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Sunday, November 28, 2010

November 28, 2010 Bob Brinker's Moneytalk: Lynn Jimenez Fill-in Host

November 28, 2010....Bob Brinker took this Thanksgiving Sunday off. Brinker's fill-in host was Lynn Jimenez. Ms. Jimenez is an excellent business reporter for KGO810 radio.

Sorry friends, I have better things to do than listen to Lynn Jimenez, but comments about her program are certainly welcome. :)

Here is a quick review Bob Brinker's current financial market views:

~ Brinker sez the stock market is in a cyclical bull within a secular bear -- his current target range is S&P 500 Index 1300 to 1350.
Please note: Not only is Brinker's current S&P target range about 7% below his January, 2008 mid-1400's buy signal, it is THREE HUNDRED points below his project S&P target range of late 2007!

November, 2007 Marketimer (S&P at 1549.38), Bob Brinker wrote:
"Investors are increasingly looking forward to 2008 earnings prospects. Our current estimate for 2008 S&P operating earnings is $99.00. Based on this outlook, the index is currently valued at 15.6 times forward earnings. Using our estimated P/E range of 16 to 17 times operating earnings, the S&P 500 Index should rise at least into the mid-1600's range next year, in our view."
~ Brinker recommends that all stock market money be fully invested. (as his model portfolios have been since March, 2003).

~ Brinker recommends dollar-cost-averaging approach for new stock market money.

Brinker recommends staying short-term with bond funds. Nov 14th, Brinker said: "You want to keep the maturities toward the shorter end.....This is not a time when one should be looking to extend their durations and maturities."

~ Brinker recommends establishing a mental stop for Ginnie Mae Funds at a price where you want to sell when the net-asset-value begins dropping. He believes this offers psychologically protection from fear of catastrophic losses.

~ Brinker recommends silver as an alternative to gold hedge. Nov. 7th, Brinker said: "As far as silver is concerned, I think it could be considered as an alternative form of hedging in a portfolio......The preferred way for those who wish to have a silver hedge in their portfolio would be the Exchange Traded Fund that holds the silver bullion -- that trades under the symbol SLV.....the Ishares Silver Trust."

Brinker likes the Vanguard High-Yield Bond Fund (VWEHX) and includes it in his Marketimer fixed income portfolio. Nov. 7th, caller Carl told Brinker that he was using Vanguard's High Yield Bond fund for part of his grand-child's college fund. Brinker replied: "I think you will see that it's done quite well. The yields have been excellent on that fund, and the net-asset-value is doing fine. Last time I checked it was like $5.83. I think that you'll be find that you'll be very happy when you look at the numbers."

November 2, 2010 Marketimer, Page 3, Paragraph 2, Bob Brinker wrote: "Based on the excellent corporate earnings progress we are seeing and our estimate of real GDP growth in the 2% to 2.5% range next year, we are increasing our S&P 500 Operating earnings estimates to $78 in 2010 and $87 in 2011."

Ms. Jimenez' book is bi-lingual. Here are some comments about it from

"Whether you speak English or Spanish, you need to speak the "language of Money." ¿Se Habla Dinero? is a family guide in both languages to help you overcome your fears and to answer your questions about money, banking, budgeting, and borrowing. Use it as a quick reference as you join the millions of Latinos climbing the ladder to financial success.

"¿Se Habla Dinero? is written for the average Latino family that is struggling to meet daily needs while planning for the future.? Lynn Jimenez provides a comprehensive and commonsense, easy-to-follow road map for managing your money and achieving your family's financial goals.""

Moneytalk is totally free and available On Demand 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

Dixiegeezer's reminder of spring:


Saturday, November 27, 2010

Bob Brinker and The 4% Rule: Is it Always Good Advice?

November 27, 2010....Bob Brinker has always advised limiting one's ownership in any specific company stock to no more than 4% of total equity holdings. Bob Brinker said on Moneytalk and in Marketimer that this "rule" does not apply to mutual funds or ETFs.

Some have questioned the advisability of using the 4% rule in all cases. It might be wise in most cases, but is it always wise? And on the other hand, are there some mutual funds and ETFs that one should limit to 4%?

In his November 22nd weekly newsletter which includes a summary of Brinker's Moneytalk program, David Korn wrote the following:

"Caller: This caller wanted to know whether Bob's recommendation of limiting an individual stock holding to 4% of a portfolio would apply to something like a mutual fund from Vanguard. Bob said the 4% rule applies to an individual company stock, not to a mutual fund that already has diversification built in. The reason for the 4% rule is to manage the risk involved. If you were talking about something like the S&P 500 or Total Stock Market Index or other index fund, the 4% rule would not apply.

[David Korn] EC: Ever wonder what the genesis for the 4% rule is? It really derives from modern portfolio theory and the concepts of systematic and non-systematic risk. Let's take a closer look for a moment at these important concepts.

Systematic Risk: Think of "systematic risk" as the risk of just being invested in the market. This risk is the risk that all stocks face, regardless of what industry, sector, or price-to-earnings ratio they have. It is simply the overall risk of being in the market. For example, terrorist attacks, recessions, world wars, alien invasions to earth, all would create risk for the entire market.

Nonsystematic Risk:
This is the risk that individual stocks face. Companies face all kinds of specific risks, such as lawsuits, strikes by employees, changing attitudes about a product. For example, Microsoft faced the nonsystematic risk of being sued by the Federal Government and in that case, the risk turned real! Another example of a nonsystematic risk for a company would be in the case of a product that loses favor with the public -- say a study revealed that drinking Coke caused cancer. That would be a seriously bad problem for Coke and provides a clear example of the nonsystematic risk than one stock faces.

4% Rule: Here is where it gets interesting (that is if you find any of this stuff interesting). Academics point out that you can not avoid systematic risk if you are going to invest in the stock market (other than by hedging techniques which is for another day). HOWEVER, you can avoid nonsystematic risk through diversification of stock holdings. When you think it through, it is kind of obvious. How can you avoid the nonsystematic risk of holding one stock? Easy, try to make your holdings more similar to the overall market -- own more stocks!

