January 31, 2012: Bob Brinker's Moneytalk Guest, James Rickards: Summary and Commentary

 January 31, 2012.....Bob Brinker's Moneytalk guest-speaker on Sunday was James Rickards. Rickards was an outstanding speaker and I have a treat for you.

Guest writer, FrankJ,  has written a very comprehensive summary of this third hour of the program for us:

"Third hour guest:  James Rickards, author of Currency Wars: The Making of the Next Global Crisis Bob asked his guest why he wrote this book. Rickards answered that he wanted to explain how international money systems work and put thing in plain English. He mentioned the International Monetary Fund’s creation of a global currency, the SDR (see below).

BB:  Is there any appetite for a single global currency?  Rickards said yes there is and pointed out that since 2008 the Federal Reserve added over $2 trillion to its balance sheet, but the next time a crisis occurs, the Federal Reserve will not be able to handle it.  Like the Fed, the IMF has a printing press and can churn out Special Drawing Rights, (SDRs) so the next time there is a panic, it will be papered over with SDRs.  SDRs have been around since 1969 but little used until 2009 when a few hundred billion were printed and “handed out."

 In answer to Bob’s question on what the author would have done if he were in Ben Bernanke’s position, Rickards explained that he “would have closed a lot of the banks.”  Wipe out the stock holders, give the bond holders a haircut, strip out the  bad assets and put them into a government holding entity with the intent to sell them eventually.  Then “IPO” the cleaned up bank so that it was in a position to lend.  Rickards said that banks today are not in a position to lend because they have so many bad debts and they are investing in government bonds.  

Bob challenged Rickards’ nationalization stance and the author responded that in effect, the government has already nationalized them, in a stealth manner, but they placed the cost on the taxpayers instead of on management, the stockholders and the bondholders.

Bob said that they (government/taxpayers) got their money back.  Rickards said they only got it back because Fannie and Freddie are the “backdoor bailout mechanism.”  He said that it was “all rigged." 

 The “all rigged” comment prompted Bob to ask if there was some under the table conspiracy and what was meant by “rigged.”   Rickards reiterated that the stockholders and bondholders of banks did not take the hit they should have and that Fannie and Freddie, banks, the home mortgage industry, Congress and the Treasury are acting in concert to place a floor under housing prices.  Bob asked the guest if he would have closed Fannie and Freddie.  Answer:  “Sure." 

Bob asked him what condition the housing market would be in if that had happened and Rickards said housing would be down an additional 20-25% and unemployment would be much higher.    2009’s economic pain would have been worse but Rickards believes we would be better off today.   He linked governments inaction during the depression in 1919-1920 to a quick recovery, and said the depression of the 1930s lasted longer than it should have because of government’s attempts to intervene.    Rickards said that today, businesses are sitting on their cash because of the uncertainty about what government might do next. 

After the break, talk  turned to Europe and James Rickard said the Euro would hang in there.  He thinks Angela Merkel “gets it” because she IS NOT and economist. 

Caller David asked if we should raise taxes to get out of debt?   JR explained three ways to solve the debt problem: 1)  Default (which the US will not do).  2)  Inflation – he said government is “working hard to create inflation.”    3) The third method is to grow the economy.   He said we have an anti-growth government with this administration.  Go pro-growth with an elimination of the corporate income tax and capital gains taxes.  Go to a personal flat tax, break up the big banks, ban derivatives.

Bob asked about China’s manipulation of their currency.  Rickards shot back that the US is the biggest manipulator of currency in the world, via quantitative easing.  He said QE was designed to reduce the value of the dollar in the currency markets.  It did not cause inflation in the US as some predicted, it caused it in China.  Rickards says that inflation will now come to the US in the form of higher prices for imported goods. Bob disagreed and predicted inflation would remain low in 2012.

Caller Alan from Illinois wanted to get back to the old days of the savings and loan when lenders were limited in what they could loan on, borrowers had to put down 20%, and have a steady job.  He suggested that without Fannie and Freddie we would not have had the bust.   Rickards agreed with his recollection and gave his own history lesson as to how Congress raised the FDIC protection to $100,000, which had the unintended consequences of banks and S&Ls making risky loans.   Rickards said that when he started in banking, the rule was, “a loan should hold up in all phases of the business cycle,” but this notion has gone away with the securitization of loan packages." 

Honey's Comments: Thank you FrankJ, for that great summary of this Moneytalk guest-speaker.  You certainly covered all the high points.

As you pointed out, Brinker immediately jumped on Rickard's comment about Fannie and Freddie being "all rigged." Then Rickard really hammered his point home by saying he would have closed them altogether. 

Another interesting  point is that Rickards said that Merkel is the only head of state in the world "who gets it"--  for the reasons that you stated.

Rickard's response to David's call was a bit disturbing. As you wrote, he said that the United States would never default because we have the printing press.  We might never default, but what will we be able to buy with those dollars if they keep running the printing press? Like Rickard's said, "Good luck buying a loaf of bread." 

As you wrote, Rickard's third method to get out of debt was to have a pro-growth policy. I found it refreshing that unlike Bob Brinker, Rickard's had no trouble actually saying, "The Obama Administration" when he point out that we now have anti-growth policies with the Obama Administration.

I laughed out loud when Rickards said that inflation is picking up now and we can expect to see higher inflation this year as a result of increasing Chinese import prices, and  the "Fed's misguided currency policy." Brinker broke his own policy of not disagreeing with his guests while they are on the air -- guess he just couldn't help himself since he has been preaching no inflation for so long. 

FrankJ and I rate the James Rickards interview an 8 on a scale of 1 - 10.  I recommend downloading this program from the KSFO560 archives FOR FREE Moneytalk on Demand.  It will be there until Sunday morning. Go to KSFO.com   Click on "Listen/Seven Day Archives/Sunday" Then download hours 1-2, 2-3, and 3-4pm.

Dixiegeezer sent this amazing picture tonight. Please enlarge it to see the surprise in the bird's mouth:

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January 29, 2012, Bob Brinker's Moneytalk: Summary, Excerpts, Commentary and Discussion

January 29, 2012.....Bob Brinker hosted Moneytalk today.........(comments welcome)

STOCK MARKET....Bob Brinker said:  "Interesting week in the stock market. S&P 500 gaining close to a point for the week, but the Nasdaq gaining close to 1% for the week. And the Nasdaq moving close to an eleven year high.....Now why is that?.... A lot of it has to do with one company. A company which reported spectacular earnings this past week and as a consequence the stock celebrated those earnings by increasing in value to $447 a share.....The stock in Apple was trading in the $30's and it closed Friday at $447 a share...."

APPLE IPod and IPhone....Bob continued: "A lot of this has to do with two new products in the last five years. Products that did not even exist in the long term past of the company.....Those products are the IPhone and the IPad....Thirty-seven million IPhone sold in the last fiscal quarter for the Apple....A total of one hundred eighty three million IPhones since the product was first available in 2007.....The IPad has also grown rapidly...The company sold fifteen point 4 million IPads in the latest quarter....The IPhone and the IPad made up 72% of total Apple revenue in the latest quarter....Which means that Apple is now battling with Exxon-Mobil for the most highly valued company on the market....They can go back and forth...."

AMAZON KINDLE FIRE VS APPLE...Bob continued: "Interesting conference call following the earnings report by Apple this week....Amazon introduced their Kindle Fire for $199 and that's way cheaper than the $499 starting price level for the I-Pad. According to the CEO of Apple, Tim Cook, IPad sales were not hurt by Amazon's Kindle Products. The Kindle has less computing power, and at this time, it does not have features such as the camera that goes with the IPhone....."

APPLE INCOME FOR QUARTER....Bob continued: "The company reported income for the quarter up 118%.....They made over thirteen billion in the quarter....And the McIntosh is still selling. Apple sold five point two million McIntoshes for the quarter.....holiday quarter...Apple is thriving in the mobile phone market...now available on the three largest wireless networks in the USA and in the autumn of this year, they are going to add Sprint..."

Honey EC: Bob Brinker has never recommended Apple on Moneytalk or in Marketimer. However, he has had Microsoft and Vodaphone on his recommended issues list for over a decade. 

