Home About Archives RSS Feed

The Independent Investor: Mind the Gap, Please

By Bill Schmick
iBerkshires Columnist

As the unemployment rate drops toward full employment, the growing skills gap between business and labor is becoming a huge problem in this country. Fully 80 percent of manufacturers and small business owners can't find qualified staff.

Over the years, I've written several columns about this growing problem, but now the economy is picking up and unemployment, at 5.1 percent, is coming close to full employment. Both corporate and government leaders are realizing that in in some industries, such as utilities and aerospace, the skilled labor shortage may hamstring America's ability to do business in the years ahead.

The Harvard Business Review estimates that 47 percent of all new job openings over this decade will fall into the middle-skills range. Middle-skill jobs usually require postsecondary technical education and training and, in many cases, require college math and science courses if not a degree in those subjects.

Although the manufacturing sector today only represents 18 percent of total GDP, every dollar spent in manufacturing adds $1.37 to the U.S. economy. And every 100 jobs in that sector create an additional 250 jobs in other sectors that support manufacturing. The vast majority of manufacturing executives believe this growing skills gap will impact their ability to meet customer demand in the future. They say they are ready and willing to pay well above market rates for qualified employees, yet six out of 10 positions go unfilled.

Back in the day, skilled workers had two avenues to obtain marketable work skills. They could learn on the job through a cooperative apprenticeship system developed by management and company unions. But as unions declined (less than 12 percent of the total U.S. work force is represented by unions), so did the system of this on-the-job training. At the same time, the landscape has changed from gradual and incremental upgrades easily learned on the job to new skills requiring a quantum leap in technical and behavioral understanding. Things like problem solving, communication, teamwork and leadership.

That's where the second avenue of learning new workplace skills would be useful. Colleges were supposed to be the place where young people can absorb these massive breakthroughs and develop the rules necessary to excel in a modern-age professional work life. We were told to major in a field that suited our interests and talents.

Unfortunately, thanks to a high school system that has failed to adequately prepare our students in science and math, plus an American prejudice against just about anything that was not in the liberal arts field, fewer and fewer college students choose a career that is needed in the job market. Over the last two decades only 15 percent of U.S. college graduates majored in science, technology, engineering or math and that, my reader, is where the jobs are.

As the gap widens, a number of initiatives between government, education and the private sector has sought to remedy the situation through training and hiring of graduates, so far with varying degrees of success. The old system of apprenticeships, although trial-tested, is difficult to maintain, given the small number of unions remaining throughout the country.

In-house job training has also been met with some success in major corporations that have the time and money to bring a new employee up to the level of skilled competence necessary for their job requirements. However, small businesses, the main engine of employment and prosperity in this nation, do not have the time, money or number of skilled employees necessary to teach and/or train the unskilled employee.

A crisis always seems to light a fire under those who know what to do, but have just not got around to doing it yet. I think we are getting quite close to the point where everyone in the private and public sectors is going to have to roll up their sleeves and focus on this issue.

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 Economics of European Migration

By Bill Schmick
iBerkshires Staff

A stream of destitute refugees arrives on European shores every day. Greece, Hungary and Italy have borne the brunt of this migration, but the ocean of displaced persons this year has already swamped their resources. It is a life and death crisis that demands an answer now.

Unfortunately, the European Union is neither accustomed to, nor organized in a fashion that allows for rapid decision making, especially when it comes to political problems like this. Something as knotty as what to do with the influx of over 500,000 illegal immigrants over the past year has taken European leaders out of their comfort zone.

Normally, a long process of consensus-building among EU members is necessary before political or economic decisions can be implemented. As an example, think of the time and effort that was necessary to bail out Greece. But this emergency won't wait. The drowning of hundreds of migrants in April, the discovery of a truckload of dead refugees in Austria last month and the recent front-page photo of a dead 3-year old immigrant in Turkey underscore the fact that political dithering means additional lives lost.

