BRINKER'S EUROPEAN REPORT.....Brinker's opening monologue was about the election of radical leftists in Greece, and the implications to its sovereign debt, its status as one of the nations using the Euro -- and the possibility that Germany just may tell Greece to pull out its printing press and start printing Drachmas.
Brinker said: "What Super Mario is saying here is very clear, the European Central Bank is not going to purchase the sovereign debt of Greece in the face of a radical leftist government that could lead to the risk of default. I'm a 100% was Super Mario on this." Wall Street Journal: Leftist Sweep to Power in Greece
ANOTHER WEEK ANOTHER OBAMA TAX-INCREASE PROPOSAL....Brinker said: "Believe it or not, we talked last week about a tax increase proposed by the president, and now this week we are going to talk about a new tax increase proposed by the president. This one has to do with dramatic changes for new investment in 529 plans. This is a topic we are going to discuss on today's program – it's a stunner, it's a shocker -- and very much an anti-middle class proposal, which surprised some people. But look, it's a tax increase which shouldn't surprise you, considering the source, all that much… Are there enough votes for this Republican Congress to approve this bizarre idea? I think not. I certainly hope not."
MORE.....There was discussion of this topic throughout the program, including one seminar caller who had all the Democrat talking points down pat. Nasdaq: Obama Proposal to Cut 529 Tax Benefits Meets Opposition
GOOD NEWS ABOUT THE LAME DUCK IN THE WHITE HOUSE.....Honey comments: Later in the program, Brinker said something that "shocked and stunned" me in light of how he has been so silent about Barack Obama for six years now. I could count on one hand the number of times Brinker has even uttered his name on the air. Today Brinker said: "The good news is that there is only two years left in this lame-duck term."
STOCK MARKET.....Caller Meryl from Illinois said: "Earlier this month there were some days when the stock market 200, 300 points, up and then down in the same day even. And I was wondering if there was any significance to this kind of market volatility in the stock market that occurs periodically."
Brinker replied: "There certainly is because really it's related to the level of the Dow Jones Industrial Average – the point swings that you quote are the point swings in the Dow Jones Industrial Average. It's an average of 30 stocks that are not market-cap weighted. They are simply thrown together. As a result, as the divisor for the.Dow has become less and less over the decades, you get tremendous volatility when the overall number is as high as it is right now. And right now the Dow Jones Industrial Average is in the upper-17,000s. So that means to get a swing of just 1%, you need 170 points – just for 1%. And to get 2% you need over 300 points. And so the points don't really matter. If I were you, I'd look at it in percentage terms."
Honey EC: It seemed to me like Brinker was playing obtuse with Meryl. I think that what Meryl really wanted to know is if there was any reason to be concerned about the roller-coaster days that have been happening lately. I'd like to know what Brinker really thinks about that too. He didn't mention it in the latest Marketimer -- maybe he really thinks it's "noise."
Brinker still recommends: "dollar-cost-averaging on weakness" as he remains fully invested. He expects "stock market gains in 2015" and his target range is S&P 500 Index "mid-to-upper 2100s."
BOB BRINKER'S MARKETIMER INCOME PORTFOLIO
Caller Lee from Reno said: "In your Marketimer, you have an income portfolio, it has a current yield of 2.8% and the duration is 1.4 years...." (Brinker interrupted)
Brinker interrupted and replied: "Now Lee, so listeners will not be misled, those are the figures on our former portfolio. We made significant changes to that portfolio in early January and those numbers have changed. I want our listeners to be aware of that and we will be publishing the new numbers in the February investment letter."
Honey EC: Last week Brinker talked about the bond funds that he sold from portfolio III and Marketimer income portfolio -- and also the funds that he bought. I covered these funds in detail in last week's show summary. The effective date for these changes was January 9, 2015, so the January issue of Marketimer was already out. Therefore, the portfolios in that issue had not been updated.
January 5, 2015 Marketimer, Page 3, Bob Brinker wrote: "These changes will be reflected in the February Marketimer and will produce a significant increase in portfolio quality and a modest increase in duration. The current yield will also increase slightly. DoubleLine Total Return Fund has a current yield of 3.7% and a duration of three years, while Midwest Unconstrained Bond Fund has a current yield of 1.66% and a duration of 1.2 years.It's starting to look very much like Brinker realizes that his major moves into the low-duration bond funds in 2013 was a big mistake. The funds he moved out of -- like Vanguard Ginnie Mae Fund -- have done very well, and the funds he moved into are a bust. Matter of fact, his Marketimer income portfolio only made about 1% last year, and his model portfolio three only made about 6% -- about 1/2 what the Total Stock Market returned.
