October 29, 2017, Bob Brinker's Moneytalk: Stocks, Bonds, Economy and Investing

October 29, 2017...Bob Brinker hosted Moneytalk live today....(comments welcome)

STOCKS....In the second hour, Brinker mentioned that the S&P 500 Index has rallied since spring 2009 - from 676 to 2581, with no bear markets.

Honey EC: Yes, the stock market started dropping in October 2007  when Brinker was recommending S&P 1465 as an all-in buying opportunity. As he remained fully invested and the market dropped, he made ever-lower Marketimer buy-signal calls all the way down.   The market bottomed at 676 in March 2009.  

NASDAQ RECORD CLOSES THIS YEAR.... (Honey comments). The Nasdaq is outpacing the Dow and S&P and has had 61 record closes this year.

Nasdaq books biggest blowout victory against the Dow industrials in 15 years  The Nasdaq gave the Dow a historic beating in Friday trading.

BRINKER'S MARKETIMER SOLD ALL NASDAQ HOLDINGS IN 2012.... (Honey comments)  In November 2012, Brinker sold out all of his Nasdaq holdings, including any leftover QQQ's that some subscribers might have been holding since his 2000 Buy-Bulletin.  They did not recoup all of their losses after holding for twelve years.

OOPS, SOLD TOO SOON....When Brinker sold all Nasdaq, it was at 3065.   Today five years later, it is at 6701 - more than double!  He sold QQQ five years ago at $67.26, today it is $151.04. 

BONDS....No mention of bond funds or interest rates today.

NATIONAL DEBT....BB reported that the deficit is now about $662 Billion and the National Debt is climbing close to $20.5 Trillion, but is not being talked about in Washington.

Honey EC: Yep, that's true, just like it was never talked about the prior 8 years when it DOUBLED from all previous presidents.   Brinker only occasionally mentioned it during those years but worries about it every week now.

ECONOMY....BB: The 3rd Quarter GDP growth is  at 3.1%....."Good news on the economy and you have seen the stock market respond to that good news on the economy."

NEW HOME SALES....BB: New home sales are up for the month of September 18.9% - biggest gain in 25 years.

POLITICS OF TAX-REFORM PROPOSALS.... Brinker spent almost all of the first two hours today speculating on what the tax-reform proposals will be. He was very upset because he believed that congress were going to "blow up" the 401Ks by reducing the amount that be deposited in them.

 He quoted one of President Trump's Tweets which said that 401Ks were safe, and then kept saying that  he "hoped" the president would keep his promise.   Most of the caller's talked about and ask questions about the same subject.

However, before the program ended, the news had been published that congress has no intention of "blowing up" the 401Ks.  From Fox News: Americans' 401(k)s will be safe, GOP leaders set record straight

Honey EC: It is my intention to avoid turning this blog into a political discussion forum. I will report the general subjects that Brinker talks about but will avoid covering his  speculation.

After the tax-reform bill becomes LAW, if Brinker wants to give educated guesses about the effects on the markets, we will cover that and open it up for discussion. 

Personally, it is very disappointing to see Moneytalk turn into political-talk almost non-stop, and especially when Brinker clearly was not informed on what he was talking about. 

==> Unfortunately, our friend dRahme was not able to make any audio clips for us today. 

FRANKJ'S MONEYTALK-GUEST SUMMARY

Bob’s third hour guest this last Sunday in October was Henry Kaufman.   Dr. Kaufman’s latest book is “Tectonic Shifts in Financial Markets:  People, Policy and Institutions.”   

While an economist working at Salomon Brothers in the 1970’s, he earned the nickname of Dr. Doom for his frequent criticism of  government policies.  Later, he accurately called the bottom of the market on August 17, 1982.  That day there was a rally which was the beginning of the longest bull market in history.  (Source:  David Warsh, "Bull Run". The New York Times. January 21, 2001.) 

Bob led off with a question on the pending appointment of a possible new Fed chair.  Would he appoint Janet Yellen?  Answer, Yes.  She has done a good job, markets have moved ahead, unemployment is down, inflation under control.   Regarding two leading replacement candidates, he thinks Jerome Powell is a “steady as you go” type who would further the policies of JY.  The other candidate is John Taylor who he said was wedded to his monetary beliefs.  He mentioned the “Taylor Rule.”  He thinks Taylor would raise interest rates faster than Powell.   Read up on the Taylor Rule here,  there WILL be a quiz.

http://www.investopedia.com/articles/economics/10/taylor-rule.asp

The Fed is good at reacting to changes they’ve seen in the past.   The economy expands and inflation heats up and the Fed knows what to do:  tighten the  money supply.  When the opposite happens and the economy needs a boost then start the printing presses.     

