Financial gurus have come up short in explaining exactly why interest rates are going down, and not up, as everyone expected them to do. The same thing is happening overseas. What gives?

Pundits have been trotting out the same old reasons for why rates are declining. Slow-growth economies in North America, Europe and Japan have persisted this year, much to the surprise of everyone. So central banks worldwide are maintaining an easy-money policy, which is driving all interest rates lower. That is at odds with the Fed's view of economic conditions.

If you recall, back in May of last year, the Fed announced that the U.S. economy was gathering so much steam that they had decided to begin tapering their $85 billion a month stimulus program beginning in January of this year.

Interest rates spiked higher as the bond market anticipated not only the end of stimulus but higher economic growth as well in 2014. The Fed was right, but only in the very short term.

The fourth quarter GDP hit 4 percent. But then the economy fell off a cliff.

Economists would have us believe that the Polar Vortex is to blame. I expect when the first quarter is finally revised for the final time we will have experienced a minus sign in growth for the first three months of the year. No question that the prolonged season of cold weather hurt the economy, but by how much? No way was that decline all weather-related, in my opinion.

Through it all, the stock markets have refused to go down, despite the slowing economy, cautionary earnings and revenue forecasts by corporations, the Ukraine, and any other bad news.

We are in an environment where new highs in stocks are reflecting an expectation that economic growth will not only continue but accelerate. Historically, when the economy gains momentum, interest rates rise and the stock market goes up. When the economy weakens, the reverse happens. So, my dear readers, either the bond market has it wrong or the stock market does.

What or who is the fly in this particular ointment? My guess is the Fed has a lot to do with this.

Think back, what happened when our central bank announced the first quantitative easing plan, known as QE I. The economy gained ground, the recession faded and the stock market took off. When the Fed announced the end of that program, the economy slowed, and stocks plummeted. So the Fed announced QE II. The process was repeated: stocks up, rates down and economic growth. By the end of QE II, the bond market and corporate America had learned a thing or two about central bank stimulus. They learned to anticipate.

Corporations began to pull back their investments. The bond market headed lower, bracing for more sluggish growth and a possible recession and stocks headed lower. Enter QE III. But by then, even the Fed realized something had to change. So they changed the game plan.

As QE III was about to sunset, Ben Bernanke, the Fed chairman at the time, extended QE III indefinitely. He promised that the stimulus would continue until the economy was able to stand on its feet again without assistance that unemployment needed to drop to at least 6.5 percent and that short-term interest rates would stay low out to 2015.

The stock market took off and the economy gathered steam once again. Fast forward to today. QE Infinity is winding down at a rate of $10 billion dollars per month. By the end of the year the Fed plans to end their stimulus program entirely. It has already been cut in half, year to date. The economy has slowed from 4 percent in the fourth quarter to 0–to–negative in the first quarter. The data seems to indicate it is slowing still. The bond market's low interest rates are indicating the same thing.

So something has to give. If bond players are right, (and they tend to get it right more often than stock jockeys) then we can expect even slower growth in the months ahead. Might the Fed reverse course if that were to happen? The consensus says no, but consensus tends to be wrong fairly often. In the meantime, what in the world is the stock market doing at record highs?

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.

The S&P 500 Index hit 1,900 this week. The Dow Jones Industrial and Transportation averages also reached new historical highs but the euphoria lasted about a minute and a half.

That's about as long as it took for traders to sell into the move. Not good.

The market gave the bulls all the excuses in the world to man-up and push the markets higher, as they backed and filled for two days, then the bears took over. Thursday was a blood bath and sellers added to the damage again on Friday. Not good.

Last year, if you recall, all I recommended readers to do is "buy the dips" whenever the stock market declined. Obviously, from this headline, I am recommending just the opposite today, especially in the so-called momentum stocks. Momentum, small-cap and mid-cap stocks continue to lead the markets lower. As it should be, since they have led the market up over the first three months of the year. Don't think that they have bottomed. In fact, sell any bounces in these names.

