STOCK MARKET: REDWOODS OR BONZAI.....Brinker did not discuss stocks, but made one comment. He said that unless something has changed and trees now grow to the sky, the stock market will not go up forever - that we have not had a bear market for 8 years.
KEEP BOND FUND SHORT-DURATION....BB recommends keeping bond fund duration very short. It doesn't matter if you buy individual bonds and intend to hold to maturity.
MARKETIMER PORTFOLIO III AND INCOME FUNDS .....BB pointed out a few times today that his bond portfolio and model portfolio III (balanced between stock funds and bond funds) have an average duration of 1.4.
Honey EC: The THREE Marketimer bond funds that Brinker referred to several times today have low duration - as he said. But be aware that they also have high-yield bond holdings, especially OSTIX.
NEW JOBS MARKET.....BB comments: Another good jobs report on the books....adding jobs at a terrific pace in recent years....in February, we added 235,000 jobs...."We had a warmer than normal February in many parts of the country. And some favorable seasonal adjustment factors played in. This number was a little bit lower than the prior year, but still a very good number."
INTEREST RATES FOMC HAS NO WIGGLE ROOM ....BB continued: When we look at this jobs report, it removes any remaining doubt about what the Federal Reserve will do at it's meeting next Wednesday.....What are the chances that the FOMC will vote to increase interest rates? I'm placing them now at 100%. That leaves no wiggle room, but it's my opinion and I'm sticking to it.....That means 0.25% rate hike. ...That will move the Federal Funds rate from 50-75 basis points to 75-100 basis points. ...
THREE (OR MORE) HIKES THIS YEAR LOOK GOOD..... BB continued: How many times will the Fed raise rates this year? The current thinking three or close to three. I'd say with this week being a slam dunk, as long as the data continues to come in favorably on the economy.....the Fed is data-dependent.....the number 3 is good for rate hikes this year. If that number is incorrect, it is more likely higher than lower.
ECONOMY....BB comments: Last year we had a year-over-year real GDP of 1.9%. I estimate we can grow at a little better rate this year.
Honey EC: Brinker is clearly expecting the economy to continue to grow at a more rapid pace than it has for the past 8 years which will continue to give the FOMC the data it needs to keep raising interest rates.
Honey EC: I highly recommend Staples online. I also recommend Walgreens and Costco. In many cases, they offer better prices, more and faster free delivery and other perks. No way is Amazon king of online shopping anymore.
==> Thanks to dRahme, short clip of Brinker discussing a possible new fiduciary rule, and government forcing investors to pay for advice - with Tom from Saratoga, CA
ALL PRESIDENTS PURGE THE OPPOSITION.....Even though he didn't mention President Trump by name, Brinker made a big deal out him firing U.S. Attorney Preet Bharara. Brinker neglected to say that Bharara was part of a group of 48 that President Trump replaced - and that this is business as usual when new presidents of a different Party take over. Clinton and Obama both did it.
==> Thanks to dRahme, short clip about hedge fund inside information.
Honey EC: Bharara is a Democrat - and he was offered chance to tender his resignation just like the other 48 were. He refused and almost dared President Trump to fire him. Not a wise thing to do with this president.
Question I'd like to ask Mr. Brinker: Does he think that Bharara is the only attorney who has (and will) investigate insider trading? I have hopes that his replacement will investigate "investment letters" that are sold with questionable performance records. I would especially like to see an investigation into "investment letters" that cover up (HIDE) mistakes that cost subscribers large amounts of money, and never accounted for in official records.
==> Thanks to dRahme, short clip of what's coming out next week in the Canyons of Wall Street.
FRANKJ'S MONEYTALK GUEST-AUTHOR SUMMARY
Barry B. LePatner was Bob’s guest on the Starship on March 12, 2017. Mr. LePatner is the author of Too Big to Fall: America's Failing Infrastructure and the Way Forward (published 2010).
Bob led off by mentioning the I-35 bridge collapse in the upper Midwest. The guest countered with the statement that bridge failures are not isolated and 600 bridges. Bob then launched into a long speech about growing up in eastern Pennsylvania and witnessing the beginnings of the Pennsylvania Turnpike. This led to a discussion of the interstate highway system and its beginnings in the 1950’s during the Eisenhower administration.
History buffs may remember that as an Army Major in 1919, Eisenhower was assigned to lead a convoy of military vehicles across country from Washington, DC to San Francisco. Wikipedia says they averaged about 5 miles per hour, given breakdowns, washouts, dirt roads, etc. The interstate highway project, which was really about national defense, was kicked off 30+ years later.
Construction and maintenance is supposed to be funded by a gas tax. The guest said it was set at 18.3 cents per gallon in 1983 by President Clinton. Oops. He meant 1993 by President Clinton. The tax has not been raised since he said.
Bob asked if President Trump’s $ 1 Trillion infrastructure program will make a difference – considering that’s a 10 year program amounting to $100 billion per year. The guest said it would be necessary to prioritize and address problems on a regional basis. It sounded like he was saying it will do little good to solve isolated problems here and there. He recommended a “National Infrastructure Czar.”
Bob teed up the subject of dams with reference to the Oroville Dam in California and the guest was off to the races. We have 4000 high risk dams in the country. He recommended doing an internet search on “failing dams” to learn where the risks are.
The guest was interviewed on the show 20/20 and he said it would take a disaster for people to wake up. Then he cited the collapse of the steel bridge where I-5 crosses the Skagit River in Washington State.
Nitpick: He pronounced it wrong. It is spelled “Skagit” but pronounced, “SKA-jit.” Indian name. Anyway, this bridge did not just suddenly fall into the river. It was weakened when a truck carrying something that exceeded the clearance hit one or more girders. This truck was carrying an oversize (wide) load and should have been in the inside (fast) lane crossing the bridge. Instead it was in the outside (right) lane where there was inadequate clearance. The pilot car did not communicate correctly with the driver. Further, it was squeezed to the right by another truck passing it, that’s why it hit the bridge girder. One of the 4 bridge spans collapsed immediately after the truck got across the bridge. Three people went in the drink but were not seriously hurt.