Structural changes have left the Fed scratching its head.   Dr. Kaufman listed some of these:

Low unemployment often leads to inflation as labor pushes for higher wages.  That element seems missing due in part to the weakening of unions, automation and offshoring of jobs.  So while unemployment is at a low level, the Fed is not fighting inflation.   Another structural change regards banks and financial institutions and how big a piece of the financial pie they control.  In the 1990s the ten largest banks only controlled 10% of the financial “pie.”  Today, the ten largest financial institutions (not all of them banks) control 80%.  

Likewise, the Federal Deposit Insurance Corporation insured 15,000 outfits but today they only insure 6,000.

These are not the repetitive changes in the economy that the Fed is used to dealing with.  These fit into the “you can’t go home again” category he referred to, which is the title to a chapter in his book.    Productivity is hard for the Fed to estimate because machines, artificial intelligence, and analytics have clouded the labor input/product output relationship.  He thinks we’ll have about 2.75% GDP growth for a while. 

On the national debt, ($20 Trillion plus) Dr. Kaufman had these observations:  The users of credit (borrowers) in the U.S. are households, business and the government.    The availability and use of credit is necessary for the economy to grow.  Right now business has borrowed a lot and further borrowing might be difficult without expanding into the junk bond area.  Households aren’ t borrowed to the hilt like they were in 2008,  but they aren’t far off that mark according to the guest.  That leaves government as the only entity that can keep borrowing to grow the economy. 

(That is a scary notion with the federal debt where it is). 

Don’t we need population growth in order to have GDP growth?  That was the question from caller Sharon in Missouri.   Dr. Kaufman said traditional population growth won’t be as important.  He pointed to Japan as an example of a country that is not replacing its aging population with young people.  Robotics is filling the gap.  

Bob said, “robots don’t shop,” so where will the consumer spending come from?    Good question.   I can’t say the guest gave a definitive answer.  He did say we need to think about where people’s retirement benefits will come from in 30 to 40 years.  I assume he was thinking of Social Security.

Speaking of retirement benefits, what did Dr. Kaufman think of the proposal to severely limit the 401K program?  Bob had talked about this extensively during the previous two hours.   The guest said it was not a good idea, he favored the incentive it gives people to save.  

Regarding another big tax reform issue, Dr. Kaufman said he thought the proposal to do away with the sales and property tax deductions would not make it into the final tax reform legislation.  

Dr. Kaufman does not think transparency is good for the Fed.  There is no going back even though he thinks they functioned better when they worked behind the scenes.  He said when Bill Martin was head of the Fed, his name was not as well-known as Greenspan, Bernanke and Yellen.   There will be no going back to those days, though.  

Honey here: Thank you very much Frankj! Very interesting guest - and very informative summary! 

       

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October 22, 2017, Bob Brinker's Moneytalk: Not Live Today - All Re-Runs

October 22, 1017...Bob Brinker did NOT host Moneytalk live today.

The show was previously broadcasted monologues and calls. I do  not cover re-run programs.

Review of Bob Brinker's Current Views:

STOCK MARKET CORRECTIONS:

1. Brinker still considers a 10% decline to be a correction, but said in the latest Marketimer that 20% is a major correction.

2. Brinker has been saying for some time now that a correction would be "health-restoring" for the market but is not predicting a bear market. 

3. His Marketimer model portfolios are fully invested, and he is still recommending dollar-cost-averaging new money into the market.

RECESSION....Brinker believes that the risk of recession is "very low."

INTEREST RATES AND QUANTITATIVE TIGHTENING:

On Moneytalk recently, Brinker has talked at length about the FOMC (which you will find in my summaries). He thinks the Fed may raise interest rates again in December - and they have begun "Quantitative Tightening" of the money supply.

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October 15, 2017, Bob Brinker's Moneytalk: Stocks, Bonds, Economy and Investing

October 15, 2017....Bob Brinker was live on Moneytalk  today.....(comments welcome)

STOCKS....Brinker did not mention the stock market and certainly did not report that it has risen over 25% since President Donald Trump was elected.

However, in the latest Marketimer, he is still fully invested.  Page 3: Paragraph 4; Brinker wrote:  "Applying this (17 to 18 times operating earning for the S&P 500 Index) to our 2018 estimate provides the potential for the index to challenge the 2600 level going forward."

