April 12, 2015, Bob Brinker's Moneytalk: Stocks, Bonds, Economic and Investing Summary

April 12, 2015....Bob Brinker was not live on the air, but he tried real hard to make us think he was -- twice, today's date was spliced in to the old recorded monologues. All the callers were from various old shows. (comments welcome)

THREE CALLS FROM TODAY THAT WERE FIRST BROADCAST OVER A YEAR AGO

1. Crack Blog-Researcher (CBR), Chris from ATL, said:   "I think the "Jerry from Binghamton" call was first broadcast on March 30, 2014." 

Sure enough, here is the transcription of this call from over a year ago. Note that it gives out information that is no longer true. Brinker sold all FFRHX in January 2015:

FIDELITY FLOATING RATE HIGH INCOME (FFRHX) VS VANGUARD GINNIE MAE FUND (VFIIX)... Caller Jerry from Binghamton (?) said: I'm a long time listener and a market time (SIC) subscriber. My wife and are retired and we pretty much have critical mass. Question for you is, our portfolio is -- the money is between model portfolio two and three. I kind of have a combination of both..... That leaves us with 20% in the Floating Rate Fund. Is that is conservative as the Ginnie Mae – over all these years we followed you on Ginnie Maes. I know I got weak there (non-discernable)..... but the Floating Rate, as I understand it, is a high-yield but is tied into the market rate. As interest rate goes up that fund should increase to have a high-yield. Is that correct?

Brinker replied: "I think that that would be accurate. And by the way as I said many times, we prefer credit risk at this time over interest rate risk. And that is the reason that we prefer not to be in Ginnie Maes at this time because we don't want that extended maturity that is generally found in a Ginnie Mae Fund. We like short-term maturities much much better. And the fund that you are talking about in that portfolio has a duration of only an average of three months. So that is extraordinarily low even though our overall duration is closer to one year. And we do prefer to control the duration aspect of the portfolio to minimize interest rate risk, but were perfectly comfortable with accepting some credit market risk in an expanding economy. So basically I would say yes, as rates go up the rate on the fund would go up. And this is what's most important, the net asset value of rates going up should be minimized in a fund of that nature because of the very low average duration in that fund. So that fund is giving us everything that we want in an income security at this time. A short duration, a reasonable yield, and certainly some credit risk in a portfolio, which again, in an expanding economy, I think that's the best place to be."

2. CBR Chris from ATL found a second call that was covered by this blog. He said:  "The current "Doris from Williamsburg" call was first broadcast on the Apr 20, 2014 show"   (Jeffchristie wrote the summary of this original call in April 2014)

 "Doris in Williamsburg ask about critical mass.  Bob told her that if you have assets that generate enough income to live the way you want you have reached it."

3. CBR Jeffchristie remembered caller Abraham from Albany who mentioned the "$16 trillion national debt. Take a look in the right hand column of this page and you will see that we are now well over $18 trillion national debt -- in one year! Now that is skeery!  Here is the original coverage of Abraham from Albany written in April 2014 by Jeffchristie:

 "Abraham from Albany said he attended a presentation where the speaker said the dollar was worthless.  Bob told him that was nonsense."

BRINKER'S LATEST ANALYSIS OF FIVE ROOT CAUSES OF A BEAR MARKET

Bob Brinker analyzed the five primary (root) causes of a bear market in the April issue of Marketimer.

1. Tight Money: Brinker has talked about rate normalization for over a year now. He likes to point out that the end of quantitative easing did not damage the stock market. He has said that the Fed is now interested in ZIRP (zero interest rate policy), but lately, he seems to be backing off a bit on his predictions for rising rates. He predicted that the Fed will remain accommodative "at least into 2016."

2. Rising Rates: Based on very low PCE and core inflation rates, Brinker said: "We expect any short-term interest rate increases this year to be minor.  Small rate increases would not impede the current economic expansion in our view."

3. High Inflation: Brinker said: "The incoming data continues to show a benign inflation pattern.…  As long as all of the major inflation indexes remain below the Federal Reserve inflation target of 2%, there is no pressure on the Fed to tighten monetary policy to any significant degree."

4. Rapid Growth: Brinker defines rapid growth as a rate of real gross domestic product (GDP) expansion above the historical average of 3% to 3 1/2%.  As he has said on Moneytalk, the impact of harsh winter weather is expected to dampen first-quarter activity.  He expects the full year of 2015 real GDP to be within a range of 2 to 3%.  However, he still expects the first quarter to be soft.

