March 19, 2012, Bob Brinker's Moneytalk Show Summary Part II

March 19, 2012,  Hour-two summary of Bob Brinker's Moneytalk.....(comments welcome)

I-BONDS and TIPS....The interest on I-bonds are tax-deferrable until redemption, but you can pay current taxes if you elect to...Bob said: "At this time, if I were a holder of Inflation Protected Securities, I would sell them. The reason is that I think the base rate has reached unattractive levels. I have no desire at this juncture to hold (them)."

BOB SETS ME AND BLOG READERS STRAIGHT....Jim from Ohio asked: "I have heard you on a number of occasions caution investors in the bond fund to set a mental stop as to when to get out. My question is, have you done so or will you do so on your Marketimer income portfolio?" 

Bob replied: "I don't think that it would in the context of the way I have answered those question....Sometimes, people call into the program and their primary concern is net-asset-value fluctuation. The mental stop tool is  used in order to ameliorate  those concerns in reference to that specific holding whether it be a Ginnie Mae or whatever. I have the flexibility in my investment letter in managing the portfolio.

I personally manage all of the model portfolios in my investment letter. Just as I personally write every word that's every been in the investment letter.  So the bottom line of all of this is, I have the ability to manage through the investment letter to manage those portfolios. I can announce change whenever I want to. It's normally done within the context of the monthly letter. But I can announce changes whenever I want to and as a consequence, I have that flexibility. So if I'm going to make a change -- do I have a change in hand right now today as we speak, no. But I can make a change in the portfolio at any time." 

Honey EC: If you want to hear this call and Bob's voice as he announces that he alone writes every word in Marketimer and always has (LOL!), it's 9 minutes into the second hour -- available at KSFO 560 archives. When I wrote the summary of Bob's son's Fixed Income Advisor last Tuesday, there was discussion about which Bob Brinker was actually writing Marketimer.  I stated that I thought anything was possible since the address for both letters is in Colorado.  Another thing, the Jr-Brinker uses almost identical funds in his model portfolios, including DoubleLine Total Return, Wellesley Income Fund and Vanguard High-Yield fund. Our friend, Birdbrain also recognized Bob's answer to Jim  as a message to this blog and said this this morning:

birdbrain said...
When Mr B said that he personally manages every portfolio and writes every word in his investment letter, he was speaking directly to the host and readers of this blog.


He claims that he has owned Apple stock for a decade or so and it has probably been the number one performer that he has owned. A rise of over 4500% in ten years is PROBABLY one of his top investments? The inclusion of that one word raises doubt. As Honey brought up, why no mention of this great success in print or on air?

 SELLING OUT AND BUYING BACK AT HIGHER PRICES....Caller John from San Mateo claimed that he had been a Marketimer subscriber for a long time and followed Bob's portfolio-one, but he got scared last August and went to cash. John pointed out that his portfolio dropped almost 25% during the market downturn.

Bob replied:  "John, just so we don't mislead anybody, we issued a buy-signal on September 22nd in the low 1100s.....The total S&P market decline was 19%....(John reminded Bob that he had told a caller that if he sold he might have to buy back at higher prices.) Bob continued: "That's exactly right, virtually verbatim what I said....I would not buy individual stocks. I would buy the total stock market -- like VTI shares....The SPY shares would be another way. I would dollar-cost-average. I'm certainly not jumping up and down at this level as I was last September in the low 1100's....You're going to be kicking yourself for selling out near the bottom. It's one of the most painful experiences.

Honey EC:  Bob slipped in some horse-puckey again. Unfortunately, most listeners will never know the truth. Yes, Bob did tell a caller that if he sold out, he might have to buy back at higher prices. What Bob didn't say yesterday was that the call  was in June and  there were several opportunities AFTER it to buy in at lower prices -- as much as 19.4% lower when the S&P bottomed in October before turning up again.  Here is a link where I document this call in my summary.

REASON WHY BOB ISSUES BUY SIGNALS WHILE HIS NEWSLETTER ADVICE IS TO REMAIN FULLY INVESTED...Bob said: "Some people will wonder over time, well Bob, you're fully invested, right? Why are you issuing a buy signal? As I have said many times, I have to exercise market-timing in a situation like that. Okay, the model portfolios are fully invested, but we see a buy signal develop in the market on a correction. And this has happened twice in the last two years. It happened in the beginning of July of 2010. Yes, we were fully invested, but at the same time, we saw a buying opportunity on the correction, so we issued a buy by upgrading our investment letter recommendation to attractive for purchase at that time. That was near the 1000 level on the S&P less than two years ago.  And then it happened again last September. Even though we were fully invested, so many of our subscribers asked us is this an opportunity to buy."

Honey EC: Bob just blows off the fact that his subscribers are only gaining back what they have lost from bears in the past few years.  Bob took  no action to raise cash and preserve profits.  What he was  basically bragging about  is that subscribers following his advice, rode the market down 20% in 2010 and 2011. And as those same followers are STILL UNDERWATER from the mega-bear market of 2008-'09.  

Honey EC2: Bob bragged about issuing a couple of buy-signal before the stock market happened to go up. What he has never done is apologize for  all of the buy-signals he has issued before the stock market continued going down.

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"

LENDING SHARES FOR SHORT SELLING: David Korn wrote this commentary:

Caller: This caller owns 70,000 shares in a drug stock trading at $4.50. His brokerage firm told him they wanted to borrow the shares and will pay him 4% a year for that with no restrictions on when he can buy or sell.  Bob asked if this was a thinly traded stock, to which the caller said it had 71 million shares outstanding.  Bob said that meant it had a $318 million market cap which is pretty small.  Bob said it sounded like there was a short-seller who the brokerage firm wanted to lend the stock out for them to short.  Bob said during the period of time he has the stock on loan he will get 4% and since there is no restriction you will get that added income for lending out the stock.  Bob said it must be a hard stock to short given the brokerage house is willing to pay 4% in this kind of market.   The brokerage firm can't naked short, so they need to secure a borrowing of the shares so they can enable their customer to go into the market and sell 70,000 shares short.  The caller then asked if the brokerage firm could use the shares in a margin account without going to a client?  Bob said he thinks many margin accounts have allowed brokerage firms to do that.

Honey EC: The caller was Ed from Illinois. He called in the second half of hour-one....Thanks to Jeffchristie for finding the name of this stock and even finding a Yahoo message board post by the caller.  It's KERX, and you can read Ed's comments about his call to  Bob Brinker (he uses an alias). Here's the LINK. 

Bob Brinker's Moneytalk on Demand is FREE on KSFO560.  Shows are archived for seven days after broadcast.
 

Please see hour one summary below

 

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