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Saturday, December 27, 2008

Summary: Bob Brinker's Moneytalk December 27, 2008

Bob Brinker's Moneytalk: Excerpts, Summary and Commentary, December 27, 2008. Dow: 8515.55 (Down from 8579.11 last week); S&P 500 Index: 872.80 (down from 887.60 last week); Nasdaq: 1530.24 (down from 1564.32 last week) Oil: $37.90 (up from $33.17 last week).

As expected, Bob Brinker took the Christmas holiday off and was replaced by Bill Flanagan.

Bill Flanagan said it is in "rough shape," recited the year-to-date numbers [Dow down 35.8%; S&P 500 down 40.56%; Nasdaq down 42.3%.], then wryly understated, "Not what you would call a banner year for equities." He said that even though we are all bored with the reasons why, the "real nitty-gritty explanations" may take some time to come out. Bill said: "Some geniuses have been able to predict it, but their predictions fell pretty much on deaf ears." He also pointed out that "bonds took a hit -- the credit market."

Bill angrily talked about some of the men running the banks that "made even Madoff's scam look puny" -- they have now taken their "money and run." He talked about the former head of Merrill Lynch -- Stanley O'Neal, who walked away with $161million. Bill said these "scamsters" are "so rich and so gone." Bill spoke, with sarcasm dripping, about Citigroup's, Mr. Rueben, who made $15million a year but said he couldn't possibly determine the risk-profiles of the investments that were going on behind the scenes, such as CMO's, etc. Now Citigroup is number one in line for the bailout money and netted the most from it. Bill thinks we should "at least" call back the money from them and even more. He said that people are really suffering this year and the ones who did it to them are "whistling and laughing at us."

Bill said: "They not only monkeyed with the family jewels, they stole 'em, so now what in the name of God do you do? We know that not every CEO in America is a crook. Most of them are too busy trying to manage their businesses to even think up some of these heinous schemes that are so popular on Wall Street. They are trying to make a buck for themselves and their shareholders. There's still guys and gals like that around, trying to run their companies and they are in the majority and they will eventually return to what they do best......

.....But meantime, I think that long-term investors will indeed see a lot of improvement in the markets, in the equity markets. And in the bond markets, well, things will remain tricky. So where does somebody go with your money to get more than your mattress yields? Believe it or not, that's a tough question to answer. I've listened to hundreds of these shows -- watched hundreds of hours of CNBC -- Fox Business News -- nobody talks about this. They all get some scrambled hedge fund guys or day traders, goes, oh yeah, buy McDonalds, buy Staples, buy Campbells, buy this, buy that. They don't want to talk about bonds. Why? Maybe they know it's a sucker's game, I don't know. Well they don't make any money on day-trading bonds, that's why.....

......Day traders are fun, they're attractive, they're amusing to watch. They've done something except bite their fingernails off. They've actually made money because they're using puts and calls and all kinds of devices, and they have teams of geniuses sitting at consoles all day long trading with the speed of summer lightening. And God bless 'em, and they do make entertaining guests. But to follow a strategy like this on your own is insane......

......Well a couple of publications have at least stuck their necks out long enough to admit that there are those of us who would settle for small, super safe gains in bonds, although even they can't help from getting -- they call up financial advisors, you see, and the financial advisors don't make any money selling CD's or things like this, so they wind up getting into the soup to by saying, oh put together your own portfolio of bonds --baloney! You're nuts! You don't have enough money, and you don't know how to pick them out and neither do they......

.......Yeah, you're only going to get 2 or 3, or with any luck, close to 4%, but if you want your money to yield more than your mattress, that's about the best we can get with the kind of safety you need right now for some folks. Others want to take a chance, be my guest. And if you're in, and have stayed in, I certainly wouldn't get out of equities. But if you're trying to preserve the capital you have left, you can lose it in bonds as well as you lose it in equities....."

Bill's advice not to sell equities is the same as Bob Brinker's. Brinker has not recommended selling equities throughout this bear market. Indeed, the last time Brinker recommended raising cash was in January/August 2000.

[Bill's comments paraphrased]: There is a story in Forbes special issue 2009 investment guide titled: "Bond Buyers Dilemma -- the bond market is bracing for deflation, yet inflation looks like the greater threat: our advice buy TIPS" The government is handing out a lot of money and it can only be repaid one way and that is to keep the printing presses going until some or all of the money comes back -- many think that spells inflation down the road. So how can you protect yourself from inflation and deflation at the same time? One of the ways you CAN'T do it is with corporate bonds or bond funds.

Bill said that for this past year, one of the best performers in the bond arena was the Vanguard Total Market Bond Index Fund -- it returned about 5%. Remember, last year's results are no guarantee of future performance. Brinker said just a couple of weeks ago that he preferred Vanguard Ginnie Mae Fund.

Later on, Bill was very clear in his answer to a caller who asked him if he expected inflation. Bill emphatically said yes -- he expected perhaps a small period of deflation and then inflation. Bill's views on this are different from Bob Brinker's. Brinker is predicting deflation, not inflation. has an informative article "5 ways to outlast deflation."

Bill announced an article in today's NYTimes by Tara Siegel Bernard, Older Investors Should Examine the Risk in Bonds. It's a great explanation of the fundamentals of bond investing.

The calls today were mostly on the subject of the GM bailout. Bill made it VERY clear that he is totally for it -- even without any concessions or changes in outrageous UAW wages ($72 per hour, compared with Toyota's $44 per hour), cushy health care retirement benefits, and a job program that pays laid off workers to do nothing. Bob Brinker's views are just the opposite of Bill Flanagan's on this subject.

Download the show, listen at your convenience. A downloadable version of the entertaining Bob Brinker program is available FREE at KGO Archives for a full 7 days after broadcast! Now, you will be able to listen at your convenience on your portable media device whether it's in your car, on the trail, in your garden, or just relaxing at home. You won't have to stay online to listen any more! Moneytalk available when you want it FREE at KGO810
Skier Pig sent these: South Lake Tahoe shot from Heavenly and a North Lake Tahoe shot from the top of Diamond Peak at Incline Village.

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