Don Yacktman, his son, Stephen, and Jason Subotky, all portfolio managers of the Yacktman Fund and it’s sister the Yacktman Focus Fund, are not sitting on their duffs just because their funds are up over 51% and 48% respectively so far this year, according to Morningstar. And just because Mr. Yacktman is a finalist in a very small group of five fund managers being considered as “domestic fund manager of the decade”, doesn’t mean much to this veteran manager with 40 years experience.

What matters to Don and his crew are stocks; stocks trading at a good price, with a good business and boasting a management that has a long term track record in deploying cash. As value mangers, stocks like that are not easy to find, but when they do, they invest heavily. If the price drops, they buy even more.

“We don’t want to have a Noah’s Ark approach to investing,” Mr. Yacktman explained, “the more one diversifies, the more your returns are going to approximate the returns of the S&P.”

He argues that “having too many investments is a function of not having done your homework, because if one really has conviction, then you concentrate those investments.”

Matching the S&P is not what Yacktman is about either. Both funds hold over 50% or more of their assets in their top ten holdings. How has that worked for him?

“My joy comes from looking at our ten year numbers,” he said,” We actually experienced a lost decade where the S&P is down about 1%, including income, and our funds are up 11.7% compounded annually year after year. Over ten years, that is a huge spread.”

He concedes that “every once in a while” he gets one wrong, but insists that rarely do they lose money on the investment.

“It’s a point of pride for us.”

He credits his son, Stephen, who started working for him in 1993, for much of that performance. “I would stack him up next to the best business analysts in America.”

So what is his take on the future?

“I’m worried about the economy and about what is going on in Washington,” he admits. “The Fed is walking a tightrope: low rates now to stimulate the economy, but once it starts to recover, there will be a lot of imbedded inflation, which will force rates up. How long that will take, however, I have no idea.”

This could mean volatile markets will be with us for some time, maybe a long time, but that doesn’t bother Yacktman.

“I welcome more volatility,” he says, “Volatility is the friend of a value manager. In that kind of environment we thrive.”

So how does he plan to handle that volatility?

“The best protection against the worst case, a collapse in the economy, is not gold, it’s stocks like Coca Cola with pricing power and a consistent cash flow,” he argues, referring to his list of investments.

Coke, Pepsi, Microsoft, Viacom, Pfizer, Newscorp, P&G, Comcast and Conoco are among his top ten holdings, according to the fund’s latest quarterly report. Recently, he bought H&R Block as well, according to Yacktman.

“In the past, they ‘de-worsified’ into some businesses that didn’t make any sense, now they have returned to their core business, tax preparation, which generates double digit returns. And I don’t see the tax code getting any simpler over the long term.”

Based on the information in both fund’s prospectuses. The symbol for the Yacktman Fund is YACKX, with an expense ratio of 0.95% and the Yacktman Focused Fund, YAFFX, with a bit higher expense at 1.35%. Neither fund has a front nor back end load and neither has a 12b-1 fee (a kickback to your broker, planner or money manager).

Until recently most professionals simply lumped men and women together when it came to planning for retirement, savings or other investment goals. However, it is becoming increasingly apparent to me that the genders do differ in their investment needs and I want my women readers to understand that.

Let’s start with a few statistics. Women live longer than men by an average of 5.2 years. That doesn’t sound like much on the surface but that means women need to save more than men– an additional $250,000 or more over a lifetime assuming it takes $50,000/year to support yourself.

“So what”, you say, “I’m married (or getting married) and my husband will leave me and our kids well-provided for.”

That could happen, but the odds are only 50/50 it will since the divorce rate in America is fast approaching 50%. And, what happens to the children if you get divorced and have to go to work? Did you know that there are10 million single mothers in this country? And 87% of poverty-stricken elderly Americans are women.

And, let’s say you do stay married. Guess what, over 75% of married women are widowed at an average age of 56, and one in four of these women are broke within two months of being widowed.

And yet, despite all of the above, by next year women will be in a position to control 60% of the wealth in the United States, according to a study by Allianz Life Insurance Company of North America. Women generated $3.7 trillion in buying power last year and carry 76 million credit cards—8 million more than men.

So why is it that only 12% of women take responsibility for planning and investing their money? One reason for this may be rooted in a gender stereotype of investing which historically has been male-based. Industry and academic studies I have read indicate that boys are typically encouraged by their parents to save money. I know in my family that was true. The National Center for Women and Retirement Research, in a survey they conducted with Dreyfus Corporation found that sons were more likely to be encouraged to earn money at a much earlier age (13) versus daughters (16-18).

