November 20, 2011, Bob Brinker's Moneytalk: Summary, Commentary, Excerpts and Discussion

November 20, 2011...........................................................(comments)

Bob Brinker hosted Moneytalk today.  Both of those 800-pound gorillas that were on the Starship last week have grown considerably this week -- the two important topics that Moneytalk travelers are most interested in hearing Bob's opinion about. Namely: the stock market and recession forecasts. Bob did not mention either subject today.

[IN EDIT] Perhaps Bob Brinker didn't want to talk about the stock market yesterday because he is sweating about the fact that last week,  the Dow declined 2.9%, the S&P 500 declined 3.8% and the Nasdaq declined 4.0%.   Now here  on Monday morning (Nov 21st), the Dow and S&P are down another 2%.  The S&P is back to 1189.25. 

On September 22nd, Bob issued a special bulletin, calling the stock market "attractive for purchase" at S&P 1129.  In the November 2011 issue of Marketimer, Bob reminded readers of that bulletin even though the S&P was at 1253.30 on the November issue date.  It was simply bragging, and now starts to look silly. In November, Bob wrote:  

"....we anticipate that the market will transition into a renewed uptrend based on our corporate earnings outlook. In our view, this transition has occurred and we look for S&P 500 Index gains into the low-to-mid 1400s range in 2012."  

There was one caller who asked Bob how the stock market might react if  the Super committee fails to reach an agreement:

SUPER COMMITTEE AFFECT THE STOCK MARKET?  Tom from Nevada told Bob that he was a long-time Marketimer subscriber and ask: "(I'd like to know) how to handle the stock market if this (super) committee decides not to sign anything. Whether that is going to have an effect on our own stock market come tomorrow or Wednesday." 

Bob replied: "Well, ask yourself this Tom. We have triggers, December 23rd, that go into affect  in 2013 for automatic, average, 120 billion annual cuts. That's where we are right now. So whether the committee agrees on anything or they don't agree, you still get the cuts spread over ten years under the current set-up. So either way, it's essentially the same result."

Honey EC: I laughed out loud when I heard Bob's answer to Tom's question. What did he say? Can anybody decipher Bob's  non-answer for me? :)

SUPER COMMITTEE DEADLINE....Bob opined that unless the committee comes up with a last minute deal, they should be re-named the "Loser Committee" -- that they are a national joke.  The deadline for a deal is tomorrow (November 21st) and it's not looking good.  Some of the committee don't want to increase taxes and want to make the George W. Bush tax cuts permanent. Some want to cut entitlement  programs, some don't.

Bob said: "The good news is that even if the Loser Committee continues to fail in coming up with a deal, the triggers take affect December 23rd and they actually go into the budget in January of 2013. Which gives them a whole other year to renege even on that. The bottom line here is that they are supposed to come up with 1.2 trillion dollars in deficit reduction....The cuts would average 120 billion dollars a year starting in 2013, running for ten years through 2022 inclusive."

Honey EC: Amazing creativity and talent for name-calling.

SEQUESTRATION: Bob said that we will be hearing this new word more frequently in the future because it "revolves around the potential failure by the super committee to come up with a plan by Wednesday of this week" and has to do with the automatic trigger.

Honey EC: It's possible that Bob read this article:

Federal Government Spending:
The Super Committee and Sequestration

With Washington’s deadline to cut a targeted $1.5 trillion – but a minimum of $1.2 trillion – in federal spending quickly approaching, many commentators are beginning to doubt the Super Committee will have the political fortitude to make lasting change. What are the consequences of failure, and are these targeted cuts enough to get our nation’s fiscal house in order. Read article at this   LINK

 ANNUAL DEFICIT: Bob said:  "We continue to run 10-digit annual deficits. That means annual deficits of over a trillion dollars......therefore cutting an average of 120 billion dollars from the budget on an annual basis would be a relatively small contribution to the solution." 

Honey EC: This topic was kicked around quite a lot today, but I didn't hear anything that hasn't been discussed before. 

I-BONDS:  Today, there were two calls about I-Bonds.   Gary from Gilroy said he bought some ten years ago with a base rate of about  3%  (according to Bob).  Gary asked if he should hang on to them or cash them in.  Bob advised hanging  on to them because of the great base rate, which Bob said,  "robbed Uncle Sam blind."   I-bonds pay the base rate plus the Consumer Price Index.

