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Wednesday, July 29, 2009
What Brinker has not talked about (and has not allowed any calls about) is the fact that in 2003, he also began recommending Vanguard High Yield Fund and included it in his "off the books" fixed-income portfolio.
In the April 2003 issue of Marketimer, Brinker wrote: "Effective at the close on April 11, we are reducing our page seven all fixed-income portfolio weighting in the Vanguard Ginnie Mae Fund from 50% to 35%, we are introducing a 15% weighting in the Vanguard High-Yield Corporate Fund." [VWEHX] Brinker has maintained this high yield holding until the present time.
While almost every weekend, Brinker accepts kudos from callers about his Ginnie Mae recommendation, absolutely no one has been allowed on the air to ask about the gut-wrenching ride they took with the high yield fund. I call it "cherry picking" when Brinker touts his cherries calls and buries his calls that are "the pits." 8^)
VWEHX went from well over $6 per share to a low of $3.90 in December 2008. It is now back above $5 per share.
Monday, July 27, 2009
"Saturday, Bob called in to Moneytalk. He was worried that we are taking the best health care system in the world and turning it into third world banana republic form of health care. then asked, 'Bob, you are calling in from California. What is the reaction you are hearing there about California slashing $9,000,000,000 out of the education budget?' Caller Bob said, 'I know I want to tell you the truth. Most people don't really care. There are more administrator than there are teachers. For many, many years mandated education programs have cost the state. I mean we spent over $10,000 per student right now and about 60% of that goes to administration. The kids aren't being educated anyway. Most of the high school students can't pass the test they need to get out of high school. They have got to take it 3 or 4 or 5 or 6 times.'
Brinker did not seem happy about Bob's response. He said, 'you mean to tell our listeners that if you go to school in California you don't learn anything?' Then Brinker claimed that Bob hung up on him. I am suspicious as to which one of the Bob's hung up on the other. Brinker went on to say he has never heard that. We have never had a caller suggest that if you go to school in California you really don't learn very much. That caller was saying that the money goes to administrators..
After hearing this call I thought it might be interesting to look into this situation. I seem to remember reading a few months back that the California education system had high administrative costs because there are many school boards within a given county. One of the first article I found after doing a Google search was this one from the San Jose Mercury.
The article indicates that there are 34 school districts in the county. It also states that superintendents are paid around $200,000 including benefits. The writer doesn't agree with the findings of the grand jury that this is excessive. 34 school district with 34 superintendents would result in an annual cost of $6,800,000 for 34 employees.
I found it interesting that the school system was being investigated by a grand jury so I went to the court records to get more details. Here is the link to the court's website. Interestingly enough, the first grand jury report is titled who really benefits from the education dollars. Hint, it isn't the students. If you click on it you will see that the first question they are raising is why does the county need 34 school districts. If you read the entire report it seems to back up caller Bob's statement that too much money is going for administration.
You will also note that three more grand jury investigation were made targeting the county's education system. After reading all this, I think I now understand why they need such a large administrative staff. They seem to be facing more grand jury investigations than Tony Soprano and Johnny Sacks combined. They need all these people to respond to grand jury inquiries.
That still leaves us with Bob Brinker's question of do you mean to tell our listeners that if you go to school in California you don't learn anything? Brinker, I think the best way to address your question is to look at how the California school system stacks up to the rest of he country. Are you sitting down Brinker? The good news is California is not last. However when your state ranks 15 states below Arkansas I think that is a reason for concern. California ranks 47th out of 50 and your state Nevada is 49th. I guess now we can understand why Harry Reid is such a fool. Arizona is last so we know why John McCain was near the bottom of his class at Annapolis. Here is the link where I found the data."
Here is the osprey holding a fish in his left claw -- look closely, it's there.
Saturday, July 25, 2009
.....And obviously, the worst place to be is to have any stock market money in cash in here, with returns close to zero, plus missing out on the gains this year. I guess the only place worse than cash has been to be short the market.....Some people are short the market because it's summer....And there's no question that when that positive stock market forecast was made in January.....it was a forecast that was a voice in the wilderness. There's no doubt about that, with all the negativity that was out there back in January. But I've often said, so frequently, the best place to be is to be a voice in the wilderness because that's the way the stock market works very frequently....it is a forward looking mechanism.....it does not have a rear-view mirror. And so the key to success in 2009 has been to be looking forward, to be discounting future developments. And the key has been to do so with a fully invested stock market portfolio."
[Honey EC: Brinker was also fully invested during the biggest bear market in 70 years -- 2007-2009. That "key" was not considered quite so successful by those who followed his advice. And all this "melt-up" is doing for their portfolios is recouping major losses.]
CALIFORNIA BUDGET AGREEMENT...Brinker said that education was slashed $9billion-plus, however, bond-holders were paid in a timely manner. [Honey EC: Brinker did not mention the fact that the state is picking the pockets of cities and counties, even the ones that are having big financial problems of their own. There will be lawsuits.]
Caller Tom from Wisconsin, asked about Prop 13 in California.
Brinker used this opportunity to voice his own viewpoint that Prop 13 is totally "unfair." [Honey EC: Brinker is VERY ill-informed about Prop 13. And it seems disingenuous for him to, on one hand, say how "out of control" and "dysfunctional" the California Legislature is, and on the other hand, want to open the door for them to tax people out of their homes and/or be driven from the state.]
