November 27, 2011, Bob Brinker's Moneytalk Show Summary

November 27, 2011..........................................................................(comments)

Lynn Jimenez hosted Bob Brinker's Moneytalk today. Lynn is the business reporter for KGO810 radio.

BOB BRINKER WAS DIGESTING TURKEY: Lynn said: "Welcome, Welcome. You're listening to Moneytalk.... I'm Lynn Jimenez, I'm in for Bob Brinker, who  is taking a little  break to digest his turkey. Now during the week, I'm business reporter for KGO Radio in San Francisco, and the author of,   "Se Habla Dinero, the Everyday Guide to Financial Success." 

STOCK MARKET WORST SINCE 1932....Lynn said: "There's no getting around it. It was a bad week for Wall Street. Friday marked stocks seventh straight loss.....This was the worst Thanksgiving performance since 1932.....For the week, the S&P gave back 4.7%, nearly a third of what it gained in October."

November 25, 2011, closing numbers:
DJIA: 11,231.78 = down 4.8% for week
S&P: 1158.67 = down 4.7% for week
Nasdaq: 2441.51 = down 5.1% for week

NO BOB BRINKER STOCK MARKET FOLLOWERS TODAY  AND LYNN AGREED WITH THEM:  There were several callers who said they had lost a lot of money in the stock market. And many who said they no longer invest in the stock market. To name a few: Patrick from Cupertino, California; Charles from Berkeley; Dennis from Alaska; John from Homer Glen, Chicago; Mike from Albany, Oregon and Peter from California.  Even Lynn said she had lost a lot of her 401K in the stock market.

Honey EC: Not one of those callers would have been allowed on the air if Bob Brinker was hosting the program today, but I got the feeling that Lynn was having to work at getting callers. Perhaps because of it being a holiday weekend. 

BIG FIRMS MAKING PROFITS AND BUYING BACK STOCK. Lynn said:  "Big firms are so sure of hitting their profit targets, they're buying their own stock back at a faster pace than they're spending on plants or infrastructure.....Pfizer is buying 5 billion dollars of its own stock back. That doesn't do a whole lot for hiring, and it doesn't do a heck of a lot for shareholders who buy and hold. But it sure makes top management happy because with fewer shares in circulation, it's easier for top execs to hit their profit targets and collect those big bonuses."

SCANDALS SCARE OFF STOCK MARKET INVESTORS AND  FROST LYNN'S CUPCAKES...Lynn said: "My question is, do these kinds of scandals (MF Global) make you lose faith in the market?  Do you feel nervous about investing in stock now?......Should there be criminal or civil charges filed....From my perspective, this frosts my cupcakes....This should not be happening, not at all....I just don't know when we are going to learn. It seems there's a scandal a month. Every time I come and substitute for Bob, it feels as though I have a new scandal for you. And I'm not trying to scare you off of the market.....I am not someone who believes in nanny-government, but  there has been so many transgressions. I mean, it just seems that we've got to have a stronger hand in government. But the minute we try to take a stronger hand, someone in congress says we're going  to cut the budget or they push-back on the bill and try to change it."

EXTREMELY PAINFUL FOR LYNN AND BOB.... Mick from Oregon, said: "I think that people are foolish for being in the stock market. I think a big problem we have in our country  now is because of the stock market and I think what it does is it kills small business."

Lynn replied: "Do you know how hard that is for me to swallow and I don't mean that it is wrong. I mean, here we are money talk, you know, we talk about investing, about growing our corporations and our own savings. This has been extremely painful for Bob and me. Here we are. We're trying to help people grow their money. (Mike interjected: "There's other ways to grow your money.") Lynn continued: "I think you're right....Just plain saving helps too."

Honey EC: I replayed that three times to be certain that  I heard Lynn correctly when she said, "This has been extremely painful for Bob and me." If you want to listen to it, it's about 29 minutes into the second hour. You can download the program from KGO810 radio archives for the next seven days.

If we take Lynn at her word, then we have to believe that Bob has said to her  that these stock market corrections, that he is so cavalier about with callers,  cause him "extreme pain."  If that is true, then he regularly lies to Moneytalk audience and even Marketimer subscribers. He has said nothing about pain on Moneytalk or in Marketimer.

As a matter of fact, in the November Marketimer, Brinker compared the "waterfall phase" of 2011 (closing low 1119.46) to the "waterfall phase" of 1998 (closing low 957.28).  Then he compared the "final test" of the 1998 (closing low 959.44) to the "final test" of  the  October 2011 (closing low 1099.23) and pointed out that both led to "relief rallies." So far, the S&P has not dropped below what he said was the 2011 "final test" closing low.  Matter of fact, it hasn't quite dropped to his September 22nd  "attractive for purchase" level of S&P 1129 -- yet!

Just last month on Moneytalk, Bob made it clear that "teenage corrections" were not anything he was worried about. This is from my  October 23rd show summary,

Bob said: "Bill, here's the acid test for you. If you do not have the stomach for the volatility that is inherent in being in the stock market, then you really have to ask yourself what in the world are you  doing in the stock market. Because if the stock market through it's fluctuations, and certainly we had a correction in 2011 and we had a correction in 2010, and both of them went into the teenage category. If it's something that's just too much for you to bear, you need to ask yourself why are you bothering with it at all." 

 So my question to Lynn would be, do you ever actually listen to Bob Brinker when he hosts Moneytalk? Have you ever read a copy of Marketimer? 

My question to Bob would be, do you actually listen to Lynn Jimenez when she fills in for you?  If so, you are certainly not showing any consideration for your listeners by having a fill-in that might actually scare them out of the market. You had some very strong words for those recession bears for (according to you) scaring people out of the market. And the truth is lots of people have lost money while you are busy issuing new buy signals and recommending staying fully invested like your model portfolios. Your model portfolios are all down for the year. And worse yet, stock model portfolios one and two are still underwater from the all-time-high in 2007.

Lynn said she reads seven newspapers a day and recommended that investors read Bloomberg's Business Week, the Wall Street Journal and these online websites: Seeking Alpha, AOL Blogging Stocks, Herb Greenberg's CNBC Market Blog and the New York Times DealBook and 24-7 WallSt and Calculated Risk.

More of Lynn's topics of the day:

* MF Global bankruptcy scandal (Lynn claimed that Jon Corzine declined his $9 million severance pay.)
* Will you have to work to age 80 before you retire.
* How to take deductions for a home office (second hour guest, Jan Zobel, San Francisco-Oakland tax preparer) .
* How to give your money away (third hour guest, Patrick Rooney, University of Indiana).

Dixiegeezer, who due to health problems, has not been able to go on photographic jaunts, sent this picture with these comments:  "I drove over to Lakeland, Fl where the swans are….about 50-70 on this lake….along with geese and many duck."  Click picture to enlarge and see the beautiful colors:

 

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November 25, 2011, Bob Brinker's Special Subscriber Message Bulletin Announcement Removed

November 25, 2011.......I made a photocopy from Bob Brinker's Land of Critical Mass Website and posted it two days ago (look at my post below this one). In it, I predicted that Bob Brinker would be removing the September 22nd  "Special Message Bulletin" announcement very soon because after rising for awhile in October, the stock market has now returned almost to the level it was the day he issued the bulletin (S&P 1129). 

Here is a photocopy from Brinker's homepage tonight. Compare this with my post below this one from two days ago:

Marketimer Bulletin Login

There is no bulletin posted.

