March 18, 2018, Bob Brinker's Moneytalk: Stocks, Bonds, Economy and Investing

March 18, 2018....Bob Brinker hosted  Moneytalk live today....(comments welcome)

STOCKS....The only time that Brinker mentioned the stock market today was when he said to only invest what you are comfortable with - and can still sleep well at night.  

Honey EC: It is beginning to  look like - barring any new exogenous events - that Brinker missed the bottom of the 10% correction. That would be a total non-event, except that he  sent out a "special bulletin" on February 12th saying that he was looking for an opportunity to issue a new "buying-opportunity."  For that, he was looking for a re-test of the lows, and to continue to "dollar-cost-average on weakness."  

However, in the March issue of Marketimer, Brinker wrote:  "It remains to be seen whether the correction activity that commenced in late January will eventually lead to a confirmed buying opportunity, including the process of successfully testing the area of the initial lows. It is important to note that the timeline for a correction and retest can vary from several weeks to several months."

Honey here: Does anyone buy that?

==> EDIT: dRahme Audio Clip: FOMC Meeting; Rate Hikes; SSA; Price Indexes

VANGUARD AND FIDELITY....WHY NOT SCHWAB?   Several times again today,  Brinker recommended Vanguard and Fidelity's total stock market funds.   He talked about the low expense fees and how great the funds are for long term objectives. He never once included Schwab. One has to wonder why not, because every time he is asked on the air, he states that "Chuck" is his friend and has been on Moneytalk as a guest. 

BRT (blog research team) member, Robert,  did some research  this afternoon and found that not only do Schwab's index funds charge lower fees, they perform better. I cannot get his graphic to post, but here is the data: 

Robert wrote:  "Here’s the performance of the Schwab Total Stock Market Index Fund, SWTSX, compared to the Vanguard Total Stock Mkt Idx Inv, VTSMX......

Note that the Schwab fund has beaten the Vanguard fund in EVERY time period from one day to 15 years. That’s pretty amazing. Since the Schwab fund has an expense ratio of 0.03% and the Vanguard fund has an expense ratio of 0.15%, the Schwab fund has a big advantage which is seen in the total returns.

That makes it even more surprising that Brinker recommends Vanguard and Fidelity but doesn’t mention Schwab......Vanguard’s Admiral share class has an expense ratio of .04%, so it’s very close, but you have to invest $10,000 to get that." 

FOMC WILL RAISE INTEREST RATES IN JUNE, SEPTEMBER AND MAYBE DECEMBER....BB said that he rates the chances of a rate increase of 0.25% next Wednesday at 100%.   He expects at least two more this year, and maybe one more in December....In order to get to 3% on Federal Funds rates, we need 3 more hikes next year - if the economy continues to grow. 

INFLATION: CPI VS PCE....Brinker commented that the correct index to use for inflation is the one that the Federal Reserve uses - the Personal Consumption Expenditures Index - not the CPI.  The CPI is used to calculate Social Security cost of living increases and that causes the increases to be much too high.

SOCIAL SECURITY COLA'S-ARE ALL THE IDIOTS IN WASHINGTON, BOB?  Brinker said:  "They are overpaying Social Security recipients......But there is a lot of idiocy in government as you have learned over your lifetime. This is one more example of the idiocy in the federal government.....This is what we have to work with. We have to go with what we have. And if Washington is populated with idiots, well, it is what it is."

==> EDIT: dRahme Audio Clip: Housing; Retail Sales

SAVINGS....BB comments:  Everyone should begin saving at least 10% of their income early on or they may end up dependent on Social Security. 

BANKRATE. COM ARTICLE....BB FALSELY  claimed that a "Bankrate article" said that "trickle down wasn't working.    Here is the article:  Despite an Improving Economy, 20% of Americans Aren't Saving Any Money    BB then went on to make a quote or two from the article without giving credit. I will quote it and also give credit. The following are excerpts from Bankrate.com:

"A rising tide isn’t lifting all boats. The unemployment rate rests at a post-recession low, stocks flirt with all-time highs and paychecks are perking up in recent months thanks to a slight increase in wages and the implementation of the GOP tax bill. Consumers are as confident as they’ve been in two decades.....

....And yet, one-fifth of Americans are adding nothing to their savings, according to a Bankrate survey. Why not? Among respondents, 2 in 5 cite life’s high expenses, while another 1 in 6 blame their crummy job. 

WHAT'S KEEPING PEOPLE FROM SAVING: Among respondents, 20 percent said they aren’t saving anything or don’t have an income. Another 47 percent are saving 1 to 10 percent, and 27 percent are saving 11 percent of their income or more.

Expenses are the biggest obstacle, with 39 percent of the respondents citing this as the main reason they’re not saving. Sixteen percent said their job isn’t good enough, while an equal amount said the main reason they aren’t saving more is because they haven’t gotten around to it. 

ECOMOMIC NEWS:  Employers added 313,000 to payrolls in February, keeping the unemployment rate at recent low of 4.1 percent, while more people returned to the labor force."

