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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:


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