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Tuesday, June 30, 2009
"It is beyond amazing to me that anyone listens to Brinker for anything other than entertainment these days.
As we know Brinker could not have been more wrong on his prediction of this stock market and this economy from the high of 1565 to the low of 600 something. He was an absolute IDIOT simply yammering and hoping the market would bail him hout.
As further example he felt he was confined by claiming we were in a secular bear market and in the most bizzare (and telling) exercise ever of a market "seer" chose to claim it ended on June 13, 2006--but that claim a year after that date with NO EXPLANATION buried in a monthly rag shows you the guy's game .
And it wasn't long until he was gung ho bullish at S&P 1565 and all the way down to 660 on the S&P with too many "go all in" buy calls to count. How totally silly. For anyone taking that krap seriously; they were harmed.
Brinker has claimed that there was no problem with Califoria general obligation bonds---until he hedged. For years on end he claimed there were no worries about buying california munis--and as further proof bragged about his holdings in the state that never met a cause they would not fund. Now more recently he has hedged his guarantee to listeners and subscribers claiming his California GOs are "different" and "prerefunded". He repeated that again this weekend after there were major news reports that the federal government was reluctant to guarnatee California's debt because it would provide a precendent for other unwise fiscal state governments.
It's typical Brinker--like he claimed recently how smart he was for being bullish while George Soros was bearish--not admitting his more than 50% loss.
In this case Brinker added a qualifier to what GOs one should OWN in the California GO market that he did not until recently.
Along with this BS about children not having a lobby is the reason they don't recieve healthcare monies similar to the elderly of our nation--should tell anyone with a brain that the guy is a scamster--worse even than politicians in his zeal to flip flop and try to convince people he knows what he is doing.
Only liberal activists capable of believing that only if we spend more money than we have by a factor of 10 to cure our economic problems can buy into Brinker's gobbly gook. They are out there. And then of course there is the totally clueless."
June 28, 2009 3:50 PM__posted by Newslettercheat [LINK]
My daughter took this picture on a recent camping/hiking trip to Frazier Flats near Sonora, California:
Saturday, June 27, 2009
Market Numbers for the Week:IMPLIED INFLATION RATE....The 10-year Treasury Inflation Protected Security is at 1.8%, and compared to the 10-year note at 3.5%, the differential is 1.7% -- that is the "implied inflation rate over the next 10 years on an annual basis." Three percent higher than the current deflation rate of 1.3%.
* The Dow closed Friday at 8438.39, a 1.2% decline.
* The closed at 1838.22, up 0.6%.
* The S&P 500 Index closed at 918.90, a 0.3% decline.
* Oil closed at $69.44, unchanged from last week at $69.40.
* Gold closed at $941, up from $936 last week.
* Treasury rates [see link-1 at bottom of summary]
* Federal Reserve, M1 - M2 money supplies for May 2009 reported June 25th. [see link-2 at bottom of summary]
U.S. DOLLAR.....Brinker said: "We are continuing to see softness in the U.S. dollar because international investors are not fooled, they know that the fiscal policy in the United States is a joke......we all know that.....As a consequence the Euro has moved up to 1.4077, and that comes as a general loss of confidence in the U.S. dollar around the world due to a combination of factors. I think that there are two principal factors. One would be the lack of fiscal discipline we are seeing out of Washington......Five trillion dollars in government security sales scheduled for 2009-2010 combined......"
HAPPENINGS IN WASHINGTON DC.....Brinker announced that "Cap-and-trade passed the House by a narrow margin on Friday night, but now has to go to the Senate where it faces a great deal of opposition." [Honeybee EC: That bill also faced a great deal of opposition in the House. The phone lines were locked up with people objecting to it as the votes were being cast, and if not for eight Republicans that voted for it, it would not have passed.]
Brinker said that this bill is "watered down." [Honeybee EC: How do you know that, Mr. Brinker? According to the Washington Examiner, the 1100-page Bill may not even exist in readable form. See link-3 at bottom of summary]
NEW ENERGY SUPPLIES.....Brinker said: "Obviously nuclear is by far the most powerful [policy].......The other is a government top-down to convert a substantial portion of our vehicle fleet to natural gas power which can be easily done with our own domestic resources. We don't have to import that natural gas.......And......to start drilling on the outer continental shelf. this can be done in an environmentally protected way.....to increase our oil supplies."
WHY DOESN'T THE PRESIDENT TALK ABOUT BRINKER'S IDEAS.....Caller Sam from San Jose said that he couldn't figure out why the president was only talking about solar and wind and not the policies that Brinker had talked about. Brinker replied: "Well for one thing, he certainly has an awful lot on his plate right now....this whole idea of coming into office and trying to do everything in your first year. They're working this cap-and-trade business.....And then they're working this health care proposal which is gargantuan.......How do you focus on getting any one major program through when you are spreading your emphasis across so many areas....." [Honeybee EC: How kind of Mr. Brinker, but as he has said before, most of the items that the president seems to want rushed through have nothing to do with stimulating our economy. There is lots of evidence that they will have the opposite effect.]
EXPECT HIGHER TAXES GOING FORWARD......(inaudible) from Pennsylvania asked Brinker if this would be a good time to convert from a traditional IRA to a Roth IRA. Brinker explained that under the current law you can make these conversions as long as your adjusted gross income is less than $100,000, single or married. Brinker said: "With the government programs we are now talking about, and with the state deficits around the country that we are now looking at, I think it's a safe bet to plan for higher levels of taxation going forward."