I had a paper route at 10 and was working part-time in a drug store at 13 while my sister had her first job at 18.

In addition, boys were twice as likely to be encouraged by their parents to save money. However, the study revealed that those women who were supported in academic and math achievement by their parents or teachers early in life were more confident with math during school and later tended to count on their own financial management abilities.

Conversely, women who were uncomfortable with high school math were prone to worry about finances in their adulthood and likely to be more conservative in their investment choices. The study concluded that as a result of this “cultural imprinting” many women approach investing with some insecurity.

Barbara, my wife, doesn’t fall into this category but she has had fear over her investments nonetheless. She explained that her father, an insurance executive, had handled her finances from her first IRA contribution at age 18 up until the time she married me at age 42.

“All I did was glance at my statement once in a while and file it away. When I got married I simply passed the management of my investments from him to you. Then I saw the light a few years ago and decided to take charge of my own future,” she said.

Now Barbara manages her own finances and retirement investments.

“It feels liberating, although there is a healthy fear mixed with excitement about being able to take control of my own life.”

In the months to come, I plan to address and explore the topic of women and investing at great length. My next column will address different strategies of investing for women depending upon your age. We will examine the dos and don’ts for those of you who are just starting out in the working world or with established careers. Baby Boomers and women over 50 will also be an area of special attention as will women who are already retired and struggling to make sense of their financial issues. I urge all readers who are interested in this subject to e-mail or call in your comments and questions to me at the address below. I would like nothing better than to start a forum of women on the topic of investment.

That’s right, thanks to an initiative by President Obama, announced earlier this month; you can contribute all those unused vacation days to your 401(k). So if you’re the type that just can’t stay away from the job, start lobbying your employer to amend your benefit plan.

It is remarkable how few people are aware of this change since it is a benefit that applies to many qualified plans including 401(k)s, Keogh and profit-sharing plans. It does not, however, apply to IRAs or SEP-IRAs. And while the new rules do not currently extend to 403(b) plans (available to educational institutions and some non-profit organizations), they may in the future, according to the Treasury.

The rules include “cash-outs” or taking cash in lieu of yearly vacations, sick leave and/or personal days, or when an employee leaves a job. As long as your employer pays for these days or at least part of them, you can contribute the cash equivalent to your retirement plan. But remember, the maximum contribution limits still apply which is $16,500 per person or $22,000 for those over 50 years old.

From the company’s point of view, employers that don’t currently pay workers for unused holidays might want to rethink that policy. First, this benefit will not increase your worker’s base pay. Second, companies can opt only to pay for this unused time if they put the money into the worker’s 401(k) or other qualified plan. By compensating workers this way, the employer encourages savings since the worker either agrees to save or loses the benefit. And while your company must offer the choice as an option to all their plan participants, you don’t have to offer it every year. A company can also prorate or limit the amount of vacation they would be willing to pay for. It is still a little murky on whether this money will qualify for an employer “match” so it would be best to check with your plan sponsor.

Although the vacations benefit occupied most of the news press, there were a few added initiatives included as well. Employers, for example, will be able to automatically enroll new employees in their retirement plan. This rule targets mainly younger workers who all too often, when given the choice, opt out of saving for their retirement to their long-term detriment. Now, by automatically enrolling workers, the onus is on the employee to discontinue the savings plan. Studies have shown that once enrolled, few employees will go to the effort of deliberately reversing enrollment.

The new rules will also allow taxpayers to use their income tax refund to purchase U.S. Savings Bonds. That’s good for the government but would probably not be the right investment to meet most savers’ long-term goals. The money would be better invested in an IRA, for example, unless special circumstances indicated otherwise. Finally, the government is going to try and tackle the complicated language used in explaining why it is dumb to cash in your 401 (K) between jobs.

The hope is that by explaining the downside in “laymen’s terms” more people will resist the temptation to spend their retirement savings. I will give the Feds an “A” for effort, but if they really wanted to make a change in people’s behavior they would stiffen the rules (and penalties) for withdrawing money from your 401(K) except in emergencies.

All-in-all the new rules should benefit savers on the margin. For us workaholics, it is a great deal. I wish I had a dollar for every hour of unused vacation time I have given up in my career. Don’t you?

