February 26, 2017 Bob Brinker's Moneytalk: Stocks, Bonds, Interest Rates, Economy

February 26, 2017....Bob Brinker hosted Moneytalk live today....(comments welcome)

FAMOUS COMMUNIQUE......Bob Brinker did not do the usual current events opening monologue today. Instead he read another "communique" from a listener who had over $2 Million and had reached The Land of Critical Mass - he and his wife are in their early 50's.....  Thanks to dRahme, you can listen to Brinker read it in this short audio clip. 

STOCK MARKET....BB comments: Investors are "falling all over each other to buy stocks" because they are anticipating some good things ahead - like tax cuts and less heavy-handed regulation.  He told callers today that he is still for dollar-cost-averaging.....and recommends a 50-50 split between stocks and fixed income asset portfolio asset allocation for those retirees.

STOCK MARKET HISTORY.....BB comments:  The S&P 500 Index is at an all-time-historic-high of 2367....Dow at 20, 821...an 8 year bull market run....The S&P has risen 1700 points since the bottom of 667 in 2009 = a 255% increase. If cash dividends are added it goes up to 270% total return.

Honey EC: It took several years for Brinker's Marketimer model portfolios to get back to even in this long bull market because they and those who follow Brinker, rode that megabear down to that 667 S&P bottom! What a shame that Brinker got caught in that bear.   He never sells into "weakness," and he kept thinking it had bottomed, so he kept issuing all-in buy-signals all the way down.  Thanks to dRahme, here is a clip of Brinker's stock market history lesson.

BOND MARKET.....No change in Brinker's recommendation to avoid longer-term bond funds and stick with short-term bond funds only. He said he is still willing to take credit risk in his bond fund holdings, but not interest rate risk.

TAKE TIME OFF AND SPEND MORE....Brinker told caller Chris from Alabama, who was a 47 year-old Federal employee with extra money beyond Critical Mass, to spend more and  to take "more time off."

Honey EC: Now in this case, we all know for a fact that Brinker "eats his own cooking." He has his  own "time off" down to where he works at most, three days a month - that's three 3-hour weeks per month. 

NEXT WEEK'S ECONOMICS - GDP, JOBLESS, FOMC: .....BB comments: GDP first revision coming out Tuesday....estimate is 4th quarter revised 2.1% annual, up from 1.9%. Thanks to dRahme, short clip of expected reports.

FRANKJ'S MONEYTALK GUEST-AUTHOR SUMMARY

Bob’s guest on February 26, 2017 was Sheelah Kolhatkar, author of the recently published book,  Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street.” Ms. Kolhatkar’s short bio says she is a former hedge fund analyst, and is now a staff writer at The New Yorker, where she writes about Wall Street, Silicon Valley and politics.

Who was the Most Wanted Man on Wall Street? Steven Cohen. He was the operator of SAC Capital Advisors, a hedge fund that averaged annual returns of almost 30% over two decades. Cohen isn’t managing the hedge fund anymore. It shut down in 2013 after pleading guilty to insider trading and paying a $1.8 billion dollar fine. Hedge funds charge investors between 1 and 2% and collect 20% of any profits. Cohen was sitting on about $12 billion in personal wealth when he paid the fine.

And what is “the Black Edge?” It is Wall Street slang for inside information – things that would only be known to officers and the board of directors of a company.

The guest got interested in this story when a former employee of Cohen’s was arrested. This was Matthew Martoma who was later found guilty of insider trading. He was sentenced to 9 years in prison. The federal investigators hoped he would give them information that would lead to an indictment of Cohen. He never cooperated with authorities, however.

Bob asked the guest if she thought justice was done. She said that most average people would say no.

Bob made the point that given Modern Portfolio Theory, it would be nearly impossible for a hedge fund (or nearly any investor) to compile the record Cohen built over the years. This conforms with comments Bob has made over the past couple of years on hedge funds in general. He has implied that there must be SOME level of insider information coming their way in order for them to do so well. (Not all are profitable.)