POSITIVE YIELD SLOPE.....John from Milbrae expressed concern about the president's June 18th plan to drastically alter the banking system by placing banks under government control through lowering rates on money market and CD's in order to boost capital -- at the expense of depositors. [Please see link-4 below for more info] John asked this question: "What are your thoughts on perhaps owning gold and what percentage of a person's portfolio should be in gold because people are certainly not going to invest in CD's or anything else under these circumstances."
Brinker did not answer John's question about gold. He never mentioned gold to this caller. Instead, he said that he thinks the government is trying to maintain a positive yield slope. He said that the slope is very positive right now. And the reason they want to keep it that way is because they want the banks to be in a profitable position -- "after the sub-prime debacle." Brinker explained that the president does not set monetary policy -- that it is set by the Chairman of the Federal Reserve. He believes that Ben Bernanke has "designs" on keeping short-term rates low so the banks can borrow low on the short-term and lend out at higher rates on the long-term.
"BAD DAY FOR THOSE WHO WORRY ABOUT THE U.S. MOVING TOWARD SOCIALISM".....Brinker opined that the federal government "took a step" this week to get out from under the ownership of the banks by deciding to allow the banks to repurchase the warrants that were issued in connection with TARP..... Brinker added: "For those of you who were cheering that we were going into a socialized government in the United States, that they wanted to take over the banks, this is a bad day for you because this is the opposite of that......" [Honeybee EC: I'm sorry Mr Brinker, but you have it all wrong. The people you say are "cheering" about "going into a socialized government in the United States," are doing just the opposite. They were mourning, and saying be afraid, be very afraid."
"PRAGMATIC FEDERAL INTERVENTION".....Brinker declared that it was not a "socialism intervention" when the government took over banks, it was simply a "federal intervention" to "protect the country" -- and that they never intended to "take over the banking system." [Honeybee EC: Well, that's Mr. Brinker's opinion. One that is not shared by many American citizens.]
CALIFORNIA GENERAL OBLIGATION ISSUES....Brinker said: "There's no change in my view on California as I have expressed it recently. And that is, I would not have more than 1% in any one California issuer, including the state."
THE EQUITY FUNDING CONGLOMERATE SCANDAL....Brinker said: "....turbulent financial times are frequently accompanied by big-time Wall Street scandals, and I've talked to you about the big one that went in with the 1973-74 Wall Street debacle where the market lost about half of its value. And of course that was the Equity Funding Corporation of America......And you are reminded of those days, of course we've gone through a very tough market place in the past year, you're reminded of those days when you look at today's headlines. In fact, it's rather stunning when you put the headlines side by side, the one headline you know about, about this Monday that Bernard Madoff is on the hook for up to 150 years in the big-house. He will be sentenced on Monday in New York. And that sentence is in return for swindling over 1300 investors of over $13 billion in the mother of all Ponzi schemes -- certainly of our era......Can you blame investors for losing confidence in Wall Street? I don't think you can. [see link-5 below for more information about Equity Funding]
GINNIE MAES [VFIIX]....Brinker pointed out that the only risk with Ginnie Mae Funds is interest rate risk. There is no credit risk -- they are Treasury-backed. He expects the net asset value range to fluctuate about 3 1/2% either side of $10.35. Brinker said: "If you used $10.35 as a mid-point, the total fluctuation on that fund in the last year has been about 3 1/2%. So it's been in a very narrow range and right now it's toward the top end of that range because interest rates are still very low.".....
........Brinker told a caller that he would only buy the Vanguard Ginnie Mae Fund because of its low expense ratio. However, if the caller wanted to look at other Ginnie Mae Funds, then he would suggest checking out Fidelity or T. Rowe Price.
GOLD.....Brinker explained that if you go back to the 1980-81 time period, gold was over $800 an ounce, and it is now over $900 an ounce. So over 30 years, it's only about 15% higher. Brinker said, "So if you want to look at that long period of time, it's been a lousy hedge against inflation. Because if you took 30 years worth of inflation and you compare it to the price of gold over that same time line, you are going to see inflation went up a lot more than the price of gold. Oh the other hand, if you go to the early 1970's when President Nixon completely removed the United States from the gold standard in any way, shape or form, then in that situation, it was $35 an ounce. The price was fixed up until then....If you take it from $35 an ounce up to its current price in the $900, then in that case, you would see it had outpaced inflation during that time......
.....Although inflation is one factor that has to be considered when you're looking at gold prices, there are a number of other factors that you have to consider.......And they change from time to time. One of the factors you have to consider is the amount of gold that is being sold by central banks. The largest individual holders of gold bullion, gold bars, are central banks around the world. There are central banks around the world who have vaults loaded with gold bullion bars......Another factor you have to look at is production versus consumption and this is done on an annual basis.....varies from year to year.....
......When I was at the Bank of New York, I did a gold study for the bank....that was done in the late 70's.....And as part of that, I had to get into this pretty deeply because I had to go to London, Paris....Frankfort, also to Zurich and Geneva .....to complete this study.....And I can actually tell you that I sat down in Zurich, Switzerland with the gnomes of Zurich. I was there. So I have a little experience on the subject of gold and I can tell you that at that time, gold was approaching the $800 area.......And since that time, I think that people that bought gold then and have held it since are probably pretty disappointed with it. But it had a tremendous run-up off the $35 in the early 70's........
