August 19, 2012.....Bob Brinker hosted Moneytalk today............(comments welcome)
STOCK MARKET.....Bob Brinker said: "The stock market is doing well. It is trading less than one point off its closing high for the year. S&P 500 at 1418. Dow Jones also just about 4 points off its closing high for the year at 13,275. The S&P 500 is sporting very handsome double-digit gains year-to-date. So congratulations to all of our Moneytalk listeners that have taken advantage of the opportunity in 2012 despite all the naysayers out there -- despite all those out the sitting with cash.....You've made outstanding returns in what is essentially a zero interest rate world.....Nasdaq sitting at 3076, so all of the indexes have been doing well in 2012."
Honey EC: Who knows? Perhaps we will eventually return to the S&P 500 all-time-high from October 2007. Considering the fact that Brinker followers have ridden this market all the way down and all the way back up fully invested for five years, they can truly celebrate when that happens. Will Brinker ever raise cash again? Right now, Brinker's target range is "upper1400s to lower-1500s."
BOND MARKET.....Brinker said: "It's been quite a year for investors. An opportunity to make money in the stock market......And also an opportunity to make money in the bond market year-to-date.....And I think they should be happy campers because when you are in a zero interest rate world, you deserve credit for making an excellent return in your portfolio."
BRINKER'S MODEL PORTFOLIO FUND CHANGES....Caller Tom from Pasadena, a Marketimer subscriber, said: "In your last newsletter you recommended the Gabelli Fund to be sold and changed for the Vanguard Dividend Growth Fund.....Hello?' (Brinker: "I'm listening to you.") Oh, okay. Anyway, I thought it might be a good time to shift my from my portfolio two to three. Do you recommend dollar-cost-averaging into three? It would be the Rydex Fund and the Meridian Fund, I'd sell those, take my gains and....."
BRINKER'S ADVICE FOR BUYING STOCKS AND BONDS....Brinker interrupted Tom and said: "Tom, let me answer your question this way. When you go from model portfolio II, which is a long-term growth portfolio, into model portfolio III, which is a balanced portfolio that includes income securities -- when you make that change, you are making an asset class change. You going from some stock funds into other stock funds, fine. But you're also going some stock funds into....income oriented funds....For the fixed income funds in the balanced model III, I would recommend dollar-cost-averaging at this time...As far as changes that go from stocks to stocks -- if you are switching from one stock fund into another stock fund, in that case, I regard that as a sideways move. So in that situation, I would be willing to do it all in the same day....."
Honey EC: It was apparent that Brinker was not happy about Tom from Pasadena revealing the mutual fund changes that he had made in the August issue of Marketimer. Indeed, Brinker did as Tom said and sold all of the Gabelli Asset Fund (GABAX) holding in both of the portfolios that Tom mentioned -- model portfolio II and III. The replacement fund he bought for both of those model portfolios is Vanguard Dividend Growth Fund (VDIGX). I did a brief review of this new fund on August 3rd HERE.
And that wasn't enough for Tom, LOL, he went on to reveal two more of Brinker's Marketimer model portfolio holdings -- RYDEX (RYOCX) which is a proxy for the Nasdaq 100, and Meridian (MERDX). Tom mentioned selling the 10% positions of both of those funds from model portfolio II and moving that money into the fixed income holdings in model portfolio III. Brinker advised dollar-cost-averaging into the bond/income funds, but he said to consider the stock holdings a sideways move. I thought that made sense since the vast majority of model portfolio III stock holdings is in Vanguard Total Stock Market Fund.
INTEREST RATES: At or near there record lows. Brinker recited the current yields. You can see them at this site: Morningstar
HOUSING MARKET: "...gradually improving."
CYBER-SPACE BANKS.... Brinker said: "I like the idea of a bank that I can go in to. Even if I'm dealing online, I still know that the bank is there physically. The whole cyber-space bank thing, I'll leave that to others...The important thing is you know you have your FDIC coverage-- you're good."
INFLATION: Inflation "well-behaved".....The core number (which the Fed looks at) is below 2%. Brinker does "not anticipate that number rising above 2% any time soon." He thinks the Fed's "primary goal is to prevent deflation."