Someone once said, "You can't make this stuff up."  LOL! If you belong to the Bob Brinker fan club, you must be feeling some frustration right now.  Bob clammed up about the stock market and took no calls about it on his radio show for the entire month of November as it declined precipitously. As a matter of fact, the last time he talked about the stock market on his radio show was when the market briefly rallied in October:

October 23, 2011, Moneytalk Summary...  Bob said (to a caller) "Are you even aware that we are having one of the greatest October rallies in the history of the stock market?"

Bill replied: "All I know is that about two months ago, I was having a really bad feeling in my stomach and I felt powerless...yeah, it's been good lately." 

Bob said: "Bill, here's the acid test for you. If you do not have the stomach for the volatility that is inherent in being in the stock market, then you really have to ask yourself what in the world are you  doing in the stock market. Because if the stock market through it's fluctuations, and certainly we had a correction in 2011 and we had a correction in 2010, and both of them went into the teenage category. If it's something that's just too much for you to bear, you need to ask yourself why are you bothering with it at all."

If that seems pretty cavalier to you, I agree......For the record: The Dow and S&P had their largest Thanksgiving week percentage decline since the Great Depression.  The S&P and Nasdaq have dropped for seven consecutive days.

November 25, 2011, closing numbers:
DJIA: 11,231.78 = down 4.8% for week
S&P: 1158.67 = down 4.7% for week
Nasdaq: 2441.51 = down 5.1% for week

Our friend, Jim, saw this coming back in September. He wrote:

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

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November 23, 2011, Bob Brinker's Special Subscriber Message (September 22, 2011)

November 23, 2011....Bob Brinker's September 22nd Special Subscriber Message is still available on his homepage. The S&P 500 Index is dipping ever closer to the magic number of 1129.56, so you may want to hurry if you want to buy Marketimer and read his two paragraph bulletin. 

If the market continues going down, I suspect that the bulletin will soon go the way of all of his other special subscriber messages that didn't work out so that he could brag about them -- forever gone and never mentioned again.

Marketimer Bulletin Login

"Special Subscriber Message is available by clicking on Special Subscriber Message (September 22) at the homepage"

Brinker did not give any particular time line as to when he expected the "backing and filling" to end.  But he did say that he expects "...the market will transition into a  renewed uptrend" and have "gains into the low-to-mid 1400s range in 2012."

Of course, Brinker originally projected the market would reach 1350 to 1400 range THIS YEAR: 

February 3 2011, Marketimer, Bob Brinker wrote: "Since we expect the S&P 500 Index to trade into the 1350 to 1400 range later this year, all of our stock market model portfolios remain fully invested."

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November 20, 2011, Bob Brinker's Moneytalk: Summary, Commentary, Excerpts and Discussion

November 20, 2011...........................................................(comments)

Bob Brinker hosted Moneytalk today.  Both of those 800-pound gorillas that were on the Starship last week have grown considerably this week -- the two important topics that Moneytalk travelers are most interested in hearing Bob's opinion about. Namely: the stock market and recession forecasts. Bob did not mention either subject today.

[IN EDIT] Perhaps Bob Brinker didn't want to talk about the stock market yesterday because he is sweating about the fact that last week,  the Dow declined 2.9%, the S&P 500 declined 3.8% and the Nasdaq declined 4.0%.   Now here  on Monday morning (Nov 21st), the Dow and S&P are down another 2%.  The S&P is back to 1189.25. 

On September 22nd, Bob issued a special bulletin, calling the stock market "attractive for purchase" at S&P 1129.  In the November 2011 issue of Marketimer, Bob reminded readers of that bulletin even though the S&P was at 1253.30 on the November issue date.  It was simply bragging, and now starts to look silly. In November, Bob wrote:  

"....we anticipate that the market will transition into a renewed uptrend based on our corporate earnings outlook. In our view, this transition has occurred and we look for S&P 500 Index gains into the low-to-mid 1400s range in 2012."  

There was one caller who asked Bob how the stock market might react if  the Super committee fails to reach an agreement:

SUPER COMMITTEE AFFECT THE STOCK MARKET?  Tom from Nevada told Bob that he was a long-time Marketimer subscriber and ask: "(I'd like to know) how to handle the stock market if this (super) committee decides not to sign anything. Whether that is going to have an effect on our own stock market come tomorrow or Wednesday." 

Bob replied: "Well, ask yourself this Tom. We have triggers, December 23rd, that go into affect  in 2013 for automatic, average, 120 billion annual cuts. That's where we are right now. So whether the committee agrees on anything or they don't agree, you still get the cuts spread over ten years under the current set-up. So either way, it's essentially the same result."

Honey EC: I laughed out loud when I heard Bob's answer to Tom's question. What did he say? Can anybody decipher Bob's  non-answer for me? :)

SUPER COMMITTEE DEADLINE....Bob opined that unless the committee comes up with a last minute deal, they should be re-named the "Loser Committee" -- that they are a national joke.  The deadline for a deal is tomorrow (November 21st) and it's not looking good.  Some of the committee don't want to increase taxes and want to make the George W. Bush tax cuts permanent. Some want to cut entitlement  programs, some don't.

Bob said: "The good news is that even if the Loser Committee continues to fail in coming up with a deal, the triggers take affect December 23rd and they actually go into the budget in January of 2013. Which gives them a whole other year to renege even on that. The bottom line here is that they are supposed to come up with 1.2 trillion dollars in deficit reduction....The cuts would average 120 billion dollars a year starting in 2013, running for ten years through 2022 inclusive."

Honey EC: Amazing creativity and talent for name-calling.

SEQUESTRATION: Bob said that we will be hearing this new word more frequently in the future because it "revolves around the potential failure by the super committee to come up with a plan by Wednesday of this week" and has to do with the automatic trigger.

Honey EC: It's possible that Bob read this article:

Federal Government Spending:
The Super Committee and Sequestration

With Washington’s deadline to cut a targeted $1.5 trillion – but a minimum of $1.2 trillion – in federal spending quickly approaching, many commentators are beginning to doubt the Super Committee will have the political fortitude to make lasting change. What are the consequences of failure, and are these targeted cuts enough to get our nation’s fiscal house in order. Read article at this   LINK

 ANNUAL DEFICIT: Bob said:  "We continue to run 10-digit annual deficits. That means annual deficits of over a trillion dollars......therefore cutting an average of 120 billion dollars from the budget on an annual basis would be a relatively small contribution to the solution." 

Honey EC: This topic was kicked around quite a lot today, but I didn't hear anything that hasn't been discussed before. 

I-BONDS:  Today, there were two calls about I-Bonds.   Gary from Gilroy said he bought some ten years ago with a base rate of about  3%  (according to Bob).  Gary asked if he should hang on to them or cash them in.  Bob advised hanging  on to them because of the great base rate, which Bob said,  "robbed Uncle Sam blind."   I-bonds pay the base rate plus the Consumer Price Index.

HOW TO BUY GOLD: Bob said:  "I would stay away from numismatic coins like the plague. Now if you want to buy gold content coins like the America n Eagle which is priced to its gold content plus a tiny premium.....Or something like a Krugerrand or a Canadian Maple Leaf, that coin is going to be priced almost identically to the gold value of one ounce....The other way to buy it is to buy the Exchange Traded Fund, GLD....You are holding a fund that holds bullion." 