Faced with public outrage, the European Commission's President, Jean-Claude Juncker, proposed a plan to redistribute 160,000 refugees across the European bloc. The plan must be approved by a qualified majority of EU governments. Even before countries vote on the plan, it is obvious to everyone that it falls far short of a solution considering the numbers of migrants expected to descend upon the continent.

Many of the immigrants are political refugees from the Middle East (mainly Syria, Afghanistan and Iraq). For several years, we have all watched on the nightly news the plight of these refugees living in squalid camps in Turkey, Lebanon and Jordan. At this point, however, these countries cannot take any more refugees, nor do they have the resources to care for those in the camps.

Lebanon, for example, has taken in one million refugees. Given that their entire population amounts to 4.5 million, the overload of immigrants is destroying that country. GDP is expected to decline 3 percent this year as the government and economy collapse under the weight of refugees. Faced with starvation or worse, many of these camp migrants are escaping to Europe with the help of smugglers.

Part of the problem within Europe is the routes used in smuggling these immigrants into the EU. The Mediterranean gives smugglers and others easy access to Italy and the Greek Islands. From there, refugees travel over land in pursuit of economic opportunity wherever they can find it. Countries such as Germany, Finland, France, Spain and Great Britain are attractive end points for these immigrants.

Faced with already high unemployment rates, slow to no-growth economies, and overburdened social spending programs in many cases, European countries are not in the kind of economic shape to support an influx of destitute migrants. Many governments (and voters) believe these new arrivals will simply add to the strain they are already feeling. In Eastern Europe, religious and cultural differences have created a backlash against accepting any migrants at all.

In addition, many European countries have little or no experience in accepting and processing refugees, which makes an EU Pan-European approach that much more difficult to implement.

Europe has faced and managed emergencies like this before. The Yugoslav wars of the 1990s and influx of Vietnamese "boat people" are just two that come to mind. Yet, the number of migrants seeking asylum in Europe today is higher than at any time since World War II. Meeting this challenge will test Europe like never before. Let's all hope that Europe's politicians are up to the task. Otherwise this crisis will only get much, much worse.

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: Senior Housing Set to Soar

By Bill Schmick
iBerkshires Columnist

United States demographics indicate that the senior population in this country is growing at twice the national average. As more and more Baby Boomers retire in the years ahead the demand for senior housing is set to skyrocket.

Independent living facilities, where the elderly are still active and relatively healthy, are driving the growth in the overall retirement market. Occupancy rates have reached 91.3 percent and the overall growth rate in this sector is averaging about 6 percent a year. Since seniors will represent 20 percent of the U.S. population by 2030, according to the U.S. Census Bureau, this segment of the housing market will continue to grow.

The demand for these communities will continue to rise by the 500,000 people a year who will hit the age of 65 in the years to come.

Although the vast majority of Americans over 50 years of age still want to remain in their homes indefinitely, that may not be possible as health and other factors force them into alternative living styles. And the so-called nursing home business has been given a bad rap (and deservedly so), thanks to decades of accounting scandals, operational issues, excessive debt and poor, regimented living conditions. The good news is that this industry, that so many of us fear, is actually getting a facelift.

Surviving players and new entrants in the senior living industry have acquired a better understanding of what make seniors happy. They have adapted programs and amenities that are starting to attract the elderly. Back in the 1960s, when retirement communities were first built, big was beautiful and some developments numbered 25,000 homes or more. Today, planned developments range from 20-30 units to as large as 300-400 units, but rarely larger than that.   

The cookie-cutter approach has all but disappeared and in its place is a focused customizing strategy that transforms each new resident’s experience within the senior living community into something uniquely their own. There is also a renewed emphasis on home ownership rather than renting, since 80 percent of seniors, age 65 and older, are accustomed to being homeowners rather than tenants and they want to keep it that way.

The senior housing market is normally divided into several categories ranging from active adult communities, which are typically condos, co-ops or single-family homes with minimum or no services offered to those who are less active and may have more difficulty with routine housekeeping might prefer independent living facilities that supply everything from meals to organized group activities.

