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Thursday, April 30, 2009
* Brinker remained bullish throughout the whole bear market until just days before the actual market bottom.
* Then astonishingly, Brinker did not see the largest stock market rally since 2000 coming. Four days before the beginning of a 31% rally on the S&P 500 Index, Brinker said:
March 5, 2009, with the S&P 500 Index @ 696.33: Marketimer, Page 3; Paragraph 4: “Due to the fact that the November 20, 2008 S&P 500 Index closing low failed to hold during the testing process, we believe a new bottoming process will be necessary for a sustainable market advance, we need to see a sequence of events consisting of (a) the establishment of an initial closing low; (b) a short-term rally; (c) a test of the area of the initial closing low on reduced selling pressure."
* Today, the S&P closed at 872.81 -- up 9.5% in April, and up 31% from the March 9th closing low of 677.
Wednesday, April 29, 2009
Bob only had one guest this weekend, but he was a good one. It was Dr. Alan Blinder, former Vice Chairman of the Federal Reserve Board of Governors, and current Princeton University Professor of Economics.
Blinder/Brinker: Bob noted that Alan was a guest on Moneytalk back in September 2008 and asked him what kind of shape the financial sector is in now as opposed to back then. Alan said the financial system is not cured, but there is no question it is in better shape than it was last fall, but it is not great. Last fall we were in an abyss and the question was how deep it would go. The Federal Reserve has done a huge number of things and the Treasury has as well.
Blinder/Brinker: Bob said the credit markets have improved, particularly in the municipal bond market. Last fall, the municipal bond market was in total disarray but in recent offerings of state general obligations, the yields have come way down. Alan said they are probably not auction rate securities which is where the real problem came in the municipal bond arena. There were all sorts of auction rate securities that were allegedly just as safe as long-term debts for the municipality and just as safe for the buyer, neither was true. Alan said Bob was referring to the GO market which has been around for well over 100 years.
Blinder/Brinker: On May 4th, we are supposed to get some feedback on the stress test. Your thoughts? Alan said he thinks that everyone should realize these are not pass/fail tests. Nobody will probably "fail." Once it is figured out how much losses a bank has to absorb, the Fed/Treasury will make a judgment as to how much capital they will need. The big question is how much money each of the 19 banks will need to raise enough capital.
Blinder/Brinker: What are your thoughts on how the banks can raise capital? Alan said in some cases, the banks have non-core businesses that are thriving which could be sold to raise capital if they can't get new equity from the investors in the market. A last resort is to raise additional capital through government intervention which is the last resort. The government will tell the banks how much they need to raise and if they can't, they will get government capital which will come with strings attached. Right now, there is a scramble from the healthier banks who are trying to give the TARP money back, such as Goldman Sachs and JP Morgan. Alan said they should be allowed to give back the TARP money because as a long-term proposition, nobody wants the government to be involved in the banks. Moreover, the TARP restrictions are hurting the operations of the banks. Finally, the Treasury is short on money so if they can get $40-$100 billion in funds back that they previously gave back out through TARP, that is money they will have to recycle it to banks that need it more.
Caller: This caller is worried that the government isn't anxious to take back the TARP money because it creates a competitive advantage for the banks that pay it back. Alan said there was some hesitancy in Washington on taking the money back, but he thinks that is largely over. We will see it play out for certain after the stress test results are announced. Alan said if he were in charge and banks wanted to pay back TARP money, he would allow it but would make it conditional upon the banks not coming back to the government later for more money.
Caller: Why would any bank want to give back the TARP money if it meant they couldn't come back later to borrow funds? Alan said the banks don't like the restrictions that come with TARP which include limits on executive compensation, rules on dividends, etc.
Blinder/Brinker: Bob said there is lots of talk of government "nationalization" or socialization of banks. Bob said he doesn't see it that way. Alan said there will not be any long-term nationalization of financial institutions with the exception of Fannie Mae/Freddie Mac. The old system under which they operated is no longer viable. Whether they become a private entity, or a governmental agency is unknown. But beside those two entities, when you talk about JP Morgan, Bank of America, etc., they won't be nationalized. But when there is short-term nationalization here the government takes over a bank shortly and then turns it over to private investors that can take a 1-2 years.