Honey EC: I don't recall ever before hearing Bob mention American Eagle, Krugerrand or Canadian Maple Leaf coins as an okay way to buy gold.

GOLD HEDGE AND POSSIBLE EUROPEAN UNION BREAK-UP:  Bob in Virginia Beach said he "got out of the market" and  asked Brinker if he thought the European Union will break up and if so, what will it do to gold.

Bob Brinker replied:  "My guess is that Europe will muddle through....I think it's possible that Greece will be forced to print up its drachma and go back as an independent currency country.....The country is insolvent....I think that gold does benefit the failure of fiat currencies. But I don't think that Greece going back to the drachma...... is that big of an international event...There's no doubt about it, the failure of paper currency is a good thing for gold. Some people have a hedge in gold for that reason."

US DOLLAR IN DANGER? Caller Dawn from Reno asked Bob if the US dollar was in danger of becoming worth nothing. Bob emphatically answered that the dollar was not in danger.

ARE TARIFFS THE ANSWER?  Caller Victor from Washington made quite a lengthy presentation promoting ending free trade and installing tariffs. Bob sent him to the Starship brig for the remainder of hour two. Bob said: "Victor, where did you learn this economic nonsense that you are preaching?"  Bob cited the Smoot-Hawley Tariffs of the 1930's, the depression and other dire consequence.

INHERITED IRAS....Warren from Michigan, who recently inherited a regular IRA (not a Roth) from his mother, asked Bob if he should take minimum distributions based on his lifetime or his mothers.

Bob replied: "If you inherited this from another family member, not a spouse, then you have to take distributions starting the following year....My understanding is that you are prohibited from rolling it into another plan or making contributions....The schedule you use is the IRS single-life expectancy table.....That would be based on whatever is in the table...."

Honey EC: Fidelity offers an easy-to-read explanation of inherited IRAS at this LINK.

GRANDFATHER BOB BRINKER: Caller Bob from Indiana said: "I hate to disagree with you because you're so likeable. You make me think of my grandfather, so I speak to you respectfully, when I disagree with you......My philosophy on that committee is like an analogy if I was to walk up on two teenagers that were fighting, and it was a slug-fest fight, I don't think that I can automatically conclude that they are both wrong. For all I know, one of those teenagers  jumped the other one from behind when he wasn't looking and he is fighting for his life because he was assaulted. For that reason, I don't believe that just because they (the super committee) are not coming to agreement with each other, does not necessarily mean that they are all wrong...I believe it's possible that six of those committee members are doing the right thing and the other six don't want to do the right thing and that's the reason they can't agree. Before 2008, we had a budget that did not pass a budget which to me screams out fiscal and financial irresponsibility. And six of these people that didn't see fit to pass a budget on on this committee."

 Bob replied: "Well if you are right and everybody else is wrong, why do you think that 84% of Americans think Congress is dysfunctional." 

Honey EC: Bob's political pontification went on for several minutes and then after the break, he continued hammering poor defenseless, Bob from Indiana.  Brinker finished hammering the caller by announcing that he showed his partisanship.  LOL! Duh...Mr. Brinker and what do you do throughout every program? 

Bob spent a lot of time today talking about Europe, but in my opinion, none of his opinions are new. And basically all he did was report what is available in the news or internet.

WHAT'S HAPPENING NEXT WEEK...Monday: Existing Home Sales;  Tuesday: GDP: Wednesday: Durable Goods Orders and Personal Income;  The stock market is closed on  Thursday for Thanksgiving Day and early on Friday.   Here is a LINK  to the full economic calendar,  and a LINK to Bloomberg Major World Stock Futures.

Bob's guest-speaker today was Richard Brandt, who writes about Silicon Valley, "The Google Guys" and "One Click: The Rise of Jeff Bezos and Amazon. com"

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November 17, 2011, Bob Brinker's Stock Market Timing Advice and Asset Allocation

November 17, 2011.........................................(comments)

Bob Brinker's most current  stock market-timing advice is to remain fully invested and dollar-cost-average new money.

In the November issue of Marketimer, Bob Brinker said that he uses the study of history as one of his market-timing tools.  And he called the 19.4% decline of the S&P 500 Index in August 2011 an "intermediate correction."

Additionally, in the November Marketimer, Brinker compared the "waterfall phase" of 2011 (closing low 1119.46) to the "waterfall phase" of 1998 (closing low 957.28).  Then he compared the "final test" of the 1998 closing low (959.44) to the "final test" of  the 2011 closing low (1099.23) and pointed out that both led to "relief rallies." 

Let's dig a little deeper into "history"  that Brinker has never talked about in Marketimer or on Moneytalk.

For the record, in 1998, Brinker did just what he did this year and that is to ride down the almost 20% market correction.  However, if we go further back in history, we see that he went to 100% cash  when it was a mistake to do so. That was in  January 1988 after the Black Monday market crash in October 1987.

That was a very costly mistake because the market climbed considerably before he finally got back to a fully invested asset allocation in January 1991.

Here is a complete roster of Brinker's asset allocation. I can personally vouch for all of it except 1982:

Pen-name Math Junkie wrote: “Some have raised questions about the allocation percentage from 1982 to 1987, so I have added a question mark to reflect this. As Steve did, I am retaining information from radio broadcasts, and it is labeled as such.”
    
* Aug 14, 1982….equities @ 100% (?)……....777

(Announced on local radio in New York he recommended being fully invested. He had been mildly bullish to bullish on NBR the previous April, and is said to have been recommending dollar cost averaging prior to August 14th.)

* Aug 21, 1987…..equities @ 100% ................2710

* Oct 19, 1987……equities @ 100%................1841

(Black Monday: Dow Down 695  or 25.6% From Top.)

* Jan. 1988…….equities @  Zero.…………...2015

 (Went to 100% cash & told listeners he was  
   bearish after the market was 9.5% above
   bottom, taking the brunt of most of the
   bear decline.) 

*  Feb. 1989… equities @ 50%........................2342

(Market up 27% from the bottom.)

Nov 1989....equities @ 75%.........................2650

Feb  1990…. equities @ 40%..................2559

Mar.1990…..equities @ 50%..................2635

Apr. 1990….. equities @ 65%.................2687

May 1990…...equities @ 75%.................2656

July..1990…...equities @ 85%.................2840

July 18, 1990: Dow @ 3016....(Bull  peak: up 50% since Jan. 1988)

* Oct. 12, 1990: Dow @ 2398

(Gulf War bear bottom. Down 20.5% since bull peak.Market is back to where it was in Feb 1989 where Brinker went form 0% to 50%)

 * Dec. 1990....equities @ 95%......2565

* Jan. 1991…. equities @ 100%..................2550

(Finally back to fully invested: Dow up 26.7% since going to 0% equities.  Missed out on a large portion of market gains from when he went to 100% cash at 2015 in January 1988.)

For the next nine years (January 1991 to January 2000),  Brinker remained fully invested and made himself a legend. (Rode out the 19% selloff in 1998.)

* Jan. 2000… equities @ 40% ………Dow: 11, 122

(Lowered equities 60% within 5.1% of S&P top, 

and recommended putting cash in money market funds .)

* Aug. 2000… equities @ 35% ...........Dow: 10,688

(65% now in cash reserves)

 * Oct. 16, 2000…equities @ 35%......QQQ = $83

(Told subscribers to put 20% - 50% of (the 65%)  cash reserves into QQQ for counter-trend rally.)

