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@theMarket: Market Stalls at Record Highs

By Bill Schmick
iBerkshires Columnist

Stock market averages made another batch of new highs this week only to fall back in what may be buyer exhaustion. If the trend continues, investors may be looking at a 4-5 percent decline from here.

It is too early to tell, because one day does not make a trend. We could easily experience a rebound next week, but I would still consider the present levels of most indexes ripe for a fall. My column last week pointed out that we are now in a "danger zone." Sure, the markets could continue to grind higher but every additional point just sets us up for an overdue correction.

Since all eyes and ears are on Washington, progress on President Trump's agenda is dictating where the markets will trade. Every television appearance and tweet by President Trump simply adds to investor expectations. At this point, investors expect that tax cuts, a wholesale revamp of rules and regulations, plus a multitrillion-dollar infrastructure spending plan is just around the corner. It is not.

For those of us who understand the pace of reform in the nation's capital, it would be best to take a longer-term approach to Trump's agenda. It appears, for example, that health care will be the first area our legislatures will be addressing this year. That does not mean that one day soon Congress will vote on a soup-to-nuts replacement of the Affordable Care Act.

Instead, expect to see a flurry of piecemeal changes over the course of many months. Lawmakers will attempt to address the failings of the present health system without disrupting those who are already members of the Obamacare insurance scheme. That will not be an easy task.

Steve Mnuchin, the new secretary of the Treasury, tempered investors' expectations this week that tax reform would also be a done deal any day now. Instead, he promised "significant" tax reform before the congressional August recess. In my opinion, that is still a wildly optimistic deadline for something that has been talked about, but not acted upon, for many years. And yet, naïve investors were disappointed by the new time frame.

Prospects for infrastructure spending, another of the president's policy initiatives, appears to be fading into sometime next year. That is understandable, given the need to balance the desire to get Americans back to work again with the impact that spending will have on an already-bloated deficit.  

Of course, the problem with that kind of disappointing news is investors have already bid up material, commodity and building stocks to outrageous price levels over the past two months. Given that market participants today are notoriously short-term in outlook, there is a risk that speculators will dump these stocks now and revisit them later (hopefully at a lower price).

And if they do, what's to stop traders from taking down the entire market simply because there may be a time delay between investor expectations and the implementation of Trump's agenda? You can see the risk, and it is one reason that I have turned cautious in the short-term.

Do I believe, like some, that Donald Trump won't be able to pull off his program? No, I don't, but I am realistic about the time required to accomplish his goals. There may simply be a disconnect between what investors are expecting and what I believe can be accomplished in the short-term.

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. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

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The Independent Investor: What Happens to Your Pet After Your Death?

By Bill Schmick
iBerkshires Columnist

If you are one of the 70 percent of the population that considers their pet a member of the family, you should review your estate planning documents. Otherwise, there is a good chance your pet will either end up in the pound, or worse.

This hits close to home for many of us. If my wife and I were to die, for example, who would take care of our chocolate Lab, Titus?

There are few people who we would trust to take care of him. Compounding the problem is the fact that he is 8 years old and suffers from arthritis. I discovered that simply putting some instructions in a will was neither legally binding nor particularly useful. Unless we do something different, Titus could be condemned to imprisonment and a life without love.  

You must understand that legally a dog, cat, horse or any other kind of pet is not considered a human being. They are considered your property. As such, Titus is our "property" and the law states that you can't leave property to a piece of property.

Therefore (until recently and only in some states) your pet can't be a beneficiary in a will. Your instructions within a will are not enforceable. I might state that Bri (our dog whisperer) gets Titus in the event we pass, but a will cannot instruct Bri to care for the dog, take him to the vets, etc. Don't forget, too, that your will is not enacted immediately. All wills have a waiting period, sometimes months, even longer if it is contested.  Who is going to care for your pet in the meantime?

It is also difficult in a will to disburse money to someone for your pet's care over a pet's lifetime since a will is a static (as opposed to an on-going) document. And changes to a will are at the court's discretion. Do you really want some judge, who may or may not be an animal lover, deciding your pet's fate?

You may recall the now-famous case of Leona Helmsley, who left $12 million in trust to Trouble, her white Maltese, while giving nothing to two of her four grandchildren. In 2007, a year after she died, a judge reduced the dog's wealth by $10 million. Still, $2 million was enough for Trouble to live a life of luxury, until she died at age 12 in 2011.

In some cases, pet provisions in your will may only be "honorary." Fortunately, 40 states and the District of Columbia recognize statutory pet trusts, so that pet owners who direct someone to take care of their pet and bequest funds for its care could work through such a legal document. In the states without statutory pet protections, however, these provisions are "honorary." That means the person who receives the funds decides whether or not to use them for your pet's care. There is nothing to prevent that person from dumping your pet and taking a vacation with your $5,000.