Caller John in San Jose, California, tried to explain why there is "absolutely no inequity in Prop 13." After just a few seconds, Brinker interrupted John and said he wanted to talk because he wasn't interested in one-sided conversations. [Honey EC: I laughed for three minutes at that one.] John got in a few more words before Brinker interrupted him again, repeated his views even louder, then hung up.
Caller Bob in San Francisco, California, tried to explain some more details about Prop 13 to Brinker. He said that if it was changed, there would be a mass-exodus from California. Brinker replied that people would not leave the state if they didn't want to. [Honey EC: Brinker evidently isn't aware that taxpayers are already leaving the state. In my humble opinion, Brinker needs to come down off that high horse he's riding there in state-tax-free Nevada and take a look at the real world and real people.]
WHY PROP 13 HAPPENED...Caller Bill in Cupertino, California, said: "Basically local government treated everyone's home as a cash machine, so it was a form of taxpayer revolt. The problem in terms of non-functionality is people in government that can't live within their means. Everyone wants to live on a champagne budget when they can afford beer......The over-spending just goes up and down government all the way."
[Honey EC: I can personally attest that Bill is absolutely correct about homes being treated as "cash machines" until Prop 13 dampened it. And another thing Brinker is evidently not aware of is that since 1978, the vast majority of homes in California have changed hands and have been re-assessed at higher levels. That includes my own when I moved in 1999 and gave up my low tax basis in San Jose. So there are relatively few homes that are still assessed at the 1975 level. This was true 20 years ago as the following press release states, and is exponentially more true today]:
Press Release [link] "They also found that the fraction of 1975 base-year property has decreased substantially over time, mainly due to new construction and properties being sold and reassessed.....limiting the property tax rate to one percent, and restricting the growth of property tax increases to two percent annually."
CALIFORNIA STATE GOVERNMENT....Brinker said: "The IOU's sunk the battleship. In other words, when they ran out of money and had to start printing fake vouchers, whether they're good or not, they are not money. And once that happened....that was it. School was out, it was there for all to see, dysfuntionality on steroids. It's called Sacramento, the government not the city." [Honey EC: And these are the people that Brinker wants to again give carte blanche to tax us out of our homes. Yes, the state IS helping itself to local property taxes as I type this...]
IMPLIED INFLATION RATE: Brinker said the implied rate is now at 1.9% annual for the next ten years.
DEFLATION RATE: Brinker said the YOY deflation rate in the CPI is now at 1.4% "....so in order to get from the negative 1.4 to positive 1.9, the implied rate....you would need to see inflation increase by 3.3%."
FDIC INSURANCE....Frank in Pittsburgh, Pennsylvania, said his mom sold her home and was getting a settlement for over $250,000. He wanted to know about FDIC insurance. Brinker asked: "Is your mother married? ....In a case like this FDIC insurance is essential. I wouldn't ever consider any other possibility." Brinker mentioned the CDARS program.
VANGUARD GNMA FUND [VFIIX].....Phil in Cape Cod, Massachusetts, wanted to know why GNMA's are so good. Brinker said because they are Treasury backed. No credit risk -- only interest rate risk. Brinker said he puts the GNMA Fund interest rate risk at "about the mid-$9's to the mid-$10's." The yield on VFIIX is about 4% now.
TRADING VOLUME.... Bob in New Mexico, said that he had noticed that trading volume was very low and wondered how we could have a bull market without higher trading volume. Brinker said: "Well I guess they're scratching their heads because obviously we are in a cyclical bull market.....As to why the volume is down, I think part of it is that the volume in the summer tends to wane frequently because a lot of people are vacation and doing other things...And I think the other part of it is there are a lot of people out there who became disaffected last year by what they saw going on in Wall Street."
[Honey EC: After two years of silence on cyclical/secular trends, Brinker is now free to talk about "cyclical bull markets" again because in May he admitted that he made a mistake when he retroactively declared that a "secular bear megatrend" had ended. I know, I know....But I'm really not making this up. LOL!]
Brinker thinks "something may happen" by the end of the year. Brinker said: "What will be the impact? Well the impact will be dramatic on a lot of people, but small business is certainly going to be right in the cross-hairs of this deal because if you are an employer who today does not provide health care coverage, then you are going to have to pay a payroll tax of up to 8% a year. That will be as a penalty for not providing health care coverage. Now it goes beyond that. If you are an employer today who does provide health care coverage, then if that coverage is considered by the muckity-mucks to be inadequate -- and THEY will define inadequate, not you -- then you are going to have to also pay that tax.....In addition to that, if your employees go out and choose another plan, then you are still going to have to pay.....
.....The reality is, the vast majority of jobs in the United States are created by small business. So the impact of this legislation, which remains a work in process, is really a big deal, since small businesses are so critical to the creation of new jobs.....So what do you do if you're running a small business, your profitability is probably already compromised.... by the economy and what's going on here and around the world......What do you do if Uncle Sam knocks on your door and says, Okay, pony up 8% of payroll as a tax because you're not providing sufficient coverage for your staff.....How do you raise that money? You might have to cut payroll....Reduce your payroll by 8% and you save the 8% tax that is being leveled by the hypothetical health care proposal that's out there....
