Bob Brinker did not host Moneytalk today. KGO810 radio business reporter, Ms. Lynn Jimenez, was at the Moneytalk microphone.
Lynn is an excellent business reporter and she gave a comprehensive review of the financial marketplace. Here are the topics she covered in the opening monologue:
HOUSING:
Lynn said: "Fewer people signed contracts to buy existing homes in July and that's not a good sign for future sales.....The S&P 500 Case Schiller home price index rose this spring - up by about 3.6%. Prices are still about 6% lower than last spring."
CONSUMER CONFIDENCE:
Lynn said: "And then there's the biggie, Consumer Confidence....It fell to a two-year low -- down nearly 15 points. A quarter of the people who were polled, spontaneously registered a negative reaction to the debt limit debate. They're pretty ticked off at congress."
JOBS:
Lynn said: "And the biggest worry that everybody had was jobs. In fact a recent Gallup Poll shows 31% of people polled fear they're going to lose their jobs soon. And worries about jobs had an impact on the market last week."
STOCK MARKET LAST WEEK:
Lynn said: "Markets rose Monday. First on relief that hurricane Irene wasn't worse than it was.....The market ended lower on Friday on all that jobs data we discussed. The Dow fell 253 points -- 2.2%; Nasdaq fell 2.5%; the S&P also fell 2.5%. Overall, August was not a great month for stocks."
WHY HAS MARKET BEEN DOWN FOR FIVE WEEKS:
Lynn said: "The Dow was down for five of the last six weeks. Wonder why? Let me give you a list: They had that debt limit debate. U.S. debt was downgraded by Standard and Poors. The same that firm gave securities packed with sub-prime mortgages triple-A ratings. So go figure. Europe's banks are threatened by big levels of national debt. We had an earthquake on the east coast, Hurricane Irene and no new jobs -- that was just one month. I'm not surprised the markets, and for that matter, the economy, are wobbly......."
TREASURY BONDS:
Lynn said: "Treasury prices surged in the middle of all this. The ten year yield is just 2.12%. Treasuries from zero to twelve months are giving zero. People would rather get no interest to hide in the safety of U.S. debt."
GOLD:
Lynn said: "Gold held its own. Up $47.80 on Friday, to $1876.90."
OIL PRICES:
Lynn said: "Crude dropped because of the jobs figure, but it's likely going to rise because of the gulf hurricane."
INVESTORS PULLED MONEY OUT OF STOCKS:
Lynn said: "The week before, investors yanked $3.2 Billion out of stock funds. They pulled $610 million (did she mean billions?) out of foreign funds, but that was after pouring $34 Billion into them in the first place. But I guess you can see how nervous people are. Are you? I've been nervous."
STOCK MARKET FOR LAST MONTH:
Lynn said: "For the month, stocks lurched up or down by a full percent -- one percent, in fourteen of the last 23 trading days -- six up, six down. Well, that doesn't quite make fourteen, does it? But anyway, closing with losses of about 5.7%."
Lynn said: "Now long-term investors are riding this bronco out. But those who think they will need the money in about 5 years, seem to be getting off the horse."
Lynn said: "What's ahead? Sorry to break it to you, but since 1945, stocks have fallen 45% of the time in September. Aren't I little sunshine here? Of course, given the miserable August, stocks retrace losses. They could go back up. And that could be true because we've got corporate cash piles that hit an eleventh straight quarterly record. And profits are expected to rise again in the third quarter. So the market may just have its head this month, barring any huge shocks."
COMPANIES VALUES and S&P RATIO:
Lynn said: "Instead of just thinking of all the negatives too with the market, think of this. If you believe the actual value of companies, including all that cash has dropped as much as their stock prices, well I guess you can be pessimistic. But they're still functioning and they are still making profits. It's possible that the pace of profit growth may slow after the third quarter. But so far, they're at all-time record highs in the S&P's price ratio at 13.9, when it's usually, you know, around 15.9."
SHOULD YOU BUY STOCKS?
