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The Retired Investor: Want equality? Start With Better Jobs

By Bill SchmickiBerkshires columnist
Jobs. They are the primary focus of the Federal Reserve Bank, the Biden administration, the Republican opposition, and most U.S. corporations. Supposedly, with all this high-powered attention, we still can't find enough workers to fill all the positions available. Has anyone questioned why?
 
One important reason might be that 60 percent of jobs in the U.S. are considered "mediocre" or "of poor quality," according to a recent Gallup survey. If you combine those findings with the fact that many workers in the service economy are poorly compensated, the problem begins to come into clearer focus.
 
If you listen to the free market critics, generous Federal unemployment checks are the root cause of the problem. These simpletons argue that these higher benefits have discouraged workers from returning to their former jobs. They ignore the obvious, which is that if the "government dole" is preferable to the offered wage, then that wage must be far too low. It is myths like these, as well as the historical focus on the number of jobs gained or lost without paying attention to the quality of employment, which obscures the truth.
 
American companies, especially in the service sector, have spent the last thirty-plus years cutting wages and benefits in the name of reducing costs and improving profit margins. Global competition and lower wages abroad (especially in China) have been blamed for this development. That trend has reversed in a big way, but here in the U.S. we act like it is still a fact.
 
Our treatment of the American worker, especially the lower-income, service worker, needs to change. A recent Gallup poll, for example, found that only one-third of low-income workers received fringe benefits like health insurance and retirement benefits. An even smaller number received paid sick leave. Is it any wonder that only 28 percent of the lowest quintile workers claimed to have a "good" job?
 
Remember all the fuss when the Biden Administration tried to raise the minimum wage earlier this year? No dice. Here's another myth: the federal minimum wage is meant to be a living wage. At the going rate ($7.25 per hour), a family of four is living well below the poverty line. The reality is that about half of America's working population earns less than a living wage.
 
Is it any wonder we have exploding rates of crime among our youth?
 
Parents, who just want to feed themselves and their children, are forced to work, sometimes two jobs, away from home until the early hours. That leaves their kids alone and unsupervised for much of the day and night. We all know this but choose to look the other way or worse, use the race card as an explanation. Shame on us!
 
But simply paying workers more is not the answer, although it certainly helps. Creating an entirely new culture around the job is the challenge we face. Not only must we, as a nation, provide higher pay and better benefits, but also a workplace culture that improves the overall lives of our employees. To me, a quality job is one that makes a person feel valued and respected with a voice in their workplace. I see it as an opportunity to shape my work life, while contributing to the goals of an organization.
 
If this sounds schmaltzy to you, or a job description above your pay grade, consider this: Jobs that do not meet employees' needs have a higher-than-average turnover rate, poorer employee productivity, and a lower-quality consumer experience. Amid the competition to hire workers in today's post-pandemic environment, I believe workers at all levels are seeking more than just a sign-on bonus, or a bump up over a minimum wage level.
 
Otherwise, chances are your new hire will consider their position as "just a job," as opposed to "a career." As such, these disengaged employees cost businesses an average of $350 billion every year in productivity, or $2,246 per disengaged employee. In a tight labor market, with traditional hiring habits of "only money counts," a high turnover of employees is a given.
 
The cost of replacing an employee can range from one-half to two times the employee's annual salary.
 
The pandemic has changed quite a few things, some temporary and others permanent.
 
The American worker took it on the chin during the last year and a half. Millions were unemployed, while many that did show up to work were faced with constant danger to their health and safety. Essential workers in health care, early childhood education, food production and delivery, as well as countless minimum wage workers not only showed up, but delivered in our time of need.
 
Many others managed to work from home, delivering to their employer extra hours, higher productivity, and lower expenses for the same, or lesser wages. Going forward, there is no need for America's workers to justify their worth. That's been proven, in my opinion.
 
No, the ball is squarely in the employers' court. American workers have experienced deteriorating wages and working conditions over the last few decades. As a result, fundamental pillars of our democracy have been eroded. Economic stability and opportunity have decreased dramatically, while inequality has risen to historical levels. The present polarization of this country is no accident. Our workers need and deserve better jobs with higher wages and a radical change in the quality of the workplace.
 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

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 OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.