The person to whom you entrusted your pet to could be a loving, caring person, but what if the person is allergic to your pet, or already has pets of their own and conflict develops between them? The person may live or move to a rental apartment or community that excludes pets. As you now realize, there is a lot to consider here.

But there are avenues you can pursue to protect your pets. There are legally enforceable documents that can guarantee an animal's continuing care. Some statues such as the Massachusetts General Laws chapter 203E, Section 408 are relatively new. We will be discussing pet trusts in our next column with an expert attorney on the subject, Holly Rodgers.

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. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.
 

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@theMarket: Danger Zone

By Bill Schmick
iBerkshires Columnist

"Highway to the danger zone
Gonna take you
Right into the danger zone"


Something new is happening to the stock market, it has actually had two negative days in a row. That doesn't mean much after weeks of gains, but it just may signal a temporary halt to the Trump Rally.

My short-term target in this Trump-inspired rally was achieved this week. The benchmark index, the S&P 500, not only reached 2,330 (my target) this week, but went beyond it. The S&P 500 kept on climbing, reaching an intra-day, record-setting high of 2,351.31 on both Wednesday and Thursday. The index has subsequently fallen back but not by much.

The Dow, NASDAQ, the small-cap Russell 2000 Index, plus a slew of other averages also reached record highs. Make no mistake, that's a good thing. Hence forth, any further gains will put us on a highway to what I call the danger zone.

Like the movie, "Top Gun," we can cruise into the danger zone (where most accidents occur), but as Goose and Maverick discovered, one wrong move can send us into a tailspin. Let me make something clear, however, when (not if) this tailspin occurs, your portfolio will come out of this intact and reach even higher highs over the coming months. That is the reason I have been counseling readers to expect a decline — but not try to play it.

In this Teflon market, little can dent theses gains. There were rumors, for example, that a $4 billion hedge fund was in trouble. The markets barely moved. Then there was Fed Chairwoman Janet Yellen's annual Humphrey Hawkins testimony before Congress. In the past, investors and traders would hang on to every word for clues of what the Fed would do next in the interest rate environment. Today, the Fed's spotlight has been stolen by the actions of our new president.

And speaking of our Top Gun, this week we witnessed some really crazy action coming out of Washington. True to form, "The Donald" in a press conference on Thursday performed another media-bashing episode that sent top network journalists screaming that the president has lost his mind. I found it amusing. Some of Trump's top cabinet choices backed out, another resigned, while the Democrats continued to erect as many barriers to progress that they can. Welcome to Washington.

On the foreign front, President Trump bashed Venezuela's leaders for facilitating drug running, met with Canada's and Israel's leaders, while telling Russians to give back Crimea to its people. None of these events moved the markets. Even the presence of a Russian spy ship, the SSV-175 Viktor Lenov, off our coast could do no more than produce a yawn from the high-frequency traders.

For the markets, it is all about waiting to see what "phenomenal" tax, economic and regulatory reforms will be forthcoming from the White House. To be fair, the Federal Reserve Bank still has a role to play in investors' psyches.  Bond traders are keeping a watchful eye on exactly when the Fed plans to raise interest rates again. Right now, March is off the table and June seems the month of highest probability for another quarter point rise in the Fed Funds rate.

I expect markets to do little until further economic news is released from Trump's team. The response from Congress will also be important. At any time, we could see a pullback because now we are in the danger zone.  But as I have written, it would be a dip that should be bought not sold. Stay invested.

Note: Several weeks of Mr. Schmick's columns in January & February disappeared into the ether on their way to iBerkshires. They are being back posted to the dates on which they should have appeared.

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. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

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The Independent Investor: 'Watch the Gap Please'

By Bill Schmick
iBerkshires Columnist

If you haven't realized it by now, Medicare has a lot of "gaps" in its coverage. In order to close that gap, various private insurance companies offer plans that cover a lot of out-of-pocket costs — for a price.

Bare-bones Medicare coverage can leave you with some steep medical bills. As we discussed in our last column, if you are admitted to the hospital, for example, your first bill will tally $1,216 or more, which is the deductible you pay just for being admitted. After that, you pay 20 percent of the fee for every doctor visit, lab test, MRI, X-Ray and on and on. Remember, too, that there is no yearly limit for what you may have to pay beyond your basic Medicare Part A and B coverage.

Depending on which plan you choose, a Medigap plan will pay some or all of these expenses. Some plans will pay the coinsurance for hospital stays; others could pay for the coinsurance expense for outpatient care. Other plans pay for additional costs like Part A and B deductibles, coinsurance for nursing care, and even emergency care outside of the U.S.

As you might expect, the most comprehensive plans have the highest monthly premiums, although once you pay that premium, your insurance company pays everything else. That means you pay nothing for that quarterly medical checkup, that emergency room visit, or admission to the hospital.

