August 14, 2011, Bob Brinker's Moneytalk: Summary, Commentary, Excerpts and Discussion

August 14, 2011...........................................(post and read comments)


Bob Brinker hosted Moneytalk today. Bob's comments summarized, paraphrased or quoted:

STOCK MARKET....Bob  said: "Well, the roller-coaster was open for business in the canyons of Wall Street. And what a roller-coaster ride it was....When you look at the indexes, the Dow for the week, down 1 1/2%. The S&P for the week down 1.7%. It doesn't look especially volatile but it was......Couple of big down days, couple of bid up days, and I mean huge volatility.....A two-day rally on Thursday and Friday was really one of the largest two-day rallies we've seen in many a moon.  The S&P 500 stands 13 1/2 % below its closing high for the year, and it's been a correction teenager since the 8th of August - Monday of last week.....It was volatility on steroids. What does that do for investor confidence? Probably nothing good. People look at that kind of volatility and say that's crazy and who can blame them."

Honey EC: Bob's clever, but beware. Everything he said was true, but it's what he didn't say that changes everything.  When the S&P was 1292, he said he had been buying (certainly not for Marketimer model portfolios. They remain fully invested). And he bragged that some listeners had been taking advantage of opportunities to dollar-cost-average. Of course, the market dropped like a rock the very next week. He also bragged how he had advised callers not to sell because of the debt ceiling crisis unless they wanted to buy back at  higher prices. As you read this from July 31st Moneytalk, remember that the S&P now stands at 1178.81, and that is after two huge up days last Thursday and Friday:

July 31st, Bob said: "Remember we had a caller when the market was at 1268 at the end of June who asked whether he should sell out of the market because of the debt ceiling debate......Of course, the market is now at 1292, a couple of percent higher than when that call came in at the end of June. So this is what happens. If that individual would have sold out at 1270 at that time, he would be faced now with either sitting it out or re-entering at a higher level."

Brinker's "buying-opportunities" defy logic, but he continues to sell newsletters based on his market-timing ability.  One has to be impressed with the SILLY SCHTICK of being fully invested, dollar-cost averaging regularly,  and still looking for "buying-opportunities." The only possible way that one could take advantage of them is if he/she came into money through rare occasions, like selling a home or inheriting a bundle. 

The truth is that any subscribers or listeners who actually FOLLOW Bob's ongoing advice are only recouping LOSSES when the market bottoms and turns up.  How amazing that he uses market bottoms (which he almost never calls) to pad his reputation, when the only advantage to them for his followers is to gain back money they LOST. 

 INTEREST RATES...Bob said: "And then when you look at interest rates, you say, wha' happened? Who let the dogs out? Three month Treasury Bills 0.1? Say again? No, I don't want to hear that number again. That's too low. Six-month Treasury Bill 0.7? These are annual yield boys and girls. One year Treasurys 1/10 of 1%? You mean I have to own a Treasury for a whole year to make 1/10 of 1%? Yes.....Two year Treasurys, 2/10 of 1%.  Five year Treasury, under 96 basis points.....These are rates to write down, they are historic."


IMPLIED TREASURY INFLATION RATE...Bob said: "Ten year Treasury yielding 2 1/4. Ten-year Treasury Inflation Protected with a negative yield of 3 basis points. That gives you a ten-year Treasury implied inflation rate of 2.3....... 2.7 on the thirty year."


TRIPLE-A MUNICIPAL GENERAL OBLIGATIONS....Bob said: "Gilt-edge quality triple-A, 2.3% average yield. If you are in the 35%  to federal bracket that is the equivalent of 3.5%."

LOOKING AT INTEREST RATES GOING FORWARD:  Bob said: "If you can believe the Federal Reserve, rates are going to be low.....The Federal Open Market Committee convened on Tuesday and issued a statement....They dropped from their language 'extended period of low rates.' ....They replaced it. They said they'd keep the Federal Funds rate at exceptionally low levels for quote,  'at least through middle 2013' unquote. ....They've never done that.....Obviously they're encouraging investors to take some kind of risk, whether it's going out longer term on curve or buying something besides a Treasury....."

ECONOMIC GROWTH:  Bob said: "What they  (the Fed) are expecting here is slow growth. Now many of you know I've been expecting slow growth. In fact, in the August investment letter.....we said that we had reduced our growth forecast to 1 to 2% for 2011.....That's very slow....It's not that it comes as a surprise, we already expected that we'd have slow growth. The surprise element is that the Fed would go out and say, basically for almost two years, they are going to keep rates close to zero."


Honey EC:  Yes indeed, Bob did reduce his growth projections -- by quite a lot!  Kirk Lindstrom wrote:

"In the July 2011 Marketimer, Bob Brinker projects US GDP will grow by two to three percent in 2011. He says he is "slightly more conservative than the revised Federal Reserve forecast of 2.7% to 2.9% growth in 2011."

BRINKER'S MARKETIMER SPECIAL MESSAGE:  Caller Tom from Nevada said: "I believe that your newsletter probably came for  publication electronically before the S&P downgrade because it wasn't reflected in that particular newsletter. So what are your thoughts regarding what Moody's and Fitch might do in their coming ways. I know they stuck with the triple-A, but do you think they might downgrade as well and how might that affect the market?"  

