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Saturday, September 12, 2009

Bob Brinker's Moneytalk: Summary, Commentary and Excerpts, September 12, 2009

Moneytalk, Saturday, September 12, 2009... Bob Brinker recited the latest stock market numbers, Treasury rates, and the implied annual rate of inflation which is 1.7%. Right now we have negative 2.1% inflation rate. Brinker said that 37 weeks into calendar year 2009, the S&P has returned 17.6% year-to-date.

Then Brinker said: "Many of you know I said back in January of this year that 2009 would be a significant positive year for the stock market and that is what we are looking at."

Honey EC:
Brinker has never told Moneytalk listeners that he predicted the same thing in the January 2008 Marketimer. Page 3; Paragraph 1; 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 500 Index to achieve new record highs this year 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."

Continuing with his monologue, Brinker introduced the main topic of the day. He said it was one of the big news stories of this weekend. China has voiced objections to the tire import protectionist tariffs that were announced by the White House.

Brinker said: "This decision made by President Barack an effort, and I think it is a very big mistake by this president, to introduce tariffs on Chinese tire imports.....China will refer this to the World Trade Organization and we'll see where it goes.....Typically, this of thing leads to retaliation.....

.....We saw a similar mistake....under the last George W. Bush. We criticized him at the time for imposing tariffs on steel imports. That was a mistake, just as this is a mistake.....Herbert Hoover made protectionism real famous back in 1930...He signed the Smoot-Hawley Act....And that is why he gets much of the blame for the Great Depression.....

....By the way, these tariffs are very high..... starting at 35% on tire imports from China.....Why are they doing this? The reason they are doing this is because the United Steel Worker's Union has complained that tire imports could cost jobs at their factories. In response to this complaint by union officials, the White House has place this tariff on the board.....a huge policy mistake....

....The American companies that make tires in China and sell them around the world, did not ask for these tariffs. This is something that is being done in response to union pressure. And of course, when you're elected by the union membership then you do what the union tells you to do. And that's the only explanation for why such a highly controversial and misguided decision by the White House.....

....What you don't want to see is a trade war....They have fired the first shot in a potential trade war....Retaliation is the most predictable outcome......Now you will have protectionists that will stand by these tariffs, they'd like to see another Smoot-Hawley......and just try to protect jobs here. That would be a global economic disaster if that were to happen.....

......A major tariff policy where it's going to be effecting a wide spectrum of products, in trade terms, that's the same as sending in the troops......It's an act of economic war to go into the tariff business....Here's my prediction, the United States will lose more jobs as a result of this mistake made by the White House this any sector affected by the tariffs...

.....It was a surprising decision, not because it came at the bequest of a union, that part is easy to understand, but because this administration, during the campaign, had made public statements about refraining from increasing tariffs. So if you voted for this administration on economic policy on this issue, you were voting based on public statements that they would refrain from increasing tariffs. And then they are in office for just a few months and they turn around and they come up with a gigantic tariff in this particular case.....

[Honey EC: What do you mean "they," Bob? Do you think Obama has a mouse in his pocket?]

......There are four companies in the United States that have factories that produce tires in China. And in terms China tire exports, they account for about 2/3 of exports to the United States. And these tariffs will have a direct effect on these four companies, in my opinion....These companies did not ask for these tariffs. Obviously, they did not ask to put tariffs on their own tires that they are manufacturing in China and exporting to the United States. If this is the policy that this administration is going to endorse in order to, quote, unquote, save jobs in the United States, then I am very comfortable right now pronouncing this policy a failure......The White House has made a very unfortunate mistake. They will live to regret it."

GINNIE MAE: Brinker told a caller that there was no change in his views about GNMA Funds. He recommends, VFIIX. He said that the NAV could range into the "nines."

NATIONAL DEBT: Brinker said: "When you run up the national debt, and you run up the interest cost on the national debt, which is the official policy of the United States right now, you drain your future growth potential....The reason is you are using more and more of your capital just to pay the interest on the national debt."

