“You played it for her, you can play it for me…If she can stand to listen to it, I can. Play it.”–Humphrey Bogart.

Casablanca

The Same Old Song?

Last year the bull market rally began to run out of steam on May 2^nd. Over the next two months, the Dow fell 1,000 points to the 11,900 level. There was then a rally that took the averages back up to a little over 6% before giving up the ghost once more on July 26^th . It continued to decline until the beginning of October, falling all together about 20%.

It wasn’t until the Federal Reserve Bank came to the rescue once again with a new round of monetary easing that the markets finally bottomed and began to rise on October 4th, 2011. Over the next six months, the S&P 500 Index rallied 30% until its peak this year on April 2^nd. It waited until May 1^st before beginning its present pullback.

For Wall Street traders it was also an exhausting time in the markets where swings of several percentage points a day became common. Much of the decline was blamed on Europe. The U.S. economic data didn’t help either. Week after week, one disappointing data point followed another raising the specter of a double dip recession. Does any of this sound familiar?

Today the circumstances in both Europe and the U.S. are eerily similar to what happened last spring. So far in May the stock market is playing the same swan song as last year.

“History doesn’t repeat itself, but it sure does rhyme,” said Mark Twain well over a century ago. And that saying certainly applies to the stock market. The question is what, if anything, is different about this time around?

The short answer is, not much. Italy and Greece were the focal points of the Euro debt crisis last year. Since then there has been a massive bank bailout and an austerity pact but nothing much has been done to turn the European Unions’ struggling economies around. The economic picture has actually deteriorated further, thanks to the nonsensical austerity plan engineered by Angel Merkel of Germany.

Spain is the main problem right now. As their economy nose dives, their debt explodes, while their banks wobble under mountains of bad real estate loans; the twelfth largest economy in the world is fast approaching a life support situation. Greece, after last week’s election upset, is also revisiting its off-again, on-again membership in the EU.

Once again, investors are keying off the Spanish/Greece/Italian sovereign debt yields to decide whether to buy or sell on a daily basis. So far it’s been mostly selling. Remember my “She said, He said” columns of last summer? Investors were driven crazy by conflicting and often contradictory statements out of Europe’s capitals. Today the names have changed– Hollande instead of Sarkozy in France, Draghi instead of Trichet at the ECB, and in Greece, Papandreou for someone yet to be announced– but the conflicting statements remain the same.

Over here we have the same issues over the economy that we had last year. And in the wings, hovers the Fed. That’s right, if our market, Europe’s markets, the economy and employment begin to drop dramatically, the Fed will once again come to the rescue. That, my dear reader, is why this year is rhyming with last year and the year before that.

As long as governments continue to tinker with the world’s stock markets, as they have done ever since the 2008 financial crisis, we will have these same issues over and over again. I have written about our stop and start economy often. As long as the Fed is the sole locomotive of growth, we can expect the economy and the stock markets to continue to boom and bust.

This has truly become the Great Recession. Readers of this column were advised at the end of March, beginning of April, to take profits and prepare for this sell-off. I am writing off this second quarter. By the end of it, I suspect the averages could be where they were at the beginning of the year, until then, stay defensive and I’ll keep you posted.

Readers may recall that as a result of the last go-around over the debt ceiling, investors worried that a technical default by the U.S. would create massive negative fallout among the holders of our national debt. “They” (so the story goes) would dump our debt overnight creating a huge spike in interest rates, etc. etc.

So who are “they”?

Let’s start with foreign holders. China is often mentioned as a critical investor of U.S. government debt. The horror story most mentioned is that China could use their position as a weapon. They could sell their holdings in our bonds sparking a global financial disaster. As the largest foreign holder of our debt, I do not discount the importance of China’s holdings. But as an investor in U.S. Treasuries, China still ranks as a minor player with less than $1 trillion in holdings ($895.6 billion).

China has actually reduced its level of U.S. government debt by $33.4 billion over the last two years. The bond market barely budged as a result. In fact, U.S. interest rates have declined during that period.

For all the talk about China, few know that Japan, considered one of our most reliable economic and political partners, holds only slightly less of our debt at $877.2 billion. The United Kingdom (another ally) is next followed by a global group of oil exporters who use our debt holdings as part of their oil export business. In addition, Brazil, the Caribbean Banking Centers, Hong Kong and Canada hold portions of our debt. None of the above would likely dump our bonds and might even buy more if asked.

It may surprise you to know that over a third of our government debt is held by the United States. The Fed and other intergovernmental holders own $5.351 trillion while state and local governments account for another $511.8 billion (roughly the same amount as Great Britain).

