Sunday, August 23, 2015

August 23, 2015, Bob Brinker's Moneytalk: Stocks, Bonds, Economic and Investing Summary

August 23, 2015....Bob Brinker hosted Moneytalk live today....(comments welcome)

STOCK MARKET.....Honey comments: Today, I have focused on the plentiful stock market talk because I am sure that is what you are interested in right now. Most of the calls were repetitious, esoteric  or political.  Brinker mentioned dollar-cost-averaging today and 50-50 balanced for those who are in or near retirement. So no change in his fully invested positions.

STOCK MARKET CORRECTION IS HERE.....Brinker comments: This week qualifies as interesting times, for sure.  The long-awaited stock market correction is with us.  It has been four years since the stock market had a major correction… Back in the summer of 2011 the Dow Jones Industrial Average closed at a closing low of 10,720.  And then there was a bounce off of that closing low.  And then the bounce rolled over in the market return to the area of the initial closing low and formed a second closing low at 10,000 655.…  And then the correction was over.  And on the S&P 500 index, that was right around the low 1100s… The same thing always happens during a correction.

PERMA-BEARS SCARING PEOPLE OUT OF THEIR WITS....Brinker continued:  The perma-bears who have been wrong now for over 6 consecutive years, they start hollering fire in a crowded market.  They scare investors out of their wits, in many cases.  Another thing that happens in a correction, is that the weak holders – who either don't belong in the stock market in the first place, or else have no idea what they are doing in the stock market in terms of risk – they sell out on weakness and move off to the sidelines without mentioning that the market has risen from 676 in the S&P 500 in March 2009 to the current level over the six past years while they were out of the market.  So they have managed to miss out on almost all of the gains of the past six years.  So they are always happy to be out of the market.

Honey EC: Brinker appears to be a perma-bull. He has been fully invested since March 2003.

MARKETIMER ADVICE IN 2010 CORRECTION.....Brinker continued:  It's important to remember that a correction is a process.  It's not over and done with in an instant.  It involves patience in order to work toward a point in the correction where a buying opportunity can be identified.  Now in the major correction in the summer of 2010, there was a buying opportunity in July, and that buying opportunity appeared in the Marketimer investment letter.  Here is what I wrote in the July 2010 Marketimer:  "In view of the 15% correction that has occurred in the S&P 500 index, we now rate the stock market attractive for purchase.  On a risk reward basis we believe there is substantial upside potential to stock prices."  The S&P 500 was at 1030 at that time, less than 2% from the final closing low of 1010 during that correction.

MARKETIMER SPECIAL BULLETIN IN 2011.... Brinker continued: In the summer of 2011, there was another buying opportunity following a correction that lasted into the autumn season.  Here is what I wrote at the Bob Brinker website special subscriber message on September 22, 2011 for subscribers.  "The conditions are now in place to justify an upgrade of our stock market view to attractive for purchase for subscribers looking forward for an opportunity to invest new money into the market at attractive prices." Where was the S&P 500 when that was written – 1129.  Less than 3% from the final correction low, less than two weeks later.…  Both of these buy signals were made possible by analyzing a tsunami of stock market indicators to lead to the identification of those correction bottoms.

CAN BRINKER CALL A BUYING OPPORTUNITY THIS TIME....Brinker continued:  It's fair to ask, will it be possible this time?  The answer is, I'll do everything I can to work toward that outcome.  We shall see. For now it's fair to say that the monitoring process is underway and will continue as the correction unfolds.  Corrections are the reason that stock market investors make lots of money over time and perma-bears just make lots of noise.…  The risk inherent in stock market investing is the reason that stock market investors do well over time while the perma-bears and nattering nabobs of negativism just wine and spin their wheels.  Because corrections are part of stock market investing.  I'm Bob Brinker – this is Moneytalk.

