Summary: Bob Brinker's Moneytalk, May 31, 2008

Moneytalk Summary, Commentary and Excerpts, May 31, 2008

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STOCK MARKET.... Bob Brinker said: “The stock market had a good month in the month of May, finishing at 1400.38 in the S&P 500 Index……….a gain of about 1.48%.........and for the second consecutive month the market showed gains. The Dow finished the month at 12,638, that was up 1.3% for the week……..and the Nasdaq Composite had a big week – up 3.2% to close at 2522.”

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OIL PRICE PULLBACK.... Brinker said: “Investors looking at the pull-back in oil prices. Oil prices had reached $135 a barrel, they pulled back to about $127 a barrel.”

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GROSS DOMESTIC PRODUCT.... Brinker said: “Certainly investors also looking at that Gross Domestic Product Report that came out at the end of the week, and better than the bears were saying, came in with an annualized gain for the first quarter of 9/10 of 1%. So we had growth of close to 1% annualized in real terms in the 4^th quarter. And of course the significance of that is, that is not a recessionary Gross Domestic Product Report.”

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RECESSION.... Brinker said: “In order to have a recessionary report, you would need a negative number followed by another negative number in the next quarter. So you would need two consecutive quarters, using the historic, the traditional, the academic definition of a recession that’s been used of decades……..Well, we don’t even have one at this point. Fourth quarter growth was 0.6 annualized – slow growth. And first quarter growth 0.9% annualized – slow growth. No recession in the 4^th quarter. No recession in the 1^st quarter. And this is the revised figure, so this figure will be very, very close to the final number………….”

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RECESSION CASSANDRAS.... Brinker said: “What we have right in here now is evidence that the Cassandras, who earlier this year, were telling us we were in recession – right now they’ve basically – well I’ll be kind, basically, they look like fools right now. Because all that they’ve accomplished with their talk about recession…………all that they have to show for their efforts is that they scared the people who listened to them out of the stock market this past winter……….”

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CORRECTION LOW AND TESTS.... Brinker said: “……..And probably a lot of those people got scared out near the correction lows. The initial correction low in January, which was successfully tested in mid-March, before the market reversed and resumed its uptrend. And basically, if you were to total up all of the accomplishments of the Cassandras, that would be it – that they scared people out of the market during a stock market correction in the first quarter………..Because they have been unable to present any evidence of a recession."

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LOST JOBS.... Brinker said: “And your questions to the Cassandras should be where are the millions of lost jobs that we would expect to see in a recession? In fact, in this economic slowdown, so far, we’ve only lost a few hundred thousand jobs total – dating back to the beginning of this year…………”

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STOCK MARKET BEARS.... Brinker said: “So what we have here basically, is an example of false prophets and it’s sad. And the reason it’s sad is the damage done. Think of the people that are looking today at the market, S&P at 1400 and they’ve been scared out of the market in the first quarter by these bears………It’s just amazing and yet these people are out there, and these people are not happy, I’m sure, to find themselves out of a rising market since March. To find themselves looking for ever lower prices when in fact we’ve had the opposite.

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We’ve had the market rising since mid-March. It’s rather significant when you stop to think about it. If you go back to mid-March and you take a look at the S&P 500 Index since mid-March, right now you have a total return, including cash dividends of about 10 1/2%.....................So it’s fair for you to say to the Cassandras, where is that recession, where are those millions of lost jobs, where are the two quarters of negative real GDP growth? Where’s the bear market? …………The answer is, they blew it! That is the answer, they blew it. They got caught up in their own negativity and they pronounced that it was all over, it was going to spiral downward and there was no end in sight – and they got it completely backwards. Truly amazing to see, and sad to see the people that are harmed by such unjustified negativity.”

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OIL MARKET MANIPULATION INVESTIGATION.... Brinker said: “Incidentally, an investigation has started of oil trading by the U.S. Commodity Futures Trading Commission. And they’re looking for evidence of purposeful manipulation of oil markets………The investigation was just announced within the last 48 hours. And they are going to try to prove that traders were trying to illegally move the oil markets with their activity. Now the acid test for this is that the sole intent was to try to move the price of oil, and that’s what they are going to have to prove. This is all about speculative trading – artificially pushing up oil prices.”

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OIL PRICES AROUND THE WORLD.... Brinker said: “Now keep in mind oil is an international commodity. And although you could try to manipulate prices in the United States……..that has not been proved yet. But hypothetically, if you were to try to do so, you might still have a big problem, and that big problem would be, well what about the financial capitols around the world outside the United States. How do you control those? You see, this is the problem with trying to control an international commodity. The fact is, even if you do have an impact in the United States, what about the rest of the world…………”

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OIL PRODUCTS CONSERVATION.... Brinker said: “………..This is the same point we’ve made with reference to conserving gasoline, or conserving oil products. Now you’ve probably seen that there’s been some conservation going on of gasoline. Gasoline purchases are down year-over-year – that’s practically unheard of. Why are they down year-over-year? The answer is because of price. The elasticity of demand has been put into play because of the higher prices of gasoline in the United States………”

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INTEREST RATES.... Brinker told a caller not to wait for rates on Treasury Bills to go down from this level because his expectation is that the economy will do better in 2009 than it did in 2008.

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UPTICKS FOR SHORT-SELLING.... A caller wanted to know why the up-tick rule was done away with. Brinker explained that it was to give the short-sellers a playing field that is level with the buyers. Brinker commented: “In a word, I think the decision they made was STUPID" and that it opens the door to bear-raids on individual companies.

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BRINKER’S OPINION ABOUT SELLING STOCK SHORT.... Brinker said: “Here on Moneytalk, we have never, at any time in 22 ½ years of broadcast, reflected in any way negatively on those who go short. We have always believed that investors should have the right to sell stock short. I think that you should have the right to sell indexes short. Some of you do it as a hedge against longs in times when you are bearish on the market. Some of you do it as a speculation. Some of you do it for tax reasons. But I think that going short is fine if it’s a well-founded position……….that’s going to work out for you……………So this comment that I make that elimination on the uptick rule on individual stocks was a stupid decision, this is based on the fact that it opened the door wide for bear raids on individual companies. It was not based on the fact people should not be allowed to put on short positions……….Prior to the elimination of the uptick rule you needed an uptick or a zero uptick in order to put on a short position in an individual stock. They’ve taken that away and I think that was not a good thing to do.”

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CRITICAL MASS.... Brinker paraphrase: If you don’t have to go to work to pay your bills then you are in the land of critical mass – whether you choose to work or not.

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FLORIDA SCREWS UP AGAIN.... While talking politics, Brinker mentioned the “butterfly ballot” fiasco in Palm Beach County and said: “Here they are again– year 2008, same results. Florida right back in the middle of it -- screwing up the election again. Ya know, if you didn’t see it, you wouldn’t believe it.”

