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The Independent Investor: What's Wrong With This Flight Plan?
By Bill Schmick On: 10:14AM / Friday March 21, 2014
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The next time you board a regional airplane remember this. The co-pilots responsible for your safety are making the minimum wage. That means they are earning about as much as the guy hauling trashcans outside your local supermarket or flipping fast-food burgers and working a heck of a lot longer hours as well.

The disappearance of Malaysia Airlines Flight 370 has mystified the world. It has also brought the issue of flight safety on the front-burner again. The investigation has now centered on the possibility that someone on the flight crew tampered with or re-directed the flight path of the plane carrying 227 passengers. To me, it simply drives home the point that whether you are on an international flight or a regional puddle-jumper, your pilot is crucial to your survival.

As such, it is hard for me to accept that pilots, who are required to have a college education and countless hours of flight certification, can make as low as $22,000 a year or less and work 240-300 hours a month for that privilege.

Unlike most professions, pilots only get paid from the time the airplane leaves the gate until it arrives at its destination. So the typical pilot is only on the clock for 21.5 hours a week. That translates for a first-year co-pilot as no more than a gross weekly pay of $495. A pilot with a decade of experience might average around $1,312.

Why then does anyone want to be an airline pilot?

Many simply have a passion for it and will do anything to fly. In addition, regional airlines are considered a stepping stone to a much more lucrative job at one of the major airlines. The senior-most pilots who fly 747s or 777s can earn $200,000 or more a year. It may have required 35 years or so of poor pay and long hours to attain that level but, unfortunately, there are few such openings available given the overall number of working pilots.

The pilots of the missing Malaysian airplane are being investigated now as part of the government probe. Authorities believe that whoever disabled the plane's communication systems and then flew the jet according to a different flight path had to have a high degree of technical knowledge and flying experience. It illustrates how much control one individual can have over a great many people.

Although the amount of money you make does not necessarily reflect an individual's competence or sense of responsibility. I believe the airlines, in compensating their pilots, have sunk to new lows in their multiyear industry task of cost-cutting at the passenger's expense.

Like you, I have accepted most of these management changes with a modicum of grumbling. I have said nothing when, without warning or explanation, they cancel my flights (and the next one) simply because there are not enough passengers available to pack in like sardines in a can.

Although miffed, I also shelled out the extra money I'm charged to carry luggage on my trips. I had no choice. The fact that I now have to pay for seat selection as well as their lousy food and surly service, is the new normal in aviation.

But I draw the line at paying our pilots a minimum wage. After all, this is my life we are talking about. I don't like to entrust it to a young man or woman who is overworked, underpaid and probably less than motivated on a bad day. It is a wonder that we don't have more pilot safety issues already, but to their credit, these pilots, despite their slave labor, have consistently given their utmost to ferry their passengers to safety time and again in every kind of weather and obstacle.

If there was ever a reason to raise the minimum wage, this is one.

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: Income Inequality Among Women
By Bill Schmick On: 06:37PM / Thursday March 13, 2014
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Today women make up about half our workforce. But they still make 77 cents for every dollar a man earns. That is wrong, and in 2014, it's an embarrassment.

— President Barack Obama, State of the Union Address

This week the president met with women members of congress to discuss income inequality among the sexes. At the same time, the Democratic Party is making the passage of a minimum wage bill part of its campaign strategy for mid-tem elections this year. It appears that how much a woman makes in this country has suddenly become important.

It's about time. This has been a pet peeve of mine for years. Some longtime readers may recall my first four-part series on this subject back in 2009-2010. At least once a year since then, I have tried to keep the inequity between the salaries of men and women on your front burner.

There is a lot of misinformation bandied about by both sides on this issue although you would think that everyone would be on the side of women making at least an equal wage with men performing comparable tasks. President Obama didn't help when he used the often-quoted but confusing "77 cents statistic" during his State of the Union address.

Detractors immediately jumped on the number arguing that the 23-cent gender pay gap is simply the difference between the average earnings of all men and women working full time. It does not account for differences in occupation, positions, education and job tenure or hours worked. They like to add that the U.S. Bureau of Labor Statistics found that when measured hourly, not annually, the pay gap between men and women is only 14 percent not 23 percent.

Others argue that income disparity may be linked to the field of study that women pursue. A recent survey of 1,000 adult women in higher education by Western International University found that the income gap decreases significantly in cases where women held degrees in business, technology, science and math. The American Association of University Women concurred with those findings in their study of 15,000 graduates. They found that along with science, math and some technology areas, women received equal pay with men in engineering, health-care occupations (especially nurses), life science, social services and administrative assistants.

