Two years ago, the experts were telling us that the price of oil would continue to fall. Twelve-dollar oil was a real possibility. The end of OPEC was nigh as well as their ability to influence geopolitics. It appears those predictions were premature.

 

The price of oil has more than doubled over that time, from roughly $30 a barrel in the spring of 2016 to over $71 a barrel today for West Texas Intermediate crude. Those same experts now expect the price could gain further, but there is no agreement on how much higher it can go.

 

The "swing" factor in that equation is firmly in the hands of American shale producers. They are the culprit of the past three-year decline in oil prices and will likely be the key determinant of future prices in the short-term.

 

In November, U.S. crude production exceeded 10 million barrels a day. We haven't seen that since I came home from Vietnam back in 1970. There is a real possibility that America could become the world's largest oil producer by the end of this year. That would put us ahead of both Saudi Arabia and Russia. What a change that has been since the days of the OPEC-instigated oil embargos, long lines at U.S. gas stations, and rationing!

 

The impetus for this astounding change in our fortunes has been the developing technology, which was largely government-funded, that has allowed U.S. entrepreneurs to explore and develop enormous oil and natural gas-rich shale deposits throughout the country. But that's only the beginning of this saga.

 

These producers, unlike traditional oil companies, can turn their energy spigot off and on at the drop of a hat. Typically, the oil majors such as Exxon or Saudi Arabia's Aramco, require five to 10 years to develop conventional oil reserves. Once in place the oil flows and it is difficult to change course quickly, whereas these unconventional players have developed their drilling and fracturing techniques to the point that they can respond to price changes within a few months.

 

At the same time, these modern-day wildcatters have cut their cost of production dramatically. They now represent half of all U.S. production and are increasingly profitable. For the first time, many of them will be able to fund future drilling and exploration through their own cash flow. The Permian Basin in Texas and New Mexico is the favorite target of future expansion.

 

However, that is not the whole story. It appears that even with a dramatic increase in shale oil production, the demand for oil in the short-term will outstrip supply. The world's economies have been growing and organizations such as the IMF are forecasting further growth in the years to come.

 

Oil and its derivatives, you see, are still needed to fuel this growth, despite advances in alternative energy. Every year, roughly four million barrels are consumed by the world's furnaces and engines. Oil analysts expect an additional one million barrels per annum will be necessary to satisfy future world demand.

 

That means energy producers will need to replace about 40 percent of this year's oil production over the next decade or so. The most logical and cost-effective approach to this challenge would be to exploit global reserves of shale oil. These deposits are abundant in just about every corner of the world. The problem will be in extracting it. Other countries are far behind our own energy producers. They will need to develop their shale ecosystem and supply chains from scratch.

 

Since most of these nations are either traditional oil producers/exporters or importers of oil, they will need to spend billions of dollars in new investments to gather, treat, transport and store these new shale oil deposits. As for their existing oil fields, oil majors will require a great deal of time and effort, as well as investment in new technologies, to compete with low-cost shale producers.

 

While longer-term demand for oil will likely remain robust, in the short-term, we can expect to see continued price volatility in the markets. That's because shale producers will be quick to jump-start new production as prices spike higher, and turn off the spigot when prices fall. It is no longer an OPEC-controlled market where Middle Eastern dictators and kings set prices and the world adjusts. Today's wild and wooly free market will require a strong stomach and an even stronger capacity to absorb sudden and sharp changes in price.

 

Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 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.

As Baby Boomers age, the volume of reported financial scams directed against them continues to escalate. By some estimates, more than $37 billion a year is now being stolen from America's elderly. And those are only the reported cases.

 

It is estimated that 5 million Americans are bilked by con artists every year. Some financial firms believe the total can exceed $37.5 billion annually. The Office of Children and Family Services in New York begs to disagree. They say that in their state alone $1.5 billion a year is stolen. And for every case that is reported, 44 are not.

 

Aside from the impact of losing their entire savings, elder fraud victims are dying at triple the death rate of other elderly adults. That is understandable when you realize the physical and emotional devastation that results from this type of fraud. Rarely, if ever, do the victims get their money back. The stress and time required to pursue the criminals increases the impact on senior victims' health and well-being. 