5. Overvaluation:  Brinker said; "Operating earnings estimates for the S&P 500 index extended $128 for 2015 and a preliminary figure of $135 for 2016"   Brinker agrees with the Federal Reserve 2016 real GDP forecast of 2.3% to 2.7%.

He concluded that the S&P 500 index has the potential to "Trade into the upper 2100s range going forward."    Brinker is maintaining his favorable stock market view, but is aware that there has not been a correction of 10% or more since the autumn of 2011.  He would regard such a correction as a "health-restoring event based on the current Marketimer stock market timing model outlook."  He still recommends dollar-cost-averaging for investing new money -- and he recommends taking advantage of short-term market weakness to dollar cost average.  Brinker's model portfolios remain fully invested as they have been since 2003.

Jeffchristie's Moneytalk Final Exam Question

Since today's Moneytalk was a repeat the final exam question will also be a repeat.

Bob Brinker calls Presidential candidate Hillary Clinton:

A) The Wicked Witch of the West Wing.
B) Evita
C) Madona
D) The Queen of Mean

ANSWER

                                                  Summary posted at 6:45pm PDT

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April 9, 2015, Bob Brinker "2014 Bond Timer of the Year" According to Timer Digest

April 9, 2015....Beware! There are lots of sharks out there waiting to "shark" your wallet. They swim as phony rating services or phony fan clubs or fabricated Brinker Groups

If I told you that I had declared Bob Brinker Bond Timer of the Year for 2014, it's likely that you would think I had been drinking the cooking sherry -- and rightfully so! But that's what Timer Digest has done in spite of Brinker's sad-sack performance last year. 

ETF1-Robert, one of the crack blog research team, sent an email to let me know that Kirk Lindstrom has done an article about Timer Digest naming Bob Brinker and James Stack  2014 "top bond timers."

Kirk said: "Congratulations to Bob Brinker!!!  2014 Bond Timer of the Year! On January 2, 2015 the venerable Timer Digest named James Stack and Bob Brinker as "Bond Timers of the Year." They were bullish all year and matched the T-Bond index.

I have no idea what method  Timer Digest  used to conclude that Brinker's Marketimer bond holdings "matched the T-Bond index."  Let's take a look at what Brinker did last year besides stay fully invested -- as he has been since March 2003.

Firstly, Brinker's Marketimer only has a fixed income portfolio that consists of four bond funds, and  a balanced fund that is approximately 50% invested in three of the same bond funds -- that's it! There are no other bonds in his portfolios. (NOTE: Brinker's income fund is off-the books of his performance record.)   Jim, a member of the blog crack-research team, did an analysis and  reported that the income fund performance for 2014 was 1.1% and the balanced model portfolio III only made 6%.

It's important to know that in 2013, Brinker moved into all low-duration, high-credit risk funds. Jim researched how much these moves cost Brinker's followers in missed profits. Please carefully read Jim's numbers:

Jim said...

I've taken a look at Bob Brinker's final performance numbers for his fixed income portfolio. For calendar year 2014 his Income portfolio was +1.10%. If he had not made any changes from his prior holdings he would have been +6.11%. Here is the breakdown: DLTNX +6.47 vs. DLSNX +1.35, DODIX +5.48% vs. OSTIX +1.26%, MWTRX +5.83% vs. MWLDX +1.39%, and finally VFIIX +6.65% vs. FFRHX +0.41%. All this was calculated using the numbers from M*.

Using the numbers from Yahoo Finance I've come up with the performance from the point he made his changes. They are as follows: DLTNX +7.66% vs. DLSNX +2.02%, DODIX +6.99% vs. OSTIX 1.79%, MWTRX +6.54% vs. MWLDX +2.09%, and finally VFIIX +8.2% vs. FFRHX +2.23%. Overall that computes to an average of 7.35% vs. 2.23%.

Using either time frame Brinker's funds that he sold outperformed the funds he bought by 5+%. It's going to be difficult for his followers to ever make up the 5+% of additional gains that they missed by following his bond timing advice.

January 2, 2015 at 9:44 AM

Brinker made some bond fund changes, backing off of the low-duration in January 2015. Here are some excerpts from my January 18th summary of Moneytalk:

BRINKER'S JANUARY 2015 MARKETIMER BOND FUND CHANGES.... Caller Jackie in Las Vegas (39 minutes into the second hour) asked about the Fidelity Floating  Rate High Income (FFRHX) and the Metrowest Unconstrained Bond Fund (MWCRX).

