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Saturday, November 15, 2008

Bob Brinker's Moneytalk, November 15-16, 2008

Bob Brinker's Moneytalk: Excerpts, Summary and Commentary, November 15-16, 2008. Dow: 8497.31 (down 5% for week); S&P 500 Index: 873.29 (down 6.2% for week); Nasdaq: 1416.85, (down 7.9%) for week; Oil: $56.29 (down 6.8% for week).


Bob Brinker did not mention the stock market specifically today, and there were no calls about it.

Brinker began the program by saying that it had been a "week of great volatility in the financial markets." Brinker devoted the rest of the opening monologue to the auto industry, unions, Washington D.C., and Henry Paulson's announcement that the TARP (Troubled Asset Relief Program) program has been dropped. Brinker said there would no longer be an effort to purchase bad loans -- it's not going to be done.


So now what's going to happen to the $700Billion? $290Billion has already been allocated this way: $250Billion to the nation's banking system on a capital injection program, with $125Billion of that money going to large banks such as Wells Fargo, Citigroup, J.P Morgan, Morgan Stanley, Goldman Sachs, Bank of America and a couple of others. The other half will be soaked up by other banks around the nation -- and an additional $50million was made to AIG on top of the earlier allocation........

.......So there is an additional $410Billion available, however it appears that it will be spent. The Treasury Secretary, while calling off the original purpose of the TARP Program, has replaced it with three other possibilities: Car loans, credit card loans and student loans -- those three will be the new areas of focus unless there are other changes, and there may be other changes because there will be a new Treasury Secretary sworn into office when the administration changes on January 20th. Who knows what new change he may order up........

........The government has been taking an Ad hoc approach to these situations -- the way they handled Bear Stearns in March. Following that was the Freddie Mae, Freddie Mac and AIG conservatorship along with a lot of money allocated to AIG........Then the fatal mistake of allowing Lehman Brothers to fail in September, which set off serious ripples that the government did not expect. Then they had to put in a guarantee program for money market funds that chose to join the program and establish a commercial paper funding facility that has $hundreds of billions of top-grade commercial paper obligations on the books and another number of things along the way.

Brinker thinks the books on a bail-out of the automobile industry should be closed today because the chief spokesman for United Auto Workers has stated that there will be no more labor concessions for the UAW workers. Brinker says that should close the door on any further bail-out discussion because without concessions by labor, the auto companies are doomed to the same failed business model that is clobbering their balance sheets and income statements.......The U.S./Detroit auto manufacturing companies have a failed marketing plan and cannot compete with other auto manufacturers under the current set-up.

Brinker said: "It's failed because the workers have earned so many benefits by winning their negotiations with management over the years that the companies are facing the risk of bankruptcy..........If management does not responsibly negotiate for the shareholders, then what can happen is that the pendulum can swing so far to the union's side that the unions basically own the company. They don't own it in an equity sense, but they own it in a job sense. The viability of their future employment gets washed out when the company gets washed out. And that's what we are seeing in the automobile industry. So on the one hand, there will be continued discussion on providing a bailout to Detroit, but on the other hand, it will have no long-term consequence unless the unions join in with give backs to re-negotiate their contracts.......

.......The automobile companies, as you well know, are no longer in a position to provide healthcare to their retired workers. They're struggling to provide healthcare to their current workforce........This is just one of many examples of how the auto companies management have literally given away the company. And they gave the company to the unions. And the unions will benefit as long as the company is able to the cut checks. Once that stops, then that's the end of this point, there is no point in carrying further any discussion of the bailout of the automobile industry, especially given the fact that labor wants everything they've won at the negotiating table and they refuse to even discuss making further concessions........

........The business model is broken. It's broken at General Motors, it's broken at Ford and it's broken at Chrysler..........this is Moneytalk"

The remainder of the program and most of the calls were basically about the subjects covered in the opening monologue. There was one call from a man who is very worried about the possibility of a government take over of 401K plans. This subject was covered at length in my Summary of last week's Moneytalk. Brinker simply repeated pretty much what he said last week -- with less detail.

Honeybee EC: This was a gut-wrenching week on Wall Street. The S&P lost over 6% this week alone, and the Nasdaq lost almost 8%. It astonishes me that a "financial advisor" who established his reputation and following as a stock market-timer, and has bragged about his market-timing prowess for over 20 years, now spends a whole program talking politics (yes, he even spent some time defending Obama), and government bailouts, without making any prognostications about how they might affect the stock market.

Last week, giving himself a complete mulligan on all of his prior buy levels this year, Brinker commented that he was looking for a new buy-level and recommended dollar-cost-averaging new money into the market. He failed to point out that so far this year, while he was FULLY INVESTED, he has made SIX changes to his advice for investing new money into the stock market.

In the December 2007, Marketimer, Brinker called the "mid-1400's" a "GIFT HORSE BUYING OPPORTUNITY" and said that there had been 18 opportunities to take advantage of it. By January 20th, he had dropped that advice altogether and recommended only dollar-cost-averaging. As the S&P 500 Index declined precipitously and relentlessly, Brinker issued other buying opportunities in the 1300's and 1200's....finally removing the last one in September, 2008.

Last week, Brinker said: "........during periods of weakness I would be willing to dollar-cost average money to add that to your stock market portfolio within the context of your tolerance for risk and your asset allocation........But I have not yet reached a point right now where I have been willing to upgrade the recommendation on the stock market right now from dollar-cost-average to buy. I do anticipate as we move forward that there will be an opportunity to upgrade the stock market recommendation, which is currently for new money -- we are talking new money -- as you have......."

Honeybee EC: Which is something (new money) you don't have in your model portfolios, Mr. Brinker....

Will Brinker bury all of this year's failed bottom calls and only brag about the latest one -- whatever that might be when it arrives? What about the people that believed he was correct at 1400, 1300, 1200? Too bad, so sad for them?

Brinker's Saturday guest-speaker was Robert Samuelson: The Great Inflation and Its Aftermath: The Past and Future of American Affluence


There was not one mention of the stock market on Moneytalk today. There was lots of political talk and much rehash of the same topics that were covered Saturday. Several annuity questions and some concern for annuities held by insurance companies.

Here are a few points that Brinker made on Sunday:

* Annuities held by insurance companies have NO guarantees except what is provided by the insurance company. BEWARE.

* The TARP equity stakes in banks and private companies is "total socialism."

* We are in a recession.

* Recessions are counter-inflationary.

* There will be deflation for the month of October

* There will be no economic recovery in the 4th Quarter -- "forget about it."

Brinker's Sunday guest-speaker was Burton W. Folsom: New Deal or Raw Deal: How FDR's Legacy Has Damaged America

If you missed Moneytalk this weekend, I highly recommend that you go to KGO810 Archives. You can either listen or download programs to your MP3 players or Ipods and listen at your leisure. They have Moneytalk programs available for seven days after they are broadcast. IT IS FREE!

Please note: Moneytalk was pre-empted for the Cal Bears football game Saturday (sometimes they broadcast it after the game). The program was on at its regular time 1-4pm Pacific Time Sunday.


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