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Saturday, January 24, 2009

Summary: Bob Brinker's Moneytalk January 24-25, 2009

Bob Brinker's Moneytalk: Excerpts, Summary and Commentary, January 24-25, 2009. For the week: Dow closed at 8077.56 (decline of 2.1%); S&P 500 Index closed at 831.95 (decline of 2.1%); Nasdaq closed at 1477.29 (decline of 3.4%) Oil closed at $45.98 (last week: $35.88).

Note: Bob Brinker did not discuss the stock market this weekend except for a few general comments about 2008, and to point out that Citigroup is now a penny stock. Brinker did not mention that Microsoft (which he recommends as a hold) is back to 1998 levels.

SUNDAY UPDATE: Brinker told a caller that 2008 was a "brutal year" for the stock market. He said it might be the "worst ever." [Honeybee EC: 2008 definitely fit the description of the bear market that carried out everything, including "the piano player." Brinker used to claim HE would not be in the market when that happened. How sad that after all those years of making that claim, just the opposite is true. He not only stayed fully invested, he recommended dumping all new money in consistently throughout 2008 -- either lumps sums at 1400, 1300, 1200 -- or each time those were dumped, he said to dollar-cost-average.

So all new money added on his advice has taken precipitous losses. It's very likely that he has issued a new buy signal now in the mid-800's range -- based on when he sent out his most recent special bulletin (January 15th). Is it logical to believe that he is right this time? It's possible, but if not, it's like the weather in parts of Hawaii, just wait awhile, it will change.]

The Sunday program was quite repetitious of Saturday's program -- very little new was offered. He covered the predicted inflation rates and how they are calculated. He's done that several times before, and I have covered it in detail in other summaries. He still doesn't think the Fed will let California go bankrupt. A caller asked him what he thinks will happen to the price of oil. Brinker answered: "I believe the price of oil will follow the economy."

OBAMA: Brinker made the statement that "Obama is one of the smartest presidents in the last 1/2 century." [Honeybee EC: That has to be one of the most blatantly biased and subjective opinions I've ever heard Brinker say on the air -- and I've heard plenty. I would like to ask Mr. Brinker exactly WHAT Obama has done to cause him to reach that conclusion. Has he accomplished some brilliant piece of legislature? Has he ever successfully run a business, or has he ever flown a fighter jet, or ended cold wars and had Communist walls torn down? What is it about this man that would prompt him to spout such propaganda on a "Moneytalk" program.]

Bob Brinker's Saturday opening monologue was exclusively devoted to the banking/financial situation. He talked about the original TARP program which was supposed to have been used to buy toxic assets on bank balance sheets -- instead, the first three and a half $billion went for bank capital injection and the AIG bailout.

Brinker said that as of now, the problem the government is facing is how to implement the second round of the TARP program. Brinker offered his own solution, which I have included here.

Brinker said:
"Obviously, the problem has been standing out like an 800 pound parakeet in the room since day-one of this problem has been, how do you get the toxic asset off the balance sheets of the banks, which will then allow the banks to resume normal lending practices. Which by the way, is the essential mission of the banking system. Until the banks feel that they are no longer bound by these toxic assets on their balance sheets, they are going to be recalcitrant when it comes to approving loans..........Automobile financing is just one of the significant areas of what is going on out there where the banks have pulled back on their lending practices...... And the thing that is frustrating to me -- not that I believe anything I say on Moneytalk should carry any undue weight in Washington, because I don't believe that. I think that it's a good thing for people to express their views, come up with as many ideas as they can, and see which ones can see the light of day and perhaps contribute to a solution. And that's really our effort on the program......

......But I do find it frustrating that we've been talking about an RTC, a Resolution Trust Company Solution to this same problem of toxic assets on bank balance sheets since last autumn,
we've been talking about it since last autumn [Honeybee EC: I have never heard Brinker say the words "Resolution Trust Corporation" on Moneytalk. Perhaps I just missed it all these months, but I don't think so.] and we still have not seen anyone in Washington, from either party -- it's not a partisan deal -- come forth and lead the way to a Resolution Trust Corporation type solution to this problem. And that would simply be the creation of an entity -- back in the 80's we called it the Resolution Trust Corporation -- right now, you can call it whatever you want, but back then it was the RTC. And what they did back there was, they had the office of thrift supervision take over about 700 insolvent the S&L sector.....What happened was, they took the bad loans out of these companies, they transferred ownership of the bad loans to the Resolution Trust Corporation. And the RTC had the responsibility of managing the loans until they could sell them later on, and they did sell them later on......

......Now all was said and done, the Treasury lost over a $100 billion on the deal, but it solved the problem. It solved it in a relatively short period of time in the sense that it got the bad loans off the balance sheets of the S&L's. And that was it. That was the solution and why we've not had any leadership in Washington from either Party.... And they've had all this time.......It worked before and it will work again.....This is the way they are headed.They don't really have an alternative.....They must get the bad loans off the balance sheets of the banks.....That's the only way you'll get the banks to resume normal lending habits.....Because in the interim, the bankers are in a state where they are frozen. They cannot bring themselves to make major new loan programs to their customers because they are still worried about their capital......

......So what we need is a Resolution Trust type of solution. I don't care what you call it this time, but you should call it RTC2. I've been thinking about names for this entity and this is the one I like the best because it sticks to the knitting. It focuses on what we successfully did in the 1980's and 90's..... My favorite name for this is RTC2."

In addition to the above suggestion, Brinker recommended two tax-code changes that he believes would help with the financial/banking situation:
Firstly, he suggested that vehicle loans be made deductible again, like they used to be years ago.

Second, he thinks that depreciation should be accelerated for business vehicles.
In hour-two monologue, Brinker talked about John Thain's $1.2million office remodel at Merrill Lynch. Brinker said this story reached all the way to the White House and that Obama was very, very critical. Here is a story about Obama's reaction and possible repercussions.

Later in the program, Brinker sang a little bit of a song about Zsa-Zsa Gabor and said that she was another victim of "The Mad Dog" (Bernard Maddoff) and may have lost $10million. (The song that Brinker was "singing" is "Donna, Donna, the Prima Donna." Zsa-Zsa is mentioned in the lyrics. There is a website with the lyrics on it, but I am not going to link to it because the site had several pop-ups.)

All of the callers stuck with Brinker's subjects of the day. There wasn't even a Ginnie Mae call. 8^)

Brinker's Saturday guest-speaker was David Cay Johnston, author of: "Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You With the Bill)"

Brinker's Sunday guest-speaker was Steve Knobber, who wrote: "Appetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age"

Download Moneytalk for free, listen at your convenience. A downloadable version of the entertaining Bob Brinker program is available at KGO810 Archives for a full 7 days after broadcast! Now, you can 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

Dixiegeezer took this beautiful picture. It is Mt. Rainier in Washington state.

Bob just sent me this picture that his son's friend took on a hiking trip in Washington's Mt. Rainier National Park


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