Honey EC:  It is not only fair to ask if Brinker can do it again, one can ask what are the chances he would be correct again.  He brags about  spotting two bottoms just 2 or 3%  away, but he never mentions that he missed  a 57% decline, and issued buy signals all the way down in 2008-2009.  Here is a list of  buy signals that he issued from the start of the megabear to the end when he finally gave up:
January 4, 2008, S&P @ 1411: "Mid-1400's"
Feb 10, 2008 S&P @ 1331: "Low-1300's" (delivered via "special bulletin" - no mention of January Marketimer mid-1400's buying opportunity)
Aug 5, 2008 S&P @ 1285: "1240 or less"
Sept 2, 2008 S&P @ 1282: "Low-to-mid 1200's"
September 16th -- rescinded low-to-mid 1200's (recommended dollar cost-average only)
January 2009 S&P @ 931: “bear market bottom range of 750 to 850."
Feb. 2009 S&P @ 826: “low-to-mid 800’s"
March 5, 2009, S&P @ 696: waiting for a bottom and a test of that low. No DC or buy levels.
When did Brinker's three fully invested Marketimer model portfolios get back to even after losing over 50% of their value in 2008-2009? It was February 2012. Documented here.

HOW MANY STOCK FUNDS TO BE DIVERSIFIED.....Brinker said: I would say that you could have a highly diversified portfolio of stocks by owning just one or two funds..  You would have a highly diversified portfolio in the US if you just owned the total Stock market Index. VTI would give you  very broad diversification.  Also you could do it with very low expenses – and you could do it with no load.  If you wanted to have international exposure, you could simply buy something as basic as an international index fund with low expenses and also no load.  So I would say that one or two is all you need to have a highly diversified portfolio.

HOW OFTEN STOCK MARKET CORRECTIONS HAPPEN.....Brinker comments: So how many times does the S&P 500 index usually decline over 5%?  About four times every five years.  Now of course it hasn't happened recently and that's why you've seen the reaction you've seen to it because people have been lulled into complacency, if you will, about how the market behaves – and the thought, well the market is pretty stable.  That is something that you can get lulled into but few people that have been around the market a long time believe that.

THAT'S WHY THEY MAKE THE BIG BUCKS...Brinker continued: Fact is, there is risk and volatility in the ownership of stock.  Fact is, that is one of the key reasons that stock market investors over time make a lot more money than investors in things like bonds or money market funds.  That's just inherent in the nature of stock market investing, and it's not going to go away.  It will always be there.  Remember JP Morgan's words, 'stocks tend to fluctuate'.  He certainly got that right.
 WHY DOESN'T FED SHRINK MONEY SUPPLY....Bob in Albuquerque said: "I'd like to know why the Fed doesn't start shrinking the money supply or slowing it down."

Brinker replied: Because they don't want to create a recession. If somebody told you that the decline in the price of oil is going to create problems for fracking companies that are stretched, why would lead you to  believe that there is hot money around.  That sounds like just the opposite of hot money – that sounds like the destruction of money.

Caller follows-up: "Okay I was just listening to that famous short guy yesterday, and that was one of his scenarios."

Brinker replied: While I don't listen to that stuff so I have no idea what you are talking about.…  There are people out there that are trying to scare you.…  The reason people try to scare you is so that you will buy something that they are affiliated with aided with - period
BRINKER THANKS TREKKIES AND BEAMS OUT.....Brinker said: Before they Beam Me  out of here, let me thank all our Moneytalk Trekkies for cruising with us here on the Starship and…

COMMENTS BY FRANKJ:
Blogger frankj said...
Wow, 20 posts and it is only 6 pm west coast time! Could be a 100 post week?

We will know in the fullness of time.

To blogsters: I usually summarize the 3rd hour and I listened today but couldn't get my teeth into what was being discussed. That said, the guest is a heavy hitter. If interested I'd encourage people to read about him on Wikipedia and elsewhere. His name is Philip Zelikow. Just google that and you'll find him.

Regarding the first part of the show: Bob was beating his chest so hard I was worried he'd hurt himself! Look for a spike in subscriptions.

Did anyone get the phone number of the woman from CA who called and had $8-9 million in assets? A financial advisor charging 1% on assets would make $80K a year on her. Maybe she'd get a break and "Only" get charged 0.75% -- even so ...

