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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