September 23, 2012, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

September 23, 2012....Bob Brinker hosted Moneytalk today.....(comments welcome)

STOCK MARKET: Caller Terry from Chicago said: "Hi Bob. If the Fed continues to be as accommodative as they claim they are going to be, and congress is able to get their acts together so we don't go off the fiscal cliff, and assuming that the unemployment rate doesn't get much worse than it is, wouldn't you anticipate that the stock market would continue to go up?"

Brinker replied: "Well, there's a lot of variables out there, some you just named. I certainly think with reference to the first one though, Terry, that everybody already knows it. You have to be careful when you are evaluating things that everybody already knows because there is no surprise element attached. I'm not sure there's much of a surprise element attached to the second item you mentioned either -- the fiscal cliff....The Federal Reserve has been very accommodative going back to 2008-2009...and they remain so.  But I think that just about every investor on the planet is aware that the Federal Reserve is in accommodative mode."

FISCAL CLIFF SWORD OF DAMOCLES: Brinker continued answering Terry: "As far as the fiscal cliff is concerned. I think they have to resolve it in a way that will not produce the $600 billion fiscal bombshell that is hanging over the future budgeting like a Sword of Damocles...They have they have to address after the election....I think we will muddle through the fiscal cliff. What that means is they'll come up with a pack of Band-aids after the election....probably a patch on the alternative minimum tax....almost 20% of the fiscal cliff....I think they will reduce any spending cuts....And there's no question in my mind that they will keep the tax rates as they are for those making  under $200,000 or $250,000 for couples....Whether they keep the rates down on high-earners, that's a totally separate question. There's a big difference of opinion on that."

Honey EC: Did Brinker avoid answering Terry's stock market question? Sure seemed like it, but he adds more about stocks later. However, at no time today did Brinker actually make any commitment about how he sees the market going forward. He didn't sound bearish, but his "variables" comments tell me that he sure doesn't want to be on record making bullish predictions either. 

STOCK MARKET SELL-OFF AHEAD?   Curt in San Rafael said: "If President Obama gets re-elected in November, and the stock significantly increasing over the years, do you see a sell-off in the month of December?"

Brinker replied: "Well, we are going to have to wait until we get further down the line to answer that question.  I certainly don't have forecast changes that I would make months in advance. In other words, I operate in real time so that whenever things change, they change. Doesn't matter who the president is, I can tell you that. The biggest mistake that I have seen investors make is to allow politics to interfere with their investment decisions."

Honey EC: That is hilarious  for Brinker to claim he doesn't make forecasts in advance and always works in real time. He often predicts what level the S&P will be at by "this year" or "next year."  

WILL THIS CYCLICAL BULL STOCK MARKET EXCEED OLD HIGHS? Tom from Albuquerque asked Brinker for the "macro" outlook.  "Are we in a cyclical bull run in a secular bear market?" 

Brinker replied: "I believe we are in  a cyclical bull market. I believe that cyclical bull market began in the spring of 2009 and has continued to this point." (Tom asked if this bull market could exceed old highs by any "substantial amount.") Brinker continued: "That remains to be seen. We certainly aren't there yet....What we have right now is an economy that is growing slowly and corporate  earnings are growing very slowly now. And investors are taking all of this into consideration and determining what valuation they are going to place on the market. We have a lot of variables out there right now....Certainly we've had a very attractive stock market for the last three and half years or so. It's done very well in this cyclical trend that we've been in. I think all of those things are true."

Honey EC: I wondered why Brinker ignored half of Tom's question -- the part about the "secular bear." Brinker's latest view is that a secular bear market began in January 2000. 

ABOUT PREFERRED STOCKS....Brinker said: "A straight preferred pays usually pays a higher dividend than the common shares and that dividend is subject to the financial health of the company.....The board of directors votes on each  dividend....If the company goes south...they can easily leave that dividend on the sidelines....Another factor that comes into play is the overall interest rate background. As a general rule, in a period of rising interest rates, preferred stock investors view that as a negative because their dividend is fixed.....It's not like a common stock where the dividend can be raised over time as the company does better....Interest rates decline, that's viewed as a positive because that yield is fixed."

INTEREST RATES CAN CHANGE ANY TIME....Brinker said: "I think it's a movable feast. I hear the Fed Chair talk about not raising rates until 2015. It was 2014....I take this with a grain of salt because I think it's a movable feast.....Each time they meet, they re-evaluate the current situation. They take a look and decide, hey, should we change things.....They could change it any time that the fundamentals change."

HOUSING MARKET: The Case-Schiller Housing Index will come out for the month of July on Tuesday. Brinker expects it to show a year-over-year increase in real estate values in the largest markets of about 1%.  Last month the increase was 1/2 of 1%. Stability is coming into the housing market.

GROSS DOMESTIC PRODUCT: On Thursday the final revision for the second quarter -- estimate to stay at 1.7%...Annual growth for the year stands at 1.85%.

REAL ESTATE IRAS: Dave from the Hawkeye state asked Brinker about Real Estate IRAs. Brinker recommended checking with a CPA because when you put real estate into an IRA, you have to be careful not to get any personal benefit from it prior to taking it out of the IRA.  Brinker called it "kind of a minefield." Here's more information about Investing Your IRA in Real Estate.

