A series of new historical highs rewarded investors who remained patient this year and remained invested. Unless something changes in the world of central banking, there is a good chance that further gains are in store for the stock market.

There will be pullbacks from time to time as the markets digest their gains. We have enjoyed several back-to-back gains in the stock market. The S&P 500 Index, for example, has climbed over 100 points without one down day. That is not something that can continue unabated.

The key to all this upside momentum is, of course, the worldwide largesse of governments and central banks. Take, for example, the events in England this week. Although economists and traders were expecting the UK's central bank to cut interest rates by half a percent; they didn't. But, they also said that investors should expect a rate cut in a few weeks, once they have a chance to examine the most recent economic data from the Brexit fall out.

Then there is Japan. Prime Minister Shinzo Abe's ruling coalition won the majority of seats in Japan's upper house elections last Sunday. Investors interpreted that win as a win for "Abenomics." Readers should recall that Abe and Japan's central bank has poured mountains of money into the Japanese economy. Despite that effort, Japan's economy remains in limbo.

Abe and his government plan to spend even more in the months to come. Given that we are talking about the world's third largest economy, more stimuli will wash around the world holding interest rates down and financial markets up.

Of course, our own central bank's efforts to hike interest rates is now "on hold" for the foreseeable future. That is thanks to potential worries about the impact on Europe and the UK from the Brexit vote. Once again, global markets are in a familiar environment of slow economic growth, declining interest rates (and currencies) with nowhere to go but the stock markets.

Speaking of which, we are in the first week of second quarter earnings season. As the game begins, analysts' forecasts for this quarter have been ratcheted down to 4-5 percent declines in company earnings overall. That is the sixth quarter in a row where corporate earnings have experienced a negative growth rate. The Street has been hoping (and betting) that company managements will be giving us better guidance on their future business this time around.

So far that has been the case. The big banks have been able to "beat" estimates this week.

The financial sector overall has lagged the market all year. It is difficult for banks to do well when interest rates are this low. Hopefully, these earnings results will put a fire under the sector.

Retail is another group where disappointments have weighed heavily on the sector. Although, these companies won't report for several weeks, traders are also counting on good news out of at least some companies.

You may be wondering how long all of this central bank stimulus, quarterly earnings games and other financial machinations will support the markets. It has done so for at least the last five years. Even the bankers tell us that without additional government spending, their spending efforts can do no more than maintain the present environment. The bears are right: we are in an environment of smoke and mirrors. Yet, we can worry all we want about that while the markets climb higher. The "don't fight the Fed"  mentality is still the flavor of the month until it isn't, so enjoy it.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. 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 inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

As the cost of college continues to soar in America, more and more states are offering tax breaks to families who are trying to save as much as they can for their kid's educational future.

The state of Massachusetts is deciding whether or not they will join the list this week.

The most commonly used vehicle for that purpose is the "qualified tuition plan," more commonly known as a 529 Plan. These plans are sponsored by states, state agencies or educational institutions and were originally authorized by Section 529 of the Internal Revenue Service Code. They are tax-free on a federal level and all but eight of the 42 states that have an income tax allow families and individuals to claim a tax deduction on college savings.

The idea for savers is that the state offers you two kinds of plans. A plan to prepay for your children's college educational costs at today's tuition rates at a certain college. In the other plan, rather than prepaying tuition, you are simply saving for future college costs by contributing to a plan that can be used at any school (not just those in your state) and for all qualified higher education expenses, including room and board.

Your plan contributions are invested by professional money managers in what are called age-based portfolios. Some plans also offer a selection of stocks and bonds as well. In the age-based funds, your contributions are tilted at first toward stock funds, which have more risk but also higher growth; and as your child approaches college age, the investments are skewed more toward bonds, which are normally more conservative and less risky. There are no taxes on dividends, interest or capital gains and withdrawals for college are tax free by the federal government and by most states that have an income tax.

These plans allow families to contribute as little as $25/month or as much as you want, limited only by the lifetime contribution limit set by each state. Normally this limit ranges from $100,000 on the low end to $270,000 on the other end of the spectrum.

One nice feature of these plans (for those who can afford it), is that individuals can fund a plan with up to $70,000 (or $140,000 with your spouse) in the first year without running afoul of the gift tax. Normally, any contributions you make on behalf of an individual that exceeds $14,000 annually ($28,000 for a couple) is subject to the gift tax. A 529 plan allows you to contribute basically five years' worth of gifts all at once without tax.

Each state decides what kind of tax break they will offer to their residents. They vary substantially. In Rhode Island, for example, the deduction ranges between $500 to $1,000 a year.

