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

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


STOCK MARKET: The only time that Brinker mentioned the stock market today was when he told caller Stewart from New York that he should dollar-cost-average new money.  (My latest review of Brinker's current market views.)

INFLATION.....Brinker said: "I think this whole nonsense about inflation going through the roof is a  complete and total fraud.....I predicted that inflation will stay low."

ECONOMY.....Brinker's comments: The Federal Reserve has done just about everything that it can to help the economy and should just continue doing what it is doing. Economic growth is below trend.  Gross Domestic Product grew 1.9% in the first quarter and  he expects second quarter growth in the area of 1.5%.

HOUSING MARKET.... Brinker's comments: The housing market is looking up and this is a timely development for the economy.

UNEMPLOYMENT REPORT: Brinker did not mention the unemployment report from three days ago. It was not a good one:

DShort wrote: The Unemployment Insurance Weekly Claims Report was released this morning for last week. The 386,000 new claims was a substantial 34,000 rise from the previous week's relatively small upward revision of 2,000. The less volatile and closely watched four-week moving average dropped to 375,500. The big decline posted for the previous week apparently was, as many suspected, a July 4th holiday anomaly. Today's number more than erases last week's decline.

DON'T REFINANCE YOUR HOME AND INVEST IN STOCK MARKET....Caller Douglas from Daly City said he was thinking of refinancing his home and investing in Marketimer model portfolio III. Brinker replied: "I've heard of people that tell people, and I think this is horrific advice....I don't believe in that, and I think that anybody who had done that over the last ten years might be very sorry that they did it. Especially with what's happened to housing values over that period. I think the idea of borrowing on a house to invest in the stock market if probably the worst idea I've ever heard." 

TWO VANGUARD BALANCED FUNDS THAT BRINKER RECOMMENDS:  Caller Carol from Illinois asked Brinker what investments he would recommend for her grandchildren's college funds -- needed in about six years. Brinker recommended Vanguard Wellesley Income Fund and Vanguard Balanced Fund.


BOB BRINKER FISCAL CONSERVATIVE.....Brinker said: "I am often criticized over the fact that now in its twenty-seventh year, this program stands for conservative fiscal policies.....You know, old fashioned ideas like balancing the budget and saying no those who try to game the system and give taxpayers the shaft."

FEDERAL GOVERNMENT HISTORICALLY INCOMPETENT.....Brinker said: "Unfortunately, I think it is fair to say that the level of dysfunction and incompetence in the federal government today is greater than at any time in history.....As things now stand, taxpayers across the country face enormous tax increases on the first of January. These tax increases under current law are scheduled to apply across the board. And congress, collecting its paycheck, collecting its glorious benefits package, accruing its glorious retirement benefits, congress refuses to do anything about this because its an election year.....If you ran your business the way congress operates, you would be in bankruptcy in no time at all."

CALIFORNIA BANKRUPTCIES.....Brinker continued: "As for the local governments, you've see the incompetence and the dysfunction at the local level which has already led to bankruptcy filings in places like Vallejo, Stockton, Mammoth Lakes, California. And San Bernardino is in all kinds of fiscal trouble."

PROOF: PUBLIC SECTOR UNIONS AND NO TAXPAYER REPRESENTATION CAUSE BANKRUPTCIES... Brinker said: "No matter how you look at it, there is no free lunch. And when you're elected officials allow local public sector unions to have their way and walk over the taxpayers, about the only way out is to file bankruptcy and change the playing field. There is no other way out because the money is not there......The proof that the people on, supposedly, your side of the bargaining table at a public sector union negotiation, the proof that you have no representation is the fact that these towns and cities are declaring bankruptcy because they can't afford to pay the benefits that were given away by their alleged representative." 

WATCH OUT FOR THOSE EXITING IF YOU PLAN TO MOVE IN.... Brinker said: "And for those of you who are thinking of moving into any of these communities across the country that are fiscally mismanaged, think again. Check it out before you make that decision so you don't get hit on the way in by that swinging door coming your way from those getting out of town before the local taxes soar." 