Caller: What would nationalization of banks mean to us as individuals? Alan said if were done and worked well the result would probably not be noticed by the individual bank user. The problem is that generally speaking we don't think the government is very good at running businesses, especially customer service based businesses. If a bank were nationalized, the government would step in, eliminate the existing shareholders, fire the top management and take it over as a government run enterprise. Alan said the Tennessee Valley Authority is the most prominent example of this, but we really don't have too many nationalized industries
[Korn] EC: The Tennessee Valley Authority (TVA) is a federally owned corporation in the United States created by congressional charter to provide navigation, flood control, electricity generation, fertilizer manufacturing and economic development in the Tennessee Valley which was a region particularly impacted by the Great Depression.
Blinder/Brinker: Bob asked Alan to talk about CDARS which is a service that can offer you up to $50 million in Federal Deposit insurance coverage at one financial institution. It allows you to get around the FDIC $250,000 limit. Alan said it is not just for individuals. There could be a person who is head of a municipality, a country club, whatever role where there is a fiduciary responsibility and CDARS might be a viable service. It enables the customer to come into one single bank, deposit a great deal of money. That money gets parceled out into packets below $250,000 to as many banks as necessary and so the customer ends up owning the entire portfolio but has accomplished this by one transaction. You get one statement, but listing all of the CDs. If it is a taxable entity, there will be one tax return. People could do this on their own in principle, but it would be very time consuming. Alan said there are over 2,900 institutions that offer this. Given the financial crises, more and more banks are signing up. Alan said there is a list on the CDARS web site listing all the banks that are involved.
[Korn] EC: This link brings you to a the CDARS web site which has a list of all the financial institutions across the country that offer CDARS (which is an acronym for Certificate of Deposit Account Registry Service):
[Korn] EC#2: Alan is involved with CDARS, and so it not unusual for him to promote it.
Blinder/Brinker: What are your thoughts on the safety of the FDIC? Alan said there is no question that the government will and must back up the FDIC because of its importance to the financial system. Alan thinks the FDIC is safe and told a caller that a certificate of deposit that is FDIC insured within the protected limits is as safe as a U.S. Treasury.
Blinder/Brinker: What do you think of the proposal that the free markets could work this out? Alan said we tried leaving Lehman Brothers to the "free market" on September 15th and it was a catastrophic mistake. The problem is the banks are so interrelated with other institutions that they drag other institutions down with then. Ben Bernanke has used the analogy of your neighbor's house being on fire due to his own fault. Well, even if it is your neighbor's fault, that doesn't meant that your house is not at risk to catching on fire because of it. This is called counter-party risk.
Caller: What do you think of breaking up the big banks once things are stabilized? Alan said something has to be done about the "too big to fail option" with banks. If you break them up, that is one solution. Some of that will occur naturally as banks downsize, but there is also the public policy issue that will need to be addressed once this crises is over. You can't be a one dimensional thinker on this issue because when you have capitalism, successful companies will grow bigger again so we will never be 100% rid of the too big to fail problem.
Caller: Do you think we should eliminate variable rate mortgages? Alan said he wouldn't go as far as eliminating them. But what is needed is a suitability standard. They are suitable for some people who are financially sophisticated. There are valid instances where variable rate mortgages make a lot of senses. But a lot of people got hooked into them without realizing they weren't appropriate for them.
Blinder/Brinker: Alan commented on the money supply. Ben Bernanke has resolved to keep piling up bank reserves to keep the money supply from contracting. So far, the money supply has not contracted and has expanded. There has been some contraction of the credit markets but not the money supply. The reason it takes so much is the banks are hoarding their reserves which in normal times they don't do because they don't make money from that. The excess reserves in the United States banking system have gone from just a few billion to $750 billion. If the Fed did not provide that money, we would have seen a violent contraction of the money supply. We saw that happen in the Great Depression and we don't want that to happen again.
Blinder/Brinker: Bob said his own personal view of the economy was that we will see a recovery in 2010 and that 2009 will be a transition year. What are your thoughts? Alan said early 2009 was horrible and we are still living through the tail end of that catastrophic period. However, as Ben Bernanke has said we are starting to see green buds appear. There is some sense now that maybe housing and auto markets are hitting a bottom as well as the consumer. Alan said the worst may be over very soon. The second half of 2009 could show positive growth rather than decline. Alan said this is not set in stone, but if we don¹t have any bad luck than it could work out.
[Korn] EC: Amen to that. Good interview don't you think?