Bob and the guest spent parts of the interview beating up on politicians for not doing more to address the problem of infrastructure: roads, bridges, dams, water supplies and the electrical grid. (No mention of tunnels but might as well throw them in too.) Bob at one point referred to those in Congress as “idiots,” and when the guest responded in a more conciliatory way, Bob doubled down by referring to them as a “pack of morons.”
That about concluded the interview.
For the record, I think a randomly selected group of 535 county commissioners from across the US could do a better job of governing than this crowd has done over the last decade.
Honey here: I question the amount of money that the guest and Brinker claimed that President Trump wants to spend on re-building our infrastructure. I think it will be much more than that. And with jobs returning to this country and other things that are planned, there's a good chance it will be paid for by taxes (even with tax cuts in place) rather than added to national debt.
Today, Brinker raved about the book, "Black Edge" from two weeks ago. Here is FrankJ's summary of the guest's interview from two weeks ago: FRANKJ'S MONEYTALK "BLACK EDGE" SUMMARY
JEFFCHRISTIE SKIPPED TOWN ON US TODAY - HOPE HE WILL BE FOUND SOON!
Radio Stations:
710KNUS Denver
WNTK KION 1460 Monterey
108 comments:
Hi I was wondering if you know how BBs 50/50 balanced portfolio is constructed these days?
I had not read last week's comments until today. I found this one interesting:
"birdbrain said...
Charles Schwab recently announced offering their market cap index funds (total market and S&P 500 and others) with expense ratios as low as .03% with no minimums. Vanguard and Fidelity come close with a $10000 investment (.04%). Could this be the move that causes Mr B to include Schwab in the index fund recommendation discussion? Of course it would take a live show for this to happen. With more daylight on its way as we turn the clocks ahead this weekend, I boldly predict that Cap'n Starship will emerge from the southern Nevada snows and spend more time on air. Or not."
In the meantime, Schwab has heavily advertised & promoted these funds and the low expense ratios this past week. For many years I had the Schwab 1000 fund and it had very low expense (but not really much difference than Vanguard).
I since closed the account & moved it to Vanguard more for convenience & consolidation than anything else.
When they get down below a 0.10 expense ratio, it doesn't seem material. For example, on a $500,000 investment a reduction of 0.01 % per year would result in a $50 reduction in expenses per year to your portfolio. The Vanguard Total Stock Market Index Fund (Admiral) charges 0.05 % per year. So, to make the switch from Vanguard to Schwab would result in a $100 savings.
The good thing is that all investors will benefit from competition and the information that Schwab is communicating about the cost & value of index funds. Has got to make the managers of managed mutual funds nervous!!
Interesting call discussing the fiduciary rule. Brinker says investment letters are not part of the fiduciary rule. I can't help but wonder "Why not?" Investors do use investment letters as guidance for their IRA's in some instances. Academia suggests that almost nobody can time the market consistently. So the question is "Is selling a marketiming investment letter looking out for the best interest of the investor?" Bob Brinker would say YES but much of the research says NO.
Heh, and there was the ever so-subtle sideswipe at the unnamed current President regarding his relieving of a US attorney of his duties, one who has prosecuted numerous insider traders.
Bobby, the President's name is Donald Trump, and he promised the American people that he would "drain the swamp." I trust his judgement that this particular attorney is one of dozens of left-wing attorneys that need to be booted out -- as numerous incoming Presidents have throughout our history, when the sitting attorneys are of a different political persuasion.
One could conclude that Bobby is trying to impress upon us that the prosecutions will stop because this particular prosecutor will be gone. Hey Bobby, maybe Trump's new appointee will be even MORE aggressive . . . ?
It is normal for the incoming administration and attorney general to seek the resignations of US attorneys who were appointed by a prior administration of a different party. I don't know what BB is getting so exercised about.
Also, I am doing a poll: Is anyone besides me sick of listening to calls about duration and Portfolio 3?
HB, thanks for re-posting the summary about the Black Edge book. Will I get paid again? Thanks in advance!!!
rasputin here - Screw that 16 and 19 year old car stuff. I'm buying two new vehicles this week. Reliable transportation is one of the luxuries I afford myself. A 2017 Touring Odyssey (not the elite) for my wife. A 2017 V6 Honda EX-L for myself. Actually, relatively modest, reliable and economical vehicles.
Working as hard as ever at the age of 66 and usually taking one nice vacation year. Maybe I'll bump that up to two this year. My boss says I should take more time off.
rasputin again - Bob's blathering about bragging rich people likely also a swipe at Trump. There are a number of rich people whose wealth is no secret.
You really have to give Brinker credit for not naming the most well known braggart when it comes bragging about one's alleged wealth. Brinker must realize that AM/ talk radio, by its selected audience in general, is likely to largely be trumpsters.
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Bluce...Bob Brinker might have read my note to him last week because he also did his very best to exclude President Trump from getting any credit for the large increase in new jobs - especially manufacturing. He managed to smooth it all out going back many years to make out like it was nothing new.
We know that Brinker is on record saying that the NOONE (sic) could bring jobs back into the US from other countries. The only problem for Brinker is that it is already happening. LOL!
Judge Jeanine Pirro does a great job of bringing this self-proclaimed big-shot attorney into focus. Don't miss her opening monologue - YOU WILL LOVE IT. Scroll in about 1.2 minutes for the start in this video
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Anonymous, please use a handle - you will stand a better chance of getting an answer to your questions.
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Frankj....I was thinking you deserve a raise. How about double what you got paid for the original? (zero)HeeHee :)
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MDE...Nothing quite like a rich hypocrite sitting there at the mic letting caller after caller brag about how rich they got thanks to Brinker - and a few minutes later making it sound like talking about having money is disgusting to him.
Rasp: Call me an oddball but I'm pushing 67, still running my business part-time and no plans to quit, no pension but have reached "Critical Mass," and drive a 2007 Corvette and a 2017 Toyota pickup. Aside from those two items, looking around my property, one would surely believe I am living in poverty.
Honey: Yes, I watched Judge Jeannine last night -- she is the greatest! I would love to see her in the Supreme Court. And she's not hard to look at either. I cannot believe she's only a few months younger than I am.
Thanking someone for their contributions/ advice in helping to build one's own personal wealth is far cry from unilaterally bragging about one's own alleged great level of personal wealth.