Ms. Kolhatkar seemed to agree with Bob. She referred to Cohen as “a tape reader,” and an event trader.

There were two callers. One of them was “Angry Keith” from Rochester. He has gotten through a number of times and always goes on a rant in a very loud voice. Hey Ravi, quit letting this guy through, he adds nothing to the discussion! The guest had said that Cohen did not appear to help Martoma’s family out financially while he is in the clink. This prompted Keith to point out that the Mafia helps out its people when they do a stretch. Bob cut him off.

The next caller was Ken from Illinois who said he spent 4 years in the legal system as a whistleblower against a big bank. He asked if the legal system is abused as a weapon or is it a system of justice. The guest said the legal system treats people differently according to their financial resources. Those with few resources get steam rolled. Those with vast resources make out much better. Cohen had a very effective and high priced legal team.

If you want to read the recent Wall Street Journal review of this book, you can find it by searching “Wall Street Journal review of Black Edge.” The review was written by David McClintick. It may be behind the WSJs pay wall.

Honey here: Thank you, FrankJ. I have never heard Brinker rave about a book as much as he did this one. He said he had trouble putting it down. He also said he had read half of it and did not want to have the ending ruined for him. She must be a great author. I am going to buy the audio version tomorrow. 

JEFFCHRISTIE'S MONEYTALK FINAL EXAM QUESTION

Who did Bob Brinker say was in the land of critical mass and then some.

A. Bill Gates.
B. Michael Bloomberg.
C. Warren Buffet.
D. Ted Turner.

ANSWER

Honey here: Thanks Jeffchristie. Calling that man's fortune "critical mass and then some" is rather funny. Wonder what Brinker thinks would simply be critical mass, leaving off the "then some."  :) 

This lovely picture was taken by dRahme: 

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710KNUS Denver

WNTK  
KION 1460  Monterey

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February 19, 2017, Bob Brinker's Moneytalk NOT live Today - Re-Runs

February 19, 2017....Even though it was not announced, Bob Brinker did NOT host Moneytalk live today - reruns and old calls....(comments welcome)

UPDATE ON BRINKER RECESSION AND STOCK MARKET OUTLOOK

Bob Brinker follows several indicators in his timing model, which he called "pre-recession indicators" this month. I think that is because he believes 20% + bear markets are preceded by recessions.

In the February 2017 Marketimer, Brinker reviewed these indicators.

• Accelerating Inflation
• Payroll Growth
• Rising Unemployment Claims
• Inverted Yield Curve
• Leading Economic Indicators.

Summation: Bob Brinker wrote:  "The most positive factor underpinning the stock market as of now is the absence of a recession scenario. Most bear market declines in excess of 20% are associated with recessionary economic activity. The current low level of recession risk suggests that a bear market is unlikely in the near future. On the other hand, the elevated level of stock market complacency on the part of the investment advisors suggest that a short-term pullback would be a welcome antidote to the current complacency."

As Jim commented,  in the opening re-run monologue that Brinker chose today, he took another very subtle shot at the president - from Brinker's perception of what the president advocates.

Jim said...

 I thought Brinker would take vacation last weekend but he decided to wait for Presidents Day since the market is closed Monday. Speaking of presidents I noticed Brinker couldn't resist a taking a few indirect shots at our current President in his brief opening monologue. He mentioned something about "protectionists" don't understand this or "protectionists" don't realize that. Brinker never mentions who he thinks these so-called "protectionists" are but we all know who he thinks the main "protectionist" is. Brinker needs to realize that there are a few things "Globalists" like himself don't understand either.

In addition to talking about this subject almost every time he is on the air, Brinker also wrote about this in the February Marketimer:  "Clearly, investor appetite for risk could be  reduced in the event the U.S were to pursue a policy of trade protectionism or in the event the free flow of employees and commerce were to be disrupted by ill-advised policies. We will remain vigilant in the current environment in the event changes to our market outlook occur." 