"I can't sell them now, they are down too much," retorted Chris, a friend and client, as we walked our dogs by the lake this morning.

It is an understandable attitude. The hardest thing to do is sell when you are underwater pricewise and down 40-50 percent from the highs. That little devil on your shoulder is whispering that if you just hold on you will recoup all your losses and then some. That may happen but in my experience too often the opposite occurs. Instead, you will end up watching those stocks drop another 30 percent before you finally sell in a fit of emotional disgust.

Another thing to remember is that many of these momentum names that hit astronomical prices had no business reaching that price in the first place. Expecting them to regain their former luster anytime soon is about on par with hitting the lottery next week. To me, it is far better to take losses now, sit on the sidelines in cash and wait until there truly signs of a bottom before buying back in.

If, on the other hand, you managed to avoid getting entangled in these high flyers, sit tight. You have raised the recommended cash. Sure, you will take some paper losses on the rest of your portfolio, but that will be a temporary condition. By the end of the year you should recoup those losses.

It is too hard to tell whether this week was the start of my forecasted 10-15 percent correction.

However, we are entering the third week in May (sell in May and go away) so whatever you do - don't buy the dip. If the markets follow the behaviorial pattern of the last several weeks, expect the market to bounce for a few days next week.

We have now hit my target of 1,900 on the S&P 500 Index. I actually expected a little further upside (20-30 points or so) once we hit that level but I'll settle for what I can get. And who knows, traders might try once again to break that 1,900 ceiling level and propel markets and emotions to higher highs. I don't care.

It feels to me like the markets are rolling over here. If that process has begun, I wish it would be a short, sharp and therefore less painful ordeal than a drawn-out affair that lasts through the summer. However, markets, as I have often said, will do what is most inconvenient for the greatest number of people.

Plan accordingly.

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.

Can you count the number of potholes you hit or narrowly avoid every day? Do they make your blood boil, teeth clench and trigger a choice euphemism or two during your commute? Unless the Highway Trust Fund (HTF) receives a $302 billion injection of funds this year, it could get a lot worse.

And I'm not just talking about potholes. More than one in nine bridges in this country is structurally deficient. At least 66,405 (11 percent of the total) are in sad shape and these are not out-of-the-way covered bridges that are rarely used. Americans have taken over 260 million trips over these derelict spans. They are simply accidents waiting to happen, like the one last month in Mount Vernon, Wash., or the I-35W collapse in Minneapolis that killed 13 people back in 2007.

President Obama is pleading with Congress to work with him in developing an infrastructure plan that would fund a four-year transportation program. It will not solve our infrastructure problems, but it will help. So far there has been little appetite by legislatures to embrace the concept. If they fail to act, the highway fund will run out of money by August or September.

Historically, the nation's transportation infrastructure has been financed by a gas tax of 18.4 cents established in 1993. In hindsight, that has been woefully deficient in keeping pace with the number of vehicles that use our roads today. The problem is that raising the gas tax or requiring corporations to pay more for infrastructure (an Obama suggestion) will probably not fly in an election year. So, instead, Congress will do what it always does, kick the can down the road by coming up with a stop-gap funding scheme.

If you have ever had the opportunity of driving on the Autobahn, you might ask how the Germans have managed to keep their highways in fabulous condition while keeping maintenance required down to a bare minimum. The answer, my dear reader, lies in the American past.

Back in 1919, a little known War Department publicity stunt organized a 72-vehicle convoy that journeyed across America. It required two months to make the trip. The roads west of the Mississippi were so bad that the convoy averaged a mere 6 mph for the 3,200 mile excursion. Along for the ride, was a young lieutenant colonel named Dwight Eisenhower. It affected him profoundly.