About 60% of our debt is in the hands of the private sector. Insurance companies and depository institutions (banks) hold just over half a $1 trillion while a diverse group of investors including individuals, brokers/dealers, personal trusts, estates, savings bond and corporate institutions, among others, hold $1.458 trillion. Mutual funds own $637.7 billion and pension funds another $706 billion or so.

The point is that contrary to popular opinion the majority of our debt is held in friendly hands. Sure some holders’ of our debt might sell if our credit rating is reduced again or there is some kind of technical default on U.S. sovereign debt, but those would be marginal sellers. Certainly the U.S. federal, state ad local governments would keep what they owned and possibly buy more.

Most of the private sector holders would also keep their investments. It would be difficult for pension funds, insurance companies and others to find a comparable alternative for their government debt holdings. Despite the possible downgrades, U.S. debt is still the safest investment around.

Finally, any credit rating change to our debt would not occur in a vacuum. Investors will always need to find a suitable replacement and in a world where Europe is teetering on the edge, where emerging economies are slowing and currencies go up and down like yo-yos. Our sovereign debt, while not stellar, still appears to be more appealing than the alternatives.

You gotta earn those gains

We are now down over 7% from the highs on the S&P 500 Index and if the technicians are right there is more downside to come. How much? Let’s say 1,225-1,250 on the S&P with corresponding percentage declines in the other indexes. If they are, right we are talking about no more than 25-50 points from the bottom.

“I’ve had enough already,” moaned a client, who wanted to go to cash and sit out the rest of the decline.

He admitted that this decline, for some reason, has reminded him of the declines he experienced back in 2008-2009. He lost a lot of money with a broker back then and fears he may lose the rest. That is understandable and I’m sure that there are a number of readers who might feel the same way.

I urged him not to give in to his emotions, and reminded him that for all the down days we have experienced, the market’s pullback to date is well within the realm of a normal decline. The situation today is far better today than when we were mired in the financial crisis. The economy is growing, interest rates are at record lows and employers are hiring, instead of laying off 200-300,000 workers a month.

“But why does it feel so relentlessly negative?”

“Duration,” I explained.

This is the sixth straight week of stock market losses, which qualifies as the longest losing streak we’ve experienced since the fall of 2002.  The seemingly never-ending series of down days makes one imagine that there will never be an end to these declines. It also doesn’t help that this particular client is addicted to watching the financial networks most of the day and checking his portfolio constantly.

I fully expect that before it is over all the stock averages will be in negative territory for the year. There will also be more days of downside ahead but hopefully not too many more.  I’m convinced that we are very close to a bottom, both in price declines as well as the number of down days.

The facts are that we are in our third pullback this year. Each time the markets recovered and moved to an even higher level with a series of higher lows and higher highs. That is the reverse of what happened during 2008-2009. Until that changes, I’m hanging tough. 

My suggestion is to stop stressing over the markets. Remember folks, these are paper losses until you sell. In this market, losses have turned into gains in a blink of the eye. If you sell now and the market turns higher in another day or two, what will you do?

Will you chase the market only to discover that it was a false rally? Will you sell and then try to pick the bottom? What if you are wrong? 

Selling to stop the pain is not the answer. Instead, step back a bit, take a deep breath and have some faith that the markets are still in an uptrend. The second half of this year will be better than the first. Remember that last year, all the gains in the market were made in the last four months of the year and they were substantial. That could happen again. Since you have already endured most of the pain, why not wait around for the gains?

Barbara and Titus relaxing after work

We happen to be in the money management business. That is, we invest people’s money, give them financial advice and more often than not go skiing, kayaking and generally enjoy the great outdoors with our clients who live close by. The skies are clear, hours short and best of all—no travelling.

Ours is a good life that melds the best of both worlds. We are still in touch with the world of Wall Street and, in my wife’s case, event planning, but with a job that requires less than a ten minute commute to work, not counting the occasional delay when deer or wild turkeys go jay walking.

So why did we give up those six-figure jobs, the swank apartment in Manhattan, the shows, restaurants and endless parties? Well for one thing, we were too busy working to enjoy any of those attributes. We were in the air more often than on the ground. We needed an appointment book just to meet for a quick dinner and our life style threatened to sink our marriage.

Don’t believe the stories you hear about how exciting business travel can be. For us, touring the capitals of the world amounted to an endless series of hotel rooms, and numerous client dinners barely remembered. For us, “taking in the sights” amounted to the cab drive between the airport and the city.

After decades of this kind of life, we both desired a change. We elected to put our relationship above corporate cultures and moved to the country with our eyes wide open.