FDIC.GOV: Brinker recommended this website as a great resource to answer any FDIC Insurance questions. He recommends that all money be kept under FDIC protection.

BRINKER FAILS TO TELL THE TRUTH ABOUT HIS NEWSLETTER: Caller Tom from Pennsylvania said: "Hi Bob. I'm a long time subscriber to your Marketimer and your Fixed Income Advisor. I'm sixty year.  I sometimes get confused when checking model portfolios, it's a little different one to the other....Should I try to combo both of them, or should I follow one over the other?"

Brinker replied: "Here's the deal. Anybody that is in or approaching their retirement years would certainly be looking at model portfolio III. That's the last of the model portfolios listed on page eight of the investment letter every month, and that is the balanced portfolio.....Separate from that Tom, we have subscribers who really don't want to take much risk in the stock market, and that's why we have the income portfolio on page 7.....The bottom line is your risk tolerance, that's the key."

Caller Tom followed up: "Okay, Bob. The reason I was asking was because when you get  two newsletters, when you do model portfolio III on the two of them, there is some differences between the recommended ratios, ummm.

Brinker cut in and replied: "Oh there would be Tom. Here's why. The Marketimer investment letter, which is my investment letter, that investment letter focuses a great deal of attention on equity investing. Alright? So it would be that way. Whereas, the Brinker Fixed Income Advisor, that investment letter focuses primarily on fixed income investing. Now there are some other things in there, but it's primarily fixed income investing  that is the focus of the Fixed Income Advisor."

Honey EC: So Tom buys two newsletters believing that they are both Brinker's. He is paying $185 plus $150 = $335 per year under a false premise.  Twice, Tom made it clear he thought both newsletters were Brinker's, so Tom is being deceived into paying for a newsletter he thinks is written by Brinker, but it's actually his son who writes it and collects the money. 

When one does not tell the whole truth, is that the same as lying?   When a man who calls himself America's Most Trusted Financial Advisor fails to tell the whole truth, what does that make him?   You can hear this call for yourself about 10 minutes into the second hour. 

GREECE....Brinker said: "Greece is now known as a bailout nation....It can only survive with bailout money.....It's a problem nation because over 57% of Greeks in a poll are saying that the country should not keep its pledges made in exchange for the bailout...Now that's a problem because if these voters overthrow the current administration.....then this whole thing could unravel....And as I've said before, the day could come when Greece would no longer be a member of the 17 nation Euro currency block. We certainly cannot rule that out."

POLITICS:  Brinker spent quite a bit of time on his usual political hobby horses. I don't think it's worth my time to cover because it was mostly repetitious from past weeks.

BRINKER BRAGS ABOUT HIS PORTFOLIOS BACK TO EVEN FROM 2007.... Brinker said: "I was just looking over the weekend at our model portfolio values on page 8 for model portfolios I, II and III. All three of those portfolios are currently at all-time-record valuations. They are at the highest valuation that they have ever achieved even though the stock at its highest level of valuation. The S&P 500 right now is 1460 level, actually 100 points below its all-time-high of several years ago."

Honey EC: The S&P 500 reached its all-time-record high in October 2007 at 1565. At that time, Brinker was predicting it would reach the mid-1600s by 2008. He kept all of his model portfolios fully invested for the entire megabear market of 2008 to March 2009. Portfolio I dropped as much as 57%.

Now he's excited that model portfolio I is back to the same level it was FIVE YEARS AGO. What he didn't tell you is that model portfolio I is  now only $66 above its all-time-high. LOL!  And he didn't mention that if you have been subscribing to Marketimer over that same five years, it would have cost you $1,110.00 Let's take a look. 

This is the October 2007 closing high of Marketimer model portfolio I: 

This is the Marketimer model portfolio I numbers from August 30, 2012: 

FUNNY CALL OF THE DAY: Caller C.R. from Missouri bragged that he had bought Euros back when they were 77 cents.   Brinker hit the poor guy across the face with a wet noodle when he told him that the Euro had never sold as low as 77 cents.  As the "Boy Named Sue" asked, "What could he say, what COULD he say?" Poor C.R. humbling admitted he might have his numbers wrong. :)

Jeffchristie's Moneytalk Final Exam Question:

Bob Brinker often says Iowa callers are calling from the Hawkeye state.  Iowa got this nickname from:

A)  Hawkeye Pierce from MASH.

B)  The Marvel comics superhero Hawkeye.

C)  Chief Blackhawk.

D)  The Grumman E-2 aircraft known as the Hawkeye.

Answer: Iowa Hawkeye State

Brinker's guest-speaker was Charlie Maxwell. You can read a summary of Maxwell's last Moneytalk appearance HERE.  

If time allows, I will do a summary of the Maxwell interview later this week. If you missed it, you can download it here: San Francisco, Ca. KSFO 560: 1-4pm (KSFO archives Moneytalk Free on Demand for seven days after broadcast. You can download and listen on the go.)  

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