January 23, 2010....My sincere thanks for all the encouraging words. I am out of bed a bit more today, but still have a long road to travel (maybe I should get a ride in a green Massachusetts pickup truck). 8^)
I listened to Bob Brinker, and even though I cannot write a full summary of the program, I will comment briefly.
Bob Brinker said that the stock market was "volatile" last week because some in our "dysfunctional government" are questioning Ben Bernanke's Fed Chair appointment. Brinker said: "The stock market cannot deal with the firing of Ben Bernanke right now." However, a couple of times today, Brinker said that he expects Ben Bernanke to be appointed Fed Chair.
Brinker presented his own biased views in all of his political rants and offered very little chance for opposing viewpoints. He does this in spite of constantly trying to convince the audience that he is an equal opportunity demagogue.
My good friend, Jeffchristie has sent some commentary about a couple of Brinker's callers today and a message to Bob Brinker:
Jeffchristie wrote:
"The first caller of the second hour was Carl. He was great. He pointed out what I have said here, that it was Robert Rubin who was behind the repeal of GS and not Clinton. Rubin received one of the biggest payoffs in history for doing it. Sandy Weil wanted to merge Travelers with Citicorp. Robert Rubin talked Clinton into it. Then they needed to repeal GS to make the merger permanent. Rubin was paid off by being named Vice-Chairman of Citicorp when he left office. This was a high paying job with no discernable responsibilities. It was even better than one of Tony Soprano's no-show jobs."
And:
"Mark called in later in the second hour. He suggested Brinker actually read the Supreme Court decision. He correctly said it was based on FREEDOM OF SPEECH. Brinker went into his rant on how the decision favored corporations and unions over individuals. I would have liked to ask him which corporations are you talking about, Bob? The ones you have all your subscribers invested in your model portfolios? Let me see if I understand your argument. You are saying it is a bad thing to give the corporation we are all invested in more influence over the government. Is that you position? That doesn't make sense to me. We the people who listen to you OWN these corporations. When they prosper we prosper.
Your position is based on the same populous garbage that Boxer is using to oppose Bernanke."__JeffChristie
Honey here: "East Coast" sent these comments earlier this afternoon:
"For some strange reason I have Bob Brinker on right now (1/23/2010). His guest just alluded to the fact that it is impossible to correctly time the market consistently. I'm sure Honeybee when she regains her strength will be able to reproduce the quote. The context was in regard to Bernie Madoff correctly timing the market which "almost no one can ever do." Or something similar.
Bob Brinker's Saturday guest-speaker was Brian Ross:
Moneytalk Available on Demand totally free at KGO810 radio for seven days after broadcast. The three hours of the programs are archived Saturday and Sunday 1-4pm. To download the programs and listen later, just choose the day, right click on each hour that you want and use "Save Link as." KGO Moneytalk Archives [Link] If you want to call KGO and complain about (or praise) Bob Brinker's Moneytalk, here are the numbers: Comments line: 415-216-1052....Listener services: 415-216-1050. Here is the KGO email address -- cut-and-paste it into your email compose window: kgofeedback@yahoo.com
.
Saturday, January 23, 2010
Saturday, January 16, 2010
January 16, 2010, Bob Brinker's Moneytalk: Lynn Jimenez Guest Host
January 16, 2010...Bob Brinker's fill-in host, Lynn Jimenez, is doing the program today. It seems a bit odd to me since Bob Brinker only did one day of the program last week (January 2nd) and Lynn Jimenez filled in the other day. And two weeks in December (including the last week), Brinker did not do the program live, but used pre-recorded monologues coupled with spliced calls from previous programs.
January 22, 2010, Dear readers: I'm still recovering from pnuemonia, which may have been a result of H1N1.
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January 22, 2010, Dear readers: I'm still recovering from pnuemonia, which may have been a result of H1N1.
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Wednesday, January 13, 2010
Best CD Rates with FDIC - Survey by Term
Bob Brinker is certainly correct when he says US rates are very low. The top rates for CDs this week are at Pentagon Federal Credit Union (fondly known as PenFed CU) for a 7-year certificate of deposit that currently pays 3.75%% APY. In last month's survey, PenFed paid 4.00% for the same CD term.
For shorter term, Colorado Federal Savings Bank has a 1-year CD with a 2.00% annual percentage rate.
Both CDs compare well with 1-yr and 7-yr US Treasuries (today's rates) that currently only pay 0.35% and 3.22%, respectively. Both CDs and treasuries are backed by the US government. With CDs, the backing by the US is limited to FDIC & NCUA rules to $250,000 per name on the account per institution (there are ways to get FDIC and NCUA for many times $250,000) while the amount guaranteed is unlimited for US Treasuries. See: 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. If that table is hard to read, then try reading the original at Very Best CD Rates.
Highest CD Rates Survey as of 1/13/09
| Term | Highest Rate (APY) | Where? (Click link for Full Rate Sheets) |
| Vanguard Daily | 0.05% | Vanguard Prime Money Market Fund |
| Vanguard Tax Exempt | 0.07% | Vanguard Tax Exempt Money Market Fund |
| FDIC Daily Savings | 1.70% | Colorado Federal Savings Bank => Full Rate Survey <= |
| High Yield MM | 1.60% | Bank of Internet USA |
| 6 Month CD | 1.51% | Ascencia Internet Bank |
| 1 Year CD | 2.00% | Colorado Federal Savings Bank |
| 18 - Month CD | 2.05% | Colorado Federal Savings Bank |
| 2 Year CD | 2.25% | Colorado Federal Savings Bank |
| 3 Year CD | 2.71% | National Bank of Kansas City |
| 4 Year CD | 3.03% | National Bank of Kansas City |
| 5 Year CD | 3.35% | OneWest Bank, FSB; Pasadena, CA |
| 7 Year CD | 3.75% | Pentagon Federal CU |
| 10 Year CD | 3.70% | Discover Bank |
Vanguard Money Market Rates shown for Reference
If your browser shows small text, then view the original at Very Best CD Rates.