Honeybee here: You can request a complimentary copy of David Korn's weekly newsletter. And also download a sample of The Retirement Advisor, which David and Kirk Lindstrom co-edit. [LINK]
[Alan Blinder's interview is now available for listening or downloading in the Saturday 3-4pm time slot.] You have a full seven days after broadcast to download your own FREE copies of Bob Brinker's Moneytalk programs. The programs are archived for at KGO810 radio [LINK]. To download the program to your MP3 player or flash drive, just right click the day and hour that you want and use "Save Link as." KGO Moneytalk Archives [Link]
Dixiegeezer's Arlington picture prompted Bob R. to send these picture.
Bob wrote the following comments about the pictures: "One, of the Smithsonian, I took from the mezzanine showing the mammoth and capturing the people scurrying around it. What makes it an interesting photo, I think, is the guy to the right of the mammoth, who is one of the only people standing still. He is regarding the mammoth, while others seem to be hurrying by. I did not set out to compose the picture this way......
The other photo is the Marine Memorial near Arlington Cemetery. The memorial and Arlington are very sobering places. More so to anyone with a grasp of the history of this country's overseas conflicts and the sacrifices that were made by men and women in the service."
Sunday, April 26, 2009
CALIFORNIA STATE GENERAL OBLIGATION BONDS: Brinker said: "I like general obligations of states........ That is what I use myself....I have a really hard time believing that the Federal Government would stand by idly and allow state general obligations to go into default. I really don't think they would. And so for that reason, even if they have fiscal problems of their own as many do right now, I think state general obligations are a place that a municipal investor in a high bracket can invest......I think if you own a general obligation of the State of California, and if the State of California continues to have fiscal problems, I would be very surprised if Washington D.C. would stand idly by and allow California to go into bankruptcy.....Bankruptcy has dramatic implications for the citizens of the State California, and I use California because it's the lowest rated of the general obligation state bonds right now because of their fiscal problems......In California, after education expenses are paid, the second thing that gets paid is interest on the California General Obligation Bonds."
Caller Angelo: "I have not subscribed to your newsletter, but did you ever make a call to get out of the market or are you remain fully invested."
Bob Brinker said: "We've remained in the market. I did not make a call to get out of the market. And I discussed this in detail in our program in October when the market broke. But no, I did not make a call to get out of the market. I have stayed with the market. I am bullish on the market at this time. And I think that people who are in the market right now will be very glad they are."
[Honeybee EC: Bob Brinker is (to put it kindly) "mistaken" about discussing "in detail" his decision to "not make a call to get out of the market" in October 2008. All one has to do to verify that I am telling the truth is check the 2008 archives of this blog and scroll to the October Summaries. Matter of fact, Brinker has NEVER discussed "in detail" his decision to not get out of this mega-bear market. He has admitted it when forced to, but never discussed it.
And (to put it kindly) how "silly" for him to say the "market broke" in October 2008. Anyone who can read a chart knows that it "broke" in January 2008. See Kirk's chart in the Saturday Summary below.]
Today a caller asked Brinker about buying into the stock market. Brinker said that he was "on record" as recommending to "buy on weakness," and he added that he had written that advice in his April Marketimer. That is correct. In March, he was looking for a new bear market bottom. Yesterday, Brinker inferred that this had been his unchanging advice for quite some time when he said: "Well our recommendation to our subscribers has been to be a buyer on weakness. We have regarded the market as a buy on weakness. That is our view and that's certainly a view that has not changed in recent weeks."
SWINE FLU OUTBREAK: Brinker said that he wouldn't rule out the possibility of this swine flu outbreak being a terrorist attack. And he pointed out the one of the officials that met Obama in Mexico is now dead from it!
In edit Monday morning. Jeffchristie reports -- read more here [LINK]The remainder of the Sunday program covered old ground such as, credit default swaps, repeal of Glass Steagall, the uptick rule, calculating the implied inflation (Brinker says it's 1 1/2% now), naked shorting, and the CDARS program [LINK].
Brinker did not have any guest-speaker Sunday.
I took this picture in Juneau, Alaska, when on a cruise:
In edit: Please click on "older posts" below to read my Summary of Saturday Moneytalk.
Saturday, April 25, 2009
Bob Brinker discussed the stock market action this past week. He called it a "seesaw" week and said that it had ended close to where it started. He said the "wild ride" was caused by a "false story" that came out on Monday which caused a decline of almost 4% -- "carrying the S&P 500 Index down into the "low-800's on that day," but that buyers had come back in as the inaccurate story was straightened out.