....This legislation as it's developing is going to require 20-somethings to purchase health insurance policies that will not reflect their risk of illness. Now statistically, your risk of illness when you are 20-something is really low....But the way the House Bill and the Senate Bill is shaping so far, you are going to grossly overpay-- probably as a 30-something even...Because the prices of the policies for the young will be over-priced so that the prices of the policies for the seniors can be priced at lower levels....There are a lot of problems out there.
.....You've seen the surtax proposed. I notice Nancy Pelosi really likes this tax....She has fallen in love with this 5.4% surtax on high earners. She just seems to thinks this is the greatest thing ever. Well in California, the top bracket is close to 10.5%, if you got the surtax, you got the uncapped Medicare -- that's 2.9% for a business person, both sides, got the top federal bracket going to 39.6% in January of 2011. Add them all up, in places like California, places like Oregon, many other places as well, your top bracket is in the upper 50's. So the entrepreneuer at that point is taking home a little bit more than 40 cents on the dollar....
.....One of the things that they don't seem to understand in Washington is that they just keep raising the tax brackets, and compounding the tax brackets......They just don't seem to get it.....
.....If this health care reform is so valuable....if it's that good, why would you only ask the people making over a $million a year to pay for it. What would be the rational behind that. Now supposedly, you've already nailed these people with the uncapped Medicare.....Now you are piling on these people with the 5.4 surtax....
....They've had a lot of other proposals on how to pay for this. It's going to be really expensive -- one to $1.6 trillion for a decade. This will be the biggest social reform since the Medicare act of 1965. And they don't seem to be coming up with any other ways to pay for it other than let's nail the top brackets. Pretty soon they are going to be trying to get water out of a stone because there's a very limited number of people in that bracket. You get over a $million, you've got -- and nobody feels sorry for them, don't get me wrong -- but I think it's something like 6/10 of 1% of the tax returns are over a $million.....On a thousand tax returns, you might have 6 tax returns that would be in that category. Now how much can you get out of these people there are so few of them."
Regarding the surtax on the "rich," Brinker said that congress probably will not consider the law of "unintended consequences."
Honey's Market Reports:
* Dow closed at 9093.24, a 4% gain for the week.
* Nasdaq Composite Index closed at 1965.96 a gain of 4.2% for the week.
* S&P 500 Index closed at 979.26, a gain of 4.1% for the week. (8.4% gain year-to-date.)
* GLD closed at $93.41.
Brinker's Saturday guest-speaker was Lawrence McDonald, "A Collossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers"
Bob R. sent this regarding the Brinker-McDonald interview:
"Honey: This is an excerpt from an article in Rolling Stone magazine about the on-going clout of Goldman Sachs. I'm sending it to you, appropo of Bob Brinker's Sat. 3rd hour interview with the Lawrence McDonald the guy who wrote the book about the loss of Lehman Bros. You can find the whole article by Googling "Rolling Stone Goldman Sachs." Its a long article tracing the company's history and the surprising number of GS top execs who ended up with government posts. One caution, the article contains the usual foul language that I guess Rolling Stone readers demand, so be warned."
BUBBLE #5 Rigging the Bailout
After the oil bubble collapsed last fall, there was no new bubble to keep things humming — this time, the money seems to be really gone, like worldwide-depression gone. So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle.
It began in September of last year, when then-Treasury secretary Paulson made a momentous series of decisions. Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers — one of Goldman's last real competitors — collapse without intervention. ("Goldman's superhero status was left intact," says market analyst Eric Salzman, "and an investmentbanking competitor, Lehman, goes away.") The very next day, Paulson greenlighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.
Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35yearold Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bankholding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding — most notably, lending from the discount window of the Federal Reserve. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs — and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret...."
Dixiegeezer sent this picture of a "wood stork." I am very surprised at the variety of birds that Dixiegeezer photographs in Florida that I have never seen here on the west coast.
Friday, July 24, 2009
In June, 2007, just months before the market reached it all-time-high in October, Brinker said that the "secular bear megatrend" ended in June, 2006.
This year, in the May, 2009 issue of Marketimer, Bob Brinker said: "Although it appeared to us that the secular bear megatrend that began in year-2000 had reached its conclusion, there is no question that the secular bear megatrend remains intact...."
Pen-name Perma-Bear wrote some interesting Bob Brinker commentary and posted it on Kirk Lindstrom's Facebook forums:
But as the "cyclical" bull approached the all-time 2000 highs, Brinker got cold feet on his secular bear market thesis. He talked about it less and less, eventually to the point where you never heard him mention it on his radio program. Then out of the blue, he retroactively said the secular bear market ended I believe some time in 2006 and he jumped on the bull market going forward bandwagon, all the way through the October 2007 highs. This whole time I don't recall him mentioning secular markets hardly at all. It's as if a central stock market cycle philosophy that he bought into was completely thrown away. And as I've said many times over the months and years, this was Bob Brinker's greatest mistake.
Now briefly applying the secular market theories to gold really briefly. When I hear Brinker go on about how terrible gold has been since the 1980 highs of $850, I just go back to the old secular market theories he was so fond of earlier in his career. While the stock market roared between 1982 and 2000, gold floundered, going from the $850 high to a 1999 low of around $270. But since then, if you buy into secular market cycle theories, gold has been one of the best investments to own since 2000, rising from that $270 low to what is now $940. While $1000 has indeed been a major resistance point for gold, again if you buy into the secular market thesis in which most secular markets last from 10 to 20 years, gold may only be around half way through its secular bull market move.
