November 5, 2017, Bob Brinker's Moneytalk: Stocks, Bonds, Economy and Investing

November 5, 2017....Bob Brinker was live on Moneytalk the first hour, the second hour was re-run calls, third hour guest Jeffrey Gundlach. .........(comments welcome)

STOCK MARKET....Blog comments earlier today right here:

KC said...

Just curious what everyone thought of the call,  about halfway through the first hour from the caller asking about paying $500,000 for the building of his new home. He started to ask Bob about how to withdraw the construction fees from his investment account. When the caller mentioned a reference to something in the November newsletter, Bob quickly jumped in and cut the caller off with a generic answer and waiting until the start of 2018 to defer the capital gains taxes. Any ideas on what the caller was going to reference in the November newsletter that Bob did not want disclosed over the air?

Honey here: Brinker did indeed interrupt the caller, Bob in PA.   Brinker said that there was nothing in the November Marketimer that would give any reason to be worried about the stock market.   He replied that since the caller had "already spent" his money, he should go ahead and raise the cash - being sure to consider the taxes, as you pointed out.  I have read the latest issue of Marketimer,  and I agree with Brinker - nothing there to worry about. 

=> THANKS TO DRAHME: Audio clip....stock market and tax proposals

BOND MARKET....(This was a rerun call from April 5, 2015 that BB played in the second hour - excepts from my summary on that date:)

Connie from Kansas City called with a couple questions. She and her husband are 60, plan to work to age 70 and have a cool million in equities. Bob advised a 60/40 or 65/35 allocation, stocks/bonds and pointed Connie toward the Income Portfolio on page 7. A listener with access to the newsletter could better follow this call as Bob jumped back and forth between the Income Portfolio and another one of his (numbered) portfolios that contains bond funds.

Interestingly, Bob said that “we’ve solved the bond market problem…” referring to the page 7 portfolio yielding 3%. Connie said she’s signed up for Bob’s alerts. Her next topic: the business they own has its 401K plan with a company other than Vanguard and she asked about switching to save money. Bob helped her with the math: if they have $2 million in this plan and Vanguard charges 18 basis points and the current firm charges 36 bp, then she’ll save $3600 per year.

Honey EC: Brinker's answers to Connie were very important in that Brinker claimed the risk has been taken out of his bond fund holdings. That is not so because he has added funds with large holdings in  high-yield (junk bonds).  Marketimer has three bond funds in the balanced model portfolio III,  and in his "off-the-books" income portfolio (MWCRX, OSTIX, DLSNX).

JUST RELEASED TAX-REFORM PROPOSALS..... The first hour of Moneytalk was devoted almost exclusively to the new tax reform proposal that was announced by Speaker of the House, Paul Ryan, this week. Since we all know that there is a ton of water that will go under the bridge before any of it becomes actual law, I won't waste my time or yours covering the callers' complaints.

BB's LIKES AND DISLIKES OF THE TAX PROPOSAL.....Brinker opined that Paul Ryan should not call the House tax proposals a "middle-class tax cut" because most of the benefits go to corporations.  Brinker said he likes: The corporate tax cuts  (clearly good for business) Brinker does not like the repeal of the death (estate) tax - says it only benefits rich people.

Honey EC: The people who are hurt the most by the death tax are farmers. Truly rich people will easily find ways to pass on their money without paying much tax, but small and mid-size family farms are often lost because the heirs cannot raise enough cash to pay the exorbitant taxes. 

MARK FROM ARIZONA CALL IS  JUST AS MUCH FUN THE SECOND TIME AROUND....(This re-run call was from April 5, 2015 - excerpts from my summary.)

A TREAT FOR ALL FROM DRAHME: audio clip of Mark from Arizona 

(we didn't have this the first time around - ENJOY!)

* Mark from Arizona was one of the most interesting calls in the history of Moneytalk. He met his future wife on an online Christian dating service. They will marry in a few months and she will inherit around $70,000.000. He told Bob that the money was invested in natural resources. Bob told him to look at the fees that are being charged.

Honey EC: What this caller said was either a late April Fool's joke on Brinker or he was about to become shark bait. Brinker played him along by asking if he had known about this money coming to his "future wife" BEFORE he decided to marry her. He said he didn't know about it, that her deceased father's attorney had contacted him after they decided to marry, and told him that her father set it up so that she couldn't touch the $70 million until she married. And then.....yep....wait for it....Then the new husband would be given control of it. ROFLOL!

