It was a good year for the stock market. The S&P 500 Index was up in excess of 12.5 percent with the other averages putting in a good performance as well. Naturally, investors are hoping for another year of stellar returns. Is that a reasonable expectation?

At the beginning of each year, people like me are expected to gaze into crystal balls or swirl the tea leaves at the bottom of a cup and pontificate on what the New Year will be like for investors. Unfortunately, I have an "Eight Ball" but no crystal ball and I drink coffee not tea. Honestly, I have as much chance of calling the market over the next 12 months as you do. However, there are some things I do know to be true.

Working from the top down, I expect the U.S. economy to continue to grow, while unemployment declines further. As jobs gain, I also expect wage growth will finally begin to accelerate. Coupled with the declining price of oil, that spells higher consumer spending than most anticipate. And since consumers drive over 67 percent of GDP growth, I’m looking for a better than expected first half in the United States.

As for Europe, I am in the minority when looking at the prospects among the members of the European Union. Although Europe is teetering on the edge of recession, the European Central Bank does not appear to have the political backing to launch a U.S.-style quantitative easing program. ECB head, Mario Draghi, continues to promise more, but delivers less and less.  Unless the ECB does implement a full QE, the prospects for the continent appear neutral to negative at best.

However, there are also risks ahead that could substantially change the playing field in Europe. The southern tier of European countries will hold elections this year. Populist movements, led by long-suffering voters in Greece, may repudiate the austerity programs that the northern, economically-stronger countries have demanded in exchange for bail-outs over the last few years. If that were to occur, all bets are off as far as investing in the European stock markets and the Euro currency as well. There are therefore too many risks that depend on politics and not economics for my liking.

Over in Asia, readers are aware that I like China. I am betting that the government there will continue easing monetary policy and stimulating an economy struggling with a transition from an export-led to a consumer-led economy. Japan, on the other hand, is in the middle of a full-fledged quantitative easing program that will hopefully pay positive economic dividends in 2015.  

That leaves me liking the three largest economies in the world: China, the United States and Japan. In addition, I believe the U.S. dollar will continue to rise in 2015 while the Japanese yen and the Euro will continue to fall. There are specific exchange-traded and mutual funds that allow investors to invest in these areas. Let me know if you are interested.

Readers must be aware that what happens economically may not translate into gains for stock markets. Remember, that most markets discount economic events six to nine months into the future. In which case, the U.S. stock market may have already discounted mush of the growth I see, especially in the first half of the year. On the other hand, most investors are so U.S.-centric that they either do not believe or ignore the prospects for China and Japan.

In my next column, I will get down to particles in what I see are the risks and rewards for the stock markets in the year ahead.

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.

This week a parliamentary vote to elect a president failed in Greece. National elections have now been called for late January. The outcome could trigger a revolt against an austerity program that has brought years of suffering and pain to the population.

Today, the unemployment rate is about 25 percent in Greece. Its citizens have been living with higher taxes, less goods and services, declining government spending, fewer pension benefits and longer work hours for many years. This unhappy saga was the result of a decadeslong binge of government spending, huge deficits and even higher debt. Detractors and creditors alike say the Greeks have only themselves to blame.

The global financial crisis triggered the end of the party. Since then, the Greek economy has suffered through three distinct recessions. As the economy slid, the viability of the country’s sovereign debt, which was held by the largest banks and financial companies throughout Europe, came into question. European leaders were terrified that the country would declare bankruptcy, renege on that debt and drag down the entire EU financial system with it.

A two-part debt bailout program was put together throughout 2010-2012. Various Eurozone countries, the European Central Bank and the International Monetary Fund (called the Troika) cobbled together a multi-billion dollar package that saved Greece (and the Euro) from economic disaster. In exchange, a severe austerity program, at the Troika's insistence, was forced on Greece and its citizens. Since then the prescribed medicine has improved the outlook for the economy and unemployment. In the meantime, Greek government debt has been quietly shifted from the hands of the banks, (which took losses of 53.5 percent of face value) to those of various governments. At the same time, private investors have been happy to grab up the forced sale of Greek government assets at distressed prices and the financial markets were rejoicing that Greece might actually return to a balanced budget by next year. So where is the fly in this ointment?

What may make bankers happy may not go down well with voters. Unfortunately, a country is made up of people who need to eat, to work, to aspire to the simple basics of life. Greek voters have seen precious few of those good things in life over the past seven years. Prime Minister Antonis Samaras, who has been implementing the austerity program, recently rejected demands by the Troika to raise taxes and cut incomes again in order to insure a balanced budget. As a result, additional bail-out money has been withheld.