Last week the Dow closed at 8131.33. This week the Dow closed at 8076.29, a loss of 0.7% for the week.Brinker said: "We had a stock market rout on Monday.....and it was based on an erroneous story that almost all of the 19 banks in the stress test were going to be declared insolvent. This story is false.......There is nothing to this story according to the United States Treasury. As a matter of fact, it's expected on May 4th, when the results of the stress test are announced......that we are going to see the need for some of these banks to raise additional capital.........Under the stress test guidelines, we're going to see a period of time set aside during which these banks are going to be able to find ways to raise capital. There are several ways to raise capital. You can sell non-core assets.....You can sell shares to investors......the TARP money....hundreds of billions of dollars have been put into these banks.....
Last week the S&P 500 Index closed at 869.60. This week it closed at 866.23, losing 0.4% for the week.
Last week the Nasdaq closed at 1673.07. This week the Nasdaq closed at 1694.29, up 1.3% for the week.
Last week GLD closed at $85.33. This week GLD closed at $89.72, jumping for the week because of the news that China is building a stockpile of gold [LINK]
Bob Brinker never recommends buying gold, but according to Marketwatch, China's gold holdings have been surging: "China has boosted its gold reserves to 1,054 metric tons....The increase makes China the world's fifth-largest holder of gold, just ahead of Switzerland, and among the six nations plus the International Monetary Fund that have reserves of more than 1,000 metric tons......The comments are China's first public acknowledgement in more than five years that its gold reserves had increased."
......In my opinion a great disservice was done to stock market investors this past Monday who were in receipt of this false story -- confirmed by the Treasury as a false story that practically all of these top banks were going to be declared insolvent......This is the kind of a market that you are dealing with today.....False stories damage the credibility of the stock market....."
PANICKING OUT OF THE MARKET: Brinker said: "We are talking about a report coming out last Monday from an obscure source, but it was picked up by major sources and that certainly contributed to the problem. ......They ran with this story and caused the stock market panic on Monday. You hate to see that. And the reason that you hate to see that is, those people that were panicked out of the market on Monday with levels down into the low-800, they turn around and they see the market snap right back. It goes right back to where it was the prior Friday, and the losses are virtually completely recovered within a matter of four days trading -- Tuesday through Friday. What do you think they think about the credibility of Wall Street and the credibility of investing? This is the world we live in today. This is the reality of Wall Street today.....This is Moneytalk."
UPTICK RULE: Brinker said that the repeal of the uptick rule has damaged the credibility of the stock market. Brinker talked about this several times today and there were several callers who talked about the subject -- especially in the second hour. There is no change in Brinker's viewpoint. He thinks it should be reinstated, and he believes that it will be reinstated sometime this year.
POSSIBLE SWINE FLU PANDEMIC: There was a lot of discussion about this subject today. Basically, Brinker classified it as an "exogenous factor" that is outside the normal financial flow, but a factor that has to be closely monitored -- because it is "lethal."
Caller Jack from San Diego made a good point when he said this: "......what troubles me, Bob, is the reports I'm hearing out of Mexico is, not only have they closed the schools in Mexico City, but they've canceled public events. And the CDC has come out and said they haven't seen this flu strain before. It's new to them, and it's too late to stop its spread. Now this flu strain contains elements of human flu, bird flu and three strains of swine flu -- North American, European and Asian. One has to wonder if this can even occur naturally. But the part that troubles me is that our government has yet to place any travel restrictions."
Bob Brinker replied: "Frankly, if you look at the reports from the World Health Organization, you have to take it seriously.....You are correct, it is a new flu virus and potentially a major respiratory epidemic.......We have to watch it very, very closely and that includes travel plans."
The caller continued: "......all the reports so far, appears that this is all human to human contact. In other words, the virus has mutated, which is worst case scenario as far as the pandemic...... The president of the United States was in Mexico City a week ago. And I think because of the odd nature of the strain, at this point, we should not the possibility that this could be a terrorist attack."