....."I would say this, if you are looking at gold for any reason, my suggestion is that you try to keep your expenses really low. And outside of just buying the gold coins, which you can generally buy at a small premium over asset value. Aside from that.....the best vehicle I've seen out there is the Exchange Traded Fund, symbol GLD......very low expenses.....And basically you own gold bullion.....gold bullion standing behind the shares......Let's not forget world events. World events would include things like what was going on when people were getting out of Vietnam and were sewing gold coins into their clothing to avoid detection. Things of that sort where people can be hoarding gold for one reason or another -- aside from the annual consumption for gold for jewelry."
CALIFORNIA BANKRUPT?....Brinker said: "We had a caller last weekend who indicated that it was not legal for California to go into bankruptcy, so we'll leave it to the counselors in California.....I don't think it does benefit the people of California to go into bankruptcy.......What are they going to do, sell of I-5? How many buyers are there for I-5?.....
Entertaining Bob Brinker quote: "I restrain myself when I talk about the people who are running the State of California......To be honest with you, if I can just let the restraints off for one split second, they're BOZOS!"
1. Treasury rates [LINK]
2. Federal Reserve M1-M2 Money Supplies [LINK]
3. Washington Examiner: On The House Floor [LINK]
4. Obama's Regulatory Reform Plan from June 18th [LINK]
5. The Equity Funding Scandal [LINK]
BARNEY FRANK....[Honeybee EC: During one of Brinker's political diatribes, he expressed his contempt for those who "always want to blame Barney Frank" for the sub-prime debacle. Well, Mr. Brinker, perhaps the reason people want to blame Barney Frank for it is because he was to largely to blame -- along with a several other democrats, like Maxine Waters. The undeniable proof is in their own words on this video -- and learn where the money went: "Covering up the Fannie Mae and Freddie Mac Scam that Caused our Economic Crisis" [LINK]
Bob Brinker's guest-speaker on Saturday was Mark Zandi, "Financial Shock: Global Panic and Government Bailouts -- How We Got Here and What Must be Done to Fix It." [Honeybee EC: Here is a LINK to Amazon where you can purchase the book for $13.59.]
Brinker's Sunday guest-speaker was Nathan Stovall, senior banking sector reporter for SNL Financial.
Moneytalk programs are available free on "demand" at KGO810 radio for seven days after broadcast. You can download and save Bob Brinker's Moneytalk programs (owned by ABC) and listen whenever you choose at no cost whatsoever. To download the programs 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]
My Idaho sister-in-law sent this to me this morning from her garden. Oh, and I guess my brother helped out in the garden a little bit. LOL!
Friday, June 26, 2009
In the June, 2009 Marketimer, he raised his projection for the S&P 500 Index slightly higher than his May forecast. Brinker said: "We expect the S&P 500 Index to make progress at least into the 1050 to 1150 range into next year."
However, Bob Brinker has been a bullish buy-and-holder since March 2003. On Moneytalk last year, he forecast "new all-time-highs as we get into 2009."
This is from my Moneytalk Summary of April 26, 2008 [LINK]
Caller John, in a follow-up question wanted to know why there are so many “perma-bears” out there saying we are headed for a doomsday.
Brinker reminded him that he recently had a guest on the broadcast that was extremely bearish when the market was lower than it is now -- and that he had stated “on the broadcast” that he did not agree with the guest-speaker.
Bob Brinker said: “You’ve heard me say on the broadcast, I think we are going to new all-time-historic-record stock market highs by 2009. I think by the time we get into 2009, we are going to be talking about all-time-historic record highs on the S&P 500 Index. But I know what you are talking about, I see it all the time.....in writings….in talking heads. They are talking down the United States of America. They are talking down our economy………(Caller: “Do you think people tend to focus too much on short-term?”) "Oh, absolutely, absolutely, I know this for a fact because when we have gone through this recent bottoming process, and certainly we have worked very, very hard to identify the bottom that I believe that we did accurately identify in the first quarter.
It’s my opinion that the March 10th low on the S&P 500 was the bottom for the correction. And I think that what happened was that was a very successful test of the initial low recorded January 22nd. You might remember the S&P 500 closed on January 22nd in a very high volume panic-atmosphere at 1310. Well we knew, that despite the fact there’d be some short-term rally.......back then, we knew there was going to have to be a successful test of that low. And we knew what was required of that test before it occurred. Now that is exactly is what happened. And the closing test in March was, actually it was less than 3% below the initial low established on January 22nd. So we are talking about a text-book testing process in that correction low that we looked at.
Unfortunately, unfortunately, and I’m sure you’ve heard this, there were a lot of people out there, and I mean a lot of people out there, who got it completely backwards off that correction low and that successful test……I’ve been telling people, going to, actually to February because we do this through the investment letter, of course, I’ve been telling people to actually use periods of weakness to buy into the market at specifically down in the low-1300’s or any minor weakness just below that level, which we got a little bit of there on March 10th and in mid-March, to take those opportunities to add to positions if you’re looking to add to positions – no mention, no thought of selling anything into this kind of weakness……”
Caller John concluded by saying: “I took your recommendation, Bob. When it was below the 1300’s I added…….I’m just glad I got you, your son and the Marketimer on demand.”
Brinker said: "And just for the record, I’m right with John. I was the exact same thing that John was doing. When we saw that weakness on the correction test into the low-1300’s and that very, very minor weakness that we had just below that level for a very short window of time, I was doing the same thing that John was doing – which was adding to positions."
Brinker continued: “And if John is seeing people crying now about the fact that they sold out of the market at the bottom, how do you think those people are going to feel in 2009……if I am correct........and this market recovers to record highs in 2009, how is somebody is going to feel that sold out of the market at 1300?.......this is Moneytalk.” [Honeybee EC: The S&P 500 bottomed the following March at 677.]