* Dave from Alabama said he was enjoying todays show. He wanted to know the number for the Christian dating service that Mark was using. He noted the possibility that Mark was being scammed. Bob said if he was ask to wire money so he could get the inheritance he should watch out.

THANKS TO DRAHME: audio clip...the week ahead

FRANKJ'S MONEYTALK GUEST SUMMARY

Bob’s third hour guest on this first Sunday of November 2017 was Jeffrey Gundlach.  Mr. Gundlach is the CEO of the Doubleline family of mutual funds which he started in 2009 after leaving the TCW family of funds.  Bob has spoken highly off JG in the past and has Doubleline’s Low Duration Bond fund (DLSNX) in his income portfolio and his model III portfolio.   You can read more about Mr. Gundlach here: 

https://en.wikipedia.org/wiki/Jeffrey_Gundlach

Bob must have been beaming behind the microphone when Mr. Gundlach told Bob he’s been a listener since 1986.   (He would have been 27 years old). 

The coming transition at the Federal Reserve:  JG thinks Jerome Powell is a centrist and will follow through with the planned interest rate increases.  Mr. Powell is not a classically trained economist though, he is more of a pragmatist.   The Fed has indicated 3 raises in 2018, while “the market” thinks there may only be one raise. 

William Dudley who represents the New York Federal Reserve bank is close to announcing his retirement so the shape of the Fed could change more with his replacement. 

The guest echoed the sentiments of other, recent guests regarding the Fed’s diligence at telegraphing their plans.  He referenced Ben Bernanke’s unfortunate reference that led to the taper tantrum in 2013.  This Fed is doing a better job at carrying out a “no surprises” approach. 

There was the usual talk about GDP and 10 year Treasury rates.  JG said that the 10 year rate often moves close to what the GDP is.  Interesting.

It takes population growth and productivity growth to increase GDP.    This is a topic we’ve heard often enough with guests – readers better assume it will be on the final exam.  The guest said he sees GDP only at 3% on the high end.  He said those predicting higher numbers might be mathematically challenged.  We are only looking at 0.7% population growth and 0.7% productivity growth.  Those numbers aren’t enough to get us to 4% GDP.   Again, he echoed what other guests have said about measuring productivity – it is hard to do with the amount of automation in factories. 

Other countries:  Russia is looking at a projected fall off in population.  China had a lot of population growth but they “fixed” that with their one-child policy which slowed down their growth.  India’s labor force is going to explode and he sees this as a positive.  He recommended the INDA ETF as a long term holding. 

Junk bonds:  They are not signaling a recession right now.  When their yields depart widely from treasury bonds however, watch out.  Hew  He HHh    If you own any “bank loan” type mutual funds you might want to take note:   Loans are being issued to borrowers without covenants.  Issuing WITH covenants used to be the way things were done … having these in place protects investors in these funds.  Now, it is thought that placing covenants on a borrower means the borrower is too risky and there must be something wrong.   Read your prospectus.

Is the Fed creating inflation?  That was the question from Carl, a repeat caller listening to WLS in Chicago.   By alluding to 3 rate hikes in 2018, is the Fed inadvertently creating inflation?  Mr. Gundlach said, as much as they would like to have some inflation, no, he did not think enough people even knew what the Fed was, much less would act on what they thought the Fed might do.

Mike in Vallejo, CA threw a hanging curve ball to the guest.  “Is this a good time to invest in a bond fund?”   Of course Mr. Gundlach, a fixed income expert said “you might want to invest in a low duration fund of 2-4 years.”   Bob stayed silent which might have been difficult since he’s been pounding the table on short duration funds for quite a while and Mr. Gundlach’s Low Duration bond fund is in Bob’s stable of funds, as mentioned above.

The House GOP’s proposed tax package:  First of all, the guest does not think it will pass as written.   He didn’t like the fact that it did not do away with the “carried interest” provision that allows the hedge fund operators to pay capital gains tax rates on their earnings, versus ordinary income rates.   He said the package is bad for top wage earners and said his taxes in California are going to go up.  It is very good for the heirs of the wealthy. 

Was it live or is this Memorex?  Remember those old TV ads?  The consensus seems to be that the second hour was pre-recorded.  This third hour sounded like the usual, live third hours.  

Radio Station 

710KNUS Denver
WNTK

KKOB770

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