December 2, 2012, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

December 2, 2012...Bob Brinker hosted Moneytalk today.......(comments welcome)

STOCK MARKET: Bob Brinker's comments today did not include any discussion of the current stock market.

Honey EC: It's been several weeks since Brinker  talked about "how great the market is doing this year." Perhaps he is silent because he doesn't want to mention that the  Nasdaq had its best November in three years -- he sold all Nasdaq holdings in Marketimer.  Here is what Brinker said on Moneytalk on November 18th:

Brinker said: "In early October, we sold all of our Nasdaq direct exposure. So that meant that we sold our mutual fund that was invested in the Nasdaq 100....That came out of model I and model II and we also extended that to QQQ shares, which are also invested in the Nasdaq 100. We also sold any QQQ shares that subscribers held. All of those share in the Nasdaq 100, whether they be in the mutual fund or in the Exchange Traded Fund were sold in early October. So they're out of there. There's no more direct Nasdaq exposure anywhere in model I or in model II or anywhere within newsletter subscriber positions. We sold them out in early October. I felt at that time, based on all that I had seen in the Nasdaq that that was an opportunity to sell that index and that's what we did." 

ECONOMY IN DUMPSTER AND INTEREST RATES....Brinker said: "Even more important than the operation twist effect is the economy.....If for any reason, the economy were to take off, that would put upside pressure on rates. Period. If the economy stays as it's been, which is slow, then the economy does not put pressure on rates......As long as the economy is in the dumpster, I don't think you are going to see much movement in rates....major movement. What's the dumpster? We're in the dumpster."

ECONOMY AND UNEMPLOYMENT.....Brinker said: "The economy is so low that we can't get unemployment down.  It's so low that under-employment is on the moon -- in the mid-teens."

BRINKER'S MARKETIMER PORTFOLIOS AND NET ASSET VALUE OF BOND FUNDS...Brinker said: "So as we speak, I'm not that concerned about the net-asset-value of a bond fund. Especially the kind of bond funds I recommend in the investment letter where we have very reasonable durations. Especially in the aggregate. When you take for example the income portfolio or you take the duration of the fixed income portion of the balanced portfolio....you will see they are very reasonable. So I'm not that concerned about that aspect....But if you thought the economy was going to pick up, or was picking up, then you might see some pressure on rates......That is not what we are looking at right now."

Honey EC: Brinker is right about his income portfolio. The weighted average duration of the five holdings is 2.8% and the average maturity is 4.9 years. The average yield is 3%.  He has sold all Vanguard High Yield Fund and replaced it with 25% weighting of Metro West Total Return (MWTRX).  The portfolio also contains a 25% weighting of DoubleLine Total Return Bond Fund (DLTNX).

 So in my opinion, the only possible conservative fund in this portfolio is the Vanguard Ginnie Mae Fund (VFIIX).  If you check a comparison chart between the high-yield fund, DoubleLine and Metro, you will see that the high-yield fund has outperformed over the past year and six months.

INFLATION AND THE HOUSING MARKET....Brinker said: "You can't call what's going on in housing now inflation. All you're seeing in housing so far is a partial recovery of the losses of the last few years.....It's just in its early stages....If you see the economy grow rapidly, then you could start to look for inflation pressures....I think one of the reasons that you have not seen inflation pressures so far is that the economy has been so lackluster....I've been very surprise at the number of people who came out and forecast high inflation...It's been complete fiction up until this point."

NATIONAL DEBT AND DEFICIT...Brinker said: "We now owe over 16 trillion dollars in national debt and we continue to accumulate national debt at an annual rate of a trillion dollars."

FISCAL CLIFF TAX  INCREASE PREDICTIONS...Brinker said: "There are so many tax increases on the table right  now, it's hard to keep track. Let's talk about current law since nobody has any idea what's going to happen. The only thing I'm sure of is one thing -- that if all the rates go up on New Year's Day, congress will vote to lower the rates on all but the high earners in the first quarter retroactive to the beginning of the year. That's the one thing that I am certain of -- that all of the people that earn less than $200,000 taxable as individuals....$250,000 as joint filers.....all of those people, I am certain of this, my opinion, that their rates will not change....The top 2%.....I think they're going to see a tax increase above the 35% current level, up to a maximum of 39.6......It's going up. No question about that. Just like the capital gains rate is going up from 15 to 20% and then the 3.8 is added on for the high earners making it 23.8 capital gains long-term.....For high earners, get out your wallet."

Honey EC:  Two weeks ago, Brinker did a thorough review of the impending January 1st tax increases and what deductions are on the table for elimination. I transcribed what he said in the November 18th Moneytalk Summary HERE 

ESTATE TAXES... Brinker said: "We have this bizarre situation through the end of this month only....where the lifetime exemption is $5,120,000 per person. That's $10,240,000 for a married couple. But that exemption drops to $1 million on New Year's Day, and the rate above $1 million per person goes to 55% under current law."