Brinker replied: "Well, I never rule that out....... but what I would do at this point is to monitor the pronouncements of the World Health Organization. They're usually on top of this sort of thing...... And one thing to watch is whether the WHO raises its pandemic flu alert to level four. Right now it's at level three, but if they raise it to level four, that would mean that sustained human to human transmission of a new virus has been detected.....If they go to level four, I will become more concerned than I am now." [Link to WHO]
* Sunday @ 11:30 PDT, Swine Flu Update: US declares public health emergency [LINK]
** Monday Swine Flu Update: The WHO raised the alert level to Phase 4, meaning there is sustained human-to-human transmission of the virus causing outbreaks in at least one country [LINK].
*** Wednesday, April 29th, Swine Flu Update: The WHO raised pandemic flu alert level to phase 5 [LINK]
INFLATION: Caller John asked Brinker if he thought the Fed would be able to control inflation brought on by the excessive spending. Brinker said that was "a great unknown" question with an "unknown answer."
ECONOMY: Brinker said that they are going to get the economy turned around "eventually."
FIXED-INCOME INVESTING: A caller said he was concerned about inflation's effects on fixed-income investments and Ginnie Maes. Brinker told him that if he wanted a portfolio that completely protected him for NAV deterioration, he should buy I-bond (personal money), TIPS (tax-sheltered money) or laddered FDIC-insured CD's.
[About 52 minutes into first hour] Caller Steve told Brinker that he was 55 years old and about five years from retirement. Steve said: "I've been in all cash until now and I'm considering taking that cash and going about 60% into the stock market and 40% into fixed income. Would you buy the market outright at its current levels or would you dollar-cost-average in?"
Brinker replied: "Well our recommendation to our subscribers has been to be a buyer on weakness. We have regarded the market as a buy on weakness. That is our view and that's certainly a view that has not changed in recent weeks. We are a buyer on weakness. You had tremendous weakness on Monday. I mean it knocked the thing all the way down to the low-800's on a false news story. So that's the kind of opportunity that is presented. And yeah, I'd be a buyer on weakness. I don't have any problem with your asset allocation. I think that as you move into retirement down the road, you might go to a balanced approach. But if you are going to start out with objectives in the 60 to 40% range, equities over fixed income, I'm okay with that. I think there opportunities to make money in the stock market. This is a good time, I think, to be in the stock market. And I think that people that are in the stock market right now are going to be happy they are as we move forward. There's no question about it, the credibility of the stock market has been severely damaged in the marketplace by the high jinks resulting from the repeal of the uptick rule, the high jinks we've seen in terms of false news stories. But in that case, it presents an opportunity."
Honeybee EC: Brinker recommended "buying on weakness" with no number attached for the first time in the most recent issue of Marketimer. So for him to infer this has been ongoing advice is deception. Today, he gave the audience the impression that he is "happy" to be in the market, but didn't make any reference to the fact that his subscribers have been fully invested in this bear market if they followed his advice. They have lost huge amounts of money, so I'm sure they are happy to be recouping some of their losses.
He didn't mention that he has issued repeated much higher all-new-money-in "buy levels" and has called multiple bottoms that were promptly taken out. Anyone who took his advice back at the October 2007 highs would have bought into the stock market at mid-1400's, low-1300's, low-to-mid 1200's, and low-to-mid-800's. The irony is that after all of that, he missed the real bottom.
The last new-money buy-level he issued was in January in the low-to-mid 800's. He did away with that one as the market tanked to its all-time-low of 677 in March. Whereupon he said that he was looking for a new "bottoming process." That was just about 5 days before the market began its 25% + climb.
Oops, in the March Marketimer, he did not even recommend dollar-cost-averaging....
Brinker neglected to tell the audience that "buying on weakness" ONLY applies to new money. Marketimer, April 3, 2009, Bob Brinker said: "....we would view any short-term weakness that occurs in the S&P 500 Index as a buying opportunity for those looking to add to equity positions......All of our model portfolios remain fully invested...."
Brinker's failed market timing calls, chart courtesy of Kirk Lindstrom [LINK] Please click to enlarge:
Bob Brinker’s guest-speaker Saturday was Dr. Alan Blinder. Dr. Blinder is on the faculty of Princeton University and has served as vice-Chairman of the Board of Governors of the Federal Reserve System.
Here is the [LINK] to the CDARS website that Dr Blinder talked about. It is a way to access full FDIC coverage on deposits up to $50million.
