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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