Coats to protect your pets from severe weather, or orange safety vests during hunting season are fairly common but today, the fashion industry has embraced the concept and taken pet clothing to new heights.

 

Canine couture is a big business. The pet clothing business market is growing by 4.5-5 percent per year, and by 2030 should exceed $9.15 billion annually, according to Brainy Insights, a research firm that tracks sales in the pet industry. The U.S. accounts for 30 percent of global sales and hit almost $2 billion in 2022.

 

I divide the pet clothing market into two segments: clothes that are practical, and clothes that are indulgent. Practical items have a surprisingly long history. Ancient Greek armies, for example, would fasten leather boots on their horses to protect them from the snow. Greyhound and whippet owners have long-used coats to keep their pets warm in cold weather. Police horses and dogs are often dressed in fluorescent coverings.

 

Certain kinds of animals benefit from wearing coats, boots, and rain gear. Dogs that are old, thin, tiny, elderly, have thin coats, or are ill often need protection from severe temperatures, rain, and snow. Therapy jackets and those that are used for medical conditions such as hip dysplasia, and canine arthritis or to protect an incision from the aftermath of surgery are useful protective clothing. 

 

Our dog, Atreyu (a poodle), has an insulated coat, which came in handy this winter in sub-zero temperatures. He also wears an orange vest during hunting seasons. Boots, on the other hand, while useful, (due to the heavy use of salt in our area during snow season), are a no-go. As it is, this dog is such a drama queen that he balks and runs when he sees his coat come out of the closet.

 

Canine couture, however, is an entirely different world. It is here that I believe that our tendency to anthropomorphize our pets has run rampant. Anthropomorphism is the tendency to map human traits and emotions onto animals. For many, assigning human characteristics to our pets helps them to make sense of the world around them.

 

For others seeing our pets as human-like fulfills a social need. They believe that dressing dogs, cats, and other animals in trendy, high-fashion clothing allows the pet and the owner to stand out and gain social status among certain groups. In short, you are dressing your pet for success. Doing so today, however, may cost you more than dressing yourself.

 

A deluge of high-end fashion houses has jumped into the pet clothing business with specially designed pet collections. Dior, Prada, Versace, and Fendi, among many others, offer everything from designer purses to matching people/pet outfits for all occasions.

 

Their success has spawned all sorts of marketing efforts. Tika, an Italian greyhound model, has over a million Instagram followers and has been a big celebrity at New York City's Fashion Week. Boobie Billie, an Italian sighthound/Chihuahua, another Instagram favorite, has launched a luxury clothing line. Dozens of lesser-known pet celebrities are modeling for various brands and establishing followings on social media. Dog agencies are springing up and signing these four-legged stars to contracts. The rates vary per dog, but these new influencers have millions of followers.

 

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 may not be the 1970s when interest rates offered investors double-digit returns, but 5 percent on a six-month U.S. Treasury bill isn't bad.

 

We last saw that kind of return in 2007. To be sure, the rate still comes up short when compared to the 6.4 percent annual rate of inflation right now. Yet inflation is declining and has fallen for seven months in a row.

 

The dilemma investors faced last year was that there simply was no haven to park their cash. The stock market was treacherous and falling. The Federal Reserve Bank was hiking interest rates on an almost monthly basis to combat inflation, and most bond prices were falling almost as much as equities.

 

This year the stock market rallied for the first month and a half, but many investors have now turned less bullish. Over the last week or so, the bond market has begun to price in at least three more interest rate hikes in the first half of the year. The strength of the economy and a slight uptick in some of the most recent inflation readings has been behind the increase in bond yields across the spectrum. The rush for cash and cash alternatives has suddenly taken a front seat in preferred investments.  

 

At this point, investors can earn 5 percent or more on the six-month Treasury Bill, which is one of the safest debt securities in the world. Certificates of Deposits (CDs) are yielding 4.8 percent for the same three-month maturity. Buyers need to go out to one-year CDs and beyond to capture an equivalent 5 percent yield or above.

