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Sunday, August 30, 2009

August 30, 2009 Moneytalk Sunday Update

Posted August 30, 2009...Bob Brinker's Moneytalk Sunday Update:

Bob Brinker talked about two of his Marketimer portfolios today. Let’s take a look at what he said, and what he didn’t say, since it's a topic that he frequently talks to subscribers about in front of his Moneytalk audience.

Brinker talked about his Fixed Income Portfolio on page 7 of Marketimer, which is simply Vanguard bond funds. It's almost half VFIIX and the rest is a mixture of high yield, TIPS, and short-term investment grade. According to Mark Hulbert, this FIXED INCOME portfolio lost 2.1% in 2008, perhaps because of the big hit that the Vanguard High Yield Fund took.

Moneytalk caller, Chris from Sacramento, said that she had lost about 30% in the stock market, had gotten scared and sold out in March. She said that they had recently put a bit of money back into the market via some exchange-traded-funds and mutual funds. She said she wanted to dollar-cost-average and “transition” to Brinker’s portfolio III.

Bob Brinker avoided talking about her 30% loss and did not mention how much she had lost by selling out at the bottom. Why? Possibly because Brinker could not take a chance that she might explain how she came to have lost 30% in the market. Since she is a Marketimer subscriber, it's possible that she could have said exactly which model portfolio she is "transitioning" from.

Instead, Brinker immediately explained (“for new listeners”) that exchange-traded-funds are mutual funds. Then Brinker said: "Now when you say transition into model portfolio III, let me say first for my listeners so you will not be puzzled by the caller's comment. Model portfolio III is an investment portfolio for balanced investment objectives, which I'll define. Which is published each month on page 8 of my investment letter.....We publish an aggressive model portfolio, a long-term model portfolio and a balanced model, which is the model III the caller is talking about. And in that model we are essentially half in the stock market and half in fixed income securities. And that balanced portfolio is designed to generate current investment income along with capital preservation and modest growth over a long-term time frame. And this portfolio approach is best suited for those who are either in retirement or approaching retirement.....That would be as simple as you following the allocations that are listed on page 8 in that model portfolio....all of the funds there are no-load funds...."

Honey EC: Brinker regularly "teases" listeners by giving just enough information about his newsletter to possibly inspire them to subscribe. But there is nothing mysterious about portfolio III or Brinker's "investment letter." It is simply, as Brinker said today, no-load funds. Most are Vanguard, the funds that he touts all the time.

And as to Brinker twice stating that the portfolio was on "page 8," don't be misled into thinking the newsletter contains 8 pages of new information. It does not. There are 3 pages that never change but are simply added into the middle of the newsletter each month -- which is only a list of mutual funds that Brinker "recommends." Anyone can research good performing mutual funds and find them. Of course these are all "off the books," and he never reports on their performance. And the last couple of pages are simply updated portfolio numbers with very little change beyond that. I have never heard Brinker refer to page one, two or three. LOL!

We will never know which model portfolio Chris is transitioning out of, but I'd like to warn her that even if she was in portfolio III in 2008 and up until March 2009, she would have still lost almost 30%. Brinker's model portfolio III lost 23.9% in 2008 plus another 4.7% by March of 2009.
Jeffchristie wrote: "The March 2009 month end numbers are in over at Bob Brinker's website. Portfolio III = $154,875 -4.7% YTD"
Why did this happen to retirees who follow Brinker's model portfolio III? Because, at the market high in October 2007, Brinker was a raging bull and did not re-balance the portfolio -- so it was 66% stocks!

Here is how the breakdown looked on October 31, 2007 (at market high) for portfolio III:

Stock Funds
: 144,919 / Total: 219,263 x 100% = 66%
Fixed Income Funds: 74,344 / Total: 219,263 x 100% = 34%
Total: 219,263 = 100%

Here is how the portfolio looked a year later in October 2008

Stock Funds: $91,378 / Total: $164,891 x 100% = 55%
Fixed Income Funds: $73,513 / Total: $164,891 x 100% = 45%
Total: $164,891
Thanks to Jeffchristie for sending this latest update on Brinker's balanced portfolio breakdown as of July 31, 2009. It looks like it is hasn't changed much -- still a very bullish-on-equities "balance."

Equity funds: 100,163 = 55%
Fixed income funds: 81,127 = 45%
Total 181,290

A caller was very concerned about the latest news about GNMAs, which is that they are moving some of the bad loans from Fannie Mae and Freddie Mac to GNMA. Brinker replied that this would not affect the impact of the Treasury guarantee on GNMAs because any loan accepted into the GNMA portfolio is guaranteed. Brinker also said that it has not affected the NAV of his recommended fund (VFIIX) which is near its all-time-high -- and he does not think it will in the future.

From the Wall Street Journal excerpt:

"Much to their dismay, Americans learned last year that they “owned” Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages. Taxpayers own Ginnie too. Only last week, Ginnie announced that it issued a monthly record of $43 billion in mortgage-backed securities in June. Ginnie Mae President Joseph Murin sounded almost giddy as he cheered this “phenomenal growth.” Ginnie Mae’s mortgage exposure is expected to top $1 trillion by the end of next year—or far more than double the dollar amount of 2007. (See the nearby table.)"
Read more [LINK]

Brinker's Sunday guest-speaker was Bob Collie, co-author of "Retirement Plan Solution."

Dixiegeezer took this beautiful ocean sunset:


Saturday, August 29, 2009

August 29, 2009, Bob Brinker's Moneytalk: Summary, Discussion and Excerpts

Posted August 29, 2009...Bob Brinker is still bullish and does not recommend selling stock holdings. Saturday, Bob Brinker told two callers that he had "no recommendation to pull money out of the market."


In his latest MarketWatch column, Mark Hulbert wrote: "......the speculative excesses seen since the market's low on March 9 would appear to be extraordinary. And that's a concern, since one of the distinguishing characteristics of bear-market rallies is their speculative nature......To be sure, the market's speculative character over the last six months does not guarantee that we're in a bear-market rally, of course. But it is a cause for concern."

Bob Brinker doesn't agree with Hulbert that this is a bear-market rally. Brinker says that this is a "cyclical bull-market rally" within a "secular bear-market."


In the opening monologue, Brinker reported the closing prices for the stock market indexes, and commented: "The stock market is having a very, very good year. The total stock market index.....year to return of 17 3/4%."

He also reported the current Treasury bond yields, commenting that the Federal Reserve "continues to hold down rates." The "implied inflation rate" annual is now at 2%. Just a couple of weeks ago the implied inflation rate was 1.74%. (The differential between 10-year TIPS and the 10-year Treasury Note is the "implied inflation rate over the next 10 years on an annual basis.")


