October 30, 2011, Bob Brinker's Moneytalk: Summary, Commentary, Excerpts and Discussions

October 30, 2011....Bob Brinker hosted Moneytalk today...............(comments) 

 STOCK MARKET....Bob said: "The S&P 500, already in October -- one day remaining, is up 13.6% for the month...It's the biggest monthly gain in 37 years. You have to go back to 1974 to find a monthly gain comparable. It has been an awesome stock market rally."

(BOB'S) ECONOMIC REPORTS FROM LAST WEEK

DURABLE GOODS ORDERS = Not including transportation, up 1.7% for September.

NEW HOME SALES = 5.7%  -- A bounce in new home sales. (Honey EC: This is after four straight months of declines and a home-builders cut in prices.)

GROSS DOMESTIC PRODUCT...Bob said: "We mentioned last weekend, I thought you could see a GDP number of 2 1/2%, and we got that...in the third quarter....That was almost double the second quarter of 1.3% annual rate."

INFLATION...Bob said: "The Federal Reserves' favorite core inflation gauge, up only 1/10 of 1% year-over-year, it's only ahead 1.6%"

Honey EC: Bob is referring to the Personal Expenditure Price Index which excludes both food and energy.  The headline number rose 0.2% in September and has increased 2.9% over the past twelve months.

RECESSION OR NO RECESSION? Bob said: "The stock market was not waiting for any of this news to come out (good economic reports)....Anticipating that those who say the United States is going back into  recession are wrong. That is what the stock market anticipated here in the month of October. Investors heard all the waling and crying and bashing the US economy that came from certain economists several weeks ago. They took it all in, they looked at the numbers and they said, you know something, these people look like they are simply wrong on the US economy when they say we're back into recession. That's the data said this week, and it said it loudly and clearly. With a 2 1/2 growth in the third quarter and with consumers continuing to show resilience in their spending patterns, the market spoke loudly and clearly this week, saying that those who are forecasting a return to recessionary times in the US are off base and tagged out."

Honey EC: This is the third time that Bob has bashed Economic Cycle Research Institute’s Lakshman Achuthan (and others calling for a recession). Please read my article about it here.

GREECE AND THE EUROPEAN BANKING SYSTEM...Bob said: "The viability of the European banking system is at the heart of this whole issue.  Now European countries must begin to move away from the welfare state syndrome that has been responsible for the collapse of the sovereign debt of Greece.....Most people would consider a 50% write-down a collapse....Now they need to grow their economies, to grow their way out of the mess that has been created."

Honey EC: If you want to read more of what Bob has said about Greece, please see my summary of his midnight appearance on Doug McIntire's Red Eye Radio here.

USA ENERGY...Bob said: "We need to develop our own energy resources. We need to develop our oil resources, our natural gas opportunities so we can further reduce our dependence on mid-east oil......The more the US becomes independent of mid-east oil imports, the more we strengthen the value of the US dollar. And improve the balance of payments. We are not sending as much money away."

NATURAL GAS...Bob said: "We do indeed have vast oil and natural gas reserves. Our natural gas reserves have doubled in the past five years and we have an opportunity to use these in our transportation system. Natural gas is cleaner burning than gasoline.....All the president has to do is issue an executive order on natural gas vehicles at the federal letter....And we would turn the corner on the road to energy independence from the mid-east."

HONDA'S VEHICLE TO DIE FOR....Caller Bruce from Chicago asked for Bob's opinion about why we haven't gone forward  with natural gas use. Bob said: "The president view is that he is sold, lock, stock, and barrel, for wind and solar.....The vehicles are out there. Honda has a natural gas vehicle to die for...It's already there. The infrastructure would follow if we could get the executive order out of the White House.....I don't know why George W. Bush did not further exploit the move to natural gas in transportation. I don't know of any reason why he should not have. I think he should have."

UNEMPLOYMENT RATE...Caller Susan from Illinois asked why unemployment in Illinois is at 10%. Bob said: "The national unemployment rate is 9.1, it certainly varies by local.....I think that the main reason companies are reluctant to hire is because they have enough employees to handle the demand that they currently have.  And unless they see a pick up in demand that they believe will be sustainable,  they are going to remain right where they are....The private sector has been growing at a decent rate.....We are losing government jobs at the federal, state and local level....Those lost jobs get subtracted from the total jobs number....Right now, a lot of the misery is being caused by  lost government jobs.....The fiscal problems in Illinois are so severe that they have had to increase from 3% to 5% in the last year.....Consequently, you have to expect government jobs to go out the window in a place like Illinois with those kinds of fiscal problems."


EXCHANGE-TRADED FUNDS VERSUS MUTUAL FUNDS....Caller Martha from Berkeley asked Bob to explain the difference. Bob said: "They are very similar.....One of the differences is with an Exchange Traded Fund, you can trade during the day.....Only traders would care about this. Investors would not be tuned into this particular aspect....Mutual funds are priced at the end of the trading....So whether you're redeeming or purchasing you are going to do it at the net-asset-value at the close of the market. With an exchange-traded-fund, you can transact any time during the trading day." 

VANGUARD ADMIRAL ACCOUNTS AND FIDELITY FUNDS...Bob said: "There are places like Vanguard where they have Admiral Accounts....You need a certain amount of money, not a tremendous amount at all  because they've lowered it dramatically.....which means you get extremely low expense ratios. The lowest expense ratio I've seen across the board....I also think the Fidelity Fund Family, for example in their Fidelity Spartan Index Fund have some very competitive expense ratios."

CHARLES SCHWAB.... Honey EC: Schwab's Broad Market ETF expense ratio is 0.06%. Vanguard's VTI expense ratio is 0.07%.   Bob never voluntarily mentions Schwab unless a caller asks him. He always mentions Vanguard and often mentions Fidelity. I have often wondered why the bias. When Bob was co-owner of the BJ Group, Schwab was the brokerage house they used. Then he sold the BJGroup. Did something happen? If so, why does he claim that "Chuck" is a friend? Later in the program, a caller specifically asked about Schwab. Bob said that "Chuck" was a "good guy" and that he had been a guest on the program. I do not remember Charles Schwab being on the program. If anyone does, please let me know. 

VANGUARD INTERNATIONAL FUND (VWIGX)....Caller Erma from New Mexico asked Bob about investing her 401K portfolio in 51.3% in the Vanguard Total Stock Market, 22.3% in the Vanguard Total International Fund, and 26.6 Vanguard Total Market Bond Fund  (as per a recommendation by the HR Dept. of her new job).   Bob said: "I really like the total stock market index...I'm certainly comfortable with the Vanguard International Stock Market Fund. What they are doing is giving you approximately a 20% international weighting in your overall portfolio, and I'm certainly okay with that. And they are putting about a quarter of your portfolio in the total bond fund. I think you are getting good advice, I'd be inclined to take it...."

Honey EC: I chuckled when I heard Bob say that he was "certainly comfortable" with the caller having 20% of her portfolio in the Vanguard international fund. That is precisely how much Bob has in his Marketimer model portfolios one and two.  I can't recall the last time that Bob even mentioned international investing. Does anyone recall? But my-oh-my, what a coincidence. I wrote an article about the subject just two days ago. It looks like the international funds he recommends have greatly lagged the total stock market funds (see my  article about international funds  HERE for details).

GOLD AND SILVER BUYING....Caller Tom from Missouri asked Bob about investing in gold. Bob said that for years, he has recommended GLD for those who want a gold hedge. Bob is totally against buying numismatic coins.

Honey EC: It is true that Bob has been recommending GLD in Marketimer since May, 2009. However, he has never included gold in any of his model portfolios.  It is an off-the-books recommendation and he has given no guidance as to a buy-price or how much one should own.

Before the silver market collapsed because of raised margin levels, Bob twice said on Moneytalk that silver could be used as a hedge in place of gold. 

DON'T BUY INTERMEDIATE OR LONG-TERM BONDS....Caller Steve from Nebraska asked about Bob why a red flag is up on these bonds. Bob said that people are worried about rates "normalizing." If yields go up, both intermediate and long-term bonds will be underwater and anyone who buys them now is accepting risk.