 

"I'm a trusting person," says Dorothy, my 89-year-old, widowed, mother-in-law, who was a victim of a computer scam. Fortunately, she did get her money back, thanks to her adult childrens' quick response to the incident. Asked why she would give her credit card information to a total stranger, she shrugged and said, "I never expected that people would do things like that."

 

Last month, the Justice Department announced the largest nationwide investigation of elder fraud cases. This incident victimized over one million people with estimated losses of over $500 million. In this case, the perpetrators used mass mailings and telemarketing to ensnare innocent and trusting victims such as Dorothy.

 

What makes matters worse is Americans are living longer and many of them will suffer some form of dementia. Roughly half the population over 89, show some signs of impaired memory or other cognitive problems. That makes the scam artist's job even easier. And the more money you have, the higher the chance that you will be targeted. These criminals do their research carefully, identifying just the right set of circumstances that would make their victims an easy mark.

 

At my firm, which is small compared to the billions many of our competitors manage, I have seen several attempts of financial fraud among our clients. Fortunately, because of our size, we have been able to identify and thwart these efforts. The facts are that advisors like ours may be your best protection against these scammers.   You see, many states now mandate that resident advisors notify authorities if they suspect that one of their clients may be the victim of financial fraud. Here in Massachusetts, there is no such rule, but that doesn't matter to us. We believe it is our duty and obligation as fiduciaries to report any such actions.

 

It has happened to me personally. I detected monthly withdrawals from an elderly client's portfolio that was above and beyond her normal monthly withdrawals. After questioning her, I contacted elder services in the area, who in turn brought in the police. It turned out that her "trusted" personal assistant, who had access to her account, her credit cards, and everything else financial, had a gambling problem. She was financing her addiction by stealing from her client's checking account. Even though she was caught red-handed, she eluded jail time because she argued that she had "permission" to take what she needed from the account. 

 

Trusting your advisor in this day and age, where one in every 13 financial advisors has been disciplined for some sort of misconduct, may seem like an oxymoron. It boils down to being sure that your advisor is, first and foremost, a fiduciary, who you trust and can supply the background and credentials to warrant that trust. Second, that he or she has a limited number of clients. The more clients, the more difficult it is to be able to spot and report instances of financial fraud.

 

Opioids are killing us. Both literally, as well as from an economic point of view. The economy has already suffered over $1 trillion in lost potential and those losses appear to be growing by the hour.

 

Last year, 62,000 Americans fatally overdosed on some form of opioid. It is getting to the point that almost every one of us knows someone who is either addicted or died from these drugs. However, while death is a tragedy, we tend to ignore how much this problem is costing our society.

 

"You can't put a price tag on the death of a loved one," we say, but actually we can. It's called the "value of a Statistical Life," or VSL. Federal agencies routinely use VSL measures in estimating the expected fatality risk-reduction benefits of a proposed safety regulation. It is based on studies that track how individuals trade off wealth for reduced mortality risks. 

 

For the most part, the riskier the job, the more income a worker will demand to do it.

 

Recently, the President's Council of Economic Advisors incorporated this concept in assessing the economic costs of the opioid crisis. They found that for years, we have been underestimating the price tag of this crisis by not including VSL. To put this in perspective, in the next two years alone, by applying the concept of VSL the opioid crisis will cost the United States over $500 billion.

 

Let me explain why: As more and more young people succumb to this scourge, the economic costs begin to accelerate year after year. Statistically, the average age of overdose victims is about 41 years old. Think of all the lost wages and productivity that could have been, but will now never occur, times the number of years of one's expected life. Currently, that is estimated to be around $800,000 per person's death, according to a consulting institute, Altarium, which is measuring this trend.

 

However, that doesn't include other costs such as lost tax revenues, additional spending on health care, education, social services and the criminal justice system. If one just analyzes the health care cost alone from 2001 to 2017, the opioid health care price tag was over $217 billion.

 

Unfortunately, those health care costs seem ready to explode in the months and years to come. President Trump, who has rightfully recognized the gravity of the situation, has proposed that $17 billion in extra spending be directed to combating the crisis. Of that amount, $13 billion would be ear-marked for expanding access to prevention, treatment and recovery support services.

