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Sunday, September 19, 2010

September 19, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

September 19, 2010....Bob Brinker hosted Moneytalk today.


Bob Brinker said: "The S&P 500 will be starting the week at around the 1125 area and we are very pleased with what we have seen in the market since we issued our most recent upgrade of the market to attractive for purchase making the market a buy. And that was back on the 1st of July. You might recall the S&P 500 closed at the 1030 area on June 30th. Based on that close, we upgraded our investment letter recommendation when we published that letter online on July 1st, making the market attractive for purchase. Well guess what, the market closed in the 1020s for the next 3 days......before it began its uptrend. And it has been doing very well since that time. And we're certainly pleased to see that and want to congratulate all of our listeners that took advantage of that buying opportunity that occurred back then at the beginning of July because I believe it truly was an exceptional opportunity to pick up bargain prices."

Honey EC
: How lovely for Mr. Brinker and his listeners and subscribers that he seems to finally have gotten one of his buying opportunities right - for a change. His last 4 major buys have all been devastatingly WRONG.

After he made each one of them, the market dropped like a rock, so he had to make them always lower -- five times that happened. You have to pity those who took his "opportunity" to buy at S&P 1450, mid-1300s, low-1200s, and mid-800s as the market dropped from 1527 to 676!

Bob Brinker's comments summarized and excerpted:


As of right now, all 6 tax brackets are scheduled to go up at the beginning of next year. Brinker said: "These increases are that are scheduled to go into affect on January 1st are huge. Remember we have a very slow growing economy here. An economy that is not really looking for an anti-stimulus program, which is what a tax increase would be -- anti-stimulus --taking money out of the pockets of consumers and turning it over to the Treasury black hole....

.....Well, guess what, a typical family of four, earning $50,000 a year taxable income, would get a $2,900 tax increase in 2011. A family of four making $100,000 would get a $4,500 tax increase in 2011.....They are going to have to act or taxes are going up on New Years Day. Not just those taxes -- a lot of other taxes. Capital gains are scheduled to go back to 20%. Taxes on dividends are scheduled to go to 39.6 unless something is done. Federal estate would go back to its former level of applied above $1 million per person -- with a very high tax rate on that money.....

.....By the way, these tax increases that the president wants to go for, the so-called middle-class -- they would apply to singles making under $200,000, couples making under $250,000 would not have a tax increase under the White House proposals. But this is really a brouhaha.....

..... Congressman Boehner, the minority leader -- probably soon to be majority leader -- says raising taxes on anybody, especially small businesses is the wrong thing to do in a struggling economy. Well at the same time last Sunday, he was quoted as saying.....he was willing to sign a tax increase in the top 2 brackets if that was the best deal that he could make......He has been pilloried, PILLORIED in the Republican Party for making that comment.....I think after the election we get an enhanced gridlock in Congress...."

Brinker quoted David Stockman, who is against extending the Bush tax cuts. Twice, Brinker pointed out that David Stockman identifies himself with the Republican Party but still wants to raise taxes and cut entitlements.

Honey EC:
I guess Mr. Brinker never heard of a RINO. Mr. Stockman sounds like a half-rhino. LOL! And perhaps Mr. Brinker, who is so pro-Keynesian, doesn't understand that lower tax rates actually lead to an improved economy, more actual taxes paid to the government and more jobs.

Edward Harrison, wrote for Seeking Alpha: "......Now, if Stockman had said "cut spending and cut taxes" for recovery, that might have sounded believable. But he’s not saying that; he’s asking for a double dose of austerity. This doesn’t sound like a recipe for recovery to me – more likely a debt deflationary spiral and GD II. But, hey, it is the road I am saying we may be on soon.

Harrison's article and a 12-minute video of Stockman's WSJ interview are available at this [LINK]

Peter Orszag is for extending Bush tax for two years. Brinker says the "flaw" in that plan would be that the tax cuts would then end just before the 2012 election. Honey EC: It sure sound to me like Brinker is concerned that the democrats may lose the Congress in November and Obama won't get a second term in 2012. He's always fretting about their "election" mistakes.

Brinker said that due to the inaction of Congress, George Steinbrenner, one of the hugely rich who met his Maker this year, will pay no Federal estate tax because there isn't any under current law. Honey EC: Brinker sure didn't sound happy about this.


Brinker said: "Back in the 1950s when Dwight Eisenhower was the president of the United States, and I think he was a really good president -- you know that a lot of people forget that the top marginal bracket on the federal income taxes was 91%. Which means when you added in the state income taxes, it was even higher than that. And here we are today with a top federal bracket of 35%.....and people are very unhappy.....Back in the '50's people left the country rather than give all their money to the government......