So I remain in the camp that says stocks remain stuck in a longterm secular bear market while gold remains in a longterm secular bull market. And when we see the final frenzied manic phase of the gold bull market, as we saw in the stock market in 1999/2000, I believe that gold is going to be trading much higher than it is today. If only Bob Brinker could go back in time and revive his old secular market theories. He might also see what I see."
Perma Bear wrote:
"Many folks here understand Brinker's indicators a lot better than I do. Perhaps he was just following his indicators. He stuck with the secular bear market thesis for quite a while. But as the indices approached the 2000 highs, his definition of secular bear market began to be put to the test. That is Brinker's definition was that in a secular bear market the old highs could not be superceded by more than 5 percent for the secular bear market to be violated. I think the DOW easily exceeded the 5 percent level. I don't believe the S&P ever did. It was at that point that I personally shorted the market, because I followed Brinker's old thesis."
Honey here: After I told Perma-Bear that indeed, in May, 2009, Bob Brinker returned to his original "secular bear-megatrend" forecast, Perma-Bear replied to me.
Perma Bear replied:
Feel free to use anything I post here as you please."
Dixiegeezer took this great picture:
Tuesday, July 21, 2009
CA Government: Bob Brinker Said it Best, "They are disgracing the State. They are disgracing themselves"
Here is a San Jose Mercury News article. It's important to know that San Jose is already in financial trouble and making cut-backs to stay afloat:
By Denis C. Theriault and Ken McLaughlin
Cities vow to fight 'reckless' state budget proposal in court
As more details emerged about the tax take-away — twice as large as Gov. Arnold Schwarzenegger had initially sought — leaders from already-struggling South Bay cities were left facing a new round of budget cuts far steeper than most had anticipated.
"Everything's going to be back on the table," said a stunned San Jose Mayor Chuck Reed, whose city could wind up handing $100 million to the state, including as much as $67 million in redevelopment money.
He added: "We will certainly be joining in with other cities in litigation." Opponents say the move is unconstitutional because it reroutes funds earmarked for specific purposes like repairing roads and fighting blight.
Last month, San Jose closed an $84 million deficit by laying off a handful of employees, raising fees and trimming some services. Now, Reed says, the city may no longer be able to avoid making deeper cuts; officials were expecting just $50 million in state take-aways, on top of a general fund deficit next year that already could top $90 million.
San Jose's parks and libraries could see their hours sharply reduced. Miles of roads will likely go without repaving. Even the Police and Fire departments — which Reed had pledged to protect as "priority No. 1" — may face cutbacks.
County budget officials, still crunching numbers, were bracing for a worst-case hit of more than $100 million — far less than earlier doomsday projections but still a "devastating blow," said Leslie Crowell, county budget director.
The county last month closed a $273 million deficit, mostly through layoffs and reductions in health programs. Unlike their counterparts on the San Jose City Council, county officials set aside a $63 million reserve for such a raid. But new cuts could come from social service programs and long-protected public safety departments, such as the Sheriff's and District Attorney's offices.
Gilroy, the county's hardest-hit city in the current recession, already is grappling with unpopular police layoffs. City Administrator Tom Haglund said he had been bracing only for a $1.2 million hit in property taxes. The state took all that, he said, plus at least $800,000 in gas-tax money.
"Thank God we don't have a redevelopment agency" for the state to raid, he added.
The $4.4 billion plucked from local governments would come from three sources: nearly $2.1 billion in property and sales tax receipts; more than $1.3 billion in redevelopment money; and $1 billion in transfers from local gas taxes.
Officials in Santa Clara, where a proposal for a San Francisco 49ers stadium rests heavily on a $42 million redevelopment contribution, are girding for at least a $2 million redevelopment take-away. But Assistant City Manager Ron Garratt said that wouldn't be enough to sink the proposal — at least, not yet.
The team and city "predicted there might be these bumps," and the team has pledged to fill in the financing gaps, Garratt said. Still, if the state continues to raid redevelopment coffers in future years, the 49ers could decide to reconsider the deal, he said.
Under Proposition 1A, which voters passed in 2004, the property and sales tax money must be repaid with interest within three years. No such provisions exist for redevelopment funds and cash diverted from gas tax revenues, which voters have earmarked for road repairs.
Across Santa Clara County, said Randy Rentschler of the Metropolitan Transportation Commission, some $45 million in gas taxes would be lost this year.
Cities and redevelopment agencies from around the state are expected to take part in legal challenges to the redevelopment and gas-tax grabs.
"This budget proposal is a reckless Ponzi scheme, because it depends on unconstitutional seizures of billions in local revenues that the voters dedicated to specific purposes," Chris McKenzie, head of the League of California Cities, said in a statement.
This isn't the first time Sacramento has tried to divert money from redevelopment agencies. Last spring, the California Redevelopment Association won a court fight against state plans to shift $350 million in redevelopment money for education.
State officials, however, have signaled their intention to appeal that decision.
Posted July 21, 2009....Bob Brinker has said that education and bondholders are first in line to be paid under "California law."
May 16th on Moneytalk, Bob Brinker said: "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....."