(SOCIAL SECURITY) PAYCHECK  CUTS ....Brinker said: "There's the question, do you give everybody in the country that works a 2% pay cut up to $113,700 in taxable income next year.....by allowing the payroll tax holiday to expire on the employee portion of that tax? This is roughly 10 billion dollars a month. Almost all of that money goes into the consumer economy. What do you do about that in this type of an economy.....There is no way of prediction what will happen with that."

ALTERNATIVE MINIMUM TAX.....Brinker said: "About 30 million additional taxpayers will be hit by the alternative minimum tax if it is not changed as part of any deal that occurs. My intention is not to cover every nook and cranny of the tax law -- it's just too much. These are the major items in my opinion subject to this discussion in Washington."

OPERATION TWIST.....Brinker said: "Operation twist is scheduled to end at the end of December, so what is the Fed going to do about it? That we will learn at the conclusion of the two day meeting this month."

FED GETS ALL THE CREDIT FOR ECONOMIC GROWTH SINCE 2008....Brinker said: "It's only because the Federal Reserve has been active that we have any growth at all in the economy. If the Federal Reserve would have taken a hike back in 2008, it would have been Teddy Ballgame right there. The Federal Reserve is the only operation in Washington doing its job.....If the fed would have checked out in 2008, it would have been Katy bar the door."

ONLY A "CERTIFIED, DOCUMENTED FOOL" CRITICIZES BEN BERNANKE...Brinker said: "The only person that would criticize Ben Bernanke would be a person who is so clueless about monetary policy and role of the Federal Reserve as to have nothing better than the lowest possible of education on the subject of economics....Anybody going after Ben Bernanke is a certified, documented fool....It's more like a comedy team if you're criticizing Ben Bernanke....If your not a comedian, you are totally ignorant and a complete fool....This is Moneytalk. "

ALL MAJOR CURRENCIES PRINTING MONEY....Brinker said: "The reality is, all of the major vendors are printing money....They're printing Euros, they're printing Yen and dollars.....It can go on until it can't go on."

WARREN RUDMAN: Brinker gave a glowing eulogy to Warren Rudman, the former Senator from New Hampshire,  claiming that he gave warnings before the 9-11 murders. He said that even though Rudman was a Republican, he was not just a "party hack for either side."  Brinker said Rudman was a war hero and actually "earned the kudo of a great American."

LAND OF CRITICAL MASS? Caller Jean from Florida asked what it means. Brinker told her the land of critical mass is when you can generate enough income from all sources, including your investments that you don't have to work -- whether or not you want to work.

TIME TO BUY MUNICIPAL BOND FUND?  Brinker said: "If rates stay the same or slide a little bit, you will do alright. But if rates go up in a municipal fund, you're going to see the net asset value depreciate.

TAKING LONG-TERM CAPITAL GAINS IN 2012.... Brinker said: "A lot of people are looking at their long-term capital gains in 2012 and wondering whether they should take them. Suppose they want to continue with a given position in a company, well there's no law against that. You are allowed to take long-term capital gain before the end of the year and pay the 15% maximum federal long-term capital gain tax rate that remains in the law books through the end of this year -- right through Monday, the 31st at the market close. You could pay that 15% and if you wanted to,  recreate your position.....The point would be if you think those tax savings are worth realizing. Because the fact is, starting in January, if you are a high-earner, you are going to pay a 23.8%....Here's the rub, do you want to make the new capital gains tax rate retroactive to all the money that you made on  a long-term gain? That's the issue.....Do you want to give the government 23.8 when you can give them 15....And you can recreate the position."

BOB BRINKER GETS POUNDED AND TRASHED FOR BEING FISCAL CONSERVATIVE: Brinker said: "I am roundly criticized for being so conservative on fiscal matters. And that is what this program is. This is a money program. We talk about fiscal issues and money. And I've always been balanced budget oriented. Let's get toward a balanced budget if we can....We've always maintained that for 27 years on the broadcast. And I get pounded and trashed for being so conservative."

Honey EC: Does anyone know how or where Brinker is getting "pounded and trashed" for being fiscally conservative? I'd like to ask him a few questions about why he no longer talks about the stock market on Moneytalk. 

NAMES BRINKER CALLED CONGRESS TODAY: "Dysfunctional...outstandingly incompetent....fools.... joke....unbearable."

Jeffchristie's Moneytalk Final Exam Question:

Bob Brinker's position on the Federal Reserve printing money is:

A) It will stop when Ben Bernanke is replaced as Fed chairman.
B) It will stop when they run out of ink.
C) It will go on until it can't go on.
D) If something can't go on forever it will stop.

Answer: C...It can go on until it can't go on.

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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