BONDS....BB did not talk about bond funds today, but his advice to buy only short-duration funds is the same.

GOLD AND PRECIOUS METALS NOT FOR BRINKER.....Caller Gregory from Clovis asked about owning up to 10 of gold to guard against a declining dollar and inflation.  BB replied: It depends if you want to speculate on precious metals. It's not my preference. I'd rather invest in things that have value, pay dividends, grow their earnings - doesn't apply to gold bullion. It's purely speculation and will depend on if you think there is somebody out there that will pay more for it than you."

Honey EC: Several years back, Brinker added the ETF for gold (GLD) to his Marketimer list of "recommended issues."  He never said how much he recommended or why he recommended it. A couple of years later, GLD disappeared from Marketimer. There was never any reason given, but it was probably because gold had been dropping.

INFLATION BACK, TONE-DEAF IF YOU SAY OTHERWISE.....BB said: "I would disagree with those who are telling you that there is no inflation. I think they are wrong. The year-over-year increase in wages stands at considerably over 2%.....That's inflation. The Consumer Price Index, which just took a bump because of rising energy prices recently. That certainly has moving at a little over 2% on a year-over-year basis.......So those who say there is no inflation. I think they are tone-deaf."

ECONOMY.....BB commented...."We've been stuck in 2 to 21/4 GDP growth for years."

Honey EC: Is it possible that BB missed the latest adjusted numbers - or did he ignore them:  GDP, the value of everything produced in America, was revised up to an annualized growth rate of 3.1% from 3%. It was the fastest rate since the first quarter of 2015.

FED CHAIR JANET YELLEN.....BB commented that a new appointment at the beginning  of February. No one knows if it will be Yellen - or if she would accept.

FOMC  MUST STAY AHEAD OF THE CURVE OR LEAD US INTO RECESSION .....BB said: "If we  were to have a Fed Chair that for political reasons, held rates down lower than they should be - what that would do is create a situation where the Fed would get behind the curve on interest rates. And if that were to happen, you could get into a situation that could lead to recession."

SOCIAL SECURITY PENSION INCREASE.... BB said that beginning in 2018, there will be a 2% increase. For example, if you receive $1000 per month, it will be increased to $1020 per month.

MULTI-MILLIONAIRE CALLER'S CLUB:

1: Linda (no location given) at age 52, having put her children through college and one of them through law school, wanted to know if her $3.1 Million and $1500 a month pension (at 52) - $3000 at age 60 - would be enough to retire.  Brinker thought she could retire and "buy back some of her time." He sang her praises about how well she had done.

Honey EC: Brinker gave a lot of kudos to Linda for having so much money at such a young age. My question to Brinker is: How do you know? You don't know anything at all about how she came by so much money.

=> IN EDIT: dRahme audio clip: Reinventing Yourself; HSAs: Tax Bill

2:  Mike from New Jersey, with $3 million net worth called for his wife who was offered lump sum payout of $42,000 at age 48 or a monthly payment at age 65.  Brinker made the comment that either way, the money was not important because of his net worth, but seemed to think that taking the lump sum was the better way to go.

ADDED IN EDIT     The following comments written pen-name, "Smile" 

"Million dollar calls are a little annoying simply because of what is not said. Usually the multimillionaire caller starts by saying been listening and subscribing for years...

The annoyance is based on this intro. The facts usually beg the question of where all the money came from, Bob does not ask the relevant question because he already has his advert. plug from the caller stating long time listener and subscriber.

Bob dares not ask a single question because instead of credit going to him under presumption of caller statement long time L&S... we might find out that maybe the man or woman calling in have huge salaries and or stock options which are outside of norm and attributable to the wealth described in the call or might we find out that they started with 10 million and now only have two or three.

better for Bob to be silent and let naive listeners think that his rag is by default responsible for the success of the caller rather than outside the norm events having nothing to do with da Brink...

these multi million dollar callers are annoying... for what is not said and asked even though it is part of the interest of the call... and in my mind I think the answer to why Brink does not inquire has been asked and answered.

Still annoying though.
Smile

October 16, 2017 at 3:15 PM

TAX-REFORM TALK...BB and many of his callers SPECULATED  about possible upcoming tax changes. BB summed it up with this statement: "There are no concrete numbers."

=> IN EDIT: dRahme audio clip: Tax Reform; Property Taxes and Deductibles

HONEY EC1....TAX-REFORM COMMENTS SENT BY JEFFCHRISTIE:  It's best not to make any tax plans until changes actually become law - saves a lot of useless speculation.....And remember that what President Trump intends and what Congress presents to him, may not be exactly the same.  

