February 4, 2018, Bob Brinker's Moneytalk: Stocks, Bond, Interest Rates and Economy

February 4, 2018....SUPER BOWL SUNDAY: Bob Brinker was live on air the first two hours....(comments welcome)

LOOK AT YOUR STOCK ALLOCATION ....Brinker comments:  "First time in a long time, this week we have seen the inevitable return of volatility.....it does provide a reminder of some important stuff....Asset allocation is the name of the game....You have to be diversified and if you are in or near retirement, a balanced portfolio makes the most sense....This is a reminder to anyone who is over-exposed in the stock market. Ask yourself, what are you doing..... Now that does not apply to anyone that is a balanced portfolio approaching or in retirement because that makes sense......"

STOCKS NEAR ALL-TIME-HIGH....BB continued:  "We all know that the stock market has one of its greatest runs of all time......Even though the S&P 500 is still close to its record at 2772 - it's within  less than 4% of its record high, consider that it was trading at 676 in March of 2009 - less than ten years ago...."

WELLS FARGO GETS SLAPPED DOWN... Federal Reserve Imposes New Penalties on Wells Fargo

FEDERAL RESERVE GOING TO TRAUMATIZE  INTEREST RATES.....BB continued:  "What we have going on is a trauma in the financial markets right now, and it's about interest rates.....We have made it very clear that interest rates are going higher.....it is an inevitable fact that when you have the Federal Reserve tightening monetary policy on two fronts, raising short term interest rates as they are expected to do next month - and additional after that." 

FEDERAL RESERVE THROWING THEIR SECURITIES ON OPEN MARKET.....BB continued: "In addition to that, they are throwing securities every month on to the open market from their portfolio. That's the quantitative tightening - the reversal of quantitative easing, where they are now redeeming, therefore forcing the market to absorb - to find other buyers for the securities they no longer have on their balance sheet as they redeem them and throw them off on to the open market....."

PRESSURE CAUSING INFLATION WORRIES.... BB continued:  "That places pressure on interest rates, but especially when investors start worrying about inflation as they are beginning to start worrying....In my opinion, it is inevitable that rates will continue to rise......"

TREASURY YIELD IS  STILL RIDICULOUS..... BB continued:  "It's ridiculous.....Right now, the 10-Year Treasury is yielding about 2.85%. But when you look at the Consumer Price Index annual rate, it's 2.1%. So when you subtract 2.1% from 2.85%, what are you left with in real return net of inflation? The answer is pathetic - 3/4 of 1% real return if held to maturity.....That is a really low rate of return on a 10-year Treasury, even though it has no credit risk......"

==> Additional Brinker comments sent by RJB:

* Investors have historically gotten 3 to 3.25% real return on 30 year Treasuries. 

* Right now the 30 year Treasury yields 3.1% and inflation is 2.1%, so the real return is only 1%
* Have 1 year liquidity set aside in advance per BB

BRINKER'S PROJECTION FOR INTEREST RATES..... BB continued:  "So in my opinion, you are going to see upward pressure on interest rates and it's going to come from three camps. The first camp is going to be that the Federal Reserve is going to continue to raise short-term interest rates. I expect them to raise them in March. I expect to see at least three hikes this year....And in addition to that, they are going to continue quantitative tightening. By the 4th quarter this year, the Fed is going to be throwing into the open market at an annual rate $600 billion of Treasuries and Agencies."   

DEFICIT NUTSO..... BB continued:  "We already know the deficit is going nutso.....Nobody is doing anything about the Federal deficit.....It's become unmentionable....So that's another $600 billion plus that requires financing in the open market - that's $1.2 trillion by the 4th quarter this year that has to be financed in the open market - through new issues and quantitative tightening.....We have shortened our bond duration, which was already short."  

MONEYTALK LISTENERS DON'T ALL BUY BRINKER'S FUTZY MATH:

==> Comments from Tom:

"I am wondering if it is a mis-conceived notion that Bob is promoting about interest rate increases and how much more the US debt increases. He says a 1% increase in interest rate translates to 1% of the 21 trillion dollar debt thus about $200 billion annually. However, isn't that only if all the debt is refinanced annually? Seems to me there are plenty of long term treasuries sold by the government that span many years til maturity. Is Bob saying that the $21 trillion is turned over every year for re-financing? That would mean all the debt was short term, right? What am I missing?"

==> Comments from KC:

"Related to the $200 billion in annual debt increase due to interest on the national debt, what are Republicans supposed to do about that? Just asking someone more educated in that arena than I am but seems like the fed's interest rate is something neither political party can control. Quit blaming Republicans for it!!!

