April 12, 2015, Bob Brinker's Moneytalk: Stocks, Bonds, Economic and Investing Summary

April 12, 2015....Bob Brinker was not live on the air, but he tried real hard to make us think he was -- twice, today's date was spliced in to the old recorded monologues. All the callers were from various old shows. (comments welcome)

THREE CALLS FROM TODAY THAT WERE FIRST BROADCAST OVER A YEAR AGO

1. Crack Blog-Researcher (CBR), Chris from ATL, said:   "I think the "Jerry from Binghamton" call was first broadcast on March 30, 2014." 

Sure enough, here is the transcription of this call from over a year ago. Note that it gives out information that is no longer true. Brinker sold all FFRHX in January 2015:

FIDELITY FLOATING RATE HIGH INCOME (FFRHX) VS VANGUARD GINNIE MAE FUND (VFIIX)... Caller Jerry from Binghamton (?) said: I'm a long time listener and a market time (SIC) subscriber. My wife and are retired and we pretty much have critical mass. Question for you is, our portfolio is -- the money is between model portfolio two and three. I kind of have a combination of both..... That leaves us with 20% in the Floating Rate Fund. Is that is conservative as the Ginnie Mae – over all these years we followed you on Ginnie Maes. I know I got weak there (non-discernable)..... but the Floating Rate, as I understand it, is a high-yield but is tied into the market rate. As interest rate goes up that fund should increase to have a high-yield. Is that correct?

Brinker replied: "I think that that would be accurate. And by the way as I said many times, we prefer credit risk at this time over interest rate risk. And that is the reason that we prefer not to be in Ginnie Maes at this time because we don't want that extended maturity that is generally found in a Ginnie Mae Fund. We like short-term maturities much much better. And the fund that you are talking about in that portfolio has a duration of only an average of three months. So that is extraordinarily low even though our overall duration is closer to one year. And we do prefer to control the duration aspect of the portfolio to minimize interest rate risk, but were perfectly comfortable with accepting some credit market risk in an expanding economy. So basically I would say yes, as rates go up the rate on the fund would go up. And this is what's most important, the net asset value of rates going up should be minimized in a fund of that nature because of the very low average duration in that fund. So that fund is giving us everything that we want in an income security at this time. A short duration, a reasonable yield, and certainly some credit risk in a portfolio, which again, in an expanding economy, I think that's the best place to be."

2. CBR Chris from ATL found a second call that was covered by this blog. He said:  "The current "Doris from Williamsburg" call was first broadcast on the Apr 20, 2014 show"   (Jeffchristie wrote the summary of this original call in April 2014)

 "Doris in Williamsburg ask about critical mass.  Bob told her that if you have assets that generate enough income to live the way you want you have reached it."

3. CBR Jeffchristie remembered caller Abraham from Albany who mentioned the "$16 trillion national debt. Take a look in the right hand column of this page and you will see that we are now well over $18 trillion national debt -- in one year! Now that is skeery!  Here is the original coverage of Abraham from Albany written in April 2014 by Jeffchristie:

 "Abraham from Albany said he attended a presentation where the speaker said the dollar was worthless.  Bob told him that was nonsense."

BRINKER'S LATEST ANALYSIS OF FIVE ROOT CAUSES OF A BEAR MARKET

Bob Brinker analyzed the five primary (root) causes of a bear market in the April issue of Marketimer.

1. Tight Money: Brinker has talked about rate normalization for over a year now. He likes to point out that the end of quantitative easing did not damage the stock market. He has said that the Fed is now interested in ZIRP (zero interest rate policy), but lately, he seems to be backing off a bit on his predictions for rising rates. He predicted that the Fed will remain accommodative "at least into 2016."

2. Rising Rates: Based on very low PCE and core inflation rates, Brinker said: "We expect any short-term interest rate increases this year to be minor.  Small rate increases would not impede the current economic expansion in our view."

3. High Inflation: Brinker said: "The incoming data continues to show a benign inflation pattern.…  As long as all of the major inflation indexes remain below the Federal Reserve inflation target of 2%, there is no pressure on the Fed to tighten monetary policy to any significant degree."

4. Rapid Growth: Brinker defines rapid growth as a rate of real gross domestic product (GDP) expansion above the historical average of 3% to 3 1/2%.  As he has said on Moneytalk, the impact of harsh winter weather is expected to dampen first-quarter activity.  He expects the full year of 2015 real GDP to be within a range of 2 to 3%.  However, he still expects the first quarter to be soft.

5. Overvaluation:  Brinker said; "Operating earnings estimates for the S&P 500 index extended $128 for 2015 and a preliminary figure of $135 for 2016"   Brinker agrees with the Federal Reserve 2016 real GDP forecast of 2.3% to 2.7%.

He concluded that the S&P 500 index has the potential to "Trade into the upper 2100s range going forward."    Brinker is maintaining his favorable stock market view, but is aware that there has not been a correction of 10% or more since the autumn of 2011.  He would regard such a correction as a "health-restoring event based on the current Marketimer stock market timing model outlook."  He still recommends dollar-cost-averaging for investing new money -- and he recommends taking advantage of short-term market weakness to dollar cost average.  Brinker's model portfolios remain fully invested as they have been since 2003.

Jeffchristie's Moneytalk Final Exam Question

Since today's Moneytalk was a repeat the final exam question will also be a repeat.

Bob Brinker calls Presidential candidate Hillary Clinton:

A) The Wicked Witch of the West Wing.
B) Evita
C) Madona
D) The Queen of Mean

ANSWER

                                                  Summary posted at 6:45pm PDT

READ AND POST COMMENTS