Brinker said:
"Kudos are in order for the White House for their decision to nominate for a second term an excellent Federal Reserve Chairman that we have right now. And that is Obi-wan Ben Bernanke. Mr. Bernanke has had to battle a lot of economic demons in the past year, but he has really done an excellent job. So congratulations to the president on his nomination. We had strongly urged that this nomination be made at the earliest possible date. I think this is soon enough. Getting this on the books before the summer is over.....In my opinion, Ben Bernanke has already done a better job as Fed Chairman in his short tenure than his predecessor. I would say that the last Fed Chair that we had that was as talented as this Fed Chair would have been Paul Volcker......"


Brinker continued.....
"So it's been a week of developments. One of the developments, of course, the inevitable admission by the White House that deficits over the next decade are completely out of control. Unfortunately, Washington is promoting deficit spending as never before. It's bad fiscal policy, and in the long-term, it must change. We must get on a track to a balanced budget. We learned this week what we already knew......What we have right now fiscally in Washington is government gone wild, and believe me it is X-rated. Projected deficits over the next decade coming in at approximately $9 Trillion. Given the fact that we are already pushing $12 Trillion in national debt, this is will push us through the $20 Trillion threshold.....

.....Every day we pay the interest on the national debt, it drains money out of the economic system and it restricts our ability to grow and our full potential.....We are mortgaging this generation at the hands of future generations.....This generation is handing off to future generations an unthinkable amount of debt. The Congressional Budget Office estimates deficits up to 2019 will exceed $9 Trillion, and now the White House budget group is agreeing. Prior to this, they were living a fiction that the deficit would be less.....

......Well if the United States wants to be a true reserve currency around the world, it's going to have to become fiscally responsible, otherwise countries around the world will lose confidence in the U.S. dollar. What could be more obvious?"


Caller Lee in Reno asked Brinker
if he thought California would lead the way in a national economic recovery. Brinker said he thinks California will certainly participate. Brinker commented on California government: "Any state that has to resort to printing fake money -- in California they call them IOUs.....they have a dysfunctional government by definition.....They've proved it themselves....And we do hope that California does play an important role in any economic recovery that occurs...."


Brinker told Anne in Lincoln
that in his view the market had absorbed the "bulk of the bad news from the real estate slide." He said there will be more foreclosures coming down the road, but "everybody knows that." Brinker said: "I've been amazed in recent months how many people have failed to see this. People have been sitting around for months, holding on to cash, reciting the bad things that happened last year, looking backward. And that's not what the market is about. The market is a forward looking, discounting mechanism.....And the reason the market is doing so well this year is because the market is....looking forward into next year....

.....And I think it's a shame for the people who have missed out on these gains, who've sitting around in cash because they are confused......They are missing the opportunity here to profit.....Last year was a rough year, so it's important to take advantage of a profitable opportunity when it's presented. And I just have to say, 2009 has not been the year to be sitting around in cash....I have no recommendation at this time to be taking money out of the market."


Caller Owen from Illinois asked Brinker about the housing market.
Brinker said that it had been "flat-lining" recently and he expects it to just keep "bumping along." Some stability is beginning to develop rather than continued deterioration. Brinker talked about some statistics that seem to have come from this Bloomberg article [LINK] citing the S&P Case-Shiller's Home Price Indices. Brinker said the cities with the biggest losses included Phoenix, Las Vegas, San Francisco and Miami -- 25% or more -- but the numbers are "all over the lot in the housing market." Here is an August 25th CNN article titled: "Home Prices on the Upswing."


[Honey EC: The following represents what I consider back-pedaling by Mr. Brinker on the subject of a global currency -- or as Brinker called it when he was on Moneytalk two weeks ago, "The Global." Brinker has been very pro-global currency for several weeks now. I find it difficult to believe his claim that he was trying to "scare these people." I believe he gathered some facts and scared himself.]

Jim in Illinois brought up the subject of creating a global currency ETF that could be traded, and suggested that Brinker talk to Charles Schwab or Jack Bogle about it. Brinker replied: "You are carrying the ball maybe a 100 yards further down the gridiron than I was, and I have not talked to Chuck or Jack or any of these people that you mention. I appreciate the humor, but the real point of what I'm talking here is to try to put the fear of the Lord into congress. That's what I'm trying to do......

......I don't actually care whether there is a global currency or not. My point is, I want to try to scare, because I don't know what else to do with these people, they've gone insane when it comes to spending, totally insane. The trouble with the drunken sailors analogy is it actually gives drunken sailors a bad name. These people are out of control, so I am trying to put some fear of the Lord in these people in congress to scare them into doing the right thing. And I can tell you this and I know this, that expanding the national debt by another $9 Trillion is not the answer. This is not what we should be doing as a country.....


Brinker continued:
"The Treasury says they favors a strong dollar. Does anybody believe the way to foster a strong dollar or a genuine, legitimate reserve currency is to expand the budget deficit beyond $20 Trillion? It's right now creeping up on $12 [trillion]...... I don't know what school of economics these people went to, but I can tell you this, there is no monetary authority anywhere in the world of legitimate stature that would support this kind of free-spending policy. I mean do you know what they are doing to you, the voter? What their doing is, they are saying, look, this is what we are going to do. We are going to expand the national debt to over $20 trillion -- so there.....

......I'll tell you, you have one thing left to do and only one, and that is to vote for politicians that support a balanced budget, over the long-term....and give you a plan to get there.....These people in power -- I don't care about the party because the party doesn't matter anymore.....that think they can run this debt up over $20 Trillion on the backs of your children and grandchildren -- they are a DISGRACE TO THE UNITED STATES OF AMERICA."

Honey EC: Speaking of a "disgrace to the United States of America," Quis sent this chart. It speaks for itself: FDIC Spills the Beans [LINK]

Brinker talked a bit about the tragedy of so many people losing so much money from Bernie Maddoff's Ponzi scheme because they were not diversified. Brinker said that "so many lives were affected." [Honey EC: I would be rich if I had a dollar for every person who has told me that their "lives have been affected" because they followed Brinker's Marketimer advice to stay fully invested (and/or add money at higher levels) throughout this bear market that Brinker NOW calls the worst since the depression. Granted, it's probably not on the same scale as the Maddoff losses and it's not illegal, but beyond that, it's all relative, isn't it?]

Brinker encouraged a caller to go to the reading list he has compiled on his website and learn to become her own "personal financial manager." He recommended this for everyone and said that it is a sure way to not become "shark bait." [Honey EC: Brinker has been teaching this same principle for many years -- I certainly agree with him.]

