Sunday, August 20, 2017

August 20, 2017, Bob Brinker's Moneytalk: Stocks, Bonds, Economy and Investing Commentary

August 20, 2017....Bob Brinker is hosting Moneytalk live today.....(comments welcome)

Radio Station 
710KNUS Denver

Sunday, August 13, 2017

August 13, 2017, Bob Brinker's Moneytalk, Stocks, Bonds, Economy, and Investing

August 13, 2017....Bob Brinker hosted Moneytalk live today....(comments welcome)

STOCKS...BB comments:   The market has been favorable for a long time....BB told John from Chicago that he thought it was fine at age 61 with 5 years to retirement to have 80% invested in the stock market. He told John from Ohio (age 47) and Brittany from Conn (age 54) that 70% in stocks was okay for them.

Honey EC:These comments that arrived after today's show may speak for a lot of listeners:
Irishcajun said:
Thanks again for hosting this site. I miss the old days of BB where he actually talked about current economic data and its effect on the markets. We heard very little today that would actually help steer economic decisions related to current markets until the very end of the show. Unfortunately, this was only a passing reference to the S&P being at 2,441 close to its all time high of 2480, and an offhand comment about world politics - not very helpful.
 BONDS..... BB is still recommending short duration bond mutual funds. No changes in his bond fund holdings in Marketimer.

/INTEREST RATES....Interestingly, today I heard Brinker use the word "if" when he referred to the Federal Reserve raising interest rates.

INFLATION....BB pointed out that according to the Rule of 72, inflation at 2% will cut the value of money in half in 36 years.  He also reported this news:  The Producer Price Index for final demand declined 0.1 percent in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today....For the 12 months ended in July, prices for final demand less foods, energy, and trade services rose 1.9 percent.

==> Thanks to dRahme, audio clip: Hour 1 - Interest Rates, GDP, Inflation

WHAT PERCENTAGE SHOULD YOU BET ON ANY ONE COMPANY.....Caller Ron from San Jose had 25% of his portfolio invested in his company stock and asked for Brinker's opinion about buying more because the company was giving him large discoutns.. After lengthy questioning, Brinker said that the question was "not answerable" - that he simply could not give John an answer to his question.    NVIDIA STOCK NVIDIA  Market's Hottest Stock Plunges 

==> Thanks to dRahme audio clip: Hour 2 Jamie Dimon, Wells Fargo, Caller Ron on Nvidia.

REITS AND SHOPPING MALLS.... BB said to be careful about owning REITS that invest in shopping malls. The future of walk-in shopping malls is not looking good.

Honey EC: I wonder why - NOT.  Free delivery is becoming quite common and some places even offer free returns. I used to spend time each week  browsing through malls with a group of "shopping buddies."  But as time went on, the malls and most of the stores, seemed to cater to teens with the noise that they call music at deafening volume. This soon made the malls lose appeal for women who want to talk about bargains and gossip over lunch. 

WHO CARES WHAT JAMIE DIMON SAYS ABOUT POLITICS?  Brinker talked at length about how Dimon has traveled across the country and world using vulgar language to trash the United States and WashDC.  Does he have any reason to complain - ya think?  "Dimon is one of the few bank chief executives to become a billionaire, thanks in part to a $485 million USD stake in JPMorgan Chase. He received a $23 million pay package for fiscal year 2011, more than any other bank CEO in the United States.Dimon received $20 million in compensation for his work in fiscal year 2013. He earned $28.2 million in 2016."
NORTH KOREA....KIM JUNG UN....BB comments: I don't think he has any thoughts of longevity....because if he attacks anyone, how many days will he have left?  "It's a single digit number that starts with one."  So if he uses any of that stuff he's crazier than we think. I'm not ruling it out, but he's crazier than we think. 

The venerable Charlie Maxwell was Bob’s third hour guest on the August 13, 2017 MoneyTalk broadcast. Mr. Maxwell is a global energy expert and he has been on the show often enough to have earned the complete suite of Starship regalia: coffee mug, baseball cap, money clip, briefcase, gold wings and genuine MoneyTalk Starship leather flight jacket.

Bob said that oil prices are affected by two forces: increased fracking in the US (making more available) and OPEC’s supply reductions, (decreasing the quantity). Mr. Maxwell said that was a precise description of the situation. The economics of the US oil industry used to require $80 to $100 per barrel, but American know how concerning shale oil has brought us less expensive oil. The economy has benefitted from these low energy costs.

The Keystone XL pipeline has been approved. This is the best alternative to the other ways of getting Canadian oil to the Gulf Coast where the refineries are. Charlie recounted:
  • · Moving the oil from Canada to the Gulf Coast by truck. Forget about it. Not enough trucks and not the highway infrastructure.
  •           20 or so smaller existing pipelines:  not practical.
  •       By train: risky – given accidents that have taken place with spilled crude catching on fire.
Keystone is the best choice. It will be a new pipeline without the maintenance needs of older, existing pipelines.

Will there be a rebirth of coal?

