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Sunday, October 31, 2010

October 31, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

October 31, 2010....Bob Brinker hosted Moneytalk today. Bob Brinker's radio talk show is broadcast on Sundays only now.


: S&P 500 Index total year-to-date return, including dividends: 7.7%; Wilshire 5000: 9%.

Remain historically low. Three month Treasury Bill annual: 0.11.

DEFICIT...Bob Brinker said:
"Well, I was just looking at the deficit as we move into the mid-term election and it will be interesting to see what the new group of politicians that get sworn in in January do that might be different than what the current crop has been doing to the country. Well when you look at the deficit, you see the problem. Runaway freight train government spending gone wild. Very few seem to stand up for a balanced budget......

......Here's the arithmetic: Over the past 12 months, the national debt has risen from $11.9 Trillion to $13.66 Trilion. Now that's a increase in one year -- that's increased debt of $1 3/4 Trillion. And that's the reason that if you are born into the United States today, you are born with a pro-rata debt of over $40,000......So we are draining capital from our country just for the purpose of paying interest."

.....In the third quarter, the economy grew at 2% based on the preliminary GDP report last Friday. Brinker said: "If you look back through history, the economy tends to come quite strong out of a deep recession which is what we had in 2008."

NEW JOBS....Brinker continued:
"Instead, the economy is coming back slowly......It has not even been able to create the 100,000 new jobs a month to absorb new entrants to the labor force.....And we have had private sector job growth every month in 2010, and that's a terrific accomplishment for the country, coming out of what we came out of, but it still has not been enough to get up to the threshold that would absorb all the new entrants into the labor force. And that is why I think that time is the most likely resolution."

"All kinds of things on the ballot.....The House is very much on the line. The Senate will assuredly tighten up big time, and there will be number of governor's races as well. And we don't want to forget the infamous California Proposition 19 to legalize the growing of marijuana on your own 25 square foot marijuana factory. A POTHEAD'S DREAM, it's being called by many......"

This survey was focused on those with more than $250,000 in investable assets. Brinker said: "They say that 41% in the survey say that they feel better off financially than they did a year ago. That's not surprising when you consider what the stock market has done. Additionally, 78% are confident their personal financial picture will improve in the year ahead."

Honey EC: Brinker cherry-picked what he reported from this survey. I found the whole article. Here is an excerpt and the link:

Merrill Lynch Affluent Insights Quarterly Survey Finds One in Five Have Tapped into Long-Term Savings and Investments to Meet Immediate Needs, and the Majority Now Expect to Retire Later [Daily Finance]

LOWER PAYROLL TAX * Ian from Toronto proffered the idea of globally raising personal income tax exemptions to stimulate the economy, and suggested that the government print more money to finance it. Brinker replied: "There's even a better way to stimulate the economy from a fiscal side, and remember for the moment at least, fiscal measures to help the economy are dead on arrival.....The way I'm talking about is to lower the payroll tax. Since everybody pays the payroll tax, and since the vast majority of consumers are at or close to 100% propensity to consume, the idea of lowering the payroll tax actually puts more money into the pockets of consumers right away.....

.... And this is the criticism that has been leveled at the $787 Billion stimulus package from last year. Only about 1/3 of that money went into the tax cuts. The rest of it was spread about equally between the state and local government and infrastructure spread out over a period of time. And there's no question that that kind of program is less effective than simply putting money into the pockets of consumers.......As I said, 1/3 of the stimulus package from last year very definitely went into the pockets of consumers because it was in the form of changes in taxes that put more money into the pockets of consumers. The tax structure was changed and over a couple hundred billion of that stimulus package went back to the pockets of the consumers......

* Caller Richard from the Garden State said that he thought the GOP would take over the House and possibly the Senate and that this would be a very positive thing for the stock market. He asked Brinker if he thought Wednesday would be a good time to sell stock. Brinker asked Richard if he thought with all of the poll unanimity which shows the GOP taking over the House and an even split in the Senate, that there could be anybody who invests in the stock market that doesn't already know all about it.

Brinker continued with his reply to Richard:
"I do believe that the market has discounted the results of this election, which will be a GOP House, a very tight Senate, which is almost academic since the 60-vote stealth rule has come into place in the Senate anyway. And I can't imagine anybody out there that is a serious investor that would be shocked to see that happen......It would only be a selling opportunity if you believed that was the final high of the cyclical bull market.....Let me rephrase your question: Do I think that any spike that may occur, if at all on Wednesday morning as a result of the elections results, do I think that any such hypothetical spike would mark the final high for this cyclical bull market. Let me be very clear, the answer is no."

* Jeannette from Reno
told Brinker that money is the root of all evil. Brinker either didn't hear it or ignored it. Honey EC: Jeannette misquoted scripture. It's the "love of money" that is the root of all evil.

* Bob from Chicago
told Brinker that Austrian economist Robert Murphy has challenged Paul Krugman, the NY Times "resident Keynesian to a debate on economic cycles," and that Murphy has put up a bounty of $100,000 to Paul Krugman and debate Murphy. Brinker had no comment and just thanked Bob and hung up. Honey EC: In 2008, Brinker spent a lot of air time singing the praises of Keynesian economics.

"Nobody knows what they are going to do. They should never have left this to the last few weeks of the lame duck year for their session. It's hard to believe what they've done. Then you'll get the new congress coming in January -- I'm convinced it will be a GOP House and a very divided Senate....There are three possibilities. they get locked up in infighting and they do nothing and everybody's taxes go up. Now that would be a bizarre development happening at the same time the Federal Reserve is pulling every trick it has out of its hat in order to stimulate the economy. I mean, you see the irony. If everybody's taxes go up, that will completely void the efforts of the Federal Reserve at stimulus......

.....Another possible outcome is, they get together and agree that everybody but the top 2 brackets gets a tax cut extension, and there would be no tax increase under $200,000 for individuals....

.....The third possibility is an interim compromise so that nobody gets a tax increase.....The cost for the first year for not increasing the rates on the top 2 brackets is about $40 Billion (in additional national debt)....And they are certainly not going to find any way to pay for this at this point with the red-ink tsunami in Washington....There is nobody out there, including members of congress, that knows what the tax brackets will be in 2011. Now to make a comment like that on the eve of November 1st is astounding......We have a dysfunctional government in Washington. That's what it is. They cannot govern and they are not governing."

* Walt in Wisconsin asked how much quantitative easing it will take to get the unemployment rate down. Brinker told Walt that the FOMC does not know how much it will take to get the unemployment rate down -- that they wanted it at 5%, but it is now at 9.6% and the underemployment rate is at 17.1% -- an embarrassment to the country. There is basically no inflation at 1.1% year-over-year.....

Brinker said:
"They are really guessing here....Quantitative easing is the only major tool that they have left -- they already took rates down near zero, so that's that. So now they they have to look for other ways. They found one which is quantitative easing and they went out and bought over $1 1/2 Trillion security already in the first round. Now they are coming back for a new round....This an admission that they have not found any other tool in their arsenal that they think will do a better job than quantitative easing.......

.....Alan Blinder has made it clear that there is no comparison between effectiveness of the Fed lowering rates -- well we already did that.....and the effectiveness of quantitative easing. So what he is saying is quantitative easing is a much less effective way to stimulate the economy. Well we can't lower interest rates anymore because zero is zero.....

asked Brinker if he thought the Republicans would reign in spending if they take the House. Brinker said: "I don't think anybody knows what they will do. We know what they have said. John Boehner has indicated a $100billion spending reduction program.....Details are hard to find......They include a reduction of $5 billion in Pell Grants.....I've seen talks about reductions in health benefits.....I can assure you this, that when you go on a government austerity program, you will see pain because that is part and parcel of government cutbacks.....

.....The notion that the government can cut back spending without anybody feeling anything is ridiculous.....They probably won't like it, but that seems to be what the electorate seems to be up to on Tuesday. Which by the way, is completely out of control.....We have to do a lot of things to get to a balanced budget.....Now I'm not suggesting we are going to get to a balanced budget soon. We are running annual deficits of over $1 Trillion......

.....There was a package put together with various ideas on Social Security....They wanted to gradually increase the retirement age to 70 and put in some disability eligibility for earlier periods for laborers. They wanted to reduce the annual cost of living increase formula for Social Security......They want to get medical courts established for malpractice suits for health care....They want to cut military significantly, reflecting what they call a post-cold war restructure. And they want to reduce the presence in Iraq and Afghanistan. .....They want a 5% reduction in the federal work force, so that would be tens of thousands of jobs gone.....They want to lower farm subsidies -- get rid of earmarks......They want to increase gasoline tax by $1 per gallon starting in 2013.......It's gonna be a donnybrook, I guarantee you......