HOW TO BUY GOLD: Bob said:  "I would stay away from numismatic coins like the plague. Now if you want to buy gold content coins like the America n Eagle which is priced to its gold content plus a tiny premium.....Or something like a Krugerrand or a Canadian Maple Leaf, that coin is going to be priced almost identically to the gold value of one ounce....The other way to buy it is to buy the Exchange Traded Fund, GLD....You are holding a fund that holds bullion." 

Honey EC: I don't recall ever before hearing Bob mention American Eagle, Krugerrand or Canadian Maple Leaf coins as an okay way to buy gold.

GOLD HEDGE AND POSSIBLE EUROPEAN UNION BREAK-UP:  Bob in Virginia Beach said he "got out of the market" and  asked Brinker if he thought the European Union will break up and if so, what will it do to gold.

Bob Brinker replied:  "My guess is that Europe will muddle through....I think it's possible that Greece will be forced to print up its drachma and go back as an independent currency country.....The country is insolvent....I think that gold does benefit the failure of fiat currencies. But I don't think that Greece going back to the drachma...... is that big of an international event...There's no doubt about it, the failure of paper currency is a good thing for gold. Some people have a hedge in gold for that reason."

US DOLLAR IN DANGER? Caller Dawn from Reno asked Bob if the US dollar was in danger of becoming worth nothing. Bob emphatically answered that the dollar was not in danger.

ARE TARIFFS THE ANSWER?  Caller Victor from Washington made quite a lengthy presentation promoting ending free trade and installing tariffs. Bob sent him to the Starship brig for the remainder of hour two. Bob said: "Victor, where did you learn this economic nonsense that you are preaching?"  Bob cited the Smoot-Hawley Tariffs of the 1930's, the depression and other dire consequence.

INHERITED IRAS....Warren from Michigan, who recently inherited a regular IRA (not a Roth) from his mother, asked Bob if he should take minimum distributions based on his lifetime or his mothers.

Bob replied: "If you inherited this from another family member, not a spouse, then you have to take distributions starting the following year....My understanding is that you are prohibited from rolling it into another plan or making contributions....The schedule you use is the IRS single-life expectancy table.....That would be based on whatever is in the table...."

Honey EC: Fidelity offers an easy-to-read explanation of inherited IRAS at this LINK.

GRANDFATHER BOB BRINKER: Caller Bob from Indiana said: "I hate to disagree with you because you're so likeable. You make me think of my grandfather, so I speak to you respectfully, when I disagree with you......My philosophy on that committee is like an analogy if I was to walk up on two teenagers that were fighting, and it was a slug-fest fight, I don't think that I can automatically conclude that they are both wrong. For all I know, one of those teenagers  jumped the other one from behind when he wasn't looking and he is fighting for his life because he was assaulted. For that reason, I don't believe that just because they (the super committee) are not coming to agreement with each other, does not necessarily mean that they are all wrong...I believe it's possible that six of those committee members are doing the right thing and the other six don't want to do the right thing and that's the reason they can't agree. Before 2008, we had a budget that did not pass a budget which to me screams out fiscal and financial irresponsibility. And six of these people that didn't see fit to pass a budget on on this committee."

 Bob replied: "Well if you are right and everybody else is wrong, why do you think that 84% of Americans think Congress is dysfunctional." 

Honey EC: Bob's political pontification went on for several minutes and then after the break, he continued hammering poor defenseless, Bob from Indiana.  Brinker finished hammering the caller by announcing that he showed his partisanship.  LOL! Duh...Mr. Brinker and what do you do throughout every program? 

Bob spent a lot of time today talking about Europe, but in my opinion, none of his opinions are new. And basically all he did was report what is available in the news or internet.

WHAT'S HAPPENING NEXT WEEK...Monday: Existing Home Sales;  Tuesday: GDP: Wednesday: Durable Goods Orders and Personal Income;  The stock market is closed on  Thursday for Thanksgiving Day and early on Friday.   Here is a LINK  to the full economic calendar,  and a LINK to Bloomberg Major World Stock Futures.

Bob's guest-speaker today was Richard Brandt, who writes about Silicon Valley, "The Google Guys" and "One Click: The Rise of Jeff Bezos and Amazon. com"

POST AND READ COMMENTS