Bob Brinker did not talk about the stock market this weekend. His opening monologue topics were the jobs report, education and racial employment demographics, the stimulus package and the benefits of using natural gas.
[Sunday update: The topic of the day was the stimulus package, along with some political punditry.]
JOBS REPORT... January = 598,000 jobs lost. Here is a link to a Bloomberg article about "job losses spreading to workers with college degrees."
UNEMPLOYMENT RATE... 7.6%, the biggest number since 1992.
RACIAL UNEMPLOYMENT DEMOGRAPHICS:
* White = 6.9%
* Black = 12.6%
* Hispanic = 9.7% (in this study can be of any race)
* Asian = 6.2%
* Teenagers = 20.8% (16-19 years of age)
EDUCATION UNEMPLOYMENT DEMOGRAPHICS:
* Bachelor's degree or higher = 3.8%
* Some college = 6.2%
* High school diploma = 8%
* Less than high school = 12%
TAX CREDIT FOR HOME PURCHASES.... The Senate has added a $15,000 tax credit for purchasing a primary residence -- up to 10% of purchasing a home -- for all income groups. Brinker credited Bill Wattenburg for coming up with this idea and said he was honored to be able to join him in this effort.
MANDATED NATURAL GAS USE FOR FEDERAL VEHICLES....Brinker said that "we didn't get this one," but "two out of three ain't bad." Brinker said he wonders why Obama and Congress don't see that this is a "great idea." [Honeybee EC: In my January 31st Moneytalk Summary, there is a complete rundown on Brinker's stimulus package proposals, including what he said about a nationally-mandated natural gas initiative.] Here are some excerpts:
Brinker said: "This is a plan we’ve talked about on Moneytalk where we would have a national initiative—and it should be part of this plan--in the energy section of this plan. A national initiative to move the United States vehicle fleet to natural gas propulsion. Very basic stuff here…..The first year you mandate that all Federal vehicles must be propelled by natural gas……That results in the purchase of a tremendous number of new vehicles – conversion of other vehicles to natural gas…….The second year you’d mandate that the states would have to go to natural gas……The third year the townships, the municipalities, the towns, the cities, they could join. And then you would have all the publically owned vehicles in the natural gas fleet. And then the fourth year, the general public would be ready to join. Now there’s a four-year program….."
PAYROLL TAX CUTS....Brinker said he thinks this should be included in the stimulus package because it would put money into pay envelopes starting on week one -- but so far this has not been adopted by congress.
NATIONALIZED BANKS... a caller one asked Brinker what would happen to the share prices of banks if they were nationalized. Brinker said they would become "essentially worthless." Fannie Mae is 80% nationalized and the shares are trading at 65cents a share -- they were $35 a year ago. Same thing with Freddie Mac and AIG..... Brinker said he regards AIG stock as "speculation."
......Another caller asked Brinker if he thought there was a possibility that some banks will be nationalized. Brinker said: "Well I think there is a possibility that some banks could be nationalized and those would be the real bad banks.....because they have bad balance sheets. I think that there's a possibility that if they are not viable companies.....yes, some banks could be nationalized. I don't think that would come as a surprise at that point. The ones that are too big to fail, if there are any in that category, that are simply bad banks that cannot really be turned around as shareholder banks.......Whether there will be any in that category, the too big to fail category, we don't know yet. But what we certainly know is that they continue to close banks."
BAD LOANS OFF BALANCE SHEETS....Brinker said: "We have 3 more banks that closed on Friday -- or were taken over, I should say, by FDIC or other banks, and transitioned into viable companies......The banking system is a mess right now.....You have to resolve the bad loan problem. You have to get the bad loans off the balance sheet to make them lenders again. They won't become real lenders until the bad loans are off their balance sheet. That has not been done because they haven't yet figured out a way to price the bad loans in a way to get them off the balance sheet and keep everybody copacetic......The other issue is capital injection."