Brinker's Saturday guest-speaker was David Wessel: "In Fed We Trust: Ben Bernanke's War on the Great Panic"

Honey's Market Report:

* Dow closed at 9544.20 up 0.4% for the week -- the longest uninterrupted advance since the spring of 2007.
* Nasdaq Composite Index closed at 2028.77, up 0.4% for the week -- its highest closing price since October 1, 2008.
* S&P 500 Index closed at 1028.93 , up 0.3% for the week.
* GLD closed at $93.87.

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] If you want to call KGO and complain about or praise Bob Brinker's Moneytalk, here are the numbers: Comments line: 415-216-1052....Listener services: 415-216-1050. Here is the KGO email address -- cut-and-paste it into your email compose window:

Our resident photographer, Dixiegeezer, took these great pictures for us:


Sunday, August 23, 2009

Bob Brinker's Current Projection for S&P 500 Index

August 24, 2009.....Bob Brinker's guest-host again Sunday was Lynn Jimenez. Lynn commented that in Bob Brinker's latest Marketimer, he says that he is "comfortable" predicting that the S&P 500 Index will reach the 1100 to 1200 range.

Lynn is correct. August 4, 2009 Marketimer, Bob Brinker said: "We continue to have a high comfort level with regard to our projection that the S&P 500 Index will trade significantly higher into next year. Based on our increased operating earning estimate for next year, we are raising our S&P 500 Index price target to the 1100 to 1200 range, up from our prior estimate of 1050 to 1150. Any progress beyond the 1100 to 1200 range will be a function of the magnitude and duration of the economic recovery, which we will continue to monitor on an ongoing basis."

So even though Lynn is correct about what the August Marketimer says, it's very interesting to note that it was in January 2008 (as the mega-bear market began), that Brinker was saying that the S&P 500 Index should be able to achieve a price level into the 1600's range.

And it was just a year ago (as the market was deep in the clutches of the bear) when Brinker was saying that he viewed the price of oil as the "key variable for stock prices" --that it was an "inverse indicator." That theory was not only shot down; it looks like just the opposite is true.

So Brinker is still bullish, making new predictions, and recommending "buy on weakness" (whatever that means is anyone's guess). It's possible he is right this time, and perhaps it's time for him to win one for a change. Even a stopped clock is right twice a day -- and he's way overdue for making a correct market-timing call.

Dixiegeezer took these beautiful pictures in eastern Washington, a few miles from Richland:


Saturday, August 22, 2009

August 23, 2009, Bob Brinker's Moneytalk: Summary, Discussion and Excerpts

August 23, 2009....Bob Brinker's Moneytalk was hosted by Lynn Jimenez this weekend. Lynn also filled in for Brinker on August 9th. Lynn is very helpful to novice or new investors. Her motto seems to be: "Keep it simple, keep it cheap and keep it invested." A caller pointed out that the market has basically gone nowhere since year-2000. Lynn replied, "That doesn't mean you should buy a pig and hold it until it becomes bacon."

Rather than covering Lynn's calls that were mostly elemental (or tax questions that she couldn't answer) and probably not of much interest to my readers, I am going to give you a rare treat, courtesy of David Korn's August 16, 2009 newsletter (posted with David's permission).

David's guest-writer, Bill, discusses many things about the stock market that I'm sure you will find fascinating. Hope you enjoy reading this as much as I did....(Yo, DanG, ever hear of the "Manheim Used Vehicle Index" market indicator?) 8^)

TITLE: The Market Lows....FOREVER

AUTHOR: Bill (with editorial comments by DavidK)

Bill: I appreciate the opportunity to share my thoughts with David's subscribers. As David says in his introduction, I have been fascinated with the stock market for a very long time. It became such a passion of mine, that I decided to forego an engineering career in favor of helping people plan their financial future. Here are my thoughts on the current stock market environment.

March 9, 2009

Bill: March 9, 2009 is the day that will go down in the history books as the cyclical bear market low when the S&P 500 recorded a closing price of 676.53. While Bob Brinker will not go out on a limb and make a long term forecast, this 48-year old has taken the position that the March 9th lows will be the low price for the rest of our lives (and I plan to live another 40-50 years). Therefore, not only will this mark the cyclical bear market low, but I also believe March 9th will be recorded as the low for the secular bear market that began in the first quarter of 2000.

David EC: Now that's what I like, a specific forecast right out the gate. I am in agreement with Bill that a secular bear market began in the first quarter of 2000 and continues. The secular bear market insofar as the benchmark S&P 500 Index is concerned, began on March 24, 2000, when the S&P 500 recorded a high of 1527.46. I have maintained since then that the secular bear market is based on a price-to-earnings multiple compression that will result in valuation returning to the long-term mean. I also agree with Bill that a cyclical bull market began on March 9th, which also accompanied positive divergences in the market internals across-the-board as noted in my special alert on that date. As far as whether this will mark the ultimate bear market low, I tend to agree that the odds favor that at this juncture. However, I want to address a scenario where the March 9th lows get taken out ‹ the unthinkable, another terrorist attack on homeland soil which makes 9/11 seem like peanuts. That scenario is a dirty nuclear bomb. Do I have any idea if it will ever happen? No. And hope it won't. And I don't think you can really plan for that type of event because if it happens, money is probably the least of anyone's worries. About the best you can do is make sure your asset allocation is in order such that you can weather huge swings in the market. The last year and a half has hopefully brought that lesson home.

Bill: During the prior two secular bear markets which took place between 1929-1949 and 1966-1982, the absolute price lows did not occur at the end of the secular bear trend. In the 1966-1982 secular bear, the absolute low for the Dow was on December 6, 1974, when it reached 577.60. It took nearly nine years to reach that absolute price bottom. What followed (the 7-1/2 year period from 1975-August 1982) was difficult, but we never saw lower prices than December 6, 1974.

David EC: An excellent point. The last secular (long-term) bear market occurred over a 16-1/2 year period of time which lasted from 1966 all the way through August of 1982. During this secular trend, there were four mini-bull markets, or "cyclical" bull markets as many like to refer to them which were of a shorter duration.

Bill: The 1929-1949 secular bear market was more challenging because we clearly saw very low prices after the crash of 1937 and again in April 1942, just five months after Pearl Harbor. I have seen a number of market historians refer to the secular bear trend of 1929-1942; however, my understanding is the environment was so unstable from 1942-1949 that most people didn't want to own securities during those seven years. The war and the Great Depression were still on the minds of Americans (the A-bomb was dropped on Japan in August 1945.) It was clearly difficult to be an optimist during those seven years. What made the 1929-1949 secular bear unique is the ultimate price bottom was in July 1932, but I don't think anyone believes a new bull market began in 1932.