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MDE...Oh, pulleeze....Some of the callers are only bragging. You evidently don't listen much.
And if you believed the caller today who went from not having enough money to make minimum purchase of a mutual fund to multi-millionaire, I have a bridge to sell you.
It's a pretty shade of orange.
This is Casey. Just curious as to what Bob's 50/50 portfolio contains these days.
JEFFCHRISTIE SKIPPED TOWN ON US TODAY - HOPE HE WILL BE FOUND SOON!
Probably on another extended fishing trip. The guy hasn't worked a day since he retired.
Honeybee,
Our little Wimp turd is playing on his computer again. I think it is about time to sic the super snoops in Washington on him. They don't seem to be doing much else of any importance. Is Comey still employed?
NOT Mad as HELL!:
Anonymous Mad as HELL! said...
Judge Pirro had pretty good surgery done on her. Wow...Looks great for 65!
March 12, 2017 at 3:26 PM
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I threw out the trash, Mad....Sorry.
You are right, Pig.
Jeffchristie can usually be found either out fishing or on the golf course - or taking baths. LOL!
Two typos in the summary.
1. Average bond duration is 1.4 years, not 1.4%.
2. Book is "Too Big to Fall", not "Too Big to Fail".
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Anonymous...thanks for the proof-reading.
Now start using a handle, and you can become a part of the BRT (Blog Research Team) in charge of looking for typos.
When a newly elected president takes office, it it normal procedure for all appointed members of the previous regime to tender their resignation. Then, the president can choose to keep accept the resignation or not. These attorneys, including Preet Bharara, are trying to milk the system for every last penny by waiting for President Trump to fire them. I am glad to see them go. Drain the swamp. They are trying to make President Trump look like the bad guy, when it is they who are evil ones.
Honeybee,
This may be common knowledge, but it looks like Bob's show on KABC 790 AM (Los Angeles) has gone on a diet. One hour (net of commercials = probably 35 minutes or so). I wonder how much longer he will be on locally (or nationally).
From Wiki:
"KABC-AM (790 kHz) is a commercial AM radio station licensed to Los Angeles, California. It serves as a West Coast flagship station for the Cumulus Media company. A pioneer of the talk radio format, the station went "all-talk" in September 1960, the second radio station to do so, a few months after KMOX in St. Louis."
At one time KABC was a major force in talk-radio, but has slipped in recent years. I rarely listen to the station and "found" Bob's show while twirling the radio dial around last night.
Here is their weekend program schedule:
http://www.kabc.com/weekend-programming/
The majority of KABC's weekend shows are of one to two hour duration. Actually, that might be a smart idea, as the vast majority of the shows are "selling something" and people tend to have a limited attention span for that type of program.
Last evening they broadcast MoneyTalk hour three as reviewed on your site (FRANKJ'S MONEYTALK GUEST-AUTHOR SUMMARY). That guest segment was quite interesting, yet very concerning to say the least.
For those so inclined, here is an in-depth report on the horrid state of our infrastructure. It "aint pretty":
http://www.infrastructurereportcard.org/
All I can say is WOW!...Are you KIDDING me???
Sean Spicer is to be commended for his self control. I think I would have been Mad as HELL!
http://kfiam640.iheart.com/onair/bill-handel-30603/woman-confronts-sean-spicer-at-apple-15640212/
https://medium.com/@Shreedom/such-a-great-country-such-nasty-bigotry-831eeea173cb#.246h95u19
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Well said Critical Mass! I agree with every word.
But when you think about it, isn't the vast majority of the so-called mainstream media in bed with the "evil ones."
What they are trying to do - when you cut to the chase - is overthrow the United States of America. Nothing short of that right now would shut them up - or so it seems.
Donald Trump won the CONSTITUTIONAL Electoral Vote by an overwhelming margin - to work to destroy him is to work to destroy the vote of the American people. I call that SEDITION.
You are welcome to join my thread where I discuss the president - HERE
BB comments: Brick and mortar retail struggling mightily....retail payrolls declined 26,000 in February....A lot of cuts in department stores - a lot of shopping has shifted online
Yep. This is why B&M retail is undervalued right now, and Amazon is overvalued. Everyone believes the narrative, just like they believed McDonald's was collapsing when it's stock was $20. Yet everyone forgets that B&M retail is still making big bucks! With low stock prices, their ROIC soaring. Target, Walmart, TJX are all good buys currently, fat dividends, big money, no buyers, even in the middle of a roaring bull market. There is always value in the stock market, even when it's overbought. This is why Index Funds (BB style) can never can match value investing over time, and why IQT or Buffet and the like have averaged well over 10% since the 1960s. Everyone buys the narrative rather than looks at the numbers.
Bruce, Call me an oddball...have reached "Critical Mass," and drive a 2007 Corvette and a 2017 Toyota pickup. Aside from those two items, looking around my property, one would surely believe I am living in poverty.
Yep, I'm worse that that. Cars 1998 & 2001, never spend, walk everywhere, never vacation, do all my own work, unemployed. People probably think I'm impoverished (even w/2 homes & NW $2m, hit CM in my 40s). I think a lot of America today, especially well off ones, are oddballs.
Is BB indicating a high point in the market is very near to come via his newsletter or radio show?
Thanks
Is BB indicating that the stock market is nearing to reach its high point in near future via his newsletter or radio show?
A mixed Market!
Gabe
Critical Mass wrote: . . . These attorneys, including Preet Bharara, are trying to milk the system for every last penny by waiting for President Trump to fire them.
I agree with your post, except for "every last penny . . . " That's not why this happened IMO. It's not about money, it's about the piling on of the disruption of the new administration for ideological reasons.
For leftists, "The Cause" overrides everything else including money and their own lives if necessary.
rasputin here-Gabe stock correction watch
Monday vti close 1.06% off closing high
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Jigar.....As his words, which I paraphrased in the summary, show, he thinks that it has been eight years since we had a bear market.
In the latest issue of Marketimer, he said what he often says on the air - a correction up to 20% would be health- restoring for the market.
In general, he recommends dollar-cost-averaging for new money.
Brinker is fully invested.
