Sunday, October 14, 2012

October 14, 2012, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

October 14, 2012....Bob Brinker hosted Moneytalk today......(comments welcome)

STOCK MARKET: Brinker did not discuss the stock market today, and no callers got on the air and mentioned it.

Honey EC:  Last Friday, the S&P 500 Index was at 1461. It closed this Friday at 1425. Not a major drop, but was it enough to cool Brinker's bullish-ardor jets for the week? Brinker is still bullish but is advising dollar-cost-averaging new money "on weakness." He explained this last week:
Caller Barbara said she wanted to be sure if she was interpreting Marketimer correctly when it says to "dollar-cost-average on weakness."
Brinker replied: "Let me explain that Barbara....You know how much the market has gone up. It's more than doubled in the last year....There is a tendency...to get more bullish on the market as prices go up....People get more excited after they have seen, in this case, literally skyrocket. So the reason that I make the observation that I'd rather see people dollar-cost-average on periods weakness is in order to underscore the importance of that notion of not waiting to chase rally, not getting caught up in the hype of rising prices....That is why we have been encouraging subscribers recently to take advantage of periods of weakness."
FISCAL CLIFF....Brinker's comments: The phrase "fiscal cliff" was coined by Obi Wan Ben Bernanke.  This may become a "really big" story, but right now it is being crowded out by the presidential debates -- where they don't discuss it because they don't know what to do about it. Most congress people are asking you to re-elect them even after they have failed to do their jobs.

TAX INCREASES COMING JANUARY 1ST....Brinker's comments: In 2001 and 2003, President George W. Bush proposed tax cuts that passed the congress that set the rates where they are right now. They will remain in place under current law until the first of the year, then they will expires. Marginal tax brackets will go up across the board for almost all taxpayers. The top bracket goes to 39.6%, -- and all down the line, brackets go up as these tax cuts expire.  Federal long-term capital gains tax increases from 15% to 20%. Qualified dividend rate will be taxed as ordinary income. The exemption for the Alternative Minimum Tax will expire. Estate taxes go to 55%, and the exemption goes down to $1 million. That adds up to a lot of money -- almost $300 billion. Brinker said: "We presume that something will be done by the first half of next year, at least some time in 2013."

SLOW-GROWTH ECONOMY CAN'T STAND TAX INCREASES....Brinker said: "This economy cannot afford to see taxes go up like this in January. This slow-growth economy that we have cannot withstand this kind of tax increase pressure. So something is going to have to be done.....After the election is over....this could become a really big story....."

LAME DUCK CONGRESS MAY NOT ACT THIS YEAR....Brinker continued: "And what about the possibility that the lame duck congress will just kick the can down the road and say we will let the next congress take care of this....We can't rule this out."

EMPLOYEE PAYROLL TAX HOLIDAY....Brinker comments:  The payroll tax holiday of 2% has been in place the past two years. the rate for employees has been 4.2 as opposed to 6.2....This is likely to be gone....It's $126 billion dollars -- $10 1/2 a month, front-end loaded because it applies to everyone in January. This is money that almost gets entirely spent. Okay, Bill Gates, Larry Ellison, Ross Perot are spending theirs, but this is in the almost 100% propensity to spend category. This tax break expires at the end of the year.

DYSFUNCTIONAL CONGRESS WANTS TO BE RE-ELECTED....Brinker said:  "My expectation is when the election is finished, you will hear more about this situation. It is an amazing thing that this congress after completely failing to govern on this fiscal issue, showing that they are dysfunctional on a level never before imagined. And now most of them are out there asking you to re-elect them."

MORTGAGES HAVE NOTHING TO DO WITH CAPITAL GAINS WHEN SELLING A HOUSE: Brinker replied to Joe from Albany: “I want Moneytalk listeners listen closely. The amount you owe on a mortgage has nothing to do with capital gains or capital losses.  (Brinker asked Joe the purchase price and how much he had spent on documented improvements on the property.) It sounds like you might have a long-term capital gain of a few thousand dollars.....So if you have a long-term capital gains of $3,000 and you sell this year, the maximum federal capital gains tax is 15%, which would be $450 federal, and small amount to the State of New York. So that's the way it works Joe. It's going to be a tiny amount, if anything at all....Now notice that when Joe and I talked about figuring the capital gain liability on the property, there was no discussion of the mortgage."