Question for all you financial advisors lurking out there: How much harder is it to manage $8 million than say, $2 million. Answer: in my opinion it is no harder.
 Honey here: Thanks for your comments Frankj. Last week we had almost 150 comments, and I missed it, but someone has a free lunch on the Santa Cruz Wharf with me if they want to collect.


JEFFCHRISTIE'S MONEYTALK FINAL EXAM QUESTION

Caller Bob from Albuquerque told Bob that he was listening to a famous short guy who was negative on fracking. The short guy he was talking about is:

A) Billy Barty. B) Tiny Tim. C) Tom Thumb. D) Jim Rogers.

ANSWER

Honey EC: Thanks Jeff. Note to the person who asked who the caller was asking about, Jeff gave the answer.
 
Next Weeks Economic Calendar

Brinker's guest-speaker was Philip Zelikow. Brinker bills him as the author of this book: America's Moment: Creating Opportunity in the Connected Age

PODCASTING:
Los Angeles. KABC 790. Moneytalk plays two hours later in the evening. They podcast and ARCHIVE podcasts.
                                              (summary posted at 6:55pm PDT)

Sunday, August 16, 2015

August 16, 2015, Bob Brinker's Moneytalk: Stocks, Bonds, Economic and Investing Summary

August 16, 2015....Bob Brinker hosted Moneytalk live today. (comments welcome)

The Flight of the Starship Moneytalk began with Brinker discussing the irony of the yuan being devalued last week  and how his monologue last Sunday was about the strong dollar.

CHINESE CURRENCY DEVALUATION....Brinker said: If you were with us on last weekend's Moneytalk broadcast, you heard me talking about the importance of currencies.  (Honey EC:  Brinker pre-recorded Moneytalk last week, but the monologue about the strong dollar was excellent and educational, so I covered it. HERE.)

Brinker continued: We talked on last weekend's broadcast about the US dollar.  We talked about the fact that the US dollar has been very strong and the implications of a strong dollar on both exports and imports – the whole ball of wax.  Well that was the discussion on last week's broadcast and sure enough this week, we had the news that China announced a devaluation of its currency.…  That was a 1.9% currency devaluation that was announced early this week, and that  involved the yuan.  There has been a little slippage – not a whole lot.  The markets have calmed down since that initial stirring on Monday or Tuesday with reference to the yuan.…  One of the things that will happen with the devaluation of the yuan is that the products that China exports into the foreign marketplace – especially the US – we import tons of stuff from China.  These products will be more price competitive in those foreign markets including here in the United States because of the weaker yuan. … At the same time, products that are imported into China, will cost more in China.…

Honey EC:  Today, Brinker gave another lesson on how currencies affect trade between countries. Today's was based on China, which is just the reverse of the dollar that he presented last week in a recording - he was not live on the air.  I did a complete summary last week.

STOCK MARKET....Brinker said: Now you noticed that the market was very volatile on Tuesday, and Monday even, because this announcement came out.  This announcement was music to the ears of the perma-bears who have been wrong about the stock market for six consecutive years.  If you can imagine that.

PERMA-BEARS WRONG FOR SIX YEARS.....Brinker continued:  They've been wrong for over six years now, and they latched onto this news – oh yeah, this is the end of the world,  don't you know – it's the end of the world.  It didn't turn out that way.  Turned out to be some volatility in the market on Monday and Tuesday, but once that had gone by the boards, it pretty much went away as a market factor.

STOCK MARKET HAD A GOOD WEEK....Brinker continued:  The market had a good week, the S&P 500 closed up 7/10 of 1%.  That's 17 S&P 500 points,  and here this weekend, it sets very close to the 2100 level - and that is within 1 1/2% of its all-time historic record high.

SMALL CAP STOCKS MAY DO BETTER THAN LARGE.....Martin in Illinois asked: "With this strong dollar we have now, wouldn't domestic small caps fare better than multinationals in this kind of environment?"

