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Saturday, December 5, 2009

December 5, 2009, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

Posted December 5, 2009....Bob Brinker began Moneytalk discussing the new jobs report that came out on Friday. Brinker revealed quite a lot about his current political views today. I notice that there is seldom any opposition from callers. Does that mean everyone agrees with him? If so, we should get a whole new congress next year -- but he had nothing to say about Obama, except that he's not a talk show host that "discredits" him. 8^)

JOBS NUMBERS.....Bob Brinker said:
"Well, the jobs numbers are out and they made much better reading than a lot of the pessimists have been saying. Everybody out there in the pessimist column have been saying this whole thing's been manhandled, in the response to the economy in 2009....They tell us it's all bad. But when you look at the jobs numbers, that does not square with what they've been telling us because this loss of 11,000 jobs in the month of November was way, way, way under the consensus estimate.....called for a loss in jobs of six-figures -- over 100,00 jobs. That's how many jobs were supposed to be lost in the November report. Not the case, not even close.....

.....We don't want to see any jobs lost, but 11,000 is sure a lot less than about 125,000 or so, the consensus estimate. So that was a relatively favorable report....And in addition to that, we saw a pretty good revision of the prior two months.....The prior two-month number was revised up by six-figures......So that meant that the jobs loss numbers for the prior two-months were considerably less than previously reported.....

FIXED INCOME....Brinker said:
"Rates remain very, very low. The 3 month Treasury Bill is yielding 4 basis points.....The annualized yield is 1/25 of 1% -- pretty low." [Brinker recited all of the Treasury yields. They are available in a link I posted below].

"The Ten-Year Inflation Protected sitting in around 1.3 on the base rate. Compare that to the 3 1/2% Ten-Year Note rate and the difference there comes up at 2.2, so the market is saying that the annual implied inflation rate for the next ten years is 2.2. The 30-year 4.4 yield minus the base rate of close to 2%, gives you a differential of about 2.4, or an implied inflation annual of about 2.4 on a 30 year basis."

INFLATION/DEFLATION....Brinker said: "Right now, we don't have any inflation, but we do have a small amount of deflation.....of 2/10 of 1%, so we have to get another 2 and a fraction percent added to the current rate to get it up to the implied annual inflation rate as dictated by prices in the Treasury market."

"They're definitely feeling pretty good these days.....The year-to-date total return on the S&P 500 now is 25 1/4% ....The Wilshire 5000.....the year-to-date total return at 26.8% (includes 2% dividends on both) ....No question about it, with only 18 market days remaining in 2009, we can certainly say that the stock market is having an outstanding year in 2009.....

......So there you have it. The financial markets have been celebrating the anticipation of a better economy in 2010. And those investors who've been willing to have a fully invested position in their stock market portfolio in 2009 have been reaping the generous stock market rewards this year, and they deserve it -- 2008 was a rough year. Most people had a pretty difficult time in 2008 in the stock market, so as far as I'm concerned, if you've had a very good in 2009 in the stock market, you deserve those excellent returns....this is Moneytalk."

Honey EC: Indeed, Brinker is right that 2008 was a very rough year and his followers/subscribers felt the full brunt of it because, just as he has done in 2009, he advised remaining fully invested for the whole 55+ decline in the stock market. Additionally, he advised adding new stock market money at ever-lower levels throughout the whole mega-bear. Brinker brags that he said 2009 would be a positive year for the stock market, but what he doesn't tell listeners is that even his last buy-level was 25% higher than the March 9th market low.

Thanks to my good friend Jeffchristie for these latest numbers that show Bob Brinker's 2008-2009 Marketimer Model Portfolio performance:

P1 value 30 Nov 2009 = $222,660
P1 value 31 Dec 2007 = $283,874
down $61,214 -21.5%

P2 value 30 Nov 2009 = $186,847
P2 value 31 Dec 2007 = $229,074
down $42,227 -18.4%

P3 value 30 Nov 2009 = $195,649
P3 value 31 Dec 2007 = $212,493
down $16,844 -7.9%

Let me make that perfectly clear. If you followed Brinker's advice from January 2008 to November 2009, you would STILL be down 21.5% in Model Portfolio I; 18.4% in Model Portfolio II; and 7.9% in Brinker often-touted balanced Model Portfolio III.

GOLD.... * Edward from Chicago
asked Brinker if he thought the Dow Jones - gold price ratio (Dow divided by gold price) was a useful tool for investing in the stock market, and if he had ever used it.