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February 12, 2017, Bob Brinker's Moneytalk: Stocks, Bonds, Economy Commentary

February 12, 2017....Bob Brinker hosted Moneytalk live today.....(comments welcome)

STOCK MARKET....Brinker commented that the Dow is now at 20,269 and the S&P is at 2316 - all-time-historic-highs. "How sweet it is."

S&P 500 INDEX: STARSHIP MONEYTALK'S FAVORED MEASURING TOOL....BB said: The reason  is because the S&P 500 Index, which is comprised of the 500 largest companies in the USA, is an index that contains large cap, and to some degree, large mid-cap.....It is not an index that is dominated by mid-cap and small cap. It's an index dominated by large companies as measured by their market capitalization. Market capitalization is derived by the number of shares they have outstanding times the share price.....The index is also market weighted...which means that your impact on changes in the index is measured by the size of your company....

NO DOW BASHING, JUST THE FACTS MA'AM.....BB continued: This is the problem with the Dow Jones Industrial Index. I'm not going to bash the Dow because the tradition that is baked  into tracking the DJIA is so deep - it's one of the deepest traditions that I can think of in the Canyons of Wall Street - and therefore, we continue to track the Dow.

IT'S ALL ABOUT THE ANCIENT HISTORY....BB continued:  And that's okay too because the Dow has a way longer history than the S&P 500 Index. That is very important when you go back and look at what happened in the crash of 1929 when the Dow declined 89%....So we need to know about market history, and that is why the Dow remains relevant today....

LADY GAGA SAID IT SO GETCHER  "A+" ON THE FINAL EXAM..... BB continued: To paraphrase Lady Gaga, which we don't do every day on Moneytalk, I can think of a million reasons to leave, just give me one reason to stay....One reason to stay - show respect - for the Dow is history.....And if this is on the Moneytalk Final Exam, if we have a Moneytalk Final Exam, and this is on the test, here is your answer: history.....A+ on that one.

ROUND NUMBERS ATTRACT THE BIG-MOUTH CARP.... BB talks about how the sellers are like carps waiting with open mouths for the round numbers (covered at the end of this audio) from dRahme:  Short clip of the opening monologue that covers Dow history

MICROSOFT IN MARKETIMER SINCE 1990..... Caller Victor from Chicago asked BB if there was a buy and hold stock that he would recommend. Brinker replied that he had recommended Microsoft in Marketimer in the 1990s at slightly less than $2 per share on a split-adjusted basis.  MSFT is now in the $60 range and is listed as a hold in Marketimer.

Honey EC: Thanks to FrankJ for doing the comparison between owning the total stock market and Microsoft during the years since Brinker recommended it.

VFIAX 10,000 grew to 115,220 from Jan 1 1990 to present.
MSFT grew to 1,556,560 (from 10K invested) over the same period.
Source: Morningstar graphs, comparison.

Honey EC: Jeffchristie sent a reminder that Bob Brinker has always put a 4% limit on holding one stock. Therefore, to follow Brinker excellent MSFT recommendation to the land of Critical Mass, one would have had to ignore that rule and let it all ride. 

TREASURIES UP - MARKETIMER DURATION DOWN....BB comments: The Treasury yield is up about 100 basis points off its low....I'm okay with the bond portfolios that we have. We have an average duration  in our income portfolio of 1.3 years.....It's yielding over 3%....

MARKETIMER INCREASED CREDIT RISK TO KEEP DURATIONS DOWN....BB continued: Remember, we've designed it to minimize interest risk by taking some credit risk and so far, the credit risk has paid of extremely well. In fact our major holding in the credit risk category had a gonzo year in 2016 - up close to 10%....We had the bond funds in portfolio number III....

MARKETIMER MADE CHANGES TO LOWER DURATION IN JANUARY....BB continued: Remember we made a change on January 10th - further reduced the average duration of model portfolio III and the income portfolio by making a change in fund holdings which reduced average of duration.