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CALLER LOSES $26,000; BRINKER CALLS IT NOISE.... Brinker's excerpts: “....9%. Alright. Your portfolio corrected 9% in six months. That is noise! If your tolerance for risk is so low that you cannot roll with a 9% correction in your portfolio, then you really have to ask yourself what in the world are you doing………. most people that invest in the stock market, myself included, would regard a movement of 9% in a portfolio as noise...... Anybody that’s looking at a 9% correction off the all-time-highs and saying, oh this is dreadful, what am I going to do, that tells me your tolerance for risk is close to zero.………We are nowhere near the bottom right now – the market has rallied about 10% off the bottom, but we are roughly still about 10% off the top.”

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Honeybee EC: This caller originally said she had some stocks that were not doing well and ask Brinker what he thought of her moving into Freddie Mac or GNMA’s. Brinker said he didn’t care for Freddie Mac, and that GNMA’s also have fluctuation of NAV. Then Brinker actually seemed to goad her because of her losses, and made a much bigger deal out of it than she ever did throughout the call.

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I think it's possible that Brinker may have actually scared her by telling her that her tolerance for risk was zero. And all of his other hyperbole -- he said that she only belonged in laddered CD’s, etc. -- may cause her to damage herself further by selling all of her stocks and bonds.

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EUROPEAN GASOLINE PRICES.... Brinker said: “………What about consumption around the world -- we have to deal with that as well. Now it’s true, we are getting a very, very low price of gasoline in the United States relative to, for example Europe. I mean the people in the United States complain about $4.00 gasoline, but they don’t mention the fact that in Europe the average price of a gallon of gasoline is $8.30.

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Honeybee EC: Bob Brinker either does not know or simply did not want to say that about 75% of the cost of a gallon of gasoline in Europe is TAX!!!!!! As reported in this CNN article:

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NEW YORK (CNN/Money) – Gasoline prices in the United States, which have recently hit record highs, are actually much lower than in many countries. Drivers in some European cities, like Amsterdam and Oslo, are paying nearly 3 times more than those in the U.S.

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The main factor in price disparities between countries is government policy, according to AirInc, a company that tracks the cost of living in various places around the world. Many European nations tax gasoline heavily, with taxes making up as much as 75 percent of the cost of a gallon of gasoline, said a spokesperson for AirInc.

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Saturday, Bob Brinker’s guest speaker was Tamara Erickson, author of “Retire Retirement: Career Stategies for the Boomer Generation”

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Bob Brinker’s Moneytalk guest on Sunday was Janet Novak, who wrote an article for Forbes Investment Guide titled: “Read My Lips, Taxes are Going Up Sooner or Later: Sooner if You’re Well Off and Democrats Take the Whitehouse.”

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You can read Janet Novak's article here for free.

View next week's calendar for economic data here.

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Bob Brinker's P1 Changes Since 10/31/07

Bob Brinker's Model Portfolio 1: Stock Market Round Trip
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Bob Brinker was very bullish and predicting new highs in the stock market right up until the day the market began declining about 4 days after the January Marketimer was published.
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Marketimer, January 4, 2008, Page 3; Paragraph 1; Bob Brinker said: "We expect the S&P 500 Index to achieve new record highs this year and to reach the 1600's range in the process."

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All of Brinker's Model Portfolios were 100% invested and rode the correction down, so they are making a round trip. Hopefully, they will return where they were at the October, 2007 all-time-historical-record-high of 1565 -- some day.
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Kirk Lindstrom posted the following information on the Bob Brinker Discussion Forum at Facebook (post number 1391):
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Kirk wrote:
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"Brinker recommended fully invested with DCA of new money when the market was 1565. Some of the "Kirk Critics" have been critical of me elsewhere for my explore portfolio dropping 10% last year while they seem to want us to avoid discussing Brinker has kept his whole portfolio in the market that declined 20.2% on an intraday basis where he was unable to buy the dips like I did since I take profits. Due to having funds to buy stocks near the lows that are now up significantly, my explore portfolio is roughly flat YTD (down 0.6% as I type) while the markets are still down YTD (VTSMX down 4.2% YTD)
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Change since 10/31/07
Brinker P1 10/31/07 $302,561
Brinker P1 3/31/08 $252,199 -$50,362 (16.6%)
Brinker P1 4/30/08 $267,456 -$35,105 (11.6%)
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Down 16.6% from Oct 2007 at the end of Q1-08 is not the max his portfolios were down from the peak, just the max monthly changes. Even so, 16.6% is pretty large and not "insignificant." Given the market has recovered, his most recent numbers show he is still down 11.6%. Some people say they pay him for market timing to avoid "significant declines" which makes me wonder if they think 16.6% is "insignificant" knowing that on a daily basis his portfolio was down even more from its peak due to his NASDAQ100 holdings."

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Discussion: Bob Brinker's Long-Term Timing Record

Posted May 28, 2008 Bob Brinker's Model Portfolio Performance Record

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Octavian's comments (which are posted to the previous article):

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honey said: "Please tell me how far back you want to know his long-term record and I will present it in a front page post for you. ASAP...."
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Octavian replied: --OK. Please tell me the long-term record of P1 starting when I started listening to him on the radio, around Jan. 1, 1993.
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I know you people like to make sure to include 1988-89, so you can make him look as bad as possible, and if it helps you, you like to use the average of all his portfolios,rather than P-1.

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Why do I suspect that the brainwashed sycophants who post here don't know these things? -:)

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Honeybee here: Octavian.....Thank you for your comments and question.
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However, you are mistaken. Bob Brinker is the one who charts his Model Portfolios 1 and 2 from 1988 (1-1-88, to be exact). I cannot tell you the exact performance record of Brinker’s Portfolio 1 since 1993, but Mark Hulbert (Hulbert’s Financial Digest) tracked the performance of an average of Brinker’s three Model Portfolios over the past 15 years, which would take us back to 1993. Hopefully that will be close enough for you.

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Here is Hulbert’s conclusion under this category: “Performance Scoreboard For Mutual Fund Letters: The Top 5 Performers Through 4/30/2008; Total Return Ranking (Not Adjusted for Risk)": Bob Brinker ranked number 5 over the past 15 years.

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NOTE: Brinker did not make it into the top 5 performers for the past 5 years in any of Hulbert’s three different performance ranking categories.

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Octavian continued: “In any event, when I mentioned his long-term record, I wasn't actually talking about P-1 or anything like that. As you know,I've never been a big fan of his mutual fund selection method. In all honesty, I have done MUCH, MUCH better with my own fund selections than he has.

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I could write a major essay on the weaknesses of his fund selection methods.”

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Honeybee here: You and Jeffchristie have both done much better than Bob Brinker – different investing approaches, of course.

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Octavian continued: “When I said your people need to know his REAL long-term record, I was talking about how well his long-term timing model has done since he upgraded it around 1990.

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He turned bullish around that time, and stayed that way until Jan. 2000.

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I followed the market closely during those years, and the amount of outright bearishness among the "experts" was monumental. Hardly any of them stayed bullish the whole time!

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People who weren't involved with the market during those years, or who get their info from anti-brinker propagandists do not understand what a monumental achievement that was.”

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Honeybee here: It is ludicrous to pick a date out of thin air that even Brinker does not pick. it might make an interesting game, but it wouldn’t be much help in evaluating Brinker’s performance record, because everyone could pick a different date and it would mean nothing.