Brinker replied:
"No, I don't....It's not something that I think has much predictive value.....Gold is a speculation. Gold has always been a speculation....A bar of gold bullion does not pay you a dividend.....Right now, it's being driven by speculation that the dollar weakness we have seen will continue ad infinitum. That is the reason you see some of the central bankers around the world going out and diversifying their reserve portfolio, such as the recent purchase by India of gold bullion.....a couple hundred metric tons....Now it can be used as a diversification tool, but even then, it still retains its key element as being a speculation on what supply-demand is going to be for gold bullion.....

......Keep in mind also that if people use gold bullion as a substitute holding for paper currency, and certainly the United States of America is a global in fiat paper currency -- and we have the ink supply and the rollers to prove it -- then obviously that creates demand for gold, which is one of the things that's been going on out there.....

........When you take a look at global reserve policies, it makes sense for them to diversify because they're not really getting much satisfaction out of Washington in terms of fiscal responsibility. Holders of dollars abroad want to see a move in the direction of a balanced budget. They don't want to see what they are seeing, which by the way, is over $12 trillion now, and we're getting reports from the Congressional Budget Office, it could be over $20 trillion within the next decade....They want to see fiscal responsibility, not runaway freight train spending, which is what we in the United States as far as the eye can see....."

Honey EC: Please check the comments section for more information about buying and holding gold. Are safe deposit boxes really safe? The answer may surprise you.

* Joel from Florida
asked Brinker how natural gas was priced in the United States. Brinker said various factors could affect the price, but ultimately it was supply and demand.

* Bob in Wichita asked about the stock market action on Friday. Brinker commented that he didn't want Bob to mislead his listeners about what happened on Friday. Brinker claimed that the caller must be "talking about the inter-day volatility," because it had been a good day for the market -- it had ended with gains. Brinker opined that there might have been some "short covering" in the morning because of the excellent jobs report, but perhaps the subsequent drop was due to other factors, such as concern that the Fed might start to raise interest rates "perhaps as soon as 2010 -- maybe even the first half."

Honey EC: In spite of Brinker's poo-pooing Bob's concerns, Friday really was a slightly alarming day in the stock market, at least for a little while. It was up about 150 points first thing in the morning and then dropped like a rock down to about a 35 point loss -- finally ending up 22 points for the day. However, for Brinker to non-nonchalantly call that "volatility" seems somewhat understated to me. Dan G and I had a bit of discussion about it as it was happening. You can read Dan's take on it here [LINK]

thanked Brinker for recommending GNMA's [VFIIX] and I-bonds "a long time ago," and asked him to explain the reverse repo. Brinker thanked Al for mentioning his GNMA recommendation and explained that the purpose of the reverse repo is to drain money out of the primary dealer's usually collateralized by the Treasury and takes it out of the economy.....done through an auction process. It is one of many tools that the Fed can use to drain liquidity. Another commonly used tool is for the Federal Reserve to sell Treasury or mortgage securities.

"The reality is they created a tremendous amount of excess liquidity in the fourth quarter of last year and sooner or later, they're going to have to get that out of the system because otherwise, it will create an inflation threat....I guarantee you that the Federal Reserve is going to raise interest rates because right now the zero to 25 basis point rate is unsustainable. Now the only question is when, but they definitely are going to raise interest rates......My personal opinion is that if somebody got the news that the Federal Reserve was raising the rate to 25 or 50 basis points, I don't know what they'd be upset about.....

....Once the economy starts moving along on its own, not on the government terms, that would be a different story.....The Fed is nursing the patient along.....I think a fair analogy would be to say that after the Lehman Brothers bankruptcy was allowed to happen, and I believe it was allowed to happen.... It was the equivalent for the economy of a heart attack....The credit markets froze.....When businesses and individuals cannot borrow money on any terms, then you have a disaster.....At that point, that placed the economy in the intensive care ward.....the Federal Reserve was responding to that reality and that is why they came up with zero interest rate policy, which is known in the canyons of Wall Street as the ZIRP policy."

..... * Smit in New Hampshire asked Brinker if he should put a mortgage on his home to finance his two daughter's education at private colleges. Brinker told him that instead of it being on "daddy's back" the rest of his life, he would prefer the "package approach" with "3 or 4 legs on the stool." 1. Borrow money on home 2. Apply for student aid. 3. Daughters help out by working summer and part time. Brinker pointed out that if the daughters participate in the process, they are likely to appreciate their educations more.

told Brinker that (hypothetically) he had been elected president of the United States and he had just appointed Brinker the "Eliminate the deficit-Czar," -- how would he reduce the deficit? Brinker commented that first, he would get a handle on spending and then address revenue -- getting them in balance.