January 2017; Bob Brinker's Marketimer:  

Model Portfolio III (balanced): 
SELL: DoubleLine Total Return Bond Fund (DLTNX)
BUY: Metrowest Unconstrained Bond Fund (MWCRX)
Income Portfolio:SELL:  DLTNX
BUY Additional: DoubleLine Low Duration Bond Fund (DLSNX)
BUY Additional: MWCRX
BUY Additional: OSTIX

BOB BRINKER'S VIEWS ON POSSIBLE TAX CHANGES....Thanks to dRahme for this clip of BB's tax and tariff  commments

STATE OF ILLINOIS IS RUN FOR BENEFIT OF GOVERNMENT EMPLOYEES....BB comments: Muni-bond holders may want to be warned.....The State of Illinois has real financial concerns....Pension and benefits promises have been made to public employees which exceeds $100 billion.

WHAT'S HAPPENING IN THE CANYONS OF WALL STREET NEXT WEEK....Thanks to dRahme: Short clip about the tsunami of Fed-speak, housing, possible rise of inflation,

FRANKJ'S MONEYTALK GUEST-AUTHOR SUMMARY 

Well, today February 12, 2017 we were subjected to a really boring interview with an economist from Berlin.  Philip Lepenies (Lep-en-eze) author of the book   The Power of a Single Number: A Political History of GDP   (Editorial comments in italics as usual.)

It had to be frustrating for Bob too because getting an answer out of this guest was like trying to use a fork to stab one frozen pea on a plate!

Cutting to the chase, here is the ONE thing this guest said with any conviction:  In response to Bob’s question toward the end of the interview about guaranteed incomes, the guest said, “It might work in Finland.” 

Anyone looking for anything more substantive can stop reading now.

Politicians always say economies have to grow but the guest is not sure if growth is good or bad.   So Bob asked is it realistic to grow, or for an economy to stay flat for a while?   The guest said he didn’t know if it was realistic or not.

Bob, took another run at the subject:  “How would we measure the growth of an economy if we threw out GDP.”   The guest said he didn’t know.

Bob switched gears to one of his totems, education (or lack of it).  After a short speech he threw it to the guest who brought up the author/economist John Kenneth Galbraith and his book “ The Affluent Society.” 

 (This brought back some bad memories from a college Econ course I took so I don’t know what the guest said.)

Bob kept pitching and the guest kept fouling them off.   He asked him what he thought of the recent inauguration speech by President Trump and what he might have had to say if he were in his shoes.   The guest pointed out that he couldn’t be president because he wasn’t born in the US.   He said he would not have claimed that he would double growth.  Bob asked him what he WOULD do and the guest did not have an answer. 

Jim from Lafayette, CA made a speech about robotics/hamburger flippers/education.  Technical developments keep moving ahead and they don’t necessarily “make room” for those lacking in skills.   Business owners know that robots don’t talk back, don’t join a union and don’t take sick leave.  

To which we could add:  they don’t get hurt on the job, don’t need bathroom or smoke breaks, don’t steal stuff from the company, don’t harass each other and don’t fill their water bottles from the water cooler before they leave to go home. 

Bob from Atlanta made a speech about the populist movement.  He said the people in the middle are mad because they’ve tried to do the right things but now they’re realizing they don’t qualify for a lot of the benefits the low income people qualify for.    The rising tide of an improving economy won’t necessarily lift them up.   This country needs to get its house in order by reducing spending.

Dennis from Albuquerque made a big speech too.  He pointed out housing prices have gone up in a couple of generations such that people starting out today have a very hard time buying a house.

As the interview limped to a conclusion, Bob brought up the concept of guaranteed income.  The guest said some governments are looking at different ways to do this.  England actually did it hundreds of years ago.  There is no magic bullet.  Scandinavian countries with their 50% tax on marginal income – he implied that they might try this. 

Here is one of my “economist” jokes to wrap up: 

Two economists are walking along a forest path.  The older one says to the younger one:  “If I give you $5,000 will you let me punch you in the face?”

