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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:


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