 

The consequences of this problem continue to show up in ways that few of us would expect. For example, two-thirds of America's youth don't qualify for military service today. Besides behavioral, educational and physical failings, a goodly number of those kids have addiction issues. How many? One out of every six young adults (between the ages of 18 and 25) battle a substance use disorder.

 

On the other end of the scale, an estimated 15 percent of elderly individuals suffer with substance abuse and addiction. It is something that I personally must watch for among retirees.

 

As we get older, we need more medical treatments, many of which involve surgery. Take me for example, I had both knees replaced over the last three years, plus prostate surgery.

 

Let me tell you, the pain meds flowed like manna from heaven. All the most notorious prescription opiates were at my beck and call. Fortunately, I was also trying to run a business, deal with the markets, and talk to clients. I was just too darn busy for pain meds. But I am an exception.

 

Consider the typical 60-70- 80 something, patient who is retired that has little to occupy his or her waking day, where the temptation to abuse these prescription meds is enormous. It has escalated to the level where Investment advisors like me are now being trained to identify the symptoms of opiate addiction or abuse among our clients.

 

No question about it, this opioid crisis is hamstringing the nation where it hurts the most, its people. Anything we can do, public or private, to stem the spread of this pandemic should be one of our highest priorities. Fortunately, our president feels the same

 

Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 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.

Despite spending big money and all the marketing they can muster, the Republicans are still not able to convince most Americans that the tax cut benefits anyone but the rich and the corporations they own. Maybe, we are not as dumb as they think we are.

 

An April poll by Gallup indicated that 51 percent of Americans disapproved of the tax cut, versus 39 percent who approved of the cut. Another poll, conducted by NBC News/Wall Street Journal, found that 36 percent of the people they polled thought the tax cut was a bad idea, while only 27 percent believed it was a good idea.

 

Normally, you would think that a tax cut that benefits "all Americans" and "especially the middle-class working man," according to president Trump and his party, would be greeted with great enthusiasm. Even more confusing are polls that indicate that more of us (by a slim majority) believe that middle-class taxes are fair.

 

I believe there are a couple of conflicting cross-currents that are shaping our view of taxes. For one thing, the tax bill was cobbled together quickly and passed unilaterally to give the president legislative victory before the end of his first year. As a result, few really know what's in it, or how all the changes will impact the individual taxpayer.

 

We've been given, for example, a new set of tax brackets for individuals, but, at the same time, most of the itemized deductions have been removed. There are also more questions than answers regarding who can file and benefit for the new 20 percent pass-through tax rate. Most accountants I have talked to still have no idea how to plan for their client's taxes this year and don't know when they will.

 

Given that the federal tax code has experienced its most significant changes in decades, it will take time to analyze its ramifications. As such, the majority of individual taxpayers are still uncertain if the new law will help or hurt them over the long run.

 

The controversial limit of how much state taxes can be deducted from your federal bill (capped at $10,000 from all sources) will most likely mean that in states with income taxes many taxpayers will either experience a minimal benefit from the tax bill, or in some cases, be paying more taxes. Given that large segments of the country's population live in these states, their disenchantment with the tax bill is understandable.

 

Democrats (all of whom voted "no" for the bill) have been quick to point out that the tax bill was nothing more than a vast re-distribution of wealth from the middle class and low-income Americans to the wealthy, rich CEOs and big corporations. What's more, whatever benefit the average Joe might receive now will expire by 2025. At that point, not only will your tax rate go back up, but there will be no itemized deductions to ease the blow!

 

These accusations just fuel the anger of 6 out of 10 Americans, who feel upper-income people pay too little in taxes as it is. In addition, prior to the tax cut, a large majority of Americans had already believed that corporations pay too little in taxes. Now they pay even less. It also doesn't help much that our congressmen and senators stand to make a huge windfall personally from the tax cut, as does the president and his family.

 

As we head into the mid-term elections, there is a growing expectation that the Democrats will retake the House, if not the Senate. If so, many of these tax cuts could be reversed. You can bet those lawmakers from income tax states will certainly be pushing for major revisions.