Also, when Bob mentioned the national debt was increased $1.5 trillion for the recent Republican tax cut, wasn't that cost over ten years (not annually)? If so, that is a very misleading statement these snake-oil salesmen on the left like to sell." 

MARKETIMER BOND PORTFOLIO CHANGES....

Caller Norman in New Mexico said: "I get your newsletter and I'm taking your advice and selling the Metro Bond Fund...."

Brinker rudely interrupted Norman:  "Yeah, we are reducing our duration with the recommendations in the newsletter, which has just been published, Norman. What is your question?

Norman continued: "I sold the Metro and at Vanguard, I was able to convert the assets over to the Vanguard Prime Money Market Fund. However, at Fidelity and Schwab, that fund is not available to me."

Brinker replied: "Let me give you a couple of ideas, Norman, for those particular outfits. For Fidelity, I suggest that you take a look at a money market fund, symbol: SPRXX....I recommend that as an alternate.  Schwab also has a money market fund that I suggest you look at as an alternate: SWVXX."  

Honey EC: In a nutshell, Brinker converted the Metro Unconstrained Bond Fund in portfolio III and the fixed income portfolio to Money Market Funds.  

Brinker's first reaction to Norman announcing this change that Brinker made in the just-published issue of Marketimer was extremely angry.  But he probably realized that the information was out there - millions heard it - and one cannot put the toothpaste back in the tube.  So he made the best of it by simply giving the symbols for Schwab's (SWVXX)  and Fidelity's Money Market Funds (SPRXX). Vanguard's symbol is: (VMMXX).

CURRENT MARKETIMER BOND DURATION ONE YEAR.....BB said:  "We have shortened our bond duration, which was already short. We are down under one year now on our bond market duration - now that's short."   

Honey EC: It was in 2013 - almost 5 years ago that Brinker made a bond timing call to shorten duration that was premature and very costly for those who followed his "income portfolio" off of that cliff. 

Brinker did not have a third-hour guest today because he was not there. He left at the end of the second hour to watch the Super Bowl. Did he announce it? Nope, too bad. His listeners would have said, go for it, Bob. Instead, he chose to be deceptive about it. Last week he said he would be here today. That's what you call a 2/3rd truth. 

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January 28, 2018, Bob Brinker's Moneytalk: Stocks, Bonds, Economy and Investing

January 28, 2018....Bob Brinker hosted Moneytalk live today....(comments welcome)

STOCK PERFORMANCE IN THE LAST TWO YEARS.....Brinker said:  "There are a lot of things out there in terms of the economy to like.  And that's why I've said, those of you who have ridden this wave of stock market gains, you have to give yourself a pat on the back. You have to congratulate yourself every once in a while when you're doing something extremely right. Because the bottom line is, these have been the times wherein you can make so much money in the stock market, that it is mind-boggling. Just look how much the market is up since the last major correction which bottomed in February 10, 2010 (Brinker misspoke the date).

Subscribers to the investment letter are well aware that we issued a buy signal at the bottom of that correction.....at 1829 in the S&P 500...... And the market, not counting dividends, has risen 57%..... since that time, and if you add in the dividends, it's over 60% total return since that buy signal that we published at the website after the close on February 10th, 2016 - that's a little less than two years ago - when we had the last major correction which went on for several months and bottomed finally on February 11th. We put our buy-signal after the close on the 10th - anybody buying mutual funds at the close on the 11th, actually bought in at the low of correction which was 1829. And since then a total return of over 60% in the S&P 500 Index. Pretty good, huh?  

Honey EC: That is very good, Mr. Brinker.  And I understand why you want to go back to your last fully invested - no cash-raised buy-signal, but the Wall Street Journal reported this today - about last year and this month:

In January 2018,  the S&P 500's 7.5% gain so far is the biggest since 1987....Stocks around the world have staged one of the best-ever starts to a year, a synchronized rally that has only gained momentum following 2017s sharp gains.

DOLLAR COST AVERAGE.... Brinker's Marketimer model portfolios are fully invested and he is recommending dollar-cost-averaging for new stock market money. 

BRINKER'S DEFINITION OF A BEAR MARKET,  MAJOR CORRECTION,  SMALL CORRECTION....Brinker defines a bear market as a decline of 20% or more, a major correction between 10% and 20%,  and a "noisy" correction as 10% or less. 

