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The Independent Investor: Give Local
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American charities took in over $300 billion last year and hope to make this year even better. After all, we Americans are a giving people. Nearly two-thirds of us give something to charity every year with many of those donations occurring between Thanksgiving and New Year's.
Why we give is still somewhat of a mystery. The economy is nothing to write home about, unemployment is high and most of us are pinching pennies. Yet, we somehow find that spare dollar or two to drop into the charitable pot or, in some places, the hands of the homeless.
Experts point to the fundamental social urge to help our fellow human beings. There is also the "feel good" factor, since giving makes us feel better about ourselves. There is also the social pressure to give during company fund drives, or marketing calls for example. Yet, each year we discover that things are not quite as they should be in the nonprofit world. Most readers are aware that many large charitable organizations use professional fund raisers at some point or another for phone solicitations, direct mailing, call centers, etc. These fundraisers charge a fee for their efforts, which can be enormous delivering as little as 46 cents on every dollar donated to the charity.
Recently, the attorney general for New York State released a report that found that, on average, just 37.6 cents of New Yorker donations actually went to the charity of their choice. In some places, such as the Hudson Valley, charities received even less, just 17.4 cents/dollar, which was the lowest percentage in the state. There were actually 61 cases where the charity lost money after paying telemarketers and other fund raisers. New York is no different than Massachusetts, Connecticut, Vermont, New Hampshire or most other states in this regard.
Various organizations have given donors tips on the dos and don'ts of giving. Suggestions such as resisting pressure from telemarketers to give on the spot. Others urge you to do background checks on charities before giving or use charity rating organizations that will do that job for you. Experts say that when giving on-line read the fine print and every watchdog organization advises that we should all educate ourselves about charitable giving. All of the above advice is laudable, but where's the fun in that?
You see, most studies on philanthropy indicate that charitable giving is an impulse thing. That's right, we pass through the supermarket doors and toss our spare change into the bucket without thinking, receiving a heart-felt "Thank you and Merry Christmas" for our efforts. In fact, numerous studies reveal that the more one thinks about things like which charity is the best choice or how this or that charity uses my money, the less generous one tends to be. So how does one give without spoiling the fun?
Give local just like you buy local. Most of us know the needs of our own communities. There are dozens of charities right outside your door that you can give to directly without worrying about fraud or how much of every dollar they will receive. Food banks, animal shelters, human shelters, it's all there and when you give locally there is an added benefit. You improve the quality of life in your neighborhood, which helps everyone.
Take my company, for example. We gave away hundreds of turkeys last year at Thanksgiving. Individually, this holiday season, some of us are sponsoring needy kids with holiday presents as well as donating money to a local animal shelter. Surely there must be a soup kitchen, children's home or something that tugs your heart strings some where close. You don't even need to donate money when you give locally. The donation of your time can be just as valuable. So get out there and give. And God bless us everyone.
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.
@theMarket: Is Santa Claus Coming to Town?
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There are many explanations for why markets sometimes move higher between Christmas and the New Year and into January. One reason is the "January Effect." Historically (since 1925) markets have risen in the first month of the year with small caps leading the way. Investors like to get in the market before that move begins, usually during the last week of the year.
Since 1896, the Dow's average monthly return in up years has been roughly 0.5 percent but Decembers have returned 1.4 percent overall. Some believe that tax considerations drive the markets during this time. Investors, for example, who sold losers earlier in the month, now begin to replenish their portfolios with new buys. There is also the fact that many employees receive their year-end bonuses, either in December or January, and invest those proceeds into the markets. I wouldn't discount the psychological impact either. Good feelings, generated by holiday cheer, and the absence of Grinch-like pessimists, who are usually on vacation at that time, spill over into the stock markets..
Yet, not all years have produced Christmas rallies and many Decembers have actually lost money for investors. Given the steady stream of bad news coming out of Europe one would expect that any rally we may have will be somewhat subdued.
For most of this week the markets have tried to rally, largely on good news generated by the U.S. economy. On Wednesday, Thursday and Friday morning's stocks were bid up by one percent or more only to flounder when comments out of Europe cut the gains to just above breakeven. As expected, the sniping began on Monday, almost as soon the EU agreed to expand and police a new fiscal austerity effort among its members. The naysayers were eager to explain why the agreement would be difficult to implement or just plain won't work.