Now, here is the neat part. Studies have shown that you don't need to buy every stock in the market to avoid nonsystematic risk. In fact, there have been several studies that show if you own 20-40 stocks in different sectors and industries, you will be able to diversify your way out of nonsystematic risk. You will still have systematic risk, but that's the risk you always take by being invested in the market as a whole. Bob's "4%" rule would permit someone to own 25 stocks, each weighted 4% of the total portfolio which is well within the range of owning 20-40 stocks that academics say is needed to avoid nonsystematic risk. So there you have it -- the foundation to the 4% rule. Realize that this is a pretty simplistic explanation of the nonsystematic and systematic risk, but I hope it helps explain things."__David Korn
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
Complimentary issues of David Korn's weekly newsletter and The Retirement Advisor published by David Korn and Kirk Lindstrom

Bob Brinker's Marketimer off-the-books "Individual Issues" list has contained only two stocks (MSFT and VOD) for many years. However in May, 2009, Brinker added Suncor and GLD. Here is his explanation for adding SU:
Marketimer May 2009 issue, Bob Brinker said: "This month we have added Suncor to our coverage. Suncor is a leading Canadian oil sands producer with vast reserves in the Athbasca Tar Sands of Alberta.....We view Suncor as an excellent way to protect portfolios against the rising oil prices in the future. As with all individual stock issues, holdings should not exceeed four percent of equities."
Unfortunately, Brinker has never offered any explanation as to why he added GLD to the list, and he has never said how much of it he recommends purchasing. Since he has made it clear that in his view, ETFs do not fit into the 4% rule, what category does GLD fit into? Subscribers have had to decide for themselves whether or not it's "to the moon, Alice." :)

Some of the ETFs that are on the Individual Issues List have taken a real beating over the past 5 years -- for instance, the ETF, DVY. Before the 2008-2009 megabear market, Brinker recommended DVY for those who wanted to own dividend-paying equities. He once told a Moneytalk caller that DVY could be used by conservative investors in place of the Total Stock Market because its dividends gave it a little more safety.

YIKES! What a ride those followers have had from October, 2007 in the $70 range, to March, 2009 in the $22 range. It's back up to the $48 range now. But the NAV is still down by about 1/3, even after the S&P 500 Index made some very nice gains in the past year and a half.

Brinker's DVY recommendation over the past 5 years compared to total market (VTI) and Dow (DIA). Don't hold your bref for any calls to get through to the program about this one -- like they used to when it was doing well. Brinker simply doesn't discuss his bombs:

Dixiegeezer's stunning photograph:

Sunday, November 21, 2010

November 21, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

November 21, 2010....Bob Brinker hosted Moneytalk today -- on the way to the "Land of Critical Mass." :)

STOCK MARKET....Besides quoting the Friday closing numbers, Bob Brinker only had this to say about the stock market today: "S&P 500 Index at 1199.73. Just a tick or two away from the 1200 level. That gives the S&P 500 a total return, including dividends, this year to date of 9.4 % which is pretty cool when you're in a near zero interest rate environment."

INTEREST RATES.....Brinker said: "I'll tell you what, interest rates are rock bottom."

TAX BRACKETS NEXT YEAR....Brinker said: "We don't know what the brackets will be next year because of its amazing ability to become more and more dysfunctional as time goes by, congress has failed to legislate tax rates. Starting on New Years Day, we don't know what they will be.....If they don't do something then the marginal income tax rates, across the board will go up.....There are tax credits on the books, they will be slashed. Tax rates on capital gains and dividends will change. If nothing is done, capital gains will go up to 20 and dividends to 39.6% New Years Day. And estate tax on estates worth more than $1 million will be brought back after 2010 had no estate tax at all because congress failed to take it up."

CONGRESS WORST IN UNITED STATES HISTORY.....Brinker said: ".....just about 6 weeks before the end of the year and none of know what the tax brackets will be starting in January. And for that, it is fair for you to say that in terms of dysfunctionality, this congress in Washington is the most dysfunctional in the history of the United States. And there is no doubt about it." Honey EC: Brinker has never pointed out that Nancy Pelosi and Harry Reid have been the leaders in "this congress" for over four years.

WARREN BUFFETT....Brinker reported that Warren Buffett thinks the Bush tax cuts should be allowed to expire at the end of December which would amount to one the largest tax increase ever. Buffett thinks rich people should pay more in taxes. Brinker gave a couple of Buffett quotes. Honey EC: I sure won't be quoting Buffett on this blog unless Death Valley freezes over tomorrow. Who is this leftist, Warren Buffett, that he should have any input in our Federal tax policies? Why does Brinker seem so ga-ga over the "Sage of Omaha?" Oh, Brinker has already answered that question: "It's all about the money." As Jeffchristie recently pointed out, these tax increases will hit ALL taxpayers and the lowest bracket the hardest with a 50% increase.

FOUR PERCENT RULE....Caller Tim from Madison asked Brinker if the 4% rule applied to index funds. Brinker explained that it did not apply to index funds. It only applies to individual-company stock purchases.

"My advice has been to stay away from long-term bonds right now. I don't think long-term bonds are a good place to invest right now. Short-term is another story....."

said he had permanently moved from the U.S. to Canada. He asked Brinker if he should move his retirement accounts out of the US and into Canada. Brinker replied: "Well I'm a strong believer in having the main currency in your the country that you reside.....I like to match currencies in the currency that you are trading in....You may wish to continue to invest in mutual funds that in the United States, and in that case, you will be accepting the US dollar as your currency for that transaction. But with the exception the investment category, in terms of your every day expenses and your major future liabilities, I'd be thinking in terms of the loonie....."

ZERO CAPITAL GAINS TAX IN 2010.....Caller Stella from San Francisco
asked Brinker about taking capital gains this year. Brinker advised Stella to check with a tax advisor to find out her tax bracket and then make a decision. Brinker said: "If you're in the zero tax bracket, for example, if you took a profit, you could re-establish a position (and if it's a profit, the wash sale rule doesn't apply) and hold it to the future and you'd have the higher cost basis going forward." Honey EC: I'm sure not a tax expert, but I think the income threshold for zero capital gains is about $30,000, including the capital gains.

asked: "What do you think QE2 will do to the inflation numbers"? Brinker replied: "Well, I think it's an unknown. I don't think Ben Bernanke himself knows what the value of QE2 is -- buying Treasury securities and printing additional dollars to do so. I don't think Ben himself knows. I think he's functioning under the dual mandate."