I know everyone already knows this, but Jeff Christie was an on-air name that Rush Limbaugh used during his earlier DJ career. Can I be on the BRT?
Fritzie, Oxnard
Honeybee said:
In the latest issue of Marketimer, he said what he often says on the air - a correction up to 20% would be health- restoring for the market.
Honeybee,
You have likely commented on this previously - but your post (above) has captured my curiosity...
Has Bob given advice (on-air and/or in MarkeTimer) on what investors should do with their current portfolios during these "health-restoring" periods; i.e. HOLD?, FOLD? or some variation?
We know well that many big-buck investors follow Bob - they call in on nearly every live show, i.e. 12 or so times per year. So, let's say I call in and tell the screener my name is J. David Bigbucks and I live in The Hamptons. I have a portfolio currently worth $895 million and need some advice from Bob.
When Bob takes my call I reiterate that I have an $895 million portfolio. Then I pop the question:
"Bob, what (if anything) should I do with my a $895 million portfolio if it appears that we are experiencing a health-restoring correction of up to 20%?"
How do you suppose Bob might respond?
JC
JC,
Brinker gives macro advice. He would say "don't panic, just ride it out." The health-restoring means that weak-kneed investors are shaken out (they sell) and bullish investors jump in and purchase, which pushes market prices ultimately higher. That's why he would stay fully invested.
Fritzie, Oxnard
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Jerrod....Firstly... uhhum....your question is very entertaining and not far from being typical.
I think that That-Bob has several possible avenues of monetizing that call.
1. Tell the caller how he found the exact top in year-X and moved "mostly to cash."
2. Tell the caller about that big buying-opportunity he called X-number of years ago.
3. Tell the caller that he is being very "vigilant" while monitoring tea leaves in his "investment letter."
4. Tell the caller that he will send out a special bulletin subscribers if X happens.
5. Tell the caller that if he is freeloading off of Moneytalk, he deserves to get whacked.
Or he could just tell the caller to start spending more money, especially if he's a smoker.
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Fritzie...You are absolutely right that Jeffchristie was Rush Limbaugh's on air name during his early years. That is something that many (probably most) do not know.
I think that might have been in Missouri.....
I hereby anoint you a full-fledged member of the BRT!
Fed Watch the next 2 days!
Gabe
Hi everyone this is Casey. Is anyone familiar with Bob's 50/50 portfolio?
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Oops, Bob Brinker did not mention this yesterday in his big rave about all the new jobs the last 8 years:
Nearly 95% of all new jobs during Obama era were part-time, or contract
rasputin here. Hi Casey. Bob recommends a 50% total stock market index fund, and 50% low duration bond fund mix during retirement years.
Mini volatility!
Gabe
Hi Rasputin thanks for your response. Does he recommend the same bonds funds in the 50/50 portfolio that he recommends in the income portfolio? I think he is correct to limit duration to preserve capital. I just don't know if I want to take credit risk in junk bonds if I already have stock risk since junk bonds are correlated to stocks to a large degree. It's difficult to find low credit risk yield in the feds new normal unless you extend maturities. If there's another credit contraction I'd think low quality paper would get hit hard & bonds are suppose to protect a retired persons capital when the business cycle contracts. It feels like we're in a box that the average retired person is forced to live in due to some questionable finacial engineering that may result in unpleasant consequences for retired people. What do all you folks think about how risk has changed in the new normal? Thanks everyone.
Casey: I have had the same view of being in a box for a few years now. If one expects the stock market to correct then the prudent thing to do is move to bonds. But, as Bob Brinker has pounded the table on bonds, intermediate ones will get hit because of their durations which tend to be in the middle single digits.
Short duration and ultra short duration bond funds are safer but their yield is puny so with the reduction in risk comes a reduction in income. Two longer duration funds that are demonstrating Brinker's duration "lessons": Vanguard's GNMA fund dropped 1.5% since Feb 24 and their Intermediate maturity fund, VFIDX dropped 1.3% since the same date.
When there is an equity market hiccup and a shake out begins, it won't just be S&P 500 index funds and ETFs that are affected. I was looking at some high dividend yield ETFs, and a mega-cap ETF. Their holdings are so highly correlated with the popular ETF, SPY, it is almost like owning SPY.
Your take on junk bonds is right on the money. They correlate with equities when equities decline -- and the junk gets hard to sell. I have been out of junk bond funds for a while with no plans to get back in anytime soon if at all.
Off Topic, but I hope you folks won't mind.
I am Mad as Hell because there is still no April Giraffe Calf. And no, I am not talking about a new drink at Starbucks's.
What I am talking about is April the giraffe (with calf). Everyone went on "Calf Watch" several weeks ago and still no bouncing baby boy or girl. Indications are we won't have to wait too much longer - probably birthing will occur in the next 24 hours or so.
If you get a chance, take a peek from time to time. I would really enjoy seeing the calf as final birthing occurs, but will probably need to settle for a replay.
It should be quite a scene. The calf is expected to be 6 feet tall and weigh 165 pounds at birth! (If you look at the current stream (particularly full-screen) you can see it moving around inside her).
April is a beautiful mom - look at her gorgeous markings! She is also quite poised as she moves around in her current environs.
http://www.aprilthegiraffe.com/
Mad: Not sure this is relevant, but when I was a small boy (8-ish) I watched my uncle and older cousin deliver a dairy calf right in the pasture. It was a first for the mom and she was having trouble, so they helped her. They knew what to do, and my uncle had no money for veterinarians anyway. Truly a different America from today.
It was a good lesson about real life for a youngster like me. I didn't have a lot of material things when I was growing up but I had priceless lessons like these, and they stick with you. It was almost 60 years ago and I remember it like it was yesterday.
FrankJ: With intermediate bond funds i.e.. GNMA---As you most likely are aware that if one holds the fund longer than its duration, the fund pays its higher dividend which makes up for its depreciation due to its higher duration. Quality bond fund is its attraction!
Gabe
"The market is way over-priced," he (Professor Robert Shiller) says. "It's not as intellectual as people would think, or as economists would have you believe."
