30 YEARS OF STOCK MARKET JABBERFEST... Brinker said: Here we are today on this penultimate weekend in July, looking at the S&P 500 at its highest level of all time 2175. Just since our most recent correction buy signal in February the market has a total return of over 18%.....Going back to when this whole thing got under way in March of 2009, you are looking at a triple in the S&P 500. And all of this has happened in an interest rate frame-work that in many cases to zero. Unprecedentedly low rates. And to make it even better, it's happened in an environment where inflation has been really low, which means that the value of those profits is very real. So in my point of view, and I've always been glad over the 3 decades-plus of our jabberfest, that so many Moneytalk listeners agree - you really don't have any choice - you have to take control of your personal financial future. Let those sharks swim on buy and don't be their prey.
BREAKING NEWS ON WALL STREET.....BB comments: Stories are flying that before the market opens on Monday, Verizon is going to announce that they are going to buy the internet operations of Yahoo for $4.8 to $5 Billion.....Last year, Verizon purchased AOL, and paid $4.4 billion for that company....This is not a complete takeover of Yahoo....Yahoo has struggled for years.....
BOO ON THE DOOM-AND-GLOOMERS LIKE CARL ICAHN....BB comments: This has to do to with a caller earlier reiterating the negative outlook that Carl Icahn has had on the market during a period of time the market has gone straight up. One wonders why so many of these people have been so wrong about the market.....
WHY THE FEAR-MONGERS ARE WRONG....BB continued: The answer is, they just missed the picture.....The fact of the matter is that we had an excellent jobs report in June......We had a number in the 200,000.....And then we had a lot of investors who that the BREXIT was one of those end of the world moments......Perhaps they were fear of contagion....But a few days after that, we had the election in Spain and there was no sign of it.....
TOO BAD FOR YOU IF YOU MISSED OUT.....BB continued; It's unfortunate for those who have missed this significant market rally, especially now that we sit at all-time historic record highs.....The market is designed to fool most of the people, most of the time. And when we look at the cash reserve levels that are out there today - very high historically. In one category, they are the highest since 2001 - amazing. In one category, they are the highest since right after 9-11. So look at that that money out there that has missed all of this great run. That is why it is so gratifying to me that I know that our Moneytalk listeners - and our Marketimer subscribers in particular - have been in this market and profiting from this market.
BONDS - FIXED INCOME....Caller Nick for St Louis asked about his asset allocation on $3.9 million dollars - saying he only had 35% in fixed income and 45% equities.
BB replied: We publish an income portfolio and a balanced model portfolio III that has fixed income funds....so far this year, we are doing very well in that portfolio. It depends if you want to accept the risk that in inherent in those fund.....Would you rather be in FDIC CDs until you wait for some sort of a normalized world. Nobody knows right now when that will be because the world has become very strange in a financial sense since 2008.....And I would not be taking 2175 on the S&P 500 to be increasing one's equity ratio....If you wanted to develop some kind of a dollar-cost-average on weakness program, that's another thing. But I would not be making lump sum commitment at this time.Honey here: . Note that Brinker is still recommending dollar-cost-averaging for new money. And his is balanced model portfolio III that he talked about is identical to the income portfolio - except the balanced portfolio has none of the Metrowest Fund: (DLSNX; DLTNX; MWCRX; OSTIX).
INTEREST RATES...BB comments: Mortgage rates have not been going anywhere...I am rating the chance that the Fed will raise rates this week at almost zero. It's extremely unlikely that you will see a rate hike this year before the election. September will be data-dependent and there's no way to make projection right now......one of the reason that we have low interest rates in the US is because of what's happened in European countries - where the rates are near or at zero. US right now 1.6% for ten years is attractive.....Expect no change in interest rates at the FOMC meeting next week.
NFL PLAYERS DIDN'T LEARN THE DIFFERENCE BETWEEN ASSETS AND INCOME....BB comments: Just having a high income is not enough. You need to build an asset base that is properly diversified and invested, then you are in the Catbird Seat. You don't want to end up like those NFL players that file bankruptcy a short time after their playing career is over....Here's the key: You must translate your income into assets in order to reach the Land of Critical Mass. If you don't, when that income stream goes away, you are Tap City or waiting for a Social Security check.
KEY TO FINANCIAL SUCCESS....Brinker said: "The key to financial success is working hard, saving and investing, patience and persistence."
CARL ICAHN WRONG SO FAR.....Caller Stewart from Santa Monica asked Brinker about Carl Icahn's prediction of a market crash. BB replied: I have followed this prediction that Mr. Icahn has been making for some time. This is not a prediction he made yesterday.....And it's not just the stock market. It's also the high-yield market.....During the time that he's been professing his beliefs, the market has steadily climbed upward, and high-yield bonds have steadily rallied. So it's been completely wrong....When I heard his predictions, I wondered what he looking for that the rest of us do not see.... I do not agree with him obviously because our investment letter is fully invested......I still do not know the reason behind his predictions...(Here's an article about Icahn's prediction: Carl Icahn Predicts Stock Market Crash in 2016 -17; Should We Trust Him?)
