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Saturday, March 21, 2009

Summary: Bob Brinker's Moneytalk March 21, 2009

Bob Brinker's Moneytalk: Excerpts, Summary and Commentary, March 21, 2009.

[Sunday March 22nd update added below]

Bob Brinker did not mention the stock market on Moneytalk today. And there were no callers who mentioned it or asked any questions about it.

For the week: The Dow closed up 0.8% at 7278.38; the Nasdaq closed up 1.8% at 1457.27; the S&P 500 Index up 1.6% closed at 768.54. Oil was up about 10% for the week, closing at $58.62.

In his opening monologue, Brinker talked about the National debt and deficit spending. Here is a [LINK] to a National Debt Clock.

Brinker comments paraphrased:
There is a tsunami of dollars being created in Washington these days. The government printing presses are working 24/7 in order to meet the Federal Reserve requirements as they "flood the system with greenbacks.".....

.....The national debt is a bit over $11Trillion -- that's up $1.65Trillion over the past year -- or over $100Billion monthly. It's not likely to end soon "with this recession in full swing." The current accumulated deficit in the history of this republic is $11Trillion, so if you add another $9Trillion over the next decade, you're looking at $20Trillion. If you paid 5% interest on $20Trillion, that would be $1Trillion interest per year. Politically speaking, Brinker blames "both sides of the aisle" equally, and "neither side has an ounce of credibility on the issue of fiscal responsibility."

Brinker said that in the soon-to-be-released rescue plan "Uncle Sam will purchase up to a $Trillion in troubled mortgages and other assets from banking institutions and other financial companies. The idea here is to remove toxic assets from the balance sheet and free up that money to go back into the lending system which is what has really been hurt......has hurt this economy and it's pretty much still in place."

CORRUPTION IN ILLINOIS: Caller one, who lives in Cook County Illinois, said he is worried that the state income tax might be raised. Brinker told the caller that his concerns were well-founded and reminded him that there has been a "good amount of corruption" in Illinois over the years......and that the citizens "will eventually pay the price" by face rising taxes. "Just to keep up with the burgeoning cost of retirement and health-care benefits that have been promised to the work force in Illinois at many levels."

NCUA FOR CREDIT UNIONS: Caller two asked Brinker about the safety of credit unions. Brinker told the caller that his call was very notable because he had heard just last night that two credit unions had been siezed by Federal authorities. (U.S. Central Corporate Federal Credit Union and Western Corporate Federal Credit Union and have a total $57 billion in assets.) Brinker told the caller to be certain that his credit union was covered by NCUA [LINK]

GM AND CHRYSLER: Caller three asked Brinker if he thought GM and Chrysler would go bankrupt. Brinker said that he considers them both "....wards of the state, or wards of the republic, if you wish......" and would "not be functioning today were it not for the fact that $billions have been handed over into their coffers to keep them in business.....This also applies to the auto parts companies."

[Honeybee EC: This was the second time today that Brinker emphatically called the U.S. a "republic." I suspect "someone" read my February 21st Summary where I corrected him for mistakenly saying the United States is a democracy. LOL!] [LINK]

INFLATION AND ECONOMY: Caller three also asked Brinker about "scary inflation." Brinker told the caller that first you would need an economic recovery and he "doesn't see that right now." He added that year-over-year inflation right now is 0.2 -- because of the economy. Brinker said: "But if you were to have an economic recovery and if the Federal Reserve failed to withdraw the excess liquidity that they are providing in an orderly fashion -- if those two things happened, then inflation would be inevitable."

Brinker said that he sees no reason to put annuities in tax-sheltered accounts. In general, Brinker is not for annuities, but for those who want to buy them, he recommends Vanguard Group.

Brinker commented that there were only two small banks that closed this week. He said that it is good they are small because that means the FDIC did not take much of a hit to its coffers. So far this year, there have been 20 bank closings. Brinker said that is really not very many, especially "when you look back to the 1930's, not many at all."

Brinker said that the FDIC had reserves of about $19Billion as of the end of 2008 -- and that Sheila Bair is trying to get more money into the FDIC safety net by raising bank fees and increased borrowing power for the Fed.