The market action this week appeared ideal for further upside gains in the week ahead. Although sectors such as technology, commodities, industrials and financials led the markets higher, other sectors are beginning to participate while volume expands as more investors abandon the sidelines and take the equity plunge. I expect this to continue.

I wish I had a solid feel for how high the S&P 500 can carry us but I don’t. Instead, I’ve been taking this rally in 50 point increments. So right now my target is around 1120 versus 1167 today. Most stocks, sectors and indexes are what we call “overbought” and need to pull back but if and when that happens I believe it will simply provide additional opportunities for investors to get in.

This past week, I was in San Diego at a Charles Schwab conference, a once-a-year get together where money mangers such as ourselves meet, greet and listen to the words of some of the leading lights of our industry. As such, I listened to Larry Fink, Chairman and CEO of Blackrock and Mohamed El-Erian, CEO of PIMCO, warn that, although the world’s economies are safer now than they were last year, we still have a ways to go before we’re out of the woods.

They also ruminated on possible changes within the world’s currency markets where the U.S. dollar has reigned supreme as the world’s reserve currency since World War II. Both men saw the advent of a new system where several currencies might share that reserve status along with our dollar in the years to come.

Then there was the stimulating debate between Newt Gingrich, long-time member of the House and author of “Contract with America”, and Robert Reich, former U.S. Secretary of Labor, over the future course of American politics, the deficit and the arrival of China as the new leader of the economic landscape. In future columns, I plan to share many of the insights I gleaned from these captains of industry but in the meantime back to the markets.

This week, Ben Bernanke, Chairman of the Federal Reserve, also joined the chorus of economists who are predicting that the recession “was likely over.” We came to that conclusion back in July but when Ben speaks the markets listen. It gave stocks a boost on Tuesday as did the stream of increasingly positive news on the economy. I have written that economic recoveries are a process. Readers may have noticed that the mixed data of only a month or two ago is now becoming consistently positive. That process is pushing the markets higher. But not everyone is convinced that it is time to buy.

“I am cautiously pessimistic,” says Robert Tepper, President of AEB Corp., a broker-dealer based in Great Barrington, MA.

Rob and I go back to 1982. We first met whenI was straight out of grad school and working for Drexel Burnham, Lambert, during the days when the Junk Bond King Mike Milliken was just getting started there. Rob, a Dutchman, was in Manhattan analyzing American markets for a big Netherlands bank. We have traded ideas and stocks ever since.

“There’s a lot more trouble ahead for us here in the U.S. and I don’t know how we are going to counter it,” he said. “I have my doubts about whether we are really turning around here.”

Rob’s view is common among many financial investors overseas (and many here at home as well) but so far our markets have confounded those fears. My own view, as readers may recall, is that we are in a kind of “V” shaped bounce off the bottom made in March of this year. Clearly, we can pullback at anytime given our overbought conditions but those would be buying opportunnities. Once we reach a high enough level where investors deem the market is at a fair value, I believe we will mark time or “flat line” for a period of months but whether that clearing level is at S&P 1150 or 1200 or even higher remains to be seen.

Finally, I want to invite my readers to become listeners as well. Starting this Friday, September 25th, I am launching a half hour investment show on VOX radio. My wife, Barbara has graciously agreed to co-host the show. This gives me an opportunity to enlarge on the subject matter of my columns, something many readers have asked me to do over the past few years.

We will cover a wide range of topics including investing in world markets, local business trends and financial planning themes that might interest you. My guest will include various mutual fund and exchange traded fund managers from around the nation and overseas as well as local business owners and regional leaders that we hope will give you some added clarity in this complex and confusing world of ours. Below is a schedule of the shows and times.

@theMarket with Bill Schmick
Tune in every Friday, starting September 25th, on VOX Radio

Station  AM   Time
WNAW 1230 Am 8:35am
WSBS 860 AM 9:35am
WBEC 1420AM  11:05am also WSBS 94.1 FM @9:35 A.M.

That’s right; the big banks have found yet another way to pick your pocket. Over the last month the big credit card companies have been quietly raising interest rates and fees before new rules go into effect under the Credit Card Accountability, Responsibility and Disclosure Act (the Credit Card Act).

While the meat and potatoes of the Act won’t become law until February of next year, some of the provisions are scheduled to kick in on August 20 of this year. One such provision requires that credit card issuers give 45 days notice before hiking interest rates compared with 15 days notice that is currently required.

