Jobs. They are the primary focus of the Federal Reserve Bank, the Biden administration, the Republican opposition, and most U.S. corporations. Supposedly, with all this high-powered attention, we still can't find enough workers to fill all the positions available. Has anyone questioned why?

 

One important reason might be that 60 percent of jobs in the U.S. are considered "mediocre" or "of poor quality," according to a recent Gallup survey. If you combine those findings with the fact that many workers in the service economy are poorly compensated, the problem begins to come into clearer focus.

 

If you listen to the free market critics, generous Federal unemployment checks are the root cause of the problem. These simpletons argue that these higher benefits have discouraged workers from returning to their former jobs. They ignore the obvious, which is that if the "government dole" is preferable to the offered wage, then that wage must be far too low. It is myths like these, as well as the historical focus on the number of jobs gained or lost without paying attention to the quality of employment, which obscures the truth.

 

American companies, especially in the service sector, have spent the last thirty-plus years cutting wages and benefits in the name of reducing costs and improving profit margins. Global competition and lower wages abroad (especially in China) have been blamed for this development. That trend has reversed in a big way, but here in the U.S. we act like it is still a fact.

 

Our treatment of the American worker, especially the lower-income, service worker, needs to change. A recent Gallup poll, for example, found that only one-third of low-income workers received fringe benefits like health insurance and retirement benefits. An even smaller number received paid sick leave. Is it any wonder that only 28 percent of the lowest quintile workers claimed to have a "good" job?

 

Remember all the fuss when the Biden Administration tried to raise the minimum wage earlier this year? No dice. Here's another myth: the federal minimum wage is meant to be a living wage. At the going rate ($7.25 per hour), a family of four is living well below the poverty line. The reality is that about half of America's working population earns less than a living wage.

 

Is it any wonder we have exploding rates of crime among our youth?

 

Parents, who just want to feed themselves and their children, are forced to work, sometimes two jobs, away from home until the early hours. That leaves their kids alone and unsupervised for much of the day and night. We all know this but choose to look the other way or worse, use the race card as an explanation. Shame on us!

 

But simply paying workers more is not the answer, although it certainly helps. Creating an entirely new culture around the job is the challenge we face. Not only must we, as a nation, provide higher pay and better benefits, but also a workplace culture that improves the overall lives of our employees. To me, a quality job is one that makes a person feel valued and respected with a voice in their workplace. I see it as an opportunity to shape my work life, while contributing to the goals of an organization.

 

If this sounds schmaltzy to you, or a job description above your pay grade, consider this: Jobs that do not meet employees' needs have a higher-than-average turnover rate, poorer employee productivity, and a lower-quality consumer experience. Amid the competition to hire workers in today's post-pandemic environment, I believe workers at all levels are seeking more than just a sign-on bonus, or a bump up over a minimum wage level.

 

Otherwise, chances are your new hire will consider their position as "just a job," as opposed to "a career." As such, these disengaged employees cost businesses an average of $350 billion every year in productivity, or $2,246 per disengaged employee. In a tight labor market, with traditional hiring habits of "only money counts," a high turnover of employees is a given.

 

The cost of replacing an employee can range from one-half to two times the employee's annual salary.

 

The pandemic has changed quite a few things, some temporary and others permanent.

 

The American worker took it on the chin during the last year and a half. Millions were unemployed, while many that did show up to work were faced with constant danger to their health and safety. Essential workers in health care, early childhood education, food production and delivery, as well as countless minimum wage workers not only showed up, but delivered in our time of need.

 

Many others managed to work from home, delivering to their employer extra hours, higher productivity, and lower expenses for the same, or lesser wages. Going forward, there is no need for America's workers to justify their worth. That's been proven, in my opinion.

 

No, the ball is squarely in the employers' court. American workers have experienced deteriorating wages and working conditions over the last few decades. As a result, fundamental pillars of our democracy have been eroded. Economic stability and opportunity have decreased dramatically, while inequality has risen to historical levels. The present polarization of this country is no accident. Our workers need and deserve better jobs with higher wages and a radical change in the quality of the workplace.

 

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.

It was a sleepy week in the markets for the major averages. Stocks flirted with the old highs, only to fall back by the end of the week. Energy and a few meme stocks occupied most of the attention.

 

Crude oil spiked higher, nearing almost $70 a barrel (bbl.), pulling energy stocks along with it. Energy traders were heartened by the latest OPEC meeting. The cartel expects demand to outstrip supply by more than a million barrels a day for the foreseeable future. As a result, the members intend to gradually increase production as the global economy gathers steam. Most analysts expect oil to breach $70/bbl. before taking a break.

