Immigration has become a dirty word among Americans. Illegal aliens take the brunt of the nation's animosity, for sure, and are vilified for a long list of crimes that few question. I am one of the few who see a positive side to migrants.

 

Politicians on both sides of the aisles are competing to keep as many immigrants as possible from entering the country. Campaign speeches by many radicals warn that the situation has reached cataclysmic proportions. The media stokes these fires with shots of dark-skinned refugees fording rivers, shivering in lines surrounded by barbed wire, and headlining any crimes that involve an immigrant. This is nothing new.

 

The country has a long history of failed immigration policies. Waves of immigration, followed by periods of no migration, or even expulsion, are part of our history. Migrants have settled vast areas of the country, built our railroads, and industrialized our cities. Attitudes toward these generations of newcomers have waxed and waned, blown by economic circumstances and the whims of our politicians. 

 

 Immigrants of different races, cultures, and religions have been subjected to enormous political backlash in the U.S. time and again. German, Irish, English, Italian, Canadian, French, Chinese, Jews, Japanese, South American, African — take your pick — they have all had their turn from the earliest days of this nation's existence.

 

Let's look at just a few examples. The Know Nothing Party in the 1850s hated Catholics and all foreigners. They wanted to increase the residency period for naturalization to 21 years. After the Civil War, the Naturalization Act of 1870 only granted naturalization rights to "aliens being free white persons, and to aliens of African nativity and persons of African descent." Then there was the Chinese Exclusion Act of 1882 which blocked Chinese immigrants from entering the country.  

 

In 1924, the politically popular and widespread notions of eugenics, nationalism, and xenophobia culminated in the National Origins Act. It was crafted to eliminate the "parasites of Europe and elsewhere." The Johnson-Reed Immigration Act of 1924 halted all immigration from Asia, Southern Europe and Eastern Europe. Some believe that the lack of fresh immigration labor could have contributed to the economic downturn in the 1930s.

 

In 1933, the country entered the Great Depression. The secretary of labor at the time argued that repatriating foreigners would create additional jobs for Americans. As a result, the federal government deported more than one million Mexicans and persons of Mexican ancestry (60 percent of those were U.S. citizens). How did that work? The reverse happened. The unemployment rates for Americans spiked even higher. Sound familiar?

 

And what about the impact of our pre-World War II, immigration policies? You should know that our anti-refugee rules left thousands upon thousands of Jews stranded in Nazi-occupied Europe. We, along with many other countries, turned a blind eye to Hitler's Jewish pogroms despite knowing the systematic extinction of millions. How many more German Jews and others could have escaped the holocaust by fleeing to America, but no one cared? "Play it again, Sam."

 

In my next column, I will examine the controversy over immigration raging in the country today and how our present policies have impacted our economic growth, income, and inflation.

 

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.

February inflation data showed no progress on inflation. That follows the same kind of readings from the previous month. While two months does not make a trend, the disappointing numbers gave investors pause.

 

Both the Consumer Price Index (CPI) and its cousin, The Producer Price Index (PPI), came in warmer than economists had expected. Consumer prices rose 3.2 percent in February from a year earlier but were only slightly higher than economists' expectations of 3.1 percent. The PPI rose 1.6 percent year-over-year, which was the largest gain since last September. Month-over-month, the PPI at +0.6 percent was double the average forecast.

 

These data points should be taken with a grain of salt since a couple of higher numbers should be expected. Few, if any, macroeconomic trends travel in an uninterrupted straight line higher or lower.  Unfortunately, these results practically guarantee that the Federal Reserve will hold off on any plans to cut interest rates.

 

No one was expecting the Fed to cut in March anyway. In Chairman Powell's most recent statements, he indicated March was off the table. But now, the earliest the market can expect a cut will be in June, if then. Markets are now pricing in about a 59 percent chance of an interest rate cut in June. Given that economic growth and employment trends remain strong, some argue that the Fed need not reduce interest rates at all this year.