FLAT TAX PROPOSAL....Bob said it is not going to happen because it would mean a tax cut for high earners and a tax increase for low earners. Bob went over all of the proposals by the Republican candidates including (his term): "The former boss at Godfather's Pizza."   Bob summed it up: "To think the country is going to do that is beyond dreamland. I think about all you need to figure this out is an eight-grade diploma. This is not rocket science."

BOB'S FUNNY OF THE DAY....Bob said:  "Let's go out to California, welcome to Moneytalk."  A familiar voice replied: "Hi Bob, this is Andy."

Honey EC: I need to point out that Bob ALWAYS begins his calls by introducing the caller by name and  location -- always, always, always. I conclude that this is one of Moneytalk's  Frequent Flyers, good old Andy from Redwood City,  and Bob is aware that Andy is being discussed on this blog.  LOL! Jeffchristie may know exactly  how many times Andy from Redwood City has gotten on the air -- that we know of -- it's several times.

Bob's guest-speaker today was John Hofmeister, the president of Shell Oil Company.  He wrote: "Why We Hate the Oil Companies: Straight Talk From an Oil Insider

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October 28, 2011, Bob Brinker and International Investing

October 28, 2011....Bob Brinker includes two of Vanguard's international funds in all three of his model portfolios. Is that a good thing? Does it increase the performance results of the portfolios? Should everyone have international holdings? And if so, are Vanguard International Growth Fund (VWIGX) and Vanguard FTSE All-World Fund (VFWIX) the best choices?

Bob Brinker has recommended Vanguard International Growth Fund since January, 2000 (that's as far back as I can check). The fund is very volatile and  has taken several round-trip roller coaster rides.  The 52-week closing high was $21.17 (April 29, 2011), and the closing low was $15.24 (October 3, 2011).  Looks like the U.S. market outperformed by a mile this year, and the numbers look even worse longer term:

Brinker added Vanguard FTSE All-World Fund to the model portfolios in January 2010. He sold 10% of Vanguard Total Stock Market Index Fund  (VTSMX) to add the 10% weighting of  the All-World Fund in all three model portfolios (including the conservative balanced portfolio). Did that improve performance?  It doesn't look like it right now:

There are many opinions about the wisdom of having a portion  of your investment portfolio in international/world securities. Many advocate it, like Bob Brinker does. Perhaps it has more to do with where you invest outside of the U.S. than with if you invest outside the U.S.

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October 23, 2011 Bob Brinker's Moneytalk: Summary, Excerpts, Commentary and Discussion

October 23, 2011...................................................(comments)

Bob Brinker hosted Moneytalk today. 

STOCK MARKET.... Caller Bill from DesMoines asked Bob if he should leave his money in the stock market or perhaps just go out and buy some raw land and hold on to it. 

Bob said: "Are you even aware that we are having one of the greatest October rallies in the history of the stock market?" 

Bill replied: "All I know is that about two months ago, I was having a really bad feeling in my stomach and I felt powerless...yeah, it's been good lately." 

Bob said: "Bill, here's the acid test for you. If you do not have the stomach for the volatility that is inherent in being in the stock market, then you really have to ask yourself what in the world are you  doing in the stock market. Because if the stock market through it's fluctuations, and certainly we had a correction in 2011 and we had a correction in 2010, and both of them went into the teenage category. If it's something that's just too much for you to bear, you need to ask yourself why are you bothering with it at all."  (Bob told Bill that if its only potential was to provide capital appreciation,  he would regard buying raw land as speculation, with a negative tax flow because of taxes.) 

Honey EC: After about two  months of  silence, Bob finally got an opportunity to say something about the stock market today. He found some  solid footing to step on with the October rally. However, when he said that the 2011 correction was in the "teenage category," my jaw hit the floor.   In my opinion, that statement is very disingenuous and should be beneath him.   

So far this year, the S&P declined to within  a fraction of 20% bear territory on a closing basis,  and 21.6% intraday. Does a fraction matter? It obviously matters to Bob because he can  now  claim that he did not miss another bear market because it didn't drop more than 20% on a closing basis.   It's splitting hairs  and he should be embarrassed. He had no clue how far the market was going to drop, otherwise he would have reassured listeners during the time it was dropping. It's shameful dissembling designed to deceive!

S&P 500 Index statistics for 2011:
Date of  Closing High: 04/29/11
Closing  High: 1,363.61
Date of  Closing Low: 08/08/11
Closing  Low: 1,099.23
Decline in Points: 264.38
Decline in Percentage: 19.4%

RECESSION OR NO RECESSION STOCKS ARE UP 9% IN OCTOBER:  Bob said: "Here's my opinion of those private economists that are yelling recession. I think they're fire in a crowded theater. A lot of people are nervous. A lot of people are apprehensive. A lot of people are unemployed. And I think if you're a private economist and you're yelling recession out there at a time like this, it's just the same as fire in a crowded theater. And inevitably, you know what happens when that happens, people panic. I think we saw some of that recently in the marketplace -- not in October. We are looking so far, at one of the greatest October stock market rallies of all time. We're actually already up over 9% in the month of October, which is amazing -- especially given that backdrop of people out there scaring investors with the R-word."

Honey EC: Bob has repeated this slam that is primarily directed at Economic Cycle Research Institute’s Lakshman Achuthan, who says that the economy is "tipping into recession." Please see my previous article titled: "Lakshman and Bob in the Thunderdome. 2 men enter, one man leaves." [LINK]

BOND MARKET/INTEREST RATES...Not mentioned today.

ECONOMY....Thursday, we get the third quarter GDP report. Bob expects it to come in about 2% annual and has made no change to his own estimate of 1 to 2% growth for 2011.

CORPORATE EARNINGS....Bob said that they have been good, so far.

GREECE/EUROPE....Bob used the whole opening monologue discussing the meeting that is taking place in Brussels this weekend. He repeated much of what he has previously stated on other programs, including his midnight guest appearance on Doug's Red Eye Radio where he discussed it in detail. (To read what Bob is saying about this subject, please see my summary of Bob and Doug.)

ICELAND FIRST TO GO "TAP CITY":  Bob said: "Iceland is an economy that is basically based on fishing... with only 300,000 population. And Iceland was dominated by three banks. Each of these banks had a few billion dollars, and they built their assets through leverage up to a 140 billion dollars.....Things happened in Iceland that were hard to believe. People who had been fisherman became currency traders......As Elvis once said, that is when your heartaches begin when the fisherman become your currency traders and this is what happened in Iceland."

ICELAND MEN BLEW IT SO WOMEN STEPPED UP:  Bob said: "One of the good  things that's happened in Iceland -- Iceland had a male dominated political system. A male dominated political party....They eased the bank regulation and set up the scenario under which banks could leverage and then fail, which is what happened. The good news is.....that now that the men have driven the country into the ground, women have stepped forth and have begun winning elective office, moving into positions of power. And the long winding road back for Iceland now begins." 

 Honey EC: I laughed out loud at Bob's silly hyperbole about "women stepping forward" to fix what the men did to Iceland. Bob has never had a good word to say about women in U.S. politics -- in either party. He hammered Hilary Clinton several time and ALWAYS used demeaning names for her. He has made insulting comments about Sarah Palin, and he's never had an encouraging word for Michelle Bachmann.  Matter of fact, I don't remember Bob ever having a kind word to say about any woman whom he might consider a competitor.

BOOK AUTHOR WON'T WORK ON SUNDAY.......Caller Dave from the Iowa said that Bob's opening monologue sounded like he had read Michael Lewis' book "Boomerang." Bob replied that he had seen the reviews and was sure  it was a great book and he planned to read it. Bob said: "I've invited Michael on the program numerous times. He was on in connection with "Moneyball" years ago.  But I've been unable to convince him that he should work on Sunday, which is what he would have to do to do this program with me in the third hour....I hope he changes his mind and comes on with me."

Honey EC: That was an amusing comment about Bob not being able to persuade Michael Lewis to work one hour on one Sunday. Wonder how he'd feel about working an hour at midnight like Bob has done three times for Doug McIntire's show. :)

ONLY TAXPAYERS CAN GUARANTEE A 7% PAYOUT - INTEREST  RATES AND STOCK MARKET CAN'T PAY IT....Caller Burt from New York said he was a teacher planning to retire soon and asked Bob a question about annuitizing his retirement system and collecting 13% per year on $546,000 which is growing at a rate of 7% guaranteed  by the state.