The younger one thinks for a moment and says, “OK.”   So the first economist writes out a personal check, hands it over and punches him.  The young one gets up and they walk on.  

Then the younger economist says, “If I give this check back, can I punch you?”  The older guy agrees, he is handed the check and gets socked.

They walk along in silence a while, then the younger one says, “You know, all that was stupid, we didn’t accomplish anything.”

The older one says, “Ah, that’s where you’re wrong.  We increased GDP by $10,000.”

Honey here: Thank you, FrankJ....It seems to me like the callers contributed more to this interview than the guest. Thanks to dRahme, starting at 3.4 into this clip, callers Jim from Lafayette and Bob from Atlanta and Dennis from Albuquerque.


JEFFCHRISTIE'S MONEYTALK FINAL EXAM QUESTION

Why is the DJIA relevant today? 

A. It makes sense.
B. Brokers make a commission on it.
C. History.
D. There isn't a better option.
         ANSWER

Honey here: Thanks Jeffchristie....Brinker stole some of your thunder today giving out Final Exam answers. :) 

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KION 1460  Monterey 

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February 5, 2017, Bob Brinker's Moneytalk: Stock, Bonds, Economy, and Investing

February 5, 2017....Bob Brinker hosted the first two-hours of Moneytalk live today, then without announcing it,  he left to watch the Super-Bowl and played old rerun calls the third hour.....(comments welcome) 

STOCK MARKET....Brinker  said this: "We've had a favorable view of the market going all the way back to March 2003 when the S&P was at 800. It's up more than 2 1/2 times since that time, so it's had a tremendous run. It's also had a huge run in the last year. It's up about 24% since last February. So if you are going to be establishing an equity ratio, I'd be taking a dollar-cost-average approach - especially on market weakness....I don't like to chase markets at all-time-highs after they've been running to the moon....."

WHICH INDICATORS INDICATE STOCK MARKET SLOWDOWNS... Caller Sharon asked Brinker about this.   BB replied: There are many indicators and it would be impossible to cover them on the radio. We cover this is the investment letter.....One of the many things you can look at is the Leading Economic Indicators. The Conference Board publishes monthly the Leading Indicator Index - gives some indication of the economy going forward over a period of 3 to 6 months.....But there is a long list of information that I go through in trying to determine what's going to happen to the economy going forward......

TECHNICALS PREFERRED OVER FUNDAMENTALS..... BB continued:  "From my point of view, the key input in trying to make a forecast on the stock market has to come from the technical side. Certainly you have to follow what's going on in the fundamental side. You want to have your best judgment on what is happening with the economy, but when it comes the internal market technicals, that is the best place to provide input on what is going to happen in the market.

MARKETIMER BASED ON TECHNICALS....BB contined: " When we issued our sell signal in January 2000, to take most of the money out of the market (Honey EC: it was 60%), it was based on our technical indicators.....When we issued our buy signal in September 2011, when the S&P was low 1100s....That was again driven by technical indicators......When we issued our buy signal a year ago in February....once again driven technical indicators....They are not perfect, but they can be extremely valuable.....they predicted the bear market that started in year 2000. They predicted the bottom last February. They predicted the bottom in September 2011.....Some people if it's not perfection then so what. I say when you are making those kinds of decisions, you don't have to make 100% on the decisions. For example, if you took most of your money out of the market in January 2000 and then put it back in in March 2003, when the S&P was at 800, then that is a major factor in terms of what's happened to your portfolio....."

Honey EC:  The S&P was at 800 in 2003 and rose steadily until 2008, when it dropped to 677. Brinker just skips right past the 2008-09 megabear because his "timing model" missed it entirely. As for his buy-signals that come with no prior sell signals, there have been a lot of them where the market has continued to drop afterwards. He only mentions the ones (about 50%) that he gets right. 