 

Any hint of no cuts ahead would not be taken kindly by the markets. That is because much of the gains in financial markets, whether in bonds, equities, precious metals, commodities, crypto, etc., have been fueled by investors' expectations that the Fed is planning on reducing interest rates at least three times this year.

 

As such, the FOMC meeting notes will be released on the afternoon of March 20, and I suspect every word will be analyzed with a microscope. Chairman Powell's Q&A session afterward will also be subject to the same scrutiny. I don't expect that Powell will deliver a nasty downside surprise. After all, this is an election year, and while the Fed is supposed to be "non-political," I doubt they would want to upset the economic apple cart and influence one side or the other.

 

As readers are aware, I believe the stock market is in the ninth inning of this rally. This week, the high on the S&P 500 Index was less than 44 points away from my top-of-the-range 5,220 target. I've noticed some changes in the market behavior while we made that new high. The momentum that has been driving stocks since the beginning of the year is beginning to wane and, in some areas, even reverse. The action of late has been wild and there are some signs of short-term topping patterns.

 

The technology sector, for example, which has led the market all year, is beginning to struggle. Semiconductors have been choppy. Nvidia, the quintessential AI stock, is no longer going up 2-3 percent per day. It is now down about 100 points from its all-time high. Some stalwarts of the market like Apple, Google, and Tesla (to varying degrees) seem to be rolling over. Some say that where Apple goes, so goes the market. 

 

In this risk-on environment, the declining dollar has been supporting commodities, especially gold and silver. However, the greenback, which is the world's safest trade, has flattened out and may be starting to bounce as traders worry that lower inflation is not quite in the bag. All of this tells me to be cautious and while we could still climb higher, I would have one eye on the exit.

 

Readers, please be aware that due to two upcoming medical procedures, there will be no columns next week, and again none during the week of April 1.

 

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.

Many Americans are getting a bad case of sticker shock when their check arrives at their favorite restaurants. Higher costs for labor, food, and a variety of other inputs are conspiring to make dining out a luxury item that fewer can afford.

 

Lest you think that these sky-high prices are confined to the white tablecloth crowd, guess again. I'm talking about everywhere. Prices in fast food chains, your neighborhood bar and grill, the home-style diner on the corner, and even your local Chinese takeout joint are jacking up prices.

 

By the beginning of this year, the costs of eating out rose more than 30 percent since 2019, according to the Labor Department. I think that is low. My favorite burger chain has increased prices so much that today the average burger costs more than $16 (with fries and a soda, we are talking more than $20).

 

In many cases, restaurants have no choice. Wages for everyone from waiters to busboys, cooks, and dish washers are going up along with the minimum wage. This year, the minimum wage was raised again in 22 states. In addition, restaurants in some areas have been forced to offer or expand fringe benefits to keep staff from quitting.

 

And yet, the restaurant business overall is expected to break $1.1 trillion in 2024, which is a 5 percent jump from 2023 and a new sales record. Employment in the sector is now back to its pre-pandemic level as well. The clear winners of this surge have been the fast-food and takeaway chains.

 

The independent restaurants, especially those with full-service operations, have not fared nearly as well. Caught between escalating costs and increasing resistance by diners to higher check prices, the independents are caught between a rock and a hard place with nowhere to go.

 

As if prices aren't high enough, a new technology-fueled wrinkle will soon be introduced to a restaurant or two near you. It is called "dynamic pricing." Thanks to software innovations, restaurants can move prices up and down based on demand and staffing. This will allow companies to change prices weekly or monthly depending on what they perceive are periods of surging demand.

 

It is a concept that most of us have had some experience with in the past. We all know that airfares increase during the holidays. A summer rental on the beach is more expensive in July than in November. Hotels charge more on the weekends and taxis more at rush hour. Eating and drinking establishments have long used the concept to draw in customers, for example, featuring "happy hours" or "early bird specials" where drinks and/or food are cheaper. However, now companies are using the reverse and charging higher prices during periods when demand surges.