FrankJ's Summary of Third-Hour Guest-Speaker (Philosophy about Economists Thrown in to Show Some Respect):
Bob’s third hour guest on January 25, 2015 was Robert Litan author of the book, Trillion Dollar Economists: How Economists and Their Ideas have Transformed Business.
As to why he wrote the book the author said he is an economist and a lawyer and he observed that after the financial crash in 2008, economists got an “unfair amount of blame.” The public thinks that most economists sit around and forecast, and since most of them missed predicting the financial meltdown, the public thinks they blew it.
Economists are not appreciated. (Rodney Dangerfield: “I don’t get no respect…”)
The motivation for the book was to explain better what economists do and how they have benefitted American business.
“We have 2 classes of forecasters: Those who don't know . . . and those who don't know they don't know. “ - John Kenneth Galbraith – American economist.
Bob asked why did so many miss the 2008 meltdown? The answer was inertia and a mindset that what happened in the past will happen again. Bernanke and Greenspan both missed it. Greenspan apologized later and Bernanke did his best to mitigate the problem.
The guest gave some examples of how economists help boost the economy. He cited math techniques known as linear programming and quadratic programming as big assists to the transportation industry in moving goods. (These have been around for 40 plus years.) The internet retail system that exists today could not exist without the efficient transportation system we have today. Trucks and trains used to be highly regulated and the regulations were eased. He did not explain exactly how economists aided in that effort.
Litan also referenced the oil and gas industry, natural gas in particular which was highly regulated. The deregulation started under the Carter administration and continued under President Reagan. He did not explain exactly how economists helped in the deregulation efforts.
(Ronald Reagan: “if economists had invented the game of Trivial Pursuit there would be 100 questions and 3000 answers.”)
(Harry Truman told his Chief of Staff that the next time an economist came to the oval office he should have only one arm, I’m sick of them answering my questions with, “Well, on the one hand ….”
After the break Bob and Bob got on the subject of quantitative easing in Europe. The guest explained it is the third best choice available, the first two are undoable. European countries cannot remove and reduce regulations that impede their economies, particularly regs on hiring and firing. Fiscal stimulus is out because southern European countries are already heavily in debt and northern European countries with an older age demographic don’t want to add debt. That leaves QE.
The guest expects with the leftists in control in Greece there will be a showdown with the Germans and the Finns. The Greeks want the rest of Europe to write off their debt or they will abandon the Euro. In response to the guest’s suggestion that this turmoil could make for a rocky week in the stock market, Bob pointedly asked what do we know now that we didn’t know Friday? The guest’s answer was that it (the leftists getting control in Greece) actually happened.
Bob said “Who cares? The Greek economy is only 2% of European GDP.” The guest said Greeks saying goodbye may tempt countries like Spain, Italy and Portugal to do the same. If the Euro is abandoned it will upset a lot of trade that exists, based on the Euro.
(Two economists were shipwrecked on a desert island. They had no money but over the next three years they made millions of dollars selling their hats to each other.)
The only caller was Bob from SF who has called the show before. He wanted to know when the interest paid on Treasuries starts to climb, won’t this create so much demand that it will squash yields? The guest said the Fed only controls short term rates and he thinks long term rates will stay low for a long time. He went on to say something that was music to Bob Brinker’s ears, that critics of quantitative easing here in the US said it would lead to inflation but they were wrong.
Decreases in the price of oil helped the economy, the guest predicts a 3% growth rate for the economy.
The book explains how economists helped with the rise of the internet.
Economists helped facilitate on-line dating.
(An economist takes a woman he met on-line to a cheap restaurant, their daily special of meat loaf and mashed potatoes arrives. She looks a bit miffed and he says, “assume filet mignon and champagne!”)
Bob and the guest decried the lack of financial education required in US high schools. The guest said economics could easily be made a part of math classes. (I agree completely.)
If people had basic financial literacy few might have gone for the ruinous loans in the last decade.
Jeffchristie's Moneytalk Final Exam Question
Bob Brinker refers to the president of the European central bank by which one of the following Nintendo characters?
A) Pokemon. B) Captain Toad. C) Super Mario. D) King Dedede.
Honey here: Looks like Jeffchristie and Brinker both assume that everyone knows about Nintendo characters. :)