Tuesday, October 21, 2014 07:57am
North Adams, MA now: 46 °   
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: Why Is This Recovery Different?
By Bill Schmick On: 03:59PM / Thursday October 09, 2014
Important
1
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

The stock markets are at record highs. Interest rates are at record lows. The unemployment rate is below 6 percent and yet, most Americans are unhappy. They are not feeling the recovery. Why?

The answer to that question is complicated. But let's start with the financial crisis. Like the Crash of 1929, the events of 2008-2009 were also the result of a credit crisis. The country's financial system was on the brink of a meltdown. In the 1930s, a lot of banks went under.  That was averted this time by spending massive amounts of money to shore up our financial institutions. However, the damage was done.

We lost trust. For the first time in three generations, Americans had doubts as to the credit-worthiness of its most venerable institutions. The ensuing recession was unlike any that America has experienced since the Great Depression. When one loses trust, both lender and borrower pull back. It takes a long, long time before that trust is rebuilt.  That process is still ongoing.

Readers may recall that it was only in 1939-1940, a full 10 years after the "Crash," before this country was able to climb out of its longest downturn in memory. Some say that if it had not been for World War II it would have been even longer. I don't believe that it will take us quite that long to return to a normal economy but from a historical perspective, the present state of our economy is understandable.

Back in August, The New York Times crunched some numbers to determine what the economy would look like coming out of a normal recession, compared to what is happening today. They found that five economic sectors out of 11 were lagging badly in this recovery. They were housing, state and local government spending, durable goods consumption, business equipment investment and federal spending. Let's examine how credit impacts these sectors.

Housing is no surprise. After all, it was at the forefront of the subprime loans financial crisis. There is a shortfall of over $239 billion in missing output in this sector. We know the reasons for this shortfall — tighter lending standards and housing prices that are still underwater from their peak. That means less jobs, fewer wage increases, a less mobile workforce since few are willing to sell their homes at a loss to relocate for a job. Bottom line: banks have a trust issue with borrowers; less borrowing, less housing, simple.

Less state and local government spending represents a $180 billion gap versus what they should be spending. The reason for the decline in spending is the absence of tax revenues and burgeoning debt burden most local governments incurred as a result of the recession. States have cut back drastically and for a good reason. They need to borrow just to make ends meet and who will be willing to lend if they are spending like a drunken sailor?  

The $178 billion gap in durable goods consumption is all about big-ticket items, many of which you need to borrow in order to purchase. Things like automobiles, furniture, appliances, etc. If you are already underwater on your house, who can afford to borrow and who will lend to you?

Corporations also have a trust issue. They are spending $120 billion less on plants and equipment than they should be because they lack faith in the future demand for their goods. Most of them can borrow all they want but they don't or if they do it is not for plants and equipment. It is for things they can control like stock buybacks or mergers and acquisitions.

That leaves the Federal government, which is spending $118 billion less than it would in a normal recovery. Because we were forced to spend so much in propping up our financial sectors, the nation's debt skyrocketed to a level that created a crisis of confidence among our politicians. The fear that the nation might not be able to service, let alone pay off these historical high levels of debt resulted in a compromise that in effect reduced spending for the next decade.

To make matters worse, none of the other six sectors that make up the major contributors to gross domestic product have been able to take up the slack. So where does that leave us? When one gets into financial difficulty, it takes a long time to repair a credit rating. It takes years, and that is exactly what has happened between borrowers and lenders over the last five years. There is no way to hurry the process. In the meantime, it is what it is.

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: Money & Divorce — What You Should Know
By Bill Schmick On: 06:27PM / Thursday October 02, 2014
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

You never paid attention to the family finances. Suddenly, your spouse wants a divorce. Fortunately, it's an amicable separation and you agree to split things up equitably. Where do you begin?

The above scenario is much more common than you think since the odds that your marriage will end in divorce are about even at best. More than 50 percent of first marriages end in divorce and 60 percent of remarriages, so the statistics are weighted against a successful marriage in America. It is extremely important therefore that both spouses understand their current financial situation and what their income needs will be post-divorce.

First, think of what your immediate cash needs will be. If one of you is working and the other is not, then cash flow is going to be highly important to the unemployed spouse. In that case, the cash-strapped party will want to receive assets that one can sell easily, quickly and with the least tax consequences. This would include stocks, mutual funds, exchange-traded funds bonds and possibly Roth IRA assets. For the spouse that is working, a combination of assets makes more sense. Some might not have immediate liquidity such as a home, a limited partnership, retirement plans and certain taxable accounts.