Well, looks like education was one of the first to take cuts. Almost unbelievably, California Legislature is helping themselves to some city property (and other) taxes. They call it "borrowing," but they didn't ask to borrow, they simply helped themselves. There will be lawsuits. They are also tapping next year income taxes, shifting money around and selling more bonds. Yes, that's the ticket, shift money around and sell bonds. LOL!
From Bloomberg: Spending Cuts
Senate and Assembly leaders said they will seek to put the proposals to a legislative vote by July 23. It would require passage of more than a dozen bills by a two-thirds margin. While Democrats control both chambers of the Legislature, they are six votes shy of such a supermajority.
The agreement calls for cutting spending by $15 billion, including $6 billion from schools, $3 billion from colleges and $1.2 billion from prisons. Schools will be repaid $11 billion once the state’s economy turns around. It also raises $4 billion by in part accelerating personal and corporate income tax withholdings and increasing income tax withholding schedules by 10 percent.Read more at Bloomberg here [LINK]
Dixiegeezer sent these awesome pictures. It seems like the water has such an unusual color to it -- flamingoes or pink spoonbills?
Saturday, July 18, 2009
Honey's Market Report: This was the best week for the market since last March. Earnings season will be in full swing next week...
* Dow closed at 8743.94, a 7.3% gain for the week.
* Nasdaq Composite Index closed at 1886.61 a gain 7.4% for the week.
* S&P 500 Index closed at 940.38, a gain of 7% for the week.
* GLD closed at $91.93.
STAGFLATION....Caller Doug from Illinois asked for a definition of "stagflation" and "what are the chances of it happening in the next two years." He also asked what will happen to the value of the dollar, the price of gold and interest rates, the first time that a Treasury auction "fails."
Brinker comments paraphrased: Right now, we have deflation......The latest CPI numbers show that we have year-over-year price declines of 1.4%.....The definition of stagflation is: "...rising inflation without much growth in the economy." The chances of stagflation happening are "slim and none."
TREASURY AUCTION FAILURE....Brinker told Doug that the government has never come close to not being able to sell its bonds, then he added the following caveats...Brinker comments paraphrased: We have a federal government policy right now that will increase the deficit by $3 trillion in the 2-year period ending September 2010. The deficit for the fiscal year that started last October and ends in September 2009 will be about $1.6 trillion. And the deficit for next fiscal year is projected to be about $1.25 trillion -- close to $3 trillion for the 24-month period ending 2010.
Honey EC: Brinker never misses a chance to place equal blame for the current national debt on the Bush Administration. He always hearkens back to the Medicare Drug Plan -- I agree with him on that point. But to put equal blame for the $1.6 trillion debt on an administration that was in office only 3 months out of this fiscal year is disingenuous and mathematically FALSE, as well as morally bankrupt. The Obama administration has QUADRUPLED the debt since he took office and has run it up further than all other presidents combined.
Caller Jonathon in Las Vegas (he said Las Vegas is 110 degrees) asked what is the real value of the dollar since it not backed up by a precious metal. He commented that these "fiscal-enema tax dollars" are "good for the Federal Reserve" and they get a "free ride, " then charge interest when they "loan it back to the government."
Brinker said: "I don't have any dollars right now that have the picture of the current occupant of the White House on them. I do have a Ben Franklin in my hand that I borrowed from my engineer. According to what this C-note says, 'this note is legal tender for all debts public and private,' okay? .....It is lawful money.....If I was a gambler, which I'm not, I could take this C-note into a casino and put it down on red or black and they would accept it and pay off if it came in.....So it is legal tender."
[Honey EC: Brinker almost always resorts to sarcasm when a caller says something he doesn't agree with. He often walks a fine line between civility and outright rudeness, but only with those who he feels are challenging his own prognostications or punditry. And occasionally, Brinker falls completely off the fence and makes no pretense of being polite.]
GETTING RID OF FEDERAL RESERVE....Brinker then laid it out for Jonathon. He told him that talking about getting rid of the Federal Reserve was "dangerous waters." Brinker said: "If you get rid of the Federal Reserve, then you are going to politicize the money supply. You are going to turn over the regulation of the money supply to the politicians. And I will tell you, Jonathon, when you do that, that is the end of the United States of America."
MEASURING PRICE RISK IN BOND FUNDS...John in Yuba City asked how the value of bonds would be affected if interest rates go up.
Brinker explained that the best way to measure the price risk of a bond fund is to look at the "duration factor." For example, a bond fund with a 2.0 year duration -- 2 1/2 average maturity. Brinker said: "For bond yields with an average maturity of 2 1/2 years, the duration tells you that if rates went up 1%, that fund would drop 2%.....So if you look at 2-year Treasuries right now, they are yielding 1%. So if they go up from 1% to 2%, I'd expect that fund will drop a couple of points in net-asset-value.....We track these in the investment letter that I publish too."
Honey EC: All of the information about Treasuries that Brinker "tracks" in his "investment letter" is available for free online (check the links I have posted in the right hand column under the title, "Item of Interest to Investors.") Also, all the duration information about any bond fund that you are thinking of buying is available from fund companies. Vanguard's website offers outstanding information about their bond funds, including duration and average maturity.
"DISGRACEFUL" CALIFORNIA GOVERNMENT....Bob Brinker comments paraphrased....California government leaders have scheduled another meeting for Sunday night. There is talk of closing the $26 billion deficit by taking money out of the education funds so they can be assured of having money to pay bond-holders.....Once you lose access to the credit markets, you're finished, so they have to protect bond-holders.....