.....So here we have John Boehner on eve of what should be a GOP takeover of the House, his statement is that they could propose a $100 Billion reduction in spending.....What difference would that make? But if you want to cause real pain, I can tell you how to do it. Put in a massive government spending reductions in an economy that's limping along with 17.1% underemployment.....That's a guaranteed formula for causing pain."

.....Brinker talked at length about a Bloomberg national poll taken through the 24th to the 26th, showing that by a two to one margin, likely voters think taxes have gone up and that the economy has shrunk in the past two years and that TARP money will not be recovered. Brinker blamed the Democrats because they "have not sold their program to the voters." Brinker said that taxes have gone down $240 Billion in the last two years. Honey EC: Anybody know what taxes Brinker is talking about that went down? If you want to read about this poll here's the link: Bloomberg national survey.

* Caller Louisa from Illinois
tried to point out to Brinker that people are worried about FUTURE tax increases and that is what they are thinking about as they go to the polls. Brinker said that isn't what they told the pollsters. Honey EC: Brinker again selected parts of the piece he was quoting and slanted it. Actually, the poll only included 1000 likely voters and they were not asked if they were worried about future taxes. However, they did say this about the Obama administration: “He’s all about big government and big spending.” So they must not be totally ignorant like Brinker said several times today, since what they were quoted saying certainly agrees with what Brinker has been espousing for months now.

"Some of the issues that are not being discussed or admitted to is the dire situation that exists with under-employed and unemployed. Percentages that I keep on hearing don't match what the realities are. And I'm sure that is one of the big contributing factors to the big reduction in taxes because people aren't there to make the payments on such taxes." Jim also brought up that the subject of cutting entitlements is not being addressed by any of the candidates in Tuesday's election.

Honey EC: Brinker didn't comment on what Jim said about unemployment but thanks to Jeffchristie, here are the unemployment rates January 2008-January 2009

2008 Jan 4.9
Feb 4.8
Mar 5.1
Apr 5.0
May 5.5
Jun 5.6
Jul 5.8
Aug 6.2
Sep 6.2
Oct 6.6
Nov 6.8
Dec 7.2
2009 Jan 7.6

Brinker replied to Jim: "I hear from people who collect Social Security who say it is not an entitlement. Well, it was not an entitlement when it was started, but it certainly is an entitlement if the government has to borrow to cut the checks. And to cut the 58 monthly benefit checks for Social Security, the government has to borrow as soon as the payroll tax becomes less than the payout......We are very close to getting there.....

.....And at that point, the only way the government can make the checks to pay off the monthly checks is to go out and take all the payroll tax money and then sell Treasuries to make up the difference. In my opinion, Social Security has become an entitlement because the federal government squandered the money on the general budget."

Brinker's guest-speaker today was John Zogby.

To Go is Available on Demand Totally Free at KGO810 radio for seven days after broadcast. Moneytalk is broadcast only on Sunday. The program is archived in the 1-4pm time-slots. To download and listen later, right click on each hour that you want and use "Save Link as." KGO: Download Moneytalk Here Don't forget to download the John Zogby interview in the 3-4 hour of the program.

Dixiegeezer took this beautiful picture - click to enlarge:


Wednesday, October 27, 2010

Mark Hulbert and the Two Bob Brinkers....Let's Chat

Posted October 27, 2010....Bob Brinker's Marketimer model portfolios have been included in Hulbert Financial Digest since 1986.

When Bob Brinker's son and daughter-in-law began publishing a newsletter titled, "Brinker Fixed Income Advisor," Mark Hulbert almost immediately added it to the roster of HFD.

However, the way that Hulbert lists the Advisor in HFD makes no distinction between the two Bob Brinkers. Hulbert has never indicated in HFD that the Fixed Income Advisor is published by the son and daughter-in-law, not the famous talk show host who publishes Marketimer.

Coincidentally, about the same time that Brinker's son and daughter-in-law began publishing the Fixed Income Advisor, "Jr." began posting on the internet simply as Bob Brinker (dropping the Jr) -- on his website and Twitter. No doubt, this has been very effective in deceiving many people about his true identity and his investment education, expertise, experience.

There have been numerous callers on Moneytalk who have told Brinker that they get his "two newsletters." Usually, the only reply that Brinker makes is a simple thank you. Brinker has never explained to the Moneytalk audience that the Fixed Income Advisor is actually published by his son and daughter-in-law.

Ironically, before he left his career in IT/computer technology and started selling newsletters, Bob M. Brinker (Jr) used to post on the internet as "Bob Jr" -- and he meticulously avoided being mistaken for his famous father. Here's a sample of his writing:

From: Bob Brinker, Jr. 2229 of xxxxx Greg - 11/8/1997

I truly apologize for the confusion. I am not Bob Sr. I am Bob Jr. This has happened on occasion before and I NEVER attempt to misrepresent myself as Bob Sr. From now on, I will always sign my name as bob jr. in hopes of avoiding future confusion. FWIW (For what its worth) I would not be surprised if Bob Sr. read your note to me anyway!

thanks - bob jr!

It's interesting to note that Mark Hulbert also gave Bob Brinker a mulligan on the disastrous 2000/2001 counter-trend rally QQQQ trades. Hulbert knows that Brinker recommended using model portfolio cash reserves but never added the trades to his portfolio official records. Hulbert actually uses a "footnote with asterisk" to make an excuse as to why HFD does not count those trades when ranking Brinker's portfolios.

Now in the latest issue of Hulbert Financial Digest, there is another Hulbert mulligan (I use "mulligan" but stronger words come to mind) in favor of the Brinkers. This time, it's Jr's Fixed Income Advisor that gets the benefit of Mark Hulbert playing fast and loose with the facts.

In Hulbert Financial Digest, Hulbert has recently been doing a lot of tinkering around with how he reports his ranking "scoreboards." He's changed the time-frames and changed the order in which the results are listed -- he now gives first billing to the "risk-adjusted" rankings. So one has to dig to find the actual performance that isn't skewed by Hulbert's jury-rigging.

Brinker's Fixed Income Advisor is listed in Hulbert's October 5 year top-5 "Overall Performance Scoreboard," EVEN THOUGH it comes in #25 without Hulbert's risk-adjustment hockey-puck.

You say that's quite an accomplishment for Jr, after all, his newsletter is only five years old! Yep, and even more so when you realize that the Fixed Income Advisor is 100% Fixed Income and Hulbert's performance rating is supposed to be for stock newsletters!

You might say, well that's not fair, but after all, it is a BRINKER! Then what would you say if I told you that I wrote to Mark Hulbert and showed him proof that he has Brinker's Fixed Income Advisor listed as containing equites? And what would you say if I told you that Hulbert (again) made up some convoluted excuse to give Brinker a pass?

Here is how Hulbert justified "mischaracterizing" the Fixed Income Advisor to give it the advantage over the equity newsletters it is ranked with. This is an excerpt from Mark Hulbert's email reply to me when I wrote and showed him how he had misrepresented the Fixed Income Advisor:
"I think the source of this listing that you report is a function of the algorithm that determines the range of asset classes that are reflected in a newsletter’s portfolios. I think the algorithm defaults to “E” whenever there is one or more securities that otherwise doesn’t get mapped specifically to one of the five classes. I suspect that some of the exchange traded funds that Brinker recommends fall into this category, though without a lot more work I can’t be sure…Mark"
That statement about the ETFs is totally false. The Fixed Income Advisor contains clearly only fixed income mutual funds and ETFs. Nothing that could possibly be mistaken for equities -- no matter how many "algorithms" one "defaults" to....LOL!!!

So what is the relationship between the Brinkers and Hulbert? I don't know, but I think it's pretty apparent that they are good for each other when it comes to selling newsletters....

One further note on this subject. I have read a sample BobJr's fixed income newsletter and I have read the latest copy of the Retirement Advisor, which is published by Kirk Lindstrom and David Korn. In my opinion, there is no comparison. Kirk and David's "Retirement Advisor" is superior, by far. If you are interested, I recommend that you get free copies of BOTH newsletters and make your own comparison. I am fully convinced that you will choose "Retirement Advisor." (Click for a Free Issue of The Retirement Advisor.)

I took these pictures from my deck last week when we had some nice rain and wonderful fog over the Santa Cruz Mountains. Click to enlarge


Sunday, October 24, 2010

October 24, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

Posted October 24, 2010....Bob Brinker hosted Moneytalk today. Bob Brinker's radio program is broadcast on Sundays only now.