Remember also that you may decide to split up, but that does not mean your debtors will agree to let one or the other off the hook when it comes to your liabilities. Mortgage lenders, credit card companies, the IRS and even your credit report agencies will want to know exactly who and how each party are going to honor their debt obligations. As such, it is important that before you get divorced you agree to either pay off your mutual debt or determine each spouse's responsibility for that debt. It might also be a good idea to request a credit report as well since sometimes there may be some outstanding debt that has slipped through the cracks over the course of a long marriage.

By the way, don't ignore the tax ramifications of splitting up your assets. For example, if the spouse in need of cash flow sells securities there may be taxes to pay at the end of the year. If you are going to agree to sell your home and you think you can sell it for more than the purchase price, you might want to hold off getting a divorce until after the sale. Why?

The first $500,000 in capital gains from the proceeds of a home sale is not taxed as a married couple. However, if you are single the tax exclusion drops in half to $250,000. In addition, you may have also accumulated tax assets, which are tax losses that can be applied against taxable gains over the years. Make sure this issue is examined and those assets divided appropriately.

Next to your home, retirement assets are usually a major part of any couple's net worth.

Employer–sponsored retirement plans, IRAs, even pensions can be divided and transferred on a tax-free basis as long as the rules and regulations are followed. Divison of some of these retirement assets requires both the divorce court and the plan administrator's approval.

Getting a divorce for most of us is a traumatic emotional decision but it also has a major financial impact as well. Separating emotion from the financial decisions is tough enough when the both sides are relatively civil about the decision. It can be almost impossible when the divorce is acrimonious. And I have not even mentioned the subject of children. That is another topic for another time.

In any case it is a good idea to seek out someone who can advise you on these financial matters that has an objective point of view.

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: Is Wall Street Responsible for Climate Change?
By Bill Schmick On: 10:57PM / Friday September 26, 2014
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

Monday's Wall Street sit-in by a few hundred radicals would lead us to believe that Wall Street is responsible for the present changes in the world's climate. Maybe so, but remember this, what Wall Street has done, it can also undo.

Readers know that I am no apologist for big business, the financial community or Wall Street. As for climate change, I am clearly on the side of those 300,000-plus people who participated in the People's Climate March on Sunday. The earth is in jeopardy today thanks to carbon emissions generated by fossil fuels.

The simplistic approach, preferred by this "Flood Wall Street" crowd, condemns Corporate America, Capitalism in general, and oil companies, specifically, for the global dilemma we face. The solution, they offer, is to do away with these entities with the assumption that once that is accomplished, the world shall once again be green and free. If only things were so easy.

Historically, I can understand why they blame all things business. You see, it takes a long time for climate to change, according to the scientific community. As such, we could blame the Robber Barons of the 19th century for today's ills.

After all, without a Rockefeller or Morgan(and Wall Street to fund them), there would be no oil and gas industry, nor railroads to transport these products. Of course, we probably wouldn't have computers or medical technology or a host of other things that makes up today's society either.

We could go back further still in our search for a scapegoat to the Dawn of Industrialization, but then we would have to bring Europe into the equation, specifically Great Britain where it all started. Remember, too, that it was foreign nations, not Wall Street, capitalism or America, that first developed and exploited the globe's natural resources. The world's populations ravaged the earth while mining for coal, tin, gold and dozens of other metals for centuries.

How many forests were cut down worldwide before the New World was even discovered in order to clear the way for population expansion and farming? We wring our hands in anguish today over the downing of trees in the Amazon and other locales but conveniently forget how we have all abused the environment to get us where we are today.

Some say that we need to radically change our priorities. Walk rather than drive, forsake flying and stop mining altogether. Give up fossil fuels even if it would drive the world into a global depression. Radical times, they argue, call for radical solutions.

So who wants to go first, you?

For most of us, those kinds of remedies are beyond the pale, but does that mean that we should simply continue as we are? Of course not, but let's not shoot ourselves in the foot by getting rid of the very engine of change we need to turn around this situation. The forces that got us into this mess are the ones that will get us out of it. Evidence abounds.

It is Wall Street and capitalism that is making it possible for any number of carbon-reducing technologies to flourish. Who funded and is developing the world's first, second and third electric car companies? Where are solar companies getting their backing?

Read my lips: it is private capital that will convert this generation of fossil burning vehicles into one powered by electricity and other clean technologies. Wind farms, rooftop solar panels, organic farming, solar powered utility plants, pollution controls, scrubbers, in fact, just about everything we will need to clean up the environment is either funded by or made by companies that are listed on Wall Street or soon will be.