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However, I think that most everyone agrees that the fact that Brinker was bullish throughout most of the 1990’s was an “achievement.” He actually returned to 100% invested in January 1991. Here are the FACTS (Thanks to Math Junkie, a long time Brinker fan.):

Feb 1990…. equities @ 40%..................Dow: 2559

Jan. 1991…. equities @ 100%..................Dow: 2550

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Octavian continued: “Jimmy Rogers, a brilliant guy who helped George Soros run the Quantum Fund, was on TV all the time saying he was "net long," but issuing dire warnings about interest rates, inflation, and the coming crash.

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I'm quite confident that there were only TWO OTHER reasonably well-known people who were bullish all those years--Joe Battapaglia and the woman whose name escapes me. But they turned out to be mere permabulls, whereas Brinker went correctly bearish (or "cautious," if you prefer) in 2000. He then turned strongly bullish near the bottom in March 2003. He is virtually THE ONLY ONE IN THE WORLD who got it completely right!!”

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Honeybee here: Brinker raised 60% cash reserves in January, 2000, and another 5% in August 2000. The remaining 35% was in the market throughout the whole bear that began in January 2000. To categorize that as “completely right,” is a bit of a stretch.

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Please check out this chart.

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Octavian continued: “If it wasn't for the disastrous and inexplicable QQQ call (which had nothing to do with the long-term model), he would be hailed as a genius by the entire financial world.”

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Honeybee here: You are correct that the QQQ-call was disastrous, but to say it had nothing to do with “the long-term model” is simply not true. Sure, he kept it “off the books,” and deceptively has not accounted for it in his officially reported performance results. But the fact is that he repeatedly recommended that his subscribers use 20-50% of the 65% cash reserves from their Model Portfolio Money Market holdings to purchase QQQ in October, 2000.

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November 6, 2000 Marketimer, Bob Brinker said:
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"Marketimer subscribers with aggressive objectives can invest up to 30% to 50% of cash reserves in either the QQQ shares or Rydex OTC Fund in order to participate in this recommendations. That translates into potential exposure of 19.5% to 32.5% of a TOTAL AGGRESSIVE PORTFOLIO. (30% of 65% CASH RESERVES equals 19.5%. 50% of 65% cash reserves equals 32.4%). The balance of reserves remain in money market funds.
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Conservative subscribers can invest up to 20% to 30% of cash reserves in this recommendation, using either QQQ shares or Rydex OTC Fund shares. That translates into potential exposure of 6.5% to 9.75% of a total BALANCE PORTFOLIO. (20% of 32.5% cash reserves equals 6.5%, 30% of 32.5% CASH RESERVES equals 9.75% of a BALANCED PORTFOLIO. The balance of reserves remain in money market funds."

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Octavian continued: “During all the corrections of the big bull market,when so many smart people were urging caution or even suggesting bailing out (as many always do during corrections) he was always adamantly bullish.”

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Honeybee here: Brinker was also “adamantly bullish” at the all-time-record-high last October, 2007, and kept his Model Portfolios fully invested for the whole 20% decline in the S&P and 25% decline in the Nasdaq that began in January, 2008.

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Octavian continued: “Despite basher efforts to downplay his "gift-horse" call in 1998, it remains one of the best market calls in my lifetime.

Sure, he issued the gift-horse a little early--after the market had dropped 10%. But he not only stayed bullish, he also urged people near the bottom (a 20% drop) not to be "out of the market for a single day." A lot of people like me really benefitted from the strength of his conviction!!!”

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Honeybee here: Let’s look a little closer than 10 years ago and talk about his “gift-horse” buying opportunities. First he said it was “mid-1400’s," then he said he was “looking for a new bottom,” then he said it was “low-1300.” Here’s the documentation:

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August 3, 2007 Marketimer (S&P 1455) Bob Brinker said: “We rate the stock market as attractive for purchase on any weakness that occurs in the area of the S&P 500 Index mid-1400’s.”

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January 4, 2008 Marketimer (S&P 1468) Bob Brinker said: “ We continue to rate the market attractive for purchase on any weakness into the S&P 500 Index mid-1400’s range."

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January 20, 2008 (in a special bulletin) after the steep market decline, Brinker did away with the mid-1400 gift-horse, recommended ONLY dollar-cost-averaging for new money, and said he was "looking for a bottom."

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February 10, 2008 (according to Hulbert's Marketwatch article) Bob Brinker said that the market had bottomed and he issued a buy signal in the low-1300's.

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Octavian continued: “It defies belief that you bashers look for, and find, so many ways to knock that call. The real truth is, when he was saying not to be out of the market A SINGLE DAY, most advisors and assorted experts were scared out of their ever-loving minds!!! Why do you people conveniently "forget" that truth?
(Let me guess). -:)

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In any event, the market proceeded to go up FIFTY PERCENT OVER THE NEXT SIX MONTHS!!!!! How often in the entire history of the stock market has it done that??? Who else besides Brinker was so ADAMANTLY BULLISH???”

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Honeybee here: NOONE has forgotten anything. I have mentioned the “single day” thing many times, and you know it. However, just as you so correctly pointed out, the market dropped another 10% AFTER he issued the 1998 "gift-horse."

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Octavian continued: “I haven't even mentioned his correct and strongly bullish positions on Asia and the emerging markets. Nor have I mentioned his continued pooh-poohing of inflation fears, when so many were predicting it because of our strong growth.”

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Honeybee here: When was he "strongly bullish on Asia and the emerging markets"? Do you have some facts to back up your assertions – and maybe a time frame? As for his “pooh-poohing of inflation fears,” I would say that the jury is still out on that. Additionally, there are many better-known economists who think that there is good reason to fear inflation.

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Octavian continued: “There is much more. If anyone is seriously seeking true information, they can e-mail me. They will never get the complete, unvarnished truth here. Everything will ALWAYS be slanted to make him look bad.”

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Honeybee here: You are entitled to your opinion and have the right to say it, but I hate to see you make yourself look bad by making accusations that anyone who has read my Blog for any length of time knows are not true... Additionally, the proof that your accusations are false is staring readers in the face -- I accept all viewpoints about Brinker via comments, even yours. 8~)

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Octavian continued: “The truth is that Brinker has done a great job. He made one huge mistake and covered it up. That was bad.”

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Honeybee here: Octavian is referring to the cover up of the QQQ-trade.
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Octavian continued: “Overall, he has been great, and many people, like me, have him to thank for our financial success!!”

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Honeybee here: Somehow I do not think you give yourself enough credit where credit is due, and here's why: At the beginning of your comments you said, “As you know, I've never been a big fan of his mutual fund selection method. In all honesty, I have done MUCH, MUCH better with my own fund selections than he has.” Now that is very funny, Octavian….and thanks again for your comments. 8~)

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Bill Flanagan on Moneytalk May 24, 2008

Bob Brinker's Moneytalk, Bill Flanagan Guest Host: Summary, Commentary and Excerpts:
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Posted May 24, 2008. Almost exclusively, energy was the topic of the day.
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Here are some excepts from Bill Flanagan's opening monologue:
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“It was quite a week on Wall Street – good heavens -- never a dull moment – a correction, it’s been called. I don’t know why they call it a correction when the market goes down. Don’t we all expect and hope that the market will go up and therefore when it goes down, it’s an aberration – not a correction? That’s not the right direction – down, but that’s the word. As the correction of a few months ago’s (sic) upward movement dragged the markets back down to, uh, let me see now, we’ll take a quick look at the numbers.