David EC: There were arguably four cyclical bear markets and three cyclical bull markets during the 1929-1949 secular bear market. Here is a link to an analysis of those cyclical markets within the 1929-1949 secular bear:

The Bubble Bursts - Secular Bear Chart 1929-1949

Bill: Fast forward to today. The current secular bear market trend began in March 2000 so if the March 9th price low holds, the peak in prices (with some fudge factor of a few percent) to the trough in prices will be nine years, just like the 1966-1982 secular bear reached it¹s trough after nine years. We already had financial Armageddon. We already had the bursting of the bubble(s) and are again in the rebuilding stage. Yes there are perma-bears like David Tice (Federated Prudent Bear fund), Nouriel Roubini (Economist professor) and Peter Schiff who are certain we will see new lows in the future but I believe they will be proven wrong. If this secular trend turns out to be 16-17 years long like many of the others, then we have another 7-8 years of choppiness. It may make sense to study the seven year periods of 1942-1949 and 1975-1982 closely to see how people and the markets reacted after major lows. Those sideways trends may be a guide for the future.

David EC: That¹s a great idea and it is moving to the top of the DavidK topic list.

Bill: The critical point to this discussion is that ANY pullback in prices for whatever reason should be viewed as a buying opportunity for any long term investor.

Returns by Decade

It is very rare to have a decade when the stock market loses money but we will most certainly see that at the end of this year. According to Ibbotson Associates (acquired by Morningstar), the following list is the return on Large Company Stocks (think S&P 500) by decade

1930s: - 0.1%
1940s: + 9.2%
1950s: + 19.4%
1960s: + 7.8%
1970s: +5.9%
1980s: +17.5%
1990s: +18.2%

Note that the 1970s number is an anomaly because inflation was much higher during that decade than others. The 7.4% inflation rate brought the real rate of return to negative for the decade of the 1970s. According to Standard & Poor¹s, for the 10-year period ending June 30, 2009, the S&P 500 has shown a LOSS of 2.221% compound annual return. That is unlikely to change significantly in the next 4-1/2 months which means this will be worse than the decade of the 1930s.

What is instructive is that after a bad decade (1930s & 1970s), it is common for the next 10 years to be better than normal. Another long-term bear that turned positive early this year is Jeremy Grantham. His seven year forecast at the beginning of this year was for large company stocks to average 8.9% per year for each of the next seven years. While that¹s not a decade, it does confirm the "return by decade" phenomenon.

David EC: Jeremy Grantham oversees almost $100 billion for GMO, an institutional money-management firm. Grantham was out warning of the global financial meltdown in 2007, a time when many others were claiming a new secular bull market. Grantham said he thought a fair price for the S&P 500 was 900 and he bought back into the market in March by sheer divine intervention getting near the lows. He also said he thinks is is likely, but far from certain, that we go back and make a new low. Smartmoney published an article a few months ago entitled, "Why Jeremy Grantham Changed His Mind" which you can access at this url:

Smart Money: Why Jeremy Grantham Changed his Mind

Active Money Managers

Recently Bob Brinker has been touting how well his "Portfolio I" and "Portfolio II" have been doing and the fact that they are outperforming the active/passive portfolios and the S&P 500 Index. Because everyone has an axe to grind (me included) I will fill in the blanks. The reason Bob's portfolio is doing better than the active/passive portfolio is the funds he holds that have managers making decisions have been able to find incredible bargains over the past 6-9 months. There really are smart investment managers out there who do consistently beat "the market" over simply need to do the work and find them. Bob's "Portfolio I" owns the same holdings as it did in 2005 so he doesn't make changes very frequently.

Bill: As a bonus to last year's market rout, many mutual funds have significant capital loss carry-forwards on their books. That means these funds can trade around positions, take short term gains without passing gains off to shareholders and make moves to benefit shareholders. That is not true of the Vanguard S&P 500 Index or the Vanguard Total Stock Market Index Fund. Bob will not mention this because it doesn't fit his model. He talks about how tax efficient index funds are in a roaring up market, but he does not address that active managers can protect on the downside and offer better returns and tax benefits during difficult market periods. IF, and this is a big IF, we are in for a turbulent six or seven years (cyclical bull and bear trends), then these active managers should continue to have an edge over the index approach.

Distribution of Annual Returns.

Bill: On the July 25th show (and others) Bob Brinker has been stating that 2009 would be a "significant positive year for the market." To give you some perspective, the attached spreadsheet shows the total return of the markets from 1926-2008.

Bill: Below are some of my comments and interpretation of the data:

1. Through 12/31/08, the market has averaged 9.62%. It is common to hear that stocks tend to average around 10% per year "over the long term" but notice that we have been in the 8-12% range only five out of those 83 years. The message confirms what investors have been feeling which is the market tends to be up a lot and then down a lot.

2. The frequency of returns are skewed to the positive side as 71% of the time (59 years), the S&P 500 Index is positive and 29% of the time (24 years), the return is negative.

3. Notice where 2008 fits into this graph, far on the left hand side in the 20% loss or more column. I am assuming that we will work through the current problems and re-establish a growing economy. Ignoring 1930 and 1931 because the Depression scenario is off the table, let's study the returns following the other years when the market was really bad. After 1937, the market rallied 31.12% in 1938. Following the lows of 1974, we saw an increase of 27.23% in 1975. Finally, we all remember the bear market of 2002 and saw a 28.69% rally in 2003. How many people do you know are expecting gains in excess of 20% for 2009? Perhaps this history is part of Brinker's reasoning for a "significantly positive" year forecast.

When Will I Get My Money Back!!!

Bill: I think is human nature to remember the value of your brokerage statement at the highs. It is equally natural to wonder when you will get back to that level. While that level is totally arbitrary and may have nothing to do with your ultimate goal (for example, suppose you had $1 million which declined to $700K, but you really need $2 million to retire), the fact is there are actions you take that can improve your success rate. If you lost 30% last year, you will need a 43% return in one year to reach break-even. If you wait five years, you will only need a 7% return per year to get back to 12/31/2007 levels. However, adding to your portfolio every year can greatly shorten the time to reach break even. For example, if you started with $500,000, lost 30% but added $10,000 per year, you would only need a 4.8% return to reach break even in five years. The link below will allow you to input your own numbers to see how quickly you may be able to get to your high water mark:

Kiplingers Calculator: Recoup Your Losses

David EC: The historic Dow Jones Industrial Average is still down 34% from its all-time high recorded in October 2007 of 14,164.53.