NO RECESSION, NO BEAR COMING......January 2018 Marketimer; Bob Brinker wrote:  "Marketimer economic outlook for 2018 does not anticipate a recession. This suggests that the risk of a bear market decline in excess of 20% is low, unless our economic outlook changes. In the absence of a recession, the most likely risk for the stock market is the development of a mi-term off-presidential election year correction. Whether such a   decline is a major correction of 10% to 20%, or a smaller decline of less than 10%, remains to be seen......" 

BOND/INTEREST RATES GOING UP.... BB said that he expects the Federal Reserve to raise rate 0.25% at the March FOMC meeting. 

MARKETIMER BOND FUND CHANGE COMING....Brinker told caller Brian from Reno that he plans to make changes to his Marketimer fixed income portfolio and also his balanced model portfolio III. BB said those changes will be announced in the February Marketimer which will be ready next Thursday.  

Honey EC: Several comments came in this afternoon, speculating about what those changes will be. It could be almost anything. Since there are only three bond funds (the same in both portfolios), perhaps he is adding another one.  Some think he may sell the fund that has large high-yield bond holdings. As Brinker likes to say: "We shall all know in the fullness of time." Stay tuned.... :)

HOUSING....BB: "New home sales are okay but will be volatile."   There was a  9.3% drop in December, but the rest of 2017 was a good year, and BB said there is no reason for concern because you "have to look at a longer time frame than month to month." And when you look at 2017.....new homes sales increased 8.3%, to total rate for the calendar year of 608,000.....Inventory in the housing market has been tight around the country.... 

==> Thanks DRAHME, audio clip: new homes and other economic reports

SMALL BUSINESS OPTIMISM INDEX....BB said:  "You have to be impressed....at its highest level since the second quarter of 2007....That's why I get really tired of hearing these negative comments from these negative nabobs out there. The reality is, they are not paying attention, they are not doing their homework. They are not even on the same page with reality. Very sad.....

BLOOMBERG CONSUMER COMFORT INDEX....BB said:  "is riding high right now....is now at 53.7, the highest level since March of 2001....So now we are talking about a Consumer Comfort Index very close to its highest level in almost 17 years - that is a major cord on the economic data front. 

BEAUTIFUL JOBLESS CLAIMS.... BB said: "And when you look at jobless claims, you see beauty. Initial claims for unemployment insurance have been way down, way, way down!"

ECONOMIC REPORTS SUMMATION.....Brinker rapped up his economic reports with this: "There are a lot of things out there in terms of the economy to like.  And that's why I've said, those of you who have ridden this wave of stock market gains, you have to give yourself a pat on the back. You have to congratulate yourself every once in a while when you're doing something extremely right. Because the bottom line is, these have been the times wherein you can make so much money in the stock market, that it is mind-boggling. Just look how much the market is up since the last major correction

==> Thanks to DRAHME, audio clip, nattering nabobs of negativism shot down

SOME DESERVED CROWING......BB did a little crowing about his Marketimer projection for 2017 which pretty much hit the nail on the head at 2.3% (annual).   He correctly said that 2.3% is a  "significant improvement" over 2016 - which was 1.5%.

NATIONAL DEBT/DEFICIT.... For the first time in several weeks, BB did not sound the alarm on about the deficit and national debt and mistakenly claim that "no one in Washington talks about it anymore."  Perhaps he missed this important step in the right direction: It’s Official=> President Trump Decreases the Debt to GDP Ratio in His First Year in Office – First Time in More than 50 Years!

===> Thanks DRAHME, audio clip of the week ahead.

FRANKJ'S MONEYTALK GUEST AUTHOR SUMMARY:

Today’s guest this 28^th day of January, 2018 was Tim O’Reilly, author of the book “WTF? What’s the Future and Why It’s Up to Us.”   Thus Bob Brinker adds another interview devoted to a book by an author who has done some navel gazing and in doing so, sees the future.   Either Bob or someone else in the organization seems fascinated with these futurist authors. 

If you sat and watched paint dry instead of listening to the interview, I’d say you made better use of your time.

He said he wrote the book because of concerns about income inequality and the future of work.   Also mentioned that “tech” does what we want it to do and if that means getting rid of jobs then that must be what (some of us) want.

Bob brought up the proverbial taxi driver who paid a great deal of money for a taxi medallion who now finds his income threatened by ride services like Uber.  The guest said his brother drives a taxi in Maryland …  Bob interrupted rudely and said, “well, he didn’t pay hundreds of thousands of dollars for a taxi medallion…”   Now it was Tim’s turn to interrupt and he said that Yes, his brother did buy a medallion. 

So, that was the high point (or should I say low point) of the interview.  

