August 5, 2018, Bob Brinker's Moneytalk: Summary of Stocks, Economy, Bond Advice

August 5, 2018...Bob Brinker was live on Moneytalk for the first two hours....(comments welcome) 

STOCK MARKET....Brinker made no comments about current stock market activity.

Honey's EC: As I have written before, Brinker is still looking for the market to retest the February lows based on the fact that this is an off-presidential election year. But if that doesn't happen, he is all set to look for "a market top" in 2019. The big clock on the wall aboard the Spaceship Moneytalk will certainly be right again some day. :)

VANGUARD PRIME MONEY MARKET FUND....Brinker told first caller, Mitchell, that he prefers Vanguard Prime because it pays a higher yield than Schwab Money Market Funds. 

INTEREST RATES....BB comments: The Federal Reserve will continue to increase rates and dumping Treasuries on the open market, via Quantitative Tightening (as opposed to Quantitative Easing). 

EMPLOYMENT AND UNEMPLOYMENT.....BB comments....Current unemployment rate is now 3.9%....Average hourly wages - year-over-year - have increased 2.9% (not adjusted for inflation)

GROSS DOMESTIC PRODUCT....BB gives the year-over-year number as 2.8%. (BB did not mention that the GDP for Q2 came in at 4.1% and some say will be higher next quarter.)

==> dRahme's Audio Clip: employment and GDP reports; recommends Vanguard Prime Money Market Fund and why, to caller Mitchell in Naperville. 

JOB SKILLS ARE NEEDED....BB commented on "income inequality" and how no one ever points out that workers have the responsibility of getting the skills or education needed to do jobs and get higher wages. 

"STATE LEADING INDEX" REPORTS.....BB said that according to the State Leading Index Report, over the next six month, economic activity will increase in 46 out of 50 states.  ==> dRahme Audio Clip:  job skills needed....meaning of State Leading Index

APPLE STOCK

WHY APPLE MARKET CAP HIT $TRILLION.... BB said: "Think about the caller (Bernie from West Lake Village)  that we had last hour that made an attempt to link the fact that the company - Apple - now has a $trillion market cap.  Which simply means that the number of shares outstanding, plus the price of the stock equals a trillion dollars, plus. That's all it means. And that's entirely a function of the corporate profitability of that company and the job that Tim Cook has done running that company as the successor to Steve Jobs in the role of CEO...…"

WE ARE TETHERED TO IPHONES AND SMART PHONES....BB continued:  "It's about the fact that that company has created the iPhone that is literally tethered.....to millions and millions of people. I see a lot of younger people that are so tethered to their iPhone, they can't put it down. They won't put it down. One wonders what could have possibly happened in the last 38 seconds that would require another visit to the screen, but that's the way it is. It is what it is, and there is nothing anybody can do about it....." 

SO THIS IS HOW APPLE MADE THE $TRILLION..... BB continued:  "So if you create a product like that that literally takes over the life of a human being - millions of them. They are going to the APP Store and taking advantage of the services, maybe buying some of the other products the company produces. It's like magic, right? …..So in a situation like that, the company benefits. These are customers. They are paying money for the phones, services, for everything. This has accrued to the benefit of the company and shareholders. That's where they get the revenue and earnings, that's how they pay the dividends. And that's why the stock has done what it's done." 

MARKETS THIS WEEK (Honey's report): 

STOCKS FOR THE WEEK:  the DJIA ticked 0.1% higher (25,463); the S&P 500 Index gained 0.8% (2840); and the Nasdaq Composite 1.0% (7812).

OIL:  WTI crude oil dipped $0.47 to $68.49 per barrel.

GOLD:  Bloomberg gold spot price gained $5.90 to $1,213.73 per ounce, 

DOLLAR: Nearly unchanged at 95.17. 

10-YEAR TREASURIES: The yields on the 10-year note decreasing 3 bps to 2.95%. 

TRADE BALANCE... The deficit widened by a slightly smaller amount than expected to $46.3 billion in June, compared to forecasts of $46.5 billion. May's deficit was revised higher to $43.2 billion. Exports were down 0.7% m/m at $213.8 billion, while imports rose 0.6% to $260.1 billion.  

FOMC ANNOUNCEMENT: decided to maintain the target range for the federal funds rate at 1-3/4 to 2 percent. 

BRINKER BOOK CHALLENGE... Caller Roy from Corte Madera said: "What I encourage anyone who is doing investing to do is ask their broker - give them like 4 to 6 books from your book list like Bogle's Common Sense on Mutual Funds; Random Walk Down Wall Street; Against the Gods.  Then  ask the broker if those books will help with investing. If the broker says  'no, I'll take care of everything,' go find another investment advisor."    Brinker raved about the idea and several times during the show made reference to the call and the recommended books. 

(Honey sez:  FrankJ has done short reviews of the four books which were mentioned today,  and added some of his own recommendations.)   

FRANKJ'S BOOK RECOMMENDATIONS AND COMMENTARY:

Bob’s third hour guest this Sunday, August 05, 2018 was ………  oh, wait, there wasn’t a third hour guest.   This was strange because during the second hour he mentioned the third hour guest would be Elizabeth Rosenthal, author of the book “An American Sickness:  How Healthcare Became a Big Business and How You Can Take It Back.” 