Brinker said that they are now actively considering making the temporary deposit insurance increase permanent at $250,000.

Brinker said that an exemption has been granted for 2009 -- none are required.

Caller Robert said:
"I was just Googling the company that owns Chrysler Corporation and the curious part was that Dan Quayle is the Chairman of the Board, and I thought that was really curious."

Bob Brinker said:
"Well, sometimes these private equity firms will go out and they'll write a contract for a famous person. In other words, they buy celebrity. Dan Quayle is a celebrity."

Robert said: "Well he's Chairman of the Board, wouldn't that make him more than just a celebrity?"

Brinker said: "No, I think he's a celebrity because he was the vice-president of the United States. He's a very popular guy. No, I would gauge him as a celebrity. Now I don't know what his role is. But Chairman of the Board? Look I'm not commenting on Dan Quayle, but Chairman of the Board of a company like that, it could be a celebrity appointment. I mean, it's possible. It opens a lot of doors. Well, if he is responsible, or has been responsible, for the management of that particular company -- I'm not talking about Chrysler --I'm talking about the capital management. If he has been responsible for the big decisions there, then perhaps he could explain why they paid as much money as they did for the Chrysler Corporation which has now gone to the government hat-in-hand."

Jeffchristie's said: "Now let me see if I understand what you are saying Robert. You seem to be claiming that Dan Quayle is Chairman of the Board of Cerberus which is the parent company of Chrysler. Well I am sorry but that isn't the case. Dan Quayle is chairman of one of Cerberus's overseas subsidiaries. The Chairman of the Board of Cerberus is someone who Brinker has praised several times right here on Moneytalk. I am referring to former Treasury Secretary John W. Snow. Brinker hasn't spoken favorably about many people but I believe he did so when Mr. Snow was at Treasury." Originally posted here [LINK]

March 22, 2009 8:00 AM

Brinker said: "You understand there is an irony in here. I really haven't heard much about this in the financial media. Sometimes I wonder whether the financial media pays any attention at all to what is going on. Sometimes I genuinely wonder that. And the reason I say that is there has been very little talk in the financial media this week about the irony of all ironies in Washington. Which is the Federal Reserve has gone out and said that they are going to purchase in the open market, Treasury Securities, while at the very same time in the very same city of Washington D.C., the Treasury is out there selling more Treasuries than the Fed is going to purchase......I mean if the Treasury is out there trying to fund a multi-trillion dollar deficit by printing money and bolstering the supply of Treasuries out there in order to raise money, in order to pay off the annual red ink for all of the stuff they are trying to do, some of which has nothing to do with an economic recovery -- which is very annoying -- but when the Treasury is out there raising all that money selling paper and the Fed jumps up and says, hey we'll buy some. Hey, it's one country."

The caller asked Brinker if that was just "straight printing of money."

Brinker said: "It has the same effect. It certainly is a debasement of the dollar when they flood the world with greenbacks.....Whether that shows up right in foreign exchange trading has to do with what people think of other currencies......Global currencies are a train wreck."

TAKING MONEY OUT OF HOUSE FOR INVESTING: Brinker thinks it's "totally irresponsible."

A caller asking about the historical highs and lows of the fund said: "Going back into the very high interest period, like in the 1980's......What was the range on that?"

Brinker said:
"Well it depends on what history you're looking at. If you go back to the late 1980's, when we had the double-digit inflation and the whole nine yards, you had a very short-term dip there down around the 9 areas, in the general area of 9 for a very short period of time. Now if you go back to, now remember, that was double-digit interest rates. I mean, I don't know how the government would be able to afford right now to pay double-digit interest rates on this massive debt. We didn't have much debt back then compared to now. We have $11Trillion now and it's going to $20Trillion according to the Congressional Budget Office in the next 10 years........Now back to the history of the fund, go all the way back to 1990, you'll see 9.50 - 10.50 approximately -- call it 9 1/2 to 10 1/2. Right now, you're at $10.67, so you definitely have the possibility that you could see this thing stay in that range, but I don't see it has to go below $9.50."
Honeybee EC: Jeffchristie has posted proof that Brinker is mistaken about the "late 1980's" being a time of "double-digit inflation." Read his comments here [LINK]
The caller followed up with a question about AAA rating. He asked if it had the same veracity it used to have years ago.