Specifically, the top ten credit card issuers are not only raising interest rates but they are lowering credit limits and raising minimum payment requirements at the same time. The banks had warned legislators back in May that if the Act passed they would be forced to react. They claimed that the new law would prevent them from managing “borrower’s risk” without raising rates and fees.

As a result of the recession, banks have been hit with a record number of credit card charge-offs, which are debts they are required to write off when borrower’s enter bankruptcy. These write-offs now number 10.44%, a post-war record. The second reason rates are rising stems from the scarcity of consumer credit overall. Since the credit crisis, financial institutions have become risk averse when it comes to lending us money whether for a car, house or a new television. They have lost so much money over the last few years that in order to lend they are demanding higher rates from us.

Of course it couldn’t happen at a worst time for the beleaguered consumer who has been using his credit card as a stop gap measure. Many of the unemployed, for example, are using their cards to buy food and basic staples, according to Eve Schatz, founder of the Free Legal Clinic of South Berkshire County based in Great Barrington. Others, she says, have been paying their monthly mortgage payment with plastic in an effort to stave off foreclosure.

“It’s really hard for people in that situation,” explained Schatz, “we’ve had many reports of people using credit cards in this way. Remember too, that once a credit card borrower defaults on a payment interest rates can automatically jump to 31-32%.”

The new law would prevent card companies from raising rates on existing balances unless the borrower was at least 60 days late. It would also require the original rates on existing balances to be restored if payments are received on time for six months. Unfortunately that won’t happen until next year while raising fees and rates now could be the tipping point for many consumers, possibly forcing them into bankruptcy.
In Washington, D.C. politicians are also miffed at what they see as at least a violation of the spirit of the new law. I called one of the region’s representatives about it.

“Just two months ago, we took a major step towards ensuring fairness and protecting consumers from exploitation by passing the bipartisan Credit Card Holders’ Bill of Rights,” said Scott Murphy, Columbia County’s newly-elected congressman, “As we work to stabilize our economy, we need to protect New York’s hard working families from unfair and predatory practices.”

And yet banks have been able to raise rates and fees on credit cards with impunity for years. They are not charitable organizations nor do they need to justify raising rates. If you don’t like it, it’s up to you to do something about it. Here are a few things you can do to protect yourself.

You can vote with your wallet and take your business elsewhere. There are thousands of credit card companies you can use besides the big ones with at least two right here in the Berkshires.
Greylock Federal Credit Union offers its members credit cards without the predatory pricing practices that consumers may encounter with the money center banks.

“Credit cards,” says Kent Hudson, chief of operations for the cooperative, are just another form of lending to us, like mortgages. We don’t do it to make a quick buck off our members.”

He gave one example where they differ from the big issuers.

“At the Cooperative, cash advances are charged at the same interest rate as purchases, unlike other card issuers that charge as high as 22% for the advance privilege.”

Of course in order to apply, you have to open a cooperative member account with them but the process is far from onerous.

“All you need do is fill out an application,” John Bissell, Senior Vice President of Marketing and Administration, assured me, “we can not only save you money but we treat you like a human being and not a number.”

For those readers in Columbia County, New York-based Kinderhook Bank also offers a credit card. The bank, like Greylock Federal, came out of the financial crisis stronger than before and rejects the practices of the bigger credit card issuers.

“We are not in that game,” explained Dori McDannold, Director of Marketing for the 155-year-old bank.
”We haven’t raised rates on our credit card in over 18 months. It’s just not our gig.”

You can also check out www.credit.com if you want to do a little comparison shopping for the best deals nationwide in credit cards. Another way to avoid getting hosed by credit card issuers is to maintain strong credit scores and reports. This flags your account as low risk enabling you to sidestep a lot of the card issuer’s tricks. Their main concern is protecting themselves against high risk borrowers.

Finally, be selective where and how you use your cards. Like Big Brother, credit card companies can see and track your purchases. They look for patterns such as using the card for mortgage payments, pawn shops, and other pattern-setting purchases and borrowing that might indicate financial trouble. Finally, keep your balances low and if possible pay off your debt as fast as you can.

Pick your poison—oil, unemployment, earnings, –the markets suffered through a week of anxiety as investors fretted that we just might revisit the bad old days of 2008. Although I don’t think that is in the cards, I wouldn’t rule out further downside.