Bob Brinker comments paraphrased or excerpted:


Dow: Total return 8% year-to-date.
S&P 500 Index: Total return year-to-date 8% including dividends.
Nasdaq: Trading 2% below high for year, but up for the year.

Bob Brinker said:
"If you've been with us on the program, you are aware of my view that we had a correction in 2010. I know many were forecasting a bear market. I never believed that. We thought it was a correction, and the S&P 500 corrected 16% and the Dow corrected 13 1/2%.....And that correction ended July 6th and that is when the market was down in the 1030 area.....

......Anybody listening to this broadcast is already aware that I have been bullish on the market to the extent that in the early part of July in my investment letter, I upgraded the market at that time, down in the 1030 area of the S&P 500, to attractive for purchase. Now of course, we've gone back to dollar-cost-average with the tremendous run we've had since early July....


Russ from Massachusetts said that he is a Marketimer subscriber and that of his $1.6 million, he had $800,00 in Brinker's active-passive portfolio -- 80% in VTI and 20% in EFA. He said he had another $800,000 in cash and didn't know what to do with it. He wanted to know if Brinker would recommend that he put it in the Marketimer fixed income portfolio? Bob Brinker told Russ that even though the fixed income fund was having a great year, interest rates are very low right now, so he ("we") are monitoring the funds very closely in terms of interest rate risk.

Honey EC: What the caller and Brinker were talking about was using Brinker's active-passive and fixed income portfolio to create a "simple" balanced portfolio. As the caller stated, Brinker's active-passive portfolios is simply 80% in Vanguard Total Stock Market Index (VTSMX); 10% in Vanguard International Growth (VWIGX); and 10% in Vanguard All-wlorld ex-U.S. (VFWIX). Or you can substitute those with ETFs - 80% in VTI and 20% in EFA.

As for what Brinker said about the dangers of his fixed income fund, he is right. In 2008, a year when the GNMA Fund was up almost 8%, his fixed income fund lost money.


Brinker said
: "The reality is, somewhere down the line, you are going to see a change in the interest rate picture. It certainly does not appear to be imminent, but I think eventually, it's inevitable."


Caller Jack from Wheeling asked Brinker about Vanguard automatically moving his account to the lower-cost Admiral Funds because of their reduced minimum requirements. Brinker said it was a "no-brainer" and he "applauds" Vanguard. This is from the Vanguard website:
"Effective today, Vanguard has reduced the minimum amount required to qualify for Admiral™ Shares to $10,000 for most of our broad-market index funds and $50,000 for actively managed funds, down from the previous $100,000 minimum. Admiral Shares cost significantly less than traditional fund shares, and their expense ratios are among the lowest in the mutual fund marketplace."

Caller Bobby from Hayward, said she had her life savings ($40,000) in two bank checks that were stashed away in a safe deposit box for 8 years. The bank was taken over by another bank. She decided last week she wanted to deposit the checks, however, they refused to cash them.

Brinker advised her to go in to the bank tomorrow with her reciept, and talk to an officer of the bank. Brinker said: I'm glad you called Bobby, because here is some advice for all of our listeners: Don't take checks from banks, put them in a safe deposit box and let 8 years go by before you call on the money. Not a good way to go about business......Good luck on the meeting. Let us know what happens."

I found this at the Cornell University Law School website:

§ 4-404. BANK NOT OBLIGED TO PAY CHECK MORE THAN SIX MONTHS OLD. A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six months after its date, but it may charge its customer's account for a payment made thereafter in good faith.

Judy from Illinois asked about this.... Brinker replied: "The formula is very simple. You take the amortization schedule for your mortgage, if its a 30-year mortgage, and you add a principal payment every month to cut the payment time in half.....It also cuts a 15 year mortgage to a 7 1/2 year mortgage." This method is explained here: Use an Amortization Schedule to Accelerate Mortgage Payment


Brinker said: "Nobody knows what the tax brackets will be starting New Years Day. The dysfunctional United States Congress refused to adopt a tax schedule for 2011. I know this sounds impossible to believe, but it's true......So under current law, if they don't adopt a tax schedule for 2011....a new one...... all of the tax brackets that are currently in force will expire on New Years Eve. And all of the tax brackets will go up on New Years Day if they don't act. Normally, I would say that they would act responsibly, but given the nature of what we've been seeing out of congress, I think they've become incredibly unpredictable. Frankly, I think it's very sad."


Brinker said:
"The individual investors across the country, a lot of them believe things that are completely false. It's easy to find people today who think that TARP was a failure. TARP was not a failure. It has shown a profit for the U.S. Government. Aside from providing financial stability in 2008 after the Lehman debacle, it's actually provided a profit. There is a lot of misinformation out there."

Honey EC: But what did it take to bailout Freddie and Fannie? How much more will it take? Who is to blame for Freddie and Fannie? Here is absolute proof: Democrats Fighting Regulation of Freddie and Fannie.


Rick from Illinois asked Brinker if the golden cross was a reliably market indicator. Brinker said: "I would not use a golden cross as a forecaster of a market correction......The Dow had its first golden cross in four years on the first of this month. And historically, a golden cross is a bullish sign for the market.......If you go back to 1929, over the next six months following a golden cross, the Dow has gained an average of 3.9%. .....Without a golden cross, you would get a return over the next six months of 3.1%."

[Honey EC: Rather than my typing all of the statistics that Brinker read almost verbatim (without giving ANY attribution) from the CNBC website, I will simply copy some excerpts from the article Brinker was reading from and give you the link for proper attribution.]

By: Abby Schultz
Special to

Here's another bright sign for the stock markets: both the Nasdaq and the S&P 500 hit a golden cross this week for the first time in four years.

A golden cross is when the 50-day moving average for an index crosses above the 200-day moving average.

The pattern occurs when prices over the shorter term are moving higher at a faster rate than prices over the longer-term. The Dow Jones Industrial Average hit the golden cross Oct. 1.

It's also a bullish sign for the future, say strategists who watch the charts.

"Historically, the market has performed better following these patterns than if you were look at any random one, three or six-month period," said Paul Hickey, co-founder of Bespoke Investment Group.

Specifically, the average six-month return of the S&P 500 Index following a golden cross was 3.9 percent from 1929 through 2010, while the S&P 500's average six-month return any other time was 3.1 percent, according to Bespoke's research. The research also shows the six-month average return following the golden cross is positive 63 percent of the time.

For the Nasdaq, the six-month results have been positive 83 percent of time following the golden cross since the index began in 1971, with the Nasdaq averaging 8.7 percent in the six months after a golden cross, versus the typical average gain of 4.2 percent, Bespoke found.

If you look at the S&P 500 data since 1972, the S&P 500 outperformed its average for the year as well, rising 11.9 percent on average in the year after a golden cross, versus 7.9 percent on average, according to Schaeffer's Investment Research." CNBC Stock Market News

Brinker continued: "But from my point of view, I would rather use a market-timing approach to try to identify the bottom of a correction as I did at the beginning of July as opposed to the golden cross. The problem with the golden cross is, it's very, very late to the party. The S&P 500 is at 1183.....I would much prefer using a market-timing approach to identify areas of entry - you're not always going to be right, we know that. But that's not the point. The point is, you should be able to hit some very, very well. And as a result, you should be able to take positions as we were able to do at the beginning of July when the market was at its lows for 2010. And that's an example of using market-timing as opposed to using a technical tool like a golden cross."

Honey EC:
Bob Brinker has not made any changes to his model portfolio's asset allocation or cash reserves for over 7 years -- they have remained fully invested. He has recommended that his subscribers be fully invested by dollar-cost-averaging and several gift-horse buys for new money, since March 2003. In spite of all of his forecasts and predictions, he has been a buy-and-hold "market-timer" all of these years.

Brinker's has relentlessly attempted to give Moneytalk audiences the impression that he can successfully time the stock market. Finally, after playing this sucker's game for all these years and damaging anyone who actually trusted his advise, one of his calls has not been damaging -- so far. But take a look a these and think about sinking a large amount of money into the market on these "market-timing" calls each time. These are all Marketimer quotes, but you will not find any of this discussed in any current issues:

April, 2005, (S&P: 1172.92) "Attractive for purchase at the 1120 level"
May, 2005, (S&P: 1156.85) "Attractive for purchase at the 1160 level"
September, 2005, (S&P: 1220.33) Attractive for purchase below the 1180 level"
July, 2006, (S&P: 1280.19) "Attractive for purchase at 1250 level or lower"
April, 2007 "Attractive for purchase at 1380 or lower"
August, 2007 (S&P: 1455.27) "Attractive for purchase mid-1400's.".
January 4, 2008 (S&P: 1468.36) Brinker said: "We continue to rate the market attractive for purchase on any weakness into the S&P 500 Index mid-1400's range."
February 10, 2008 (S&P: 1331), "Attractive for purchase at low-1300's"
Aug 5, 2008 (S&P: 1289) "Attractive for purchase at 1240 or less"
Sept 2, 2008 (S&P: 1277) "Attractive for purchase at low-to-mid 1200's"

Brinker said that he knows that market-timing is
"not always going to be right." Mr. Brinker, as you told a caller today: "You sir, are the master of misspeak."

