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The Independent Investor: Stubble and Scruff

By Bill Schmick
iBerkshires Columnist
Facial hair is back in a big way among men. That is nothing new, but the time, effort and expense of looking so scruffy might surprise you.

Back in the day, you were either clean shaven or grew a beard. During the Hippie Era, it was all long hair and beards, which sent many a barber to the poor house. Hair length gradually shortened, beards and moustaches were trimmed and barbers breathed a sigh of relief. Over a decade ago, American men grew older and fatter. To add insult to injury, their hair started to thin as well. The fashion industry quickly came to the rescue and convinced the nation that bald was beautiful.

I, for one, embraced the idea and quickly learned to shave my own head. For me, an avid jock, no hair was both convenient and saved a trip to the barber. However, maintaining that clean shaven pate is no easy job and many men sought out the barbershop to maintain the new style. But the fashion industry was not done with the masculine ego. Enter the man's man.

First, let me confess my ignorance. In my naivety, I had long assumed that the facial hair that had sprouted up among male actors in a variety of television and movie roles was simply the result of not shaving for a day or two. How wrong could I be? These new facial-hair styles demand a lot of time, effort and expense and have spawned a plethora of trimmers, shavers and masks to give the customer just the right look,

Today, facial hair is part of what the fashionistas call the Retrosexual Revolution. It is an era in which men are looking back to the styles, values and pastimes of traditional masculinity, albeit with a heightened discernment about brands, aesthetics and lifestyle. Sort of "Mad Men" with a dash of political correctness.

This new flannel-clad urban woodsman (for those who can afford it) will normally sport a carefully clipped or trimmed five o'clock shadow across his jowls while displaying his single-malt scotch collection or his fixed-gear touring bike. The image appears to resound mightily among American males.

As a result, more men than ever before are visiting the barbershop. Last year, there were more than 235,000 barbers in over 100,000 shops in the United States. That is the highest in recent memory and is predicted to jump again this year according to the National Association of Barbers Boards of America.

Sales of beard and stubble trimmers (as they are now called) advanced 14 percent in 2010, 17 percent last year and should top that again in 2012. And stubble trimmers aren't cheap. A top-of–the-line stubble model will set you back $60, about twice as much as your old-fashioned beard trimmer. Grooming companies such as Conair, Phillips Norelco and Wahl have taken special care to deal with facial hair at close range and have succeeded in segmenting the market.

Now, if you have the desire, you can get just the right length of stubble each day by picking up the stubble trimmer. But if instead you like a slightly longer look called Scruff (the George Clooney look) you can buy another trimmer that will convince one and all that you could grow a full beard if you wanted to, but choose not to. Full beards require a heavy-duty trimmer while goatees, moustaches and sideburns all require different trimmers. Of course, if that is not enough, one can always go "feral" and grow your beard until you look like Heidi's grandfather.

Yet self-barbering takes effort, practice and often less than satisfactory results. Many men have opted instead to visit their neighborhood barbershop breathing new life into the staid and sometimes stuffy local hair emporium. Unisex is out. Barbers have reinvented their industry by offering customers what they want, the way they want it. The top 10 barbershops in the U.S. all have one thing in common — ambience. Masculinity, tradition, and a variety of services is what distinguish barbershops today from those of my childhood.

Barber schools grew at a 29 percent rate last year and becoming a barber has appeared on several new career lists. Opening a barbershop has also become a "hot startup" area given that the barriers to entry are low, startup costs are reasonable and competition tame.

A simple survey of barbershops in the Northeast confirmed that "business is good" as Patty, a barber at The Clip Joint Barbers in Portsmouth, N.H., said.

Bob McGiffert, who owns Bob's Barber Shop in Greenport, N.Y., also agreed that haircuts were doing well, although he "doesn't see much traffic in stubble and such."

In Rutland, Vt., Steve, a barber since 1988, works at Henry's, an establishment celebrating 57 years in business. He is seeing a "lot more goatees" in his business lately. "It just adds to the product line."

And finally Nancy Donovan, who has been cutting hair for over a decade at Ken's Barber Shop in Great Barrington, is seeing a lot of facial-hair trim requests, especially in the summer.

"We have a lot of city people that vacation here in the summertime," she said, "and we get all sorts of requests."

She says she has done everything from shaving heads, to regular haircuts to even cutting a "B" for Boston on one customer's head after the World Series over the last few years.

As for the barbering business, she enjoys her line of work and would recommend that anyone wanting a great career should look into becoming a barber. Take that George Clooney!

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles 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 (toll free) or email him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.