Rumors all week that the credit agencies were preparing to downgrade sovereign French debt to ‘AA’ from "AAA" has also kept a lid on our markets. On Friday, Credit agency Fitch actually downgraded its outlook on France to "negative" but kept their "AAA" rating. It also put Italy, Spain, Ireland, Belgium, Slovenia and Cyprus on negative watch.
Traders have been watching the Euro, selling stocks as the Euro-Zone currency declines and the dollar moves up and then reversing the trade on any strength in the Euro. They argue that the Euro's decline signals worse trouble ahead for the EU and therefore for America and the rest of the world. No one seems to recognize that the Euro's decline actually helps the economies of Europe (making the goods they sell cheaper to overseas buyers), especially in places like Italy and Spain, where exports are a big part of their overall economies.
One wonders when investors are going to decouple from their manic focus on Europe and concentrate instead on the U.S. market where stocks are cheap, unemployment is declining, and the economy growing. It is my hope that it will finally dawn on the markets that there's no place like home, especially for the holidays. In which case, there may be more under the tree than most investors expected.
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.
The Independent Investor: Why Everyone Should Have a Will
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Looking at him, you might agree. At 25, he is as healthy as the horses he shoes. As a farrier with his own business, he works hard and plays hard. Life is his oyster right now but if he dies, I reminded him, the state gets everything.
"No way," he said, in utter disbelief.
But it is true. As a single man with no relatives and no will, the chances are quite high that the state would take everything. Fortunately, my client found religion and immediately did some estate planning, including creating a will. Unfortunately, most people will find every excuse in the book to avoid creating a will. Many individuals feel uncomfortable with the possibility of their own death or they take the attitude that when you're dead, you're dead, so why worry about it.
You may be surprised to know that most states are prepared for that and have effectively written a will for you. They are called statutes and are used to determine your heirs if you die "intestate" (without a valid will). Each state's statutes are different and can have an enormous impact on your heirs, especially your children.
If you die without a will, for example, and have children under 18, the state will control who will care for them. Sure, siblings or grandparents are usually the go-to choices as guardians, but not always. There are also many instances where a sister or brother may not agree with the court's ruling. In which case, there ensues a long and costly custody battle with most of the emotional hardship borne by your children.
It gets worse. Let's say you have been diligently saving for your kids' college education. Without a will, there is no guarantee that an appointed guardian will honor your wishes. They may simply use the money for your child's support dismissing college as a frivolous expense or a luxury they cannot afford.
Probate is the term used for the long, arduous and expensive state court procedure that administers your estate. An uncle of yours dies in Florida and leaves a condo, but no will. As his nearest kin, you will need to hire a lawyer in state, spend the money, time and effort necessary to have the disposition of the condo adjudicated in the court system and hope that in the end the state rules in your favor.
You go through all those hoops only to find out a distant cousin disputes your right to inherit. At the same time you discover the condo's mortgage is greater than its worth and the condo association doesn't approve the one buyer who might take it off your hands. I think you get the point. Probate is a nightmare.
Many people have confused a revocable living trust with a will. They are two different legal documents, which serve different purposes. In a living trust, you transfer assets into the trust during your lifetime. When you die, those assets go directly to your beneficiaries and do not go through probate. It is a private document and is more difficult to be challenged.
In contrast, a will is a public document. It can be useful in combination with a living trust to ensure that any property that is not already listed in your living trust (such as furniture or antiques, or heirlooms) before death will be transferred to the trust at death. A will can also address the needs of your children by naming a guardian and spelling out the financial provisions for their care and education. A will can also accommodate your wishes and intentions clearly and at greater length than a trust.
Creating a will and/or a living trust is best done through an attorney. It may cost a couple hundred dollars but it is the best way overall to cover yourself and your family in the event of your death. I suggest if you haven't done one yet, it's about time you did.
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.
@theMarket: The Case of the Crying Wolf
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Despite these weekly doom and gloom predictions, the markets have weathered the storm. Consider these "end of the world" moments: the U.S. debt ceiling, the budget debate, the lowering of our credit rating; while in Europe there have been dozens of do-or-die deadlines from Greek default to this weeks' EU summit. How long must the wolf cry before we become inured to its call?