DROUGHT WILL CAUSE RISE IN FOOD PRICES...Brinker's comments: We are having a significant drought, looking at the history of droughts. We've see the price of items like corn skyrocket. I think that without any question, we face the possibility of rising food prices into next year. "I think we should all be prepared for that." If food prices rise in 2013, that will take discretionary spending money out of the pockets of consumers and put it in the grocery aisle, but we don't know how much.
ECONOMY WILL STAY ON SLOW GROWTH TRACK....Brinker said: "There's no question food prices could have an upward bias in the next year and that takes money out of consumer pockets. And that's going to keep the economy on a slow growth track. As you know, my expectation has been a slow growth track and I expect that to continue to play out. It's been spot on over the past year and I think we will continue to see slow growth economy."
ETHANOL CAUSING CORN PRICE TO SKYROCKET: Brinker comments: In addition to the drought, we have to deal with, we are under a five year old federal mandate that requires more ethanol go into gasoline each year. This government program has diverted close to half of the U.S. corn supply away from animal feed lots and into ethanol refineries. That is one reason we've seen corn prices skyrocket. It's highly controversial program, but the politicians can't touch it -- it's the third rail in swing states like Iowa. Nothing will be done in 2012, no matter how severe the final tally is.
GOVERNMENT POLICY SCREWS AROUND WITH FOOD SUPPLY.....Brinker said: "In the United States, a government policy has been made to screw around with the food supply....Oh, that will be interesting....Well, we've done it, now we see the results of the drought. And now we are facing situation where into next year, I would expect you are going to see inflation in food prices. It seems inevitable at this point."
UNEMPLOYMENT.....Brinker comments: It's a tough labor market -- over 8.3% unemployment. Well over 20 million unemployed individuals in the country. Underemployment rate about 15%.
WASH SALE....Brinker reminded listeners that the wash sale does not apply to profits.
PURDUE UNIVERSITY STUDY: DROUGHT DAMAGE ALREADY DONE....Brinker commented that he was reading a study this week from Purdue University which pointed out that the drought has already done its economic damage -- no turning it around now. Here's the link to the study: Report: Corn Ethanol
HYDRAULICS PARTS FACTORY -- OWNED BY CATERPILLAR.....Brinker's comments: Their union voted for a new contract that accepted almost all of the companies demands. You would never see this in a public sector union -- "they run roughshod over local city councils and usually get their way. That is one of the reason so many municipalities are in fiscal trouble." Many cities in California have already filed for bankruptcy and they admit that the public sector union contracts have driven them to that point.....It is good for shareholders when you see corporate management able to restrain labor cost....It's not easy to get a job and the workforce knows it.
FACEBOOK FIASCO....Brinker said: "Some people are calling Facebook the biggest IPO fiasco of all time.....I'll never forget this offering....Things started happening before the offering that had to raise your concerns. There was a news release from General Motors saying this Facebook advertising isn't doing so good....Then we starting seeing stories that they're going to have to monetize the mobile for Facebook....People still don't know how that's going to happen.....Then the underwriters started to raise the offering.....And then the underwriters botched the entire deal.....decided to greatly increase the size of the offering. What you have there is a recipe for disaster.....Looking at a 50% mark-down in weeks is a disaster......The stock that was locked up for 90 days.... are eligible for sale within a year or less...some of that is already out there.....There are more lock-ups coming.....Between October 15th and November 13th another 241 millions shares will be available for sale....Another 1.2 billion (did Bob mean million?) shares that expires on November 14th and another 149 million shares in mid-December....How do you spell supply....This was all known at the time of the offering.....
COMPARE FACEBOOK IPO TO GOOGLE IPO....Brinker continued: "As I told you at the time of the offering on this broadcast, when you compared the valuation of Facebook at that IPO price of $38 to the valuation of Google, which was then traded at a price lower than it is now.....it jumped off the page -- the valuation exercise between the two companies jumped off the page."
WAIT UNTIL AFTER ELECTION FOR ACTION ON FISCAL CLIFF: Brinker told a caller, who said he was thinking of selling out his portfolio before the end of the year to avoid a possible high capital gains tax next year, not to expect any clarity from congress before the election on November 6th... Brinker also went over the possible capital gains tax increases and the scheduled Medicare tax on capital gains for high income earners.
