Bob Brinker, host of Moneytalk today, said: "This is the program that helps you become your own personal financial manager. And that is the magic moment where you can take charge of your personal financial future. No longer will you be shark-bait for those out there trying to take a giant bite out of your wallet.......So that hopefully, if you're not already there, you can reside in that land of critical mass."
FINANCIAL MARKETS: Bob said: "The financial markets continue extremely volatile. Stock market remaining highly volatile. The roller-coaster opened a couple of weeks ago and it's remained open this past week.......The Dow Industrial closing the week at 10,817. The S&P closing at 1123. And interest rates remaining at or near record lows.....Despite the opinion of Standard and Poors, the flight to quality has gone to US Treasurys to the extent that money is flowing into 3-month Treasury Bills for no yield on the assurance that the money will be returned dollar for dollar, principle wise on maturity."
Honey EC: That was the only time today that the stock market was mentioned -- no calls, no further comments about it. Brinker couldn't have said much less than "the market was volatile," but if stocks continue to decline, expect him to make no mention of it at all -- like he did in 2008-2009 for many months.
Bob reiterated what he said on Doug McIntire's WABC Red Eye program where he made a guest appearance last Friday. Please see my last article because I covered it there. Basically, Brinker is blaming the market volatility on two things: the slow US economy and concern for what's going on in Europe.
To add to what Bob said about the stock market, the Dow has had 4 weeks of losses. The S&P 500 Index is down 16% in 4 weeks-- the second worst 4-week loss since 1950. The Nasdaq is at 2341.84 -- a 10-month low.
Bob has zipped his lip about what he said on July 31st. The day before the Dow began the "roller-coaster ride" he said he had been buying in the 1200's Wonder why he would zip his lip about that? Maybe because he knew back then about the slowing US economy? I know that because just a day later when the August Marketimer was published, he had lowered his real GDP forecast to 1% to 2% -- as he said later in this program.
CREATING JOBS: PRIVATE VS PUBLIC....Bob said: "There is an inherent contradiction in policies when a country embarks on government austerity at the same time they are trying to grow the economy.....and it is very apparent in the United States in the July jobs report.....The private sector in July pulled its weight by creating 154,000 new private sector jobs.......But the policy in the United States right now is to move to smaller government -- less government jobs.....That's what we saw in July. Federal, state and local lost a total of 37,000 jobs in July. So instead of finishing July with a terrific number.....we wind up with 117,000, which is a fair number but not going to get the job done......with our rates of unemployment, 9.1 and 16.1 for underemployment. And this is what I mean by contradiction in policies.
And this could also make you want to bat your head against the wall to try to gather the sense of what these policies are aiming for. Think about it, on one hand, you have people in government......talking about growing the economy....growing the country out of these huge annual deficits....they talk about it 24/7....creating jobs. But on the other side of the ledger, we have a government policy of shrinking the government....let's have a more limited government.....And that means less government jobs....more minus signs in the government jobs market.....
On the one hand we want private sector job growth. On the other hand, we want smaller government. At least this is the policy coming out of Washington. And this subtraction comes off the private sector and we wind up with lackluster jobs growth....Government austerity is in in Washington. Budget cutting is in in Washington as is the move to smaller government. And that is a counter growth economic policy, which means the private sector has to pull all the weight on the economy.
And remember, we are in an economy where we are borrowing 40 cents of every dollar we spend. We are taking in about $2.3 trillion in revenue. And we're spending aobut $3.7 trillion on all of the government outgo. And that's how we get a deficit of about $1.4 trillion in the current fiscal year....." (continued next paragraph)
ECONOMIC GROWTH FOR 2011: Bob continued: "......And that is why I downgraded the growth rate of the US economy several weeks ago in my investment letter to a range of 1% to 2%, and that is what I think we are going to get in 2011 -- real Gross Domestic Product, total good and services growth in 2011.....And if you think that kind of growth is going to cure the unemployment problem - it's not going to happen. We will not cure the unemployment with growth in the range of 1% to 2%, and with government austerity the law of the land."
Honey EC: Bob is right that he lowered his real GDP growth target range to 1 to 2% in the August 3rd edition of Marketimer. However, what he didn't say was that just the prior month in the July issue, he was predicting real GDP growth of 2% to 3%, which he said was slightly more conservative than the revised Federal Reserve forecast of 2.7& to 2.9% in 2011.
S&P DOWNGRADE....Caller Craig from Cupertino said that the S&P downgrade was a vote against the politicians. Bob said that yes, they did everyone a favor because it was a "shot across the bow for the politicians" and he was all for that because the politicians created the problem. Bob thinks that the AA rating is an excellent rating.
RECESSION COMING? Caller John from Illinois asked Bob if he thought the chance of another recession is greater now than ever. Bob said: "I think the greatest chance of going into recession, when you look back at what happened with the subprime meltdown, I think the greatest chance of going into recession, with the modern era here, would be 2008. You would probably have to go back to 1974 to find as great a chance of going into recession. But obviously there are risks in the economy. My forecast is 1% to 2% growth....very slow growth....There is also a lot of stimulus going on....Anything that the government spends above revenue is stimulus spending...."