The Only Market Timing Indicator You Need (well, maybe not)

Bill: Instead of monitoring market valuation, reams of continually changing economic data, monetary policy, investor sentiment, technical analysis, historical trends, Presidential cycles, and a myriad of other information, how would you like one data point that would have told you when to get out and when to get back in? What if there was an indicator that reached its peak in March 2000 (the market highs) and turned down, then turned up in June 2003 (a few months late) but generally stayed positive until its peak in September 2007 and experienced a meaningful decline in 2007 (which happened to again be the peak for the S&P 500). This indicator continued down to lows not seen since 1995 but turned positive in January 2009. Again, this was not the bottom, but I haven't found any market timers who
have successfully captured these major turns. What's the indicator?

Drum roll please David...

The Manheim Used Vehicle Index.

David EC: It is intriguing. Manheim uses statistical analysis to more than 5 million used vehicle transactions annually to come up with a measurement of used vehicles prices that is independent of underlying shifts in the characteristics of the vehicles being sold. Link to their report follows:

Manheim Used Vehicle Value Index

Bill: Like the price of butter in Bangladesh, this might be one of those coincidental indicators, but it's worth adding to the Economic part of the model and checking periodically.

David EC: I agree. Manheim publishes their index monthly. According to their web site, wholesale used vehicle prices rose for the seventh consecutive month in July. The Manheim Used Vehicle Index for July was 115.4, an increase of 5.0% from a year ago. Manheim says that "although the cash for clunkers and resulting revitalization of new vehicle sales stole all the headlines in July, used vehicle retail activity remained solid and higher residuals and recovery rates boosted the earnings of lenders and lessors. And, despite having to pay higher prices for inventory, dealers have seen an improvement in used vehicle retail gross margins."

Miscellaneous Market Comments

Technical Analysis: The stock market rally since early July has that "hockey stick" look to it and that normally corrects itself. It doesn't matter if it's oil, soybeans, stocks, interest rates or the price of timber, whenever we see a steep uptrend like this, it is unusual for it to continue. The correction from mid-June to July 10th was only 7.08%. Historically, the time from mid-July through September is a difficult period for stocks. Given the number of investors who are still kicking themselves for not getting back in, it's possible that any correction could be one of time rather than price.

Standing back and looking at the weekly chart of the S&P 500 over the past few years, we have an "Inverse Head & Shoulders." The left shoulder is the action from last October/November; the head is the March 2009 action and the slight pullback in June/July is the right shoulder. The calculation takes the S&P 500 to the 1250 area.

David EC: Bill is referring to various chart patterns which technicians use to try and forecast the market. There are many resources to learning about these types of technical indicators. Here is a link to a good one:

StockCharts ChartSchool

Bill: On August 6, Abby Joseph Cohen said she expects the S&P 500 to earn $75 next year. Attaching a multiple of 16 times to that estimate takes the S&P 500 to 1200 or about 25% from its current level. She also said that many of the bad performing companies in the S&P 500 last year (think Lehman, Bear Stearns) are no longer in that index and therefore the index has the potential to go even higher. Year-over-year earnings in the fourth quarter should be explosive; the question is, does the market know that and is that being priced into securities today.

David EC: The Wall Street Journal just published an article entitled, "After Dow's 42% Run, Roadblock¹s Looming" (thanks for the link Tony) which you can access at this url:

WSJ: After Dow's 42% Run, Roadblocks Looming

Bill: Everyone seems to be worried about inflation these days because of recent monetary policy and deficit spending. I am confident that Bernanke will fight inflation when the time comes, but I find it curious that investors will worry about this threat 2, 3 & 5 years down the road but won't look at the fact that we have a non-existent energy policy. This lack of an energy policy is what investors should be worried about in the coming years. As an aside, remember when Warren Buffet was berated for buying Goldman Sachs with warrants in the $116/share range as the stock declined below $100 (and ultimately down to the $50s). He is getting the last laugh as it currently trades above $160! Conoco Phillips is one of his top holdings and it hasn't moved very far off its bottom. Maybe instead of worrying about inflation in 2-3-5 years, one should take a long-term look at an energy company like this one.

Bill: Without a doubt, this country has issues to deal with including the "spending like drunk sailors" in Congress that Bob talks about. With California issuing IOUs to pay bills and cutting many many services, I wonder if this will become reality in cities across the country. During the July 4th celebrations, I recall seeing citizens interviewed by the local TV
reporter and saying, "I can't believe they cut out the fireworks this year. It's just not right!" Newsflash. If cutting out fireworks totally upsets citizens, I think some people may be in for a big surprise when essential services like garbage collection, police and fire departments and even library hours get cut.

EC: Add this to the mix: California's two biggest government pension funds had lost close to a $100 billion in the fiscal year ending June 2009. CalPERS' preliminary losses were $56.2 billion while the California State Teachers' Retirement System lost $43.4 billion. The numbers are staggering.

Bill: Like Brinker, I am EXTREMELY concerned that President Obama has not appointed Ben Bernanke for another term. If Larry Summers becomes the new Fed Chairman, the position will have shifted from independent to political and we will have someone in office that may not fight inflation the way Bernanke would. This could be the reason for a correction in the upcoming months.

David EC: Read the article, "Bernanke in the Cross-Hairs" at this url:

WSJ: Bernanke in the Crosshairs

Bill: We will continue to have problems whether they be economic growth, inflation, monetary policy, consumer spending, employment or political. In a long term bull market, you go from having ALL PROBLEMS to having NO PROBLEMS. In 2000, we had peace and prosperity and ended up with an Armageddon scenario with September 11th, corporate scandals and into the invasion of Iraq in early 2003. If we eliminate all of the problems quickly, we will have a shorter bull market. If it takes many many years to solve these problems, we will have a much longer bull market. This is the "wall of worry" argument. It bears noting that to wish for the volatility of equity securities to go away, is to wish for their long-term higher return to go away. Investors are rewarded over the long term for enduring the volatility in stocks.

David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service. Copyright David Korn, L.L.C. 2009

Honeybee here: You can request a free issue of David's weekly newsletter as described above and you can download a free issue of David's Retirement Advisor Fixed Income newsletter that he co-edits along with Kirk Lindstrom here: [LINK]

Honey's Weekly Market Reports:

* Dow closed at 9505.96, gaining 2%.
* Nasdaq Composite Index closed at 2020.96, gaining 1.8%.
* S&P 500 Index closed at 1026.13. gaining 2.2%.
* GLD closed Friday at $93.65.