I-BOND RATES MAY 1ST: Bob expects the base rate to stay close to zero, but it's too early to tell what the inflation rate will be....In the fourth quarter of 2011 there was deflation -- the CPI dropped one tenth of one percent.

HOUSING MARKET: For the third week now, Bob said the housing market is in a "bottoming process."

MARKETIMER FIXED-INCOME PORTFOLIO....Caller Clark from Baton Rouge said that since money market funds are not generating much income, he was thinking of putting about $135,000 in Bob's Marketimer fixed income portfolio "where you have those five different investments and you spread it out across them to generate more income."

Bob replied: "For the listeners, the caller Clark, is talking about the income portfolio that is published on page 7 of the investment letter....I think I'm okay with that as long as you take out at least one year of that since you are going to spend it within a year.....Now you have to understand that is a dynamic portfolio.....that means it's subject to change....We mention that because from time to time, we do make changes....."

Honey EC: Many times, years will go by where Brinker's Marketimer fixed income portfolio never changes. He added Wellesley Income Fund (VWINX)  in January 2011 and Doubleline Total Return Fund (DTLNX) May 10, 2011. He lowered the weightings in Vanguard Ginnie Mae Fund (VFIIX) and also Vanguard Short-Term Investment Grade Fund when he made those changes. He also sold all of the Vanguard Inflation-Protected Fund (VIPSX) in his portfolios.   Before that, there had only been one change for seven years,  and that was in 2003,  when he added Vanguard High-Yield Fund (VWEHX).  So in my opinion, there is very little reason to wait with bated breath for him to be making any "dynamic" changes very soon. :)

LAST TIME BOB BRINKER WENT TO CASH .....Caller Chris from Charleston said: "I've been listening to you since probably the mid-90's. You definitely helped us out in, was it 2000, 2001 when you said go back to cash, revert back to cash...."    Bob interrupted and said: "We went mostly to cash in January of 2000 and we reinvested that cash in March of 2003. Let's get Bill on the line."

Honey EC: Isn't it amazing how so many  callers who have been following Bob Brinker for all of these years, praise him for "helping them out" when he went to 65% cash in 2000, but have no memory whatsoever about how much they lost by following him off the cliff in 2008?  Sadly, Bob never has anything to say about missing the biggest bear market of our lifetime.

HOW TO STIFF A BANK WITH A SHORT SALE ACCORDING TO BOB BRINKER....Caller Bill from Florida said he had bought a second home in Bradenton, Florida. He paid $160,000 for this two bedroom, one bath home. The mortgage is $120,000 and the payments are $1,100. It's now worth $60,000 or down 62%. Bill said: "I can pay it off, I have the money."

Bob asked: "What is your net worth?" Bill said: "Probably over $2 million....." Bob asked if any of it was liquid. Bill said: "I have probably $700,000 either in CDs or with an investor."

Bob said: "Here's my recommendation.....Go to the bank and attempt to negotiate a short sale.....The numbers speak for themselves.  The bankers will see for themselves that you are 50% under water on your mortgage. They will also see that your monthly payment is very high....I would say go to the bank and try to negotiate a short sale....

Bill asked: "The fact that I have the money somewhere, would they end up saying hey, you can pay that off...."

Bob said:  "If I were you -- this is not something -- during your negotiations with the bank, this is not something I would be talking about. I mean, if you want to go into the bank and you want to say, hey guys, I owe you $120, (000), the properties only worth $60, (000) but guess what, I've got $2 million in  net worth and $700,000 in liquid assets. If you do that, if you do that, you're not going to get a short-sale. But if you go into the bank and say, hey guys, look at this mess. I owe you $120, it's only worth $60, and  it's costing me $13,000 a year, this is awful, please arrange a short sale. If you go in that way, and everything I just said is the truth, then I think you have a shot."

 Bill said: "If I can't do that, you would probably just pay it off, right?"

Bob said: "If you can't arrange a short sale, your fallback position is not attractive because that market has not recovered yet.....A lot of the Florida market has not recovered yet. A lot of places have not recovered....Your fallback positions are not attractive.....You either continue to pay $13,000  to own a property or you sell it at the market and you owe the bank the difference.....A short sale to you would be very attractive.....Bob Brinker here. It's Moneytalk. 

Honey EC: There were two callers who later tried to point out to Bob that to qualify for a short sale,  it has to be a hardship case. Bob repeatedly said that he knew that, but "this is a terrible loan." Bob seemed to forget that the caller had to sign for the loan -- I doubt anyone twisted his arm.  

Bob also repeated how the caller had over $2 million in assets and "tons of liquidity," so he clearly remembered that.  It was clear to me that in a similar situation, Bob would pull every string he could to deceptively off-load an honest debt that he had committed to -- if he could. Makes me wonder if his million dollar condo in Lake Las Vegas that lost most of its value,  has undergone a short sale. (Please check here for more comments on this subject.)


TREASURY DIRECT COMPUTER ONLY NOW (LINK): Caller Elsie from Hawaii, who never used a computer in her life, said Treasury Direct is discontinuing her account and  returning $800,000  to her,  and was concerned about putting it all in one bank because of FDIC coverage.  Bob told her to spread it between four banks. Honey EC: She could also use CDARS and they would do that for her.


RON PAUL....Caller John from Illinois asked about Ron Paul wanting to do away with the Federal Reserve. Bob replied: "I don't agree Ron Paul on eliminating the Federal Reserve....We will become a third-world country if the congress takes over the money supply....Ron Paul does have some good ideas....He does not believe that the United States can afford to be the policeman of the world. I think he's right on that.....He also has some not so good ideas. I think that legalizing drugs is not a good idea...."

DODD-FRANK BILL: Bob said he is against its repeal and thinks that the "people in Washington"  who are opposed to it and  are for "no regulation" or "no oversight"  are "bought and paid for."

COMEDY SKIT FOR THE DAY: 

Caller Greg from San Francisco said: "I have a 2008 Shelby that's increased in value from what I paid for it.  I just wondered, is there a way to put that into a Roth? 

Bob said:  "Tell us a little more about this item."

Greg said: "Well, it a 2008 Shelby GT 500 Mustang. I paid $62 out the door with tax and license. It's now currently worth over $80,000. I wanted to take some more money out of my Roth and put it into the Mustang to even increase it further."

Bob said: "Do you drive this dolly around." 

Greg: "I do on weekends."

Bob said: "Okay, here's the rule. If you put it in an IRA, then you will be required to distribute it the same year you put it in and you might be liable for a 10% early distribution penalty. This is all in Publication 590, you can check it out. That applies to all collectibles, not just Mustangs.....Happy cruisin.' Chris is with us in Texas...."

Honey EC: Was Bob had by this caller? LOL! Thanks to Jeffchristie for this picture of the Roth-IRA Mustang: 

* Bob spent the opening monologue in hour-two talking about the Euro, Greece and the sovereign debt problems.

* The third hour opening monologue, Bob talked about next week's Economic Calendar.

Bob's guest speaker-author today was James Rickards Currency Wars: The Making of the Next Global Crisis (Portfolio)  Rickards was a very interesting speaker. As time allows this week, I will post a brief summary of this third hour of the show....

Bob Brinker's Moneytalk is now carried on KSFO 560 instead of KGO in San Francisco. You can listen live on KSFO -- or download the show after the broadcast and listen anytime.

(Don't miss the latest issue of the Bulb Timer posted here.)

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January 29, 2012, Congressional Insider Trading: Throw Them All Out

January 29, 2012....Surprisingly, this is a topic that Bob Brinker hasn't talked about on Moneytalk.   FrankJ has done an outstanding and informative review on a subject that roils everyone on all sides of the political spectrum -- insider trading by members of Congress.

 FrankJ. wrote:

Review of Throw Them All Out by Peter Schweizer.

President Obama’s State of the Union speech on January 24 included too many applause lines to count, but one that struck me, about three quarters of the way through, was his call for an end to insider trading by Congress.   We would have to go back to the audio tape to discern if this line got the same applause or less than his other pledges.   My own response was, “Yeah, right,” and then I left the kitchen where I was listening to the speech on the radio to retrieve my copy of the book, Throw Them All Out by Peter Schweizer, subtitled:  How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Send the Rest of Us to Prison.