[Alan Blinder's interview is now available in the Saturday 3-4pm time slot.] You have a full seven days after broadcast to download your own FREE copies of Bob Brinker's Moneytalk programs. The programs are archived for at KGO810 radio [LINK]. Saturday's program is ready now and will be there until next Saturday at 1pm. To download the program to your MP3 player or flash drive, just right click the day and hours that you want and use "Save Link as." KGO Moneytalk Archives [Link]
Dixiegeezer recently visited Arlington Cemetery and took this beautiful picture:
Monday, April 20, 2009
The stock market has risen for six straight weeks. The Dow closed at 8131.33, gaining 0.6% for the week; the S&P 500 Index closed at 8869.60, gaining 0.5% for the week; The Nasdaq gained 1.2%, closing at 1673.07; GLD closed at $85.33.
Bill Flanagan's opening monologue was very interesting. I have transcribed excerpts from all of it. I think you will enjoy reading them.
Firstly, he mentioned the April 15th tax deadline and the Tea Parties that took place all over the country on that day. He said people were "acting out their anger." There were actually about 250,000 Americans who "acted out their anger," and in my opinion, some fear for the future of the United States.
Bill Flanagan said: "The tax system obviously stinks. It stinks to high heaven and only gets worse. I especially love a quote that appeared in Tom Dolan's editorial in Barron's today. He turns to none other than Plato for inspiration. Quote: 'When there is an income tax.....the just man will pay more, and the unjust less on the same amount of income.' Plato knew this. Anybody who's got enough common sense to get out of the rain, knows this. Congress knows this. Tax cheats know this. Members of the Obama administration who are tax cheats know this. And yet we have a system that is allowed to get worse and worse and worse. And compliance becomes a bigger and bigger problem, getting the just man angrier and angrier and angrier -- and poorer.....
..... The tax code which continues to grow at astronomical lengths.....is now 70,323 pages. In 1984.....it was only 26,000. This thing is growing exponentially......The average guy can't do his taxes anymore. More than 60% of all individual returns are done by professional preparers now. Up from 46% in the mid-80's.....Pay someone on average $300 -$400 bucks because you are completely baffled.....It's bad enough we have to pay a lot in taxes....the fact that somebody is not paying their fair share, that's even worse.....
.....It's a system that is crying outrageously for change. And once again, we have these promises, promises, promises, Obama promises, Obama promises, Obama promises. And now he's promising he's going to simplify the tax code -- got that? -- Sometime by December. Let's wait folks. He's already made a mockery of it. With these new tax credits, it's been called the H.R. Block and Liberty Tax Stimulus Plan. Those are the two biggest agencies that handle tax preparation.....
.....Well of course, we have to go to the source and that is our friends in Congress -- our inept Congress people who don't give a darn about anything but themselves. They have an approval rating which is lower than whale manure and going down by the moment. Nothing is ever done to fix the most egregious problems that we have in this country -- they can't be bothered.....
.....After all, they have plenty of money, they've got plenty of help, they've got plenty of assistance. They have platoons of people to help them do anything that they want to do. They get special considerations. They don't pay the same kinds of things that we do. Why should they want to change anything when those lobbyists keep on dropping all those dollars in their campaign chests to get special consideration? And of course, they get it. They get it left and right and center......
.....This is what happens with our inept congress. If Obama thinks it's going to be easy to lower taxes, wait until he finds out how difficult it is to try to be green and fair. So they were giving tax credits to companies for using more desirable fuels, and the paper industry..... has a by-product for making paper -- it's called black liquor. And this black liquor they pour into the engines of the equipment they need to run the paper mills, and run the heating plants..... And it turns out to be a pretty efficient fuel.....
.....Well, in their infinite wisdom, our guys say.....that's a pretty good idea -- see businesses should use things like this, even though they've been doing this in the paper industry for eons. So [now] there's a special tax credit for using this black liquor -- provided -- get this folks -- it's mixed a little bit with diesel oil. So then this alternative fuel gets a tax credit of 50-cents a gallon. The net windfall to the paper companies is huge! So big it's driven the price of the whole industries' stocks up......
...... Didn't anybody think this through? The one year cost of this is THREE BILLION DOLLARS! Wall Street says it may be six billion....You know those geniuses at the Senate Finance Committee, the ones that are so friendly with those folks that gave us sub-prime mortgages......says that they are aware of it. They're really not that happy with it, but they're working to do something to fix it -- $6 to 9billion worth of alternative fuel tax credits didn't dawn on them.......