Read more: http://www.afr.com/news/economy/economist-robert-shiller-gets-dot-com-dejavu-from-trumps-plans-20170314-guy08j#ixzz4bM7oJs6D
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AD
Hi Frank Casey here, thanks for your comments. The S&P 500 has a PE of 26+ the way I understand it. Historical average is 16+or- I believe. With the fed determined to raise rates it seems like could be in for some downside of unknown magnitude. It would be nice to see stock prices ease. But as they say the stock market can be irrational longer than most can remain solvent. I think there's some serious doubts by the bond market as to whether the government can stimulate a full employment economy & a fractured congress with blood in their eyes. Plus the fed will be a headwind. $20 trillion debt ceiling & dismantling & replacing the affordable care act should make for some thrilling political theater. Everyone keep your head down & don't take any wooden nickels.
Yeah Gabe, I'm aware of that. Thanks for posting the reminder.
AD: I agree! This Market is over-priced! The Fed will raise and possibly again in June.
Gabe
Fritzie: Brinker would say "don't panic, just ride it out." The health-restoring means that weak-kneed investors are shaken out (they sell) and bullish investors jump in and purchase, which pushes market prices ultimately higher. That's why he would stay fully invested.
Since 2010, the aggregate "stock market" has been "overvalued" by historical numbers. Yet...it's been a raging bull you don't want to miss. It could have just as easily been a bear, nobody knows anything. This is why BB's "market timing" is pretty much baloney and he provides zero hard metrics, just hand waving and gut instinct.
Casey: The S&P 500 has a PE of 26+. Historical average is 16+
Yep, but the the "historical average" doesn't factor in things history has never yet seen (ZIRP, QE, Trump, China pumping more cement in 3 years than the US did in our entire history, etc.)
Also, PE is just one factor of many. Many (say Buffett & Graham) think book value is more important. And that's even worse today and it has been most of this insane bull market.
So: why not just buy low PE, low Bk, high-yield blue chip stocks? Lots of value still remains in the stock market based on historical numbers. Why not buy the value and ignore the PE 26+ indexes? There are at least 15 blue chip stocks right now that are undervalued based on historical numbers; that's plenty of diversification. TGT, CVS, BEN, & many others are PE of 15 and book values of 20ish. Most importantly: they are all making LOTS of cash today & they pay fat dividends to share their profits. Nothing is certain, but I'll put my cash in those companies there and sleep very well.
MK: Do you use Fastgraphs?
Some (old) points in addition to MK's:
It has been documented for years, from various sources, that jumping in and out of securities when you think something is going to happen will leave the vast majority of people with less money after several market cycles -- as opposed to having an AA that you are comfortable with and just letting it run.
Bob the Marketimer totally missed '08 (but never really admitted it) the worst bear since the '30s, and has totally missed interest-rate forecasting for almost four years running now. As I've asked before, what has the opportunity cost been for him being in short duration bonds all that time?
I believe Mr B will be on air Sunday to pat himself on the back with the Fed increase. His short duration bond strategy is finally starting to take shape. So what if he was a few years early and will need several more rate hikes to come close to breaking even after the lost income opportunity.
Russell 2000 IWM up 1.2% ninety minutes to the close
The deck is now cleared for 1st of 2 immediate issues as I stated; Fed's projection of growth is consistent with growth not recession still accomadative; now let's see what happens with health care legislation and more importantly tax policy which is what the market is really goo goo eyed about...
Brinker's position on impact of growth going forward no recession is consistent with higher stock prices; he kinda was hedging his last show just in case market took a breather and corrected 5-10% as HB reported him saying: "unless something has changed and trees now grow to the sky, the stock market will not go up forever - that we have not had a bear market for 8 years"
rallyho!
smile
p.s. small item called the debt ceiling which needs to be dealt with which in past depending on how it is dealt with could cause market some indigestion :) Should not be an issue this time since Republicans will not filibuster or shut down government over for obvious reasons.
pps. I am concerned about stall on health care legislation as part of critical path of getting tax reform done this year only due to market's expectation.
Rasputin here-Gabe stock market correction watch.
Wednesday vti close off 0.53% from closing high.
Bruce, agreed. I have to give BB some credit though since he is generally "in" the market and only leaves rarely. So he hasn't paid much for his silliness and otherwise, what would he be selling? Personally, 50-90% works for me based on Dow yield, percent blue chips undervalued versus overvalued).
Frnakj, I don't know Fastgraphs; did I screw up some of those #s (went from memory).
Hi MK you make good points. QE ZIRP & too big to fail are part of the new normal. I have no business managing retirement money. I have no business hiring anyone to manage retirement money. I don't have the temperament or the education to manage retirement money. But here I am like a fool fumbling around in a dark room looking for a light switch. The young man at Vanguard created a 50/50 plan for me that I probably need to adopt. I'm not sure if I substituted Vanguards bond suggestions with BBs bond suggestions if that would require a risk adjustment on the stock side since BBs bond funds do cut rate risk but credit risk is raised. So would that mean I'd need to recalculate the whole portfolio? The whole thing gets complicated.
That budget guy from the Reagan era Stockman I think. He seems quite sure the debt ceiling will be a catastrophe. Like everyone else he's entitled to his opinion. I think he has a book to sell so there's that. The major media hasn't said too much about the debt ceiling. I suppose they have it on their to do list. The Donald is their main focus right now. The debt ceiling & the Kardashians are off the radar. March madness is on the tee. Should be a great tournament. Go Zags
And speaking of the debt ceiling ....I Don't know if all R's will vote for funding of the alleged wall( that of course Mexico was to pay for), but some D's are already threatening to filibuster any bill that attempts to tack Wall funding to the otherwise unrelated bill.
My big concern is low growth!
Gabe
Casey: too big to fail are part of the new normal.
Agree 100%. I forgot that one! We should have had another 1929 crash in 2008 but the government broke every law to prevent it. People who were smart and prepared for the crash? They got screwed. Who could predict that? So all a guy can do is grit his teeth and play along. Treasuries don't pay squat, nowhere safe to turn but big blue-chip stocks that pay dividends. Oh well, I can grit my teeth and play.
I have no business managing retirement money.