Did Obama or one of his staff read this book, or did they come up with the idea of cutting off Congress on their own?   What is said can be important, but sometimes it is useful to know the significance of what is NOT said.  Left unsaid in the State of the Union speech was anything about cleaning up the system which rewards campaign contribution “bundlers” like George Kaiser, who benefitted from government guaranteed loans going to Solyndra, a company where he held a 35%.  I guess it is possible that the President or his staff didn’t read Chapter 5 of Schweizer’s book, the one titled Spreading the Wealth … To Billionaires.

The chapter begins with a quote from John Doerr, a billionaire and Obama contributor.  He calls down God’s blessings on the Obama Administration for their expected good works in green innovation.  Coincidentally, Doerr owns pieces of sixteen companies that received government loans or grants.   The chapter goes on to examine the largess from just one stimulus program for alternative energy projects, run by the Department of Energy.  

Those who benefitted included members of the Obama campaign’s National Finance Committee, campaign bundlers, and politicians who supported the campaign and launched alternative energy enterprises that ended up receiving loans or grants.  So how much did they get?   Schweizer presents a pie-chart on page 79 showing the “connected” companies received 80 percent of the $20.5 billion doled out, as September 15, 2011.   Those individuals serving on his National Finance Committee were also connected with companies which received over $11 billion, according to a table on page 88   One outfit, Leucadia Energy received $3.46 billion.  Schweizer notes that this company is a subsidiary of Leucadia National, whose CEO is Ian Cumming, a member of Obama’s finance committee and writer of checks to the Democratic party, totaling $69,000.

Pages 100 and 101 present a table listing “Obama Bundlers, Large Donors, and Supporters” with data as of September 15, 2011.  Some familiar names include:  Brin and Page (of Google), Robert Kennedy Jr., Jim Rogers (Duke Energy), Ted Turner, Larry Summers, Al Gore (connections to Fisker Automotive, recipient of $529 million, planning to build electric cars in Finland and sell them here for $100,000+).  

Part One of the book, “Congressional Cronies,” focuses on what Congress gets up to with pending legislation; how they profit from national crises, such the financial meltdown in the fall of 2008; the special treatment they get with regard to IPO’s; and how members of Congress hard-wire federal spending to their own real estate ventures.    

Chapter One, titled “The Drug Trade” mentions fifteen Senators and House members who traded in stocks of companies likely to be affected by health care legislation.  John Kerry is mentioned prominently in this chapter.  Also included are:  John Tanner, Jim Webb, Vern Buchanan, Tom Carper, Melissa Bean, Jared Polis, Johnny Isakson, Sheldon Whitehouse, James Oberstar, Jeb Bradley, Max Baucus, John Boehner, Jim McDermott and Amo Houghton.  This mix includes members of both parties.  

Part Two of the book, “Capitalist Cronies,”  consists of Chapter 5, discussed previously, and a chapter on Warren Buffett’s ties to government, and a chapter called “Cronies on Parade:  Hedge Funds, Defense Contractors, Colleges, Big Oil…and George Soros.” 

Part Three concludes with the author’s recommendations on what to do about this corruption. 

Buy this book and read it.  But resist the temptation to hurl it across the room when you read how deeply the dishonesty and corruption is embedded in Congress and the Administration. 

 Throw Them All Out, by Peter Schweizer was published in 2011 by Houghton Mifflin Harcourt.  For more information on the book, go to: www.throwthemalloutbook.com

To buy the  book from Amazon, go to: Throw Them All Out
 

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January 28, 2012, Bob Brinker's Marketimer Competition, The Bulb-Timer

January 28, 2012....Courtesy of our friend, FrankJ, and at no charge, we will now be treated to the 2nd edition of the Bulb Timer. Perhaps Bulb Timer is the stiffest competition out there for Bob Brinker's Marketimer. :)   In a light-hearted way, FrankJ presents a view of a very serious subject: 

Bulb Timer, 2^nd issue

January 2012

In the second issue of  Bulb Timer, we summarize an article  that appeared in the January 18 issue of the Wall Street Journal, written by Katherine Boehret.   The author based her article on information in Consumer Reports, and as editor of the Bulb Timer, I want to be clear I am cribbing some content from Boehret’s article.  Like many articles on bulb “futures” it draws comparisons between incandescent bulbs, compact fluorescents and LED bulbs.  

Incandescent bulbs produce light by shooting energy through a thin filament that glows when energized.  These bulbs are rated in terms of watts, which we equate to brightness, but which really equate to energy use and heat output.   An incandescent bulb might cost $1 could last anywhere from 750 to 1250 hours.  The actual operating cost depends on what you pay for electricity – my rate per kilowatt-hour (KWH) is $0.066, so it costs $3.96 to run a 60 watt bulb for 1000 hours.   (0.066 x 60).

Compact fluorescents:   For $5 to $10, you can buy a CF bulb that is supposed to last 10,000 hours.  A 43 watt CF puts out the equivalent light of a 60 watt.  The savings of 17 watts over 1000 hours of operation works out to $1.12.  But will consumers have been used to paying $1 or less for an incandescent,  pay 5 to 10 times the price, even if the bulb is supposed to last 10 times longer?   I don’t know, but if I watch enough episodes of Mad Men on Netflix, maybe I’ll have an answer for this.  

Some of these bulbs do not work well with dimmer switches.  I have some here in the Bulb Timer company headquarters, and I can tell you, they take a minute or so to “warm up” and begin giving off the proper amount of light.   This bothers some people, it does not bother your editor, I am used to under performance here in the early 21^st Century, by both politicians and the stock market, so why single out light bulbs?  

The environmental downside of these bulbs is, their mercury content.   This might doom them as a consumer option.  Not  because consumers will not want to buy them, but because the supply chain may not want to handle them and be “responsible” should someone claim mercury poisoning.   

You are supposed to dispose of these by recycling them.  How many people will do that?  And if you break one you are supposed too …. Well, fuggetabboutit.  Bulb Timer predicts that CFs will  go away based on their perceived lack of “green” credentials, even though their operating costs are lower than incandescent bulbs.

Next up is the LED bulb. (Light Emitting Diode).  Most of the aforementioned article is devoted to these.  The numbers are:  lifespans of 20,000 to 50,000 hours (that is 2.3 to 5.7 years).  “Best in Shows” are the Philips 12.5 Watt A19 bulb priced at $25 with equivalent light to a conventional 60 Watt incandescent.

The orange-themed big box store will sell a $15 “World Bulb”   Available in India now, and later in 2012, here in the US.  This bulb uses 13 Watts and is the equivalent in light of a 60 Watt old-style bulb.   Lighting Science Group Corporation, also makes the “Home Intelligent” LED bulb which can be turned on and off using a smartphone application.  (Personally I am more interested  in an app to turn off the coffee maker or the stove, after I have left the house and can’t remember for sure if…  never mind.)  

And the winner in the LED category is… the Philips “L Prize Bulb,” user of only 10 Watts (according to Philips) and the equivalent of 60 Watts traditional, for only $50 a pop, so the most likely purchasers are those consumers living in the Land of Critical Mass.  It is reputed to last 25,000 hours.    The “L Prize” is a Department of Energy award for efficiency.  (25,000 hours is a little less than 3 years, so the DOE must have been at this a while, and please …no Solyndra jokes, but I will point out that $500 million that went to this company would have purchased 10 million of these bulbs!).  

Again, using the $0.066 KWH rate, this bulb saves $3.30 per 1000 hours of operation, compared to a conventional 60 watt incandescent bulb.      

Another comparison is what $1 dollar of purchase price buys you in hours of use.  The $1 dollar spent on a 1000 hour, 60 watt incandescent, buys you 1000 hours of service.  So does each dollar spent on the $10 dollar/10,000 CF.  But each dollar spent on the $50 dollar LED only buys 500 hours of service.  But, the LED bulb has a clear operating cost advantage.  

