July 15, 2018, Bob Brinker's Moneytalk: Latest Advice, Summary and Commentary

July 15, 2018....Bob Brinker's Moneytalk:  LIVE SHOW today....(comments welcome)

HONEY'S MARKET REPORT:

=> The S&P 500 Index is back above 2800 - up 4.78 YTD - and is only about 3% below all time high.  The 10-year Treasury is still below 3% - 2.85. Inflation, according to the CPI-U is at 2.87% - still below where it was at the end of WWII.

STOCK MARKET...Brinker opened the program by completely ignoring the 10.1% correction that happened in February this year,  while mentioning the S&P 500 all-time-high in January.  He then pointed out that the Index is now only about 3% below the high. Then he launched into an opinionated diatribe about proposed tariffs.   

Honey EC: Since the S&P has recovered so much of its losses, Brinker may think it would make him look pretty silly if he claims any decline that happened now is a "retest" of the February lows - so better to go back to January and call it a "trading range."  

==> Thanks to dRahme AUDIO CLIP you can hear some of the opening comments. 

MARKETIMER MODEL PORTFOLIO MAJOR HOLDING.....Rick from Iowa, who is retired, asked Brinker about moving out of 100% equity model portfolios I and II into balanced (1/2 fixed income) portfolio III. 

Brinker replied: "I would have a balanced portfolio and that should be easy for you to do because you are going to find in looking at  (Marketimer) portfolios I, II, and III, that there are funds in there that are compatible with one another. I'll give you an example - the (Vanguard) total stock market index fund - we have a significant weighting (50% in I and II) of that in all three model portfolios.....So you see, you would be able to count that toward your weighting in model portfolio III. I really would feel that model portfolio, balanced portfolio would be appropriate for someone who is entering or is in retirement. I think it is appropriate and risk level at that stage of your investment cycle." 

BUDGET DEFICIT..... dRahme AUDIO CLIP: deficit, paying back national debt

NOREEN AND THOSE WHO AGREE WITH HER ARE  FOOLS, MORONS AND IDIOTS.....Noreen said she believed that the proposed changes in tariffs would help ordinary working Americans, and said that some steel mills had already opened up again, providing more jobs. 

After screaming about Harley-Davidson, Brinker said: "I believe that protectionism is for fools only......I want to be very clear on this. I don't want to be misunderstood. I think that the only people that protectionism works for the country are fools, morons and idiots. nobody else." 

Honey EC: The problem is, MISTER Brinker, President Trump is not for protectionism. He is for FAIR TRADE.  The United States has been the piggy bank for the world far too long.

==> dRahme's Audio clip: Noreen's call and Brinker's response starts at 6.5

VICKIE'S CALLS.....Honey EC: Vickie may be one of the most eloquent callers I have ever heard on Moneytalk. Brinker was furious, and told her what she said made no sense and was complete nonsense!  He added that her opinion (and those who agree with her)  was for  "losers."  If he would have allowed her to continue rebutting him, she would have made him look even more like that "loser" than she did. 

==> dRahme's Audio Clip: Vickie's call shortly after Noreen's

FRANKJ'S MONEYTALK GUEST-AUTHOR SUMMARY

Bob’s third hour guest on Sunday July 15, 2018 was Paul Tucker author of the book Unelected Power, The Quest for Legitimacy in Central Banking and the Regulatory State.  (published May 2018).  Mr. Tucker is a former governor of the Bank of England.  From Wikipedia:

“In December 2015, Tucker became chair of the Systemic Risk Council, a body set up in 2012 by former regulators and central bankers to promote financial stability.  Its first chair was Sheila Bair, former Chair of the FDIC, and its members include Paul Volcker (former Chair of the Federal Reserve) and Jean-Claude Trichet (former President of the European Central Bank).  Since Tucker became chair, the SRC has issued a statement to G20 Finance Ministers and Governors on financial reform and, among other things, intervened on various US Treasury proposals to roll back financial regulation.”