The truth is that the media and many of its guests see things in such simplistic terms that either/or is about all they have time for. Real life, as we know, is much more convoluted and complex than that.
Sure, there may come a time when once again (like in 2008-2009), the problems that besiege much of the world's economies will come home to roost. But, if human nature holds true, it won't happen until we least expect it. Since, if we expect something terrible to happen, we will do all we can to avoid or fix it. That process, my dear reader, is what is occurring right now throughout the world.
So if you were thinking that European leaders have finally resolved their financial crisis, think again. Friday's EU agreement moves them another step closer, but we still have a long way to go.
Twenty-six European nations agreed to forge a new treaty in order to establish an even closer fiscal union, one that will force members to get their fiscal house in order or "else." Presumably, "else" would mean that members who fail to toe the line will be booted out of the union. Great Britain, which rejected the Euro in favor of its own currency, the British pound, in the original treaty, was the only member country that refused to join the agreement.
Drafting that agreement, ironing out the fine details, and ultimately passing it should be a guaranteed source of additional volatility as the debate continues. Although the fiscal integrity of several European nations was the source of the financial crisis, this fiscal initiative does little to solve the symptoms of the crisis. Those symptoms - huge debt loads, escalating sovereign interest rates, high unemployment, slowing economies and concern over the Euro — are still of immediate concern.
These worries will be with us for the foreseeable future and, left unaddressed, could sink the markets. But remember, just two weeks ago, several of the world's largest central banks announced their intention to establish a floor under this crisis in the form of massive monetary intervention when necessary.
Over here in America we have our own issues. On the fiscal front, our do-nothing Congress and Senate guarantees there will be no additional economic stimulus unless President Obama can pull something out of his hat that does not need congressional approval. Monetary policy is on hold as the Fed waits for further clues on the economic health of the U.S.
This particular wall of worry is indeed quite formidable. Some investors have decided to just move to the sidelines until this volatile period subsides, and I don't blame them. If concern over your investments is keeping you up at night, you are too aggressively invested, in which case change your allocation.
As I warned in my last column, we saw a lot of volatility in the markets this week. Expect more of the same in the weeks to come. That said, I believe we will move higher between now and the New Year.
Next year, however, may be a different story entirely.
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.
The Independent Investor: It's Your Move America.
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Back in May of this year, in my column ("Gordon Gekko Should Run for Congress"), I pointed out that our nation's elected officials were not subject to the insider trading law that regulated everyone else. As a result, individual politicians and their cronies have profited substantially year after year from the knowledge they picked up in closed door hearings, subcommittees and the like.
This access to insider information has become even more important over the last few years as more and more market moving events are triggered by governmental actions. Just consider how government pronouncements in the U.S. and Europe over the last six months have caused huge market swings.
Efforts to change this law have been going on for years with scant success. News stories such as The Wall Street Journal articles on the subject last year and last month's "60 Minutes" report on the scandal have increased public awareness. I suspect that if their approval ratings were not so low (congress has a historically low 9 percent approval rating) the politicians would simply ignore the heat, as they have done in the past, and continue to profit at our expense.
A month ago only nine congressmen supported the bill that would require elected officials to report all trades over $1,000 within 90 days. After the "60 Minutes" show, that number increased to 180 and more than 20 senators have since jumped on the band wagon.
Today, a cozy relationship exists between politicians, political intelligence firms and big players on Wall Street. There is nothing illegal in a congressman or senator divulging sensitive information to a political intelligence firm which in turn sells that information to Wall Street. The more market-sensitive information that is passed on through the pipeline, the more a particular politician can demand in future campaign contributions from the beneficiaries of that information.
This bill would make it illegal for individuals and "political intelligence firms" to continue that practice. It would also require firms and individuals involved in "political intelligence" to register just like any other federal lobbyist.
Call me a cynic, but I doubt this bill will pass. Not only are lawmaker's potential for using their office for personal gain at stake, but this bill will also jeopardize the pipeline to campaign funds from those special interests we hear so much about.
In a different world, all my readers and everyone in America who cares (the 99 percent), will call or email their representatives in Washington and demand he or she vote for this bill when it comes up for a vote next week. It is your chance to change a lot of what is wrong with Wall Street right now. It's your move, America.
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.