Syriza, a left-wing coalition party of disgruntled Greeks, has been gaining ground and now leads the ruling Samaras' New Democracy Party in national polls. If they win in January's elections, they promise to throw out the austerity policies ordered by the Troika altogether. And Greece is not alone in rejecting the demands of outsiders. Populist movements in Spain and Italy are also attracting an increasing number of voters. They are demanding the end to similar measures in their own countries.

I am not surprised. My experiences during the debt crisis during the 1980s in Latin America convinced me that the Troika's austerity measures raised the risk of increasing social unrest in the Southern nations of Europe. Similar measures levied by the IMF in South America ushered in what is now called "the lost decade." Austerity there did little to improve economic conditions but fostered countless coups and social revolutions, untold poverty and misery.

Today, while the European Union is struggling to avoid falling back into recession, these populous uprisings are at best inconvenient and possibly the harbinger of something that could be infinitely worst. The ECB's plans in January to usher in a U.S.-style program of quantitative easing, I suspect, has been stopped in its tracks, until events in Greece are clarified. If things come undone in Greece, there is a real possibility that the Greeks could bolt the EU for good. And if they exit and survive, what would stop others from doing the same?

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.

Pessimists are on vacation this week. It doesn't matter that the indexes are overbought. That markets are hitting new highs without a pause. It's Christmas and Hanukkah week. The Big Guy has come to town.

Of course, investors have had a little help from the Fed and the latest revision of U.S. third quarter GDP. It appears that the economy grew faster than economists expected. Would you believe 5 percent? That's one barn burner of a number even for me, an uber bull on the economy. It is the fastest the economy has grown in 11 years. It follows on the tail of a 4.6 percent rate in the second quarter.

Consumer spending on health care and business investment in infrastructure and computers were largely responsible for that growth. And just think, we  have yet to benefit from the continuing drop in gas prices, which are now about $2.33 a gallon on average and predicted to drop another 11 cents or so over this weekend.

Many economists think that growth will slow this, the last quarter of 2014, not a difficult bet to make, but I still think growth will continue to surprise all of us. Consumption is gaining ground and the consumer is finally starting to hit his stride. I think fourth quarter growth will be better than anyone imagines. That's why the Fed is prepared to raise interest rates next year. None of us want the economy to overheat, sparking an uptick in inflation.

My strategy so far this year has been to listen to the Fed. By hiking rates a little next year (while China, Japan and Europe lower theirs), the Federal Reserve could be in a "sweet spot." Any slowing due to our rate increase could be offset by lower rates (and higher growth) elsewhere in the world. It is one reason why I like the Chinese and Japanese markets. I would throw Europe into that mix, but I am not convinced that Europe's central bank has the green light from all the EU members to launch a U.S.-style quantitative easing.

As for the stock markets, it is clear that the Santa Claus rally has begun early. It traditionally occurs during the week between Christmas and New Year's Day. Explanations vary for exactly why this occurs. Some say it is end-of-year bonus money finding its way into stocks. Others argue that tax-selling ends during that week, while others just believe the "feel good" behavior of most investors during this period is responsible.

Some investors could also be getting a jump on what is called the "January Effect." The month of January is normally an up month for stocks. Given the strong economic data, lower fuel costs and anticipation of strong consumer spending during this holiday season, investors are anticipating many companies will "surprise on the upside” in the upcoming earnings season.

Be that as it may, I want to wish everyone an extremely joyous holiday season. As for me, readers should be aware that on Jan. 5 I am getting a total right knee replacement. The doctors say I should be out of a commission for a few weeks. I will endeavor to disregard their advice and continue to write as best I can. Wish me luck.

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.

Information abounds on why and when you should contribute to a tax-deferred savings plan such as an Individual Retirement Account (IRA). Less is known about what happens in retirement when you have to take money out of these plans. For those who turned 70 1/2 years or older in 2014, pay attention, because it's distribution time.

The original idea behind tax-deferred savings was to provide Americans a tax break in order to encourage us to save towards retirement. Individuals could stash away money tax-free while they were working and then take it out again once they retired, when they were presumably earning less and at a lower tax rate. The government determined that once you reached 70 1/2 you have until April 1 of the next tax year to take your first distribution.  If you are older than that, you only have until the end of the year.