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The Dow Jones stood at 12,479.63 at the end of the week – off over 500 points since Monday. So for the year, the Dow Jones is off 5.92%. The S&P 500, which dropped 3 ½% this week, is off a total of 6.29% for the year. The Wilshire 5000 is off 5.85% for the year. And the Russell 2000 is off 5.47% thus far this year.

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We know the reasons of course -- the credit crisis, the home building and home selling inevitable results and cause of some of the credit crisis. Median value of a previously owned home was $202,300 in April. That’s down 8% from a year ago. So people have not only seen their portfolios shrink, they’ve all seen the value of their homes go down, and of course, the price of oil going up to a record $132.19 a barrel –rose nearly $6.00 a barrel last week. Oil is up nearly $20 a barrel in May.

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Why? Well, oh, speculation……..that’s what you hear in the wind, and of course, it’s inevitable when you have everybody hopping on the same band wagon at the same time, there is bound to be speculative bubbles, and there’s no doubt speculation in this one. Not necessarily a bad thing – speculation, it’s a reality. But the underlying reasons for the rapid increases are strictly of course supply and demand.

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And if there’s a silver lining to what’s been happening lately…….maybe it will finally get the U.S., the Congress and business, and politicians other than Congressmen, and of course you and me and other folks who have the desire to get everything without sacrificing anything – NIMBY folks – not in my back yard -- they don’t want anything built that might put shade on their SUV.

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But we’ve got to get out of this incredibly terrible, debilitating, economically ruinous cycle of handing all our money over to people that might really not be our best friends. The billions and billions of dollars that we are giving to Venezuela, to the Arab world for oil – it’s insane. They have so much money; they literally don’t know what to do with it. They’re building cities in weeks over there, it seems.

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It’s almost like the old joke about the guy in Manhattan who said, what’s that building over there, showing off to his friends – I don’t know, it wasn’t there this morning. Whole cities being built, and of course what’s the business that they’re in, finance! They have all the money. They don’t have to put it in the hands of New York guys like, Citigroup – let’s just buy Citigroup. Or just set up a competitor that will eat its lunch right in its own back yard. We are literally exporting our wealth for oil, and it has to stop.......it has to be slowed down. And folks, maybe it takes the price of gasoline being over $4 a gallon for them to really get serious about it.

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And politician……..they are the people that just get me so annoyed at this. We’ve been through this before, at least twice before. And the same people say the same things………blah, blah, blah and what happens – nothing happens -- because politicians don’t want to upset the NIMBY folks. The enviros have great political clout. They practically own certain parts of certain states and they would have you believe a lot of nonsense, which a lot of people are now becoming aware is nonsense. Hey, go fill up on ethanol. Hmmm -- Oh, don’t let them drink milk, let them drink ethanol. People are starving around the world now as a result of ethanol. And congress is giving subsidies to the farmers not to grow food – to grow ethanol – to make ethanol out of what is food. That’s a solution to the problem? That’s what Al Gore likes, bio-fuels – oh Al, please, looks like you loaded up eating first before you decided that was the way to go.

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In congress at least, it should be clear as day that we need to drastically reduce oil and gas imports. We don’t import that much gas, although that’s on the agenda. We have to, and there are three ways to do it. One is to develop more oil and gas right here in the United States and in coastal waters. There’s a lot of oil out there……..but people don’t want their view impinged or whatever, I have no idea.

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But for example, there is no drilling off the east or west coast of Florida. That being such a powerful swing state, they can get away with anything with these congressmen and congresswomen. So we leave that all alone. God knows how much oil is there. Actually the oil companies have some pretty good ideas, but they have to be very hush-hush about it because they can’t say. They were told not to investigate anymore what might be down there. That was brilliant! We have to open up a lot of these areas that have been cut off for drilling. We’ve got to stop these bans on drilling – not every one tomorrow morning, but it’s insane to have all this oil underneath us and to pay $billions and $billions and $billions of dollars every day to Arab countries and elsewhere, when this stuff is just sitting there……….

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……………. Exxon Mobil, much in the news these days. The Chief Executive, Rex Tillison…….congress brought him in and gave him a tongue lashing – that’s the cause of high fuel prices – it’s Exxon Mobil. What morons!

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So there goes Bush asking Saudi Arabia to boost its production. He goes off to Saudi Arabia, but he does nothing to increase production at home – especially in the United States off the coast of Florida and California where there is known to be significant amounts of oil that we could drill and not pay anybody else for. Will it bring down the price of oil? No of course not, but it bring down the amount of money that we are exporting.

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There are significant resources available and they are mapped out and a lot of them are known underground in the U.S. – certainly the Alaskan possibilities are well known. I don’t know if you’ve ever been to that part of the world – way, way, way up in Alaska – not many people have, but this notion that there are a few caribou running around and there’s kind of an arctic idol that might be threatened by drilling some oil wells is so far from the truth, it’s absurd.

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There are thousands and thousands and thousands of square miles of nothingness, some of it mountainous, frozen tundra, permafrost -- there’s nothing there folks. It’s unfit for man nor beast. Furthermore, because of things like permafrost, you really can’t leave anything there. And you can’t even drill into the ground the way you normally would. Of course, you can wells, but permanent structures, they have to all be put on pilings because of the permafrost. Net result is, when the oil gives out, it’s not very difficult to pick the stuff up and go.

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People are starting to realize that now. Even some environmental groups in California for example, off the coast of Santa Barbara, the oil companies are being allowed to drill in exchange for some concessions, including a promise to cease production in 2023………. Now that’s putting their heads together…..We need to do these things. We cannot expect miracles to happen by themselves. We’ve got to drill. We’ve got to conserve. We’ve got to forget this bio-fuels nonsense – it can do a little bit, but it’s not going to do much. And trust me, look at the effect it’s already had on food supplies around the world.

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We’ve got to do something with coal. We’ve got to clean up coal. You can’t tell me that technologically we can’t come up with better ways of burning coal to get more efficiency and less pollution. I know it’s possible. I……… know it can be done, if any effort were placed behind it. We don’t want to have to rely on coal, but boy, do we have an awful lot of it, and we can get through this period until, yes, Valhalla happens folks. …………

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………..Nuclear power, it’s as plain as the nose on your face, this is the long term answer to our energy problems………but we have people who are petrified by just the word nuclear……….Technologically, I think that all things considered, we can build a lot more nuclear plants around this country without endangering anybody, anymore than we are right now. We have some formidable problems to solve, including hey, what do you do with the waste, but nuclear is the way we are going to have to go. ___This is Bill Flanagan…….”