Make no mistake; it took a lot of effort, patience and determination to arrive at our destination. There were times when we were both scared to death that we wouldn’t make it. Making a living in an area which is primarily agricultural is not easy. The sad truth is that there is little or no opportunity for gainful employment unless you wanted to clean houses, landscape, milk cows or open a curio shop for visiting weekenders from Boston or Manhattan.

Both Barbara and I took huge pay cuts, were forced to drive hours each day on dangerous mountain roads simply to stay employed. At first, the hours we worked coupled with our commutes were so long that although we lived on a picture perfect country road teeming with wildlife and country atmosphere, most of the time we were just too tired to enjoy it.

Slowly we learned that there were opportunities that we had at first ignored or simply failed to understand. Back in the day, I was a pretty good journalist before going back to get my MBA in finance. I began writing financial columns for a local newspaper. Barbara, who had a background in photography and event planning, worked in consulting but also worked as a photographer in her spare time (usually weekends).

Money management seemed a natural fit with over 28 years experience on Wall Street. But where would I find the clients in this gentle paradise?

The Berkshires, I discovered, has for years been a bucolic haven for the rich and famous. They have spent their weekends and summers away from the heat of the city, listening to concerts at Tanglewood, practicing yoga at Kripala or getting buff at Canyon Ranch. Now that this elite Boomer generation is beginning to retire, they are settling down in their weekend mansions year round (or at least until the snows set in).

The wealthy like their money managers close by. With a little effort and my financial background (28 years on Wall Street) I soon found several situations that appealed to me. It took a job or two before I settled in at my present firm, Berkshire Money Management www.berkshiremm.com,, a family-owned firm that has a great track record and even better people. It also just happened to need an office manager/event planner/marketer. Who better to fulfill that roll then my wife, who, it so happened was in between jobs.

One thing led to another and before we knew it we were working together and having a ton of fun doing it. We worked on bringing new clients to the firm and found that we had a knack for it. My once weekly column on finance has blossomed and is now featured in several regional publications. At the firm’s request, we started an investment radio show.

As partners in business as well as in life, we’ve grown much closer. Sure we still have arguments, get angry and sometimes yell, but working together makes harboring resentments for longer than a few hours very difficult.

We acquired a dog, our first, a wonderful chocolate Labrador Retriever named Titus. Now we go for hikes with him before and after work, snow shoe and cross country ski and still have time for dinner with friends. We can even make it home in time for “Grey’s Anatomy”. In the summer we kayak and Titus swims along side, insisting upon being at least a nose ahead of our boats.

Global events, however, are still an integral part of our daily life. Whether protecting our clients from the impact of oil at $100/bbl. or interpreting the latest round of unemployment numbers, we remain deeply involved with the winds of change. It is a wonderful life, full of passion, excitement and natural beauty. And it is a life that we can now share together.

Money, after all, is the number one argument among American couples today. Those who are recently divorced point to marital finances as the main reason for their breakup. However, money can also provide a wonderful life, a lot less marital stress and a guaranteed retirement if you know how to handle it. To do it right, however, both couples must agree to approach finances as they would any other business, although I admit that’s easier said than done.

“For us, it’s simply a division of labor,” protested one client whose husband takes care of the investments and the lawn while she takes care of the bills and the kitchen.

Many couples say the same thing. They divide household chores based on where their relative strengths lie, but who cooks and who weed whacks is not the same when it comes to household finances and investment.

It took my wife and I several years to grow comfortable in talking about finances and even today we still find our discussions stressful at times. That’s largely because money, itself, can be stressful, especially when you don’t have enough to achieve all your goals.

Sometimes one spouse is simply trying to protect the other from what they consider unneeded stress or simply think it’s easier to handle it themselves rather than to take the time and effort to educate a spouse with no financial education or background.

But excluding one’s spouse from financial decision-making often adds to the stress and creates a permanent atmosphere of unease within the family. In the case of one spouse’s death or disability, how will the excluded spouse cope with both grief and the new responsibility of running the family’s finances?

I’ve been on the receiving end of that predicament more times than I like to count as an investment advisor.  By waiting until your death before handing over your finances, you are opening him or her to unnecessary emotional anguish as well as creating an atmosphere where your spouse is susceptible to the worst kind of advice.

Whether you are just starting out or have been married 25 years, whether you are up to your ears in debt or living on easy street, it’s never too late to make a change. Here’s how to begin.

Obviously, like any issue in a relationship, the first step is to talk about it. But don’t make the mistake of having a marathon financial talkathon where you both try and vent your feelings and solve the problem in a day. That won’t work. Instead, agree to discuss finances every week at a convenient time for both, but keep it short. Start with the bills, because everyone has them. The bill payer must begin by explaining in detail what bills are coming in and how much income is going out to pay them. That’s gong to be uncomfortable because for most of us coming out of a recession, there’s more money flowing out than in. Understand that, face up to it and begin budgeting together.