Caller Jerry in Providence thanked Brinker for his July market-timing call and said it "was very helpful." Brinker thanked him, but never asked him why it was helpful. Brinker seems to not want to give away the fact that he has recommended that all of his subscribers and listeners remain fully invested in their equity allocations throughout the 2008-2009 megabear market. Therefore, model portfolios and those who follow Brinker's market-timing are still in recovery mode.

Bob Brinker's most truthful quote: "It's all about the money."

Bob Brinker's guest-speaker was Peter Chapman:
"The Last of the Imperious Rich: Lehman Brothers, 1844-2008" (Hardcover)

To Go is Available on Demand Totally Free at KGO810 radio for seven days after broadcast. Moneytalk is broadcast only on Sunday. The program is archived in the 1-4pm time-slots. To download and listen later, right click on each hour that you want and use "Save Link as." KGO: Download Moneytalk Here Don't forget to save your copy of Brinker's guest-speaker, Peter Chapman, in the 3-4pm hour!

(A funny: Readers who remember the fun discussions that we had here about Bob Brinker quoting Jackie Gleason, will laugh like I did when they find out that Brinker has changed his opening gambit. He no longer includes Jackie Gleason. It seemed to be all new..... As our good friend, Mr. Pig, sometimes says: "ROAR"!! - UPDATE: Jim said: "After doing a little research, I learned that Brinker's new opening is a line spoken by Danny DeVito in the movie "Heist"."

Congratulations to the Giants and Rangers!

My daughter took this picture in her garden yesterday. click to enlarge:

This is Dixiegeezer's slightly larger frog. :)


Thursday, October 21, 2010

October 21, 2010, Bob Brinker's Insider Connection While Touting Utek

Posted October 21, 2010....Bob Brinker had an admitted inside relationship with UTEK at the same time that he was promoting UTEK in his newsletter, on the radio, and with an anonymous internet alias.

This relationship remained largely undisclosed until the last time he appeared on Nightly Businses Report with Paul Kangas. While probably not illegal at that time, many believed it was unethical.

It was during Bob Brinker's last appearance on the Nightly Business Report that Paul Kangas asked Brinker about a possible conflict of interest that Brinker had in UTEK. Brinker denied that there was a conflict of interest, but did not deny that there was a fee-based relationship. Here are some excerpts of the dialogue from the July 23, 1999 program:
KANGAS: We just have a minute left. You also said at that time to by Ultratech Stepper (NASDAQ:UTEK) at 29. Now, it's down to about 15. What do you do with that?

BRINKER: Ultratech's been through a difficult period. They have strong financials, close to $10 in tangible book value, mostly in cash. A new product effort under way, and they have a new technology, bump processing for advanced semiconductor manufacture. This is an important technology going forward for high performance low cost chips. So we have a "hold" on that stock.

KANGAS: Bob, it's come to my attention that employees at Ultratech have the option to invest their 401 (k) funds with a management firm in which you are a principal.

BRINKER: Exactly.

KANGAS: So, my question is does your firm recommend individual stocks?

BRINKER: Absolutely not. The BJ Group exclusively invests in no-load mutual funds.

KANGAS: All right. So, you see no conflict there?

BRINKER: Absolutely not."

Kirk Lindstrom wrote:
"I always get a chuckle out of that reply.

Brinker just recommended a specific, unheard of stock on Kangas’s National TV Show. Paul Kangas asks and Brinker answers that the firm with his name on it is paid by UTEK but the firm, with Brinker’s name on it, doesn’t recommend individual stocks.

I always wondered why Paul Kangas didn’t reply “But you just gave a recommendation for an individual stock that you admit is paying you a fee. How can you say your firm doesn’t recommend individual stocks? Isn’t a principal and employee the same thing?”
Now it's possible that the BJ Group may have waived the wrap fee for the employees. Most employees don't pay a wrap fee to own mutual funds in a 401k. What about that? Will L. explained why that just adds to the smell.

Will L. wrote:

"That is why the UTEK deal smells doesn't it? Why would a company that cares about their employees hire a wrap fund outfit when they could get nearly any mutual fund outfit or large brokerage to do their 401s?

Well if the executives that make the decision for these employees are holding tons of stock in a company that is going nowhere while other tech companies are skyrocketing had a choice of picking a radio host who touts a few stocks-- that might sway one's thinking. Can you think of a better reason a company would seek out a wrap fund who's advertising was geared toward the individual investor?

What we know when we cut through your duplicity and hubris to keep people from seeing the nature of the UTEK-Brinker relationship is that BRINKER was getting PAID after being selected by UTEK for a relationship that he NEVER DISCLOSED while he had UTEK as his ONLY BUY and touted it in the media, in his newsletter and under his alias on the internet.

So the issue is that what Brinker was doing was NOT ethical. His subscribers/listeners should have been told that UTEK was paying Brinker when he touted the stock to them. Brinker should never have used an alias on the internet to tout the stock to potential investors after having lured them to investigate the UTEK threads by his comments on the stock in the newsletter and on the media. That is beneath contempt."

To the following statement,
"You've never proven that Brinker did anything unethical regarding UTEK." Will L. answered:

"I never "proved" that the sun will rise in the east in the morning. I never "proved" that OJ killed two people. A jury acquitted them. It is still obvious to any reasonable person that he did it and it was wrong.

Brinker had one stock as a buy during much of the period from 97 through 99. That stock was Utek. He touted that stock under an alias on Silicon investor and on this very thread. He touted that stock in the newsletter as his ONLY BUY. He raved about it on the radio.

What Brinker NEVER DISCLOSED was that out of the universe of 6,000 stocks the ONLY stock he found to be a buy was ALSO PAYING HIM.

Now if you are saying that I cannot fathom the synapses of Brinker's brain, of course you are correct. If your premise is that he was so naive as to believe that touting a stock with scores of posts under his alias that you have admitted was Brinker himself and never disclosing the company was paying him, then of course like the OJ jury you have an agenda.

If your premise is that Brinker was so naive that having the stock as his ONLY individual stock buy during the greatest tech rally in history without disclosing that UTEK was paying him...then of course like the OJ jury you have an agenda.

If you need me to show you a video tape of OJ stabbing the cowboy "$%%@#" out of those two people I can't do it. You know, I know and any thinking person knows what he did was wrong. His behavior after the fact testifies to the truth.

Brinker, under his alias was evasive, and he was evasive on his last appearance on PBS when someone else called him on his apparent conflict of interest.

Now you may not want to know if the advisor you trust is being paid by the company who is the ONLY stock he is recommending. I think any thinking person outside of those with an agenda ala OJ jury or a Brinkershill like you would like to know that.

Brinker knows it was wrong and of course so do you. He hides it---you won't admit it. The thing that separates Brinker, and makes his UTEK scam worse than Grubman, was that at least Grubman had many stocks as a recommendation during that period in which he was also touting stocks that paid him.

I don't have Brinker's emails. I don't have the minutes of the meetings of UTEK. I don't have a video tape of the murder scene in the OJ trial. I know the difference between right and wrong and what Brinker did with his alias Don Lane touting UTEK and LYING in many cases about it--was WRONG."

Brinker was so sensitive about the UTEK subject, he tried to censor questions on Kirk Lindstrom's former discussion forum. Kirk wrote this first person account:

"We started the first FREE (didn’t have to pay SI or AOL) discussion forum at Suite101 in 1997. Brinker liked it so much he gave a link to our forum no his site.
In 1998 Brinker told me to delete a question someone asked about his relationship with UTEK. I refused and suggested he answer the question to end the controversy. Brinker removed all links to our site from his site and strange aliases showed up here and on Brinker’s forum to attack us and our credibility.Brinker kicked people off his discussion forum who had bad things to say about his market timing record Rande Spiegelman was kicked off Brinker’s site and Brinker cancelled our Marketimer subscriptions in January 2000 and returned our money. ....."