Here is a chart that shows all of the buying-opportunities Brinker has issued since the mega-bear market began. Notice that Brinker was "looking for a bottom" again when the market turned up on March 10th. Courtesy of Kirk Lindstrom [LINK]:
Bob Brinker's latest advice on California GO Bonds is to limit holdings to 1%. On Moneytalk last weekend, he said: "My view is that you limit your exposure to any one California issuer to no more than 1%. That includes the state of California."
Frank J wrote these comments:
Kirk Lindstrom wrote an informative article titled: "Bob Brinker's Evolving California GO Bond Advice Ignores What President Obama Did to Chrysler Bond "Speculators" [LINK]
This is Lama as a baby. See him with his sister Dolly in my profile picture:
Tuesday, June 23, 2009
Moneytalk, Sunday, June 21, 2009, Jim in Cedar City said: "I would like to thank you for some of your advice because you got me out of the market before it went collapse, and into Ginnie Maes."
Bob Brinker replied: "Well Jim, I, Jim, I, I appreciate the call very, very much. Let me ask you this, are you filing a single or married return......."
Just the opposite of what caller-Jim said, Bob Brinker advised Marketimer subscribers and Moneytalk listeners to remain fully invested ("don't sell") and recommended dumping all new money into the market at various levels (mid-1400's, low-1300's, low-1200's and mid-800's) and to keep dollar-cost-averaging all the way to the bottom on March 9, 2009.
As for Ginnie Maes, he never issued any kind of buy on them. He simply has them as a portion of his balanced portfolio and his fixed-income portfolio -- where they have been for many years.
Bob Brinker sells a newsletter titled "Marketimer." He talks about it on his national radio program that probably reaches millions. He allows callers to talk about it on Moneytalk. He bills himself as " America's Most Trusted Financial Advisor."
Would a "trusted financial advisor" speak the truth, the whole truth and nothing but the truth about his market-timing advice? Would he correct callers if/when they say something about his market-timing advice that is not true?
What if he doesn't? What if he allows false information that promotes his market-timing calls, but would mislead listeners, to be disseminated on his program? What if a caller gave Brinker credit for making good calls that Brinker NEVER made, and Brinker did not correct the caller? Would listeners perhaps form opinions about the newsletter that Brinker is selling based on misleading information because he did not set the record straight?
I'm sure it perfectly LEGAL for him to allow false information about his market-timing calls to be spoken (and not corrected), but is it blatant lying by omission? Is it honest? Should you trust him?
Here is the link to listen to this exchange. It will be available until next Saturday at 1pm -- then it will be gone! If you open this with Windows Media Player, it's at about 20:00 into the first hour (1-2pm).
KGO Moneytalk Archives [LINK]
Saturday, June 20, 2009
Market Numbers for the Week:
* The Dow closed Friday at 8539.73, a 3% decline.
* The closed at 1827.47, a 1.7% decline.
* The S&P 500 Index closed 921.23, a 2.6% decline.
* Oil closed at $69.40.
* Gold closed at $936.
Bob Brinker comments paraphrased: Right now, there is no inflation, rather there is deflation.....the implied 10-year annualized inflation rate, as indicated by the Treasury market, is 1.93%......the CPI on a year over year basis has now declined to 1.3%.....the 30-year Treasury at 4.5%, has a real return of 5.8%, and the 10-year Treasury has a real return of 5.1 when you add back in the deflation rate of 1.3% over the past year. [Honeybee wonders: Does anyone believe it works that way in the real world?]
Caller Steve from New Mexico asked Brinker if he had read an article in the Wall Street Journal by Arthur Laffer about the huge increase in the M-1 money supply. [To read it, see LINK-1 at end of this summary.]
Brinker responded that "better than" reading the article, he is aware of what is going on with the money supply because he tracks it in "the investment letter." Brinker said that the money supply is one "ingredient" that can be used to try to figure out what is going on with the economy. [Honeybee EC: The numbers that Brinker publishes in Marketimer appear to come directly from the Federal Reserve Bank site. Please see LINK-2 at the end of this summary.]
Here's paragraph from Arthur Laffer's article:
"Alas, I doubt very much that the Fed will do what is necessary to guard against future inflation and higher interest rates. If the Fed were to reduce the monetary base by $1 trillion, it would need to sell a net $1 trillion in bonds. This would put the Fed in direct competition with Treasury's planned issuance of about $2 trillion worth of bonds over the coming 12 months. Failed auctions would become the norm and bond prices would tumble, reflecting a massive oversupply of government bonds."
Caller Jim in Livermore told Brinker about an article in Bloomberg on June 17th regarding two Japanese men that were caught carrying $134 billion worth of U.S. Treasury bonds from Italy into Switzerland.
Brinker said he did hear about it and it sounded like something straight out of James Bond, but that we don't know if they were real bonds or counterfeit. [Honeybee EC: I think this story is important. Certainly more important than the media reporting would indicate. You can Google it and see that it has been reported in several other countries, but not much in the United States until this Bloomberg article. Please see LINK-3 to Bloomberg article at end of this summary.]
Caller Steve from San Jose, California said: "Your thoughts about investing in a leveraged ETF such as SSO, which is double the S&P 500."
Brinker replied: "I would track the performance of the fund to see how it has done.....over a reasonable period of time. In other words, if it is supposed to do two-times the S&P, see if it's doing two-times the S&P."
Caller Steve continued, "Right, well, I'm trying to play catch up since I followed your advice to lump sum into the S&P at the 1400 level about two years and I'm down about thir....."