 

     

The Retired Investor: The Virus & the Stock Market

By Bill SchmickiBerkshires columnist
Once upon a time, the world suffered from a pandemic. The global stock markets collapsed. The world's labor force disappeared, and the economies in every corner of the world plunged. All seemed lost until one day, the virus mysteriously disappeared, and every one lived happily ever after.  If you liked that fairy tale, I also have a bridge I can sell you.
 
Don't say we were not warned. Every epidemiologist that wasn't on the government's payroll has been sounding the alert to prepare for a second wave of the COVID-19 virus. So why didn't we listen? There are a number of reasons.
 
Number one, it is an election year. If the economy doesn't show signs of new life between now and November the chances are less than even that our own orange-haired fairy will get re-elected. It is why, from the outset of the virus, President Trump attempted to downplay the seriousness of the epidemic. He still is.
 
Then there is the business community and its relationship to the federal government. I like to think of this country as one in transformation.  It is no longer a democracy, in my opinion, but a welfare state that places the needs of the corporation first. We, the people, have been reclassified as "workers" first, and individuals with rights a distant second.
 
Both the government and Corporate America, for different reasons, have determined that the economy needs to re-open, despite the risks. Corporations fear that they will go bankrupt, lose market share as well as profits, if the shutdown continues any longer. And if that happens, the employment rate will fall even further. The present government, if it wants a second term in the White House, cannot afford to let that happen. As the U.S. Treasury Secretary, Steven Mnuchin, said today on CNBC, "We can't shut down the economy again."
 
Finally, some element of blame must fall on our shoulders, if we do experience a resurgence of COVID-19 cases and deaths. Few states paid attention to the non-binding guidelines of safe re-opening issued by medical authorities. That is because Americans, for the most part, had had enough medical advice anyway. After three months of lock-down, many of us simply found it too difficult, or too uncomfortable, to stick with the program. After all, if the president and some governors were saying it was okay, then why not me?
 
We used politics to demand the re-opening of many communities before an "all clear" was sounded. States such as Texas, Montana, Utah, Arizona and California have seen virus cases spike at least 35 percent since Memorial Day weekend. We used politics again, in the side-by-side demonstrations of the last three weeks as well, and justified our stance in the name of "black lives matter."
 
Here in Massachusetts, where until recently, most residents were pretty good at adhering to the guidelines, things started to break down on Memorial Day weekend, as well. I passed countless outdoor parties, BBQs, and the like where throngs of people simply ignored safe distancing. At the lake, pontoon boats were packed with people, as were picnic areas.
 
While we won't know for another week or so if the number of states with an upsurge in new cases expands dramatically, it is a time to at least expect more bad news on the virus front. As such, investors may see some of those outsized gains that everyone has accumulated since March disappear rather rapidly.  
 

Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at billiams1948@gmail.com or leave a message at 413-347-2401.

 

 

     

@theMarket: Jobs Jubilee

By Bill SchmickiBerkshires columnist
A funny thing happened before the market opened Friday morning. Jobless claims, which were supposed to come in at a loss of 8 million, actually did the reverse. Investors were stunned when the Department of Labor announced a gain of 2.5 million jobs. That was cause to celebrate.
 
Total nonfarm payrolls for the month of May revealed an overall unemployment rate of 13.3 percent, but that was a far cry from the 18.5 percent rate economists had expected. Indications from the most recent data argue that the re-opening of the economy is going far better than expected. That, combined with another $1 trillion in stimulus out of Congress that investors expect to be passed next month, sent stocks up over 2 percent on the opening.
 
This week, American Airlines also announced that they were planning on increasing their load capacity in July to 55 percent, which is a substantial jump from the airline's present capacity of 20 percent. Given that airlines (along with cruise ship companies) have taken the brunt of business losses during this pandemic, the news heartened the markets and also sent airline stocks in general up anywhere from 20 percent to 50 percent.
 