Officially, it's called a Required Minimum Distribution (RMD) and applies to all employee sponsored retirement plans. That includes profit-sharing plans, 401(K) plans, Self Employed Persons IRAs (SEPS), SARSEPS and SIMPLE IRAs, as well as contributory or traditional IRAs. The individual owner of each plan is responsible for computing the MRD and taking it from their accounts. There are stiff IRS penalties (of up to 50 percent of the total MRD) levied on those who fail to comply.

The RMD is calculated by taking the total amount of money and securities in each IRA, or other tax-deferred plan, as of Dec. 31 of the prior year and dividing it by a life expectancy factor that the Internal Revenue Service publishes in tables. The document, Publication 590, Individual Retirement Arrangements, can be easily accessed over the internet. As an example, let's say at the end of last year your IRA was worth $100,000. You are 72 years old. Looking up the life expectancy ratio in the IRS table for that age, which is 15.5, you divide your $100,000 by 15.5. Your RMD for this year would be $6,451.61 (100,000/15.5 = 6,451.61).

Remember that you must compute your RMD for every tax-deferred account you own. However, you can withdraw your entire distribution from just one account if you like. You can always withdraw more than the MRD from your accounts, but remember that whatever you withdraw is taxed at your tax bracket. If you make an error and withdraw too much in one year, it cannot be applied to the following year. And before you ask, no, you can't roll the RMD over into another tax-deferred savings account.

What happens if you forget or for some reason you cannot take your RMD in the year it is required? You might be able to avoid the 50 percent penalty if you can establish that the shortfall in distributions was the result of a reasonable error and that you have taken steps to remedy the situation. You must fill out Form 5329 and attach a letter of explanation asking the IRS that the penalty be waived.

For those who have an Inherited IRA, you too may have to take a RMD before the end of the year. The calculations and rules are somewhat different. Generally, if you have received the inheritance this year, as the beneficiary, you have the choice of taking one lump sum, taking the entire amount within five years or spreading out the distributions over the course of your life expectancy, starting no later than one year following the former owner's death. The IRS produces a table for use by beneficiaries in Publication 590 as well.

Many retirees have a hard time remembering to take their MRD each year. It is a good idea to ask your money manager or your accountant to handle the distribution or at least to remind you each year when the RMD is due. The last thing you want to do is give back to the IRS half your hard-earned savings each year.

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.

"I know nothing in the world that has as much power as a word."  — Emily Dickinson

The Fed ended the stock market decline this week by simply changing a sentence or two. In the space of a few hours, global markets soared, creating billions of dollars in gains for investors worldwide. Don't ever doubt the power of words.

Rumor had it that on Wednesday, the Fed was going to remove "considerable time" from its guidance on when interest rates would rise. Investors worried that thanks to the gathering strength of the economy that FOMC members were becoming hawkish and might raise rates sooner than expected. Sure enough, the Fed removed "considerable" from their statement on the time period itself, but added that the Fed would be "patient" before raising rates. That's all it took to ignite a truly breath-taking rally in stocks.

"But, but, what about Russia and the slide in oil," sputtered a California client who was sure that the declining oil price was going to be the end of us all.

"The oil price," as Janet Yellen, the Fed chairwoman, said Thursday," is a transitory event."

For longer-term investors (anyone with more than a week's time horizon in this market) the decline in oil will at some point be over. Prices will rise once again as the world economies grow and demand more energy to fuel that growth.  I wrote last week that in the meantime, lower oil prices are great for our economy and all other oil-consuming nations. Japan, if you are interested, stands out as the greatest beneficiary of declining oil prices.

Until Wednesday's Fed meeting however, traders were using the oil price as an excuse to sell off the equity markets. That short-term maneuver only works until it doesn't. The Fed meeting blew that trade right out of the water and traders, happy to be short stocks, suddenly found themselves up a certain creek without a paddle. Since then short-covering has been the name of the game. And by the way, the oil price is still sliding, despite a 500-plus point move in the Dow over the last two days.

As for all the consternation concerning Russia, investors who read last week's column "Is the Russian bear back in its cave?" were not surprised at the ruble's decline this week, nor the spike in Russian interest rates to 17 percent. I have also noticed that several publications are coming around to my view that the oil price decline could have been engineered by the U.S. and Saudi Arabia in order to bring Putin to his knees, at least economically.

Given the action of the markets over the past two days, I would guess that we have put in a bottom for 2014. Next week traditionally has been a good one for the markets and I don't see any evidence that this year will be different. The bears could try once again to establish a link between a declining oil price and the stock market, but usually stocks only discount a maneuver like that once.

For me, I would buy any further dips in the market. This one amounted to about 5.4 percent, which is within the range of most of the pull-backs we have experienced so far this year.

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.