Brinker said: "I'm talking about [California] government officials. They are disgracing the State. They are disgracing themselves by not using money. They are using IOU's.....I would have to label the government in California as completely dysfunctional because they did not plan for this day. You cannot run a state like California....the 8th largest economy in the world.....without having a reserve for bad times.....As a consequence, they have proved to the world, not just the state, that they are incompetent at running the state. And I've been very kind in calling them dysfunctional -- they are much worse than that. But this is a family broadcast."
ONE-WORLD RESERVE CURRENCY....Brinker said: "I was not critical of the Chinese government when they raised the issue a few months ago of a world reserve currency because I think it might be a good idea for the United States of America to be part of a world reserve currency. Because I think that if we as a country are going to be as fiscally irresponsible as we are through our elected leadership, then we are abrogating our responsibility to maintain a world reserve currency, which is what we are right now. We are the world reserve currency....but that carries with it a sacred responsibility....to be fiscally responsible....You know that statement by Mr. Elmendorf this week, the Director of the Congressional Budget Office -- he doesn't see cost savings in this thing, he sees it running up the deficit. It's a good thing the CBO has some independence to tell it like it is, because some of these politicians, either they are in denial, well there's another possibility, but I don't want to make accusations because it's not in my nature." [Honey EC: Good one. That "nature" line is always good for a chuckle. So it looks like Brinker is a brave-new-world advocate.]
NEW SALES TAX ON THE INTERNET....Paul from Omaha suggested immediately creating a flat sales tax on anything purchased on the internet. Brinker said he didn't think raising sales taxes in a recession is a good idea -- rather, it would be the "policy of a madman." [Honey EC: There are some people who have never seen anything they didn't want to tax. While at the same time, they seem to think that spending increases can go on forever. Is it ignorance or what?]
WHY HASN'T THE "WHITE HOUSE" RE-APPOINTED BERNANKE? Brinker said: "Why hasn't Ben Bernanke been re-appointed as the Fed Chair? What is the White House waiting for here? Ben Bernanke, in the most difficult times in 70 years, has done an outstanding job.....Why hasn't this astute Princetonian been re-appointed? What is the White House waiting for. Now we've heard rumors that Larry Summers wants the job. I don't care about Larry Summers. I care about the chairmanship of the Federal Reserve. That's the United States of America we are talking about. I've said for 23 1/2 it's the most important job in the country. The second most important is the president. But what in the world is the White House waiting for on simply making an announcement that the president has re-appointed Ben Bernanke as Fed Chair for another term. Now this is a no-brainer. It's a no-brainer, and yet we continue to wait for that announcement. It's amazing. Ah, maybe they had vacation plans that got in the way. First things first. This is Moneytalk."
[Honey EC: What "amazes" me is the lengths that Bob Brinker will go to in order to keep from calling the president by name. And I'm not real sure that the "White House" can appoint anybody to anything. I haven't check to be certain, but I do not think Brinker has called him by name since he took office. Bob, here is his name, Barack Hussein Obama.]
TAX RATES GOING UP....Brinker said: "Tax rates can only go one way and it's not going to be south -- income tax rates."
HOME PRICES IN LAS VEGAS... Brinker said that home prices in Las Vegas are down 50%. He should certainly know because he lives very near Las Vegas.
STOCK MARKET....Brinker said: "Now when we are talking about the stock market, I'm on record as of January of this year, as predicting that calendar year 2009 would show a significant total return for the market. That was my comment in January and I'm sticking to it. Now as we speak, we are up close to 7%, the total stock market index so far this year. We're a little bit past the halfway mark and I think we are on track. Nobody is saying it is going to be a straight line move and it hasn't been and it won't be, but I think we are on track to have a significant total return in the stock market this year. Now there's no change in my view. That's been my view as I expressed it in January and there no change in my view.....
......"I don't think you should be looking at multi-year horizons in here. My horizon right now --look I publish all this in the investment letter, my horizon right now goes to 2010. That's the current horizon that I've written about and I've talked about in the investment letter..... I haven't said anything where the market will be in subsequent years. But I do have a favorable horizon that encompasses 2009 and it does spill over into 2010.....My focus right is trying to be on the right track into 2010. Now so far in 2009, we are very much on the right track."
[Honey EC: Firstly, let me point out that no matter what the stock market has done this year, the only affect it has had on Brinker's Marketimer model portfolios, and those who follow them, is to re-coup MAJOR LOSSES! Brinker misleads his audience by not disclosing this fact or the fact that he was forecasting "significant bullish moves just about every level from S&P 1565.
Brinker has remained FULLY INVESTED since March 2003. Brinker rode this mega-bear all the way down over 50% from market high to market low because, as he admitted on Moneytalk, his "timing model" failed to anticipate it. Just the opposite, he was a raging bull in January 2008 -- predicting an S&P in the mid-1600's range.
Marketimer, January 2009, (S&P @ 931.77) Bob Brinker wrote: "We regard the S&P 500 Index 750-850 range as the area of the final bottom for this bear market."
Marketimer, February 2009 (S&P @ 825.88) Bob Brinker wrote: "....we recommend using periods of weakness in the low-to-mid 800's S&P 500 Index price range to add to positions. Our model portfolios remain fully invested."