Here are two samples (out of dozens) that Bob Brinker posted anonymously as "mistertopes" touting UTEK and ridiculing anyone who shorted the stock:

To:Justa Werkenstiff who wrote (1369)
From: mister topes
Wednesday, Sep 17, 1997 9:17 PM

Maybe Mr. UTEK shortseller will need one of Kulicke & Soffa's
new state of the art ball bonders next week when UTEK
appears at the annual Montgomery technology conference.
Seems to me Mr. shortseller's shorts could benefit from
a KLIC ball bonder once investors start to realize what
this company is planning to do in the future. But maybe
the shortseller needs a tax loss and is planning to cover
at 40 for a cool 40% loss on the shares sold short in the
mid twenties in September. Now the shortseller must face
the start reality that the 28-30 area is the new support
zone for UTEK and the stock is destined to gain weight
in the thirties. And wait 'til the analyst upgrades!
Good grief, I am sure glad I was buying since the teens
and not shorting! Shorting UTEK is for fools.

To:Ian Stromberg who wrote (1384)
From: mister topes
Thursday, Sep 18, 1997 8:03 PM

Don't stop thinkin' about tomorrow. That is the wise counsel of
Fleetwood Mac and very good advice for the UTEK shortsellers.
If you are short and wonder how you got screwed so very badly,
here is what happened. First we all had a long winded copyright
discussion on this thread while the shortsellers had a field day
shorting UTEK in the mid twenties. Then, after all the shorts
were in place, we started talking fundamentals. E-beam technology
that will prove the worst nightmare ever for ETEC, and P-Gild
technology that will be bigger than the whole company is now by
2000, and pole trimming for backend MR applications ready to go.
And now UTEK will appear Thursday September 25 at 10:45 am Pacific
Time at the Montgomery Technology Conference in San Francisco to
bring all of the world up to date. Are you lonesome tonight Mr. Short?

Brinker never again made an appearance on Nightly Business Report. Jeffchristy had an opportunity to ask Paul Kangas why. Jeffchristy wrote:

Author: JeffChristy
Discussion: Bob Brinker Free Discussion Site 59,820+
Date: May 30, 2005 5:41 PM
Subject: Bob Brinker and The Nightly Business Report
"I suspect many of you have wondered why Bob Brinker has not appeared on The Nightly Business Report as a guest market monitor since 1999. I attended an event sponsored by my brokerage company last week that was hosted by Paul Kangas. I was fortunate to get a chance to talk to him for a few minutes prior to the start of the event.. He said that he would like to have Brinker on but that Bob had declined several invitations to appear. He said he didn't know why.

I told him I had several thoughts about it, I said that I knew one of the viewers whose question he used in Brinkers last appearance and their was a question about a potential conflict of interest with Brinker and his relationship to the UTEK employee pension fund. I told him that Brinker took 60% out of the market in January 2000 and then he recommended putting up to half of it into the QQQ in November of the same year. The next day I thought of several other things that I wish I had said. I sent a E-mail to another executive at the NBR since I didn't have Paul Kangas's address. This evening he responded that he forwarded it to Mr. Kangas. I suggested he consider having David Korn on if Brinker doesn't want to appear."
So draw your own conclusions as to Brinker's ethics. UTEK is just one of several things that have disappeared so quickly and completely that the Great Houdini would look inept by comparison. 8)


Sunday, October 17, 2010

October 17, 2010, Bob Brinker's Moneytalk ("Land of Critical Mass")

October 17, 2010.....Bob Brinker took the day off from Moneytalk. Bob Brinker's fill-in host was Lynn Jimenez. Lynn Jimenez is a business reporter for KGO810 newstalk radio.


Bob Brinker's Marketimer off-the-books list of "Individual Issues" includes three stock picks and nine very well-known ETFs. (Brinker recommends limiting individual stocks to 4% of equity holdings, but does not put that limit on ETFs.)

Microsoft and Vodafone have remained on the Individual Issues list for more than a decade.
However, on March 11, 2003, Brinker upgraded MSFT to a "buy" at $23, and Vodafone to a "buy" at $17. They have both been on hold ever since.

As of May 1, 2009, Brinker added Suncor (SU) - buy in the mid-$20s price range. The stock closed at $27.30 that day.

Lately, Brinker has been reporting on how well his model portfolios are doing
year-to-date -- he uses the model portfolios as his "on-the-books" official performance record.

Let's take a look at how his "off-the-books" individual stock recommendations are doing year-to-date.

These year-to-date returns on Brinker's stock picks may reveal why he sticks to mutual funds in his official on-the-record model portfolios. As you can see, two of his three picks are down significantly this year (MSFT down 16.6%). And the long-term numbers for MSFT and VOD are nothing to write home about. 8)

Flash from the past:

UTEK used to be on Brinker's Individual Issues list. He added UTEK to his Marketimer
in July, 1997 at under $24, but recommended it again in the October 1997 newsletter at $30. He finally sold it in January, 2001 at $27 a share. (While I don't have access to any Marketimers going back to 1996, 1997 and 1998, I have (beyond a reasonable doubt) proof that this happened.

I also have the transcript of Brinker recommending UTEK on Nightly Business report on May 16, 1996 at (almost) $30 -- the night before it topped out at $33 per share. What's most interesting about the history of this stock pick are the lengths that Brinker went to promoting it -- and why he did it so enthusiastically.....More on this subject later....

A friend who lives in Missouri sent this picture of fall colors there:

Sunday, October 10, 2010

October 10, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

October 10, 2010....Bob Brinker hosted Moneytalk "Land of Critical Mass" today....(No Jackie Gleason in the opening. LOL!)

At the beginning of the program, Bob Brinker excitedly announced that MONEYTALK is now being broadcast on Talk Radio KABC 790. Brinker said he was delighted to welcome KABC as his "southern California flagship station." ( If I recall correctly, Rob from southern California, said that Talk Radio KABC790 had dropped Moneytalk last year. Other stations also dropped it -- so did Sirius Satellite Radio.)

Update Oct 13, 2010: I learned today from a comment on
The Brinker Fan Club blog that Brinker's new "California flagship station" KABC will carry Moneytalk on tape delay from 5 to 8pm. Yep, that's right, TAPE DELAY. 8)

Bob Brinker's comments summarized, paraphrased or excerpted:


This is the final jobs report before the November elections. Private payrolls for September 64,000 positive; August was revised to 93,000; July revised to 117,000; Moving average over three months=91,000 per month. Because of reduced taxes local governments are strained for cash, so in September, local government jobs declined at the fastest rate in three decades. Last year the $787 billion stimulus bill allowed municipalities to retain workers, but that money is almost used up, so these workers are being let go.

: Now at 9.6%.

: Now at 17.1% - one out of every six. Each month, 100,000 to 150,000 new jobs are required just to absorb new entrants into the labor force.

NEW JOBS.....Brinker said:
"You take a look at the three components of the jobs report from Friday, take a look at the private payroll number, the hours worked number, and the hourly wages number, and you see an employment picture that is flat out lackluster.....

.....There were some bright spots in certain sectors in September. Food services and drinking establishments up 33,900 new jobs. So perhaps a few people are tying one on to help them to forget the reality of the employment market. Health care added 23,900 jobs in September.....

.....But those government jobs continuing to vanish rapidly. Local governments last month slashed 76,000 jobs; state governments cut another 7,000 jobs...."

Are now available in some sectors of the unemployed for as long as 99 weeks.

Annual rate for the next ten years: 2%

VANGUARD GNMA FUND [VFIIX].....Bob Brinker said:
"The reason that we have recommended Ginnie Maes, and that recommendation has been a grand slam home run for anybody that's on them, is because they have a direct Treasury guarantee. It is the Treasury guarantee that stands behind the repayment of principal and interest on Ginnie Mae mortgages that really is the key to their triple-A rating. So I don't have any credit concerns. You always have interest rate consideration with any fixed income obligation......" (Brinker advises using mental stops for those that care about fluctuations in net-asset-value due to interest rate risk in Ginnie Mae Funds.)


Bob Brinker said: "That's a good thing. A positive yield curve is conducive to economic growth."


Bob Brinker said: "We are seeing slow economic growth, but we are still seeing economic growth."


The jobs situation has encouraged the Federal Reserve to continue their effort to stimulate the economy through every monetary tool they can find.

: Brinker said that by the end of this week, there should be an official announcement that there will be no cost of living adjustments -- this will be the second year in a row. Brinker said there are over 58 million Social Security recipients - close to 20% of all the people in the United States....