Brinker interrupting Steve: "I would not be doing that. No, no, no, I would not be doing that. I would not be trying to play catch up. What I'd be doing here would be to formulate your asset allocation. Get your asset allocation where you want it and make the investments in accordance with your asset allocation. I don't believe in trying to make catch-up because I think when you do things like that, you can make mistakes. I don't recommend to you, Steve, that you go out there trying to play catch-up ball. I'd rather see you go out there and establish yourself with your asset allocation. Now as far as leveraged ETFs, just be aware some of these have not performed in line with expectations........We don't have any recommendations in our investment letter of any leveraged ETFs. The Exchange Traded Funds in our investment letter are things like SPYDERS and Russell 3000 and things of that sort. We don't have any leveraged ETFs in the investment letter....This is Moneytalk."
[Honeybee EC: Bob Brinker obviously was not the least bit disturbed by the fact that this caller had lump-summed money into the market at S&P 1400 on Brinker's advice. Brinker never uttered a single word of sympathy or regret about the caller's losses. Matter of fact, he interrupted the caller before he could say how much he actually lost.
To me, this shows an appalling lack of character from Mr. Brinker, and a complete disregard for the suffering of those who took the advice that they paid him for and were then financially damaged (some seriously). Imagine how many of those kinds of calls never make it on the air.
Brinker's buy at "mid-1400's" advice was first issued in "the investment letter" in August 2007 and was repeated monthly up to and including January 2008 -- just days before the market started dropping precipitously. Brinker called mid-1400 a gift-horse buying-opportunity.
In October 2007, he bragged that there had been 18 mid-1400's buying-opportunities in August and September "consisting of 15 market days on which the S&p 500 Index closed within the 1430 to 1470 range......" Please note that he advised lump-sum buying up to 1470 the VERY MONTH THE BEAR MARKET STARTED!! However, Brinker never saw the bear coming. He never saw it until long after it arrived, but that's a story for another day.]
January 4, 2008 Marketimer, Bob Brinker said: ".....the risk of a cyclical bear market decline in excess of 20% is not likely to materialize anytime soon.........In summary, the Marketimer stock market timing model indicates that conditions are favorable for the market as we enter 2008. W expect the S&P 500 Index to achieve new record highs this year and to reach the 1600's range in the process. We continue to rate the market attractive for purchase on any weakness into the S&P 500 Index mid-1400's range. Above this range we prefer a dollar-cost-average approach for new purchases. All Marketimer model portfolios remain fully invested as we enter 2008."
Frank from San Rafael said he was concerned about California state bankruptcy and asked Brinker if he thought he should be worried about California muni-bond funds. He told Brinker they were "revenue bonds." Brinker said "same difference."
Brinker replied: "I think your concerns are well-founded. We've talked about them on Moneytalk. In fact, we talked about it in detail just last weekend. My view is that you limit your exposure to any one California issuer to no more than 1%. That includes the state of California. I'm seeing a level of fiscal irresponsibility and incompetence from Sacramento that is just stunning......That way even if the state goes belly up, and who knows with the clowns they have running the state these days in Sacramento, anything is possible."
Brinker again talked about California bonds in hour-three opening monologue, He said: "One of the things certainly worth noting is the talk out of the rating agencies that we may see additional reductions in the credit ratings of the State of California. Now of course on Moneytalk, we have recommended that exposure to any California issue be extremely limited. In fact, we've placed a maximum exposure for any one issuer of 1%.......perfectly happy with no exposure at all obviously. But the reality of the situation is that any one issuer, that would include the state of California. Now California is a fiscal disgrace. It's already the lowest rated state in the United States.....
..... California has the most incompetent government in American history for any state, in my opinion......They are $24 billion state deficit. Now states have to work out balanced budgets because they don't have the printing press.....They already have $72 billion in outstanding debt in California on which they have to pay the interest every day. Now Moody gives General Obligations of California an A2 rating but they warned this week about the possibility of a multiple downgrade. And if they do make such a decision, who could blame them? Standard and Poors already has California on credit watch for possible downgrade. And Fitch also has California on credit watch for possible downgrade. Now let me emphasis that the fiscal situation in California has degraded dramatically in recent months.......The state of California now may run out of money within the next few weeks. They could run out of money as soon as July. If they run out of money then the state Controller in Sacramento will have to delay most non-priority payments.....
Honeybee EC: Last week, Brinker laid the groundwork so that he could refer back to what he said then without ever mentioning that for months before that, he had said that California was "too big to fail," and California GO's were safe, he owned them and was happy about it. And last week was the very first time he ever put any percentage limitations on owning them.
Brinker has always claimed that the Federal government would not let California go bankrupt. Several times, he told callers not to worry until there were no Highway Patrol going after speeders and other critical services ceased to exist.
Here are some samples of what Brinker has said which I copied from my previous Moneytalk summaries. These are all from 2009:
* CALIFORNIA BANKRUPTCY? Brinker does not believe those who are predicting California is going bankrupt. He says he'll believe it when somebody lends him a Lamborghini to drive down I-5 at 250MPH and he doesn't see the California Highway Patrol in his rear view mirror. He does not believe all state services will be shut down and go away.
* CALIFORNIA BONDS.... Bob Brinker said: "I own California municipal bonds of general obligation of the state and I'm very happy with them. They've been very good to me. And of course they have been acting very nicely in the last couple of months especially they've started to act very nicely. And I think that people are beginning to realize that, hey, there's no rational way for state general obligations to default. They didn't default in any case in the great depression and they certainly haven't defaulted in this recession......I think when it comes to the State of California, I'm comfortable owning State of California bonds. I can't tell other people to do so because that's a decision they have to make for themselves, but I've made that decision for myself. In fact, I recently purchased additional general obligations of the State of California because I thought the yields were too high to pass up."
