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Saturday, January 17, 2009

Summary: Bob Brinker's Moneytalk, January 17-18, 2009

Bob Brinker's Moneytalk: Excerpts, Summary and Commentary, January 17-18, 2009. Dow: 8281.22 (decline of 3.7%); S&P 500 Index: 850.12 (decline of 4.5%); Nasdaq: 1529.33 (decline of 2.7%) Oil: $35.88 (last week: $40.36).

Bob Brinker did not talk about the stock market this weekend. While this is a summary of Saturday's show, Sunday was mostly repetition of Saturday.

Brinker's Pertinent Points Paraphrased and Quoted:

INFLATION EXPECTATIONS…..inflation is now 0.1%. Based on the bond market the implied inflation rate over the next 30 years is less than 1% per year.

COMPONENTS OF INFLATION…. Food prices are up 5.9 year-over-year, but have eased back dramatically in the fourth quarter – up at a compound annual rate of 1.5%. Obviously, we’ve seen dramatic drops in the price of energy, which also helps transportation expenses. It’s very good to see core inflation has gone away now. Over the last 4 months, the core rate of Consumer Price Inflation, annualized, is zero.

CONSUMER PRICE INDEX…. There is no inflation right now. The last quarter there was 13.5% rate of deflation -- annualized. All of 2008 came in at 0.1%...the lowest rate of inflation since 1954. Core Index (excludes food and energy) was unchanged for the month of December.

HIGH YIELD BONDS….Some improvement, but yields remain extremely high.

GINNIE MAES….trading close to a 52-week high because of a flight to quality.

CALIFORNIA TAX EXEMPT BONDS…..There has been a gain of 10% over the past few weeks – also gains in the national market place due to improvement in investors’ willingness to accept risk. Stimulus package will offer assistance to state and cities.

TAX CUTS…. To help with stimulus package, payroll tax should be lowered. Tax on cost of doing business should be lowered to encourage companies to create jobs.

PORK….The president-elect, and everyone in congress, should stay away from pork barrel spending.

LEHMAN BROTHERS….The decision to allow them to go bankrupt was the start of the seizure in the credit markets.

CREDIT MARKET….There has been a lot of improvement in various ways. But still, the best way to get a loan right now is to have a credit score above 700 or be a top-tier corporate credit.

POLITICS….There were several calls about Timothy Geitner (Obama’s pick for Treasury Secretary) not paying his income taxes and hiring illegal aliens. One caller mentioned Charlie Rangel’s tax problems, too. Brinker's response was to warn the callers that they should be very careful about smearing these people until all the facts are out via the vetting process.

Brinker talked at length about all of the various investment bank mergers, bailout, etc. -- old territory mostly -- or simply news that is reported every day in the media or online.


1) Caller John asked Brinker if he thought that we might be looking at inflation down the road -- at least by 2010. And with the government printing “a $trillion every couple of months," shouldn't we expect the dollar to be devalued.

Brinker told John that if he was worried about inflation, he could totally protect himself from it with buying TIPS and I-Bonds, then Brinker said: “I haven’t seen any figures that would support your claim that they are printing a $trillion every couple of months. On the contrary, what they are trying to do……. they are trying to get the banks to make loans…….The credit markets have been very tight…..they’ve been worried about their capital positions and worried about the stuff they own right now in the subprime category especially, like the commercial real estate and the credit card debt…….

.......Whoever told you that the United States mint is printing a $trillion dollars every couple of months, has no idea what they are talking about – none! Absolutely no idea what they are talking about. And you know, I hear this nonsense and it’s disturbing. You know why it’s disturbing? Because you have knuckleheads, you have knuckleheads out there that are talking about something they know absolutely nothing about. And these knuckleheads get out there and they say things that are completely nonsensical, like that caller just repeated, well you know they are printing a couple of $trillion every couple months......

...... Where does this nonsense come from? It’s unfortunate, you know why? Because people like that caller are inclined to believe it and it’s not true to begin with, so all it does is lead people down a primrose path. So let’s get this straight right now, no matter who told you, no matter what they told you, the Treasury is not printing a $trillion every couple of months – unbelievable.”

2) Steve called to defend John, he said: “I think you might have been a little bit harsh with that gentleman that talked about printing money. I think that the phrase ‘printing money’ has become synonymous with foreign debt in this country now. I could be wrong, but I think that was where he was going.”

Brinker replied: “I wasn’t harsh with the caller because I wasn’t talking anything personal with the caller. I was only talking to his idea. And I’m really fed up with hearing this……..amateur economists out there that are making things up. One of the things they are making up is that the federal government is printing tons of money every day……This kind of misleading information has to stop."

3) Caller Olan said: “Forty-one percent of the illegal aliens are receiving welfare checks. Now if the California state budget is not balanced in a few weeks, what will happen to the hordes of welfare recipients?”

Brinker replied: “I don’t know, but I think that if a state has a disproportionate amount of expense that’s related to that category, then I think the federal government has culpability because we have not protected our borders. And when we don’t protect our borders, we bring in this kind of social expense and it’s not fair to lay it on any one state, including California. That’s my opinion. This is the reason why it’s so extremely important for the federal government to fulfill its mission of protecting the borders. And unfortunately, under George W. Bush, over the past eight years, the United States has failed to do so.”

Caller Greg said: “Ben Bernanke said that Lehman Brothers holdings couldn’t be saved by the U.S. government because the investment bank didn’t have enough collateral and the Treasury lacked authority to provide funds. Lehman was not ‘allowed to fail’ he said, in the sense that there was some choice being made. There was no mechanism, there was no option, there was no set of rules, there was no funding to allow us to address the situation. This was stated in answer to a question at the Economic Club in New York on Wednesday, October 15, 2008. In this case, it was impossible. There simply wasn’t enough collateral to support the lending. From the Treasuries’ perspective, unlike the FDIC, the deposit insurance fund, there were no funds, there was no option. So basically, Bernanke is saying that Paulsen didn’t have any choice.”

Bob Brinker replied: “I have a question for you, Greg. In the context of those Ben Bernanke quotes, what does all of that mean?” Brinker then asked Greg how Bernanke's "silly quote" fit into today’s situation with the Treasury lending huge amounts for toxic assets at all the major banks. He took some time to point out several of them to Greg.

Greg reminded Brinker that the TARP legislation was passed weeks later, so Paulsen had no legal authority to bail Lehman Brothers out. Brinker emphatically disagreed with Greg.

Brinker's Saturday guest-speaker was Connor Clark.

Brinker's Sunday guest-speaker was Daniel Gross.

A friend sent these pictures of a vicious polar bear attack. I understand the victim is just fine. 8^)

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