......Ronald Reagan got the top bracket down to 28%. Remember a while back when we only had the two brackets? We had the 15% bracket and the 28% bracket. I'd still like to know who the financial engineer genius in Washington was who convinced congress to go to 6 brackets. And I think they lie to us when they talk tax-simplification......Because after you get it down to two brackets and you triple it up to six brackets, that's not tax-simplification."

Today, a caller said that he sat down and figured all of the taxes he paid on everything, including what his employer paid and it came to 80%. He simply decided to quit working. Later, a caller said that 80% taxation wasn't possible. Brinker seemed to believe that 80% might be possible the way the caller said he figured it.


Brinker said to caller Jim: "I don't know that anybody can ever say that a revenue bond is perfectly safe because a revenue bond is depending on ongoing cash flow from the business venture, whether it be a turnpike, or a bridge or whatever it pay principal and interest......In the municipal bond world, there certainly are higher levels of risk that are attendant to revenue bonds than is the case with top quality general obligations. Like a general obligation of the State of Virginia or Georgia is considered to be a gilt-edged investment. I would not compare that to any revenue bond....

....... Aside from that, I think that if you are going to be in a bond fund, you need to understand that you do accept interest rate risk......And the longer the duration -- you can check with the fund family....... to get your duration -- the greater your risk. And therefore, if your duration is 5, if rates go up 1%, you're going to probably see the net-asset-value go down 5%. And if that doesn't make you unhappy, 10% might do it if rates go up 2%......There's a way around that.....a mental stop, and that is simply a price below which you will not hold the shares......We've used $10.90 as an example of a hypothetical mental stop on the GNMA Fund [VFIIX] which is currently around $11 and has done so well.....Now the exception to that is if you don't care about the just want the interest, you don't care."


Brinker said that he already knows what they are going to do next weeek. With rates at zero, little or no inflation, and with the economy growing slowly, the Fed has no other options except to "keep on keeping on" and that Fed Funds rate will remain between zero-0.25 basis points -- and they will stay with their language which points out that rates will remain low for an extended period.


Brinker said: "Unemployment, based on the numbers coming out of the weekly unemployment insurance claims doesn't appear to be going anywhere in any measurable fashion.....In fact, the unemployment rate which right now is 9.6%, is likely to stay high for a long time. Now as far as the under-employment, that includes those working part-time and also the discouraged workers, that number has been up in the 16 percentile."


Brinker said: "Job creators are cautious here. The reason I think we know that is all of this cash, close to $2 Trillion sitting in cash sitting on balance sheets at corporations across America. Now what would be the reason.....? The reason would be uncertainty -- uncertainty about tax policy. Perhaps even uncertainty about the cost of hiring under the new health-care proposals that will be working their way in......And as long as CEOs have questions about sustainable demand, they have to really be careful about hiring....You don't want to hire people and then have to lay them off -- too much trauma there -- not good business......And there are some people in the business community today who believe the administration in Washington is anti-business."


Brinker says it is very low -- about 1/2 of 1% annualized over the last six months.


Brinker said the housing situation around the country is strained because there is a large stock of unsold homes, and behind that stock is a stealth market of houses that normally would be on the market. About 1/3 of the homes sold in the month of July were either foreclosures or short sales. This results in price pressure. Brinker expects the housing market to remain sluggish for some time.


A caller said he had doubled his IRA money by investing it in gold -- it was about 2/3 of his net worth. He bought the gold at about $500 per ounce.

Brinker told the caller that it had been a speculation and that he had done well, but it was way outside the "parameters" of what he would recommend "for a gold hedge." Brinker said: "I've said many times that if someone wants to have a small percentage of a portfolio in a gold hedge -- and I like GLD, the Exchange-traded-fund -- for that, very low expenses and tracks the price of gold very nicely. I do not like gold coins because I've seen too many people ripped off on the prices they are paying.....Unless you are going to buy the gold content of coins only at or very close to their net asset value, but none of this gold coin numismatic gold coin nonsense.....

..... GLD is the favored recommendation. I remember when I first mentioned GLD on the program in connection with a recommendation as a hedge, it was about $50 a share and now it is well over $100."

Honey EC: I will soon be posting an article that discusses the history of Bob Brinker's gold recommendations - or lack thereof... In the meantime, anyone who wants to know some "truth" that Brinker left out today, here is the link to my Archived blog article -- it includes some of David Korn remarks on the subject.

Brinker announced in the first hour that he expected a "great guest segment" but as it turned out, there was no guest today. Brinker continued to take calls in the third hour.

During the Moneytalk program, Bob Brinker advertises that you can pay for "Moneytalk on Demand" and go back "many week's" for guest segments. Moneytalk is only on Sundays now - the Saturday show has been canceled. Did the price drop in half? I don't know. But in these economic times, why not just do a bit of planning and download the weekly three-hours for free at KGO810 and listen at your leisure. All you have to do is remember to do it within 7 days of the broadcasts. Here is the [link]


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