.....(Referring to no Social Security COLA change) Brinker said: "With year-over-year inflation of only 1.1%, it is really no big deal, one way or the other."


Brinker said: "As many of you know, it's my opinion we are now in the second phase of the cyclical bull market. The first phase took us from spring of 2009 until spring of 2010. Actually, toward the end of April, we tacked 80% on the S&P 500.....Counting cash dividends made it up to about 82% total return. Then we had the mid-term correction that took the S&P down 16%, but only took the DOW down 13 1/2%. And that mid-term correction ended in early July.....

.....You might remember that right on the first of July, I had upgraded the market to attractive for purchase, recommending buying the market on the thought that we were at the bottom. Well guess what happened. We were at the bottom. The S&P 500 closed on June 30th at 1030. The upgrade to buy was made in my investment letter on July 1st and the market closed between 1022 and 1028 on the first, second, then after the holiday before resuming the cyclical bull market now in its second phase......

.....Remember last year it had a terrific year coming off the 2008 debacle, and here we have additional gains on the books as of now in 2010. And it's my opinion that as we move forward, we will add to those gains if I am correct."

Honey EC: There are some problems with Brinker's latest "upgrade to buy" signal and his latest market-timing schtick. Drum roll please:

* He hasn't had his followers raise a dime in cash since August, 2000 -- and all of his model portfolios have been fully invested since March, 2003. He wrote this the same month he now brags he recommended "buy the market"
Marketimer, July 1, 2010, Bob Brinker wrote: "All Marketimer model portfolios remain fully invested." Oops, how does that work when all stock market money is already invested, Mr. Brinker? Oh, maybe for those who inherited all that tax-free money or miraculously sold a house? LOL!

* Also, he mentioned the 2008 debacle, but he forgot to tell you that this last "buy signal" was just the latest in a long string of failed buy signals in 2008:
January 4, 2008, S&P @ 1411: Mid-1400's
Feb 10, 2008 S&P @ 1331: Low-1300's
Aug 5, 2008 S&P @ 1285: 1240 or less
Sept 2, 2008 S&P @ 1282: Low-to-mid 1200's
September 16th -- rescinded low-to-mid 1200's
Of course, the market looked like it had bottomed in November, 2008, but actually hit bottom in March, 2009 at S&P 676.

* Another problem that Brinker never tells his audience -- and certainly doesn't tell new Marketimer subscribers, is that he has changed his secular/cyclical market-timing hocus-pocus at least twice over the past 4 years. First it was a secular bear, then it wasn't, and then it was again. It looks to me like he had to resurrect the secular bear so that he could prognosticate about the "cyclical bull" cycles.

As my dear Aunt Tillie use to always say, "Oh what a tangled web we weave, when first we practice to decieve." Too bad that Mr. Brinker never met my Aunt Tillie.


In the second hour, Sharon from Fairfield told Brinker that she owned some stocks that have lost 30-60 percent of their value. Brinker told her: "That's really a shame to hear that, Sharon. Because even today, the S&P Index is only 25% below its all-time-high. And when you count in the cash dividends over the last 2 or 3 years, actually the Index is only about 20% on a total return basis below it's all-time-high. So it's very unfortunate to be sitting on those kind of losses......" (Brinker repeated this "nice market come-back - it's only 20% of its all-time-high" to Tony from Lodi about 15 minutes later.)

Honey EC:
All Marketimer subscribers and Moneytalk listeners know, Brinker has ALWAYS said that a 20%+ market drop was a bear market. Now he's telling us that the S&P 500 Index is ONLY 25% below its all-time high and it's doing great. You can't make this stuff up, nobody would believe it. LOL!

JT from Oregon said
that he has been following one of Brinker's model portfolios, but that over the past couple of years, he had not made the changes to his portfolio that Brinker made to the model portfolio. He wanted to know how to make those changes now.

Brinker replied:
"Which model portfolio are you in, JT? (JT replied, "The middle one.") The long-term growth portfolio two. Well, let me give you the good news. That portfolio is having a great year. It is doing better than the S&P 500 and the Wilshire 5000, as it did in 2009. As you know, that portfolio posted huge gains in 2009.....What I would do to get up to speed with any changes that you have not implemented, I would implement them. .....We don't make a lot of changes, we try to minimize them. But when we do make a decision to make a change, it's always based on strong feelings on my part. For that reason, I would simply implement the changes......I would use the percentage column, there on page 8, you will see the percentage column for each holding and that is the percentage I would use to put that in the portfolio."

Honey EC:
In the past couple of years, there has only been one change to Brinker's model portfolio II (the portfolio that he and the caller talked about for so long), and that was in the January, 2010 issue of Marketimer, Brinker wrote: "Model Two: Sell: 10% of the holding in the Vanguard Total Stock Market Index (VTSMX), reducing this position to 40% of the portfolio. Buy: 10% position in Vangurard FTSE All-World ex-U.S. Index Fund (VFWIX, thereby establishing a new position in the portfolio."

Bob Brinker, deceptively bragged that his portfolio is "having a great year" and did well in 2009. Why is that deceptive? Because he has made no change to his asset allocation since 2003, AND, his portfolios got CREAMED in 2008.

He deceptively refrained from posting his 2008 numbers on his website and almost never mentioned the stock market on the air in 2008 and for the first 4 months of 2009. Now, he picks out this latest S&P short-term high as a reference point to play his market-timing game. Apparently designed to sell newsletters by telling half-truths.

Because Brinker has been fully invested since 2003, let's see how his model portfolio II has done since the October, 2007 S&P 500 all-time-high -- which is actually the high that counts, rather than the one in July, 2010:

October, 2007: Portfolio II = $241,994
October, 2010: Portfolio II = $206,871
October, 2007 to October, 2010: Portfolio II - DOWN 14.5%

Moneytalk To Go is Available on Demand Totally Free at KGO810 radio for seven days after broadcast. Moneytalk has been canceled on all Saturdays. The Sunday program is archived in the 1-4pm time-slots. To download and listen later, right click on each hour that you want and use "Save Link as." KGO: Download Moneytalk Here

Brinker's guest-speaker was John Norris:

Dixiegeezer sent this beautiful Florida sunset:


Thursday, October 7, 2010

Summary of Bob Brinker's Moneytalk Guest: Mark Zandi

Last Sunday, Bob Brinker's guest-speaker in the third hour of the program was Mark Zandi. Many thought that Zandi was one of the most interesting guests that Bob Brinker has had on the program lately.

In his weekly newsletter, which includes a summary of Moneytalk, David Korn summarized the salient points of the Mark Zandi interview. David Korn wrote the following [posted with permission]:

1. Mark said a big part of TARP was bailing out the banks which were bad actors and caused much of the problems leading to the financial crises leading to the recession. If the government had not stepped in, the stakeholders in the bank would have been wiped out. As it turned out, shareholders in the stock got hurt bad, but bondholders for the most part were made whole. Mark said people are mad that these "bad actors" got away with something; however, that being said, Mark said he isn't sure there was anyway around it because we were in a sense bailing out ourselves.

2. Mark said there are a lot of pieces to TARP besides the banks; there was Chrysler, GM, AIG, Bank of America, foreclosure litigation efforts are funded by TARP. Given it is so complex, it is tough to break down and get a handle on. People tend to focus on one issue.

3. Mark said he thinks the Treasury had no choice on TARP. The original intent by Paulson was to purchase bad assets which would have been a better way to have gone if they had been given a choice. The problem was the financial system was deteriorating so fast they had to be more aggressive and take equity stakes in banks. If they had not done that, the banking system would have collapsed and the recession we experienced would have been far worse.

4. Bob asked Mark to comment on Hank Paulson's book, "On the Brink." Mark said it simply reinforced how fast moving things were and how the policy makers had to make epic decisions in short order under extreme distress.

5. Bob asked Mark to comment on what is going on in Europe and the bailout of Greece and the ripple effect in Ireland, Portugal and Spain. The European Union seems to have come to the rescue of the euro. How do you see the impact on the global economy. Mark said the events in Europe related to the sovereign debt had an immediate and significant impact on the US stock market. If you think back to the spring when the European debt crises hit, our stock market fell about 15% and that came at an unfortunate period of the recovery. At that time, it seemed that businesses were starting to get more aggressive about rehiring and the overall mood of the country was picking up. The decline in the stock market undermined the confidence of businesses and high-end consumers who are very sensitive to their net worth. The recovery got side-tracked and probably cost us 6-9 months and so it will probably take us another quarter or two to get back to where we were in the spring before the crises.

