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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. :)


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