Bob asked where they could get the money to guarantee to pay 7% per year.  Then he answered his own question (Burt acted like he didn't have a clue) that it was coming from the "taxpayers." Bob called it a ridiculous promise, but it was good for Burt because he is in the "catbird" seat" collecting that much.   Bob said: "Well wait a minute, where is the 7% coming from? Interest rates are close to zero. The investment markets have been very challenging for a long time, going all the way back to the late 1990's. To the end of the 90's. The beginning of the year 2000 period, in that first quarter there."

POLITICS....Several times today, Bob repeated views that he has expressed many times about how the United States has the best government money can buy, and how Washington  needs to become "fiscally responsible."  Bob also repeated his call for cuts in Social Security and Medicare in the form of means testing and extending the age for collecting benefits. 

OCCUPIERS....Caller Floyd from Denver challenged Bob today for encouraging and advocating the lawlessness of the Occupy Wall Street crowds. Floyd said that in Denver, the police were getting paid a lot of overtime and might even be staying on past curfew tonight if the OWS crowd had heard the program today.  Bob became furious and said that he had never advocated lawlessness or encouraged them. 

Honey EC: Bob talked about these occupiers AGAIN several times today, like he has in past programs, and I have to agree with Floyd. Why does Bob feel the need to give them talking points. I won't be covering what all Bob said in detail.  But I sure wonder why he has given them so much publicity in light of the fact that all he did was denigrate the Tea Party when they were peacefully and lawfully demonstrating. Once, he even labeled them with a nasty (unmentionable) name.

REPORTS COMING OUT NEXT WEEK: 
* Tuesday, Case-Shiller house prices, estimated at 0.2% -- still negative year-over-year.
* Wednesday, new home sales which have been "bumping along" at record lows.
* Thursday, third quarter GDP and initial unemployment numbers which are estimated to be around 400,000, which does not help lower overall unemployment.

Bob's guest-speaker was Dov Seidman, "How: Why How We Do Anything Means Everything" __ with a forward by Bill Clinton.

TUESDAY, IN EDIT: Caller Mark from San Mateo said he was too young to understand what happened during the Vietnam war demonstrations, but that he had heard that at first it was not focused.

Mark's point was that the OCCUPY Wall Street crowd shouldn't be expected to have a focused message yet so Bob shouldn't be critical if he didn't really understand their message.

Mark said: "This isn't against you, Bob, but there is a certain news channel, that's their main criticism -- ah there's no end solution right off the bat. Are you kidding me? That's setting such high expectations...."

Bob replied: "Now wait a minute Mark! That's their business model. Don't you see that? That is their business....This is important...That is their niche! So you know already before you turned them on what they were going to say.

It's like a lot of the talk hosts in America today. I'm not going to name any, I don't have to. It's like most of the talk hosts in America today. You know what they are going to say before they say it.

Happily on this broadcast, that's not the case.....This is Moneytalk."

Honey sez: "ROAR"! Right Bob, "NOONE" ever has a clue what you are going to say before you say it. 

Moneytalk on demandhttp://kgoradio.com/ and to go with Bob Brinker, is archived 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.)

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October 21, 2011, Bob Brinker's Third Midnight Guest Appearance

October 21, 2011.........................................................................(comments)

Bob Brinker has now made his third guest appearance on Doug McIntyre's RedEye radio late night show.

Rob in Pasadena explained:

 Bob Brinker made his third appearance on Doug McIntyre's RedEye Radio again last (night). He was on the 50,000 watts of KABC radio here in Los Angeles. Doug lives in the San Fernando Valley so he does his syndicated show live from the KABC studios. 

This allows Doug to be heard on other stations such as WABC New York. Brinker was on Doug's show during the first hours which was on October 19th from 10 p.m. until 11:00 p.m. Pacific Time (then run again at 2:00 a.m.) so of course the time difference makes it October 20th from 1:00 a.m. to 2:00a.m. in New York if you're going to listen to the WABC podcast.___Rob in Pasadena, CA"

 Here is my summary of Doug's interview of Bob Brinker:

Doug said:  "As you know, the stock market has been ping-ponging all over the place. Every other day, there's a headline about the Greek debt, or somebody's debt. To try to make sense of it, we turn to this guy because he's one of the best in the business. He's the host of nationally syndicated Moneytalk which has been heard all over the country since 1986. It's must listening as far as I'm concerned. He's the author of Marketimer newsletter and a member of the New York Society of Security  Analyst and Financial Analyst Foundation.  It's a pleasure to welcome back Bob Brinker."

Honey EC: Rob can verify this, but I don't find Bob Brinker's Moneytalk listed anywhere on the WABC or KABC program schedules. I know they used to carry the show, so evidently those to stations don't believe it is "must listening" like Doug does. BTW: What is the  "New York Society of Security  Analyst and Financial Analyst Foundation?"

Doug said: "I guess we should start with where are we in the world......Explain to us why Greece matters to us."


Bob said: "Well Greece matters mainly to the European Union, the seventeen countries that use the Euro as their exchange currency. That would be tier one. We are at second tier factor because there are some sovereign obligations, notes, and bonds and the like. Then the bank vaults of a lot of our banks in the United States that have made investments in countries like Greece....Another reason it matters to us is  the obvious, which is that  we export a lot of products in the United States. And it's one of the bright spots for creating jobs...."


Doug said: "What would the effect be if the European Union were to collapse?"

Bob said: "It would not be good. It certainly would effect our export account. It would effect the sovereign obligations owned by banks around the world.....That's not where we are. Certainly Greece is insolvent at this time.....The European banks have already been forced to write down their sovereign obligations of Greece by 21%. There's some talk that that could expand to 50%. They haven't agreed on that yet, but they're talking.....We can certainly declare that the Greek Socialist State has failed.  We have 147% Greek debt as a percentage of Gross Domestic Product. It's over fiscally for Greece. So they're trying to do now is put together a plan to transition into the next phase where everybody recognizes the obvious, which is Greece cannot pay its debts."

Doug and Bob discussed all of the outrageous Greek government spending and promises. Bob said that Greece alone cannot bring down Europe because it represents only 2% of Euro-land Gross Domestic Product.  However, Bob said  that they will definitely  need to find permanent solutions to the problems in Italy and Spain.


Doug asked: "The world's markets are so intertwined, is there an exclusive solution to America's financial problems, or does it almost have to be coordinated with global conditions?"

Bob replied: "Well,  I think our economy certainly is coordinated with world conditions....at the same time, we do have an opportunity to prudently manage our own fiscal affairs. We can do this. Now we have not done this....We're going to have to make changes to Social Security payout method. We're going to have to make changes to Medicare....."

Doug talked a bit about "Occupy Wall Street," suggesting that one of their complaints has to do with too much wealth concentrated in fewer and fewer hands. He asked Bob if that was a "legitimate complaint."


Bob replied: "Here's the figures on that Doug.  About two to three decades ago, the typical CEO in the USA made about 30 or 40 more annually than the average employee in his or her company. That figure today is a lot different. It's 300 to 400 times the average employee in the company. Has that given rise to Occupy Wall Street complaints? I guess there's the possibility. Of course, there's the other part that sounds like the Tea Party.  Bashing the Federal Reserve. Bashing the bail-out of the banks....."

Doug said: "I agree, I actually believe, uhhh. The Tea Party people object to being associated with these filthy, lay about Communists....But I think the anger in the country is uniform. It's just being expressed by the left slightly differently than the right. The bottom line is, there's a general feeling is that the right complains that there is too much government, and that it's crushing individual liberties and making a mockery of our Constitutional rights. And I think that they are exactly correct.....And I do think that we have giant multinational corporations that don't have any particular allegiance to America. It's just one market against many and they get to shape economic policy. And the too-big-to-fail companies are bigger now than they were before they failed."

Bob said: "Here's the bottom line on this as I see it. Until we change the system in the United States so that money cannot purchase political office, then there will be this kind of corruption. Lobbyist money gets what it wants because it is virtually limitless. And the average GI has no say that is comparable to the power of the money that is funneled at politicians through lobbyists. And that is why I've said, The United States of America has the best government money can buy."  (Doug and Bob then slammed both political parties for awhile.)