Honey EC: Brinker's tune was quite different last week. This week he's trying to make it appear that Bernanke is only "doing what he has to." That is NOT what he was saying when he spouted off about this last week. Here is what he said on November 14th: "Let me be very clear on this because I do not want to be misinterpreted on this. Any politician, and I don't care who they are and I don't care what party they're in, that tells you that the Federal Reserve is wrong to attempt additional quantitative easing is a fiscal moron....."

Brinker explained that over three decades ago, congress adopted a dual mandate for the Federal Reserve. Brinker said: "The dual mandate is price stability and maximum employment, taken together. And of course, they are polar opposites. .....Now they have price stability but they don't have anything close to maximization of employment potential. In Europe, they have a single mandate -- to keep inflation down. Prior to the change in the mandate back in the 70's the Fed here had a single mandate. The single mandate was to keep prices stable (inflation down) and to keep the US dollar sound.......All Ben Bernanke is doing is adhering to the mandate congress gave him. And now to hear members of congress attacking him, and other politicians -- some of whom I regard as idiots --attacking him on the basis of the fact that he is doing what he has to do under the mandate, that is sinful behavior......If I were Ben Bernanke, I would be furious. In fact, if I were Ben Bernanke, I would consider resignation......"

: "They have to cut benefits. That includes extending the age on Social Security beneficiary recipient. That includes the possibility of means testing. Oh wait until you see the reaction to means testing on Social Security.....Certainly you have to have changes in the Medicare program...." Honey EC: Is Brinker afraid to talk about making cuts in any programs that are strictly hand-outs? The programs that he always focuses on are those that every working person has been forced to pay into his/her whole life. Perhaps it would not be politically correct to address any other kind of "benefits."

ENERGY PRICE INCREASES DON'T CAUSE INFLATION......Caller Gene from Sacramento asked about the accuracy of the official inflation numbers in light of the fact that food and energy are not included in the CPI. Brinker said: "Energy is way up in the past year. Energy, commodities up about 10%. Gasoline is up a big number. Fuel oil is up double-digit in the last year. But of course, rising energy prices alone don't produce inflation because they are weighted into the overall index. And when you mete it all out, that is just not the number that comes out. Even though, energy is up big in the last year, it has not resulted in big inflation, even in the headline number which includes everything. The headline number is1.2% year-over-year. But I must tell you that the food component is not up a lot. In the last year, it is up less than 1.5%.......If you throw out food and energy, we have one of the lowest ever -- goes back to the 1950s-- core rate which is 0.6% annual."

Caller Brian from Chicago
became the victim of Brinker's wrath today. Brian said that he was a loan officer and had done loans for 20 years. He explained that there are some 30 pages of forms that need to be signed and that no one ever really reads all of them. Brinker interrupted Brian to say that it does not matter whether you read a legal document or not. Brian tried to explain further, but Brinker immediately lashed out at Brian, demanding that he let him speak, then continued to explain that if you sign a document, you are legally responsible even if you don't read it.

Brian then told Brinker that every year, the government comes out with extra forms ,and sometimes these extra bureaucratic red-tape forms get left out from the original signing, so they need to be signed. Brinker became irate, raised his voice and shouted: "Brian that should not happen. That's incompetence. You've already started down the road of incompetence -- 'Oh, I forgot to put this in, it's not a legal document, it's an incomplete document, I have to come back for another signature.' You're already in the land of incompetence right now. It shouldn't be that way. Have the documents in order before you make the signing official. I don't want to hear about this. I gave the wrong documents. The documents are incomplete. I really don't want to hear that. Take the proper documents. Take the time. Do your homework......

.......If you're doing a mortgage deal, before you go out and get the signings, do your homework. Get the deal right. I have to tell you, I don't want to hear from anybody on the mortgage granting side, 'Oh I gave you the wrong documents, they're incomplete.' That is just ridiculous. That is just absurd. Time to fire your mortgage broker right there. More to come on America's money program......"

asked: "California is issuing a lot of these general obligation bonds and we're concerned if they are going to be able to pay them off and I wanted your take on that." Brinker replied: "I don't think there is any financial stability at all in the State of California. I think that the state of California is as dysfunctional as you can possibly get.....And when I look at the results of this last election in California, I don't see any reason to change my view that California is fiscally unstable......They cannot continue to do what they have been doing without becoming insolvent."

.Brinker reported that over $3 1/4 billion of additional debt placed on the backs of California taxpayers by Sacramento politicians as they went out and did another massive sale of federally subsidized Build America Bonds. These bonds pay a huge premium above the Treasury rate because of the questionable reliability of the State of California to repay debt......Brinker said: "You're not buying Treasuries, you're buying the full faith and credit of the State of California when you buy one of these Build-America Bonds........Yes, they get a 35% of the interest cost rebate from the Federal Government, but the principle is on the backs of the taxpayers of the State of California."

CALIFORNIA'S PROMISES TO PAY SO MANY PEOPLE SO MUCH.....Brinker said: "There is so much uncertainty about how in the world the state is going to meet all of the promises it has made to so many people over the years. Including those who have worked for the state and are eligible for benefit packages for many years to come. Who's going to pay for all that? Investors are worried about that, as they should be......The way people are looking at California right now is, it's basically a debt machine. As a matter of fact, this coming week, they are scheduled to sell another $billion of tax-exempt General Obligation Bonds. And another $100 million of taxable-lease revenue bonds......The investor has legitimate questions now about the long-term solvency of issuers like the State of California."

told Brinker he was concerned that the Federal Government might have to bail-out California. Brinker agreed with Tom and said that if the state should become insolvent, there were two possibilities -- either the Fed would offer aid or it would not. It all boils down to this: Is California too big to fail?

Brinker's guest-speaker was Robert Slater:

Moneytalk is FREE and available on demand at KGO810 radio for seven days after broadcast. (Saturday Moneytalk broadcasts have been canceled.) The Sunday program is archived in the 1-4pm time-slots. To download and listen at your convenience, right click on the hour and use "Save Link as." KGO: Moneytalk Download Don't forget to download the Robert Slater interview in the 3-4 hour of the program.

