September 21, 2014....Bob Brinker hosted Moneytalk live today......(comments welcome)
STOCK MARKET....Brinker said: "We are looking at the S&P 500 trading very close to an all-time historic record level; a Dow Jones Industrial Average that has been making all-time historic new highs."
Honey EC: Absolutely no change in Brinker's stock market outlook. He still recommends being fully invested and dollar-cost-average new money. He recommends a balanced asset allocation for those in or near retirement.
ECONOMY/JOBS/HIGH CONSUMER CONFIDENCE AND GROWING CORPORATE EARNINGS....Brinker continued: "And we are looking at all of this in the context of an economy that continues to grow – despite the naysayers that are out there – that are trying to pretend that it's not true. We are seeing growth in this economy. We are seeing new jobs in its economy. We are seeing a relatively high level of consumer confidence that has been coming in consumer confidence surveys. We are seeing all of this within the context of growing corporate earnings, which is – by the way – a very important piece of the total picture."
Honey EC: Wow, if I could carry a tune, I'd start singing "Happy Days are Here Again." :)
BONDS/DURATION.... Brinker still touting low duration bond funds and willingness to trade credit risk for interest rate risk. Brinker said: "I don't have concern right now about credit risk. I like the credit risk in this economy as a trade-off against duration."
ALIBABA HOT IPO....Brinker said: "Hey did you see that Alibaba initial public offering? We talked about it the last couple of weekends on Moneytalk. And we said that all the buzz on Wall Street was that this was a hot IPO and a hot IPO is supposed to go up the time after the initial public offering is priced. The initial public offering was a big one, it was priced on Thursday night at $68 a share which was the very top of the estimated price range. And it traded on Friday in the $90 range all day long – reached $99 at the high point of the day and then fell back -- up sharply for the first day around $93 a share.
BRINKER SEZ HE TOLD YOU SO..... Brinker continued: "So as we said on the broadcast, if you are able to get IPO price shares at $68 a share,… You were in line to get a nice pop in the stock on the first day… That is exactly what happened and it was what investors expected to happen. It was tough though especially for individual investors, it was tough to get their hands on shares. Because this was an IPO that was institution oriented really by necessity in a way because there was such a large distribution of stock on this IPO. So as a result, it was thought that the best way to market this was to go right to the institutions – and the institutions gobbled up a lot of shares. That's where a lot of the stock went.…
AND HERE'S HOW IT WILL PLAY OUT.... "Brinker continued: "So if you were listening to the program, you know my feeling on this. This now will play out based on the fundamental development of the company – how the company does going forward in terms of meeting their objectives and executing their business plan. That's what will be the driver one way or the other of the shares going forward. The easy money was made on the first day when it went from 68 to the 90s. That was the hot IPO money opportunity for those that didn't get shares on the IPO price. Beyond that it's back to the fundamentals – the business plan and how the company develops going forward."
HEDGE FUNDS AND GOING TO BIG HOUSE....Brinker comments: One of the things that we have talked about on Moneytalk many times is, what has gone on with the hedge funds. Many have had their eyes wide open ever since the news came out that some of these hedge fund gains are resulting from inside trading. And as you know, there are hedge fund managers who are going off to the big house to serve their time as a result of insider trading violations that were made when they were running their hedge fund operations. Some of gone off to the big house, some were sentenced to the big house but are on appeal, and others were able to buy their way out by paying enormous fines measured in the billions of dollars. But by paying these enormous fines so far at least they been able to buy their way out of jail."
HEDGE FUNDS PERFORMANCE AND CALIFORNIA SELLING THEM OUT....Brinker continued: "Now that we've learned that inside trading has been responsible for some of the gains that hedge funds of game, and now that we've also learned that we've seen five consecutive years of poor performance out of the hedge fund industry, and lo and behold, Sacramento California sa this week breaks the news that the That the California Public employees retirement system – this is the largest United States pension fund – announced that it is pulling out all of its money – $4 billion – invested in hedge funds. Calling them too costly and too complicated.… Now this is a big deal because CALPERS was one of the very first large pension funds to get involved with hedge fund investing, and here they are pulling their money out of 30 firms in order to get away from the hedge fund industry.… The fees they charge are ridiculous. They typically charge 2% annual management fee and 20% of profits.So we'll see whether other companies follow the lead of CALPERS and pull money out of hedge funds. Don't be surprised if it happens. It could very well could happen because CALPERS has been a leader in terms of the hedge fund industry."
Honey EC: Coincidentally, I received an email from a reader last week asking my opinion about buying hedge funds.....hmmmmm......
Brinker's guest-speaker was James Galbraith: The End of Normal: The Great Crisis and the Future of Growth
ETF1_Robert's comments sum up the interview very well:
I think the author has a lot of ideas that differ from BB's.......he wants to enforce the 35% tax rate on businesses and not lower it. I was a bit surprised that he defended it and would like the Treasury to act and if necessary Congress, to enforce and put an end to inversions....wants to raise the minimum wage to $12/hour. Even thinks people should retire earlier to create room in those jobs and pass those jobs onto the next generation..... I think he said "the system" is not as secure as people had hoped it would be, that we now realize that military power can't accomplish much, that technology reduces the need for jobs, that the current generation will have a much harder time with respect to finding new jobs and good wages than the post WWII generation, our financial sector is not contributing to economic activity as much as it did in the pastThese comments also sum up the James Galbraith interview:
Disappointing interview with Prof. Galbraith today. It could have been a lively exchange, but the opportunity was wasted. Brinker did not challenge the Professor's ideas at all; the closest he came was to ask for a clarification on the Prof's view on taxation of overseas profits just before the first break. He got a brief non-answer and never came back to the topic the rest of the interview. Prof. Galbraith could not be more wrong. His is standard Liberal stuff about taxing corporations more, higher minimum wage, yada yada. Nothing there. By the way, the correct tax rate for corporations, wherever profits come from, is zero. There are better ways for the government to extract more revenue from the economy with less damage.
Jeffchristie's Moneytalk Final Exam Question
Today Bob Brinker said some hedge fund managers were off to:
A) The Hamptons. B) The races. C) The poor house. D) The big house.
San Francisco, Ca. KSFO 560: 1-4pm (KSFO archives Moneytalk Free on Demand for seven days after broadcast. You can download and listen on the go.)