Honey EC: I've covered all of that tax stuff ad nauseum. If you want to listen to it, it's about halfway into the first hour of the program. Here's a Fidelity article: Could Elections Impact Your Stocks: History Doesn't Always Repeat Itself
BRINKER'S POLITICAL VIEWS: Brinker said: "It's going to be a rough and tumble year on the political front. We're going to see a negative campaign the likes of which maybe we've never seen before. If you take a look at some of the opening salvos and the many lies that have already been told on both sides of the campaign. You take a look and you have to conclude this has the potential to be one of the ugliest presidential campaigns of all time. It really is a shame....All we get is purely partisan pap on both sides of the aisle......I think this year, (voting) none of the above would do real well."
Honey EC: As usual, he must almost break his arm trying spreading the blame" equally on both Parties, and he seldom is challenged. Hey, Bob, speaking of purely partisan pap: Do you ever look in the mirror? It seems really disingenuous of you to me to use a national "money-talk" program for your propaganda. It's understandable why few are willing to brave your bully pulpit and cut-off switch which is almost always used when someone disagrees with you.
Here's a Business Week Article that explains the difference between Obama and Romney's tax plans: Capital Gains Faultline as Obama-Romney Tax Plans Differ
ECONOMIC CALENDAR NEXT WEEK: Brinker reviewed it -- it's available HERE.
Brinker's guest-speaker was Edward Skidelsky: How Much is Enough?: Money and the Good Life
Here is Jeffchristie's Final Exam Question for this week:
Which one of the following did Bob Brinker say was one of the most bizarre tax policies he has ever seen:
A) The tax on Olympic medals.
B) The tanning salon tax.
C) The new Medicare tax on high earners in the health care law.
D) Utah's additional 10% sales tax if you buy something from a nude person.
Answer
San Francisco, Ca. KSFO 560: 1-4pm (KSFO archives Moneytalk Free on Demand for seven days after broadcast. You can download and listen on the go.)
30 comments:
that interview that bob did with Edward S was terrible and bob cornered him with the ninety five million dollar condo that was up for sale,the man was gasping for a reply,, rich or poor people love the chase and that is the name of that tune,,,
Frankj:
Interview fits in with BB's "retire in place" advice, something not heard on the show for quite a while now.
"Most investors who are in this market are happy campers." - Bob Brinker 8/19
Honey EC: Who knows? Perhaps we will eventually return to the S&P 500 all-time-high from October 2007. Considering the fact that Brinker followers have ridden this market all the way down and all the way back up fully invested for five years,
The HoneyBeeBadger goes for the jugular.
tfb
Hi I am back just thought I would put in my two cents worth.I think Brinker is right on his outlook of slow growth for the econonmy and to hang in there dollar cost averaging. I know a lot of you are skeptical but life is a gamble and i have a feeling just a feeling that Brinker is right this time... Thanks for the post Honeybee I do appreciate your diligence in posting bobs comments.. Thanks John
The big Thunderdome Battle between Bob Brinker and Lakshman Achuthan (ECRI) looks like it may be going in Brinker's direction.
Lakshman stated that a recession would be clearly identifiable mid-2012. It's not. Is he too early? Brinker is concerned about the effect of the drought on the economy going forward.
Has the U.S. Economy Turned the Corner?
With recent U.S. economic data showing better-than-expected readings, the markets and consensus are increasingly upbeat about the economic outlook, including a belief that the U.S. economy has dodged a recession. A number of key coincident data, in particular July’s payroll job gains, are used to make this case.
However, is this view warranted? ECRI’s latest analysis of the U.S. cyclical outlook, based on an objective process that distinguishes between cyclical swings and noise, clarifies whether this optimism can be sustained.
ECRI Ticks Up
Lakshman Achuthan called for a recession about 11 months ago. He said it would be a bad one and "You ain't seen nothing yet"
He now claims that he was right and we are in a recession right now except nobody agrees with him.
He just plain blew it and won't admit it just like some others we know.
When you pay Lak 6 figures for his predictions I think he should at least step up and admit he was wrong.
There seems to be a perverse trend in our modern media-led society to embrace negative outlooks, so forecasters, like ECRI, Shiller, Shilling, Roubini, Rosenberg, Whitney, Faber, etc., are publicized, lauded and annointed with supposedly special powers of observation, analysis and forecasting prowess. This fawning love affair with negative punditry continues even well after it becomes obvious that their fifteen minutes of accuracy have passed.