My Idaho sister-in-law sent this today. It's the first snowfall lightly dusting the wheat grass, making it look like it's blooming snow flakes. Click to enlarge:

Thursday, November 18, 2010

Risky B2B Recommendation That Bob Brinker Kept Off the Books

November 18, 2010.... Many of Bob Brinker's followers view his B2B-buy [TEFQX] as his second most costly recommendation. After the fund went south about 90%, Brinker put it on hold and, walla! it disappeared completely.

Our resident wise Mr. Pig
reminded me about this today when he wrote: "If the "hold" goes "south" for a long time, the recommendation disappears from the newsrag, and history. (BUT.....not from this site) TEFQX is a great example."

In many ways, Bob Brinker handled this disastrous trade similarly to his 2000 QQQQ trade. He didn't send out a special bulletin like with the Q's. However, like with the Q's, he touted the Firsthand Fund [TEFQX] in several Marketimers. He advised aggressive subscribers to invest a defined amount from the 60% cash reserves raised in January 2000.

So I'm going to tell the history of this from my files by posting some writings from people who "were there" and some direct quotes from Marketimers. Some of these people may be a pleasant flash-from-the-past for some of you. :)

(2000) Rande, a professional financial analyst, wrote:

in response to message posted by Mark_J:

Seems otherwise reasonable people continue to argue over the meaning of "immediately" and other strange stuff, but can we at least put to rest the absolute nonsensical and unfounded bullcrap about what "5%" means?

Here's an exact quote from the Jan. [2000] newsletter:
"Firsthand e-Commerce Fund is added to page four of the Recommended List this month. We will include a writeup on this fund in the February Marketimer. For now, we would limit investment in this fund to 5%, and this 5% would be part of the revised 25% overall United States Equity weighting."
NOT 5% of 40%, but 5% of the total portfolio, which was 25% US, 15% International, and 60% cash. So, TEFQX was actually 12.5% of total equities (according to the recommendation), just as International was 38% as a percentage of equities, even though it was "only" 15% of the total portfolio. BUT, not enough conviction to include in the Model Portfolio's evidently.

Read on from the Feb. [2000] letter:
"We have always viewed books, toys and on-line auctions a the tip of the iceberg.... We are very positive on the potential for the Internet growth track to carry forward.... ...the fund is appropriate for subscribers with a high risk tolerance who seek exposure to one of the fastest growing areas of the economy going forward in our view. Due to our current risk averse stock market stance, we are not placing this fund in any of our Model Portfolios at this time. ...we would regard a five percent exposure to this fund as the maximum...."
So, to recap, TEFQX could have been as much as 12.5% of equities, but the guru wasn't willing to add it to the Model Portfolios. The guru was gung-ho on the Internet and fully caught up in the B2B mania, even though he trashed the net for the better part of 1999. And it only got worse as the year dragged on with "no chance" of new highs on the trusty old S&P and "buy immediately" on the "impossible to call/don't ask me" Nasdaq. Any wonder most of his followers don't know what the heck to do or believe"__ posted by Rande

Kirk Lindstrom wrote:
“It is simply amazing to me how "confused" Brinker's advice at the time was in January 2000. He told people to take money out of the market, which was a great call, then the told them to put some of it into TEFQX and QQQQ that were disasters. He did the latter "off the books" that seemed odd at the time, but now we see how he pretends it didn't happen so the risky advice was what seems now to have been a "hedge" to give him something to advertise should the market not crashed.

Yup, he was buying into the IPO mania in internet stocks right at the very top. He did mention it was volatile and not for risk averse investors which would leave out P3 types that don't market time.

Everyone is wrong on occasion. Is sure know I have been wrong on many stocks over the years. But we put our risky recommendations into our portfolios so they can be measured."__Kirk L.

David Korn wrote: "Other than the QQQQ recommendation from Bob Brinker, the recommendation he gave that probably comes in second place insofar as complaints that I get from my subscribers is TEFQX - the mutual fund that Bob recommended in early 2000. You may recall the excitement both on Moneytalk, and on Bob Brinker's discussion message boards at the time over this recommendation.

I do give Bob credit on one count relative to this recommendation -- he put some of his money where his mouth was because he said that he owned the fund. Why? Because he felt that Kevin Landis, the fund manager, was a great stock picker. Unfortunately, Bob simply dropped the fund from his Marketimer newsletter and hasn't brought up the topic in years leaving many people who bought it on his recommendation to decide for themselves what to do about it.

It is a familiar story when one of Bob's recommendations goes afoul I am afraid. I suppose its the ego thing. Do any of you still own TEFQX and have an opinion on it? I keep track of it because I get questions about it on a somewhat regular basis from my subscribers." __ David Korn
Will L. wrote: "I recall retired sorts were going crazy on his site [Brinker message boards] with Junior hyping the B2B sector and stocks in the fall of 99 and spring of 2000. Brinker and his adoration of TEFQX and Landis, the fund manager likely caused many people to bet too heavily on that terrible idea that he just hid rather than ever closed out."
Honey here: Brinker's disappearing trade in black and white:

* Jan 8, 2000, Marketimer, TEFQX=$15.40, Brinker said:
"Firsthand e-Commerce Fund, (888-883-3863) is added to page four of the Recommended list this month. We will include a writeup on this fund in the February Marketimer. For now, we would limit investments in this fund to 5%, and this 5% would be part of our revised 25% overall United States equity weighting. This fund is expected to be volatile, therefore it is appropriate only for very high risk tolerance investors."

* Feb 8, 2000, Marketimer, TEFQX=$15.99, Brinker said:
"Firsthand e-Commerce Fund is the newest addition to the Marketimer No-Load Fund Recommended List on Page four...... We have ALWAYS viewed books, toys and on-line auctions as the tip of the iceberg for electronic business. We believe business-to-business transactions will greatly surpass retail e-commerce including software development tools, database providers, hardware manufacturers and service providers.......We are very positive on the potential for the internet growth track to carry forward through international penetration. We are hopeful the fund will be able to add many of the best positioned B2B companies going forward. Many of these companies are not yet publicly owned but will come to market in the future."

