Mid-term elections are less than two weeks away. Issues, for the most part, have fallen by the wayside as pure politics runs amuck. No wonder voter turnout is traditionally so poor in this midterm madness.

Republicans are running against an unpopular president and are expected to sweep both houses of Congress. All they have to do is keep the focus on President Obama while mobilizing their die-hard base.  That strategy appears to be highly effective so why worry about mundane things like issues? After all, if voters don't care, why should they?

Both parties' campaigns are now dictated by whatever voters are worrying about on a day-by-day basis.  The fear of an ebola pandemic plays well, while the ISIS terrorists are always good for a sound bite or two. The minimum wage, the Affordable Care Act, the economy; these are all given short shrift while the most pressing challenge of this generation barely receives a mention. I'm talking about income inequality.

Despite gaining over 2 million new jobs in the last year or two, income inequality has widened in the United States and is, in fact, accelerating. Our country now finishes dead last in income inequality when compared to all developed nations. The U.S. actually trails Mexico, Chile and Turkey (all emerging markets) when it comes to an equitable distribution of wealth among our citizens.

As this disgraceful and dangerous wealth gap widens, shouldn't we be looking to our lawmakers in these mid-term elections to address this problem? Unfortunately, that's like asking the fox to guard the henhouse.

The average wealth of a congressman is now above $750,000. In the Senate, it's even higher, at $2.6 million. That wealth is distributed among both parties. John Kerry, for example is worth $231 million, while Diane Feinstein, claims $69 million in assets and Frank Lautenberg is worth $85 million to name a few. Clearly our representatives are part of the problem.

The failure to address income inequality in this country is not confined to one or the other parties. Democrats are just as anxious to ignore the problem as are Republicans. It may surprise you that income inequality is actually higher in Democratic-controlled districts than in Republican ones. In the 35 districts with the highest income inequality in the country, Democrats represent 32 of those districts.

These 35 districts share some similar traits. They contain small, enormously wealthy elites surrounded by impoverished neighbors. Most are situated within urban areas such as Washington, Boston, New York, Chicago and Philadelphia. Here are some examples.

Income inequality in New York's 10th District, represented by Jerrold Nadler, a Democrat, is about equal to Haiti. Nancy Pelosi's California District 12 ranks on par with Bolivia. John Boehner's Ohio District has the same income inequality as Nigeria and Paul Ryan's Minnesota District 6 is as bad as Burundi's.

It gets worse. Our elected representatives have actually exacerbated the income inequality problem over the last 20 years. Two decades of federal spending and expanding regulation by both parties have spawned a growing elite class of federal contractors, lobbyists and lawyers in the D.C. area. Over $100 billion has been funneled into this area since 1989. Is it any wonder that 10 of the capital's surrounding counties in Virginia and Maryland place in the top 20 counties nationwide in household income? Manassas Park City, Craig County, and Bath County, all in Virginia, placed within the top 10 counties nationwide that ranked among the highest in income inequality in the nation.

At this point, about 15 cents of every dollar of the federal procurement budget stays in the DC area. That amounted to $80 billion out of $536 billion in 2010. Think of the monumental transfer of wealth that is occurring from 98 percent of taxpayers to fewer than 2 percent of the U.S. population. Those in the top 5 percent of income in our nation's hometown make 54 times the money that the bottom 20 percent receives.

All of this is being conveniently ignored by those campaigning for your vote. So when you pull that lever in November, remember these are the people you will be voting for - regardless of political party.

As the rich get richer, your share in the nation's wealth and income is falling lower and lower. Do not be swayed by the fear mongers. Ask yourself if voting for these clowns is in your best self-interest and that of America's generations to come. I sincerely doubt it.

If you want to keep up abreast of my most up-to-date articles follow me @afewdollarsmore or on Facebook at billsafewdollarsmore.

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's behavior in the stock market went according to plan. We broke through several technical supports, reached a fairly critical level, and then bounced back. However, October isn't over and the probability that we experience more downside remains high. Here's my take on the week ahead.