Since 12/31/98 "Kirk's Investment Letter Explore Portfolio" is UP 159% (a double plus another 59%) vs. the S&P500 UP at tiny 8.6% vs. NASDAQ UP an even smaller 3.5% (All through 12/31/09 )
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Understanding Kirk's Two Investment Letters
Monday, January 11, 2010
January 9-10 Moneytalk Summary and David Korn Commentary
January 11, 2009...Sorry to say that I have been very sick since last week, so will not be writing a summary of Bob Brinker's Moneytalk for the January 9-10 programs. (The doctor says probably H1N1, but waited 3 days before seeing him and now all he can do is give me antibiotics to fight infection.)
However, I have a real treat for you -- excerpts from David Korn's weekend newsletter. Posted with David's permission:
GOVERNMENT BONDS
Brinker Comment: The Municipal Bond Market and the fixed income market have both had good years. Ten-year AAA Municipal Bond General Obligations are currently yielding 3.28%. If you adjust that for a 35% top federal tax bracket, that would equate to a 5.05% taxable equivalent. The 30-year AAA Municipal Bond security is yielding 4.45% and that equates 6-7/8ths% for the top bracket.
(Korn) EC: I wanted to alert you all to an interesting new offering in the municipal bond market that is hot off the presses. BlackRock Inc.'s Ishares unit started the first municipal-bond exchange traded funds designed to liquidate at the end of a fixed maturity period. Six funds started trading on Friday. This is a pretty new product for municipal bond investors because it is liquid and tradable in its ETF form. I am going to do a
little digging into these and will report back.....
EMPLOYMENT REPORT
Brinker Comment: We received information on Friday about the employment situation in this country. The unemployment rate came in at 10%, but this number is slightly misleading because the workforce decreased in December largely due to discouraged workers. There was a decrease in the workforce of 661,000 in December. The unemployment rate would actually be higher if you counted the discouraged workers. The number of jobs on private payrolls declined by 84,000 in December from November. Bob said he thinks a better measure is the U-6 calculation, which includes people who have part time jobs who would like full time jobs and the people who have given up looking for work. That number is 17.3%, down from its record high of 17.5%.
The number of discouraged workers is up to 929,000 in the month of December. They started keeping this data in 1994, and last month is the record high. It is taking people longer to find a job as well. It takes unemployed workers an average of 29 weeks to find a job. That is a long time and is the biggest number since they started keeping the data in 1948. This causes a lot of grief in families when you have long term unemployment. It is no wonder workers get discouraged in this kind of situation.
(Korn) EC: There are actually several categories of employment measure the Bureau of Labor Statistics. The number that always gets reported is the U-3 which is the "total unemployed as a percent of the civilian labor force and is considered the official unemployment rate. U-6 is defined as the total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers." Marginally attached workers are persons who currently are neither working nor looking for work but indicate that want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.
Brinker Comment: Bob noted that we are hearing a lot of talk in Washington about creating jobs, but these are not long term jobs. These are more geared for specific projects, like building a road. Plus, these are jobs being paid for by taxpayers. That is totally different situation than having a long term job with a private company where your hard work creates revenue. One of the reasons that so many cities, counties and even states have had budget problems is because so much money has been drained out of taxpayer pockets to pay for government jobs. This is not a good economic business model for job creation. The only way you will get a sustainable and meaningful increase in job creation is for private enterprise and especially small businesses to do the hiring. Why are we seeing such reluctance from small businesses and private industry to hire right now? Why did we see a decline of 84,000 jobs in December even with an economy that has been recovering since summer? Bob said he thinks there has been a tremendous amount of uncertainty created by the politicians in Congress with reference to tax policy. Small business owners and entrepreneurs are looking at the potential change in tax policy and are holding back from hiring because they don't know what it will cost them.
Brinker Comment: A lot of people were disappointed at the reported 85,000 Job losses reported for the month of December, but keep in mind that job losses are much more moderate than they were last year when we were seeing hundreds of thousands of jobs being lost each month. Plus, another positive about the latest employment report is that the data for November was revised upward such that we actually had an increase in jobs of 4,000 for the first month in a long time.
(Korn) EC: Here is a chart showing the jobs gained by decade in the United States. This past decade is the first on record during which the number of jobs increased by less than 20%:
Chart of the day
Brinker Comment: You need to add about 1.2 million jobs a year in our country just to accommodate all of the people that grow up and enter the labor force. In the last couple of years, we have lost 7 million jobs, so you can see what kind of problem that has caused. This is one of the reasons you have seen interest rates kept so low by the Federal Reserve as one of their mandates is to maximize employment while maintaining low inflation. The government has not really come up with any kind plan for being helpful in terms of creating jobs. In fact, they have done the reverse by creating uncertainty about the tax code given the wide array of tax increase proposals floating around Capital Hill.
ASSET ALLOCATION QUESTIONS
Caller: This 55-year old caller has been 100% in stocks for a long time. He can start collecting a pension at age 65 and wanted to know if he could view the pension, along with social security, as the fixed income portion of his asset allocation. Bob said he wouldn't adopt that approach. When you get to a point where you are approaching or in retirement, you should have a balanced portfolio with a general area of 50% allocated to the equity markets and 50% investment in the fixed income market. The pension fund money would give you cash flow on top of the cash flow generated from your portfolio and allow you to maintain a lower withdrawal rate.
