Sunday, November 23, 2014

November 23, 2014, Bob Brinker's Moneytalk: Stocks, Bonds, Investing, Economic Summary

November 23, 2014, Bob Brinker hosted Moneytalk live today.....(comments welcome

STOCK MARKET: Brinker said:  Here we are looking at all time closing levels for the major indexes. It has been truly a remarkable run that we have seen in the stock market -- for sure… The Standard & Poor's 500 index is 2063.5, the highest closing price in the history of Wall Street. The Dow Jones Industrial index, even though it's only 30 stocks, closing at an all-time historic record high of 17,810.  So this is a market that we have been looking at that can only be characterized as truly spectacular market. 

Brinker also  told 76 year-old Steve from Texas that he was okay with him being balanced 60 bonds/40 stocks in the markets -- using Marketimer model portfolio III.  

VANGUARD HIGH YIELD BOND FUND....Caller Mike from Fort Myers asked Brinker if high-yield funds would lose net-asset-value if interest rates rise. 

Brinker replied: "....The other piece of the puzzle on a junk bond fund is the quality of the holdings.  Now if you check that fund I, you will see that fund took a beating in 2008 during the financial crisis when people worried about getting paid on a lot of things.  So you have the credit quality component of return on a junk bond fund.  You don't have to consider that on a treasury fund…"

Honey EC: My goodness, Brinker knows first hand how that fund took a beating in 2008-2009 because he had his Marketimer income portfolio investors invested to the tune of 25% of their holdings. I got emails from several subscribers who wanted to know what they should do. I always told them to hold on, it would come back. Brinker sold all Marketimer holdings in VWEHX in October 2012. 

Another point that Brinker does not tell the audience and I doubt that many subscribers know -- the "low-duration" funds that he now has in his Marketimer income portfolio and his balanced portfolio III all contain low quality securities.

BRINKER'S FAIR WAY TO DEAL WITH MINIMUM WAGE.....Brinker said:  "I want all of our Moneytalk listeners to understand that the fair way to deal with the minimum wage, once it's established and it was established decades ago – the fair way to manage that is to index the minimum wage to inflation so that the real value of the minimum wage remains the same no matter how much time goes by.  But that's not what was done… Unfortunately, the party that brought you the minimum wage decided we will not index this minimum wage because if we index that we are protecting workers forever against any problems because they are going to be made whole through indexation – just like we do with the tax code, by the way… And as a result they won't lose any purchasing power because that will be taking care of just like Social Security is taken care of through indexation on an annual basis.  Instead the party that brought you the minimum wage made a cynical decision not to index the minimum wage.  Now why did they do that?  They did that because they wanted to use it for ever as a wedge issue so that anytime so that anytime they are getting some bad headlines – as they recently did in the election, they drag out the wedge issue.  Oh what about the minimum wage?"

HOUSING:Brinker said: "Good news this week on the housing markets.  Single-family housing starts were up in the monthly update and building permits were also up.  That's right, groundbreaking for single-family houses increased in the month of October along with permits for future construction.…  Another thing that supporting all of this, and we have a decent housing market, we have very low mortgage rates – very low.  We have jobs growth and we have housing affordability.…  We have more homes under construction right now than it any time since the end of 2008."
 
INFLATION/CPI:  Brinker said: "Meanwhile inflation figures continue to come in and they continue to be quite impressive.  In fact very impressive in that they are really not showing much in the way of inflation.  Inflation is a big deal because stock market price-earnings ratio feed off of inflation… We now have the figures for October.  The Consumer Price Index through the end of October – year to date, was zero.  Inflation in October came in at zero and year-over-year 1.7.  Even over the last four months, inflation is zero.…  Core price index – which is all items minus food and energy, is 1.8%.....

Brinker continued....."On the other hand when we look at food prices, we cannot be happy because a lot of this is related to what's happened with the weather.  Food prices are going up 3.1% on a year-over-year basis.  There isn't much you can do about food price inflation because food price inflation is primarily dependent on the weather.…  Bottom line 3.1 food in price inflation is rough because it hits everybody including the people who are just scraping by paycheck to paycheck… They have been offset some by lower energy prices… For example gasoline year-over-year is down 5%… We certainly have to be pleased when we see medical care year-over-year up 1.9.  Now you remember we have talked about it, medical care has a tendency to be on the high side… That's really good to see because it's taken a long time to get medical care under control."

Honey EC: Brinker elaborated on all the "good economic news" he gave in the opening monologue and said there was a big disconnect between reality and what the voters see. I don't think so. I think the disconnect is between Brinker's rose-colored glasses and what's between his ears. How many here have had their medical insurance go down in the last couple of years? I thought so -- noone.

