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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