Brinker replied: I think that's a good point.  We've talked about it.  I regard that as a headwind.  In other words, it's not all or none – it's not the only factor that impacts small-cap investing.…  The reason is because multinational companies have a larger percentage of their income derived from foreign sales than small-cap.  Now there are always exceptions, but as a general rule if you look at the small-cap universe – which is a very small part of the total stock market weighting in general, you will find that they have a smaller proportion of sales and profits derived from foreign markets.

STRONG DOLLAR EFFECT FOMC RAISING INTEREST RATES....Martin from Illinois follow-up question: "Do you think that with the strong dollar, do you think that that will make the Fed hesitate – Janet Yellen to hesitate – on increasing interest rates.  Because that would even make the dollar stronger."

Brinker replied:  The dollar has been strong throughout this period of time that Chair Janet has been talking up the possibility of raising short-term interest rates.  By the way, at this juncture they are only talking about a 0.25% increase in the short term Federal Funds rate.…  And they've had no reason to assume that anything would change.…  So my comment to you would be that within the FOMC meetings, they know all of this.…  So I think you have to assume that since they know the dollar is strong, that they wouldn't be out there talking about the possibility of a rate increase if they felt that the strong dollar was a reason not to do it.  It's basic logic as far as I'm concerned

CHAIR JANET DOESN'T WANT TO TIP US INTO RECESSION, SO HAS TO TREAD LIGHTLY....Brinker said: Let us observe that interest rates have been stable or dormant for quite some time, so we haven't really seen any movement in that regard.  Aand even then, Chair Janet has made it clear that she is going to take a measured approach – the gradual approach to interest rate changes.  I would expect that they would start with one quarter of 1%, eventually, and then pause, take a look, see the impact on the economy and the markets, and go on from there.  But I don't think they are going to go on a relentless program of increasing rates, because I think that Chair Janet is not anxious to tip the economy into a recession for which she would then get total blame.  So she has to tread very lightly on that one.
 ENTERTAINING CALL OF THE DAY....Caller James from Colorado Springs talked about an investment scheme he's heard touted on the radio that did not supply a lot of information or details.

Brinker pointed out how risky that can be,  then he said:   "I would never subscribe to something like that.  When we talk about investments on Moneytalk, and we have for 30 years, we talk about details.  We talk about ranges.  We talk about risk.  We don't talk about what you're talking about which is just fluffery. …

Honey EC: I question that statement.  Does he talk about details and ranges?  When is the last time we heard him talk about the stock market in particular ranges, except in retrospect? He does get a little more specific about interest rates and economic data.

Caller James follow up question: "Let me ask you this.  You invest a lot of time and money in your Marketimer and you have subscribers buy that.  You make people pay for your input and....."

Brinker interrupted and yelled over him:  No, no, no, time out, timeout, timeout.  Nobody was ever made to pay for the Marketimer investment letter.  The Marketimer investment letter is a subscription letter which is decided by the subscriber whether they want it or they don't want it.…  You just said, you 'make them pay.'  That's nonsense.  People make a voluntary decision on whether the information in the investment letter is of value to them.  And that's up to them.  And I don't think it's fair for you to say something that is that misleading – 'you make them pay.'  I don't know how you could even say something like that.…  I subscribe to the Wall Street Journal.  The Wall Street Journal does not make me subscribe.  I subscribe to Barons Financial Weekly.  Barons does not make me subscribe.  I choose to subscribe.  And when you're talking about what you're talking about – people coming on the radio, making promises and not giving any details or information, that's a whole different deal isn't it.  We have no idea what they're talking about.  Gary is on the line in…

Honey EC: I think James point was clear, but Brinker did about the only thing he could do, which in my opinion was really childish. He focused on the word "make" and ignored the point that he charges for his Marketimer advice and that it can also be risky. 
BRINKER GETS COMMUNIQUES....Brinker said: I want to thank Janet for her communiqué to our Moneytalk broadcast.  She says,  'Dear Bob, thank you so much for educating me over the years.  I'm on my way – although I'm not yet at, Critical Mass.  It is so empowering to be able to do it myself, and to understand.…'  Well Janet, thank you for taking the time to send us that nice communiqué.  That was very thoughtful of you.  Another Moneytalk on demand listener checks in from France.  John, who listens to our broadcast in France says, 'Just a quick Bonjour from France.  Always look forward to…'"

Honey EC: Interesting that Brinker gets "communiques," since no one here has been able to find a way to communicate with him. Maybe they sat down at a writing table with a quill pen and wrote a letter and mailed it by US mail to Littleton, Colorado.