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Kirk Lindstrom posted the following Market Correction Statistics:
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"Correction Statistics for 05/23/08
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S&P 500 Chart (Using Intraday prices): http://home.netcom.com/~kirklindstrom/Charts/SnP500.html
Last Market High 10/11/07 at 1,576.09
Last Market low 03/17/08 at 1,256.98
Current S&P500 Price 1,375.93
Decline in Pts 200.16
Decline in % 12.7%
Max Decline 20.2%
This means the correction from intraday high to intraday low is 20.2% and we are currently 12.7% off the peak.
The decline from the high to the low on a closing basis is 18.6%
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DJIA Chart (Using Intraday prices): http://home.netcom.com/~kirklindstrom/Charts/DJIA.html
Last Market High 10/11/07 at 14,279.96
Last Market Low 01/22/08 at 11,508.74
Current DJIA Price 12,479.63
Decline in Pts 1800.33
Decline in % 12.6%
Max Decline 19.4%
This means the correction from high to low has been 19.4% and we are currently 12.6% off the peak.
The decline off the high on a closing basis has been 17.1%
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NASDAQ Chart (Using Intraday prices):
http://home.netcom.com/~kirklindstrom/Charts/NASDAQ.html
Last Market High 10/31/07 at 2,861.51
Last Market Low 03/17/08 at 2,155.42
Current NASDAQ Price 2,444.67
Decline in Pts 416.84
Decline in % 14.6%
Max Decline 24.7%
This means the correction from high to low has been 24.7% and we are currently 14.6% off the peak.
The decline off the high on a closing basis has been 24.1%

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Honeybee here: This is a view of the beautiful Santa Cruz Mountains from my deck:
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Bob Brinker's Portfolio1 YTD

Posted May, 21, 2008, Bob Brinker's Portfolio One year-to-date numbers:

JoeJr wrote:

"Bob Brinker's P 1 is still down YTD as of the 21 May 2008 close. I looked at each fund in the portfolio. I subtracted the value as of 21 May 2008 from the value on 31 Dec 2007. All funds were down YTD. I then took the % down times the weighting in the portfolio. The total was then divided by 100 and Brinker's P 1 is down 3.3% YTD as of the 21 May 2008 close. All data was obtained from Yahoo finance.
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I will not reveal the funds involved for fear that Brinker might force the closure of this board just like he did at fund alarm and suite101."

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Honeybee here: Brinker's subscribers must be happy that the market has recovered so much from the March lows.
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On the other hand, it must have been difficult for Marketimer subscribers (who count on Bob Brinker to warn them when a bear market is looming) to have ridden this market down fully invested while expecting imminent new highs.
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The Nasdaq definitely went into bear territory at a 24.1% drop on a closing basis. The S&P dropped 20.2% intraday, and 18.6 on a closing basis.
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As he admitted on Moneytalk, Bob Brinker did not see this one coming. Brinker had opined that the 7-10% correction last year had restored health to the market.
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Last October, as the market reached its all-time-historical-record-high, Brinker was predicting MORE new highs and saying that the S&P would reach into the mid-1600's.
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And from August, 2007 through January 4, 2008, Brinker was recommending all-new-money-in at the mid-1400's level. Unfortunately, there is still quite a distance to go before the market gets back to where it was in October 2007.
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Recently on Moneytalk, Brinker bragged about his new "buying opportunity" of low-1300's. Seems to me like he just moved the goal post and began a new game. Rather ridiculous when one thinks about it.

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My weekend Moneytalk Summary drew several very interesting, varied and sometimes amusing, comments by CWK, Princepro110, Jeffchristie, Jumpnjoey, Kirk and "Thoughts of a Conservative Genius Mind".
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Don't miss them! 8~)
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Summary: Bob Brinker's Moneytalk May 17-18, 2008

Moneytalk Summary, Commentary and Excepts, May 17-18, 2008

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STOCK MARKET AND ECONOMIC RECOVERY

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Bob Brinker said: “In terms of the market place, the S&P 500 is sitting in right now at 1425 and a fraction. And that’s 8.9% below the all-time-historic-record-high. And overall, the market is having a good week, and investors are feeling better now about the prospect of signs of recovery showing up in the second half of 2008, followed by an economic recovery in 2009.”

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INFLATION, ECONOMY, AND RECESSION
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Saturday opening monologue excerpts, Brinker said:

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“Well, there was good news on the inflation front this week. We’ve been talking about the fact that the inflation numbers have been coming in very, very low, despite the fact that oil has gone through the roof – up around $128 per barrel.

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The favorite inflation gauge at the Federal Reserve is the Personal Consumption Expenditure Index. Those numbers are excellent – 3.2 year-over-year counting everything, 2.1 year-over-year for the core index, excluding food and energy……….But they are better than that because of the underlying conditions. Because these numbers are occurring at a time when gasoline prices over the last year have risen a staggering 20.7%.........Taking the entire energy complex, the year-over-year gain in energy prices at 15.9%. And with the energy intrusion into the food chain……things like ethanol, corn-base, etc. we have food prices now up 5.1% in the United States on a year-over-year basis. Taking all that into consideration, in that key Federal Reserve inflation index, we have very low numbers………so we are seeing some great numbers in terms of inflation.

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And this is what we told you would happen, even though there were many doubters…….That in the event energy prices went up sharply, they would provide an overall contractionary impact on inflation. Why? Because consumers who drive the economy……..get pinched when they have to empty their wallet at the gasoline pump – or when they have to send in extra money to pay their monthly utility bill……and that leaves them with less money in their pocket to spend on discretionary spending.....

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And of course, energy prices go up and they feed into transportation prices. Transportation prices are up 7.2 year-over-year……..but beyond that, we just have not seen it.

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Now we have seen the contractionary impact on the economy. A lot of people mistook that for a guaranteed recessionary outcome. We don’t even have one quarter yet of negative GDP. We need two in a row to get a recession, using the traditional, historical and academic definition of a recession………We had slow growth. For sure, it’s an economic slowdown – 0.6 growth in the last six months, 0.6 growth in the fourth quarter, and that’s the preliminary estimate on the first quarter……..We have a very, very sluggish economy and part of that has to do with the housing recession.

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But so many people on Wall Street fell into the trap of guaranteeing a recession when in fact, it was highly arguable as to whether we were going to have a recession………And as we look at things right now, we just don’t have the statistical evidence to bring any comfort to those that were guaranteeing a recession. And with the stimulus checks now being distributed as of late April, there’s a question mark on the second quarter……..It’s too close to call. It’s certainly not going to be a meaningful growth quarter……….So the question is how close to the flat line do we come in the second quarter. But once again, those guaranteeing a recession, so far, frankly, they are looking pretty ridiculous……..

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.........The other factor is, so far the job losses have been very, very minor. We’ve lost a few hundred thousand jobs, but you should be losing millions of jobs in a recession……….Certainly at least 2 or 3 million………So once again, these people out there guaranteeing a recession, they’re looking like fools right now. They are going to have to muster some statistical evidence to support their case, or of course, the other thing they may do is what they frequently do is simply change the definition of a recession to match whatever comes out. But of course that doesn’t cut anything with reference to history because we have a history of recessions in the United States, and they all had two straight quarters of negative real Gross Domestic Product. So without that, you’re kind of just making a fool of yourself, in my opinion – going out with a forecast like that without the evidence.

