January 28, 2018, Bob Brinker's Moneytalk: Stocks, Bonds, Economy and Investing

January 28, 2018....Bob Brinker hosted Moneytalk live today....(comments welcome)

STOCK PERFORMANCE IN THE LAST TWO YEARS.....Brinker said:  "There are a lot of things out there in terms of the economy to like.  And that's why I've said, those of you who have ridden this wave of stock market gains, you have to give yourself a pat on the back. You have to congratulate yourself every once in a while when you're doing something extremely right. Because the bottom line is, these have been the times wherein you can make so much money in the stock market, that it is mind-boggling. Just look how much the market is up since the last major correction which bottomed in February 10, 2010 (Brinker misspoke the date).

Subscribers to the investment letter are well aware that we issued a buy signal at the bottom of that correction.....at 1829 in the S&P 500...... And the market, not counting dividends, has risen 57%..... since that time, and if you add in the dividends, it's over 60% total return since that buy signal that we published at the website after the close on February 10th, 2016 - that's a little less than two years ago - when we had the last major correction which went on for several months and bottomed finally on February 11th. We put our buy-signal after the close on the 10th - anybody buying mutual funds at the close on the 11th, actually bought in at the low of correction which was 1829. And since then a total return of over 60% in the S&P 500 Index. Pretty good, huh?  

Honey EC: That is very good, Mr. Brinker.  And I understand why you want to go back to your last fully invested - no cash-raised buy-signal, but the Wall Street Journal reported this today - about last year and this month:

In January 2018,  the S&P 500's 7.5% gain so far is the biggest since 1987....Stocks around the world have staged one of the best-ever starts to a year, a synchronized rally that has only gained momentum following 2017s sharp gains.

DOLLAR COST AVERAGE.... Brinker's Marketimer model portfolios are fully invested and he is recommending dollar-cost-averaging for new stock market money. 

BRINKER'S DEFINITION OF A BEAR MARKET,  MAJOR CORRECTION,  SMALL CORRECTION....Brinker defines a bear market as a decline of 20% or more, a major correction between 10% and 20%,  and a "noisy" correction as 10% or less. 

NO RECESSION, NO BEAR COMING......January 2018 Marketimer; Bob Brinker wrote:  "Marketimer economic outlook for 2018 does not anticipate a recession. This suggests that the risk of a bear market decline in excess of 20% is low, unless our economic outlook changes. In the absence of a recession, the most likely risk for the stock market is the development of a mi-term off-presidential election year correction. Whether such a   decline is a major correction of 10% to 20%, or a smaller decline of less than 10%, remains to be seen......" 

BOND/INTEREST RATES GOING UP.... BB said that he expects the Federal Reserve to raise rate 0.25% at the March FOMC meeting. 

MARKETIMER BOND FUND CHANGE COMING....Brinker told caller Brian from Reno that he plans to make changes to his Marketimer fixed income portfolio and also his balanced model portfolio III. BB said those changes will be announced in the February Marketimer which will be ready next Thursday.  

Honey EC: Several comments came in this afternoon, speculating about what those changes will be. It could be almost anything. Since there are only three bond funds (the same in both portfolios), perhaps he is adding another one.  Some think he may sell the fund that has large high-yield bond holdings. As Brinker likes to say: "We shall all know in the fullness of time." Stay tuned.... :)

HOUSING....BB: "New home sales are okay but will be volatile."   There was a  9.3% drop in December, but the rest of 2017 was a good year, and BB said there is no reason for concern because you "have to look at a longer time frame than month to month." And when you look at 2017.....new homes sales increased 8.3%, to total rate for the calendar year of 608,000.....Inventory in the housing market has been tight around the country.... 

==> Thanks DRAHME, audio clip: new homes and other economic reports

SMALL BUSINESS OPTIMISM INDEX....BB said:  "You have to be impressed....at its highest level since the second quarter of 2007....That's why I get really tired of hearing these negative comments from these negative nabobs out there. The reality is, they are not paying attention, they are not doing their homework. They are not even on the same page with reality. Very sad.....

BLOOMBERG CONSUMER COMFORT INDEX....BB said:  "is riding high right now....is now at 53.7, the highest level since March of 2001....So now we are talking about a Consumer Comfort Index very close to its highest level in almost 17 years - that is a major cord on the economic data front. 

BEAUTIFUL JOBLESS CLAIMS.... BB said: "And when you look at jobless claims, you see beauty. Initial claims for unemployment insurance have been way down, way, way down!"