Seniors who find themselves needing personalized support services but do not require nursing home care might choose multifamily properties in an assisted living facility. Skilled nursing facilities and continuing care retirement communities provide hospitallike levels of care mixed with large numbers of independent living and assisted living units.

However, the days of long institutional hallways filled with drab rooms and silent residents watching visitors walk by are long gone. Instead, expect to see beautiful resort-style communities that offer residents exercise classes, fitness rooms and amenities and services that you might see at a luxury resort or on a cruise ship. Monday it may be cooking classes offered by an in-house chef. Tuesday could be golf pro lessons on the community links. Some communities have their own broadcast stations, social media sites or newspapers, with residents taking an active part in producing the news or entertainment.

As the population grows older it is also growing smarter. For the most part, seniors are more educated than ever before. They know what the future holds and are more willing to take control now. Moving into a beautiful senior living community at a younger age is making more and more sense to a growing segment of the elderly population.  I expect that trend to continue.

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 Marijuana Market

By Bill Schmick
iBerkshires Columnist

Only four states have legalized marijuana for recreational use so far. Another 23 have given the nod for using cannabis for medical usage. Today it is a $2.7 billion industry that is set to grow substantially in the years ahead if more states jump on the band wagon.

Whether legalization is a fad or a trend in this country will have to wait until the next election cycle in 2016. Legalizing the drug will most likely be on the ballot in several more states. Researchers from California-based The ArcView Group, a cannabis investment and research firm, predicts that 14 more states will legalize marijuana while two more will legalize medical marijuana next year. In addition, at least 10 more states are "considering" legalization, according to them.

Since the latest polls by Gallup indicate that only a slim majority (51 percent) of Americans favor legalizing marijuana, those projections may prove to be overly-optimistic. If they did materialize, that would place legal marijuana as the fastest growing industry in the United States. To date, only four states — Colorado, Washington, Alaska and Oregon — have developed a retail trade in legalized marijuana. D.C. has also legalized the drug, but sales are currently banned. Congressional Republicans have blocked the new law.

Remember, too, that the federal government still considers marijuana a dangerous drug (a Schedule 1 controlled substance like heroin or LSD). And clearly, there are a number of legislators that are bound and determined to keep it that way. As a result, if you are thinking of entering this business you should be aware of the drawbacks and political risks before ripping up the tomatoes and re-planting your back-yard with pot plants.

Since banks are federally regulated, very few of them are willing to loan newly minted pot entrepreneurs the seed money for a start-up (no pun intended). You can also forget credit card transactions as well. This is a purely cash business. Not only will you need your own startup capital, but without access to banking, you are going to need to pay your staff, your suppliers and even your taxes in cash.

There may be some longtime growers and users of marijuana out there that think they have an edge once pot is legal. That may prove to be an erroneous assumption. Legalization, like the end of Prohibition for alcohol, creates two opposing changes in growing and selling marijuana. It provides downward pressure on pot prices. The same ounce that sold for $300, may now only command $200. Second, the supply of marijuana suddenly expands considerably as new growers jump in.

In that kind of environment, quality of product becomes one of the critical factors in the sale and profitability of production. Competition is fierce. Those with the resources to grow their crop scientifically, using the best and latest bioscience, fertilizers and equipment will end up on top. All of that costs money and a lot of it.

In addition, you will need to brand, market and distribute your product. Handing off the "dime baggie" at your local park won't cut it. After all, you are trying to get on the ground floor of what you hope might be the next Wholefoods in the marijuana business. To do so, and do it profitably, is going to take a lot of business knowledge, retailing know-how and luck. Do you have what it takes?

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: Not All Bonds Are the Same

By Bill Schmick
iBerkshires Columnist

Bondholders are holding their breath as they wait for the Federal Reserve Bank to begin hiking short-term interest rates. Most investors are expecting all bonds to take a hit at the outset of the country's first rate hike in nine years. What happens after that may surprise you.

Prior to the financial crisis and the stimulus policies instituted by the Fed to solve it, bond investors could count on a fairly predictable pattern of behavior among bond categories as interest rates rose. Historically, the Fed would begin to raise rates when they perceived the economy was growing too quickly. Why?