Lynn said: "If you do some careful shopping and you have lots of patience, you can get some big rewards in the future. Remember, even if you retire in five years, that doesn't mean that your investing stops. You need to grow your money to keep up with inflation. And even if you've pulled cash out of the market to retain it and get over the humps, think about re-entering the market with what you can spare. What you're comfortable with, to insure your money grows over time."
DOUBLE-DIP?
Lynn said: "Okay, we are a lot closer to a double-dip with the weak job market. Should lawmakers take action or let the market work it all out. Can we wait that long?"
Honey EC: The remainder of the program was mostly about creating jobs. I didn't actually listen to it, but a good friend did and briefed me on the whole program. I did listen to the third hour guest, David Brin, a self-proclaimed "futurist." He was so blatantly biased that even Lynn interrupted him one time to tell him that the program "tried" to remain politically neutral. That must have been her joke for the day.
I'm sure there will be some comments about this abuse of a "money-talk" program to promote left-wing ideology. And if there is interest in knowing more about this guy, I can do a brief summary of what he had to say -- and Lynn's chirping reactions to him.
STOCK MARKET
The last time that Brinker made any serious stock market comments on Moneytalk was July 31st, before the correction got down to business. Here is what he said:
Brinker said: ".....we had a caller when the market was at 1268 at the end of June who asked whether he should sell out of the market because of the debt ceiling debate......Of course, the market is now at 1292, a couple of percent higher than when that call came in at the end of June. So this is what happens. If that individual would have sold out at 1270 at that time, he would be faced now with either sitting it out or re-entering at a higher level."
Brinker continued: "And certainly we've seen some nice dollar-cost-average opportunities this past week in the market. I must admit on Friday I was taking advantage of some of the bargains that were out there with the market in the 1200's, reacting to this hyper-drama out of Washington DC. I know many of you also have been taking advantage of the dollar-cost-averaging opportunities on short-term weakness - and certainly it's minor. I mean, 5% is really noise when you look at the market over time.......If you've been listening to this broadcast, we have not been part of the panic-brigade here on Moneytalk.
Honey EC: As of today, all of Bob's Marketimer model portfolios remain fully invested. His target range remains what it was in January, 2011. He predicts the S&P 500 Index will reach the low-to-mid 1400's going forward. Although, he has now extended the time frame from 2011 to 2012. As usual, he continues to recommend dollar-cost-averaging for new money.
BOND MARKET AND INTEREST RATES
Bob said: "And then when you look at interest rates, you say, wha' happened? Who let the dogs out? Three month Treasury Bills 0.1? Say again? No, I don't want to hear that number again. That's too low. Six-month Treasury Bill 0.7? These are annual yield boys and girls. One year Treasurys 1/10 of 1%? You mean I have to own a Treasury for a whole year to make 1/10 of 1%? Yes.....Two year Treasurys, 2/10 of 1%. Five year Treasury, under 96 basis points.....These are rates to write down, they are historic."
Honey EC: Earlier in the year, Bob sold all of his model portfolio TIPS and lowered the Vanguard Ginnie Mae Fund (VFIIX) holdings and Vanguard Short-Term Investment Grade (VFSTX). He increased Vanguard High-Yield Corporate Fund (VWEHX) holding in his "income" portfolio.
ECONOMY
Bob said: "What they (the Fed) are expecting here is slow growth. Now many of you know I've been expecting slow growth. In fact, in the August investment letter.....we said that we had reduced our growth forecast to 1 to 2% for 2011.....That's very slow....It's not that it comes as a surprise, we already expected that we'd have slow growth. The surprise element is that the Fed would go out and say, basically for almost two years, they are going to keep rates close to zero."
Honey EC: Yes indeed, Bob did reduce his growth projections. In the July Marketimer, Bob projected the US GDP will grow by 2 to 3 percent in 2011..... "slightly more conservative than the revised Federal Reserve forecast of 2.7% to 2.9% growth in 2011."