Despite a dramatic two-week plunge six weeks ago, the S&P 500 index is up 4.1 percent so far in 2018, after gaining 21 percent last year, pushing 401(k) balances to record levels. Home prices are skyrocketing, while consumer confidence is at the highest point since 2000. 

In fact, the stock market fell off at the end of January because investors were so worried that rising wages would lead to much higher inflation levels. (Wage growth was more modest in February.)

Meanwhile, the personal savings rate has trended downward over the past two years, while credit card balances have jumped to all-time highs. A separate Bankrate survey found that 39 percent of Americans wouldn’t pay for a $1,000 unexpected expense from their savings account.

The average American has less than $5,000 in a financial account, a quarter to a fifth of what you should have, and those aged 55 to 64 who have retirement savings only carry $120,000 – which won’t last long in the absence of paychecks." 

Honey EC: As you can see from reading those excerpts, Brinker's PHONY conclusion about that article either shows immense ignorance or wild-eyed need to LIE in order to discredit President Trump and the GOP congress. 

TWO THINGS THAT WERE NOT SAID TODAY:

==>   No mention that Larry Kudlow, who in the past has substituted for Brinker on Moneytalk, has been chosen by President Trump to be the next White House Economics Advisor. It's been many years since Kudlow was on Moneytalk (maybe some old-timers will remember how long), but he was always everyone's favorite replacement for Brinker. 

==>  Not a single word about letting the guest  last week speak about the President with hateful and vicious name-calling that one would only expect from a mentally-ill person. 

FRANKJ'S MONEYTALK GUEST-AUTHOR SUMMARY

Bob’s third hour guest this Sunday March 18, 2018 came to us from across the pond.  Jonathan Haskel, author of “Capitalism Without Capital: The rise of the intangible economy.” The guest is a Professor of Economics at the Imperial College in London.  Stian Westlake is a co-author on the book.  

We learned a new term today, “Big Bananas,” synonymous “a big deal” used by the guest to describe the importance of the rise in investments in intangibles.   Intangible assets are things like branding, software, apps, marketing and design.  The authors estimate that for every dollar US companies invest in “tangibles” they invest $1.15 in intangibles.  

Some companies find it easy to take the intangible route.  Uber was given as an example.  Set up an app, engage some freelancers to drive and they’re on their way.  Compare that to a traditional taxi company that has to acquire its own vehicles, etc. etc.   Amazon did much the same, stealing a march on traditional malls. 

Bob asked whether it was important to be first in the intangible world.  He seemed to think it was important but the guest was gracious and said he disagreed but didn’t want to contradict Bob on his own show.   Bob was all peaches and cream, saying “that’s what it’s all about,” (disagreement).

Bob asked what I will start calling “the college question,” namely, what course of study would you advise a young person to take in college?  The guest hedged around and mentioned a few majors, non-technical ones, and concluded by saying that in the intangible economy, people need skills in coordinating groups within the company.   To be successful at this you need to be a people person.

MoneyTalk “trekkies” knew what was coming next.  Bob asked the guest to describe the higher education system in the UK.  This was a precursor to Bob making a comparison to the same in the US.  

·         The UK admissions are merit based.

·         High school exams are administered nationally

·         It is hard to squeeze into the top schools.

·         Students get generous support from the government.

·         They have a very long time period to pay the loans back with forgiving terms.

Frankly, these characteristics don’t sound all that different from how it is in the US.  Maybe the difference is how “generous support” is defined.   Bob pointed out that there were many in the US who want to attend college but are unable to because of a lack of funds.  

There followed a little discussion about the neighborhood disruptions caused by AirBnB another example of an “intangible” company.   

After the half-hour break there was some navel contemplation that I didn’t pay much attention to.  Then Bob got back a topic he sometimes brings up with guests:  Guaranteed Minimum Income (aka Universal Basic Income).  The guest was very clear that he doubted it would happen in Europe because it is “very, very expensive.”   

Bob asked where is the world headed with so much debt and borrowing?  The guest said economists believe “as long as we get the growth to pay it back …”  

Bob said the thought here in the US is to just pay the interest, no one is thinking about paying it (the debt) down.  

The growth rate of the US economy is another subject Bob often asks guests about.  “Why has the US had a low growth rate for so long?”  The guest said the answer to that has eluded most economists, then he went on to speculate on the difficulty in measuring GDP today, when intangibles are part of the economy.  A second reason he offered was that when an economy is adapting to new drivers, it could cause a pause in growth.  Bob said bean counters are missing “free stuff” like apps.  

Bob guided the guest to make a comment on the two traditional drivers of economic growth:  population growth and productivity growth.  The guest only commented on Europe’s situation:  growth in population has been held down …. then he mentioned immigration.   Yeah, immigration in Europe is a double edged sword.  

There were no calls during today’s third hour.  If you dozed off during the interview you are excused, it certainly did not have the fireworks of the one two weeks ago.  

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