Search Bob Brinker Blogs

Saturday, April 26, 2008

Summary: Bob Brinker's Moneytalk April 26, 2008


Brief Summary, Commentary and Moneytalk Excerpts, April 26, 2008
.

The Captain of the Spaceship Moneytalk was on vacation today.

.
Bob Brinker’s Moneytalk guest-host, Bill Flanagan.

.

Honeybee EC: Bill Flanagan seemed decidedly less bullish than Brinker, at least in the short-term. Here are some excerpts from Bill's comments:

.

STOCK MARKET “A week that the bears may have retreated somewhat and the bulls had something to cheer about. In spite the fact, as I said, there’s all kinds of annoying facts out there that make you wonder."

.
OIL PRICES "Grim stuff on oil – touching $120 a barrel, closing at about $118. Gas is up 17% this year – that can’t be good. "

.
CONSUMER CONFIDENCE "Consumer confidence 62.6 positive sentiment – that’s the lowest in 26 years – that can’t be good."

.
JOBS "Jobs, a quarter of a million jobs have been lost so far this year – 80,000 alone in March. It’s been a while since that’s happened – that can’t be good."

.

HOME PRICES "And of course, declining home sales and prices go on and on which doesn’t do anything for people’s dispositions. They’ve seen their portfolios get whacked and whacked again, so far in this decade. Now they see their home prices shrinking – taxes going up – prices going up."

.
STOCK MARKET CONT "Yeah, they are a little unhappy, but there were things that gave people reason to smile. Apple had a robust revenue quarter………..Ford……..managed to put some good numbers up, at least for the day. Goodyear and some others coming through with earnings that brought some cheers – some stockholders, anyway."

.
DOLLAR VS EURO "They believe that there are signs – some managers believe anyway, that the dollar is hitting the bottom versus the Euro. And of course this week we have another probable rate cut of a ¼%. So there’s a lot of hope and this week, the hope guys won out a little bit."

.
CPI "CHANGED INGREDIENTS Flanagan talked about having done a story for Esquire about the CPI back in the 1970’s and how it had come about. Flanagan said: “When it (CPI) didn’t suit them, they just changed the ingredients. The housing as a component was considered to be a little too high because it had furniture in there and a lot of things at a disproportionate balance. So they corrected that, but they didn’t go back and correct statistics before that to show that there was a change. And heaven knows how much tinkering has gone on since. And then you have this ridiculous situation that the CPI number that really applies, excludes fuel and food. Now what’s that all about? ……..You know somebody is benefiting from it. It keeps the amount of Social Security increases down or whatever………. A couple of good things could happen this week. I don’t know – we don’t try to predict. We do try to figure out what has happened maybe."

.
While speaking about the Stimulus Package checks which will soon be sent to those who qualify, Flanagan said: “……….$1200 is better than a sharp stick in the eye, but even George Bush……..had to admit that probably a lot of what it would go for -- food and oil prices, increases in the oil price that filter down through gasoline, home heating, everything else.

.
Went into a store the other day, to replenish my booze supply and noticed that my favorite vodka had gone up a dollar. And so being a nasty customer, I asked the fellow in the store how come it went up a buck. He said well gasoline. I said, wait a minute, how many bottles of vodka does Smirnoff deliver here when they come by, or when your distributor comes by – five, ten, twenty, a hundred cases? How many? You mean to tell me that all those bottles don’t account, I mean how many, 500 bottles, $500 a trip more in gasoline from the same trip that the guys been doing for many years? I don’t know.

.
There’s a lot of skullduggery going on, hiding under the skirts of inflation. Take their names, folks. Patronize elsewhere. Don’t let them con you. It’s bad enough that we have to deal with these increases without baloney being put behind them. They’re trying to increase their margins, which is fine, but tell me the truth. Don’t lie to me. Don’t blame it all on something else."

.
Caller asked about a possible “Mexican-style devaluation of the dollar” and wondered if it could happen here.

.
Flanagan said: “I think the dollar has been sliced and pared and chopped and diced so much that I don’t see any wholesale further devaluation of it on a Mexican scale, say……..Mexico’s situation is a little bit different from ours…..I would not worry about that. Of course, inflation is not good. Inflation is something that we are watching very carefully and it’s rearing its ugly head – and that’s really the enemy of your cash position. And it looks like, by the way, the dollar may, according to some of the people that I read, at least have come close to a bottom versus the Euro………”

.
The caller continued, making the point that some people, in certain circumstances, can mitigate how much they are affected by inflation -- that in Maui, he buys gasoline once a month.

.
Flanagan said: “Well I don’t know there is too much you can do about food, medicine and heating oil……a lot of people put on a thousand miles a week."

.

Some Flanagan quotes:

.

  • “The economy is much better off when the consumer is up to his eyeballs in debt.”
  • .
    “You’re not going to get to the land of critical mass in a savings account.”
  • .

Honeybee EC: Flanagan seems to have a different viewpoint about the effects that higher energy prices has on inflation. Here are some excerpts from Bob Brinker's comments about inflation from just last week.

.

April 19, 2008, when a caller asked why higher energy prices were not inflationary in light of the fact that anything that is delivered by truck now has increased costs -- and UPS and Fed Ex are now adding surcharges.

.
Bob Brinker replied: “……..outside of the energy and transportation complex, that it’s impossible for rising energy prices to cause inflation. Of course, they increase the cost of energy and they increase the cost of transportation – that’s a given. But outside of those related areas……..there’s no way that higher oil prices can cause inflation because higher oil prices are counter……. economic growth. In other words, they are contractionary for the overall economy."

.

Caller pointed out that food, clothing and consumer items are continually increasing.

.
Brinker replied: “No, we are not seeing that…….in the numbers……We are not seeing it in the core number. Outside of the food and energy we are not seeing it.

.
Yeah, there are a lot of people out there that just don’t understand how inflation works. They see a rising oil price and right away they think, oh wow, we are going to see dramatic inflation – not true.

.
First of all, in the last year, energy in general is up 17%. Second of all, the key measure of inflation…….is up 2.0 at the core rate, 3.4 at the all inclusive rate. The all inclusive rate includes the 17% increase in energy prices.

.
There are people out there that just don’t understand that when energy prices go up, people are robbed of their discretionary purchasing power. That means they can’t go to the mall, they can’t go to the store and create demand-pull inflation through excess demand for goods because they don’t have the money to do so – and it’s really that simple.

.
That’s the reason, one of the reasons, we are having a contraction in our economy. The economy is contracting, certainly because of the housing recession. We know that. But it’s also pressured by what has gone on with oil prices, which has taken consumer discretionary spending money out of the pockets.

.
Now most people get it at this point. I think even Ben Bernanke gets it at this point, but there are still a handful of people out there that probably will never understand the workings of inflation……….this is Moneytalk”



.

Thursday, April 24, 2008

Bob Brinker's Market Timing Advice Part Two

Stevied sent the following reply to my previous article. At his request, I will not publish all of what he sent (even though I don't agree with him that it was a copyright violation), but here is what he said without the link he didn't want posted:
.

"This is a copyright violation, so don't post this. I would advise you to re-listen to Bob's opening monologue from Saturday. You can find it right now in the free and clear at XXXXXXXXXXXXXXXXXX
.

(btw just change the date in the URL to find programs back several months, and future programs have the same format).
.

I can also forward copies of Marketimer PDFs to you desire.
.

This "Bob's wrong, Kirk's right" stuff gets pretty boring. But your quotes from Bob are helpful to true fans of his investment style."
.

Honeybee says:
.

