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The Independent Investor: Vocational Schools — A Youthful Answer to Unemployment
By Bill Schmick On: 04:24PM / Thursday February 21, 2013
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If you think a 7.8 percent unemployment rate in this country is terrible, ask an unemployed 18-year-old how their job search is going.

I'll tell you, not well. Today, unemployed workers between the ages of 16 and 19 years old have an unemployment rate of more than 23 percent, according to the Bureau of Labor Statistics. That number falls to 20.9 percent among white kids and explodes to 39.3 percent for African-American youths. The dismal fact is that for America's young adults unemployment is 30 percent higher than the national average.

Youth unemployment is worse than at any time since the Great Depression and will remain stubbornly high largely because the young lack the experience and skills of older workers. So if you believe, like I do, that young people represent the future of this country, something better be done to turn these numbers around and pronto.

In my last column, I wrote that trade/vocational schools were making a comeback. And as this century picks up speed the demand for skilled workers in a variety of high-paying, blue-collar areas is going to accelerate. For many of today's unemployed youth, vocational training should be a no-brainer. Here's why.

Vocational training requires less time to complete than a college degree since most postsecondary vocational degrees can be had in two years. Unlike your college-educated brethren, you will have readily employable skills, therefore you can be working and earning money in as little as 24 months while many college grads will still be searching for a job. And you will do so without an enormous educational debt burden that most college grads will be required to pay down over the next 15-20 years.

But the future of vocational training, in my opinion, must do more. It must reach backward into our high school system. That's where the student's technical training should start. Let's face it, not everyone should go to college, nor do they want to. Yet, for the most part, our educational system is geared for that single objective. That is a big mistake.

Some students, maybe a lot of students, won't be attending college. What about them? Given the high cost of a college education today, many lower and middle income students already know they can't afford college. So why, they ask, should they even remain in a high school dedicated to preparing them for a college they will never attend?

I say bring back shop classes. Why not allow those students to spend at least half their time in a trade area, alternating a full week of career education and a week of academics?

What about trying a Swiss or Netherlands-style vocational education approach? In their systems, students in their last two-years of high school have the option of participating in a structured workplace apprenticeship, making money some of the week while spending the rest of the time in the classroom. That might explain why the Swiss unemployment rate among youths is only 5 percent.

Consider that in the Massachusetts' vocational technical high schools the dropout rate is half the rate of those at comprehensive high schools, according to a recent study by Pioneer Institute, a Boston-based research firm.

Why? Students, who are given a choice between preparing for college (the comprehensive approach) or preparing to learn a skill or trade, feel they have more control of the future. In addition, the academic and applied learning environment in mastering a vocation of their choice tends to keep the student's attention and reinforce their commitment.

Finally, the more a student can apprentice while in the classroom the better. Apprenticeships, in combination with academic education, will improve the transition from schools to careers and higher paying jobs. It can upgrade skills and fine tune them to the needs of our nation's companies. I say urge our nation's businesses to return to the apprenticeship and training model. It worked well in this country for decades and works splendidly today in Germany, Austria and other European countries.

President Obama, in his State of the Union address, appears to recognize the need for a change of direction in how we are educating and training our youth for the challenges ahead. I say he is on the right track. What do you say?

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: Inch by inch
By Bill Schmick On: 09:07AM / Saturday February 16, 2013
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Markets continue to grind higher with several averages, like the small and mid-cap indexes, hitting record highs. What little profit-taking occurs is met by buyers anxious to get into the market. I suspect this stage will continue for a bit longer.
 
We are only 3 percent away from the historic highs of the S&P 500 Index at 1,565. That magic number is acting like a magnet to bullish investors who argue there is no reason we shouldn't at least reach that number before giving some back. Seasonally, the first quarter is also kind to the stock market. All in all, enjoy the run and stay invested.
 
This weekend, the G20 group of finance ministers and central bankers will meet in Moscow. There was a time not long ago when investors would be holding their breath in anticipation of some new pronouncement involving the EU and Greece in particular. It appears those days are behind us.
 
The press has been playing up the risk of a currency war erupting between some nations, specifically those who make up the G7 countries. Where have they been? The devaluation of currencies has been going on ever since 2009. The U.S. dollar has been dropping against most currencies now for well over a year. The yen has plummeted 20 percent since November while the Euro has also lost value on various occasions.
 
This week the G7 countries — the U.S., Japan, Germany, Great Britain, France, Canada and Italy — issued a joint communique stating that domestic economic policies must not be used to target currencies. But every central banker will argue that most, if not all, of their nation's currency moves have simply been a side effect of their domestic policy. They argue that their stimulus policies have been targeting domestic growth, not a weaker currency.
 
Take our own Federal Reserve; it is on its third such stimulus program. It is true that the Fed's main objective is reducing unemployment by growing the economy. And both the Fed and the U.S. Treasury have been careful to publically insist on a strong dollar policy. But the facts are that the dollar has weakened and continues to do so in the face of our latest quantitative easing strategy.
 
