September 9, 2012, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

September 9, 2012....Bob Brinker hosted Moneytalk today. (comments welcome)

Caller John has a million dollar portfolio that has been invested in Marketimer model portfolio III and he's now on the edge of critical mass. He is inheriting another $600,000 and wanted advice about how to put it in the market.

Brinker replied: "John, the first thing to understand is that a one million dollar portfolio is different from a 1.6 million dollar portfolio.  You may decide with a million dollar portfolio that you are very comfortable with a balanced portfolio, but with a 1.6 million dollar portfolio that you want to change your allocations.....You have the right to pause and reconsider... and think about where the markets are." 

FIXED INCOME MARKET....Brinker continued:  "Think about where the markets are today. In the fixed income market, you're looking at near historical lows on just about all the rates right now.....You have to consider the risks that are inherent in the fixed income market.....and what changes might be brought about if somewhere down the road, rates were to normalize. That hasn't happened yet. We have a slow-growth economy." 

STOCK MARKET.....Brinker continued: "And then you look at the equity market. We are at the highest level now in over 4 1/2 years....We are close to the levels of the end of 2007. We are basically at the levels of January 2008. You have to look at that and consider that this market has more than doubled in the last 3 1/2 years.....Take all that into consideration...You have every right to then say, I want to take a look at this asset allocation -- it's been great for you -- you've had the balanced portfolio." 

Honey EC: If John had his million dollar portfolio invested in Marketimer model portfolio III back at the closing highs Brinker mentioned, he lost well over a quarter of the NAV from October 2007 to March 2009. Ouch! It's back now, but it's five years later.    

MARKETIMER BALANCED MODEL PORTFOLIO III.....Brinker continued: "I'm happy to report to you, we're having a really good year in our balanced portfolio.....We take a relatively low level of risk in that portfolio....That's worked for you....God bless you....The reality is, you're looking to the future as you should be." 

Honey EC: Be aware that portfolio III is not evenly balanced right now. It is about 67% equities.

ASSET ALLOCATION AT THIS TIME....Brinker continued: "These are the questions I'd be asking.  What do I want to do in a fixed income market like this? What do I want to do in a stock market that's had a run like this? Do I want to maintain the same asset allocation that's worked for me up to now? I mean, you've benefited from everything that could possibly go right. You've had fixed income securities, rates have come down to historical levels....Of course in model III, you're in quality fixed income....You've had equity exposure.....that portfolio has also done nicely.....How do you reconcile the fact that you're now coming into money.....This has been a de facto melt up in the stock market...."

MARKETIMER FULLY INVESTED....Brinker continued: "I'm very happy to say that our Marketimer subscribers have been fully invested in this move. Let me tell you, there have been a lot of skeptics out there predicting recessions, scaring people out of the market....You should feel very good that you have been making money....For information on my investment letter, Bob Brinker's Marketimer, go to Bob Brinker.com and request a complimentary back issue." 

Honey EC: Brinker bragging about his portfolios (and subscribers) being fully invested for this market "melt-up" would be funny if it wasn't so absurd. His portfolios, and subscribers have been fully invested since March 2003 -- including the 2008 market "melt-down." 

Obviously, Brinker is dangling a juicy carrot for those who actually believe he can or will be able to call the top in the market. In my opinion, he can't and won't even try.

UNEMPLOYMENT/JOBS REPORT....New jobs for August came in at net 96,000....The reported unemployment rate at 8.11. Brinker said: "The main reason it went down was because of people leaving the work force. Millions have left the work force because unable to find a job.....The underemployed rate remains elevated at 14.7%....That's a big number....It includes those who are looking for full-time work but can only find part-time....and those who are long-term unemployed.....Unemployment has been a real problem and remains a real problem because the economy has not been growing fast enough to create the necessary level of jobs growth to (a) absorb all new entrants into the labor force and (b) absorb those in the unemployment pool....You know it peaked at 10.1, so it has come down.....

FED'S MANDATES AND CONGRESSIONAL COWBOYS.....Brinker continues: "The Federal Reserve would like to see it at 5 1/2 to 6% so they could at least believe that they have lived up to their congressional mandate to keep employment as high as possible consistent with stable prices.....The reason they have not been able to achieve that, we have not seen enough economic growth. It is absorb to throw all of this on the back of Ben Bernanke....Definitely the most transparent Federal Chair of all time....He has said he does not have the power to solve the problem of the fiscal cliff or all the problems facing congress.....Congress is going to have to cowboy up and do what's right. They are not willing to do it right now because they are too busy running for re-election...."

WHEN WILL THE NEXT RECESSION HIT?  Caller Mike from Denver, pointing out that December 2007 was the start of the last recession (which was five years ago) said that since we have 4 to 6 year business cycles, when does Brinker expects the next recession to begin.