Caller Chris asked about leveraged funds, such as DIG and GRX. Bob said to be careful with those funds that trade at 2 or 3 times the underlying asset because the expenses can be high. He said they were better used as "trading vehicle by highly informed market players."

Caller Peter asked  what happens down the road if the deficit keeps rising year after year and we can't keep printing money.

Bob said:  "The worst case would be normalization of interest rates......Think about the expense of carrying our burgeoning National Debt, it's almost $16 trillion.....We are getting away with murder here because rates are close to zero. But what happens if rates normalize and  we have to start to  pay way more interest on the National Debt. That would be very, very alarming."


Doug asked Bob  for his take on the housing market. Bob said: "It's going to take time and probably a lot of time. Right now, people are afraid to buy because they are afraid the price will go down some more.....We have foreclosures still on the market, depressing prices. We have tightened lending standards at the banks. Whereas a few years ago, a bank would lend anyone money on a house even if there was no chance they would pay it back. Now they've gone to the other extreme. The only way to get a loan now to buy a house is to prove that you don't need the money.....It has now become more expensive  to build a new house than to buy an existing  property."

Doug replied: "And that is devastating for the job market too because it out all the construction and the supplies....I just saw a story that Lowes are closing a bunch of stores."

Bob continued:  "Housing prices have come down roughly 35% in the last three years or so. That's a big drop. And in some markets, they've come down a lot more than that.  The bottom line in all of this is, I think we have had a tremendous correction.  I think we're bumping along the bottom....And I think we will make a bottom somewhere in the general price level we are now -- give or take 10%. But I think most of the price damage has been done."  (Bob mentioned that there has been a giant increase in demand for multi-family units.)

Doug asked Bob about Herman Cain's 9-9-9 tax plan. Bob waxed eloquent about how he liked Herman Cain, but that he had studied up on Cain's  9-9-9 tax plan and it  would be "dead on arrival and will never happen."

Bob said: "Here's why: I'm in the 35% tax bracket, if Herman Cain's plan gets passed, I get a 26% reduction in my ordinary income tax. There is no way that congress would ever consider giving me a 26% tax cut in the top tax bracket.

However, if I'm in the lower or middle tax  bracket look what happens to me. As you know, close to half of the country pays zero personal  income tax. Well under 9-9-9 that changes....You had zero before, now it just went to 18%, because you have to pay 9% on personal income and  now you have to also pay 9% when you spend with your personal income, which you do in the lower and middle income sectors. 

So all of a sudden this person in the lower to middle goes from zero to 18 while some guy in the 35 goes down to 9 because he doesn't even come close spending all his money, so the 9% sales tax won't apply to all his income."

Doug agreed that it was a "regressive tax" as all flat taxes are....Both Bob and Doug agreed that our budget problem was a "spending issue" not a tax issue.


Doug asked: "The economy of the United States, the unemployment of the United States is grim....How long do you see us staying in this great recession as it's been called."

Bob replied: "Well, we have projected slow growth for this year between 1 and 2%. I think we are going to get a nice, positive number later this month for the third quarter Gross Domestic Product. We could be looking at a number close to 2% or a little better." 

Honey EC: I laughed out loud when I listened to this final question from Doug and realized that he made a big blunder with his recession question. And Bob did blow out some air before answering, but he was out of time -- the music was starting -- so he just gave his "slow growth" spiel and let Doug give his good-bye thank yous.

Doug did an excellent  job of selling Marketimer for Brinker. He did several ads sprinkled throughout the program, plus several promotions for Brinker's website. A couple of callers seemed to be on the air just  to rave about Bob and say they were Marketimer subscribers.

I was very disappointed that, even though Doug mentioned the stock market and its volatility at the beginning of the program during the introduction, he never asked  Bob about it or mentioned it again. I reached the conclusion that Doug had made an agreement with Bob not to ask his stock market views.

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October 20, 2011: Lakshman and Bob in the Thunderdome. 2 men enter, one man leaves.

October 20, 2011..............................................................(comments)

Metaphorically speaking, Bob Brinker has thrown down the gauntlet, challenging recession-bears to a showdown at the No-Bear Corral.

Bob Brinker's  no-recession weapon of choice

October 16th, Bob said: "My personal opinion is that  some of those private forecasters out there that are so convinced that we are going into a recession which is historically defined as two consecutive quarters of negative Gross Domestic Product, I think they are going to be proven wrong. That is my prediction....I believe those forecasts will prove to be false...Therefore, those who are making investment decisions based on what I regard as that bogus forecast, I think they are going to regret it.  And they might regret it mightily, if they don't already."

Laksman Achuthan chooses an "Ugly Forecast That's Been Right Before" 

 Economic Cycle Research Institute’s Lakshman Achuthan said that the economy is "tipping into recession."  Excerpts from Business Cycle:

Mr. Achuthan, on the other hand, says that the gross domestic product rate is likely to go negative by the first quarter of 2012, if not sooner. He told me last week that he couldn’t tell exactly when the recession would start — or whether it had already begun. The institute made its recession call only after an array of economic indicators showed a “pronounced, pervasive and persistent” downturn consistent with a recession, he says. By contrast, in the summer of 2010, when some market bears interpreted the decline in one of the institute’s indexes as a signal that a recession was in the offing, the institute said the pattern pointed not to recession, but only to weakness.

Now, he says, the pattern is clear.

This time, Mr. Achuthan says, a host of leading and coincident indexes — those that suggest activity down the road, and those that measure current movements —are all pointing strongly toward recession.

The institute’s U.S. Leading Diffusion Index, for example, has dipped into territory that, with only one exception, would have signaled the recessions of the last 60 years. The single exception was in a short-lived downturn in 1966-7.

In addition, its U.S. Coincident Index has moved into territory that would have signaled recessions over those six decades, with three exceptions. Those were dips in September 2005, after Hurricane Katrina; in March 1993, after a huge storm on the east coast of North America, and in July 1952, after a steel strike. In none of those cases did the two indexes reach recession territory at the same time, as they have now, he says.

TAKEN as a whole, he says, these and other indicators are quite clear. “We’ve entered a vicious cycle, and it’s too late: a recession can’t be averted,” he says.

Unfortunately, this isn’t the end of the institute’s gloomy prognostications. What’s worse, he says, is that the business cycle appears to have become shorter than it was from the mid-80s until the start of the last recession, an era that has sometimes been called “the Great Moderation.”" 

So there you have it.  Bob Brinker is saying that the recession-bears are going to regret their stance.  Lakshman  is saying a recession is inevitable,  and we're already "tipping into it."

A long time Bob Brinker fan, pen-name Marc Ultra, agrees with ECRI this time and wrote:

"Lakshman and Bob in the Thunderdome. 2 men enter, one man leaves.

While technically there may be wiggle room because they're not defining a recession in exactly the same way, the battle lines are now clearly drawn, one will be correct and one will be wrong. Today Bob flat out said the ECRI ("the private forecaster out of NY") will be wrong and those (like me) who have acted on their call will regret if. It's possible Bob might even be using me as as part of his example since when he was using an alias he would respond to me at various times (including praise at times), so if he glances at this board occasionally he is aware that I have flipped from bull to bear due to the ECRI call but obviously a lot of people have made investment changes based on the CRI so the possible personal point would not be that relevant regardless."

 To summarize Bob's latest forecasts

Bob's GDP forecast from last Sunday's show: "I expect we're going to see a positive number in the third quarter. I expect to see a positive GDP number in the third quarter. Remember in the second quarter we grew at an annual rate of 1.3%. Remember  my forecast is 1 to 2% real GDP growth this year."

In  the September Marketimer, Bob raised his 2011 S&P 500 operating earnings estimate to $95, up from $93.50 the month before and predicts slightly higher earnings in 2012 with "sluggish" growth in the European Union.

Bob is still bullish on the stock market and has been forecasting the S&P 500 Index reach the "mid-1400s" for several months. As the recent 20% decline took place, Bob extended the time frame for that prediction from "this year" to "in 2012."

Some humor by birdbrain:

birdbrain said...