Honey EC: Brinker also didn't discuss the $250,000 individual, $500,000 per couple, exemption on PERSONAL RESIDENCES that has been law since 1997. Brinker often tells callers to seek the advice of a CPA, but failed to do that with Joe. I sure hope Joe reads this blog.  The exemption explained at  Fox Business:
When you sell your primary residence, you can make up to $250,000 in profit if you're a single owner, twice that if you're married, and not owe any capital gains taxes.....If you used pre-1997 rules for residential sales, don't worry. That doesn't disqualify you from claiming the exclusion on any residential sales now. The law change applies to all sales since it took effect.....there's no limit on the number of times you can use the home-sale exemption. In most cases, you can make tax-free profits of $250,000, or $500,000 depending on your filing status, every time you sell a home.
CALLER LEONARD FROM HOOSIERLAND.... Leonard and Brinker talked politics and how sometimes politicians change their minds after they get elected. Brinker asked Leonard about where he lived in Indiana then said: "At one time I lived in Jasper, Indiana....I love Hoosierland and I always will. I actually was a Hoosier and enjoyed every minute of it." 

VANGUARD'S NEW INDEX BENCHMARK...Caller Julius mentioned that Vanguard is changing its benchmark on some of its index funds and wondered if there would really be long-term savings. Brinker commented that this is not anything he is concerned about, and expects that over the long-term, there will be some very small savings.  He told Julius if he was concerned he could go to Fidelity or buy other index funds or ETFs like SPY.  You can read more at Vanguard's website.
Over a number of months, 22 Vanguard index funds will change the benchmarks used to measure their performance. Six international stock funds will transition to established FTSE benchmarks, while 16 U.S. stock funds will move to new benchmarks developed by the University of Chicago's Center for Research in Security Prices (CRSP). These changes apply to all the funds' share classes, including exchange-traded funds (ETFs).
SOCIAL SECURITY INCREASE IN BENEFITS....Brinker said: "We have some preliminary numbers that indicate the benefit increase should be between 1% and 2%. There ya go. We'll know the answer by Tuesday....By the way, there are 56 million people across the USA that are currently receiving Social Security benefits....There was a decent increase last year of 3.6, but no increase in 2010 or 2011." 

NO "FAIR SHARE OF TAXES"....Brinker said: "It's amazing to me when you look at the tax situation. The unfairness in the tax code. I always hear about this fair share rhetoric. When I look at the tax code, I don't see a whole lot of fairness there. I just don't. And when you look at all the special interest legislation that is in the tax code. I mean, it really is mind-boggling.....How much input did you or your family have in putting together the US tax code. I suspect little or no input. All I hear about is fairness, then I look at the figures. Forty-six percent  (46%) of US households paid zero in federal income tax in 2011. This is according to the tax policy center....The top 20% of US households, by income, paid over 2/3 of all of the taxes in 2009. This is an analysis done by the CBO....Isn't that amazing? To get into the top 20% in 2009, you had to make more that $131,700....You don't hear about this much."

IS THE TAX CODE COMPLICATED?....Brinker said: "Right now, the tax code has 72,536 pages. Can you picture a document like this?....Back in 1939, the tax code had 504 pages, so it's up 150 times in length. Even since 1984, it's tripled in size from 24,000 to over 72,000 pages...." 

Honey EC: This was not a very interesting program, in my opinion.  There was just too much political talk and very little added value for investors. Brinker bragged a couple of times about his financial show being the longest running on radio -- over 26 years. 

I've listened to Moneytalk since 1986 and can tell you that over the years, he has used politics more and more as a time filler. Of course, he already fills 1/3 of the program with guests who have books to sell, so he only has two hours a week to fill.

Jeffchristie's Moneytalk Final Exam Question: 

Today Bob Brinker revealed that for a short period of time he was:
A) A redneck.
B) A Hoosier.
C) A wetback.
D) A Razorback.

Answer: Bob Brinker lived in Jasper Indiana.

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.)  

Brinker's guest-speaker was Joseph Hurley: The Best Way to Save for College: A Complete Guide to 529 Plans 2011-12

20 comments:

john said...

Thanks for the post Honeybee. I was hoping Bob would talk about the market but apparently like you say he would rather talk politics and use his sales talk to promote whatever. I am hoping also that they will resolve this fiscal cliff after the election in the lame duck session but time will tell. I hope all is well with you and I am glad we can resuming posting on this blog..Thanks John

Seattlesam said...
This comment has been removed by a blog administrator.
birdbrain said...