Forty years later, as the 34th president of the U.S., Eisenhower was finally in a position to do something about our road system. Starting in the 1950s, the Interstate Highway System was founded and developed 42,795 miles of roads across the nation. Once again, America showed the world what we could do when we put our mind to it. The goal was to get them down as quickly as possible.

The problem was that these roads were never built to last.

Of course, this sudden network of nationwide roads allowed the American family to enjoy cheap vacations, see the country and make the weekend drive an American pastime. Combined with fuel-efficiency gains, the ownership of cars exploded in this country.

That was bad enough, but what the planners did not count on was the massive shift by American industry from transporting goods via railroad to shipping them via the nation's brand-new highway system. Roads that were of substandard construction (although good enough to withstand the damage of 2,000-pound cars) were suddenly assaulted by convoys of commercial trucks. These rigs, weighing 80,000 pounds or more, do 40 times the damage (the mathematical equivalent) of the lighter weight cars due to a truck's weight distribution.

When roads are not properly sealed, water (ice, snow, etc.) leaks underneath the asphalt and settles in the base of the road, which is mostly compacted dirt here in the U.S. Big trucks constantly drive over these moisture spots driving the water downward causing air pockets that form over time the great American pothole.

The Germans know this, as does every engineer in the world. So some foreign engineers and governments choose instead to build extremely thick roads with solid foundations designed to prevent moisture from penetrating the underside of their structures. So why don't we do this? Because it costs more.

Obviously, in a country that groans and moans over the on-going cost of infrastructure maintenance, building better roads at higher costs is a non-starter. If we ban large trucks from our highway and bridge systems, then our roads would stand up a lot better than they do now.

Good luck trying to implement that change.

Given that corporate America uses our transportation system to help turn a profit, (rather than simply commute to work or see Mom on Mother's Day, as taxpayers do), would it not be reasonable to ask them to foot a larger percentage of the cost of maintenance? Reasonable, but probably political suicide for any elected official. I guess we will just have to settle for potholes.

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.

Throw out the new, embrace the old, not something you see often on Wall Street. But as technology stocks and other high flyers continue to get trounced, utilities and other oldies but goodies are doing quite well.

When looking at the gyrations of the stock market indexes every day, it appears stocks are simply gaining one day and giving it all back the next. It would be easy to miss the sea change occurring right before our eyes.

Most readers are aware that the biotech sector, along with most new age technology areas, like 3D printing or cloud stocks, has been in the throes of a severe sell-off for over two months. If you review their technical charts, as I have, just about all of them look like death warmed over. Obviously, growth stocks are out and value is in. Those who have bucked that trend and attempted to pick the bottom in these groups have gotten their head handed to them.

However, utility, consumer durable, energy and other old economy sectors have risen as investors took profits in new age equities and invested the proceeds in these "low beta" stocks. Unfortunately for the overall market, that trend is not a good sign. It says that more and more investors are becoming cautious the closer we get to record highs.

One may have noticed, for example, that as the technology-heavy NASDAQ index, along with both the small and mid-cap Russell Indexes, have been declining steadily, the Dow hit record highs last week. The S&P 500 Index has also flirted with record highs and even now, after a so-so week, it is only 30 points from all-time highs.

If you look under the hood, you will find the explanation. Only one security of the top 12 most heavily-weighted stocks (all low-beta, defensive names) in the S&P 500 is exhibiting weakness. Over on the Dow Jones Industrial Average, most stocks that make up that average pay dividends and are also thought to be more defensive than the overall market. In essence, big money investors, especially professional players who have to be invested in equities, are hiding in these defensive areas. They are hoping that if the markets roll over, these stocks will get hurt less than the overall market.

Unfortunately, historical data tells us that even these stocks will ultimately succumb to selling pressure. It just takes a bit longer before the large, big cap value names follow the other indexes lower. The S&P is now in its 10th week of this process, which is the longest it has exhibited this behavior since 1994. The intra-day volatility is also increasing. Consider just one example. On Friday the NASDAQ rallied 0.80 percent in the first half hour of trading and then declined 0.50 percent before 10:45 a.m. The other averages are also experiencing these kinds of wild swings. Not good.

