June 24, 2018, Bob Brinker's Moneytalk: Summary and Commentary

June 24, 2018....Bob Brinker was live on Moneytalk today....(comments welcome)

STOCK MARKET....Today, Bob Brinker indicated that there has been no change to his fully invested position in equities.  He also recommends dollar-cost-averaging any new stock market money. He recommended Vanguard Total Stock Market Fund for long-term investing to a caller for his grandchildren's education. And he also repeated his recommendation for those in or near retirement to stay near a 50-50 (stock, fixed income) balanced portfolio. 

Honey's Market Reports: The S&P 500 had three days of losses and two days of gains this week and ended down 0.88% from last week. The index is now up 2.19% YTD, and is 4.11% below its all-time-high record close......The 10-year Treasury Note is now at 2.90%.....

BOB BRINKER TALKED ABOUT STOCK INVESTING:

Caller Bill from Florida, who said he is heavy in stocks in his taxable funds,  wanted to gradually reduce his stock holdings over time. 

Brinker replied: "That's going to work as long as the market holds together, Bill. You mention you are a subscriber and I strongly recommend that you stay close to that because this thing has been going on for many years. We are way down the road and long in the tooth of this economic recovery. And there is a big time connection between what the stock market does and the economy does - and economy-wise growing..... 

Brinker continued: …...This is not going to last forever......If that changes, there could be a lot of pain in the stock market down the road. In fact I think there will be a lot of pain in the stock market down the road. It's a question of when. I don't think that when is right now, and therefore, we are staying with it......At this time, I would not see that a person would have to go below a 50-50 balance (in retirement). There may come a time  when a person would have to go below a 50-50 balance...... 

Brinker continued.....Anything is possible with this stock market going forward when the time comes......We've had a tremendous run in this stock market. I think sometimes complacency can bleed into the investment culture and can be very dangerous......Someone who has been in the business ten years now has never seen a bear market....One thing we have to be aware of is, nothing is forever in the stock market - not something we want to forget." 

BRINKER "RECIEVED A COMMNUNIQUE".... Brinker read what he called a "communique" from a "Ms.M"  in the San Francisco Bay Area. Thanks to ==> dRahme, you can hear Brinker read it in this Audio Clip:   Hour 1 Ms M. from SanFran, Russell 2k Rebalancing

OIL PRICE DISCUSSION.....==> dRahme's Audio Clip:  Hour 2 - OPEC, ARAMCO  IPO, 

BOND FUNDS..... Brinker still recommends only very short duration bond funds - one year or less. He repeated that advice a couple of times today. He explained to a caller that he does not have any of Vanguard's balanced funds in Marketimer right now because the duration in them is too long. However, they have been included in the past (Vanguard Wellesley) and may be again in the future. 

TARIFFS, $17 BILLION HERE - $17 BILLION THERE.....Brinker turned his monologues into political diatribes and name-calling sessions as he talked about possible tariffs on Canada. He made the  claim that somehow the fact that Canadian soldiers have fought alongside Americans in various wars that we owed them something.  (Honey will try to keep her lip-zipped about this.) 

Jim said...

While discussing trade with Canada Brinker failed to mention the 270% tariff Canada charges the U.S. on dairy products. If he's going to discuss this topic he should give listeners ALL the facts, not selective facts. 

June 24, 2018 at 2:00 PM

STOCKS THAT WENT UNDER YEARS AGO-INFLATION-THE WEEK AHEAD.....==>dRahme's Audio Clip:  Hour 3 - Kind of Jumbled - Equity Funding and the Week Ahead

FRANKJ'S MONEYTALK GUEST-AUTHOR SUMMARY

Author Brad Stone made his second appearance on the June 24, 2018 interview hour of MoneyTalk.  Brad was on a while back discussing a book, “The Everything Store,” a book about Jeff Bezos and Amazon. 

 I went back through my archives, such as they are but could not find this write-up.  I blame Russian hackers who must have deleted it.

This new book is titled “The Upstarts.”  Like many books published these days, it has an annoyingly long subtitle.  Most of the interview concerned Uber and Airbnb. 

Cities are trying to figure out how to cope with Airbnb.  Short term rentals in apartments, condos and houses are something new.  Direct competition to the hotel industry.   New York City started discussing regulations in 2010 and they’re still at it.   Neighbors don’t like Airbnb if the comings and goings of guests or their parties are disruptive.  The guest said that it is not unknown for film crews to move in for a short time … and he made it clear that these film crews are NOT necessarily filming G-rated, PG-rated stuff. 