Stevied, Since I quoted some verbatim excerpts from Brinker's opening monologue on Saturday, do you think that I didn't listen to it? Please be specific about what you think I either missed or what I wrote that was not correct.
.
(And please do not send me anything to do with Marketimer!!)
.
I did not make any comparisons between Kirk and Brinker in the previous article. For you to accuse me of doing that is not fair.
.
Kirk does not sell himself as a market-timer, so it would be difficult to make a comparison. The only comparisons I have ever made is between BrinkerJr's Fixed Income Advisor and Kirk Lindstrom/David Korn/ HenryTo's Retirement Advisor. They are both primarily geared toward fixed income investing. However, Kirk's Retirement Advisor is MUCH MORE than that! Have you sent for a free sample? I'm betting you would be very impressed with it.
.
Now that you have brought up the subject (I DIDN'T!), there really is no comparison between Kirk's Investment Newsletter and what is offered in Marketimers. As opposed to Marketimer, Kirk uses an entirely different approach -- and he offers an astonishing wealth of information about his portfolio and his stock recommendations.
.
Here is a quote from Kirk's newsletter:
.
"I believe we can beat the markets by keeping a fairly constant allocation to stocks and then taking profits when they are high and buying the highest quality growth stocks when they are cheap. Over time, I add to positions in dividend paying stocks as well as grow my cash balance. This has worked well for me in personal investing and over eight years of writing this newsletter where I have managed to grow my Newsletter Explore portfolio..............."



.

Bob Brinker's Market Timing Advice

Bob Brinker would show integrity if he made it clear to Moneytalk listeners that he re-evaluated and changed his stock market timing advice in January and February, 2008. Unfortunately, he didn't make that fact clear last weekend during his stock market commentary.

.

Stevied commented: "Honey, you keep using goalposts that Bob never does."
.

Honeybee says: Here are two examples (of many I could quote) of Brinker moving the goalpost:
.

  • First he said: October 3, 2007 Marketimer (S&P @ 1526.75), ".......we see the potential for the S&P 500 Index to rise at least into the mid-1600's range next year."
  • .
    Then he said: January 4, 2008 Marketimer (S&P@ 1468.36) Bob Brinker said: “…..conditions are favorable for the market as we enter 2008. We expect the S&P 500 Index to achieve new record highs this year and to reach the 1600’s range in the process.”
  • .
    First he said: August, 2007 – January 4, 2008 gift-horse buying opportunity: “mid-1400’s”
  • .
    Then he said: February 10, 2008 gift-horse buying opportunity: “low-1300’s”

.
Stevied continued: “He works on closing day S&P 500, you quoted intraday. This kind of "noise" is something Bob does not predict.”

.
Honeybee says: To paraphrase what Larry Swedroe said, that kind of hair-splitting is ridiculous. Most people find a 19.5% decline in their stock holdings just as painful as 20% decline. The S&P closed on March 18th at 1276.60. The intraday low was 1256.98.

.

Here's a dose of reality: For months, Brinker has been saying that there was no 20% bear market decline “on the radar.” He admitted that the current “correction” is more than he expected. And don’t forget that the Nasdaq has corrected 25%+, while a couple of Brinker’s portfolios are holding a mutual fund proxy for QQQQ.

.
Steved Cont: “Be honest and tell your "fans" that Bob has said in the past there might be a correction on the way to new highs.”

.
Honeybee says: Bob Brinker has always maintained that a 5-10% correction is “health-restoring." At no time this past year did he predict, OR EXPECT, a 20% decline. Just the opposite, he has maintained his gift horse buy level at mid-1400’s since last August.

.

Stevied Cont: “Bob predicted that at the bottom last January he said there would be a test of that low, we have had it and now we are on our way back up gain. Dollar cost averaging of new money as the market went down was the right thing to do."

.

Honeybee says: So you want to set the goal-post only back to MID-January (after the correction hit), when he moved it and started over with a new bottom and a lower gift-horse buying opportunity. Did you forget that he was advising dollar-cost-averaging back in October when the S&P hit its all-time-record-high? Dollar-cost averaging is nothing new. The only thing that is new is that his mid-1400’s gift-horse looked ridiculous with the S&P down at 1300 and below.

.
Stevied Cont: “Adding to positions at the bottom was the right thing to do. And the Bob NEVER said there would not be corrections along the way. This one was pretty short lived as things go.”

.
I think many might argue with your statement that this has been a "short-lived" correction, but let me know if you ever hear Brinker say that. However, adding to positions at the bottom is always the right thing to do, but you seem not to know that Brinker has been bragging about “adding to positions” in the mid-1400s for several months now. Here is what he said just 3 months before he was blind-sided with this almost-20% correction:

.
October 3, 2007 (S&P@ 1526.75) Marketimer, Page Bob Brinker said: “In August and September editions of Marketimer, we rated the stock market attractive for purchase on any weakness in the area of the S&P 500 Index mid-1400’s range. During August and September there were 18 buying opportunities, consisting of 15 market days on which the S&P 500 Index closed within the 1430 to 1470 range, and three market days on which the index closed slightly below that range. Although we do not believe further weakness into the mid-1400’s range must occur, we remain comfortable with rating the market attractive for purchase should any such additional weakness occur……….”

.

.

Moving goal-posts, disappearing trades, and do-overs -- that's what it's all about...



.

Tuesday, April 22, 2008

Bob Brinker "Feeling Good" About What?


Bob Brinker didn't see it coming, so he lowered the goal post and continued the game, just like he did with QQQ in March 2003:
.

Bob Brinker did not see this intraday 20% S&P correction (25% Nasdaq bear correction) coming. Admirably, he has admitted that fact on Moneytalk.
.
Up until the day the market-drop started, he had been predicting new highs and advising a dollar-cost-average approach for many months. Until the middle of January, when he did away with the call, he had been recommending MID-1400's as a gift-horse buying opportunity.
.
When the S&P was topping out in October at 1576+, Brinker was predicting the S&P would reach into the MID-1600's. He has been recommending 100% all-in for stock market allocations since March 2003 and has ridden this correction down with Model Portfolios fully invested.
.
He never at any time (since 2003) has recommended raising any cash reserves. IOW, his advice to listeners and subscribers: Hold ZERO cash reserves in your equity allocations...
.
On Moneytalk this Saturday, Brinker said this: "...........if you are looking for the market into 2009, then obviously, you should be feeling pretty good about your stock market portfolio. Because not only has it shown a very nice advance since the correction lows in March."
.

Now why would anyone who had been following Brinker's advice (even since January 4, 2008) feel "pretty good" about their stock market porfolios right now? That makes NO sense whatsoever! His followers are still down 10+, after riding it down 20% from the high. I'd like to ask Mr. Brinker why he thinks it would feel good to regain a portion of such a big loss?
.
Saturday, Brinker continued:
"......but in addition to that, I think it has a lot further to go. And I continue to expect, as I have said, that we will see new all-time-historic-record highs in the S&P 500 Index."
.
Yes, Brinker did say he expected all-time-historic record highs in the S&P 500 Index, but it isn't NEW by a long shot. He was "expecting" new highs last October, November, December and when he published the January issue of Marketimer.
.
What he wasn't "expecting," by his own admission, was an intermediate-term correction. So far, he has managed to miss the 20% decline on a closing-basis definition of a bear in the S&P -- but only by a bear's-hair.

I agree with Larry Swedroe, that kind of splitting-hairs is downright silly.
.

Here are some comments from Kirk's Facebook Bob Brinker Discussion Forum:
.
Steve T., who has extensive background knowledge of Brinker wrote:
.
"Thanks Honey Oakes, I must say I believe your comments were quite generous. I think you are way to easy on bob and his numerous character flaws. What I have never been able to decipher is bob aware how dishonest he is and it doesn’t bother him or disrupt his sleep? Maybe he justifies his actions as long the money keeps rolling in? Or has he been so far out of the ethics mainstream for so long he doesn’t even realize what he is doing? Apparently lying has become a habit. Does he do it while being totally unaware he is doing it. I’ve seen this behavior in others but it is most often associated with profane language. Either way I sure would NOT want to be in his shoes when he meets his maker. "

____________________
.
Jim Firestone wrote:
.
" Very good summary Honey. Brinker finally discussed the market on the radio. I guess he felt it would be a good opportunity to attract new subscribers by bragging about his "low 1300's" buy call. Had the market gone down, he would not have even mentioned the market. He wants the uninformed to think "wow, this guy is really in touch with the market! I'd better subscribe". Of course his current subscribers and readers of this forum and your site know the real story. If the market gets back to S&P 1565, Brinker will brag about all the money made since his low 1300's buy call, but in reality fully invested subscribers will simply have gotten back to even at that point."