 

Earlier this month, Wendy's CEO Kirk Tanner mentioned that the burger chain was testing dynamic pricing using algorithms, machine learning, and AI. The comment hit the national news wires and the backlash from fast-food fans was fast and furious. The furor resulted in a company statement denying it was going to raise prices, but instead use digital menus to change offerings during the day and offer discounts at slower times.

 

However, dozens of restaurants have already implemented surge pricing, according to the New York Post. And more will certainly be trying out the concept. By some estimates, restaurant chains could easily see prices during the lunch rush, for example, increase by 10-20 percent. The key is in how it is implemented. Focusing on the times of day when prices are lower seems crucial, rather than when they are higher. Somehow that is considered more palatable to consumers. Good luck with that. 

 

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.

At this point, a day without a new high seems almost abnormal. AI stocks rage higher, joined by weight loss companies like Lilly. The good news keeps rolling in with even Chairman Jerome Powell of the Federal Reserve Bank seemingly more dovish. 

 

The Fed chairman testified before both the House and Senate this week. He indicated that we could expect a couple of interest rate cuts this year if the inflation data continues to weaken. He also said that if it does, the Fed won't wait until inflation hits its 2 percent target before loosening monetary policy.

 

The economy continues to grow, and while there is some evidence that labor growth is moderating in certain sectors, the latest non-farm payroll numbers for February — a gain of 275,000 jobs — were higher than expected. However, the headline unemployment rate hit 3.9 percent from 3.7 percent in January.

 

Bottom line: there are still plentiful jobs available for anyone who wants one. Wage growth, however, is slowing (0.1 percent versus 0.2 percent month over month). That is helping to rein in inflation. The macroeconomic data is helping to boost the good cheer within the financial markets.

 

Even the problems that have beset a large regional bank, New York Community Bank (NYCB), did nothing to dent the armor of the bulls. This regional bank merged with a troubled Michigan mortgage lender, Flagstar Bank, in a $2.6 billion deal last year during the regional bank crisis. The merger pushed the combined bank near a $100 billion regulator threshold, which imposes stiff capital rules on banks over that level.

 

The consensus on Wall Street is that NYCB's increased exposure to the commercial real estate market, plus the new requirements, forced the bank to slash its dividend in January. That sent NYCBs' stock diving, which in turn sparked credit downgrades.

 

This week, as the bank's stock price was in free fall, several investment firms, including Steven Mnuchin's Liberty Strategic Capital, Hudson Bay Capital, and Reverence Capital Partners injected more than $1 billion into the bank in exchange for equity. 

 

A year ago, a related issue (remember Silicon Valley Bank) drove down equity markets. At the time, investors feared that financial contagion might overwhelm the overall banking sector. It didn't. This time around, markets barely blinked.

 

The widening of the breath of the stock markets has also increased investors’ confidence in the rally. Bond yields have fallen, and the U.S. dollar along with it. That has sparked a bull run in gold and in Bitcoin since both are considered currency equivalents.

 

But there is a little more to this story than that. Some economists and stock strategists argue that when the Fed begins to cut interest rates, the dollar is going to tumble, and the demand for alternative currencies like gold and crypto will spike higher. Throw in the fear that the country's out-of-control debt level is going to cause a crisis, and you have the makings for much higher prices. As a result, both Bitcoin and gold hit all-time highs this week.

 

As I wrote last week, we have met my first target on the S&P 500 Index of 5,140. My second higher target was 5,220-5,240. We are already halfway there as of Friday. The precious metals are over-extended and need a pullback as is the rest of the market. My advice: hold on, but not chase.

 

We continue to have at least one day a week where markets suddenly dive by more than 1-2 percent on no news.  Each time, (so far) markets rally back by the next day. Don't be lulled into believing that the dip and bounce strategy will continue to work. Somewhere up ahead there awaits a 7-10 percent correction. It could take until April before that occurs.