In response to another question the guest wandered off into a long, long answer about the good and bad entrepreneurs in Silicon Valley.   The founders of Uber were just a couple of rich guys who wanted to get even richer, as an example. 

After the break, Bob asked “do we say too bad to people who got the shaft,” (from the introduction of technology.)   There was another long, rambling answer by the guest who ended up criticizing McDonalds as a company that had the means to pay its employees more, but doesn’t.

Bob asked if an employee’s economic value to an employer depends on the skills they bring to the job.   Tim replied that he didn’t think that was fair and this set off another minor back and forth, then a long speech by Tim ending with Apple as an example of a company whose three most important things are its employees, its customers and its suppliers.  Its investors are just along for the ride and don’t matter to Apple – so says Tim O’Reilly.

Bob pointed out that the investors being described are in the secondary market for the stock – Tim more or less agreed, but said in effect, an investor who owns a big chunk of stock has no right to demand that more of the corporation’s cash be returned to investors as dividends. 

After the break: 

·         What about calls to break up these outfits like Amazon, Facebook, etc?  Answer:  companies like these have to think about the systemic ecosystem in which they exist. 

·         Bernie from Westlake Village CA weighed in by asking the guest if he ever employed people and how many?   The guest said he employs about 500 people.  Bernie pointed out that artificially raising wages increases automation.  

·         Tim responded that the market dictates what skills are worth (a concept he seems to disagree with).   He said there is more to rates of pay than the simplistic notion of the market.  

·         Bob jumped in and hammered Wal Mart for making a big deal out of their announcement to raise wages from $9 to $11 per hour as a result of the tax cuts.  He criticized Wal Mart for keeping wages so low for so long and shorting employees on medical coverage for so long. 

·         Bob mentioned his theme that Congress should have indexed the minimum wage to inflation a long time ago and the guest agreed.

The guest gave such long winded answers that Bob had to interrupt him a couple of times to get the next question in.   I looked him up on the interweb, and he was born in 1954.  He is older than he sounded over the radio – I thought he was much younger. 

Honey here: This guest could go in the running for the all-time Moneytalk most boring - but your summary certainly made a "silk purse" out of it.  I got the strong feeling that Brinker was having a problem finding any periods when the Tim O'Reilly was having his one-man jabberfest. :) 

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January 21, 2018, Bob Brinker's Marketimer, Stocks, Bonds, Economy and Investing

January 21, 2018....Bob Brinker hosted Moneytalk live today....comments welcome

STOCKS....Bob Brinker did not talk about the incredible stock market, which went from 25,000 to 26,000 in just a matter of days.    And it looks like the market is saying "ho-hum" to the so-called shut-down. 

MARKETIMER MODEL PORFOLIOS I, II AND III.....Caller Bill in Springfield, a new subscriber, asked Brinker about portfolios I and II being presented as "current income is not a factor in this portfolio," but not P-III.  Brinker pointed out that P-I and II are growth portfolios, but P-III is balanced - stocks and bonds.  Since Bill was retiring in a couple of months, Brinker recommended P-III.

Honey EC: Clearly Marketimer portfolios I and II are for growth since they are 100% stock funds. The only differences between the two stock portfolios is the addition of a 10% holding in VDAIX in P-II.  Portfolio-III, which Brinker always recommends for those in or near retirement, is a balanced portfolio - 50% stock and 50% bonds. 

INTEREST AND MORTGAGE RATE RISES....BB said that we have now transitioned from Quantitative Easing to Quantitative Tightening.  ==> Thanks to DRHAME, audio clip: Interest Rates, The Financial Media and their veracity or lack thereof.

DAY-TRADING....Brinker said that he gets really upset when he hears ads for day-trading, or moving money in and out of the market, because it is "very damaging." 

SIPC INSURANCE AT VANGUARD..... Caller Bill from Virginia has over $500,000 invested with Vanguard and was concerned about it being over the limit for SIPC insurance. Brinker said that when it comes to companies like Vanguard, he would not lose any sleep about it, or move any of the money. 

Honey EC: Include Schwab and Fidelity in those rock solid companies.

INCREASES IN TAX-SHELTERED CONTRIBUTIONS..... The amount that can be contributed to 401K, 403B, and 457 qualified programs has increased by $500 to $18,500. It is higher for those over 50.   Regular IRA is now at $5500 - over 50 - $6500. (Roth IRAs are after-tax money.) 

GE IS LOOKING LIKE A DISASTER AND MAY DAMAGE PENSIONS....Caller Rob from Lincoln is worried about his $3400 a month GE pension - saying it was underfunded by $30billion. Brinker could not give him much reassurance and pointed out that the stock had lost about 50% of its value.