.


Saturday, April 19, 2008

Summary: Bob Brinker's Moneytalk April 19, 2008

Brief Summary, Commentary and Moneytalk Excerpts, April 19, 2008
.
.
Bob Brinker’s stock market discussion began with his opening monologue. He presented the closing level of the S&P 500 Index (1390), Dow (12,849), and Nasdaq (2412). Brinker said that investors were doing the “inevitable -- discounting the future of economic recovery.” Brinker said that in his opinion, the “real returns going forward into the next year” will be in the stock market.
.
ECONOMY …..(Brinker comments paraphrased) We are certainly having an economic downturn, but only after we get all of the data from the first two quarters will we know whether or not we had a recession -- technically speaking (defined as two consecutive quarters of negative real GDP). There’s a real good possibility we will get negative numbers for the first quarter, and if the second quarter is also negative, that will mean that we had a “brief and mild” recession. We will be seeing signs of the beginning of an economic recovery in the second half of 2008 and that will continue into 2009.
.
.

BRINKER’S STAND ON STOCK MARKET…....Brinker said: "One thing is for sure if you’re a Moneytalk listener, you know where I stand on the stock market. In fact we had a discussion about this very topic earlier this month right here on Moneytalk.”
.
Honeybee EC: Brinker did not discuss the stock market at all last week. He only gave the closing numbers for the S&P and Dow. He didn’t even give the closing number for the Nasdaq, which had lost 81 points that week. However, Brinker discussed his stock market views on April 6th. Here are some excerpts from my April 6th Summary:
.
Later, Brinker, in answer to his guest speaker’s direct question, “Are you still bullish," said that he thinks we are going to have “new record highs in the stock market by next year” but that a lot of people think he’s lost his mind. Brinker added: “We’ll see who wins out. I’m pretty confident of my forecast…..”

.
Brinker monologue cont: "...........if you are looking for the market into 2009, then obviously, you should be feeling pretty good about your stock market portfolio. Because not only has it shown a very nice advance since the correction lows in March, (Honeybee EC: How is that possible when all of his portfolios were 100% invested for the whole almost-20% correction?) but in addition to that, I think it has a lot further to go. And I continue to expect, as I have said, that we will see new all-time-historic-record highs in the S&P 500 Index."
.
January 4, 2008 Marketimer, Page 3; Paragraph 1; (S&P 1468.36), Bob Brinker said: "In summary....conditions are favorable for the market as we enter 2008. We expect the S&P 500 Index to achieve new record highs this year and to reach the 1600's range in the process. We continue to rate the market attractive for purchase on any weakness into the S&P 500 index mid-1400's range. Above that range we prefer a dollar-cost- average approach for new purchases. All Marketimer Model Portfolios remain fully invested as we enter 2008."

.
"And I believe those new all-time-historic-record highs will develop as we move into 2009. And I believe that what we will have in the record book point is what we already have, which is a stock market correction. And unfortunately, there are people in the market who don’t understand that stocks do fluctuate. And they can certainly fluctuate within the correct zone of less than 20% and they’ve done it many times in the past -- Nothing unusual about it at all.”

.
Honeybee EC: Bob Brinker is on record saying that a 10% correction can happen any time, but I do not recall him EVER saying it is “nothing unusual” for the market to "fluctuate" more than that. Perhaps David Korn will have this documented one way or the other -- I'll check with him. I also challenge Brinker's premise that the market has “done it many times in the past.” What past? The last 100 years? It certainly hasn’t done it many times since Moneytalk has been on the air.
.
STOCK MARKET CORRECTION: Brinker said: “....Stock market sitting in at 1390 on the S&P 500 Index. Now the all-time high recorded last October at 1565 prior to the correction, and we’ve had the correction. In my opinion, it came and it went and it’s in the history books. And right now, we are in a position where investors are looking ahead. I think they are looking ahead to an economic recovery down the line and that’s why we’ve seen the market improving.”
.

BEAR MARKET…..Brinker said:
“Those who are out there with the bear stories now are making fools of themselves because it just doesn’t compute does it? When you have a market that’s seen this kind of buying it just doesn’t compute……. that America is spiraling downward – doesn’t make any sense.”
.
INFLATION AND INTEREST RATES…….(Brinker comments paraphrased) Compare the 5-year Treasury Inflation-Protected base yield is .56 points to the 5-year Treasury Note at 2.94 and you have an implied inflation rate for 5 years of 2 3/8%. This is also supported by comparing the 10-Tips to the 10-year Note. This is global money “voting” and is a highly efficient market.
.
Caller John said: “My question is, looking at your Brinker Fixed Income Advisor letter, and in there, under the economic dash-board, you have a comparable to the Federal Funds rate, a Taylor rule….can you just explain what that means?”
.
Bob Brinker went right into a lengthy description of Taylor’s Rule, but here is an excerpt of a more concise and brief explanation: “Taylor's rule is a formula developed by Stanford economist John Taylor. It was designed to provide "recommendations" for how a central bank like the Federal Reserve should set short-term interest rates as economic conditions change to achieve both its short-run goal for stabilizing the economy and its long-run goal for inflation.”
.
Federal Reserve Bank of Kansas City offers a link to a complete and recent description of "Taylor’s Rule and the Transformation of Monetary Policy": http://www.johnbtaylor.com/
.
Honeybee EC: Bob Brinker made no attempt to correct the caller’s incorrect inference. Bob Brinker, the publisher of Marketimer and host of Moneytalk is not the publisher of Fixed Income Advisor– his son and daughter-in-law are the publishers. Is this an attempt to deceive? Why was this call immediately followed by an ad that seems misleading and deceptive in that there is no way to know which Brinker is actually publishing the newsletter? Why does Bob Brinker, the son, now sign articles at his website as “Bob Brinker,” showing no way to differentiate between himself and his father. For years, he called himself Bob Jr. and carefully made the distinction so as not to be confused with his famous father? What changed and why would anyone do such a thing?
.
I recommend that you ask for a free copy of Fixed Income Advisor and read it. I also recommend that you get a copy of the “Retirement Advisor” and read it. I am convinced that you will find the Retirement Advisor FAR SUPERIOR! Please send a comment to this Blog and let me know if you agree with me or not.
.
http://www.theretirementadvisor.net/index.php
.
Caller John, in a follow-up question wanted to know why there are so many “perma-bears” out there saying we are headed for a doomsday.
.
Brinker reminded him that he recently had a guest on the broadcast that was extremely bearish when the market was lower than it is now -- and that he had stated “on the broadcast” that he did not agree with the guest-speaker.
.
Bob Brinker said: “You’ve heard me say on the broadcast, I think we are going to new all-time-historic-record stock market highs by 2009. I think by the time we get into 2009, we are going to be talking about all-time-historic record highs on the S&P 500 Index. But I know what you are talking about, I see it all the time.....in writings….in talking heads. They are talking down the United States of America. They are talking down our economy………(Caller: “Do you think people tend to focus too much on short-term?”) "Oh, absolutely, absolutely, I know this for a fact because when we have gone through this recent bottoming process, and certainly we have worked very, very hard to identify the bottom that I believe that we did accurately identify in the first quarter.
.
It’s my opinion that the March 10th low on the S&P 500 was the bottom for the correction. And I think that what happened was that was a very successful test of the initial low recorded January 22nd. You might remember the S&P 500 closed on January 22nd in a very high volume panic-atmosphere at 1310. Well we knew, that despite the fact there’d be some short-term rally.......back then, we knew there was going to have to be a successful test of that low. And we knew what was required of that test before it occurred. Now that is exactly is what happened. And the closing test in March was, actually it was less than 3% below the initial low established on January 22nd. So we are talking about a text-book testing process in that correction low that we looked at.
.
Unfortunately, unfortunately, and I’m sure you’ve heard this, there were a lot of people out there, and I mean a lot of people out there, who got it completely backwards off that correction low and that successful test……I’ve been telling people, going to, actually to February because we do this through the investment letter, of course, I’ve been telling people to actually use periods of weakness to buy into the market at specifically down in the low-1300’s or any minor weakness just below that level, which we got a little bit of there on March 10th and in mid-March, to take those opportunities to add to positions if you’re looking to add to positions – no mention, no thought of selling anything into this kind of weakness……”

