Bob Brinker did not say anything about the stock market today even though the curtain just came down on the worst year in the stock market since 1931 -- the third worst decline in the history of the stock market -- 2008 closed with the Dow down 31.3%; the S&P 500 down 36.1%; the Nasdaq down 40.5% for the year.
However, in just the past 6 weeks, the market is up 23.8% from the November 20th bottom of 752. For those with any "new money," November was a good time to put it in the market if you wanted a 23.8% gain. Since September, Bob Brinker has been looking for a market bottom that he thinks will "sustain an uptrend."
Mark Hulbert, in a Marketwatch column, wrote about Bob Brinker's current market-timing stance and he quoted from the December issue of Marketimer:
Hulbert wrote: "Brinker currently believes the stock market is in a perhaps extended bottoming process, and he therefore recommends that subscribers invest in the stock market on a dollar-cost-averaging basis. "We are aware that there is widespread fear that financial Armageddon is the likely outcome of the global financial crisis. We take the opposite view, and expect the stock market to record significant gains during the next major market uptrend. We continue to focus our efforts on the ongoing bottoming process that we regard as essential to establishing the level from which a sustainable market uptrend can occur. When we reach the point at which we can upgrade our current stock market view from dollar-cost-average to a renewed buy recommendation, we will do so." [Honeybee EC: Hulbert quoted the December 2008 issue of Marketimer.]
Brinker's opening monologue was devoted to a recitation of the changes to the income tax code for 2009. That information is all available online at the Internal Revenue Service and other places like About Taxes. Here is information about the new marginal tax rates, capital gains tax rates, and estate taxes.
* The annual gift exclusion increased from $12,000 to $13,000 in 2009.
* There were increases in the amount of contributions allowed into tax-sheltered accounts (Brinker said he likes the Roth IRA).
GINNIE MAES: Brinker told a caller that they have performed extremely well -- up about 7% in 2008. He reminded the caller that the NAV of the Vanguard GNMA Fund that he recommends (VFIIX) fluctuates -- usually between $9.50 - $10.50. Right now it is selling for $10.57.
Caller Ray said that several months ago he bought $40,000 worth of Fidelity California Muni Bond Fund and it was down about 2%. He asked Brinker if he had a recommendation regarding that fund.
Bob Brinker said: "I don't own the fund, Ray. But I do have an issues of the State of California General Obligations, and I have to tell you that I am not selling them. Now I must admit they have done very well for me, and I have no complaints. But I am not selling them and I'll tell you why. I've said this on the program many, many times, and it's just my personal point of view. I just think the State of California is too big to fail. I can't think of a scenario where the Federal Governmnent would allow the State of California to go bankrupt.....
..... Remember what that means. When you go bankrupt, you lose access to the credit market -- you can't borrow a nickel. In addition to that, you would have to shut down all state functions......I just don't see it.....It's too big to fail, in my opinion, and that is the reason that I'm perfectly comfortable with the California General Obligations that I own."
[Honeybee EC: You've heard of having your "socks knocked off," well I had everything but my undies knocked off when I heard Brinker say that, because he said just the opposite on December 20, 2008.] Here is what he said to Pamela:
Caller Pamela asked about California State Muni Bonds (General Obligations):
Bob Brinker said: "Well, I think the State of California is going to have to get its act together and until then, they are going to continue to do what they are doing right now, which is, they are threatening their bond holders with fiscal irresponsibility......Just look at the numbers, the State of California is facing a possible deficit in excess of $40billion in the next fiscal year.....They have to cut their spending.....dramatically."
Pamela asked: "So would you sell your bonds if you were me?"
Bob Brinker said: "That's a personal decision, Pamela. I really can't tell you what to do with your bonds. I have some California bonds, but in almost all cases my bonds might be different than your bonds and I'll tell you why. The bonds that I own have Treasuries behind them. In other words, they've been pre-refunded by earlier transactions by the state and backed by Treasuries. So in almost all cases, the California bonds that I own are actually backed by Treasuries and are not backed by the State of California.....
.....If you own bonds that are backed by the State of California, then you need to make a decision on whether you're comfortable with the fiscal situation in California. I would not argue with anybody in here that would say that we have seen gross fiscal irresponsibility in the State of California. Their refusal to slash spending in California is part of the reason that they are in the pickle that they are in."
Caller Sam told Brinker that he did not agree him on the bailout cliche' "too big to fail." He said that he believed it has been shown to have fail miserably.
Brinker said: "Sam.....you are doing something that I really despise....you are generalizing......" Brinker went on to explain that he does not favor all bail-outs, that each case needs to be looked at individually -- and that earlier today, he said that he believes if California gets into trouble, the Feds will bail it out.
TIPS AUCTION TUESDAY Brinker said the base-rate is attractive and expects about 2.2% for the 10-year TIPS. He recommends them for deferred accounts and prefers TIPS over the 10-year Treasury Note.
DEFLATION/INFLATION Brinker said that based on what the Federal Reserve is doing, inflation is inevitable at some point down the road, but "right now we have deflation."
Brinker's Saturday guest speaker was Alice Schroeder who wrote, The Snowball: Warren Buffett and the Business of Life
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