Brinker said: "No, it doesn't, but it does for government guaranteed, and that is a government guaranteed AAA Ginnie Mae......We are talking about a mortgage guarantee from the United States government. It's absolute. It's a government guaranteed and that is legitimate AAA rating."

Brinker's Saturday guest-speaker was William D. Cohan: "House of Cards: A Tale of Hubris and Wretched Excess on Wall Street." [LINK]

[Honeybee EC:
Brinker bills himself as "America's most trusted financial advisor" on a national radio program titled "Moneytalk." Yet for the most part, during this whole Mega-Bear Market, he has offered almost no commentary about it -- and very seldom does a caller get on the air to ask questions about it. That seems rather shabby to me, but in a way, I understand. His market-timing has been so wrong for so long, and he has been so reluctant to admit it, that I can see why it would very difficult for him to suddenly become candid now and still hope to inspire "trust" as a "financial advisor." Most people, including myself, certainly understand being "wrong," but we hate it like the dickens when it is covered up.]

Sunday on Moneytalk

Most of the program was a continuation of the same subjects from yesterday. Brinker made a few comments that may be of interest:
* Brinker does not recommend converting traditional IRAs to Roth IRAs if you are over the 15% tax bracket.

* Brinker said the problem with the legislation that congress is working on is that it is not a good thing for companies to be penalized for paying bonuses for outstanding work coming out of people who are helping them get out of this mess.

* In Brinker's view, California Municipal General Obligation Bonds are safe because the Federal Government would not let the State of California go bankrupt.

* Consumer's Report has done a good job on their report card for cars. [LINK]

* When the government/Federal Reserve refused to bail out Lehman Brothers, the market started going down.

Honeybee EC: Evidently, Brinker is not aware of Ben Bernanke's speech at the time, where he explained that there were no choices made to let Lehman fail. There were no other options available. Read about it in this WSJ article. [LINK].....

....And as for the stock market going down AFTER Lehman Brothers failed, Brinker must be aware that they filed Chapter 11 on September 15, 2008. At that time, the S&P was at 1192, already down from its October 9, 2007 high of 1565 -- well INTO BEAR TERRITORY!

STOCK MARKET CALL: [EC: Considering my commentary yesterday, this call seems downright "notable." LOL!]

Caller Jim said: “I’m 46. I saw that the market was going up in 2006 and it wasn’t correcting. So I moved everything into fixed funds, guaranteed stuff. Is it time for me to get back into the stock market with my allocation?”

Brinker said: “Well, Jim, I think the first thing you have to ask yourself is what is your tolerance for risk. I mean do you have the tolerance for the volatility that occurs in the stock market?"

Jim said: “I probably don’t personality-wise, but I’m thinking this is a buying opportunity.”

Brinker said: “Well, I think what you should do is you should definitely, if you feel as though you have room in your risk tolerance to have a portion of your portfolio in the equity market, then I certainly would get started on that. And you can certainly put money to work in here. I mean, the market is actually fairly close to its closing low right now. The closing low on the S&P is 676. We’re looking at a market right now trading in the 768 area. You’re looking at a market that has lost half of its value relative to where it was less than two years ago. So I mean in the broad context of accumulating an equity position, I certainly would not have a problem with that for you -- if you, again, if you feel you have the tolerance for risk to do so and that would be the key.”

Brinker's Sunday guest-speaker was Peter Marber: "Seeing the Elephant: Understanding Globalization From Trunk to Tail"

No need to pay to have downloaded copies of Bob Brinker's Moneytalk programs. They are archived for FREE downloading at KGO810 radio for a full 7 days after broadcast! Download and save them and listen whenever you like. [Saturday/Sunday 1-4pm] Moneytalk: Download it for FREE at KGO810 (link)

I took these pictures this afternoon. The feeder hangs on my covered patio. Our hummingbirds come to visit even in the rain. Sometimes there are three eating at the same time and others scolding in the trees:


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