October 31, 2009....Summary of Bob Brinker's Moneytalk, and Honey's Editorial Comments.
STOCK MARKET....Bob Brinker said: "The stock market has been undergoing a correction in recent sessions.....We have ten months in the books now and the total return on the S&P 500 Index year-to-date -- this includes the cash dividend which is at an annual rate of about 2% -- comes in at 17.1%.....On the Total Stock Market Index, which also has a cash yield of about 2% -- now standing at 18.5%. Now you recall those numbers were above the 20% level quite recently, so we've certainly had some corrective action in the market....."
FIXED INCOME YIELDS....Brinker said: "On the fixed income side, rates remain extremely low. In fact, when we speak about these as low as they are, some of these numbers seem to go even lower, which is hard to believe because they are close to zero." Brinker announced all of the latest Treasury yield numbers. [See links in Honey's market report below.]
[Honey EC: Do not be misled by the Brinker Fixed Income Ad that played during the program today. That newsletter is NOT published by Bob Brinker the radio talk show host. He only publishes Marketimer.]
IMPLIED INFLATION RATE....For ten years, as implicit in the market prices and yields, it is at 2% -- for long-term its 2.2% [See Brinker's explanation of this in last week's summary. LINK]
MUNICIPAL GENERAL OBLIGATIONS....Ten year AAA yield 3.34.....that would be a taxable equivalent in the 35% federal bracket of 5 1/8.
DEFLATION.... Currently at 1.3%.
GNMA [VFIIX].....Brinker said: "Remember this is a triple-A rated government backed security, because the government backs all principal and interest on GNMA securities.....As long as you have this active policy by the Fed to keep rates down, I wouldn't expect to see a whole lot of change....."
GNMA AT RISK IF FED "GUMS UP" INFLATION.....Brinker said: "The risk is down the road what we said earlier in this hour. If we get a situation where the central bankers gum up their efforts, whether they do it consciously or unconsciously doesn't even matter.....if they gum up their efforts to remove monetary stimulus from the system, that could cause inflation fires to burn down the road.....
.....Or if they make a, and I think it would a conscious decision in this case but it would not be advertised -- nobody would talk about it -- it would be kinda like the dollar position that the U.S. takes where we obviously are comfortable with a lower dollar but nobody ever admits it. Suppose the central bankers adopted a page out of that book and said well, we are willing to tolerate higher inflation than normal, but we're not going to talk about it or admit it.....That would also create a higher inflation risk. They would do this in order to inflate away national debt obligations of course which have become absolutely humongous."
INFLATION AND "DRUNKEN SAILOR" SPENDING...Brinker said: "Inflation is something that we always keep an eye on on Moneytalk. We don't take anything for granted. And I think right now it would be fool's errand to take anything for granted in terms of what is going on in Washington with deficit spending. And as long as they are willing to spend like drunken sailors and we have certainly seen that both parties have signed on to this particular mantra of spending like drunken sailors. They've both become particularly astute at doing this -- borrowing money and spending money.....We have to be vigilant about the risk of future inflation. ....
......Now we don't have inflation today. We have deflation......We are talking about going down the road in the future. What kind of inflation risk is out there? What kind of answers will come to critical questions that have not yet been answered? Here's one of those critical questions: Will the Central Bankers be overly cautious when time comes to remove their monetary stimulus from the financial system? All this money they've poured into the financial system in an effort to revive the economy......Will they drag their feet? Will they leave the stimulus in place too long? Because if they do, that creates an inflation risk......
.....But there's more to it than that. Is it possible that central bankers, whether they be in Washington or in other capitals, decide that they are willing to tolerate inflation at a higher level that is normally acceptable in order to inflate away the gargantuan national debts that are being racked up in places like Washington DC?.....We've talked about the national debt problem up around $12 Trillion right now. The highly respected Congressional Budget Office talks about it going to $20 Trillion within the next decade. Do we have any possibility that the central bankers saying that we are going to have to inflate some of this debt away and we'll tolerate a higher level of inflation than normal. Is that a risk out there? Of course, it's a risk.....Whether it comes to fruition or not remains to be seen, but we shall know all of this in the fullness of time.
[Honey EC: While it is true that President Bush (who had a Democrat Congress the last two years of his term) spent more money than his constituents would have liked, for Brinker to continuously harp about how there is no difference between the two administrations is sheer hyperbole. How long is he going to be afraid to criticize the current administration without bashing the previous one at the same time? It's becoming laughable because TO ME, it seems obvious he's AFRAID of criticizing Obama for fear of being called a racist....