Not mentioned on the show, but pertinent:  there was a lengthy article in today’s paper on the disruption that Airbnb rentals have had on the community of Joshua Tree, CA.  This town is in eastern San Bernardino, CA near Joshua Tree Nat’l Park.  Short term visitors running all over; home prices drive up by speculators who buy and then start renting them out. 

How do you list on Airbnb?  The guest said you  go through a registration process, and upload pictures you’ve taken.  Airbnb advises you to comply with local regulations.   Airbnb collects from the tenant when they book the place and the host gets paid only when the booking is over.   The “float.” 

The guest said there was little or no vetting.  That was contradicted by a caller who rented his Cape Cod place through Airbnb.  He said the vetting is thorough on hosts.  And Airbnb encourages (requires?) both tenants and hosts to post reviews of each other.   Airbnb looks for valid phone numbers, e-mails, and presence on social media in their vetting.   John from Cape Cod said he gets his money paid into his PayPal account.

Earlier Bob had asked the guest what Airbnb’s fee was.  The guest stumbled all around and finally guessed 10% with Bob pushing him.  With an actual Airbnb host on the line, Bob asked John what the fee was, but the telecom gremlins intervened and we lost John’s phone signal, so we await the answer. 

Uber has hit some speedbumps recently.   In the fatal accident that took place recently in Arizona, the Uber driver (of the self-driving car) was watching an episode of The Voice on her cell phone.  There have been incidents of drivers assaulting passengers and vice versa.   Uber got off to a fast start under an aggressive CEO and they ended up with problems.  He was gone after the video came out showing him yelling at an Uber driver who was complaining about reimbursement rates. 

The guest thinks there is a better management team in place, a new CEO came in from Expedia.  He recently went to London to smooth over the city officials who were ready to kick Uber out. 

That’s about it, other than Charlie’s call from Colorado Springs who asked about insurance with Lyft and Uber.  The gremlins struck again.  The guest’s answer was, initially, neither company gave it much thought (!) but states began to require minimums. 

Bob wrapped up about 3:52 or so.   

Brinker's guest-author Brad Stone: The Upstarts: Uber, Airbnb, The Battle for the New Silicon Valley

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June 17, 2018, Bob Brinker's Moneytalk: Stock Market Summary and Commentary

June 17, 2018...Bob Brinker was  not live on Moneytalk - Pre-recorded reruns and old calls  today....(comments welcome)

WHAT'S AHEAD FOR THE STOCK MARKET IN 2018

My opinion and synopsis of what Bob Brinker said about the stock market in the June  2018 issue of Marketimer:

The all-time closing high for the S&P 500 Index is 2872.87. The closing low for 2018 was on February 8th at 2581. 

The big question right now is,  will the S&P 500 Index 10.16% correction in February be the low for this "mid-term election year" selling pressure.  Brinker is "attuned" to the possibility that it will not be, and is prepared to post a "Special Subscriber Message" at bobbrinker.com if he should "identify" a new buying-opportunity. 

Of course, all of Brinker's buying opportunities are for those who do not follow his advice to  remain fully invested and dollar-cost-average new money, or for those who may come into some new money they want to get into the stock market. 

There is a very low probability of a recession beginning this year,  so that likely means that any further market declines will not exceed beyond 20% that would be considered a bear market.

History shows that after the mid-term election year correction activity ends, market action is highly favorable, therefore Marketimer model portfolios are remaining fully invested.  Going back to 1962, the  S&P 500 has rallied at least 27% after the correction ends.  

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June 10, 2018, Bob Brinker's Moneytalk: Stocks, Bonds, Economy and Investing

June 10, 2018….Bob Brinker's Moneytalk....(comments welcome)

ADDED From Hour One   dRahme:  AUDIO CLIP.... FED winding, unwinding, CPI, Tariffs, Interest Rates

Honey was doing a handbell and choir concert Sunday, but Frankj has done a complete 3-hour summary of Moneytalk.

FRANKJ WROTE: 

Moneytalk June 10, 2018

First hour

Bob’s first hour monologue focused on what the Fed has been up to.  He expects another FOMC interest rate increase of 25 basis points this coming week.  This will bring the short term (overnight) rate up to a range of 1.75 to 2.00%.   He speculated that there will be two additional increases in 2018.   These raises pose a headwind for stock prices as people sell securities and move funds to fixed income. 