Honey EC2: It seems to me that Brinker is using this tax speculation   issue to open up the phones to allow President Trump to be trashed.  I think that "Trees" sent some excellent comments:

Trees has left a new comment on your post "October 15, 2017, Bob Brinker's Moneytalk: Stocks,...":

Bob was quite the Drama Queen again with proposals on IRS rule change. Like what we have now is the optimum.

Our tax system is a mess, why can't he start there with the discussion? Germany and France are proposing lowering their tax rates. We have the highest corp tax in world. Shouldn't a money talk guy know more about the caustic effect of our screwed up IRS tax system to economy? He should alert listenership to this. Also, he smearing the tax overhaul as the proposals and political actions are dishonest without accurate final numbers. Really? Like Obama health overhaul met all these benchmarks.

We have to raise revenue to pay for tax cuts? What is he talking about? It is a economic game of tax revenue not offsetting pluses and minuses upon an accounting leger. That is a completely bogus idea he spins. How about the rich are getting a tax break? O.k. but that is a nonsensical statement. Tax revenue is not based on tax rate. It is based on overall tax package effects. One example, a lower tax rate often dispels power of income tax avoidance concerns and positioned investors decision making upon hard reality. Meaning no artificial government regulation pollution to distort decision making. This will present a more efficient economy. 

RULE 72 (t)....BB explained this  method of taking money out early from tax-sheltered accounts.


FRANKJ'S MONEYTALK GUEST-AUTHOR SUMMARY

Today’s guest on this 15^th day of October 2017 was Robert L. Dilenschneider, founder and principal of the The Dilenschneider Group a Connecticut-based consulting firm.  You can read about his outfit here:  https://www.dilenschneider.com/

He has published his 55^th trend report titled, A Time of Turmoil:  At Home and Abroad, All Order is Challenged.    This was a pretty interesting guest interview.  Bob threw a lot of questions at the guest and he had ready answers.    (Editorial comments in italics, as usual). 

We start with population trends:  By 2020, millennials will make up 50% of the work force.   This will change how we (they) work.  Technology will become even more important in the workplace.   In that same vein, fertility rates are trending down in the US, Europe, Russia and Japan.  This is a big deal because we need to do more than just replace ourselves we need population growth to expand the economy and produce tax dollars.  India will have 2 billion people in 15-20 years.  Africa’s population will surge in 10-15 years.  A contributing factor is the lack of readily available contraception.   

Self driving cars:  What would a future trends interview be without a swerve into this topic?   The guest was firm in his belief that this would be the future for cars and trucks.  He pointed out that 10 years ago not much of the US was digitally mapped.  Now, there is not much that ISN’T digitally mapped.  

Bob said on any freeway there are people who are going above the speed limit.  He gently challenged the guest asking him if this crowd would be OK in a self-driving car limited to going the speed limit?  The guest said he didn’t think they’d have any choice about how fast the car went and an “orderly” procession on the highway would be better.

Education:  Asian countries spend more time working with young people.  He’s optimistic though about our prospects.  The cost of a college education is “off the charts.”  He cited his own experience at Notre Dame (and put in a plug for them) with his $500 tuition per semester there, back when.  Investments in buildings, technology, etc. have driven costs up at a rate that far outstrips inflation.   Tenure is a problem, colleges cannot move ineffective faculty out of the picture. 

Caller John from West Chicago said spending (by colleges) is the result of money thrown at them.  The guest agreed and pointed out that the larger institutions have raised lots of money and the small, private liberal arts schools are struggling to keep their doors open.  He said we’ll see closures in this sector in the next four years. 

Cybersecurity:  Hacking is “off the charts.”  Everyone’s data and accounts are at risk.  We need something equivalent to the Manhattan Project to shore up digital security in this country and protect ourselves from hackers in Russia, the Middle East, China and Europe.  The lack of cooperation between tech companies and our law enforcement agencies is “shocking.”   (We all probably still remember the big stink Apple created with their unwillingness to help the FBI get into a domestic terrorist’s cell phone – the San Bernardino  murderer.)  The guest said they have an obligation to come forward and help out.

International relations:  “New boss same as the old boss.”  The crowd running things in China is little different from those in charge at the time of Tiananmen Square, 1989 --  remember the picture of the guy in the slacks and white shirt standing in front of a tank?   If the bosses don’t want something to happen it won’t.  They’ll limit access to the Internet to keep a lid on things.  China has a big problem with so many people there still in poverty.  