==>Thanks to DRAHME, audio clip: Contribution limits; Brett in Wash; Rob in Lincoln about GE

BOB BRINKER SAID IT WOULDN'T HAPPEN: 

Apple, already the largest US taxpayer, anticipates repatriation tax payments of approximately $38 billion as required by recent changes to the tax law. A payment of that size would likely be the largest of its kind ever made.

Alabama will be the site of a new $1.6 billion Toyota Motor Corp (tm, +0.78%) and Mazda Motor Corp (mazda-motor) auto plant, a victory for President Donald Trump who had prodded manufacturers to build new U.S. facilities and threatened tariffs on foreign production, sources said on Tuesday.

Fiat Chrysler said this week that it would move production of its Ram heavy pickup trucks from Mexico to Michigan. Moving production of the Ram, which is mostly sold in the United States and Canada, will mean that Fiat Chrysler will not risk paying steep import duties likely to apply if NAFTA is rolled-back.

ECONOMY..... According to BB is "doing fine." 

LAND OF CRITICAL MASS....BB teaches that it means having a nest filled with enough eggs to live as your own boss without alarm clocks. 

MULTI-MILLIONAIRE CALLERS AND THEIR PROBLEMS.....

1.  Dennis in Kansas City, net worth of $1.25 million and a pension of $57,000 per year was worried about how long his money would last using the 4% withdrawal that Brinker recommends. Brinker explained that Dennis was on "cruise control" in  the Land of Critical Mass, and due to the dividends, capital gains and growth, Dennis would likely be a net saver using the 4% rule.

2.  Caller Clark from Baton Rouge, net worth $2.3 million and $40,000 pension wanted advice about raising $180,000 to send his 26 year old son to law school. He was considering taking out a loan on his home which is worth $200,000. Brinker wondered if he needed to borrow it all it once, but seemed non-committal, and pretty much left it in Bill's (obviously) capable hands. 

3. Caller Brett in Washington, net worth $3.4 million at age 60 has Critical Mass, but will soon retire and is thinking about using Roth money to pay off his house which has a mortgage at 2.78%.  Brinker said that was the kind of mortgage that the bank would send a stretch-limousine to pick him up if he decides to pay it off. 

WEEK AHEAD MEBBE....Thanks to DRHAME audio clip: The week ahead and home sales

FRANKJ'S MONEYTALK GUEST-AUTHOR SUMMARY:

Bob’s guest this 21^st day of January 2018 was Leslie Berlin, the author of the recently released book titled “Troublemakers:  Silicon Valley’s Coming of Age.”  She is the historian for the Silicon Valley archives at Stanford University.

There was some puckering at the outset of the interview when Bob welcomed her to the program and was greeted by silence.  Seems they lost the connection but Bob handled it like the broadcast professional that he is and in a few moments, Ravi got Leslie on the line.

Here’s what I got out of the interview before the half hour mark:

·         5 American high tech firms are among the most highly valued companies in the world.

·         50% of people asked said they cannot live without their cell phone.

·         Robert Noyce, a pioneer in microchips does not get enough recognition for his contributions in the late 60’s and early 70’s.

·         There was some inside baseball chit chat about pioneers and Bob Taylor was mentioned as the guy who convinced the Dept. of Defense to develop the Arpanet (? spelling ) precursor to the internet.

·         IBM and Microsoft are not covered extensively in the book.

After the break the author mentioned the first woman to take a tech firm public, Sandy Kurtzig (?) and the ASK software company. 

·         In 1974 it became illegal to deny women credit.

·         Work place harassment laws were passed in 1977 – therefore when tech was in its infancy there was still pervasive discrimination against women in tech.

·         More inside baseball chit chat on Bob Noyce, Bob Taylor, Steve Jobs, Gordon Moore.

·         Noyce and Moore were founders of Intel.

·         Noyce was running the tech operations at Fairchild Camera and Instruments and it was making money but the company thought he was too young to be in charge.

·         He bailed and the rest is history. 

·         The Valley is linked to countries outside the US by virtue of immigrants working in tech.

·         Two-thirds of people working in the valley in certain companies were born outside the US.

·         Either there were no calls after the half hour, or none were worthy of air time.

After the interview ended Bob allowed as how he bought shares of Intel for 70 dollars per share when they were getting going, and had only 4 million shares being traded.

Honey here: Thanks very much, Frankj.....I notice that the number one tech news this week didn't get mentioned before or during the guest today, and that is Apple moving several $billions back to the USA and will be giving Americans thousands of new jobs.

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