Readers who read my column last week were prepared for the S&P 500 Index to break its 200-day moving average at 1,905. I expected prices to overshoot on the downside and they did The S&P 500 Index dropped further to an intraday low of 1,820 on Tuesday. That was thirty points lower than my best guess. But before the end of the day on Wednesday, the markets rebounded to close above my 1,850 target level. On Thursday, sellers tried again, but could only push the average down to 1,835 before rebounding once again. The Index ended the day at just about the same level of 1,862.

I advised readers last week that I expect the S&P 500 to continue this consolidation process, moving slightly above and then below that 200 DMA in the days ahead. So far things are going according to plan

So, what does that say about the markets and this correction?  It says to me that this decline, although much-needed, is not about anything fundamental. Sure, Europe is struggling and Ebola cases are springing up in the United States but those are simply weak excuses for a market that simply needed a correction and now we have it.

Lesson 1: do not panic.
Lesson 2: do not sell.
Lesson 3: buy when the blood is running in the streets, and we had some of that on Wednesday and Thursday. How can I tell?

One of my best indications came when I tried to log on to one of my brokerage accounts on Wednesday morning.  The market opened down 40 points on the S&P and over 300 points on the Dow. I could not get quotes on the site and the online trading response was extremely sluggish. That usually happens when the number of people trying to sell stocks overwhelms the system. That told me there was panic in the air, which is a great time to buy stocks — so I did. The same thing happened the next day as the markets hit lows for the day once again. So I went shopping. Remember, I'm the kind of guy that buys straw hats in the winter and snow blowers in the summer.

I also look for 90 percent down days when investors overwhelmingly rush for the exits. We had those too this week. I recognize that most investors find it difficult to buy when the markets are falling. It is a scary thing to do, but it almost always pays off.

As the headline says, "so far so good" but now what?

I suspect we need to re-test the lows just to be sure they will hold. That means we could get back down to the 1,820 level or maybe 1,800, since it is a round number and prices seem to gravitate to those marker buoys. Could we break 1,800? Of course we could, but only by 20 or 30 points and even then it would probably happen on an intraday basis like the lows of this week.

Friday's rebound was a good sign. But the fact that investors were hoping the Fed will come to our rescue simply because we had a down week in the market is ludicrous. Listen people, you can't continue to make gains in equities if you don't have pull backs like this. The S&P 500 has only lost almost 10 percent from the highs before rebounding on Friday. That's the way things are supposed to happen. We haven't had a 10 percent pullback since 2011.  It is great news if you care about the stock market in the months and years to come. This kind of sell-off clears the decks for further gains ahead.

There are some real values out there. Airline stocks have been pummeled because of the Ebola crisis. Panicked investors have dumped them en masse assuming that the entire industry will be shut down and no one will fly ever again. Poppycock! Oil companies have been trounced because bears are saying that global demand for oil is so weak and the dollar so strong that 30% declines in those stocks are justified. Are you kidding me?

There is no way I can guarantee you that my scenario will turn out as I expect. Remember, this is an art, not a science, but so far, so good. Take my advice, this too shall pass and there are good things right around the corner. Next week I'll discuss some of those good things and what I expect after mid-term elections, so stay tuned.  

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.

Over the last four months, Americans have received an early Christmas present. The price of oil has dropped precipitously, benefiting both corporations as well as the consumer. But that could be a two-edged sword for this nation.

Brent crude, the global oil benchmark in the futures market, has declined 23 percent since its June price of $115 per barrel. Today it is trading below $83 per barrel, providing an enormous windfall in cost savings for all of us. The retail price of gasoline has dropped 15 percent during the same time period to a national average of $3.17 a gallon. Every one-cent decline in gas prices equals about a $1 billion drop in energy spending, according to economists. So we have all just received what amounts to a tax cut that has gone directly into our pockets.     

That's the good news. The bad news is that many of the same economists believe the reason prices have fallen so quickly is the deteriorating state of the global economy. Slower growth equals less demand for oil, all things being equal. As such we find ourselves with an oversupply of oil.