.....There's more! The EPA now wants a higher ethanol mix......We all know that it requires more energy to create a gallon of ethanol than it does virtually any other fuel, except perhaps brain-power from congress because you'd need a awful lot of brains to make a gallon of fuel out of that. They want 15% gasoline blends. Why? Because the farmers want it, that's why. And because Archer Daniels Midlands want it, that's why. Now the auto makers are saying wait a minute, 15%, we may have trouble with the cars running right. No problem. Of course remember, Obama and his ilk want us to all drive $40,000 electric cars around. Never mind that electricity costs by the time that happens will be about $700 a kilowatt hour.......
.....Do you know how much corn in the United States is produced simply for making ethanol? One quarter of all the corn produced in the United States -- it used to be known as FOOD. Food for us and for cattle and for the rest of the world now winds up in gas tanks. That's roughly double what it was in 2004. Now tell me the ethanol companies have really not been doing a good job of lobbying, huh? They should all get awards. Hey, let's do it all. Let's use every single kernel of corn that we grow. No more in the movies. No more anywhere. Let's pump it all into the manufacture of ethanol. That would make some people very, very happy. The farmers would be delighted, except they really couldn't eat steak could they? Not corn-fed steak anyway."
[Honeybee EC: Agree or disagree with Bill Flanagan, kudos to him for some refreshing straight talk.]
STOCK MARKET... Bill said: "This has been a real bad market, folks, and it's very hard to stick to your guns when there is no powder left and cannon balls around and it seems that the end is near. Of course, the market over the last 6 weeks has been up, which is always encouraging. Although we still continue to have discouraging news -- unemployment is up. Well there's been a little bit of movement in retail sales but unemployment is just dreadful. Well beyond 10% in California and on the west coast. This is not good. People don't have jobs, they can't buy things. We are a consumer driven economy. You can talk about all the hoopla about the financials doing this, that, and the other thing, but I think that's hysterical money jumping up and down trying to get some life pumped into a system that obviously has been very, very seriously injured."
DOLLAR-COST-AVERAGE....Bill told a caller who wanted to move money out of bonds into equities that the way to do it is to dollar-cost-average in at opportune times. He pointed out that historically, the market is a lot lower than it has been for a long time.
INTEREST RATES... Bill said that the "handwriting is on the wall." That you simply can't have this kind of profligate spending without an eventual increase in interest rates. He said the questions are, how much will it be and when -- that it could be quite awhile and it could be very incremental.
CALIFORNIA GENERAL OBLIGATION BONDS: Bill said: "If you are talking California, I'd be concerned."
INFLATION....Bill said that it is an inevitable fact that we are going to get some inflation down the road.
There was no guest-speaker today.
You have a full seven days after broadcast to download your own FREE copies of Bob Brinker's Moneytalk programs. The programs are archived for at KGO810 radio [LINK]. Saturday's program is ready now and will be there until next Saturday at 1pm. To download the program to your MP3 player or flash drive, just right click the day and hours that you want and use "Save Link as." KGO Moneytalk Archives [Link]
Thursday, April 16, 2009
According to the April issue, Bob Brinker's Marketimer model portfolios are no longer in Hulbert's Financial Digest "Top-5 Performers" for any time-frame, in any of Mark Hulbert's categories.
This is in spite of the fact that since October 2000, Hulbert has used a footnote to justify not including Brinker's QQQQ-trades when he ranks his performance. Hulbert is aware that Brinker repeatedly instructed subscribers to use model portfolio cash reserves, while he "chose" to keep the trades (yes, there were THREE of them) off-the-books. Hulbert added the footnote to justify this deception. Indeed, it's a circular deception because Brinker has used HFD to advertise Marketimer, but he has never mentioned Hulbert's footnote.
I know from personal experience that Hulbert won't listen to the facts about that this matter, and continues to claim that Brinker made the decision to keep the trade off the books when he first made the trade. That is false! I wrote to Mark Hulbert and told him that I could prove his footnote was false. He refused to pay any attention. So in my opinion, he's either deliberately ignorant of the facts or he knows he's lying.
In the footnote, Hulbert says Brinker's "HFD record has not suffered...." That's right -- it also has not been accurate because Hulbert is basically giving Brinker's portfolios a years-long mulligan on a huge, disastrous trade that lost over 70%!