* Jan. 8, 2001…equities @35%....QQQ = $62.44

(Again suggested putting 20% to 50% of cash reserves into QQQ.
Repeated same recommendation in February through May 2001 issues.)

 * June 8, 2001….QQQ = 47.35 (Placed  on hold)

* Sept. 21, 2001…equities @ 35%...(Dow 8236 – hit 7926.93 intraday.)

* Oct. 2002…equities @ 35%...21% actually remaining in   equities…Dow 8950

(Still recommended 35% equities, but P1 in newsletter is 21% equities (not counting QQQ trades apparently due to lack of rebalancing.)

* March 12, 2002…23% actual balance in equities …Dow 10,586

(DJIA +28.5% from 9/23/01 closing.
DJIA same level as August 2000 5% sell.)

* Oct 9, 2002…19% balance in equities…Dow 7286

(Cyclical low so far. QQQ = 20.06, down 75.8% from

10/16/00 buy at $83.)

 * March 11, 2003: equities @ 100% …Dow 7568; S&P 807.48.

(Issued bulletin on website before open based on March 10th close. QQQ = 24.01; S&P500 = 807.48; SPY = 81.32. He ended all  guidance for existing QQQ positions in March, 2003.)

* March 15, 2003….Announced 100% to weekend audience.

* March 17, 2003 (Monday)….Dow 8142

(QQQ = 26.60; S&P500 = 862.79; SPY = 86.78
typical buy levels for weekend and snail mail
followers who use mutual funds.)

* April 5, 2003….100%...(Recommended new equity purchases below S&P 810, and dollar cost averaging otherwise. Stopped mentioning existing QQQ positions in the newsletter text. It was never again accounted for in his reports of newsletter performance.)

Bob Brinker's Marketimer model portfolio stock allocations have  remained 100% invested since March 10, 2003.

[This data was  compiled by Math Junkie,  Pete from Stamford, CT.  MrGreenJeans, DanG. Kirk Lindstrom and SteveT.

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November 13, 2011, Bob Brinker's Moneytalk: Summary, Excerpts, Commentary and Discussions

November 13, 2011...Bob Brinker hosted Moneytalk today...................(comments)

TWO 800-POUND GORILLAS IN THE ROOM....First, Bob did not make any comments about what the stock market did last week.

And, for the first time in several weeks, Bob  did not slam those who are predicting a recession. Bob's main target has been Economic Cycle Research Institute’s Lakshman Achuthan who said that the economy is "tipping into recession."  Lakshman is still forecasting a recession as of November 7th.  Here's a LINK to his latest CNBC video interview.

 SUPER COMMITTEE....Bob commented that there was word today that the Super Committee in Congress is trying to find some common ground to bypass their partisan impasse....they have ten days before automatic cuts are due.  Bob called the proposed cuts  a "drop in the bucket" spread over ten years.

US BUDGET DEFICIT....is over a trillion  dollars a year. (And the National Debt is about $14 1/2 trillion and rising fast.)

BUY TREASURIES AND HOLD-TO-MATURITY....Caller Scott from Chicago said he had been listening to Moneytalk since 1991 and  is "hopefully on his way to the Land of Critical Mass."  Scott told Bob that he was concerned about owning Treasuries because of the nation's high debt and  deficits. He was looking for a way to diversify from Treasuries and dollars.

Bob replied: "I think if you're going to be invested in Treasuries at this juncture, you have to have a hold-to-maturity approach....If you go out and buy a Treasury today at these historically low yields....If you buy a ten year Treasury at 2.06 and at any point down the line, rates normally, then rates would not be 2%....If you were to see higher yields you would see a reduction in the value of the principal that you paid for the Treasury....I think you do run the risk of seeing these securities go under water sometime in the next ten years."
 
BOB BRINKER'S MARKETIMER INCOME PORTFOLIO....Scott from Chicago was allowed to ask a  follow up question. He said that he was about 80% invested in Bob Brinker's Marketimer balanced portfolio and the rest in cash and was concerned about the devaluation of the dollar.

Bob resplied: "I have an idea for you. You mentioned the investment letter and you might want to  consider the income portfolio on page 7 of the investment letter. Past results are not a guarantee of future results, but this portfolio has been doing exceptionally well....The total return for 2010 was 7% on this portfolio and so far this year, the total return was 5.7%.......The current yield on that portfolio is close to 5%."

Honey EC: Bob's selective reporting looks mighty suspicious to me. This is the second week that Bob has talked in detail about what used to be sort of a "throw-away" portfolio "on page 7 of the investment letter."  Never, to my knowledge, has there been an official year-end report on it.  And Hulbert Financial Digest does not use it in their Marketimer ranking. (Read what Bob said about this portfolio last week: HERE)

And note that  Bob has NOT mentioned the year-to-date total return on  his "official" portfolios that are lagging the Total Stock Market.  Mebbe this is why -- as of November 2nd:

Model portfolio I: YTD = down 2.3% 
Model portfolio II: YTD = down 2.4%
Compare to: Vanguard Total Stock Market Fund YTD = up 0.4%

HIGH YIELD FUNDS....Bob from Virginia asked Bob about them. Bob Brinker said: "I have included those bonds in my income portfolio, which is the portfolio on page 7 of the investment letter....and it's done exceedingly well in there....Yes, I'm okay with having a reasonable amount percentage in junk bonds.....But keep in mind we focus in the investment letter in using this type of security for income portfolio purposes. ....We don't  have junk bonds in model portfolios one, two and three, which include significant percentages in the stock market. We only have the junk bonds in our income portfolio, which is the page 7 portfolio."

Honey EC: LOL again!! Everyone who doesn't know what page Bob's income portfolio in on, please stand up!   Ginnie Mae (VFIIX)  = 15%; Short-Term Investment Grade (VFSTX) = 15%;  High-Yield Corporate (VWEHX) = 25%;  Wellesley (VWINX) = 25%; Double LIne Total Return Bond (DLTNX) = 20%.

COST BASIS on DOUBLELINE TOTAL RETURN FUND (DLTNX)....Caller Fred from Colorado said he "recently took a position in the total return fund that you recently added to the income portfolio" (Honey EC: that would be on page 7 LOL!) and they had asked him to  pick a cost basis.

Bob replied: "I think you are going to be choosing from three possibilities when you are looking at this.  You can take an average cost basis where you take all the shares that you purchased and that might include re-investment shares. You can take a FIFO, first-in first-out approach, or a LIFO, last-in, first-out...You would have to make a decision what works for you. Most people choose the average basis just because it's easy....And if the company is going to figure the average basis for you, that's an added bonus." 

Honey EC: Brinker added DoubleLine to his income portfolio (on page 7) back in May, 2011 at a cost basis of $11.08. It closed Friday at $11.13.  However, it pays a tidy dividend that is in the high-yield bond fund territory of about 8%.

VANGUARD GINNIE MAE FUND CAPITAL GAINS DISTRIBUTION....Bob said that the Vanguard Ginnie Mae Fund has estimated a 13-cent capital gains distribution to be paid in late December.