Here in Massachusetts, you have a guaranteed right to buy any Medigap policy sold in your area, beginning on the first day of the month after turning the age of 65. You do have to be enrolled in Medicare Part B to qualify. Those Medigap insurers cannot deny you coverage or charge you a higher premium due to existing health conditions. In most cases, Medigap will cover a pre-existing condition immediately, but some policies will delay coverage of out-of-pocket expenses for the first six months. Any doctor that accepts basic Medicare coverage will also accept your Medigap insurance.

There is another option called Medicare Advantage. These plans offer all your Medicare coverage benefits in one package plan. Hospital care, medical care and prescription drugs are covered. Some plans even cover vision and dental care plus other services. Most Medicare Advantage plans also provide financial protection. They place a limit on how much you pay out-of-pocket per year. Under this program, you share in the costs of your health care by paying co-pays or coinsurance. After you pay up to the plan's out-of-pocket limit, the Medicare Advantage plan pays 100 percent of all your medical costs. One caveat, though; it does not include your prescription drug costs.

Under Medicare Advantage plans, you will pay less if you receive care from doctors, hospitals and other providers that participate in the plan's network.  Each plan will build different networks of medical providers who provide quality care. There is a "star" quality rating that ranks these plans and naturally the higher the stars, the more customers they get.

As with Medigap, Medicare Advantage Plans provide consumers an array of choices. How do you choose? First, you check to see if your doctors are on the insurance company's plan  and which hospitals each plan offers. Make sure your physical therapists and pharmacy are also on the plan. If none or some of the above are not listed, would you be willing to switch in order to save money?

Some more questions you might ask are: does the plan you are considering provide good coverage of the health services you use now, or what you may use in the future? Does the plan cover all the existing drugs you need and what are the co-pays? Do you need or want extra benefits such as vision or dental?

Finally, figure out how much you will have to pay per month and year for the medical benefits each plan offers. That means the premium, deductible, co-pays, coinsurance and out-of-pocket expenses. Remember while making your decision, a plan with a low premium might not be the best bet if the co-pays are higher for certain services you use frequently.

Note: Several weeks of Mr. Schmick's columns in January & February disappeared into the ether on their way to iBerkshires. They are being back posted to the dates on which they should have appeared.

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. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

 

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@theMarket: Stock Markets at Historical Highs

By Bill Schmick
iBerkshires Columnist

The bears headed for cover this week as all three U.S. indexes made new, all-time highs. That's a good sign and augers well for even more upside ahead.

Credit goes to President Trump and his tweets once again. This time, his promises to address tax reform within the next few weeks had the Algos (algorithmic computer software traders) hitting the "buy" buttons on their machines.

Investors (if there is still such a thing) had been worried that Trump and the GOP would get bogged down in Obamacare repeal and immigration issues. If so, that would be a major distraction and might mean that tax reform and fiscal spending would be pushed back to next year or even later. The tweet seemed to put that story to bed, and the rest was history.

Good quarterly earnings have been supporting the over-all market.  Expectations have been for a 6 percent increase in corporate earnings, but that number proved low. Companies have been reporting better than that (7 percent-plus), but forward guidance has been better than expected. Whether it is Trump or the gathering strength of the economy, business executives are more optimistic about the U.S. economy and their fortunes than they have been in years.

Technically speaking, the Dow and the S&P 500 Indexes have established a new trading floor at 20,000 and 2,300. Readers may recall that I am looking at 2,330 as a short-term top in the S&P 500 Index, with the other indexes following suit. The downside, if it occurs, could be in the 5-7 percent range.

Be aware that tagging a short-term top or bottom is notoriously difficult, especially in today's topsy-turvey markets. There have been plenty of warning signs signaling a top, from high levels of positive investor sentiment, to the narrowing of breath within the markets. The problem with all indicators is that things can get even more extreme before a crack appears in the bull's camp.

I would not advise long-term investors to do anything if the markets do decline. It would be just too difficult to game the downside, especially when we have a tweet-happy president who is not above lobbing a bear-killing message tweet in the midst of a market decline. There just seems to be too much risk in not remaining invested.

Over the weekend, President Tump will be golfing in Florida with Prime Minster Shinzo Abe of Japan (after first meeting Abe in Washington, D.C. for talks). The Japanese market was up almost 2.5 percent on Friday in anticipation of the two leaders' first meeting.

There is a lot riding on what happens between the two men, since Japan provides the lion's share of manufacturing jobs within the U.S. and is America's fourth largest trading partner. Aside from the historical relationships between the two countries, everything from mutual defense to currency will be discussed. Let's hope there are no surprises, but anything can happen in this new age of Trump-O-Nomics.

Note: Several weeks of Mr. Schmick's columns in January & February disappeared into the ether on their way to iBerkshires. They are being back posted to the dates on which they should have appeared.

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. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries 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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