Caller: This caller has a $4 million net worth and is invested in Bob's Model Portfolio III and uses the bond portion of that portfolio to generate income for his every day living. Because of the recent decline in the GNMA dividend, he is coming up short about $500 a month for his cash flow. He has to make an IRA distribution of about $55,000 for 2009 which he can do from a cash position and was considering purchasing some long-term quality bonds to generate about $250 a month. He also has some stocks that he could sell, but wondering if he should take some out of his inflation protection holdings. Bob said he would take $30,000 out of the distribution, put it aside and tap that for $500 a month which will cover you for 5 years.
INVESTING IN BOND FUNDS
Caller: This caller just had a large Certificate of Deposit mature and he wants to purchase some bonds with the money. He is concerned about net asset value declines in the bond funds he is going to purchase. Should he lump sum into a bond fund, or delay it over a period of 4-5 months. Bob said you can fully insulate yourself against net asset value decline by purchasing a ladder of FDIC-insured CDs with varying maturities and hold them to maturity. You will get 100 cents on the dollar at maturity and you can reinvest the money at prevailing rates. If you want to purchase a bond fund, dollar cost averaging a position over time can reduce the risk, but at the same time if you get into a rising interest rate environment you will see declining NAVs anyway.
Brinker Comment: We really have not yet seen declining NAVs in bond funds. Bob said he was looking at the Vanguard GNMA fund that he recommends. Adjusted for the seven cent distribution the fund paid in December, the fund would be trading at $10.74, which is not far from its all-time high of $10.90. Even though rates have moved some, it hasn't really impacted the NAV yet. Bob noted that if you are so nervous that you are watching interest rates all the time, you might consider whether you are more suited for an FDIC-insured CD.
(Korn) EC: The Vanguard GNMA Fund (VFIIX) closed Friday at $10.67. It has yield of 2.71% as of 1/8/2010.
HIGH YIELD CORPORATE BOND FUNDS
Caller: This caller is in a position to add some money in the Vanguard High Yield Corporate Bond Fund, but saw that there is a penalty of 1% for not holding it for more than a year. Bob said he owns a small percentage of that fund in his fixed income Model Portfolio and is comfortable with establishing a position in for a year. Bob noted that the fund is yielding over 7% which is a tremendous yield in this market place. And we have been entering into a more sanguine economic period ever since summer. Plus a 1% penalty is not a huge deal. The caller than asked if the good run in stocks is what is helping the bonds here. Bob said what is helping bond funds like this is investors are feeling more and more comfortable about the credit markets and that we won't see wholesale corporate bankruptcies. As the healing process has continued, that is what you have been seeing in the high yield corporate bond market. It was rough for a while, but the run up in the high yield junk bond market and has recouped the vast majority on what it had lost on the downside during this recovery.
(Korn) EC: A lot of Trekkies were shocked when Bob first recommended the Vanguard High Yield Corporate Bond Fund (VWEHX) in his fixed income portfolio. It was contrary to what he had preached for a long time; namely, to not chase yield in the junk bond market. Bob justified the recommendation by saying it was only a portion of his fixed-income only portfolio. The fund then got creamed during the bear market, bottoming at the end of 2008, but has had a great run since.
Caller: A caller asked Bob why not go with the Vanguard High Yield Corporate Bond Fund versus the GNMA Fund when you can get 7% yield versus 2.7%. Bob pointed out that you have much more volatility in the High Yield Fund. Also, Bob pointed out that over the last 10 years, the GNMA Fund has actually done better that the High Yield by a sizable margin. The GNMA has had an annualized return of 6.23% versus 5.07% of the High Yield Bond fund. You made an additional 116 basis points per year with far less risk in the GNMA. The GNMA Fund has weathered the storm and continues to trade near record highs in recent months.
(Korn) EC#2: Junk bonds aren¹t my cup of tea for fixed income. Sure, its great when the yields are high, but you are paying for that extra yield with the risk that the underlying credit will default. My philosophy is you take risk on the stock side of the equation and the bond side you seek stability and very high quality. But if you want some exposure to junk bonds, at least a bond fund gives you diversification and Vanguard knows how to keep the expenses down.
[Honey EC: Brinker could not have picked a worse time to add (15%) Vanguard High Yield Fund to his Fixed Income Portfolio. I know from experience that if one is aware of what makes High Yield Bond Funds tick and uses some good "market-timing," they can be very profitable.]
SAFETY OF TREASURIES
Caller: This caller has $25,000 in GMAC that mature January 15th of this month. He was thinking of putting all $25K into the Vanguard Investment Grade Bond Fund and wanted to know if it was a decent fund to hold for the long term? Bob first expressed surprise that he was getting his money back from the GMAC bond, which Bob said was a miracle and that he benefited directly from the taxpayer bailout. If you decide to put it in a long-term bond fund, you have to expect to endure some pain because at some point, Bob said he thinks eventually long-term rates will rise and when that happens long term bond funds will be under pressure. For that reason, Bob said he would not be going there. If you are willing to hold it for the long term, Bob would rather hold a specific date-certain maturity such as a Treasury Note. A five-year note is yielding 2.60% and a 10-year Note is yielding 3.8%. The interest is taxable, but you will get your money back.