Mr. Tucker said he wrote the book because he was worried that more power has shifted from political leaders to central bankers.  Today we do not see presidents and prime ministers at the forefront, instead we see central bankers.  During our recent financial crisis Paulson, Bernanke and Geithner were in the news, trying to deal with the problems.  He contrasted this with the situation in the US during the Great Depression when Pres. Roosevelt was front and center trying to deal with the economic problems. 

Bob asked if there is a disconnect between central bank monetary policy and what the typical taxpayer/citizen knows about such policy.  Being British, the guest  was diplomatic in his answer which was:  people in the UK know more about economic policy than people in the US.  Part of the reason is more TV exposure for Britain’s central bankers, going back 15 to 20 years when the Bank of England made an effort to get its people in front of the cameras. 

There was some talk about Mario Draghi but I missed most of it because I got a phone call.

After the financial crisis here, did the Fed get any help from Congress?  This is a favorite theme of Bob’s.  Starship regulars know the answer is “No.”   Mr. Tucker agreed and suggested that Congress could have launched infrastructure projects.   He said Congress could have paid for it by raising taxes, not borrowing.   Both agreed in the political atmosphere at the time there was no way this was going to happen. 

Remember when Bear Stearns melted down in March of 2008?  Bob said this was a “gift” to the regulators and securities crowd – meaning it served as a warning of things to come, yet no one did anything for 6 months.  The guest seemed to agree and did not know why no action was taken.

Caller Bernie from Westlake Village, CA wanted to know if nationalism is dead in Europe.  The guest gave an answer that wandered around and ended with the statement that the EU is still developing.

A caller from El Paso TX asked if monetary policy is so complicated that members of Congress cannot comprehend it, so this is why they leave it to unelected experts.    

Editorial comment:  Think of the Congressmen and women in your own state.  Now decide  which one of them is the biggest dope.  Now picture that person having anything to do with monetary policy. 

Bob from North Hollywood, CA said if he has a heart problem he wants a cardiology specialist on the case, not a general practice doctor.  Likewise, the economy: keep the politicians (generalists) on the sidelines and let the specialists deal with monetary policy.  

The guest said that it is OK for politicians to delegate tasks to central bankers but they need to be specific.  For example,  part of the reforms after our financial crisis were that banks should not engage in speculative activity.  This was Congress’ wish.  The regulators ended up writing 800 pages of rules.  Overkill. 

Bob wrapped up at about 3:52. 

Honey here: Thanks Frankj….It is a little scary when unelected people and bureaucrats have so much control over our lives, because there is no way to vote them out. And worse, it's almost impossible to get them fired. 

NEXT WEEK.....==> dRahme AUDIO CLIPS: economy, inflation, treasuries, quantitative tightening-which has only just begun. 

Listen Talk Radio:
TALKOFCONNECTICUT;  

READ OR POST COMMENTS

July 8, 2018, Bob Brinker's Moneytalk - NOT Live: Reruns and Spliced Old Calls

July 8, 2018....Bob Brinker's Moneytalk was not live today, so as usual, there was no third-hour guest author.....(comments welcome)

HONEY'S FULL UPDATE ON BRINKER'S LATEST STOCK MARKET ADVICE

This week's numbers:  Friday, July 6, 2018. Dow closed at 24,456.48; S&P 500 Index closed at 2759.82; Nasdaq closed at 7688.39.   (Last week: S&P 500 = 2718.37; Dow = 24,271.41; Nasdaq = 7501.30)

So we see that as the time-distance from the February correction low keeps growing, the Dow, S&P and Nasdaq keep climbing.   

Since February, Bob Brinker has been looking for the S&P to test the February 2018 10.1% correction low so he can proclaim a "buying opportunity" - without raising any cash to take advantage of it.  

In the July 2018 issue of Marketimer, Brinker explains that  most off-presidential year corrections usually happen in the second half of the year - most likely in October. In the meantime, his advice (as usual) is to dollar-cost-average new money - all Marketimer portfolios are fully invested. 