MONEY FUNDS INVESTED IN EUROPE....Bob from Virginia asked about money market funds that are invested in Europe. Bob Brinker said: "It wouldn't surprise me, I think you have to be real careful in selecting a money market fund.....Here's the thing, money market funds usually have very  average maturity - no more than a few months.  There has been so much warning time for money fund managers to get their European holdings into places where they are confident, like Germany. And get them away from places where they are feeling a lot of heat....If your money fund is overly exposed in Europe as of now, then this is just my opinion, he should be fired."

SKIRT-CHASERS AND THE EUROZONE....Bob said that  people are glad to see Italy's Berlusconi resign because he had a reputation as a "skirt-chaser, and when you have a "skirt-chaser at the top of your government, you have a credibility problem -- doesn't matter what country it is."

Honey EC: Wonder who Bob was thinking about? Was it Herman Cain, who has been  figuratively lynched by the media? Or was it John F. Kennedy and William Jefferson Clinton? 

WHAT IT WILL TAKE FOR COMPANIES TO BEGIN HIRING...Bob said: "What we need in terms of hiring is sustainable demand for companies to hire. Companies are not going to hire because the president says, we want you to hire. That's not going to do it.....Companies are only to hire because they see that demand curve going in the right direction on a sustainable basis because that's the way the system works." 

BOB IS NOT FOR GETTING RID OF DODD-FRANK....After repeating his same old mantra about what caused the meltdown in 2008  and how there was no regulation and no oversight, Bob said that he was against "throwing out Dodd-Frank" and doesn't "understand" why  some of the GOP candidates are for doing that.  

KEYSTONE XL PIPELINE....After a lengthy talk about the US oil prices and energy needs, (old territory he's covered before) Bob said: "Bottom line, I'm in favor of the Keystone XL Pipeline." 

Honey EC: Looks like the Obama Administration may have shot the US energy supply down again by delaying a decision on this. News just out from Reuters:

HONOLULU (Reuters / November 13) - Canada will try to sell more of its energy products to Asia after Washington delayed a decision on whether to approve the Keystone XL Canada-to-Texas oil pipeline project, Prime Minister Stephen Harper said

END OF YEAR TAX PLANNING....Now is the time to make year end tax adjustments, such as deferring income into 2012. Bob said: "In terms of the Federal income tax brackets, the way things stand right now, things appear to be in place....for 2012, just the same as for 2011. There is nothing going on right now that would suggest that there will be a different set of tax rates for federal taxable income in 2012 when compared to 2011. Now obviously, there are questions remaining as to what the employee portion of the payroll tax will be in 2012. Under current law, there would be a 2% tax  increase on New Year's Day because the employee portion of the payroll tax would go up 2%.....You have an opportunity here to make charitable gifts before year end and get the deduction in 2011.....Are you properly withheld for your earnings for your federal income tax? The ideal way to do this.... is to get as close as possible to the proper level of withholding -- that should be your goal....This is something you can take a look at too."

STOCK MARKET $3000 QUALIFIED LOSS....Bob said: "If you wind up the year with a $3000 qualified loss on a stock portfolio, you can deduct $3000 against your taxable income.....So you could reduce your taxable income by that amount."

Bob Brinker quote of the day: "Stay away from those shark attacks forever. Take charge of your financial future, that's what I believe in." 

Bob's guest speaker was Peter Hoflick, "Banks at Risk: Global Best Practices in an Age of Turbulence"

IT'S FREE! Download it from KGO810 radio archives within seven days and  listen to  Moneytalk on demand.

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November 10, 2011, Bob Brinker's Moneytalk Guest: Estate Taxes

November 10, 2011......Bob Brinker's guest-speaker last Sunday on Moneytalk was Rachel Emma Silverman. Here is a very brief summary written by David Korn, posted here for you with his permission: 

David Korn wrote:

"Bob had on Rachel Emma Silverman, author of The Wall Street Journal Complete Estate-Planning Guidebook.”  Not too long of an interview, and kind of boring, but since it involves an issue that doesn’t come up too much I thought you would want the highlights so I summarized the key points below:

1. The federal estate laws keep changing, but in 2011 and 2012 the exemption — the amount shielded from estate taxes – is $5 million per person.  If you are a married couple, the total exemption is $10 million.

2. Before if a married couple wanted to take advantage of the full $10 million, the spouses would usually have to set up a trust.  Now, there is a portability element where a couple can take advantage of the full $10 million without the consequences and can avoid much of the headaches, costs and time to get that accomplished.

3.  About half the States in our country have their own estate taxes and many of their exemptions are much lower.  New Jersey, example, has an exemption of $675,000.  For a lot of people they might have a home that is worth more than that.  Bob said he thinks people will leave States where taxes are confiscatory.

4.  Rachel encouraged every single adult to write a will because if you don’t, your state government will decide where your money goes.  This is particularly important if you are in a relationship with someone, but not a family member or married and want to leave money to them.  The other group that needs a will is for those with young children so that you can name the guardian for your children.  Another reason to have a will is to address the issue of your health and to name someone as a power of attorney who can make decisions over your health care of finances.

5.  When you are thinking about your estate, here are the questions and goals to keep in mind:

• Do you want to leave money to family members and if so, in what percentages. Are there people other than heirs, such as good friends, who you want to leave money to?
• If you have young children, do you want to leave money in different amounts to them such as if your children have different needs or you are estranged from one child versus the other. 
• Do you want leave a charitable bequest, or create a charitable remainder trust that provides for regular payments. 
• Consider your animals.  It might sound silly, but make plans for your animals if you want them provided for. Keep copies of your documents.  
• If you have a lawyer, they should have a copy. Also keep a copy in a fire-proof safe at your house.

6. If you have debts, in general your family won’t be on the hook but it is dependent on state law. There are exceptions for things like student loans where your someone co-signed a loan.

7. Your estate includes whatever asset you have.  It is not just your bank account.  It is your ownership in businesses, property, and can include intellectual property, insurance, etc."

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 November 7, 2011

Honey sez: (Here is THE LINK to my complete summary of last Sunday Moneytalk.)  David Korn writes a weekly investment letter.  David and Kirk Lindstrom also publish The Retirement Advisor. You can request complimentary issues of both newsletters at THIS LINK.

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November 8, 2011, Bob Brinker's Moneytalk: Summary Continued....

November 8, 2011...In the opening monologue Sunday, Bob Brinker gave some excellent advice to young people about when to begin saving and investing for retirement. He cited an article from the University of Boston.

A reader asked me about the name of the article and the author. I have searched for it and even called in Jeffchristie, blog super-sleuth, to help. Neither of us have been able to find it. I wish that Bob Brinker would have given more information about it.

IN EDIT: Thanks to the "anonymous" someone who sent THIS LINK to the article.

Here is a transcript of what Brinker said:

Moneytalk, November 6, 2011: Bob said:  "There's a new study from Boston University. And it talks about the amount the amount of time that you have to save to reach your retirement objectives. If you start young at 25 years of age and work until the age of 70, that's a 45 year time horizon in order to get from 25 to 70.....If you start later on, say around 45 and you decide to hang up up at 62 -- you take short leash, the 17-year saving and investing leash, you have to save and invest ten times more money than the person that starts at 25 and saves and invests out to the age of 70. Think about it.

And by the way, the annual rates of return that were presumed in the Boston University study, very reasonable annual rates of return to achieve -- only 4%.....So you start at 25, you go out and save and invest, before you start taking it  all the way out to age 70 -- versus somebody starting at 45, retiring early at 62, that early retiree has to save and invest ten times more than the person that started young in that example.

