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@theMarket: Markets Climb Wall of Worry

By Bill Schmick
iBerkshires Columnist

It was a week of geopolitical risks and yet the markets managed to hold their own. True to form, investors were bound and determined that this would be a good week for stocks and it was.

Historically, markets do well on Thanksgiving week and this was no exception. Since the turn of the last century, stocks perform well (at least two thirds of the time) during this 3 1/2 day trading week and into the end of the first week of December. So far, this year has been no exception.

Given the headline risks, its performance was quite impressive. Investors had to contend with the shutdown of Brussels for most of the week as authorities ransacked the capital of Belgium in pursuit of suspected terrorists. At the same time, the rest of Europe was on high alert for terrorist attacks. In our own country, Thanksgiving, the largest travel period all year, has security folks worried. The Paris terrorist attacks have provoked concerns that the nation's many parades and other celebratory events could be prime targets for Jihad crazies.

On Tuesday, global investors woke up to the downing of a Russian plane over Turkish airspace and all that might portend. U.S. stocks took a nose dive on the news but by the end of the day there was quite a bit more green than red in the averages. That was another encouraging sign.

As Black Friday approaches, investors will also be wondering how the nation's retailers will fare. See my column "How black will this Black Friday be?" for details. My own belief is that stores will do OK, but no records will be set. Black Friday is not what it once was as many consumers have moved on from door busters and long lines on this holiday.

Overall, if one steps back and looks at the market's performance since August, the signs are encouraging. We had the long-awaited pullback in August-September; followed by a huge recovery in October into November, another minor sell-off, and we are now approaching the highs of the year. It seems to me, a classic stair-step climb that could translate into new highs in December. But first we must take out the most recent highs set in November, on the S&P 500 Index that would be 2,109 and on the Dow, 17,910.

Stocks will also remain volatile right up to the New Year. Several big events are scheduled for this coming month. We have the last FOMC meeting and a high probability of the first hike in interest rates on December 16th. We also have an OPEC meeting on December 2. That meeting has some guessing that Saudi Arabia may become a little more cooperative in supporting oil prices at this level.

We are also expecting a decision from the IMF concerning China's currency, the Yuan. China has been lobbying the organization for years to allow the yuan to become a reserve currency along with the dollar, yen, British pound, the Euro and Swiss Franc. If so, that would most likely be greeted favorably by the Chinese market and global markets as well. Then we have the European Central Bank's decision whether or not to add more stimuli to their economies.

All of the above could well be market-moving events and not necessarily all will be positive. Throw in the traditional Santa Claus rally somewhere along the way, and you have the makings for a rather turbulent sleigh ride. But I do digress. What is important is that you all have a wonderful holiday. Take a moment and remember all that you have to be grateful for. I know that I will. Happy Thanksgiving.

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: Financial Media May Be Your Worst Enemy

By Bill Schmick
iBerkshires Columnist

The business of financial news reporting has achieved a high level of sophistication and timeliness. Almost anything noteworthy that happens around the world is instantaneously transmitted to you from a variety of sources. The question is should an investor act on that news?

The short answer is no, not unless the event is truly catastrophic — nuclear war, end-of-the-world type stuff.  Achieving your financial goals and objectives requires a well-thought out approach and an investment process, which is by its nature long term. That process will almost always be at cross purposes with those of the news media. Why?

It begins with the media's time horizon and business model. A media organization's goal is to bring you breaking news first. By its very definition, it is largely short term in nature. "Turkey shoots down Russian jet invading its airspace," is a recent example of breaking news. That story will have legs to run for a while or be bumped aside by the next newsworthy event, depending on developments.

In the meantime, the stock markets in Europe and the U.S. sold off in reaction to this event, fearing that the situation might escalate. What should you do? Ask yourself if this is truly an event that should disrupt your long-term plans to save for retirement. Most reasonable investors would answer no.

Why is breaking news so important to the media? Most news organizations' source of revenue and profits is generated by advertising dollars. How advertisers decide on who gets what of their budget depends on market share, especially in electronic media where most of us get our news.

The more market share you command, the more money you make. And all of this is measured in minutes, hours, days and weeks by rating organizations that make a living selling that data to the Fortune 500 companies. As such there is an intense drive to keep your "viewership" by whatever means possible.

In the financial community this is most often accomplished by appealing to either fear or greed. Headlines and sound bites that promise to tell you why this company could see its value cut in half or what will move markets tomorrow or next week or whether or not the Russians will "strike back" at Turkey are the hooks the media uses to trigger fear or greed in most investors. It works remarkably well.

The problem is that fear and greed have nothing to do with rational investing. I often tell my clients that by the time the news gets to you, the retail investor, it has been discounted seven ways to Sunday by the markets. The more popular the investment theme becomes in the media, the more cautious you should become. The opposite holds true when the media turns negative.

Increasingly, the media has contributed to what I call a herd effect in the markets. When markets pull back (and they always do), news reporters treat it as if it were big news. The further markets fall, the more the news media attempts to increase the drama with headlines that promise even darker days ahead. The same is true on big up days. The only purpose this serves is to increase "viewership," ratings and a larger share of advertising dollars.