If neither of you have established spending and/or savings goals now is the time to start. Household budgeting is the cornerstone of savings and investing. Sometimes one spouse leans toward spending too much while the other wants to save every dime. Remember to compromise; you’ve got to give a little to get a little, especially in the crucial establishment of financial goals and objectives. Too many couples fail in this crucial area by insisting on an all-or-nothing approach to finance. Like anything in marriage, that attitude only leads to failure.

Over the course of several weeks or months, both spouses should become knowledgeable (I didn’t say comfortable) in how much they are spending from  the monthly cable TV service to the rent or mortgage payment to the amount the kid’s school clothes cost every year. Sure, one spouse may be designated the bill payer, but that does not excuse the bread winner, for example, from knowing how and what bills to pay.

Some of us are blessed with a head for finance while others are not. It is your obligation to educate your spouse in the basics and do so in baby steps if necessary. The learning spouse has the obligation to be a willing and motivated student and to ask questions at every opportunity. Over time, a couple will begin to work in tandem to handle the family’s finances, but that doesn’t mean that all your finances must be conducted jointly.

It is a good idea that each spouse has their own individual bank account as well as their own credit cards. That way each surviving spouse can maintain their own credit history which will be important in the event of death or divorce. Finally, don’t take no for an answer. If your spouse is unwilling to work with you, call in a third party and get financial counseling. The counselor may be able to provide an objective point of view and helpful suggestions to help you both overcome serious money issues now and in the future. Don’t let money come between you and the one you love. Your relationship is worth it.

The Oliver Stone directed sequel to the 1987 film “Wall Street” starring Michael Douglas, Shia LaBeouf and Josh Brolin, opens Friday in the aftermath of two years of financial crisis that almost sank the global financial structure and put 9.9% of Americans on the bread line. Will this new film heighten or lessen Main Street’s disenchantment with Wall Street? I’m betting the latter.

The story opens with the nefarious Gekko, older and supposedly chastened, getting out of jail to regain his place within the financial power structure. I can’t help but think how the victims of the convicted Ponzi schemer, Bernie Madof, or the half a dozen other crooks that were indicted over the last two years will feel about that. Will we wonder if someday we’ll see the same justice system release convicted culprits of this decade’s financial crimes?

As it is, most investors (up to 90%) already believe the stock market is unfair to the little guy. The majority of us are only now realizing that stock brokers, financial advisers and insurance agents are not held to a Fiduciary standard under current SEC rules. As I’ve written before, a Fiduciary is someone who puts your interest above their own and their company.

So many retail investors have already given up on the stock market and its unscrupulous professionals that brokerage houses have begun to report disappointing earnings due to the anemic volume and lack of participation by individual investors. Analysts have been cutting their earnings estimates for the money center brokers as well.

It is my opinion that most Americans have still not forgiven Wall Street for getting us into this mess and with so many Americans out of work, why should they? As I’ve written before, the new financial regulations bill passed a few months ago was a farce and did very little to protect you and I from the financial services industry. Many of the excesses that got us into this mess are still very much alive on Wall Street today.

So when you pay $12 or more for a ticket to see the movie, be prepared for some in-your-face celebration of money and power. The characters in the movie will be flaunting the latest in power clothes and accoutrements, according to a story in Thursday’s Wall Street Journal.

I was working at a global brokerage house in Manhattan when Mr. Gekko first descended upon our consciousness. I admit to emulating his ‘look’ even though by the end of the show he was carted off to jail in ignominy. I found myself, along with just about everyone else I knew who was making the big money on The Street back then, squandering quite a bit of money dressing in contrast-collar shirts, expensive cuff links and two-tone suspenders. The new movie will feature custom-made $2-$3,000 suits, handmade shoes and watches that are so expensive that I can’t pronounce their brand names. How is that going to play with you and I who continue to cut corners, make do and forego new clothes for our kids this school season?

The point is that this new “power style” was copied from what the people on Wall Street are wearing today. That’s a far cry from most of us who get along in our LL Bean khaki dress pants and ‘wrinkle-free’ blue oxford, button-down, dress shirts. Now don’t get me wrong, I like dressing down and would never want to go back to those days of pinstriped three-piece suits, watch chain and wing tips. But just seeing those actors glorifying a culture that has driven most of us to the wall and gotten away with it makes me see red.

To me, “it’s about doing the right thing”, words that I lifted from a line in the movie. But Gekko sums up the credo of Wall Street, which got us where we are today and will continue to drive the financial industry toward its next melt-down when he replies

“No, it’s all about the money.”
See it and weep.

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).

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.

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?

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.