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Saturday, May 16, 2009

Bob Brinker's Moneytalk: Excerpts, Summary and Commentary, May 16, 2009

May 16, 2009,

This is the second week that Bob Brinker has not done any monologues to speak of at the beginning of the hour. Today, Bob Brinker commented that he had received a letter from Guam and said: "If you want to know what's going on in the housing market, all you have to do is look at the front page of the New York Times," then he went directly to a caller.

CALIFORNIA GO BONDS: Bob Brinker told the first caller:
"I don't consider the insurance as a safety net for municipal bonds, and I'll tell you why. In the event you have a massive default in the municipal bond market, I don't know where the insurance companies would get the money. They don't have nearly enough pay off massive claims in the event you had a widespread municipal default across America.......I consider the insurance of no value at all.....

....... So as always, we go to the underlying rating. Now California, although it is investment grade, it's the lowest investment grade of any municipal bond in the United States. Now why is that the case? Fiscal irresponsibility on steroids in California........That means that they not interested in balancing the budget -- which they must do, and they have shown no propensity to get their financial house in order......So there is always the possibility that they are going to be unable to come up with the money to do whatever they have to do to meet their obligations.....

....Now it is unlikely in the case of the bondholders, because the bondholders under law in California are second in line after education to get paid. So they are so high up the food chain in the order of getting paid that they are protected to a significant degree......Hypothetically, my personal view is, if you had a default in the State of California, I'd expect you'd get assistance from the federal government. Now whether that assistance would bail out the bondholders is an entirely different story. It may not bail out the bondholders, but I think it would provide essential services for some interim period. But there is no doubt about it, State of California has been really a national disgrace in the way they have conducted their fiscal Sacramento, California."

Caller Jim said that he was calling from Cape Girardeau, Missouri, Rush Limbaugh's hometown. Jim said:
"I worked for the Hartmarx Corporation home office in Chicago for 41 years. Mr. Barack Obama, when he was campaigning, stopped and had a town hall meeting at our factory, which makes suits for Marx. And he fielded questions for 100 employees only and I was fortunate enough to shake his hand and meet him......He guaranteed us change and we made his suit that he accepted the nomination in......And about two to three months later, we started going to 3 days a week. And then after 41 years, on November 26th, we closed our sewing and cutting side and I was out of a job. So I saw the change, let's put it that way."

Jim asked Brinker if he thought it might be possible for him to get some kind settlement from this company where he had worked for so long -- which has now filed Chapter 11. Basically, Brinker said it was going to be up to the bankruptcy judge.

Bob Brinker then asked Jim:
"How is Cape Girardeau doing? I mean, okay, you've lost this particular facility. In general, how is the town doing?"

Jim replied:
"Well they lost the Dana Axle Factory just before our plant went out and then we lost ours and that was 325 jobs, but we have a Proctor and Gamble Factory in town that's doing good and pays well. There's a lot of work force out there and I've found that a 60-year old white man is the most discriminated person in the world, my personal opinion."

Brinker continued: "Let me ask you a question. You mentioned a famous talk-radio host that's made gargantuan amounts of money, of course. Now you mentioned him as being from your home town....has he brought any of that money back to Cape Girardeau? Has he brought any of that money back to his hometown for the people?" Honeybee EC: for more information about Bob Brinker and Rush Limbaugh's philanthropy [LINK]

Jim answered:
"Uhhh...not that I know of. I know he contributes to various charities in town, and his family is much rooted in there. He was there -- they named the Federal Courthouse after his grandfather (Brinker, "ummmm") and he was there for that. He comes at various times to visit relatives. But as far as his personal impact, I know he came back to the high school -- he went to Cape Girardeau Central -- he came back to the high school and gave the commencement speech, which I thought was nice of him."

Brinker responded:
"Yeah, what I was asking whether you had seen any financial benefit to your hometown as a result of that. Your answer is 'no'."

Jim replied:
"Well, in the tourism, yes. His names on.....(Brinker interrupts: "Oh, okay, you're getting into tourism, okay.") Yes, we have a flood wall along the Mississippi River and we have all the famous Missourians and his picture's there."

Brinker said:
"So the people are coming from all over the country then to see this 'flood wall' and it's generating tourism dollars for the hometown folks? Is that what you're saying?"

Jim replied:
"Yes, I think that helps. The home of Rush Limbaugh, and as he becomes more focal in the Republican Party, he uh, all of us listen to Rush Limbaugh, most of us anyway, on this same radio station 960...."

Brinker interrupted and said:
"Well Jim, I know that he is one of the very famous favorite sons of Cape Girardeau, Missouri. And we have many good friends in Cape Girardeau, and I hope things work out for you. I'm sorry about your plant closing but we really appreciate your call."