If you listen and act on this hysteria, the only thing that is guaranteed is that you will sell low and buy high over and over again. I know it is difficult to ignore, but one of the worst mistakes you can make as an investor is to fall prey to the day-to-day noise in the media. Use the media as a source of information and for entertainment but don't confuse the two. The media is no substitute for a rational investment process.

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: How 'Black' Will This Black Friday Be?

By Bill Schmick
iBerkshires Columnist

For retailers, the upcoming Thanksgiving holiday traditionally signals the beginning of the do-or-die holiday selling season. The question worrying Wall Street and retailers alike this year is will the results justify the hype?

Listening to the third-quarter earnings and revenue guidance from retailers last week, there was little to applaud. Department stores were especially downbeat on their expectations for the entire 2015 holiday shopping season. Big discount stores, like Walmart, were less negative, and argued consumers were simply keeping their powder dry, while waiting for next weekend's super deals.

Some analysts argue that the disappointing earnings most retailers posted had more to do with the exceptionally warm fall weather we have been experiencing than lack of shopper enthusiasm. October, after all, will go down in the history books as the warmest October on record. That had to hurt winter clothing and apparel sales.

You may have noticed that the usual sales hype we come to expect wherever we look about now has been somewhat muted over the last week. That may have more to do with the terrorist bombings in Paris than anything else. Promoting the latest gizmo for your dog, or a better hair curler to de-frizz your hair may not be as meaningful to you when Parisian cops are storming apartment buildings and Russian planes are blowing up over Syria.

Most pundits are expecting a 3.7 percent rise is retail sales, which is below last year's 4.1 percent gain. Is it the economy, the weather, geopolitical events or changing tastes really behind the slowdown, or is Black Friday losing its mojo?

Officially, Black Friday was an invention of the American retail sector wishing to goose their holiday sales. I remember back in the 1960s growing up in Philadelphia when the city's police department called the day after Thanksgiving "Black Friday," because of the traffic jams and crowded sidewalks that launched the holiday season. Retailers embraced the concept and attempted during the 1980s to transform the event into a family shopping tradition.

Over the years, however, as the numbers of “door busters” multiplied, and ad budgets skyrocketed,  it created some unanticipated results. Long lines, combined with a heightened mood of "get it first at any costs" led to some very un-Thanksgiving moments. Highly publicized damage to stores, fistfights among shoppers and other injuries, have led many to forsake this so-called tradition.

At the same time, retailers, in their drive to capture every available dollar of the consumer's money, pushed forward store opening times from early Friday morning to midnight to the recent decision to open their doors on Thanksgiving Day. For many, that latest move was the final straw that led to increased disenchantment with the entire idea. Labor organizations and social media campaigns have reacted by calling for consumers to boycott stores that have pushed the concept over the edge.

Then, too, some shoppers report a sense of fatigue as the holiday chatter escalates. The "only X days to Christmas" countdown has backfired on many of us. We find ourselves rejecting this pressure to spend, spend, and spend on the perfect gift that probably does not exist.

Then, too, the overall importance of the year-end holiday sales season is waning.

Competition among retailers is now so intense that some merchants are offering Black Friday-like sales in the middle of the summer. Others have been offering holiday discounts on merchandise for weeks and intend to keep offering it well after year-end. Shoppers now expect sale events on every major holiday. Not to be undone, stores are even inventing more holidays like "Single's Day" to lure shoppers. As a result, retail spending has become far more dispersed throughout the year.

If this is the case, why then do retailers continue to hype a concept that generates at least as much ill will as it does good will? For mass retailers, it is all about competition. Every dollar you spend elsewhere is a dollar they have lost. They are on a treadmill of their own making and haven't yet figured a way of getting off. When that occurs is up to us.

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 Market: Buy the Dip

By Bill Schmick
iBerkshires Columnist

Markets sold off this week but not everywhere. While the U.S. and Europe suffered a bout of profit taking, parts of Asia did fine. Investors should expect more volatility on the home front next week.

The mood among investment advisors was somber, if not downright bearish, at the Schwab investment conference in Boston. Over the last week, hundreds of money managers, including yours truly, sat through educational and investment sessions given by some of the best minds on Wall Street. Why so glum?

Many were worried that global growth would continue to slow and drag our economy down with it. Then there were the Fed Heads, who changed their mind about a December rate hike for the umpteenth time. Now, the odds are better than 70 percent (up from 30 percent) that the Fed will raise rates next month.

Given the current level of the stock market, which is close to all-time highs, most investment advisers are better sellers than buyers. Contrarian that I am, I think that is a mistake. The Schwab equity strategy team, Liz Anne Sonders and Jeffrey Kleintop, tend to agree with my view. Kleintop, Schwab's global strategist, pointed out that world GDP next year was forecasted to grow by 5 percent, according to the OECD, IMF and World Bank. He is also expecting global economic data will continue to surprise us on the upside between now and the end of the year.