Over the past few months I counseled readers to keep some cash on the sidelines, play the market rally defensively, and wait to see if the S&P 500 Index broke above the 940-950 level. We did kiss that level briefly and made several attempts over the last month or so to breach that barrier. Unfortunately, rather than breaking above that level, we now have to worry about breaking below 874 on the S&P.
Friday that level was tested all day. Many believe it will break. For those diviners of financial tea leaves like myself this would be a bad sign. It would mean there is a high probability that markets are going lower. How much lower? I’ll say 800-820 on the S&P. That would equate to roughly a 15% pullback from the highs. Let me hasten to add that this would not be a bad thing.

Readers may recall that throughout our meteoric rise from the March lows, I repeatedly bemoaned our lack of healthy corrections on the way up. We barely stopped to catch our breath through that process until we hit 940 on the S&P. A pull back would not only be healthy but would actually present a buying opportunity for readers who do have available cash to invest.

Fundamentally, I don’t see anything on the horizon that would imply a revisit of the March lows of 666. For sure, commodities, led by oil, took a tumble this week. Some say that decline was based on fears that economic demand for commodities was faltering but I suspect the real reason lay elsewhere. The CFTC (Commodities Futures Trading Corporation), which regulates commodity trading, floated a trial balloon this week that might restrict what they see as speculation in those markets. Given the rapid decline in the price of oil on the news (from over $70/BBL. to under $59/BBL. in less than a week), it suggests to me that there is a lot of “hot” money in oil and other commodities that suddenly cashed out. So I see this decline as a good thing. Lower commodity prices certainly would help, not hinder, an economic recovery and the consumer. Today, for example, while filling up on Route 7, outside of Pittsfield, I could already see the impact of oil’s decline at the pumps.

I’m sure that talk of the necessity for a second stimulus plan spooked investors as well. Traders were quick to jump to the conclusion that another plan would mean that the expected recovery was in trouble. I do not believe a second plan is in the cards (please see my column “What’s up with the Stimulus Plan” for more on this subject).

Second quarter earnings season has begun and so far there is no cause for alarm although investors are jittery. Tuesday, Alcoa, the aluminum producer, kicked off earnings season and came in better than expected although still down considerably from prior years. Next week should give us a better idea of how company management’s view the future prospects for the economy and their particular businesses. That could be the key to the market’s fortunes in the short-term.

The technology sector, in particular, has a lot riding on earnings. It is one of the few sectors that is expected to show an improvement over last quarter when earnings as a group were down 26%. The sector has been the star performer in this rally represented by the tech-heavy NASDAQ index which is up 14% this year. So there is little room for negative surprises.

All in all we are still range bond as we have been for weeks. The only difference is that now we are bumping along the bottom of the range instead of the top. Remember too that it is summertime and that usually means lighter volumes, slow days and not much action. I hope that continues since it is a welcome change from the huge percentage swings we experienced practically every day earlier in the year.

With the unemployment rate at 9.5% and an economy that continues to give mixed signals about a recovery, both economists and politicians are talking about the need for a second stimulus plan. I suggest it may be a good idea to first examine why the existing stimulus plan may not be working as well as it should.

Whether the Administration “misread” the economy, as Vice President Joe Biden claimed on television last weekend, or simply “we did not have enough data” as President Obama said in a subsequent statement is really not the issue. In my opinion, unemployment is the issue as it is both upfront and personal and a visible sign of recession to most of us. It scares the Be Jesus out of consumers and creates fearful and often times unhappy voters come election time.

Now one can argue that Americans simply lack patience. After all, very little of the stimulus money has been spent and it will take time before the $787 billion trickles through the economy. Another argument made by the Administration is that without the stimulus money unemployment would be far higher than it is, which I believe is a fair comment. Finally, we are reminded that the unemployment numbers are a lagging indicator of the economy and do not give an accurate picture of where we are heading.

It is true that the unemployment rate lags the economy, but new claims for unemployment benefits are a leading indicator. Those claims peaked in March at about 674,000 lost jobs. In times past new claims have fallen sharply from peak levels, but not this time. Since the peak (22 weeks ago) we are still seeing substantial new claims in the 600,000 area although the latest week came in at 565,000 claims, the best so far. That indicates that although things may be improving, they are doing so at a snail’s pace. In addition, two other leading indicators, temporary workers and hours worked, are both continuing to decline.