Brinker replied:   "We don't own the Floating Rate Fund anymore, so it's out of the portfolio.…  The Floating Rate Fund that we sold was a different fund and it was a different fund company also.  As far as the Unconstrained is concerned, there are many unconstrained funds out there.  If you're not comfortable, you should not make the change.…  I do believe that those who are investing in unconstrained, I think it has a place in the portfolio at this point.  That doesn't mean you have to do it.…  Because what you're talking about with unconstrained funds – and there are many of them out there – what you are talking about is a fun that is going to invest in a highly diversified portfolio.  They are going to use varying maturities.  They are going to be unconstrained by managing against an index.  They are not going to be held to investing against an index.  The duration of the portfolio can vary substantially with the management opinion at the time… And all of those things come into play." 

Brinker continued: "Unconstrained also in the sense than you are giving the portfolio manager considerable leeway in terms of how he or she wishes to invest the portfolio.  That's really what it means… Now again, anytime you are uncomfortable with any type of fund, you shouldn't be in it – period.  From my point of view, and anybody obviously that subscribing to the newsletter is interested in my point of view, I'm sharing with them my opinion that within the context of a diversified income only portfolio – because that fund only appears in the income portfolio (3 unintelligible  words).  And I'm saying that within the context of that type of portfolio, I think there's room for a plum like that at this point.

Honey EC: As Brinker said, he sold all Fidelity Floating High Income Fund from his Marketimer off-the-books income portfolio (BrinkerJr sold it last month) and also from Marketimer model portfolio III -- as of January 9, 2015.  He replaced it with DoubleLine Total Return Bond Fund (DLTNX)  which he had sold in 2013. He also sold MetroWest Low Duration (MWLDX) in model portfolio III and replaced it with MetroWest Unconstained (MWCRX). Notice that he did a bit of a sales pitch on the Unconstrained Fund.

My conclusion is that Timer Digest's "timer of the year awards" are not to be trusted, much like Hulbert's silly "Honor Roll" awards.  They are similar to so many other shark attacks from phony Brinker groups and fan clubs, it's all about selling newsletters by any means possible -- in my opinion.

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April 5, 2015, Bob Brinker's Moneytalk: Stocks, Bonds, Economic and Investing Summary

April 5, 2015....Bob Brinker hosted Moneytalk live today -- as usual, Easter is the only holiday that Brinker works. (comments welcome)

I want to thank the fabulous Blog Research-Team for covering the program for me today. As it turned out my family celebration was scheduled for the exact hours Moneytalk was on the air.  My sincere thanks to Jeffchristie, FrankJ and ETF1 Robert!

Jeffchristie's Caller's Summary from HOUR ONE and TWO:

* Bob began by saying that the latest jobs report was soft. Estimates for 1st quarter GDP are also soft. Reasons are cold weather, the port strike, oil price collapse and the strong dollar.

* Matt from Washington wanted to prepay his mortgage. Bob advised against it.

* Mike from Missouri wanted to how to know when he had enough to retire. Bob told him to figure a 4% withdrawal rate on his investment portfolio then add that to his other retirement income and see if he can live off of the annual income.

* Mark from Arizona was one of the most interesting calls in the history of Moneytalk. He met his future wife on an online Christian dating service. They will marry in a few months and she will inherit around $70,000.000. He told Bob that the money was invested in natural resources. Bob told him to look at the fees that are being charged.

 Honey EC: What this caller said was either a late April Fool's joke on Brinker or he was about to become shark bait. Brinker played him along by asking if he had known about this money coming to his "future wife" BEFORE he decided to marry her. He said he didn't know about it, that her deceased father's attorney had contacted him after they decided to marry, and told him that her father set it up so that she couldn't touch the $70 million until she married. And then.....yep....wait for it....Then the new husband would be given control of it. ROFLOL!

* Bob from Des Moines was underwater in his Mortgage and wanted to know if he should take money from an annuity to pay down enough of it to refinance at a lower rate. Brinker chided him for buying an annuity that had a withdrawal penalty. He told the caller to think about a part-time job.

* Bob started the second hour by saying he sees no reason for the Fed to raise interest rates given the economy and jobs data. His estimate for GDP growth for this year is 2 to 3%.

* Dave from Alabama said he was enjoying todays show. He wanted to know the number for the Christian dating service that Mark was using. He noted the possibility that Mark was being scammed. Bob said if he was ask to wire money so he could get the inheritance he should watch out.

 Honey EC: Yes, Dave also said that in Alabama these kinds of hookups are called Mating Services. LOL!

* Bob praised the WSJ for an article exposing non traded REITS. They called them Zombie investments.

* Connie from Kansas city was 60 years old and fully invested in portfolio 1. Bob suggested going 60/40 using the income portfolio on page 7 or the fixed income funds in portfolio 3. She thanked Bob for getting her in and out of the market at the right times over the years.

