Bob Brinker's Moneytalk: Excerpts, Summary and Commentary, November 1, 2008. Dow: 9325.01 (up 11.4% for week); S&P 500 Index: 968.75 (up 10.7% for week); Nasdaq: 1720.95 (up 10.9% for week) Oil: 64.69 (up $3.38 for week).
Firstly, let me tell you what Bob Brinker did not say (which I think is what most of you are truly interested in knowing). 8-)
- Brinker did not make any comments about the stock market today.
- Brinker did not mention that the S&P 500 Index just finished its WORST MONTH SINCE 1987.
- Brinker did not mention the fact that the stock market just had its BEST WEEK IN 34 YEARS.
Honeybee EC: How sad for Bob Brinker's vast Moneytalk audience that he chooses to avoid the very subject that he has built his reputation on: his perceived ability to time the stock market. Listening to Moneytalk now, you might possibly think the only thing he has ever recommended over the past 20+ years is the Vanguard Ginnie Mae Fund. To my knowledge, Brinker is the only market-timing "guru" on the national airwaves who often ignores the stock market -- especially since the Cassandras and "bad news bears" turned out to be so right and he turned out to be so wrong this year. (Even Jim Cramer admits when he's wrong and just keeps on keeping on.) 8-)
In Bob Brinker's opening monologue, he talked about the preliminary GDP report for the third quarter. He said it was negative 0.3%, but may be revised. He blamed the drop that happened between the second and third quarters on the decision to allow Lehman Brothers to go bankrupt, and said when that happened, the economy froze and went into free-fall. Brinker said that in the second quarter the economy was benefiting from the stimulus package, which he claims was largely given to people who spent the money --the second quarter GDP rose 2.8%.
Brinker said: "This (Lehman bankruptcy) was a huge mistake in Federal policy. Notice they did not allow that to happen to Bear Stearns.........They accomodated J.P. Morgan to take in Bear Stearns and avoid a bankruptcy. But with Lehman, they decided, and this was a disastrous mistake at the top, they decided to let Lehman go and that set off the credit market freeze and everything that followed. When you talk about the extreme moves in the financial markets, it comes right after the Lehman Brothers bankruptcy. And that was a decision by the mucka-mucks at the top to let Lehman go. It didn't have to be that way. They could have easily worked out a deal similar to the Bear Stearns deal. They made a critical policy mistake......."
ECONOMIC FORECAST....Brinker continued his monologue by giving a lengthy and detailed run-down of several economic reports, and said: "It's a weak economy and it's going to stay weak for sometime to come."
LEHMAN BROTHER MOMENT TRIGGERED EVERYTHING....Brinker said: "Now if you were to ask was there a single moment in the past several weeks where something happened in the financial community that had a dramatic impact on everything, then you go right back to the decision to allow Lehman Brothers to go under. It triggered the credit default swaps on Lehman.......
.......It triggered the concern about the tens of $trillion of credit default swaps that are out there. It triggered the concern the insurance companies. Did you see Hartford Insurance on Thursday? Hartford Insurance lost half its market value....in one day.....Prudential is trading down around $30 a share -- within the last year, it's been close to $100 a share. Did you see what happened to Metropolitan Life? These are insurance companies........
........These are companies that are involved in credit default swaps -- insurance contracts. These are insurance companies that are involved in writing $billions of annuity contracts to people all over the United States of America.........You're talking about counter-party risk on steroids when you talk about insurance company counter-party risk. This is the reason that one of the latest things that's coming out of Washington is the possibility that money from the Troubled Asset Relief Program (TARP), will be used as a direct capital injection into troubled insurance companies if the powers that be decide that that's required to save the companies......
....Now there is one thing about the Lehman Brothers bankruptcy, which is the thing that really triggered the Wall Street collapse, and the credit market freeze, and the economic free-fall.......it's impossible to understand.....and that one thing is, why wasn't Lehman Brothers too big to fail?.......You know we had Dr. Blinder on the program.......and when I asked him, are companies to big to fail, he current answer is yeah, there are companies that are too big to fail. Here's the question, why wasn't Lehman Brothers too big to fail.......I don't give a darn about the common share holders of Lehman Brothers, nothing, I don't care if they lose everything -- they already did.......look at the credit market siezure since that decision on Lehman......look what happened to LIBOR, look what happened globaling. The systemic risk around the world failed miserably.........That was a huge policy mistake by the Federal Government. This is Moneytalk."
GOVERNMENT BAILOUT FOR MORTGAGE HOLDERS...Brinker said that the SINGLE reason that there is no government program to assist troubled mortgage holders is because there are people out there who have done everything right, followed the rules and paid their mortgage, who do not want aid given to those who can't pay their mortgages.
CRITICAL MASS....caller Don said he had followed Brinker in 2000 and 2003 and had consequently reached critical mass. Brinker said: "Maholo."
Honeybee EC: What a shame that Brinker often lets callers say things that can mislead and be deceptive to other listeners and then just says "Thank you." If Brinker would have wanted to show integrity, character and honesty, he MIGHT have replied to Don with something like this: Well, Don, those were my two best calls, but I have made some clunkers since 2000, too. If you missed them, then good for you. You could taken have my advice to buy QQQQ in late 2000 and early 2001 with 50% of the cash you had raised in January, 2000 -- and then you would have lost 70+% of it -- and still be holding them hoping for recovery. You could have put a chunk of new money in the stock market on my mid-1400's buy-level in August 2007. You might have put more money in the market on my advice at the low-1300's in February, 2008 -- or low-to-mid 1200's in September, 2008. But kudos to you, Don, for missing all those blunders and choosing to follow only the two good calls.
ANNUITIES.....Brinker is totally against buying annuities. He says that a high percentage are inappropriately purchased, have high expenses and surrender charges -- the Vanguard annuity program is the one exception.
GENERAL OBLIGATION MUNIS....Brinker recommends only State General Obligations.
GNMA....Brinker recommends Vanguard GNMA Fund (VFIIX). Ginnie Maes are backed by the full faith and credit of the U.S. Treasury. They are in no way related to Fannie Mae or Freddie Mac. The principal on the Fund can fluctuate with interest rates. Brinker believes that VFIIX will stay in the price range between $9.50 - $10.50. Right now, it is selling for $10.07.
NO MARKET CALLS.....Saturday, there were no callers who asked or mentioned the stock market.
Jeffchristie makes some excellent points about Brinker's "Lehman Brothers" rant:
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!