Honey EC2: I'm not sure that I understand the real difference between "fundamentals" and "technicals." If some of the BRT (Blog Research Team  - anyone can become one) would like to help me understand, I'd certainly appreciate it. 

FED SEZ INTEREST RATES GOING UP.....BB comments....The Fed has said that they expect to raise rates several time for the next few years....This year a broad band of possible rate hikes would be 2 to 4.....My personal view is 2 to 3. The only way I could see four would be if we saw an acceleration in the economy. Did not see it in the fourth quarter at 1.9% preliminary.....This is data dependent....not set in stone.....They are trying to get the Federal Funds overnight lending rate to 3% as the long-term target....There is a long ways to go because Federal Funds right now are 1/2 of % to 3/4%.....

FOMC ECONOMIC ANALYSIS.... BB comments....First meeting this past week...there was no change in rates.... In their  statements the Fed said  that the labor market continues to strengthen; economic activity continues to expand at a moderate pace;  household spending continues to rise moderately; business fixed investment remains soft; measures of consumer and business sentiment are improving;  inflation increased in recent quarters, but is below the 2% long term objective.

JOBS GROWTH NUMBERS....BB comments: Very good numbers reported Friday for January.......227,000 new jobs......unemployment rate of 4.8%......an increase in participation rate......wage growth for the month 0.1%, which means an annual rate of 1.2%. This is important because wage growth is a major component of inflation - watched closely by Fed.

FACTS ON THE FIDUCIARY RULE....Brinker talked about Dodd-Frank and the so-called Fiduciary Rule that was supposed to start in April being done away with. He was all atwitter. But I say Caveat Emptor.   No investment advisor - not even America's Most Trusted one - can be trusted to put clients ahead of themselves. I could cite enough examples to fill a good sized book. Check it out for yourself - there's good reason to do away with it.

AS HE WAS LEAVING AT END OF HOUR TWO BRINKER SAID THANK YOU FOR 31 YEARS....BB said: "We've been around since Super Bowl Sunday 1986. I've enjoyed this run and the program. I've enjoyed every minute of this 31 year run on the program. I guess some of our listeners are not aware that if you are on a radio program for 31 years, then obviously the listeners are enjoying the program, otherwise you would not be on the program for 31 years. This is a crazy business. Not a business known for 31 year runs in anything. So I want to thank each and everyone of our Moneytalk listeners for making this program possible because without the loyalty of our listenership over the years, it would not have been possible to host this program."

PRECURSOR TO MONEYTALK.....BB continued: "This program had a precursor prior to debuting on the national broadcast hookup, I had hosted a similar program. Literally a precursor to Moneytalk on a major talk radio station in New York City at the time. We were on  one station in the mornings, and then later it was on Saturday mid-days until I left to take this broadcast....We  started that in October 1981 and continued until the week before Super Bowl Sunday 1986, at which time, I accepted the offer that was made to host this program......

BOB BRINKER LIFETIME BROADCAST HISTORY....BB continued: "In terms of doing radio broadcasting. It kind of got in my blood when I was a teenager. I literally started help pay my way through college when I was 18 years of age. I started in what was then a small town, Sante Fe, New Mexico - that was the first time I took a radio broadcast job and tried to learn the ropes over the years. Kept my hands on it as an avocation and I'm glad I did because the opportunity down the road came along after I'd gone off in several different directions, including NCAA college basketball and football play-by-play, which I enjoyed immensely. But I always returned to my roots in investments. It worked out well, working in investments and at the same time, having a hand in the broadcasting business. And we were able to put the two together for this program."

Honey here: I have been one of those who has listened to Moneytalk almost from the beginning when KGO started carrying the program. I became not only a fan, but a critic about 15 years ago when my eyes were opened on the Brinker message boards that the Jr webmastered. 

Did Brinker just say good-bye to Moneytalk? I doubt it, but if he ever does, he will not tell us - that would show real respect for his audience to actually say good-bye, which I know he does not feel. 


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KION 1460  Monterey 

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