US DOLLAR/GOLD: Brinker said: "Look at the strength of the US dollar.  The dollar has been on a roll, it is at its highest level in four years.  It has been one of the strongest currencies on planet Earth… It's ironic isn't it.  How many times did you heard from others – not here – that the dollar was going to get crushed?  Probably as many times as you have heard that gold was going to go up as gold has dropped precipitously for the past several years.  And it's ironic because you hear this so many times and it turns out to be the opposite of what actually happens.  There's some irony in there somewhere."

WAGES AFFECTED BY GLOBALIZATION.....Caller Joyce from Iowa made the point that wages  have not gone up. 

Brinker replied:  I think that wages have not gone up more than the rate of inflation over the last year……the average wage growth and the rate of inflation are almost identical…..One of the problems that cannot be dealt with by governments, and that  is globalization.We've talked about globalization for a long time on Moneytalk.  The inevitability of globalization on wages.…  And this is one of the things that you have seen.  Where you have seen jobs move offshore where there are workers willing to do the work for a lower rate and as a result you have salary compaction.…  You can't get rid of that, because to get rid of that you have to stop globalization.
 
NO NEED TO SPEND MORE THAN $30k FOR A CAR--BRINKER DIDN'T.....Joyce said: well I don't know how were going to be optimal for these $30,000 cars if we can't stop it.

Brinker replied: "Well I don't think everybody has to drive a $30,000 car and I think frankly there are many cars out there today that are less than $30,000 that are drivable and reasonable.  So I don't think there's a $30,000 minimum on the purchase of a car.  I know there isn't, because I just bought a car this month and I think I spent $23,500.  So it's not necessary to spend $30,000 on a car, and anybody that says it is is not paying attention."
 

Honey EC: Brinker didn't say who he bought the new car for -- I wondered if it might have been for a "young sprout" grandchild on his/her way to college.

BRINKER EXPECTS GOOD HOLIDAY SALES-SEASON.... Brinker said that people have extra money in their pockets now, so he expects a "good holiday season."

ETF1 Robert covered two important call dealing with Gold and Social Security/Medicare:

Call on Gold
(some excerpts and a loose rendition, not a transcription. A very long call)


Hour 1, 40 minute mark. Patrick, Charlotte, NC

Question about the recent announcement by the Netherlands, that the Dutch Central Bank has demanded 120 tons of its gold back from the Federal Reserve in New York……….could they see a crack in the dike because of the upcoming vote in Switzerland…..referendum where the people will decide if the Swiss National Bank will have to back their currency with 20% of assets held in gold…are the gold bugs going to come out…….are we going to see a short squeeze in gold……the Swiss are going to need 400 tons of gold, and all these other countries like the Dutch….Germany has also in the past demanded some of its gold back……………….

So what’s going on with the gold issue and the Federal Reserve banks around the world? Is the paper fiat currency going to hit a wall or not?

BB: I don’t see any evidence of it at all Patrick. I’m sure the gold bugs are desperate at this point to try to come up with a story to try and resurrect the precious metal, as you know it has been crushed. It reached an all-time high of $1911 in 2011…………....The price of gold has been decimated, it’s now down 37% to the 1200 area. You’re always going to see stories from the gold community to try and hype up the precious metal, but I don’t see any evidence of it

Caller: But what if the Swiss Nat’l Bank referendum does go thru and they will have to get that gold back…..all that demand in the gold market……..You have strong demand from India, strong demand from China, Far East are big consumers of gold…….India just had a four-fold increase in gold demand………..there’s a limited supply out there, it’s harder to find, and Quite frankly, I’m putting my chips on gold

BB: “I view gold as a speculation, in the case of something like the price of gold…if you buy gold, you’re basically hoping that there will be a greater fool out there than you who will pay a higher price for it for some reason down the line…a lot of people have been sold a bill of goods….when gold was $1900 in 2011 a lot of people were told gold was going to $3,000 or $5000/ounce……instead it went down to $1200/ounce. It has been crushed

Caller: That was the result of the Federal Reserve gone wild creating 4.5 trillion of bond purchases….now we have Japan going into the market, they’re buying securities, they’re buying stocks……..eventually these Federal Reserve banks are going to run out of chairs and you’ll see a collapse……..Caller said he will be able to trade his gold for whatever commodity he needs to since it’s been a world currency since the dawn of time

BB: …………………..I just heard you say something which is 100% opposite from reality…… You just said that the Fed has been going wild, you were referring to the QE program……..….what you failed to say is that that is a reason for people to say that inflation is going to go wild and gold is going to go wild, and yet none of that happened

Caller: Your previous caller just told you…..(about consumer prices being a lot higher)…….we have inflation, but the Fed just won’t admit it….because that’s their job

BB: ……………Correct me if I am wrong….you just said that the Federal Reserve is lying about inflation

Caller: yes, they are understating the actual inflation rate…….Steak is $9.50/lb for a top round steak…used to be able to get those for $2 or $3/lb…………inflation is real out here…….I don’t know what planet you’re living on but this planet where I’m at, I see it every day

BB: I’m living on planet earth, along with everyone else that we know of………..You just said that the Federal Reserve is lying about the rate of inflation……if it is true…….. that also means that behind the scenes somewhere….they have usurped the power of issuing and tracking inflation from the Bureau of Labor Statistics…….who tracks and publishes the rate of inflation…………………..