Yes, world governments have a role in providing the incentives for companies to take a chance on new technologies. But all the governments in the world do not have the money, knowledge or technology to effect climate change. That's the job of the private sector. And as long as there is a profit to be made in cleaning up the environment, Wall Street will be happy to oblige.

So let's use it.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.



     
The Independent Investor: The United States of Scotland?
By Bill Schmick On: 05:38PM / Thursday September 11, 2014
Important
0
Interesting
1
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

Will the ghost of William Wallace finally see the British thrown out of his country once and for all? If the latest polls on the outcome of the Sept. 18th referendum on Scottish Independence are any indication, Scots are in a dead heat over the political and economic future of their country.

Last weekend, for the first time, polls showed that the majority of voters in Scotland were leaning toward independence. Since then new polls show the public vacillating between yes and no on a daily basis. The news has shocked the world and galvanized the three major British political parties to implement a no-holds-barred program of damage control.

UK Prime Minister David Cameron, Liberal Democrat leader Nick Clegg and opposition Labour Party chief Ed Millbank dropped whatever they were doing and headed for the Highlands on Wednesday. The British leaders are pulling out all the stops in trying to convince Scottish voters to stay with the Union. Even Harry Potter has been enlisted or at least his author, JK Rowling, is backing the Union, which has been in effect for 307 years.

On the financial front, the polls caught "The City" (England's Wall Street) by surprise. For months, European financial institutions had been discounting the referendum as a non-event, just another opportunity for those dour Northern people, who talk funny, to blow off a little electoral steam. No one seriously considered that Scotland would actually embrace independence.

For most of the week both the British pound and the UK stock markets have been declining. And they should, because if Scotland does decide to fly the coop, there will be severe economic consequences for all parties concerned.  No less a presence than billionaire fund manager George Soros has weighed in warning Scotland that now would be the worst possible time to leave the United Kingdom.

A group of big global bank experts also joined the fray arguing that Scottish independence could threaten the UK's economic recovery, weaken the sterling by as much as 5 percent against the dollar, throw Scotland into a deep recession, and wipe billions off the value of big Scottish corporations.

Those for independence argue the positives outweigh the negatives. Exports would grow. North Sea oil revenues, they also contend, would be Scotland's and worth billions, even if energy production from those deep, cold waters is peaking out. Scotland would be able to tax its citizens and determine how that money would be spent. Investments, jobs and future productivity would be for Scotland's benefit alone, not simply as part of a greater United Kingdom budget plan.

Of course, the Scotts would have to come up with a new currency. U.K. politicians have already said they would be against the use of their own currency in the event Scotland went its own way. The Euro would be out of the question, since Scotland would first have to petition and wait for membership in the European Union before using that currency.

Scotland now represents just under 10 percent of Britain's GDP. Independence would pose a potentially lethal blow to the UK's fragile recovery. The loss of billions of dollars in oil revenues alone would throw the country into a much larger deficit.  It would also jeopardize the Labour Party's chances of winning the next election. At present, Labour leads in the polls for parliamentary elections that are scheduled for next year. Of 59 Scottish seats in Parliament, Labour holds 41 of them. Independence would at best reduce the race to a tie between Labour and the reigning Conservative Party of David Cameron.  

The Scots are sitting in the catbird seat. As it is, the politicians have promised the Scots more autonomy on everything from social to economic issues including income tax, housing and transportation. The people of William Wallace might demand even more and receive it. By next Thursday's vote, it could be that the canny Scots, without raising a sword, could come away with independence in everything but name. And for you of Scots birth — "Alba gu bràth."

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: Europe Follows the U.S. lead
By Bill Schmick On: 05:23PM / Thursday September 04, 2014
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

The European Central Bank has lagged behind both the U.S. and Japanese counterparts in their efforts to stimulate the economies of the European Union. Today, they attempted to address that fault before Europe sinks into a recession.

Both bond and stock market investors have been anticipating additional stimulus for several weeks. ECB President Mario Draghi did not disappoint. He said the bank would begin purchasing asset-backed securities and covered bonds, which are investments based on loans to corporations and residential mortgages. The hope is that others will now also jump on board and buy them too.

If that occurs, then European banks would have the courage to make more such loans knowing that the central bank and others would be there to buy them. The thinking is that if it worked in the U.S., it should probably work in Europe.

The ECB also cut its benchmark interest rate to just 0.05 percent and the deposit rate (what European banks pay to keep their money in the ECB) to minus 0.2 percent.They stopped short, however, of actually buying government debt, at least for now.