* Caller Ron asked Brinker about the safety of municipal bonds. The caller pointed out that the “other fellow” who did the program is “negative against them.” He no doubt meant Bill Flanagan. Flanagan is not as sure as Brinker that California is "too big to fail."
* Bob Brinker replied: “Since I own municipal bonds, I certainly am not negative on municipal bonds. If I were negative on municipal bonds, I wouldn’t own them….."
* Caller Randy explained that a major part of his portfolio is in municipal bonds and he too wondered about the safety of them. Randy said, “I’m concerned about the ability of our government agencies to even be able to repay the money if they continue like they are.”
* Bob Brinker replied: “I think that General Obligations are one way to go with this. [Honeybee EC: A Major OUCH if you are Randy and you believed Brinker back then!!]
Here are David Korn's comments on Brinker's obvious flip-flop from being totally safe to putting a 1% limit on California GO's:
"This is new advice from Bob. For years, he has been heaping praise on California bonds and they had done well. In the last year, he has flip-flopped on his advice relative to California General Obligations. I remember him trying to distance himself by saying the ones that HE OWNED had the Treasury backing. Well today he admitted to owning those, but also some regular California General Obligations, the kind that us regular folk own. But he said it is limited to 1%. I don't disagree with Bob's advice today. But I think it is fair to be critical of him for waiting until now to make this advice when the state finances have never looked worse. Better late than never though."
A poster who listens to Moneytalk wrote this:
Runner Twentysix said: "I wonder if anyone ran out and bought CA GO's after Brinker, over the past month said there was not chance of the Federal Gov. letting CA go bankrupt. Remember how he said that if CA went bankrupt, there would be no Highway Patrol! There is no chance of that he SHOUTED. If anyone followed his advice and bought, and then heard this weekends show, they have to feel that old Bob just blindsided them. And maybe they loaded up because Bob never mentioned the 1% bond rule before, only his no more than 5% in one stock. It is obvious that he just makes this stuff up as he goes."Brinker did not have a guest-speaker Saturday, perhaps because tomorrow is Father's Day.
Moneytalk programs are available free on "demand" at KGO810 radio for seven days after broadcast. You can download and save Bob Brinker's Moneytalk programs (owned by ABC) and listen whenever you choose at no cost whatsoever. To download the programs 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]
1-WSJ: "Get Ready for Inflation and Higher Interest Rates" : Arthur Laffer [Shows an alarming graph]
2-Federal Reserve: M1, M2, Money supply as of June 18, 2009
3-Bloomberg: "Suitcase With $134 Billion Puts Dollar on Edge": William Pesek
My daughter took these pictures in Kauia recently:
Saturday, June 13, 2009
Bob Brinker opened Moneytalk with a monologue today. He reported the closing stock market prices for the S&P 500 Index, the Dow, the Nasdaq Composite and the Nasdaq 100 Index. Brinker said: "The S&P 500 Index having another good week gaining a little bit over six points for the week at 946 and change. That brings the total return, including the cash dividends paid, year to date on the S&P 500 up to just about the 6% mark......"
Brinker also gave the current yields for Treasury securities, and said that the implied 10-year inflation rate is now at 1.93%. [Honeybee EC: Please check the right column of this blog under the title: "Items of Interest to Investors." I posted links to all of the fixed-income data that Brinker recited.]
Market Numbers for the Week:HYPER-INFLATION PROTECTION:
* The Dow closed Friday at 8799.26; up 0.4%.
* The closed at 1858.80; up 0.5%.
* The S&P 500 Index closed at 946.21; up 0.7%.
* Oil closed at $73.48, up from $68.
* GLD closed at $92.17.
Caller Phil from Sunnyvale asked Brinker what he recommended for "hyper-inflation" protection.
Brinker told Phil that TIPS (Treasury Inflation-Protected Securities) are a very good way to protect against inflation. He said they are available through no-load mutual funds, ETFs (Exchange Traded Funds), and they can be purchased through Treasury Direct. They pay a base rate in addition to the CPI rate of inflation. However, they should be owned in a tax-deferred account because the price increase is taxed.
Caller Bill in LaCross asked Brinker how I-bonds stack up against TIPS.
Brinker said that I-bonds are okay for inflation protection but you can only invest $5,000 annually. The limit used to be $30,000 annually.
Caller Don from Boston asked if the stimulus package would create more bureaucracy.
Brinker told Don that it was not the stimulus package that would create more bureaucracy. Instead, it was the massive new programs that are being discussed in Washington. He said they could be "gargantuan" when they are finished with them. The part of the stimulus package that Brinker likes is the tax cut that started in April which gives wage-earners an additional $60 a month. He likes it because he believes "these people" will spend the money. Brinker said that it is good that the "high earners" didn't get it, because they "don't need a tax cut."
Caller Victor from Belmont, California asked Brinker what would happen to Ginnie Maes if interest rates rose to 9% because of inflation in a couple of years.
Brinker said: "The Vanguard GNMA Fund right now has an average maturity of 3.4 years, so that would be the maturity range that you'd want to be looking at......the average duration on that fund is only 2 years......That's where it's going to have an impact on the share price primarily........Three year Treasury Notes are yielding 1.9 and five-year Treasury notes are yielding 2.78, so we can interpolate quite easily that 3 1/2 year Treasury notes would have a yield of approximately 2.1......