So I think there's a lesson to be learned there. It's a lesson we've discussed on our broadcast many years,  going all the way back to Super Bowl Sunday 1986. And that lesson is, there is great value for you in moving forward on a saving and investment program as early as you can get started. I'm not saying you have to get started when you're a yon-teen, or something like that. But certainly mid-20's is a reasonable goal for you to get started.

Also on our broadcast we've talked for close to 26 years about how much you should use as a minimum saving vehicle. And that number that we've always talked about is 10% -- minimal....In this day and age with the various programs that are available in ta- advantaged accounts, it's easier than ever for you to do this,  because you can do it through 401K's, 403B's -- take the money off the top. Pre-tax money going in there. Remove that money from the tax-man's grasp up front and then  invest it tax-advantaged all the way out to your retirement years. It's a terrific way for you to do it."

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November 6, 2011, Bob Brinker's Moneytalk: Summary, Excerpts, Commentary and Discussion

November 6, 2011....Bob Brinker hosted Moneytalk today.....................(comments)


STOCK MARKET PRICE/EARNING RATIO: Bob said: "We have a low price/earnings ratio in the stock market right now. Investors are taking a conservative approach to how they are valuing earnings. We're seeing a good earnings picture in here." 

Honey EC: Bob didn't make any comments about stock market activity last week, but as you will see as you read on, he did a  lot of talking about all of his fully invested Marketimer portfolios.

JOBS REPORT....Bob commented that government jobs are "dwindling" because at the state and local level,  the money is no longer available.  And at the federal level, the political-will of the country is to shrink the United States Federal Government.

Numbers for October:

* Private sector created 104,000 new job.
* Government jobs shrank by 24,000.
* Net payroll gain =80,000.
* Unemployment = 9% (14 million), Under-employed = 16.2% (25 million)

ECONOMY - REAL GROSS DOMESTIC PRODUCT: Bob commented that the economy "has been recovering." There was 1.3 annual growth rate in the second quarter, and according to the preliminary reading, there was 2 1/2% real GDP in the third quarter (total goods and services).  Bob said: "The annual rate of growth for the real GDP for the first three quarters is about 1 1/2. And you'll remember my forecast has been between 1% and 2% for 2011....I think we will see a positive real GDP number reported when all the data is collected in the fourth quarter."

Honey EC: Bob has never admitted it on the air but he lowered his economic growth projection half-way into the year.   July 2011 Marketimer, Bob Brinker wrote:  "We expect real gross domestic product (GDP) to grow 2% to 3% this year...."

RECESSION DRUMS: Bob said: "My estimate is that we will see growth again in the fourth quarter, which means, where's the recession? You know, we have these private forecasters out there going around beating the drums of recession. Warning everybody that the US is going back into recession. Batten down the hatches and get in the bomb shelter because we are in a lot of economic trouble. That is what they say, but that's not what we see. So far, we see an economy that continues to grow slowly."

BOB WANTS PRIVATE FIRMS TO APOLOGIZE TO HIM: Bob said: "One of things that amazes me about the private firms that are forecasting a  recession in here is their conviction. I mean they talk about it like it's a fait accompli. They talk about it like it's for sure -- take it to the bank. Well I'm not taking it to the bank. What do you think about that? I think these forecasters are wrong, but I'll look forward to their apology....this is Moneytalk." 

IN EDIT, Monday the 7th: Business Cycle, Lakshmann Achuthan speaks out on CNBC -- we are in a recession.  See video here: CNBC

CORPORATE PROFITS... Bob commented that they have been "excellent," and  that corporations "have a couple of trillion dollars sitting on their balance sheets" which they won't invest until they have better demand visibility.

BUYING GOLD AND SILVER: Bob said: "This week we heard the stories of those who have purchased gold and silver coins at huge mark-ups to their market value.....How many times have we talked about this on the broadcast....And I hope you have not been victimized by this situation.....Gold bullion is gold bullion, you know the price....You have no idea what the underlying value of a  numismatic gold or silver is....I saw a story this week.....  A gentlemen had put $5000 into these coins that he purchased, so he decided to find out what they are actually worth and the answer was $2900 -- so the mark-up was 72%.....The way you find out the value is ask the seller what would you buy them back for -- make sure you are sitting down when you prepare for that response....This is a precious metal hedge....That's a profit center for the seller.... If you want to put on a hedge in gold, there is a way.....it's an Exchange Traded Fund... GLD."

Honey EC:  Bob talked about this subject a couple of times today. He is referring to charges against Goldline for allegedly misleading customers. I read about it here and the charges sound pretty flimsy to me.

HOUSING MARKET: Bob said: "I'm not seeing anything in the future housing statistics that's would suggest anything's going to be taking off soon. I think the level of short sale and foreclosure activity is sufficient to keep prices from skyrocketing in here -- along with demand, along with the economy, along with the high rate of unemployment." 

 ANNUITIES....Caller Tony from Illinois asked Bob for  his opinion of annuities. Bob replied: "I'm not a big fan of annuities in general.....If you are going to get involved with an annuity, you want to do it with a low-cost producer, somebody that gives you many types of no-load funds to invest in.....The Vanguard annuity program has been quite attractive for both of those reasons....You don't get stuck with these surrender charges to get back your own money."

COMMODITY PRICES: Bob said: "I think if they keep messing around with the food chain by using a  lot of our corn to make ethanol, then I think you are going to be seeing the same thing that you've seen with corn prices.....We pour government subsidies into doing the wrong thing...As long as we're doing that, we're messing with the food chain. We are using a sizable percentage of our corn crop in the production of ethanol. Believe it or not. I know it doesn't sound possible, but that's the way it is.....As long as we're doing this, it's Katy bar the door....I think that is why you've seen so much price gain in corn."

CALIFORNIA INTERMEDIATE-TERM TAX-FREE BOND FUNDS....Caller Matthew from Palm Springs said he was considering the Vanguard Intermediate Tax-exempt fund and asked Bob's "feelings"  about it. Bob said: "I think the reason I would not be buying that fund is because the level of interest rates is near historical lows.  I understand as a California resident, you want that double exemption....at the same time, with rates down here.....I'd be disinclined,  unless you set a real tight mental stop where you would clear out of the position in the event it went against you.....The Fed is committed to keeping them  (rates) down as long as the economy is slow, but the reality is, rates are really low." 

Honey EC: Bob used to spend time on each program (deservedly) hammering "Sacramento" for its fiscal irresponsibility, but never does that any more......California is in even worse condition now, but there is one major difference, namely, a left-leaning Democrat governor.

MANAGEMENT FEES....Ron from Las Vegas said he pays an annual management fee of 1.3% on his 457 account and asked Bob what he thought about it. Bob didn't really answer Ron's question.  He simply told him that it was his job  to decide if the performance was worth it.

Honey EC: I wondered if Bob was reluctant to answer Ron's question about management fees because for many years, Bob was co-owner of the BJ Group which charged management fees up to 2% for accounts under $100,000.