Brinker said to "President Andrew":
"We have a Social Security system that is essentially unfunded the way it's currently put together because we spent the payroll tax on the general budget so we didn't put anything aside.....We have to also revise the Medicare system. The Medicare system spending trend is so out of balance with reality that it's going to add an enormous amount to future deficits over the long term. So we have to address Social Security, we have to address Medicare, we have to address the overall level of spending and then we have to get to revenues and determine how we are going to have enough of a revenue stream to pay for the revised Social Security and the revised Medicare. That's why it's such a mess.....A few years ago we a new entitlement program added to the mess which is the prescription drugs for Medicare benefit which was not funded."

Brinker peppered the program today with his political viewpoints, including his strong desire for term limits. Brinker said: "Without term limits, we are not going to get a major change in this [spending] problem.......We elect these politicians and they become sooooo cozy in their cushy government jobs in Congress that they decide they'll stay. They decide, you know something, this really beats a real job. Why should I work a real job when I can be here earning a nice salary, earning the best perks you can imagine.....

.....And also, I can become a star......I can go on the Bill Maher Comedy Hour.....How many times has Barney Frank been on the Bill Maher Comedy Hour and he's not the only one. The incumbency is way over 90% because they start raising money the day after they are elected.....If we keep electing the same people -- if you look in the House and the Senate, they've been there a good part of their lives, if not most of their working lives.....nothing will change. The United States of America has become the land, the torch carrier for extreme fiscal irresponsibility.....The whole system is rotten......."

Honey EC: FrankJ sent these comments this afternoon:
"I've been wondering this week, whether BB will give any attention to "climategate" since this is not too far removed from cap and trade, which is not far removed from one of his favorite topics, energy. (One of mine too.)" Frank's comments caused me to listen closely for any mention of the subject. However, even with all the hubbub about (as Frank called it) "climategate," that has been in the news lately, Brinker was strangely silent on the subject today.


* The uptick rule should be re-instated.
* It was a huge mistake to repeal Glass-Steagall Act.
* "Amazed" that group of Congressional Democrats, including Tom Harkin, Peter DeFazio and 5 others, came up with a plan to place a new federal tax on stock and derivative transactions over $100,000 (1000 shares of Apple is close to $200,000). This appears to be about creating government jobs that would be paid for by taxpayers -- not much of a way to get the economy going on its own.

Honey in EDIT: Brinker did not mention Nancy Pelosi when he was naming the Democrats who are for the new global tax investing transactions. From CNSNEW:
"Pelosi Endorses Global Tax on Stocks, Bonds and Other Financial Transactions."

* They keep going back to high earners for more money, for instance: The House-passed surtax of 5.4% for health care; Carl Levin's tax to pay for more troops in the Afghan campaign; and another proposal for 1/2 of 1% on stock trades over $100,000.
* Why would they expect only high-earners to pay for the Afghan campaign? Why not go to the general public for that?
* When will they run out of high-earners? It's already happened in California.
* I'm not a talk show host dedicated to discrediting Obama.

Honey EC: Several times, Brinker has made disparaging comments about other talk show hosts "discrediting Obama." The host he clearly hates the most is Rush Limbaugh. Brinker's HYPOCRISY is appalling! Limbaugh and the other hosts Brinker was sarcastically demeaning, have POLITICAL SHOWS AND THEY SAY SO. Brinker bills his program as "Moneytalk," and himself as "America's Most Trusted Financial Advisor." The fact is, Brinker spends about 90% of his shows promoting his own political biases. Maybe he should come out from behind that curtain and admit he wants to politically influence the country while getting rich selling his own brand of investment snake oil.
Blogger jeffchristie said...

"I am not a talk show host dedicated to discrediting Obama"

That's OK Bob. While you don't talk about him you do spend a great deal of your time discrediting every major policy of his admnistration. First of all you have said that now is not the time to be passing health care, his top priority. They should be focused on improving the economy and creating jobs you claim. Then there is the spending that has taken place in the first year of Obama's presidency. You rant against it every week. Bob you have done a great job of attacking just about everything this president has done or wanted to do since he took office.

Brinker's Saturday guest-speaker was Joshua Kosman, "The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis"

Honey's Market Report, December 4, 2009:

* Dow closed at 10,3 10,389.92 -- a gain of 0.8% for the week.
* Nasdaq Composite Index closed at 2194 -- a 2.6% gain for the week.
* S&P 500 Index closed at 1106, adding 1.3% for the week.
* Gold closed at 1161.80
* Light Crude is at $75.70
* U.S. Dollar 1.1% higher for the week (DXY 75.91) Nearly a 16% drop this year, which according to Marketwatch, has helped stoke the stock and commodities rally in part by providing cheap credit to buy equities, oil, metals and emerging markets currencies.
* Treasury Bond 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, 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:

Dixiegeezer took this beautiful eagle picture and framed it for us.... We're all feeling patriotic these days. Enlarge and enjoy:


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