.
Caller John concluded by saying: “I took your recommendation, Bob. When it was below the 1300’s I added…….I’m just glad I got you, your son and the Marketimer on demand.”
.
Brinker said: "And just for the record, I’m right with John. I was the exact same thing that John was doing. When we saw that weakness on the correction test into the low-1300’s and that very, very minor weakness that we had just below that level for a very short window of time, I was doing the same thing that John was doing – which was adding to positions."
.
Honeybee EC: Brinker’s Model Portfolios have been 100% invested since March, 2003, and he has bragged many times about that fact on Moneytalk. Therefore, it would show integrity if he would explain that the low-1300’s buying opportunity that he is now touting (and claiming he has taken advantage of) could benefit only those who happened to come into NEW money AFTER January 20th. Before that, his all-new-money-in buy level had been at mid-1400’s.
.
Brinker recommended mid-1400's as a gift-horse buying opportunity between August 2007 and January, 2008. Anyone who retired, inherited a large sum of money, etc., and had a substantial amount of money to invest in the stock market, had ample opportunity (indeed, ample encouragement from Brinker) to lump sum it in at the mid-1400's level.
.
To now brag about his new revised (and much lower than the PREVIOUS one) "low-1300's" buy-level, which came about as the result of a correction that he admits he did not "expect," and for which he had no "available cash reserves" from his model portfolios, without adding ample disclosure, seems disingenuous at best.
.

Brinker continued: “And if John is seeing people crying now about the fact that they sold out of the market at the bottom, how do you think those people are going to feel in 2009……if I am correct........and this market recovers to record highs in 2009, how is somebody is going to feel that sold out of the market at 1300?.......this is Moneytalk.”
.
RECOMMENDED READING…… Some of Brinker’s favorites:
“Economics in One Lesson” by Henry Haslett
“Against the Odds” by Peter Bernstein
Books by Charlie Ellis
Books by Larry Swedroe
Brinker suggested checking these books out at the library or buying them to build your own library.
.
Honeybee EC: It’s been over 7 years since Bob Brinker stopped allowing libraries to subscribe to Marketimer. This happened shortly after his bungled October, 2000 QQQQ-trade -- which has now been very effectively covered up, even though it has never been closed.
.
CALLER..... said that he had taken advantage of Brinker’s buying opportunities as far back as June, 2007. Brinker replied: “Excellent.”
.
Honeybee EC: Why was an incorrect assumption allowed to stand? The truth is there was no “buying opportunity” issued in June, 2007. In the June, 2007 Marketimer, Brinker claimed that a six-year long “secular bear megatrend” had ended in June, 2006. He was recommending “dollar-cost-averaging” into the market and said this on Page 3; Paragraph 5: “…….and we expect to see the S&P 500 Index make a series of new record highs going forward.” The S&P closed at 1530.62 at that time. In July, 2007, Brinker was predicting the S&P would move into the 1600’s range “as investors begin to discount operating earnings growth potential into 2008.”
.
A complete history of Brinker’s totally incorrect secular-trend market-timing analysis:
.
http://honeysbobbrinkerbeehivebuzz.blogspot.com/2007/09/what-happened-to-bob-brinkers-secular.html


.

Thursday, April 17, 2008

Bob Brinker Bullish at Top and at Bottom

Bob Brinker's Short-term market-timing calls since January 4th, 2008:

Bob Brinker was 100% bullish when the market topped in October, 2007 and he still is...

January 4, 2008 (S&P 1468.36) Marketimer, Bob Brinker said: “We expect the S&P 500 Index to achieve new record highs this year and to reach the 1600’s range…….attractive for purchase on any weakness in the S&P 500 Index mid-1400’s range.”
.
January 19, 2008, Moneytalk, Bob Brinker said that the stock market is going through a “rocky period in here,” and has declined about 15% on the S&P Index, which is “more than I expected.”
.
January 20, 2008, Brinker did away with the mid-1400's gift horse buying opportunity.
.
February 10, 2008, Brinker said the market was bottoming in the low-1300's and issued a new buy level:
"S&P 500 Index low 1,300s, or any minor weakness that occurs below that level."
.
April 6, 2008, Moneytalk, Brinker, in answer to his guest speaker’s direct question, “Are you still bullish," said that he thinks we are going to have “new record highs in the stock market by next year” but that a lot of people think he’s lost his mind. Brinker added: “We’ll see who wins out. I’m pretty confident of my forecast…..”

.
.
Pen-name Quis, asked an interesting question: "Anyhoo, Bob says it's no big deal the market is down 15%; we're not in a bear market. But what happens if the market goes sideways for the next two or three years and stays down between 1 and 19% from its high."
.

Wednesday, April 16, 2008


How comments are handled on my Blog:
.
At various times, I have answered questions about how I handle comments on this Blog, but I have never posted a complete explanation. I hope the following will be helpful. If you have any specific questions beyond what is written here, I will be happy to answer them.

The first thing you need to know is that all comments are moderated. This means that I will review them and then make the decision as to whether they will be published or not. Handling comments this way was not my first choice. I would rather that they all be posted directly, but due to some vulgar and/or ad hominem vituperation directed at Kirk, me and other commentators, that is no longer possible. Therefore, there will usually be some lapse of time between when you send your comments and when I post them.
.
My personal philosophy tells me that everyone should have an equal opportunity to speak freely and express their viewpoints. Therefore, I will publish ALL comments about Bob Brinker -- pro or con. I will never refrain from posting a comment simply because I do not agree with what is written. MOF: I actually welcome viewpoints that differ from my own. (I will also publish those comments that are simply intended for good-natured fun and humor -- I love to laugh.)
.
I welcome criticism, corrections or additions to anything I write. If I fail to address any topics that Bob Brinker talks about on Moneytalk, I welcome others to bring that to my attention.
.
However, I will not publish any comments that are not courteous and respectful to everyone. I believe that we can disagree without being disagreeable.
.
(Addendum: While opinions are welcome, data that is presented as factual, but is provably untrue, will not be published.)
.
Most of the time, I will personally respond to comments, especially those that ask specific questions. ____Honeybee

.
"I learned long ago, never to wrestle with a pig, you get dirty; and besides, the pig likes it. --George Bernard Shaw
.

High Inflation Data Good News for I-Bonds & TIPS

Bob Brinker should have fun explaining how this high inflation data is good news for iBonds (Inflation Protected Bonds) and TIPS (Treasury Inflation Protected Securities) this weekend.

I posted two articles at the "Bob Brinker Fan Club Blog" worth reading. They are:

Vanguard's TIPS index fund (VIPSX) was up 11.59% in 2007 and is up 4.74% YTD in anticipation of these high inflation readings. With inflation expected to moderate, I don't expect to see this level of performance continue.

Disclaimer: I have a fairly large position in TIPS in both my personal account and some of the newsletter porfolios in "The Retirement Advisor" investment letter. I also recommend TIPS as part of a 3-item alternative to the easy to track "Total Bond Fund" in "Kirk Lindstrom's Investment Newsletter" where I may again recommend iBonds with these attractive rates.
.