Charlie indicated here in the US – not so much. He named all the health hazards. We are fortunate to have natural gas that will help us bridge the transition from coal to cleaner energy. Countries like India, China and Russia don’t have much choice, they will continue to use coal. Global consumption of coal will continue to increase even though it will decline here in the US. Charlie channeled Bob Brinker saying, “We’re in the catbird seat.”


The accident at Fukushima, Japan will continue to hurt nuclear energy development for the next 10 years. However, nuclear produces about 25% of global energy and Mr. Maxwell sees it as a “bridge source” of energy in the future. (Work stopped recently on two nuke plants in South Carolina but I think it was a due to costs). 
Solar and Wind

All the best wind locations have been developed. Much of the energy produced by windfarms is lost if it needs to transported for long distances over transmission lines. He sees a brighter future for solar energy (sorry).

Global sources of energy:

Oil 32%, coal 29%, natural gas 25%, nuclear 7%, hydro 3%, all others including wood, biomass, solar and wind: 4%.

Bob asked what Charlie thought about Saudi Aramco. The guest said that Saudi Arabia dominated worldwide oil production for years, but the “end of the rainbow” is now in sight. (Editorial comment:  this reminded me of the book by Matthew R. Simmons titled, “Twilight in the Desert,” and examination of the outlook for Saudi oil production, published in 2006. An interesting book.)

Caller Tom from WI wanted to know if fracking creates the possibility of earthquakes. Charlie answered that it does but he pointed out they have not produced serious damage.

Then we heard from a repeat caller, Keith who calls in from New York. Keith always seems to have an axe to grind and his tone was aggressive as usual. He ranted some about the health problems people living near windfarms experience from the low frequency vibrations of the turning rotors. He said something about the crony capitalism of solar energy projects (I agree wholeheartedly with him on this). Charlie reiterated that wind power expansion will slow down then there will be no more expansion. It will peak at 3% of worldwide energy production.

Bob queried Charlie on the prices for West Texas Intermediate. Charlie said it is now at $45-46 per barrel and should range from $38 to 50 for the rest of the year. Prices in 2018: $49, and in 2019 and 2020, $54 and $57 respectively. These higher prices reflect a lack of investment over the last few years.
Bob wrapped up at 3:52 pm.

Data from previous Charlie Maxwell interviews:

From the Dec. 1 2013 interview:

The interview got underway at about 3:18 pm but some connection problems at first had Bob filling in a little time until Charlie came on the line. The interview topics included natural gas and the interplay between it and oil here in the US, the Keystone Pipeline, the price differential between West Texas Crude and Brent Crude and Charlie’s outlook for energy in the US.

Charlie started off with a quick review of our energy use here in the US.

• We consume 16-17 million barrels a day here.

• This is down from a peak of 20 million.

• We produce between 5.5 and 7.5 million barrels a day.

• We import about 9, down from 11.5 million.

• Charlie thinks imports will drop to about 6 million barrels in the future and this would strengthen the dollar.

Bob and Charlie revisited the price difference between West Texas crude oil and Brent crude. The world price is based on Brent crude, and West Texas prices have been lower. Apparently this gap closed as Charlie predicted it would, but it has now opened up again. As Charlie pointed out on his prior ride on the Starship Moneytalk, a distribution bottleneck created a surplus of West Texas crude so this is the reason for the lower price. Charlie sees additional pipeline capacity as the way to get this oil to market.

Thomas from Birmingham boarded the Starship at its next stop and asked about the long term price outlook for oil – relating the price to something he read about the increase in the world’s population. Charlie’s answer was that most analysts (including him) who forecast future prices are wrong, but he did posit that the price of natural gas is low and that oil is 3.5 times more expensive in terms of its thermal equivalent. He said that this is a ratio that cannot exist for very much longer.

In closing, Bob and Charlie revisited the price spread of Brent vs. West Texas and Charlie said the premium (on Brent) should disappear as the pipeline is built.

From the June 2015 interview:

Charlie said the Saudis are going to allow the price to fall, i.e., not cut their production to encourage a rise in the world price. His forecast is that prices will gradually rise and there will be equilibrium 2017 to 2018. (He also said, when forecasting, it is important to do so often.) He thinks the price of oil will be at $80 to $100 per barrel by 2020.

The “rig count” is down but the new drilling rigs are so productive that the industry has been able to maintain high levels of production. It takes about 5 years to bring a new field on-stream so it is hard for the industry to know what demand levels will be that far ahead. Charlie said we need to produce an additional 7.5% (of oil) each year to keep up with the increase in use.

Some data points from the Sept. 7 2016 interview.

• In 1970 we produced 12 million barrels per day in the US.

• We will produce 10-11 million in 5-6 years (with the new technology and finds).

• Our production will flatten and then decline.

• Canada peaked in the late 60’s early 70’s.

• Even with the non-conventional oil they’re producing now, they won’t break through their previous peak.

Bill from Alaska wanted to know how the North Slope figured in. Charlie was almost melancholy in his description of how North Slope oil production is in the “depletion” stage. There are a few fields yet to be opened but production peaked at 1.7 to 1.8 million barrels per day and is now down to 900,000.

Radio Station 
710KNUS Denver