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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