Bob reviewed the gyrations that the Fed went though, going back to the Great Recession.  First they lowered short term interest rates to near zero.  Then they launched the quantitative easing program, buying Treasury notes, bills, and bonds.  QE was designed to create liquidity and (hopefully) stimulate the economy, especially the housing sector. 

Last year the Fed announced they’re reversing course and will be quantitatively tightening.  They’ll sell those treasury securities now on their books at an annual rate of $600 billion per year.   At the same time they’re raising interest rates as mentioned above. 

So, all this is a review for Moneytalk regulars but might be useful to those who are just now discovering the show. 

Despite all the talk about tariffs and trade wars, they really haven’t taken place.  The market is jumping up and down in response to the talk.  The actual tariffs in place represent a tiny fraction of the overall amount of trade.  He referred to the market as “trendless,”  and this was about his only reference to the market.

He gave out the toll free number at the end of the monologue which has become the norm lately.

·         Headwinds for preferred stocks:  Ron from St. Mary’s GA is in the land of critical mass, invested in Portfolio 3.  He asked Bob about putting some separate money in preferred stocks.  Bob cautioned him pointing out that the payout is fixed, making them bond-similar.  As such they’ll be subject to headwinds caused by rising interest rates.

·         A refinance question:  John in Crown Point, IN has an adjustable rate mortgage which is pegged to a short term rate he expects to go up.   He wanted to know what he should do, hang on, pay off, etc.   Turns out he has a net worth of $ 4 MILLION.   Bob said “the amount of the mortgage represents a tiny part of your net worth.” Implication:  it doesn’t matter what you do.  John then praised Bob for his past advice about 529 programs and how his grandkids are benefitting citing some dollar figures.  One wonders what was the real purpose of the call?

·         Short term interest rates:  Johnny called in from El Paso, TX on a scratchy phone line.  He’s having angst over the rates he’s getting on fixed income investments.  Bob told him to watch what the Fed does.  He said “normal” 10 year rates ought to be about equal to real GDP plus inflation.

I think we originally heard this in a 3^rd hour interview with the guy who runs the Doubleline funds.   

Bob said, if GDP is 3% and inflation 2% then the ten year rate ought to be about 5%.  The 10 year rate is now at about 3%.

·         Stick with stocks and roll the dice?  John from Lake City, FL seemed to be seeking Bob’s blessing on his 85/15 stock/bond allocation.   I didn’t get his age but he is still working and expects to live a long time yet.  Bob basically wished him well, acknowledging that John seemed to understand the risks associated with his allocation.

·         Worried about your junk bond fund?  Keep an eye on small cap stocks.  Who knew?  Bob told Fred in El Paso that just as credit markets affect junk bond funds, so too do they affect small cap stocks.  When the credit environment is friendly small caps do well and they are doing well right now.  But… Bob cautioned that this can change quickly.  

2^nd hour

Bob pointed out the grim projections for Medicare and Social Security.  Medicare funding is slated to run out in 2026, three years sooner than previously estimated.  Social Security is doing a little better with 2034 as a critical date.   Together, both programs account for 40% of federal government spending.   Bob that solving the fiscal problems of these two programs is one of the major issues facing Congress but given the level of partisanship in Washington DC no one is addressing them.  

ADDED....dRahme AUDIO CLIP....Medicare and Social Security (Honey wrote some personal EC's in the comments section here. 

·         529 plans.  Jennifer in Sacramento better adjust the allocation in the 529 plan devoted to her 16 year old grandchild since he’s only 2 years from college.  Then do the same as the other four approach college age.  

·         Don’t pay back that loan!   Dennis, a government employee is about to retire.  He borrowed from his retirement account years ago and has not paid it back.  With interest he owes $97K and the gov’t says if he doesn’t pay it back they’ll dock his pension by $8400 per year.  What should he do?   Bob did some ciphering and told him not to pay it back, take the hit on the monthly checks.  

·         Is that $250 or $250,000?   Jim has $250K in two different banks in Bend, OR.  He needs to find a home for another $500K when he sells a house soon.  (Nice problem to have).   Bob told him to put it in Vanguard’s Prime money market fund and earn about 2% with check writing at a minimum of “two-fifty.”   The caller asked if that was $250 or $250,000?   A good question for the MoneyTalk Final Exam.

·         Three great fears.   Bob answered John in Michigan’s question:  1)  that the Fed will make a mistake; 2) that inflation will heat up in light of the tight labor market; 3) growing protectionism.

·         Vanguard gets the nod again.   Mark in Virginia Beach:  take the $160K sitting in your bank earning practically nothing and stick it in Vanguard’s Prime Money Market, or build a CD ladder.