Tom from Carson City, NV said Chinese people are buying up land and businesses in the US.  The guest pointed out that China’s foreign expansion includes putting tens of thousands of Chinese into a foreign country as workers in some Chinese enterprise.  

Almost as an afterthought, the guest mentioned the on-going border war between China and India which is virtually unreported here.   (Well let’s see …. If you were an editor of a major media outlet and you had to choose between a story on Harvey W. shuffling around in a bathrobe and a war between the two largest (in population) countries in the world … oh never mind.)

Will we see a third political party?   Mr. Dilenschneider says yes, no question.  The Democrats don’t have a leader so a third party could come from that side.  Or, John Kasich of Ohio could emerge from the GOP.  He thinks President Trump will go the distance – not just 4 years, but 8.  If the tax bill goes through, there will be economic growth here.

The economy:  We’re growing slowly but passage of the tax bill and repatriation of corporate money from overseas will be a huge boost to the economy.  On the downside, on Wall Street, places where you can accomplish trades have decreased.  This could be a problem.    He thinks low interest rates will need to continue, given all the areas that need to be rebuilt:  Florida,  Texas, Puerto Rico (and California although not mentioned.)

 .....and right here at 3:50 is when my audio connection to KKOH Reno cut off for no apparent reason so I was not able to listen to the rest of this very interesting interview.  By the time I got back in at 3:54 it was over.

One thing I liked in particular about this guest is he didn’t equivocate with any of his answers.

Honey here: Thank you very much, FrankJ.  Interesting guest - and a fabulous summary! 

I see that the guest said "there are still opportunities in gold." Earlier in the program, Brinker did a long speech on how buying gold is speculation.

Brinker's guest-author was Robert Dilenschnieder:  "Power and Influence: The Rules Have Changed"

IN EDIT: dRahme's audio clip: The Week Ahead

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October 8, 2017, Bob Brinker's Moneytalk, Stock, Bonds, Economy and Investing

October 8, 2017....Bob  Brinker hosted Moneytalk live today....(comments welcome)

STOCKS....Brinker did not talk about the stock market's  amazing run up. 

Honey EC: Brinker has made no change in his fully invested market outlook.

=> Thanks to dRahme: audio clip of jobs report

COLOMBUS DAY HOLIDAY..... Monday, the banks are closed and the markets are open.

WILSHIRE 5000 NOT 5000 STOCKS.... Caller Gary from Texas asked Brinker why there were only about 3600 stocks in the Wilshire 5000. BB replied that the name is just that, a name, and that they may have started with 5000 stocks, but have since weeded out all of the penny stocks.

BONDS.....Brinker did not discuss the bond market today.

Honey EC: Brinker made no changes in his recommendation to keep duration of bond fund short - 1 to 2 years.

ECONOMY....Brinker did not talk about the economy....

QUANTITATIVE TIGHTENING.....BB mentioned his guest-author from last week, Alan Blinder.  Brinker and Blinder talked about Quantitative Tightening last week in depth. (Please see my summary, and Frankj's summary of Blinder's Moneytalk interview.) 

BITCOIN.... Brinker had two calls today about Bitcoin, and he pointed out that he has covered this before. He stated that he believes it is speculative, and drug dealers love it.

NATIONAL DEBT....BB stated that the $20 trillion National Debt was no longer talked about in Washington DC.

Honey EC: As my Moneytalk summaries will show to anyone who wants to research them over the eight years of the Obama administration, Brinker was virtually silent all of those years as the National Debt DOUBLED. Yes, that's right - it doubled over all the prior administrations.

TERM LIFE INSURANCE VS WHOLE OR UNIVERSAL LIFE....BB stated categorically that the only way to go was to buy Term Life Insurance. Caller Colin from Missouri disagreed with Brinker 100% and gave several very good reasons why Term Life Insurance is NOT the only way to go for everyone. Colin's most important point was that life does not always follow what is planned, so with Term Life Insurance, one could end up with no investments in later years.

Honey EC: Brinker does not like to be disagreed with, and was quite rude to Colin. He tried to make up for it by "praising" his call later in the program. Far too little and too late. Colin was a perfect gentleman and a superior caller.