What was odd was that Bob almost never reveals the name of the third hour guest beforehand.  And when I was looking at archived third hour summaries on my hard drive (the ones the Bulgarians had not hacked into) I noticed a summary of the very same author and the same book from August of 2017.  (Cue the Twilight Zone music.)     So how did that mention slip into the second hour?  Inquiring minds want to know. 

Early in the show Bob got a call from someone who said that people using financial advisors or contemplating using one should ask them their reaction to 4 books on Bob’s reading list (available on his website – and it is a long one.)   Not all of them have to do with investing, per se, some are topical and a great many are by third hour guests. 

So here are the four books the caller recommended:

1.      A Random Walk Down Wall Street by Burton Malkiel.   Malkiel is a finance prof (still, I think) and he’s a board member of Vanguard last time I checked.  That makes him an index fund guy.   I read this book a long time ago but it is now in its 12^th edition. 

2.      Against the Gods, by Peter L. Bernstein.  Bernstein has been a guest on the show.  He wrote this book and others which show up on Bob’s reading list.   I read this book too, largely on Bob’s recommendation but I have to confess I don’t remember a whole lot about it other than it focused a lot on risk.   I bought this book but don’t have it anymore so I must have given it away. 

3.      Common Sense on Mutual Funds, by the venerable John C. Bogle, founder of Vanguard and the innovator of index fund investing (although I read somewhere recently that some other outfit brought out an index mutual fund way earlier, it just wasn’t that widely available.)   I read this one too, but no longer have it.  I gave my kids each a copy of another book by St. John,  The Little Book of Common Sense Investing.  This is a short book which is part of a series of “Little Books” covering various aspects of investing. 

4.      Winning the Loser’s Game, by Charles Ellis.  Mr. Ellis has been a guest on the program several times and he has more than one book on Bob’s reading list.  I read this one too, having heard about it on Bob’s show.   I liked this book, had it for a while, probably gave it away. 

Which of these four would I recommend to someone starting out if I could only choose one? 

That would be John Bogle’s book.   And I would advise them to read Ellis’ book because it explains how financial advisors can take a chunk out of your earnings in various ways. 

At one point the blog here included its own reading list of good books.  I don’t see it there now, but I am sure it is archived. 

Here are some other books I read and recommend:

A book I liked on bonds was Larry Swedroe’s (co-author)  The Only Guide to a Winning Bond Strategy You’ll Ever Need.   This also seems to be part of a series with “The Only Guide” as part of the title of other books.  Personally, I learned some stuff about bonds and it got me to take a more critical look at junk bond funds, and I ended up getting rid of the one I had. 

Then there is Lowell Miller’s book, The Single Best Investment, which I have read at least twice and is now heavily highlighted.   The “single best investment” being dividend growth investing.  He describes the advantages, how his investment firm screens stocks and how you can do this yourself.  He gives specifics on what he looks for in choosing individual stocks. 

Jeremy Siegel’s The Future for Investors, Why the Tried and True Triumph Over the Bold and New.   This is another book emphasizing dividend paying stocks over growth stocks.  Published in 2005 though, so I’m not sure if investors in the FAANG stocks would be much interested in the ideas here.

Howard Marks’ book, The Most Important Thing, Illuminated.  2013.  He was chairman and founder of Oaktree Capital Mgt, at time of publication.  Marks is firmly in the camp of active fund management.  The Oakmark fund has a pretty good record, long term.  What is the “most important thing?”  Actually there are 21 of them, each chapter describes a “most important” concept. 

There is a book I snagged for $1 on our local library’s surplus shelf:  Steven  B. Achelis’ Technical Analysis from A to Z.  I’m not a chart guy but I found this book interesting in that it described dozens of technical trading approaches all in one place. 

Here is a quick mention of  Bad Blood, by John Carreyou as long as we’re on the topic of books.   Remember him as a third hour guest a little while back?  I recently read this book and found it very good.  Entertaining to the extent that scams like the one Theranos was running could be.  Well written.  Moves right along.   Remember, Theranos was the company that was going to revolutionize blood testing using tiny pinpricks to obtain blood droplets that would then be used in their proprietary equipment to do rapid analysis for  an amazing number of blood tests.   Well, their equipment never worked properly and they skated around the needed regulatory approvals as he briefly described in the interview. 

The founder, Elizabeth Holmes was featured all over the financial media because of her young age and the fact that she was on her way to becoming Silicon Valley’s first female billionaire.  In her pitches to investors she’d make reference to a relative that died who, she implied, could have lived if her technology was available at the time.  So, her company was out to save lives – but the author makes clear that in fact, their technology was so bad that if it rolled out on a larger scale, it could have cost lives and gives examples.   Mr. Carreyou’s book documents the run up and then the unraveling of the whole thing.   

Honey here: Thank you, Frankj! I think if anyone really wants to learn to be their own financial advisor, all the top-notch help they need is provided in your book reviews and comments above. 

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