Friday, September 30, 2011

September 30, 2011, A Question for Bob Brinker's Final Exam

September 30, 2011....Bob Brinker sometimes talks about the Moneytalk Final Exam.  I don't think that he will be giving that exam any time soon,  but here's a question  that Jeffchristie suggested which might surprise many of Bob's listeners:

Who was president when Bob Brinker last issued any kind of sell signal? 

It happened in January 2000.  Brinker sold 60% equities from his model portfolios,  recommending the money be held in money market funds. (He raised another 5% cash in August 2000.) That was the last time that Brinker ever recommended selling equities and raising cash to buy back at lower prices.

So does that make Bob a buy-and-hold advocate?  That depends on what your definition of is is....errrrr,  sorry, that was someone else.  But you guessed it -- it was President Bill Clinton.
Birdbrain said:
"In the April 1 2003 Kiplinger article:

(Bob) Brinker predicts market timing, in general, will be more valuable in the future. "The buy and hold days are over" he proclaims.
And what has been Mr B been doing in the over eight years since?
Altogether on three...1..2..3
BUYING AND HOLDING"
I did a search for the article that Birdbrain wrote about. It's very interesting to see what Brinker said about buy-and-hold stock investing one month after he returned all 2000 cash reserves to fully invested.

Back then, Bob was touting his market-timing skills and riding high, but in 2007-2009, he missed the worst bear market since the Great Depression and rode it down fully invested. How ironic that during the  ensuing eight years from 2003, he did exactly what he said "was over."  Here are  excepts from the 2003 Kiplinger article about market timing: 
"While market timing has been in disrepute for many years, Brinker, who has been in the investment business 35 years, says that's only because of the long bull market.  Brinker predicts market timing, in general, will be more valuable in the future. "The buy and hold days are over," he proclaims."
 Here are excepts from a 2009 Kiplinger article titled: "Can You Time the Market?"
"Newsletter editor and radio host Bob Brinker, for example, correctly called the market top in 2000 and turned bullish not long after the bottom in late 2002. But he didn't get out of the way of the 2007-09 bear market..." 
Brinker largely maintains his reputation as a market-timer (in spite of the fact that he has not changed his fully invested equity allocation in eight years) by repeatedly declaring stocks "attractive for purchase" at various levels.   Like Bill Clinton, he sees a lot of attractive (market) bottoms, but hasn't got any cattle in his hat to take advantage of them... (Sorry for the mutilated metaphor.) :)

Thursday, September 29, 2011

September 29, 2011, Bob Brinker's Moneytalk Guest: Charles Maxwell

 September 29, 2011.....................................................(comments)

Bob Brinker's guest-speaker last Sunday was Charlie Maxwell. David Korn, who has written a weekly summary of  Bob Brinker's Moneytalk for over a decade,  has graciously given me permission to post his summary of Charlie Maxwell's Moneytalk interview.  

David Korn wrote the following, including editorial comments:

MONEYTALK GUEST – CHARLES MAXWELL

Introduction:  
Bob had on one of his favorite guests, Charlie Maxwell, Senior Energy Analyst for Weedon & Co.  Charlie was educated at Princeton and then Oxford.  He has been working in the oil industry since the 1950s.  In the 1960s he became an analyst on Wall Street and has been rated the #1 energy and oil analyst on many occasions.   Bob heaped heavy praise on Charlie as the best of the best in terms of energy analysts and mandatory listening for Moneytalk trekkies.  Bob also congratulated Charlie on receiving the M. King Hubbert E3 Ward for Excellence in Energy Education at the 2007 ASPO World Oil Conference.  I summarized the interview below.

Brinker/Maxwell:  Bob asked Charlie his thoughts on the collapse of the solar-electric company Solyndra.  Charlie says it is important that government step in and help at the early stage in new technologies. China is doing that allowing them to do preliminary research that doesn’t produce revenue and get them over the hurdles of the early days of the industry when there are little profits to have.   Our government has been remiss in not helping much.  They don’t have to give money, they can lend them money and check on them.  President Obama with a good thought in his mind and trying to help America went ahead to push solar power.  The problem is he doesn’t select companies or gives them the money and his underlings let him down by picking a loser who had a new and controversial type of solar power that they thought would be cheaper but turned out to be much more expensive and they couldn’t sell what they have made.  They should have pulled back from their help but they didn’t because they were told by the company that everything was all right and just needed time.  They weren’t analyzed carefully by the government and now a bad name has been given to the industry and to President Obama for helping.  It shows you can’t just throw money at problems, you have to monitor and evaluate and follow up.

EC:
 Solyndra was a manufacturer of solar cells and last year was promoted as a model for government investing in green technology.  A $535 million loan guarantee was applied for under the Bush administration but was denied, but later granted under the Obama administration and private investors also invested more than $1 billion in the company.  Early last month, the company ceased all business activity filed for Chapter 11 bankruptcy and laid off all employees suspended all of its operations last month leaving behind the United States government as its largest creditor.

Brinker/Maxwell:   
There is a lot of volatility in oil prices.  What do you see ahead?  Charlie says there is almost nothing that can stop a longer-term rise in oil prices because oil is the most attractive energy supply. It is easy to transport.  It is powerful as a fuel. And we have been using it like crazy for 150 years.  We have now reached a point where we are producing 88 million barrels a day and the earth is saying how can I continue to grow this much.  Getting the production going has been a real problem.  In 5 years we will probably reach a plateau and at some point we won’t  have additional barrels and the price will go up and we will have to ration oil for those who don’t have the money to pay for the higher rates.

EC:
 Charlie is on record stating that agrees with the viewpoint of the renown Shell geologist, Dr. Marion King Hubbert, who predicted that the world oil production would reach a peak and then rapidly decline.  Hubbert said the amount of oil given to our planet when it was formed is finite.  When an individual field has produced 50% of its oil, you cannot force it to produce more oil on a daily basis.  Charlie thinks the we are not far away from when more countries have declining production versus those that have rising production.

Brinker/Maxwell:  Bob said we are sitting on incredible reserves of natural gas and many have implored the President to start a program that would require all federal vehicles to use natural gas which would jump start this program.  Charlie agreed that he has not picked up the ball on this issue.  We have problems with coal because of greenhouse gases (and he thinks we will have to reduce it); we are running short of oil, and we have the problems with nuclear energy now other countries saying no to nuclear following what happened in Japan. (Charlie thinks we will come back to nuclear in 20-30 years but it has been terribly delayed by the issues in Japan).  And here we have natural gas which produces less waste than coal or oil.  In the US, we have a surplus in gas and the price has dropped in half over the last five years so it makes sense to increase our reliance on it.  We should have growth of 4-5% a year, but instead it is 2% a year and the government is not sponsoring it.  Why not?  The environmentalists are a big factor.  They want to get rid of the fossil fuels (Charlie says we all do), but they fuel 80% of our energy and so we can’t get rid of it immediately.  Solar and wind just won’t cut it right now because they account for a very small percent of our energy and are expensive sources and take a long time to develop the capital equipment.  What we have available is fossil fuels.  So if we are going to be forced to use less oil and we want to use less coal, let’s go with natural gas.  Let’s use it for more transportation purposes where oil dominates.

EC:  Last time Charlie was on the show, Bob had asked him to comment on whether hydrogen would ever play an important role in our energy supply.  Charlie said he thinks it will in 40- 50 years because hydrogen is the most plentiful element on the planet.  Charlie also pointed out that he problem is that Hydrogen bonds so easily and powerfully on a molecular level with other elements that it requires a lot of energy to unbind it and, therefore, getting pure hydrogen is therefore expensive, and it costs money to transport and store.

Brinker/Maxwell:  
Bob noted that Wind and solar energy only amounts to less than 2% of our energy yet there seems to be a huge lack of federal sponsorship for natural gas. Charlie says it is a political issue.  There is a battle between maintaining our standard of living and the ideology of the environmental movement.   Charlie said we are finding out new ways of opening source rocks that we have known about for a long time but could never open.  Using new cracking techniques with sand, we are getting lots more gas than we ever suspected we would.  We are going to have a lot more natural gas which can be converted to liquid form so many big trucks and buses can use it as well as for marine applications.  It can be compressed or put in a liquid by cooling. All of that will allow us to move to a natural gas economy over time.

Brinker/Maxwell:  
There is a lot in the headlines about a move against the oil companies and the White House is talking about raising their tax bill.  What is your view?  Charlie said we need to do something if oil is going to reach a peak in the next 5-10 years.    We need energy efficiency.  However, we could use help to get a little more oil than we might otherwise get if we don’t make a real effort.  What we have seen so far is the President comes up with a good idea like increasing car miles per gallon, but then he slams the energy companies by taking away the means to do it. We have a government that wants to punish the oil companies for their success, but on the other hand needs the oil companies since the government can’t do it itself. The result is that we are not making the strides we need relative to our energy policy. We need leadership on this issue otherwise we will have big problems 7-10 years down the road.