NO LAW SAYS YOU HAVE TO PAY, YOU CAN MOVE.....Brinker said: "Fortunately there's no law that says that you have to pay benefits to workers in the public sector that are way better than any benefits you may or may not have yourself. And remember, there is no law that says you have to provide bloated benefits to those who win them at the bargaining table because you, the essentially unrepresented taxpayer, have no recourse......Remember, you can choose to live wherever you want. You might have to make some changes in your life.....That means you are free to re-locate if you have to, if that's your best option."


Honey EC: I wonder if Brinker has an idea how it feels to be forced to move out of your own state or city because of the tax-suckers and big-spenders who have driven California to the edge of bankruptcy and still keep wanting more and more? Or to know that cuts are being made to vital services and felons are being released early from prisons.


GIVE CREDIT TO UNIONS IF YOU WANT TO....Brinker said: "Now if you want to you can give great credit to public sector unions that have won great benefit packages in their local communities....If that's where your sentiment rests."


WHAT HAPPENS IF TAXPAYERS MOVE RATHER THAN PAY UNION BENEFIT PACKAGES? .....Brinker said: "Then the question arises.....if you and others re-locate and leave the city, who pays for benefit packages? .....The answer is, that will be resolved in local bankruptcy court. It will not be your problem. After all, you did not create the problem, so why should you pay for it. The only answer here is fiscal responsibility and we're a long way from that." 


MEDICARE BLACK HOLE IN BUDGET.....Brinker's comments:  The weakness in the Simpson-Bowles budget plan was that it failed to address the "black hole in the budget known as Medicare."  The average couple pays in about $130,000 and receives about $350,000 in lifetime benefits -- will pay out trillions more than beneficiaries paid in. 


EXPLODING NATIONAL DEBT AND HUGE INTEREST RATE GAP....Brinker comments: Average interest we are paying on the national debt (almost $16 trillion) is about 2%.  Looking back historically, the average interest rate on the national debt is 5.8%, so there is a gap between normalization of interest rates and today's interest rates of about 4%  ($640 billion annually).  That is the increase in interest costs that the taxpayers are exposed to as the national debt explodes. 

SEQUESTRATION:  Brinker commented that even this is a failure because it is only $108 billion and cuts all programs including the good one.


"DRONES AND DREGS" IN CONGRESS GOING ON RECESS FOR SUMMER....Brinker said: "How can they possibly go away for the summer with all of this on the table. This defies belief.....Obviously, the statesmen have left the building and we are now ruled by the drones and the dregs at the federal level....And if you were one of them, you would be embarrassed to collect your paycheck and your benefit and retirement package while Rome burns. This is truly, utterly pathetic."


FDIC PAY ON NEGATIVE INTEREST RATES?  Caller Jack asked if it was legal for banks to pay negative interest rates,  and what about the FDIC. Brinker responded  that we are seeing negative interest rates in the sovereign community, such as Denmark, so it can happen. Brinker said: "If you agreed to put your money in a one-year bank CD at minus 1%, then you would agree that a year from now, you are going to get back 99 cents on the dollar. If the bank should fail at the end of that period, why couldn't the FDIC simply make good on the insured amount up to 99 cents on the dollar. I don't see why that would be an issue. Brinker said he'd certainly like to get a legal opinion on that, but he wouldn't rule it out." 

GRIDLOCK, GOLD, FISCAL CLIFF?  Caller PJ from Indiana said he was thinking of dumping all stocks and buying gold if Obama is re-elected.  Brinker's comments:  No matter who wins the White House, we are going to have gridlock even though they will have to come up with a band-aid for the year-end Fiscal Cliff right after the election. The only way to get power in either Party is to have the White House, the House and 60 votes in the Senate.


