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The Independent Investor: Boomers' Kids Don't Want Your Stuff

By Bill Schmick
iBerkshires Columnist

You saved all your life, acquiring all sorts of assets that you now want to leave to your children. Today, more and more Baby Boomers are finding that their kids just don't want that antique auto or that original oil painting.

Too many of us fail to recognize that the Millennial generation has grown up with an entirely different view of the world, their possessions, one's life style and even value system. This may come as a shock. It did to me. As readers may recall, my wife and I have been downsizing for three years now. During the course of this process, we have offered our thirtysomething daughter and her husband all sorts of stuff that they didn't want. From snowboards to unopened Tiffany wedding gifts, they politely and gently declined our largesse. This includes larger assets as well.

We have, for example, the luxury of owning two homes, a weekend place and another dwelling close to the office. Although my daughter loves to visit and has a real sentimental attachment to the "country" home, she really has no interest in inheriting the old homestead.

"I just couldn't afford the upkeep and maintenance," she says. "It wouldn't be feasible."

If you haven't had this discussion with your kids, maybe you should.  I have learned that there is a major difference between how my generation (and my parent's generation) spent their time, versus today's Millennials. Previous generations spent most of their lives in pursuit of stuff. We worked to acquire stuff and spent most of our time buying, collecting, storing and enjoying our possessions. Any spare time we had was devoted to maintaining and repairing these symbols of our success. Many of us prided ourselves by measuring our self-worth by how many possessions we acquired.

When asked why we needed two houses, four cars and 11 wide-screen televisions, we answered "why, to leave to the kids and the grandchildren of course." We assumed our future generations would value, maintain and accumulate even more antique rugs, dining room sets, golf clubs etc. Brother, it's time to face the truth. They don't want our junk, no matter how valuable we think it is.

For one thing, they don't have room for it. I recently wrote a column on the growing trend by Millennials towards living in smaller houses, apartments and even trailers. My daughter has no room for my teakwood bookcase full of thousands of DVDs and CDs that I have painstakingly collected through the years. She shakes her head quietly while grinning at me, wondering why in the world I still own those things when all of these media products can be easily and simply obtained on the internet and stored/streamed through the Cloud.

In addition, most of our kids value mobility, adventure and experience far more than we did. Given the choice between spending $20,000 on a new car, or a three-week African safari, most of them would choose Africa. The argument that the automobile would last years longer than that safari doesn't faze them in the least.

To them, stuff has to have a purpose. It must be a means to an end, not the end itself. If something new accomplishes a purpose more efficiently, they dump the old and embrace the new. That may sound unsentimental or even ungrateful but it isn't. It's just different.

My daughter still wants to keep certain objects that evoke memories of our past together. Usually, they are small and hardly the most valuable objects. But they are valuable to her and in the end that's what counts. As for the rest of that stuff, my advice is to sell it, give it away, or dump it and spare your children that chore.

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: Supermarkets Evolve to Survive

By Bill Schmick
iBerkshires Columnist

We take our local supermarkets for granted. Like gas stations, there seems to one on almost every corner, at least in suburbia. With competition from a variety of sources, supermarkets have been forced to reinvent themselves and are doing a good job doing just that.

Historically, supermarkets are a low-margin business, barely eking out 1-2 percent profit margins annually. Even the "hot" areas of the grocery market, like natural. organic and gourmet food emporiums only command 3 percent to 6 percent margins but to the big store chains that's an attractive option.

In addition, the supermarkets industry is highly fragmented with the top 10 chains only accounting for 35 percent of the total number of grocery stores (although they account for over 68 percent of total industry sales in this country). In order to increase profitability, supermarkets are reinventing themselves and benefiting the consumer in the process.

Given that I'm the cook and grocery shopper in my family, I have some firsthand experience in shopping through this transition and so far I like what I see. Clearly your local megastore is going after the natural and organic food shopper. Most readers already know that you pay more for those items, substantially more in some cases. Have you also noticed that you are seeing more "local vegetables" right alongside those that are shipped in from elsewhere? If you are price conscious (like me) you might also notice the price difference. You could be paying as much as 50 cents more per pound for that locally grown spinach or kale but its fresh and you are supporting local farmers, right?

Supermarkets are adding other products and services where profits are far higher than that box of mac and cheese on sale every other week. Look for those "specials" to continue since middle and low-income shoppers account for 70 percent of grocery sales. Most shoppers tend to be price conscious and will switch if they feel that one chain’s prices are better than another's. In fact, super stores are marketing their weekly special flyers with renewed effort. The name of that game is to get the shopper into their stores.

Since food shopping is essentially a sensory experience, the grocery store is hoping that once in the door the consumer will be susceptible to the siren call of other more high-priced items that promise a variety of convenience, culinary and even educational experiences.

More and more markets are adding pharmacies, bakeries, coffee shops as well as salad bars, chef-prepared entrees, brunch stations and gelato bars. And God forbid if you go shopping hungry. I fully acknowledge that the sushi bar or an impulse order of hot wings at the grocery store has replaced my occasional visit to a fast-food burger chain or restaurant. All of that adds meat to the supermarket's net profits.

