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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:


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