Frankj's Summary of HOUR TWO:

MoneyTalk: 2nd hour, April 5, 2015

Bob started the second hour discussing the March jobs report which came in at a net of 126,000 new jobs. He sees no way that the Fed will increase rates at the April FOMC meeting. The economy is expanding although gradually:

· Home sales up year over year, 5%

· Home prices up 4.7%.

· Mortgage rates are close to the bottom of range for the last 12 months.

· Collection of withholding tax is up 7% -- another sign of expansion.

Bob predicts 2-3% GDP growth for 2015. He said his prediction is in line with the Fed’s estimate.

He spent a while talking about the headwind to expansion which is the strong dollar. When the dollar is strong, our EXPORTS cost more to buy overseas. US companies may have to cut prices to stay competitive. The things we buy here that are IMPORTED cost less, which is nice, but if there is a competing product made in the US, the domestic company many have to cut its price to stay competitive.

After 2:20 Dave from Alabama called and he and Bob ran out the clock to the bottom of the hour bantering about a caller in the first hour who met someone on-line and could come into $70 million if he married her. 

Honey EC: Again...LOL!

After the half-hour break Bob lauded Robbie Whelan’s March 24, 2015 article in the Wall Street Journal which shone a light on non-traded REITs, or “Zombie REITs” as they are referred to in the article. You can find this article simply by typing that term into a search engine. Billions of dollars are tied up in these securities and shareholders, in some instances, can’t get out. Bob reminded the listeners that he has been warning people away from these investments.

Connie from Kansas City called with a couple questions. She and her husband are 60, plan to work to age 70 and have a cool million in equities. Bob advised a 60/40 or 65/35 allocation, stocks/bonds and pointed Connie toward the Income Portfolio on page 7. A listener with access to the newsletter could better follow this call as Bob jumped back and forth between the Income Portfolio and another one of his (numbered) portfolios that contains bond funds.

Interestingly, Bob said that “we’ve solved the bond market problem…” referring to the page 7 portfolio yielding 3%. Connie said she’s signed up for Bob’s alerts. Her next topic: the business they own has its 401K plan with a company other than Vanguard and she asked about switching to save money. Bob helped her with the math: if they have $2 million in this plan and Vanguard charges 18 basis points and the current firm charges 36 bp, then she’ll save $3600 per year.

 Honey EC: Brinker's answers to Connie were very important in that Brinker claimed the risk has been taken out of his bond fund holdings. That is not so. I will be writing more on this subject later.

David from Chicago wants to up his 15% allocation in fixed income to a 25% allocation. He asked whether he should use a managed account or mutual funds. Bob sounded a little suspicious that a managed account might not add much value given the low interest rates on bonds. A one-percent annual fee from a financial planner could wipe out a significant part of any bond yield.

ETF1 Robert's Summary of Brinker's second hour monologue:

2:08 pm Monologue: BB says he can’t think of any reason the Fed would want to raise rates with the recent report that came out………[I think this was a poor employment report]
 
BB says he doesn’t think the Fed will raise rates anytime soon……..and no way they will raise rates at their April FOMC Meeting

BB’s 2015 forecast: 2-3% real GDP growth

We had a negative GDP figure in the first quarter, a lot of which had to do with the cold weather……..but the weather will not affect the economy for the rest of this year since ‘Spring has sprung’

The Long Beach port strike is now over……….it was a factor in the first quarter but won’t be a factor the rest of the year

The dollar is something we have to tune into…….there are a lot of benefits to a strong dollar, such as attracting foreign capital into the US………….but some negative factors with a strong dollar:

1. Exports cost more overseas on the shelf for the foreign buyer…….when the dollar is strong. So our price competitiveness is degraded…….the foreign products we are competing with have an advantage [price advantage due to a strong dollar]. So you are either going to have reduced sales…..or the company can reduce their prices overseas, which will reduce the profit margins…….

2. Imported products available here are cheaper…….due to the strong dollar……….so increased price competition for products produced in the US and sold in the US…….imported products are cheaper than the products produced in the US and sold in the US……

Both of these factors are important. The winter of 2014-2015, and the port strike is over……but the above 2 factors caused by the strong dollar has a headwind effect on the economy; it is very very real

Frankj's Summary of  Third-Hour Moneytalk Guest:

Bob’s third hour interview, April 5, 2015

The ever popular Barbara Welkman was Bob’s guest in the third hour. She is an editor of the J.K. Lasser Tax Guide. J.K. Lasser's Your Income Tax 2015: For Preparing Your 2014 Tax Return
Previously she has been a regular on December MoneyTalk shows, advising on last minute things to do as the tax year closes out. My own comments are in italics.