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Looking at the inflation numbers around the country, there is some variance with inflation. Year-over-year, using the CPI numbers, New York is up 3.6; Los Angeles is up 3.1; Chicagoland, 4.2; Boston, 2.9; Dallas, 4.4; Detroit, 2.4; San Francisco, 2.9; and Washington D.C., 4.7……….

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.......When we look at the CPI components, we see that the housing component is showing inflation of 3%. Now that seems ridiculous, but remember how this is constructed. This is constructed on a rental equivalent formula. Now I know what you are saying: How could the Consumer Price Index be showing a 3% gain in housing costs year-over-year, when everybody knows we’ve seen a double-digit decline in the price of houses over the last year. And the answer is, they throw that out. They don’t use it. They use the rental equivalent, and the rental equivalent formula shows the housing increase in the CPI at 3.0 year-over-year.

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Another number that tends to be stubbornly high is medical care, and that’s coming in at 4.3%.........There are other areas that have been behaving themselves – none like apparel – apparel showing a year-over-year decline of 0.7%, believe it or not………So, the anticipation is that inflation is going to remain reasonable for the rest of this year."

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CALLER: Said his definition of inflation is, “Too many dollars chasing too many goods and services.” Brinker agreed that was one of the ways that we can have inflation, but another way to have inflation is when there is excessive money supply – in other words, the Federal Reserve throws inflation concerns to the wind and keeps printing money -- which obviously can lead to the situation the caller mentioned. Caller also pointed out that many packages now contain smaller amounts of food than before, but are still selling for the same price, and asked if that is inflationary. Brinker said that is factored in, just as they factor it in when prices come down -- like for instance, in the high tech arena.

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CALLER: Said that the Vanguard Prime Money Market interest rate is down considerably and he was thinking of moving to another Vanguard Fund. Brinker asked about his tax bracket (33%) and recommended that he take a look at Vanguard’s New Jersey Tax Exempt Money Market Fund – that he might find that the yields on the two funds are fairly close.

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CALLER: Asked about the safety of credit unions. Brinker said to be sure to look for membership in the NCUA (National Credit Union Administration) -- which gives you coverage up to $100,000 and in some cases up to $250,000.

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CALLER: Finds it difficult to believe that food and energy are included in the inflation numbers, and wanted to know what other listeners might be thinking. He said that eggs are up about 70% and milk is up 50%, so this has to be passed through to the consumer. Brinker reassured him that it was all in the numbers, and that there are always people who throw the true numbers out and make up their own.

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(Honeybee EC: Brinker adamantly defends the Fed's inflation "numbers," and seems willing to ignore the fact that in the "real world," people, especially poorer people, are being hurt by the huge increases in food. IN SPITE of what the published statistics say, inflation is hurting many.)

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Here are some comments by Jeffchristie, an objective Brinker-commentator:

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"Two observations on inflation. If you are poor inflation is eating you alive. Food and energy are up big and the poor are having trouble just buying food.

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Second Brinker says that inflation is being held in check because average people don't have much money left after buying gasoline and food. My question is does anyone think this is a good thing? He even claimed that many people are not filling their tanks because they don't have the money. Not sure I agree based on what I am seeing at the pump. Most people are using credit cards. Brinker told some hokey story about buying only 4 gallons because his tank was over half full. It didn't make sense to me. Why would he even stop for gas if he still had half a tank.

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.......... Brinker says people have less money because of the high price of gasoline. Guess what Bob, I have more money because of it.........A caller from Alaska said the state is making so much money off of oil that each citizen may be getting $100 a month back from the state.........."

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CALLER: Wanted to know if Brinker thought the Federal Reserve had been overly concerned about inflation because of all the federal entitlements that had been signed into law. Brinker said the things that worry the Fed about inflation are the things that have always worried the Fed about inflation – too much monetary growth – a condition that we do not have right now. Another condition they worry about is demand-pull, but that’s an offshoot of excessive monetary growth. And you cannot have cost-push inflation in a sluggish economy because there is too much competition. Competition has been exacerbated by the development of Internet sales – people buy over the internet and save money.

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Brinker said: “…….the most misunderstood inflation concept – is the concept of rising oil prices. Believe it or not, there are people out there who believe that rising oil prices are inflationary – wrong. Rising oil prices are counter-inflationary because they result in a sluggish economy.”

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CALLER: Asked Brinker if he was familiar with Auction Rate Preferred Securities, and then said that because of the credit crises, these securities cannot be sold now – so $330Billion in assets is frozen. The caller had invested $78,000 in them. Brinker commented that, in 22 years of doing Moneytalk, he had never recommended a single penny be invested in them – that he never saw any reason to take the extra risk for a short-term yield. Brinker wished the caller well, and reminded the audience to “know what you own.”

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CALLER: How secure are bridge-loans? Brinker said that’s the question – because they vary. There is credit risk, so if the bridge loan doesn’t get paid in a timely manner, and if the company should go under, “Welcome to bankruptcy court.”

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CALLER: Wanted to know where to find objective information on housing sales in her area. Brinker recommended that she get a real estate broker to give her a print out of comparables in her area. There are a number of ways to evaluate comparables. For instance, you can evaluate comparables by looking at amenities, square-footage and the tax situation – and always put a higher weight on recent transactions. This is the only way to assess the true value of a real estate property – through the transaction records. A property is worth only what someone is willing to pay for it – no more, no less.

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HOUR TWO OPENING MONOLOGUE

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Bob Brinker said: “Well the President of the United States, George W. Bush, says that Saudi Arabia is not going to give us, in response to our request to raise oil output…….what we want. They’ve agreed a paltry increase of 300,000 barrels a day…….and so that’s going to do virtually nothing to satisfy the supply-demand equation out there that has pushed oil into the $126 per barrel range this week. What really has to be done is a Manhattan Project – as we’ve discussed it on Moneytalk. It’s a major program and it is multi-faceted.”

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Brinker Comments Paraphrased: Solar and wind power are fine, but are only a small part of the solution – and would solve less than 10% of our energy problem. Brinker’s Manhattan Project is a plan to build nuclear power generation facilities for making electricity. Sadly, now in the United States, only 20% of our power comes out of nuclear power facilities, 30% comes out of natural gas facilities – which is a waste because we should be using our natural gas for other things. The “nightmare scenario” is that 50% comes from the filthiest source of all – coal-fired electricity plants across America. Since 1954, in the U.S., the military has used nuclear power generation submarine fleet. Yet we have the “nay-sayers” like the “Sierra Club” sorts bashing nuclear power without justification. For those worried about waste – the answer is, we recycle – just like they do in France.

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But where are the candidates, McCain and Obama on this topic? There is nothing more important to the U.S. than energy. Not just because of the price of oil and gas, but also because now we have compromised our food chain through the corn-based ethanol program and other programs that are getting into the food chain and driving up the food. Brinker said, “It’s the primary reason foods up 5.1 year-over-year.”

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BRINKER’S FOUR-STEP ENERGY PLAN

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Step one: Manhattan Project for nuclear generation across America.

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Step two: Coal-liquifaction program – to tap into our plentiful coal resources without burning it in electricity generating plants to a level that’s completely unacceptable.

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Step Three: Raise fleet café-standards/mileage. Informative website

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Step Four: Immediately start drilling in Alaska National Wildlife Reserve.