.......So now you're saying what happens if a couple of years from now that rate is 9%, right? That's what you're saying? [Victor: "yeah"] Okay, I just wanted to get it straight..... So you're saying what happens to the price of the Ginnie Mae Fund if it continues to have a duration of 2 for the next couple of years and if rates go from 2 to 9, that's your question. And the answer is that the net asset value would decline about 14%.....
.....But you know it's interesting, you chose 9%. You could of chosen 50%, 100%, 30%, 5%, you chose 9%. Let's also understand the implications of what you're saying......I think listeners need to walk this walk.....What are the implications for the American economy, and Americans in general, if two years from now, the 3 1/2-year Treasury rate is 9%?........[Victor: "It could destroy it."].....Of course, it would destroy it. There's no possible about it.....It would destroy the American economy and it would push the American economy, at the very minimum, a very severe recession.....
...... So you have to understand what you're talking about here. If rates go to 9% on 3 1/2-year Treasury paper in the next 2 years, the U.S. economy is the Titanic..... You said that this would destroy the American economy and your comment is correct, I have no quarrel with it at all. But remember what that means. That means then that Ginnie Mae prices would rise as the economy would sink right back into recession. And as the economy would sink back into recession, rates would come back down and net asset values of Treasury-backed paper would go back up."
Caller Victor said: "I've heard you comment over the air about the possibility of inflation......"
Brinker said: "Of course there's the possibility of inflation. I stand by that, that there's the possibility of inflation. And the Fed has to guard against inflation as it goes down and it tries to extract all of the excess liquidity that's placed into the system.....And I guarantee you it will worry about inflation and that's one of their jobs. That, along with maximizing employment consistent with low inflation. That's their dual mandate.......It's critical."
CALIFORNIA GENERAL OBLIGATION MUNI BONDS:
Caller Eric from Rancho Mirage asked about "California Muni's" He said they were about 1/3 of his portfolio and that his broker said don't worry about them. He wanted to know what would happen to them if the State of California goes "belly up."
Brinker said: "You're talking about General Obligations of the state, is that right? If the state goes under that doesn't speak for a city......My opinion has not changed. I have said this on Moneytalk. I consider the state of California the poster boy for fiscal irresponsibility.....Now I also have a holding in the State of California that's a General Obligation. I have other California holdings that are pre-refunded. That means they're backed by Treasuries. So I can hold them to maturity and I have Treasury backing, even though they generate tax-exempt interest. Those securities, of course, are triple-A.....
......But I do have one holding of the State of California General Obligation and it represents less than 1% of the money that I have invested. So if anything were to happen, it would frankly be immaterial. So you're in an entirely different position with 33% in California. I would say to you that California is the most fiscally irresponsible state in the United States. And the legislature in Sacramento should collectively hold their heads in shame for the way they have mismanaged the finances of a great state." [Honeybee EC: It's obvious that Brinker meticulously avoids mentioning Schwarzenegger by name or putting any blame on him.]
The caller asked: "My direct question is, should I sell them all off or should I sell them half off and I realize they are individual cities in California."
Brinker said: "I would limit my exposure to any one issuer to no more than 1%. So that way if one of your issuers does go bankrupt, be it the State of California or one of the cities -- and there are already rumors today about the possibility of Oakland, California declaring bankruptcy.....We've already seen the city of Vallejo, California declare bankruptcy. We all know.... the fiscal troubles in San Diego, California. There's nothing stealth about any of this, it's all out there......Sacramento is a fiscal train-wreck."
The caller asked again: "So you are basically telling me that I should sell off my various California Munis before something happens. Am I reading you right?"
Brinker said: "I would never place myself in the position where I would tell you to buy or sell a specific issue. I'm here to talk about the subject, and my specific recommendation on this would be the one I've given myself -- limit your exposure to any given issuer in the State of California, including the state, to no more than 1% of a portfolio.....This is Moneytalk."
"RICH PEOPLE" SPEND MONEY TOO:
Caller David from Maryland called to disagree with Brinker that anyone making over $250,000 a year doesn't "need a tax break." David said he made over that much running a small business and argued that he would also spend his money. He might hire new employees, or buy a new car, or computers for the business. He pointed out that the Bush tax breaks will be expiring -- and that Obama is going to raise taxes again, which may even cause him to have to fire some employees.
Brinker told David that he was not talking about the same thing, that he was only talking about the stimulus package. [Honeybee EC: The fact is, David's premise was that discriminating against "certain" taxpayers, which Brinker had just advocated to caller Don from Boston in the first hour, may have unintended consequences. I think David was right on the mark. However, Brinker ignored the point of his call and zeroed in on a minor detail and brushed the caller off -- rather rudely, in my opinion.]
TAXING EMPLOYER HEALTH-CARE BENEFITS:
Caller Ralph in New Jersey asked Brinker if he thinks it would be right for Obama to tax employer health care benefits.
Brinker said that he thinks Washington is at "loose ends" right now wondering how to pay for their new health-care program and they will look every place they can to find revenue -- because they are "drowning in red ink."
TAXING MEDICARE BENEFITS:
Caller Jack from Massachusetts said that for every dollar the Federal government spends on children, six dollars were spent on the elderly, including wealthy retirees. He suggested that it would be fair to tax Medicare benefits like they do Social Security.
Brinker thinks this will be one of the issues that Washington will be looking at. Brinker asked: "You know the reason that we see $6 spent for every senior relative to $1 for every child. You know the reason for that. What's the reason for that?"