Honey,

With the two hours weekly Bob has to fill, a good thirty minutes goes to commercials and news breaks. Add an opening monologue and repeating govt stats (housing prices across various cities, upcoming economic data releases, etc.) and political ramblings, less than an hour is devoted to general questions from pre-screened callers. The show has become less interesting over the years.

QQQ note: Mr B is fond of the phonetic alphabet (Victor Tango India). The current word for the letter Q is Quebec, but prior to 1938 another word was used. Given the result of his Nasdaq 100 counter trend rally prediction, that word would be suitable today.

Quack.

Anonymous said...

Frankj:

Surprising that BB got the answer to the capital gains on sale of a house wrong. I wonder how many people who listened are now wondering whether he is right or what the had heard or read previously, was right, i.e., no cap gains for most people.

Worthy of making mention of a correction to the answer, on a subsequent show, in my opinion. This is basic stuff.

This is from Investopedia.com, a brief description of the Act which modified the tax rules on sale of a primary residence:


The Taxpayer Relief Act of 1997 was signed off on by President Clinton on August 5, 1997. In addition to the aforementioned tax breaks, this act also created a $1.3 million exclusion for farms and small businesses. This act was widely applauded by the American public, and has since provided billions of dollars in tax relief for both personal and business taxpayers.

Read more: http://www.investopedia.com/terms/t/taxpayer-relief-act-of-1997.asp#ixzz29Obmlxcr

Dancing Bozo said...

You have to wonder why Bob Brinker doesn't talk about investing on a show called "Moneytalk." Could it be his "Marketimer" newsletter didn't make the "Timer Digest Top Ten Timers List" so he is grumpy?

He acts like it is called "Political Talk" but there are far better shows with pundits much more qualified to discuss politics.

Bluce said...

Honey: I didn't get a chance to hear "Little Bobby" at all, so thanks for your summary.

When I was reading your quote about the house sale and cap gains, I immediately thought: "Hey they did away with that some time ago. Doesn't Little Bobby know that?" Then the next paragraph was where you caught him, lol. It is quite shocking that he didn't mention it, and as someone else here said, he should bring it up during the next show. But I doubt he will.

Politics: I've been listening to Kudlow on Saturdays since they dumped Bobby's Saturday show, and he always has too much politics but the last few weeks it's been nearly ALL politics. I haven't bothered listening anymore -- if I want that I know where to find it. I expect to hear finances/investing on Kudlow's show, or Bobbie's for that matter.

It just goes to show how politicized our entire culture has become. I can't go anywhere, listen to anything, watch anything, read anything without getting silly, superficial, partisan politics -- or government-related stories -- shoved down my throat.

I've been watching the 6:30 network evening news all of my adult life but in the spring of 2010 during the Gulf Oil Spill, the networks led with THAT story for a couple of weeks instead of politics/government. What a relief!

At any rate, that broke my life-long habit: I don't watch the evening news at all anymore.

john said...

I dont expect Bob to make a correction to his wrong answer on capitol gains.He has yet to say that he apologized for missing the recent bear market in which he told evryone to stay fully invested all the way to the bottom.

Anonymous said...

He has yet to say that he apologized for missing the recent bear market in which he told evryone to stay fully invested all the way to the bottom.

It WASN"T DA Brinks fault. His dog ate his market timing indicators that week!

tfb

Marc Anderson said...

CALIFORNIA

Unfunded liability: $100 billion in the Public Employees' Retirement System and $65 billion in the State Teachers' Retirement System.

Changes: Gov. Jerry Brown last month signed legislation expected to save billions of dollars in coming years by increasing the retirement age for new employees, limiting annual pension payouts to $132,120 and requiring workers who are not contributing half of their retirement costs to pay more. San Diego this year moved its city workers to a defined contribution plan similar to a 401(k).

Honeybee said...

Bob Brinker gets his subscribers out of all Nasdaq holdings and it goes up like a rocket.

jeffchristie said...

I just listened to Neal Cavuto talking to Donald Trump. Trump said he agreed with Jack Welch that the 7.8% unemployment number doesn't make sense. He went on to say that people who have accomplished nothing in their life have been criticizing Welch for his comment. I wonder if Donald was referring to.......?

Anonymous said...

Bob Brinker gets his subscribers out of all Nasdaq holdings and it goes up like a rocket.

This is because Da Brink could not time a 3 minute egg much less the stock market as demonstrated by his rather abysmal record. How did you like that 2008 bear - growl!

tfb

Marc Anderson said...

What changes do you think investors should make to their portfolios to avoid the financial meltdown that could result if we go over the "fiscal cliff"?

Jim said...