(Korn) EC: Interest income from Treasuries is subject to federal income tax. However, interest income from Treasuries is exempt from state and local income taxes. Thus, the higher your state and/or local income tax bracket, the more beneficial a Treasury can be. If you are subject to the federal alternative tax (AMT), it is also included in income for purposes of that tax.
BOND BUBBLE?
Caller: This caller was reading an article that posited whether we have a bond bubble in the Treasury market, and noted that famed PIMCO bond fund manager is issuing strong warnings about the impact our government policies and the ability to finance the new debt in the future. Bob said he didn't think the term "bubble" applied to what was going on in the Treasury market. What happened is we had the worst recession since the 1930s and took rates down to record levels and at some point rates will adjust to more normalized levels. The internet dot com boom was a bubble, and we had a housing bubble, but it doesn't work for the Treasury market. The Treasury market is 100% guaranteed by the printing press so you don't have that credit risk in Treasuries.
(Korn) EC: Bill Gross just published his January 2010 Investment Outlook. If you are going to read any one article linked to this weekend, I encourage all of you to read this one. Recognize that Mr. Gross is not the all knowing, and certainly he is selling a product (his bond fund), but the stats that he cites in his article about the fiscal deficit, and how much the Federal Reserve has purchased is staggering. Gross believes it is unlikely that the US economy is stronger enough for the government to "gracefully exit" stimulus spending programs or that private investors are going to be capable of absorbing the balance in deficit funding. Check it out at this url:
http://tinyurl.com/yefgeuw
CHINA BUBBLE?
Caller: This caller asked Bob if he had read the article this week about the famous hedge fund manager who had predicted the collapse of Enron and was not predicting that China¹s economy was headed for a crash. Bob said China is the most dramatic growth story in the world today. And it is reasonable to expect that it will be volatile. Bob said he would find common ground with anyone who was projecting high beta, and high volatility in Chinese stock prices. But to think that China will collapse right now is premature because China is a great growth story for a while. They are really early on in their industrial process. Having said that, you should continue to see dramatic earth-shattering volatility in the Chinese equity prices.
(Korn) EC: The caller was referring to James Chanos, the contrarian investor whose hedge fund, Kynikos Associates has about $6 billion under management. Chanos said that China's surging real estate sector is being flooded by speculative capital and he thinks that Beijing is cooking the books about its growth. An interesting take from a guy who has made a lot of money betting against conventional wisdom. Read more about what Chanos is saying
relative to China at this url:
http://tinyurl.com/yan8mbr
TIPS AUCTION
Caller: This caller asked Bob to give him an estimate of what he thinks the base rate of the upcoming 10-year TIPS Auction would be. Bob said the base rate on the 10-year Treasury Inflation Protected Security is currently 1.23% based on trading Friday. That means in the secondary market you get 1.23% plus the inflation pay through. Bob said he expects the base rate in the auction this week to be very close to that as the auctions generally go close to the prevailing rates. You want to watch what is going to happen where inflation heats up. If that happens, you would probably see the base rate increase which would result in a depreciation of the net asset value although it would eventually come through at par value with the inflation add on. But if you had a TIPS Fund and had rising rates, you should expect the NAV to decline.
Brinker Comment: The 5-year TIPS have a base rate of 0.25%. 10-year TIPS have a base rate of 1.23%. 20-year TIPS have a base rate of 1.99% and the longest TIPS which mature in 2032 have a base rate of 2.0%. You add on the inflation pay through in all of this. We have seen periods when the base rate has gone higher and where it has gone lower.
EC: Here is a link to the upcoming Treasury Auction.
http://tinyurl.com/33p5x
KEEP YOUR CASH SAFE
Caller: This caller had a bunch of CDs mature last week resulting in $1 million in cash that is now sitting in a federal credit union and he didn't want to take too much risk with hit. Bob told the caller that on Monday morning he needed to move at least $750,000 out of there because only $250,000 was covered by federal deposit insurance (through the national credit union association). Bob said he would use direct Treasury instruments and insured CDs.
(Korn) EC: With the creation of CDARS --- a service that can offer you up to $50 million in Federal Deposit insurance coverage at one financial institution, people have more options since it allows you to get around the FDIC $250,000 limit. It enables an individual, or charity, or whatever, to come into one single bank, deposit a great deal of money. That money gets parceled out into packets below $250,000 to as many banks as necessary and so the customer ends up owning the entire portfolio but has accomplished this by one transaction. You get one statement, but listing all of the CDs. If it is a taxable entity, there will be one tax return. People could do this on their own in principle, but it would be very time consuming. There are now thousands of institutions that offer this. Now all we have to do is get millions so that we have to worry about a problem like this, right? This link brings you to a the CDARS web site which has a list of all the financial institutions across the country that offer CDARS (which is an acronym for Certificate of Deposit Account Registry Service):
http://www.cdars.com/find-cdars.php
I-BONDS
Caller: This caller read that I-Bonds purchased in early part of the last decade are earning a net interest rate of zero. Bob said that couldn't be right because the for I-Bonds purchased from November 2009 through April 2010, you get 3.36%. This includes a 0.30% fixed rate, and a 3.06% annualized rate of inflation. Bob noted that the six month annualized rate of inflation is based on the CPI from March 2009-September 2009. The caller said the Treasury web site is saying he is getting zero percent. Bob said there was a six month period ending October 31st there was a zero return for that period because of the deflation. But for the period beginning November 1st, you should be getting a positive rate of return. Bob noted that I-Bonds have been a good conservative investment, but the rates have jumped around. However, if you purchased I-Bonds several years back, you have been getting a good rate when compared to the current rates offered.
