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The Independent Investor: Money & Divorce — What You Should Know
By Bill Schmick On: 06:27PM / Thursday October 02, 2014
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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.



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@theMarket: Wash, Rinse and Repeat
By Bill Schmick On: 08:20AM / Saturday September 27, 2014
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The dollars running, stocks are falling, bond prices are jumping while commodities are tanking. Welcome to another week in the financial markets. Expect more of the same in October.

As September, the worst month of the year for markets, comes to a close (next Tuesday) volatility appears to be rising. Stay strapped down, however, because we are not through the woods quite yet.

Historically, the first two weeks of October can get pretty hairy. Some of us might recall October of 1987 as an example.

So many of us have nudged up our exposure to the equity markets this year in pursuit of more and more gains that any sell-off scares the bejesus out of us. The 1-2 percent pullbacks, like investors experienced on Thursday, is a shock to our system. If you can't stand the heat, get out of the kitchen or so the slogan says.

Does that mean you should raise cash, sell your equity holdings and wait to jump back in after the correction? If you can do that, "you're a better man than I,Gunga Din."

In markets like this "volatility" is another name for stock market declines. Heading into October, therefore, don't be surprised if we have more of this same kind of action in the weeks ahead. The best advice I can give is to hang in there, ignore the paper losses and look ahead toward the end of the year.

I am convinced that whatever losses you may incur will be made up before January.

The U.S. dollar is still climbing after experiencing a decadelong period of underperformance. Usually, a rising dollar and a rising stock market can continue in tandem.

That makes sense because the engine that drives both markets is a growing economy. Like the Fed, I believe that is what is happening in this country.

However, that does not mean that all companies benefit from a strong dollar. Export stocks, many of which you will find among the S&P 500 Index can, and will be hurt by the fact that every gain in the dollar makes the products they sell more expensive to foreign buyers.

Non-U.S. sales account for roughly two thirds of total sales among companies in the S&P and 62 of the largest exporters generate more than 50 percent of their profits from exports. If the dollar continues to strengthen (and most currency analysts think it will) then the impact on the S&P 500 Index could be substantial. Why is that important?

Over the last several years the S&P 500 Index was the best performing equity index in the world. Prior to the financial crisis, other indexes (international, emerging markets, small or mid-caps, etc.) did better.

The S&P 500 Index also happens to be the index most professionals use as a benchmark of comparative performance. As such, it has been hard to beat an index that has performed so well. This could change.

In the future, savvy investors may re-focus their interest on other non-S&P stocks or indexes for better performance if the dollar's strength turns out to be a longer-term trend and I think it will. I suspect that some investors (myself included) are already making the switch.

In any case, chances are high that the market will put us through the wringer (wash, rinse and repeat) in the days ahead.

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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The Independent Investor: Is Wall Street Responsible for Climate Change?
By Bill Schmick On: 10:57PM / Friday September 26, 2014
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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.



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@theMarket: Waiting on the Fed
By Bill Schmick On: 10:36AM / Saturday September 13, 2014
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It should be clear to you by now that in the United States the Federal Reserve Bank is calling the shots in our financial markets. To a lesser extent this phenomena is happening all over the world. As such, the markets did little this week because the Fed doesn't meet again until Tuesday.

The S&P 500 Index has simply been trading in a tight range between 1,970 and 2,000. Although stocks are marking time, there has been some movement elsewhere in the financial spectrum. Take the dollar for example. The greenback is on a tear against most other currencies, but specifically the Yen and the Euro. As the dollar has strengthened gold, silver and oil have plummeted.

This is both good and bad news. The dollar's gains make our exports more expensive and imports cheaper. Since most commodities are priced in dollars, as the U.S. currency climbs, commodities become more expensive. Traders, always looking for a profitable arbitrage, sell gold or oil and buy dollars.

The decline in energy prices, however, gives an important boost to consumers, who buy an average of 400 gallons of fuel a year or more. A 40 cents decline at the pump translates into well over $120 in savings for everyone who drives. It is like getting a multibillion dollar tax cut that goes right into our pockets.

So what is behind this gain in the dollar?

Some say it is because of all of the geopolitical risk in the world today. ISIS, Ukraine, Russia, even Scottish secession are making the safe haven dollar an attractive alternative. Others argue it is not so much that the dollar is gaining ground but that the Euro and yen are getting weaker. That is due to the policies that are being implemented by their central banks.

It is true that Japan has been actively promoting a weaker currency, as they continue their own massive QE program. I have written at length on their efforts to break a double decade worth of stagflation. The job is not done, in my opinion. I expect that although the program is supposed to sunset in 2015, the Japanese central bank will extend its efforts beyond that date.

Over in Europe, as I wrote last week, the ECB has also announced further easing of interest rates and their own bond buying form of quantitative easing. More actions will be implemented if called for, according to their officials.

The result of this European and Japanese stimulus was to drive down their currencies as interest rates fall. Given that our own Fed is ending our QE program in October, investors are betting interest rates in the U.S. and the dollar offer a better deal going forward than elsewhere.

There is another more speculative element in the dollar's rise. As readers know, thanks to the Fed's overwhelming influence on the markets, a cottage industry of Fed Guessers has sprung up among the financial weeds. These pundits make a living trying to outguess the next central bank move. They parse every word, comma and period of the monthly Federal Open Market Committee (FOMC) statements trying to discern a change in stance.

This week, in anticipation of Tuesday's FOMC, the guess is that with the economy exhibiting gathering signs of strength, the Fed will be forced to move earlier in raising interest rates. Right now that move is not expected to happen until sometime in 2015. No one knows, but in a slow market where stocks are waiting for the Fed's next move, traders will believe just about anything.

As for me, I am ignoring all of these pundits. I do believe the U.S. dollar is on a long-term trajectory higher as are interest rates. That is a natural thing to happen when a country's economy is improving. The Fed says rates will remain low until 2015, and maybe after that. That's all I need to know. Stay invested and ignore the noise.

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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The Independent Investor: The United States of Scotland?
By Bill Schmick On: 05:38PM / Thursday September 11, 2014
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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.



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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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