Brinker/Maxwell:  
Should we be drilling for more oil in the United States?  Charlie said every barrel we can save or can substitute for oil we should.  We need to cut down on the imports and increase the value of the dollar by not spending so many dollars on these imports. We are very vulnerable to being cut off from imports. We need to create greater efficiency and finding more oil where we can.  Charlie said we will never find enough oil in the United States to meet our needs.  It will never get back to the glory days of the late 1960s.  But we can develop some additional supplies and every barrel we do it will cut back our reliance on some of the very countries that are using that money to fuel terrorism.  Charlie said they can just give the oil companies a level playing field by removing some of the paperwork and ways that don’t involve tax breaks.

Brinker/Maxwell:  Are there any areas that are potential drilling regions in the country that you would be taking a serious look at if you were in charge?   Charlie said Alaska has areas that have never been tapped that have substantial amounts. The other is area is the Gulf Coast where there is a lot of oil and and we have found new sources of oil and gas.

Caller:  
Don’t we have tons of oil in our country that we just haven’t found yet?  Charlie said we found oil in 1859 for the first time and we have been producing more and more since them. There has only been 5 or 6 years that production has been down. Then came Hubbard in 1956 and said this will last until the early 1970s then we will go over the peak. Then in November 1970, oil production peaked. He was absolutely right and we have been in a downward course of production from 1970 through today.  At that point we were the only country progressing downward in oil production but now there are 13 other countries including Russia that have a downward production and so this is a very well accepted theory around the world.  Soon the whole world will peak, probably in the late teens.

EC:  David Strahan has written a book called, "The Last Oil Shock."  In that book, he writes, "There are currently 98 oil producing countries in the world, of which 64 are thought to have passed their geologically imposed production peak, and of those 60 are in terminal production decline."  Learn more about that book at the hubbert peak web site at this url:
 

www.hubbertspeak.com

Brinker/Maxwell:  
Bob asked Charlie to comment on China as it relates to energy.  Charlie said 70% of their energy is derived from coal and they don’t have the administrative restrictions that we do so it is blasting out into the world and polluting the sky and air.  We are all breathing air that has been polluted in China.  We are working with the Chinese, but they will probably not cut back on their economic growth and so they will probably keep up their coal use.  It is the cheapest source for electricity.  That is a long term problem that we can’t solve since it is not an American problem.  On the other side, we should be sponsoring a lot more natural gas. The Chinese have natural gas and they can easily import it through pipeline from a number of countries in Europe and Asia.  We should be helping them do that. They can also import it in liquefied form.

Caller:  This caller has been following the building of wind towers in Illinois.  The caller wanted to know what rate of capacity they are putting out because he read a report that they are spending a lot of money without getting much bang for the buck.   Charlie said he is afraid that he is right.  Although he can’t speak to the wind farms in Illinois, when you hear someone say you get 70-80% capacity when the wind is continuously flowing they are right; however, wind doesn’t continuously flow and during hot spells you have to fire up the coal production as a back up to the wind farm. It means you have to build the equipment even if you don’t use it.  This is being sold to the American public as a real answer and it is not a real answer. It is pretty close to break even in terms of making a profit bur we need to look elsewhere.  Photovoltaics will take over wind as a better long-term energy solution.

EC:
Photovoltaics generates electric power by converting solar radiation into direct current electricity using semiconductors that exhibit the photovoltaic effect.  Try saying that five times fast


 David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service.  Copyright David Korn, L.L.C. 2011

Honey here: If you would like to have a complimentary issue of David's weekly newsletter, or The Retirement Advisor that he co-publishes with Kirk Lindstrom, there are links to both here: David Korn's newsletters (look in the right column under "Related Links").


Sunday, September 25, 2011

September 25, 2011, Bob Brinker's Moneytalk: Summary, Excerpts, Commentary and Discussion

September 25, 2011....Bob Brinker hosted Moneytalk today............(comments)

STOCK MARKET....Brinker did not talk about what's been going on in the stock market today.  It may or may not have anything to do with the special online bulletin he issued last Thursday.  The S&P closed at 1129 that day.

We know that Bob did not issue a sell signal -- he's bullish and fully invested.  Bob Brinker's Marketimer target range prediction for the S&P has been low-to-mid 1400's since March 2011. He increased the time-frame in August from  "this year" to 2012.   My friend, Jim, has a theory that makes absolute sense to me:

Jim said...
I think Brinker is waiting to see what the market does. Brinker will only mention the bulletin if the market rallies from here. If it does not, he will cover it up like all his other failed buying opportunities.
September 25, 2011 4:18 PM
BOND MARKET....Bob said the quality bond market is at record highs. Treasuries yields are at record lows. Honey EC:  It's been ages since Bob took any questions about muni-bonds, general obligation bonds or I-Bonds. He no longer recommends  TIPS, Treasury Inflation Protected Securities. Earlier this year, he sold out the weightings in his fixed-income and balanced portfolios. 

SAFETY OF INVESTMENT FIRMS....Caller Don from Massachusetts wanted to know if what happened at UBS could happen at  institutions like Fidelity and Vanguard.

Bob said: "You have to understand that UBS has a trading desk where they trade for the banks account. And that is risky situation. Now  it's not unusual, most of the major banks are going to have a trading desk...... That's  not what you're looking at when you're looking at a mutual fund company.......A mutual fund company has a group of mutual funds, in the case of the companies you mentioned, a very large group of mutual funds for investors to choose from and it's the same situation where they are out there trading for their own account or speculating for the market. So my reaction to that question is that it's an apples and oranges situation.  Now if you said what about Citigroup, Bank of America, Wells Fargo, JP Morgan, yeah, I'm sure there's a lot of trading going on at places like that and that is part of the equation."

SAFETY OF MONEY MARKET FUNDS.... Caller Don followed up with a question about money market fund safety. Bob explained that any investments in money market funds that are not dollar-good are going to cost either the shareholders or the management company.  He said that those are the only two possible resolutions, and that is why he recommends dealing with very large companies.  Large companies are more likely to make good any break-the-buck losses.

REFINANCE HOME TO TAKE EQUITY OUT....Caller Steve from California asked Bob what he thought about his plan to re-finance a $300,000  home loan  on his $600,000 property  and borrow an additional $100,00 so he'd have more liquidity in case he lost his job. Bob agreed that would be acceptable if he wanted the extra money for a safety net and was willing to pay 4% for liquidity -- and if it was invested  prudently.

Honey EC: It surprised me to hear Bob give his okay to borrowing extra money on a primary resident to invest. As I recall,  Bob has always been very against doing that. 

LUMP SUM OR ANNUITY? ....Caller Maria from California asked Bob which would be better for her, a sizable lump sum retirement payment or a generous annuity.  Bob asked her for all the details and then told her that it really comes down to whether she wants to increase her net worth, and have more to leave to her two sons, or take the yearly annuity which paid 31,000 a year.   

WASH SALES RULE/TAX LOSS TRANSACTIONS....Caller Roger from Tucson wanted to know when was the best time to sell a stock for a tax loss. Bob said that both ends of the transaction have to occur within the same calendar year.  And you have to allow 31 days to elapse, so late November is the latest you can sell  in order avoid the "wash sale."   Bob  explained that if you are worried the market might go against you, you can buy  double of your shares, hold them for 31 days and then sell half.

KEYNESIAN SPENDING.... Caller Josh from Naples said that Bob was "mistaken" when he said that  "certain talk show hosts" equate the country failing with politicians failing. Josh said that half the country is against "fundamental change" by Keynesian stimulus. Bob literally shouted Josh down repeatedly until he finally shut up. Bob shouted "This is important, since Keynes can't speak for himself."   He said that  what the politicians have been doing is not what John Maynard Keynes wrote about.  Bob called Keynes a "genius."

Honey EC: At the beginning of the government stimulus packages, Bob clearly said it was Keynesian economics and repeatedly raved about how it was needed and was a great thing to do. 

VANGUARD GINNIE MAE FUND TOTAL RETURN....Caller Arthur from Oregon said the fund was showing a 6% interest rate for the year. Bob explained that the 6% was total return and  would include the increase in net-asset-value.  Bob said that Vanguard's expenses were very low.  Honey EC: So are Fidelity and Charles Schwab's Ginnie Mae Funds. 

GREECE SOVEREIGN DEBT....Bob spent close to half of each of the first two hours of the  program discussing Greece and European sovereign debt issues. Greece may default on its sovereign debt. He cautioned that their banks could be nationalized and investors could  lose 100% of their capital.

EUROPEAN STABILITY MECHANISM....Bob also reported that the establishment of the "European Stability Mechanism" may be sped up to come to the rescue of European economies.    From Businessweek: "European governments are exploring accelerating the start of a permanent rescue fund for their economies, with senior finance officials set to examine this week the cost advantages of setting up the European Stability Mechanism, or ESM, a year earlier than its July 2013 start, according to a document prepared for the meetings and obtained by Bloomberg News."  All of the news that Bob reported on is available online. Here is  link to several headline news stories.

