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Saturday, May 9, 2009

Bob Brinker's Moneytalk: Discussion, Commentary and Excerpts, May 9, 2009

May 9, 2009, Bob Brinker's Moneytalk was devoted exclusively to callers today. There were no monologues or general stock market commentary.

* The Dow was up 4.4% for the week; up 30% in the past 9 weeks; YTD, down 2.3%.
* The S&P 500 Index was up 5.9% for the week; up 36% in the past 9 weeks; YTD, up 2.28%.
* The Nasdaq was up 3.4% for the week; up 34% in the past 9 weeks; YTD, up 10.27%.
* GLD closed at $89.98

Caller Ken asked Bob Brinker how he thought the stock market would be effected by more foreclosures as mortgages reset this year.

Bob Brinker replied: "I think that it will have more of an effect on the credit markets because a lot of this has been anticipated in the credit market and that is what's going on, especially with commercial property mortgages. We know for a fact that there are a lot of vacant commercial properties out there. A lot of non-performing loans in that area....."

Ken's follow-up question: "Do you think the XLF will drop in the next six months or so?"

Brinker replied: "It's had a nice move. You're talking about the Exchange Traded Fund on the financials......I think the reason it's had such a nice move is there were a lot of dire forecasts out there about the results of the stress tests. There were people out that said when the stress test results come out everything will just fall out of bed. And of course, it turned out to be the opposite....they were very well recieved. Now obviously they were presented in a way that was going to be as palatable as possible because it was not going to be the objective of the stress testers to create a financial panic.....

.....The Secretary of the Treasury came out and said that none of the 19 largest banks were in danger of failing....He used the word 'reassuring' in describing the results of the test..... Matter of fact, we had a 21% rally this week in the Keefe, Bruette and Woods Bank Index [LINK] as the financials rallied strongly......So this is frequently the case. You get conventional wisdom out there and it turns out to be 180 degrees in the opposite direction."

A caller asked Brinker:
"So the price of gold right now. Do you feel there is a bit of a bubble....There's not much behind it. It's just maybe some scared investors?"

Bob Brinker said:
"When you look at the price of gold over the last 30 years, it's essentially unchanged. The price of an ounce of gold bullion today is approximately the same it was back around 1980. It had run up into the 800's in 1980. Now it has been extremely volatile during that time. But basically if you were to look at the two price points between that '80, '81 period and today, they'd be fairly close.....

....I prefer to look at gold as something that you use as a hedge. Not so much as an investment in absolute terms, but rather as a hedge in a portfolio that is used against some potential risk, or perceived risk. Let me make one up. If you were to think that we were in for hyper-inflation.....then you could be looking at gold as some sort of a hedge in your portfolio; some sort of an alternate in your portfolio......"

Caller follow up question:
"Is there a certain allocation that makes sense for your average investor to be in gold?"

Bob Brinker replied:
"Well my advice on Moneytalk has been for those that want to have a hedge, that you put a small percentage in the Exchange Traded Fund that invests in gold bullion, which has the symbol, and we've talked about this on numerous occasions, GLD.....They own gold bullion against the shares. They have an expense ratio of about 40 basis points and so you basically track along with the price of gold bullion minus that expense ratio of about 4/10 of 1% on an annual basis. And right now, that Exchange Traded Fund is about $90 a share.

[Honeybee EC: How timely for a caller to ask about gold today. If I recall correctly, it's been several months since anyone asked about buying gold. I wonder if the caller was aware that Brinker added GLD to his list of recommended "individual issues" in Marketimer.]

Miscellaneous Brinker comments paraphrased:

There were a couple of callers who were concerned about U.S. currency. Brinker said that currency is a "tough call" in the short term. However, he pointed out that the price of oil is already "back up to $58" a barrel, and our government is "doing nothing about energy." Brinker said that Hugo Chavez "laughs in our face" and we are "helpless."

Brinker said that Ben Bernanke has done a wonderful job of handling this financial crisis and he "salutes him." He said Obama should "make us proud" and reappoint Bernanke as Fed Chair.

Brinker's guest-speaker Saturday was Patricia Crisafulli who wrote: "The House of Dimond: How J.P. Morgan's Jamie Dimon Rose to the Top of the Financial World." [LINK

You can download your own FREE copies of Bob Brinker's Moneytalk programs. The programs are archived for seven days after broadcast at KGO810 radio [LINK]. To download the program to your MP3 player or flash drive, just choose the day, then right click on the hour that you want and use "Save Link as." KGO Moneytalk Archives [Link]

Chart of Bob Brinker's new-money all-in buy-levels courtesy of Kirk Lindstrom [LINK]:


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