 

In the meantime, Corporate America isn't helping the GOP cause. Instead of using their windfall tax profits to invest in America and hire more workers, they are using the money to reward their shareholders by raising their dividend payouts to historical levels. In the first three months of 2018, dividends have increased by $18.8 billion — that's a 13.9 percent increase over last year. At that rate, dividend payout increases could total more than $56 billion this year.

 

In addition, corporations have also announced $159 billion in share buybacks. Analysts expect that figure to rise to $800 billion by the end of the year. That would be a 10 percent increase over last year.

 

Between buyback and dividend increases, roughly 23 percent of the $1.5 trillion in tax cuts have already been spoken for. Remember too, that these dividends and buybacks go directly into the pockets of the wealthy, who are already enjoying outsized benefits from the tax cuts.

 

It just proves a point, that we Americans are not as dumb as we look. We know a bad deal when we see one and for most of us, this dog won't run.

 

Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 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.

After a grueling two-day inquisition before both houses of Congress, Mark Zuckerberg, the founder of Facebook, has left the building. The question is how much did anyone really learn about the privacy issues of this social media behemoth?

 

As most readers are aware, the present controversy erupted when it was revealed that a Trump-campaign related firm, Cambridge Analytica, harvested personal data from millions of Facebook users. It spawned a huge controversy over privacy, cybersecurity and Big Data companies in general.

 

I watched as much of the hearings as I could stomach. What was clear to me was most of our so-called legislators had no idea how Facebook works. While some were obviously coached by their aides, even the answers to their questions drew blank or embarrassed stares. How they expect to regulate something they don't understand is beyond me, but then again, I guess it happens all the time.

 

It could be any one of us up there grappling to understand an entity that has become so entangled in our everyday lives. The truth is only a handful of Americans truly "get" what Facebook is even though they have been upfront with us since the get-go.

 

So, let's start by asking a simple question — how does Facebook make money? And yes, Joe, Facebook is a for-profit company. In one word, the answer is advertising. How much is that worth? At last count, the company is capitalized at roughly $543 billion. Clearly, Facebook is not some kumbaya, social network where everything is free no matter how touchy-feely it may look.

 

Helping two billion people worldwide "connect" is an admirable accomplishment from a social point of view, but it is also a darn good revenue generator. Let's be clear, Mark Zuckerberg has never said it wasn't. He has reminded everyone countless times that "building a mission and building a business go hand in hand."

 

Selling ads has generated over $39 billion for the company. So, what makes advertisers flock to Facebook when they could just as easily spend their money on tv or radio ads? One word: the product.

 

"What product?" you may ask.

 

That's easy. You're the product — along with all the countless billions of bytes that represent the information you have so generously spewed out over years and years of posting personal information about yourself and everyone in your universe. How much of that information you want to share with the world and advertisers is completely up to you.

 

Through the years, the thousands and thousands of Facebook employees have given you almost every option they could think of to "opt out" of sharing that information.  Instead, if you are like me, we blithely pump out more and more personal information to the outside world without a care of how or who is using it. That is until the bad guys start to take advantage of our stupidity.

 

Suddenly, when that happens, we all feel betrayed by the very entity that tries to protect us when the fact is, in my opinion, that we all have been too lazy to read the material, examine and control who we are sending information to, and doing all that is required to use this social network in a rational way.

 

We are like the guy who uses 1-2-3-4 as his password on all his accounts. He is then hacked and subsequently sues the company for not providing enough password protection.

 

You may even admit to the worth of my argument but still insist that you would fulfill your obligations if the safeguards weren't so complex and difficult to use. That's like saying I would practice gun safety if I could figure out which end the bullet came out. The meaning here is you have no business using social media if you don't understand its ramifications to you, your family, and your friends.

 

No matter how much social media companies try to protect us, who can protect us from ourselves? If you post photos of walking your dog day in, day out at a specific, isolated location, and then someone mugs you there, can you guess why?

 

The point is that we are Facebook's product. It has always been the case. Yes, we are a lucrative product to them, but it is we who determine what we want to give away. So far, most users have been willing to give away the farm. Are you one of them?

 

Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 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.