DEFICITS, DEBT AND THE SUPER COMMITTEE: Bob announced that the super committee  had until November 23rd to come up with their recommendations for cutting 1.2 trillion dollars off the budget -- over the next ten years. Bob said: "It's not a lot because we are running deficits in excess of a trillion every single year. So if you cut 1.2 trillion off spending over ten years, you're cutting an average of 120 billion a year....You're still going into the sink hole, major. And that is what we are doing in the US -- going into the sink hole in a big way. The deficit (Bob meant debt)  is  close to $15 trillion now, heading to $16 trillion down the road, probably a year from now.....If the Super Committee fails to come up with a way to cut this money through agreement in Washington, the automatic cuts take effect on December 23rd. On December 23rd, they will come up with 1.2 trillion cuts over ten years and those cuts would begin in 2013....An average of 120 billion a year. Is that enough to  even come close to balancing the budget? Of course not. They're not even in the same universe with what would have to be  done to balance the budget or even get within 3%."

BOB BRINKER'S MARKETIMER INCOME PORTFOLIO... Caller Rudy from Oakland said he had inherited 1 1/4 million dollars and asked Bob how to minimize risk since he wanted to preserve capital for purchasing a house. He said he was a subscriber and mentioned Marketimer portfolios.

Bob said: "I stand by my income portfolio in my investment letter. You brought up my investment letter. My page seven income portfolio is having a terrific year, frankly. A really good year in the income portfolio. We have five different investments in that portfolio. We spread the investments over five different securities, no-load funds. And we're having a terrific year in the income portfolio and I stand by it.....To compare the  risk level with a Treasury Bill or a fully insured short-term CD would not be fair because the people invested in that income portfolio on page 7 of the investment letter, they are willing to accept the fact that in order to get a current interest rate which is close to 5% on the portfolio. The current yield is close 5%. In order to get that yield they are willing to take the diversified risk that they are taking in that portfolio." 

Honey EC: I laughed out loud as Bob repeated himself so many times. Do you suppose people got it the fourth time around?   However, he's right that there are five different funds in the income portfolio "on page seven." :)  Four Vanguard Funds: Ginnie Mae (VFIIX)  = 15%; Short-Term Investment Grade (VFSTX) = 15%;  High-Yield Corporate (VWEHX) = 25%;  Wellesley (VWINX) = 25%; Double LIne Total Return Bond (DLTNX) = 20%. 

But  here is what Bob isn't telling you is:  Bob's "income portfolio" is the off-the-books portfolio that he formerly called "Fixed-Income Portfolio" before he added the Vanguard Wellesley Income Fund -- which is 37% stock.  This portfolio is  not part of Bob's official performance record, and Hulbert Financial Digest does not include it in Bob's performance ranking. In 2008, a good year for bonds, this portfolio lost money, but Bob never posted any 2008 performance numbers and certainly not for this portfolio -- and he never talked about it either.

BOB BRINKER'S MARKETIMER BALANCED PORTFOLIO.....Caller Dahlia from Concord told Bob that because the stock market had gone down "so bad" she took all of her money out three years ago and put it  in money market funds. She said "I subscribe to your newsletter, the 'Marketeer'"  and didn't know where to put her money to get a better return.

Bob replied: "Past results are not a guarantee of future results.....In terms of what is going on with various types of portfolios that you can use within the investment letter, there actually are several portfolios. If you're looking for a balanced portfolio which has an income  oriented component and a stock market component, then certainly model portfolio 3 on page eight of the investment letter would be a balanced portfolio.... Designed to provide both growth and income with a relatively conservative approach compared to an all equity approach. That might be something for you to consider -- the balanced model portfolio 3  approach. The whole idea is here is, you are going to be invested in a portfolio of securities that has, in the aggregate for the whole portfolio has a reasonable expense ratio. We are  dealing in no-load funds in the investment letter. And  all of that material of course, is available within the context of  letter." 

 Honey EC: Aha, now Bob has moved on the page eight -- the last  page of the newsletter.  LOL! Marketimer only has three portfolios that Brinker uses as an official performance record. Portfolio one and two are 100% stock mutual funds and portfolio 3 is the balanced fund which, as he told Dahlia, is about 50-50 stock and bond mutual funds. His active-passive is almost equivalent to simply buying the total stock market funds and throwing in some international for good measure. The other portfolio is the income portfolio that he spoke about with Rudy just above.

Bob Brinker's guest-speaker was Rachael Emma Silverman: "The Wall Street Journal Complete Estate Planning Guidebook" You can download all of Moneytalk, including this third hour at KGO810 radio archives for free. This program is available for the next seven days.

 I have posted a complete summary of Bob Brinker's guest-speaker from last week --  John Hofmeister, author of a book called “Why We Hate the Oil Companies.”   John is the former president of Shell Oil Co. -- right here on this blog. It was written by FrankJ  and you can read it for free at this LINK

Bob mentioned the Charlie Maxwell interview from September 25th. I have posted a complete summary of that interview written by David Korn. You can read it for free right here on this blog  at this LINK.

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November 5, 2011, Bob Brinker and Liz Ann Sonders: No Recession

November 5, 2011....Bob Brinker is dead set against recession-bears, like Lakshmann Achutan (ECRI).  Bob Brinker has said that those who predict an upcoming recession are off base and "tagged out."

Liz Ann Sonders Senior Vice President, Chief Investment Strategist
Charles Schwab & Co., Inc., agrees with Bob Brinker.  From her article "Born in the USA: A Look at What Could Go Right:

Key Points
* The expectations bar has probably been set low enough to be easily hurdled as the big market rally may be indicating.
* Not only is recession risk fading in the near term, a very positive
longer-term story is emerging, even though very few are in tune (yet).
* Investors have gotten used to digesting worst-case scenarios … maybe it's time to ask what could go right.

 In her November 2011  Charles Schwab Market-Snapshot Presentation, Liz Ann Sonders makes the case for the bulls and bears:

The Bulls’ Case
• Still-strong consumer-driven growth in emerging economies
• US real GDP rebounding nicely from first half
• Exceptionally low expectations bar
• “Operation Twist” to lower borrowing/mortgage rates (help for refinancings)
• Strong corporate profits / $2.1 trillion cash on corporate balance sheets
• Leading indicators for job growth remain healthy
• Lift to auto sector from Japan’s recovery
• Credit markets on the mend; lending starting to grow again
• Tax reform on table
• Commodity prices down from peak; global monetary tightening ending
• Inexpensive valuation on forward earnings
• Extreme investor pessimism (contrarian indicator)

  The Bears’ Case
• “Stall speed” in economy … elevated recession risk
• Eurozone debt crisis … shaky plan?
• US debt crisis … nasty political scene
• Debt deleveraging cycle depresses growth and lasts a long time
• Volatile stock market becoming catalyst vs. discounter?
• Fed out of traditional bullets, hence “Operation Twist” (pushing on string?)
• Anemic jobs and real estate recoveries
• Slowing global growth
• Corporate margin pressure and weakening forward earnings guidance
• Confidence crisis = self-fulfilling prophecy
• Fiscal restraint draining economic growth

* Market Suffers Around Recessions: Biggest Hit Came Around Last Recession, Hence Elevated Fear

 * A Lost Decade … and Then Some But Not Everything Has Been Flat Since the Late-1990s

  * On Forward Earnings, Stocks Are Very Cheap Barring Recession: Estimates Have Likely Been Cut Enough

See more of Sonders' great graphs that show each of the following topics here:

