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Monday, December 20, 2010

Bob Brinker's Moneytalk: Don't Expect Answers Until You Pay Up

December 20, 2010....Bob Brinker's Moneytalk program, which is now down to only two hours, plus a guest hour, per week, almost always has what appears to be a set-up call, sometimes more than one.

These calls always offer perfect opportunities for Bob Brinker to dangle some investment-letter shark bait. No doubt that shark bait reels in a very full net each week.

The fact that it is done in a manner that ( in my opinion) is nefarious, doesn't seem to matter one little bit to Bob Brinker. Perhaps he does it for all those "young sprouts" and he feels that makes the ends justify the means.

Sunday, December 12th, Paul from Santa Fe said
: "Mr. Brinker, first of all, I think you should be declared a national treasure. (Brinker: "You are very kind.") "The question I have is, I have about $650,000 in the Ginnie Mae Fund. I don't rely on it for current income. In fact, I just have the dividends re-invested, but I know that it's going to take a price hit. I wonder if you would recommend getting out of bonds completely, or if you'd just recommend moving into a shorter duration bond fund."

Honey EC: Even though Brinker tells Paul there are two answers, notice that he does NOT ANSWER his question at all! Paul did not even mention Brinker's "portfolios," he simply wanted to know if Brinker recommended "getting out of bonds completely," or moving into a fund with shorter duration than Ginnie Mae Funds.

But Brinker, ever the opportunist, jumped right in and gave Paul a spiel which basically gave him and all listeners this message:
You are just a lowly "freeloader" (Brinker's own word, if you want the quote, ask me for it) radio listener. It doesn't matter that (through radio station advertising) listeners have paid my salary for 25 years and made me a multi-millionaire many times over via newsletter sales and my BJ Group, if you want to know the answer to your SIMPLE question, you will need to send me $185 bucks, ASAP!

Here are Brinker's exact words to Paul: "There are two answers to that question, Paul. Obviously, for years, I have had a recommendation in the Vanguard Ginnie Mae Fund included in my model portfolio III and I've also placed it in my page 7 fixed income portfolio.....Those are my official portfolio recommendations on which my performance record is based. All of my official portfolio recommendations that I make, on which I am tracked for performance purposes, are made within the context of the investment letter. And I publish a new letter every month toward the beginning of the month. And it is within the context of the investment letter that I make those kinds of specific recommendations......"

Honey EC: That shark attack was good for a big laugh-out-loud. It's been years since Brinker changed portfolio percentages of Vanguard Ginnie Mae Fund (VFIIX). It was 2003 to be exact (and another 5% added in 2004). How many thousands of dollars would it have cost Brinker in new subscriptions to simply tell Paul that he has no sell recommendations on bonds? How much integrity would it have taken?

Poor Paul, he could save himself writing Brinker a check to find out if he recommends selling bonds if only he knew that's about as likely to happen as it is that Brinker will ever again sell stocks from his model portfolios. There's not a snowballs chance in Death Valley that he will ever sell stock again after riding down fully invested one of the three worst over-50% bear markets in the history of the stock market.

* In April, 2003 Brinker traded 15% of VFIIX for a 15% purchase of Vanguard High Yield Fund (VWEHX).

* The last change he made to his fixed income portfolio was in April, 2004 when he reduced Vanguard Inflation Protected (VIPSX) from 25% to 10%. He reinvested 5% of that into VFIIX, bringing it up to 40% where it's been ever since. (And the other 10% from TIPS went into Vanguard Short-Term Corporate Fund (VFSTX).)

* As for portfolio III, the balanced portfolio, Ginnie Maes have been at 20% for years.
Brinker continued talking to Paul from Santa Fe: Now in terms of radio listeners who happen to have bond funds, my recommendation has been very clear that if you have any concerns about net-asset-value volatility, net-asset-value deterioration.....then you need to protect yourself. And the way that I recommend you protect yourself is with what is called a mental stop. And a mental stop is very simple.....You come up with a price on each of your bond fund holdings below which you are not willing to maintain the position, and if that price is published on any given night..... If you see your price then at that point, the next day, you liquidate your position......

...... Now obviously, if you liquidate a position in Ginnie Maes today, which are yielding over 3%, and you want to go with a high-quality investment - that's a triple-A grade investment - then you're probably going to wind up with a lower investment return, a lower yield, on whatever you decide to do with the money. In return for that, you get, if you go with a money fund or FDIC insured CD, you get principle protection because you aren't going to see any more price changes past the day you liquidate.......Always remember if there is a distribution in your bond fund, or any fund, then you need to adjust your mental stop for the distribution......This week Vanguard updated their estimate for their Ginnie Mae Fund, which is going to happen around the 29th of 23-cents......18-cents short-term and 5-cents long-term......The money is in your account......Never adjust your mental stop by a tax-distribution. Only by price change."

Paul continued:
"I appreciate the insight, Maestro, and can I subscribe to your newsletter?"

Brinker said:
"Oh absolutely. All you have to do is go to The information is all right there, Paul."

Paul continued:
"Okay, I've been listening for about six weeks."

Brinker said:
"We just completed our 25th year. We welcome you aboard."

Paul said:
"That says a lot about you that you can last 25 years because it's performance and meritocracy in this business."

Brinker said: "Thank you Paul, appreciate the call, good to hear from ya."

Honey EC: Caching! At first, I didn't think this was one of Brinker's set-up calls until Paul made that last statement. I simply cannot believe that a person who sounded as intelligent as Paul did, and who has built a nice nest egg (we know he said he didn't even need the income on $650,000 invested in GNMAs), could be that naive and gullible or that easily suckered in. Didn't people used to ask Bernie Madoff if they could "subscribe" to his marketing plan? -- Just a thought.

To Paul, I would say, sure it's about performance with Brinker, but not his market-timing performance which is almost non-existent. It's about his dog-n-pony show on national radio-performance. He's been a buy-and-holder for the past seven years.

And as for Brinker's "meritocracy," one has to have integrity, honesty and character for merit to count. Merit hasn't kept Brinker on the air. Spin, half-truths and cover-ups have kept him on the air. And remember this, being a master wordsmith with a nice voice and talent behind a microphone, with the censor button in hand, does not equal merit. It only equals a 25 year song-and-dance marketing plan that probably worked out well beyond even Brinker's wildest expectations.

Blog poster, Joel from Dallas, asked a very good question: "....and Bob said to subscribe to his newsletter as that is where the information goes first. Why are we listening?

Moneytalk is FREE and available on demand at KGO810 radio for seven days after broadcast.
The now once-weekly Sunday program is archived in the 1-4pm time-slots. KGO: Moneytalk Download Don't forget to download the Barbara Weltman editor of the J K Lasser tax guide interview in the 3-4 hour of the program.

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