FDIC INSURANCE....Be sure you have it! "On January 1, 2010, the standard coverage limit will return to $100,000 for all deposit categories except IRAs and Certain Retirement Accounts, which will continue to be insured up to $250,000 per owner." Keep track on this website: http://www.fdic.gov/
ETF - TIPS...A caller asked for a website to check the yields on TIPs. Brinker said to go to a site for information, but didn't specify which one he meant. Here are a couple of suggestions: Vanguard Group and Ishares TIPS.
[Honeybee EC: Brinker does not use bond fund ETFs in his fixed income or balance portfolios. That is one very important reason why I believe that Kirk Lindstrom's "Retirement Advisor" is far superior to Brinker's newsletter. In Kirk's model portfolios, he offers the equivalent ETF for all mutual funds.]
GLOBALIZATION... Brinker said, like it or not, it is real.
SWITCHING BETWEEN SECTORS...Brinker said it is a "difficult challenge."
ROTH IRA.... A caller asked if there is an upper age limit. Brinker said there is not, but there are age restrictions on traditional IRAs.
VANGUARD GINNIE MAE FUND....A caller asked about GNMA interest rate risk. Brinker said that the fund had done extremely well. He said if you take a look at the fund, you will see that the average maturity and the duration is very low, so there is not much interest rate risk on the fund. He projects that it will stay in a price range between $9.50-$10.50.
INFLATION...Brinker said there is "no inflation" -- the headline CPI is "zero."
INTEREST RATES....Brinker said, "I don't have a forecast right now for where interest rates will be a year from now. I think that in the world we live in, a one-year time horizon is a pretty long time.....But I would say this, that looking at the economic fundamentals right now, I think that it's going to require a better economy to get a significant move in rates. We don't have a better economy right now."
ECONOMIC RECOVERY...Brinker said: "I think the United States is going to come back bigger and better than ever. I really believe that, but it's going to take time.....Look, I see them every day, these people who are giving up on this country. They always come out of the woodwork at times like this. I've seen it all before. I saw it in 1974........when we had the oil embargo....and we had the Watergate scandal....it happened back in the 30s as well. But the reality is, I'm not buying it."
Brinker's Saturday guest-speaker was David Kansas, "Wall Street Guide to the End of Wall Street as We Know it"
Brinker's Sunday guest-speaker was Stephane Fitch, who wrote an interesting column for Forbes Magazine in the February 16th edition: "Gilt Edged Pensions." You'll need to be sitting down when you read it. Here are some excerpts:
"Don't let anyone tell you the American dream has faded. the truth is the U.S. is still minting lots of millionaires. Glenn Goss is one of them.
Goss retired four years ago, at 42, from a $90,000 job as a police commander in Delray Beach, Fla. He immediately began drawing a $65,000 annual pension that is guaranteed for life, is indexed to keep up with inflation and comes with full health benefits.
Goss promptly took a new job as police chief in nearby Highland Beach. One big lure: the benefits.
Given that the average man his age will live to 78, Goss is already worth nearly $2 million, based on the present value of his vested retirement benefits. Looked at another way, he is a $2 million liability to Florida taxpayers.
"When I got the job at 21, I knew it was a dangerous profession but that I'd be rewarded on the back end," says Goss. Even so, he adds, "The benefits back then weren't anywhere near what they've become today."
The problem with this picture is not Glenn Goss. By all accounts he was a good cop. The problem is that there are millions of Glenn Gosses from Highland Beach to Honolulu. So many that they pose a vast, debilitating burden to state and local finances.
They're creating a nasty social problem as well. America, in case you hadn't noticed, is dividing into two nations. The 22.5-million-strong public sector (that includes retirees) is growing ever larger, and enjoying ever greater wages and benefits often guaranteed by state constitutions."
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Dixiegeezer sent this picture of beautiful (but temperamental) Mount St. Helens in Washington. It has significance to me because I was born in St.Helens, Oregon -- just across the border.
Bob sent this amazing picture of Maui. This is for my friend, allancoleman, who loves Hawaii. (Who doesn't?) 8~)