* March 7, 2001, Marketimer, TEFQX=$3.93, Brinker said
: "We are removing Firsthand e-Commerce Fund from the Recommended List. We rate the fund a "hold" at these levels... we expect the shares to recover value over time."

The trade was never again mentioned in Marketimer or on Moneytalk! [Record low down 90%, August 5, 2002 @ $1.60/In 2008, it was close to $2.00/Today, it is at $5.84]

Note: Brinker's "Recommended List" is strictly "off the books" and is never included in his performance records. His model portfolios are his only official record and are used by Mark Hulbert to rank his market-timing performance. Hulbert never accounted for this trade or the Q's in his rankings.

As Rande pointed out above, Brinker did not want the trade on his official record (his model portfolios) "just in case" it took a nose-dive -- which it did. Here is a mind-boggling Marketimer quote which gives the whole picture quite clearly: Brinker said: "Due to our current risk averse stock market stance, we are not placing this fund in any of our Model Portfolios at this time."

(2000) Kirk Lindstrom sumed it up:
"Brinker seems to put most his risky advice "off the books" so he can delete it from the newsletter if they go down (UTEK, ONTK, TEFQX) or keep them as multi year "HOLDS" if they go up (MSFT & VOD). In this day and age of exposing those that "cook the books" consumers should DEMAND accounting accuracy from those in the national spotlight. This sort of behavior (off the books accounting) from a national figure on a Disney Network should be held to EVEN HIGHER standards."

Chart courtesy of Kirk Lindstrom (click to enlarge):

Dixiegeezer photographed this pair of beautiful birds. Click to enlarge:


Sunday, November 14, 2010

November 14, 2010 Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

November 14, 2010....Bob Brinker hosted Moneytalk today. Bob Brinker's mantra on the way to the "Land of Critical Mass" seems to be: "It's all about the money."

Bob Brinker's comments summarized, paraphrased or excerpted:

....DJIA is 11,192; S&P 500 Index within 2% of its closing high of year -- total return, including dividends, 9.3%. Honey EC: Brinker is bullish on the stock market and has remained fully invested since March 2003. For new stock market money he recommends dollar-cost-averaging at the present time. His current S&P target range is 1300 - 1350. I was very disappointed that Brinker did not comment about the dips in the stock and commodities markets last week.

BOND DURATION AND MATURITY....Brinker said: "You want to keep the maturities toward the shorter end, especially with the interest rate environment that we are in right now with a lot of uncertainties with where interest rates will be in future years -- not where they'll be tomorrow -- we know where they'll be tomorrow.....As a consequence, I'd have no willingness to be extending average maturities.....This is not a time when one should be looking to extend their durations and maturities."


POLITICIANS AND THE FED.....Brinker said: "Let's keep the politicians out of monetary policy. We don't need the politicians to come in and screw up monetary policy after they've already imploded the fiscal policy of the United States. They've already blown up the fiscal side of the government equation. There are only two sides, fiscal and monetary. The fiscal side has been destroyed by the politicians. It's the politicians who have created budget deficits that nobody can fathom. $1.4 trillion in the 2009 fiscal year. $1.3 trillion in the 2010 fiscal year, ending in September. An estimated $1 trillion plus in the new fiscal year ending next September....

.....For crying out loud, let's keep the politicians out of the Federal Reserve monetary policy. They don't have any idea what they are talking about, and just because you can see a grocery store from your house, does not make you an expert on monetary policy. Puulleeeze stay out of matters you know nothing about mr. or ms. politician. Mouthing off about Federal Reserve monetary policy when they very possibly have trouble balancing their own checkbooks. It's silly. It's absurd...

......And this past week, in terms of any politician out there that was attacking the Federal Reserve, let me just say, 'I can't believe what I just saw,' to quote the late, great Jack Buck when Kirk Gibson hit it out of the park.......And when I saw these political comments this past week attacking the Federal Reserve, well, depressing is putting it mildly. Stay out of it. You don't know anything about it, you probably never will and it's way, way over your head......

.....As far as the deficit is concerned....if there is no political will, and there is none, to cut spending in a major way, then nothing is going to change. The deficit will continue to run wild as it is. And there's no country on Earth, including the United States, that can run a deficit close to 10% of Gross Domestic Product and build for the future. It's not possible......

......Remember this is a country that has let spending go wild. A country that's been unwilling to pay for that spending, and beginning to see the very early stages of the consequences of that. If you think this is something, wait until interest rates normalize someday. See what happens to the annual interest costs on the close to $14 trillion in debt that the United States has already run up...... There is no political will to move toward a balanced budget."

Honey EC: It seemed like Brinker was nearly on the verge of a meltdown as he hooted, hollered, insulted and demeaned "politicians"..... Later in the program, he spread the blame on to both parties even though Democrats have controlled congress since 2007, and the deficit has quadrupled since Obama took office.....

......Brinker made the blanket statement that no politicians have the "will" to work towards spending cuts and a balanced budget. I guess he forgot about the recent election that literally turned the country red except for the two coasts. This video is about 3 seconds long. Educate yourself, Mr. Brinker, take a look at it:

* Caller Richard from Oxnard
talked about the Fed buying $600 billion in Treasuries -- trying to stave off deflation even though the economy is growing and may continue to grow into 2011. He asked Brinker if he thinks the economy will continue to grow, or is the Fed correct, deflation is just around the corner.

Brinker replied:
"The Federal Reserve is under a congressional mandate under the law to do two things --to keep inflation down and to maximize employment. You are looking right now at a 17% unemployment rate, including the under-employed, the part-timers who can't get full-time, the discouraged workers......with 1.2% inflation. If the Federal Reserve just sits around twiddling it's thumbs, like some idiot politicians seem to think it should.....then every person on the Federal Reserve should be fired."

Honey EC: Brinker sounded alarmed about the unemployment situation a couple of times today. Quite a turnaround from last week when he waxed eloquent about the "good jobs report" but never once mentioned under-employment numbers.

* Caller Rick from Santa Ana
asked about the effect of quantitative easing on the economy. Brinker explained that nobody really knows the effect of quantitative easing on the economy, but that the Fed has to take action and since interest rates are zero, they are have to try quantitative easing.