Although it is true that women are now the majority of students pursing academic degrees, few are pursuing careers in high-paying areas such as petroleum, aerospace, and chemical or electrical engineering. Instead, female students dominate in what are considered the 10 least profitable majors like early childhood education, communication disorders, human services, community organization and so on.

All of the above seems to point to one obvious conclusion. Your income is largely dependent on what degree and profession you pursue. Women, so the critics argue, earn less money because they choose to enter careers that have built-in income disparities.

They conveniently dismiss that, even with all of the above arguments, the statistics indicate that women still suffer from a disparity of income despite degree or profession. They also assume that choice, in American society today, is a woman's prerogative.  In my next column, I will explore those issues and why and how women now represent 60 percent of minimum wage workers and 75 percent of workers in the 10 lowest-paid occupations. Stay tuned.

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: True Confessions
By Bill Schmick On: 01:53PM / Friday February 28, 2014
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Money holds a great deal of power over us. For many, it is a symbol of worth, competence, freedom, prestige, masculinity, control and security. No wonder most of us have such a hard time talking about ours.

The psychological taboo of discussing money in this country had been identified and recognized as far back as the early 1900s by Sigmund Freud, among others. He wrote that "money questions will be treated by cultured people in the same manner as sexual matters, with the same inconsistency, prudishness and hypocrisy."

Recently an article from USA Today on the subject caught my attention. It concerned the anxiety most people feel when approaching financial advisers. The article was spot on, in my opinion. As an investment adviser myself, rarely does a week go by without my sitting down with an individual or couple to discuss their finances. Sometimes I feel like a therapist.

For the most part, at the beginning of most of my meetings with new individuals or couples there are few smiles and an air of tension. By the end, however, the sun has come out and the atmosphere has radically changed.

"You are not at all what we expected," said one couple recently.

I asked them why.

They confessed that they had been feeling a great deal of anxiety over revealing their finances to a stranger. It was hard enough, they confessed, to talk about money between themselves, but they worried what would happen if they shared this highly personal information with me.

"Everything you share with us is strictly confidential," I explained and I meant it. "Our privacy code is so strict that I won't discuss your information with anyone, even your spouse, without your permission."

In this case, the discussion allowed both of them to share a burden they were keeping to themselves with someone competent to help them work out their finances. We were able to pinpoint the problem areas in their finances and suggest several remedies.

Another client admitted that he feared that I would immediately judge him for either not saving enough or not making enough money. It turned out that he had done a magnificent job at both and I told him so. The point of hiring someone like me is to figure out how to save more or make more with the money you do have. There is no room in this business for judgment of any kind.

Others worry that by coming to me they will reveal their lack of knowledge of investment, finance and/or money management. No one likes to appear stupid and for many, finance might as well be written in Sanskrit. I do not expect anyone that comes through my door to be familiar with the subject. Why do some people think that because they may be an expert at whatever they do for a living, they must also be a whiz at finance?

So, how do I personally make prospective clients feel more at home with me? For one thing, I never "dress up" for my meetings. I left my three-piece suits, silk ties and wingtips behind when I left the canyons of Wall Street. It helps that I live and work in a rural community where few wear suits and ties. I dress like my client because it helps break the ice, puts me on an equal footing and dispels any image that I "come from money" just because I am a money manager. Besides, that's the kind of guy that I am, and any number of pin-stripes never helped me make money for my clients.

I also avoid "financial speak" at all costs. I talk like I write, in plain American, without pretensions or ten dollar words that no one understands. As for appearing stupid, I know you've heard it before, but in regard to your finances "there are no dumb questions except the ones you fail to ask." The moral of this tale is simple - seek financial advice at your earliest opportunity. In the majority of cases your anxiety will disappear almost immediately and the help that you may obtain will be good value for the money.

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: How to Look at Early Retirement Offers
By Bill Schmick On: 04:42PM / Thursday February 20, 2014
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Buyouts and early retirement packages are increasingly becoming a part of the American landscape. Not a day goes by when some group of employees somewhere are offered financial incentives to retire early. If it happens to you, this is what you should consider.

Is this voluntary or a forced offer? If it is voluntary and you take it, you can't apply for unemployment benefits. Forced retirement is akin to a layoff, where you either accept the deal or else. Your chances of getting unemployment are higher under the latter circumstances.

Clearly, the largest single benefit of a retirement incentive is the upfront financial reward. These incentives are typically tied to the number of years of employment and can be either a lump sum or some form of annuity. The simplest rule of thumb is if you were planning to retire anyway in a year or two and the company offers you a two-year severance package that's free money and you should take it.

