Bob Brinker's Moneytalk Summary, Excerpts and Discussions August 1-2, 2009

Posted August 1, 2009....

Sunday August 2, 2009 Update: There was nothing new on Moneytalk on Sunday. It was very much a repeat of Saturday's program. Brinker again showed how misinformed (or biased?) he is about California's Prop 13. A couple of callers explained some points about it, but certainly not all of them. I tried to call but couldn't get through.

Since yesterday, Brinker has found out that the caller that he disparaged yesterday for saying that "cash for clunker" cars have to be year 1984 and newer was correct. He didn't apologize, he simply spoke as though he knew it all along.

Saturday, August 1, 2009, Bob Brinker began Moneytalk today with a report on the stock market closing levels from Friday. Bob Brinker said that the S&P 500 Index has had a total year-to-date return of 11% (counting dividends). The total stock market index has had a YTD return of 12 1/2%.

Bob Brinker said: "How are you doing in this very good 2009 stock market year. I hope you're doing very, very well. And you know something? If you're fully invested and you're properly invested, then you are doing very, very well, as you deserve here in 2009.....In the last three weeks we've had an old-fashioned Wall Street summer melt-up.....That usually makes investors smile. And there are many stock market investors with ear-to-ear smiles here this weekend as they look at the results in this year-to-date stock market. It's a good idea for you to check and see now that you have seven months on the books, how are you doing?....Back in January, you will recall I had stated that it was my opinion that calendar year 2009 would be a significant positive year for the stock market.... We are certainly seeing a significant positive year for the stock market based on the first seven months of the year....

.....I'd be dollar-cost-averaging here. Now we were recommending buying on weakness. We've been fully invested all year, so we've managed to capture the entire market advance. The model portfolios have been doing exceptionally well actually."

Honey EC: Yes indeedy my mateys, Brinker certainly has been fully invested all of this year -- all the way to the BOTTOM in March at S&P 677.

He was also fully invested all of last year and the year before -- all the way back to March 2003. Additionally, his three-month long spiel about saying in January that 2009 would be a year of "significant" market gains, has a strangely familiar ring to it. It could be because he said nearly the same thing in the January 2008 Marketimer with the S&P at 1468.35 (problems after here on IE):

Bob Brinker said: “In summary, the Marketimer stock market timing model indicates that conditions are favorable for the market as we enter 2008. We expect the S&P Index to achieve new record highs this year and to reach the 1600’s range in the process. We continue to rate the market attractive for purchase on any weakness into the S&P 500 Index mid-1400’s range. Above this range we prefer a dollar-cost-average approach for new purchases. All Marketimer model portfolios remain fully invested as we enter 2008."

Here are David Korn's comments regarding Brinker's new spiel about having said that 2009 would be a year of "significant gains" for the stock market. David Korn wrote:

"EC: Ahem. Let me first congratulate Bob for making a prediction in January of this year that the stock market would produce significant gains. Well done buddy. Now let me remind Bob that immediately following his forecast, the stock market declined around 25%, blowing past Bob’s revised lower buy points. Then along came March, when he finally capitulated on no longer issuing “buy recommendations” and then the market began its bull market run on March 9, 2009.

Bob’s “voice in the wilderness” remarks run completely shallow in my opinion, because he was belittling the bears throughout the first quarter of 2008 as the market began the ravages of worst bear market in 70 years. His forecast for significant gains in 2009, was simply one of many bullish calls Bob has made over the last 2 years.

He missed the bottom on March 9th completely (see my March 9, 2009 special alert which discussed the positive divergences).

Think I am too hard on daBrink? If he wasn’t such a spinner, I wouldn’t have to set him straight." _David Korn

Brinker continued his monologue by reciting the yields on the 3-month, 6-month, one year, two-year, 5-year, 10-year and 30-year Treasury rates -- and municipal general obligations yields which are now down to 3.3% for the 10-year. Honey EC: I have links to all of that information in the right column of this blog. Brinker said the "implied inflation rate" is now at 1.8%....

Brinker did not identify caller one. The caller said that Citigroup had gone from a penny stock to a company with great earnings. Brinker comments paraphrased: There is no information to indicate that is true.....it is indeed a penny stock.....American taxpayers own 34% of Citigroup.....and more than 60% of General Motors. AIG, Fannie Mae and Freddie Mac are 80% taxpayer-owned. (Brinker identifies any stock below $5 a share as a a penny stock.)

Caller Chris was an 18 year-old new investor who had just opened and funded a TD Ameritrade account in hopes of having graduation money to invest. Brinker recommended Chris go down the learning curve and start with the reading list on his Marketimer-Critical Mass reading list. Brinker pointed out that his reading list books are also available at the library.

Honey EC: Brinker recommends libraries, but does not allow most libraries to subscribe to his own Marketimer newsletter. Marketimer used to be available in libraries until Brinker's disastrous QQQQ trade of October 2000. At that time, he told most libraries to remove them from shelves, including the special QQQQ bulletin he had sent recommending investors put up to 50% of model portfolio cash reserves into QQQQ at $83. (Brinker has never closed the QQQQ trade and his last follow up advice in March, 2003 was to "hold for recovery." Nine years later that trade is still down over 50%.)