Those that get immersed in idolatry of pundits (positive or negative, but especially negative) do so at substantial harm to their investment performance.
How can Bob Brinker call himself a Market Timer when he stayed invested throughout the major 2008 decline?
A Market Timer would at least have some protective sell stops in place especially considering that the market had been up five years in a row. That almost never happens. The large gains from 2003-2007 should have had any investor on the lookout for a down year. Perhaps Bob was relying on his Timing Model which failed miserably.
That brings up the question as to whether some of his past calls have just been lucky. In fact, I've often wondered if his calls were based only on his model or whether they at times included other factors. His signal in early 2003 looked more like a buy signal based on the triple bottom with the S&P 500 near the 800 level.
Bob's guest in the third hour said that John Maynard Keynes predicted in 1929 that in the next 100 years people would be far richer and would only be working about 3 hours a day or 16 hours a week. The guest said Keynes was wrong about the shorter work week. Wait a minute, Keynes may have been right. Bob Brinker is living proof. He is wealthy and only works 3 hours per week three out of every four weeks.
How can Bob Brinker call himself a Market Timer when he stayed invested throughout the major 2008 decline?
He is a market timer, just not a very good one.
tfb
Market timing is not difficult at all.
Everybody, even little old ladies, know that you go in the morning to get the fresh meat and vegetables.
I think even Juni can figure this one out.
Anything more complicated than this is a sheer guess by them, which is why they have to fudge and spin so much with their past results.
Ken wrote:
"That brings up the question as to whether some of his past calls have just been lucky. In fact, I've often wondered if his calls were based only on his model or whether they at times included other factors. His signal in early 2003 looked more like a buy signal based on the triple bottom with the S&P 500 near the 800 level."
I think you are right Ken. Brinker did get lucky with some of his calls. You are also correct that Brinker uses other things besides his timing model. He relies heavily on TA(technical analysis) to identify buying opportunities. He used the timing model for his 2000 "sell" and he uses it to decide if he should stay invested but anytime he mentions a "gifthorse" buying opportunity it's based on TA.
Everybody, even little old ladies, know that you go in the morning to get the fresh meat and vegetables.
ROTFLMAO...
tfb
Jim Rogers may be one of those bad-news-bears that Bob Brinker is always slamming. This is almost enough to scare me out of the market:
Jim Rogers: It's Going To Get Really "Bad After The Next Election"
By Terry Weiss, Money Morning
In a riveting interview on CNBC, legendary investor Jim Rogers warned Americans to prepare for "Financial Armageddon," saying he fully expects the economy to implode after the U.S. election.
Rogers, who for years has been an outspoken critic of the Feds policies of "Quantitative Easing," says the world is "drowning in too much debt." He put the blame squarely on U.S. and European governments for abusing their "license to print money." In the U.S. alone, the national debt has surged to nearly $16 trillion, that's more than $50,000 for every American man, woman and child.
"[They] need to stop spending money they don't have," Rogers said. "The solution to too much debt is not more debt... What would make me very excited is if a few people [in the government] went bankrupt..." Rogers added.
Rogers also charged Obama and German Chancellor Angela Merkel with promoting dangerous policies that create the illusion the economy is stable... but are really only intended to buy time before their upcoming elections. Do these charts and graphs prove that the Obama Administration’s current economic path is headed for disaster?
"Mrs. Merkle has an election next year," Rogers said. "Mr. Obama has an election in November. The Americans and the Germans - they want to do everything they can to hold the world up until after the next election."
"It's going to be bad after the next election." In a newly released documentary that went viral last month, a team of influential economic experts say they have discovered a "frightening pattern" they believe points to a massive economic catastrophe unlike anything ever seen in the history of the world
Read more: Jim Rogers Issues Dramatic Warning
Jim Rogers said, ""It's going to be bad after the next election."
It may start being bad even before the next election. The market has been up for 6 straight weeks. It attempted making a 4-year closing high this morning.
That was my cue to exit...and go short via SDS. This is a low risk opportunity because if the market keeps on running and does make a closing new high, I can get out with a small loss.
