July 24, 2011, Bob Brinker's Moneytalk: Summary, Commentary and Excerpts

July 24, 2011....Bob Brinker hosted Moneytalk today.

Bob Brinker's comments summarized, paraphrased or quoted 

STOCK MARKET: Brinker did not mention the stock market today and there were no calls about it.

Honey EC: Brinker has made no changes in his model portfolio's asset allocation. They are still fully invested. In the July Marketimer, Brinker said the May correction was health-restoring and had increased the likelihood that  "the S&P 500 Index will  reach low-to-mid 1400's target range going forward." 

INTEREST RATES-BOND MARKET IF GOV DEFAULTS: There were a couple of callers that asked about this subject.  In his weekly newsletter which contains a summary of Moneytalk, David Korn wrote (posted with permission):

Caller:  What would happen to interest rates if there is a government default?  Bob said that would depend on the credit rating.  Bob said people around the world would actually believe that Americans would fail to pay their Treasury obligations.  That said, Bob estimates it would be less than a 100 basis points.   Take the 10-year Treasury which is yielding around 3% which Bob said he didn¹t think it would go above the 3s even with a downgrade.  Many investors don't even have that much regard for the credit rating agencies.  So far, however, there hasn't been much of a reaction. The financial markets have yawned as the did back in 1995 when there was a short-term government shut down.  Bob added that even though we have an August 2nd deadline, the Treasury has said that it found another $14 billion from revenues that came in above projections which could extend the deadline by another week or so.

Caller:  What do you think would happen to a holder in a Treasury Bill if the government shuts down?  Bob said he think you would get an IOU and that once the issue was resolved you could get your money.  Bob said he expected that if the government shuts down, it will be very temporary as the leaders feel the repercussions of that decision so it would be reopened quickly. Bob said he thinks a holder of Treasuries would get their money back.

David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service.  Copyright David Korn, L.L.C. 2011

THE DOLLAR'S VALUE:  Brinker said that much of what you hear about the value of the dollar is political. For example,  even though the Treasury Secretary claims that US policy is for a stronger dollar, he has never seen a policy that actually favors a strong dollar. However, the dollar trades against other major currencies, which has benefited the dollar, because Euro-land and the Yen have had so many problems. Brinker said that whether or not the Fed printing dollars will devalue them depends on the growth rate of the economy. If they grow the money supply in excess of the rate of economic growth, then the dollar will face devaluation.  

Honey EC: Over the past decade, the dollar has lost value against the Euro, Pound, Yen and other currencies.  It is for this reason that many own gold as a hedge.  Brinker recommends GLD (gold ETF), as well as SLV (silver ETF),  for those who want a hedge against the falling dollar. 

WILL THE US GO INTO DEFAULT?  Brinker said: "I just cannot agree with those who say that we will not raise the debt ceiling and therefore we will go into default around the world on our Treasury debt. I cannot agree with that view. I'm sorry." 

WILL THE GOVERNMENT PRIORITIZE IF THE DEBT CEILING DOESN'T GET RAISED? Brinker said:  "I don't know the answer to that question. Will they prioritize? Will they pay Medicare but not Medicaid? Will they pay active military but not veteran's benefits? Will they pay Social Security, but not pay somebody else. I don't know the answer and for sure they don't know the answer to that question at the Treasury. But I'd be really surprise to see that come out from Washington.....I don't see any precedent for that kind of behavior."  

NATIONAL DEBT VS GROSS DOMESTIC PRODUCT (re-visited): Caller Les from San Jose said:  "Last week.....there was a  question about the comparison between the  national debt, which is about $14.5 trillion, versus our GDP, and you were talking about percentages. Like if it were at 70, it would be okay but if it was above 90%, it might be an issue. I was confused when I heard it. Our GDP right now looking forward  is about 14.8 trillion dollars.  So as percentage of our GDP, our debt is about 98.14%." 