Since I, like 92 percent of American adults, believe that eating at home is healthier (and cheaper) than eating out, my main objective in the supermarket is still shopping for fresh food. However, I'm frequently drawn to the seafood or butcher's counter where the slicing, dicing, marinating and stuffing has been done for me by the store's "sous chef."

These wily grocers are also bundling together other meal components right next to the meats and fish, which are easy to prepare and taste almost as good as my own, with a few finishing touches.  I admit that on busy weeknights, going this route makes fixing dinner for two an easier and faster affair. Granted, I'm paying up for the pork roast with cranberry stuffing but still paying less than I would going out to eat. The supermarket’s profit is much higher as a result.

I'm still not using the online applications that stores are offering. There are well over 1,000 apps offered by my iPhone right now and that number is growing exponentially each day. More and more establishments are offering lessons in everything from basic cooking to preparing for your next Super Bowl party. Healthy eating for you and the family, educational courses and advice in weight loss management, heart, diabetes, food allergies and even family mealtime management are now offered along with countess recipes and food guides.

The bottom line seems to me that we are all paying more while the supermarkets are making more as a result, but the added services and products seem to be a fair trade. That's a win-win for everyone.

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: Are You Ready for El Niño

By Bill Schmick
iBerkshires Columnist

It's that time again. Trade winds in the Pacific are blowing west to east, pushing warm water to the surface. In times past, those conditions created havoc with much of the world's weather creating everything from fires to floods, sometimes, in epic proportions. Some weather models predict this year's El Niño could rank among the worse.

El Niño ("boy child" in Spanish) has been around for a long time, but it was only in the early '80s that scientists realized the global impact of these events. Their potential intensity is difficult to predict because they interact with other natural climate factors, which can change the outcome.

Since predicting the strength of a potential El Niño is about as risky as predicting the direction of the stock market, the U.S. National Oceanic and Atmospheric Administration (NOAA) will only deal in probabilities. They predict an 85 percent chance that El Niño this year will be "strong." So far this summer the 2015 El Niño is about tied with the 1997-1998 El Niño in terms of intensity. That's a bit troublesome since the 1997-98 disturbance turned out to be a record-setting event.

The social and economic impact of an El Niño on the United States varies, depending upon where you live and the changing weather patterns. This year, we will feel the strongest impacts of El Niño in the fall and winter. Some of us could actually benefit somewhat, depending upon where you live.

In New England, one can expect a milder winter than average. Snowfall should be less and winter temperatures above average, although we could still experience a few Nor'easters, especially in the beginning and end of the season. The East Coast, overall, should see a much calmer hurricane season. That would be good news in terms of lower heating bills, storm damage, lower insurance claims and business disruption, especially in the retail sector.

Other areas of the country might not be so lucky. In general, summer agricultural crops in the U.S. and Canadian grain belts do well but winter crops not so much. Most often the weather change will bring cooler wetter winters to most southern states.  A strong El Niño often brings heavy rains to places like Texas, the Southern Plains and California.

That might not be a bad thing if it breaks the horrendous drought that has strangled the food and farming economies in these areas for the past few years. The issue will be how much is enough? Back in 1997-1998, heavy rains created terrible flooding, mudslides and death, especially in California. In February 1998, a series of storms caused $550 million in damages and killed 17 people in California.

All in all, the U.S. tends to avoid the worst effects of El Niño, while countries in Southeast Asia, the Horn of Africa and Latin America bear the brunt of these weather patterns. I experienced those conditions first hand while visiting and investing in Peru, Indonesia and Papua New Guinea in 1997-1998.

In Peru, entire towns were wiped away in terrible landslides. Mountains literally tumbled into the Pacific Ocean, burying everything in their path. Fires in Indonesia were so bad that the entire region was blanketed by haze and smog that left your clothes and skin black with ash. These uncontrolled fires decimated crop production in one country after another causing poverty, starvation and ultimately social unrest.

The decline in food production by so many nations had a beneficial impact on our own farming exports but at the expense of so many others. Hopefully, this time around, if El Niño is as bad as some predict, governments in those potential danger areas will be more prepared. But how much they can do, aside from controlling the customary slash and burn style of agriculture, is questionable.

There is no guarantee that this El Niño will develop into another record-breaking event. But temperatures to date this year are already far above average around the planet and many weather models are predicting that 2015 will be the warmest year on record. That simply increases the odds that this boy child of a weather pattern could evolve into a real temper tantrum of nature.

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 'No' Means 'Yes'

By Bill Schmick
iBerkshires Columnist

A Greek referendum less than two weeks ago delivered a resounding "no" when voters were asked to approve the European Community's austerity ultimatum in exchange for a new bailout. While Grecians danced in the streets, global markets tumbled, but fast forward 10 days and we now face an entirely different set of outcomes.

Today the Greek parliament approved an austerity program much tougher than the one they originally rejected in the referendum vote. It was approved by 229 votes out of the 300-seat chamber. In a showdown with the EU, it was either pass the package or get booted out of the Euro.