PRECIOUS METALS
Caller: This caller noted that Bob had never been big on precious metals, but in light of the unprecedented debt financing an possible devaluation of our currency, do you think a modest position in the Vanguard Precious Metals and Mining Mutual fund might be a reasonable idea? Bob said if you want to do anything in that area, his preferred vehicle is the exchange traded fund that tracks gold (ticker: GLD). Bob said he still views gold as a speculation. When he hears people saying gold is going to 2,000 or 3,000 he is amazed because they don't know that. The price of gold by definition is a speculation. When you buy shares in a common stock, you buy because there is an increase in earnings and dividend stream. But when you buy gold you don't have that increase in dividends stream. Gold bouillon bars just sit and you pay for storage. You are speculating in what others are willing to pay for gold.
(Korn) EC: I watch gold pretty closely, and have been in and out of it in my newsletter a few times. Still looking for attractive entry price, but Bob's points where legit.
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
Honey here: Thanks to David Korn for this great Moneytalk Summary and his commentaries. You can request a complimentary issue of David's weekly newsletter that contains much more than the Brinker summary. Also, David Korn and Kirk Lindstrom publish a monthly fixed income newsletter. David Korn's newsletter and The Retirement Advisor: [LINK]
More David Korn Links:
The Retirement Advisor Model Portfolios all began with $200,000 on 1/1/2007
Honey's Market Report, January 8, 2010:
* Dow closed at 10,618 -- gaining 1.82% first week in January.
* Nasdaq Composite Index closed at 2317 -- gaining 2.12% for the week.
* S&P 500 Index closed at 1145 -- gaining 2.68% for the week.
* Gold closed at 1139, up from 1095.70 on January 1, 2010.
* Light Crude: $83.57, up from $79.62 last week.
* U.S. Dollar: DXY 77.16, down from 77.86, For the week, the dollar index fell 0.5%.
Brinker's Saturday guest-speaker was Matthew Richardson, editor of "Restoring Financial Stability: How to Repair a Failed System"
Brinker's Sunday guest-speaker was Erwann Miche-Kerjan, co-editor of "The Irrational Economist: Making Decisions in a Dangerous World"
Moneytalk FREE on Demand at KGO810 radio. Archived immediately after broadcast and available for seven days. Saturday and Sunday 1-4pm. To download the programs and listen later, just choose the day, right click on each hour that you want and use "Save Link as." KGO Moneytalk Archives [Link] If you want to call KGO and complain about (or praise) Bob Brinker's Moneytalk, here are the numbers: Comments line: 415-216-1052....Listener services: 415-216-1050. Here is the KGO email address -- cut-and-paste it into your email compose window: kgofeedback@yahoo.com
However, I have a real treat for you -- excerpts from David Korn's weekend newsletter. Posted with David's permission:
GOVERNMENT BONDS
Brinker Comment: The Municipal Bond Market and the fixed income market have both had good years. Ten-year AAA Municipal Bond General Obligations are currently yielding 3.28%. If you adjust that for a 35% top federal tax bracket, that would equate to a 5.05% taxable equivalent. The 30-year AAA Municipal Bond security is yielding 4.45% and that equates 6-7/8ths% for the top bracket.
(Korn) EC: I wanted to alert you all to an interesting new offering in the municipal bond market that is hot off the presses. BlackRock Inc.'s Ishares unit started the first municipal-bond exchange traded funds designed to liquidate at the end of a fixed maturity period. Six funds started trading on Friday. This is a pretty new product for municipal bond investors because it is liquid and tradable in its ETF form. I am going to do a
little digging into these and will report back.....
EMPLOYMENT REPORT
Brinker Comment: We received information on Friday about the employment situation in this country. The unemployment rate came in at 10%, but this number is slightly misleading because the workforce decreased in December largely due to discouraged workers. There was a decrease in the workforce of 661,000 in December. The unemployment rate would actually be higher if you counted the discouraged workers. The number of jobs on private payrolls declined by 84,000 in December from November. Bob said he thinks a better measure is the U-6 calculation, which includes people who have part time jobs who would like full time jobs and the people who have given up looking for work. That number is 17.3%, down from its record high of 17.5%.
The number of discouraged workers is up to 929,000 in the month of December. They started keeping this data in 1994, and last month is the record high. It is taking people longer to find a job as well. It takes unemployed workers an average of 29 weeks to find a job. That is a long time and is the biggest number since they started keeping the data in 1948. This causes a lot of grief in families when you have long term unemployment. It is no wonder workers get discouraged in this kind of situation.
(Korn) EC: There are actually several categories of employment measure the Bureau of Labor Statistics. The number that always gets reported is the U-3 which is the "total unemployed as a percent of the civilian labor force and is considered the official unemployment rate. U-6 is defined as the total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers." Marginally attached workers are persons who currently are neither working nor looking for work but indicate that want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.
Brinker Comment: Bob noted that we are hearing a lot of talk in Washington about creating jobs, but these are not long term jobs. These are more geared for specific projects, like building a road. Plus, these are jobs being paid for by taxpayers. That is totally different situation than having a long term job with a private company where your hard work creates revenue. One of the reasons that so many cities, counties and even states have had budget problems is because so much money has been drained out of taxpayer pockets to pay for government jobs. This is not a good economic business model for job creation. The only way you will get a sustainable and meaningful increase in job creation is for private enterprise and especially small businesses to do the hiring. Why are we seeing such reluctance from small businesses and private industry to hire right now? Why did we see a decline of 84,000 jobs in December even with an economy that has been recovering since summer? Bob said he thinks there has been a tremendous amount of uncertainty created by the politicians in Congress with reference to tax policy. Small business owners and entrepreneurs are looking at the potential change in tax policy and are holding back from hiring because they don't know what it will cost them.