(In edit Monday).....Does anyone remember all the demeaning names that Brinker had for Hilary Clinton? He had a whole list of them he strung together to ridicule her. Here it is: “Hillary Diane Evita Christine Rodham Clinton”
I resented Brinker doing this then, and I resent it even more now that he so carefully avoids using Obama's name at all -- never mind disrespectfully. So I'm a "non-partisan" critic for those who might have a problem with my right to clearly stated editorial comments on Brinker's political preaching.....
I am not the one with the national microphone flying under the radar as a financial advisor while making political pronouncements virtually unchallenged. Anyone who wants to disagree with me here, is welcome do so and I will not censor, cut off or denigrate you for it -- like often happens to Brinker's callers..]
POLITICAL SOAPBOX....Brinker said: "We've had a lot of discussion about what's going on in Washington because it really is important.....We are bi-partisan off the rails right now. For example, spending.....That means we need a program to get back to a balanced budget
[Honey EC: Mr. Brinker must not be aware that the Democrats have complete power in Washington right now. They can pass any bill they want without one Republican vote. And he must not be aware that ALL Republican congresspeople (including Olympia Snowe finally) are AGAINST this $trillion take over of another 13% of the American economy, government-run health care plan, that Obama and Pelosi are working so hard to pass.]
HEALTHCARE PROPOSAL....Bob Brinker said: "We said predicted on the program just a few weeks ago that the most likely outcome on the healthcare proposal would be that they would let the high earners pay for it. That's the way it looked at the time and that's the way it looks right now. The House has come out with a proposal to let the high earners pay for it. What they're proposing is to those making more than $500,000 a year -- and that's only about 1.2% of the taxpaying public -- pay a surtax on their income of 5.4%. Now for couples this would be over a $million a year.....This would take effect in 2011 when the other tax increase, the expiration of the current tax cut proposals goes by the board at the end of next year......
.....Let's take California....Starting in 2011, the top bracket would go to 39.6 under the current plan. Then we would have the 5.4 for the surtax. That takes it up to 45. Of course, California the top bracket is 10 1/2%, we have to add that on there. That gets it up to 55 1/2. But it's going higher because if you are running a business, you're subject to the uncapped Medicare tax already. You've already been slammed....paying both sides of that, that's 2/9. Now you're up to 58 1/2, and you throw in your Social Security obligation, what have you......In a high tax state, you're talking about just about 60% tax bracket. The government gets 60 cents on the dollar -- you get 40 cents on the dollar.....
...... That's where we are going under this proposal -- hasn't been voted on yet......These are the jobs creators that own the businesses -- the entrprenuers.....So I think it's fair to say that under these proposals, what we are really talking about here is a program to re-distribute income. This is about income re-distribution on the high end.....As long as you are aware of where it's headed, that way you're informed."
[Honey EC: Mr. Brinker may not know that there will be other tax increase besides the surtax and that they are cutting Medicare by $500 billion. So he can rest assured that the misery will be spread beyond his doorstep.]
* Gold is so strong because people are concerned about too much money being printed, fearful of central bankers inflating away national debt and/or allowing the stimulus to remain in place too long.
* Brinker is in favor of the uptick rule being reestablished, but sees no need for a downtick rule.
* Repeal of Glass Steagall = bi-partisan incompetence.
* Don't believe your lying eyes if you are paying more at the grocery store these days, only believe the numbers that say prices are going down.
* Ron Paul is wrong to blame the Fed for anything. [Honey EC: Pardon me while I get my smelling salts.]
Bob Brinker quote of the day: "Moneytalk is an investment program. It's not an infomercial." About an hour later, Bob Brinker said: "The newsletter will be published next week. We are putting the finishing touches on it and it will be out early next week." [Honey EC: As Brinker said twice today, "it's not in my nature to criticize anyone," (LOL!) so I will assume that was only Brinker's "off-the-books" sense of humor at work.]
Honey's Market Report:
* Dow closed at 9712.73, dropping 2.6% for the week.
* Nasdaq Composite Index closed at 2045.11, dropping 5.1% for the week.
* S&P 500 Index closed at 1036.18, dropping 4% for the week.
* GLD closed at $102.53.....Last week it closed at $103.18.
* Treasury rates, TIPS, munis [LINK],
* Fed Funds, Mortgage, CD rates [LINK]
* Daily Treasury Statement [LINK]
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: firstname.lastname@example.org [Moneytalk was preempted on Saturday, October 31st.]
Brinker's Saturday guest-speaker was David L. Scott: "The American Heritage Dictionary of Business Terms." Here is a link to Amazon. com where the book is available in paperback for $5.76 [LINK]
Bob took this picture from inside his home looking out his screen door at this beautiful deer. Notice the great antlers. I've seen a lot of deer around my home, but have never seen a big buck like this one.
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