Brinker said: "I'm rating the chances of either Party getting 60 Senate seats would be close to zero.....I don't see any way in the world that things are going to change.....In terms of actual change, if the Republicans win the White House the Democrats are going to go on defense. Right now, the Democrats are in the White House and the Republicans are on defense....They both are gridlocked, both ways."

Honey EC: For years, Brinker touted "gridlock" as the best possible election outcome. Now he  sounds like it's a disaster.


DON'T RAISE TAXES NOW....Brinker said: "For right now, for January, they should forget about increasing taxes. This is no time, with an economy that's growing slowly, below trend, which is exactly my forecast, they should not be increasing taxes at a time like this.....They should come up with a delay on the tax increase proposal until the economy is in better shape. They do need a long-term solution at the same time. That solution would be a ten-year program to get the federal deficit within 3% of Gross Domestic Product on an annual basis." 


SOME HEALTHCARE REFORM QUESTIONS...Brinker said:  "Why is it that if you have a job and receive possibly 5 figure health benefits you don't pay any tax on those benefits?  But the person next door does not have those benefits at work so has to go out and buy a healthcare policy,  and has to pay for it in after tax dollar? Second, why has the so-called health reform taken the  flexible spending accounts.....and put a very low cap of $2500?....There used to be no limit at all.....This is money you're allowed to set aside for medical expenses....The system is totally screwed up....This is AFTER health reform....Long term it would sink the battleship.....Now obviously, this is going to be addressed. The question is when  and how much additional debt will pile up in the interim." 


SLAUGHTER IN AURORA, COLORADO....Caller William from Littleton, Colorado mentioned the sadness in his area which is near Aurora, a suburb of Denver, not far from Littleton.  Brinker called it a "slaughter and  massacre" that is "depressing and beyond words."  He said it was especially tragic because there were so many young people and children killed. Brinker said: "For everybody at Moneytalk, all of our prayers and sympathies are with the victims, those injured, their families and the entire greater Denver, Colorado community because this is one of the most devastating tragedies in the history of the country as far as I'm concerned. A very, very tragic day for America."


Honey EC: I agree with Brinker, this is an act of unfathomably evil,  and one cannot even imagine the pain and suffering the victims and their families have gone through. This has to be especially disturbing to Brinker because the Marketimer office is located in Littleton. His son and family live in the area and has his own office at the same location as Marketimer.  Here is a bio: The Aurora Shooting Victims.

CALIFORNIA COMMITS SUICIDE:  Caller Paul began his call by telling Brinker that he had done well because he "stayed on his true financial path."  He then talked about  how Jerry Brown has proposed some tax increases including a sales tax increase, while voting to build a high-speed train -- 68 billion dollars and rising, plus giving a 5% raise to legislators, 

FUNNIEST? QUOTE OF THE DAY.....Brinker replied to Paul:  "If I was a voter in California and I was asked to vote on a tax increase and then I found out they were giving raises to state workers, I would vote no. That's ridiculous. You've got to be kidding......Where did the idea come from in the first place-- that the new boss, Jerry Brown would be exactly the same as the old boss, Jerry Brown and that this would represent progress for California? Where did that idea come from? This gives color to that great line from the song: 'Meet the new boss, he's the same as the old boss because he is. He is the old boss....He's the same guy. It's stunning to me the things that happen at the election box are stunning."


Jeffchristie's Moneytalk Final Exam Question of the Day:


Bob took a call from Paul in Sacramento.  He thanked Bob for his advice and said he stayed on:
A)  The shining path.
B)  The true path.
C)  The road to riches.
D)  The road to salvation.


Brinker's third-hour guest-speaker was Maneet Ahuja: The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds 


San Francisco, Ca. KSFO 560: 1-4pm  (Good News! KSFO now archives Free Moneytalk on Demand immediately after broadcast and carries it for seven days. You can download all three hours and listen on the go.)

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