Bob's guest-speaker today was Charlie Maxwell, oil analyst from  Weeden and Co.   I will try to write more about this interview during the week, but you may want to download the interview from KGO 810 radio. It is archived in the 3-4pm time slot. (It's free)

Saturday, September 24, 2011

September 24, 2011, Bob Brinker's September 22nd Special Bulletin

September 24, 2011............................................................(comments)

Bob Brinker issued a special online bulletin September 22, 2011. Was it a sell-signal,  hold-signal or buy-signal?  I will use some known facts about Bob Brinker's market-timing history to do an analysis, and then make an educated guess.

WAS IT A SELL SIGNAL? 

Bob Brinker has never sold into weakness. Just the opposite, he has often recommended against selling into weakness. Based on most of his record, he'd rather ride the bears to the bottom fully invested than sell into weakness.

David Korn, an expert on Brinker's financial-advice history, wrote: 
"It bears noting that in the 22 years of Moneytalk, Bob has only issued a sell signal twice. Once following the crash of 1987 which turned out to be a very bad timing move and resulted in the subsequent modification of his timing model to include a sentiment indicator.

The second time was based on the market's close on January 8, 2000, where he reduced his stock market allocation from a fully invested position, to 60% cash (later increased to 65% cash). I would certainly not expect him to issue a sell signal at this juncture. 
AND: September 27, 2009 (after the S&P had dropped from 1565 to 1060) Brinker said: "Actually Ken, it's not my opinion that you should be selling stocks right now. I don't have a recommendation to sell stock right now. And if I did have a recommendation to sell stock right now, you would know about it. No, I do not have that recommendation. And really, that's all I can say. We have not, we have not issued a sell signal on this market." 

CONCLUSION:  Brinker did not issue a sell signal last Thursday with the market  down close to 15% when it closed Friday.

WAS IT A HOLD SIGNAL?

Brinker has never issued a special bulletin  just to say "hold."  Conclusion: Brinker's Thursday special online bulletin did not say "hold."

WAS IT A BUY SIGNAL? 

Brinker  has always promoted himself as a market-timer. His investment letter is even named Marketimer.  If he ever stopped issuing  so-called buy-signals for new money, it would soon become apparent to everyone that he has joined his often-denigrated "church of buy and hold" because it's been years since he has issued any sell-signals.  

So even though he advised his followers to remain fully invested,  and  his model portfolios are fully invested (since 2003), and he has not raised any cash,  he has continued to issue buy-signals over the years.

CONCLUSION:    When the market declines, like it has recently, Brinker issues buy-signals. When the market goes up, he picks the one of those buy-signals that is near the bottom and touts it repeatedly on Moneytalk.  Therefore,  I conclude that the September 22nd special bulletin, issued when the S&P was at 1129 (down from an April year-to-date high of 1363) was a buy-signal (for new money).  

Brinker's most recent "attractive for purchase buying opportunities." Count yourself very lucky if you did not take any in 2008 or early 2009 seriously!

  • 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.
  • April 3, 2009 S&P @ 798: 676 benchmark low in. Short-term weakness is buying opportunity. He gave up giving specifics. S&P500 Target: 1000s to 1100s in next 12 to 18 months. (we got there in 5 months!)
  • July 1, 2010: S&P 1030: "attractive for purchase."
Out to lunch with a couple of friends last week and ran across these wonderful classic Chevys on display:


Wednesday, September 21, 2011

September 21, 2011, Bob Brinker's Moneytalk Guest: More Taxes is the Solution

September 21, 2011...........................................................(comments)

Last Sunday, Bob Brinker's third-hour guest was Menzie Chinn who is with the University of Wisconsin. You will either love this guy's views or you will be infuriated by them.

Bob Brinker started the interview by reminding Chinn that the national debt is now over $14.5 trillion,  with $9 trillion of it being  held publicly -- which includes the paper held overseas. He said there doesn't seem to be any "true  political will" to do anything about it because for the third consecutive fiscal year,  we are going to chalk up well over a trillion dollars in national debt. 

Chinn replied:  "I think this is the natural outcome where you have a debt-lead boom that's unsustainable. There was an accumulation of house debt in the private sector under the premise that housing prices could go up indefinitely......A lot of that debt has been transferred to public sector.  Where times were unnaturally good before are now unnaturally bad now.  A big chunk of that shortfall is not specific discretionary measures but rather the fact that tax revenues have collapsed.....A lot of it that tax revenues are way down.....If we just let the current law stay in place a lot of these problems will be solved in the next two years if you let the tax-cuts of  '01 and '03 expire. You pull up tax revenues back up toward historical levels and that will shave off a lot of the accumulation of debt that we see."

Bob pointed out that things seem to be going the other way because the president has proposed a 50% payroll tax cut on both sides for 2012. He asked Chinn  if that doesn't make these policies at odds.

Chinn responded that it appeared so on the surface. In the  short-run, we don't want to stall the economy, but we need to look at the longer horizons where there are real problems with debt.


Chinn said: "It's the fact that entitlement will explode in after the next decade, particularly in the health area. What's true is even if we get tax cuts ended, the president's proposal was for temporary tax cuts, then let's also let the Bush tax cuts expire, that's good for a few years and that solves a lot of our problems. Then going forward into, let's say 2025, 2030, everybody agrees that's where the big problems are. And it's not really Social Security, that could be solved with relatively minor adjustments. It's really health care, Medicare..... A lot of the rhetorical right now is let's cut discretionary spending, let's cut defense, NOLA, the weather service, things like that. That may have the feeling of doing something good, but that's not going to face the true debt problem that the nation faces......We saw this debt coming a long time ago. I was in the White House ten years ago, serving as a staff economist and we saw that entitlements would explode in the 2020, 2030's. All that's happened is we've moved that up with the Bush-era tax cuts. It's a problem that's always been there. It's not really a debt problem that's completely because of the short policies we've had in the past three years."


Honey EC: Personally, I am sickened to know that this  blindly-biased man was an "economist in the White House" ten years ago and is now teaching these ignorant views in University. If he bent over any further backwards to keep from putting any blame for the state of our economy and national debt on the current administration, he would have been a pretzel.


Bob pointed out that in the first half of this year, real GDP  grew at  only 0.7%  annualized, and that his estimate is 1 to 2% for 2011. Bob asked: "I need to ask you what would we be looking to to justify a massive tax increase, an exceptionally massive tax increase when you consider this proposal to cut the payroll tax next year.  Some of which, if not all, is going to go into law. So you go into 2013 and the payroll tax goes back to where it was prior to this year, and then you also have the expiration of the tax cuts.....The question is, why should we believe that the economy will be ready for that kind of a tax increase?"


Chinn replied: "At some juncture, we do have to raise revenues. If you look at a graph, you know we're at an all time low in terms of total federal and payroll income tax revenues......I have a feeling that a lot of the  measures in the tax code right now are giving a gift to certain individuals and households without necessarily spurring economic activity. So what you want to do is raise revenue in a smart way that doesn't hurt growth over the longer-term."

Honey EC: Looks like Mr. Chinn believes that the money that the government doesn't take from "individuals and households" is a gift from the government! Now where are my smelling salts??

Bob abruptly changed the subject and reviewed everything that he said earlier about Warren Buffett (please see Sunday's summary for Bob's take on this).

Chinn's response: "The fact of the matter is you have to get additional revenue. Where is the additional revenue? It's people at the higher income deciles. Personally, I'd say don't stop at millions. Go further down on the income distributions, but it sounds like those at one million and above is at least a reasonable place to start."

Honey EC: Obviously, Chinn does NOT agree with Brinker's take on Buffett or the phony-baloney about how he pays less than his secretary. Just the opposite, he totally contradicted what Bob said. 

Chinn went on to blame the exorbitant increase  in debt between 2007 and 2011 on President Bush. He blamed the Bush tax-cuts, the Afghanistan and Iraq Wars, but mostly Iraq -- no doubt because Obama has been in charge of the Afghanistan War.  He blamed Medicare Part D, which of course gave Bob another chance to complain about it.

Chinn also said he would be all for doing away with the household mortgage deduction and claimed that we  could double income tax revenue, as of 2010, if you got rid of "every expenditure of that nature."  But he said that won't close the deficit gap -- that we absolutely  have to raise tax rates unless we want to do without "a national weather or US geological survey."

Honey EC:  LOL!  Mr. Chinn, while you're at it, you could threaten to close all first-responders, fire, police and libraries. And don't forget the young sprouts who will never eat again when we're forced to  close public schools. Come the think of it, not a bad idea. Why not start with the University of Wisconsin. :)

Some of the callers disagreed with Chinn, but the best caller was Jackie.   FrankJ has written some excerpts from that great call: 

Menzie D. Chinn from the University of Wisconsin was the guest in the 3rd hour.  He co-authored a book titled, “Lost Decades: the Making of America’s Debt Crisis.” 