If, on the other hand, you were planning to work for another four or five years, you must weigh the benefits carefully. For many workers, the most important factor is whether or not the company offers health benefits. A study by Fidelity Investments found that a 65-year-old couple retiring today without employer-provided health benefits needs at least $200,000 to finance out-of-pocket medical costs. ObamaCare may reduce that number somewhat, but it will still be significant, especially when you consider things like Medicare premiums, co-payments and Medigap expenses.

Sometimes the first offer is not the final offer. If your company really needs these cutbacks, you may be able to negotiate better terms. You might be able to improve any health benefits, or include help in a job search or additional training. For some, early pension payments might be possible.

But what if you just love your job; can't imagine what you would do without it and can't afford to retire? Much will depend on whether the offer is a prelude to larger layoffs in the future or is purely voluntary.

There are risks in not taking an early retirement or incentive buyout package that readers should understand. If you have been singled out by your company, there could be a target on your back. If your company is in some financial difficulty and looking to cut back even further, your days could be numbered regardless of your decision. In which case, the first offer you receive is as good as it gets. The next wave of layoffs may find you unemployed with no incentive package at all.

This could also be a great opportunity, if handled right. You might be tired of working there and this could be your ticket to a new and better job. If so, start looking right away. The economy is picking up and job opportunities are better than they have been for several years. If you find a job quickly, this buy out could be just like a big bonus and an opportunity to invest it towards your retirement. Your new job does not even have to pay as much, thanks to your severance package.

For others, it could be the starting point for that business you always wanted to create. You may be old enough and with enough experience to become a small-business owner, even if you are the only employee. You might even offer to consult for your old company at a price. The point is that an offer is better than no offer at all. Treat this as a challenge and an opportunity, rather than the end of the world.

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: The Debt Ceiling Turnabout
By Bill Schmick On: 06:42PM / Thursday February 13, 2014
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Both houses of Congress passed the debt ceiling this week with no strings attached. That means that global investors will be assured that the United States will honor its commitments until at least March 15, 2015. Should we care?

Aside from the moral question of paying one's debt payments on time and a real catastrophe if we don't, the debt ceiling has been one 11th-hour deal after another. It has been pure political theater in this country since 2009. In the Republican-controlled House, only 18 out of the GOP's 232 majority voted for the bill. Two Democrats voted against it. Are you surprised?

If one were naive enough to believe that the Republicans actually believed that America's "out-of-control debt ceiling" was the most dangerous threat to this country, well, I have a bridge I can sell you in Brooklyn.

Both parties clearly understand that the debt ceiling is simply the money that we already owe to our debtors. It is money already spent by our government. Read my lips: by the time it has become debt it has already been spent.

The truth is that both sides of the aisle continue to spend money like drunken sailors. The only difference is in what they buy — guns or butter. Take the latest farm bill, for example. Food stamps were cut, thanks to the GOP, but farm subsidies to the nation's farmers (of whom 80 percent are giant corporations) sailed through the House to the tune of $1 trillion in spending over the next five years. What needs to be reduced is the money government is spending month after month and year after year and there's no indication that will change anytime soon no matter who is in power.

Remember that it is the Republican-controlled states (Red States) that receive the majority of government social spending. For all of their posturing about reducing "welfare spending," the Republicans are not about to bite the hand that feeds them. It's simply the mix of spending that changes between the two parties, not the amount.

Historically, the Democrats tend to spend more on social programs. The Republicans maintain social spending, while cutting taxes. Democrats and Republicans alike have always been happy to spend on defense. Bottom line: both approaches increase the deficit and the debt ceiling.

Clearly, the abrupt turnaround in the Republican's willingness to drop the debt ceiling issue has everything to do with the coming mid-term elections this year. The 16-day, Federal government shutdown last year was a national fiasco. As a result, Republican strategists quickly decided that the party needed to take a break from confrontational politics, at least until the elections are over.

They are counting on the fact that we will forget their past sins by the time November rolls around. It remains to be seen whether voters will be dumb enough to accept their new image as the party of compromise but if they do, and then the GOP has a good chance of capturing a majority in both houses this fall. If their strategy fails, they can always quickly return to partisan politics. Readers please note that the debt ceiling deal expires in March of 2015 and that is no coincidence.

 The pretense that the debt ceiling is some kind of line in the sand that America must not cross is misleading, if not downright duplicitous. At least investors will be spared the needless drama of a debt ceiling battle for the remainder of this year. Hopefully, after the election, both parties will relinquish the debt ceiling as their favorite hostage but I won't hold my breath.

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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