Then Brinker told Rick: "Let me be very clear on this because I do not want to be misinterpreted on this. Any politician, and I don't care who they are and I don't care what party they're in, that tells you that the Federal Reserve is wrong to attempt additional quantitative easing is a fiscal moron because they don't understand the law....

...... Ben Bernanke understands the law. Now I don't I always defend Obi-Wan Ben, but in this case, I think he's right. I know he's right......He is under the mandate from the United States Congress, he must act.....If he doesn't act, he should be fired today, on a Sunday.......And any politician that says they should not act to try to stimulate the economy in a situation like this, with 1.2 inflation on the books right now......should resign on the grounds that they're too stupid to be in the game. I don't want to be misunderstood on this. 1-800-xxx-

Honey EC: I don't think any listener misunderstood Brinker. I think he made it real clear that he is very good at calling people who he doesn't agree with names like "stupid" and "moron."


* Caller Tom, a retiree from Watsonville who said he had absolutely no idea how to handle money, wanted to know what Brinker thought he should do with 1.5 million dollars that he is soon to get from the sale of a home. Brinker inquired at length about any other money that Tom had.

Then Brinker told Tom:
"What I think I would shoot for would be to get in the direction of a balanced portfolio. Now a balanced portfolio is a portfolio like the model three investment portfolio that I publish in my investment letter which is a portfolio that is basically about 50% in quality fixed income, and about 50% in the stock market....

......Now a simplified version of that would be that you could own something like a total stock market index for the stock market portion...... And in the fixed income area, you could go whatever direction makes sense for you. If you are in a top bracket, you might want to consider some tax-exempt municipal paper. If you're not, you might want to just put together a ladder of Certificates of Deposit and see what happens down the road with interest rates.....But the most decision here for me, Tom, would be to be thinking in terms of a balanced portfolio where you are going to spread your risk over different asset-allocation areas and go from there."

Honey EC: I often wonder if Brinker has a deal with ABC to advertise his newsletter for free. Brinker could have answered Tom's question without even mentioning his newsletter balanced model portfolio. But instead, Brinker discussed the portfolio in detail.

On previous programs, Brinker has discussed which stocks and bonds are in his balanced portfolio III. For example, VTSMX is the major stock holding. It also has a couple of managed funds, but the percent of each is infinitesimal. He recently added a very small percentage of Vanguard International Growth. On the bond side, he has 20% Vanguard Ginnie Mae, and the other 30% divided between Vanguard TIPS and VFSTX.

Best quote of the day: "Texting while driving is suicidal."__Bob Brinker

Brinker's guest-speaker was Andrew Ross Sorkin. This is the second time this year that Sorkin has appeared on Moneytalk. Brinker also interviewed him February 27th:

Moneytalk To Go is Available FREE at KGO810 radio for seven days after broadcast. (Saturday Moneytalk broadcasts have been canceled.) The Sunday program is archived in the 1-4pm time-slots. To download and listen at your convenience, right click on the hour and use "Save Link as." KGO: Moneytalk Download Don't forget to download the Andrew Ross Sorkin interview in the 3-4 hour of the program.

RR sent this gorgeous picture that he took north of Bly, Oregon. Click to enlarge:


Tuesday, November 9, 2010

Top CD Rates for 1, 2, 3, 5, 7 & 10-yr Terms

Guest Article by Kirk Lindstrom (
The top rate for a certificate of deposit (CD) this week is at Pentagon Federal Credit Union (fondly known as PenFed CU) where you can get a 7-year certificate that currently pays 3.49% APY.

For shorter terms, Melrose Credit Union has a 1-year CD with a 1.51% annual percentage rate.

With rates so low, banks will try to sell you their annuity products. Make sure you read our article: Beware of Annuities

The table below shows the best CD rates for other terms.

For Larger Text: If that table is hard to read, then try Very Best CD Rates.

Highest CD Rates Survey by Term as of November 9, 2010

Rate (APY)
(Click link for Full Rate Sheets)
Vanguard Daily
Vanguard Prime Money Market Fund
Vanguard Tax Exempt
Vanguard Tax Exempt Money Market Fund
FDIC Daily Savings
Best Savings Account Rate Survey
6 Month CD
Bank of Internet USA
1 Year CD
1.51% Melrose CU
1 Yr US Treasury
US Treasury Rate Quote
18 - Month CD
MetLife Bank
2 Year CD
Melrose CU
3 Year CD
Melrose CU
4 Year CD
Melrose CU
5 Year CD
Melrose CU
5 Yr US Treasury
US Treasury Rate Quote
7 Year CD
PenFed CU
10 Year CD
Discover Bank
10 Yr US Treasury
US Treasury Rate Quote
Vanguard Money Market & US Treasury Rates shown for Reference

Related Information:

With rates so low, banks will try to sell you their annuity products. Make sure you read our article: Beware of Annuities.
The one year US Treasury rate is currently 0.28%.
6-Month Certificate of Deposit Historical Chart

30-Year Conventional Mortgage Rate Historical Chart

Warning:  Banks and credit unions with high promotion rates to attract new deposits often have high early withdrawal penalties to recover the benefits should you need your money before the agreed upon term.  Make sure you read the fine print before making a decision.  If you think you might need some of your money before 5 years, for example, then you should consider splitting it into several CDs with multiple terms.  Perhaps split the money into 5 CDs with terms of 1, 2, 3, 4 and 5 years.  If you don't need the money when the 1 yr CD matures, you can roll it over into a new 5YR CD then do the same each year until you have a ladder of 5YR CDs that mature one per year.

Sunday, November 7, 2010

November 7, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

November 7, 2010....Bob Brinker hosted Moneytalk today. Bob Brinker's comments summarized, paraphrased or excerpted:

......As the market opens tomorrow, the S&P 500 is at the closing high for 2010 (1225.85), with a year-to-date total return (including dividends) of 11.6%. Wilshire 5000 has done better with a total return of 13%. The Nasdaq (2578.98) and Dow (11,444) at year-to-date closing highs for the year.

