I want to sincerely thank Jeffchristie and Frankj. for coming to my rescue while I spent time with family who were here visiting from Utah.
Jeffchristie's First-Hour Moneytalk summary:
Bob started with the standard opening. Become your own financial manager etc. He spent the rest of the first segment talking about Greece. The new government ran on unrealistic reforms. The current bailout from the EU is valued at a quarter of a trillion dollars. The way Greece is going, Bob does not see how they can pay it off. Will Greece remain in the Euro or print their own money? Will the government and the banks default on their loans? We shall know in the fullness of time.
Joe from Fort Lauderdale wanted to know if he should include the required minimum distribution from his IRA as part of his annual 4% withdrawal. Bob said he didn't have a problem with that.
Bob from Missouri, a Marketimer subscriber, has his ROTH IRA in Portfolio 1 and his income producing assets in a taxable account. He wanted to know if he should swap. Bob told him to look at the tax consequences. In general Bob said he felt it is better to keep the income portion of your portfolio in a tax privileged account.
Clay in Medford Oregon wanted Bob to tell him what the future exchange rate would be for Bit coins vs. the US dollar. Bob told him that Bit coins were extremely volatile and no one can predict their future.
Rowan in Illinois wanted to know if he was at critical mass. He inherited a rental property from his mother and he also has Social Security and another monthly disability payment. Bob said that critical mass was having enough income to live on without requiring you to work.
Richard in Maui said it was too hot for him there in the summer time and he was looking at a place in Catalina. He was thinking about selling a rental property . As they talked through the tax consequences he decided it would be better for him to rent in Catalina.
Nathen in San Diego had rental property he wanted to sell. Bob sais he should look at a 1031 like kind exchange.
Clarence in Utah had several hundred thousand dollars that he was considering investing in gold and silver. Bob said he didn't own either and advised against it.
Kevin in Indiana wanted advice on an annuity. Bob advised against it.
FrankJ's Second-Hour Summary
China is easing its monetary policy, announcing a reduction of 1% in the reserve requirements for lenders. The accommodative policy sets the new reserve requirement at 18.5%.
A study conducted by Morningstar and published on April 13th in the New York Times compared the mutual fund performance of funds owned by investment banks like J. P. Morgan and Goldman Sachs with Vanguard. The investment bank funds underperformed their benchmarks. The managed funds at Vanguard outperformed 80% of their peers over the last decade.
Vanguard emphasizes its index funds, but they do have some very good managed funds with low expense ratios.
Bob then went to calls, beginning with Estelle from WLS Chicago country. She is 86 and is widowed, with about 500 thousand at Vanguard and 1.5 million in laddered CDs. Bob advised her to move the CDs over to Vanguard and get their help with reinvesting as they mature.
Lee from Iowa is trying to get his portfolio configured to be like Bob’s Portfolio III. He has money in a REIT mutual fund that is worth $35,600. And he has $112,000 in GNMAs and I Bonds. Bob advised him to go 50% equity and fixed. Bob made no comment on the GNMAs. It sounded like Bob was OK with the REIT allocation as long as Lee was.
Next up was George from Illinois. I did not catch whether he said he was a long time listener, but based on his question, I would be surprised if he was: “I have my IRA at a bank that is charging me a 2% management fee, I am thinking of moving it to a brokerage firm where I’ll have more choices.” Bob cut to the chase and told him to move it to a large no-load outfit like Vanguard or Fidelity. George asked about Schwab and Bob said, “sure,” Vanguard is my first choice but you can use Schwab, Chuck Schwab has been a guest on the show.
Bob got back into the Greek Tragedy with caller Alan from Missouri who wanted to know the short term (2-3 month) effect on the stock market if Greece is kicked out of the Euro. Bob brushed off any effects and went into a rant against the Greek leadership and the people who put them in power that ran the clock down to the bottom of the hour.