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The Independent Investor: Clients Last? Welcome to Wall Street

By Bill Schmick
iBerkshires Columnist
Sam Rogers, head of trading: "And you're selling something that you 'know' has no value."
John Tuld, CEO: "We are selling to willing buyers at the current market price."
John Tuld: "So that we may survive."
                                                                    — "Margin Call"

If you ever wondered where you stand on Wall Street, the op-ed piece in Wednesday's New York Times is a must read. The fallout from the words of a 12-year veteran of one of the world's most prestigious investment firm is resonating around the world.

It is not necessary for me to identify either the firm or the writer, since just about everyone now knows who I am talking about it. Yesterday, my inbox was deluged with readers who forwarded me the piece. Most readers are aware that I have a huge beef with the ethics on Wall Street and what I see as the "customer comes last" attitude that is prevalent within that sector.

As has happened in the past, I'm sure that after this column runs I will receive a flurry of hate mail from those in the financial community, who believe I am attacking them personally. I'm not. Most individuals in this business are decent folks who do care about their clients –when they are allowed.

Unfortunately, they work for firms that cannot put the interests of their clients first or even in the top ten of their business objectives. These firms are just too big, too short-term and too focused on next year's bonuses to afford the luxury of putting their clients first.

Now, I know for the most part I am preaching to the choir at this moment. As the facts have come out about just how duplicitous these companies and their managements have been in creating, exacerbating and finally being rewarded for the financial crisis they engineered. Is it any wonder that very few Americans trust Wall Street?

Despite financial legislation and promises of a new ethic by those caught with their hand in the cookie jar, it is very much business as usual on Wall Street. It cannot be otherwise. When I first got into the business in the early 1980s, the big names on the Street were largely partnerships with long-term relationships with their clients. It was a world where trust among your clients was your most valuable asset.

The shift from private to public companies, the end of fixed commissions, the dawn of proprietary trading (firms trading their own capital), the escalation of risk and with it much greater rewards, altered the ethics of finance. These new masters of the financial universe embraced greed and abandoned the old ways. As a result, they saw their total pay skyrocket 70 percent above average paychecks in all other industries in the last decade.

Big became not only beautiful but mandatory in this new high stakes area. The bigger you are, the more muscle you can throw around, not only with your competitors but with your customers as well. Clients become numbers to be crunched. Today, these firms are so big that they truly are "too big to fail." And because they are, they are largely immune from retribution or legislation.

I say we should salute this middle-management executive and his op-ed piece. He most likely will face legal and monetary retribution from his ex-firm. You see, almost everyone on Wall Street must sign both a non-compete contract as well as agree not to say anything disparaging about their firm upon departure (whether voluntary or not).

If you violate these agreements, the company will and does come after you with the full weight of their legal departments. It is one of the reasons that so few ex-employees actually "tell all" when they quit. Although this guy's opinion will amount to no more than a cry in the darkness, he should be commended and remembered for his courage and honesty.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles 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 (toll free) or email him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.



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The Independent Investor: Child Labor: An American Tradition

By Bill Schmick
iBerkshires Columnist
Child labor has been given a bad rap around the world and deservedly so. However, all child labor isn't necessarily bad. I for one have benefited greatly from my youthful work experiences and I bet you have too.

The words "child labor" evokes visions in our minds of wretched children working in filthy factories or dangerous coal mines with little to eat and even less compensation. The universally accepted definition of child labor is the "employment of children in regular and sustained labor." Most countries ban that kind of child labor, but what about other forms of labor?

I had my first paper route at 11 years old. By the following year I was also delivering Sunday papers, waking up at 4 a.m. and working until noon. By my 14th birthday, I was working at Duff's, my neighborhood drug store in Philadelphia, serving soda and making change for the neighborhood after school. During the summers, I worked even harder: cutting lawns, bagging in supermarkets and even hauling hot roofing tar up two stories on occasion. I always had money, was rarely bored, made OK grades in school and received a fabulous education that I could have never obtained in school.

In the U.S., you can legally get a job at 14 as long as you work no more than three hours a day (18 hours a week during the school year or past 7 p.m.). Youths of any age can deliver newspapers, perform in radio, television, movie or theatrical productions; and baby sit or perform other minor duties around a private home. In the agricultural sector, kids can work as young as 12 years old during non-school periods. But by the age of 16, America's youth can work without restrictions or parent's consent.

In this country, there is a long tradition of kids like me, dating back to the last century. The jobs of our youth often teach us skills that are with us our whole lives. Some of the things I learned were simple things like filling out applications and more complicated skills like interviewing, working responsibly and how to get along with co-workers and, of course, the boss. Since my father started his underage work life in the coal mines near Altoona, Pa., (until he was trapped in a cave-in), my early working career seemed comparatively easy.