But if it does what the overbought indicator has been indicating, it just could tank...at least temporarily. And that should be enough to take a few thousand bucks out of this market on the short side.
So, small risk on the upside, large profit potential on the down side. Makes for a near perfect trading opportunity...IMHO, of course. Others may think differently...that is, wrongly! :-)
The ugliest campaign ever. I think not. Campaigns are always ugly and there certainly vicious campaigns in the 18th and 19th century.
Mark
Newark, CA
Submitted by: Frankj
"Interview fits in with BB's "retire in place" advice, something not heard on the show for quite a while now."
August 19, 2012 4:56 PM
I'm not familiar with Brinker's "retire in place" advice. Is anyone here willing to expound on that subject? I'm curious. Is this another form of the Federal worker's "ROAD" program? R-O-A-D = Retired On Active Duty.
A U Ric
FrankJ sent the link to this article. Since it is a WSJ article that I can get access to, I have copied most of it here for you.
I truly live in the state of fruits, nuts and crazy people:
The sages of Sacramento have done such a splendid job of not adequately funding California's public pensions that now they want to do the same for non-government workers. Their latest brainstorm is to establish state-administered retirement plans for workers in the private economy.
This is not a joke. Social Security faces a funding shortfall as the baby boomers retire. The business world long ago began moving toward 401(k) plans from pensions that they couldn't sustain. (See GM, failure of.) The most far-seeing states have begun to move in the same direction, if the politics allow. But the other-worldly liberals who run the Golden State want to establish a new pension for five to seven million additional workers.
The legislation would require employers that don't already sponsor retirement plans to enroll their workers in state-administered "individual retirement accounts," but they are really defined-benefit pensions in disguise. Democrats are calling a spade a club in order to skirt the federal Employee Retirement Income Security Act (Erisa), which imposes fiduciary obligations on private employers that sponsor defined-benefit plans. Trouble is, the retirement plan Democrats have conceived has all the trappings of a cash balance account, a breed of defined benefit that guarantees workers a return on their investments.
Workers would be automatically enrolled (unless they opt out) and have to contribute 3% of their wages. A retirement board consisting of government officials and appointees would invest the money and guarantee a still-to-be determined rate of return. Employers would be required to withhold wages to fund the plan—or pay a $500 penalty per worker.
Democrats insist this is not another pension but merely a "modest supplement" to Social Security. But this is also how government pensions started 80 years ago. Legislative sponsor Kevin de Leon's office claims that workers would own their retirement plans just as they would IRAs, but there's nothing in the legislation that guarantees ownership or portability (in case overtaxed workers want to move to Texas or Florida).
The bill's proponents say taxpayers wouldn't be on the hook for any shortfalls. But once workers make contributions into any kind of government-administered pot, taxpayers can assume they have been volunteered to guarantee the returns. The legislation even establishes the mechanism by allowing the retirement board to "accept any grants, gifts, legislative appropriation, and other moneys from the state."
CONTINUED NEXT POST
CONTINUED:
Democrats say that the plans will be "privately insured," but what financial institution, pray tell, would underwrite indeterminate returns? Calculating the liabilities would be a purely metaphysical exercise. The unfunded liability for the California Public Employees' Retirement System, or Calpers (which implicitly guarantees a 7.5% return), is $290 billion, and this new pension plan would cover about four times as many workers.
As a side note, Calpers, which is dominated by union allies, has expressed interest in managing the investments. Just what the economy needs: More investment dollars influenced by politics.
The California Senate has already passed the bill on a party line vote, and the Assembly is expected to do the same shortly. Democrats seem to believe that offering private workers this fillip will relieve the political pressure to reform government worker pensions.
Governor Jerry Brown hasn't taken a position, but he ought to veto it on principle as a danger to the public fisc. If nothing else, he ought to have the self-respect to sit on it until the legislature takes up his proposals to reform the state's bleeding public pensions. Democrats who run the legislature won't even give him a vote.
The Governor believes (correctly) that voters will be more inclined to approve income and sales tax hikes this November if lawmakers show they're earnest about getting the state's fiscal house in order. They're not, which is clear enough from this latest attempt to make American workers more dependent on politicians.
Read more: Another California Brainstorm
Let's create one more pension scheme the state can't afford.