As for quarterly earnings, 736 US companies reported this week, and they have averaged a decline of 2.09 percent on their report days. The average stock that beat EPS estimates has gone up a mere 0.18 percent on its report day. But the average stock that has missed EPS this week has fallen 5.33 percent on its report day. Not good.

Given everything that is occurring in the stock market, I remain cautious and expect further volatility with a higher risk of downside in the weeks ahead.

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.

You, you said that they — What'd you say just a minute ago? They had to wait and save their money before they even thought of a decent home. Wait? Wait for what?! Until their children grow up and leave them? Until they're so old and broken-down that — You know how long it takes a workin' man to save five thousand dollars? Just remember this, Mr. Potter, that this rabble you're talking about, they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?

— George Bailey, "It's a Wonderful Life"

The most expensive home ever sold in America occurred over the weekend in "The Hamptons," Long Island's playground for the one percent. Just a week before that a Greenwich, Conn., estate sold for $120 million. At the same time, the percentage of America's first-time home buyers is at its lowest level since 2008. What does that say about homeownership in the United States?

American income inequality is taking on an even uglier caste as it impacts the real estate market. The recovery in housing over the past two years has been highly unusual. This time around, it has been led largely by institutional investors, hedge funds, private equity firms and wealthy individuals. These astute investors, flush with the cash they had made in the recovery of the financial markets, took advantage of the 35 percent decline in housing prices and the new rental demand of 5 million foreclosed homeowners who were forced to find a new place to live.

These entities spent more than $20 billion to buy up over 200,000 homes which they rented or resold (flipped) as the housing market climbed. All-cash sales have become so prevalent that in the first quarter of 2014 almost 43 percent of all residential property sales were transacted in this way. That's up from 38 percent in the previous quarter.

At this point the big money has been made and the institutions are winding down their purchases. Wealthy individuals, second-home buyers and the occasional owner-occupant buyer, who have the cash, are entering the market. Thanks to the Fed's tapering, mortgage rates have climbed, while stricter credit standards following the crash have shut out the rest of us from any hope of tapping the mortgage market.

As the American middle-class disappears, so too will homeownership at an accelerating pace and what's worse, there is little hope for the future. Consider, for example, those young, first-time homebuyers. Rest assured that "the kids are not OK."

Struggling with high college debt, low-paying jobs (if any) and high monthly rents, the younger generation has little chance of cobbling together the money needed for the 10-20 percent down payment required to purchase a home, even if they could get a bank loan. The reality is that the only borrowers most banks will lend to are those who don't really need to borrow in the first place.

Sure, prices have appreciated and in several locales, mainly along the nation's east and west coasts, sales of $1 million homes have spiked 7.8 percent over the past year. But at the same time, there has been a 7.5 percent drop in overall home buying during that same period.

One wonders who these new, all-cash buyers are going to sell these properties to in the years to come. By definition, there is only one percent of the population that can afford to buy or borrow. How many jumbo loans can banks make before borrowing dries up? Evidently, U.S. lenders are seeing the handwriting on the wall and are cutting jobs in their mortgage lending divisions in advance of further downside.

Clearly, the housing market is stalling and even Janet Yellen, the chairwoman of the Federal Reserve Bank, worries that "the flattening out in housing activity could prove more protracted than currently expected, rather than resuming its earlier pace of recovery."

As my readers know, almost all of the country's income gains from 2009 to 2012 flowed to the top one percent of earners. It is becoming clear that the same thing has happened in the real estate market. That leaves 99 percent of us who will either remain property-less or who will live in our present abode for the foreseeable future. Unfortunately for America, as housing falls prey to the growing trend of income inequality in this country, the future prospects for all of us continue to dim, especially among our young.

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.