Now usually, OPEC, which controls the lion's share of oil production worldwide, would begin to throttle down the amount of oil produced per day. There would be meetings and all the disparate members of this energy cartel would decide what cut backs are necessary in order to prop up energy prices. This time around no such agreement is contemplated.

Instead, Saudi Arabia, the energy colossus, has been quietly telling the oil market that they would be quite comfortable with even lower prices for an extended period of time. Behind the scenes, they have said that $80 a barrel for a year or two would be just fine with them even though that level of pricing would hurt all OPEC members, and some more than others. Venezuela, for example, is in such bad shape that oil at that level would probably force the country into bankruptcy.

So what, you might ask, is the reason for this change in strategy? OPEC recognizes that a new competitor is emerging in the form of United States energy independence. Readers may be surprised to learn that the U.S. has emerged as the No. 1 oil producer in the world, even as it maintains the same spot in energy consumption. We can thank new technology, such as oil and gas fracking, for the turnabout in our energy prospects.

OPEC competitors would like to slow the rate of production here at home, thereby reducing our competitive edge. The best way to do that is by lowering prices. As prices drop certain sources of energy such as fracking and tar sands become less economical in comparison. Industry experts figure that a drop to $75 a barrel in oil would begin to curtail drillers and producers from developing additional fracking wells. The fracking industry has become much more cost sensitive since the early days of 2003. There has been so much capital sunk into the cost of expanding this output that any price change in oil impacts the bottom line much faster.

Investors are well aware of that risk, which explains why many energy stocks have dropped 25-30 percent over the last month. By keeping prices low for a year or two, OPEC could effectively gut much of the growth in energy production here at home. I suspect that is their game plan going forward.

There are other negative implications if OPEC succeeds in their plan. The U.S. oil and gas sector has added over 400,000 jobs since 2003. Some estimate that another 1 million to 2 million jobs have been created in construction, manufacturing and transportation to support our drive for energy independence. As a result, although the cost savings in energy consumption might contribute a 0.03 percent gain to GDP growth, the hit to Americas as a result of a decline in the energy sector could be far greater.     

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.

No, is the short answer to that headline. The S&P 500 Index needs to test 1,905 or thereabouts before all is said and done. You might ask why.

The talking heads will tell you weak data in Europe is at fault. Others will blame the recent strength in the dollar. Then there is the uncertainty of the mid-term elections now less than a month away. The problem with all of the above is that investors have known all about these issues for months and months. So why react now?

Readers will recall that since the springtime I have been waiting for the markets to test what is called the 200 Day Moving Average (DMA), which is a popular technical indicator that investors use to analyze price trends. The 200 DMA is simply a security's average closing price over the last 200 days. You would think that the higher the 200 DMA climbs the more bullish it is for stocks, but actually the reverse is true

The higher the ratio climbs the more optimistic traders have become and, for a contrarian, like me, that flashes a danger signal. Historically, the S&P 500 Index has re-tested (sold down) to its 200 DMA at least once every two years. We were way overdue for a retest. This, among other indicators (mid-term election years since 1950 have experienced at least an 8 percent correction), has made me cautious as well.

Over the last few weeks I have been warning investors to expect a pick up in volatility and boy have we experienced that over the last five days. The Dow Jones Industrial Average has experienced a swing of over 2,000 points up and down through the week. Wednesday and Thursday marked the largest one-day gain and worst one day decline in 17 years. This kind of volatility, after five months of practically none, is an emotional shock to most of us.

Back in 2010-2011, we had far longer periods of high volatility and experienced much deeper pullbacks. Human beings, however, tend to have short memories so October has been especially painful for most. Your first reaction is to sell and stop the pain before it gets any worse. That's a normal feeling, but feelings have no business in investment, so what should you do?

Nothing, if you are fully invested and most people are at this point; hang in there. The 200 DMA is just a few points away. Sometimes the indexes will bounce off that line and shoot straight up, but that is rare. Usually, stocks will overshoot to the downside, and in that case, we might see 1,875 or so and then spend a week meandering up and then down around the 200 DM level.