Over the last two weeks, given that the economic news has been better than expected, the rally from the March lows has started to spread out from a handful of "FANG" mega-cap, technology stocks to more economic-sensitive sectors like financials, industrials, and even basic material sectors. That was a good sign. The durability and confidence of bull market rallies increases as the breath of the market expands and more stocks participate in the upside. That is what is happening now.
 
Another indication that the worst may be over is that the bond market is starting to get back to normal. As stocks rise and the economy begins to revive, interest rates should start to move up (and bond prices fall). Of course, it is early days, and when I say rise that's really a relative term. The U.S. 10-year Treasury bond, at 0.925 percent, is still yielding less than 1 percent.
 
The U.S. dollar (a traditional safe haven asset) has also weakened somewhat, which is another sign that investors around the world are starting to become more confident that things are improving. That is despite the fact that in places like Brazil the number of COVID-19 cases is still in an upward trajectory.
 
Gold has also taken it on the chin this week, falling almost 2.5 percent on Friday as investors dumped the precious metal for "risk-on" trades in the equity markets. As it stands, the S&P 500 Index (down 1 percent year-to-date) is still below its highs, while NASDAQ has regained its losses from the entire decline. As such, technology is taking a back seat in the last few days as other sectors play catch-up. That should continue. The question you may be asking is for how much longer.
 
In my last column, I outlined the importance and power of remaining above the 200 Day Moving Average (200 DMA) on the S&P 500 Index.  We did that and look, a week later we have gained almost 100 points. Can we go even higher?  I expect so. Look for the S&P 500 to hit 3,220-3,250 next week before pausing to catch its breath.
 

Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at billiams1948@gmail.com or leave a message at 413-347-2401.

 

     

The Retired Investor: Will Jobs Come Back Postpandemic?

By Bill SchmickiBerkshires columnist
As this week's job report looms ever closer, investors have become inured over data showing job losses in the multimillions. The present thinking among economists, strategists and politicians is that all these jobs will come back. The question is when.
 
Readers need to realize that prior to the onset of the pandemic, the unemployment rate at 3.5 percent was a historically low level. The spread of COVID-19 forced the country's economy to shut down. The first Americans to lose their jobs were those low-paid workers in the service industries, those that could not work from home. Fortunately, the government's response was to provide fiscal stimulus (in the form of extended and increased unemployment insurance), plus direct payments to those below a certain income level. That effort boosted household income and somewhat cushioned the pain of historical job losses. 
 
Many of those jobs in restaurants, retail stores, and the like are expected to come back as the economy re-opens and there is evidence that they already are. However, layoffs in other areas, such as white-collar jobs and among women, are continuing to escalate. In fact, white-collar jobs continue to shrink and have done so every week since the pandemic started.
 
One reason that Congress is working on yet another stimulus program is that once the impact of the last stimulus wears off, they worry that the layoffs could continue to spread. Consumer spending and a rebound in economic growth may take more time than most expect. From the outset, economists believed that many of the service jobs would come back. Those lay-offs were considered to be temporary, a "quasi-furlough," as opposed to an outright firing. However, the losses of the higher-paid, white-collar jobs that are continuing will be more difficult to gain back and could be permanent.
 
There is also another alarming unemployment trend facing the nation this summer.  The problem centers around working women with children. Readers may recall that for the first time in many years, women made up the majority of the workforce in 2019. As such, it should come as no surprise that during March and April of this year, women suffered the most (55 percent) job losses in this country. In those sectors that are heavily represented by women, the losses were even greater.
 
Recall my column of last month in which I outlined the one-sided difficulties working women were facing  in juggling work commitments, child care, home schooling, cooking, cleaning and a variety of other chores during this pandemic. None of those issues have gone away. In fact, they have multiplied. Online schooling, where it existed, has helped but it will end soon. As the summer begins, working women have no child-care support to rely on while they go back to work.
 
As it is, they are losing more jobs than men, and have, in general, less paid sick leave than their male counterparts. As school winds down, women are now being forced to make some hard choices. Do they quit their job (or possibly get laid off) because there is no one to take care of the kids this summer?  At the very least, they will be forced to scale back their professional ambitions, while continuing to balance an even more untenable situation between work and children.    
 