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HIGH MILEAGE HYBRID PREMIUM-PAYBACK

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Brinker commented that he had checked online at Edmunds and found that the three leaders are: Toyota Camry Hybrid Sedan = 1.7 year. Toyota Prius Hybrid Hatchback = 2.6 year (this is the vehicle Brinker owns). Nissan Altima Hybrid Sedan = 3.4 payback. This assumes 15,000 miles per year driven at $3.67 per gallon.

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MISCELLANEOUS BOB BRINKER QUOTES OF THE WEEKEND:

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• "We are beggars. When the United States president has to fly to Saudi Arabia and kneel down at the altar of the royal family and say, please, please, please, give us a little more oil, how pathetic can you get?”
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  “We look like fools on energy consumption today.”
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  “Don’t buy adjustable rate mortgages unless you are living over the short term.”
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  “Hillary is toast.”

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SUNDAY TOPICS: Almost exclusively energy and politics.

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GUEST SPEAKERS:

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Saturday: Craig Karmin, reporter for Money and Investing Section of the Wall Street Journal. Author of “Biography of the Dollar, How the Mighty Buck Conquered the World and Why It’s Under Siege.”

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Sunday: William J. Bernstein who wrote: “A Splendid Exchange: How Trade Shaped the World.”

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Summary Conclusion Bob Brinker's May 10-11, 2008 Moneytalk

Posted May 16, 2008, Bob Brinker's May 10-11, 2008 Moneytalk Summary, Commentary and Excerpts: (Conclusion)

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• Bob Brinker Tidbits of Advice:
• Buying FDIC Certificates of Deposit is not the same as buying Annuities. When bankers tell customers that they are both guaranteed, that is “bull-bleep.” Annuity guarantees are not the same as FDIC guarantees.
• VTI is a good substitute for Model Portfolio1 holdings for those just getting started.
• By 2009, in terms of housing market……we should have made real progress and enter a period of stabilization, but “the glory days are over for housing.”

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A Moneytalk Caller asked Bob Brinker about demographics of the retiring baby boomers and how that might affect the stock market. After mentioning a local commentator, the caller said this: “He’s saying that as the baby boomers retire now, the spending would trail off and that would cause the stock market to go down in 2010, and actually create a Secular Bear Market. I was just wondering what your opinion was on that type of scenario."

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Honeybee EC: Brinker did an outstanding job of evading the caller's question about the possibility of a “Secular Bear Market.” There is a very good reason why Brinker would not want the subject discussed openly on Moneytalk. It goes to the very heart of Bob Brinker's ability to analyze and reach conclusions about stock market-timing and IMO, clearly shows how it's more luck than skill. Here are the facts:

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When Bob Brinker issued a buy signal in March, 2003, he predicted that it was the beginning of a cyclical bull market. However, he opined (and cautioned) that the cyclical bull market was part of an ongoing secular bear market megatrend and he expected the cyclical bull market to last only 1-2 years.

• As the cyclical bull market stretched longer, he extended the time-frame to 1-3 years.
• Later, as it stretched even longer, he called it "long-in-the-tooth."
  
• In November, 2006 (five months after he later claimed the secular bear had ended) he said this: "We regard this cyclical bull market as an outlier in terms of its unusually long durations."

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Here are two examples of what he said about the secular bear megatrend: In the August 2002, Marketimer, Page One; Paragraph One; Bob Brinker said: "In our view, the U.S. stock market entered a secular bear market in the first quarter of year 2000. The benchmark starting points for this secular bear are: Standard and Poor's 500 Index: 1527.46...March 24, 2000. Dow Jones Industrial Average: 11,722.98....January 14, 2000"

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September 2002 Marketimer, Page One; Paragraph Two; Bob Brinker said: "We believe the ongoing secular megatrend we are now experiencing will see a succession of cyclical bull and bear markets lasting approximately one-to-three years each."

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Finally, in June, 2007, Brinker retroactively declared that the secular bear megatrend had ended a year earlier, in June, 2006. Of course, he did not say that in June, 2006 or at any time between June, 2006 and June, 2007.

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Matter of fact, even Brinker was not aware that the secular bear market had ended in June, 2006 when he had this conversation on Moneytalk in 2007:

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February 3, 2007, Moneytalk caller: "Just a quick question. It's kind of a philosophy of what you do - the secular bear, cyclical bull thing." (Brinker: "Yeah, sure.") "I'm curious because I've read previous letters and it may be some time ago, but I think you gave some kind of an actual projection what you thought the S&P would actually get up to before it may roll over into the bear cycle."

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Bob Brinker: "Well, we haven't put a final number on that, and we'll certainly update that by the way on a continuing basis in the monthly letter, which is just part of what we do. But no, we have not put a final number on that. But what we do know is within secular trends there are no cases where a secular trend has gone beyond the previous peak by more than, by more than 10%. It's never happened, so I think it's fair to say that until that happens, the secular trend is intact."
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Now the secular trend that began in year 2000 when the S&P was up in the 1500s, awww, that remains intact. The S&P 500 Index - and this is measured by the Index itself - has not gone above the prior high of 1527 close. In fact, in remains in the mid-1400s at this point. In order for it to move beyond an existing secular trend, such as the one we've had the past seven years, you would have to exceed it, I would think, by at least 10%.

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There are many cases, Peter, where we have exceeded it in the single digits. There are many cases, for example, go back to 1966-1982-that was a secular bear trend. And there were many cases during that trend, where the Index exceeded the prior cyclical bull market high during that secular trend by let's say, 4%, 5%, 6%, but there were no cases where it was exceeded by 10% or more. So for now, the secular trend remains intact because the S&P has been unable to exceed the prior high of 1527 by anything close to 10%. In fact, it's never even been back to that level and even today remains below that level."____Bob Brinker

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Brinker has NEVER told Moneytalk listeners (the very ones he was thanking so profusely at the beginning of the show this weekend) that he has called an end to his long-touted secular bear market -- and he never mentioned it again in Marketimer after he made the short announcement in June, 2007.

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Perhaps that is why he evaded the callers question when he heard the words, "secular bear market," because history has proven that he was 100% mistaken -- there has not been a secular bear since 1982 when the secular bull market began. The record shows a cyclical bear market between March, 2000 and October 2002. And we came real close to another cyclical bear (by Brinker's definition) beginning in January, 2008 -- one that he says he did not expect, and certainly rode down with all Model Portfolios fully invested.

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This chart shows that (so far) the high was October 2007 and the low was March 2008.

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Now back to how Brinker answered the “secular bear” question from this past weekend: “Charles, there are “as many opinions about the stock market as there are people forecasting the stock market.” Brinker went on to explain the obvious – that you could look at hundreds of forecasters and they would all be different. Some forecasters predict the market is going to the moon, others say it is going to zero. Brinker said that his policy has always been to do his own work, and that he pays no attention to what anybody else is saying about the market, because he doesn’t want his thinking to be “colored.”

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Brinker continued: “When I put out my sell signal on the stock market in January of 2000, and we took most of our Model Portfolio money out of the market at that time, I did it based on my own work. And when I put out the buy-signal, the major buy-signal, on March 11, 2003, when the S&P was around 800, I did it based on my own work. Now in January of 2000, there were many people that were bullish and I put out a sell-signal. And in of March, 2003, there was very wide-spread bearish viewpoint out there and I put out a major buy signal.”