Bob answered:  "I appreciate you raising the question of the downgrade, because I think this has been the most misunderstood item of the week in the financial media. Chances are that you saw in the special subscriber message that we posted online for subscriber access early on Wednesday of this week. We did comment on that. And the comment we made on that was specifically what I just said, which is that this whole issue of the downgrade, I think has been misinterpreted in the financial media. And what I mean by that is, I think that this has really not been an underlying cause of the volatility that we saw this week to any material degree. I think the underlying cause of the volatility we have seen this week is quite obvious. 

And I mentioned it in the special subscriber message that I put up on Wednesday. And that has to do with a couple of things. One of them is certainly concern about the economy. That's a legitimate concern, 1 to 2% growth. The forecast that I have in the investment letter.......The other is what's going on with the sovereign debt situation and what's going on with the banks in Europe......Particularly with regard to Italy and Spain....

The other concern about the downgrade is off-base. I'll tell you why. When you look at the yields on  these securities, you can see that people are not worried about them not pay off or collecting their interest or their principal at maturity...... Nobody in their right mind would lend money to the Treasury for 30 years at 3.7% if they feared a default.....There is no fear whatsoever of default in the yields. Remember this is money coming in all around the world into Treasurys, not just Americans.....So what people are saying is Moody has a triple-A, Fitch has a triple-A, S& P has a double-A plus..... that's a just a notch below triple-A.....And I think people look at those ratings........and realize a lot of politics involved in this....And they don't see a default risk....."

Honey EC #1:  Thanks Bob, for  covering all of those special message points for the radio audience!  It won't cost you anything because you are dangling a much bigger bait, aren't you? It should be illegal, but it's not. I know you believe in Karma. I don't.  But I believe in ultimate just-desserts, and I know that selling a pig in a poke hurts people.

Honey EC #2: It is important to remember that Bob rarely sends out messages to subscribers (this time, he also sent it to many former subscribers.)   The last time he sent out a bulletin was in January 2009.  Those who acted on that "special" message, had the misery of riding the S&P down another 175 points to get to the final bottom. Excerpt from January 2009 bulletin: "We regard any weakness in the low-to-mid 800's S&P 500 Index price range as an opportunity to buy into the stock market at favorable price levels." That was Bob's 5th and final "buying-opportunity" during the 2008-2009 megabear market. His buys ranged from the mid-1400's to the mid-1300's, then the low-1200s as the market declined. That was no roller-coaster. That was a downhill ski-jump gone wild.

 S&P  TREASURY DOWNGRADE:  Bob said: "No question that we saw the financial media talking a lot about that rating downgrade this week. And I really want to go on record as disagreeing with that view that that was a primary reason for the volatility. I think it's connected almost entirely with what's going on in economic growth concerns there and what's going on in Europe.....Money is pouring into Treasurys at record rate.....and that pushes the yields down."

NOT ENOUGH FISCAL RESPONSIBILITY IN EXECUTIVE BRANCH: "Bob said: "I've been concerned that there is not enough concern in the executive branch of government right now. And as for congress, they are responsible for appropriating all the money, as you know.  They've done a terrible job of balancing the books. I mean a country that is taking in $2.3 trillion and spending $3.7 trillion....It doesn't even sound possible. And yet that is the way we are running the country right now."

SUPER COMMITTEE OF TWELVE:  Bob expressed great concern that they will not be able to reach any agreements, and that they will be influenced by lobbyists.  

JOBS NUMBER:  Bob said the jobs number on (August) 5th was a decent overall number of 117,000. The government lost 37,000 more jobs -- federal, state and local. Private sector gained 154,000.

VANGUARD GINNIE MAE FUND (VFIIX): Bill asked Bob if Ginnie Maes would be affected by the downgrade. Bob told him that Ginnie Maes are now trading at an historic high of $11.22 a share, so obviously no one was worried about default. He also said that the payout rates are record low.  He said that he had been recommending the fund basically "forever." 

Honey EC: Bob recently lowered Ginnie Mae holdings in his (fixed) income fund and his balanced model portfolio III. In its place, he added DoubleLine Total Return Fund, Wellesley Income Fund and increased Vanguard High-Yield Fund (VWEHX). 

FIDO KNOWS AND DESERVES A TREAT:  Caller Beck asked a question about the Fed and before Bob could answer, a dog could be heard barking loudly in the background.

Bob went ballistic with excitement and yelled: "Fido is with me. Fido already knows what I'm going to say. God bless him. God bless that dog. What a smart canine we have in Concord. I love that canine. He already knows, but you don't. I'll tell you what....The Fed did what they had to do.... But here is what I was going to say when Fido anticipated what I was going to say. He floored me. He floored me when he did that. He just floored me, doesn't happen every day.......Now I want you to do something for me. I want you to give Fido a nice cup of pinkberry tonight......Some of these canines, they go nuts for this pink berry. So your canine has already earned a large pinkberry tonight, or some alternate treat." 


Honey EC: I guess Bob loves dogs. LOL!!!


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

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