You might consider subscribing to IQ Trends for a few months, plus read Dividends Still Don't Lie (Wright). Makes conservative investing on your own fairly easy with little work (portfolio of about 25 blue-chip stocks w/ 5 trades/yr to keep them undervalued). Index funds? They were great pre-2008, but they give me the overvalue shivers with QE. Post-2008 the big blue-chip companies practically own the government. Many a good company in the Wilshire 5000 may not be politically connected enough to survive the next 2008. Who knows who is gonna be the next Bear Sterns? At least, that's my fear, but I'm a coward.
gabe said...
My big concern is low growth!
====
I agree!
smile
MK, No you didn't screw up any numbers. I asked whether you use Fastgraphs because it is a site you can use to help identify undervalued stocks. You mentioned a PE of 15 and that's what the site uses as a benchmark for what the average long term PE of the market is. And it is a number Benjamin Graham used in his estimate of a "fair" price to pay. I'm not shilling for this site, but I have found it useful.
Hi everyone Casey here. If growth is a concern does anyone have an opinion on whether the fed should be raising rates now? Thanks
Casey said...
Hi everyone Casey here. If growth is a concern does anyone have an opinion on whether the fed should be raising rates now? Thanks
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Casey, when I agreed with Gabe that growth was a concern it was in the context of the market's expectation of what the growth would be based on the new administration's policy. When expectations exceed reality you get a dislocation.
I think you are asking a different question - and I think Yellen did a good job of responding to this concern yesterday. BTW the Fed's expectation of growth was around 2% which is much different from the new administration's goal of 3.5 to 4% by way of tax cuts, deregulation and fiscal stimulus (infrastructure spending). The Fed is of course data dependent and will adjust as necessary, but they are looking at normalizing rates not to slow the economy but to be in line with price stability in a full or almost full at 4.7% employment environment.
I'm still looking for an exit point but at higher levels hopefully if the market is not disappointed with legislative events anytime soon.
As I stated without the prospect of recession bear markets are rare occurrences. My issue again with growth is the market may be too optimistic re: growth as the stock market hopefully pushes higher. Example there are a lot of fiscal conservative hawks on Republican side who will not vote for higher deficit spending or borrowing using floated idea of 50 year bonds/private company partnership etc. on Infrastructure (growth) or the higher deficits which may occur if revenue is cut with tax cuts which may not produce expected growth.
My take on it FWIW
smile
frankj, got it. Yes, I worship Graham. But I think the average guy (especially myself) cannot research companies in the detail Graham demands (neither the brains nor the time nor the experience) so I use IQT that does it for me.
Casey, I think the Fed will merely respond to events they cannot control. Monetary policy had it's day after 2008 and has clearly failed to drive the economy, just the markets. Now it's Trump's turn with Fiscal policy. The Fed will likely respond to that. So Congress & Trump's spending spree is maybe where the real action is. It's likely why the market is already up, so if Trump can't work with Congress like Obama wouldn't? Yikes! Look out below. But who can predict Trump? Myself, I think he's gonna get his way, he's a negotiator, beholden to nobody, a businessman, and not an ideologue like Obama. So I'm expecting the spending spree, inflation, and the Fed raising rates while they can without threatening the economy too much. But nobody knows anything, I sure don't.
Thanks MK for suggesting IQ Trends. I will check it out. Thanks everyone for clarifying your thoughts. Great group of people here. I think BB does bring value to the table. The market timing is obviously controversial. The 2000 call he made was a hedged call & based on valuations for the most part it seemed. The missed call in late 2007 was a very different beast. It was perpetuated by fraud due to the elimination of the glass- steagall act & greed. The banks drove the car off the cliff. I'm not sure BB could believe the banking culture had it in their DNA to hit the self destruct button. I think it shocked many people. The finacial system has been on monetary life support ever since. Trust is hard to establish & easy to destroy. Just my uneducated conclusion from what I've can piece together. Life goes on. It is what it is.
Hi everybody. Sorry I'm a motor mouth. From what I've read a tax cut is basically a slam dunk to create growth. In an interview with Stockman who was the budget guy for Reagan he said the tax cut that was passed during that era was actually much larger than what they asked for. Did that tax cut basically create the secular bull market from late 1982 thru 1999? Stockman says Trump simply has completely different circumstances from 1980. Reagan had lots of maneuvering room. He claims Trump is boxed in. Interest rates were topped out in 1981 & on their way down in what turned out to be a bond mega bull market. Today rates are on their way up & may prove to be a major headwind to the stock market. Could it be that simple? Probably not.
rasputin here- Gabe stock market correction watch. Reasons he sees a correction in his recent posts.
Low growth
Mini volitilty
Fed watch
Oil
Disappointing market numbers in spite of jobs report
Overbought
Washington mess
Washington tumult
Overvalued
Overpriced
Isn't there a simple counter to all those logical reasons for a correction or worse? They call it a wall of worry. Wall st is very similar to Hollywood. People pretending. Nothing matters until it does. A 50% bear market from here would only take us back to DOW 11k. Probably need to see PE 35 first.
Somewhat lengthy, but a very interesting article:
Here’s why you should never try to time the stock market
http://www.marketwatch.com/story/heres-why-you-should-never-try-to-time-the-stock-market-2017-03-14
~ or ~
https://goo.gl/bUkwy4
JC
Mini volatility remains the mainstay of this Market. Enjoy!
Gabe
Jerrod: Great quote from your article “The only sensible way to invest for individual investors is to have a balanced portfolio that rebalances mechanically.”
Fully agree. I would note that BB does not do this! Heck, were he to do so, why would anyone listen? So he waves his hands and goes with his gut. Good work if you can get it.
I personally use 3 mechanical factors: Dow yield (2.2 limit), % select blue-chip overvalue (17% limit), % select blue-chip overvalue/undervalue ratio (2 limit):
Feb 1, 2017 Primary Trend UP: Dow Div Yield 2.40%, 17.8%, 65/42 = 1.5
-----Undervalued stocks falls below 17%-----
Feb 15, 2017 Primary Trend UP: Dow Div Yield 2.36%, 15.7%, 64/37 = 1.7
Mar 1, 2017 Primary Trend UP: Dow Div Yield 2.32%, 14.8%, 68/35 = 1.9
Mar 15, 2017 Primary Trend UP: Dow Div Yield 2.32%, 14.4%, 67/33 = 2.0
-----Overvalue/Undervalue ratio rises above 2-----
So all I'm waiting for is the Dow Yield to fall below 2.2% to place stop losses. But merely to be ready to buy more stocks when the correction happens. I want dividends and so hate to be out of the market even when falling. 50-90% is where I play (75% right now).