NATIONAL DEBT: A caller asked Brinker what is the total national debt, then asked:
"Did Obama inherit a $1.3 trillion deficit from Bush, or did the Republicans, under Bush, leave approximately a $450 billion debt?

Brinker replied:
"I think what we have to do there is look at calendar year numbers....the forward numbers are estimates. The backward numbers we have, and I think we have to let the numbers speak for themselves in order to make a judgment on this -- take the politics out of it. In terms of the deficit.....for 2009, the estimated deficit looks like about 2 trillion one hundred billion dollars.....fiscal year ending September.....

.....Now in terms of who is responsible for that: It was a team effort. The retired president would be responsible for October, November, December and the first three weeks of January, and then the rest would go to the current occupant of the White House for the rest of the fiscal year through the 30th of September. So we'll call that a team effort. Looks like about 2.1 trillion dollars for the fiscal year. Let me be more specific. That is the amount of debt that will be sold, but that includes rollovers. Let's just talk deficit numbers. Deficit $1.84 trillion, that's current estimate........

.....Now here's the bad news.....For the following fiscal year, the estimate one and a quarter trillion additional, so for the 2 years, it's over $3 trillion. By the way, the estimate for 2011 is close to a $trillion, so for the 3 years, it would be right around $4 trillion. To answer your first question, the total national debt right now is over $11 trillion. The Congressional Budget Office estimates $20 trillion within the decade. The United States of America is a fiscal train wreck.....The national debt will be in the area of $15 trillion by September of 2011.....We are draining the future growth potential of the United States when we pay the interest on the debt. Right now, we have government gone wild.....

.....It's a shame that we do not have people in Washington, and we have not for the past 8 years, right up to the present.....that understand the importance of fiscal responsibility. Just like in California. They have people in Sacramento that have no regard for the importance of fiscal responsibility. That is what has dragged California down to the lowest general obligation bond rating of any state in the United States, and that has certainly opened the possibility in California......."

[Honeybee EC: Brinker did not answer the caller's question and he never let him back on the air. As for his "team effort" in fiscal 2009, it was a rather imbalanced team -- less than four months against eight months. It was also imbalanced in the AMOUNTS that each added to the national debt -- that was what the caller wanted Brinker to address. But Brinker, in his eagerness to find opportunities to continue blaming President Bush equally for this obscene national debt, ignores the fact that there was a Democrat congress the last two years of his term in office.]

Bob Brinker's misc responses to callers paraphrased:

* When your bank go belly up, FDIC coverage guarantees principal and interest to the date the bank went under, then the new entity can renegotiate CD rates.

* There are about 789 Chrysler dealerships closing by June 9 -- about 25% of existing dealerships. There will still be about 2400 Chrysler dealerships operating.

* General Motors is closing about 1100 dealers in a year. That could change if there is a bankruptcy, which would not be surprising.

* Bankruptcy judges have enormous power because they can come in and void existing agreements.

* Estate tax law for 2010 will likely be changed from zero, which is where it is now. Best guess, they'll change it to $3 1/2 million per person or $7 million per married couple -- which would be extending current law.

* Annuities and load-funds are sold -- not purchased.

* Free do-it-yourself method pay down your mortgage early: Get amortization schedule, when you make payments, add in next principle sum to it . Thirty-year loans will then be paid in fifteen years -- if you add two principle payments each month, it will be paid in ten years.

STOCK MARKET: If you tuned into Moneytalk today to hear Brinker discuss his viewpoints about stock market activity this week, you were very disappointed because the stock market was not mentioned.

* For the week, the Dow declined 3.6%, closing at 8268.64
* For the week, the S&P 500 Index declined 5%, closing at 882.88
* The Nasdaq declined 3.4%, closing at 1680
* GOLD closed at $931.30
* OIL closed at $57

This was a down week for the market. It's worth noting that last weekend Bob Brinker said this: "You know, I published a statement in January that I thought that 2009 could be a good year for the stock market – and that was back in January……A lot of people thought basically I had gone insane to make a comment like that. Look, it’s only May and we’re already in positive territory. Certainly we can slip back into negative territory for a period. Nobody can rule that out because we are only in minor positive territory using the S&P 500…..I still think 2009 is going to be a significant positive year for the stock market. I’m on record back in January having said that and I’m not changing anything about that forecast. I think that 2009 will be a significant up year for the stock market."

[Honeybee EC: It would have been nice if Brinker would have taken this opportunity to point out that just last week he said the market was volatile and might "slip back into negative territory for a period." But as usual, he goes silent when the market is declining.]

Bob Brinker's Saturday guest-speaker was Nariman Behravesh: "Spin-Free Economics" [LINK]

Brinker's Sunday guest-speaker was David L.Scott: "Wall Street Words: An A to Z Guide to Investment Terms For Today's Investors" [LINK]

David L Scott's new book: "An American Heritage of Business Terms" [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]

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