=> Thanks to dRahme: audio clip of Colin's life insurance call (scroll 3 minutes in)

POLITICS AND TAXES....Honey EC: Brinker did a massive hit job on President Donald Trump today. The only thing that Brinker did not do was use the president's name. Clearly, Brinker gets his talking points from MSNBC, CNN, WASHINGTON POST and the NYTIMES. I will not dignify a mere radio talk show host who flies under the banner of "Moneytalk" and "non-partisanship" by spending time repeating his leftist talking points. I agree with Jim:

Jim has left a new comment on your post "October 8, 2017, Bob Brinker's Moneytalk, Stocks, ...":

Brinker's political views were irritating today. He was basically telling the President to stop being a populist and get in bed with the GOP Establishment if he wants legislation passed. He seemed to take the side of Corker and McCain and against the President. I'd like to ask Brinker if he thinks it's proper for politicians to vote NO on legislation that may be beneficial to the country just because they have a personal vendetta against the President. I think a politician who no longer cares about the country and votes NO simply to be spiteful should not be serving.

He also opened the show once again by emphasizing the value of a college education. From a purely financial point of view I cannot dispute what he said, but doesn't Brinker ever think about how college students minds are poisoned by liberal college professors? While a college education can reward a person financially it can harm them in their political way of thinking. Bernie Sanders was popular with college students. Why would college students be attracted to an old guy like Bernie? He probably reminded them of their college professors who spouted the same kind of nonsense. So going to college does have negatives on a persons life as well Bob.

=> Thanks to dRahme: audio clip of Senato Corker and Taxes

Frankj's Moneytalk Guest-Author Summary:

Scott Galloway, author of  “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google,” was Bob’s guest today, October 8, 2017.  Mr. Galloway is a professor at the New York University’s Stern School of Business.   

The author researched and wrote about these companies out of admiration for them as well as some of the issues raised by their success.  Despite mention of these four firms in the title, most of the interview concerned Amazon. 

“Amazon fulfills a need to hunt and gather …”  The guest went on to give his interpretation of how men shop differently from women.  Whatever.  What was more interesting was his explanation of “tedious, low-consideration, non-joyous shopping.”  This is the routine shopping we don’t look forward to but is a necessary part of life.  He said Amazon is very good at fulfilling this need, and with artificial intelligence and analysis of shopping habits we could reach the point where groceries are automatically delivered to homes. 

The purchase of Whole Foods (or Whole Wallet as Bob Brinker and my mother-in-law call it) is a game changer.  Despite the fact that Whole Foods was about 9% the size of Kroger, the biggest grocery chain in the US, Kroger’s stock dropped about one-third in the days after Amazon announced they were acquiring Whole Foods.   The acquisition turned 550 WF stores, into potential Amazon warehouses – and these stores in close proximity to a very sizable percentage of the US population.   The guest characterized the Amazon/WF combination as getting a Mercedes for the price of a Toyota. 

Does this mean the end of shopping malls?  

The higher end malls will probably be OK.  Some re-engineering may be required.  Malls in lower income area may not be OK.   We have more retail square footage then we really need, he cited some comparisons between the US and Canada and Europe.   The demise of malls and traditional stores is exaggerated right now because about 80% of purchases still take place at brick and mortar locations.

Bob asked what parts of the market would an investor avoid if they didn’t want to get “Krogered” (my term) by Amazon.  The guest was hesitant to be very specific but he pointed out the recent decline in UPS and Fed Ex shares with Amazon hinting about getting into the delivery business.   He said any sector where Amazon could be viewed as a competitor could have a setback, citing Walgreens’ and CVS as pharmacy/retail that could take a hit if Amazon gets into the pharma business. 

He quoted Mickey Drexler the former CEO of J Crew as saying, “How can you compete with any company that doesn’t care about profits?” 

Indeed.  Amazon is successful enough to be able to borrow at very favorable rates of interest.  

All this talk about their success led to mention of anti-trust activities.  The guest said the Justice Dept. only looks at about 3 anti-trust actions per year whereas in the 1980s they looked at about 20 per year.   He thinks any anti-trust actions against Amazon will come from the European Union.

Google has 90% of the search market so they may not be immune from anti-trust.

Facebook:  the recent scrutiny over Russians using FB to influence the 2016 election is warranted, said the guest.   It was “frightening that it (FB) was weaponized by Russia.”  The average age of FB employees is only 28 so they have no historical perspective.   Whether they realize it or not, they are a media company, not just some social platform for posting selfies.  Zuckerberg has to insure that FB never gets used in that way again.

Caller Sam from St. Louis brought up the issue of low pay and no benefits for Amazon drivers.  The guest was not ready to assess the equity of wages but he did point out that the tech business has two strata of employees, the creative, innovative group who are paid handsomely and the worker bees who are not necessarily paid that well.  He said we need more CEO like Henry Ford was and fewer like Jack Welch. 

