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Saturday, March 28, 2009

Summary: Bob Brinker's Moneytalk March 28, 2009

Bob Brinker's Moneytalk: Excerpts, Summary and Commentary, March 28, 2009. [Sunday update added below.]

Bob Brinker had nothing to say about the stock market today and there were no callers who mentioned it or said anything about it.

All stock market indexes rose for the week -- three weeks in a row of gains. The Dow closed at 7,776.18, up 6.8% for the week. The Nasdaq closed at 1,545.20, up 6% for the week. The S&P 500 Index closed at 815.94 on Friday, a 6.2% gain for the week. In the past 13 trading sessions the market is up over 20% -- 11% gain for the month (with 2 days to go).

Brinker talked at length in his opening monologue about mortgage rates. He said that the 30-year national average is now 4 5/8%, which is bringing out the "bargain hunters." The problem is, to get a loan, you need to "prove you don't need it."

Brinker said that there will be an extra $13 in 95% of American's pockets beginning on April 1st. [Honeybee EC: Why did I laugh out loud when I typed that sentence?]

Some paraphrased Brinker comments:

* The economy will come back.
* Ford = speculation.
* If you are in or near retirement, you should be invested 50% fixed income, 50% equities "at least at the start."
* Over the long-term taxes will go up.
* The national debt will be $20Trillion in a decade.
* Diversification is most important.
* Obama keeps getting bad advice about natural gas and nuclear power usage. [Honeybee EC: How generous of Brinker to put the blame on Obama's advisors. Seems odd to me that the "smartest president in 50 years" (according to Brinker) wouldn't do some simple reading and research, then make up his own mind.]
* It looks like more tax money is going to go to GM and Chrysler even though they do not have a viable business model. [Link to article]

A caller asked Brinker about the safety of having 70% of his assets with Vanguard. Brinker said he had no problem with "mega-mutual fund families" like Vanguard or Fidelity. He said that having various investments with them is not the same thing as it was with Bernard Maddoff or Sir Allen Stanford. "It's an entirely different thing."

In Brinker's second monologue, he talked about the European banks. He said that they were hit by fall-out from the United States because they bought toxic securitized packaged mortgages. Brinker said that taxpayers in Great Britain now own 95% of the Royal Bank of Scotland.

Brinker also talked about the German "bank rescues." He specifically mentioned HYPO Real Estate, which has lost 93% in a year -- $7.3Billion. Brinker said that the German government has taken it's "first step to nationalization" by taking an 8.7% stake in the company. [link to story]

A woman called who said she had over $2million with an insurance company, which was most of her net worth. Brinker urgently reminded her that she was at risk because of lack of diversification.

A caller told Brinker that using natural gas in vehicles was impractical and that the storage was the problem. Brinker said that was not true and told him that there is a Honda Civic that uses natural gas and will go about 200 miles on the freeway and gets about 34 MPG.

A woman, who said she was a rather recent widow, asked if she should pay off her 30-year $170,000 loan (5.25% interest). She has enough money invested at money market rates to pay the loan.

Brinker told the caller that it was a matter of liquidity. In other words, if she paid off the loan, she would not have any liquid assets. He said that he came down on the side of having the liquidity, rather than being "penniless." Brinker suggested that she could move her money into Ginnie Maes to help close the gap between what she earns and what she is paying in interest. (Brinker recommends the Vanguard GNMA Fund VFIIX.)

Caller Thomas, who said he was in a high tax bracket, asked Brinker to explain why he had said that converting a traditional IRA to a Roth Ira was not a good idea unless you are in a low bracket.

Brinker said:
"The whole idea here is that as a general rule, we're not looking for opportunities to pre-pay taxes. And what you are doing in the situation.......especially in high bracket, in any bracket....what you are doing is you're prepaying your taxes. Like take the top bracket -- you are living in the Garden State......when you take a look at the Federal and the State top brackets in New Jersey, you are in the 40's.....Take a 40% slice out of your IRA account and see how that feels. All of a sudden $50,000 becomes $30,000 overnight when you pay the tax......When you are in a zero or very low tax bracket, at least the hit is small."

Thomas asked: "But then doesn't the Roth IRA then grow tax-deferred and then I don't have to pay taxes on it at all when I withdraw?"

Brinker said:
"Yeah, that's right. So you have an easy question to answer. How much money do you have in this account?"

Thomas answered:
"Let's say $20,000."

Brinker said:
"So would you rather have $20,000 to invest all the way out to retirement and then deal with the taxes as you take withdrawals on an annual basis. Or would you rather see that $20,000 turn in overnight to, let's say $12,000? Wow, I tell you, that's murderous hitting the top bracket........Look this is your decision. I tell you what I would do. Obviously, it's totally your money, but if it were my money, I would not do a conversion in that tax bracket. I would rather invest the entire amount tax and then go out to retirement and then take annual withdrawals at that point."

Some Brinker quotes:

* "Government gone wild....they are throwing money like confetti."
* "The president has his head in the sand." [regarding natural gas in vehicles]

Brinker's guest-speaker on Saturday was Robert F. Bruner: "The Panic of 1907: Lessons Learned from the Market's Perfect Storm" The Robert Bruner interview is now available for free download in the Saturday 3-4 hour at the KGO link below.


In my opinion, there was not much that I heard on Moneytalk today that was new or interesting enough to report on it. There was no stock market talk. There was more complaining about the previous administration's Medicare drug plan -- more talk about TIPS, GNMAs, budget deficit, IRAs, and "balanced portfolios are good for retirees."

Brinker repeated what he said last week about the Fed needing to remove liquidity to avoid inflation when the economy turns. Today, he said if that doesn't happen, it's "KATY BAR THE DOOR."
Here is what Brinker said last week:

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."

It seemed like most of the calls today dealt with personal and very esoteric subjects. Brinker is very accommodating to those "special" situations that his callers ask him about concerning what to do with their IRA's and re-financing their loans. He seems to always allows them all the time they want on the air.

At one point, Brinker was talking about Secretary of State Hilary Clinton and rather than call her by name, he referred to her as "Evita." In light of Brinker's immensely respectful attitude, and his total lack of pejorative nicknames for Obama, I found that VERY OFFENSIVE.

Brinker's Sunday guest-speaker was Steven Axilrod: "Inside the Fed: Moneytary Policy and its Management, Martin Through Greenspan to Bernanke." [LINK]

Perhaps Bob Brinker is not aware of the true reason for the toxic asset catastrophe and Fannie Mae/Freddie Mac's downfall. There were some who tried to prevent it from happening but were thwarted by the very people now in charge of fixing it.

Caller Jerry said to Steven Axilrod:
"You mentioned Barney Frank. Wasn't he the one with Maxine Waters that said that Fannie Mae and Freddie Mac was in very good shape and there was no concern with any kind of problem with them."

Brinker replied:
"IF he said it, it sure didn't hold up."

Honeybee: No "ifs" about it, Mr. Brinker. Perhaps it would be very helpful in disseminating information on your program, if you take a look at this absolute proof of what actually caused this financial "catastrophe":

Maxine Waters/Barney Frank blocking Republican requests to fix Fannie Mae: Youtube video [LINK]

Steven Axilrod's interview is now available at KGO. Click on the Sunday page and download the 3-4pm hour.
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's program is available now: Download hours 1-4pm] Moneytalk: Download it for FREE at KGO810 (link)

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