You may need a little background in order to understand this about face by the Greeks. Greek Prime Minister Alexis Tsipras has spent the last six months deliberately stalling while negotiating in bad faith with the "Troika" (the IMF, EU and ECB).  When it appeared that the other side was getting close to agreeing on some of his demands, Tsipras walked out while calling for a referendum. That deliberate act of sabotage was supposed to force the Troika to agree to even more concessions on the back of a "no" vote. Instead, it did just the opposite.

Tsipras' theatrics convinced the Troika that they were dealing with damaged goods and that the era of conciliation was over when it came to dealing with Greece and its problems. There would be no more emergency money. Greek banks would remain closed as would the stock market. If default and an exit from the Euro were the outcome, so be it.

Germany's Finance Minister Wolfgang Schauble, who had become increasingly cynical of the on-again, off-again, negotiating tactics of the Greeks, floated an idea in last weekend's emergency session of the EU in Brussels that would kick Greece out of the Euro in what he called a "five-year time out." Although not all EU members agreed with the idea, enough did. The statement signaled that Germany had had enough. Either Greece was going to toe the line or it was going to experience a financial and economic meltdown.

Tsipras was given until the middle of this week to convince his nation's parliament to pass a series of austerity measures that went beyond those already rejected in the referendum vote. Some of these changes include rules and regulations that would make it easier to fire employees, the end of some protectionist measures that would open up multiple markets including pharmaceuticals and diary products, as well as the creation of a privatization fund whose proceeds would be earmarked to pay down debt.

In order to comply, Tsipras found himself in the unenviable position of enlisting the aid of the opposition parties while fighting his own hardline supporters in the Syriza party. In the meantime, a confused and disillusioned populace wonders how and why their leaders have sold them down the river. It would appear that even though the beleaguered Prime Minster was successful in this latest turnabout, his days as a leader are numbered. The EU has already cast their verdict, Tsipras cannot be trusted. His own party will likely call for new snap elections and a no confidence vote regardless of the outcome of this austerity deal.     

In hindsight, the flawed tactics of Tsipras and his newly-elected, left-wing Syriza party were typical of a group of amateurs trying to play Game of Thrones with the likes of Germany's Angela Merkel and Christine lagarde, director of the IMF.  Unfortunately, the entire charade has left the leading actors somewhat tarnished as a result. Germany and the other members of the EU, an organization founded on the principals of democracy, harmony and peaceful unification have just engineered "one of the most brutal diplomatic de-marches in the history of the European Union" as a front-page story of the Wall Street Journal described it.

Greece is left with an economy at a standstill, an exploding debt load with no real way to pay its creditors and a population, already drowning in austerity measures, facing even worse. Do I think that the worst is over for Greece and the EU? Not by a long shot.

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: Same-Sex Marriage Good for Business

By Bill Schmick
iBerkshires Columnist

Last week's Supreme Court decision to legalize gay marriage at the federal level was greeted with a sigh of relief by most large companies. It also makes my job a lot easier as well. Here's why.

Previously, the myriad laws that allowed or disallowed gay marriage cost the private sector at least $1 billion annually. Over two-thirds of Fortune 500 companies were offering health and retirement benefits to same-sex partners in states that did not recognize their marriage. That incentive became a nightmare for human resources departments throughout the country that tried to square their practices with that of the states.

Spousal benefits for employees' same-sex partners were also more expensive, since some states and the federal government taxed those fringe benefits for gays, while heterosexual married couples were tax-deferred. That caused many same-sex employers to offer gay employees a bigger salary to compensate for these tax costs.

Companies also have had a harder time recruiting workers with same-sex partners to states where their marriage isn't recognized, where varying laws require corporations treat same-sex marriages differently depending on the state.

From my own experience, advising clients in same-sex relationships to plan for the future has been extremely difficult. In addition to the confusing and contradictory nature of state laws in regard to gay marriage, the federal government has also been a Gordian knot of confusion. Regulations and interpretations of same-sex marriage were handled differently depending on the government agency. Different bureaucracies, whether in Veterans Affairs, the Department of Labor, Social Security and even the Railroad Retirement Board had all devised different interpretations of what constitutes a gay union and its benefits (or lack thereof). In addition, there are more than 1,000 federal laws and regulations that currently apply to married couples and these same laws will now need to be reviewed and re-evaluated with all couples in mind.

The Supreme Court ruling now allows our LGBT clients to simplify what had been complicated estate plans, including trusts and living wills. Since same-sex marriages will be viewed the same as other marriages, much of the estate planning can now follow a more standardized process. Spousal beneficiaries of pension plans, 401 (k) and other tax-deferred and IRA plans, as well as spousal health insurance benefits, will no longer be in question.

Some sources have guesstimated that the same-sex decision could generate as much as $2.6 billion in an economic windfall over the next three years. The $51 billion a year wedding industry should see a boost in business for sure. Others calculate that the tax savings from reporting a combined income and other cost savings by the LGBT community will result in additional consumer spending.

Economic benefits aside, last week was a great week for Americans, in my opinion. The court's upholding of Obamacare, the 5-4 decision in favor of gay marriage, and witnessing the families of the Emanuel African Methodist Episcopal Church forgive the alleged murderer of its family and congregation members were all momentous events. This week, I'm proud to be an American.

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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