Saturday, April 12, 2008

Summary: Bob Brinker's Moneytalk

Brief Summary, Commentary and Moneytalk Excerpts, April 12, 2008

.

Bob Brinker’s Moneytalk monologue began with his report of the closing numbers for the S&P 500 at 1332.83, and the Dow at 12,325.42. Brinker did not give the closing numbers for the Nasdaq today, but last Saturday he said: “Nasdaq had a big week, up over 5% -- sitting in at 2371.” The Nasdaq closed Friday at 2290, down 81 points for the week.
.
The Nasdaq is firmly in bear market territory – even by Brinker’s own definition of a bear market, which he describes as a 20%+ decline. The Nasdaq has declined 24.1% off the October 2007 high on a closing basis.
.

Here are some comments about the Nasdaq from Kirk's Facebook Brinker Forum:
.
Jim Firestone said:

"I think the reason Brinker did not mention the Nasdaq performance on the Saturday program is because it is near or at bear market territory. Since Brinker's timing model is not predicting a bear market, mentioning this decline would be somewhat embarrassing for him. He should care about the Nasdaq though, since it is relevant to his QQQQ shares."
.

Kirk Lindstrom replied:
.
"Yes, his P1 recommends 15% in QQQ via a RYDEX fund. One would think a market timer who REALLY could successfully do it (time the markets) would have picked Gold or Oil rather than QQQ, which is currently in bear market territory. Heck, he'd have picked XLE rather than QQQ back in 2000!
.
Yahoo! says the 52 wk range for QQQ is 41.61 - 55.07
and it currently trades at 42.87 or 22% off its peak.
.
Given its high beta, if we are still in a bull market, then it should come back... but I think it got a lot of its gains last year from Google, Apple, Rimm and a few other stocks that I thought were over valued."

.
STOCK MARKET DISCUSSION……There was no further stock market discussion on the program today. Last week, Brinker said: “……..it’s going to be a week where I think stocks will be trading on their own merit. I don’t think they will be trading as much on the news background this week based the economic calendar and the earnings calendar.

.
Brinker talked mostly about fixed-income investments today, and only indirectly referred to the stock market by recommending “diversification.” Last week he said that he did not have a recommendation to sell stock market holdings at this time, and that he would not be taking money out of the stock market at this time.

.

NO BEAR MARKET ON THE RADAR

.
December 5, 2007 Marketimer (S&P 1481): “As is frequently the case, a number of stock market forecasters are claiming that the correction is the start of a bear market. We have heard the same claims during every correction since this bull market began in March of 2003. We continue to believe that a bear market (S&P Index decline in excess of 20%) is not on the radar screen at this time. We expect the bull market to continue at least well into 2008, and we look for significant stock market gains, including new S&P 500 record highs."

.
Here is an excerpt from Peter Brimelow's Marketwatch article. He published this quote from the February Marketimer. (see the link below) Bob Brinker said:
.
"As has been the case with every correction since August of 2007, several stock market pundits are claiming that a bear market is underway. We do not believe this is the case. We expect the S$P 500 Index to work its way into record new high ground by late this year or in 2009.".

.
March 1, 2008, Larry Swedroe was guest-speaker on Moneytalk. Swedroe has said that he thinks splitting hairs over a 20% decline bear market-definition is "silly." Brinker said this to him: “Of course at this point Larry, as you well know, we have not had a bear market."

.
January 4, 2008, Page Three, Paragraph One: (S&P 1468) “In summary, the Marketimer stock market timing model indicates that conditions are favorable for the market as we enter 2008. We expect the S&P Index to achieve new record highs this year and to reach the 1600’s range in the process. We continue to rate the market attractive for purchase on any weakness into the S&P 500 Index mid-1400’s range. Above this range we prefer a dollar-cost-average approach for new purchases. All Marketimer model portfolios remain fully invested as we enter 2008."

.
By mid-January, Brinker had removed his mid-1400’s buying opportunity, which had been in place for several months.

.
Mid-February, in a special bulletin, Brinker said that the correction bottom was in and issued a new, lower “attractive for purchase” buying level – as reported on Marketwatch in an article by Peter Brimelow on February 21st. Brimelow quoted a couple of paragraphs from Brinker’s Bulletin including these:"The initial closing low in the current stock market correction process occurred on Jan. 22, when the S&P 500 Index closed at 1310.50. The market subsequently rallied for eight days, at which point it began the process of testing the area of the Jan. 22 closing low."
.
"In our view, the correction bottoming process has proceeded with a high degree of historical consistency to date. We have witnessed a decided reduction in selling pressure during the testing process, which is essential to a successful outcome. We now rate the stock market attractive for purchase on any weakness that occurs in the current area of the S&P 500 Index low 1,300s, or any minor weakness that occurs below that level."

.
http://www.marketwatch.com/news/story/bold-bulls-bloody-unbowed/story.aspx?guid=%7BEC77C4E7%2D96CB%2D4BDC%2DAD15%2D2DC81C4ECB51%7D

.
TREASURY MARKET…..(Brinker comments paraphrased) Very low yields….10-year U.S. Treasury note at 3.5%; 10-year TIPS base rate 1.15%. There is a 2.3% differential, which is what the markets are pricing in as the implied inflation rate for the next 10 years…Strongly positive slope yield curve based on 3-month Treasury Bill of 1.1% compared to the Treasury Bond of 4.3%.

.
ECONOMY........(Brinker comments paraphrased)........moving at a very, very sluggish pace.......there is a probability that the first quarter real GDP will be in negative territory, and second quarter also has potential to be negative depending on the impact of the stimulus package checks which will be distributed in May. The "traditional academic historical definition" of a recession is two consecutive quarters of negative real GDP. Brinker said: “.......by later this year, the economy should be moving in the direction of starting a recovery.”

.
GE.......(Brinker comments paraphrased)........credibility issue with GE because back in March, the CEO had said that there was going to be a good quarter.......and that is why there has been so much reaction in Wall Street. In December, the CEO claimed that the results were “In the bag.” People react to the “quick change.” New credibility will have to be established. Brinker said: “Now the revenues at the company were pretty darned good. They were up 8%, and you know in this environment that’s pretty good – to $42.2billion. That’s a nice increase. Now the forecast was $44billion, and obviously that was wrong………and I think that people were looking at the revenue line, they were disappointed because the promises were too high……..this really calls into question the whole issue of making these forecasts………you know some companies just don’t do it anymore……….now in Wall Street right now, there are 13 analysts that have a buy recommendation on the stock, and there are 6 analysts that have a hold recommendation on the stock and there are no analysts that have a sell recommendation on the stock. That is among close to 20 analysts that were surveyed. Now that is not to say that there are no sell recommendations on the stock."

.
Various Points Brinker made to callers:

.

  • Always be sure your CDs have FDIC coverage.
  • .
    Likes Vanguard GNMA Fund.
  • .
    Barack Obama’s tax increase proposal will raise marginal tax rates to over 62% for entrepreneurs and increase corporate taxes, which are already about 40%. The worst idea Brinker ever heard of and he is stunned that the financial media and the mainstream media is closing its eyes and not reporting it.
  • .
    If we had begun to increase the mileage on cars by 1/3 mile per year in 1974 when the Saudis' “declared war on us,” we would not have to “beg” for the 12 million barrels of oil that we import every day.
  • .
    Do not have more than 4% of your stock market allocation in one stock.
  • .
    Diversify your portfolio.
  • .
    What comes out of Treasury Secretary Paulson office about being for a strong dollar is “nonsense and pap.” Paulson doesn’t “give a hoot” about the plight of the dollar, or he’d stop talking about it and do something about moving the country in the direction of a balanced budget.
  • .
    Weak dollar means a stronger Euro.
  • .
    In general, GE is a well run company, but well-run companies can still be decimated.
  • .
    GNMA’s are preferable to TIPS for current income.
  • .