Brinker replied:  "On a snapshot basis, you are correct. Now on a normalized basis, one would hope that you're not correct. Now on a normalized basis, one would hope that you're not correct.  And hopefully, this that's being drawn to the fiscal issue through this debt ceiling issue is going to bring that to the fore. You know, only a couple of years ago, that number was down around 70%.  Now we've gone through an extraodinary period of annual deficits added to the national debt while the economy has not been growing very fast. As a result, you do have the current annual deficit as a percentage of GDP in the 90s percentile, which is too high.  That's the snapshot number.... if you take a moving average of the 3 years, it would be well below that."  

Honey EC: Another reason to double-check anything that Brinker says on Moneytalk.  Just as caller-Les said, it was just last week that Brinker said unequivocally that the debt/GDP ratio was at 70% and specifically said that if it got to the 90's it would be "dangerous." Perhaps all the very smart people who send comments to this blog made Brinker realize his error. Here are my comments from last week's Summary. No equivocation here and no "snapshot" hocus-pocus either: 

"GDP AS PERCENTAGE OF NATIONAL DEBT: Brinker said that the total sovereign debt as a percentage of Gross Domestic Product is now about 70%....the danger level comes in  at about  90%."

RAISING TAXES: Brinker said: They have a lot of ideas. They're talking this weekend about eliminating the mortgage interest deduction. They are talking about eliminating the deductibility of all the retirement account moneys that go in, like IRAs and 401Ks.....They are talking about changes to Medicare and Social Security." 

Honey EC: It's astonishing how they always want to make cuts that affect those who have worked, paid into the system and saved.

NATIONAL DEBT DAILY INCREASE:  Brinker said the National Debt is growing by over 4 billion dollars a day and that is simply not acceptable.

BULLY-PULPIT POLITICS...Brinker said: "Put me down in the column of fiscal responsibility that is consistent with protecting  above all the full faith and credit, around the world, of the U.S. Treasury. And these people that want to destroy the country's credit rating and put the country into default. In my opinion, these people are not qualified to serve."  

Honey EC:  Brinker continued to preach  his political views throughout the program. To me, he seems to contradict himself. On one hand, he ranted and raved about the deficit and national debt and how it is unsustainable. On the other hand, he continually slammed those in Washington who are showing some fiscal responsibility. Having it both ways seems to be the Brinker way in more than just the  financial arena.

Brinker's guest-author was Gretchen Morgenson,  "Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon"  (If there is enough interest in this guest-speaker, I will write a summary of her rather short appearance on Moneytalk later in the week.

 Moneytalk on demand and to go with Bob Brinker, is available for FREE audio/podcasting at KGO810 radio for seven days after broadcast.  I download and save all three hours, including the third hour guest-speaker. (The program is archived in the 1-4pm time-slots.) If you don't download it from KGO within seven day, it's available at bobbrinker.com by paid subscription. KGO Radio Sunday Archives

This is my beautiful and amazingly smart, Persian cat (from before my Himalayan siblings).  He  died when he was seven years-old from kidney failure. I gave him "kitty dialysis" for about a year to extend his life. Click to see him close-up. :)

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July 17, 2011, Bob Brinker's Moneytalk: Summary, Excerpts, Commentary and Discussion

July 17, 2011.....Bob Brinker hosted Moneytalk today.

(Brinker's comments summarized, paraphrased or excerpted)

STOCK MARKET:  The S&P 500 year-to-date is up around 6%.  Brinker said: "When you consider what interest rates are, short-term rates, not too shabby. We had a couple of minor pullbacks this year. Back in March.....we had a  6 1/2% pullback there. In the May, June period we had a 7% pullback.....So far,  the market has shown a tremendous amount of resilience."

IS BRINKER RECOMMENDING SELLING EQUITIES?   Caller Lon from Oregon said he was fully invested following Brinker's  Marketimer newsletter. Lon asked: "Given this debt ceiling crisis and what I see as a potential stock market drop for who knows how long, should we move that money into money market accounts for a little while?"  