ECONOMIC REPORTS SUMMATION.....Brinker rapped up his economic reports with this: "There are a lot of things out there in terms of the economy to like.  And that's why I've said, those of you who have ridden this wave of stock market gains, you have to give yourself a pat on the back. You have to congratulate yourself every once in a while when you're doing something extremely right. Because the bottom line is, these have been the times wherein you can make so much money in the stock market, that it is mind-boggling. Just look how much the market is up since the last major correction

==> Thanks to DRAHME, audio clip, nattering nabobs of negativism shot down

SOME DESERVED CROWING......BB did a little crowing about his Marketimer projection for 2017 which pretty much hit the nail on the head at 2.3% (annual).   He correctly said that 2.3% is a  "significant improvement" over 2016 - which was 1.5%.

NATIONAL DEBT/DEFICIT.... For the first time in several weeks, BB did not sound the alarm on about the deficit and national debt and mistakenly claim that "no one in Washington talks about it anymore."  Perhaps he missed this important step in the right direction: It’s Official=> President Trump Decreases the Debt to GDP Ratio in His First Year in Office – First Time in More than 50 Years!

===> Thanks DRAHME, audio clip of the week ahead.

FRANKJ'S MONEYTALK GUEST AUTHOR SUMMARY:

Today’s guest this 28^th day of January, 2018 was Tim O’Reilly, author of the book “WTF? What’s the Future and Why It’s Up to Us.”   Thus Bob Brinker adds another interview devoted to a book by an author who has done some navel gazing and in doing so, sees the future.   Either Bob or someone else in the organization seems fascinated with these futurist authors. 

If you sat and watched paint dry instead of listening to the interview, I’d say you made better use of your time.

He said he wrote the book because of concerns about income inequality and the future of work.   Also mentioned that “tech” does what we want it to do and if that means getting rid of jobs then that must be what (some of us) want.

Bob brought up the proverbial taxi driver who paid a great deal of money for a taxi medallion who now finds his income threatened by ride services like Uber.  The guest said his brother drives a taxi in Maryland …  Bob interrupted rudely and said, “well, he didn’t pay hundreds of thousands of dollars for a taxi medallion…”   Now it was Tim’s turn to interrupt and he said that Yes, his brother did buy a medallion. 

So, that was the high point (or should I say low point) of the interview.  

In response to another question the guest wandered off into a long, long answer about the good and bad entrepreneurs in Silicon Valley.   The founders of Uber were just a couple of rich guys who wanted to get even richer, as an example. 

After the break, Bob asked “do we say too bad to people who got the shaft,” (from the introduction of technology.)   There was another long, rambling answer by the guest who ended up criticizing McDonalds as a company that had the means to pay its employees more, but doesn’t.

Bob asked if an employee’s economic value to an employer depends on the skills they bring to the job.   Tim replied that he didn’t think that was fair and this set off another minor back and forth, then a long speech by Tim ending with Apple as an example of a company whose three most important things are its employees, its customers and its suppliers.  Its investors are just along for the ride and don’t matter to Apple – so says Tim O’Reilly.

Bob pointed out that the investors being described are in the secondary market for the stock – Tim more or less agreed, but said in effect, an investor who owns a big chunk of stock has no right to demand that more of the corporation’s cash be returned to investors as dividends. 

After the break: 

·         What about calls to break up these outfits like Amazon, Facebook, etc?  Answer:  companies like these have to think about the systemic ecosystem in which they exist. 

·         Bernie from Westlake Village CA weighed in by asking the guest if he ever employed people and how many?   The guest said he employs about 500 people.  Bernie pointed out that artificially raising wages increases automation.  

·         Tim responded that the market dictates what skills are worth (a concept he seems to disagree with).   He said there is more to rates of pay than the simplistic notion of the market.  

·         Bob jumped in and hammered Wal Mart for making a big deal out of their announcement to raise wages from $9 to $11 per hour as a result of the tax cuts.  He criticized Wal Mart for keeping wages so low for so long and shorting employees on medical coverage for so long. 

·         Bob mentioned his theme that Congress should have indexed the minimum wage to inflation a long time ago and the guest agreed.

The guest gave such long winded answers that Bob had to interrupt him a couple of times to get the next question in.   I looked him up on the interweb, and he was born in 1954.  He is older than he sounded over the radio – I thought he was much younger. 

Honey here: This guest could go in the running for the all-time Moneytalk most boring - but your summary certainly made a "silk purse" out of it.  I got the strong feeling that Brinker was having a problem finding any periods when the Tim O'Reilly was having his one-man jabberfest. :) 

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