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The Independent Investor: Woman Need to Invest More

By Bill Schmick
iBerkshires Columnist

We all know women generally make less than men. On average, female workers make 77 cents for every dollar a man earns doing the same job. If you are a woman of color, or work in some lower paid industries, the gap could be even wider. It is one of the reasons women need to invest and save more, not less.

That may sound counter-intuitive. After all, if you are making less, you have less to save and invest. You are absolutely right, but there are important reasons that you still need to save more. One of the main reasons is that the chances are you will live longer than your male counterparts by about five years.

That means if you are living on $50,000 a year, you will need $250,000 (five years times $50,000) in additional income and assets simply to stay afloat until you die. And guess how much the gender wage cap will cost you over your career? The Women's Institute for a Secure Retirement figures that over your lifetime the wage gap will cost you $300,000. Do you see where I'm going here?

The numbers don't add up. Over 150 psychological studies have shown that most women are great at saving, but saving alone won't save you. The only way I believe women can overcome the wage gap penalty, while living longer, is through investing. But unfortunately, the same studies reveal that women are generally more risk-adverse than men when it comes to investing.

There are several reasons for that: everything from lack of confidence to the fear of becoming a homeless bag lady in their old age. The net result of this aversion to risk is less reward. And therefore less money to live on when you retire, get divorced, or experience the death of your husband.

And yet, study after study reveals that when women do invest, they do it well and, in most cases, outperform their male counterparts by almost 1 percent per year. I can attest to that since well over half of my clients are women.  One of the main reasons is that my female clients trade less than male clients. Frequent trading usually ends up with less, not greater, rewards over time.

For the most part, my female clients contribute to their tax-deferred savings plans on a far more regular basis than males. They also refrain from second-guessing their advisors as well. Given that they are usually paying a fee to have their investments managed, their "hands-off" attitude allows the professional to do their jobs. Many men, on the other hand, are like back-seat drivers, always tinkering with their portfolios usually at the wrong time and with the wrong investment.

Probably, their best investment trait is the ability and willingness to ask for help. And when they get advice that makes sense to them, they stay the course, despite the ups and downs which are always present in financial markets. When you combine all of the above, it is not difficult to understand why women investors outperform men.

The bottom line for women is that despite the wage, age and gender gap, you owe it to yourself to start investing and do it now. The longer you wait, the more difficult it will become to avoid that bag lady fate that haunts your dreams.

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: Markets Get Back to Business

By Bill Schmick
iBerkshires Columnist

Since Labor Day marked the end of summer for Wall Street, the big guys came back to work and evidently did not like what they saw. As this week comes to a close, all three indexes suffered losses.

Friday's downturn could be attributed to North Korea, the rogue state that detonated a nuclear device on Thursday night. Those kind of one-off political events often-times unsettle markets. Stocks went down, the dollar spiked as did interest rates and that I found interesting.

Normally, U.S. Treasury bonds are a safe haven so prices go up in times of uncertainty; but not Friday. We have to therefore look under the hood to discern what is really going on with the markets. Aside from the fact that stocks are due for some turbulence, the culprit seems to be additional worries over whether or not the Fed may surprise us by raising rates on September 21.

Then again, traders were somewhat disappointed that Mario Draghi, the chief of the European Central Bank, did not add further stimulus to the already-multi-billions of Euros the ECB is already pumping into their financial markets. Like junkies in search of their next high, traders want central banks to provide more and more easy money in order to justify higher equity prices.

Draghi disappointed them. He appears to have joined his counterparts at the U.S. Federal Reserve in telling the EU membership countries that it is their turn to take up the mantle. He especially singled out Germany in discussing why additional fiscal spending is necessary to accomplish the European bloc's hope for higher economic growth.

Of course European politicians, like those in America, have been sitting back, playing it safe and letting their central bank do all the heavy lifting on the economic front. Naturally, politicians on both sides of the Atlantic like the status quo. You see, doing nothing is not unique to American politicians.

By increasing spending, cutting taxes and/or regulations in order to grow the economy, legislatures are taking a chance. What will their constituents say if the deficit ballooned as a result? T Baggers, here in America, for example, would be out for blood.  I will be curious to see what happens when the Japanese Central Bank meets later this month. Will they send the same message to Japan's parliament?

But in the meantime, our Fed officials are busy sending mixed messages (as usual) over when they plan to raise interest rates in this country. Boston Fed President Eric Rosengren joined the “hawks” on the Fed in warning that rates need to rise soon.  Fed Governor Daniel Tarullo said on morning television, that he would rather wait until there was more proof that inflation was rising before he pulled the trigger.