The point is that this is a technical sell-off based on overbought markets that have been this way for some time. We are down about 5 percent from the highs. Fundamentally, the economy is in good shape. Stocks are not overvalued. We simply need to pull back and catch our breath. If you have any money on the sidelines I would advise you to start putting it to work as the market declines from here. Not all at once, because no one can pick the bottom. Industrials, mega cap stocks, technology, health care, financials are just some areas that come to mind. This would also be a good time to swap out of your more defensive positions in favor of more aggressive equity holdings.

Above all, stop worrying about the volatility. It is the cost of doing business in the equity market.

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.

The stock markets are at record highs. Interest rates are at record lows. The unemployment rate is below 6 percent and yet, most Americans are unhappy. They are not feeling the recovery. Why?

The answer to that question is complicated. But let's start with the financial crisis. Like the Crash of 1929, the events of 2008-2009 were also the result of a credit crisis. The country's financial system was on the brink of a meltdown. In the 1930s, a lot of banks went under.  That was averted this time by spending massive amounts of money to shore up our financial institutions. However, the damage was done.

We lost trust. For the first time in three generations, Americans had doubts as to the credit-worthiness of its most venerable institutions. The ensuing recession was unlike any that America has experienced since the Great Depression. When one loses trust, both lender and borrower pull back. It takes a long, long time before that trust is rebuilt.  That process is still ongoing.

Readers may recall that it was only in 1939-1940, a full 10 years after the "Crash," before this country was able to climb out of its longest downturn in memory. Some say that if it had not been for World War II it would have been even longer. I don't believe that it will take us quite that long to return to a normal economy but from a historical perspective, the present state of our economy is understandable.

Back in August, The New York Times crunched some numbers to determine what the economy would look like coming out of a normal recession, compared to what is happening today. They found that five economic sectors out of 11 were lagging badly in this recovery. They were housing, state and local government spending, durable goods consumption, business equipment investment and federal spending. Let's examine how credit impacts these sectors.

Housing is no surprise. After all, it was at the forefront of the subprime loans financial crisis. There is a shortfall of over $239 billion in missing output in this sector. We know the reasons for this shortfall — tighter lending standards and housing prices that are still underwater from their peak. That means less jobs, fewer wage increases, a less mobile workforce since few are willing to sell their homes at a loss to relocate for a job. Bottom line: banks have a trust issue with borrowers; less borrowing, less housing, simple.

Less state and local government spending represents a $180 billion gap versus what they should be spending. The reason for the decline in spending is the absence of tax revenues and burgeoning debt burden most local governments incurred as a result of the recession. States have cut back drastically and for a good reason. They need to borrow just to make ends meet and who will be willing to lend if they are spending like a drunken sailor?  

The $178 billion gap in durable goods consumption is all about big-ticket items, many of which you need to borrow in order to purchase. Things like automobiles, furniture, appliances, etc. If you are already underwater on your house, who can afford to borrow and who will lend to you?

Corporations also have a trust issue. They are spending $120 billion less on plants and equipment than they should be because they lack faith in the future demand for their goods. Most of them can borrow all they want but they don't or if they do it is not for plants and equipment. It is for things they can control like stock buybacks or mergers and acquisitions.

That leaves the Federal government, which is spending $118 billion less than it would in a normal recovery. Because we were forced to spend so much in propping up our financial sectors, the nation's debt skyrocketed to a level that created a crisis of confidence among our politicians. The fear that the nation might not be able to service, let alone pay off these historical high levels of debt resulted in a compromise that in effect reduced spending for the next decade.

To make matters worse, none of the other six sectors that make up the major contributors to gross domestic product have been able to take up the slack. So where does that leave us? When one gets into financial difficulty, it takes a long time to repair a credit rating. It takes years, and that is exactly what has happened between borrowers and lenders over the last five years. There is no way to hurry the process. In the meantime, it is what it is.

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.