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Saturday, October 3, 2009

Bob Brinker's Moneytalk: Summary, Discussion and Excerpts October 3, 2009

Update Item: October 3rd Moneytalk, for the second time, Bob Brinker told a caller that he has recommended T. Rowe Price International Bond Fund (RPIBX) as one way to hedge against the dollar -- although it carries other risks and is a taxable fund.

Bob Brinker's Moneytalk: Summary, Discussion and Excerpts, October 3-4, 2009

Bob Brinker's opening monologue:


* The S&P closed at 1025, "The S&P 500 posted its best performance in the third quarter, ended September 30th..... in 39 years. All the way back to 1970, with a double digit gain in the third quarter. And the total rate of return, year-to-date, including the cash dividend of a little bit over 2% annual....stands at 15.7%."
* Dow Jones stands at 9487.
* Total stock market index YTD = total return of 17.7%
* You can compare your portfolio to these indexes to see how it is doing.


* Three-month Treasury Bill = 9 basis points annual.
* Six-month T-bills = 14 basis points annual.
* One-year T-bills = 33 basis points annual.
* Two-year Notes = 7/8 of 1% annual.
* Five-year Notes = 2.2%
* Ten-year Note = 3.2%
* Thirty-year Bond = 4%.
* Implied inflation rate annual for next decade = 1.7%
* Deflation is 1.5% year-over-year. No inflation pressure right now.
* Ten-year AAA Municipal General Obligations are yielding 2.9%.


* Friday jobs report showed 263,000 jobs losses in September. Government jobs went down 53,000 -- this is smaller than earlier this year.


* Unemployment is at 9.8%. The moving average of job losses continues to moderate and contract significantly.
* Manufacturing jobs down 51,000.
* Construction jobs down 64,000.
* Service jobs down 94,000 (retail alone down 38,000).
* Health care sector added jobs.
* College-graduate unemployment rate is now up to 4.9%
* There are now over 15 million unemployed in the United States -- 1/3 for longer than six months.
* Average hourly earnings (YOY) are up 2.5%.
* Average work week is 33 hours.
* Jobs reports are backward-looking numbers and don't tell us anything about 2010.


* Brinker expects the GDP number to be positive for the third and fourth quarters.

Caller's questions and Brinker's replies:

Caller Mike from Washington said that Brinker's advice took him and his parents from "critical mess to critical mass." Brinker said thank you, but told Mike that he couldn't take the credit because they had done the investing. Mike asked Brinker where is a good place to have your money in case the world should all of a sudden get into a "state of chaos." Brinker commented that it depends on whether it is long or short-term market impact, but that he thinks the ultimate protection against "Armageddon" would be U.S. Treasuries -- and Ginnie Maes should also do fine.

Caller Mike continued: "I followed your advice and the only place I got hurt in this last downturn was that story you told about don't put too much in one particular stock -- never more than 4%....Well, you know, I got in love with a stock and that's the only place I got hurt. And had I followed your advice all the way through, I would come through this smelling like a rose, so again, thank you very much."

Brinker tried to respond but seemed unable to, so he dropped his voice and said: "Well, uhhhhhhhhh....I appreciate the call. It's good to hear from you."

Honey EC: Brinker has always advised against having more than 4% of net worth in one stock. Many think that is excellent advice.

Obviously, it took more courage than Bob Brinker could muster to be honest with the audience about his advice during the "last downturn." Let's be clear, the "downturn" that Mike says he followed Brinker "all the way through" happened to be the worst bear market since the Great Depression!

If Mike actually had followed Brinker's advice, he remained 100% invested all the way from beginning to end. He lost 30% of his money if he was in Brinker's balanced Model Portfolio III for retirees, and 40% if he was in one of Brinker all-equity model portfolios. Granted, he has gained some of those losses back since March 2009, but Mike certainly can't be "smelling like a rose" yet!

Additionally, if Mike followed Brinker's advice during the time that he was referring to, he was continuously adding any new money that he had to invest in the stock market on Brinker's advice to dollar-cost-average and ALL-IN at: mid-1400's; low-to-mid-1300's; mid-1200's (and mid-800's in January, 2009, before the drop to 677 in March, 2009).

If you want to read the actual performance returns and dollar values of Brinker's model portfolios since the start of the 2008-2009 megabear market, see my previous article.

Read David Korn's "Armageddon" commentary here [link]

Caller Peter
asked if municipal union contracts could be made re-negotiable in economic downturns. Brinker said: "I like that idea lot.....The idea of putting in the contracts that if the economic situation in the county, subject to re-negotiation..... These politicians sit down with these municipal unions and they make these extraordinary promises. And the reason they make them is because they know that in the end, these promises will have to be kept by the taxpayers."

Caller Jennifer
asked Brinker what he thought about Build America Bonds. Brinker said he liked them a lot as long as they carried a good credit rating. These bonds are taxable and are usually locked up for long periods of time. WSJ article: "Obama's Municipal Bonds Make a Splash."

Caller Peter
from New York asked Brinker about having CD's in foreign currencies to hedge against the dollar. Brinker said that you can do it with an exchange traded fund (FXE) that trades the Euro versus the dollar. [Honey EC: Brinker mentioned this ETF last weekend and twice this weekend.]

Caller Collette from Carmel said that she was nearing retirement and her portfolio was currently at 65% equity/35% fixed income. She asked if she should make the change all at once or over several months to get back to 50-50. Brinker replied: "As far as getting to a balanced portfolio, I would do that during periods of strength going forward into next year.....I think you can get yourself to a balanced portfolio of 50/50, which I think is a good place to be in retirement."