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 at your leisure -- with 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] If you want to call KGO and complain about or praise Bob Brinker's Moneytalk, here are the numbers: Comments line: 415-216-1052....Listener services: 415-216-1050. Here is the KGO email address -- cut-and-paste it into your email compose window:


Saturday, August 15, 2009

Bob Brinker's Moneytalk: Summary, Commentary and Excerpts, August 15, 2009

Posted August 15, 2009....Today on Moneytalk, Bob Brinker said: "Let's take a look at the markets. Well, you know, back in January when I stated that calendar 2009 is expected to be a significant, positive year for the stock market. I will admit to you that I was going out on a limb because there was so much pessimism back at the start of 2009 after that rough year in 2008. Well guess what, we are having a significant, positive year in the stock market and the numbers prove it. Listen to this. The total stock market index, year to date, for the 33 weeks that are in the book, is now up -- this includes the cash dividend portion that is paid to shareholders -- now stands at 14 3/4%. And that is sweet....."

Bob Brinker recited the following statistics:
* Three-month T-bill yield at 0.16%.
* Six-month T-bills yield at 0.25%.
* One-year Treasury = 0.4%
* Two-year Treasury = 1.05%
* Five-year = 2 1/2%
* Ten-year = 3.56%
* Thirty-year = 4.4%
* Ten- year TIPS = 1.82%
* Implied annual inflation rate = 1.74%
* Ten-year AAA General Obligation Bonds, Muncipal GO's, fully federal-backed = 3.3%
Bob Brinker continued: "And by the way, I mentioned the performance of the total stock market index and the S&P 500 Index, total stock market up 14 3/4, S&P up 13 -- that's total return. And happily our investment letter model portfolios are having a truly outstanding year. And that's good to see because everybody knows 2008 was a difficult year. So it's very, very gratifying to see 2009, at least through the first 33 weeks of the calendar year, turning out to be a very rewarding place to be. And of course, the key to making these profits is a fully invested position. And as you know, I've recommended a fully invested position throughout calendar year 2009 and as a result, we've been able to exploit what's been going on in the marketplace and it certainly has been a profitable year to date in the stock market......There is no reason for me to change the view as I stated in January, in my opinion, 2009 is going to be a significant, positive year for the stock market."

Mike from Kansas City, said he had money from the sale of a home that he wanted to invest in the stock market. Brinker told him: "I would dollar-cost-average. That would be my approach. Now if you go back to January, at the very same time that I stated that I thought that 2009 would be a significant, positive year for the stock market -- which I think was a very important thing to state coming off of a difficult 2008 -- I also said at that time, that I thought the market was attractive for outright purchase in the low-to-mid 800's of the S&P. We're over 1000 now. We're way higher than we were when that buy recommendation was issued."

Honey EC: SHARK ALERT! I'd like to parse some of what Bob Brinker said today and add some facts and perspective. Draw your own conclusions about Brinker's honesty and trustworthiness. What he said is in blue, my comments are in red:

Today, Brinker said:
"....back in January when I stated that calendar 2009 is expected to be a significant, positive year for the stock market." Yes, he did say that, but he also said the same thing in January 2008: Marketimer (S&P at 1468.36) Bob Brinker said: "....conditions are favorable for the market as we enter 2008."

Today, Bob Brinker said:
"I will admit to you that I was going out on a limb because there was so much pessimism back at the start of 2009 after that rough year in 2008." Yes, it was, but Brinker went out on that same limb many times during 2008 and it was sawed off each time!

For example, here is what Brinker said on Moneytalk in May 2008:

RECESSION CASSANDRAS.... Brinker said: “What we have right in here now is evidence that the Cassandras, who earlier this year, were telling us we were in recession – right now they’ve basically – well I’ll be kind, basically, they look like fools right now. Because all that they’ve accomplished with their talk about recession…………all that they have to show for their efforts is that they scared the people who listened to them out of the stock market this past winter……….”

CORRECTION LOW AND TESTS.... Brinker said: “……..And probably a lot of those people got scared out near the correction lows....... The initial correction low in January, which was successfully tested in mid-March, before the market reversed and resumed its uptrend. And basically, if you were to total up all of the accomplishments of the Cassandras, that would be it – that they scared people out of the market during a stock market correction in the first quarter………..Because they have been unable to present any evidence of a recession."

LOST JOBS.... Brinker said: “And your questions to the Cassandras should be where are the millions of lost jobs that we would expect to see in a recession? In fact, in this economic slowdown, so far, we’ve only lost a few hundred thousand jobs total – dating back to the beginning of this year…………”

STOCK MARKET BEARS.... Brinker said: “So what we have here basically, is an example of false prophets and it’s sad. And the reason it’s sad is the damage done. Think of the people that are looking today at the market, S&P at 1400 and they’ve been scared out of the market in the first quarter by these bears………It’s just amazing and yet these people are out there, and these people are not happy, I’m sure, to find themselves out of a rising market since March. To find themselves looking for ever lower prices when in fact we’ve had the opposite."

We’ve had the market rising since mid-March. It’s rather significant when you stop to think about it. If you go back to mid-March and you take a look at the S&P 500 Index since mid-March, right now you have a total return, including cash dividends of about 10 1/2%...........................So it’s fair for you to say to the Cassandras, where is that recession, where are those millions of lost jobs, where are the two quarters of negative real GDP growth? Where’s the bear market? …………The answer is, they blew it! That is the answer, they blew it. They got caught up in their own negativity and they pronounced that it was all over, it was going to spiral downward and there was no end in sight – and they got it completely backwards.. Truly amazing to see, and sad to see the people that are harmed by such unjustified negativity.” [LINK]
Of course, the "mid-March" rise that Brinker was talking about was in 2008 and the S&P was at 1400!! In mid-March of 2009, the S&P bottomed at 677!!

Today, Brinker said:
"...And happily our investment letter model portfolios are having a truly outstanding year. And that's good to see because everybody knows 2008 was a difficult year." Right, Mr. nice it is for your model portfolio followers to regain some of the monumental losses they incurred as they stayed fully invested for the 50%+ mega-bear market. I would call that VERY "difficult" and VERY "rough." Here are the performance numbers on Brinker's "investment letter model portfolios" for 2008 (you won't find these numbers on his website -- first time ever that he didn't publish his one-year numbers):
Model Portfolio I = down 39.7%
Model Portfolio II = down 37.4%
Model Portfolio III = down 23.9%
(The losses off the October 2007 highs to the March 2009 lows are even more horrendous, but that's a subject for another day.) Even though he didn't post 2008 returns on his website, Brinker has now posted his "first half" portfolio numbers, so let's take a look at them and see how much the portfolios have gained back from 2008 losses:
First Half 2009 performance for all Model Portfolios:
Portfolio I: + 9.0%
Portfolio II: + 9.2%
Portfolio III: + 6.5%% (balanced portfolio with 50% fixed-income position)
Today, Brinker said: "I also said at that time, that I thought the market was attractive for outright purchase in the low-to-mid 800's of the S&P. We're over 1000 now. We're way higher than we were when that buy recommendation was issued." Firstly, let me say that no matter how "attractive" a market may look, if one has all his/her money already invested (as Brinker has recommended since March 2003), it means absolutely nothing. And secondly, Brinker must have conveniently forgotten that even though the market is higher today than it was in January, it dropped about 25% AFTER HE MADE THAT CALL! He has always claimed that market declines over 20% constitute a bear market.