* A “Square Root” Shaped Recovery Unfolding? Our Initial View When Estimating Recession Was Over in Mid-2009
* Real GDP Rebounding From Downward Revisions: Nominal GDP Actually Higher For Many Quarters, But So Was Inflation
* Corporate Profits Revised Up By Whopping 15%: Bright Spot Among GDP’s Revisions (Helped by Higher Inflation)
* Investment Has Undershot Corporate Earnings: Means Are There, But Not Motivation … Yet
* Corporate Profits on a Tear
But Secular Impediments to Lower Unemployment Rate Remain
* Education (or Lack Thereof) Matters As of 9/11. Source: Department of Labor, FactSet. Spread Has Never Been Greater
* Unemployment Rate Lags Big Time Recent Stickiness Troubling But Not Unprecedented
* 90% Debt/GDP = Threshold Above Which GDP Suffers: US Federal Debt Presently 96% of GDP Eurozone Leaders Agree to Preliminary Strategy
* Private Sector Began Deleveraging in 2008: But Public Sector Deleveraging is Just Beginning
* Consumers’ Stresses on Volatile Path: Lower Commodity Prices and Liabilities Helping Recently
* Market Suffers Around Recessions: Biggest Hit Came Around Last Recession, Hence Elevated Fear
* Investor Confidence Got Crushed by Market’s Rout: “Wall of Worry” Remains But Sentiment is Chasing Rally

Watch the complete Liz Ann Sonders' video  presentation here

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November 3, 2011....Bob Brinker's Moneytalk: Summary of Latest Guest-Speaker

 November 3, 2011....Guest blog writer, pen-name FrankJ, has a real treat for us this week. He has written a summary of the third hour of Bob Brinker's  Moneytalk from last Sunday...............................................................................(comments)

FrankJ wrote:

Bob’s guest on Sunday, Oct. 31 was John Hofmeister, author of a book called “Why We Hate the Oil Companies.”   John is the former president of Shell Oil Co. and is the founder of a non-profit, non-partisan organization, Citizens for Affordable Energy, a group devoted to holding politicians accountable for energy policy.

Hofmeister’s opening statement, in response to BB’s question as to why he wrote the book was that, while it is the oil companies that consumers hold responsible for high prices, they should “look through” the oil companies to see the federal government standing behind them, preventing increases in the domestic oil supply.

BB asked why we seem to have made a conscious decision over the past decades to buy oil from people like Hugo Chavez and the Saudi royal family.

JH answered that in the 1960s and 1970s, few barriers to domestic production existed, but after the Santa Barbara oil spill in 1969, and the Exxon Valdez spill,  a shift in politics caused us to “export the environmental risk.”  Congress reacted to Santa Barbara by putting a moratorium on off shore drilling.   The result of this policy was we exported dollars and did not create domestic energy jobs.

BB asked John if the Gulf of Mexico spill gave energy and motivation to the anti-drilling groups? 

JH said, the Gulf spill added to their motivation, and pointed out that the Santa Barbara and Exxon Valdez names never went away among arguments against domestic production.  JH pointed out that the political response to the Gulf event was to shut down drilling, and while this change took place immediately, only one-third of rigs are back in production, due to the difficulty in getting permits.  JH said we pay more than ever before for gas thanks to government’s unwillingness to produce domestic resources.

BB made the statement familiar to regular listeners that we would be much better off in terms of balance of payments and a strong dollar if we did not have to buy foreign oil.  JH agreed and said that dependence on foreign oil “saps the strength” of the domestic oil industry.

JH went on to blame oil companies for not doing a better job of telling their story to the American people and suggested that fear of retaliation from the federal gov’t might be the reason – it is the gov’t that grants exploration and drilling permits. 

BB then brought up the topic of natural gas and asked another question familiar to listeners as to why there has been no action on the part of the government to issue an executive order to convert the federal vehicle fleet to natural gas?  

JH said politicians are “actors” who act on a 2 year cycle, and used the term “political time” and said that elected officials can’t look beyond Nov 2012, whereas, the benefit of natural gas use in vehicles might take 5-10 years before there is a material impact on the economy.  He mentioned his non-profit group and said the American people need reminding that they are being victimized. 

After the break, BB brought up Wind and Solar, asking the guest, “Why do they get all the face time in Washington, D.C?”

JH answered that it is a matter or political popularity.  Politicians will support whatever brings in better polling numbers, and they like to get political contributions from groups and individuals who support wind and solar.    

Wind and solar are not, in fact, about green jobs because they are largely self-operating.  He said wind towers will not last as long as predicted because they are out in the weather.  He said we need to stop throwing money at projects that require tax subsidies in order to produce electricity at prices consumers will pay. 

Editorial Comment:  Consumers often don’t have a choice because some states have passed legislation REQUIRING electric utilities to purchase a percentage of their power from renewable sources. 

BB asked John if he has seen the large wind farm along Interstate 40, near Weatherford, OK and is this business model economically viable?

JH said he had not, but he has seen wind farms out west.   JH does not think it is economically viable.  Instead of “dozens and dozens” of towers, there need to be “hundreds and hundreds” of towers.   He said, the amount of energy produced by existing wind farms is, “paltry.”  The scale needed would require “billions” in investment and people would not go for that.

JH cited the negatives:

·       Projects require incentives in the form of tax write-offs. 

·       Utilities are required to buy the more expensive electricity and they simply pass the higher costs on to consumers. 

·       Getting the electricity from remote areas to where it is used, is inefficient:  transmission lines lose 3% of the energy per mile.

·       Ratepayers pay for the new transmission lines.

·       Ratepayers pay for backup energy sources needed (often natural gas plants).

 JH said we are “…paying through the nose for a very small benefit so politicians can say – look what we are doing for green energy.”

A caller criticized Americans for buying gas guzzlers.  Before the caller could launch into a full-blown filibuster, BB cut him off and asked JH about the smaller cars in Europe.

JH answered that European cities built in the 15^th-16^th century have narrow streets and cannot accommodate large vehicles like SUVs.   Editorial Comment:  OK, that was weak.  He went on with a little better explanation:

Parking is expensive because land is limited.  Getting better.

Europeans have had to make do with less because Europe does not have the natural resources the United States does.    Getting better.

We (in the US) are used to having choices.   That’s the ticket.

EC:   High taxes on fuel mean people want cars that get high mileage and that means small cars, a pretty obvious reason for the prevalence of small cars in Europe.

BB asked John’s views on conservation. 

JH said 30 years ago we put the burden of conservation on the consumer.  We were told we needed to be colder in the winter and hotter in the summer to save energy.  Instead, we need to design conservation into the products we use and suggested that it is time (over the next 30 years) to say good bye to the inefficient internal combustion engine and replace it with batteries, hydrogen fuel cells and mass transit. 

A caller asked about over-the-road trucks being converted to natural gas as an alternative fuel.  JH seemed to agree with this concept and went into a discussion of Methanol for use in engines.  Methanol can be produced from natural gas, or other sources in bio-refineries, but this will take a political framework.  Advantages would be domestic drilling jobs and jobs in bio-refineries.

In closing, BB asked if John would end the government subsidies for ethanol?

JH said we need a larger plan for the use of ethanol, methanol, butanol, and compressed natural gas.  We need an open fuel standard predicated on domestic energy production and suggested that natural gas could be used to produce methanol without subsidies, making it competitive with ethanol."

 Honey here: Thanks again, FrankJ. That was a great summary of an interesting subject! 

The Hofmeister interview is available at KGO810 radio until Sunday. It is archived in the 3-4pm hour and can be downloaded for free. 

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