UPTICK RULE....Caller Collette from Carmel asked Bob about petitioning the government to re-instate the uptick rule. Bob said that it was lobbying money that had paid to get it removed in 2007, and the same money had overturned the Glass Steagall in 1999. He is all for it being re-instated, but thinks that the average American's one vote probably isn't powerful enough to over-rule the power of the big-money lobbying movement.
NATURAL GAS AND $2 A GALLON GASOLINE. Collette second question: "When I reread Dr Bill Wattenberg's letter, he said we could have $2 a gallon gasoline, which of course, would boost this economy incredibly...Maybe that's what Michelle Bachmann's talking about if she becomes president. She mentioned $2 a gallon gasoline. Isn't that interesting?"
Bob replied: "If you want to see gasoline prices come down, you watch what would happen the day that an executive order was signed by the president to run all government vehicles going forward on natural gas. Because the next year, we could move that to the state and municipal level, and then to the consumer level, and we could stop spending hundreds of billions of dollars and sending that money to places like Venezuela and Saudi Arabia."
FREEZE FEDERAL EMPLOYEE SALARIES? Caller Sylvia suggested a 5% pay cut for all federal employees. Bob said: "It would be fully appropriate to put in a salary and benefit freeze on government employees at the federal level."
DON'T MESS WITH FOOD CHAIN...Caller Bill from Stockton said that in San Joaquin County, they have more cows than people and the ethanol subsidies have put 250 dairies out of business in the last couple of years in California because of the feed prices. He said that even Castro says that ethanol equals genocide.
Bob replied that they should never mess with food supply, food chain -- that when you start using corn for energy, you are messing with the food chain and running the risk of food price inflation worldwide. "It is a disastrous policy" and he hates to agree with a "ruthless, Communist Dictator like Fidel Castro, but in terms of messing with the food chain, it's something you just never do."
GOVERNMENT SELL GOLD RESERVES? Caller Dave from Rockford wanted to know why the government couldn't sell reserve gold bars to help with the debt. Bob said he didn't think it would have any effect on the economy because there is no shortage of money in the economy. In fact, the banks are flush with money they are not lending out. They have become risk averse and will only lend to those who don't need it. Also corporations have over a $trillion in their coffers and are "lean and mean."
COMMON EURO BOND? Bob said: (German Chancellor) "Angela Merkel is speaking loudly and clearly that she is not ready to agree to the issuance of common Euro-area bonds.....Those would be bonds denominated in Euros and therefore payable by the members of the European Union. Seventeen countries use the Euro as a currency today."
BAN SHORT-SELLING? Caller George in Tennessee said that many countries around the world are banning short-selling and wanted to know if that would be a good idea here. Bob said that he would not be for banning short selling, but he was certainly for re-instating the uptick rule. It was "happy hour for the bear raiders" when they removed it.
WILL THE GOVERNMENT TAKE AWAY THE MORTGAGE DEDUCTION? Joe in California asked Bob if he thought it might be taken away. Bob said he thought it was "on the table" because it wass being discussed as one of the ways to close the budget deficit.
WILL THE GOVERNMENT CONFISCATE GOLD, SILVER, PLATINUM OR CLASSIC CARS? Joe in California said that in the 1930's when they confiscated gold, they did not confiscate silver or classic cars. Bob said he had not seen any evidence that the government was going to move to confiscate gold.
Bob said: "If you recall what happened in the 1930's the confiscation had a purpose. The purpose was because they wanted people to use the green back, fiat currency. That was accomplished 7 or 8 decades ago. So there is no purpose to confiscate gold to encourage the use of fiat currency. People don't buy things with gold.....So I don't see any reason for the government to confiscate gold. The reason you hear about this mainly it's from gold coin sellers...don't be surprised if a gold coin are marked up 50 or 100% the day you buy it......You have a speculative metal and you have some people who are using gold as a hedge against fiat currency because they think fiat currencies are going to be worthless.....It's virtually impossible to forecast the price of gold because you have this speculative furor out there right now that's dominating the market price in gold." (Bob said the same applies to silver and platinum.)
WHAT HAPPENS TO ECONOMY IF INTEREST RATES GO UP? Bob said: "The reason you've seen interest rates come down is because the economy is very sluggish....I do expect we'll finish out the year between 1% and 2%, so consequently we've seen interest rates come down because there is no risk that the rate of inflation is going to skyrocket. Core inflation over the past twelve.... is 1.3% and they are tolerating core inflation rate of up to 2%.....I think there's a lot of people that would be happy to see higher level of interest rates.....If the Federal Reserve were to raise the Federal Funds rate from 0 to 25 basis points, up to 100 basis points, in response to a better economy, no, I don't believe that that would hurt an already improving economy which is probably a precursor to that kind of a policy change."
Bob's guest today was Bob Lutz, "Car Guys Versus Bean Counters: The Battle for the Soul of American Business." (Honey EC: In Edit: After reviewing this guest interview, I decided it was mostly just rehashing the GM bailout and political posturing by both Bobs -- not worth the time to even summarize.)
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
