STOCK MARKET....Brinker only mentioned the stock market one time today when he was talking to Ludwig from Connecticut. Brinker said: "Look at the tripe that people have been sold in recent years.....They were sold a bill of goods about putting more money into gold. Gold was going to go to whatever. Actually more recently, gold's been heading south off its highs in recent months.They were told to beware of the stock market. The stock market was a Ponzi scheme. That turned out to be untrue as we see. There have been so many false premises laid upon the public in the past few years, it's absolutely stunning."
US NOT DEBASING CURRENCY....Caller Ludwig from Connecticut asked what Brinker thought about those who claim that the United States is debasing its currency. Brinker replied: "I think that anybody that tells you that the United States is debasing its currency is full of soup. The US dollar is one of the strongest currencies on the planet."
GOLD....Caller Paul from Florida thought people in Cyprus might put there money into gold bars so "it couldn't be taken away from them." Brinker said: "I understand what you're saying but that doesn't necessarily mean that they're going to rush to a speculative item like gold which is based on supply and demand around the world."
Honey EC: Brinker still has GLD on his short off-the-books list of "individual issues" on Page 7 of Marketimer. Last February, Brinker added a new item to that list: Vanguard FTSE All-World ex-USA (VEU). Like with GLD, he has not given any reason for adding it -- or guidance.
Brinker's entire opening monologue was devoted to the Cyprus bank levy. Here are transcribed excerpts from it:
EURO LEADERS PLACE LEVY ON CYPRUS BANK DEPOSITORS....Brinker said: "Boys and girls, this weekend, we have seen one of the most bizarre developments in the history of finance....I speak of the bank deposit tax that has been announced this weekend in Cyprus....It turns out that the banks in Cyprus are basically insolvent...So the Euro area finance ministers got together this weekend to decide what to do about the de facto insolvency of Cypriot banks. And what they decided is a rescue plan that can only be described as bizarro to the nth degree....As part of the bailout....Cyprus is going to impose a tax on deposits. I know most of you are accustomed to receiving interest on their deposits....Cyprus is going to tax money already in the bank, as of Friday, 6.75% up to 100,000 euros....and that is the ceiling for account insurance for the European Union....For deposits about 100,000 euros, Cyprus is going to tax 9.9%....Now these taxes, if they happen.....There is a banking holiday on Monday....will raise $5.8 billion....There is no problem collecting the tax. They froze the accounts over the weekend...they are going to extract the tax from the balances."
(BRINKER CONTINUED) "There is a lot of Russian money in Cyprus banks....Thirty percent of the deposits in Cyprus banks are non-euro nation deposits.....This is uncharted territory....When you start confiscating, let's use real words here.... When they begin to confiscate deposits in banks, what kind of a precedent does that set?......You can't avoid this....All of the accounts were frozen while the banks were closed....The deposit tax will be assessed before the banks open on Tuesday....They are going to limit electronic transfers until the banks re-opening. There's not going to be any opportunity to get around this.....And one of the politicians said quote, 'as it is a contribution -- that's the word I want to focus on -- to the financial stability of Cyprus, it seems just -- that's another good one -- to ask a contribution... of all deposit holders. Is that the sentence from Hel...sinki or what?"
(BRINKER CONTINUED) "It's amazing to me that something like this would be...or proposed....Now there's concern that they could re-ignite the financial crisis with this kind of an effort.....Another of the observers said that tapping deposit holders -- there's another semantical exercise -- was needed to expand the tax base in Cyprus. Is that a tap on the shoulders when you wake up and find 6.7% of your hard-earned money is gone?....Will people in other countries start wondering about their deposits in banks in places like Greece, Portugal, and Ireland and even Italy.....Could we see re-circulation of money to get away from that risk?"
MORE BRINKER COMMENTS SCATTERED THROUGHOUT THE SHOW: Brinker said: "This precedent is beyond ugly....It's an outrage. It's outlandish....In my opinion, the people in Cyprus have been robbed.....It's not really a tax. It's an outright confiscation.When you think about the fact that they are doing it to somebody who managed to save 1000 or 10,000 euros over a period of years by scrimping and saving and denying themselves...It's unconscionable."
WILL IT HAPPEN IN UNITED STATES BANKS? ....Brinker said: "I expect that here in the US, people will recognize that it's not going to happen in US banks."
IN EDIT MONDAY: Honey EC: Several have pointed out in comments (LINK) that this kind of "confiscation" has already happened in the US.
from CNBC: "The arrangement, structured as a bail-in, would give depositors shares in the banks in return for the levy."
Here are a couple links to read more about the subject. This one seems to be keeping it updated regularly: Telegraph UK News/Cyprus And this from the BBC.
PEOPLE ARE LINING UP AT CYPRUS BANKS.....Caller Martin from Virgina Beach said if he had money on deposit, he'd take what was left out of the bank as soon as possible. Brinker correctly said that people are already lining up, but the banks have frozen the accounts, limited what can be taken out. Martin ended his call by saying: "They must not have Second Amendment rights over there."
BE SURE YOU HAVE FDIC INSURANCE...Brinker said: "When people lose money by doing it (not having FDIC insurance on all deposits), they are literally asking for it. They're saying, okay, I know it's not insured and I lose it if you go under, but I'm going to do it anyway. What can you do to help a person with that mind set. Nothing, they are walking off a cliff if the bank fails. That does happen when these banks that are not too big to fail, go under....We have too big fail banks in our system right now....And we have executives of those banks, in some cases, that are too big to jail. The Attorney General has told us that, so we know that.....But that makes it harder on the smaller banks."
REITS AND VQN: Caller Clark from Baton Rouge asked Bob about non-traded REITS. Brinker said he didn't "like them." He said the only REITS he would invest in is Vanguard REIT Index (VQN) -- an ETF.
REVERSE MORTGAGES....Brinker said: "I don't like them. I don't recommend them."
Honey EC: The hot topic of the day was Cyprus. Most of the callers talked about it, except for a couple that were very esoteric like "should I take a lump sum or not" and "which account should I draw down first when I retire."
Jeffchristie's Moneytalk Final Exam Question:Brinker's third-hour guest was Anat Admani who wrote "The Bankers New Clothes." (I do not advertise for Amazon anymore.) Here's a LINK to read more about her background.
What does Bob Brinker think of the new tax on bank deposits in Cyprus?
A) It is the most bizarre development in the history of finance.
B) It's more confiscation than a tax.
C) It is bazarro to the "N"th degree.
D) All of the above.
Answer: D All of the above.
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.)
Every so often, when she got some money ahead she would go to the bank. In those days, dollars were convertible to gold. You could exchange a 5 dollar bll for a 5 dollar gold coin. She would do this and put the 5 dollar coin into her safety deposit box. She couldn't keep the coins at home due to the lodgers and crime.
Then came FDRs order. Her bank was closed late on a friday. And stayed closed for a week. When she finally got in, her box had been opened and all her gold taken. She got NO recompense. There was no one to complain to. Ordinary accts were lost too. No FDIC.
Prior to FDRs order, gold was a bit over $20/ounce. Once the govt owned all the gold, they raised it to $35. Instant inflation.
There are a lot of lessons from history. Cyprus learned the same one again - banks take orders from the govt, not its customers.