STOCK MARKET.....BB comments: In or near retirement, maintain a balanced asset allocation of 50% stocks and 50% fixed income.....no changes in Marketimer advice - fully invested. Possible S&P 500 target range projection now at "mid-2500's range."
TAX REFORM PROPOSALS AND BB'S SPECULATION: Brinker talked about "the president's" proposed tax reforms, health care bill, deficit . ==> Thanks to dRahme, here is the short clip of what he said.
BOND MARKET......BB commented that his Marketimer bond fund recommendations at this time have very low duration to keep the interest rate risk low, but he is willing to take credit risk because there is no recession forecast at this time.
Honey EC: Brinker mentioned one fund that he recommends in Marketimer has done very well because of the high yield (junk) bonds in it. He was talking about Osterweiss (OSTIX) and it IS a junk bond fund and it has lagged behind VWEHX in both total return and dividends paid. Brinker sold all VWEHX several years ago. I held mine all the while and have done much better. Compare the two funds: VWEHX; OSTIX.
TWO THINGS YOU NEED TO KNOW ABOUT ROTH IRAS....BB: 1. You do not have to report any contributions on your income taxes. 2. You should always keep good records because it is possible for the rules to change in the future.
THREE THINGS YOU NEED TO KNOW ABOUT BOND FUNDS....BB: Firstly, the average duration (so you can gauge interest rate risk). Second, the current yield (so you can gauge how much interest you will get), And third, the credit quality.
ECONOMY.....BB said that there is no recession in the current forecast.
==> Thanks to dRahme, here is the clip of BB explaining FOMC plans and Quantitative Tightening. (At 10.3, caller Linda asked how QT would affect the stock market - but Brinker didn't seem to under stand what she was asking.)
Honey EC: I find it very interesting that since the change in presidency, Yellen and the Fed has done a 180 from massive easing to massive tightening
WHAT WILL QUANTITATIVE TIGHTENING DO TO HOUSING PRICES.....Caller Kathy from So. Carolina wanted to know if in light of upcoming Fed action, is she should sell some of her real estate now or later.
Brinker replied: "That's a very tough question to answer because we still don't know how the market will receive the additional securities that are going to be placed into the market as a result of the Quantitative Tightening Program which starts in a small way in October. We don't know what will happen in terms of investors, buyers stepping up around the world in order to meet the additional supply that's going to be thrown upon the market. Although, in small amounts this 4th quarter - only $10 Billion a month. That's not much in the bond market.....What we do know a year from now, if the Fed keeps its word, they are going to be putting an annual rate of $600 billion onto the market, on top of the federal deficit, whatever that turns out to be a year from now. One can only imagine what that's going to be a year from now with the talks we're hearing in Washington about possible tax cuts, possible infrastructure. Will it be deficit neutral? We don't know any of that yet. We don't know any of that, but it is something to keep your eye on."WHERE DID THE FED GET THE $TRILLIONS IT NOW HAS TO GET RID OF......Brinker said: "But the securities that they have on their balance sheet that are subject to be redeemed or sold in the future, as they reduce the balance sheet size, are primarily in two categories: U.S. Treasury Securities, which are bills, bond and notes. And also agency securities, and that would include mortgage-backed securities......These are securities that were acquired through the three Quantitative Easing programs that were engineered in past years."
FEDERAL RESERVE IS HONEST, REPUTABLE AND HARD-WORKING.... Brinker said: "Let me very clear, I do not believe that the Federal Reserve has a shredder in the Federal Reserve Department and I don't believe that they behave dishonestly, or that they are a disreputable group in any way, shape or form. I do believe that they are doing the best they can in a very complicated operation of managing the money supply."
Honey EC: My tongue was firmly planted while writing the title in the paragraph above.
==> Thanks to dRahme, audio clip: the week ahead in the Canyons of Wall Street.
LAND OF CRITICAL MASS...BB: Only the accumulation of assets will get you there. Income will never get you there.
FRANKJ'S MONEYTALK GUEST-AUTHOR SUMMARY
Bob’s third hour guest on Sunday September 24, 2017 was Professor Markus K. Brunnermeier, of Princeton University, co-author of the book "The Euro and the Battle of Ideas" His co-author is Harold James.
The interview started with a review of the election in Germany. Angela Merkel won but she needs to form a coalition and include additional parties in her government.
A more interesting part of the interview was a discussion by the guest on how French and German economic policy differs.
1. With regard to policy, the French tend to want more discretion to act on problems, i.e., they grant more latitude to the government. In contrast, Germans tend to want established rules to guide government actions.
2. The French will exhibit a certain amount of solidarity, the example being their ready approval of help to Greece. The Germans are more concerned about how action will lead to liabilities – “if you’re in charge, you’re liable.”
3. The French are more prone to solve a problem by boosting liquidity. The Germans tend to look to reforms and restructuring as ways to solve an economic crisis.
4. The French have placed more emphasis on stimulus while the Germans value austerity.
Bob asked the guest about how the European Union was reacting to the UK exiting the Union. He said the European countries want the UK to stay in but they are wary of “cherry picking” of the benefits if they leave. The benefits of being in the EU include the easy movement of goods, services, capital and people. The UK would like to retain the benefits of all of the above but restrict the free movement of people.
Bob brought up the topic of the Fed’s plan for Quantitative Tightening (QT) – next fall they expect to be selling $50 billion per month ($600 billion per year) of securities they own. Bob expects this to raise interest rates, he spent a great deal of time on it in the earlier part of the show. The guest said the short end of the yield curve may not be affected much, but yields on the long end may come up.
Bob asked why would anyone invest in a 10 year Treasury yielding 2.25% when the Fed’s inflation target is 2.0%. Again, he spent time on this with a caller earlier in the show. The guest speculated that the 2.25% yield might be the result of investors thinking the Fed will miss its inflation target. If I interpret this correctly he’s saying inflation may not run at 2.0%, it will be lower, so someone will actually get a little bit of a return on the 10 year.
Wrap up: Super Mario Draghi has two more years to go on an 8 year term and he cannot be reappointed. The guest thought Janet Yellen has done a good job of communicating the Fed’s intention on QT and he would reappoint her.
Honey here: Thanks very much, Frankj. That was a difficult guest to understand and follow. We appreciate your sorting it out for us.
Brinker also sang the praises of Janet Yellen and said that "the president" (no name from Brinker in ten months now) should be praised if he re-appoints her. He added that he did not approve of some of the names he has heard floating around to replace her. Hmmmm...... guess I'll zip my political lip. LOL!
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