Jack answered: "Children don't vote, the elderly do."
Brinker responded, "You got it. The voter turn out on seniors is the highest voter turn out percentage for any demographic group in the United States. They win every time.....Children are not eligible to vote, so they have no voice. They have no constituency. They have no American Association for Children."
[Honeybee EC: In my opinion this was a planted call. It was entirely too convenient that this caller's statistics were so readily accepted as fact by Brinker. Whether or not the statistics are true (I don't know), this may be one of the SILLIEST things that Brinker has ever said. Children certainly do have a "voice," "constituency" and "Association for Children." They are called parents, Mr. Brinker! Believe it or not, there are still multitudes of parents, e.g., MOTHERS AND FATHERS, who responsibly pay for their own children's health care through insurance or other means.]
Thanks to Jeffchristie for supplying this information: The president signed the Children's Health Insurance Program Re-Authorization Act of 2009:
The Children's Health Insurance Program Reauthorization Act expands the State Children’s Health Insurance Program (SCHIP) and reauthorizes it through 2013. SCHIP, founded in 1997, currently provides health insurance coverage to 7 million children from low- and middle-income families that cannot afford private health insurance but are not eligible for Medicaid benefits. The program is jointly financed by the federal and state governments and is administered by the states.....HUB CAP THEORY:
Caller Everett in New Hampshire and Brinker went a few rounds because Everett said that jobs were leaving the country because the Fed was printing money. Brinker said no way, it's because of "globalization" -- "The "Hub Cap Theory."
HEALTH-CARE REFORM STAND ALONE ISSUE:
Bob Brinker said: "It is disingenuous for anybody in Washington to tell you, as they have told you this year, that economic recovery is tied to health-care reform. It is not true that economic recovery is tied to health-care reform. Health-care reform is essentially, relative to the health of the economy, it is essentially a stand alone issue -- and a very tough issue. But it is not directly tied to economic recovery. And it has saddened me that the politicians in Washington have conducted themselves in a totally disingenuous way by telling the American people this year that the two are tied together. They are not tied together."
[Honeybee EC: When it comes to Brinker's political-punditry, the lengths that Brinker goes to in order to avoid specifically blaming Barack Obama for anything always astonishes me. Brinker seems to not even know the name of the man in the White House -- he almost never speaks it.]
CALIFORNIA FISCALLY IRRESPONSIBLE TRAIN WRECK:
Betty in Corona Del Mar said she had about $150,000 in California Municipal Bonds and California State Bonds, and she was worried about them.
Brinker repeated what he had said earlier about California being the most fiscally irresponsible state in the country. He said he thinks Sacramento is a fiscal train wreck. He repeated his advice to limit California bonds to 1% of a total portfolio.
ONE REASON WHY CALIFORNIA IS A "FISCAL TRAIN-WRECK":
Brinker said: "It's unfortunate that California has been burdened with a tremendous amount of additional expense due to things like people getting across the porous border -- things like that. It's not just California. It's also Arizona and it's also Texas. Some of those expenses have bled into other states too, in the Rockies but the reality is that California has been the hardest hit. So it's not entirely the fault -- part of it is just geography. It's just bad luck of the geography of California has placed it in the flow of all this additional expense that's been placed on the taxpayer of California. It's unfortunate....
IF CALIFORNIA "GOES UNDER," FED MAY OR MAY NOT PAY BOND-HOLDERS:
".....If the state goes under, if they have to declare bankruptcy, if the state has to follow in the footsteps of Vallejo and declare bankruptcy, then they would be at the mercy of the federal government at that point. And it would be up to the federal government whether they wanted to pay any money to the bond-holders. They may or may not, they may or may not. No way to know that one. But make no mistake about it, as a fiscal unit, the state of California is a train-wreck......
......State of California Bonds have not yet collapsed. And if the state can find a way to be fiscally responsible then that will be a plus, but that has not yet happened. But we're making this discussion about California at a time when the bonds have performed reasonably well. And so we are not talking about California after the horse has left the barn. The horse is still in the barn. California bonds are still trading and California bond funds are still trading reasonably close to the bond funds of other states. That does not change the reality of what we talked about. Sacramento is a fiscal train wreck."
[Honeybee EC: Today, Bob Brinker did a complete 180 degree turnaround on California State General Obligations and the possibility of California going bankrupt. He has been telling callers for months that they were safe and that the Federal Government would not let California go bankrupt -- because it was "too big to fail." Now he even questions whether or not the Feds would pay state bond holders.]
Bob Brinker's Saturday guest-speaker was Jerry Flint, auto columnist for Forbes Magazine. Flint's June 10th column titled, "Yes, New Auto Plants Will be Built: Foreigners will build factories to replace the GM and Chrysler sales that are going to disappear. Where will the plants go?"
Here's an Amazon [LINK] to Jerry Flint's book, "The Dream Machine: The Golden Age of American Automobiles, 1946-1965" [I haven't read this book yet, but it sure looks like it might be on my Christmas list for my brothers and my son.]
Brinker's Sunday guest-speaker was Kate Kelly. Here is an Amazon [LINK] to her latest book: "Street Fighter: The last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street."
Moneytalk programs are available free on your "demand" at KGO810 radio for seven days after broadcast. You can download and save Bob Brinker's Moneytalk programs (owned by ABC) and listen whenever you choose at no cost whatsoever. To download the programs 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]
A beauty-break from my Idaho sister-in-law:
It rained last night near Boise, Idaho. My sister-in-law sent the same plant with raindrops on it. Click on it to enlarge.