A weak dollar helps our exports by making our goods cheaper to buy for overseas consumers.  Strong exports equate to higher domestic growth. And over the last two years our economy needed those export gains badly.
 
In Japan, the same thing is happening. Its newly elected government has taken a page out of our book. After years of stagnation, Japan is attempting to stimulate their economy by easing monetary policy. That has driven the yen much lower, which will help grow Japanese exports. The Germans are miffed by that strategy and have been complaining. Yet, Germany has benefited for years by exporting their products in Euros. The worth of the Euro is a heck of a lot cheaper than Germany's original export currency, the Deutsch mark. As a result, Germany became an export powerhouse in Europe.
 
The simple truth is that we have been dealing with these currency issues for several years now. The declines have been gradual for the most part. That way no one rocks the boat too much and competitors can adjust to currency changes over time. The sharp devaluation of the yen, however, has inconvenienced some G7 players and they are making their views known. I suspect that Japan has gotten the message and the pace of the yens’ decline will likely moderate from here.
 
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: Trade Schools versus College
By Bill Schmick On: 05:56PM / Thursday February 14, 2013
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When was the last time anyone seriously considered a choice like that? Over the last 50 years, most Americans considered a college education as the only ticket to their slice of the American dream. The high cost of that education, coupled with declining incomes and fewer openings for today's college grads make me wonder if there isn't a better way forward for a large portion of our work force.
 
When was the last time you could get an electrician, plumber, or other skilled laborer to show up on the same day you called? Have their fees gone up or down? Why are there 200,000 or more high-paying manufacturing jobs left unfilled in this country in the face of 7.8 percent unemployment? My point is that there is an enormous opportunity for millions of Americans to earn more money and live a more prosperous life than ever before, but they lack the skills to apply.
 
During the Cold War, John F. Kennedy urged this nation's youth to enroll in college. It was their patriotic duty in order to counter Soviet aggression and technological gains. We listened and enrolled in college by the millions. The Vietnam War and the draft spurred even greater growth in university attendance. By the 1980s, college was the only answer to getting ahead. If you wanted an even better life, graduate school was the next step, so I applied. We called it the age of the MBA. 
 
Trade and technical schools fell by the wayside. It was a place where only those who couldn't pass their SATs would go, quietly and in shame. Attendance declined, schools were shuttered and those that did survive were as popular as the plague.
 
The globalization of the world's economies, however, threw the world's labor force on its head. What followed was a 30-year wrenching readjustment of worldwide employment practices. The developed world's work force experienced a substantial decline in real wages, especially among its unskilled workers, while the labor force among emerging economies has enjoyed a high income and standard of living.
 
Here in America those trends have resulted in a stubbornly high unemployment rate (especially among the nation's youth) and an imbalance in our skill sets. We have an overabundance of college-trained workers, an increasing (and unfulfilled) demand for skilled "blue collar" workers and a large number of undereducated high school graduates making the minimum wage.
 
The Center on Education and the Workforce at Georgetown University projects that between now and 2018, the U.S. economy will create 47 million job openings. However, less than a third of those jobs will require a college degree. Many of these new jobs will require some occupational training and skills. This new national demand will come from healthcare, construction, manufacturing and natural resources among other areas.
 
As a result, vocational or trade schools are making a comeback. Over the last five years these schools have experienced relatively strong growth, about 4.1 percent annually and are expected to continue to grow by about 2.6 percent a year over the next five years. At the same time, much of academia as well as the present government have changed their attitude toward vocational training.
 
Traditionally, we have considered vocational training as an institution that trains students for entry-level positions in jobs that don't require a college degree. That may have been the case in my "Daddy's Day" but vocational training is in a state of transition. Trade schools increasingly offer a much broader approach to education and are providing students with a variety of applicable skills. Today, technical school graduates are working in business, health, computer technology and various areas of administration as well as in the more traditionally recognized blue collar jobs.
 
I have often said that opportunities for U.S. workers with only a high school degree are dismal at best and shrinking daily. These are today's minimum wage employees. The present debate over whether or not to increase that minimum wage addresses a symptom rather than a cause in this country. 
 
In my next column, we will look at how technical schools and vocational training could help turn around the high unemployment rate of America's youth, while lifting an entire segment of workers out of the minimum-wage trap.
 
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: America, the Battered
By Bill Schmick On: 04:40PM / Thursday February 07, 2013
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On the eve of what is supposed to be one whopping big snow storm here in the Northeast, one can only wonder if Mother Nature is preparing us for yet another horrendous weather year. Last year was one of the costliest on record.

In 2012, at least 11 weather events, each causing more than $1 billion in losses, were delivered upon this nation. Tornados, hurricanes, wildfires, and drought were just some of the fire and brimstone that left 349 people dead while leaving millions of inhabitants seeking shelter.

Out West, those "purple mountain majesties" were hidden by months of thick smoke as almost 10 million acres of national forest was reduced to blackened stumps. At the same time, those "fruited plains" and "amber waves of grain" shriveled away, replaced by acres of cracked, parched earth. After months of waterless weather, the 2012 drought spread over half the United States, from California, north to Idaho and the Dakotas and then east to Indiana and Illinois. Think "Dust Bowl."