The “Bulb Timer Newsletter” is brought to you on this blog through the generosity of our publisher, Honeybee.  The staff consists of your editor, Frankj, who is solely responsible for its content.  Our Chief Researcher, VP of Marketing, Head Fund Raiser, and Creative Strategist is Birdbrain, who, when not working on Bulb Timer,  spends time prowling flea markets and prognosticating on major sports events.  He checks in when his corporate debit card needs recharging. 

January 25, 2012, Bob Brinker's Moneytalk: Active Trading vs. Buy and Hold

January 25, 2012....Bob Brinker's market-timing advice does not include making short or long-term trades. The last time he actually made a trade on the air was in the year-2000. That was when Bob Brinker recommended a short-term trade in QQQ at $90 to $100 -- and advised listeners to put in a stop-loss at $84.

It ended badly for many because it looked like the market-makers decided to take out those stops, and that is exactly what happened. The very next week,  I was watching on my trading screen. QQQ started dropping until it hit exactly $84 and then turned up again. I can't recall where it closed that day, but it was several dollars higher than where it opened.

* I was reminded of that unfortunate trade (that ended Bob Brinker's Moneytalk trading) when I heard this call last Sunday:

Caller Harry from Nevada City said: "My IRA On January 1st, 2007, was worth $508,227."

Bob said: "How was that invested at that time?"

Harry said: "I'll tell you in a second. I just want to tell you where I ended up the five year annual compound return. Bob, are you with me?"

Bob:  "I'm listening. I'm listening."

Harry:  "Alright. My ending value, and this is without any additional money going in and no money coming out. My last earned income was 2001.  So what I'm about to tell you is strictly the performance inside the IRA by the assets invested. It went to $930,908. Now I just checked the Vanguard Wellesley Fund. It had a 6.13% annual compound return, and that would have been $684,303. And of course the S&P would have been down a quarter percent."

Bob:  "Harry, tell us how you did this."

Harry:  "Well, the first two years, years 07 and 08.  I finished off what I'd started in year 2000, and that is a (?)-structured pyramid of zero-coupon bonds which I traded opportunistically. I sold Bear Stearns St. Patty's Day Monday, reset July of  '08, sold everything in October. Then in December, I went all into corporate bond mutual funds which had the best performance two years since the Depression."

Bob said: "So what you're saying, what you're telling the listeners is that you did this with a really a hyperactive trading approach, where you were skipping between securities of various assets classes, stock, bonds, whatever, and trading actively and you were doing it in an IRA to get the tax privilege. And that's the beauty of that IRA tax shelter.....This is Moneytalk."

Bob cut Harry off and put his own spin on the call.  He chose to ignore the fact that Harry almost doubled his money in the same five years that Marketimer's fully-invested model portfolios made miniscule gains. But the best he could come up with was an "hyperactive trading approach," and the beauty of tax-sheltered accounts. Actually, if the caller had stated all the trading he did in five years, that was certainly NOT  "hyperactive trading" by any stretch of the imagination. But to a market-timer who has been a buy-and-holder for eight years, perhaps that's the way it looks. LOL!


* Bob Brinker's third-hour guest-author last Sunday was Suzanne McGee: Chasing Goldman Sachs: How the Masters of the Universe Melted Wall Street Down...And Why They'll Take Us to the Brink Again.  During the interview, Suzanne was talking about John Paulson,  who made billions calling the collapse of the mortgage market in 2008, but whose mutual funds  Brinker said "fell out of bed" in 2011, but I wonder if she wasn't also talking to Bob: 

Suzanne said:  "One lucky call, one astute, intuitive forecast does not make someone a genius. This is not specific to John Paulson, incidentally. We have a tendency, and again, I think it goes back to our own knowledge and awareness of financial matters generally, but we do have a tendency to elevate, to godlike status those people who have made money for us.......People who forecast the 1987 crash, very few of us remember their names today. One lucky call does not a guru make and we should remember that." 

I think that Bob should pay close attention to what Suzanne said. One lucky call does not make one a genius. And even those who are elevated to "godlike status" for one good call, are soon forgotten (unless they have a national radio show and play fast and loose with history.

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January 22, 2012, Bob Brinker's Moneytalk: Summary, Excerpts, Commentary and Discussion

January 22, 2012....Bob Brinker hosted Moneytalk today...........(comments welcome)

STOCK MARKET....Bob said: "Stock market off to a good start in 2012. We are only three weeks into the new year and the S&P 500 Index is up about 4 1/2%. It is off to its best start in fifteen years....at 1315 level....It ended the year where it started the year at 1257.6 level." 

Honey EC:  Last spring before the stock market corrected 20% -- twice, Bob was also touting how well it was doing. In early spring, he even cautioned a caller about selling stock and having to buy back at higher prices -- oops.   

And now this year,  the stock market has a ways to go to reach Bob's expectations from the March 2011 Marketimer: Bob wrote: "We expect the S&P 500 Index to reach the low-to-mid 1400's range within the next year." How ironic! That is the exact level that Bob called a "gift-horse" buying-opportunity in the fall of 2007,  as the S&P  was reaching its all-time-high of 1567. 

RECESSION/ECONOMY.....Bob said: "Those forecasting recession, well they have been wrong so far. The economy continues to grow. We are looking for the fourth quarter real gross domestic product growth rate, which will be coming out soon, to increase over the third quarter rate.....Full year growth for 2011 looks to be very close to 1.5%.....Now 1.5% is the mid-point of the 1% to 2% growth rate that was projected on Moneytalk many months ago."

Honey EC: What Bob didn't say is that he changed his projection in August 2011. That is when he began talking about it on Moneytalk.  What he has not told the audience, and even Marketimer subscribers may miss it,  is this:

* July 2011 Marketimer, Bob Brinker wrote: "We expect real gross domestic product (GDP) to grow 2% to 3% this year...."
* August 2011 Marketimer, Bob Brinker wrote: "We estimate real gross domestic product (GDP) growth this year will be in the range of 1% to 2%."

EMPLOYMENT/JOBS.....Bob said: "Employment is growing too. An average of  136,000 new jobs monthly created in 2011. This despite the continuing shrinkage of public sector employment. Private sector jobs growth is carrying the mother-lode of employment growth at this point.....So government services and benefits are going to continue to disappear because the money is just not there. That will be at the federal, the state and local levels."

CORPORATE BUY BACKS....Bob said that corporate buy backs rose 46% last year.....almost all on in the open market.....it's a means of reinvesting retained earnings for the companies...and that produces demand for the shares.....it also produces higher earnings per share because the earnings are spread over fewer shares outstanding when Treasury stock is purchased out of  retained earnings.

Honey EC: Here is a Wall Street Journal article   "Upside: How to Profit From Stock Buybacks."

DOW INCREASING DIVIDENDS THIS YEAR.....Bob said: "Dow Jones Industrial Average stocks are on track to increase dividends in 2012 by an estimated 12%, so there is no doubt about it, companies are looking at their stocks and buying them back more than.....in 2011....And earnings are very good.....That's what the stock market is all about.....Investors responds when earnings and dividends are doing better and that's what we've been looking at here -- for sure." 

CALLER ROBERT ASKS ABOUT VANGUARD WELLESLEY INCOME FUND (VWINX):  Bob Brinker gave no location for this caller named "Robert." "Robert" said: "I'm just interested in keeping what I got and I wondered how you felt about dividend growth and Wellesley Income -- just split them."

Honey EC: Was this caller holding his nose while he talked or did he have a stuffy head from a bad cold or was he trying to disguise his voice? Why didn't Bob give a location that he was calling from? Was it a planted call? If you want to listen to it, it's in the first hour  -- third caller.


Bob replied to Robert: "Well Robert, with reference to that question, I have had a fondness, if you will, for the Vanguard Wellesley Income Fund. In fact, I thought so much of that fund that I have included it in my model portfolio III, which is a balanced portfolio for those approaching or in retirement.  And I've also included some shares of that fund in my income portfolio, which is the page 7 investment letter portfolio for income investors. Both of those portfolios, I have included weightings in the Vanguard Wellesley Income Fund..."

VANGUARD GINNIE MAE FUND (VFIIX):  Michael in California asked if one should use the  Ginnie Mae Fund for all fixed income investing.

