STOCK MARKET....Brinker did not talk about what's been going on in the stock market today. It may or may not have anything to do with the special online bulletin he issued last Thursday. The S&P closed at 1129 that day.
We know that Bob did not issue a sell signal -- he's bullish and fully invested. Bob Brinker's Marketimer target range prediction for the S&P has been low-to-mid 1400's since March 2011. He increased the time-frame in August from "this year" to 2012. My friend, Jim, has a theory that makes absolute sense to me:
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.
SAFETY OF INVESTMENT FIRMS....Caller Don from Massachusetts wanted to know if what happened at UBS could happen at institutions like Fidelity and Vanguard.
Bob said: "You have to understand that UBS has a trading desk where they trade for the banks account. And that is risky situation. Now it's not unusual, most of the major banks are going to have a trading desk...... That's not what you're looking at when you're looking at a mutual fund company.......A mutual fund company has a group of mutual funds, in the case of the companies you mentioned, a very large group of mutual funds for investors to choose from and it's the same situation where they are out there trading for their own account or speculating for the market. So my reaction to that question is that it's an apples and oranges situation. Now if you said what about Citigroup, Bank of America, Wells Fargo, JP Morgan, yeah, I'm sure there's a lot of trading going on at places like that and that is part of the equation."
SAFETY OF MONEY MARKET FUNDS.... Caller Don followed up with a question about money market fund safety. Bob explained that any investments in money market funds that are not dollar-good are going to cost either the shareholders or the management company. He said that those are the only two possible resolutions, and that is why he recommends dealing with very large companies. Large companies are more likely to make good any break-the-buck losses.
REFINANCE HOME TO TAKE EQUITY OUT....Caller Steve from California asked Bob what he thought about his plan to re-finance a $300,000 home loan on his $600,000 property and borrow an additional $100,00 so he'd have more liquidity in case he lost his job. Bob agreed that would be acceptable if he wanted the extra money for a safety net and was willing to pay 4% for liquidity -- and if it was invested prudently.
Honey EC: It surprised me to hear Bob give his okay to borrowing extra money on a primary resident to invest. As I recall, Bob has always been very against doing that.
LUMP SUM OR ANNUITY? ....Caller Maria from California asked Bob which would be better for her, a sizable lump sum retirement payment or a generous annuity. Bob asked her for all the details and then told her that it really comes down to whether she wants to increase her net worth, and have more to leave to her two sons, or take the yearly annuity which paid 31,000 a year.
WASH SALES RULE/TAX LOSS TRANSACTIONS....Caller Roger from Tucson wanted to know when was the best time to sell a stock for a tax loss. Bob said that both ends of the transaction have to occur within the same calendar year. And you have to allow 31 days to elapse, so late November is the latest you can sell in order avoid the "wash sale." Bob explained that if you are worried the market might go against you, you can buy double of your shares, hold them for 31 days and then sell half.
KEYNESIAN SPENDING.... Caller Josh from Naples said that Bob was "mistaken" when he said that "certain talk show hosts" equate the country failing with politicians failing. Josh said that half the country is against "fundamental change" by Keynesian stimulus. Bob literally shouted Josh down repeatedly until he finally shut up. Bob shouted "This is important, since Keynes can't speak for himself." He said that what the politicians have been doing is not what John Maynard Keynes wrote about. Bob called Keynes a "genius."
Honey EC: At the beginning of the government stimulus packages, Bob clearly said it was Keynesian economics and repeatedly raved about how it was needed and was a great thing to do.
VANGUARD GINNIE MAE FUND TOTAL RETURN....Caller Arthur from Oregon said the fund was showing a 6% interest rate for the year. Bob explained that the 6% was total return and would include the increase in net-asset-value. Bob said that Vanguard's expenses were very low. Honey EC: So are Fidelity and Charles Schwab's Ginnie Mae Funds.
GREECE SOVEREIGN DEBT....Bob spent close to half of each of the first two hours of the program discussing Greece and European sovereign debt issues. Greece may default on its sovereign debt. He cautioned that their banks could be nationalized and investors could lose 100% of their capital.
EUROPEAN STABILITY MECHANISM....Bob also reported that the establishment of the "European Stability Mechanism" may be sped up to come to the rescue of European economies. From Businessweek: "European governments are exploring accelerating the start of a permanent rescue fund for their economies, with senior finance officials set to examine this week the cost advantages of setting up the European Stability Mechanism, or ESM, a year earlier than its July 2013 start, according to a document prepared for the meetings and obtained by Bloomberg News." All of the news that Bob reported on is available online. Here is link to several headline news stories.
Bob's guest-speaker today was Charlie Maxwell, oil analyst from Weeden and Co. I will try to write more about this interview during the week, but you may want to download the interview from KGO 810 radio. It is archived in the 3-4pm time slot. (It's free)