The ECB reduced its forecast for economic growth this year to just 0.9 percent while lowering its inflation expectations to 0.6 percent. Some economists think that is still too optimistic. As of August, the EU’s inflation rate was 0.3 percent, far below the targeted rate of just under 2 percent.

The ECB has only one job and that is to manage inflation. A slide in inflation (0 or below) can be just as bad as an inflation rate rise. Deflation, rather than inflation, appears to be the greatest fear of officials in the EU. In a deflationary economy, it becomes much more difficult for governments, businesses and consumers to service their debt payments. Investment falls and so does spending. This downward spiral becomes extremely difficult to break.

Japan is a textbook case of what happens to a country caught in this kind of cycle. For over 20 years, Japan has suffered from low to negative growth, falling exports, declining wages and jobs and negative interest rates.  It has taken massive amounts of monetary stimulus, combined with government spending to break out of this cycle and the jury is still out on whether they will succeed.

The European Community, however, is a union of competing interests and it is difficult to arrive at a consensus among 18 members. It is one reason why the ECB has lagged behind its brethren banks around the world in supporting its economies. Although the ECB has conducted a low-interest rate policy, it has stopped short of more aggressive programs such as employing their balance sheet to buy vast amounts of debt in the financial markets. However, today it appears European officials have reached a moment of truth. Cutting interest rates alone has not been able to turn around the situation so even the foot draggers among the EU have finally agreed to more drastic measures.

Most observers would agree that Germany has been the loudest voice in opposing any bond buying actions by the ECB. However, today's actions set the stage for even more stimulus in the months ahead. Let's hope it works.

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 1 of 39 1  2  3  4  5  6  7  8  9  10  11 ... 39  
News Headlines
Colegrove Park School Project Toured
Pittsfield School, City Officials Prepping For Big Decisions
BArT Students Get Lesson in Chocolate, Child Labor
MBTA Rail Cars to Be Built in Springfield
Trick-or-Treat Hours for Halloween 2014
Hunting Permits Available for Hopkins Forest
BerkshireWorks Plans Events in Honor of Veterans
Adams Civic Club Seeking Broader Membership
Cariddi Hosting Information Forum on Ballot Questions
Lanesborough Committees to Discuss School Funding
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 (147)
Independent Investor (199)
Archives:
October 2014 (4)
October 2013 (2)
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)
Tags:
Housing Economy Europe Euro Debt Ceiling Stocks Energy Taxes Debt Stock Market Recession Fiscal Cliff Jobs Japan Deficit Retirement Commodities Currency Banks Bailout Selloff Stimulus Greece Federal Reserve Election Crisis Fed Oil Metals Interest Rates Pullback Markets Congress Europe Rally
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: Are We There Yet?
The Independent Investor: Why Is This Recovery Different?
@theMarket: October Starts Off on High Note
The Independent Investor: Money & Divorce — What You Should Know
@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?


View All
Football: Franklin Tech vs...
McCann Tech holds on for the win Saturday afternoon. McCann...
Colegrove Park Elementary...
Mayor Richard Alcombright and the City Council were updated...
Boys and Girls Cross Country
Berkshire Chamber Greylock
Boys and Girls Cross Country
The Lenox boys and girls teams both cleaned up on Senior...
Volleyball: St. Joe s vs...
Taconic takes 3 from St. Joseph Tuesday night.
Ramblefest 2014
Adams residents enjoyed entertainment, food, and locally...
Girls Soccer: Hoosac Valley...
The Wahconah girls soccer team on Monday advanced to an...
Berkshire County Classic Golf
Francois Benistand, an exchange student from the south of...
Indashio Fashion Show
Fashion designer Indashio holds his second FAME Festival in...
Football: Pittsfield vs...
Senior quarterback Nick Clayton marched his team 80 yards...
Football: Lee vs Drury
FINAL: Lee Wildcats beat Drury 24 -14.
Football: Taconic vs Hoosac...
FINAL: Hoosac Valley 51-14 over Taconic.
Soccer: Mount Greylock vs...
Eric Hirsch scored twice, and Taylor Carlough played strong...
Girls Soccer: Wahconah vs...
The Mount Greylock girls soccer team is still in search of...
Boys and Girls Cross Country
Hoosac Valley's Travis Ciempa and Mount Greylock's Margo...
Football: Franklin Tech vs...
McCann Tech holds on for the win Saturday afternoon. McCann...
Colegrove Park Elementary...
Mayor Richard Alcombright and the City Council were updated...
Boys and Girls Cross Country
Berkshire Chamber Greylock
Boys and Girls Cross Country
The Lenox boys and girls teams both cleaned up on Senior...
| 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