But in states like North Carolina you can deduct as much as $2,500-$5,000. New York and Connecticut offer as much as $10,000 to $20,000 in tax deductions. In Massachusetts, the Legislature is voting on a deduction of $1,000 per individual or $2,000 per couple.

Although some complain that the performance of these plans is not that competitive, they are still one of the only games in town for consumers to save for education and enjoy tax advantages while they do so.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. 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 inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

There was a time when soaring bond prices and correspondingly lower interest rates were a bad sign for the stock market and the economy. Thanks to worldwide central banks, that correlation no longer exists, or does it?

Current wisdom on Wall Street will tell you that interest rates are at historical lows because investors are hunting for yield. And it just so happens that the U.S. bond market still offers the highest return on your money. That's not hard to understand if you realize that most developed nations' treasury bonds are yielding far less than ours thanks to central bank manipulation.

Gold, on the other hand, continues to rise, racking up a 30 percent gain so far this year. Buyers of gold are usually worried that one of two things will occur — runaway inflation or fear of economic collapse. Wall Street will tell you that none of those historical reasons matter. Instead, this time around, the pundits say it is all about the declining value of global currencies.

As foreign countries' interest rates continue to decline, so do their currencies. Foreign and domestic investors, according to the headlines, are buying gold and our Treasury bonds because "there is nowhere else to go."

You can throw into that explanation the reason why so many investors are buying anything with a yield. One conservative client of mine called today wanting to know if she should buy more of two Vanguard dividend funds (both of which were trading at record highs). I suggested she wait a bit, but like so many retirees, she wanted and needed her money to be earning something, anything, even if it was less than a dollar a month. I remember the same kind of conversations in 2008.

Remember last month's non-farm payroll employment number? No? Well, let me remind you. Job growth came in at just 38,000 job gains. The market swooned. Today the job gains totaled 278,000 jobs. The market roared. The moral of this tale is individual data points mean absolutely nothing. All they do is give high-frequency traders the chance to buy your stocks cheap or sell them to you at the highs.

For those of you who follow my columns, you know that I am a bit of a contrarian. Here is my take on the markets, gold and interest rates. Something is wrong. The bond market is full of very smart people, who don't normally get swayed by emotions or short-term events. The fact that rates are this low says there is something out there lurking in the woods that should (but isn't) telling us to be careful.

Maybe we are underestimating Brexit. The markets are convinced that whatever happens, the central banks will bail us out. I hope so. But then there is the gold price. Even on days when gold should logically fall back (like today), it doesn't. Normally, when the dollar gains, gold declines. It isn't happening.

I write this because we should all be wary of what is happening right now in the markets.

That does not mean that markets won't reach and even surpass the historical highs. There is a good chance that the S&P 500 Index will climb to 2,160-2,170 in the short term. That's not much but the direction is still up. However, when it does, I may turn a bit more cautious going into the doldrums of summer. Stand by.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. 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 inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

It wasn't supposed to happen. After the British surprise vote to exit the European Union caught global investors leaning the wrong way last week, most traders expected a blood bath.

Instead, after a two-day 5 percent sell-off, markets have regained almost 90 percent of that loss in the last few days. So how could the "smart money" get it so wrong twice in one week?

Readers may recall that traders had at first bid the stock market higher in anticipation that the UK would remain in the EU. When that didn't happen, traders flipped the other way by selling and shorting. Most of the world markets were down by 5 percent or more between last Friday and Tuesday.

And then a funny thing happened. Markets worldwide started to rebound despite dire predictions that fallout from the Brexit vote would crater the economies of Europe, impact the U.S. economy, and generally create worldwide havoc. You can credit the central banks of the world for the turnaround in the markets, not that they did anything special. They simply stated that they stood ready to defend world markets, if necessary, from anything that might appear to be unorderly. That’s all that was required.

Traders took that reassurance to mean (like it has in the past) that even more money would be poured into financial assets in the near future. Global bonds rallied as interest rates plummeted. Commodities soared and so did stocks. Over the last three days there was a worldwide dash to buy back financial assets of all kinds. Thursday night, as expected, the Governor of the Bank of England Mark Carney said British investors could see further stimulus this summer.

That sent the UK stock market (the FTSE 100) to a 10-month high leaving British stocks up 2.8 percent since Brexit. The British pound, on the other hand, has plummeted 8.5 percent during that same time period, which will be good for UK exports in the months ahead.