Phil in Michigan's subject was Yahoo -- said he bought shares at $14.28 and thought next week the shares would be back above $16. Brinker comments paraphrased: Google has the advantage of being the first and most successful search engine. Yahoo and Microsoft have had limited success....We'll have to wait and see about Bing....And another thing, people still remember the Yahoo decision not to take the $30 a share offer from Microsoft a while back...a disastrous decision.

Caller George from Virginia, expressed concern about "what might really be going on" with the "Cash for Clunkers" give away, and said he was worried about the government being more and more in charge of businesses. He pointed out that now we have 200,000 more people in debt for all the new cars.

Brinker said: "Approximately 225,00 trade-ins went through on the first $billion, but they've just thrown another $2 billion at it.....I think there are two sides to this....It's very expensive, but the politicians in Washington don't seem to care about that.....I'm all for all non-catalytic-converter vehicles off the road....and gas guzzlers off the road....People are smart to take advantage of it....It's a government giveaway, so if you're smart enough to take advantage of it, you deserve credit for it. This is a defacto government give-away......

....I know that a lot of people have gone down that road and talked about the government taking over businesses.....The key point is, it's temporary, and that's why I've used the word 'intervention.' It's a government intervention in situations where companies are in dire straights like Citigroup.....AIG is a perfect example. I think it's $182 billion that's been thrown into the AIG black hole.....The ownership of General Motors....In the case of General Motors and Citigroup, I would expect eventually that these will be resold to shareholders.....There will be government offerings.....It will take time.....Here's why I don't see a sinister motive -- this all started last year under George W. Bush and Hank Paulsen....It had nothing to do with the current administration. And now they've continued it, that's true."

Caller Pat in San Francisco wanted to discuss his bond holdings in portfolio III. Brinker told Pat that portfolio III is a balanced portfolio -- about 50-50 stocks and bonds. Basically, Brinker advised Pat that he could use all Vanguard Ginnie Mae Fund for the bond portion if he wanted to [VFIIX] Honey EC: Brinker's portfolio III lost 23% in calendar year 2008.

Pat then asked about California General Obligation Bonds. Brinker recommends a maximum of 1% in any California state bond. Brinker said: California is obviously a totally dysfunctional government from a fiscal standpoint....It's a joke. They are going to have to redo their constitution or they're not going to get past it on a long-term basis....That's how screwed up it is."

Honey EC: There he goes again! Obviously, Brinker wants California to change the constitution so that there are no limitations on property tax, and at the same time, it would make it so that a simple majority is all that is needed to raise ANY tax. IOW: Do away with Prop 13! Passing Prop 13 in 1978 was the only time that California voters have been able to limit government spending in the past 20 years. Shame on you Brinker, for pushing for this on Californians while you live in Nevada.

INTEREST RATES.... Brinker said he doesn't expect interest rates to stay at the low level that they are now.

BRINKERS NO-BRAINER PORTFOLIO... Brinker said he first suggested this portfolio in 1986 -- half in Vanguard Total Stock Market Index Fund and half in Vanguard Ginnie Mae Fund.....It has low expenses and can throw off a 4% annual income by using GNMA and stock dividends, plus liquidating about 1% of the stock fund each year.

Caller Bret in Seattle asked Brinker if he thought that manufacturing jobs would ever return to the United States. Brinker comments paraphrased: The answer is no, manufacturing jobs are not coming back because of globalization....The reality of the Hubcap Theory has caused those jobs to go away. Ten years ago software engineering was a very high-paying profession, especially going into Y2K....now a lot of those jobs have gone to places like India where those people make much less money than software engineers were paid here. The United States is now a service economy.

CASH FOR CLUNKERS: WHAT'S A CLUNKER? A caller said that only cars that were newer than 1984 qualified as a clunker. Brinker said that made no sense to him.

Brinker quote of the day to Carol whose kids told her not to pay off a $200K loan for a new home even though she has $1 1/2 million in investments and wanted it paid off. Brinker said: "It's your money and your life. I'm serious. And I would not even consider, I would not even consider what your children are saying to you on this topic.....What I do have an objection to is your kids telling you how to run your life. Yeah, that kind of bothers me, that kind of bothers me."

Honey EC: Oops, Brinker said that with great feeling. Carol said her age and it was only a few years older than Brinker...Hmmmm? 8^)

Honey's Market Reports:
* Dow closed at 9171.61, gain for the week 0.9% -- best monthly gain since October, 2002.
* Nasdaq Composite Index closed at 1978.50, a gain of 0.6% for the week.
* S&P 500 Index closed at 987.48, up 0.8% for the week.
* GLD closed at $93.35.

Brinker's Saturday guest-speaker was Gerald Davis, "Managed by the Market: How Finance Re-Shaped America"
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