Bob replied: "I don't do that, Michael. We've had Ginnie Mae Funds,  and have had for many years,  in our recommended portfolios........We have a weighting in the income portfolio on page seven. We have a weighting in the balanced model portfolio III on page eight. That is for those approaching  or in retirement.....But we have a weighting there and it's nowhere near the entire weighting in our income portfolio. So we have included it, but we have not included it to the exclusion of everything else."

Honey EC: What Bob didn't say is that he has sold off large percentages of the Ginnie Mae Fund. Now the income portfolio, which used to be 40% Ginnie Mae Fund,  is only 15% weighting. Please see my post right below this one for more details on these changes. 

I-BONDS: There were three callers today who had purchased 2001 I-Bonds. They all said that they had done very well with them. Bob congratulated them on a job well-done.

WILL FANNIE MAE AND FREDDIE MAC CLOSE? Caller John from Illinois asked Bob if he thought Fannie and Freddie might close down. Bob stated if that happened, it would be the end of the housing market because the mortgage market would be frozen.......they underpin the viability of the mortgage market.....they continue to operate and are solvent because of  government money.

INFLATION THREAT?  Bob said: "Until we see a rate of growth in the economy that is consistent with inflation....In order to get that kind of inflation threat, you would have to have above trend real growth.....That would be a sustained trend -- we're not talking about one quarter here -- where you would see real gross domestic product growing in excess of 3 1/2%. I'm convinced if you were to see real GDP growth in the mid-to-high single digits, that that would create inflation. Some people disagree with this. I feel secure in this belief. That would give you an inflation threat. In the absence of that, I don't think you have one."

GREECE: In the second hour monologue, Bob talked at length about Greece and its bonds, sovereign debt, credit default swaps and hedge funds.

Honey EC: If you are interested in this subject, Bob gave out a lot of good information. I recommend that you download hour two of the program and listen to the opening monologue. 

HOUSING MARKET: Bob repeated what he said last week, that the housing market seems to be bottoming.

COMEDY SKIT OF THE DAY

 Caller Carol from Santa Barbara (who said she's been a follower since 1999) said: "Thank you for the recommendation on  I-Bonds. I bought a lot of them and I'm a happy camper. As well as other great recommendations you've made, so thank you first. Also, I love your Marketimer on Demand and the newsletter, everything you do is fabulous as far as I'm concerned."

Bob replied: "Thank you Carol. You are definitely wonderful."

 Honey EC:  During entertaining and amusing moments like that,  I join the  Bob Brinker Fan Club. LOL! 

Bob guest-author was Suzanne McGee:  Chasing Goldman Sachs: How the Masters of the Universe Melted Wall Street Down...And Why They'll Take Us to the Brink Again

You can download and listen to  (or save) the program from KSFO 560. It will be archived there for the next seven days.

Dixiegeezer sent this picture that he took at a Florida beach tonight. Click to enlarge. It's stunning:

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January 21, 2012, Bob Brinker Increases Risk in Marketimer Portfolios

January 21, 2012.....Bob Brinker fans have known for years that Brinker recommends Vanguard Ginnie Mae Fund (VFIIX), but he has lowered holdings in that fund and increased the risk in his income and balanced portfolios.

 1. Brinker has told Moneytalk listeners that he  includes the Vanguard High-Yield Bond Fund (VWEHX) in his income portfolio and talked about how well they have done. 

 Last Sunday on Moneytalk, Bob Brinker told a caller that he added Double Line Total Return Fund to his income portfolio because he thinks that Jeffrey Gundlach is the best bond manager in the world today: ".....the fund has had an outstanding record. The reason for that, it is my opinion that the fund manager on that fund is the best there is out there in the world income investing....That's why I added that fund to my income portfolio." 

 2. Double Line is invested in 26%  BELOW-B  rated bonds.

 Another risk increase happened when Brinker  lowered the percentage of bond holdings in his "balanced" portfolio III by adding the Vanguard Wellesley Income Fund a year ago. 

 3. The Wellesley Fund is invested in 35% equities. That brings  Brinker's "balanced" portfolio to more than 50% weighted in equities.

 Now here in January 2012, Brinker increased risk in all three model portfolio by adding the Akre Focus Retail Fund (AKREX).

 4. Akrex Fund is more risky than the Vanguard Total Return Fund that it replaced because it lacks diversity.   It also breaks Brinker's 4% rule in most of its top-ten holdings -- the top-ten holdings represent 63% of total holdings, and  the top three are almost 10% of the fund. 

Brinker is  still very bullish and expects equities to do better than bonds this year: "My expectation is that right now, the equity portion, the equity portfolios are in a better position in terms of their total return potential than the fixed income..."

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January 15, 2012, Bob Brinker's Moneytalk: Summary, Excerpts, Discussion and Commentary

January 15, 2012................................................................(comments welcome)

Bob Brinker hosted Moneytalk today. For those in the San Francisco Bay Area, KGO no longer carries Moneytalk. You can download the broadcast for free at KSFO 560, it is archived for one week.

STOCK MARKET

MILLIONS OF INVESTORS GOT CREAMED IN 2000 and 2008:  Bob said: "I do believe there are millions of investors across America who are finished with the stock market.....because they got creamed in the 2001 collapse and then it happened all over again. As a consequence, I don't think you're going to be able to change the mindset of a lot of people who went through that period. It was a very difficult, psychological double-header, if you will -- to go through it twice in a matter of several years -- very, very tough. Now for those who would like information on my investment letter. The Marketimer investment letter. Bob Brinker's Marketimer investment letter, you can........" 

Honey EC: Did Bob reveal a hint of the reaction he got from subscribers when his Marketimer investment letter timing model© only issued a partial sell signal in 2000 and completely missed the 2008 mega bear market? 

BANK OF AMERICA STOCK:  Greg from Las Vegas said he bought 20,000 shares of Bank of America last week. He wanted to know Bob's thoughts.  Bob said: "One of the risks in Bank of America stocks that will have to be reckoned with is the risk of the  bank coming out selling common shares to raise equity. If they can raise equity without selling common shares, then you don't have the dilution that otherwise would occur.....We don't know what the end game will show in terms of capital raised on the part of Bank of America.....They can do it by the sales of assets or selling debt or by selling common equity. We don't know.....I would rate it a speculation at this juncture."

BRINKER'S MARKETIMER PORTFOLIOS: Caller Bill from Wisconsin, said he was a long-time subscriber in the Land of Critical Mass and following model portfolio III. He asked Bob if he should put some of the money he had in the income portfolio into the (50%) income portion of the balanced portfolio III.

Bob said: "What you could do is you could have two portfolios. You could have a balanced model III. Then separately from that, you could have an income portfolio that would include those other investments. We have done it this way because our primary risk in model III is in the stock market......As a consequence, we don't have any junk bonds in model III. Now if you go over to the income portfolio, you will see that there is a significant recommended weighting in the high-yield area. That's because we have 90% of the weighting in fixed income investments......" 

Honey EC: Yes, Bob has 25% of his income portfolio in Vanguard High-Yield Fund (VWEHX). The 10% in equities that he referred to in the income portfolio is the portion of Vanguard Wellesley Income Fund (VWINX) that is in stock. That fund is 37% equities and the rest in bonds.  I thought it was strange when he added that fund to his fixed-income portfolio and said so. He subsequently changed the name to simply "income portfolio."

DOUBLELINE TOTAL RETURN FUND (DLTNX) and BOB'S INCOME PORTFOLIO: Caller Paul from Minnesota said: "We really like the Doubleline Total Return Fund that you recommend in your income portfolio." He wanted to know if he could substitute it for the Vanguard High Yield Fund.

Bob said: "That's something that I'm not going to do. You're right, the fund has had an outstanding record. The reason for that, it is my opinion that the fund manager on that fund is the best there is out there in the world income investing. I think that the founder of that firm is the best income manager in the country today....That's why I added that fund to my income portfolio. It's done exceeding well....But I am not going to increase my weighting in that fund to 45% because I like the diversification that we have in that portfolio.  We have five different funds in that portfolio ranging in weightings of 15% to 25%......"