As the fireworks subside and the smoke clears, we find ourselves just about where we were before the whole Brexit thing started. The S&P 500 Index and the Dow are up 3 percent for the year, NASDAQ, the weak sister, is making up its losses and the world looks wonderful as we head into a three-day weekend.

Of course, you may wonder why gold, a traditional safe-haven commodity, is climbing, even though Brexit fears appear to be a thing of the past. So too are U.S. Treasury bond prices, also a safe-haven in times of uncertainty. Does this mean, as many think, that the world is in a mess and investors are simply whistling past the graveyard?

Well, yes and no. Gold and other commodities are running because more and more investors are convinced that this entire central bank stimulus is making the world’s currencies less and less viable. There will come a day, so the bears say, when we will all pay a high price either in inflation or another financial crisis for all this central bank largesse.

Then, too, as more and more global bonds pay negative interest rates, thanks to these same central banks, investors are chasing the highest rates of returns they can find. U.S. Treasury bonds, after inflation, are returning you nothing in interest payments, but foreign investors are buying them hand over fist because they still offer more than their own bond markets do.

As rates fall, dividend yielding stocks, such as utility and telecom companies, which pay large dividends, are making new highs, despite the fact that these stocks are becoming more and more expensive.  What used to be safe and defensive has now become aggressive and risky.

As central banks continue to experiment with our financial futures in this brave new world, the stock market continues to climb until it doesn't. Where it all ends, no one knows. Have a happy Fourth of July.
 

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. 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 inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

Have you noticed that you are buying more products via the internet? Do you find yourself showroom shopping when you do make the trip to that department store or mall? It is happening to all of us and as it does, the traditional brick-and-mortar retailers are feeling the loss.

That doesn’t mean the demise of malls or department stores altogether, but over the next decade there will be fewer of them, especially in depressed areas of the country. The main culprit in this story is e-commerce or internet shopping. In the first quarter of this year, e-commerce accounted for $74.9 billion. That might sound like a lot of money but it still only accounts for 7 percent of overall consumer spending in this country.

Still, online shopping has taken market share every year since it began and is growing at roughly 8 percent per year. Its main attractions are convenience, lower prices and increasingly, free shipping. Clearly, without the overhead costs of physical storefronts, e-commerce companies such as Amazon can undercut traditional retailers at every turn. As more and more internet retailers develop huge logistics networks around the country, it will become both easier and cheaper to ship to their customers.

Wall Street analysts are quick to predict the demise of malls, shopping centers and department stores. They estimate that the brick-and-mortar crowd will need to close as many as 20 percent of their stores nationwide in the future. Weaker retailers (like Sears and J.C. Penny) will bear the brunt of shuttered shops.

Although traditional retailers are fighting back with their own e-commerce efforts, they find that when they close a storefront, what e-commerce traffic they had before the closing also declines. That generates a double whammy to their bottom lines. Despite that fact, most brick-and-mortar retailers are forging ahead in establishing their own e-commerce businesses.

In addition, they are establishing "loyalty programs," which reward the shopper by discounting merchandise. They are also issuing their own credit cards with various bonus schemes attached to how much you purchase on those cards. You may have also noticed that in certain stores there are more and more interactive or digital displays for comparison shopping on the spot. Other stores have developed entertainment for the kids while the parents shop as well as eateries and other efforts to enhance the experience of your shopping trip.

So don't play taps for traditional retailers just yet. There are also some things an online website just can't replicate. You can't, for example, touch and feel a product before buying it on the internet. That doesn’t stop someone like me from checking out the product and price in the store and then buying it on the internet anyway. That's called the "showroom effect." In my own case, however, if the store has a knowledgeable and professional staff, depending on the product, chances are that I will buy it in the store anyway.

Higher-end retail stores and malls will continue to thrive, in my opinion, as they meet the challenge of the internet. Just check out your neighborhood Apple emporium to get a taste of what the future brick-and-mortar stores will look and feel like. The experience will be worth the trip for many. And let’s not forget the social aspects of shopping, at least for those of the Baby Boomer generation. One elderly client I recently talked with admitted that he loves shopping and enjoys wandering the aisles checking out new and varied products.

I imagine that there are people of all ages that still "hang out at the mall" or just visit the brick-and-mortar storefronts for a day of shopping; but the younger you are, the less likely that you will want to spend time doing that.

In summary, there is still going to be room for both clicks and bricks kind of shopping in the future. At least until the likes of Amazon can somehow bring virtual reality shopping into our living rooms. Don't laugh; I wouldn't put it past them to be working on something like that right now.
 

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. 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 inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.