My daughter, Jackie, followed in the family footsteps, first as a snowboard instructor at 13 years old (almost 14). She was the snowboard director by the age of 17, managing almost 50 instructors on the weekends at a local ski slope. She credits her early work experience for giving her confidence and independence, an MVP status among her high school peers and a developed sense of responsibility that continues to this day as a new mother and as an executive at a international public relations company.

Like me, her work life kept her on the straight and narrow in school, away from parties, drugs and poor grades. She also learned the meaning of money and had enough income to pay for her own auto insurance when she learned to drive.

Now, granted, this is all anecdotal evidence. Research indicates that those teenagers who work more than 10 to 15 hours a week do receive lower grades. Many also sacrifice extracurricular activities and friendships they would have otherwise made if they weren't working as hard.

Some teens, their pockets flush with cash, have the means to experiment with drugs and alcohol, which many obtain from older co-workers. Finally, there are many cases where overworked teens spend a lot less time with their families, eating and exercising less than those kids without onerous work schedules.

Many teens' first jobs are in the retail sector such as fast food outlets, restaurants and grocery stores. Often these entry-level jobs are routine, boring and lack positive interaction with adults. It can be tough on a young person, and that's where you can add value as a parent. Encouragement, a sympathetic ear and a little compassion can go along way to help your child through that first rough year or so.

I also advise you to monitor your child's progress. Don't simply take "OK" as an answer for how work is going. And if you don't like the thought of after-school work for your teenager, summer employment is an excellent alternative.

If for some reason your kid doesn't need to earn money, there are always non-profit alternatives to choose from, like selling Girl Scout cookies or fundraising for the Boy Scouts of America or any number of charitable organizations desperate for additional help.

The point is that child labor, American-style, is a major positive in my opinion as long as it is accomplished within the guidelines above.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles 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 (toll free) or email him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.

 
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The Independent Investor: Gas Prices Going Higher

By Bill Schmick
iBerkshires Columnist
Over the last week a flurry of price forecasts for gasoline have reverberated through Wall Street. Some experts are guessing that pump prices could easily top $4 a gallon and possibly higher by Memorial Day this year.

Their forecasts are being extrapolated from the present price of gasoline which averages $3.61 per gallon. That is high for this time of year, since February is usually a period of low gasoline demand. You might think that this year is a bit different since the mild winter and absence of snow throughout much of the country might bolster driving. But demand nationwide is down to 15-year lows.

What has propped up oil prices so far this year is continued instability worldwide. The financial crisis and subsequent recession in Europe, which should have reduced energy demand has been counterbalanced by events in the Middle East. The real culprit in the oil patch appears to be Iran.

The world wants Iran to cease and desist developing nuclear weapons or else. In response, Iran has been threatening to close a key oil avenue through the Strait of Hormuz, if the U.S. and the EU deliver on their intent to apply economic sanctions to their country. As a result, the price of oil has been flirting with $100-barrel level over the last few months and is presently trading above $106.73 a barrel for West Texas crude. The threat of higher oil prices if Iran were to embargo Europe or the U.S. is real. Iran boasts the world's fourth-largest proven oil reserves and the world's second largest natural gas reserves.

Middle East tensions are nothing new. The oil market periodically moves up and down with unfolding events in that region. Spikes tend to be short-lived but everyone from the Fed on down pays attention to trends. What makes this situation a little different than usual is that the tensions are occurring just at the moment when the U.S. economy appears to be picking up some speed.

The last thing this country needs right now is for oil/gasoline prices to trend higher. I have written at length on how energy prices are another form of tax on American consumers. Although energy prices account for only 5 percent of our overall spending, it is spending that cannot easily be cut back. If the experts are right and gasoline prices move higher as a result of a stronger demand and the continuation of political tensions, then consumers might be paying a few hundred dollars more this summer for gasoline.

That is a lot of money when multiplied by the number of Americans driving cars, trucks, buses and motorcycles. If past behavior is any guide, consumers will fork over the extra money for gas but at the same time cut spending on other things like restaurants, vacations, and shopping at the mall. Higher energy prices will also take a bite out of profits in Corporate America. It will also mean higher prices from everything from diapers to tires as companies attempt to pass on the higher energy costs to consumers.

Unfortunately, higher energy prices are here to stay as long as this country fails to develop a comprehensive energy plan that will reduce our dependency on oil. Until then, we will remain hostage to every two-bit, oil-rich dictator or wanna-be nation that takes a swipe at us. 