6. Bob said Mark to comment on the fact that Congress has not yet addressed the tax code and the expiration of the tax cuts that go into effect January 1. Mark said it creates a lot of uncertainty and is one of the reasons that businesses are not aggressively expanding or hiring. You would think it would be prudent for politicians to make a decision, one way or another --- whether they adopt the President¹s agenda or the Republican's Congressional agenda ‹ at least there would be a resolution to the issue and get rid of the uncertainty. It was a mistake not to nail that down.

7. How do you see the employment report coming out Friday. Mark said he thinks the consensus of 77,000 private jobs is about right and we are going to lose just about as many in census worker jobs. The total employment will probably be around the flat line and unemployment will probably tick up to 9.7%. The key benchmark is we need about 150,000 new jobs just to keep unemployment rate flat. It seems very likely that unemployment is going to drift higher as we go into the end of the year. Mark said he thinks we will probably see close to double-digit unemployment through most of next year. On a positive note, the preconditions for better job growth are coming into play. Mid-size and large growth companies are becoming very profitable and getting their balance sheets in order. They have been able to reduce their debt and lock in low rates. They are in such good financial shape, the question no longer is can they hire, but will they hire. If we can get our tax code squared away, and not get side-swiped by another European-type debt crises issue, by mid-next year, or at least by this time next year, the unemployment rate will start to come down in a more definitive way.

8. Bob noted that the U-6 calculation, which includes people who have part time jobs who would like full time jobs and the people who have given up looking for work, shows that the rate is 16.7% -- an extremely high number. Mark said this is a big number and why so many people are upset and it will take a long time to get all of these people who are unemployed and underemployed back to work. Even under the best scenario, it will be 2014 but maybe as far out as 2016 before we get back to full employment as we had before the recession.

[Korn] EC: There are actually several categories of employment measure the Bureau of Labor Statistics. The number that always gets reported is the U-3 which is the total unemployed as a percent of the civilian labor force and is considered the official unemployment rate. U-6 is defined as the "total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers." Marginally attached workers are persons who currently are neither working nor looking for work but indicate that want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.

9. Where do you think we stand on housing? Mark said we are 5 years into the housing crash and we are probably pretty close to the bottom. There will be a few more quarters of price pressure on housing but we are getting closer to the end of this foreclosure nightmare. If we do get the better job markets and mortgage/interest rates remain low, that lays the foundation for a better housing market by this time next year.

10. What do you propose to fix the situation? Mark said he is surprised that some of the things he suggested have been implemented. We got financial regulatory reform and there were efforts to improve underwriting standards for mortgage lending

Caller: What is your opinion on interest rates going out a few years? Mark said interest rates will rise in a few years, but in the next 9-12 months rates will remain low as the Federal Reserve continues to be very aggressive with monetary policy and openly discussing resuming quantitative easing, i.e. purchasing Treasury bonds. But down the road, when the economy does gain traction, and it will by 2012-2013, at that point the Federal Reserve will have to tighten, drain some liquidity and there will be expectations that inflation will pick up. At that point, interest rates will rise. In a normal well functioning economy, the 10-year Treasury yield should be around 4.5%. If you are planning for the long run, that is the kind of interest rate he would be expecting.

Caller: What do you think about Meredith Whitney's report that some of the large states are going to need a bailout which will require a huge bailout by the Federal Government. Mark said hasn't read the report but he doesn't think there will be any major municipal bond defaults. State general obligations are high on politicians priority list and they will do whatever is necessary to pay on those bonds because if they default it would make them difficult to raise money in the future. Mark said he thinks once the economy does improve and it will, state tax revenues will increase substantially, particularly in the states that are distressed like Illinois, California, etc. where they are supported by high income taxes. The concern for municipal bond defaults will fade rapidly when the economy recovers. Bottom line, Mark thinks the odds of municipal bond defaults remains low. That doesn't mean there won't be small bonds financed with specific projects, but that is a big difference between a general obligation of a State.

Caller: How will the economy improve when taxes are going to go up so high? Mark said there are good things that are happening. Strong corporate profits, which we are seeing, is always something that precedes a recovery. Household debt/leverage, which in a fundamental way got us in this predicament, is improving rapidly. The amount of debt that households have to service is also moving in the right direction. With regard to taxes, we have a serious fiscal problem to address but we don't have to fix it in one year. We just have to come up with a credible plan to address it over a long period of time, like a decade, but it doesn¹t mean we can't grow despite that.

Caller: This caller can't see why Mark is positive about the growth of our economy. Mark said another driver of our recovery will be growth in our exports. If you are an American company that survived this period of time, you are cost-competitive or have a market niche. We do a lot of things right, such as aerospace, machine tools, sophisticated equipment, agricultural equipment, and in the future we are going to increase our exports that are services such as engineering, legal, financial, management consulting, etc. We just have to get through the next 6-9 months without getting side-swiped with another unexpected crises."
David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service. Copyright David Korn, L.L.C. 2010

Honey here: You can get complimentary copies of David Korn's weekly newsletter and The Retirement Advisor, published by David Korn and Kirk Lindstrom, here: [LINK]


Sunday, October 3, 2010

October 3, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary,

Posted October 3, 2010....Bob Brinker hosted the starship Moneytalk - on the way to the Land of Critical Mass.

Bob Brinker talked about several subjects that many of you are interested in, so to conserve on length, I have included his monologues and caller-response excerpts, but will add my own editorial commentary in the comments section as the week goes on. Be sure to check the link at the bottom of this summary for those.


Bob Brinker said
: "We've had a number of calls over the last several weeks about the flash-crash back in early May. There seem to be about as many theories about what caused the flash-crash as there are people to expound on those theories..... We have a new theory now. This one courtesy of the Commodity Future Trading Commission and the SEC......This particular theory says that a large sell order in the futures market created the flash-crash. Now you can choose to believe this or not - that is up to you - but this is what they are trying to say right now as the latest explanation of the flash-crash.....

.....There had been another case of this many, many years ago, before the computerized trading had taken over the floor. That one was never really fully explained either. And now, the explanation that's coming out of the agencies is that this is because some mutual fund company - and there is speculation it might have been Waddell and Reed out of Overland Park, Kansas - but there's no confirmation on that.......And the speculation is that they wanted to hedge their mutual fund portfolios, so they dumped about 4 billion dollars worth of S&P futures, and the market fell out of bed......

.......Now this is not the largest mutual fund company - not even close. This is not a Vanguard. This is not a Fidelity........This is a mutual fund company that some people have heard of, some people haven't........Now they have acknowledged that they made a trade like this on the day of the flash-crash........But the explanation is that this is what caused the precipitous decline. I think most people feel as though a 4 billion dollar futures order in a market as big as the U.S. stock market, should not cause that kind of volatility. So I think that most people are going to be very skeptical.....and should be skeptical.....

......Seventy-five thousands e-mini contracts valued at about $4 billion can send the market on its way to zero? I think most people would be cynical about that explanation, but that is the best we have as of today. Of course, a cynic would say, well if you want me to believe that, what happens if a bunch of mutual fund companies decide on the same day they are going to put on a hedge like that? Suppose five or ten mutual fund companies - there are many mutual fund companies -- dozens....thousands. Well, I think the cynic would be on firm ground there that the inevitable conclusion is the market would be down around zero at that point.....

.......Suppose you had Vanguard in there with tens of billions of S&P 500 futures contracts for hedging....and Fidelity and T.Rowe Price......Well 700 points in a matter of minutes on a comparatively small order when you look at the size of the market. We're talking about trillions and trillions and trillions of dollars in market value here. But that's the best explanation they've come up here......

.......I told you you would not be happy with the explanation even if you got one......You've heard the theories - some of them have been expounded on the program - the financial terrorist attack theory.....the fractional trades, the canceled orders - you've heard them all. And many of you have been properly skeptical. Well this is what you're left with.....This is what you're being asked to believe at this point. I'll leave it up to you - whether you believe it or not....."


Brinker said:
"Another thing in the believe it or not category is the California budget impasse. Supposedly they have a compromise to come up to close this $19 billion annual deficit -- for one state. They've been at an impasse for the past 3 months and finally came up with a compromise......You shake your head in disbelief. How do you close an $19 Billion annual budget deficit? Well you get $5 billion from the Federal Government. WHAT? $5 billion from the federal government? Most people didn't know the federal government could send 5 billion dollars to help the California budget. That's taxpayer money, boys and girls - from the 50 states. They've also compromised on $7 1/2 billion on spending cuts......They are cutting money for schools.....They are cutting money for child care.....They're cutting health-care benefits and social programs.....