Also, Mr. Brinker must have forgotten all about his other five higher "new-money" recommendations that the market dropped through
like a rock -- almost immediately! So, what about those shark-bitten people who lump-summed new money into the market on the recommendations that he didn't mention today? How much did they lose on these "off-the-books" calls? Here they are, the "buy recommendations" that Brinker issued before the "low-to-mid 800's" that he bragged about today:

January 4, 2008, S&P @ 1411: Mid-1400's
Feb 10, 2008 S&P @ 1331: Low-1300's
Aug 5, 2008 S&P @ 1285: 1240 or less
Sept 2, 2008 S&P @ 1282: Low-to-mid 1200's
September 16th -- rescinded low-to-mid 1200's (recommended dollar cost-average only)
January 2009 S&P @ 931: “ bear market bottom range of 750 to 850.
February 2009: “low-to-mid 800’s.

And after all of that, Brinker MISSED the real bear market bottom. Marketimer, March 5, 2009, S&P @ 696.33, Brinker issued no buy-level and did not recommend dollar-cost averaging. He said: “Due to the fact that the November 20, 2008 S&P 500 Index closing low failed to hold during the testing process, we believe a new bottoming process will be necessary for a sustainable market advance, we need to see a sequence of events consisting of (a) the establishment of an initial closing low; (b) a short-term rally; (c) a test of the area of the initial closing low on reduced selling pressure."

Most all of the calls today were in regard to the health care changes that the democrats and Obama want to make -- mostly as it pertains to costs and cuts in Medicare and Medical. I'm not going to waste my time or yours reporting all of the different opinions. There was the usual Ginnie Mae and gold calls. Brinker recommends VFIIX and GLD.

Brinker's Saturday guest-speaker was Michelene Maynard, "The End of Detroit: How the Big Three Lost Their Grip on the American Car Market." (This was written in 2003 and is now in paperback.)

Honey's Market Reports:
* Dow closed at 9321.40, losing 0.5% for the week.
* Nasdaq Composite Index closed at 1985.52, a loss of 0.7% for the week.
* S&P 500 Index closed at 1004.09, losing 0.6% for the week.
* GLD closed Friday at $93.00.

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 at your leisure -- with 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] If you want to call KGO and complain about or praise Bob Brinker's Moneytalk, here are the numbers: Comments line: 415-216-1052....Listener services: 415-216-1050. Here is the KGO email address -- cut-and-paste it into your email address window:


I took this picture of some "Naked Ladies" as I was out for my morning hike:

Dixiegeezer sent this picture of a beautiful black swan:


Tuesday, August 11, 2009

Thursday, August 6, 2009

Did Bob Brinker Issue a Buy Signal in January 2009?

Posted August 11, 2009....No. Bob Brinker could not have issued an official buy-signal in January, 2009 because his "market timing model" failed to warn him that a bear market of historical proportions was approaching. Therefore, Bob Brinker's Marketimer model portfolios had no cash reserves available in January.

Brinker's model portfolios have remained fully invested and in "buy-and-hold" since 2003. However, he issued several "gift-horse" or "attractive for purchase" buy-levels for new money in 2008 and one in 2009. These are all "off-the-books," but are important because many of his subscribers trusted the advice and invested at these levels. And they are pertinent because they show that "market-timing" can be a costly scam.

Here is a chart of Brinker's bottom calls courtesy of Kirk Lindstrom:

In January, Brinker said that 2009 would be a "significant" year for the stock market. Of course after he said that, the market dropped another 25% and bottomed on March 9th at S&P 677. Brinker no longer issues "buy-levels" by numbers, instead he simply says "buy on weakness."

This is my flame-point Himalayan who prefers to sleep in the dark. LOL!

Dixiegeezer took this picture tonight:


Saturday, August 8, 2009

Bob Brinker's Moneytalk: Discussion, Commentary and Excerpts, August 8, 2009

Sunday, August 9, 2009, Update: Lynn Jimenez took Bob Brinker's role as host of Moneytalk today. She did a good job and was very patient and kind to callers. But based on a couple of things she told callers, she does not know much about the stock market. She recommends dollar-cost-averaging. She thinks that inflation is a couple of years away.

There were a few "beginning-investor" callers, and some who are in trouble with their mortgages and credit lines , asked for advice. She told one caller to hire a fee-based "Certified Financial Planner." Brinker would have advised him to learn to be his own "financial planner." Lynn told one down-and-outer to call "Acorn" for help. This is me with my hair standing straight up when I heard that. ==8O LOL
Posted August 8, 2009....Bob Brinker discussed only the Federal Reserve in his very short opening monologue. Bob Brinker's comments paraphrased:

* The Federal Reserve is very powerful because they are responsible for establishing monetary policy, and have direct, total control over short-term interest rates.
* Federal Funds rate is set by the Federal Reserve.
* Prime Rates are different and set by banks.


1. Royce in Rochester said that he believes low interest rates are better because banks can make more money. Brinker agreed with him, and said that there have been dramatic improvements in the credit markets.....banks are in the best possible position now to make money.

2. Bob in San Francisco talked about California's Prop 13, re-affirming that with it, property taxes can be increased a maximum of 2% annually. What he didn't explain is that limit applies to ALL properties, regardless of how recently they were purchased.....

.....Caller Bob said: "What we as California home-owners do experience is a situation where when you get your annual property tax bill, because of the passage of local bond measures, that 2% maximum can easily be banged up to 4 or 6% when you do include the passage of those local bond measures.....

.....For a California resident, the taxation picture is so ugly out here that I believe many, many people would flee the state if Proposition 13 is reversed, amended, whatever. One pays 9.3% in state income tax without even earning much in the state. Top rate's over 10% as you well know the highest in the country. Sales tax where I live is now 9.25%. It's just too much.....

..... Services have been slashed. Roads are in poor shape. State offices are closed most Fridays -- like DMV, etc., right now. So I can speak personally because I will have the flexibility to do so. If anything ever happens to Prop 13, that will be the last straw that broke the camel's back, at least for my family. We'll leave the state immediately."

Honey EC: The caller made the assumption that California education has suffered since the passage of Prop 13. I submit that is a quite simply FALSE and that there are multiple other reasons why education has suffered over the past 30 years. Some of the reasons have been covered here previously in the comments from reader's section.....