"In this corner wearing blue and gold trunks, co-founder of ECRI, predictor of an upcoming recession and who has the courage to appear with Suzanne Pratt on Nightly Business Report, Lakshman Achuthan.

And in this corner wearing in-the-red trunks, publisher of Marketholder, looking for a comeback after being defeated by both Cassandra and Bad News Bear in 2008 and terribly pummeled by Nevada Property, from Lake Las Vegas, Bob Brinker."

Pay per view, anyone?

October 21, 2011 5:24 AM

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October 16, 2011, Bob Brinker's Moneytalk: Summary, Commentary, Excerpts and Discussion

October 16, 2011...Bob Brinker hosted Moneytalk today.......(comments)

Bob Brinker said: "Moneytalk is the program that helps you learn to become your own personal financial manager...so you can get out of the way of the shark attacks and take charge of your personal financial future....You turn it over to someone else, frankly, you never know what's going to happen....That's what our broadcast is about. The strategies and the tools  to achieve that personal financial freedom for youself and your family, so that some day, if you're not already hanging out there, you can reside in the Land of Critical Mass."

 Honey EC:  That's right, but based on Bob's broadcast the past couple of months, don't expect to learn anything about the stock market that will help you make decisions about investing in it. Other than a couple of vague references today, Brinker has been silent since the September-October 20% bear market decline went above 5% -- when he was  still calling it "noise."  

STOCK MARKET:  The only time that the stock market was mentioned on today's program was when Bob talked about trading curbs and capital gains distributions (see below).

Honey EC: Bob is a perma-bull who stayed fully invested for another 20% bear market drop this year.

STOCK MARKET TRADING CURBS:  Caller Roger from Pennsylvania asked Bob why we haven't seen trading curbs in the stock market over the past couple of years.  Bob told him that it was because there have not been the inter-day swings that we had in 2008. He said that back then, there were inter-day swings of 10% or more, but now it's a big deal if you see 6 or 7% inter-day swing.  

YEAR-END CAPITAL GAINS DISTRIBUTIONS:  Bob in Topeka wanted to know when  tax distributions take place. Bob answered that for the most part, it's in the month of December.  And this year, don't expect to see major capital gains payouts from mutual funds this year because the S&P 500 year-to-date is negative about 1 or 2%.

RECESSION OR NO RECESSION?  Bob said: "My personal opinion is that  some of those private forecasters out there that are so convinced that we are going into a recession which is historically defined as two consecutive quarters of negative Gross Domestic Product, I think they are going to be proven wrong. That is my prediction....I believe those forecasts will prove to be false...Therefore, those who are making investment decisions based on what I regard as that bogus forecast, I think they are going to regret it.  And they might regret it mightily, if they don't already."

Honey EC: At least one of the "forecasters" that Bob was talking about is Economic Cycle Research Institute's Lakshman Achuthan.  Achuthan says the economy is "tipping into recession" right now. 

BOB BRINKER'S GDP FORECAST: "Bob said: I expect we're going to see a positive number in the third quarter. I expect to see a positive GDP number in the third quarter. Remember in the second quarter we grew at an annual rate of 1.3%. Remember  my forecast is 1 to 2% real GDP growth this year."

VANGUARD GINNIE MAE FUND (VFIIX) NAV:  Caller Bill from Palo Alto asked: "In the secondary market.....Some people believe that if Treasury rates fall, which means mortgage rates may fall, he price of the Ginnie Mae that you own already could go down because the duration shortens because people refinance. Is that correct?  Bob said: "That really has not been the case. What we have seen with Ginnie Mae prices is in general as the overall level of interest rates have declined, we've seen strength in the prices of Ginnie Maes...."

BOB BRINKER FOLLOWER SINCE 1998: Caller Roger from Pennsylvania thanked Bob and said "since 1998"  he was in a "terrific position following Bob's advice." Bob asked him about the  sentiment in Harrisburg since the  bankruptcy.

Honey EC:  Bob chose to ignore Roger's comment about 1998. I think it's very clear why he did that. His advice since 2000 has been a mine field.   I wonder which parts of it Roger followed. If he followed it all, he lost 57% of his portfolio in 2008-2009. If he's still following Bob's advice, he just took a 20% ride down and is still underwater from the March 2009 low. He's also underwater for the year.

FEDERAL FISCAL YEAR ENDED SEPTEMBER 30th:  Deficit $1.3 trillion....Bob said: "Despite all the talk of fiscal discipline in Washington, that number was actually higher than the previous fiscal year....If you look at these numbers for three years, you're at $4 trillion. I know it doesn't sound possible....."

INTEREST ON NATIONAL DEBT:  The National Debt is almost $16 trillion now. Bob said: "Remember we're paying the interest on this debt every day and interest rates will not be zero forever. If and when interest rates normalize, we the taxpayers will have an interest bill to choke a horse."
 
DEFICIT WHAT PORTION OF GROSS DOMESTIC PRODUCT?  Bob said: "I know there's been a lot of discussion about what percentage of GDP does the deficit represent...We have the figures. The figures come to 8.7% of GDP for the USA....So far, Congress has been clueless on how to get rid of this runaway deficit problem."

SUPER COMMITTEE LOOKING FOR CUTS: Bob said: "The twelve-member Congressional Super Committee is looking for $1 1/2 trillion in savings over the next decade under the terms of the debt ceiling deal that was agreed upon in August. And if there is no action from Congress on the recommendations from the Super Committee by December 23rd, the automatic cuts will be triggered.....That's over ten years, $150 billion average per year on a deficit that's running over a trillion dollars per year.  So you can see how gargantuan the spending problem is." 

SOAK THE RICH: Bob said: "One survey said 75% of Americans, like Warren Buffett, who want to hike taxes on high earners.....I fully expect taxes to go up on high earners.....The latest proposal out of the White House is the millionaires' tax......another 5% on top of the 39.6 that they are proposing go into effect when the current tax cuts expire. That would take the rate up to 44.6 for high earners.  If you're in California it would be 55.  If you own your own business, paying both sides of the uncapped Medicare,  it would be 58,  plus what you pay in Social Security....The marginal rate in high income tax states could be as high as about 60% under some of the proposals that are on the table right now." 

KUDOS FOR FREE TRADE: Bob said: "Kudos to the president and Congress for clearing those free trade agreements with South Korea, Columbia and Panama.....The South Korea deal is the biggest deal for the United States since the North American Free Trade Agreement in 1994 removes duties on about 2/3 of American farm exports and phases out tariffs on more than 95% of industrial and consumer exports in the next five years....We always like to see moves in the direction of free trade on this broadcast. Yes, we are a  conservative fiscal broadcast. We believe in balanced budgets, free trade and a proper level of oversight. Of course, we have almost no oversight in the United States when it comes to Wall Street." 

Honey EC: I guess Bob never heard of Bernie Madoff or Raj Rajaratnam, who was sentenced to eleven years for insider trading last week -- or Sarbanes-Oxley... 

KEYNESIAN ECONOMICS: Today Bob talked about how Washington has not used Keynesian Economics.

Honey EC: This is the second or third time he has made that same assertion.  Either his memory is failing or he doesn't want to admit that in 2008,  as the whole TARP  stimulus package was being done, he was touting the use of Keynesian Economics to rescue the country. Here is one example of what I wrote in the February 23, 2008 Summary:  "Brinker praised the stimulus package…said it was the proper role of government to institute Keynesian economics and the “right things are being done.

STEVE JOBS AND APPLE: Bob talked about Apple's success under Steve Jobs-- and the launch of the new I-Phone. He said that he was certainly sad to learn of Job's passing -- that he was certainly one of the most innovative people to come out of America.   Apple's market capitalization makes it the world's most valuable company, and the shareholders are very, very happy.

Honey EC: Bob has never recommended Apple, IBM or Google. His individual stock recommendations are limited to Microsoft, Vodaphone and Suncor.  

POLITICS

OCCUPY-WHATEVER ON WALL STREET: Bob said: "I really have a hard time figuring out what they stand for.....They  are upset about the bail out of the banks. So are we to presume they would be happier demonstrators if the banks had failed?  They're upset about the disparity of incomes...There is a huge disparity of income that has evolved....But what do they want to do about that? Do they want the people who have made the money to cut enough checks to make everybody even so that everybody then would have the same amount of money...Very, very weird, these demonstrators....If you try to make any sense out of it, your head will spin." 