Since Bob Brinker will not tell us why he sold the QQQ shares I guess I will try and speculate. The answer I come up with is Apple.

Yes, I know Bob Brinker likes Apple admitting a while back that he has some shares. But I've read recently that Apple now makes up around 20% of the Nasdaq 100. Perhaps he feels the QQQ shares are too heavily concentrated now.

Apple is a big influence on almost any index, but is less of an influence with VTI.

Anonymous said...

This article may interest some of the readers here. the first page is very well done. I could live without page two...

http://money.msn.com/investing/is-the-economy-a-lost-cause

tfb

jeffchristie said...

Yesterday I received several political calls One was from a guy who said his name was Jose. He ask me if president Obama could count on my support in the election. I told him that he could count on me to do everything possible to see that that rotten $*%@!-(*$%@# doesn't get re-elected.

Another call was from a lady who said my congressman was holding a town hall meeting over the phone and ask if I wanted to participate. I even got to ask him a question that Brinker discussed on Moneytalk last Sunday. I started my question with something we hear from callers talking to Brinker. "Sir, it is a great honor to speak with you. I am retired and my income is from Social Security, a pension and my investment portfolio. The current tax code is scheduled to expire at the end of this year and I don't know what to do. Do you have any feel for what will happen. He said he thinks it rests on who wins the presidential election." I was impressed with his responses to the myriad of questions he received on a wide variety of issues. He seemed more knowledgeable to me than any of the four participants in the debates. One lady was concerned with the quality of the water that the Army Corp of engineers is releasing into lake Okeechobee. He said he was a master diver and diving thru the first 20 feet was like diving at night. He said he was an Army man and thought that he could work with them to get it resolved. BTW the man I talked to was Allen West.

Marc Anderson said...

Jack Bogle says forget about trying to time the market...just buy and hold.

Jack Bogle: Forget trading, start investing
October 17, 2012, 6:01 PM

Jack Bogle, founder of the Vanguard Group and author of “The Clash of the Cultures: Investment Versus Speculation,” says that investors should not be shaken by the economy, the election or the fiscal cliff and should, instead, stay focused on buying good businesses for the long haul, regardless of market conditions.

“Get out of the casino, own Corporate America and hold it forever,” Bogle said during “The Big Interview” on MoneyLife with Chuck Jaffe. “No trading, no nothing. You don’t need to trade; you don’t need to worry about the market. To protect yourself from the bumps the stock market will scare you with – even though it shouldn’t scare you because there have been bumps in the market since the beginning of time – have a bond position to go along with your stock position, and have your bond position [the proportion of your assets in bonds] … have something to do with your age.”

http://blogs.marketwatch.com/thetell/2012/10/17/jack-bogle-forget-trading-start-investing/

Mark said...

I too read that Apple is 20% of the NASDAQ. I recently sold half my position and bought Facebook as I think it finally reached my buying price. That said I am in for a wild ride.

Mark
Newar, CA

Dan G said...

Worshipers of John Bogle and his "buy and hold forever" strategy will not be interested in this, but those who think market timing might be worth trying might be.

The market is getting creamed today, yet is still not even close to oversold territory. I won't commit until it's at least close to oversold.

Sy Harding's seasonal strategy awaits a positive crossover in the Dow's daily MACD. This is not looking good right now. It will come, but probably not today.

Ok, I'm done. Buy-and-hold-and-yawners can now wake up and watch the market tumble...currently the Dow is down 220 points. But ho-hum, who cares? It's only money!

Marc Anderson said...

Isn't this one of those years where seasons market timing didn't work?

...In a commendable exercise in historical analysis, he has studied the record of the S & P 500 going back to 1926. As he reports in a column at fool.com today, there is some truth in the adage — but not enough to matter. It turns out that stocks do indeed tend to do a little less well in summer than in winter. But even if there were no adverse tax consequences or significant transaction costs, the difference is not enough to justify going into cash. On Dumortier’s figures, anyone who sold consistently the index stocks in May and bought back in October would have garnered an average return of 8.4 percent over the last 86 years. By contrast, those who followed the opposite strategy of buying in May and selling in October would have generated only 5.1 percent. Both calculations include not only dividends but interest on the cash that would be seasonably generated.

So winter investing does better than summer but the best strategy is to hold on regardless throughout the year. This would have generated a return of 10.0 percent, while minimizing both tax consequences and transaction costs...


http://www.forbes.com/sites/eamonnfingleton/2012/05/01/sell-in-may-and-go-away-not/