Honey EC: Yes indeed, Bob's right -- five funds:   Vanguard Ginnie Mae Fund = 15%; Vanguard Short-term Investment Grade = 15%; Vanguard High-Yield Corporate = 25%; Vanguard Wellesley Income Fund = 25%; Double Line Total Return Bond = 20%.

BOB COMPARES EQUITIES TO FIXED INCOME GOING FORWARD..... Bob continues with his reply to Bill:  "Now you have to understand, 2011, I'd categorize as a transition year for the market. The market pretty much went nowhere. It closed at 1257.6 and the prior New Years Eve it closed at 1257.6.....We had this tremendous recovery in 2009-2010 combined from what had happened in 2008...... So we had what I would call a consolidation-transition year in 2011.....The income portfolio had a great year. It had a total return of 7%. It beat the pants off the stock market in 2011 because of the flatness of the market.....My expectation is that right now, the equity portion, the equity portfolios are in a better position in terms of their total return potential than the fixed income, if I'm right about that. This is Moneytalk." 


JANUARY INDICATOR OLD WIVES' TALE...Bob said: "The statistical evidence proves overwhelmingly that there is very little significance to this indicator.....Most of the talk about the January  indicator revolves around the first five stock market days of the year....And certainly the market did well during the first five days of 2012. We saw the S&P 500 Index up 1.8%.....The Dow was up 1.4%."

Honey EC: Bob continued  on with some statistics and explanations that were almost verbatim of a Marketwatch article posted by Mark Hulbert on January 11, 2012. The Dow goes up 65% of the time regardless of what it does the first five days. Here is what Mark Hulbert wrote:

Jan. 11, 2012, 12:01 a.m. EST
        The ‘first five days of January’ indicator
        Commentary: Can five days predict the year? __By Mark Hulbert 
CHAPEL HILL, N.C. (MarketWatch) — Here’s another old wives’ tale to  ignore — or maybe I should say, another old brokers’ tale ...This is the one that says we can divine the stock market’s direction for the full year by how it does during the first five trading days of  January. ....."

You can read Mark's article and view his graph at this LINK.

 ZERO COUPON BONDS....Bob said: "If you're talking about a zero coupon, you have to be absolutely certain that it's going to pay off at maturity..... Now you can be certain of that in terms of US Treasury issues. But if you are talking about anything other than that, you have to do your due diligence to be sure that you get your money back since that is the only money you will ever get back -- if held to maturity.....Also keep in mind if during the term of the zero coupons rates rise, then the market value of that security will inversely reflect that rate increase. I think generally speaking,  a zero coupon should be held to maturity except for traders....The other problem you have today with zeroes, the rates are really low." 

I-BONDS NOT AVAILABLE IN BANKS/SHRINKING GOVERNMENT: Caller Jim from Chicago was upset  because he can no longer go into banks and make purchases for his grandchildren. They now have to be purchased on the internet.  

Bob said: "You are going to have to get used to it. We live in a country where we have what I'd call the incredible shrinking government....You see it in the employment numbers. Thousands and thousands of government jobs are being eliminated....What that means is you have fewer services being provided by the government.....Get used to this. You are going to see it at the federal level, the state level and also the county and municipal level....The money is not there. At the federal level, there certainly is no excess money available to support the system as we knew it. At the state, county, local level, same deal. I mean a lot of these states are running enormous deficits.....It's necessitated so that the United States does not become Greece."

NATIONAL DEBT AND BIG SPENDING: Bob said: "We have run the national debt up to15.2 trillion dollars....And even in the past year, it's up almost 9%. It was about $14 trillion a year ago, and here's what's really amazing. I was just looking at some numbers from 2005. In 2005, the national debt was around $8 trillion. So that means that a year from now, we are going to have seen a doubling of the national debt from $8 trillion, to the soon to be beheld $16 trillion within the next year. You can take that to the bank. That's coming.....We are going to have doubled the national debt from $8 to $16 trillion in a matter of only about seven and a half years. That is a phenomenal thing to say....We still  don't have a handle on our spending habits. Spending over a trillion dollars more every year than we take in. And with the dysfunctional government we have in Washington, changes are going to have to be made." 

UNIVERSAL AND WHOLE LIFE INSURANCE:  A caller asked Bob about using these for investment purposes. Bob said that these should never be used for investments vehicles because it makes the death benefits too expensive. He likes and recommends term life insurance. (Learn about Whole Life insurance and Term insurance at this LINK.)

MORTGAGE INTEREST RATES: Bob said that thirty year fixed mortgage rates are at record lows -- down about 3.9%. The fifteen year are about 3.2% on average across the country.

HOUSING MARKET IN PROCESS OF FINDING A BOTTOM: Bob said that it certainly looks like the housing market has been in the process of finding a bottom. Low mortgage rates and lower prices make housing more affordable, which is a good for the supply-demand dynamic. There are no government programs now, so it's a free market environment.

LADDERED CDS FOR TOTAL SAFETY: Bob had two callers who wanted to know how to keep their principle money totally safe. Bob recommended  FDIC-insured three, six,  nine or twelve- year laddered CDS.

ECONOMY AND NO RECESSION:   The Federal Reserve Beige Book gives a snapshot of what is going on in the economy district by district.  The latest reports show many regional indicators looking up.   Bob said: "These are decent reports. I see no reason at this point, to share in the pessimism. There's a lot of pessimism out there -- people forecasting recession. I disagree. I think they are wrong, and I do not see the likelihood of a recession coming on in the USA based on what I'm looking at."  Here is a LINK to the January 11th Beige Book Report.

POLITICS, RON PAUL and THE FED: Bob said: "Let me tell you something, if we hadn't had the Federal Reserve stepping forward in 2008, and I hope Ron Paul is listening -- candidate Ron Paul should be listening to this --......taking a pro-active stance in  2008, the whole system would have been flushed away. So these people that very cavalierly come out and talk about their populist theories, about keep the Federal Reserve out or get rid of the Federal Reserve. Let's get real! Let's get serious! If they hadn't stepped forward, it would have been cap-city." 

Later in the program, Bob, again talked to a caller about Ron Paul. Bob says that Ron Paul wants to go back on the gold standard, but it can't be done because there isn't enough gold in the world to cover our currency -- and we certainly don't have enough.  Bob also said that he "hates"  Paul's stance on legalizing drugs and believes it would be a huge mistake. Bob also said that Ron Paul was coming in second in the Republican primaries.

Honey EC: Maybe someone can do some research on where Ron Paul is placing in the primaries. I think Bob may be wrong about that. 

BOB WELCOMES HIMSELF  BACK to KABC1460 in LOS ANGELES.  Bob announced that Moneytalk will now be carried on KABC.  The station dropped Moneytalk some time back. Even so, Bob made three late night guest-appearances on Doug McIntyre's Redeye Radio.

LAS VEGAS INTERNATIONAL CONSUMER ELECTRONIC SHOW:  This year it was January 10 - 13th.  Bob said he was broadcasting from Las Vegas.  There was 140,000 people attending the show and he called it "gadget city."   There were 2,700 exhibitors.  Click this LINK to read about it.

BOB TWO TOP RECOMMENDED BOOKS: 1. John Bogle's "Common Sense on Mutual Funds" and Charlie Ellis' "Winning the Losers Game."

BOB'S COMEDY SKIT OF THE DAY

(SCENE ONE)  Speaking of Ron Paul, Bob said: "He is capable in some states, in the primaries, of getting 20 to 25% of the vote....If you go across the states, other than the front runner, the former  Governor of Massachusetts, Mr. Romneycare, other than that particular candidate, there is nobody really that's had support of Ron Paul.....There's nobody, including Mr. Romneycare, that has the zealous, emotional support." 

(SCENE TWO) After caller praised Bob for allowing opposing viewpoints, Bob said: "The idea on this program is the free and open exchange of ideas. And I'll tell you what makes it different from most of the other programs you hear. Almost all of the programs have a political agenda. And the reason that I'm registered as an Independent voter is so that I can judge on the issue and not the ideology....."