HERMAN CAIN'S 999 PLAN: Several times today, Bob talked about Cain's 999 tax plan. Bob said that, even though he likes Cain, his tax plan is dead-on-arrival -- that it will never happen because it is a "very regressive" plan. 

CHARLIE MAXWELL INTERVIEW:  Bob said that the Charlie Maxwell interview from September 25th is available at Moneytalk on Demand.

Honey EC: Like all Moneytalk shows, that interview was available at KGO810 radio archives for seven days after broadcast FOR FREE. 

And if you want to read a complete summary of the interview written by David Korn (FOR FREE), it's posted on this blog (HERE)

Bob's guest-speaker today was Bethany McClean who wrote: "All the Devils are Here: The Hidden History of the Financial Crisis." Her book is on Bob's recommended reading list.

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October 13, 2011: Brinker's Oil Stock Round-Trip

October 13, 2011..................................................(comments link)

To my knowledge, Bob Brinker has only recommended one oil stock in all these years and that was Suncor (SU) back in May 2009. The buy price was the "mid-$20 range."

Beginning in June 2009, Bob recommended Suncor in the low-$30 range and each month thereafter,  it was listed as a buy "below $33." Now here in October 2011, after it declined over 45% off its high (before recovering slightly), Marketimer simply says that Suncor is "attractive for purchase."

Suncor has done a full round-trip ride from Bob's $27 buy price to a top of  $47.73 in March 2011 and then lost all those gains, bottoming at $24 on October 3, 2011 -- lower than the original buy-price in 2009.  (Yahoo lists the 52-week  Range:22.55 - 48.53.)

Be aware that Bob did not add Suncor to any of his model portfolios, rather he added it to his list of off-the-books stocks. So this will have no affect on his "official performance record"  as reported by Hulbert Financial Digest. 

In the past, if stocks on that list do well, he will talk about the recommendation. But if stocks on that list go down, he sometimes removes them from the list and never mentions them again.

Round trips are getting to be the norm for Bob Brinker's Marketimer model portfolios. Since March 2003, Brinker has been a buy and holder. No timing moves whatsoever in his model portfolios.

In 2008, his stock portfolios both lost almost 40%. And  now riding out another 20% decline in the S&P 500 during the past couple of months can't be fun for those who are still underwater from 2008 and 2009 -- like Bob's model portfolios are....

Was Bob's oil stock choice a good one,  or would he have done better with BNO or USO? First, let's read what he said about it on Moneytalk February 20, 2011. This is from my Summary of that show: 

Brinker replied: "Let me share with you something I've done personally and I've also recommended in my investment letter.. And that is turning a potential negative into a positive, literally. And that is to invest in oil stock that is in a politically safe region. And the region that I've chosen, I consider to be the most politically safe regions in the world, which is Canada. And Canada is the largest exporter of oil to the United States in the world.....

.....The reality in the mid-east has been very, very ugly, very unstable......I would agree with anybody that calls the mid-east a giant tinderbox......Aside from the fact that about 3% of the world's daily oil supply floats through the Suez Canal.....a substantial portion of the world's oil supply comes out of Saudi Arabia....So when you consider the potential risk to the world's oil supply......and when you oil that you can identify, long sources of oil supply and decades of proven reserves....in political stable reasons.....And again, I mention Canada as one of my favorites, the negative becomes a positive."

I think we may find some answers in this chart which compares SU, BNO and USO over the past six months. Click to enlarge:

  

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October 9, 2011: Bob Brinker's Moneytalk, Lynn Jimenez Fill-in Host Today

October 9, 2011....Bob Brinker did not host Moneytalk today. Lynn Jimenez, business reporter for KGO810 radio, was replacement host.

After pointing out that the stock market has been volatile, Lynn said: "Just a few months ago, you and I were talking about getting ready to take the plunge again. Instead, the market took the plunge."

Later in the program, Lynn said: "The third quarter ended a week ago Friday, I'm sure Bob commented on this last week.  Good riddance to that. It was down 12%.....That was the worst performance since '09. Then Monday, it lost more ground. The S&P dipped below 1100.....Stocks still down for the year. The S&P 500 down 9%." 

Several times today, Lynn showed that she not only doesn't listen to Bob Brinker's Moneytalk, but that she doesn't read Marketimer. It has been several weeks since Bob even mentioned  the stock market, and months since he expressed any opinions.  And Lynn  clearly does not know that Bob declared the stock market "attractive for purchase" at the S&P 500 level of 1129 on September 22nd.

Lynn went over some of the latest economic reports and said: "In the past several weeks, twenty of twenty-five economic indicators have come in stronger than expected. So reports of the economy's  demise have been exaggerated, as Mark Twain once said about his own death." 

She might have been referring to the ECRI prediction that the economy is going into recession. Bob agrees with Lynn on that. He has not forecast a recession.

Lynn's two major topics of the day were:  CEOs getting  millions of dollars when they are "shown the door," and the new $5 charge for Bank of America Debit Cards.   I'm not going to cover those topics. If you are interested in them, you can download the program from KGO810 radio in the program archives -- it's free!

Lynn's guest-speaker today was Gina Martin Adams, Senior Institutional Equity Strategist for Wells Fargo.

Gina said: "I see the market as kind of in the midst of a secular bear trend.  And if you look at former secular bear markets, you tend to have very large swings in prices, both to the up side and to the down side."

Lynn replied: "For the novices among us and there aren't an awful lot who listen to Bob Brinker who don't know what a secular bear is, but for those who don't, please explain that to us so we can pinpoint what you're doing." 

Gina said: "It's a long-term trend in which the market valuation falls....." 

Honey EC:  It's questionable whether Gina knows anything about cyclical bull market trends. She sure never mentioned them today. Brinker claims that the current market is in a cyclical bull within a secular bear.

And as I said before, Lynn obviously does not listen to Brinker. He has not discussed secular trends for years. The last  time he talked to a caller about secular bear markets was in 2007 just before he retroactively declared that the secular bear that started in 2000 had ended in 2006.

At that time, the market was going up so fast that it was beginning to look like his "cyclical bull market" was going to be taken out by a roaring bull market reaching well above previous all-time-highs and  breaking all the rules that he had laid out in Marketimer and on Moneytalk about cyclical/secular trends.  That would have made him look rather foolish. 

Of course, it was about that time that the mega-bear market started and continued until it bottomed in March 2009.  At that time, he declared the  "secular bear megatrend" on again:  

May, 2009 Marketimer, Bob Brinker said: "Although it appeared to us that the secular bear megatrend that began in year-2000 had reached its conclusion, there is no question that the secular bear megatrend remains intact...." 

Three times today, Lynn advised a caller to consult a "certified financial planner." That is diametretically opposed to what Brinker recommends. He always recommends learning to be your own financial manager.

Matter of fact, I do not believe that Brinker is a "certified financial planner."  Here is what Bobbrinker.com says about him:  "Bob Brinker has more than twenty five years of investment management experience. He is the host of the weekend financial talk program MoneyTalk."

Experience does not equal "certified financial planner." If it does, I will soon qualify. :)

Bob Brinker's S&P target range in 2007:  

November 2007, Marketimer, Page 2; Paragraph 7; Brinker wrote: ".......the S&P 500 Index should rise at the least into the mid-1600's range next year, in our view."  

Bob Brinker's S&P target range in 2011:

March 2011, Marketimer, Page3; Paragraph 5; Brinker wrote: "We expect the S&P 500 Index to reach the low-to-mid 1400's range within the next year."  (That would have been March 2012, but now he is saying 2012, which would be up to December.)

Lynn's best quote of the day: "Steve (from Vacaville) Stop Me From Babbling!"

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October 7, 2011, Summary of Bob Brinker's Stock Market Views in 2011

October 7, 2011.... Each time Bob Brinker comes on the air, it's easy to predict whether or not he will discuss the stock market. If the market is looking good, expect him to talk about it. If it is going against his bullish forecasts, expect him not to mention it or let callers ask about it.