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles 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 (toll free) or email him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.


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The Independent Investor: Should College be Free, Part II

By Bill Schmick
iBerkshires Columnist
My last column ended with two questions:

"Does a high school education prepare our youth to enter the work force, escape poverty and become productive citizen of the economy?"

The answer to that question is a resounding no, in my opinion, which creates a problem since the purpose of public education, according to our founding fathers, was the accomplishment of those goals. I believe there is a consensus among Americans that a college education has supplanted high school as a requirement in accomplishing the above goals. In which case, colleges should be tuition-free just like most high schools.

Whether college really does prepare our future generations for "living the dream" is another issue, which leads me to my second question.

"Are we still in the industrial revolution or have we graduated into something more?"

The answer is more important to the future of education and America's place in the world than just about anything you can imagine. Most people would agree that the U.S. has graduated from an industrial revolution to the "information age," yet I believe our educational system, thanks to some historical detours, has failed to adjust to this new reality.

A tuition–free college education is an old concept in this country. Baruch College, now part of the City University of New York system, was founded as a free college back in 1847. In 1862, the Merrill Act established public universities through federal land grant. Most states opted to charge no tuition or a nominal tuition. California’s public university system, for example, which remains the largest in the nation, abolished tuition three months after it was founded in 1868.

When WW II ended in 1945, 16 million Americans (one out of eight) were serving their country in some capacity. With returning vets looking for work, many feared we were heading for massive unemployment and another Depression unless Washington did something about it. In 1944, the GI Bill of Rights was passed. It gave servicemen unemployment checks, low-interest housing, business loans and a free college education.

Nearly 8 million vets took advantage of that benefit and in the process drove the U.S. illiteracy rate to 3 percent, the lowest level in American history. It also transformed our economy, creating a massive Technocracy, while introducing the age of information.

But according to Walt Kelley, one of our readers who sent us his excellent book "Common Sense, A New Conversation about Public Education," it was the launch of the Russian Sputnik in October 1957, and our national response to that event, which set American education on a disastrous detour.

Prior to that period, only 18 percent of Americans went on to college. To meet the perceived Soviet nuclear threat, President Kennedy spearheaded a new educational strategy to answer the Russian menace. In addition to bomb shelters and the like, he argued that higher education would be key to saving our country. Kennedy exhorted an entire generation of high school graduates to go on to college and become professionals. It was, he said, their patriotic duty and would not only save America but the rest of the world as well.

Science and engineering were the main areas of educational pursuit as part of the "space race." Those who may have had the aptitude and interest to attend technical schools thought twice about it. After all, going on to college had become a patriotic duty. The federal government made it even easier to attend by supplying new federal and state loans. The number of colleges and students attending them exploded in the 1960s.

The advent of the unpopular Vietnam War (and the subsequent disillusion among the '60s Generation) brought on a whole new set of variables that once again stood college education on its head. The nucleus of the anti-war movement was centered in colleges, especially those colleges that charged little or no tuition. The ranks of student/teacher protestors swelled since college students were also exempted from the draft as were those graduates who decided to become teachers.

Given the strong anti-war sentiment among educators in general, less qualified high school graduates were admitted to colleges (thus escaping the draft) and many below-average college graduates opted for teaching rather than a stint in the Army. Avoiding war, rather than getting an education, became the driving force for attending college.

Politicians in Washington, miffed by the growing protests and civil disobedience of both students and faculty, realized that funding these institutions of higher education was at cross purposes with their own wartime policies. Ronald Reagan used the University of California's peace activists as a campaign issue in his 1966 election for governor and hiked tuitions shortly after being elected. The same kind of thing was happening in New York and other states.

As funding dwindled, tuition-free universities had no choice but to trim costs and begin to boost tuition. Teachers, feeling the squeeze on both their salaries and benefits, began to organize, forming labor unions to protect their jobs and livelihoods. The end result was an upward spiral of ever-increasing tuition costs that continues today.

A second unanticipated result was the decline in the perceived worth of teachers. Teacher unionization on a national scale led many Americans to unjustly compare teachers to similar blue-collar union members in the auto, teamsters and steel industries. At the same time, the quality of new teachers was thought to have declined as the result of the draft evading tactics of the Vietnam Era. This, combined with the poor results of the American educational system in general, gave teachers a bum rap that has continued to this day.

As the U.S. educational system continues to decline, despite the best efforts of both government and the private sector, I don't believe free college tuition will solve America's educational dilemma although it may help future generations make better career choices. In my next and final column on free colleges, we will address the broader issue of the future of education in this country. Stay tuned.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles 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 (toll free) or email him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.

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