STOCK MARKET: Bob Brinker did not talk about the stock market or recite closing numbers or year-to-date returns like he was doing before the market began to drop. The last time he made any comments about the stock market was on May 1st when he said that the market had closed at its 2011 closing high.
BOND MARKET....Brinker didn't talk about it today.
LAND OF CRITICAL MASS: Brinker said: "When you are in the land of critical mass, you are the master of your finances and your life because you don't have to go out and work for da man. Now as you know, there are people who are clearly residing in the land of critical mass and they go to work every day. Warren Buffett is probably the best example out there. Here's a guy, who despite his 80th birthday, is out there working pretty much every day. Why? Because he likes it. He wants to do it.
Hey, it's his life. If he wants to work into his 80's, so be it. It's his decision. It's a personal decision. It's not for you or for me to make any comments about what somebody wants to do in terms of continuing to work.....He's working for sport. He's working for personal gratification....And that's what critical mass is all about. It gives you the personal freedom so that you can choose how you wish to spend your time......I admire people who get themselves in a position - through hard work - that they can do what they want to do......What's the most precious asset out there? It's not money. Time is the most precious asset out there....You can't buy it. It's not for sale."
BRINKER IS DOING WHAT HE LOVES....Caller Bruce from LA said: "Thank you for hanging in there all these years in what can't always be an easy job." Brinker replied: "I'm doing what I love Bruce, so don't give me too much credit for that. I love radio."
Honey EC: The odds are pretty good that Brinker reached "The Land of Critical Mass" long ago. About a year ago, Brinker claimed that he had requested that the Saturday Moneytalk program be dropped altogether and only broadcast on Sundays. Since then, Brinker has averaged doing the program about 3 time per month and there has been fill-in hosts the other times.
However, Brinker has continued to use the short time that he is on the air quite effectively to promote Marketimer. This is also advantageous to his son (also known as Bob Brinker), who sells a newsletter of his own. Callers often mistakenly think that the Fixed Income Advisor is Brinker's. It's not, but I have never heard Brinker correct that misconception.
The past couple of weeks, Brinker has done several, (what appears to be paid) ads for Marketimer -- it's been awhile since he did that. So he may "love radio" but one has to wonder how much because it looks like one more cut back and he may as well phone it in and buy ads. LOL!
IS IT TIME TO TRANSFER ALL STOCKS AND BONDS TO A MONEY MARKET FUND? Caller David asked: "Assuming that Congress and the president stalemate on the debt ceiling and we face a crisis of high interest rates or plunging stocks or both, would it be smart to protect against that now by transferring all bonds and stock funds to a money market fund?"
Brinker replied: "I would say the answer to that would be as long as you are willing to run the risk that if it doesn't turn out you're way, which would be a de facto default by the US Treasury, which would be an event of enormous historical significance. If we don't have a de facto default, which can only occur if the debt ceiling is not raised, then you have to be prepared if you exit now to do one of two things. Either to stay out indefinitely or whatever, or to re-enter at a higher level......
.If you are going to exit now on the theory that you're exiting because they won't raise the debt ceiling. And if you turn out to be wrong, and they do raise the debt ceiling, I think that the probabilities would be unfavorable that you would re-enter at a lower level. Of course, it would be always possible to re-enter at whatever level you were looking at .......but you might be really unhappy if you made a move like that and then you had to re-enter at a higher level. And there's another factor. You would lose all of your timeline toward long-term capital gains on any positions held for less than a year in a taxable account.......Meanwhile you've got people like me saying they are going to raise the debt ceiling......... because they don't have any choice. And guess what, they know it.....What you are looking at in Washington is political theater of the absurd."
100% CHANCE THEY WILL RAISE THE DEBT CEILING.... Brinker said: "There is a 100% chance that they will raise the debt ceiling. I don't know for how long or how much they will raise it, but they are not going to allow the United States Treasury to go into a default position this summer because they failed to act on the debt ceiling in time to avoid a default position, which right now would be sometime in the month of August based on calculations coming out of the Treasury Department.....And if they set up a default, all of the Credit Default Insurance contracts around the world that are out there, that have been underwritten on the probability of US Treasury default, would be called in.....If you have no debt ceiling raise, then you have no ability of the Treasury to pay its debts.......This is a big deal....."
EUROLAND FINANCIAL TROUBLES....Brinker spent quite a lot time discussing "Euroland" and the three countries that are in financial distress, namely, Greece, Ireland and Portugal. He called Greece a "fiscal welfare state." Brinker had great praise for Germany and said that "we can only dream" of the day when we could manage our fiscal situation like Germany is managing theirs right now. Brinker said: "The good news is.....in the United States, only about $9 or 10 billion is sitting in the banks in the United States, which represents sovereign debt of Greece."
GREEK BONDS.... Yielding close to 17% annual for ten-year Greek bonds...
RAISE INTEREST RATES: Caller Bruce asked Brinker about Jim Grant, who compared the Depression to what is happening now. Brinker told Bruce that he had great respect for Jim Grant and he was entitled to his opinion, but it's difficult to compare today with the 1930's. There were three major items that happened back then that have not happened now. 1. The Federal Reserve tightened the money supply. 2. The stock market was operating on a 10% margin rule so when the market dropped, everyone on margin was out of business -- and the brokerage houses ended up holding the bag.. 3. The creation of the Smoot-Hawley Tariff Act, which created international trade wars.
IS THE MONETARY/FISCAL STIMULUS WORKING? Brinker said: "The talking heads have no idea what they are talking about because they miss this point all the time. Where would the economy be today without the stimulus, fiscal and monetary?.....It would be shrinking....They are thinking about the next vote....That is why I have said many times, Bruce, in Washington DC today, we have a dysfunctional United States Government. And I mean it when I say it."
Brinker's guest-speaker was Dave Kansas "Wall Street Journal Guide to the New Rules of Personal Finance."
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