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The caller followed-up by again asking if Brinker had any opinion on the “generational shifts.” Brinker commented that he thinks there are always generational shifts -- it is an ongoing thing, but that stocks are valued based on the discounted present value of future earnings, or alternatively, the discounted present value of the future dividend stream.

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Bob Brinker amusing quotes of the May 10-11, 2008 weekend:

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“I think you have to do more work than just be a shill.”

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"That is “bull-bleep.”

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(Honeybee EC: Great sense of humor, Bob...Kudos!)

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April CPI Report, Freddie Mac, Bernanke, Libor

Subjects Bob Brinker Discusses on Moneytalk:
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Freddie Mac Rules Ease "Shares in Freddie Mac rose more than 9 per cent on Wednesday after the government-sponsored mortgage financier was granted greater flexibility to support the beleaguered US housing market.

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The Office of Federal Housing Enterprise Oversight said it would lower a surcharge on the company’s regulatory capital requirements after Freddie announced plans to raise $5.5bn in capital and reported its third consecutive quarterly loss..........."

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April CPI Report YOY figures are: Headline CPI +3.9%. core CPI +2.3%

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Kirk Lindstrom has reported more detailed data and charts at Investing For the Long Term in the U.S. Economy Forum and there is additional discussion there about how the price of gasoline is and will affect the CPI.

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Bernanke: Fed may boost TAF loans if needed.

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Libor/TED improves slightly.

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Summary Cont: Bob Brinker's Moneytalk May 10-11, 2008

Posted May 12, 2008, Bob Brinker's May 10-11, 2008 Moneytalk Summary, Commentary and Excerpts, Part Two:
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Bob Brinker's Moneytalk guest speaker on Saturday was, Kevin Phillips, Author of “Bad Money, Reckless Finance, Failed Politics and the Global Crisis of American Capitalism”

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When Brinker asked Kevin Phillips about the strength of the dollar against the Euro, Phillips replied: “Well, I think they are getting very nervous about this. The Europeans are concerned that with the Euro at a $1.60 of our currency, it’s too over-valued and threatens their economy, and I think the Washington people are finally getting scared that they’ve got the dollar close to some further downward lurch that would really cause a global panic. But I think they’ve absolutely set it up. I think we’ve seen relentless lies about their intentions on the dollar.

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We’ve also seen relentless lies about whether we can expect inflation. I think the CPI numbers – this is another thing that is important – are flawed! And if we actually have 5 or 6% inflation today, then the government’s computation of economic growth during the first quarter would stop being 0.6% up and would be something like 1 ½% down. So that there is just massive negligence of an economic sort going on in Washington, in my opinion.”

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Brinker replied to Phillips: “Now we use the Personal Consumption Expenditure price index as a back-up to the CPI, and as you know, it’s the favorite gauge of the Federal Reserve. It shows 3.2 year-over-year inflation, 2.1 core inflation. I gather you don’t have any confidence in that either.”

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Phillips replied: “No, there’s a fellow named Williams who runs something called ‘shadow statistics’, who’s gone back and looked at the history of CPI and his argument, and I think it can be at least partially substantiated well, is that if you use the pre-1980 computations – fixed basket and all of the other things, you’d be running about 10 or 11%. It’s pretty clear that we’ve got about 5 to 7, and a lot of European investors who are worried about the dollar, think it’s 6 to 9”

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Brinker said: “But of course with Social Security tied into the CPI, there is some conflict of interest there.”

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Phillips replied: “The government has a massive, perhaps $250billion a year to lie. If they were to face the truth of even let’s say 5 or 6% inflation, the additional interest they would pay on the various debts, principally the national debt, but there’s more at stake than that, the increase that we’d have had to have seen over the years, and still probably need to see on Social Security, cost of living adjustment......... there’s just all kinds of things that would cost them money, so they’d just prefer just to fudge it.”

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When Brinker returned after the commercial, he asked Phillips what he thought about the disasters in Burma and then moved on to talking politics, so we got to hear Phillip's and Brinker’s opinions about McCain, Obama and Hillary.

************************************************

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Sunday, (Honeybee EC: conveniently) a caller asked Brinker his opinion about what Kevin Phillips had said about inflation numbers being much higher than what the government is reporting.

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Brinker must have decided this was the time to dispute what his guest had said the day before. Here are some excerpts of what Brinker said: “Well, if you just had one indicator that would be better grounds for that view. I brought up the fact with the guest that there’s another indicator, which is the Federal Reserves favorite indicator, and that is the Personal Consumption Expenditure Index. And I think that the Personal Consumption Expenditure Index is an excellent gauge of inflation. It shows 3.2 year-over-year. It shows 2.1 year-over-year core. And in the CPI, it should be noted that nothing is really being hidden.

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Nothing is apparently hidden in the CPI in the sense that the energy component is up 17% year-over-year. So the energy component is showing tremendous run-up in the price of oil as part of that energy component. And certainly other parts of energy, like natural gas, have also risen in price and are part of that component. And without question that spills into the transportation sector as we’ve always said…….What has been remarkable is that it really has not bled into the core index very much at all because all of that, you know was supposed to bleed in and cause all of this inflation. It didn’t happen. It just hasn’t happened………..

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Look, we have people on the program that have different views than me, I’ve told you……I mentioned last week we had a recent guest on the program back when the market was at the lows – when the market was down around 1300 in the S&P……..he was bearish as a (unintelligible) bears. And I remember telling the audience, I said look, it’s a free and open exchange of ideas. This is not my view. I happened to be very bullish at that time.

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In fact, at that time, I happened to have a buy signal on the market when the market was down around 1300. But he was coming with his bearish views………”

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Honeybee Sez: The above statement is a blatant example of Bob Brinker's ability and more importantly, his willingness to mislead his audience about his market timing skills by carefully selecting certain facts and saying them in a way that gives a false impression.

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Here is the whole truth about Brinker's "buying opportunities" over the past year:

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1) April 4, 2007 Marketimer (S&P 1424) Bob Brinker said: “Marketimer currently rates the stock market as attractive for purchase during periods of weakness in the vicinity of the S&P 500 Index 1380 level or lower.”

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2) August 3, 2007 Marketimer (S&P 1455) Bob Brinker said: “We rate the stock market as attractive for purchase on any weakness that occurs in the area of the S&P 500 Index mid-1400’s.”

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3) January 4, 2008 Marketimer (S&P 1468) Bob Brinker said: “ We continue to rate the market attractive for purchase on any weakness into the S&P 500 Index mid-1400’s range."

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4) January 20, 2008 (in a special bulletin) after the steep market decline, Brinker did away with the mid-1400 gift-horse, recommended ONLY dollar-cost-averaging for new money, and said he was "looking for a bottom."

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5) February 10, 2008 (according to Hulbert's Marketwatch article) Bob Brinker said that the market had bottomed and he issued the buy signal in the low-1300's that he was bragging about this weekend.

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This Moneytalk Summary will be continued....Honeybee

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