In his response to some of Bob’s questions, the guest referred to certain deductions as “giving a gift” to the taxpayer.  This is what might have gotten Jackie’s attention.  She was calling from Atlanta, and was about the 4th caller for this guest, coming in at about 44 minutes into the third hour.   

Jackie:    “Bob, first I want to tell you how much I like your program and I’m on my way to work, I work all night…I’m close to retirement age so I have a lot of mental history about this country and the times we’ve gone through.
It’s a good thing I didn’t come on first, because I would have said some things about this person that I would have regretted…”
Brinker:  “Wait a minute, now I want you to talk directly to Manzie our guest, he’s on the line with you.”
Jackie: “OK, well the only 2 deductions I can take on my income tax are the mortgage deduction and charitable giving.  I take my return, because I have a sizeable mortgage and I pay my local property taxes which amounted to $13,000 last year, and I work very hard, I work all night. 
I have just retrained myself at my own expense to become a respectable person in the healthcare industry and I spent $250,000 of my own money to go back to school.  I didn’t take one penny of unemployment when the company for which I worked, after 128 years in business closed because the entire textile industry went to China.
I don’t know what you think my political leanings are, but I can tell you they are in contradistinction to you, Menzie.”
Brinker took over and told the guest author that there were millions of people like Jackie who are sick and tired of the whole thing and they feel they’ve paid their taxes and now with this huge debt, the government wants more, and they’re unhappy campers. 
The guest said he understood the anger and then went on to say that he thought it would be good to make income taxes more progressive.  People making $1 million and above can bear an extra burden… he’s not proposing to raise taxes on the lowest income deciles… people below median income, “I’d prefer they have no increase in income tax.” 
 Honey here:  Thank you for that, FrankJ! 

Bob never contradicted or blatantly argued with Chinn, but his voice seemed stressed  at various times,  and he often spoke in a clipped manner.  You can download the third hour (3-4pm slot) of Moneytalk from KGO if you want to listen to it.... It will be available until next Saturday.

Moneytalk on demand and to go with Bob Brinker, is available for FREE audio/podcasting at KGO810 radio for seven days after broadcast.  (At the KGO website, go to "listen/podcast" to download.)

FrankJ's daughter took this beautiful photograph at Gilpin Lake, near  Steamboat Springs, Colorado.  Click to enlarge:  


Sunday, September 18, 2011

September 18, 2011, Bob Brinker's Moneytalk: Summary, Excerpts, Commentary and Discussion

September 18, 2011......................................(post and read comments)

Bob Brinker, sitting in the Catbird Seat with a Watermelon Smile, hosted the Starship Moneytalk today.

STOCK MARKET....Bob never talked about what's been happening in the stock market. And believe it or not, there was not one caller who asked what he thought about it.

RISKS OF VANGUARD WELLESLEY INCOME FUND....Caller Gary from Lousiana said that he had his emergency stash invested in Vanguard Wellesley and Franklin Income Funds and wanted to know what risks were involved with these funds.


Bob said: "Well you are certainly subject to some volatility, some fluctuation. In this case rising interest rates would be a factor and would not show up well in some of those funds. Obviously, the stock market would be helpful to those funds, as long as the stock market is doing alright. One thing I would ask you to do is check the expense ratio on that Franklin Income Fund. Expense ratio is a very important part of income investing. And we try to keep the expense ratio on our income portfolio recommendations as low as possible." 

Honey EC: Vanguard Wellesley Income Fund, which is part of Bob's Marketimer (officially off-the-books) Income Portfolio, has an expense ratio of  0.28%.  The Franklin Income Fund expense ration is 0.65%, plus a 12b-1 fee of 0.15% and a maximum initial sales charge of 4.25% -- ouch!  (Bob recently recommended the Double Line Total Return Fund which has an expense ratio of 0.74% and a 12b-1 fee of 0.25%.)

BRINKER'S CONSERVATIVE BALANCED-PORTFOLIO RECOMMENDATION....Caller Karen from Seattle said she is 78 years old and recently "got scared" into selling all of her Vanguard Ginnie Mae Fund.  Now, she is being advised by  a "no-load fund company"  to buy Vanguard Total Bond Fund and Vanguard Total International Stock Index.  She said they "even want me to sell Microsoft and put it in the Total International Stock Index." 

Bob told her that it was all about her asset allocation and tolerance for risk. He pointed out that there has been "tremendous volatility in the last several years in the stock market." Bob said: "I'd want to have a conservative balanced portfolio. My definition of conservative balanced would be 30% in the equity market, because you are getting a decent dividend income of close to 2%. And  the Total Stock Market Index because you have enough multinational in there where you're deriving a good chunk of the income from overseas. And the other 70% could be in income portfolio securities. But I think with rates  down where they are,  I think, in your case, a  fully insured (FDIC) Certificate of Deposit component in the portfolio, so  that you can see what's going to happen going forward. Cause rates are so low right now, on something like a Total Bond Market Index Fund, that to put all your money in there at this point, that would be questionable."

Honey EC: Bob gave Karen some  very good advice, but he completely blew off her question about Microsoft. Maybe because he recommended it over a  decade ago, and it did well for awhile, but for years now, it's been almost dead money.  He still has it, along with Vodafone, on his  (off-the-book) "individual issues" list -- but he never mentions either of them.

ECONOMY....Growing very slowly at  0.7%. Bob reminded listeners that his projection for 2011 is 1 to 2%.  Honey EC: So far, Bob has not sounded any recession alarm bells. Perhaps that is because he still has a fairly optimistic outlook for earnings going forward.
September 2011, Marketimer, Bob Brinker said: "We expect the S&P 500 Index to reach the low-to-mid 1400s range in  2012 in response to increasing corporate profits."

IRAQI DINAR....Caller Dennis from Indiana asked about the Iraqi Dinar. Bob said: "I have no interest in putting any money in the Iraqi Dinar. However, I will say this, there is word out that there are some scams related to getting people to put money into the Iraqi Dinar.....Beware."

UNEMPLOYMENT....There are 25 million people in the U.S. that are part of the 16.5% under-employment numbers -- a really big number.

HOW MANY DO NOT PAY INCOME TAX?  Rita from Los Gatos asked Bob who is it that actually pays most of the  federal income taxes and how many pay none at all. Bob said: "The majority of income tax are paid by high earners. And about 47% of Americans pay no income tax at all. They do pay the payroll tax....So it's fair to say close to half of Americans don't pay personal income tax, and it's very fair to say that the majority of personal income taxes are paid by those in the middle-to-high income brackets....."

SHOULD YOU TAKE SOCIAL SECURITY EARLY OR WAIT FOR FULL BENEFITS?  Caller John from New York asked Bob if he should take Social Security at 63 or wait until he is 66 when he would get 100%.  Bob told him that he should first look at his longevity-prospects,  even though it's difficult to project. And secondly, at his income needs.  Bob said, "If you think you will live into your 80's and if you don't need the money, it's okay to wait." 

"AMERICAN JOBS ACT"....Caller Jack from San Diego was for doing away with the 16th Amendment and starting over. He said that all Obama's "pass the bill if you love me" pleas didn't reach his own Party. There have been no Democrats who have sponsored the bill, and it doesn't  even have a number. Bob said that the only hope this bill offered for  creating jobs  was the $240 billion payroll tax cut. The other  $10 billion goes into infrastructure -- and even that is controversial since it takes so long to get started.


RIOTS IN NEW YORK? Caller George (location?) asked Bob if he heard Mayor Bloomberg's comments about possible riots.  Bob said that he did not approve of  the mayor using that kind of inflammatory language.

Honey EC: It hasn't been very long since Bob thought Bloomberg was wonderful. Maybe someone can remember the exact details of when Bob was singing Bloomberg's praises. 

UBS (United Bank of Switzerland) Over the past three months, UBS  lost $2.3 billion from unauthorized trading in the S&P 500, the German stock market index,  and the Euro stocks index futures.  The "rogue trader" has been charged with "false accounting."  Bob said it "does not look good for these European Banks."

WARREN BUFFETT, THE "SHADOW PRESIDENT"  TAX PROPOSAL

Excerpts from Bob's opening monologue. Bob said: "We're supposedly going  to hear this week about the new Buffett tax. No, no, no, not the Margaritaville Tax. Not the Jimmy Buffett tax. This is the Warren Buffett tax because he is all bent out of shape about the fact that the top bracket is 35%.....Of course he's missing the point completely because he's comparing it to his own tax return which bears no commonality with the typical tax return.  Because Warren Buffett gets most of his income from things like qualified dividends, things like long-term capital gains......So of course, he's paying the top federal bracket of 15%. And that's why he can say that he paid only 17.4% -- that's his word --only, 17.4% of his taxable income last year for a total tax of little less than 7 million dollars. And he complains that that's a  lower percentage that was paid by the  people in his office who paid an average of 36%.