·         Risk averse in Nevada.   Tessa has some money from a home sale and she doesn’t want to risk it in stocks.  She said she has a 403B account that she’s had for 30 years and asked if she should put it in there since it has earned 4.5% per year, steadily.  

This was a strange call, I thought.  Bob did not at first pick up on the fact of this 403B.  It was not clear whether she was still working and it wasn’t clear that she could contribute “outside” money from the sale of a house into a 403B account.   This is what he seemed to be telling her to do.  

·         Shark attack on Virginia Beach.  A financially secure, 85 year old woman was the victim of a shark attack.  This shark didn’t have fins or teeth but was seen departing the scene of the attack with a signed, Whole Life insurance contract and check in his briefcase.   A male friend of the woman reported the attack to Bob who was on duty in the lifeguard stand.  Bob advised him to contact the shark and see about unwinding the sale before reporting the incident to the insurance commissioner.

·         A first for MoneyTalk?   Have we ever had a lottery winner asking advice?   Warren and his wife won a $5 million jackpot in Flint, MI.  After taxes they are looking at $2.4 million.  Warren seemed to be saying they were ok financially before the win and now they were sitting on a total of $4.5 million.   He wanted to know what he should do in light of future federal estate tax changes. 

Warren mentioned gifting, setting up a foundation and having various advisors in the background (which sounds scary).  Bob said no one has a crystal ball with regard to estate taxes.  They seem to change with whichever party is in control in DC.  The current exemption is $11,200 for individuals and double that for married couples, so Warren and his wife are OK, for now.

ADDED...Thanks to  dRahme AUDIO CLIP: The Week Ahead

3^rd Hour interview

Jacques Peretti, a journalist from London was the interviewee on the third hour of the June 10, 2018 edition of MoneyTalk.   Like most guests he wrote a book.   The title is:  “The Deals that Made the World.”  The subtitle is … annoying.  You’ll have to look it up yourself.

Ostensibly, the book is about deals that transformed different industries.  The interview consisted of him giving examples from the book and Bob’s questioning him about the state of affairs in the UK regarding Brexit.

Bullet points only (and not because I’m exhausted from the first two hours, I’m not, but this interview just wasn’t that interesting).

·         Pharma:  a Merck CEO in the 70’s told other pharma CEOs that the future is in treating the “well” not the sick.  So as a result, we have lots of preventative drugs (statins for example).   Treating the “well” widens the net of people that want/need prescriptions for what ails them. 

·         It was Great Britain that invented the off-shoring of business to the Cayman Islands for tax purposes.  They did this to invigorate their own economy. 

·         Robots:   All jobs fit into one of the following categories:  Cognitive/Manual;  Cognitive/Non Manual;  Non-cognitive/Manual;  Non-cognitive/Non Manual.  Robots will someday take over 3 ½ of these classifications.  

·         Peter Theil and Elon Musk were principals at Paypal before selling it to eBay.  Paypal was a monetization of the internet.  Theil and Musk became aware of some brain research that revealed a “flinch response – i.e. neural pain,  when someone making a purchase handed over the money.  Brain scans apparently documented this very slight hesitation.   

They should do a scan on my spouse, I don’t think any such flinch response exists with my darling wife.

So, if the payment could be handed over with the click of a mouse,  people would spend faster and more often.  And Paypal was off to the races.  

·         Planned obsolescence:  There is a light bulb in Livermore, CA that has been burning continuously for 115 years.  Lightbulbs were originally designed to last a very long time.  In the 1930’s makers of bulbs and other equipment decided to “fix” this problem.

·         There was mention of a Japanese researcher who was messing around with extracts from corn, trying to make an adhesive.  He had some extract on his fingers, licked them and it tasted sweet.  The extract led to corn syrup, something that is hard to avoid in many types of food today.  Good thing it wasn’t the precursor to Super Glue he had on his fingers. 

·         Some guy from MetLife messed with the Body Mass Index tables in such a way to make more people appear to be obese according to the tables.  This prompted a diet craze in this country. 

·         Finally Brexit:  the liberal elites, about 10% of the population are in a panic over it.  Another 10-15% are hard line in favor of it and wonder why GB hasn’t done it long before.  The rest don’t care and are tired of hearing about it.  They’re more worried about wages and crime in London which is at an all-time high.

Bob wrapped up the interview at about 3:50.

Honey here: Frankj, thank you so much for coming to my rescue with that fabulous, educational, summary of Moneytalk today!

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