Brinker replied: "That's the 64 dollar question.....The reality is that we know a couple of things. In terms of the economy, there are two tools that can be used to help the economy. One is fiscal policy....Those who are waiting around for another fiscal stimulus package, don't hold your breath because I don't think the votes are there for another stimulus package.....There's tremendous stimulus coming from the over spending by the government. The government is still spending more than a  trillion dollars a year than it brings in.....As far monetary is concerned. It amazes me the way that people will latch on to the possibility of QE3, which may happen down the road...if the economy continues its below trend track and unemployment stays as high as its been....But what are people expecting out of QE3....QE1 was helpful, but QE2 and Operation Twist was only marginally helpful, not major help...."I don't see where another round would dramatically help the growth rate." 

WILL THE FEDERAL RESERVE DO QE3?....Brinker said: "It will be interesting to see what the Federal Open Market Committee decides...They have a two-day meeting coming up....Ben Bernanke has been very vocal....This is what he said, "The daunting economic challenges economic challenges that confront the US.....He said something else that was notable. He said, 'The stagnation of the labor market is a grave concern.' He also went on to say 'unemployment will wreak structural damage on our economy that could last for years.'  Now  the question is, do we have structural unemployment. Now that is a big deal because you can have structural unemployment for several different and it's likely to be a continuing problem. And is that contributing to the high unemployment rate? We shall find out in the fullness of time.....There are many jobs out there that are not filled because the employees with the necessary skill set are not available....Then we have geography....There are construction jobs available in places like North Dakota. Will those Arizona, California going to relocate....probably not."  

POLITICAL CONVENTIONS AND FISCAL CLIFF: Brinker said: "One of the things that was notably absent from the political conventions was discussion of the fiscal cliff....You'd think they'd talk about the 800 pound gorilla in the middle of the room, but they didn't so I will.....This looks like at least until after the election, it will not even be addressed.....I was kind of amazed that we saw both conventions go by and so little was said about the fiscal cliff....I think they are embarrassed. Both parties are embarrassed by the creation of the fiscal cliff which has been manufactured by politicians to begin with. They are totally embarrassed on both sides of the aisle by the situation they have created where business owners today don't know what the tax rate will be in less than four months."

Honey EC: Brinker went over all of the upcoming taxes that will kick in on January 1st if nothing is done. I've covered all of this before.  I was a bit surprised that Brinker listened to all of  both conventions. Since I didn't, I could not say with certainty that no one discussed the  fiscal cliff. 

EUROPEAN SOVEREIGN DEBT....Bob Brinker said: "We have the story of super Mario, Mario Draghi, the European Central Bank Chief....."  Brinker talked at length about Draghi. Here is the text of Draghi's speech after the bank held interest rates on Thursday and outlined its new bond-buying program.

BEN BERNANKE A TRAITOR? Jack from San Diego asked Brinker if the Fed could do anything to impact the upcoming election. He said that he had a list of all the threats that Republicans are making against Bernanke.

Brinker replied: "I have that list because I heard the comments by the South Carolina state senator recently  who accused the Fed Chair of being a traitor to the United States. I've heard all this pap.....The bottom line is will politics play a role in the upcoming Fed meeting.....If they eventually do implement another round of quantitative easing, but if they don't do it at this upcoming FOMC meeting in a few days, then I think it will be fair to have said that was a politically motivated decision.....I really don't expect another round of QE to have a dramatic impact on the economy....Since QE2 did very little to help the economy, why expect anything different in the future."

Honey EC: Later in the second hour, this same subject came up. Brinker  went into what could be classified as a complete rage. He literally screamed that Ben Bernanke was not a traitor and that calling him a traitor is "pretty sick, sick, sick."  Brinker said it was the other way round -- that those calling Bernanke a traitor were the real traitors. 

I think this may be the most angry that I have ever heard Brinker sound.  He claims that Bernanke has "no brief for Obama." Well, I'm wondering what is Brinker's "brief" for Bernanke. After reading this article, I find it hard to agree with Brinker that Bernanke has no "brief for Obama." Romney Affirms He Wouldn't Reappoint Bernanke as Fed Chair

Check out this article and video: Bernanke Called Traitor

Jeffchristie's Moneytalk Final Exam Question:

Bob Brinker's nickname for the president of the European central bank was inspired by which of the following Nintendo characters?

A) Donkey Kong.

B) Pokemon.

C) Super Mario.

D) Slippy toad.

Answer: Mario SMBW

Brinker's guest-speaker today was Deepa Seetharaman, automotive correspondent for Thompson-Reuters. See video clip

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.)  

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