Some are already praising Bob for his September 22nd buy-signal alert  (at S&P 1129). Well, the "backing and filling" he mentioned took the S&P down to 1099, thirty points below where he said it was "attractive for purchase."  But who's counting?

It's nice to give credit where credit is due, but one needs to be well-informed before making investment decisions based on just one of Bob's calls. So in order to put this in perspective, let's take a look at some of the things he said earlier this year.

March 20, 2011 Bob Brinker said: The generally accepted language for a correction is that the market is down over 10% but less than 20%.....I think anything in the single digits is a minor pullbacks. Some people would call it noise. That's really what we've had here.....And my forecast, as I've given it on this broadcast has been very consistent on this point......And that is, and we started saying this earlier this year, and that was that we thought that pullbacks would be in the single digit category..... So you can always see short-term corrections in a cyclical bull market, which is what I believe we are in right now.......From my point of view, it's just provided those looking for an opportunity to dollar-cost new money into the market, to do so.

 In April, the S&P 500 Index reached a high of 1363. From my May 1st Moneytalk Summary:

 Bob said:  "And now 2011, with 4 months in the books, has a 9% rate of return. So it's off to a very good start. Nasdaq Index doing alright itself, 2873. The Nasdaq 100, which is the basis for the triple-Q ETF stock price, 2404.....Of course, the bear stories have been out there. The people with their bearish forecasts have been out there this year. So far, what they're left with, at least as we complete the month of April, they're left with the 2011 stock market highs on the close on Friday."

In July, Bob said that he had been buying in the 1200's. From my July 31st Moneytalk Summary:

Brinker said:  "And certainly we've seen some nice dollar-cost-average opportunities this past week in the market. I must admit on Friday I was taking advantage of some of the bargains that were out there with the market in the 1200's, reacting to this hyper-drama out of Washington DC. I know many of you also have been taking advantage of the dollar-cost-averaging opportunities on short-term weakness - and certainly it's minor. I mean, 5% is really noise when you look at the market over time.......If you've been listening to this broadcast, we have not been part of the panic-brigade here on Moneytalk."

Brinker's "buying-opportunities" defy logic because his model portfolios have been fully invested since 2003. But still,  he continues to maintain his reputation based on market-timing ability,  and has never admitted that he has been a buy-and-hold advocate for the past eight years.

Somehow,  he has successfully combined being fully invested and looking for "buying-opportunities." One has to wonder how those subscribers feel who are simply recouping losses after he proclaims the market "attractive for purchase!"

So far this year, the S&P declined to within  a fraction of 20% bear territory on a closing basis,  and 21.6% intraday. Does a fraction matter? It will only matter to Bob Brinker because he can claim that he did not miss another bear market. It's splitting hairs and he has to know it and has to be embarrassed. Maybe that is why he  has not talked about the stock market since the "correction" went above15%. 


S&P 500 Index statistics for 2011:
Date of  Closing High: 04/29/11
Closing  High: 1,363.61
Date of  Closing Low: 08/08/11
Closing  Low: 1,099.23
Decline in Points: 264.38
Decline in Percentage: 19.4%

October 4, 2011,  Marketimer, Page 3; Paragraph 4; Bob Brinker said: "In our view, the S&P 500 Index has the potential to trade into the low-to-mid 1400s range in 2012. Our Marketimer model portfolios are fully invested."


So please weigh all of this information before making decisions. As Bob always says, learning is the best protection from shark attacks.

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October 5, 2011: Bob Brinker Beehive Buzz Guest Writer

October 5, 2011........................................................................................(comments)

This great review and commentary was written by a guest-author who posts here with the pen-name,  FrankJ:

"The mortgage meltdown and resulting financial crisis, spawned a large number of books on the subject.  Some analyzed the causes and some looked at  how the fix was put in place:  who won and who lost.  Bob Brinker has hosted a number of these authors on his show.   To me, with a few exceptions, this parade of authors grew tedious and I wondered just how long Bob would keep returning to this subject area for the show’s third hour.     

I recently finished reading Reckless Endangerment by Gretchen Morgenson and Josh Rosner, published in 2011.  Morgenson was a third hour guest earlier this year.  The subtitle is an apt description of what the book is about:  How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon – this book is solidly in the group dealing with the causes.  And to borrow a phrase from Bob Brinker, the book and the co- authors, belong “at the head of the class.”

To put this book in perspective, it could be contrasted to Andrew Ross Sorkin’s book, Too Big to Fail,   another book and author featured in Bob’s third hour.  On the strength of the book being made into a movie, Sorkin appeared twice as a guest.  It has been a while since I read that book, but I remember it as a moment-by-moment account of the efforts made to save some of the major Wall Street firms.  It addresses the causes, sure, but much of the content of this book deals with personalities, drama, deals, hubris, stupidity and suspense that unfolded in 2008. 

Reckless Endangerment is not the stuff of movies, but it is a detailed, thorough and well-researched analysis of the causes of the financial crisis of 2008.  Morgenson writes in the Introduction: 

This is not the first book to be written about the epic financial crisis of 2008 and neither will it be the last.  But Josh and I believe that Reckless Endangerment is different from the others in two important ways.  It identifies powerful people whose involvement in the debacle has not yet been chronicled and it connects key incidents that have seemed heretofore unrelated.   

The reader gets a preview for how the story will unfold, when the Cast of Characters is presented prior to the Introduction.   This cast grouped into these categories:

• ·        Fannie Mae and Friends
• ·        Doubters and Those Who Pushed Back
• ·        Subprime Lenders and Their Enablers
• ·        Feckless Regulators

I think most of those who have been paying attention these last several years are aware that Fannie Mae and Freddie Mac were a large part of the problem;  that Wall Street enabled the subprime boom even after there was evidence the bubble was about to burst;  and that regulators were outclassed, or worse, controlled by those they were supposed to regulate.   

I suggest that the stories of “Those Who Pushed Back” have been under reported and to their credit, the authors of this book devote space to them.   

One of these heroes is Marvin Phaup, who, in 1996, was a deputy assistant director of the Congressional Budget Office.  He set out to examine Fannie Mae’s claim that  they “…served the American public by passing along to borrowers all of the cost savings the company received from its government association.”    Mr. Phaup examined the amount of the subsidy they received as a government sponsored entity, and, how much of the savings they actually passed on to borrowers. 

 Phaup found that Fannie and Freddie’s  borrowing costs were lower because investors assumed they would be bailed out by the government.  For the year 1995, he estimated they benefited to the tune of $7 billion.   Did they pass on all of these savings?  No, they passed along  two-thirds, keeping one-third for themselves.   To Phaup and the CBO, this explained Fannie’s outsized executive salaries, aggressive lobbying efforts, charitable contributions, and penchant for keeping academics on retainer – ready to publish studies in support of its role in the mortgage markets. 

In May of 1996, when the report was finished, Fannie Mae demanded a meeting with the CBO.  Franklin Raines  and Robert Zoellick (top execs with Fannie Mae) did not refute the report’s findings but insisted that it not be published.  (If the name Zoellick sounds familiar, it is because he is now the head of the World Bank…these people just don’t go away).   

Marvin Phaup’s boss and head of the CBO, June O’Neill, is another hero.  In response to Fannie’s demands,  she told them it would be published as written.   One month later, O’Neill was in the crosshairs of the House Banking Subcommittee on Capital Markets, when she presented and defended the report.  She had to sit through questions and statements from members of the subcommittee, provided by Fannie Mae.  Congress did not act on CBO’s suggestion that they consider privatizing Fannie and Freddie.

On finishing the book, I was struck by how many people who were involved as schemers, enablers, or were just asleep at the switch, are still involved in politics and policy.  In the authors’ words, “…we are disturbed that so many who contributed to the mess are still in positions of power or have risen to higher ranks.  … A system where perpetrators of such a crime are allowed to slip quietly from the scene is just plain wrong.”     

This point is driven home in the last few pages, where the key players in the events leading up to the 2008 crisis are listed, along with what they are doing as of late 2010. " 

Honey here: Thank you very much FrankJ! 