 

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.

In today's tight job market, many companies are dropping the required college degree

 

Time was that if you wanted to get ahead, find a higher-paying job, and establish financial security go to college. While some of that advice continues to hold, many companies are foregoing the sheepskin in exchange for experience, skills, and competencies workers have developed in the school of hard knocks.

 

In some respects, the hurtle of a college degree makes no sense when interviewing for a job that does not require college-level skills. I know of dozens of liberal arts majors who ended up working at fast food chains or landscaping.

 

But don't take my word for it. A labor analytics firm, Burning Glass Institute, and the Strada Education Foundations, a non-profit organization, studied the career path of 10 million people who entered the job market between 2012 and 2021. They found that roughly 52 percent of college grads were not using their skills and credentials in their jobs.

 

What a person studies in college, followed by the chance to intern were the main determinants of obtaining a college-level career track, according to the study. Given the escalating costs of higher education, along with years of student-debt payments, is it any wonder that the debate over the value of higher education is a hot topic today.

 

Last year, thanks to a tight labor market, companies began to get wise to the fact that a college degree was not necessary in many areas of employment. ZipRecruiter said the share of jobs that listed a bachelor's degree as a "must" fell from 18 percent in 2022 to 14.5 percent in 2023.

 

In a recent survey by the same recruiting firm, 45 percent of employers surveyed said they had dropped the degree requirement for certain roles, while 72 percent said they valued a candidate's skills and experience higher than the diploma they hold.  

 

Even among postings in "college-level occupations" only 78.4 percent of companies insisted on a degree. That is down from 85 percent 25 years ago, according to labor analytics firm Lightcast. In jobs such as insurance sales agents, e-commerce analysts, property appraisers, and call center managers a degree is now seldom required. Other areas where a college degree may give way to skills-based hiring are in health care, financial services, and IT.

 

That’s good news for a large segment of American workers. Almost two-thirds of the U.S. population over 25 years of age do not have a college degree. And today, America, like many other countries, is facing a long-term labor shortage with no easy solutions. Baby Boomers are retiring. The U.S. birth rates are low and still dropping, and the present shift against immigration by both the public and policymakers has cut off a historic avenue of new labor supply.

 

Given that 62 percent of Americans do not have a college degree, some companies most notably IBM, Walmart, General Motors, and Medtronic are eliminating degree requirements in hundreds of their job postings. Others are following but old habits die hard. The value of a college degree is deeply embedded in the psyche of many a human resources department. Changing those attitudes take time as does discarding automated screening tools that automatically reject non-college applicants.

 

One of the most vocal critics of today's college education is billionaire Peter Thiel, an early Facebook investor and founder of PayPal Holdings and Palantir Technologies. A Stanford graduate with degrees in philosophy and law, he became disenchanted with how leading U.S. colleges were turning out graduates. Thiel became convinced that higher education is not in the best interests of most Americans.

 

Starting in 2010, Thiel established a non-profit foundation that offers to pay students $100,000 to drop out of school to start companies or nonprofits. He selects 20 students per year. Since then, Thiel's program has backed 271 people. Some of those selected have since established successful companies in venture capital as well as in the technology area.

 

In defense of the college degree, studies still show that recent college grads, aged 22-27 working full time, earned $24,000 more per year than those with only a high school degree. Presumably, these grads were lucky enough to find entry jobs in their chosen fields. 

 

David Deming, an economist at Harvard University, argues that wage premium for college grads doubles over the life cycle from age 25 to 60 versus high schoolers. More educated workers are also more likely to have paid health insurance, sick and family leave, as well as the ability to work remotely.

 

As for me, I have long believed that college is not for everyone. Sure, the hard sciences will always be in demand and college is good place to acquire that knowledge base. Beyond that, liberal arts in this country does not seem to be a robust career path if money and security are a topic of concern. I would much rather see a young man or woman give equal consideration to a vocational school after graduating from high school. 

 

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.