After the half hour break, Christopher from Charleston called with a long, sad story about his daughter’s foray into gold investing. From the sound of it, she got scammed BIG TIME. She invested $7500 when gold was trading at about $790 per ounce. Instead of getting the actual metal, she got certificates. Then after it had doubled in price she tried to cash out and ended up with only $2900. Bob called the whole thing a scam. Coincidentally, on the station I was listening to, WLS Chicago, there was an ad for gold investments at the close of the second hour.
Social security came up a couple times in the second hour. Tony from Texas and his wife are approaching age 62. They have a couple of adopted kids under 18. Tony heard that you could get additional money from Social Security for these 2 dependents. Bob rightfully referred him to a local office of the SS Administration. A caller from Fairbanks wanted to know the future for SS. Bob said he thought those receiving benefits now are OK, but long term changes are needed. The system is very generous which makes it “unsound” long term considering fewer workers are paying in per recipient.
I thought one of the more interesting calls came from Carey in Illinois who asked Bob about the most recent jobs report and its effect on the market. Bob said that the S&P is now over 2000 (at 2081) and back in early 2003 there was a buying opportunity in March when it was at 800.
He said, “yeah, there was a lot of volatility in 2008 but it came and went.” This was about 45 minutes into the 2nd hour if anyone wants to hear this dismissal of the market meltdown with their own ears.
(Honey here: Frankj dropped me an email and told me that I needed to carefully listen to Carey's call and Brinker's reply, which was truly astonishing. I transcribed it and posted it below.)
Bob went on to explain the jobs report as being affected by cold weather, the West Coast port strike in Long Beach. But these have “come and gone.” Still with us is a weak energy sector and strong dollar.
Another interesting call came in from David in Michigan who gets income from SocSec and has a portfolio of individual stocks worth $250,000 in total. Bob quizzed him on the largest holding and David said about $5000. He inherited these and there are considerable capital gains if sold. He wants to gift the stock to a daughter. David seemed to favor selling them and booking the gain and buying them back, then giving or willing them to his daughter with a higher basis. He thought he would not actually have to pay much or anything in tax on the gain since his income was low and consisted of SocSec only. Bob mentioned gifting and David’s 5 million dollar lifetime exclusion on gifts.
If he gifts shares to his daughter, a bit at a time, there are no tax consequences for him, but she takes on his low cost basis, so if she sells, she might have a big capital gain tax hit.
If she inherits after his death, then she gets a stepped up basis, that is the value of the stock on the date of death or 6 months after becomes her basis.
Patricia from Novato CA wanted to know what effect China’s decision to change its reserve requirement would have on the world at large. Bob said “It is Sunday, it just happened!” So, no prognostications were forthcoming. Then she asked for the title of a book she could read to understand bonds better. Bob recommended one from the reading list called The Bond Bible. Another one is by Larry Swedroe, The Only Guide to a Winning Bond Strategy You'll Ever Need: The Way Smart Money Preserves Wealth Today.
Frankj's Third-Hour Guest Summary:
Bob’s third hour guest on April 19th was Ben Parr, author of the book, Captivology: The Science of Capturing People's Attention
This is going to be short because I found the topic boring but that’s just me. Also, the interviewee must have been calling on a cheap phone, or using a can with a string attached because some of the interview was hard to understand.
Capturing people’s attention is important to anyone who wants to sell stuff, particularly startups. One of the ways you do it, capture their attention, and retain it, is to violate people’s expectations. Two TV shows were mentioned, The Sopranos and Curb Your Enthusiasm. In fact they spent a lot of time talking about TV shows, series and media. Breaking Bad was another example of a show that violated our expectations.
There had not been a similar story line in anything previously. It became a mystery for viewers as how Walter would keep going, so that kept people watching. And, we were interested in looking at a world that most of us would never be part of.
This author identified three “stages” of attention. Immediate, like when a car backfires. That gets your attention but only momentarily. Then, short term, like a song you like from an artist. Then, long term, when you go out and buy everything that particular artist ever released.
The guest said that inattention can result when you are trying hard to keep the audience’s attention. He cited a teacher giving a Power Point presentation with imagery on the slides, bullet points on the slides, and at the same time, explaining the slides. The children get distracted looking at the slides and bullet points and don’t hear the teacher. Just put an image on the slide and drop the bullet points.