In the second hour monologue, Brinker talked about what was going on during this same weekend last year with Lehman Brothers, Bank of America takeover of Merrill Lynch, etc. He said that investment banking stocks were in free-fall at that time.

[Honey EC: As an excuse for being caught completely unawares by the mega-bear market, Brinker is on record saying that he had no way of predicting the global banking crises. But he certainly knew about it a year ago because today he talked about how he was reporting the "breaking news" as it happened in September 2008.

Regardless, in the October 2008 Marketimer (S&P @1164) Brinker wrote: "We recommend a dollar-cost-averaging approach for new stock market investing at this time. We expect to see a period of stock market price stability develop in the fourth quarter...." Brinker's model portfolios were fully invested. I'm sure he regrets not having raised cash reserves even then. If he had done that, his subscribers could have sidestepped a drop from 1164 to the March 2009 bottom of 677. I'm sure he's happy that his subscribers have regained some of those horrific losses in their portfolios. At one time, Portfolio I was down over 40%.

Most of the callers today wanted to talk about the pros and cons of tariffs. Here are some excerpts from Brinker's replies to various callers: "There is no question that this is an anti-business out of the White House, therefore, I don't see how this helps the economy.....The bottom line is, this is a payback to the unions for their election support, let's call it what it is.....I think the White House blew it on this one."

Today, Brinker carefully pointed out that there was no racism involved in his criticisms of Obama about the Chinese tire tariffs. He explained that he had also complained about George W. Bushs' steel tariffs. [Honey EC: Someone please get my smelling salts. Is this what our country has come to? If you criticize Obama, you have to explain that you are not a racist and "prove" it by saying that you had criticized a white man for something similar? Someone needs to back up this truck and unload the #@%*&, it's getting way too offensive.]

Brinker's Saturday guest-speaker was Ron Shelp, co-author: "Fallen Giant, the Amazing Story of Hank Greenberg and the History of AIG"


Sunday, September 13th update: The only thing new to report from the program today is that the U.S. Treasury guarantee on Money Market Funds will expire next week -- on September 18.

This guarantee which was quickly put in place last year, probably served an invaluable purpose in that it stopped an impending run on Money Market Funds after the demise of the Primary Reserve Fund, and provided a safety net for investors. This program earned the government a cool $1 billion....Read more about it at American Banking News [LINK]

Additionally, I should mention that a caller asked Brinker if the banks loading up on Ginnie Maes would have any adverse affect them. Brinker said he didn't think so... This from Wall Street Journal:

Banks have been silent partners in the meteoric rise of the Federal Housing Administration.

In the past year, the nation's financial institutions have snapped up securities backed by Ginnie Mae, a government-owned agency that guarantees payments on mortgages backed by the FHA. That helped drive demand for Ginnie securities and created an outlet for billions of dollars of FHA-backed loans made to borrowers who in many cases couldn't afford big down payments.

As of June 30, the roughly 8,500 federally insured banks and thrifts were holding $113.5 billion of Ginnie securities, compared with just $41 billion a year earlier,
Brinker's Sunday guest-speaker was Erin Arvedlund. She wrote, "Too Good to be True, the Rise and Fall of Bernard Maddoff." In 2001, Erin wrote an article about Maddoff for Barrons titled "Don't Ask, Don't Tell." You can read about what she wrote in this 2008 Barrons [LINK]. You can read more about Erin's Maddoff investigation in this August 2009 NPR article [LINK]

Honey's Market Report:

* Dow closed at 9605, a gain of 1.7% for the week.
* Nasdaq Composite Index closed at 2081, a 3.1% gain for the week.
* S&P 500 Index closed at 1043, a 2.6% gain for the week.
* GLD closed at $98.78, up from $93.87 last week.
Interest bit of market trivia from the Drudge Report today: September 10, 2001, Dow Jones 9605/September 11, 2009, Dow Jones 9605

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:

This is Lama at one of his favorite pastimes. Watching Scarlett the Betta Fish.
My daughter made the beautiful quilted table-topper for me.

Scarlett just wants to know if Lama wants to fight. 8^)

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