Well guess what, Warren, high earners on ordinary income and short-term capital gains, which is what the top bracket is supposed to tax.....at the federal level,  pay more than an average of the  people in your office,  excluding you -- because the rate if you are self-employed is 38% with the uncapped payroll tax......Now there is a complete disconnect. I am amazed that this is going to be proposed because it's based on totally faulty reasoning, which hopefully, at some point will be pointed out to "these people."  So how is Warren Buffett making his money. He pays himself a relatively small salary. His salary has nothing to do with his contribution to Berkshire Hathaway....So he's not in a high bracket on ordinary income, but he's in a very heavy position on the low tax bracket income, the 15% maximum federal, the long-term capital gains, the qualified dividends......

There is a solution to this - I don't go along with it -- you simply raise the long-term capital gains and qualified dividend rate to 35% so that all the money that Warren earns is taxed at the top rate. Of course the other thing that Warren could do, instead of what he is doing, is simply write a check for 7 million dollars as a contribution on his annual taxes. That would bring him up to 35% and the whole problem would go away for Warren. But instead, he seems to be favoring his recommendation to the president to raise the top bracket above 35%. ....

If you are a resident of California and you own your own business, you're already in the 48% top bracket....right today, now.....And Warren Buffett wants to raise your income tax just because he gets the vast majority of his income from long-term capital gains and qualified dividends -- which is not the case for most high earners....But in his relentless pursuit for higher tax rates on high earners, we are told the president is actually going to propose this nonsense this week......"

Caller John from Oakland  said he agreed with Bob about  this "abomination" tax proposal.  Bob said: "There is totally faulty logic and reasoning underneath the Warren Buffett tax proposal, that supposedly the president is going to parrot to us this week. It's like Warren Buffett has become the shadow president on taxation this week -- that's the feeling that I'm starting to get. I'm sure you know the connection here. Mr. Buffett has served as a quote-unquote "informal advisor" to the president. He was in conference with the president prior to the September 8th address to the joint session of congress. And in addition....Warren Buffett is planning to hold a fund-raiser on September 30th in New York City for the president's re-election bid.  So the ties are extremely close here. Like I say, it's like he's a shadow president on tax policy....."

John continued talking about how Warren Buffett and Bill Gates could give checks to the government instead of their favorite charities, but to ask for more from the job-creators in this country was ridiculous, and he hoped it was a "killer when it comes to the 2012 elections."

Bob continued: "This business of essentially making municipal bond tax-exempt interest taxable for those in the top brackets. This idea is simply going to raise the cost of money for states and municipalities.....And those taxes will be paid, and this is important because they hide behind this curtain of defending the little guy -- it's the little  guy that will have to pony up the additional taxes to pay the additional revenue to these states and municipalities that they will require to pay the higher rates that they're going to have to pay on munis. These people are dumber than a box of rocks.....The additional suggestion that we are hearing about to cap the destructibility of charitable donations. That is another brain-dead idea. Where do they come up with this nonsense?" 

John interjected that he almost wished that Hilary had won.


Bob replied: "It's funny you mention that because former vice-president Cheney this week, has suggested that Hilary Clinton challenge for the nomination. Now Mr. Hilary Clinton, also known as former President Bill Clinton has said  that he admires Dick Cheney's political acumen. He's just trying to stir it up.....As of today, there is no question in my mind that she would have been a better president."

Honey EC: Well, Bob, I remember during the campaign, while always giving Obama a COMPLETE PASS, you would slam Hilary and call her names -- long drawn out names, designed to demean a woman. SHAME ON YOU! SHAME, SHAME on YOU! 

John interjected again: "Look at the economy it couldn't have been worse."

Bob continued: "What's frustrating for me about that, on this broadcast,  week after week, I said this is what the presidency is about -- getting the economy turned around. And instead, the year or two of the presidency was on a totally separate topic of healthcare and that was a disastrous decision. That's called taking your eye off the ball. It's like standing in the batter's box when you have a fat pitch on the way and looking the other way and taking it for a strike. And that is why we are in the position that we are in."

WHEN RICH CEO'S BUY ELECTIONS....Tom in Nevada: "You hit it right on the nose about Warren Buffett....I think the shares of Berkshire Hathaway will actually go up when he leaves the company.....I'm selling my shares on Monday." 

Bob said: "I think it's fairly uncommon for a CEO of a major company to be this deeply involved in a political movement. I mean this guy has jumped into the White House re-election campaign now with this big fund-raiser in New York City at the end of the month. He's jumped in hook, line and sinker. And I have to believe that that's the reason that he had a conference with the president before the joint session of congress earlier this month. To me, it's the money that buys the influence -- the money!"


Brinker added: "It's very, very risky for a CEO to become totally  engaged with any one political candidate....And yet is there hypocrisy here?....Remember they wanted to extend the timeline on depreciation of corporate jets, so it would be a little bit more expensive to write them off? And yet didn't we hear some complaints out of Omaha on that particular item?  Is that the definition of hypocrisy."

Andy from Redwood City said that he totally disagreed with Bob on Warren Buffett.  He said that when this country went  to war in the past (he mentioned Lincoln, Civil War;  Roosevelt, Spanish-American War;  Wilson,  WWI), the rich came up with the money to pay the debt -- but that this didn't happen with Iraq and Afghanistan. He said the bottom line is that during the Eisenhower Administration in the 1950's, the top tax bracket was 91%  after the first $100,000. And it  was 70% before Reagan got in, and the 35% is way too low.

Bob managed to talk him down and asked him what he thought was a fair amount of tax for high-earners. Andy said 50%. Bob reminded him that in California it's already there. Bob ended by saying, "Andy, you are so misinformed on this subject, it is sad."


NEXT WEEK...Bob reminded listeners that there is  housing data coming out on  Monday, Tuesday and Wednesday. Housing starts are expected to be down. There is an  FOMC announcement on Wednesday and Leading Indicators on Thursday.

Bob's guest-speaker was Menzie Chin: Lost Decades: The Making of America's Debt Crisis and the Long Recovery"  Honey EC: Some have already told me that they found this interview interesting, so I will write a review of it "subsequently" :)

Wednesday, September 14, 2011

September 14, 2011, Bob Brinker's Marketimer: Two Most Recent No-Load Fund Additions

September 14, 2011....So far this year, Bob Brinker has added two new mutual funds to his Marketimer off-the-books fixed-income portfolio (Brinker now calls that portfolio "income fund").

Firstly, in January, Bob Brinker added the Vanguard Wellesley Income Fund (VWINX).  Moneytalk,   February 20, 2011, caller-Josephine asked Brinker about the Wellesley Fund. From my summary of the call:
Josephine followed up by asking Brinker if the Vanguard Wellesley Income Fund (VWINX) was going to be "in the fixed part of his portfolio" or was it going to be "in the equity part of his portfolio."

Brinker replied: "That's a hybrid. We're using that as a hybrid. So the answer to your question is yes and yes. It is an income related security..... And that fund has done a great job in a conservative realm. That is a fund that is 62% in fixed income securities, and 38% in income-related securities, such as dividend paying stocks. So that makes it a hybrid........Personally, and I've said this before in the past, I think it's a well-managed fund."
The Vanguard Wellesley Income Fund has been doing okay since Brinker recommended it. Possibly because it is mostly invested in bonds and dividend paying stocks.  It was  priced at $21.70 when he made the recommendation, and today it closed at $22.25. It also pays a 3.2% dividend according to the Vanguard website.  


The second fund that Brinker added this year was the Double Line Total Return Fund (DTLNX), which is managed by Jeffrey Gundlach.   Moneytalk, May 15, 2011, caller-Bill  asked Brinker about the new fund. From my summary of the call:
* Caller Bill from Wisconsin said: "In your last issue of Marketimer, you made a change in the income portfolio, going to a brand new fund. Double Line Total Return and it looks to me like....."

Brinker interrupted:
"Bill did you read page 3 of that issue? ....I've explained in there why I selected that fund. It's right there."

Bill continued:
"Yes, I have it right it front of me. Let me ask a couple of questions that aren't there. One, it's a very short life fund. It's only been around a year or less, and it has a higher expense ratio. And I assume the rating isn't as good as the funds that it replaces. And I question what the duration would be on that fund."

Brinker replied:
"Now this is a change that was made in the income portfolio. Now if you check that data that I published in the letter, you will see that I published the duration. Did you see that? You don't see any information on the duration?"