However, if 2018 goes by without any further corrections, then he says the "door opens" for him to "shift the risk" to 2019,  and begin looking for a "buying opportunity" next year.   

So what that means in a nutshell in Honey's own words: The stock market fluctuates.  And Brinker will tell you after the fact if it declined 10%, 20% or goes into a full blown bear. But in my opinion,  he will never again raise cash to prepare for it. The last time he raised cash before a market decline was in year-2000. 

FINANCIAL MARKET REPORTS FROM CHARLES SCHWAB

STOCK MARKET: 

U.S. stocks finished the final trading session of the holiday-shortened week higher, courtesy of the June labor report that seemed to tamp down some concerns of a possible acceleration to the Fed's rate hike campaign. Some upbeat economic data aided in countering the tension in regard to global trade as the U.S. implemented its previously announced tariffs on China, which immediately retaliated with levies of its own. Treasury yields dipped and the U.S. dollar was also lower, while crude oil prices were mixed and gold experienced a minor decline. 

TRADE: 

The trade balance showed that the deficit shrunk more than expected to $43.1 billion in May, compared to forecasts of $43.6 billion. April's deficit was revised lower to $46.1 billion. Exports were up 1.9% m/m at $215.3 billion, while imports increased 0.4% to $258.4 billion.

TREASURIES:

Treasuries ticked higher, with the yields on the 2-year note and the 30-year bond dipping 1 basis point (bp) to 2.54% and 2.93%, respectively, while the yield on the 10-year note was nearly unchanged at 2.82%.


Listen Talk Radio:
TALKOFCONNECTICUT; 

READ AND POST COMMENTS

July 1, 2018, Frankj: Advice for Preparing Financially for Cognitive Decline

July 1, 2018....Bob Brinker took today off to celebrate the 4th of July week. (comments welcome)

FrankJ has summarized and added to a treatise about making a financial plan for later years that might include cognitive decline. Frankj wrote: 

I referenced an article I read on the SeekingAlpha.com website.  The title is:  Defending Your Retirement Financial Plan From Cognitive Decline.   The author is ISTJ investor which is a screen name he (or she) uses, so I don’t have the actual name.   It was posted about June 20^th and unless you subscribe to SeekingAlpha (which I do not) it is no longer available since they put articles behind a paywall once they’re over 10 days old.  I downloaded the article though and summarize parts of it below. 

About half the article covered medical information on cognitive decline:  Alzheimer’s, dementia, etc.  Who was susceptible and at what ages.  Interesting but too lengthy to go into here.   

I’ll put my comments in italics to distinguish them from the actual author’s writing.

As background, society at large recognizes that cognitive decline is something to face when people get into their 60’s and 70’s.  From the article:

·         A  2016 Harvard Business Review article notes that more than a third of S&P 500 companies have a mandatory CEO retirement age.

·         A 2017 study found that about 40% of S&P 500 companies disclose a mandatory retirement age for board members, with 72 being the most common age.

·         Over 30 States have mandatory retirement ages for judges, with 70 being the most common age.

·         Air traffic controllers are normally required to retire at 56.

·         Although there is no mandatory retirement age for doctors, this article reports that 5-10% of hospitals have begun mandatory evaluations for doctors at 70 or 75. At one hospital, 7 of 35 doctors over 70 gave up hospital privileges rather than be evaluated.

·         And finally, the Financial Industry Regulatory Authority has adopted rules 4512 and 2165, which encourage fiduciaries to identify a Trusted Contact and apply additional oversight to specifically to accounts held by people over 65.

Tradition - distilled empirical observation - suggests that cognitive risk increases somewhere around 70.  It's worth pointing out the relatively tight grouping of ages in the above policies. If there is a cognitive performance retirement policy at all, it's almost unanimously before age 75.  People today can reasonably expect to live into their 80s, and arguably their retirement plans should accommodate living into their 90s. It looks like a risk.

We are all subject to Normal Aging.   The probability of this is 100%.   With regard to financial planning the impact is none to very little.   Symptoms might be slower processing speed, memory and slower decision making.  

Mild Cognitive Impairment might affect 15 to 20% of us.  The impact is  reduced  capability to manage even routine financial activities.  The symptoms are noticeable declines in memory, information processing, decision making, and risk assessment.

Dementia might affect 10-35%  of us.  The impact is a catastrophic loss of capability.  The symptoms are a decline in memory and other areas, increasingly unable to care for oneself

The author’s operational assessment is: 

·         The risk of material cognitive impairment during retirement is real

·         The risk should be explicitly considered in retirement financial planning

·         The probability is > 10%, perhaps > 20%

·         The probability increases with age

·         The impact can be moderate to catastrophic

·         Plans should anticipate mild impairment of 5 or more years

·         Plans should anticipate significant impairment of 2-3 years

·         Basic precautions should be in place by age 70

·         Precautions should be finalized by age 75

The author’s recommended plan:

Critical legal documents

Perhaps most importantly ensure that you have the legal documents that appoint and empower an agent to manage your medical care, your financial affairs, and your estate, should you no longer be able to do so.

This will include at a minimum an advanced medical directive, a healthcare power of attorney, a durable financial power of attorney, a will, and potentially one or more trusts.

An amazing number of people don't even have a will. According to a 2016 Gallup poll, 44% of those in the 50-64 age group, and 32% in the 65+ group, and 25% of age 55+ with income of $75,000+ do not have a will.

I'll just close this section by saying that in the event they are needed, each of these will be extremely useful to the agent trying to take care of you and carry out your wishes.

Good Housekeeping

Life is easier if things are in good order. This may become particularly important if your agent is trying to step in to handle your affairs.

Put your financial status and plans in writing. I personally have a Financial Plan document in Word and a multi-tab Excel spreadsheet. Between the two, everything from the location of my safe deposit box to projected RMD distributions is readily available.

Other housekeeping  things to consider:

·         Ensure all financial accounts are correctly titled.

o   Maybe your spouse passed away and you had joint investment accounts.  You want to put them in your name only.

·         Ensure beneficiaries on accounts are correct and current

o   Very important.   I’m not a lawyer but I know that you do not need to put anything about beneficiaries to an IRA account in a will because the beneficiaries that the custodian has on file are the ones who’ll get the dough.

o   Keep a hardcopy of the beneficiary designation form.

·         Document - financial accounts (checking, savings, investments), pensions, annuities, trusts, alimony, real property, insurance policies (life, medical, long term care, house, renter, auto, umbrella, flood), debts, credit cards, safe deposit boxes

·         Clean up your physical files (buy a shredder ?? and if you do, don’t buy an el Cheapo).

·         Write down login and passwords; keep them secure but accessible to your agent.

·         Ensure you have backups for digital files

·         Name a Trusted Contact for each of your fiduciaries

o   I think you’d want to include your tax preparer as one of these fiduciaries and let them know who your agent is  and that he or she has your ok to work with the tax preparer if needed.  Tell your agent who your tax preparer is, if you use one. 

·         Review security; freeze your credit.  

·         Create a checklist for the surviving spouse on death of first-to-die spouse

·         Put desired funeral/burial arrangements in writing

·         Review all this with your agent, by age 70

·         To this list I would add having hardcopies of the last few years of tax returns available.  Three years is good, seven is better.  What if someone passes away and by coincidence a letter arrives from the IRS questioning a past return?  

Simplify

Consider simplifying your financial affairs where it makes sense, and meets your objectives. You may be able to reduce the burden on yourself, operating at less than 100%, or a surviving spouse, or your agent.

I'll give two examples from personal experience. In the first case, a surviving spouse was left with critical retirement assets tied up in a closely held company. While growing and profitable, it yielded little income, and was not routinely liquid. In the second case, the surviving spouse was left with a portfolio of difficult-to-manage rental properties.