Honey EC: Wow, Bob is always good for a few laughs on every program. So Bob, what kind of "issue" were you judging when you called Mitt Romney, "Mr. Romneycare" TWO TIMES, just seconds before you told us you didn't use ideology?

And Bob, ever hear about the "issue" of  "Mr. Obamacare?"  I've never heard those words come out of your mouth. Why is that?What are you afraid of?  Why demean what happened in one state while giving a pass on the takeover of the entire American health care system?  You must be joking, Bob, when you say that you don't judge on ideology. Does the "H" word apply to you? I think it does....

Bob's guest-speaker today was Denny Strigl:  Managers, Can You Hear Me Now?: Hard-Hitting Lessons on How to Get Real Results

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January 12, 2012, Bob Brinker's New Marketimer Fund: Akre Focus Retail Fund

January 12, 2012....As of  the market close yesterday, Bob Brinker added the Akre Focus Retail Fund (AKREX) to his Marketimer Model Portfolios I, II and III. 

Bob Brinker broke some of his own long-standing  rules with these changes and has added risk to all of his model portfolios.  He sold all of Barons Partners  (BPTRX) in model portfolio I, and percentages of Vanguard Total Stock Market Fund in  model portfolio II and III, in order to purchase the Akre Focus Fund.  That lowers each Marketimer portfolio diversification by a huge factor. There are only 25 stocks in the Akre Fund and 3344 stocks in the VanguardTotal Stock Market Fund.

Akre Focus is a mid-cap growth fund and is only 2 1/2 years old. It has less than $450 million in assets and a 25% turnover.

Even though Bob has always taught listeners to keep expenses down to a minimum, and recommended Vanguard Funds for that reason, AKREX has  a very high expense ratio (1.45%) and a 12b1 fee.

Also, Bob has always recommended limiting exposure in any one stock to only 4%  of one's total investment portfolio. However, Akre Focus Fund's top ten holdings are all much more than that -- and the top two holdings are almost 12% each:

Mastercard Incorporated Common [11.77%]
Dollar Tree, Inc. [11.66%]

It looks like Brinker is hoping to "beat the market" with these moves. But why did he wait until now to jump on the Akre Focus Fund band-wagon? There was lots of publicity about it BEFORE it gained 25% in the past couple of years. AKREX was up 11.9% in 2011:




In recent years, Bob Brinker has made several moves that are not typical of his advice over the years of Money Talk. Things like adding  GLD to his list of recommended stocks and recommending a high-yield fund or adding stock to his fixed-income portfolio. One might even question whether the Bob Brinker who is now making decisions for Market Timer is the same man who has been on the air for over 26 years.

Bob's son began publishing a fixed-income newsletter about six years ago. Since then, most people get him confused with the talk show host because he makes no effort to distinguish himself on the internet now that he is in the same business as his father. He is known as "Bob Brinker" too.

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January 8, 2012, Bob Brinker's Moneytalk: Summary, Commentary and Discussion

January 8, 2012...................................................................(comments welcome)

Bob Brinker was on vacation again this week. Lynn Jimenez, business reporter for KGO810 radio in San Francisco,  filled in.

KGO canceled Moneytalk in December 2011 and replaced Brinker with other talk shows. However, Brinker's Moneytalk was picked up by KSFO560 -- also in San Francisco.  I was surprised to hear that  Lynn Jimenez was still Brinker's fill-in.  Even though they are "sister" stations, the two stations are political  opposites and in competition with each other. 

Of course, KGO is ten times more powerful than KSFO, so Brinker is not reaching nearly as many people out of San Francisco as he did before. 

I listened to the first two hours of Lynn's show. Bob Brinker was only mentioned one time. A caller said he was a long-time Moneytalk listener and Lynn replied: "Thank you for listening to Bob and me."

I will write a list of the main subjects from the first two hours so if you want, you can download the broadcast from the KSFO archives and listen. The third hour guest-speaker was Peter Massari who talked about saving for college.

* Economy and jobs report looking optimistic.
* Definition of laddered CDs. (Older woman caller wanted a whole program on CDs.)
* Mortgages and how to get government help if you can't make your payments. (Caller stopped making his mortgage payments and bought another home -- now looking for a government bailout. Lynn said she didn't want to hear about the new home and gave him this link.)
* Traditional IRA vs Roth IRA. (Caller wanted to know if he could roll money from a traditional IRA to Roth without paying taxes. The answer is no.)
* There were two personal comments made to Lynn today because she is a woman that would never be made to Bob: "Your voice sounds pretty" and "You have a smiling voice."

BOB BRINKER  NEWS

I was investigating the Akre Focus Fund (AKREX) and found this information posted on the Yahoo Focus Retail  message board: "Bob Brinker's Dec letter reconmended AKREX. For what it is worth"  (click here). It was posted on December 8, 2011. I confirmed this in  the December (and January) Marketimer.

AKREX is a new fund. Started by  Charles T. Akre, Jr. August 31, 2009. The expense ratio is 1.45, which is extremely high compared to the low-cost Vanguard Funds that Brinker usually recommends. Plus, it carries a 0.25 12b1 fee.  This fund  been extremely volatile in the two years that it's existed: In 2010 it was up 19.29%, and it was down 11.09% n 2011.

Item: Bob has been on the air only three days out of the past seven weeks -- that's 9 hours.
November 27, 2011: Lynn Jimenez
December 4, 2011: Bob Brinker

December 11, 2011:  Neale Godfrey

December 18, 2011: Bob Brinker

December 25, 2011: Christmas, no show

January 1, 2012: Bob Brinker

January 8, 2012: Lynn Jimenez

Dixiegeezer sent this wonderful Great Horned Owl photo this afternoon. Click on it to enlarge: 

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January 4, 2012....Bob Brinker's Stock Market Performance Record for 2011

January 4, 2012....Bob Brinker has posted his 2011 market performance numbers on his website.  Something new this year, he added the three year numbers. One might wonder if he did that because the three year numbers no longer include the 2008 - early 2009 megabear.  (Brinker's  model portfolios I and II were down 57% when the bear bottomed in March 2009.)

Just like 2010, year-2011 was another (almost) 20%  correction year.  Unbelievably, in 2011, the S&P 500 Index ended right where it started at 1257.60, but it was a wild ride. Brinker's  advice (like it's been since 2003) was to stay fully invested and  keep dollar-cost-averaging into the market. In September, he sent out a special bulletin saying that the market was "attractive for purchase" again when the S&P was at  1129.56.

Brinker has three model portfolios that are used for tracking his official Marketimer market-performance record. Model portfolios  I and II are 100% stock,  and model portfolio III is balanced 50-50 stocks and bond. Model portfolios I and II both lost money in 2011.  Let's leave out the three-year time period and look at 5 and 1 year periods. That will even out the results and give a  better picture of the effects of the 2008 bear market and the two 20% corrections. This is from Bob Brinker's Land of Critical Mass

5 years ended 12-31-2011 for all Model Portfolios:
Portfolio I: 4%
Portfolio II: 6%
Portfolio III: 14% (balanced portfolio of equity and fixed-income securities)
Active/Passive: (2%)
MSCI Broad Market Index: 1% (VTSMX)

1 year ended 12-31-2011 for all Model Portfolios:
Portfolio I: (3%)
Portfolio II: (3%)
Portfolio III: 1% (balanced portfolio of equity and fixed-income securities)
Active/Passive: (2%)
MSCI Broad Market Index: 1% (VTSMX)

So even though Brinker no longer predicts new all-time-highs or anticipates the  S&P will reach 1600s -- like he did in 2007, 2008 and 2009 -- since February 2011, he has predicted low-to-mid 1400's.

December 5, 2011 Marketimer, 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."

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January 1, 2012, Bob Brinker's Moneytalk: Summary, Excerpts, Commentary and Discussion

January 1, 2012.......................................................................(comments welcome)

Bob Brinker hosted Moneytalk today -- the first day of the year.  Happy New Year to everyone!


BOB AND WARREN BUFFET IN THE LAND OF CRITICAL MASS.....Bob explained that critical mass is where you have enough money saved and invested so that you can choose whether or not  to work.  Warren Buffet and Larry Ellison  (and Steve Jobs, until his death)  work because they love to work. Bob said:  "If you enjoy your work, as I enjoy my work, and I hope you do,  because I really enjoy my work, then you should do what you want to do -- make you happy." 