 

At this point, the three-month Treasury bill at 5.07 percent has a yield that is now competitive with far riskier assets like stocks as measured by the S&P 500 Index. Readers need to be aware that these "riskless" securities are not quite what they seem. Treasuries, while backed by the full faith and credit of the U.S. government, do have interest rate risk. If interest rates climb higher, the price of all notes, bills, and bonds declines. The longer dated the bonds are, the deeper the decline when rates rise.

 

However, there may be another, upcoming glitch in the risk profile of the six-month bill's perceived safety. Last week I wrote a column on the present political debate on raising the debt ceiling. The Congressional Budget Office is now projecting that the U.S. government will run out of cash to pay its bills sometime between July and September. The six-month U.S. note will mature sometime in that time, which puts it squarely in the crosshairs of this partisan battle. It is conceivable that some investors, wary that there may be a government default, are steering clear of the note, while others are willing to take the risk.

 

However, I noticed that both the one-year (5.08 percent) and 18-month (5.01) U.S. Treasury notes are now trading above 5 percent. That indicates to me that the present rise in yields is more about higher interest rates tethered to the Fed's intent to keep interest rates higher for longer than it is about fears of a debt crisis.

 

The question is whether yields on other government debt will follow suit.  Recently, weekly bill auctions have drawn strong demand. However, auctions this week indicated that bond investors, fearing future rate increases, were demanding higher yields. The U.S. Treasury sold $60 billion of three-month bills, $48 billion of six-month bills, and $34 billion of one-year paper as well as auctions of two-, five-, and seven-year notes.

 

For those who are waiting out the volatility in the stock market in cash, short-term U.S. Treasuries could be an interesting purchase right now.

 

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 a few months, be prepared for politicians of both parties to turn up the heat as the June debt ceiling deadline approaches. Normally, the stock market responds with increased volatility. The question is should investors pay attention at all?

 

That may sound like heresy given that we are talking about the full faith and credit of the United States of America. If the government defaults on its debt, the global repercussions of such an event would be momentous. Currencies would plummet, stocks would crash, and interest rates would soar. Armageddon would reign, or at least that's what is predicted to happen, but no one knows for sure because the U.S. has never defaulted on its fiscal responsibilities.

 

"But there could always be a first time," you might say. And that is exactly why politicians can hold the nation hostage to advance their political careers while making outlandish demands that they know will never become law.

 

Legislation establishing a debt ceiling was passed in 1939. Since then, Congress has revamped the limit 100 times since World War II. Back then, Congress was more heavily involved in federal borrowing, as opposed to today, where the focus is solely on spending. For those who are unaware, the debt limit is not in the Constitution, nor in any of its 27 amendments. It is at best, a statute (law) that gives politicians a chance to disrupt, lie, evade, and create headaches for the country whenever they please.

 

The biggest joke of all is that the debt limit reflects money that has already been spent and is now owed to others. Has it ever stopped Congress from spending more money? No, at most it just redistributes spending into different areas such as more in defense, less in social programs, or vice versa for a short time. Given that serves no policy purpose whatsoever, why have one?

 

Because it is an immense bargaining chip for some.

 

Fear of default gives leverage to those who have none. All that is necessary is to threaten while stretching out any compromise agreement to the last possible moment. By doing so, they are counting on the financial markets to become unwilling negotiators on their behalf. Those leading the opposition to raise the debt limit receive enormous coverage by the media.

 

Demands for programs and legislation, no matter how outlandish, that have nothing to do with the debt limit give politicians a national forum and unearned legitimacy. Debt limits become the saving grace for the economy and the nation for a few short months. However, when they finally do vote to raise the limit, few hear about it.

 

Unfortunately, all this rhetoric seeps into the national consciousness. In a recent poll by the Economist, only 38 percent of U.S. adult citizens (and only 20 percent of Republicans) think Congress should raise the debt ceiling.  Given those numbers, it is no wonder that agreeing to pay the debts we already owe has become an extremely partisan affair.