Bill: "No sir."
Brinker said: "That's because it was effective on the 10th of May. Let me explain why you didn't find the duration, and you will find the duration. The duration is in the table on page 7, but that table does not include the fund because the change wasn't made on April 30th. Everything in the newsletter for May is as of April 30. So what I've done is, I've stated in that recommendation to make those changes in the income portfolio in page 7 ..... that those changes take place on the close May 10th. So they happened last Tuesday....We implemented those changes..... for performance purposes......So when we publish the June investment letter, on page 7, you will see the duration of that fund in there........"

Brinker continued:  "Now as to why I selected that fund. I selected that fund because I really like that manager. I think that manager has really outstanding talent. Actually, I stipulate that on page 3 of the newsletter, that I like the manager. And that was the reason that I selected that fund. Now although what you said is true that it's a relatively new fund. It started in the spring of 2010, its done very well its first year out there. Now here's the thing, that manager had a long-term track record at his prior fund. A record of over ten years of excellence in income management at his prior fund. I looked at that record, looked at what he's done the first year in his new fund since he's gone out on his own, and was very pleased at the data I was looking at. And that was the reason that I selected it.....Remember though, if you see a recommendation that doesn't work with you investment, don't buy it...... But I have to go with what I believe in the investment letter because of performance tracking.....and that was the analysis that I based that recommendation on. Good call, Bill. I appreciate it. This is Moneytalk."
The Double Line website lists the fund duration at 3.35.  The fund sold for $11.08 on May 10th, when Brinker first recommended it. It closed at $11.27 today. Its yield is  about 8.43%.

My sister-in-law and brother are vacationing in McCall, Idaho.  She sent this picture of McCall Harbor. Click to enlarge - very beautiful:




Sunday, September 11, 2011

September 11, 2011, Bob Brinker's Moneytalk: Summary, Commentary, Excerpts and Discussion

September 11, 2011..............................................(post and read comments)

After being gone for the past two weeks, Bob Brinker hosted Moneytalk today. 

OPENING MONOLOGUE.... Brinker devoted the entire opening monologue to discussing the ten-year anniversary of 9-11-01.  Brinker said that it hit close to home with him because he had spent so many years working in the "canyons of Wall Street."  His daily commute would take him through the World Trade Center every day, right where the Twin Towers came down.

The replacement tower, when completed, will be the tallest building in the country. One World Trade Center will eventually have 100 floors. They are now working on the 80th floor --  at a cost of $3.2 Billion -- and it's  expected to be complete in  2013.  Since 9-11-01, lower Manhattan has grown a lot. The  residential population has doubled and there are nineteen new parks. 

GOLD AND SILVER....Caller Tom from San Jose asked if gold and silver were in a bubble about to burst, and if so,  was it related  to the bailouts.  Brinker said: "I really don't think it's related to the bailouts. The bailouts are pretty much yesterday's news, they occurred mostly back in 2008 when it was proposed that they do the toxic-asset relief program and the rest of it. And that was three years ago......I really think that it is speculation.....To some people degree, people are substituting precious metal ownership for fiat currency......

What's unfortunate is that if people want to do a true gold hedge, they should use the exchange-traded fund for that purpose.....And that's the GLD, exchange-traded fund shares.....backed by gold bullion.....When we first started talking about this for those who want a hedge, gold was about $550 an ounce. Last time I checked, it was over $1800 an ounce. So it's been a terrific hedge for those who want a hedge in their portfolio for a reasonable percentage. But in terms of trying to tie  predictions to gold, it's simply speculation at this point and it's going to be driven by the speculative money flows more than anything else, I believe."

Honey EC: I have no idea when Brinker thinks he first started recommending GLD, but he has never really recommended buying gold in any form. He has only ever recommended GLD as a preferred way to buy it for those who want it in spite of Brinker's negativity.  Other than that, he added GLD to his Marketimer off-the-books list of individual issues in May, 2009.  But he never said why he added it to the list, and he never recommended a buy price or said how much to buy!  Gold was certainly more than $500 an ounce at that time. I think you have to go back to 2005 to find gold at $500 an ounce. At that time, Brinker was against buying gold, even as a hedge.  

VANGUARD GINNIE MAE FUND (VFIIX)....Caller Joe from Santa Maria said that he currently had about 5% of his portfolio in Vanguard Ginnie Mae Fund and he was considering transferring all of it into the Vanguard Wellington or Vanguard Wellesley funds (VWINX).  

Brinker replied: "That would be different from what I have been recommending, Joe. So it would be hard for me to tell you what to do since I am recommending something different. I have a recommendation right now in my income portfolio....Now the income portfolio that I publish in my investment letter has over 90% of its assets in fixed-income obligations. So this is an overwhelmingly income oriented portfolio. Because even the portion that's not in fixed-income is actually in dividend paying stocks......Now we have a higher weighting in our income portfolio in the Ginnie Maes, than you have. You're only at 5%......We also have several other portfolio holdings in that particular sector......Should you take your last 5% out of the Ginnie Mae? That would be something that I have not recommended. I have not recommended going to zero in Ginnie Maes."

Honey EC: In January 2009, Brinker sold part of his Ginnie Mae holdings in both the income-fund model portfolio III. Also, in the January, 2011 Marketimer, Bob Brinker wrote:
  Model portfolio III Changes:

Sell: 10% of the weighting in Vanguard Short-Term Investment Grade (VFSTX) thereby reducing this weighting from 20% to 10%;

Sell: 10% weighting in Vanguard Inflation-Protected Securities (VIPSX) thereby eliminating this holding;

Buy: 20% weighting in Vanguard Wellesley Income Fund (VWINX) thereby establishing this new holding.

Fixed-Income Portfolio Changes:

Sell: 15% of the weighting in Vanguard Ginnie Mae Fund (VFIIX) thereby reducing this weighting from 40% to 25%;

Sell: 10% of the weighting in Vanguard Short-Term Investment Grade (VFSTX) thereby reducing this

Sell: 10% Vanguard Inflation-Protected Securities (VIPSX)thereby eliminating this holding;

Buy: 25% weighting in Vanguard Wellesley Income Fund (VWINX) thereby establishing this new holding;

Buy: 10% weighting in Vanguard High-Yield Corporate (VWEHX) Thereby increasing this weighting from 15% to 25%

Brinker continued:  "By the way, the Ginnie Maes have been an extraordinary holding. We continue to hold Ginnie Mae Securities in our model portfolio III in the investment letter, which is a balanced portfolio. And we also continue to hold Ginnie Mae Securities in our income portfolio that I just spoke of......We've had exposure to Ginnie Maes for many years......And I would say that the Ginnie Maes  have been an outstanding holding because during all of the period that people were concerned about credit quality back around 2008, 2009 especially, these securities,  which are backed by the full faith and credit of the US Treasury for full payment of principal and interest in timely manner, these securities have continued very strong. In fact, even as we speak, they are within a few cents of their all time net asset high........And we've certainly heard a tremendous amount of positive feedback over time from investment letter subscribers about how pleased they are with their Ginnie Mae holdings." 

Honey EC: Brinker used to call the "income portfolio" his "fixed-income" portfolio until he added stock to it via the Vanguard Wellesley Income Fund in January.  When it was pointed out here on this blog that it was misleading to have stocks in a fixed-income portfolio, he changed the name in Marketimer to simply "income portfolio"  and announced it on the radio about the same time.

SOCIAL SECURITY A PONZI SCHEME?  Several times today. Brinker talked about the latest flap about whether Social Security is a Ponzi scheme or not. Brinker clearly stated that he does NOT believe it is a Ponzi scheme.  Caller Brad from North Carolina said he thought it was possible that Social Security is a Ponzi scheme since the government keeps changing their promises and spends the money as soon as it comes in.  

Brinker replied: "The Social Security Trust Fund,  money  that should have been set aside for the payment of benefits, has been spent. And the reason it was spent was because when the government went to a unified budget many years ago, that gave them a license to take the payroll tax revenue that comes in every year and spend it not only on Social Security benefits, but anything else they chose to spend it on, and that's what they've done.  And as a consequence, in order to raise money to cover future deficits for beneficiaries, they have to sell Treasurys to raise the money.....

If you want to look at Social Security and what it's done, you have to look at the figures. Here are the figures. The government created the program in 1035 and the first checks went in the mail in  1940........Going back to 1959, over 35% of the elderly were below the poverty line according to the Social Security Administration.  The figure for 2009 is is 8.9%, a dramatic improvement.....That means that far fewer people.....are going to be standing on the corner with a tin cup......

Now you go back to 1983 when a bi-partisan increased the amount of money they were going to tax. By the way, that's now up to $106,800. And they made some very slow changes in the age in which full benefits were received.....increasing the age to 67 for those born after 1959......That helped the system.....I think they have to make more changes.....means testing...... 54 million receive Social Security checks...."

IRAQI DINAR.....Dale from Oklahoma asked about the Iraqi Dinar.  Brinker told Dale that his concern is  that there is a scam risk. He thinks that those selling the Iraqi dinar are the only ones who will make money on them,  and he will not be putting any money in them. 