Bob Brinker quote of the day: “The bottom line in all this is, Obama’s tax policies are genuinely an “obamanation.” (That’s truly the way it sounded folks.) LOL!

.
Saturday, Brinker's guest speaker was one of the editors of J.K. Lasser's "Your Income Tax 2008."
.
Sunday it was Charles Morris, author of the book, "The Trillion Dollar Meltdown: Easy Money, High Rollors and the Great Credit Crash."


.

Wednesday, April 9, 2008

Bob Brinker Beehive Market Update - April 9, 2008

We email regular "FREE Bob Brinker Fan Club Updates" to everyone on our "Bob Brinker Fan Club" distribution list. If you would like to get on this list, then click this link.

Market Statistics

All the major markets remain down double digits off their recent highs made in 2007. The NASDAQ and S&P500 were down over 20% on an intaday basis at their worst while the DOW managed to "only" fall 19.4%.

S&P 500 Chart
(Using Intraday prices):
Last Market High 10/11/07 at 1,576.09
Last Market low 03/17/08 at 1,256.98
Current S&P500 Price 1,358.39
Decline in Pts 217.70
Decline in % 13.8%
Max Decline 20.2%

This means the correction from intraday high to intraday low is 20.2% and we are currently 13.8% off the peak.

The decline from the high to the low on a closing basis is 18.6%
.
DJIA Chart
(Using Intraday prices):
Last Market High 10/11/07 at 14,279.96
Last Market Low 01/22/08 at 11,508.74
Current DJIA Price 12,528.00
Decline in Pts 1751.96
Decline in % 12.3%
Max Decline 19.4%

This means the correction from high to low has been 19.4% and we are currently 12.3% off the peak.

The decline off the high on a closing basis has been 17.1%

NASDAQ Chart
(Using Intraday prices):
Last Market High 10/31/07 at 2,861.51
Last Market Low 03/17/08 at 2,155.42
Current NASDAQ Price 2,330.77
Decline in Pts 530.74
Decline in % 18.5%
Max Decline 24.7%

This means the correction from high to low has been 24.7% and we are currently 18.5% off the peak.

The decline off the high on a closing basis has been 24.1%

Bob Brinker:

On January 04, with the 60-DMA of the put/call ratio at a then record of 1.00 and the S&P500 closing the day before at 1,447.16 , we reported here that Bob Brinker said this was bullish.

In his January Marketimer, Bob Brinker reported:
    "The 60-day put/call ratio remains in bullish territory as the new year begins."

Brinker remains bullish, does not expect a bear market (as defined as a 20% or more decline in the S&P500) and he looks for new highs to be made in the year ahead.


Click charts courtesy of stockcharts.com to view full sized images

Brinker was so bullish then that he had a Lump Sum Buy for the market in the mid 1400s.

Read:
Today the 60 day moving average of the put/call ratio is 10% higher at a new record of 1.10! (See Put Call Ratio 60 Day Moving Average Record High )

On an intraday basis, the S&P500 declined 20.2% and has recovered to be "only" down 13.8% from its peak level as of today.

For more information, see Technical Analysis: Sentiment Indicators

= = = = = = = = = = = = = = = = =

Click to view the attached (but slow to load) PDF file: Take Profits & Sell Sentiment Indictors from The Market Top.

If you want to know what I have been buying in this period of weakness with my profit taking dollars from selling when the market was higher, Subscribe to Kirk's Investment Newsletter TODAY and get the April 2008 issue FOR FREE!
.

Monday, April 7, 2008

Bob Brinker's Stock Market Views

Moneytalk Discussions, Commentary and
Excerpts, April 6, 2008

.
Bob Brinker discussed the stock market three
times on Sunday's program.

Firstly, a caller asked Brinker if he should take money out of some of his stock funds. Brinker replied that he did not have a recommendation to sell stock market holdings at this time, and that he would not be taking money out of the stock market at this time.

.
Brinker, in answer to his guest speaker’s direct question, “Are you still bullish," said that he thinks we are going to have “new record highs in the stock market by next year” but that a lot of people think he’s lost his mind. Brinker added: “We’ll see who wins out. I’m pretty confident of my forecast…..”

.
Here are some Brinker excerpts: “……..it’s going to be a week where I think stocks will be trading on their own merit. I don’t think they will be trading as much on the news background this week based the economic calendar and the earnings calendar. And that’s okay, it’s good for stocks to trade on their own merit. In the final analysis, stock prices discount the future rally – the future value of accumulated dividends. Or separately, another way to analyze fundamentally on earnings – the present value of future earnings……in the final analysis, after all the news plays out…..that is what governs the price of stocks. That is the way it always has been. That’s the way it always will be.

.
But we talk there in terms of their true value. Now their market value can vary from their true value. Their market can at times, like in January of year-2000……can exceed their true value to such an extent that, really they have to be sold. And you just have to take a big chunk out of the market at times like that, which is what we did in January of 2000. There are times, it doesn’t happen that often, but there are times when over-valuation is ridiculous…….We were looking at a price-earnings ratio on S&P 500 operating earnings of close to 30 times earnings…….So the market was really screaming at that time for money to be taken out. And a lot of people did take money out of the market in January 2000, and we know what followed – S&P basically lost half its value over the next couple of years. So there are times like that and it’s certainly worthwhile to be aware of when those times occur.”




Here are some excerpts from David Korn's April 5-6, 2008
newsletter. Posted with the author's permission:

.
Brinker Comment: Because this coming week doesn't really
have much on the economic calendar, stocks shouldn't be
trading as much based on news, but rather on their own
merits. Stock prices discount the future value of
accumulated dividends, or the present value of future
earnings. After all the news plays out, that is what
governs the price of stocks. The market value of stocks
can vary very differently from their true value. Look
what happened back in 2000, where stocks traded much
higher than their true value. At such times you have
to sell stocks and Bob said that is exactly what he did.
At that time, the P/E of the S&P 500 was close to 30 times
operating earnings! The market was screaming at that
time for money to be taken out and a lot of people did
in January 2000. What followed was the S&P 500 lost
nearly 50% of its value.
.
(David Korn) EC: As a follow up to Bob's prior comment,
this is clearly not a time in which Bob is recommending
a change in asset allocation as he did in January 2000
where he moved from 100% stocks to 40% stocks and then
later reducing that weighting to 35% stocks in August
2000 which was the least amount of stock holdings Bob
ever had in his model portfolios. Of course, two months
later he recommended that his subscribers use 20-50%
of those cash reserves and invest it into the QQQQ shares.
.
David Korn's Stock Market Commentary, Interpretation of
Moneytalk (Bob Brinker Host), Financial Education, Helpful
Links, Guest Editorials, and Special Alert E-Mail Service.
Copyright David Korn, L.L.C. 2008

.
http://david-korn.blogspot.com/
.


Brinker’s guest speaker on Sunday was Mark Skousen, author of “EconoPower: How a New Generation of Economists is Transforming the World.”

.





Saturday, April 5, 2008

Summary, Bob Brinker's Moneytalk

Discussions, Commentary and Excerpts, April 5, 2008
.
STOCK MARKET…..Bob Brinker reported the latest rear-view mirror statistics for the stock and bond market: “The S&P 500 and the stock market this week had a great week. It was up 4.2%. It’s now just a little over 12% below its all-time-record high – sitting in at 1370. Nasdaq had a big week, up over 5% -- sitting in at 2371. Oil closed the week at $106.23. The two-year Treasury Note at 1.8; the ten-year Note at 3 ½; and the 30-year Bond at 4.3. And the implied inflation rate for the next ten years, which is derived from comparing 10-year Notes to 10-year Treasury Inflation Protected Securities……..is 2.3%.
.