He linked the “violates our expectation” concept to humans once being hunters and gatherers where paying attention could be a matter of survival. This is why we take notice of stuff in our everyday lives that is unexpected or out of place. Is that clown that just came through the door at Starbuck’s a threat? That kind of stuff.
Honey here: I agree. I heard the last half hour and found the guest-speaker boring, but Frankj found some interesting points anyway. :)
The following is a transcription of Brinker's 2008 "volatility" and "dollar-cost-averaging opportunities" in 2008. The call was 45 minutes into the second hour:
Caller Carey said: "My question is with the weaker jobs creation the last time they reported it, and the lower long-term rates which I think in the past you have said where significant, and now that China has eased further, what are your thoughts about the markets going forward. Is it time to add additional money or are you becoming a little more cautious at this point."
Brinker replied: "We are already fully invested. We have been fully invested since the S&P 500 was basically at the 800 level. We took the money out early in the last decade and put it back in March 2003, we put it all back in – the S&P was around 800. Now the S&P is over 2000 and we've been fully invested during that entire period. Obviously, it's been an incredibly rewarding run. Yet it was a lot of volatility in 2008, but it came and it went. In fact it provided additional dollar cost average opportunities throughout that period.
Honey EC: For those of you who have been following Brinker since 2000, please bear with me while I review the FACTS that Brinker either FORGOT or? You be the judge.
1. Brinker SAID: "We took the money out early in the last decade and put it back in March 2003. The S&P was around 800. Now the S&P is over 2000 and we've been fully invested during that entire period. Obviously, it's been an incredibly rewarding run."
Truth: Brinker took out a total of 65% from equities in his model portfolios in year 2000 and put it back in March 2003 -- where it has been ever since.
2. Brinker SAID: "Yet it was a lot volatility in 2008, but it came and it went. In fact it provided additional dollar cost average opportunities throughout that period."
Truth: SAY WHAT? Did Brinker really ignore the fact that the S&P did another complete round-trip to BELOW 800 in 2008-2009? The S&P was at 800 in March 2003, but it had climbed to over 1500 in October 2007, then dropped to a low of 677 in March 2009!
3. Brinker said: "In fact it provided additional dollar cost average opportunities throughout that period."
Truth: I'm just suuurree that Brinker simply forgot all the gift-horse buying opportunities that he put out during 2008 as the market dropped.In 2008-early 2009 Brinker called several "buying opportunity" bottoms. Yep, that's it, he just forgot. Here's the list of them:
- January 4, 2008, S&P @ 1411: "Mid-1400's"
- Feb 10, 2008 S&P @ 1331: "Low-1300's" (delivered via "special bulletin" - no mention of January Marketimer mid-1400's buying opportunity)
- Aug 5, 2008 S&P @ 1285: "1240 or less"
- Sept 2, 2008 S&P @ 1282: "Low-to-mid 1200's"
- September 16th -- rescinded low-to-mid 1200's (recommended dollar cost-average only)
- January 2009 S&P @ 931: “bear market bottom range of 750 to 850."
- Feb. 2009 S&P @ 826: “low-to-mid 800’s"
- March 5, 2009, S&P @ 696: said waiting for a "bottom and a test of that low." NO DOLLAR-COST AVERAGE IN MARKETIMER or buy levels.
- Jim explains another Truth that Brinker "just forgot":
- Jim said...
- I was so shocked hearing Brinker describe 2008 as merely
"volatility" that I missed the lie about putting ALL of his money back
in during 2003. You can't put ALL the money back in unless you had
already taken ALL the money out. As we know after taking only 65% out he
told aggressive investors to put half back into QQQ shares. So those
people only had 32.5% left to put back in during 2003. 32.5% is far from
being ALL the money.
How many times has Greece defaulted on its sovereign debt since 1800?
A) Three B) Four C) Five D) Six
ANSWER
Summaries Posted at 7:55pm PDT
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