Brinker Comment: A lot of people were disappointed at the reported 85,000 Job losses reported for the month of December, but keep in mind that job losses are much more moderate than they were last year when we were seeing hundreds of thousands of jobs being lost each month. Plus, another positive about the latest employment report is that the data for November was revised upward such that we actually had an increase in jobs of 4,000 for the first month in a long time.
(Korn) EC: Here is a chart showing the jobs gained by decade in the United States. This past decade is the first on record during which the number of jobs increased by less than 20%:
Chart of the day
Brinker Comment: You need to add about 1.2 million jobs a year in our country just to accommodate all of the people that grow up and enter the labor force. In the last couple of years, we have lost 7 million jobs, so you can see what kind of problem that has caused. This is one of the reasons you have seen interest rates kept so low by the Federal Reserve as one of their mandates is to maximize employment while maintaining low inflation. The government has not really come up with any kind plan for being helpful in terms of creating jobs. In fact, they have done the reverse by creating uncertainty about the tax code given the wide array of tax increase proposals floating around Capital Hill.
ASSET ALLOCATION QUESTIONS
Caller: This 55-year old caller has been 100% in stocks for a long time. He can start collecting a pension at age 65 and wanted to know if he could view the pension, along with social security, as the fixed income portion of his asset allocation. Bob said he wouldn't adopt that approach. When you get to a point where you are approaching or in retirement, you should have a balanced portfolio with a general area of 50% allocated to the equity markets and 50% investment in the fixed income market. The pension fund money would give you cash flow on top of the cash flow generated from your portfolio and allow you to maintain a lower withdrawal rate.
Caller: This caller has a $4 million net worth and is invested in Bob's Model Portfolio III and uses the bond portion of that portfolio to generate income for his every day living. Because of the recent decline in the GNMA dividend, he is coming up short about $500 a month for his cash flow. He has to make an IRA distribution of about $55,000 for 2009 which he can do from a cash position and was considering purchasing some long-term quality bonds to generate about $250 a month. He also has some stocks that he could sell, but wondering if he should take some out of his inflation protection holdings. Bob said he would take $30,000 out of the distribution, put it aside and tap that for $500 a month which will cover you for 5 years.
INVESTING IN BOND FUNDS
Caller: This caller just had a large Certificate of Deposit mature and he wants to purchase some bonds with the money. He is concerned about net asset value declines in the bond funds he is going to purchase. Should he lump sum into a bond fund, or delay it over a period of 4-5 months. Bob said you can fully insulate yourself against net asset value decline by purchasing a ladder of FDIC-insured CDs with varying maturities and hold them to maturity. You will get 100 cents on the dollar at maturity and you can reinvest the money at prevailing rates. If you want to purchase a bond fund, dollar cost averaging a position over time can reduce the risk, but at the same time if you get into a rising interest rate environment you will see declining NAVs anyway.
Brinker Comment: We really have not yet seen declining NAVs in bond funds. Bob said he was looking at the Vanguard GNMA fund that he recommends. Adjusted for the seven cent distribution the fund paid in December, the fund would be trading at $10.74, which is not far from its all-time high of $10.90. Even though rates have moved some, it hasn't really impacted the NAV yet. Bob noted that if you are so nervous that you are watching interest rates all the time, you might consider whether you are more suited for an FDIC-insured CD.
(Korn) EC: The Vanguard GNMA Fund (VFIIX) closed Friday at $10.67. It has yield of 2.71% as of 1/8/2010.
HIGH YIELD CORPORATE BOND FUNDS
Caller: This caller is in a position to add some money in the Vanguard High Yield Corporate Bond Fund, but saw that there is a penalty of 1% for not holding it for more than a year. Bob said he owns a small percentage of that fund in his fixed income Model Portfolio and is comfortable with establishing a position in for a year. Bob noted that the fund is yielding over 7% which is a tremendous yield in this market place. And we have been entering into a more sanguine economic period ever since summer. Plus a 1% penalty is not a huge deal. The caller than asked if the good run in stocks is what is helping the bonds here. Bob said what is helping bond funds like this is investors are feeling more and more comfortable about the credit markets and that we won't see wholesale corporate bankruptcies. As the healing process has continued, that is what you have been seeing in the high yield corporate bond market. It was rough for a while, but the run up in the high yield junk bond market and has recouped the vast majority on what it had lost on the downside during this recovery.
(Korn) EC: A lot of Trekkies were shocked when Bob first recommended the Vanguard High Yield Corporate Bond Fund (VWEHX) in his fixed income portfolio. It was contrary to what he had preached for a long time; namely, to not chase yield in the junk bond market. Bob justified the recommendation by saying it was only a portion of his fixed-income only portfolio. The fund then got creamed during the bear market, bottoming at the end of 2008, but has had a great run since.
Caller: A caller asked Bob why not go with the Vanguard High Yield Corporate Bond Fund versus the GNMA Fund when you can get 7% yield versus 2.7%. Bob pointed out that you have much more volatility in the High Yield Fund. Also, Bob pointed out that over the last 10 years, the GNMA Fund has actually done better that the High Yield by a sizable margin. The GNMA has had an annualized return of 6.23% versus 5.07% of the High Yield Bond fund. You made an additional 116 basis points per year with far less risk in the GNMA. The GNMA Fund has weathered the storm and continues to trade near record highs in recent months.