Caller: Look at the unemployment rate….they said it was 5.7%….but they count part time jobs flipping hamburgers…in the 1970’s you could get groceries cheaper, pay your car payment……….

BB: Let’s do a little fact checking here. Out of the 140 M workers in the US today, how many of the 140M are part time. The answer is 7M are part time, but 133M are not part time…..you are focusing on 5% of the workforce and ignoring 95% of the workforce…………….…..while claiming that the Federal Reserve has secretly taken over the BLS and manufactured false inflation numbers, I don’t think it’s productive, but I do appreciate the call

Honey EC: What Brinker doesn't tell the audience is that he had gold (GLD) on his Marketimer "off-the-books" recommended issues list from May 2009 to May 2013. He simply added it in May 2009 with no guidance whatsoever and took it off in May 2013 with no reason or explanation given.  

Social Security Call:

Hour 2, 12 minute mark. Steve is checking in from Washington, Hello Steve.

Caller: I was wondering about drawing Social Security (SS) versus spending retirement savings, I am 65 so I will be 66 full retirement age later into 2015, I need some cash each month to pay for medical insurance until I am Medicare eligible. I just don’t know if I should just keep drawing down a little bit each month to pay for the medical insurance, or if I should draw SS a little bit earlier?

BB: I think it’s a very very good question and I appreciate you raising it again……For every year you postpone your SS payments up until the max age in terms of fulfilling the max amount you can collect, you gain over 7% in annual benefits. Now it’s true you have to live a certain number of years to make this pay off but the reality is in terms of the annual amount or monthly amount you get, You’re increasing it by over 7% for each year you defer SS…….so for that reason, for those that can afford to do so, I recommend, especially those that have a reasonable expectation of longevity, I recommend trying to postpone it where you can…….

Caller: OK, that makes sense to me…..Thank you so much

BB: The reality is, It’s basic math, since your SS annual take is increasing by over 7% a year every year you defer it, once you get out into your 60’s and thinking of taking it, every year you defer it you increase the amount over 7%....I think that’s a pretty good increase, especially in today’s world, and I recommend those that can afford to do so do just that

Comment: The caller is already 65 years old. Why does the caller think he is not eligible for Medicare right now?

Eligibility, Premium and Enrollment

When can I sign up?

The Initial Enrollment Period (IEP) is your first chance to sign up for Medicare. It starts 3 months before your 65th birthday, includes the month you turn 65, and ends 3 months after the month you turn 65.

Jeffchristie's Moneytalk Final Exam Question:

What is the name of the game that Bob Brinker said he saw being played on the street when he worked in the canyons of Wall Street?

A) Crapes.  B) The shell game. C) Three card Monte. D) Five card stud.

ANSWER
 (Summary posted Monday at 12:27 due to ISP outage on Sunday.)

Brinker's guest-author today was Don Tapscott: The Digital Economy ANNIVERSARY EDITION: Rethinking Promise and Peril in the Age of Networked Intelligence

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.)  


Sunday, November 16, 2014

November 16, 2014, Bob Brinker's Moneytalk: Unannounced Re-Run Calls and Monologues

November 16, 2014....All three hours of Bob Brinker's Moneytalk was old (some very old) re-run calls and pre-recorded monologues.   He has gotten more clever at deceiving the audience, because it took even me about 20 minutes to be sure......(comments welcome)

Bob Brinker's current stock and bond market advice:

There has been no changes in Brinker's bullishness on the stock market and bearishness on the bond market.

Brinker recommends that all stock market asset allocations be invested or dollar-cost-averaged in "on weakness" if possible. His S&P target range "going forward" is "low-2100s."

Brinker recommends that durations in bond funds be kept in the one-year range. However so far, the changes he made to his fixed income holdings in the Marketimer income portfolio and balances model portfolio have been costly to those who followed his recommendations.

Selling Vanguard Ginnie Mae Fund has been especially costly because its NAV has increased from $10.37 to $10.79 while the Fidelity Floating Rate High Income Fund has declined -- and this is just one of the changes that he made that are underwater from what he sold.  I covered the fixed income portfolio more in depth in my last show summary.

Jeffchristie's Moneytalk Final Exam Question:

Today Bob Brinker mentioned the opposite of the land of critical mass. He referred to it as:

A) The poor house. B) Shanty town. C) Hooverville.  D) Tap city.

ANSWER 

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.)  

Off topic, but proud. :) A family member doing the Arizona IronMan today: