December 9, 2012, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

December 9,  2012....Bob Brinker hosted Moneytalk today....(comments welcome)

I was not able to listen to Moneytalk today because I was busy this afternoon.  The Handbell Choir that I belong to was performing a Christmas program -- along with a Chorale Group.

But lucky for us, Jeffchristie listened to the program and compiled a brief summary. I spoke to Jeff, who lives on the opposite coast from me,  just before posting this  and he told me that Brinker did not say anything that would indicate any change in his market-timing outlook.

Jeffchristie's Moneytalk summary:

Bob started the program talking about Friday's jobs report. He said it was a decent number but not a fantastic number. It is big enough to keep unemployment from going lower. Bob gave the unemployment numbers for racial groups and by education level.

Bob also said that a soap opera about the fiscal cliff was going on in Washington. He praised the efforts by Ben Bernanke to improve the economy.

The first caller was Steve in Colorado. He was worried about going over the fiscal cliff. He is 55 years old and in a 35% federal tax bracket. He wanted to take early withdrawal from his 401k and use the money to pay his mortgage. Bob said he would be losing 50% of his money to penalties and taxes and advised him against doing it.

Bill called in from Wichita Kansas. He wanted to know if it was a good idea to buy stocks before they go ex-dividend. Bob explained to him that the stock is adjusted downward by the cost of the dividend and that there was no advantage by doing what he ask about.

Bob mentioned that California has the highest state income tax at 13.3% and Hawaii is second at 11%.

Don from Chicago was next. He had an idea to free up some money to help the economy. He suggested allowing people under 59 1/2 to take tax free withdrawals from their retirement accounts. Bob said it would be OK if they used the money to buy a first time house but didn't like the idea if the money was used for other purposes.

Pete called in from Seattle. He was a long time subscriber and thanked Bob. He still had significant holdings in a Ginnie mae fund and said he was willing to accept a 10% drop in NAV. He knew that Bob had reduced his allocation and ask if he should also do the same. Bob said it was OK to maintain his position.

Bonnie from Birmingham said she has 85% of her 401K in stocks and thought she should lower her exposure. She told Bob she was 63 years old. He recommended she sell on strength and go to 50/50.

Martin called in from Fairbanks. He is semi retired and has 40% in stocks, 50% in bonds and 10% in cash. Bob said he was comfortable with that allocation.

Mike from Colorado said the problem with the federal budget deficit was spending. Bob agreed with him.

Burt in Gulfport, Mississippi wanted to withdraw money from his 401k to build a new home for his retirement. Bob ask if he would be subject to any penalties. He said no and Bob said he didn't have a problem with him doing it.

Joe in California wanted to know if Apple was a good buy since he has dropped from its all time high. Bob said he didn't have an opinion on the stock. He mentioned that he sold all of his NASDAQ holdings in October.

Joyce in Iowa ask about the wash sale rule. Bob told her that she had to wait 31 days to buy back a stock that has a loss. If she books a gain it can be bought back at any time.

Charlie in Albuquerque is nervous about the fiscal cliff. He is worried that his taxes will be going up. He has an annual income of 80K and Bob told him that he doesn't think there will be any change when all is said and done. Charlie is also thinking about selling his stocks. Bob said it depended on Charlie's risk tolerance.

Dan in Washington a long time listener said he would be receiving 42K a year in pension benefits and he had 470k in equities in retirement accounts. Bob said he was OK with that asset allocation.

Jamie in Santa Clara was worried about inheritance taxes. She said her house was worth about $1,000,000. Her total net worth is around $3,000,000. Bob thought she would be OK after everything gets worked out. One proposal currently being considered was for the tax to start at $3.5 million.

Jim in Henderson is thinking about selling stock to lock in capital gains at the current 15% rate.

Tom in Virginia beach pointed out that raising taxes on the top earners will do little to reduce the annual deficit.

Edward in Cheyenne Wyoming said he recently read an article on Bloomberg that talked about making municipal bonds taxable. Bob thought that this would be a bad idea.

FrankJ sent a few comments about the Apple Stock call today:

Frequent caller Joe took a short ride on the MoneyTalk trolley today at 13 minutes into the 2nd hour. Joe wanted to know if Apple was a good buy at $532.

Bob professed to have "no opinion" on the stock. But he "wished all shareholders the best." He was quick to point out that his portfolios sold all NASDAQ holdings in early October, "fortunately, very near the highs..." He added, as a consequence, he has no opinion on the stock.

FrankJ also sent some of his great humor:

We came very close to losing BB today, just before the end of the 2nd hour. BB was already under duress from a caller who brought up the notion of gov't taking over people's 401Ks.  

Late in the 2nd hour a caller asked whether the government might decide to tax municipal bonds.

Bob lost it and began shouting repeatedly, with regard to these rumors, "It's coming out of the woodwork!!" 

At this stage Bob went to the break which was fortunate because all it would have taken to drive him off the cliff would have been a caller asserting the need to do away with the Federal Reserve!

Honey here: Regarding Brinker's re-iteration that he sold all Nasdaq holdings in Marketimer in response to Joe's question about Apple Stock:   Brinker said he "had no opinion" on the stock. He must have forgotten that on March 18, 2012, he told the audience that he had owned this stock for over a decade and it was a "magnificent performer."  Here are the excerpts of Brinker's words: 

Bob replied:  ".......You won't hear any complaints about Apple from me because Apple has been extremely good to me over the last decade or so....It's been a magnificent performer. It's a company that I'm invested in, and for the last ten years it's probably been the number one performer over that ten year period that I've owned.  As to when you make a decision to sell Apple? Well, I think that's a decision at some point will have to be made. But I think those who have stayed with it are very, very glad that they have stayed with it....."

It's clear from the paragraph above that Brinker is talking about personal holdings and not Marketimer holdings in QQQ or RYOCX. Brinker has NEVER recommended Apple stock in Marketimer, and has never before said he had invested in Apple on Moneytalk. 

Don't be deceived into thinking otherwise in spite of how it might have sounded. A man of integrity would have made it clear that this was a personal choice that he made for himself but never shared with listeners OR subscribers.

Now today, we have another example of Brinker's lack of integrity in REVERSE when he inferred that his only holdings in Apple were in the Nasdaq holdings in Marketimer.  He may have indeed sold those "decade" old shares of Apple. But if he has, why didn't he just say so? Pathetic lack of character, IMO....

Brinker's guest-speaker was David Wessel: Red Ink: Inside the High-Stakes Politics of the Federal Budget

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December 8, 2012, Bob Brinker's Views About the End of the Cyclical Bull Market

December 8, 2012....Bob Brinker's views on stock market secular and cyclical trends has not changed as of last week.  He is sticking to his belief that there is an ongoing "long-in-the-tooth" cyclical bull market that began in 2009 inside a secular bear market that began in year-2000,   (Here is a complete history of Bob Brinker's market-trends calls.)

At this time, Brinker has not raised any cash, but as he said recently on Red Eye Radio, he is "watching it closely."  His biggest concern is that there was no 10% "health-restoring correction" in 2012 like there was in 2010 and 2011.  This could possibly indicate another severe cyclical bear market is in the cards.

Regarding the stock market going forward, Brinker has told listeners to watch for "economic malaise," and to be aware that the Federal Reserve has largely exhausted its monetary arsenal (see my summary from last Sunday). During the first nine months of this year, the economy grew at a sluggish annual 2%.  Brinker clearly believes that the government should use more stimulus -- otherwise, the economy and the stock market will suffer.

Brinker totally missed the 2008-2009 megabear market (which he now considers a cyclical bear), and he remained fully invested.  Fortunately for his subscribers/followers, Marketimer model portfolios have finally regained all of their losses and are now a little higher than they were at the October 2007 stock market high.

Brinker is using fear in Marketimer now, and holding out the carrot for all those wabbits who think he will get them out of the market before the next major bear. Brinker's actual record at calling bear markets is abysmal. The one time he went to all cash (see his asset allocation history back to 1987), it was a costly mistake.  He knows that and will be very cautious about ever doing it again.

If  Brinker does raise cash in the future, that will mean he expects a more than 20% correction because he has 10-20% corrections for breakfast.  He's ridden down several 19+ corrections which he doesn't call bear markets because he insists corrections have to exceed 20% to be an "official bear market."  IMO, that is just plain silly.

As of the December Marketimer, Brinker  has not changed his S&P 500 Index "upper-1400s to lower-1500s" target range.

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December 2, 2012, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

December 2, 2012...Bob Brinker hosted Moneytalk today.......(comments welcome)

STOCK MARKET: Bob Brinker's comments today did not include any discussion of the current stock market.

Honey EC: It's been several weeks since Brinker  talked about "how great the market is doing this year." Perhaps he is silent because he doesn't want to mention that the  Nasdaq had its best November in three years -- he sold all Nasdaq holdings in Marketimer.  Here is what Brinker said on Moneytalk on November 18th:

Brinker said: "In early October, we sold all of our Nasdaq direct exposure. So that meant that we sold our mutual fund that was invested in the Nasdaq 100....That came out of model I and model II and we also extended that to QQQ shares, which are also invested in the Nasdaq 100. We also sold any QQQ shares that subscribers held. All of those share in the Nasdaq 100, whether they be in the mutual fund or in the Exchange Traded Fund were sold in early October. So they're out of there. There's no more direct Nasdaq exposure anywhere in model I or in model II or anywhere within newsletter subscriber positions. We sold them out in early October. I felt at that time, based on all that I had seen in the Nasdaq that that was an opportunity to sell that index and that's what we did." 

ECONOMY IN DUMPSTER AND INTEREST RATES....Brinker said: "Even more important than the operation twist effect is the economy.....If for any reason, the economy were to take off, that would put upside pressure on rates. Period. If the economy stays as it's been, which is slow, then the economy does not put pressure on rates......As long as the economy is in the dumpster, I don't think you are going to see much movement in rates....major movement. What's the dumpster? We're in the dumpster."

ECONOMY AND UNEMPLOYMENT.....Brinker said: "The economy is so low that we can't get unemployment down.  It's so low that under-employment is on the moon -- in the mid-teens."

BRINKER'S MARKETIMER PORTFOLIOS AND NET ASSET VALUE OF BOND FUNDS...Brinker said: "So as we speak, I'm not that concerned about the net-asset-value of a bond fund. Especially the kind of bond funds I recommend in the investment letter where we have very reasonable durations. Especially in the aggregate. When you take for example the income portfolio or you take the duration of the fixed income portion of the balanced portfolio....you will see they are very reasonable. So I'm not that concerned about that aspect....But if you thought the economy was going to pick up, or was picking up, then you might see some pressure on rates......That is not what we are looking at right now."

Honey EC: Brinker is right about his income portfolio. The weighted average duration of the five holdings is 2.8% and the average maturity is 4.9 years. The average yield is 3%.  He has sold all Vanguard High Yield Fund and replaced it with 25% weighting of Metro West Total Return (MWTRX).  The portfolio also contains a 25% weighting of DoubleLine Total Return Bond Fund (DLTNX).

 So in my opinion, the only possible conservative fund in this portfolio is the Vanguard Ginnie Mae Fund (VFIIX).  If you check a comparison chart between the high-yield fund, DoubleLine and Metro, you will see that the high-yield fund has outperformed over the past year and six months.

INFLATION AND THE HOUSING MARKET....Brinker said: "You can't call what's going on in housing now inflation. All you're seeing in housing so far is a partial recovery of the losses of the last few years.....It's just in its early stages....If you see the economy grow rapidly, then you could start to look for inflation pressures....I think one of the reasons that you have not seen inflation pressures so far is that the economy has been so lackluster....I've been very surprise at the number of people who came out and forecast high inflation...It's been complete fiction up until this point."

NATIONAL DEBT AND DEFICIT...Brinker said: "We now owe over 16 trillion dollars in national debt and we continue to accumulate national debt at an annual rate of a trillion dollars."

FISCAL CLIFF TAX  INCREASE PREDICTIONS...Brinker said: "There are so many tax increases on the table right  now, it's hard to keep track. Let's talk about current law since nobody has any idea what's going to happen. The only thing I'm sure of is one thing -- that if all the rates go up on New Year's Day, congress will vote to lower the rates on all but the high earners in the first quarter retroactive to the beginning of the year. That's the one thing that I am certain of -- that all of the people that earn less than $200,000 taxable as individuals....$250,000 as joint filers.....all of those people, I am certain of this, my opinion, that their rates will not change....The top 2%.....I think they're going to see a tax increase above the 35% current level, up to a maximum of 39.6......It's going up. No question about that. Just like the capital gains rate is going up from 15 to 20% and then the 3.8 is added on for the high earners making it 23.8 capital gains long-term.....For high earners, get out your wallet."

Honey EC:  Two weeks ago, Brinker did a thorough review of the impending January 1st tax increases and what deductions are on the table for elimination. I transcribed what he said in the November 18th Moneytalk Summary HERE 

ESTATE TAXES... Brinker said: "We have this bizarre situation through the end of this month only....where the lifetime exemption is $5,120,000 per person. That's $10,240,000 for a married couple. But that exemption drops to $1 million on New Year's Day, and the rate above $1 million per person goes to 55% under current law."

(SOCIAL SECURITY) PAYCHECK  CUTS ....Brinker said: "There's the question, do you give everybody in the country that works a 2% pay cut up to $113,700 in taxable income next year.....by allowing the payroll tax holiday to expire on the employee portion of that tax? This is roughly 10 billion dollars a month. Almost all of that money goes into the consumer economy. What do you do about that in this type of an economy.....There is no way of prediction what will happen with that."

ALTERNATIVE MINIMUM TAX.....Brinker said: "About 30 million additional taxpayers will be hit by the alternative minimum tax if it is not changed as part of any deal that occurs. My intention is not to cover every nook and cranny of the tax law -- it's just too much. These are the major items in my opinion subject to this discussion in Washington."

OPERATION TWIST.....Brinker said: "Operation twist is scheduled to end at the end of December, so what is the Fed going to do about it? That we will learn at the conclusion of the two day meeting this month."

FED GETS ALL THE CREDIT FOR ECONOMIC GROWTH SINCE 2008....Brinker said: "It's only because the Federal Reserve has been active that we have any growth at all in the economy. If the Federal Reserve would have taken a hike back in 2008, it would have been Teddy Ballgame right there. The Federal Reserve is the only operation in Washington doing its job.....If the fed would have checked out in 2008, it would have been Katy bar the door."

ONLY A "CERTIFIED, DOCUMENTED FOOL" CRITICIZES BEN BERNANKE...Brinker said: "The only person that would criticize Ben Bernanke would be a person who is so clueless about monetary policy and role of the Federal Reserve as to have nothing better than the lowest possible of education on the subject of economics....Anybody going after Ben Bernanke is a certified, documented fool....It's more like a comedy team if you're criticizing Ben Bernanke....If your not a comedian, you are totally ignorant and a complete fool....This is Moneytalk. "

ALL MAJOR CURRENCIES PRINTING MONEY....Brinker said: "The reality is, all of the major vendors are printing money....They're printing Euros, they're printing Yen and dollars.....It can go on until it can't go on."

WARREN RUDMAN: Brinker gave a glowing eulogy to Warren Rudman, the former Senator from New Hampshire,  claiming that he gave warnings before the 9-11 murders. He said that even though Rudman was a Republican, he was not just a "party hack for either side."  Brinker said Rudman was a war hero and actually "earned the kudo of a great American."

LAND OF CRITICAL MASS? Caller Jean from Florida asked what it means. Brinker told her the land of critical mass is when you can generate enough income from all sources, including your investments that you don't have to work -- whether or not you want to work.

TIME TO BUY MUNICIPAL BOND FUND?  Brinker said: "If rates stay the same or slide a little bit, you will do alright. But if rates go up in a municipal fund, you're going to see the net asset value depreciate.

TAKING LONG-TERM CAPITAL GAINS IN 2012.... Brinker said: "A lot of people are looking at their long-term capital gains in 2012 and wondering whether they should take them. Suppose they want to continue with a given position in a company, well there's no law against that. You are allowed to take long-term capital gain before the end of the year and pay the 15% maximum federal long-term capital gain tax rate that remains in the law books through the end of this year -- right through Monday, the 31st at the market close. You could pay that 15% and if you wanted to,  recreate your position.....The point would be if you think those tax savings are worth realizing. Because the fact is, starting in January, if you are a high-earner, you are going to pay a 23.8%....Here's the rub, do you want to make the new capital gains tax rate retroactive to all the money that you made on  a long-term gain? That's the issue.....Do you want to give the government 23.8 when you can give them 15....And you can recreate the position."

BOB BRINKER GETS POUNDED AND TRASHED FOR BEING FISCAL CONSERVATIVE: Brinker said: "I am roundly criticized for being so conservative on fiscal matters. And that is what this program is. This is a money program. We talk about fiscal issues and money. And I've always been balanced budget oriented. Let's get toward a balanced budget if we can....We've always maintained that for 27 years on the broadcast. And I get pounded and trashed for being so conservative."

Honey EC: Does anyone know how or where Brinker is getting "pounded and trashed" for being fiscally conservative? I'd like to ask him a few questions about why he no longer talks about the stock market on Moneytalk. 

NAMES BRINKER CALLED CONGRESS TODAY: "Dysfunctional...outstandingly incompetent....fools.... joke....unbearable."

Jeffchristie's Moneytalk Final Exam Question:

Bob Brinker's position on the Federal Reserve printing money is:

A) It will stop when Ben Bernanke is replaced as Fed chairman.
B) It will stop when they run out of ink.
C) It will go on until it can't go on.
D) If something can't go on forever it will stop.

Answer: C...It can go on until it can't go on.

San Francisco, Ca. KSFO 560: 1-4pm (KSFO archives Moneytalk Free on Demand for seven days after broadcast. You can download and listen on the go.)  

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