Market died at the close! Bonds survived!
Gabe
market churn till GOP controlled House passes Health Care and pushes to Senate. Senate will amend house bill, not clear if Senate GOP issue of dropped coverage will cause this phase 1 to fail. If it passes reconciliation, phase 3 will not pass in Senate 60 vote threshold.
Anything which appears to stand in way of Tax reform/cuts such as above Health Care issue has the potential of knocking this market down.
It really is that simple.
smile
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No, nothing is "that simple," Smile.
Your theories are just what they are, theories.
The only thing we know for certain is that the Fed raised interest rate by a quarter of 1% this week - just as Bob Brinker (and many others) thought they would.
Volatility (VIX) is "running cool" as there has been only a very minor uptick since 1/23/17 when it registered 10.58.
It is interesting to see what happened to the S&P when the VIX reached values of 28.03, 27.02, 25.76 and 22.51 (see chart call-out flags).
Actually, I believe the VIX may currently be running "too cool", i.e. exhibiting a lack of fear in the marketplace. But that will change in due course. Unfortunately, at this juncture it is particularly difficult to even "guess" when that might occur.
On a personal basis, my biggest concern at this time is North Korea. I also have about 10-15 subordinate concerns - but if I add all of those up they pale in comparison to North Korea.
5 Year Monthly Chart:
http://schrts.co/0ErulF
JC
HB, not theory but fact, the market has gone up on optimism of Trump Tax Cuts and 1 Trillion infrastructure call by Trump for fiscal Spending.
It really is that simple.
Vapor if it does not happen.
smile
.
Smile...makes sense to me....But I think it's also anticipation of a pro-business, pro-growth future (for a few years anyway).
Honey: Maybe smile has a crystal ball . . . ?
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Sorry Casey. Bashing and insulting the president is not allowed on this thread.
Heaven knows, that job is CONSTANTLY handled on all the major network and cable channels - much of radio news - and the NY Times, Washington Post and sometimes even the WSJ.
So you will have to keep the Trump talk clinical - or in sweet enough words that you can eat them some day.
Does anyone think we will see meaningful tax cuts & trillion dollar infrastructure spending spending that the stock market is pricing in?
Honey just for the record I'm glad Trump won the election. If I was disparaging I didn't intend to be. Hope he drains the swamp. I hope it works out for the majority of people. I enjoy your site & keep up the good work. Thanks.
Casey said...
"Does anyone think we will see meaningful tax cuts & trillion dollar infrastructure spending spending that the stock market is pricing in?"
Every presidential administration and every Congress cuts taxes and fees on some, raises taxes and fees on others, spends here and cuts spending there. The notion that one party "cuts taxes and reduces spending" while the other party "raises taxes and increases spending" is a myth. They both do...both. Just to different people. And, historically speaking, with vastly different, largely opposite results.
Also historically speaking, how and where President Trump and this Congressional leadership apparently wants to cut taxes has precipitated the 3 or 4 biggest stock market crashes of the past 100 years or so and virtually none of the strongest or prolonged bull rallies. And if the party controlling all of it at this moment promotes and passes anything remotely like a (adjusted for inflation) "trillion dollar infrastructure spending bill" that creates significant numbers of domestic private sector jobs, appreciable revenue enhancement, greater GDP growth and so on, it will also be a first in the past 100 years or so, if ever.
So my answer would be no. But it can certainly float higher on the "prospect" of those rosy outcomes occurring until the likely real world results start piling up and can no longer be ignored. Who knows, that might even last several months, a year or a bit more.
Good interview with Bogle aired this morning on CNN Smerconish.
About 1 min 22 seconds or so into the interview Bogle discusses why the market has been doing so well of late:
Full interview with Bogle confirms what I said was driving the market 1min 22sec into the interview
No crystal ball, just a little common sense.
Much respect to Bogle the guy is 88, heart surgery 20 years ago and still grinding, lucid and making sense.
smile
I agree HB, anticipation of growth (but via tax cuts & infrastructure spend) is what has been driving the market, problem or dislocation occurs IMO if that growth does not materialize. Postulation that stock market is forward looking up to about 6 months.
Maybe if Brinker is on this weekend he will discuss especially if he see the Bogle interview by way of reading this blog. :)
smile
p.s. I'm with JC on the concern over N. Korea. Obama left Trump admin. his council that nothing will dissuade N. Korean nuclear path. Tillerson recently said everything on the table including Military action, but I think is also working the Chinese angle. This would be one of those exogenous events.
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Casey....thanks for clarifying.
I admit to being sensitive when it comes to demeaning the president. I have never seen anything like what is happening to him.
He made great financial and personal sacrifices in order to use his talents for our benefit. But it is becoming ever-clearer who is in the swamp.
The John Bogle interview is worth watching.
Thanks, Smile.
Honey I understand how you feel. No need to apoligize for your passion. I'm in your house & respect your views. I'm not a political person & I hope Trumps negotiating abilities translate into productive policies for the average person in the US. Your a straight shooter & value accountability. I wouldn't be here if I didn't respect what your doing. You are spot on with regard to personal attacts. They are never productive.
HB: But I think it's also anticipation of a pro-business, pro-growth future
YES to this.
Most people not in industry can't understand how much regulations kill, especially EPA stuff. Look at something simple like coal or Keystone Pipeline deliberately killed by Obama. The TransAlaksan Pipeline 30 years ago was a massive economic boom for the US yet yet even back then had to pass Congress by breaking the tie with the VP vote! ANWR is still not drilled. Other countries think we are nuts, and they are right. Lawyers win, everyone else loses.
Trump, regardless of what one thinks of him, is a businessman. He has already slashed regulations and nobody knows how far he will get in the next 3 years. The potential for real, large growth from this boon is one possible reason for the stock market surge. It's why I'm optimistic, and much of the industry I work in is as well. Trump just might bring the US back to a competitive position. There is real stock value here. The US has no high speed rail, China has 6,000 miles of it in 6 years. China has grown 1,300% over the time the US has grown only 100%. There is real potential for growth with new technology. If Trump can get libs can get out of the way. Big "if", but worth a bet.