So why isn’t the stimulus having a bigger impact on job growth? Well, one reason could be the nature of the present job losses, which have inordinately impacted teenagers (22.7%), and adults who lack a high school diploma (14%) as compared to those with a college degree (4.6%) according to the Center for American Progress. That should be no surprise to readers. Wages and jobs for lesser skilled and uneducated labor in this country have been falling for years. Those jobs have been shipped overseas in increasing numbers to places like China and India.

“Sticky wages” is another explanation. Companies have found it easier to reduce output and cut employment rather than drop wages among their workforce. The minimum wage and labor contracts can also hamper wage reductions. This phenomenon makes the old relationship of economic recovery and wholesale job creation less correlated than in the past. It appears that American business during the last few recessionary periods has shed unskilled and uneducated laborers and substituted by hiring more educated and higher skilled workers coming out of each recession.

The original concept of President Obama’s Stimulus Plan, The American Recovery and Reinvestment Act of 2009, was intended to put Americans back to work through massive infrastructure projects which were “shovel ready”. This made sense on two levels. Our Bridges, highways, levees and schools are crumbling after over a century or more of disrepair. Infrastructure is also good for business growth which would spur economic recovery. It would also employ many in that segment of society which has been hit the hardest by this recession, the unskilled or less- educated worker. Unfortunately, by the time the House and Senate got through with the stimulus package, just $111 billion was left for infrastructure and science, $280 billion went to tax relief, another $144 billion went to state and local municipalities to fill budget gaps and the final $155 billion went to healthcare, energy and education.

All those areas were certainly worthy of assistance during this recession but if the purpose of the act was to alleviate unemployment and jump- start the economy then the money (what little of it that has been dispensed) has been misplaced, in my opinion. The President ran on a platform of healthcare, alternative energy and education among other issues. I’m sure he had the best of intentions by using some of the stimulus money to address those areas. The problem is those areas require long- term investment and payback will be measured over decades not months. The majority of the funds ($424 billion) were spent on tax relief which has little impact on job generation although it does go a long way in preventing further job losses especially at the state and local level.

Still some of the money has had an impact. All you have to do is drive down Route 8 in Cheshire or Route 22 in Columbia County to see our stimulus plan at work patching pavement and potholes. I just wish more of that money was out there generating jobs.

Is it too late to turn things around? Probably. I can’t imagine our elected politicians re-writing the act or even dispensing the funds at a more rapid pace. You see, much of the money is ear-marked to be spent in the administration’s third year in office. That’s not an unusual tactic in politics. It insures that running for re-election in the following year will be aided and abetted by the tailwinds of large-scale government spending.
So given that most Americans are already fairly cynical about both the stimulus program and the financial bail-outs the government has implemented thus far, it is hard for me to believe that they will go for another round of spending, especially with the trillions in debt we already owe. That leaves patience, something many voters may find hard to accept when economists forecast the unemployment rate could top 11% or more. Fortunately, elections are still a good ways off so there is still a window of opportunity to get it right. Let’s hope they do.

As a fairly recent owner of a dog, my wife and I have suddenly taken an interest in how much this pooch is costing us. Sure we love him to death but pets can be expensive and all indications are that those costs are just going to go higher in the future. So if you’re thinking of taking the plunge, learn from our experience.

Several months ago we bought a Labrador Retriever we called Titus from a private breeder in Williamstown for $700. We decided that the cost of a guaranteed, healthy, well-bred puppy was worth the money since we had heard too many stories of owners who had bought poorly-bred dogs at cheaper prices only to be saddled with thousands of dollars in medical bills later on. Bad hips, allergies, disposition and other maladies caused by in-breeding abound in dogs today, we discovered.

Now that’s not to say you can’t find a perfectly healthy pet at your local humane society. Quite the contrary, one of the benefits of adoption is you receive a clean bill of health with your adopted pet or if not you will know ahead of time what problems your pet has. But whether you pay $25 or $1,000 for your pet that is only the down payment for an investment that over the life of the animal will cost you many times more.

Food alone will cost you between $300-$500 yearly. When I was a kid our dogs got table scraps. No more. Titus’s diet is as strict as our own and this stuff is expensive. We shop at the cheapest outlet we can find for Purina dog chow. There is a bewildering array of more expensive gourmet brands available but it costs a great deal more and I’m not convinced it is that much better. I estimate it will still cost us closer to $500 for the year.