Brinker replied:  "We had this same question two weeks ago when the S&P was around 1270. And now the debt ceiling debate has heated up dramatically in the last two weeks and the S&P is up to 1316. Showing a total return year-to-date of close to  6%.  So I will repeat what I said to that caller at 1270, asked virtually identical question....I said to that caller, you need to be prepared, if you do that,  to re-enter the market at a higher level. Now if that caller re-entered today, he would be re-entering about 46 S&P  500 points higher than he exited the market two weeks ago....I have not exited the market until I see a resolution of the debt ceiling issue because I already know....what's going to happen.....I'll clue you in. They are going to raise the debt ceiling......With or without a short-term government shut down. On that issue, take your pick. They just did it in Minnesota......"

Honey EC:  The call that Brinker referred to was actually on June 26th. Here is the link to my Summary of that program and  Brinker's answer to caller-David

GNMA, VANGUARD GINNIE MAE FUND (VFIIX):  Caller Mike from Colorado praised Brinker for recommending  GNMA's and raved about how he loves to see the money show up in his account.   Brinker said:  "As much as I'd love to take credit for this, I'm much too modest, but I did recommend them.....Actually to give you a little background on that, we've had Ginnie Mae holdings in our model portfolios in my investment letter for many, many years."

Honey EC:  After all the friendly banter, what Brinker did not tell Mike was that he has lowered his model portfolio Ginnie Mae weightings a couple of times. The last time was in January 2011. The model portfolios that he mentioned are model portfolio III,  which is now down to only a 20% weighting in Vanguard Ginnie Mae Fund.  And his off-the-books "income portfolio" only has a 15% weighting. He increased the risk greatly in both those portfolios when he sold the Ginnie Maes and bought Vanguard High Yield Fund and Wellesley Income fund.

 RAISE TAX ON HIGH EARNERS OKAY WITH BRINKER:  Brinker said: "I think if they raise tax on the middle class, it would be bad news for the economy....I think if they take the top rate from 35 to 39.6, I would not expect that to have a dramatic impact on the economy because in order to get into the 35% bracket, you have to be a high earner. And if you're a high earner, you should be a  net saver. And if you're a net saver, you shouldn't have to cut back on your expenditures in order to deal with the higher bracket.  So my opinion is, raising the rates on the middle-class would be a very bad idea. I would vote against it.  Raising the top bracket, I don't really care."

DEBT CEILING "BRUHAHA"....Brinker said:   "....going on in Washington, the debt ceiling bruhaha.... The debt ceiling must be raised with or without a short-term, stage-produced government shut-down and that's because the country cannot afford to go into default. If you wonder why,  $14.4 trillion in national debt, annual Treasury sales of way over a trillion dollars.   The country cannot afford to go into default on its Treasuries obligations."

GOVERNMENT COFFERS RUN DRY IN AUGUST....Brinker said: "We also know that in the month of August, the Treasury Secretary is saying that August 2nd is the date the coffers will run dry......It looks the Treasury is about 134 billion dollars short of what they need in order to pay the bills and the interest on the national debt,  just in the month of August. I'm calculating about 173 billion dollars for several items that are considered essential. Interest on the national debt about 29 billion, checks for recipients of Social Security in the month of August, about 49 billion dollars, Medicare and Medicaid expenses in August, about 50 billion dollars. In addition to that, Defense Department about 32 billion dollars, and Unemployment Insurance benefits about 13 billion. All of that adds up to about 173 billion dollars. And the problem is, it's about 134 billion dollars short of what is needed. Even if all of that is paid, it would still leave unpaid bills. For example, all of those on active military duty......they would not be paid in the month of August. Veterans....would not be paid. The FBI would not be paid. All other federal programs and the court system would not be paid....." 

IF INTEREST ON NATIONAL DEBT IS NOT PAID.... Brinker has said for several weeks now that if the interest on the national debt is not paid, the country will officially go into default and will no longer be able to justify having a triple-A rating. 

GOVERNMENT BORROWING... Brinker  pointed out  that we are now borrowing about 40 cents on every dollar we spend - a "horrible" situation. 