Marketimer, March 2009 (S&P @696.33) Bob Brinker wrote: “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 in order to put an end to the bear market.”
So Brinker's SIXTH and FINAL bottom-call for the mega-bear market (which he made in February, 2009 @ low-to-mid 800's), missed the bottom by another 20%. The stock market bottomed at 677 on March 9th -- 5 days after Brinker said he was looking for a new bottom. By the time April rolled around with the market jumping, he began advising "buy on weakness" -- with no explanation of what he considers "weakness." Please click on chart, it reveals the truth that Brinker is covering up!
Brinker's Saturday guest-speaker was Alistair Miln: "The Fall of the House of Credit: What Went Wrong in Banking and What Can be Done to Repair it."
Brinker's Sunday guest-speaker was Jonathon Kirshner: "The Future of the Dollar."
Brinker talked about Niall Ferguson's guest appearance last Sunday. I have posted David Korn's excellent summary of that interview on the previous page of this blog.
Here is a [LINK] to the complete statement from CBO Director, Douglas Elmendorf, about the effects the Obama health care takeover will have on the Federal deficit. It is a PDF file and VERY comprehensive.
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]SJ_Al sent the following bit of humor that has a lot of truth in it. (Al included one more cartoon that is hilarious, but since this is a "family" blog, I can't post it. If anyone wants to see it, send me an email and I'll send it to you.):
The portfolio has got scratches and dents and bumps and holes in it. The gleam and the shine that used to be there is downright dull.
But that's not the worst of it.
The advisor seems out of focus and it's been hard watching especially hard watching my dollars slip by. It regularly sputters and backfires is the timing off?
It keeps slipping and sliding and skidding and bumping into things I was told it would avoid. Maybe the tires are bald and that's why there's no grip.
The blinkers seem to work backwards.
All of the accounts are leaking. Is that blood?
It's done so poorly it will take years to complete this trip and get home again. My heartburn rate is terrible and I don't sleep well at nights.
But here's the worst of it --
Every time when the market sneezes, coughs or sputters, the blinkers won't indicate and my advisor fails to show or start doing what I thought I paid him for. His advice just plain sucks. I'm worried that either his timing is off or his battery has gone dead. When I call to complain, I'm told just use jumper-cables.
Thursday, July 16, 2009
Bob Brinker was mentioned in Kiplinger's August 2009 article titled, "Can You Time the Market? Making money by darting in and out of stocks is easier said than done."
Brinker is known to have used a bit of technical analysis over the years -- key items like double-bottoms or volume. But mostly, he has trusted his "timing model" to signal the appearance of bear markets of more than 20%. The "timing model" completely missed the 50%+ mega-bear of 2007-2009.
Excerpts from Kiplinger's Personal Finance magazine, August 2009, David Landis, Contributing Editor.
"If ten years ago you had invested $10,000 in a low-cost mutual fund that tracks Standard & Poor's 500-stock index, stuck with it and reinvested dividends along the way, you would have been left with just $8,416 as of May 31. No wonder many restless investors (and more than a few advisers) are dismissing buy and hold as something that works during long bull markets, such as the one that began in 1990 and ended in 2000, but not now. "Buy low, sell high has two parts, and most of the world focuses on just the first part," says Will Hepburn, a Prescott, Ariz., money manager and president of the National Association of Active Investment Managers, whose 200 or so members practice a variety of alternatives to buy-and-hold investing.
Certainly, if you could master the second part of Hepburn's equation -- knowing when to get out -- you, like Parrish, would be sitting pretty. A chart on Hepburn's web site shows that if you had owned the S&P 500 from 1983 through 2003, but somehow managed to miss the 30 worst days during that period, you would have earned an annualized 19%, almost double the 10% buy-and-hold return.
Easier said than done. While we agree that there's plenty of evidence that market timing has worked over short and even long periods, the devil is in the details. It's a tougher strategy to pull off than buy and hold, and few do it well. Even Parrish, who has made it work, admits, "I'm savvy enough to recognize I've been very fortunate and that it's not going to last."
Our take on timing
Mark Matson, a Cincinnati money manager, likens a market-timing strategy of switching between stocks and cash to "playing Russian roulette with two bullets in the chamber. The idea that some market timer is going to save you from the crashes while getting you all the upside from great markets is a fantasy."
We're not as dead set against market timing as Matson, but neither are we ready to throw in the towel on buy and hold. We think buy-and-hold investors could incorporate some mild forms of market timing to improve their results. But first, let's take a closer look at market timing to see why it is so alluring to frustrated buy-and-hold investors.
Successful market timing requires three key ingredients: a reliable signal to tell you when to get in and out of stocks (or bonds, gold and other types of investments), the ability to interpret the signal correctly and the discipline to act on it. The popular image of market timing is that it calls for making drastic, all-or-nothing moves into and out of a particular market.
In reality, many timers adjust their investments in stages, and their recommendations don't always reflect such a black-and-white view of things. And while some timers may trade frequently, others use signals that rarely change from buy to sell or vice versa. In any case, timers say that being out of the stock market during its most uncertain periods results in a smoother ride for your portfolio compared with a buy-and-hold approach.
Three kinds of signals
Academics and economists claim to have discovered a number of signals that have proved surprisingly predictive of market turning points in the past. The indicators fall into three broad categories:
Yields and valuations.....