 

As for those on the other side of the debate, in this case, the Biden administration, there are a variety of avenues available to them if they choose to take them. The U.S. Treasury, for example, could stop making some payments (Social Security and Congressional salaries for example), while coupon and principal payments continue to be paid in full out of tax revenues.

 

A more drastic direction would be to keep the debt ceiling in place, but the Treasury borrows more money anyway arguing that failing to do so would be unconstitutional under the 14th Amendment. They could also mint a trillion-dollar platinum coin that could be used to fund new spending, including debt service on the national debt. The problem with pursuing any of the above would be that it would almost guarantee that the Republicans in Congress would have no incentive to vote to raise the debt ceiling.

 

Democrats have learned some hard lessons by giving in to debt limit demands in the past. Back in 2011, during a clash between former President Obama and the Republican Tea Party, the administration spent months negotiating without success.

 

At the eleventh hour, an agreement was fashioned by Mitch McConnell and some Democrats to avoid a debt default. But the credit markets, spooked by the close call and partisan behavior, downgraded the country's credit ranking for the first time, which resulted in raising the costs of our future borrowings.

 

The facts are that those who threaten default are part of the partisan political process, but some person, group, or party that causes a debt default will go down in flames along with the economy and nation. Politicians know this, or if they don't there are still enough level heads in Washington to get the deal done.

 

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.

One of the silver linings of the pandemic was an explosion of startups throughout the nation. After a 40-year decline, entrepreneurship rose from the ashes, and contrary to expectations continues to thrive today. What is behind this trend?

 

In 2020, the early days of COVID-19, as unemployment skyrocketed and businesses shut down by the thousands, 4.3 million new business applications were filed, according to the U.S. Census Bureau. That was one million more than in 2019.

 

The following year (2021), 1.8 million companies were formed, which was a record. Last year, the numbers dropped a little to 1.7 million applications, but still up 28 percent from the pre-pandemic days. Funny enough, the worst event of the last 100 years, COVID-19, was the trigger for this economic renaissance.

 

The pandemic was an unparalleled global catastrophe. As such, some of those pandemic start-ups were born out of necessity. The U.S. unemployment rate hit double digits. More than 30,000 businesses shut down. Waves of unemployed, with no prospect of finding another job in the lockdowns that swept the nation, started a business simply to survive.

 

At the same time, a surge in migration out of the infected urban centers to more rural, less populous areas, resulted in a surge in business startups. At the same time, the trend in work-from-home exploded.

 

Professional and technical services were two of the top sectors where entrepreneurs staked a claim, accounting for 23 percent of the net increase in all startups, according to the Economic Innovation Group (EIG), a Washington-based think tank. Another area that blossomed was support services for the elderly and disabled, a demographic group that was devastated by the virus. That area experienced a 13 percent growth rate.

 

One of the reasons that galvanized entrepreneurs of every age to try their hand at a new business was a decline in the barriers to entry. It turned out that starting a new business on the internet, for example, was much easier than they were back in the Financial Crisis of 2008. Entrepreneurial neophytes planning business startups now have widely available broadband, even in many rural areas. There is also a much greater digital fluency in all things internet, and a mature and dynamic e-commerce marketplace. Those strengths make website creation, marketing, and online sales far easier to establish.

 

I should also give the government its due in its response to the economic fallout created by COVID-19. The Pandemic relief checks, for example, went a long way in providing the seed money for many of these new ventures. Of course, we now blame the government for spending too much during this period and igniting inflation, yet no one I know has offered to refund those checks to the federal government.

 

The question is whether the pandemic fallout has somehow reinvigorated the creative juices of all these modern-day Horatio Algers, or is this just a flash in the pan?

 

The relative steadiness in new business applications since 2020 indicates that this trend may be here to stay. When one looks at all sectors, rather than just those that were booming during the pandemic years, we find start-ups rising across most sectors. Only four out of 19 sectors, according to the Census Bureau, saw 2022 applications below pre-pandemic levels.