In Brinker's second-hour opening monologue he said that news coming out of the G-7 meeting was that they had not been critical of the U.S. dollar and that he thought they should have been critical. Brinker said: "The U.S. dollar is viewed today as the world's currency strictly by default...I know a lot of people in this country are not happy with the way that the dollar has performed over a period of years against other currencies. And they have every right to feel that way. So we see investors around the world looking with disdain on the drunken sailor spending policies that are promoted by Congress and Washington.....

..... And unless the voters put fiscally responsible office-holders in place, then the red-ink tsunami will continue. The budget deficit is rising faster than the temperature in Death Valley in the heat of summer. Nobody is doing anything about it.....Now they are talking about raising the national debt limit.....The national debt is a little over $12 trillion -- I can't even stand to say trillion in reference to debt -- so now they are talking about raising it up above $13 trillion. Let's see how much of an outcry there is about this issue....I suspect it will be some inertia.....

......The Congressional Budget Office says today that we are aiming for a $20 trillion national debt within the next decade.....That will require many increases.....I just wish that someone in Washington cared about this issue......"

Caller John
in Clovis asked if the $250,000 FDIC insurance would be made permanent. Brinker said that it should remain in place until the health of the banking system is fully restored, but that it should not be made permanent because it could lead to irresponsibility at banks. This is what happened in the savings and loan crises in the 1980's.

Brinker told caller Lee
from Santa Maria that taxes will be going up in 2011 because the President Bush tax cuts will expire at the end of 2010.

Caller Ann
from San Jose pointed out that people over 70 1/2 do not have to take IRA minimum distributions in 2009. She asked if Brinker thought that might also be the case in 2010. Brinker said it depends on the level of the market in 2010, that it was instituted as a response to what had happened in the market. If the market continues to improve, they will "want the tax money."

Caller Rick
from Michigan asked about commodities and said that Michigan unemployment is over 15% and people are very unhappy. Brinker said that commodities are "global" and that he didn't know anybody anywhere who is happy with what is happening with the dollar -- or with what is going on in some states and municipalities. Brinker took this opportunity to make some comments about California:

Brinker said: "My vote for the most dysfunctional state government in the United States, it's a landslide vote for Sacramento, California....Look what's happened. I mean, earlier this year, it got to the point where in order to get to the next day, they had to print fake money in Sacramento. They called them IOU's. Now how much worse can it get than that? Not a situation to be proud of, that's for sure."

Caller Karen
from Honolulu asked, "What is the national debt?" Brinker said: "The national debt is an accumulation of annual deficits that the United States has put on its liability sheet. It's money that they owe to bond holders.....that have financed all of our excess spending."

Caller Norman
asked Brinker about converting from a traditional IRA to a Roth Ira and spreading the tax over two years. (If you convert to a Roth in 2010, you have the option of paying your tax bill over two years, in 2011 and 2012.) Brinker said he only recommends that for people who are in a very low tax bracket.

Honey EC update: During Moneytalk Saturday, there was an ad for "Brinker's Fixed Income Advisor." Don't be misled! This newsletter is not published by Bob Brinker, the radio talk show host.

This newsletter is published by his son, who goes by the name Bob Brinker on the internet (his website and Twitter) so that there is no way to distinguish between the two of them -- draw your own conclusions.

I have concluded that the reason (the Jr) Brinker no longer uses the "Jr" AS HE USED TO, is because name-recognition goes a long ways when it comes to selling newsletters. Mark Hulbert evidently thought so too because he covered Jr's newsletter from the beginning.

Selling newsletters was not the original career choice for (the Jr) Bob Brinker. His education was in Computer and IT technology. He is a savvy computer technician and was the webmaster for the now-defunct Brinker message boards. Making a career change as jobs disappear from the scene is not unusual and having a famous father with the same name presented a great opportunity for (the Jr) Bob Brinker.

But beware because according to Hulbert's Financial Digest, the "Brinker Fixed Income Advisor" lost money last year. Here are the performance numbers for year-2008. You will not find these numbers on (the Jr) Bob Brinker's website, but you will find the 2009 YTD numbers, just like his dad has done with Marketimer:

Brinker's "fixed income advisor" model portfolio #1 lost 21.7% last year, 2008.
Brinker's "fixed income advisor" model portfolio #2 lost 11.5% last year, 2008.
Brinker's "fixed income advisor" model portfolio #3 lost 5.2% last year, 2008.
Brinker's "Fixed income only" portfolio in “Marketimer” lost 2.1% in 2008.

Brinker's Saturday guest-speaker was Gretchen Morgenson, "The Capitalist's Bible: The Essential Guide to Free Markets -- and Why They Matter to you"

Brinker's Sunday guest-speaker was Steven Davidoff, "Gods at War: Shotgun Takeovers, Government by Deal, and the Private Equity Implosion"

Honey's Market Report:

* Dow closed at 9487.67, losing 1.8% for the week.
* Nasdaq Composite Index closed at 2048.11, losing 2.1% for the week.
* S&P 500 Index closed at 1025.21, losing 1.8% for the week.
* GLD closed at $98.37.

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:

Hmmm? Psychic-Skiing-Pig sent these comments and sure enough there was a picture in my email:

"I notice there is no picture with this thread. Didn't "somebody" send you a breathtaking early season picture this morning? (NOT that I'm demanding that it be shown, or anything like that)" :---)


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