Sonders, Schwab's U.S. equity chief, believes here at home a recession is several years away. It's her opinion that our economy is getting very close to "escape velocity." That's a term used to describe the ability of our economy to grow on its own, independent of any help from the Federal Reserve Bank.  She also thinks the Fed will raise rates in December, barring any unanticipated slowdown in the economic data between now and then.

There are, however, some issues confronting the economy that indicate that it won't all be smooth sailing in the weeks and months ahead. Although we have gained 13 million jobs since the financial crisis, which is a good thing, the flip side is that small businesses are having trouble finding workers.

We are also grabbling with an earnings recession. Profits over the last two quarters have been down, versus last year's results, and that is expected to continue. The rising dollar, energy prices, and a slowdown in China are among the causes of these disappointments. Corporations have been able to mask this decline by buying back more of their shares on the open market. This has the effect of boosting their profit per share (simply because they have less shares outstanding) but even the most naïve investor is beginning to see through this ploy.

Clearly, the above issues bear watching, but are not enough to derail the bull market. The days of double-digit gains may be over but we can still see respectable single digit growth from stocks. It all adds up to more volatility in the stock market in the months ahead.

This week was part of the readjustment in thinking among investors that is necessary as the Fed prepares to hike rates. Remember, two thirds of the nation's money managers have never experienced a rate hike by the Federal Reserve Bank. Fortunately, I'm not one of them.

As I predicted last week, the markets need to consolidate after several weeks of gains. It is nothing to worry about; just the usual give and take within the markets. If you have a little cash to spare, this would be a good time to put it to work.

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: 'Bag Lady' Syndrome and You

By Bill Schmick
iBerkshires Columnist

Ladies, are you secretly terrified that you are going to end up penniless on the streets, begging for enough money to feed yourself? Well, join the crowd because almost 50 percent of women share your anxiety.

That's right, a high percentage of women, even those who make more than $30,000 per year (and 27 percent of women who have salaries over $200,000) are secretly (or not so secretly) worrying that they will become destitute in their old age. The study, conducted by Allianz, an insurance company, surveyed 2,200 women between the ages of 25 and 75.

You might discount these findings, figuring that most of the women surveyed were stay-at-home wives or wealthy widows. You would be wrong. Sixty percent identified themselves as the "breadwinner" in their family and 54 percent were the household's appointed keeper of the purse strings. Fifty-three percent of single, divorced and widowed women admitted to the bag lady syndrome but so did 43 percent of all married women.

It appears that these fears are not relegated to American women. German, Russian, English, just about all women across the pond, identify with the syndrome (although the jury is still out in regards to Asian women). It is understandable why women in America should be concerned, given the facts.

Women are almost twice as likely as men to live below the poverty line during retirement. Single and minority women feel it the most. Women, who are 65 or older; make do with a median income of around $16,000 a year, or $11,000 less than men of the same age. Why would that be?

Women earn and save less over their lifetime than men. I have written numerous columns detailing why. From the continued inequity of receiving less pay for the same job as men, to the erroneous assumption that men are the breadwinners and women are the caretakers, the odds continue to be stacked against women in this country (and in Europe).

However, the bag lady syndrome goes far beyond these obvious facts. It seems that men have this attitude toward work that a job is their birthright. If one doesn't work out for whatever the reason, there is always another one. If more money is needed, they simply work harder or get two jobs or assume they can and will do whatever it takes. Women, in general, don't usually feel that way for the following reasons.

While job opportunities are better for women than ever before in this country, in order to succeed, women still need to "show" they can do the job. They need to work harder, outperform and get along with their male counterparts to an extent that male workers do not. The system has still not come to grips with all that we expect from our women. They need to be mothers, home managers, caregivers for dependent parents, as well as professionals. Employers and Social Security (and tax-deferred savings plans) penalize them for taking time off for rearing children or parent care. As a result, they save less.

Curious to see how my female clients and friends would respond, I did my own small informal survey. I asked them if they were affected with the Bag Lady syndrome. Here is what they said.

"Yes, I do," said the 57-year-old president of a local company, who owns two houses, has substantial retirement savings and money in the bank. "I feel like I only have a small window of time when I can live on my savings, but what's going to happen when I'm 90 and my money and my husband are gone?"

"I fear I won't have enough money to retire. I'm 43 and even though I have full faith in my husband, what would happen if he died, or the market crashes or something like that," answers a 43-year-old, part-owner of a successful firm.

"I am pretty close to that ... for me it's not a fear, it is very close to becoming a reality," answers a single, middle-aged women, who is not only hard-working but intelligent and a former business owner.

Yet, the younger the woman I asked, the less concerned they were with what would happen to them by the time they reached retirement age.

"No, but I have a modified version of that syndrome," explained a 35-year-old professional with two young children. "I am concerned that my children won't be as comfortable growing up as I was. As for me, I can get a job, any job, if I want it enough and I'll never be destitute."

And finally this is the answer from a working, twentysomething female professional.

"No, not me, that's too far away to even think about,"

I can only assume that the further one is from retirement, the less anxiety there is among women over how they will support themselves in their old age. In addition, the workplace experiences of women today are far different from those of a middle-aged or elderly women. That could also change feminine attitudes in the future. We will wait and see.

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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