Because normally, unbridled economic growth will result in higher inflation, which is something no one wants. Higher rates would force the cost of borrowing to go up. That, in turn, would slow investment, spending and ultimately economic growth. The trick is to raise rates just enough to head off inflation while allowing the economy to continue to grow.  

In that kind of environment some bonds do better than others. To understand why, you need to know something about risk. To make it simple, there are two kinds of risk. Interest rate risk occurs when rates rise. That risk affects all bonds. Then there is the risk of bankruptcy.

Generally, U.S. government entities (Federal, state and local) are perceived to have little or no bankruptcy risk. Therefore, the fear of bankruptcy does not enter into the bond investor's calculations. Corporate bonds, on the other hand, do have this additional risk factor.

It is one reason why corporate debt, whether investment grade, convertible bond or high-yield (known as junk bonds), almost always offers a higher rate of interest than government bonds. Since the fortunes of most corporations are tied to the fate of the economy, when the country is doing poorly, the risk of corporate bankruptcy rises. Corporate bond prices fall and the interest rate they offer goes up. The opposite occurs when the economy is growing.

In today's growing economy, the most likely outcome of a moderate rise in interest rates (interest rate risk) on corporate bonds would be neutral to positive. Better prospects for companies in a growing economy would lessen bankruptcy risk. That will hopefully negate some or all of the losses incurred by rising rates overall.  

Corporate bonds of all kinds have performed well over the last few years, maybe too well. It may be why bonds overall will have a knee-jerk negative first reaction to the end of an era of easy money. But corporate debt should continue to do well at least until the Fed hikes interest rates to a level that tips the economy into recession. That could be years from now.

Various Fed spokesmen have reiterated over and over again that the pace of interest rate increases in the future will be slow and moderate.   

The moral of this tale is that in the future corporate bonds should do better than government bonds. My advice to investors who continue to insist on keeping the majority of their money in the bond market is to switch from governments to corporates at your earliest opportunity.

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 3 of 51 1  2  3  4  5  6  7  8  9  10  11  12  13 ... 51  
News Headlines
Petition Voices Objection to Proposed Williams Art Museum Site
Northern Berkshire Santa Fund Kicks Off 2015 Campaign
North Adams Ready to Take Possession of Colegrove School
Pittsfield Bars Raising Security After Shooting Incidents
6th Annual Cop On Top Returns To Pittsfield Walmart This Weekend
Pittsfield Fires Police Union President For 'Misconduct'
Holiday Cards Support CATA Artists With Disabilities
Berkshire Tidbits: Time for Hanukkah, Christmas Foods
YMCA Hosts Free Youth Snowboarding Program
Ohio Baptists Erecting Monument in Cheshire to John Leland

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.




@theMarket (187)
Independent Investor (255)
November 2015 (6)
October 2015 (9)
September 2015 (7)
August 2015 (7)
July 2015 (6)
June 2015 (8)
May 2015 (6)
April 2015 (8)
March 2015 (6)
February 2015 (7)
January 2015 (9)
December 2014 (7)
Crisis Metals Recession Pullback Fed Congress Jobs Energy Rally Stock Market Federal Reserve Currency Banks Stimulus Oil Bailout Election Interest Rates Greece Debt Selloff Commodities Fiscal Cliff Economy Housing Japan Debt Ceiling Markets Deficit Taxes Stocks Europe Europe Retirement Euro
Popular Entries:
The Independent Investor: Don't Fight the Fed
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
@theMarket: Markets Climb Wall of Worry
The Independent Investor: Financial Media May Be Your Worst Enemy
The Independent Investor: How 'Black' Will This Black Friday Be?
@the Market: Buy the Dip
The Independent Investor: 'Bag Lady' Syndrome and You
The Independent Investor: Social Security & the Budget, Part II
@theMarket: How High Will We go?
The Independent Investor: Budget Deal Craters Social Security Strategies
@theMarket: Regaining the High Ground
The Independent Investor: Water Scarcity Not Only California's Problem