..... I just perused my property tax bill and counted the "school bond measures" that are added on to my property taxes every year. There are EIGHT of them. I won't give dollar amounts, but it adds up to a sizable sum of money and is actually greater than the 2% increase that they automatically add on every year because Prop 13 allows them to.

3. Ralph in Oregon asked how to transfer an IRA into a brokerage house without incurring any penalties. Brinker said it was relatively simple and recommended a "no-load fund family" such as Vanguard or Fidelity.

4. Rick in California
asked about FDIC coverage -- and the safety of money market accounts. Brinker said to stay within the FDIC $250,000 limit.....And for money market funds, be sure the brokerage house has SIPC insurance, which covers up to $500,000.

5. Chuck in Arizona
asked about a "structured note." Brinker said that he finds "these products expensive." He does not recommend them....and said that commissions are the motivation for selling them.

6. Don in Nebraska
said he had been a "subscriber" for about 10 years, and talked about his laddered CD portfolio. BTW: Don got that laddered CD suggestion from Moneytalk, not Marketimer. Brinker's fixed income portfolios do not contain CD's. Don added that he was a bit worried about inflation. Brinker said there is always risk of inflation, but we have deflation right now.

7. Casey in Illinois asked about Point and Figure Charting.
Brinker said that Point and Figure Charting is quite efficient at telling you what happened in the's highly questionable whether it adds any value for knowing the future, and is very much like using astrology for market forecasting. Brinker said he wouldn't put any money on either method, and never uses Point and Figure Charts to make his forecasts.

8. Frank in Salinas
asked if mutual funds and ETFs are regulated so that if a company goes bankrupt the stocks in the funds have to be sold and the money paid to shareholders. Brinker answered by explaining the difference between mutual funds and ETF's. He said that an ETF is a mutual fund, and the main difference is that it is traded throughout the market day much like a stock -- SPY is an ETF.

9. Ron in Houston
said that federal government spending is completely out of control because of one-party rule. He asked Brinker if he thought that if the United States dollar ceased being the world's reserve currency would that be some kind of "external break that would end the madness." Brinker, as he does every week, explained that it didn't matter which side of the aisle was in power, spending was still out of control....

..... Brinker said: "As a result, it calls into question whether the dollar should be the world's reserve currency or whether there should be a new currency, a global currency based on the economies of the entire world that would not be subject to just irresponsibility in Washington, which is where we are right now. So I am open to the development of thinking on the possibility of a global currency. And to be perfectly honest with you, if I had my choice today between owning a global currency -- a well-constructed, well-thought out global currency and owning the U.S. Dollar, I would definitely have some money in the global currency if that option were available, so I think it's something worth exploring."

Caller Ron replied, "I'm agreeing with you. The only way to constrain the United States from spending is a global currency." [Honey EC: I was shocked, stunned and dismayed when I heard this conversation, especially Brinker's willingness to hand the control of our currency over to a "one world government." Let's see, he would trust the likes of Communists Wen Jiabao, Putin, Chavez, and Castro, Socialist European leaders and Middle-eastern dictators more than the congress of the United States? Did I understand him correctly? What am I missing?]

10. Chris in California
asked if Brinker had heard the rumor about a plan for banks to take a holiday in September in order for the government to take action that would devalue the dollar by 40%. Brinker said there is no reason for them to do that because the dollar trades freely in high volume every day on the foreign exchange market, and that such talk is unfounded.

11. Patrick in Jacksonville
said he is retiring from the railroad after 40 years and asked about equity index annuities. Brinker said he is not a fan of equity index annuities because they tend to be too expensive. He recommended a balanced portfolio of total stock market index [VTSMX] and GNMA [VFIIX] Funds.

12. Woman (name inaudible) in Pennsylvania
asked if there a rule that said you don't have to pay capital gains when you sell a home after age 55 if you have lived in the home at least 5 years. Brinker said there is no tax on sales that fit those criteria.

13. Gregory in Burbank
asked what are the best bank rating-services, and said that he is concerned about the FDIC running out of money. Brinker said he looks at the major services like Standard and Poor's, Moodys and Fitch, and said that he had absolutely no concern about the FDIC running out of money.

14. Matt in Chicago said:
"I absolutely love how you destroy these people with just common sense, and with their own words and how you kind of tie it around their neck and let them hang themselves." [Honey EC: Wow! That seems very aggressive to me. Is everyone in Chicago that violently inclined? (teehee) I wonder who it is that Matt thinks Brinker "destroys."]

15. Nathan in Los Angeles
asked about Ginnie Mae individual issues. Brinker said he does not recommend buying individual Ginnie Mae Bonds because of the commissions. He recommends VFIIX.

Brinker's funniest line of the day:
Speaking of the Obama health-care takeover, Brinker said: "They are trying to generate an insurance program for most of the people that don't have any insurance. That's their objective." [Honey EC: ROFLOL! Surely you jest Bob, if you think that is their "objective." And for 15 million out of 300 million Americans, they are willing to destroy the best health care system IN THE WORLD? Brinker is either being deliberately obtuse or he's so far in the tank for the Obama administration he can't get his head into the light of day. Please read: "The Fuzzy Math of 47 Million"]

Brinker did not have a guest-speaker in the third hour
. He talked about buying no-load fund versus ETFs. He explained that there is a commission each time you buy an ETF, but no-load funds can be purchased free of charge. [Honey EC: if you use a discount broker, the charge is very low.]

Some Brinker comments from hour-three paraphrased:

* Interest rates are low because of the economy and the current Fed policy.
* Single party rule is killing us.
* Converting from a traditional IRA to a Roth IRA incurs taxes that otherwise might not have to be paid for many years.
* Under the changes to the Uniform Gift to Minors Act, the first $950 is not taxed if the child has no income. [Honey EC: I think the actual number is $900.]
* Estate tax: In 2009, you can leave your heirs $3 1/2 million tax free -- $7 million per couple.

Brinker did not mention the stock market today, and there were no callers who mentioned it or asked anything about it.

Honey's Markets Report:

* Dow closed at 9370.07 up 2.2% for the week.
* Nasdaq Composite Index closed at 2000.25, up 1.1% for the week.
* S&P 500 Index closed at 1010.48, up 2.3% for the week.
* GLD closed at $93.75.

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] If you want to call KGO and complain about or praise Bob Brinker's Moneytalk, here are the numbers: Comments line: 415-216-1052....Listener services: 415-216-1050

I promised Bluce that I would post this picture of a De Soto (not sure what year it is) that I took on my way into church last Sunday. It's a beauty. Cars and men, both get better with age - usually. 8^)

Here's a picture of the Boardwalk's 85 year old Giant Dipper from the street side that I took Wednesday evening as a friend and I drove by after dinner on the Wharf:


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