FRANKJ'S THIRD-HOUR GUEST-AUTHOR SUMMARY

Bob’s third hour guest on August 16, 2015 was Jason Trennert, author of a book titled, My Side of the Street. It has an annoyingly long subtitle, which I will not include here.

From part of the description of the book on Amazon:

“Part memoir, part love letter to an institution popularly viewed as a necessary (or as just plain) evil,  My Side of the Street delivers the long-overdue defense of the investment banking industry critiqued by Michael Lewis and others, illuminating the ethical and decent majority who take the subway, worry about mortgages, and keep the entire enterprise on its feet. Introducing the general reader to captains of finance, famous on The Street but invisible to outsiders, Trennert lays on display thee absurdity and unbridled joy of big business-a comic tale of unlikely success in America's most notorious industry.”

This is going to be short because the interview was lackluster even though the topic might be interesting.

Trennert rejects the notion that the markets are rigged against the little guys.

He thinks the Trans Pacific Agreement might do a better job of allocating capital but he hasn’t read it yet.

As government gets larger it benefits those with the most pull. This leaves out the little guy.

Trump is the only candidate who has said, in effect, here in the US we get the best government that money can buy. Trump says what he says because he has enough of his own money and doesn’t need to solicit contributions.

Bob asked him what he thought about Goldman Sachs having designed a portfolio of mortgage loans designed to fail. Trennert runs an investment research firm and maybe GS is one of his clients because he hedged around and gave, in my opinion, a very weaseley answer.

Ron from Houston boarded the StarShip after the break and asked a pretty good question on the role of hedge funds. A hedge fund requires volatility to be successful, but volatility has nothing to do with capital allocation. The guest gave another semi-weaseley answer, “hedge funds can be beneficial in revealing things about companies.” “In 2008, hedge funds did not create systemic risk, it was the highly regulated firms (banks) who created this risk.”(Paraphrasing.)

Bob asked about HRC’s capital gains tax proposal. The guest said it was “not appropriate.” The guest went on to point out that since 1926, 50% off the returns associated with the SP 500 came from dividends.

(Ed. Comment: Are we going to have to start counting how many weeks running Bob avoids saying the words, “Hillary Rodham Clinton?” )

The 90% rate advocated by Bernie Sanders “would only benefit government.” Back in the 1950s, this very high rate was designed to gather taxes from a handful of very wealthy people. (As was the alternative minimum tax). Bob wrapped up at about 3:50 pm.

Honey EC: And also that 90% tax was largely avoided through loopholes, so almost no one paid it.  

JEFFCHRISTIE'S MONEYTALK FINAL EXAM QUESTION

Caller Ed from Cape Coral Florida told Bob there was someone predicting the Chinese Yuan was going to go up against the US dollar. Bob Brinker said.

A) He agrees. B) He doesn't know. C) It was complete nonsense. D) Who cares.

ANSWER

Honey EC: That's right Jeff,  and Caller Ed was concerned that the IMF might make the yuan part of the reserve currency. Brinker said it was possible, but would be "no big deal."  

PODCASTING:
Los Angeles. KABC 790. Moneytalk plays two hours later in the evening. They podcast and ARCHIVE podcasts.

Brinker's guest-author was Jason Trennert My Side of the Street: Why Wolves, Flash Boys, Quants, and Masters of the Universe Don't Represent the Real Wall Street


                                                 (Summary posted at 6:47pm PDT)