BEN BERNANKE....Brinker made the comment that even though Ben Bernanke has said that the FOMC will keep rates where they are until 2013, "if the economy starts to move they will change their policy in a New York minute."   

STOCK MARKET....Jerry from Providence asked about the debt problems in Europe. Brinker said that what was happening in Greece  was not good, but Greece is only 2% of Europe's GDP.  The real "big deals" would be if the sovereign debt situation  spread to Italy or Spain.   Then  Jerry seemed to slip in this question:   "Do you think that their stock markets are performing poorly, you think that's why our market has been performing poorly?" 

Brinker replied: "I think that our market certainly has had some spill-over from the concerns involving the banks with reference to sovereign debt in Europe, but I think that the real driver in the US stock market and the US economy. What kind of a growth rate will see in the US economy going forward. How will corporate earnings do within the framework of that economy. And I think that is what really drives things in terms of the US.....Brad in North Carolina....."


Honey EC: Brinker hung up abruptly on Jerry and moved on to the next caller. I don't think he wanted to say anything at all about the stock market. And as you can see, he almost didn't say anything at all. :) 

That  was the only time today that Brinker mentioned the stock market. He made no comments about what's been going on the past couple of weeks since he was last on the air, and he accepted no calls about it.

Brinker's guest-speaker was Joseph Hurley, CEO of savingforcollege.com.

Moneytalk on demand and to go with Bob Brinker, is available for FREE audio/podcasting at KGO810 radio for seven days after broadcast.  (At the KGO website, go to "listen/podcast" to download.)  I download and save all three hours, including the third hour guest-speaker. (The program is archived in the 1-4pm time-slots.) If you don't download it from KGO within seven day, it's available at bobbrinker.com by paid subscription. 

Saturday, September 10, 2011

2011 Intraday "Correction" Statistics 09/09/11

September 10, 2011.....Bob Brinker called the stock market correction "noise" when it was at 5%.  Perhaps tomorrow, we will find out what he has to say about an 18.3% decline.

July 31, 2011, Bob Brinker said:
"I know many of you also have been taking advantage of  the dollar-cost-averaging opportunities on short-term weakness - and certainly it's minor. I mean, 5% is really noise when you look at the market over time.......If you've been listening to this broadcast, we have not been part of the panic-brigade here on Moneytalk."

Thank you to  Kirk Lindstrom, who posted the following in the comments section of the previous article:

Kirk said...

Speaking of truth....

2011 Intraday "Correction" Statistics 09/09/11 


[Honey, in edit: Thanks SIVbum, here is an update with the corrected numbers]

S&P 500 Intraday Statistics

Date of last bull market high 05/02/11
Last Bull Market High: 1,370.58
Date of last low: 08/09/11
Intraday Low: 1,101.54
Decline in Pts: 269.04
Decline in %: 19.6%
S&P500 Chart
 
Kirk said: It reminds me of 1998 when Brinker called a bottom after a 10% correction then the market went down another 10%... all while fully invested. I think he used closing values to show he was just under 20.0% for the correction so he didn't miss a bear.

19.6% decline rounds up to 20%... so that could be low enough for many to call it a bear and a bottom. Interesting.

Today QQQ is $53.18 which is down 39.5% from $87.87, the highest QQQ was while Brinker was recommending it for up to 50% of cash reserves.

You can see an actual copy of the special bulletin advising purchase of the NASDAQ100 via QQQ HERE.

How would it have affected model portfolios? Glad you asked.  Effect of Bob Brinker's QQQQ advice on his Reported Model Portfolio Returns

[quote from Kirk's link above]  "Conclusion:  I calculate the QQQQ advice caused Brinker's reported total to drop by 29% and his APR to drop 2.0% a year such that his portfolio under performs the buy and holders of the Wilshire 5000 by 1.3% per year since the inception of P1."
 
Truth... best shark repellent ever!

Honey here: So if Brinker had not given himself a mulligan on those model portfolio cash reserves, his returns would be well below market returns. And the cost of paying for his advice since then would have added up to $1,850  big smackeroos!!

As of today,  it looks like Brinker is going down the same path he did in  2007.  At the beginning of the  megabear bear market, he was predicting S&P 500 Index of 1650.

In January, Brinker was predicting S&P 500 Index would reach "low-to-mid 1400's" in 2011.  Since then  we've had an 18% correction from the YTD top.... In September, without mentioning that he was making a  change, he extended that prediction to 2012. 

Delete

Thursday, September 8, 2011

September 8, 2011, Bob Brinker's Stock Model Portfolios Underwater Year-to-Date

September 8, 2011...............................................(post and read comments)

Earlier this year on  Moneytalk,  Bob Brinker was regularly announcing the S&P 500 Index year-to-date returns. Bob Brinker has not been on the air for the past two Sundays, so it will be interesting to hear what he will say about the fact that the S&P is now down for the year,  and  175 points below the April 29th high.
Marketimer, January 5, 2011, Bob Brinker said: "....our new S&P 500 target range in the mid-to-upper 1300's zone for this year......Given our view that the S&P 500 Index is on track to rise to the mid-to-upper 1300's range this year, all of our stock market model portfolios remain fully invested."
Of course, the inference is that if he was not projecting the (relatively) high S&P target range, the model portfolios might not remain fully invested. That is almost certainly not true since the  portfolios have been fully invested since March 2003 -- riding the S&P roller-coaster all the way from 800 to 1565 in October 2007, then all the way back down to 677 in March 2009.

Now without making any cash reserve changes whatsoever,  Brinker has re-set his market-timing clock -- ignoring all that happened over the past three years.

Even with a clock-reset, Brinker's model portfolios are again down for this year:
December 31, 2010:  Marketimer model portfolio I = $278,330
August 31, 2011.........Marketimer model portfolio I = $268,000


December 31, 2010: Marketimer model portfolio II = $230,317  
August 31, 2011.........Marketimer model portfolio II: $220,890

NEW TOPIC: What Happened Between the  Bob Brinker Message Boards and Kirk Lindstrom's?  

I have been asked to explain the connection between Bob Brinker's message boards (Brinker Jr was the webmaster),  and Kirk Lindstrom's Suite 101 message boards.  Neither message board exists anymore, but the history is very interesting to anyone who wants to know  more about what makes the man behind the microphone tick. When deciding whether or not to trust Brinker, it is helpful to be educated about how he operates behind the scenes.

Like almost everyone that ended up on Kirk's Suite 101 forums, Kirk was once  a fan of Brinker's.  That was until Brinker tried to bully Kirk into removing a message posted on his Suite101 forums. Brinker complained about  a post by Jack Swanson regarding Brinker's inside relationship with UTEK.

Brinker said the post was "slanderous lies" and demanded that Kirk censor it. Kirk told Brinker that if he could show that the post was not true, then he would censor the post. 

As it turns out, it was indeed proved that Brinker did have an inside connection to UTEK through his BJGroup.  He admitted it on Nightly Business Report when Paul Kangas asked him if the relationship was a "conflict of interest." Brinker said no -- but the facts speak for themselves.

Here is one of Brinker's posts to Kirk about the subject:
To:Kirk who wrote (8133)
From: mister topes Thursday, Oct 1, 1998 9:59 AM
View Replies (1) | Respond to of 20905
If you had any question regarding the slanderous lies posted
on your board you could have called the company and asked
the questions. You would be told there has never ever been
any stock option granted and never any market making done
in the stock. Then you could post this on your board and
set the record straight. But instead people come to your
board and read slanderous lies. This is wrong.
You should never promote your board on the Brinker website
again as it is only an invitation to read slanderous lies
in a smear and hate campaign by Swanson. Do not take my word
for this, call the company and learn for yourself first hand
of these slanderous lies.

So that was when the two Brinkers (in essence) declared war on "Suite 101ers." They refused to allow links to Kirk's message boards and  started banning people for no reason if they were connected to Suite101 in any way.    Here are a few people relating what they experienced at the  Bob Brinker's message boards (now just a  website).

[You need to know that if I had not saved these to my personal files they would all have been gone forever, like so much of Brinker's history.   After Kirk left Suite 101, they vaporized everything about Bob Brinker -- literally tens of thousands of posts. Was Suite 101 pressured? You bet! I was personally told that my account would be terminated if I even mentioned Brinker again.  That is when I began my first blog. Now the pressure comes in other forms, but it is always there.]


Suite101, Testimonial Thread for “Refugees” who got “Booted From Brinkerdom."

30. Jul 30, 2000 10:48 PM » JenL_2 - Send us your sick, your homeless, your weary and your poor.

Send us your sick, your homeless, your weary and your poor. Suite101 has become the ultimate refuge for Stage IV Brinkerbots who were kicked off of bobbrinker.com for any number of reasons. I thought we should start a tally of the number of people who were given daBoot by daBrink and wound up posting over here. I will start the BFB List. Simply give your name or alias and the reason for the boot.
Booted From Brinkerdom.