Brinker said: "This is on top of extraordinary gains that occurred in 2009....The Dow is now higher than it was when Lehman Brothers filed for bankruptcy in September 2008. The S&P 500 is at its highest level since September 2008. And the Nasdaq is closing in to its high level of October 2007. Give you an idea how many gains have been chalked up in this stock market..... .... And the stock market is liking a number of things it is seeing. It certainly likes the gridlock that we are going to have in Washington. Certainly likes the results of the election and anticipated those results perfectly -- well in advance. It certainly like the accommodative Federal Reserve monetary policy that we are seeing. And it definitely likes the earnings report we are getting......

.....Earnings are now up 39% year-over-year. And in addition to that, in this third quarter reporting season, we are looking at 80% of companies exceeding Wall Street's expectations......Now of course the way to take advantage of a market like this is to be fully invested. That is the posture we have taken. For those sitting with idle cash in early July, we recommended putting it in the market at the low for the year -- down in the 1030 area.....

Honey EC: Yes, it's wonderful to be fully invested during a "market like this," but in spite of his inferences, Brinker was also fully invested in 2008-2009, during the worst megabear market since the 1930s.

Yes, Brinker did recommend putting cash in the market in July at S&P 1030, but he misleads by not saying that in 2008, he also recommended putting cash in the market at S&P 1450, mid-1300's, low to mid 1200's.
I get letters from people who lost money on that advice. Brinker seems to not give a flying fig. As he says on each program, "It's about the money." Maybe he should add the word "my" ....
Brinker continued: "This definitely has been a profitable year for the market in 2010, year-to-date. It comes on top of the extraordinary gains of 2009, following the 2008 debacle which really culminated with the bankruptcy of Lehman Brothers in September of 2008, and the freezing of the credit markets within less than 24 hours all over the world."

..Brinker said: "Very, very good.... 159,000 private sector new jobs and a 54,000 uptick in the September revision. that's a very good report."

Honey EC: Brinker was very upbeat about the new jobs report even though he has repeatedly pointed out that each month, it takes 100,000 to 150,000 new jobs just to absorb new entrants into the labor force. And he didn't mention the underemployment numbers which is at least 17.1%.

.....Brinker recommends establishing a mental stop at a price that you want to sell the fund if the net-asset-value drops down to it. This offers psychologically protection against fear of catastrophic losses in your bond funds.

RESET COST-BASIS FOR THOSE WHO QUALIFY FOR ZERO CAPITAL GAINS in 2010....Brinker said: "If you're selling a security on which you're going to have no capital gains tax liability, then you can reset your cost-basis by buying a security back. If you're selling at a profit, you can buy it right back. There are no wash-sale rules on profits....." Honey EC: If the Bush tax-cuts are renewed, this would not be a necessary move. But it might be advantageous for some if the tax cuts are allowed to expire.

IF GINNIE-MAE FUND NET-ASSET-VALUE GOES DOWN, WILL THE YIELD GO UP? Brinker said: "Oh yes. What you will see if you see a decline in the net asset-value of the Ginnie-Mae Fund, you would see a gradual increase in the yield." Honey EC: Brinker recommends Vanguard's Ginnie Mae Fund [VFIIX).

"Firstly, keep in mind that unless you plan to spend your money in foreign currencies, then it should work for you here in the United States buying goods and services.....This would only be a major problem if your liabilities were in Euros, or Yens or some other currency. But if your liabilities are in dollars, then you are in the currency that will cover that....

....Hedging the portfolio against decline in foreign exchange, and there is a way to do that. It is a speculation, but there is a way to do it. And that is to put some GLD, the Exchange Traded Fund for gold in your portfolio, a few percentage point perhaps, if you elect to do this. And that will give you a precious metal in the name of gold bullion-hedge in your portfolio against the dollar. It won't pay you any interest......When I first started mentioning this years ago on the broadcast the GLD shares were in the $50s. They are now well over $100 per share.....I would say the general guideline we've used on the GLD shares for those wanting a hedge is to have up to 5%......"

Honey EC: Brinker is very clever and seems unscrupulous when it comes to being honest about his financial advice.
Brinker has been bearish on gold for years. When callers insisted they wanted to buy gold, he would say that GLD was the best vehicle to use. Pen-name, TFB wrote: "Da Brink has openly and repeatedly slammed Gold Bugs for ages."

This is not the first time that Brinker has deliberately mislead the audience by inferring that he recommended purchasing gold when it was $50 an ounce. It's simply not true. In 2007,
David Korn wrote: "Bob has been steadfastly BEARISH on gold for as long as I have been doing my newsletter."

Brinker added GLD to his off-the-books Marketimer Individual Issues list in May, 2009. However, he wrote no explanation as to why he did that; and never gave a price or an amount.
Please click to enlarge:

BUYING SILVER AS HEDGE Brinker said: "As far as silver is concerned, I think it could be considered as an alternative form of hedging in a portfolio......The preferred way for those who wish to have a silver hedge in their portfolio would be the Exchange Traded Fund that holds the silver bullion -- that trades under the symbol SLV.....the Ishares Silver Trust. There is a derivatives investment in an Exchange Traded Fund which is under the ticker symbol DBS (futures ETF). If I were going to consider the possibility using a silver hedge, I think I'd be looking at owning the silver bullion."

HIGH YIELD BOND FUND [VWEHX].....Caller Carl told Brinker that he was using Vanguard's High Yield Bond fund for part of his grand-child's college fund. He asked for Brinker's opinion. Brinker said: "I think you will see that it's done quite well. The yields have been excellent on that fund, and the net-asset-value is doing fine. Last time I checked it was like $5.83. I think that you'll be find that you'll be very happy when you look at the numbers."

Honey EC: Brinker has recommended the Vanguard High Yield Fund [VWEHX] in his Marketimer Fixed Income Portfolio since April, 2003. At that time, he sold 15% of the portfolios 50% GNMA [VFIIX] holdings and put the money into the high yield fund. The fund took a heart-stopping dive in 2008, but has come back quite nicely.

"I think there are two areas with a California Muncipal Bond Fund. One of those areas would be if in the future, we see an increase in interest rates, then you would see a decline in net-asset-value of the shares. So if you are concerned about that, you would want to protect yourself with a mental stop that would allow you to terminate your holdings.... .....The other risk with California is political. I don't like what I'm seeing in California in terms of fiscal irresponsibility. And I'm not convinced that the results of the gubernatorial election that was just held in California will do anything other than put further strains on the fiscal situation in California.....If either one of these resulted a degradation you'd be able to protect your money with a mental stop......The reality of the situation in gubernatorial election was that the voters had an Hobson's choice in California."