If you’re a Moneytalk listener you know that we have repeatedly said that those that were forecasting runaway inflation, hyper inflation – whatever you want to call it, were completely wrong because they were basing their forecast on a bogus centerpiece……..high oil prices would result in runaway inflation – not true…….”
.
INFLATION.....YOY over-all inflation, including 19% energy hike = 3.4; core inflation (excluding food and energy) = 2.0; For rank and file, year over year = 3.4% YOY -- about the same as inflation; core inflation = 2.0 YOY -- showing that the energy complex has not had much impact on core inflation. Brinker said: “The inflation hawks, that’s what they said would happen. They said that rising oil prices would cause rising core prices and it did not happen – they were completely wrong.”
.

INFLATION EXPECTATIONS…..Brinker said: “When you look at the bond market……..you get a really good measure of what investors think, regardless of what Bob Brinker thinks, or anybody thinks, even Ben Bernanke for that matter……..So you take the 10-year Treasury Note, subtract out the real yield…….and the market tells you what investors are expecting from inflation for the next ten years – and that number is 2.3.”
.

EMPLOYMENT REPORT AND ECONOMY…..
came out on the first Friday of the month, which was yesterday; no big surprises; 80,00 job lost in March; added to January and February revised numbers = 70,000 monthly for first quarter; high probability of negative GDP figure in first quarter.
.
UNEMPLOYMENT DEMOGRAPHICS
…..White = 4.5%; Black = 9%; Hispanic = 6.9% Asian = 3.6%
.
UNEMPLOYMENT BASED ON EDUCATION LEVEL….a valuable tool to encourage “youngsters” to get an education -- very dynamic figures: Bachelor’s degree or higher, which is about 25% of the U.S = 2.1% (National Unemployment Rate is 5.1%); some college, but no degree = 3.8% (still below national average); high school diploma = 5.1%; no high school diploma = 8.2%; teenagers at 16, 17, 18, 19 = 15.8%.
.

POLITICAL TALK….. Polls show that it looks like a fairly close race, but lots can happen between now and Election Day; Moneytalk "cares" (and "talks about") the candidates stand on the economy and tax policy. Brinker said: “Cactus John has been very honest about the economy. He recently stated that he doesn’t know much about the economy. I want to give John McCain all the credit I can give him for being honest with the voters………

.
Over on the other side, the most likely nominee based on the current polls, subject to change, is Barack Obama………Barack Obama stands firmly on raising the marginal tax rate on entrepreneurs to levels not seen since John F. Kennedy………..he’s talking about a potential marginal tax rate of about 60 to 63%........Now I think with a marginal rate of 60 to 63%, I think that a lot of entrepreneurs will take a page out the old Johnny Paycheck Songbook, ‘Take This Job and Shove It, I Don’t Work Here Anymore.’ That line made the late, great Johnny Paycheck famous and it may make Barack Obama famous too, to a lot of entrepreneurs who may take up golf. Because the bottom line is if you are confiscating 60% or more of somebody’s compensation, in a lot of cases, they’re just going to find something else to do with their time.”

.
Brinker continued, saying that this was a gigantic misstep in Obama’s campaign, and that he may get away with it with people who don’t know any better or understand where the jobs come from, but he was not going to get away with it with him.

.
Brinker went on to explain how easy it would be to construct this 60%+ marginal tax bracket for a lot of American entrepreneurs who create jobs. Firstly, Obama and Clinton will very quickly get the top rate up to 39.6 after inauguration – as soon as they can get it through congress.

.
And Obama has made it clear that he likes this donut-hole Social Security plan that he has come up with. Brinker described Obama’s “donut hole” plan: “This is the plan where, right now you have the $102,000 cap on the Social Security tax. This is the 6.2 plus 6.2, which is 12.4 to the entrepreneur and business owner…….everything above that not subject. Well, he has this donut hole idea, where you create maybe a $100,000 up to $200,000………. where you don’t do anything right now………where you don’t make any changes. Then he sinks the battleship when the donut hole is finished. Because above $200,000, the Junior Senator from Illinois, in his na├»ve notion of how jobs are created and economics works, is talking about lifting the cap on Social Security……..So we have the 39.6 and we have the 12.4, so all of a sudden we’re up to 52%. And the 2.9, the cap is already lifted on Medicare…….now we are up to 55%. How many entrepreneurs do you think live in places that charge high state taxes………now you are up to 62%, depending on the state you choose. A 62% marginal tax rate on entrepreneurs. This is the policy that Barack Obama is talking about.”

.
Brinker commented that he thinks Obama may get away with this because entrepreneurs don’t elect presidents – they are elected by “rank and file.” However, Brinker thinks it is one of the worst economic policies that he has ever heard out of a presidential candidate, and he believes that if Obama doesn’t change his “donut hole” policy, then he is running a “dreadful, dreadful” presidential campaign -- because he will be attacking the “core growth engine for new jobs in America.”

.
CALLER….asked if the CPI was the Core Inflation rate. Brinker commented that there are two of them –one is better than the other. The CPI core inflation rate comes out every month, but another one that comes out on a regular basis is attached to Gross Domestic Products reports the Personal Consumption Expenditure Core rate. Brinker agrees with the Federal Reserve that the PCE is better. (Changes are made in the index as times change.)

.
CALLER….pointed out that he didn’t know anyone who didn’t use heating oil, gasoline and eat food, and asked why they were not included in the core inflation rate. Brinker said: “Because the core index by definition excludes food and energy, so if you were to include food and energy in the core index, then instead of being the core index it would the headline, all inclusive number. We have talked about the all-inclusive number which is 3.4 using the Personal Consumption Expenditure Index……..The reality is even with that 19% year over year increase in energy prices, and even with that 5% year over year increase in food – and that’s up partially because we’re using so much of our feed stock in the production of ethanol – our corn stock. So what happens is people look for spill-over, how much has that spilled over into the core. So far, we really haven’t seen that spill over.”

.
CALLER…. asked if FDIC had ever been tested. Brinker commented that it sure had – every time a bank fails and people want their money back. Then the caller told Brinker that he had $500,000 in a bank with only $100,000 of it under FDIC insurance and asked what he should do. Brinker said: "Well the first thing you might want to do is to make an appointment to see a psychiatrist.” (Honeybee EC: ROFLOL!) Brinker told him that he had $400,000 at risk for no good reason, and should diversify "around" to get the coverage. Caller explained that someone at the bank told him that it took 99 years to get money back from FDIC. Brinker indignantly stated that the bank representative should be fired – that it did not take long to get your money from FDIC.

.
On a lighter note, Brinker reminisced about when he was “a youngster” and used to "drive out to visit his paternal grandparents in Greensberg, Pennsylvania." He talked about remembering the “Horseshoe Curve” landmark near Altuna, Pennsylvania. There are nice pictures (one from 1934) and description here:

.
http://en.wikipedia.org/wiki/Horseshoe_Curve_%28Pennsylvania%29

.
CALLER: “What I’m finding is, in a slow economy, a lot of companies are absorbing these costs with no pass-through because of top-line growth is very flat and it’s translating into margin compression. I just wanted your opinion regarding earnings outlook going forward for the S&P in general.”

.
Brinker said:
“Well as I’ve – you mentioned the investment letter that you subscribe to, and then you well know, I’ve written about this in the letter. And this is the reason that I’ve had very, very conservative 2008 earnings estimates for the S&P 500 -- very, very conservative number. My number for the S&P 500 for 2008 is way below, way below the Wall Street number for 2008. And the reason is because of the reason you said – because we have a sluggish economy.

.
We expect the first half to be especially sluggish. And even though I expect some recovery will start in the second half, when you take a look at the year on a whole, hey, we’re looking at a sluggish year. Very low growth in real GDP for the full year is my projection.

.
And consistent with that, and consistent with the inevitable margin compression you get in an economy like this, we have anticipated this in the investment letter by coming forth with a very, very conservative estimate for S&P 500 earnings for calendar year 2008.