And I’ll add one of my own.  The sister of a friend died and her IRA went to three people, two of them were her nephews in their 20’s.  The third one was her mother, about 80.  Her executor was not financially aware.  He could have had the mutual fund company split the assets into three beneficiary accounts – each with its own mandatory withdrawal rate.  There is a time limit for this and it passed without the accounts being split up.  So, the mandatory withdrawals were based on the OLDEST beneficiary’s age, in other words, the Grandma.  Their distributions are higher than they would be if they inherited separately.  Both the young men are working so they don’t especially need the extra income, which is taxed as ordinary income.

Some specifics actions to consider while simplifying:

·         Cancel unneeded credit cards

·         Consolidate 401(k)s, IRAs, and other retirement accounts

·         Consolidate accounts to fewer fiduciary institutions

·         Simplify portfolio

·         Sell non-liquid or difficult to manage assets

·         Sell out of state property

·         Set a schedule to sell your residence

As an example, simplifying your portfolio might mean consolidating four mutual funds and a dozen individual stocks into a single target date fund.   

Today, July 1, 2018 in a repeat show, Bob Brinker told a caller that he thought target date funds were for people who didn’t know what they were doing.   I don’t agree with Bob although I do not use them myself.  

I would add instead of a target date fund, 

·         A balanced fund or, 

·         A large cap fund and a bond fund or, 

·         A total market fund and a bond fund.

The point is, the fund or funds need to satisfy YOUR needs if income generation is an objective.  You’re not dead yet,  so don’t worry too much about what your heirs might be faced with in the funds they inherit.  They can always change things, just don’t stick them with some high expense ratio funds in case inertia takes hold.

The author did not go down all the rabbit trails of types of accounts and tax ramifications.  Probably not enough space or it might be grist for a future article or because the focus was on a living person-- in decline.  I’ll add here that someone may not want to convert holdings in a personal account to one, or just a few mutual funds.  The tax consequences are not appetizing.  If this account is inherited, the heirs can liquidate if they wish, and probably owe very little in taxes because they get a stepped up basis.

A spouse gets to treat an inherited IRA as his/her own.  So they can change the type of fund it is in if they wish.  The biggest risk is an inexperienced spouse falling into the clutches of a greedy financial planner.  A solid agent can help with that especially if the deceased left behind clear instructions.

Put your financial affairs on auto-pilot

Once your financial affairs are in order, and appropriately simplified, consider automating them to the extent feasible; the model here is to put your financial affairs on auto-pilot. 

Your agent may be trying to act in your interest for several years.  Plan ahead to make it easy on them; in the meantime, make it easy on yourself.

Some specifics to consider:

·         Automate bill payment - utilities, rent, insurance, credit cards

·         Pay recurring bills with a bank draft where possible

·         Automate re-investment and asset allocation changes

·         Add your agent to your safe deposit box signature list if you have one.

·         Add agent to checking account signature list

·         If you have an in-home safe, your agent should have the combination.

Communicate

Talk to your agent. They need to know they ARE your agent, and agree to take on the task. They need to understand at least in general your plans and wishes, what documents and files you have, and where to find things.

The author does not go into how to pick an “agent” or what the skills of the agent need to be although they are implied.  Here are my thoughts.   

·         The agent must be WILLING as mentioned above and they must KNOW they are the agent.

·         They are going to be acting as a fiduciary so it follows they must be honest to the max. 

·         It should be someone who will outlive you, or at least not go down the track of cognitive decline in parallel.

·         It should be someone who understands your goals – this means you need to state them clearly. 

·         Your executor might make a good agent, if willing.  

·        A responsible child might make a good one.  If there are a number of kids, explain why one is being chosen over others.   Along this line, if you haven’t taught your kids about money management, maybe now is a good time to start.  If they are grown up you probably know which one would make a good “agent.”

Honey here: Thank you so much, Frankj!

(My market and Bob Brinker update is below this post.)

READ AND POST COMMENTS