Next, add in regular maintenance visits to the vets (check-ups, inoculations, boosters, worming, heartworms, tick and flea treatments, etc.) without any emergencies equals another $500-$1,000/year. Given the advancements in veterinary care such as high-end geriatric screening and advanced vaccines and blood work, the cost of medical care has steadily increased. Fortunately, we’ve had only one emergency this year (Titus had an allergic reaction to some road kill he gobbled down before we could stop him) so add another $125 on top of that. However, a single veterinary problem can routinely cost an owner $2,000 or over.

Given our chocolate Lab already weighs in at over 50 pounds and his front paws reach to my wife’s shoulders, obedience training seemed a good idea especially in today’s litigious society. You may think it’s cute that your dog nipped your neighbor’s hand in a friendly greeting but you may change your mind when his lawyer contacts you. So far we’ve been to two, six-week puppy obedience classes and are starting an intermediate course next week for a total of $330.

“Many owners don’t spend any money on training their puppies and then show up a year or two later at my door,” explains Erica Nance, owner of Dogs of Hudson, a training, retail and playgroup emporium for pets in Hudson, N.Y., “by then it will cost them much more to unlearn bad habits then it would to have taken a course at the beginning.”

There is a wide range of obedience courses starting at the typical community college for $60 for a six week basic course to the high end of $185 for 7 week courses like those offered by Dogs of Hudson. Aside from these rather large expenses there are a host of other outlays ranging from equipment (bowls, leashes, collars, crates, fencing), grooming, boarding, and of course treats and toys. All in, depending upon the dog, its health, size and where you live expect an annual expense of $500 to $1500 a year without medical emergencies. If you expect your pet to live an average of 14 years we’re talking $7000 to $21,000 over its lifetime. Is it any wonder that the recession, high foreclosure and double digit unemployment rate has had an impact on our pets and their owners?

Whether we’re talking about cats, dogs or even horses the rate of abandonment has jumped nationwide as unemployed owners can no longer afford the cost of care required in America today.

“Up until this year the Berkshires were relatively untouched,” says John Perreault, Executive Director of the Berkshire Humane Society in Pittsfield, MA. ”but that has changed in the last six months. Our pet abandonment rate is up 10-12% and our food donations over 500%.”

Perreault says his agency is getting calls from desperate owners, some without shelter themselves, who can no longer afford to pay for veterinarian visits, medicine, food or even shelter for their animals “and we can’t afford to treat all these animals either,” he laments.

Even though the Humane Society has reduced fees for adoptions the adoption rate is down because fewer people can afford to take on an extra pet. The Society has now opened 18 food banks in the county and can barely keep pace with demand.

“A few months ago we had a cat food drive,” he said, “we ended up with 600 bags of cat food and it’s almost gone.”

A similar situation confronts all the animal shelters, societies and organizations in our region whether in Massachusetts, New York or Connecticut. So before you embark on the journey of pet ownership, I urge you to focus not just on the joys and love that a pet most assuredly will provide you and your family. Focus on the dollars and cents cost and whether or not you can afford it. That way you can be certain that your new pet won’t end up in the pound and become someone else’s problem.

How many times have I read or heard that the Social Security Trust Fund is in trouble? It’s like a skin rash that won’t go away. This week’s announcement that the fund will run out of money four years sooner than last year’s estimate, in 2037, is just more of the same. Sure, Americans want it fixed. We just don’t want to pay for it and why should we.

I’m sixty and a Baby Boomer. I’ve been working since I was 18 and have paid my social security payroll taxes every year since then so how come there is no money in the till now that I’m seven years from retirement? I took a look at how the social security system works. It explains some of it.

Both Social Security and Medicare are financed by virtually all the workers in America. The government takes 6.2 % of each of our paychecks to pay the benefits of current retirees. There is a yearly salary cap however. Right now the tax is limited to the first $106,800 you earn (if you make that much). If you make more you pay no payroll taxes on that extra amount.

The truth is that current workers like you and I have been overpaying into Social Security for years since there have been far more workers than retirees for many decades. The surplus payments we have made are used to buy special U.S. treasury bonds that are part of the Social Security trust Fund. But that era is coming to an end.