Market breadth. Dan Sullivan, whose newsletter, The Chartist, has a good long-term track record of market calls, says that when advancing stocks outnumber declining stocks by two to one over a ten-day period, it's a buy signal that works "just about every time." The signal has flashed "buy" just 11 times since 1949, says Sullivan, most recently on March 23.
Moving averages. Many professional timers use moving averages of daily prices as a signal......
Unfortunately, a long list of caveats accompanies all of these signals. First, although powerful computers can sift through mountains of market data and find strategies that would have worked in the past, it doesn't mean they'll work in the future. For example, many experts believe the relationship between the S&P 500 earnings yield and interest rates that economist Shen observed breaks down when rates are unusually low, as they had been until recently. "There's no such thing as a perfect indicator," says Sullivan, 74, who began publishing his stock newsletter in 1969 and manages about $200 million in assets. "They tend to change over time." Sullivan says he uses five other proprietary signals in addition to the ratio of advancing to declining stocks.
In general, be wary of any strategy with little to recommend it other than so-called back-tested data. If a market timer hasn't actually produced those outstanding returns, preferably with his or her own money on the line, move on.
And given that the signals themselves are less than perfect, a lot is riding on the person who interprets them....
Finally, if you're thinking of timing the market yourself, rather than hiring a professional, consider this: Buying or selling when everyone else is doing the opposite may sound easy, but it's not. "Once you get into market timing, it changes from an investing game to an emotional game," says Garrett.
Pitfalls of being wrong
Remember how Hepburn's chart shows that you could have nearly doubled your buy-and-hold returns by missing the market's worst days? Another portion of the same chart shows that if you missed the 20 best days over the period, your buy-and-hold return would have been sliced in half, to 5% annualized.
Adam Bold, head of the Mutual Fund Store, a nationwide network of advisers based in Overland Park, Kan., speculates that many timers missed the 2,200-point rally in the Dow Jones industrial average from March 9 through June 5. And having done so, they now face a quandary. "It's emotionally hard to get back into the market 2,000 points higher," says Bold. "You may say you'll buy when it comes back down, but what if it never comes back down?" Parrish, the retired executive, recalls battling his own emotions after betting against the stock market as it was rising during the first three quarters of 2007. "It wasn't easy for me to see my portfolio sliding downward," he says.
Mark Hulbert, whose newsletter, the Hulbert Financial Digest, has tracked the performance of investing newsletters for almost 30 years, counts nearly two dozen portfolios that have beaten the market, after adjusting for risk, over the past 15 years. But for some it hasn't been a smooth ride." [Honeybee EC: Hulbert's "adjusting for risk" is a subjective re-calculation. Hulbert slants his Marketimer performance ranking by using a "footnote" to give Brinker a mulligan on having used some of the same model portfolio money twice.]
"Newsletter editor and radio host Bob Brinker, for example, correctly called the market top in 2000 and turned bullish not long after the bottom in late 2002. But he didn't get out of the way of the 2007-09 bear market, and his model portfolios lost an average of 25% over the past 12 months through May 31. He still beats the market over the long term. But how many do-it-yourselfers would have the fortitude to stick with their strategy after a loss like that?"
[Honeybee EC: When Brinker made the now famous call in January, 2000 (which is almost mystically exaggerated and has become a part of Bob Brinker Folk Lore), he did not use technical analysis.
Instead, he said that his "timing model turned unfavorable." Brinker recommended raising 60% cash at that time. In August, 2000, when he actually became bearish, he raised another 5% cash from model portfolios. So throughout that bear market, his model portfolios remained 35% in the market.]
Granted, many buy-and-hold investors also abandon their strategies when the going gets tough and wind up engaging in an unintentional form of market timing. But here's something else to weigh: The stock market's miserable performance over the past decade -- an annualized loss of 1.7% -- comes on the heels of the nifty '90s. During that decade, the S&P 500 gained an astounding 18% a year. In the '90s and the aughts, results diverged dramatically from the stock market's long-term return of 10% a year.
Who knows whether or when we'll see long-term, double-digit average stock returns? But if we do, despite widespread antipathy toward buy-and-hold investing, patience will be rewarded."
Honeybee here: This response was posted to the comments section under the article:
POSTED BY: Bob Brinker Fan Club (July 14, 2009 04:14 PM)
Mark Hulbert says Brinker's "fixed income advisor" model portfolio #1 lost 21.7% last year....
Mark Hulbert says Brinker's "fixed income advisor" model portfolio #2 lost 11.5% last year...
Mark Hulbert says Brinker's "fixed income advisor" model portfolio #3 lost 5.2% last year, 2008....
Mark Hulbert says Brinker's "Fixed income only" portfolio in “Marketimer” lost 2.1% in 2008...
All his fixed income portfolios lost money in a year Vanguard's GNMA fund was up 7.22% and Vanguard's Total Bond fund was up 5.24%.
Equities were even worse: Brinker's "Marketimer" model portfolio #1 lost 39.7% last year, 2008...
"Marketimer" model portfolio #2 lost 37.4 last year...
"Marketimer" model portfolio #3 lost 23.9 last year,..
Honeybee here: I think the color is beautiful in Dixiegeezer's photos that he took in North Tarpon Springs, Florida, early this morning. Does he ever sleep? 8^)