Jim wrote.. "I think you are right Ken. Brinker did get lucky with some of his calls. You are also correct that Brinker uses other things besides his timing model. He relies heavily on TA(technical analysis) to identify buying opportunities. He used the timing model for his 2000 "sell" and he uses it to decide if he should stay invested but anytime he mentions a "gifthorse" buying opportunity it's based on TA."
Appreciated your comments. Bob seems to only do broad index market timing. He missed some great sector opportunities in 2000-2003. As an example, Bonds, Small Cap Value, REITs and a few other areas were very profitable in that period. I think Small Cap Value had one of its most spectacular outperformance periods ever. It was also very interesting that the daily and weekly AD lines showed an uptrend in that period. Prior to the 2000 peak both AD lines were very weak.
A U Ric:
Since I brought it up, I'll take a stab at explaining "retire in place." Someone at or near retirement age who elects to keep working because they want to, not because they have to.
Someone who perhaps does not need to apply themselves as diligently to the job as they once did but still get the job done. So, one would have to be at a certain level in the organization.
I should add, it was a long time ago when this was mentioned and things were very different in the economy and unemployment. If anyone has anything to add, please do so.
-- Frankj
About an hour ago, the national debt was: $15,960,468,522,111.20
About an hour ago, the national debt was: $15,960,468,522,111.20
So what? That figure means absolutely nothing. Do you even have any idea what you are talking about.
I get so sick of armchair economists on the internet. Everybody is an expert.
Econ101,
Did you flunk out of economics?
Evidently you are not aware that we actually pay interest on the national debt.
Listen to Bob Brinker this Sunday. He may be helpful to you.
"Evidently you are not aware that we actually pay interest on the national debt."
That's what I mean. It doesn't really matter, we pay interest the same way we got the debt.
We print it!
You and Brinker both could use a little basic information.
The Fed printing money does matter. It can lead to runaway inflation if it isn't stopped.
What is your point anyway in claiming that the national debt doesn't matter?
If it didn't matter, and the fed could print money into infinity, why not print a million dollars for every person in the U.S.?
I'll answer my own question for you:
Because the million dollars wouldn't be worth a loaf of bread.
Oops....this is not good news:
August 24, 2012
Durable goods orders drop for 4th month out of last 5
Rick Moran
Bad news all around for American factories. Two leading indices have dropped for the 4th time in 5 months while last month's dismal numbers have been revised downward.
Bloomberg:
Signs that U.S. manufacturing is faltering emerged from a report Friday that orders for long-lasting factory goods, excluding the volatile transportation category, fell in July for the fourth time in five months.
Overall orders for durable goods rose a seasonally adjusted 4.2 percent in July, the Commerce Department said. But excluding aircraft and other transportation goods, orders dropped 0.4 percent.
Durable goods are items meant to last at least three years. Orders for so-called core capital goods, a key measure of business investment plans, fell 3.4 percent. That's the biggest drop since November and the fourth decline in five months. And June's figure was revised down to show a drop of 2.7 percent -- much worse than the initial estimate of a 1.7 percent fall.
"This is a very weak report," Paul Ashworth, an economist at Capital Economics, said in a note to clients.
Core capital goods include computers, industrial machinery and steel. The steady decline in such orders suggests that companies are worried that the economy will slow and are reducing investment. Europe's financial crisis has pushed that region to the brink of recession, threatening exports of U.S. goods. Economies in China, India and Brazil are also growing more slowly.
The manufacturing sector is a much smaller component of the overall economy than it used to be, but is the most sensitive employment wise to downturns. Factory jobs are usually the first to show improvement when coming out of a recession and the first to show decline when a downturn looms.
These numbers are worrisome, but surprisingly, overall factory employment has remained fairly steady over these last few months. This may mean we can avoid a double dip recession - as long as we avoid the fiscal cliff next January.
--This may mean we can avoid a double dip recession - as long as we avoid the fiscal cliff next January.--
....ECRI says we are already in a recession but nobody seems to know it except them.
Do the people here agree with ECRI? I don't.
Mayme
Manufacturing:
I'm a life-long toolmaker, self employed for the past 27 years, and the last let-up I had in work was for a month or two immediately following 9/11.
FWIW, been buried since then.
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