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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