That drought persisted all year and continues today in much of the nation's mid-section. Over 123 of those deaths and billions in damages can be attributed to that drought alone. Of course, the drought played a major role in spreading the wild fires, which gave us our second worst fire season in over a decade in the western U.S.

One can only wonder how the high temperatures interacted with other weather conditions to trigger an unrelenting series of tornados and severe thunderstorms in places like Texas, Oklahoma, Colorado and much of the Southern Plains. Forty-eight deaths, countless casualties and $14.5 billion in damages had many residents in a dozen states as shell-shocked as war victims.  

There was even an unusual combination of high winds and severe storms (called the Derecho Event) that cut a swath of death and damage through the mid-Atlantic from New Jersey to South Carolina this summer. It caused 28 deaths and $3.75 billion in losses.

There was also little left shining from "sea to shining sea" except search lights during the nation's two largest hurricanes: "Isaac," which blew in from the Gulf of Mexico and Hurricane Sandy that made a shambles of much of the East Coast.

It was Sandy that skewed the numbers last year. The Superstorm killed 131 people and estimated damages have peaked at $50 billion. Only 2005, the year of Hurricane Katrina, Wilma, Rita and Dennis, generated more deaths (2,000) and worse damage ($187 billion). And the damage caused by Mother Nature is on the increase.

Back in the '80s and '90s, according to the National Climatic Data Center, which is part of the National Oceanic and Atmospheric Administration, it was rare to see more than two or three $1 billion, weather-related damage events annually. We had many years where the losses totaled less than $20 million a year. But today, the standout years during those decades have now become fairly common. Billion-dollar events have become twice as frequent as they were back in 1996 and in the proceeding 15 years.

So as you read this today, "Nemo the Nor'easter," will have descended upon us. It is forecasted to pile up the white stuff at the rate of an inch an hour around here. Over in Boston, it could be much worse. Let's hope everyone survives it. Unfortunately, this may only be the first big weather event of many that we will endure this year. In which case, 2013 will simply be adhering to what is now the new normal in weather-related costs.

C'mon, Mother Nature, go pick on someone else.

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: Not If, But When
By Bill Schmick On: 04:47PM / Saturday February 02, 2013
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On the technical front, more and more indicators are flashing warning signs. The markets look extended and investor sentiment points to extreme bullishness. Those are usually signals that we are due for a sell off.

That does not mean that the markets won't go higher but the higher the averages climb without a pullback, the sharper the decline will be when it does occur. Remember too that pullbacks are good for the markets. Two steps forward and one step back is the rhythm of just about everything and the markets are simply a reflection of that fact of life. We have had a good run over the last few weeks and the averages are close to historic highs for good reasons.

The traditional Christmas rally was postponed last year because of concerns over the Fiscal Cliff. Prior to that, in November, some investors vented their disappointment over the re-election of President Obama by selling the market. They were convinced that without Mitt Romney, the world would come to an end.

As a result, since the beginning of the year, many investors have been playing catchup. As predicted, once the Cassandras had been proven wrong on tax hikes, spending cuts, the growth of the economy, the debt limit and whatever else they were fretting about, the bears have been making up for lost time and have been throwing money at stocks hand over fist.

As I explained last week, we may also be seeing the beginnings of a shift out of U.S. Treasury bonds and into stocks over the last few weeks.

All of this good news has kept the markets propped up. I expect that enthusiasm will continue over the very short term, but somewhere up ahead lies the possibility of a correction of up to 10%. That might sound like a lot (and it is), but those kinds of corrections normally occur once or twice every 12 months or so. We are overdue for this one.

“Should I sell now?” asks a client.

My answer depends on your circumstances. If you know that at some point over the next few months you will need to raise cash for college tuition, a new roof, an auto or other big ticket purchase, then it probably makes sense to take some profits now and make sure you have the money available for when you will need it.

On the other hand, if it is simply fear and greed spurring your desire to sell, I would advise against it. I have never met anyone who can consistently sell at the highs and buy back at the lows. The majority of times, those who try lose more money than they make.

“So I'm supposed to just sit here and take a 10 percent hit?" the client asks.

My answer is yes. The next thing longtime readers will point out is that over the past few years I have taken action on many similar declines. Why not now?

If I thought that something serious was lurking out there in the bushes, something that could drive the market down a lot further than 10 percent, then I might advise you to step to the sidelines. But I don't see anything like that.

Europe is recovering, not failing. The Fed is easing and the government appears to be getting its act together. Globally, I see more growth ahead. No matter how much I beat the bushes, I just don’t see the kind of dangers that we have had to navigate over the last few years.

There is no way of telling when a correction will occur. We could easily gain another 4-5 percent before it occurs and there is no guarantee that if it does occur it will turn out to be 10 percent. It could be less, a lot less. In which case, selling now will be an exercise in futility. My advice for most investors is simply weather the decline if it occurs. I have a strong feeling that the markets will ultimately make back any losses they may incur and then some.

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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