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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