Well, you might ask, why don't their spouses, or male counterparts, stay home instead? The answer is an economic one. Women still make about 20 percent less than men, so an already cash-strapped family will need to opt for the man's higher salary. So what is to be done?
 
Although a long shot, government might finally recognize the needs of the working women, something I have been writing about for ages. The pandemic would be the perfect excuse to establish policies that would equalize the pay scale, provide additional child-care support, and institute flexible working arrangements, among other initiatives for women. Unfortunately, I expect that our government will likely cast a blind eye to these needs. So, it is up to us. What, therefore, can you do to help?
 
In our case, my wife and I (along with the other grandparents), are scheduling weekly internet dates with the grandkids throughout the summer.  We will set times and schedules, just like in summer camp. For starters, I will play (and probably lose) a weekly chess tournament with my 8-year-old grandson, chess champion Miles.  
 
In addition, my wife will begin a photography course for both Miles, and 5-year-old, Madeline. That summer project, in addition to teaching them the rudiments of photography, will hopefully result in a photo book of this pandemic from their own perspective. Now, it is your turn.   
 

Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at billiams1948@gmail.com or leave a message at 413-347-2401.

 

     

The Independent Investor: The Culling of America

By Bill SchmickiBerkshires columnist
As the death toll attributed to the coronavirus breached 100,000 in the Unites States this week, among the hardest hit Americans are those in the elderly population. The numbers simply illustrate what we all know. Eighty percent of the known fatalities were at least 65 years old. As such, the virus appears to be very good at selective slaughter.
 
As one of those who are most susceptible to dying from this virus, I have done a lot of soul searching over our future.  Today, I will begin to share some of these thoughts. Aside from the human loss, for example, what potential impact will this pandemic have on health care costs in the future?
 
Today, according to the most recent statistics, firms and individuals spend between 10-15 percent of Gross Domestic Product on health care. While the elderly account for about 16 percent of the population, they represent over 35 percent of total health-care costs. Most of these people are oldsters like me. Statistically, they tend to be older and white, with 40 percent of those expenses accounted for by inpatient stays.
 
Part of the reason for this trend happens to be the large segment of the population that is now represented by Baby Boomers. One can assume that, as they age, their medical costs are going to escalate and grow to an increasing portion of the country's health care costs. That seems to be a no brainer.
 
However, one wonders how the ongoing pandemic will alter that equation. For example, if COVID-19 is here to stay (in one form or another), and continue to prey on the elderly, will the nation's health care costs go up or down? One's first thought would be up, but that may not be true. The coronavirus is an efficient killer. Victims either recover, or die fairly soon. There does not seem to be many cases where the victims linger on.
 
Why is this important?  Because medical spending in the last year of life accounts for 16.8 percent of total costs for those over 65 years old. Just think of it — machines, specialists, MRIs, chemo, radiation, surgeries — the list goes on and on. It is even worse for those that make it over age 70. They can expect to see health care costs double from the ages of 70 to 90. Will death by virus alter that spending outcome? I think so.
 
I realize that's a pretty gruesome argument but one that is nonetheless realistic. I wonder if nature, in the form of this pandemic, is taking a hand in culling our human herd, and, if so, how does one avoid the slaughterhouse?
 
We know that those suffering from low immune systems, diabetes, cancer, and other ailments are highly susceptible to dying from this virus. In fact, the sicker you already are, the higher your risk. The silver lining in this crisis is obvious.
 
If we Baby Boomers ever needed a motivation to change our unhealthy ways, we have it now. How many of us fail even to do the most rudimentary exercises? We eat all the wrong things, and as a result, we number among the highest of all nations in obesity.  In this country, fully 85 percent of us will die from chronic diseases, which could easily be avoided through exercise and diet. We know all of this and yet choose to ignore it.
 
Could this virus trigger a change in our collective psyche in regard to our health? Will exercising at home, wearing masks, eating healthier, and shunning fast food by necessity catch on? If elderly Americans start to perceive a life style change as a result of COVID-19, then just maybe there will be some good outcomes to this pandemic. What do you think?
 

Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at billiams1948@gmail.com or leave a message at 413-347-2401.

 

     
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