1). Jonathon. This goes back some months when Rande all of sudden stop posting. I simply typed in what happened to Rande Spiegelman and ZAP! My post was gone. I tried it one more time, and ZAP! I was gone. Subsequent attempts to log onto bobbrinker.com were for naught. I wound up here, scared and afraid. Anyone else out there like me?

2) Thruhiker. "Where's Rande?" followed by a brief reference to the Saturday Night Massacre.


3) (Honey) Delxx_x. 
I was kicked off because I posted on THIS site how I believe the censorship on the BB site is contemptible!

4) UTEK Thread Hello, My name is Ultra and I am a "tech Stepper" It has been 1 year, 47 days and 12 minutes since my name was last mentioned, and not immediately deleted, on the brinker.bot site. Can you imagine what that site would be like if they could start their own threads without JR/SR's approval? Someone might actually start another UTEK thread and I'd fall off the wagon for sure!

5) Steve T. For linking to Ask Rande on Suite101


6) David K. Someone told me that you can't type in the word "Korn" without getting the boot. I guess Bob doesn't like that new hardcore grunge band known as KORN.

7) Phish. me too. I was booted a while back when it wasn't so easy, even before Rande. I posted s u i t e 1 0 1 . c o m and got a warning, but the boot came when I called jr a chickens___! I used a $ for the s, but that was the proverbial straw. The whole situation is hilarious. Bob is gonna self destruct as his image morphs from astute advisor to greedy bitter old prune. I wouldn't be surprised if this is his last year on the radio. Perhaps he's smart enough to get out before it deteriorates into a bigger farce than it already has become. Sad situation - it could have been very different. -Randy

8) Karin. The Reason.....Here is the reason I got kicked out permanently:
(link) ( my home-page had the S101 link in it!!!) Karin

9) Wendell. BOOTED. Well, for a simple old fence sitter, I have gotten the boot from both the discussion site and chat room. I was reading the messages at BB.com and someone asked about that "other" site. Well, being such a nice guy I thought I would slip one in. I wrote, please go to: sweetoneohonedotcom and that should get you there. Soon after I joined the land of the banishees. Can't remember what I said in the chat room before Mak gave me the old heave ho. Woe is me. I feel so terrible not being able to post and chat with that elite circle.
Wendell D. Semore

10) Will_L. I was a very bad boy and typed exactly what I saw happening in the market vs Brinker's call. I happened to also mention his omissions of things happening in the market. It was a very bad combination. I'm sure the devil made me do it.

11) Steven_Russell. I killed the Town Hall. Great thread. It would be nice if we could re-arrange them in order, with near dates of banishment. Steven Russell here. I killed Town Hall. My post on Town Hall, June 23 2000, 4:09 am, listed and explained the relevant chronological remaining Town Hall posts, by number and time, which were real-time responses to the Will Lxxxxx Imposter, and to the Real Will's immediate subsequent banishment. I also explained how to substitute the Win95 Edit Find function for the earlier-assassinated Search Tool. My post ended with, "This post will self-destruct in 5 seconds." (Kirk said "Not here it won't", and re-posted it here right away, at 6:51 am, on the Brinker Free thread) My original post lasted on Town Hall about another 2 hours, before Town Hall itself was taken out and shot, after the responses that my post generated provoked a wave of new Brinker banishments that morning.

Steven Russell part 2. Banished and purged Monday, June 26, 2000. After the Town Hall execution, I lasted another couple days on other threads, with some moderate continuing respectful criticism of the Brinkers' banishment tactics. I think the final straw was when I posted that the Brinkers were showing great disrespect for the entire community of posters by their overzealous censorship.


12) Suite101.com. Jen here - I used to read BB.com discussion everyday and if there were questions that could be answered by information already posted at Suite 101 I would post a link to the Suite 101 thread or message. I'd also follow up with an email and send along an invitation to join in the discussion at Suite 101. I was always polite and got many Thank you notes from BB.com members. The purpose was never to "steal" members away from BB.com but to share like sites with like-minded people. But the Brinkers apparently took it as "promotion of a competing site" and blocked all links to Suite101.com without warning sometime around June '99......Jen

13) Jack Swanson here... I got kicked off the Brinker site for...well...for just being Jack Swanson!! Jack jackswanson00@yahoo.com

14) martin_lowe - I got booted twice... from my home ISP as "Martin Lowe," for criticizing the Brinkers for the censorship. Also on my work ISP I had set up an alias, "Bobby Charlton," the England soccer great from world cup '66. In response to a poster as to where Will and Russell had vanished, I posted to "They have gone to Cyberheaven and have be re-born to a site of higher conscious." Martin

15) matttheduck - i wasn't fired, i quit!
i quit posting/visiting the brinker site when rande got the boot. outrageous

16) Chris3 - I Quit, Too Like Matttheduck, I quit when Rande got booted. I posted a defense of Rande (name: Chris Fleur) immediately after the booting, about the same time Karin did (at least, I thought she was "our" Karin), and it amazingly stayed there (wouldn't happen now, and I don't know if it is still there. Don't even go back to see what's going on. Who cares? I had very much respected Bob and his investing education advice for years. My eyes were opened that day. I continue to be amazed at what I hear coming out of his mouth on the radio when I listen (I'm not even a little bit as faithful of a listener as I was before), and also amazed at what I read here that is going on over there. I am so disappointed in the man behind the curtain!!!!

17) Kirk (Kirk Lindstrom) - I Quit too! Jr told me via email that it was OK for Jen to keep posting links to our site. He also said that the link to us was accidentally deleted and he would put it back. Both were lies as two hours after the email he had his site deforming Jen's links changing  "suite101.com" to just  "suite101" and so they would fail.
I stopped posting there as I don't like to support people that have been proven to  "make alterations to the truth".
Business wise, it is great to point out the snakeoil mixed with the good advice Brinker dispenses. He has mostly good stuff to say so it is hard to detect the snakeoil and so I feel we do a service pointing the snakeoil out. Even better that the  "Buzz" this creates makes our site fun rather than just educational. Of course, he hates us as we point out the snakeoil he is selling which makes it less attractive.
Kirk Lindstrom - Editor: Investing and Personal Finance
 
18) Dave_K (David Kimball) - I Quit Also. Had listened to Bob for a long long time. His treatment of some callers was beginning to wear on me. Plus the fact that the education value had seemed to reach a plateau. Used to visit the BB site occasionally to see how informative it might be. Ironically began to see a new level of education coming from posts of people like Rande and Kirk. Visited site more often just to pick out their posts and learn something more advanced. They suffered an undue amount of criticism from good advice/comments even then. Their banning left no attraction to that site. Haven't lurked over there in several months. In addition, the effects of Bob's January call on my portfolio has reduced his credibility. His advice ranks pretty far down below a lot of notable market analysts and commentators these days. I still listen to the radio program when convenient but don't go out of my way to plan around it like I used to.

19) oneputt - me too -1st time was a long time ago, I might have been one of the first. I thought it odd that he would play a taped show and not identify it as one. I posted "Why would he decieve.....". After that I could not log on. I got a new name and password and then was kicked off for finally having enough of poobutt. I asked him bluntly why he intentionally lies when talking about this site. I no longer even read the posts over there. That site is banished from my browser's list.


Top 31. Jul 31, 2000 11:26 AM
» Will_L - Much Better Off Like many who dropped by BB's site to find out what was up with the January sell signal, I found myself soon in the middle of a firestorm. Although not sucking up and asking very pointed questions, I treated everyone there with at least more respect than accorded me. After a while I became not just concerned about the wisdom of his call but rather seeing a side of Brinker that I didn't know existed. I began to suspect his motives in many of the things he was saying on the radio and doing on his website. My respect for someone I thought to be a straight shooter albeit an egotistical one eroded. His shinnanigans around his website in trying to smear the reputation of those who disagree with him including falsly posting or allowing others to do so without interference under their name and taking on aliases to attack and generally be a jerk on his own thread certainly demonstrated to me he was neither a straight shooter or someone I would trust at all. As such I was excluded from the site--along with about anyone who has disagreed with him. The way it happened I did object to. The fact that it happened, I really am thankful for. I wish I would have left a little sooner and just posted here. In some respects it is not right once you are no longer just differing on his market calls but think that he is quite the snakeoil salesman that I came to believe to post on his site. Although he pounces on posters, callers and other analysts who have the gall to disagree with him, he has the thinnist skin I have ever seen for someone in his role. So it is just better to talk about him and his calls --just like he loves to do others in the freedom that an environment like this offers. It's much better all the way around.

It was an amazing saga that lasted several years,  and would have made an interesting book. It was about 2003 that I first began writing summaries of Moneytalk and trying to provide an educational record of the shenanigans of the  velvet-voiced "Emperor" with no-clothes on national radio.