.
Now we do expect a nice recovery, a nice recovery in earnings in 2009. And I believe as we go forward that will become much more of a factor in the market as we move forward over the next 6 to 12 months. But in terms of calendar year 2008, you certainly have to be realistic and pragmatic about what’s going on in the economy and that’s what we have done. This is Moneytalk..."

.
Brinker's guest speaker today was David Henderson, author of “Concise Encyclopedia of Economics.”

Review by by Stephen Hicks (Roscoe, IL USA):I used the first edition extensively after it came out in 1993. This second edition is updated appropriately and retains all of the classic material that made the first edition so good.

Thursday, April 3, 2008

Bob Brinker: Inflation and the Fed

Bob Brinker discussed the economy, inflation and the Fed in his opening monologue on Sunday, March 30, 2008. Here are some excerpts:

.
Bob Brinker said: “Well, if you’ve been listening to Moneytalk for a while, you know full well that I’ve maintained that this business about run-away inflation is total nonsense. This business about pre-occupation with high inflation is total nonsense. We have said over and over on a consistent on-going basis that the problem is not inflation. And as has been the case, we’ve received more good news on inflation this past week. The most important gauge of inflation, according to the Federal Open Market Committee, is an index known as the Chain Price Index for Personal Consumption Expenditures. I usually refer to this on the program as the Personal Consumption Expenditure Price Index. And this index came through this week showing some really outstanding numbers showing that inflation is decreasing. The year-over-year rate of inflation on the Index came in at 3.4, in the latest data. And the year-over-year core index – excluding food and energy – came in at 2%.

.
Now you’ll remember that the inflation hawks told us last year that because oil prices were going up, that was going to feed into the overall rate of inflation and cause higher inflation..........That’s what they told us. That’s not what happened. Oil prices went up.......... They are up over 19% over the past year. They’re up over $100 a barrel for crude oil, but so what..........Even though oil prices are very, very high, we continue to see a situation where inflation is low.

.
And because inflation is low, we have very, very low interest rates right now. In fact, when you take a look at interest rates right now, even if you go out to the longest Treasury..........to 2038, the 30-year Treasury Bond, the yield on that one is just sitting in at 4.34%. It’s also interesting to see that investors are pricing low inflation into quality bonds..........Triple-A rated full faith and credit U.S. Treasury securities..........Ten year Treasury Note yielding 3 1/2 %. The ten-year Treasury Inflation Protected Security base rate at 1.1%..........That’s one of the lowest base-rate in the history of the ten-year Treasury Inflation Protected Security..........The difference in there is 2.4, the 3 ½ minus 1.1..........That’s the implied inflation rate over the next ten years based on the current market pricing of yields on the ten-year Treasury Inflation Protected Security versus the Note. Now if you do the five-year comparison, the numbers are similar..........again, one of the lowest yields in the history of the five-year Treasury Inflation Protected Security at 0.4% -- pretty close to zero when you look at it..........the five-year implied inflation rate is only 2.1%.

.
So bond holders, and they have often been called bond-vigilantes in Wall Street because bond-holders, bond-buyers are the most vigilant of all when it comes to inflation risk because they, after all, all they get is the interest on their bond and therefore inflation robs them of the only return they are going to get on a security that is held to maturity. So the bottom line in all of this is bond-vigilantes, bond-holders in here are pricing in a today a 2.1 implied inflation for 5-year Treasuries and a 2.4% implied inflation rate for the 10-year Treasuries.

.
What that means is that bond holders are telling us they’re not expecting to see an acceleration in the inflation rate based on their assessment of the economy and how that plays out in triple-A Treasury Securities. And I have to agree. And of course, this has been our position. It has not changed that inflation is not the problem.

.
Now if you are a Moneytalk listener, you know that I was really critical, even though being critical is not in my nature, any Moneytalk listener knows that. Rarely, if ever have I been critical. But you may recall that I have been critical in the past year on some of the Federal Reserve officials who’ve been out there talking up inflation..........I do understand that some of the Federal Reserve members made a mistake. And the mistake that they made was that they equated high oil prices with inflation. Now we’ve seen – the proof is in the pudding – look at the numbers. Inflation in the last 52 weeks, 3.4 – core inflation 2.0, energy 19. So obviously, equating inflation to energy prices is a fool’s errand. And I think there were some – I don’t want to embarrass them, so I’m not going to name them..........in the Federal Reserve that made this error, thinking that higher oil prices equaled higher inflation. As we explained on our broadcast many times, the reason that is false logic is because consumers get strained when energy prices go up..........it makes it more difficult for them to spend money on other things.

.
As a result you do not get demand-pull inflation. By the way, you don’t get demand-pull inflation in an economy like this one anyway..........Gross Domestic Product adjusted for inflation in the 4th quarter increased at an annual rate of only 0.6%..........And here in the 1st quarter, it’s going to be flat to down. And the second quarter looks dicey also, depending on how the stimulus package plays in..........Well, the only other kind of inflation there is isn’t happening either – and that is cost-push inflation..........We are not getting cost-push inflation because it’s impossible for sellers to command sharply higher prices for their goods in an economy that is in the state that this economy is in, which is in the doldrums. You can’t push your prices ever higher when consumers are counting their consumer discretionary income dollars after they leave the gas station or pay their heating oil bill...........You just have to price in a competitive way. So you don’t get cost-push inflation -- even with the weak dollar which could have provided an umbrella for domestic producers to raise prices, given the fact that foreign were coming in with upward price pressure because of the lower dollar. But the reality is that they couldn’t do it..........The domestic producers couldn’t push through big price hikes, and even the companies importing products into the United States had to take a hit on their profit margins because they just don’t have the pricing flexibility in an economy that’s dead in the water like the one that we’ve been looking at here really since the 4th quarter.

.
So the bottom line on all of this, if you’re not going to get demand-pull inflation, if you’re not going to get cost-push inflation, that’s the reason that we have been right here on the program discussing inflation for so long. How did it turn out that so many people, including members of the Federal Reserve, were wrong when they said higher oil prices would create an inflation problem? How is it that here on Moneytalk, we were able to correctly assess the situation by saying over and over again that this is not inflationary. In fact, it’s contractionary..........That’s what it’s all about. This is Moneytalk.........."

.

______________________________________

Honeybee in edit (Friday, April 4th). Jeffchristie sent a comment that I think is very important so will add it here. He wrote:
.
"There is another aspect to the Bear Stearns story that Jim Rogers pointed out in a recent interview with Bloomberg. Bear Stearns paid out billions of dollars in bonuses to it's executives and top traders in January. If Bear Stearns had declared bankruptcy, the recipients would have been forced to give that money back since they were paid less than 90 days prior to declaring bankruptcy. So the CEO isn't the only person who benefited by the Fed's action."

.___________________________________

.
Honeybee here: Kirk Lindstrom also wrote an interesting response to this item, which are available under "comments." He posted the following information on his Bob Brinker Fan Club Blog:

.
"Federal reserve chairman Ben Bernanke testifying before Congress on April 3, 2008 about the Bear Sterns rescue was asked about inflation:
.

Question from Senator Johnson: "Are you concerned about inflation?"
.
Answer by Chairman Bernanke: "Of course, we are concerned about inflation. Inflation has been too high. Over the last year, it has been about three and a half percent instead of a little over two percent in the previous year. The primary reason for the high inflation is rapidly increases in prices of globally traded commodities including crude oil and food, among others. It is our expectation, which is consistent with prices seen in futures markets, and that these prices will moderate in the coming year…. Therefore, overall inflation will tend to slow. However, we are aware of the uncertainties with that. ""
.
http://bobbrinkerfanclub.blogspot.com/2008/04/bob-brinker-ben-bernanke-on-high.html


.


Top Rated Newsletter


Timer Digest Features
Kirk Lindstrom's Investment Letter
on its Cover

Cick to read the full page article!