SOCIAL SECURITY TRUST FUND DOESN'T EXIST....Brinker said: "Here's the way that Social Security is paid out. First, money pours in every single week from the payroll tax.....When the benefits exceed that cash flow, the Treasury has to raise the money. You know they don't have any money. They're in the red......They sell Treasuries (IOUs) to raise the money to pay for the checks..... That's the way that Social Security  works, and it's unfortunate that so many people are under the illusion that there's a trust fund out there with piles of money in it waiting to get paid out. That's not the case.....The money has been spent."

GDP AS PERCENTAGE OF NATIONAL DEBT: Brinker said that the total sovereign debt as a percentage of Gross Domestic Product is now about 70%....the danger level come in  at about  90%.

BULLY-PULPIT POLITICS...Brinker said: "I see that there are some so-called presidential candidates out there stomping in Iowa, and they are calling for the US government not to raise the debt ceiling. And of course, this is the height of folly, the height of irresponsibility.....So if you hear a so-called presidential candidate telling you  we don't need to raise the debt ceiling,  you can cross that one right off your list. That's a person who's not qualified to run the country. That we know.....No serious person would ever endorse a policy that would lead to a US Treasury default." 

DIVIDING CALIFORNIA IN HALF:  Brinker said he thought splitting California into two states would make it more "manageable."   But instead of dividing it into North and South California, he suggested  dividing it  lengthwise, turning it into Eastern and Western California. He said he would choose the coastal half.

Honey EC: LOL!  Yes, Bob...the coastal half is very nice. You're welcome to join us. All you have to do is be willing to pay all the additional state taxes, sales taxes, etc. that you don't pay in Nevada -- just  for the privilege of living in California.

DEFICIT ACCUMULATION:  Caller Rick from Hartford tried to blame the  current huge deficits on Dick Cheney, Ronald Reagan and George Bush. He claimed that 90% of the deficits are the fault of George Bush --  between 2000 - 2008.  Brinker said, "Now Rick, that talking point you just shared with us is false. Look at the figures for  2009, 10 and 11 and you will be shocked......It's  not because of the interest. Interest rates are reasonable now because of the low rates. It's because of the tremendous amount of money that the Federal Government has expended over the last three years....."

Honey EC:  LOL! Brinker told the caller to check his talking points several times....The caller was factually wrong as Brinker pointed out.   (The caller was also ignorant if he thinks George Bush was president in 2000.)  According to Bill O'Reilly, the National Debt was $5.7 trillion when George Bush took office and $10.6 trillion when he left office. It is now almost $14.5 trillion. 

2012 ELECTION ISSUE: Caller David from Chicago asked Brinker why more people aren't concerned about "what's going on out there."  Brinker blamed it on inertia and lack of interest.  Brinker said:  "I really like the  idea of keeping this on the front page and getting this into the general election next year because I think this is the perfect topic for a general election in 2012. Which direction is the United States going to go in terms of how it balances its revenues with its expenses.....And we have to get the deficit down. I'm very conservative on fiscal affairs. I always have been.....I think it will be a great subject to bring to the voters in 2012. Let's elect a whole House of Representatives on this issue, and the president on this issue, and 1/3 of the Senate on this issue. I wish we could elect the whole Senate on this issue."

Bob Brinker quote of the day: "Anybody that listens to this broadcast knows that I don't ever want to be vain. It's not in my nature to be vain."

Brinker's guest-speaker was Diana B. Henriques: "The Wizard of Lies: Bernie Madoff and the Death of Trust"

Honey EC: Interesting comment by Diana Henriques. She said that Madoff investors may get back as much as 50-cents on the dollar of their investments.

Moneytalk on demand and to go with Bob Brinker, is available for FREE audio/podcasting at KGO810 radio for seven days after broadcast.  I download and save all three hours, including the third hour guest-speaker. (The program is archived in the 1-4pm time-slots.) If you don't download it from KGO within seven day, it's available at bobbrinker.com by paid subscription. KGO Radio Sunday Archives

Jenny's Bird of Paradise. First time in bloom. Click to enlarge:

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July 10, 2011, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary,

Posted July 10, 2011....Bob Brinker hosted Moneytalk today. 