My family member and her husband, who is an amputee, both completed the Canada IronMan last month.  Yesterday, they ran a half-marathon together. This is a great accomplishment in light of the long road Jeff took to recover and get to this point. Having someone like her has made the difference for him (I admit to some bias in thinking she is wonderful) :)

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October 2, 2011, Bob Brinker's Moneytalk: Summary, Commentary, Excerpts and Discussion

October 2, 2011....Bob Brinker hosted Moneytalk today.......(comments)

Bob Brinker never mentioned the stock market today, and no caller was put on the air to ask about it. The S&P 500 Index closed Friday at 1131 -- very close to 1129 again -- where it was when Brinker issued a special Marketimer online bulletin on September 22nd.

There have now been five straight  months of losses for the stock market.  Last week the Dow dropped 6% and the S&P dropped 7.2%.  The S&P declined 14.3% for the quarter -- its worst quarter in 2 years!  The S&P closed out 2010 at 1257.64 and has corrected  as much as 20%, but is still down 10%.

Honey EC: Perhaps if the market turns up again, Brinker will find some reason to talk about it. In the meantime, I'd guess he's remaining silent because he doesn't want the information about the special online bulletin on the air -- yet.

I called the program today.  The call screener asked me what question I wanted to ask Bob. I told him I wanted to ask Bob's opinion of the stock market last week.  Mr. Screener seemed to catch his breath and told me that it was getting too late in the hour to take calls and hung up on me.

 Bob started the voyage of the Starship Moneytalk by reporting financial data that came out last week:

* New home sales: at historic lows - 295,000 units annual = 25,000 sales per month.
* S&P Case-Schiller  Home Price Index:  monthly gain in large markets of 0.9%.
* Consumer Confidence Index: Slight uptick from 45.4 from 45.2 = some stability.
* Durable Goods: Decline 0.1% month on month.
* Core Inflation Index: 1.6% year-over-year, same this month as last month.
* University of Michigan Wolverine Confidence Index:  up-ticked to 59.4 from 59.7 the prior month.
* Gross Domestic Product: Revised upward to 1.3% annual rate of growth in Q2. 

Bob said: "Now there have been some private economists out there talking about the likelihood of another recession in the United States.....The most obvious  historical definition of a recession is two consecutive quarters of  negative GDP, two in a row.....One of the popular notions going around is a recession is whatever you say it is, whatever you think. That's not true. If you want consistency, you have to go with the long-held definition." 

* Initial Jobless Claims: Weekly came in at 391,000. Prior week 428,000 (revised) = decline 37,000 weekly. Four week moving average is 417,000.

Bob said: "When you are looking in the four hundred thousands, you're in a situation where the  economy is growing very slowly, not creating the number of jobs you want created."   

First hour calls (all of them):

* Ryan in Spokane disagreed with Bob about the definition of a recession. Bob said that you can't just define a recession as whatever you want it to be.

* Eric in Santa Cruz said he was offered a re-financed loan at a lower percentage rate with no appraisal, no fees and no questions asked. Bob said he'd call that bank mismanagement -- perhaps it was "Robo-signed" contract.

* Judy from East Bay said she needed to begin taking minimum distributions from her IRA. She had been investing in laddered CDs and wondered what to do now. Bob told her she was doing the right thing.

* Dan from Central Valley said he was age 53 and  asked for early retirement advice. Bob used up the rest of the first hour asking Dan questions.  Bob advised him to be sure that retiring early would make both him and his wife happy.

Second hour calls (all of them): 

* Scott from Cape Cod said he fully supported the protestors on Wall Street and then ranted about "international Jewish bankers."  Bob cut him off and said that kind of ethnic slurs would not be allowed on the program.

* Joyce from Indiana wanted to raise capital gains rates incrementally on higher-incomes. Bob responded that "Fairness is in the eye of the beholder." 

* Rodney in Georgia disagreed with Bob about the huge exit packages for CEOs of large corporations -- he thought that in many cases they were well-deserved. Bob reminded him about  the "genius at Yahoo!" who turned down the  $31+ offer a few years back.

* Larry from Cape Girardeau wanted to talk about Keynesian economics. Bob repeated his opinion that the government has been doing "the opposite of what John Maynard Keynes recommended."   

*Andy from Redwood City talked about Keynesian economics...Bob said he was "sick and tired" of the "distortions" of Keynes -- that Keynes recommended saving money in the good times to prepare for the bad times.

* Tony said he was declaring bankruptcy and wanted advice on how to protect his IRA from creditors. Bob told him to check his state law, that each state has different bankruptcy laws. For example, in Florida personal residences are protected.


Several times today, Bob talked about Warren Buffett and how Buffett called for increased taxes on "the rich" even though he has very little  income in wages.  Most of Buffetts  income comes from  capital gains, capital growth and dividends. Bob said that Buffett is now claiming that he didn't say that the rich should be taxed more.  However, Bob said that is simply not true because he heard  Buffett say it in a Liz Clayman interview.  Bob also pointed out that Buffett is donating  a great deal of money to the Obama re-election campaign.

Honey EC: Oh my, how Warren Buffett has come down from the pedestal Bob once had him on. Who knows, maybe someday Bob will see how disgusting it is that the man goes around whining because he doesn't pay enough taxes while he shelters billions by giving it to organizations that promote his liberal agendas -- when he could just send a check to the IRS.

Brinker's guest-speaker was John Sylvia,  Managing Director and Chief Economist for Wells Fargo. Sylvia wrote: "Dynamic Economic Decision Making"

RECESSION COMING? WHO IS RIGHT, ECRI OR BRINKER AND HIS GUEST? 

As of August and September, Bob is forecasting 1-2% economic growth for year 2011,  and "gradual growth" in 2012. That would preclude a recession based on his definition of recession. John Sylvia also sees slow growth. However, Lakshman Achuthan of ECRI has said that the economy is "tipping into recession."  Excerpts from Business Cycle, September 30th:

"Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet. And that has profound implications for both Main Street and Wall Street."

In the third hour, caller Nick from Texas said: "A prominent professional,Lakshman Achuthan of Economic Cycle Research Institute is now predicting an imminent recession and the downward cycle of everything that's going to feed on itself -- the slowdown in China, the situation in Europe, it's sort of tipped over. And that being a pretty conservative forecaster and very careful in their deliberations, I'm wondering how you see the next six months panning out with everything that's going on.?"

John Sylvia replied: "I think you are very fortunate to be in Texas and you are doing pretty will with energy prices and the nature of the diversified economy in Texas.....But I do see overall just slow economic growth in the U.S. We're still going through transitions in terms of the housing market, the de-leveraging in the American consumer, and continued challenges in employment. I think yes, Europe is having a challenge because it's coming to grips with a very large state enterprise, particularly in countries like Greece and Portugal that are not able to meet their  budget needs with the current pace of economic growth. They have to re-trench and that suggest a transition period that's very tough for people as well as countries and it's a longer work off period, but it is what we are going through, Nick."

In his newsletter summary of yesterday's program,   David Korn wrote these comments about Bob's formerly high opinion of ECRI:

"I was doing some research in my old newsletters, and Bob quite often during the bull market of 1982-2000 spoke highly of ECRI and even suggested he used their work as at least part of his market timing decisions.  The thing is that Bob has been pretty vocal that a recession is not in the cards and Bob has, shall we say, some  "issues" with eating crow and quickly admitting he is wrong.  That usually comes long after it is quite apparent he has been wrong like after he had predicted no recession in May, 2008.  Now he may not be wrong this time.  We shall only know in the fullness of time as he would like to say, but I am keeping a much more open mind than he is about this."

Be aware that on May 31, 2008, just as the megabear market was picking up speed, Bob said this on Moneytalk:  “What we have right in here now is evidence that the Cassandras, who earlier this year, were telling us we were in recession – right now they’ve basically – well I’ll be kind, basically, they look like fools right now. Because all that they’ve accomplished with their talk about recession…………all that they have to show for their efforts is that they scared the people who listened to them out of the stock market this past winter....."

Bob was completely wrong then and had issued buy signals at the same time. Now here in 2011 with the market falling,  he is not predicting a recession and is issuing buy-signals. Think it over. A flipped coin comes up heads 50% of the time. Is he right this time?

Don't pay to listen On Demand to the Charlie Maxwell interview from last Sunday, read the summary for free on this Blog [LINK].

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