Nonetheless, their contradictory comments were enough to send the stock market reeling and hike the probability of a September rate hike to 33 percent. In my opinion, I do not believe the Central Bank will hike in September. I do believe, however, that they do not want market participants to become too complacent about when the Fed will raise rates.

The more important question one must ask is what will happen to the stock market if the Fed does raise rates; if this week is any indication, nothing good. As you know, I have been preparing you for a market pull-back. This may be the beginning, and if it is, it won't be something to worry about, but it could be painful while it occurs.

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 VA — If It Isn't Broke, Don't Fix It

By Bill Schmick
iBerkshires Columnist

In the heat of presidential campaign rhetoric, the quality of care given to our veterans has become a popular topic. Needless to say, neither candidate has received care in a veteran's hospital and probably does not know anyone who has.

Actually, few of us know anything at all about the Department of Veterans Affairs medical capabilities. Most Americans have never served in the military. Fewer still have ever been inside a VA facility, and if they have, it was to see a relative or friend.

As such, our ignorance breeds a whole host of misunderstandings about how good or bad our veterans are being treated. Critics are quick to point to the 2014 scandal when some VA facilities were found to be denying care to service members and covering up those failures as well. But is that scandal enough to completely revamp an organization that has been serving our countrymen through countless wars?

As a vet who has experienced VA medical treatment, I can tell you that I found my treatment both professional and given with a high degree of care. There are plenty of other veterans who have had the same experience. But don't take my word for it.

There are at least 60 recent studies (since 2014) done by a variety of medical and other organizations. The results indicate that the care our vets receive at VA facilities is comparable to (or superior to) that offered by private providers. In areas such as mental health, preventative care, outpatient processes and outcomes, VA treatment was superior to that received in the private sector, according to these studies.

Their goal, which is centered on the well-being and health of each veteran, explains why their track record is better than average. Take my case as an example. I was wounded in Vietnam as a teenager. I am now in my late 60s and the VA has had a record of my health and well-being for practically my entire adult life. They know me from top to bottom, inside and out.

For the VA, there has always been a strong incentive to invest in my long-term health. In addition, the specialists work as a team with access to the same records and treatments that I have received over the decades. Therefore, there is little redundant treatment and my care is not fragmented among various doctors, hospitals etc., as it can be in the private sector.

The VA's motives are to keep me healthy and living longer and that gives me a warm, fuzzy feeling. In the private sector, profit dictates what happens to the patient. Those who favor privatization of the Veteran Affairs' medical system can swear that won't happen, but ask me if I believe them? And who says they can run the VA any better? If I look at the performance of the prison system, where privatization has been the buzz word for years, I am not impressed nor convinced they do a better job than the state.

Dr. Joseph Lalka, who worked as a primary-care physician at the VA for five years and is now retired, thinks that privatization would be a big mistake. Even though he recognizes the faults of the system, he believes the vast majority of services fill the veteran's needs. Improvements can always be made and the timing of visits to specialty treatment, in particular, is one obvious area that needs to be upgraded, he says.

Remember also that a lot of vets treated at the VA have combat-related traumas and disabilities. You don't see that often in your run-of-the-mill hospital or medical office. Their treatment costs money and requires expertise born from experience. It is hard for me to believe that the private sector could do a comparable job in this area of medicine. Of course, with trauma comes pain medication and with that the higher chances of developing an addiction. It is a problem that is affecting many Americans, not just Vets. Treatment of drug addiction is another area that could be improved at the VA.

I'm sure there are readers out there who disagree with my stance and I would love to hear from you. In the meantime, fix what needs fixing, but don't jettison a system that has served its veterans well in their time of need.

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: A Tale of Two Interest Rates

By Bill Schmick
iBerkshires Staff

Ahead of the Labor Day weekend, investors had little to do but bet on how strong or weak the unemployment number would be. It turned out to be weaker than expected and the markets rallied.

Yes, we are once again in a "bad news is good news environment." Weaker economic data means the chances of the Federal Reserve Bank raising interest rates at the September meeting is diminished. That means lower rates for longer, which equals higher prices for stocks, bonds, and commodities. None of the above disappointed on Friday.

Investors should take the action in the markets (both up and down) with a grain of salt. The real market moves normally begin after the unofficial end of summer, Labor Day. We will have to wait until then before identifying real trends in the markets.

It has been almost 40 days since the stock indexes have experienced a one percent move. That hasn't happened since 2007.  The pros are expecting a big move one way or another. The markets are coiled but the problem is which way will they move? But don't look at stocks for the key. It is in the bond market where we may find clues to the next move.

What is the bond market saying about the chances of a rate hike in September? Traders are giving a hike less than 50 percent. So unless that changes, it remains a plus for a stock market advance. But is a rate hike really what is driving the bond market?