.....California, which is the 8th largest economy on the planet, has an $84 1/2 billion annual budget. So a $19 billion dollar budget deficit represents 22% of the annual budget. And as everybody knows, California is being strangled by incredibly high benefit costs being paid to government workers - government programs for government workers in California.....For any state to run a 22% annual budget deficit.... is really a shocking admission. But if you think the federal government in Washington, which just adjourned for the election, without passing tax policy - even for next year - then Sacramento is dysfunctionality on steroids."

[Honey EC: In my opinion, Brinker is understating the "incredibly high benefits costs" for government workers in California. In many cases, they are obscene! And in most cases, private sector worker's pay is MUCH LOWER. And the benefits that the taxpayers fund for public employees (at all levels) are mostly non-existent in the private sector. ]


In answer to caller, Carl's, question about the flash-crash, Bob Brinker said: "The reality is that this is the worst possible conclusion that they could have reached as to what was the cause of the flash-crash....What they are saying to the investor is, look a so-so hedging order like this caused the market to go into an uncontrollable nose-dive.....What they are saying is, this was just one order from one mid-western mutual fund company. So what they are implying is, if you had had a flood of sell orders in the futures market, occurring within the same day even, you could be looking at stock market Armageddon."


Brinker continued with his reply to Carl: "One of the reasons I think you've seen volume dry up, regardless of what the direction the market's doing, the volume has dried up relative to where it had been. Now I think the little guy is gone.....Many of them looked at the flash-crash and they said, that's it, I'm outta here - it's not a viable market.....Whatever is going on out there makes it very difficult for the small investor to deal with this."


Brinker continued: "The reason it hasn't mattered to the prices - and you've seen a really good trend here since early July in the market and we have a positive market so this year - the reason is because the institutions are trading the market all over the world. It's a global market - the US market. They don't care about this stuff - they just go about their business. But the small investor that gets up in the emotion of all this, oh they are gone......."


Brinker continued:
"And it's a shame because they may wind up sitting out what looks like a really nice cyclical bull trend here. As you know, I believe we are in the second phase of a cyclical bull market with the correction low in early July when we upgraded the market to attractive for purchase done there in the 1030 S&P area. Now we are in the 1140's and I think investors are going to be very pleased with what they are going to be seeing. So it is unfortunate that an event like this would scare the little guy out of the market, but I suspect there has been some of that."


Caller John from Hartford said a lot of people in his congressional district are upset about TARP and he asked Brinker what he thought out it. Brinker said: "I think they are wrong. There's a lot of ignorance in politics....I think there is a lot of ignorance out there on what happened with TARP. Now the reality is, the latest estimate on the results of TARP are that the loss could be as much as $50 billion or it could wind up at a profit. It depends on how the sale of equity positions go in the future. And that includes the sale of the Citicorp equity position which is still close to half owned by the federal government......We know there was no humongous loss as a result of TARP.....Possibly all of it will be recovered with a profit. What it did was provide the banks with a capital cushion at a time when they couldn't get the money anywhere else. So I think it was a success, and I give President George W. Bush and Treasury Secretary, Henry Paulson, who are responsible for TARP - let's not muddy the water here - TARP was a product of George W. Bush and Henry Paulson. And I would say that they did the right thing with TARP......

........The only mistake that was made was Henry Paulson sold TARP to Congress on the false premise that he was going to use the money to buy toxic-assets, which never happened......Those who don't understand that the TARP program was a success are being unduly harsh on both President Bush and Henry Paulson - that's my opinion."


Brinker repeated his advice that in case of sustained rising interest rates, those who don't want to ride the NAV down should set a mental stop price level below which you will not hold your bond funds.


About big estate beneficiaries, Brinker said, "They just won the lottery, those people. Beneficiaries of those estates, won the lottery because of the dysfunctionality of the US Congress, which is at a level I never dreamed conceivable, there is no federal estate tax this year.....And it doesn't appear right now that that is going to change."


After pointing that Congress has not passed a tax policy and there isn't much time left to act, except as a lame-duck, Brinker said: "This congress has done one thing - they have passed a health-care bill. And it's already had some effect and many of you have seen it. In fact, some of you have called about it - like skyrocketing insurance premiums. People around the country, many of them are seeing their health insurance premiums soaring because insurance companies are trying to position themselves for the changes that come in over a period of years. We see companies already that are announcing they're quitting the health-care insurance business in this line or that line.......

.......The latest example this week is the gigantic company in Des Moines Iowa - Principal Financial Group. They say that they are going to drop many of their health-care policies because of the changes in the health-care legislation. And this raises an interesting question as the companies run their insurance premiums up so that some can't afford them and other companies in the business just drop the health-care lines.....Is this the law of unintended consequences which we so frequently from legislation out of Washington?.......

.....Remember years ago the law of untended consequences reared it's ugly head after Congress passed a luxury tax on the purchase of yachts? Yachts costing more than $40,000 were going to be subject to a 10% luxury tax......Well there weren't many yachts being constructed after that because of the tax. And all off a sudden, we saw unemployment soar in that small sector of the economy.....But the point was, it hit hard where it did hit......"


........Brinker continued: "I'm not sure that what we are already seeing as the fall-out on the health-care bill is an unintended consequence. Call me a cynic, which I am, but I think that perhaps it's an intended consequence. I think those that passed this bill knew that this would happen and they didn't want this bill anyway - we all knew that. They wanted single-payer.....Since they could not get single-payer, they didn't have the votes, they wanted a bill that was a stepping stone to single-payer - and I think that's what they got.......

.....I can just hear them now sitting around saying, well if we pass this bill, the first thing that will happen is insurance premiums will go through the roof - a lot of people won't be able to afford health insurance. And the next thing that will happen right away is a lot of insurance companies will say we're not going to write these policies because we can't make any money on them. Instead of the law of unintended consequences, that would make it the law of intended consequences....."


Brinker continued: "Of course, the new health-care law requires insurance companies to provide coverage to children with pre-existing conditions....It's effective now. Did you notice Principal Financial Group dropped that line too? You'll see more and more of this. You know this. Companies will simply leave the areas of coverage under the bill that they can't make money on. They're not going to take the inevitable losses on the policies. They'll drop the line.....


Brinker continued: "We've already seen this film. You remember the hurricane situation in Florida got out of hand in 2005. They had storms criss-crossing the state like 18-wheelers. It was a disaster - cost the insurance companies a fortune. And what did they do? They pulled out......If you're along the coast, you know how hard it is to get a top-rated insurance company to write a policy against a hurricane these days - and other states too, up the coast........This is what happens - the companies just bail when the business model degrades......that's the way it works......

...... And it will be interesting to see the fall-out as this health-care bill gets phased in over a period of 8 years - all the way out to 2018.....Starting in January.....the pharmaceutical companies will be paying an annual government charge of 2 1/2 billion dollars. Now who do you think is going to pay that? You will pay it. It will simply flow through to your cost when you buy the drugs. And that fee will be up to $3 billion by 2014 - this is a back door tax. You slam the corporation and the corporation has no choice but to pass it on - and that is what'll happen.


Brinker said: "They've also put in a provision starting in 2013 limiting how much you can contribute to your health-care savings account. It will be capped at $2,500. Right now the employer sets the limit - that'll change. They're also raising the deductible on medical expenses that year to 10% of adjusted gross income -- it's 7 1/2 now....."


Brinker said: "Did you see the Medicare tax increases in this bill? It's 1.45 right now for both sides, the employer and the employee. It's going up to 2.35, that's 4.7 combined for the self-employed, compared to 2.9 combined right now on earnings over $200,000 for individuals - $250,000 for couples.....

.....And did you see the new 3.8% Medicare tax on unearned income? And did you see what is covered by this - capital gains, dividends, interest, rents, royalties. And if you make a taxable profit when you sell you home, you'll pay a 3.8% Medicare tax on the taxable portion of any profit from the sale of your home. This all starts in 27 months - January 2013. And these are just some of the provisions. So when you see the stuff coming out of Congress, you can appreciate the frustration of the voters."

Brinker's guest-speaker was Mark Zandi:

Moneytalk To Go is Available on Demand Totally Free at KGO810 radio for seven days after broadcast. Moneytalk has been canceled on all Saturdays. The Sunday program is archived in the 1-4pm time-slots. To download and listen later, right click on each hour that you want and use "Save Link as." KGO: Download Moneytalk Here Don't forget to save your copy of Brinker's guest-speaker in the 3-4pm hour!

SJ_Al took these while bike-riding around the Alviso Salt Ponds last week. This is a great picture of the old dirigible hangars at Moffett Field and Ames NASA Center:


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