Bob Brinker's comments paraphrased, summarized or excerpted:

STOCK MARKET: Brinker said:  "The stock market measured by the S&P 500 at 1363.61 on its high for the year on April 29th had a minor pullback in May and June, bottoming June 15 at 1265.72, for a minor pullback of 7%. Bernadette asked me this  week how do you calculate the size of a correction.....You take the closing high, which was on April 29th at 1363.61, then you take the closing low at 1265.72  and subtract it from the closing high, then you divide the closing high to get the correction....The total return correction was 7% and it lasted for a period of six weeks......Generally, we call a correction a loss in excess of 10% but less than 20%. This was a 7% event. That would certainly qualify as a minor pullback for the market.....The S&P 500 has subsequently traded up to the current level of 1343 and a fraction, and now stands about 1 1/2% below its closing high for the year." 

BOND MARKET: Brinker did not mention bonds or interest rates today.  

UNEMPLOYMENT/JOBS REPORT:  Recent trend continues, some jobs added in private sector, but jobs lost in the  public sector....In the month of July, 39,000 government jobs were lost...Private sector added 57,000.....That's a net increase of 18,000. Unemployment rate up to 9.2%...underemployment rate up to 16.2%....big numbers that may affect the 2012 election.  (Brinker got his info here: BLS)


ECONOMY:  GDP grew at 1.9% annual in first quarter....Later this month the second quarter is expected to be about 2%....

NON-EXISTENT SOCIAL SECURITY  TRUST FUND:  Brinker said:  "When they went  to  the unified budget many years ago, the Social Security trust fund  and all of that malarkey, it went out the window.....There is just one pot of money, so there is no trust fund, so forget about it.....There is no trust fund....The trust fund is a joke."

HOW THEY PAY SOCIAL SECURITY WHEN THERE IS NO MONEY: Brinker said: "The Treasury is running enormous deficits. Something in the area of 1 1/2 trillion dollar annual deficits we've been running in recent years and that's the reason that we've piled up close to 14 1/2 trillion dollars in our national debt. That means that they don't have any money unless they sell Treasuries to raise money, which of course is what they do every week.....So in order to pay Social Security, and I believe they will pay Social Security to the extent that they decide they want to pay it.......But the only way they'll be able to make them in the long term.....is to sell additional US Treasuries to pay out." 

DEBT CEILING HIKE: Brinker said: "Regarding this debt ceiling bruhaha that's going on in Washington. I would like to suggest to you that this is not the real issue facing the country......They must, those in power in Washington, must raise the debt ceiling. They have no choice. They either do it before a government shutdown, in which case, things go on as they are.  Or they do it after a shutdown, like they did back in 1994 -- short government shutdown and then they re-open. In either case, they must raise the debt ceiling....There is no alternative of no debt ceiling increase....It must be raised."

FIXED INCOME ADVISOR MISINFORMATION: Caller Carl from Buffalo Grove, Illinois said: "I'm a loyal subscriber to your Fixed Income Advisor."  Brinker replied: "Thank you." 

Birdbrain said: "Heard a caller during the first hour saying he subscribed to "your Fixed Income Advsor" to which Mr B uttered a quick thank you, without stating that supposedly his son is the publisher of said rag."

 Honey EC:  Obviously, this was one more (of  many) callers who mistakenly believes that the "Bob Brinker" who publishes the Fixed Income Advisor is the host of Moneytalk. This is only made possible by the fact that the real publisher/editor of the newsletter  (Brinker's middle-aged son) no longer makes any  effort to differentiate himself from his father. He used to be very careful to make sure that he was not mistaken for his father, but that changed 5 or 6 years ago, about the same time that  he started selling newsletters.

Some might conclude that Bob Brinker, the talk show host, is deliberately aiding in the deception. That's my conclusion. Readers should decide for themselves. It may also be a clue as to why he doesn't retire when he is well past retirement age, and no doubt reached "The Land of Critical Mass" decades ago.