(Korn) EC#2: Junk bonds aren¹t my cup of tea for fixed income. Sure, its great when the yields are high, but you are paying for that extra yield with the risk that the underlying credit will default. My philosophy is you take risk on the stock side of the equation and the bond side you seek stability and very high quality. But if you want some exposure to junk bonds, at least a bond fund gives you diversification and Vanguard knows how to keep the expenses down.
[Honey EC: Brinker could not have picked a worse time to add (15%) Vanguard High Yield Fund to his Fixed Income Portfolio. I know from experience that if one is aware of what makes High Yield Bond Funds tick and uses some good "market-timing," they can be very profitable.]
SAFETY OF TREASURIES
Caller: This caller has $25,000 in GMAC that mature January 15th of this month. He was thinking of putting all $25K into the Vanguard Investment Grade Bond Fund and wanted to know if it was a decent fund to hold for the long term? Bob first expressed surprise that he was getting his money back from the GMAC bond, which Bob said was a miracle and that he benefited directly from the taxpayer bailout. If you decide to put it in a long-term bond fund, you have to expect to endure some pain because at some point, Bob said he thinks eventually long-term rates will rise and when that happens long term bond funds will be under pressure. For that reason, Bob said he would not be going there. If you are willing to hold it for the long term, Bob would rather hold a specific date-certain maturity such as a Treasury Note. A five-year note is yielding 2.60% and a 10-year Note is yielding 3.8%. The interest is taxable, but you will get your money back.
(Korn) EC: Interest income from Treasuries is subject to federal income tax. However, interest income from Treasuries is exempt from state and local income taxes. Thus, the higher your state and/or local income tax bracket, the more beneficial a Treasury can be. If you are subject to the federal alternative tax (AMT), it is also included in income for purposes of that tax.
BOND BUBBLE?
Caller: This caller was reading an article that posited whether we have a bond bubble in the Treasury market, and noted that famed PIMCO bond fund manager is issuing strong warnings about the impact our government policies and the ability to finance the new debt in the future. Bob said he didn't think the term "bubble" applied to what was going on in the Treasury market. What happened is we had the worst recession since the 1930s and took rates down to record levels and at some point rates will adjust to more normalized levels. The internet dot com boom was a bubble, and we had a housing bubble, but it doesn't work for the Treasury market. The Treasury market is 100% guaranteed by the printing press so you don't have that credit risk in Treasuries.
(Korn) EC: Bill Gross just published his January 2010 Investment Outlook. If you are going to read any one article linked to this weekend, I encourage all of you to read this one. Recognize that Mr. Gross is not the all knowing, and certainly he is selling a product (his bond fund), but the stats that he cites in his article about the fiscal deficit, and how much the Federal Reserve has purchased is staggering. Gross believes it is unlikely that the US economy is stronger enough for the government to "gracefully exit" stimulus spending programs or that private investors are going to be capable of absorbing the balance in deficit funding. Check it out at this url:
http://tinyurl.com/yefgeuw
CHINA BUBBLE?
Caller: This caller asked Bob if he had read the article this week about the famous hedge fund manager who had predicted the collapse of Enron and was not predicting that China¹s economy was headed for a crash. Bob said China is the most dramatic growth story in the world today. And it is reasonable to expect that it will be volatile. Bob said he would find common ground with anyone who was projecting high beta, and high volatility in Chinese stock prices. But to think that China will collapse right now is premature because China is a great growth story for a while. They are really early on in their industrial process. Having said that, you should continue to see dramatic earth-shattering volatility in the Chinese equity prices.
(Korn) EC: The caller was referring to James Chanos, the contrarian investor whose hedge fund, Kynikos Associates has about $6 billion under management. Chanos said that China's surging real estate sector is being flooded by speculative capital and he thinks that Beijing is cooking the books about its growth. An interesting take from a guy who has made a lot of money betting against conventional wisdom. Read more about what Chanos is saying
relative to China at this url:
http://tinyurl.com/yan8mbr
TIPS AUCTION
Caller: This caller asked Bob to give him an estimate of what he thinks the base rate of the upcoming 10-year TIPS Auction would be. Bob said the base rate on the 10-year Treasury Inflation Protected Security is currently 1.23% based on trading Friday. That means in the secondary market you get 1.23% plus the inflation pay through. Bob said he expects the base rate in the auction this week to be very close to that as the auctions generally go close to the prevailing rates. You want to watch what is going to happen where inflation heats up. If that happens, you would probably see the base rate increase which would result in a depreciation of the net asset value although it would eventually come through at par value with the inflation add on. But if you had a TIPS Fund and had rising rates, you should expect the NAV to decline.
Brinker Comment: The 5-year TIPS have a base rate of 0.25%. 10-year TIPS have a base rate of 1.23%. 20-year TIPS have a base rate of 1.99% and the longest TIPS which mature in 2032 have a base rate of 2.0%. You add on the inflation pay through in all of this. We have seen periods when the base rate has gone higher and where it has gone lower.
EC: Here is a link to the upcoming Treasury Auction.
http://tinyurl.com/33p5x
KEEP YOUR CASH SAFE
Caller: This caller had a bunch of CDs mature last week resulting in $1 million in cash that is now sitting in a federal credit union and he didn't want to take too much risk with hit. Bob told the caller that on Monday morning he needed to move at least $750,000 out of there because only $250,000 was covered by federal deposit insurance (through the national credit union association). Bob said he would use direct Treasury instruments and insured CDs.