 

Across the nation, the southern United States experiencing the largest boom in startups, while the Northeast has the smallest. It is also encouraging that entrepreneurs were able to shake off the impact of a spike in inflation and threats of recession throughout last year. What we don't know is how many of these new businesses are simply part-time, side jobs earning a few bucks to supplement existing salaries.

 

As a guess, a survey conducted by Venture Forward, a multi-year research program from GoDaddy to quantify entrepreneurial activity, indicated that roughly 39 percent of micro business founders said their enterprise was a supplemental source of income. However, 67 percent of them would like to see their start-up become their full-time job.

 

The key to a flourishing future economy is greater economic dynamism. Those entrepreneurs that can flourish by providing new jobs, greater innovation, and productivity advancements could drive this nation's long-term growth. We could be on the verge of a much-needed shot in the arm from this group. I am betting on their success, how about you?

 

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 2022, Congress increased the amount an individual can contribute to an Individual Retirement Account (IRA) as well as a 401(k), 403(b), and most 457 plans. If you have not already, it is time to increase your contributions for 2023 to take advantage of this opportunity.

 

If you missed it, the Internal Revenue Service (IRS) announced in October 2022 the largest-ever annual increase in 401(k) contributions. It boosted the maximum contribution limit by $2,000 to $22,500 for 2023. For those over 50 years old, an additional "catch-up" contribution will rise by $1,000 to $7,500. As for the contribution limits for an individual IRA, an additional $50 in contributions to $6,500 from $6,000 last year was implemented. The catch-up amount, however, remains the same at $1,000.

 

The IRS also raises the income threshold for which tax deductions for IRA contributions will be phased out. For those who are not aware, at a certain level of income, you can still contribute to a tax-deferred account, but you don't get a tax deduction when you do. The new income bar will be set at $73,000 to $83,000 for individuals and single heads of households, and for married couples filing jointly, the new threshold will be $109,000 to $129,999 for married couples.

 

These are generous benefits, and they are occurring at just the right time. Unfortunately, many savers may be hesitant to take advantage of this gift. There is a tendency among those saving for retirement to reduce or postpone contributions to their retirement accounts when the equity markets are declining, or inflation is rising. Allianz Life, a Minneapolis-based insurance company, found in a recent survey that 54 percent of Americans reduced or stop contributions to their retirement savings.

 

On the surface, with trillions of dollars wiped out of retirement savings, I can understand this hesitation. Human nature is such that the first reaction in a down market to putting more money in the markets is not to. With the average retirement account down 20 percent in 2022, I often hear "Why put good money after bad in a market like this?"

 

The answer is that the best time to invest is when the markets are going down, not up. Furthermore, at least for those saving through a 401(k) or similar plan, contributions are made monthly and usually on autopilot. That means as the markets decline each month you contribute your cost basis on a particular fund or stock is going down — not up. That means you are getting a better price month after month on your investments and buying more shares at the same time.

 

"Yes," you may say, "but the total amount in my retirement plan is going down." That's true, but for how long?

 

Remember, this is money that you are saving for retirement. It is not money you will be spending next week or next year. Consider this: Since 1928, the benchmark S&P 500 Index has suffered through 21 bear markets, or, on average, one every 4.5 years. The typical bear market lasted 388 days or a little over one year. That means that every five years or so you get the opportunity to buy the market at a great price.

 

This year, you are getting a double whammy: the savvy saver is not only getting to buy at a great price, but Uncle Sam is allowing you even more tax-deductible money to spend in the form of increased contributions to your retirement plans across the board.

 

 If the bears are correct, sometime in this first quarter, the stock market may plummet once again. If it does, I suspect markets will rebound and likely go higher from there. Still not convinced then consider it this way; let's say you are in the market for a top-of-the-line, new car. Suddenly, your local dealership announces a sale on the auto you want at a 30 percent discount off the list price and offers you a credit on top of that, plus a guarantee that the car will appreciate over the next 15 years. would you buy it?

 

Hopefully, you have already increased your contributions for 2023. If you haven't, I suggest you call your back office and arrange to increase your monthly contributions right now. In the years to come, you will thank me for it. 

 

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.