMarket: QE II Supports the Markets
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
Recent Entries:
@theMarket: Wash, Rinse and Repeat
The Independent Investor: Is Wall Street Responsible for Climate Change?
@theMarket: Waiting on the Fed
The Independent Investor: The United States of Scotland?
The Independent Investor: Europe Follows the U.S. lead
@theMarket: What's Up With Bonds?
The Independent Investor: Baby Boomers and Retirement
@theMarket: Labor on Their Mind
The Independent Investor: Financing ISIS
@theMarket: Geopolitical Risk Trumps Economic Growth


View All
Soccer:Taconic vs Lee
Lee won 6-2 over Taconic Tuesday afternoon. Submitting...
Soccer: Lenox vs Mount...
Dan Flynn scored both his goals after half-time to lead...
Girls Soccer: Wahconah vs...
Monday afternoon girls soccer game between Wahconah and...
Golf: Drury vs Pittsfield
Nick Boulger carded a 40 to lead the Drury High School golf...
Bike Night 2014
Motorcycles packed into the Visitor Center parking lot...
Girls Soccer: Pittsfield vs...
Trinity Cookis tallied three of Pittsfield’s seven goals...
Soccer: PHS vs Taconic
Pittsfield boys, top Taconic 5-0
Football: Smith Voc vs McCann...
McCann over Smith Voc. 53-0.
Soccer: St. Joe's vs Taconic
St. Joe 1, Taconic 1: 1st half: Tac - Ryan Abel (Colin...
McCann Tech Golf
The McCann Tech golf team dropped a 19-5 decision to...
Girls Soccer: Hoosac vs Mt....
Rand made two of her six saves in the last six minutes, and...
Berkshire Works Career Fair...
The annual Berkshire Works Career Fair connected hundreds...
Soccer: Mount Everett vs...
Bradley Lupiani scored twice to lead the Mount Everett boys...
Cross Country at Wahconah
Boys:Wahconah beat Hoosac Valley 28-31; Lenox beat Hoosac...
Soccer: Commerce vs McCann
McCann Tech's Fuller Closing in on Hundredth Point. Nico...
UCP Annual Meeting 2014
United Cerebral Palsy of Berkshire County dedicated its...
Soccer:Taconic vs Lee
Lee won 6-2 over Taconic Tuesday afternoon. Submitting...
Soccer: Lenox vs Mount...
Dan Flynn scored both his goals after half-time to lead...
Girls Soccer: Wahconah vs...
Monday afternoon girls soccer game between Wahconah and...
Golf: Drury vs Pittsfield
Nick Boulger carded a 40 to lead the Drury High School golf...
Bike Night 2014
Motorcycles packed into the Visitor Center parking lot...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings
Advertise | Recommend This Page | Help Contact Us | Privacy Policy| User Agreement
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2000 Boxcar Media LLC - All rights reserved