In the April issue of HFD, Hulbert did a review and commentary of Brinker's Marketimer. Hulbert makes the claim that "Brinker's letter primarily is intended to help fund investors time the domestic and international stock and bond markets as well as select individual funds. His approach involves a combination of both technical and fundamental analysis." Since when has Brinker used technical analysis? [In EDIT: DanG, long-time Brinker connoisseur, has shed some light on Brinker's use of TA. See Dan's comments here [LINK]. Hulbert seems to make it up as he goes when he is writing about Bob Brinker.
Not surprisingly, Hulbert said that Brinker is a long-term timer and mentioned the only two times over the past 22-years that Brinker has "deviated from being fully invested" -- AFTER the 1987 crash and between January 2000 and March 2003. On the other hand, Hulbert didn't say a word about Brinker remaining fully invested during the 2008/2009 worst bear market in several decades.
As of January 2009, Brinker stopped posting his model portfolio one-year numbers on his website, so here are the year-2008 returns:
Model Portfolio I = Down 39.7%
Model Portfolio II = Down 37.4%
Model III (balanced) = Down 23.9%
Jeffchristie tracks the YTD returns based on the portfolio values that are posted at the end of each month on Brinker's website. Jeff wrote:
The March 2009 month end numbers are in over at Bob Brinker's website.
Portfolio 1 $157,235 -8.1% YTD
Portfolio 2 $129,878 -9.3% YTDPortfolio 3 $154,875 -4.7% YTD
From the Oct 2007 high, P1 is down 48%; P2 is down 46%; and P3 is down 29%.
I took these pictures as I walked around a nearby neighborhood where they more or less line the streets. The trees grow quite large and are stunningly beautiful in bloom. I'm not sure of the name -- maybe some type of blossoming cherry tree?
Wednesday, April 15, 2009
"Bob Brinker has partnered with Genworth Financial Asset Management to offer a personalized and professional money management service. Dollar cost averaging strategies are also available for those investors who want to minimize entry point risk. The account minimum size is $100,000. A financial agreement exists with GFAM for services, including referrals. Please refer to Schedule H for details."
Genworth Financial Inc. failed to qualify for new capital [TARP money] from the U.S. Treasury.
The following is a direct quote from the GFAM website [LINK] Please note that it doesn't mention Brinker's latest "call to add new money" at "low-to-mid 800's.":
"Genworth Financial Asset Management, Inc. (GFAM), through its exclusive relationship with Bob Brinker, provides the framework to help clients achieve their financial goals. GFAM implements Bob’s tactical asset allocation recommendations by selecting mutual funds for client accounts. You may be aware of Bob's recommendation in January 2000, to move 60% from equities to cash, and in March 2003, to become 100% invested in the equity portion of your portfolio. Additionally, during the past three years, Bob has made several less publicized, yet equally astute, calls to add new money to portfolios at the 1100, 1160, 1180, and, more recently, 1250 levels on the S&P 500 index"
GNW is a penny stock:
Kirk Lindstrom's comments here: [LINK]
* Analysts question Genworth's business model
* Shares slide as much as 30.5 percent (Recasts first two paragraphs)
By Jonathan Stempel
NEW YORK, April 13 (Reuters) - Genworth Financial Inc (GNW) shares tumbled on Monday after the money-losing life and mortgage insurer failed to qualify for new capital from the U.S. Treasury, prompting questions about the company's business model.
In afternoon trading, the shares were down 58 cents, or 21.1 percent, at $2.17 on the New York Stock Exchange, after earlier falling as much as 30.5 percent to $1.91.
Genworth, once part of General Electric Co, is one of several insurers that sought to buy banks or savings and loans last year to win holding company status as lenders and qualify for taxpayer funds under the $700 billion Troubled Asset Relief Program. Insurers have seen capital squeezed as the value of their investments has fallen.
After markets closed on Thursday, Richmond, Virginia-based Genworth abandoned its TARP request, saying the Office of Thrift Supervision had failed to approve its application to become a savings and loan holding company.
Genworth had planned to buy Interbank fsb, a Maple Grove, Minnesota, lender, to be eligible for TARP money.
"I don't believe Genworth has a viable business model in the current market environment," said Alan Rambaldini, an equity analyst at Morningstar Inc in Chicago. "The question is whether Genworth can muddle through the next couple of years until the economy turns around. That's the only thing that can save them."
Neither Genworth nor the OTS would comment on why the company's application was allowed to expire. Last week, the Treasury Department said some insurers would be eligible for TARP money...