 

Certain stocks such as AMC and GameStop, which have been dubbed "meme" stocks by the Reddit crowd of retail traders, had an unbelievable week of gains. AMC, the nation's largest theater chain, for example, saw its stock gain by more than 100 percent in one day. The price rise finally slowed and then reversed after the company announced two consecutive stock offerings over three days.

 

There is no fundamental reason to justify this kind of price movements. I witnessed the same thing during the Dot.Com boom (and bust) back in the beginning of this century. For those who can ride the bull, I applaud you. I just hope you are lucky enough to exit before you get trampled. Buyers beware.

 

Investors are also watching the infrastructure negotiations between the two political parties. The horse trading is getting intense. Reports that President Biden might be willing to revise his proposal to increase the corporate tax rate to 28 percent from 21 percent cheered markets. That tax hike has been a major roadblock in winning Republican support for his infrastructure plan.

 

The Washington Post reported that Biden might consider a minimum corporate tax rate of 15 percent instead. On the surface, that might seem to be a tax cut from the present 21 percent rate. However, few corporations pay the going rate (although politicians like to pretend they do). The actual tax, after all the credits and loopholes in the tax law, usually results in a payment that is a substantial discount to the stated tax rate. Some large corporations pay no tax at all.  

 

Another indication that the U.S. Central Bank sees further signs of economic recovery is that the Fed announced it was preparing to sell its $13 billion corporate bond and ETF portfolio (called the Secondary Market Corporate Credit facility, which it established during the pandemic). Officials made it clear that this was a separate move and should not be considered as a move toward tightening monetary policy.

 

May's Non-Farm Payroll employment report for May 2021, which was announced on June 4, was the second monthly disappointment in a row. New hires came in at 559,000 jobs. That was far lower than the 675,000 expected, but bad news proved to be good news for the financial markets. Stocks rallied since markets are keenly focused on the "tapering" conversation.

 

Some Federal Reserve Bank members continue to talk openly about the need to start tapering purchases of fixed income assets. Yet, other "doves" on the FOMC board remain convinced that we need several more months of data before beginning that process. The weak employment numbers give credence to those Fed officials who want to go slow.

 

Continued, easy monetary policy means interest rates should remain low, which is good for equity assets. And so the stock market rallied on the Non-Farm Payroll "bad" news. At this point, traders are expecting to hear more about tapering from Fed officials after their mid-June FOMC meeting with a possible announcement on when tapering will begin around the Fed's annual Jackson Hole conference in August.

 

Equity markets, I believe, will continue to be a battle between bulls and bears. While summers are usually a slow period in the markets, I suspect this year we could see further turbulence and possibly further gains. That could keep the pros close to the terminals, since we are quite close to historical highs on the S&P 500 Index. A break above them (at 4,238) would give the bulls clear sailing to 4,300. The question is what new piece of news could trigger that breakout?

 

The crypto currency market, on the other hand, remains subdued. Bitcoin continues to trade in a range between $33,500-$38,000. Technicians seem to be biding their time before making a move. Many believe Bitcoin must either break decisively below $33,000 to sell it, or above $40,000 for new purchases.

 

In the commodities corner, copper, gold, and silver took it on the chin this week after the U.S. dollar bounced off three-week lows, while oil continued to rally. Volatility like this is the name of the game when investing in crypto currencies, commodities, and commodity stocks. There is a saying "If you can't stand the heat, get out of the kitchen," so invest accordingly.  

 

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.

The Memorial Day weekend launched the unofficial beginning of the summer season. Movie theater owners are holding their breath in hopes that consumers, once vaccinated, may start to return to the cinema. Is it a false hope?

At the beginning of this year, the global price of carbon was $24.05 per ton of CO2. In order to achieve the emissions reduction goals of members of the Paris Agreement, prices need to reach a range of $50-$100 per ton of CO2. That makes buying carbon an attractive investment.

 

The ongoing concerns about climate change have spawned several emission trading schemes over the last decade. The reasoning is simple: if left unchecked, carbon emissions (among other factors) will have a material impact on our environment and will do severe damage to the global economy.

 

The ratification of the Kyoto Protocol of 2007, by world governments, effectively addressed the challenge, establishing rules of carbon emissions. And in the process created an entirely new asset class.

 

Today, whatever system a government chooses has at its core, a cap-and-trade system. Emitters of carbon must by law either limit carbon emissions to the level allocated by their government, purchase additional carbon emissions permits in the marketplace, or pay a fine for exceeding their emission limits. This has created a new commodity: carbon emission permits.

 

The European Union Emission Trading Scheme (EU ETS) is by far the largest such scheme in the world. It has also become the model for most of the world's governments. Carbon emissions, according to the Financial Times, was the top performing commodity in recent years, growing fivefold in the last four years. By the end of 2020, the three largest global carbon futures exchanges had a market size of $260 billion.