Ike from Davis, CA wanted to know how you define the middle-class.  Mr. Galloway said you look at household income and group households by quintiles.  The middle class is in the middle three quintiles, i.e., between the bottom 20% of household income and the top 20% of household income.  He said the percentage in these three quintiles has shrunk recently and is now between 51% - 55%.

Finally, the guest used the work “gestalt” several times so I decided to look it up.   It’s a noun that means “something that is made of many parts and yet is somehow more than or different from the combination of its parts.”   It came up in the discussion of Amazon.  

By the way, Bob frequently mentions the exchange traded fund VTI which is Vanguard’s total US stock market ETF, weighing in at about $86 billion in assets.   Apple comprises 3% of this fund, Facebook A shares, 1.59% and Amazon 1.55%.   If you own any diversified, large cap fund, managed or passive, it is likely you own these companies, as well as Google. 

Honey here: Thank you, Frankj, that turned out to be a very interesting interview.

=> Thanks to dRahme: audio clip, what's up in the Canyons of Wall Street next week, and FOMC.

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October 1, 2017, Bob Brinker's Moneytalk: Stocks, Bonds, Economy and Investing

October 1, 2017....Bob Brinker hosted Moneyalk live today.....(comments welcome)

STOCKS.. Today Brinker did not mention the stock market performance, but recommended dollar-cost-average new money into the market.

PRESIDENT TRUMP'S TAX REFORM PROPOSAL....Most of the program was about President Trump's new tax proposals. Thankfully, dRahme has provided us a clip of some of Brinker's  prognostications about it.  dRahme: Taxes, Taxes, and More Taxes

FLIP-FLOPPING YOUR $4 MILLION STOCKS AND BONDS LOCATION....Caller Dave in Las Vegas has  (50%)  stock investments in his tax-privileged account and  (50%) income producing in his personal account - and he needs to switch them around.

 BB explained that it is always better to have stock market holdings in personal accounts and fixed income in sheltered for general tax purposes. He explained how to do it as a sideways move about 7 minutes into the following clip:

Thanks to dRahme: Taxes and Flip-Flopping stocks and bonds the same day.

VANGUARD HIGH-YIELD BOND FUND (VWEHX)...BB said: "That's a wonderful investment during periods of economic expansion - as you've seen.  But just keep in mind that if you get a recession, that fund is vulnerable."

Honey EC: Yes, Brinker learned that lesson the hard way. He had his Marketimer subscribers invested in VWEHX  when the economy and market crashed in 2008-09. I received several emails during that time  from subscribers asking me for advice when the fund dropped out of bed. I always told them to hold on - that it would come back, and it did.  

Brinker then sold  VWEHX in 2011, and all Vanguard Ginnie Mae Fund in 2013. Both have done extremely well since then - Much BETTER  than the funds he replaced them with. 

DEFLATION WOULD BE A DISASTER...BB comments: The FOMC inflation target range is 2% because they want to avoid any possibility of deflation. Deflation would mean lower prices, lower wages and lower corporate profits - leading to lower earnings. Also debt would become much more difficult to service....."It would be a financial disaster."

MONEYTALK MULTI-MILLIONAIRE'S CLUB TODAY:

1. Dave in Las Vegas with net worth over $4 million and a flip-flop problem. (Hear the call in the link above.)  

2. Irene in Kern County, with net worth of about $2 million wanted to know where to get more than the 2%.income she was now getting. Brinker explained that his Marketimer fixed income portfolio was now getting 2.9%, but it had more risk than a Certificate of Deposit. (To hear Irene's call go to the end of the  Wall Street clip below.)   

3. Bill in Chicago with net worth  over $2 million had a huge decision to make about accepting a lump sum Social Security payment of $18,000 which would reduce his monthly  benefits microscopically. Brinker pointed out that this money represented about 1% of Bill's net worth. 

Thanks to dRahme: What's up next week in the Canyons of Wall Street.

FRANKJ'S MONEYTALK GUEST-SUMMARY

Bob’s third hour guest this first day of October 2017 was Alan Blinder of Princeton University. The guest is the author of the book, “After the Music Stopped,” and is a former vice chair of the Federal Reserve’s Board of Governors. Professor Blinder has been such a frequent third hour guest, Bob might be running out of SWAG for him. By now, the professor must have the MoneyTalk Star Ship pen and pencil set, coffee mug, baseball cap, windbreaker and briefcase. (Editorial comments in italics as usual.)