Honey EC: I might be more inclined to believe that Bob Brinker is still working on Sundays and some holidays at 70 years of age if he didn't spend so much time on the program "infomercialing" for Marketimer and advertising his son's newsletter.

STOCK MARKET....Bob said:  "The reality is the S&P 500 was, not only flat, it was basically unchanged. Taken out to the first decimal point....the S&P 500 started the year at 1257.6. Believe it or not, it closed for the year at exactly that figure, 1257.6.  Now as far as I know, that is unprecedented.....Some people will say, look what a coinkidink..... To have a index 500 market weighted stocks go through the course of a whole calendar year and finish to the decimal point.....

.....As I mentioned our income portfolio had an outstanding year because it was the year of income.....We had about a 7% return on our income portfolio which  is the one on page 7.....But as I look out at 2012, I would expect, at least as long as the market outlook is positive....and I want to put that in there because we are not talking about what the market outlook will be in the fourth quarter of 2012 because that's too far out, in my opinion. Even in the third quarter is too far out.....I think that the probabilities favor, and this is just my opinion....that as long as the stock market view remains favorable in 2012 --  and anybody who listens to our program is aware that that is my point of view, that it is favorable, I think that the stock market will outperform the bond market in 2012.....Unless there is a sell signal sometime later in 2012, unless there is a change in the market outlook from my perspective, absent any change in that outlook, I would say the stock market has the probability of outperforming the bond market and income portfolios in 2012."

Honey EC: LOL!  So Bob is now dangling a new carrot with his "unless there is a sell signal" hokum-pokum. This is perhaps the funniest thing Bob has said in years, and he's gotten off some good ones. Bob's last "sell signal" was in January and August 2000 when he "sold" 65% of his equity holdings. He went back to 100% invested in March 2003, and since then has only issued "buy signals" -- over and over and over again (for "new money" of course.) 

In addition to remaining 100% invested through the 2008-2009 mega bear market, he remained fully invested for a correction in 2010 that was close to 20%, and  for a 19.6% correction in 2011.  Don't be a sucker! Bob never issues  sell signals anymore.

EC2: So Bob thinks it's unprecedented that the S&P closed where it started in 2011.  I can understand his shock. It's 100 points under what he was forecasting for 2011 and it was as low as 1074.77.

January, 5, 2011 Marketimer, Brinker said: ".....our new S&P 500 target price range in the mid-to-upper 1300s zone for this year."

EC3: Bob said that the third and fourth quarters were too far out for him to have a market outlook. To my knowledge, that's something entirely new  He's never been bashful about predicting even a year ahead.

MARKETIMER INCOME PORTFOLIO and RISING INTEREST RATES: Caller Jim from Chicago said he had a million dollars in Bob's income portfolio and asked what would happen if interest rates doubled and "the portfolio net-asset-value dropped by 50%."  Would his income stay the same?

Bob said: "The best way for you to do that calculation would be to take the durations that are published -- you talk about the income portfolio, and let me say congratulations on the ownership of that portfolio. We just completed 2011, and that portfolio had a total return of 7%. In this zero interest rate world we live in, that's pretty terrific....In terms of trying to figure the price risk of each of the portfolio holdings, and there are five funds in that portfolio. The way to calculate your net-asset-value exposure is to take that duration number for each of the holdings, and that will tell  you....what the risk is per 1% of corresponding interest rate increase.....Now if you look at that portfolio we have the weighted average duration that we publish there on page 7......Let me give you an example. If you had a duration of 4....then if rates went up 1%, then you'd have net-asset-value depreciation of about 4%..." 

Honey EC:  Bob has been touting that "income portfolio on page 7" for the several months: Vanguard Ginnie Mae Fund, 15%; Vanguard Short-term Investment Grade, 15%; Vanguard High-yield Corporate, 25%; Vanguard Wellesley Income Fund, 25%; Double Line Total Return Bond, 20%.    This is the first year that Bob has touted that portfolio on Moneytalk, and this is the first year that he has tracked its performance. It will be very interesting to find out how Bob's "on-the-books"  three model portfolios performed in 2011. 

ECONOMY....Bob said: "Right now the United States is a shining beacon of light in terms of the economy. The economy grew at 1.8% annual rate in the third quarter here. And I'm expecting the fourth quarter Real Gross Domestic Product to grow at 2%+.  I think the number will actually be over 2%. It wouldn't surprise me to see the number in the area of 3%." 

WILL EUROPEAN SITUATION AFFECT U.S.....Bob said: "Will the situation in Europe have a dramatic impact on the U.S. economy? Well, we export about 19% of our export account to the European countries. So that leaves 81% that we export elsewhere. So we're not heavily dependent on European exports. So we have all those factors in our favor. But so far, I think the U.S. economy has surprised a lot of economists out there that were taking a negative view on the economy." 

Honey EC: It's very likely that is still waiting for Economic Cycle Research Institute’s Lakshman Achuthan to apologize.  But Achuthan still believes that the economy is "tipping into recession." December 9th on CNBC, he said that it will take a year before we know if he is wrong.  I summarized his interview here.

JOBS.....Bob said: "I'm looking for a decent jobs report coming up next Friday when we see the private sector number."

GOLD....Bob said: "For those who want to have a hedge in gold and only for that purpose, and that's going to be a very small figure, obviously, we've recommended on this broadcast that listeners look at the GLD shares."

TREASURYS AND INTEREST RATES....Bob said: "Take a look at interest rates today, they've just about disappeared. Three-month Treasury Bill has a yield of 1 basis point (annual)....Six-month Treasury, 6 basis points....One-year Treasury are yielding 10 basis points....WHOA, who let the dogs out?  I mean these rates are hideous..." 

GENERAL OBLIGATION MUNI-BOND FUNDS....Bob said, "I don't like the bond funds because there is too much interest rate risk if you buy a municipal bond fund.....However, if you buy a state municipal bond and hold until maturity, that's a different story....A general obligation bond with a date certain."


HULBERT FINANCIAL DIGEST "HONOR ROLL".... Bob said that Marketimer made the  HFD "Honor Roll."

Honey EC: This does not mean that he is a top performer compared to other newsletters.  Hulbert clearly pointed that out in the December issue of Hulbert Financial Digest. And  that fact is made clear in the HFD Overall Performance Scoreboard. Bob Brinker's Marketimer is not among the top-seven in the 5 or 10 year time frames. For complete coverage of this subject, please see my article at this LINK.

MINIMUM WAGE IN SAN FRANCISCO: Bob said that the minimum wage has been raised to $10.24 an hour, the highest in the nation. The Federal minimum wage is $7.25. California State minimum wage is $8.00.

Honey EC: I haven't checked my facts, but I think that unemployment is also extremely high in San Francisco, especially with the teens and uneducated.

SAFETY OF BROKERAGE ACCOUNTS...Bob said they are safe if they covered by SIPC insurance.

HUMOR OF THE DAY,  "CIRCUMCISION STOCKS":  Caller Ben said: "I've got different portfolios for different children of different ages,  and they are fairly well-balanced. They are heavy in  tech stocks, financials and heavy in circumcision stocks....."   Bob replied: "Ben, let me ask you a question. You mention you are heavy in circumcision stock. What kind of stocks are circumcision stocks? Are they health care stocks? What are they? Hello, Ben! Hello! Hello?"  (Ben was gone. Bob laughed and said maybe they could get Ben back on the line.)

 Brinker's guest-speaker was Robert Stowe England: "Black Box England: How Wall Street's Risky Shadow Banking Crashed Global Finance.

REGARDING MONEYTALK RADIO STATIONS: For those in the San Francisco bay area: Bob Brinker's Moneytalk was dropped by KGO radio. It is  now carried on KSFO 560 radio station out of San Francisco. You can listen live here at this LINK

KSFO has the same hourly archives that you can download and listen to on demand.  Go to this LINK and click on "listen" then "7-day archives."  From there, it will give you instructions for either listening or downloading each hour -- 1-4pm time slots.

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