Honey here: Note that Brinker is still fully invested - as he has been since March 2003. However, he sold all of his Marketimer Vanguard High Yield Fund holding at the same time he sold all Nasdaq holdings about 3 years ago. He also sold all Vanguard Ginnie Mae Fund in 2013.
GROSS DOMESTIC PRODUCT REVISION FOR Q2....BB comments: We are looking for a decent bump up from that soft patch first quarter figure of 1.1 - the consensus figure is 2.6%.....It's baked in the cake that second quarter GDP will improve over the first quarter.
WHAT TO DO WITH ALL THAT DOUGH AFTER YOU PAY TAXES.....Caller Jim from Lafayette with a net worth of $4million was griping about the government making him take more out his IRA as he get older. At age 82, he said he had to take out 5.85% this year.
BB responded: You are free to re-invest if you like - after you pay the tax. "I look at IRAs as a rare gift from Uncle Sam."
BRINKER'S FAVORITE CALLER OF THE DAY, MEBBE EVER: Roy from Minnesota. said: "You do a tremendous service for the people that listen to Moneytalk and also for youR investment letter - Marketimer......I want to thank you for the tremendous job that you have done....You are one fantastic man."
Honey EC: It was interesting to me that at least half of the callers today were Marketimer subscribers.
FRANKJ'S MONEYTALK THIRD-HOUR GUEST INTERVIEW:
Mervyn King was Bob’s third hour guest on the July 24, 2016 edition of Moneytalk. The guest was a governor of the Bank of England from 2003 to 2013. He is the author of a recent book, The End of Alchemy: Money, Banking and the Future of the Global Economy.
Bob started by asking about Brexit. Mr. King said most of the world’s ills do not stem from Brexit. In 30 to 40 years we’ll look back and wonder what all the fuss was about. As to whether it will really happen, the guest said it would. He said it was not a recommendation by the voters, it was a clear expression of what they wanted their government to do. He mentioned that the UK was not a member of the “passport free” community. The European Union faces a couple of existential problems. One of them is migration from outside the EU into EU countries.
We did not learn lessons from the 1930’s as to how to deal with a financial crisis. Low interest rates, 8 years on now, have not stimulated the world economy. We failed to understand what was wrong with the banking system because banking changed and outstripped the remedies that would have worked in the past.
Keynesians on steroids? Bob mentioned John Maynard Keynes recommendation that some deficit spending was OK on the part of government, but he wouldn’t have gone along with the running up of government debt to the levels seen here today. The guest agreed.
The bank crisis in the US (the last one) is now over, according to the guest. But Europe is going through its own banking crisis, Italy in particular. He said the entire Italian system is in trouble. Deutsche Bank in Germany has problems.
Negative interest rates are not going to solve things. Cutting interest rates seemed like the way to stimulate the economy but it turned out not to be the answer. We need to get back to normal amounts of spending and borrowing and at more normal interest rates. Central bank monetary policy is increasingly ineffective these days.
Bob went to the “Way Back Machine” setting the controls for the fall of 2008 and asked the guest about the proposed purchase of Lehman Bros. by Barclay’s Bank. Mr. King said the UK government was asked to back this deal to the tune of several 10’s of billions of dollars but they said no. Why would they agree to put UK taxpayers on the hook for debt the US was not willing to put on its taxpayers? He said it very politely.
In a note of irony, a few weeks after Lehman disappeared beneath the waves, AIG got bailed out.
Chris from Iowa asked about Glass Steagall. The guest gave a long answer that included:
· The Glass Steagall act was ok in the 1930’s but he felt it was no longer needed.
· The Dodd Frank Act is far too complicated with thousands of pages and lots of attorneys needed to understand it.
· Since 2008 we have not solved the problem of Too Big To Fail.
· He thinks banks should have enough assets in cash or collateral to lodge with the central bank as an insurance policy against runs on the bank.
Jerry from Washington said all the right things at the start of his call. He said Bob’s show is better than an Econ 101 course in college and that he planned to buy Mr. King’s book. (We hope Jerry will come to Ms. Honeybee’s blog and click on it there.)
Then Jerry launched into a long, wordy build-up to his question which ended up being, “with today’s low interest rates, why would anyone save?”
The answer was equally if not more lengthy.
· We must provide an incentive to save.
· Saving is unbalanced around the world, the Chinese and the Germans are saving too much.
· Governments have to work together to correct things. Central banks can’t do this alone.
Bob wrapped up at about 3:50 pm.
Honey here: Thanks Frankj....I thought Mervyn was a very interesting guest, but I noticed that Brinker didn't ask him if he thought the financial markets were going to crash. Maybe because he had already been making fun of other gurus who have been wrong up to now. However, thanks to Jeffcrhistie for discovering that Mervyn is one of those calling for an imminent crash. This was written in February 2016.
Excerpts and read more here: "New Financial Crash 'Certain' Says Former Bank of England Governor, Mervyn King." Another financial crisis is "certain" and will come "sooner rather than later", the former Bank of England governor has warned. Another financial crisis is "certain" and will come "sooner rather than later", the former Bank of England governor has warned.JEFFCHRISTIE'S MONEYTALK FINAL EXAM QUESTION:
Which one of the following did Bob Brinker say was good today?
Honey here...Thanks, Jeffchristie. Doesn't Brinker's answer kind of contradict all of his preaching today? :)
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