We kicked things off with a discussion of Quantitative Tightening, an activity of the Fed, due to start very soon. The guest complimented the Fed’s pre-announcement of the concept and details of this policy. They will reduce the Federal securities held on their balance sheet from $4.5 trillion to $2.5 trillion over many years. This should not create disruptions since the market handles $0.5 trillion in gov’t securities each day.

If Quantitative Easing LOWERED interest rates, how much will QT RAISE interest rates?

Prof. Blinder said the “up” in rates as a result of QT will not be as big as the “down” in rates that resulted from QE. Going forward the Fed is following two tracks: 1) they will gradually raise the overnight Fed funds rate, and 2) they will normalize their balance sheet (QT). QT will go on in the background. If course corrections are needed he said they would do that via the Fed funds rate.

PCE vs. CPI: The Fed uses the Personal Consumption Expenditures Index (PCE) to assess inflation. This index is skewed a little more toward the consumption of items that consumers may buy using credit. Prof. Blinder said if he were the shot caller he’d use the CPI because it’s what the public understands.

Don from Sacramento asked the question that many people would have liked to ask: When the Fed reduces its balance sheet where does the money go? The guest said in the past when bonds matured, the Fed bought new ones. Now they will no longer do that. He also said the reserves the Fed holds will shrink.

OK, I’m not sure if Don was enlightened, I know I was not.

Mindy from Florida sought more information on Prof. Blinder’s criticism of the government’s plan to “block grant” money to the states for Medicaid. He said the administration wanted to give Medicaid money to the states for ten years and then end it – that was his criticism.

Professor Blinder: I think you realize the federal government’s proclivity for EXPANDING entitlement programs far outstrips their record for reducing or ending them. In case you don’t know this is true, I’ll assign you some reading: “The High Cost of Good Intentions” by John F. Cogan of Stanford University and the Hoover Institution. Published in 2017. This book examines federal entitlement programs from the Revolutionary War up through Obamacare.

Bob asked why the 10 year German bond was paying one-half of one percent interest while the US Treasury 10 year bond was paying 2.3%. The guest said the German bond rate is based on the expectation that inflation will remain below the inflation in the US.

John in Naperville, IL said Milton Friedman’s approach to monetary policy would be to target economic growth at 2-3% per year and call it good. This gave the guest a chance to take a swipe at the Chicago “school” of economics – the second swipe in the interview. He said this was what was done in Paul Volcker’s first three years as Fed chair and it led to “tremendous fluctuations” in interest rates.

Lest we forget, Paul Volcker was appointed to bring runaway inflation to heel, and he did it. 

Bob added that by doing what Milton Friedman suggested “you’re betting on Congress to do the right thing.” Bob and Prof. Blinder had a little chuckle over that one.

The guest answered “Yes” to Alan’s question from Kansas City on whether he would issue 50 and 75 year bonds in the low interest rate environment.

The topic of Fed Chair Janet Yellen’s expiring term in February 2018 led to some condescending comments from the guest. Bob threw him a softball by asking what advice Blinder would have for the President on choosing the next Fed chair. The guest said he wouldn’t expect to be asked such a question and didn’t think any advice would be listened to, then went on to say President Trump should “ beg her to stay.” He said he thought the President would expect her to pledge loyalty to him and that is not what a Fed chair does.

Bob wouldn’t let it go and asked Prof. Blinder if offered a re-appointment, would she accept. He said he didn’t know but used some of his answer to refer to the “general swamp” the Trump team has created.

The interview was pretty much your normal love-fest between Bob and Alan. It is a lock that he’ll be back before too much longer. Bob mentioned several times Prof. Blinder’s popular opinion pieces in the Wall Street Journal. As a reader of that paper and his columns, as well as the comments about his opinions, I can assure all here that his opinions are not popular with everyone.

And we get it you do not like the President since you referred to him repeatedly as “Trump” and only once that I counted as President Trump. 

Honey here: Thank you for that outstanding summary, Frankj. I enjoyed reading it more than I enjoyed listening to the Professor. I find it very distressing that he was so willing to trash President Trump with opinions since he is an "educator."  And I wonder why, if the Fed Chair is not supposed to be political, is he so in the tank for Janet Yellen. 

Also, Blinder's claim that the president would "expect her to pledge loyalty" is nothing but nasty gossip spread by a media that doesn't worry much about the truth these days. Blinder CANNOT back that up with any kind of proof or documentation.

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