The biggest change to the 2014 tax returns concerns the Affordable Care Act, requiring filers to check a box that they had a government approved health care plan in force during 2014. Barbara pointed out that if you did not, then you may have to make a “shared responsibility payment.”

Here is a link to the 14 ways you can get an exemption from having to have health care coverage.

14 Ways To Avoid The Obamacare Tax (Actually 15 if you include 'brief incarceration')
“Shared responsibility payment” is “Newspeak” (hats off to George Orwell) for a tax, as the Supreme Court called it, or a penalty as Barbara called it. It is based on “household income,” which Barbara referred to as a new tax term. Bob threw her a softball question, “Why is it called the Affordable Care Act?” Barbara said that was part of politics intended to sell the plan.

Procrastinators can submit a Form 4868 to the IRS before April 15 and get a no questions asked extension to October 15. But… you must send in a payment representing what you think you’ll owe. AND, you if you are subject making quarterly tax payments, you’ll need to send in your first quarterly payment for 2015 taxes by April 15.

Figuring out whether to itemize or not should be easy if you go to a preparer or use a tax software package or do it on-line. Otherwise, be aware of the standard deduction for your filing status and whether you might have itemized deductions that add up to more than the standard deduction.

You can Google “Schedule A” to see what the one page Itemized Deduction schedule looks like. Be aware of a couple important things:

· Medical expenses can be deducted only to the extent that they EXCEED 10% of your Adjusted Gross Income. (Thanks, Obama, Pelosi and Reid!). So, if your AGI was $90,000 and you had 10,000 in medical expenses, you can deduct only $1000. This hurdle used to be 7.5%.

· Some expenses you might deduct have to exceed 2% of your AGI, then you can deduct the amount in excess of that 2% number.

More bullet points:

· Barbara said that because Congress makes tweaks to the 2014 rules on into 2015, Lasser offers an on-line supplement to people using their tax guide.

· When considering a Roth-IRA, a Traditional IRA or a 401K, make sure you qualify. Generally this means checking your income against the income limits. Then, figure out how much you can afford to contribute. Barbara thinks choosing a Roth-IRA makes sense if you are young.

· When to use a tax expert? Consider how much time do you want to spend preparing your taxes and realize there is a free, on-line filing option for people who make up to $60,000.

· Be very skeptical of the ads for help in shedding tax debt.

· Watch out for advice you might get from the IRS help line …. That is, if you can get through. Ask for the name of the person and their tax ID and write it down in case you get bad advice, you can refer to who it was who gave it to you. They will give this information when they take the call, but I guarantee you will not get it the first time. Don’t be afraid to ask them to repeat themselves.

· Mistakes people make, whether filing on-line or on paper: they transpose numbers, drop zeroes (1000 becomes 100), end up with the wrong filing status.

· Bob asked with 18 trillion if national debt do we have to worry about Congress changing the rules on taxability of Roth-IRAs? Barbara said yes, the “Congress could decide tomorrow,” (to change the rules.

· As for getting rid of the IRS, it isn’t going to happen. Some dept. of government needs to collect the revenue. They were called the Internal Revenue Bureau prior to 1954.

· Simplifying the tax code will result in more revenue in Barbara’s opinion.

Margaret from San Leandro asked something about audits. Her phone connection was so bad I couldn’t hear what she said. Barbara said most audits take the form of a correspondence audit. The IRS computer generates a form letter if it identifies an error. Then you respond. These can identify an error that resulted in underpayment or one that resulted in overpayment, in which case you get a refund.

Joe from Chicago gets $10K a year from Social Security Disability Insurance. He wanted to know if he has to file taxes. If that is his ONLY income, then no. But Barbara made it clear she was not on the show to offer specific tax advice to individuals.

Becky from Kansas wanted to know about converting the RMD from a 401K account to a Roth-IRA. Barbara said when you take a RMD you cannot put it back in a Roth-IRA, but you can convert a 401K to a Roth 401K or a Roth-IRA.

Jeffchristie's Moneytalk Final Exam Question:

Bob referred to non traded REITS as:

A)  Vampire investments.

B)  Voodoo  investments.

C)  Zombie investments.

D)  Phantom investments.  

ANSWER

San Francisco, Ca. KSFO 560: 2-4pm  UPDATE January 2015: KSFO no longer carries the first hour of Moneytalk. (KSFO archives Moneytalk (2pm & 3pm) Free on Demand for seven days after broadcast.
 Los Angeles, Ca. KABC 790

Summaries posted at 7:59 PDT
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