Sure, the central bank can raise the level of interest rates on short-term bonds, but they have little control over what really matters to the economy and that is long-term interest rates.

Ten- and 30-year U.S. Treasury interest rates are controlled by the market, not the Fed. If long rates stay down, it is good for the economy and good for the stock market. If they rise, then the reverse is true. And it is here that the plot thickens.

The fate and direction of our long-term bonds are highly dependent on what happens in the global fixed income markets. All investors seek higher yield (along with safety). The country that provides the best deal gets the lion-share of demand for fixed income investments. Because our two main competitors in that market (Japan and the European Union) are offering negative rates of interest, demand for U. S. bonds have been highly popular among global investors.

What's not to like. You get to own the safest bonds in the world and get 2.9 percent (in the case of 30-year treasuries) while other countries are giving you zippo for their bonds. How long can that continue? Until the European Central Bank and the Bank of Japan decide to change their monetary policies.

The European Central Bank will meet on Sept. 8 and the Bank of Japan on Sept. 21. All indications are that neither central bank has any plans on changing their stimulus policies any time soon. In the case of Japan, they may actually increase their stimulus. If that is the case, we can look to the U.S. markets as a place you want to be invested between now and at least the end of the year.

Now that does not mean that we are immune to market declines. In fact, we are overdue for one, but it will be a passing event and nothing to get worried about if and when it comes. Have a great Labor Day!

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 VA — Political Football

By Bill Schmick
iBerkshires Columnist

It is an election year and as such veterans are a voting block that neither side can resist. Both candidates are promising to overhaul Veterans Affairs once elected. The questions are whether to hand it over to the private sector or just try and fix the government organization's short-comings.

We all remember the terrible scandal back in 2014 when a whistle-blower revealed shocking inefficiencies, coverups and the deaths of some veterans within the Veterans Affairs. The then Secretary of Veterans Affairs Eric Shinseki, along with a gaggle of bosses in various states, who were caught falsifying waiting time reports for vets, provided the obligatory resignation parade before the nation.

Hearings were called where "outraged" politicians and veterans rights activists all got their share of free media time and in the end the Choice Act was rushed through Congress. This allowed vets to go to private care providers if they were unable to schedule medical appointments within 30 days or travel distances of at least 40 miles to a VA office. This would theoretically insure that no more vets would die while waiting for treatment.

Critics charged that this was simply the first step toward privatization of the veterans' health care system.

A bi-partisan panel, the Commission on Care (COC), comprised of  health care executives and veterans' advocates were charged with looking at the system and coming up with recommendations to "fix" it. Last month that panel issued 18 recommendations that are supposed to "transform this complex system."

If this all sounds like the typical smoke and mirrors remedy to a national problem that we have become accustomed to, then you wouldn't be wrong. First off, the panel recommended an 11-member board of directors that would govern the Veterans Health Administration and report directly to the president. To me that just sounds like adding another layer of bureaucracy on top of an administration chock full of the same.

In addition, a new "community network of care" would allow vets to obtain medical services from both private and federal health-care providers regardless of the distance to or wait times at their nearest VA providers. That would push the system further towards privatization, say its critics. Other suggestions included improving VA leadership, modernizing computer systems, enhancing clinic operations and creating an easy to use VA personnel system.

If all of those suggestions sound well-meaning, but nebulous in the extreme, you are right. If history is any guide, millions (if not billions) will be spent with little visible improvement in veteran's care, accountability will be low to non-existent, and as time passes, the whole effort will dwindle to nothing when the next crisis becomes the nation's priority.

Sorry for my cynicism, and now on to politics.

Few voters realized that the 2014 scandal occurred on Bernie Sanders' watch. He was chairman of the Senate Veterans Affairs Committee and had been so for a year when the scandal erupted. Critics argue that Sanders had been using the veterans' health care system as a model for what a universal health care system in America would look like. Did Sanders' ideological views of how much government could deliver blind him to the VA's obvious (in hindsight) problems and deficiencies?

As politicians will do, Bernie soon turned a losing proposition into a win by taking credit for the Choice Act, even though the legislation opened the door for further privatization of the VA. Not to be outdone, Hillary Clinton, towing the traditional Democrat's party line, wants to build upon the Choice Act and restructure the agency, but falls short of privatizing it.

Republican Donald Trump, as you might expect, jumped into the act. Stating that the Department of Veterans Affairs' health care system is "badly broken," he would move the VA further toward privatization. His campaign spokespeople suggested that it could evolve into more of an insurance provider (like Medicare), than an integrated hospital system as it is now. Other GOP legislatures support at least a partial privatization of vet's affairs.

As a Vietnam vet, there is a lot at stake for me and my fellow veterans. In my next column, I will examine the pros and cons of both positions.

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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