As Baby Boomers like me retire, the number of workers for each retiree will fall until eventually, the payroll taxes our kids pay won’t cover all of my promised retirement benefits. That is now expected to happen by 2016, at about the same time I reach retirement age. So no sweat, you say, all the trust fund has to do is redeem some of those special bonds right? Well, sure, but there’s a catch. The government doesn’t have that money.

Unlike a business that is required to have the cash available to pay off its bonds coming due, the government (read generations of our elected officials) has been dipping into that particular till for years. They have been spending our surplus payroll taxes (in addition to our income taxes) on their pet projects while promising to repay us “someday”. So whether it was The Great Society, the Vietnam War, NASA, $2,000 toilet seats or the bridge to nowhere, the simple answer is our government spent it so they will have to borrow more money or tax us to get it. By 2037, the fund will have used up all its bonds. At that point, Social Security will only be able to pay 78% of the benefits they promised us.

Past presidents have promised to fix the problem but found that the forces aligned against them were just too great to overcome. George Bush tried in 2005 when he suggested that workers set aside a portion of their payroll tax and establish a separate retirement account which would be self-managed. It was greeted with accusations of “political pandering”, “fear mongering to the Baby Boomer Generation” and declared irresponsible. In hindsight, given last year’s market free fall and subsequent decimation of American retirement accounts in general, it was probably a good thing that George’s plan ended up in defeat.

So what does President Obama have in store for us? Clearly, he means to address the issue and soon. I expect that within the next year or so I will be asked to pay more and receive less. You see, Social Security is not nearly as difficult to fix financially as Medicare (which I will address in a future column). If, for example, the payroll tax was increased by 2-3% and/or the present yearly income cap was expanded so that those who earned more paid more than the gap could be closed quickly. During his campaign, President Obama opposed reducing Social Security benefits but I suspect that option will certainly be debated in the House and Senate.

I guess what burns me most is that after forty- two year of paying into my governmental “insurance ‘program’, I should have saved more than enough to retire without any problems. Instead, thanks to the mismanagement, misappropriation and outright squandering of my contributions, I’m going to be asked to pay all over again. And all that today’s politicians will claim is that I should be blaming the politicians of past generations. Go figure.

Bear market corrections usually end with a bottom. If you have been in the markets long enough you know what to expect. It is a grand finale of sorts where panic roars through the trading floor, grown men cry and fortunes are won or lost in seconds. Volume explodes, stocks markets make new lows, and you feel like you are free falling off the Grand Canyon without a bungee cord. We are not there yet.

Over the last year dozens of newsletters, media personalities and market professionals have had to wipe the egg from their faces after attempting to call such a bottom, present company included. There was one, two-week period last year where I was sure it was over and said so before reversing course with a printed apology. Fortunately, even the most arrogant of us are learning to keep our mouth shut.

This week the market declined substantially with the Dow making eleven year lows while the NASDAQ and S&P500 flirted with levels last seen in November. As I wrote last week, I expect the S&P to follow the Dow down and decline to 680 which would be a new market low for that index. We are well on the way to that level. I’m not calling that a market bottom, just a target or way stop that may or may not prove to be the end of our journey. And as usual the financial sector is leading the way downward.

Stock prices in that sector are in a tailspin. I have déjà vu whenever I look at Citibank below $2.00/share or Bank of America under $3.00 where they were for a brief time on Friday. The stocks of Fannie Mae and Freddie Mac, the mortgage giants, acted in a similar fashion last year just before they were effectively nationalized by the Federal government. It appears that the markets are going to force the government’s hand by driving these bank stock prices to a level where the only alternatives are bankruptcy or nationalization.

In the meantime, there appear to be few safe havens in this market. I neglected last week to mention gold and silver, these two commodities are twin towers of light in an otherwise darkening landscape in my opinion and belong in your portfolio. Both metals have had quite a run however and are due for a pullback so wait until a sell-off before buying. The dollar oddly enough is also making gains as are U.S. Treasury bonds. Although I think both the dollar and Treasuries will have problems in the future, in the short term, especially in market downturns like this week, they function as ‘flight to safety’ investments.

What bothers me most is the orderly way that markets are declining. Volume this week was not extraordinary (although Friday’s did pick up somewhat), there was no fear or loathing, the new lows kept piling up and although the markets are deeply oversold, they continue to decline. After trading within two points of last year’s low, the S&P bounced back somewhat. Traders are already looking for an oversold bounce next week, which if it occurs, they will short once again. It’s almost business as usual on Wall Street which definitely says to me we go lower.