REAL FISCAL ISSUES FACING THE COUNTRY: Brinker said: "The real issues facing the country in terms of fiscal are the annual deficits that we're running are in the 1 1/2 trillion mega, mega, mega-zone, and the growth of the national debt, which are simply not sustainable. It's already approaching 14 1/2 trillion dollars. Inaction, doing nothing is not option......There has to be some tax reform and spending reform agreement reached in order to move things forward. Tough decisions have to be made. We need leaders. We don't need whiners. The government's own bi-partisan deficit-reduction commission has already given the formula. You cut spending $3, you raise taxes $1. If you cut spending $3 trillion, you raise taxes $1 trillion....They have a formula, at least as a starting point." 

IF THE UNTHINKABLE HAPPENS: Brinker said: "If the United States were to refuse to raise the debt ceiling -- remember, I don't believe that's an option and I don't expect that to happen -- then the credit quality of US Treasuries would be degraded....because of political posturing."  

A TEMPORARY SOLUTION: "Brinker said: "If they want to come up with a temporary hike in the debt ceiling to push this thing out, turn it over to the voters in 2012. Let's have a plebiscite as part of the general election. Well, the candidates will be the answer.  They'll take positions....Let the voters decide which way they want to go." 

POLITICAL BLOCKHEADS PLAYING POLITICAL THEATER: Brinker talked at length about the debt  problems in the European countries -- Greece, Portugal, Italy, Ireland and Spain.  He emphatically explained that the  "sovereign debt" of those countries  is not risk-free. Brinker said: "If any sovereign debt out there is supposed to be risk free, it's  the USA. But wait a minute. We have political blockhead -- and I'm being very kind, I'm in a good mood today, and that's the only reason I'm being very kind -- we have political blockheads in Washington who are running the risk of a default of the United States triple-A rated paper so that they can play their game of political theater. I'm Bob Brinker. This is Moneytalk."  

In his hot-off-the-press weekly newsletter which includes a summary of Moneytalk,  David Korn wrote about caller Maria from El Paso:

REDUCING SUPPLY ON FOREIGN OIL Caller:  This caller said we have millions of tons of natural gas in our country and thinks we should use it to reduce our reliance on foreign oil. Bob said for two years, he and Dr. Wattenburg have been preaching this. Bob noted that Dr. Bill used his own money to purchase an ad in the Washington Post right after the election where he discussed these very things.  The problem is that Bob has seen no results of the ad.  Bob agreed we should be using natural gas in our transit system in a big way.

(Korn) EC:  The ad Dr. Bill placed was in the Washington Post on February 25, 2009 and paid for by Dr. Bill.  It appears on page A2 at the bottom left hand corner.  Dr. Bill actually mentions Bob Brinker in the ad.  Using unpatented and highly non-proprietary DavidK search technology, I found the ad.  Check it out at this url:  Bill Wattenburg Writes Open Letter to Barack Obama, mentions Bob Brinker

 Brinker's guest-speaker was Steven M. Davidoff:   "Gods at War: Shotgun Takeovers, Government by Deal and the Private Equity Implosion"

Moneytalk on demand and to go with Bob Brinker, is available for FREE audio/podcasting at KGO810 radio for seven days after broadcast.  I download and save all three hours, including the third hour guest-speaker. (The program is archived in the 1-4pm time-slots.) If you don't download it from KGO within seven day, it's available at bobbrinker.com by paid subscription. KGO Radio Sunday Archives 

SJ_Al sent these beautiful pictures with these comments:

"Pictures of the Stanislaus River at Sour Grass Crossing, off of Hwy 4 near Dorrington Ca, taken July 2. Sour Grass is about 20 miles downstream of Lake Alpine."

"The river area..... is normally a swimming hole. Not this year. High water like this is typical late April through early June, not in July. The dams upstream are all running over their spillways. In a normal year, the rapids shown in Pic 4318, which is just above the swimming hole, would be inner tube and plastic raft safe."

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