Bogle is a national treasure. The mind of 25 year old. The experience of an 86 years old who isn't close to being done. The aging body is a tragedy. Who will fill his shoes. I hear him saying America is squandering it's opportunities & running a brilliant system into the ground.
I concur with the John Bogle interview with Smile and FrankJ.
Gabe
A couple of good quotes from John Bogle in the interview: "The croupiers of Wall Street," referring to the skimmers who reduce everyone's return.
And he said our form of government was designed by geniuses who knew it would be operated by idiots. (That's a paraphrase).
He said the popular vote in the UK to leave the EU was an example of a problem with direct democracy. Everyone's vote counted the same whether they were really informed on the issue or not. I agree about being informed. Too many people cannot name their own Senators, or name one Supreme Court justice but they know everything about Kim Kardashian.
I noticed quite a bit of commentary on this weeks blog about President Trump's pro business and deregulation policies. Let me say, I for one am hopeful that they will materialize into an overall boost to the economy. However, if I may play devil's advocate, not all regulation is evil. To slightly alter a phrase from Churchill: capitalism is the worst economic system except for all the others. Capitalism is inherently exploitative. Left to their own devises, businesses will more often than not take advantage of the weak. That is why we have labor laws and other forms of regulation.
I am hopeful Trump's policies will result in greater productivity and prosperity, however, I hope it doesn't come at the expense of the less fortunate. Sadly, we often tend to go from one extreme to the other...
John Bogle is a national treasure. Period!
David: I hope it doesn't come at the expense of the less fortunate.
No, it will come at the expense of government workers (definitely not the "less fortunate"). Government is the fat cats who exploit everyone else. I always ask my government friends: would you be willing to privatize and bid out your job? They fight tooth and nail. They know they are exploiting the common man.
Regarding regs? The US had too many regs by 1980 when we had good clean water and air with half the regs. Regulation since? Used primarily for political reasons, at the expense of the "less fortunate".
This is probably the largest issue facing the American economy and the stock market today. I'm skeptical Trump can do much, but if anyone can, he might. He's the only real outsider ever elected to the position in history. If they don't get him first.
Honeybee said...
I admit to being sensitive when it comes to demeaning the president. I have never seen anything like what is happening to him.
Honeybee, the only other election that incurred even a hint of what we are seeing today was the 1860 Presidential election. Those were definitely "spirited times" but certainly not as ugly and violent as that which we are witnessing today.
I'm not sure...but I wonder if Soros may have also been up to his neck in the goings-on in 1860. ;-)
JC
Don't be upset the Lib Tards are way upset, they are mean and will do anything to advance there agenda. Trump is the right man at the right time! GOD bless the Usa.
MK :No, it will come at the expense of government workers
Excellent points, MK. I hope you are right. I have no qualms with downsizing government. However, you failed to mention the devastation that occurred from the financial crisis which, in my opinion, was the direct result of a lack of regulation.
Ruyfa said... Don't be upset the Lib Tards are way upset, they are mean and will do anything...
I wonder why that is? They are always angry about something, or hate somebody. Half the country did not treat Obama like they are treating Trump. It's very strange. Michelle was not called the names that Melania is called. Country and Western did not make videos calling for the execution of Obama.
The MSM press would never allow the other side to get away with that crap. The HYPOCRISY is beyond the pale.
(this thread is scrolling off today, so I took the liberty of more politics) :--)
Does anyone think repeal of glass-steagall contributed mightily to the Wall st bank fraud that lead to what is generically refered to as the financial crisis? Does anyone agree with Bogle that capitalism cannot be relied on to distribute wealth in a manner that keeps the financial system equitable for the average person in America?
Anonymous Casey said...
"Does anyone think repeal of glass-steagall contributed mightily to the Wall st bank fraud that lead to what is generically refered to as the financial crisis? Does anyone agree with Bogle that capitalism cannot be relied on to distribute wealth in a manner that keeps the financial system equitable for the average person in America?"
No and Yes, in that order. In the aftermath of the crash, during the hearings to try to find out what caused it, then Fed Chairman Bernanke was asked point blank by none other than Senator Bernie Sanders if, in retrospect, he thought repealing Glass-Steagall (and it was replaced by something else, mind you) was a terrible mistake. He said no. His reasoning was key and imo applies to virtually every debate about "too much" or "too little" regulation. He said it was a matter of enforcement, not whether or not there was too much or too little regulation, Glass-Steagall or no Glass-Steagall. And that is almost always true.
Some can rant and tear out their hair about "too many regulations", but if the powers that be have zero interest in enforcing them, there might as well be none. That is what happened with the subprime mortgage collapse. Bush's Office of Thrift Supervision within the Treasury Department knew the boss and his party had nothing but disdain for banking regulations and would just fine with no one enforcing them. So they didn't bother opening the files to discover how many crappy home loans were being floated.
Likewise in the case of Glass-Steagall. There could have been 1,000 Glass-Steagall Acts in place all during the Bush years and it wouldn't have mattered one whit if the agencies charged with seeing to it that the Act was enforced didn't do their job of supervising and enforcing it.
BB is definitely slipping. During the last half of the second hour, caller Ron from Honolulu was talking about surrendering an annuity, and I think that he was questioning about whether he had a tax penalty since he's over 55 and was laid off from his job. Ron also said that he had a surrender charge on the annuity that wiped out the gain that he had.
Bob was totally confused, and he seemed to think that the tax penalty and the annuity surrender charge were the same thing. Bob even referred to what he called "surrender charge / penalty" twice during his response. Of course, Bob was wrong, wrong, wrong, because a tax penalty paid to the government and a surrender charge imposed by an insurance company are totally different.
I've listened to BB for many years, and much of his advice is pretty sound. But every piece of financial advice from anyone, including the esteemed BB, needs to be taken with a grain of salt. Sometimes the advice is misleading, and in this case BB was totally wrong.
Did anyone else notice BB's slip-up?
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