Honey EC: "Meg Whitman and Jerry Brown a "Hobson's Choice"???!!
Brinker is either ignorant of the facts or his extreme hatred for women in leadership roles messes with his judgment. I have listened to Bob Brinker since 1987 and I have never heard him have a good word to say about strong women. He actually goes out of his way to denigrate strong, conservative women.

Meg Whitman is a successful business woman that made $billions for Ebay. She could have brought her qualifications, experience and talent to Sacramento and may have saved the state from bankruptcy.....

.....Jerry Brown's record is well-known and clearly shows that all he will do is increase government spending and debt. Brown is responsible for unionizing California's public employees which has created unsustainable entitlements -- and it explains why he was re-elected.

Brinker said: "The Federal Reserve is in charge of the money supply. They have the ability to create money by running the printing press, by flood the system with money. When they buy these securities, they deposit the money into the banks, and the banks have the ability to create money by creating credit. And so that's what this is all about. The Federal Reserve has the power to influence the money supply, to manage the money supply and to grow it as well as shrink it. Right now, they are interested in growing it......."

WHO PAYS THE INTEREST ON NATIONAL DEBT? Brinker said to caller: "The interest is paid by you, Nick, along with all the other taxpayers in the country.....The interest goes into the coffers of whoever owns the debt......Or it might be somebody over in Beijing who runs the government of China."

LAME DUCK CONGRESS Brinker said: "The lame duck congress will be back on November 15th. I don't know what they will do them. They'll certainly want a Thanksgiving break.....They left a lot of unfinished business. We've described this congress as being the most dysfunctional congress of all time in terms of their inability to govern......They did not address the estate tax situation which is zero in 2010, to the delight of the George Steinbrenner estate and a few others as well......This congress has not addressed the tax bracket situation for 2011. We do not know what the tax brackets will be on New Years Day.....

......Now there is an indication that President Barack Obama is willing to compromise, given the results of the election, with Republicans on what the new package will be for 2011.....The GOP want to have the tax cuts for everybody continue, and President Barack Obama would like to see taxes go up on families above $250,000 and individuals above $200,000.....Now the most obvious compromise would be the one we've talked about on this program which would be one year extension of the tax brackets as they are now......If they don't make changes, the capital gains tax goes from 15 to 20 in the top bracket in January. And the qualified dividend goes from a current top of 15 to a new top of 39.6......They've governed like lame ducks from day one, as far as I'm concerned."

Honey EC: I don't recall ever before hearing Brinker use the title "President Barack Obama." Is he finally an Obama fan? :)

Immediately after the opening monologue, there was an advertisement for the Brinker Fixed Income Advisor. Be aware that the publisher of this newsletter is not the radio talk-show host, even though that is exactly the impression that the ad gave to the audience. One of the editors of the newsletter is Lisa J. Brinker, Brinker's daughter-in-law, who graduated college with a degree in linguistics. If you are interested, download a free issue, but be sure to compare it to a free issue of The Retirement Advisor, published by David Korn and Kirk Lindstrom. I promise there is no comparison, The Retirement Advisor is far superior, and the performance record confirms that. Lisa and Bob Jr's FIXED INCOME Advisor actually LOST money in 2008!


Brinker gave a hearty congratulations to the San Francisco Giants. He said: "I talked about the pitching. No one would listen to me. They went up 8 to 1 here in Las Vegas on the board. Congratulations to all Giants' fans."

Brinker's guest-speaker was Charles Gasparino:

Moneytalk To Go is Available FREE at KGO810 radio for seven days after broadcast. (Saturday Moneytalk broadcasts have been canceled.) The Sunday program is archived in the 1-4pm time-slots. To download and listen at your convenience, right click on the hour and use "Save Link as." KGO: Moneytalk Download Don't forget to download the Charles Gasparino interview in the 3-4 hour of the program.

RR took this breath-taking picture of Aspen in fall colors north of Bly, Oregon. Click to enlarge:


Friday, November 5, 2010

Bob Brinker's Roller-Coaster Marketimer Model Portfolios

November 5, 2010....Bob Brinker's model portfolios have been doing quite well since this current bull market began March 10, 2009. However, because of the very skeery roller-coaster ride they took during the mega-bear market, they are still underwater from the market all-time-high.

Bob Brinker certainly was correct when he said that he's a long-term investor. Brinker has made no changes to his model portfolio asset allocations since he returned his equity allocations to fully invested positions on March, 2003.

On the other hand, Brinker likes to brag about any shorter-term market-timing calls that he has made which were successful (while ignoring the flops).

July 1, 2010, Brinker finally got one right when he recommended S&P 500 Index as an outright-buy at 1030. That was the latest in a long line of Brinker's outright-buys from 2008-2009 that had flopped because the market kept dropping after he made them.

Now let's take a look at how Brinker's fully invested model portfolios did, beginning at the market's all-time-high, going down to the bear market bottom and back up to today.

Brinker's market "timing model" did not see the bear coming, or recognize it as it was happening. Therefore, he never raised any cash reserves before or during it (he issued repeated buy signals throughout the bear. See the chart below).

Portfolio I:
October, 2007, stock market all-time high: $302,561...March, 2009 Megabear market bottom: $143,938...November, 2010: $259,036

Portfolio II: October, 2007, stock market all-time high: $241,994...March, 2009 Megabear market bottom: $119,105...November, 2010: $215,507

Portfolio III
October, 2007, stock market all-time high: $219,263...March, 2009 Megabear market bottom: $147,013...November, 2010: $216,010 (Portfolio III is a balanced portfolio, recommended for conservative investors.)

Currently, Brinker's market-timing advice is to dollar-cost-average new money. As of November 1st, his S&P target range is 1300 - 1350.

Chart showing all of Brinker's "outright buy" levels courtesy of Kirk Lindstrom. Please click to enlarge:

“We have long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, Charlie (Munger) and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”__Warren Buffet

Jenny, Bailey, Annie and Little Lucy enjoy the Doggie beach at West Cliff Drive, Santa Cruz.


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