 

In April 2021, on Earth Day, President Joe Biden hosted a "Leaders' Summit on Climate," and promised to reduce emissions by 50-52 percent below 2005 levels by 2030. The U.S. was just one country, among many. The EU, the U.K., and China promised similar, if not larger, reductions. Carbon emission pricing was the central theme of the summit and is the key, fundamental component for achieving the summit's reduction goals.

 

Prices have risen by 70 percent this year in response to the aggressive goals set by the EU, which is targeting a 55 percent reduction in greenhouse gases by 2030 and net-zero by 2050. The hope is that as the price of carbon credits continue to rise, polluting companies will at some point decide to invest in reducing emissions rather than purchasing increasingly expensive credits.

 

The re-opening of the world's economies is also a bullish development for carbon pricing as industrial companies and utilities increase output and carbon emissions, which is sparking even more demand for carbon credits. And adding to that trend, new carbon markets seem to be popping up every month. Cap-and-trade carbon pricing exists in 24 national and sub-national markets currently. Another 19 more markets are in the development or consolidation phase.

 

Some American institutional investors and pension funds are gaining access to this market either directly, or through Exchange Traded Funds (ETFs). The retail crowd is still relatively absent from this asset class.

 

In addition, as far as I can tell, the carbon market is uncorrelated with other risk assets. The underlying asset, the EU ETS, is a liquid instrument with a well-understood prospective risk premium. Its risk-adjusted returns have outperformed traditional asset classes such as equities, bonds, and other commodities. In my opinion, it appears to be a case of making some real money over the long-term, and, at the same time, contributing to the greater good by helping to address climate change and a much-improved global environment.

 

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 inflationary environments, investors historically have hedged their bets by buying gold. However, this time around, the precious metal has languished as investors bought alternative investments. But times are changing.

 

The primary alternative to buying gold has been cryptocurrencies. Bitcoin and Ethereum, two of my 2021 buy recommendations (for those with a strong stomach) have enjoyed spectacular gains in 2021. Bitcoin, at one point in May, had gained almost 100 percent, while Ethereum saw gains of more than 400 percent.

 

In addition, other commodities held more interest than gold for most investors. In January 2021, I recommended investors focus on some specific commodities, especially oil, copper, and soft commodities, like food and lumber. I listed gold as my last pick among those commodities.

 

That proved to be the correct approach because I recognized that the world had moved on, at least temporarily from something as arcane as gold. In today's internet world among the Robin Hood traders and GameStop crowd, gold was simply not be as attractive as digital currencies. There are plenty of arguments for why that could be the case. Bullion, for example, is expensive to hold, and rising interest rates increases the cost of holding it. Gold is cumbersome, while digital transactions are easy and far more efficient. And while gold is still used in several products, copper, lumber, and oil are far more leveraged to a re-opening global economy.

 

It is not as if gold has gone nowhere. Gold made what I consider a cycle low back in November 2020 at $1,767.20 an ounce. Today, that same ounce of gold will fetch $1,882.70. That's roughly a 6.5 percent gain. That's much better than the risk-free rate in the bond market but compared to the stock market's 12 percent gains it has been disappointing at best.

 

However, recently gold has begun to perk up and I believe we may be on the cusp of a new move higher in this precious metal (and silver along with it). Why the change in attitude? The increased worry over how high and how fast inflation will rise and the dollar's sharp decline has investors nervous. At the same time, other commodities are at record peak prices, while gold has done little.

 

In addition, recent arguments that crypto currencies are the Twenty-First Century's "new gold" is beginning to unravel as speculation within that asset class runs amuck.

 

As an example, the crypto world is in the midst of a massive decline (evenas I write this). Bitcoin has fallen from a high of $64,000 to Wednesday's low of $33,700, which is almost a 50 percent decline. Ethereum and Dogecoin have also incurred similar losses. The argument that it is a hedge against inflation or rising interest rates seems to be suspect given recent events.

 

I have noticed over the last few months an increasing number of Wall Street firms including Goldman Sachs and Credit Suisse have warmed to the prospects of gold. Some respected analyst forecasts are expecting gold to move much higher. Twelve out of 32 analysts are predicting that gold will average $2,000 an ounce this year. The median forecast with half above and half below, averages $1,965 an ounce.

 

I expect that all these forecasts could be low. I am putting gold at the top of my commodity list for the second half of 2021. Silver could be a close second. For investors interested in this area, keep in mind that gold and silver mining stocks usually outperform the metals by a ratio of 2-3 to one. Remember, however, that commodities overall, and precious metals in particular, are highly aggressive investments.

 

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.