(Korn) EC: With the creation of CDARS --- a service that can offer you up to $50 million in Federal Deposit insurance coverage at one financial institution, people have more options since it allows you to get around the FDIC $250,000 limit. It enables an individual, or charity, or whatever, to come into one single bank, deposit a great deal of money. That money gets parceled out into packets below $250,000 to as many banks as necessary and so the customer ends up owning the entire portfolio but has accomplished this by one transaction. You get one statement, but listing all of the CDs. If it is a taxable entity, there will be one tax return. People could do this on their own in principle, but it would be very time consuming. There are now thousands of institutions that offer this. Now all we have to do is get millions so that we have to worry about a problem like this, right? This link brings you to a the CDARS web site which has a list of all the financial institutions across the country that offer CDARS (which is an acronym for Certificate of Deposit Account Registry Service):
http://www.cdars.com/find-cdars.php
I-BONDS
Caller: This caller read that I-Bonds purchased in early part of the last decade are earning a net interest rate of zero. Bob said that couldn't be right because the for I-Bonds purchased from November 2009 through April 2010, you get 3.36%. This includes a 0.30% fixed rate, and a 3.06% annualized rate of inflation. Bob noted that the six month annualized rate of inflation is based on the CPI from March 2009-September 2009. The caller said the Treasury web site is saying he is getting zero percent. Bob said there was a six month period ending October 31st there was a zero return for that period because of the deflation. But for the period beginning November 1st, you should be getting a positive rate of return. Bob noted that I-Bonds have been a good conservative investment, but the rates have jumped around. However, if you purchased I-Bonds several years back, you have been getting a good rate when compared to the current rates offered.
PRECIOUS METALS
Caller: This caller noted that Bob had never been big on precious metals, but in light of the unprecedented debt financing an possible devaluation of our currency, do you think a modest position in the Vanguard Precious Metals and Mining Mutual fund might be a reasonable idea? Bob said if you want to do anything in that area, his preferred vehicle is the exchange traded fund that tracks gold (ticker: GLD). Bob said he still views gold as a speculation. When he hears people saying gold is going to 2,000 or 3,000 he is amazed because they don't know that. The price of gold by definition is a speculation. When you buy shares in a common stock, you buy because there is an increase in earnings and dividend stream. But when you buy gold you don't have that increase in dividends stream. Gold bouillon bars just sit and you pay for storage. You are speculating in what others are willing to pay for gold.
(Korn) EC: I watch gold pretty closely, and have been in and out of it in my newsletter a few times. Still looking for attractive entry price, but Bob's points where legit.
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
Honey here: Thanks to David Korn for this great Moneytalk Summary and his commentaries. You can request a complimentary issue of David's weekly newsletter that contains much more than the Brinker summary. Also, David Korn and Kirk Lindstrom publish a monthly fixed income newsletter. David Korn's newsletter and The Retirement Advisor: [LINK]
More David Korn Links:
- Download a FREE Copy of The Retirement Advisor
- The Retirement Advisor web site and blog.
| The Retirement Advisor Portfolios | Dollar Value on 12/31/09 | Change |
| Model Portfolio 1 | $214,500 | 7.2% |
| Model Portfolio 2 | $224,106 | 12.1% |
| Model Portfolio 3 | $237,109 | 18.6% |
| DJIA 12,501.52 on 1/1/2007 | $10,428 | (16.6%) |
| S&P500 1,418.30 on 1/1/2007 | $1,115.10 | (21.4%) |
The Retirement Advisor Model Portfolios all began with $200,000 on 1/1/2007
Honey's Market Report, January 8, 2010:
* Dow closed at 10,618 -- gaining 1.82% first week in January.
* Nasdaq Composite Index closed at 2317 -- gaining 2.12% for the week.
* S&P 500 Index closed at 1145 -- gaining 2.68% for the week.
* Gold closed at 1139, up from 1095.70 on January 1, 2010.
* Light Crude: $83.57, up from $79.62 last week.
* U.S. Dollar: DXY 77.16, down from 77.86, For the week, the dollar index fell 0.5%.
Brinker's Saturday guest-speaker was Matthew Richardson, editor of "Restoring Financial Stability: How to Repair a Failed System"
Brinker's Sunday guest-speaker was Erwann Miche-Kerjan, co-editor of "The Irrational Economist: Making Decisions in a Dangerous World"
Moneytalk FREE on Demand at KGO810 radio. Archived immediately after broadcast and available for seven days. Saturday and Sunday 1-4pm. To download the programs and listen later, just choose the day, right click on each hour that you want and use "Save Link as." KGO Moneytalk Archives [Link] If you want to call KGO and complain about (or praise) Bob Brinker's Moneytalk, here are the numbers: Comments line: 415-216-1052....Listener services: 415-216-1050. Here is the KGO email address -- cut-and-paste it into your email compose window: kgofeedback@yahoo.com
Wednesday, January 6, 2010
Bob Brinker, Mark Hulbert and Barron's
January 6, 2010....Please note: In 2007, 2008 or 2009, Bob Brinker's Marketimer was not on the Hulbert Financial Digest list of Top-5 Performers (of all newsletters Hulbert ranked) in any category, over any 5-year time period! [If you question this but don't subscribe to Hulbert Financial Digest, go to your library, they are usually available there.]
However, in spite of the above fact, according to Mark Hulbert's January 6, 2010 Barron's column, he includes Bob Brinker among a panel of top-5 market-timers who "jumped over three hurdles" to qualify as a "top market timer."
Mark Hulbert wrote:
Hey, Mark, here's a newsflash for you! Bob Brinker WAS a buy-and-holder during the 2007-2009 BEAR MARKET! What's up with that?
Bob Brinker's model portfolio three year performance numbers. [Courtesy of Jeffchristie. Brinker no longer includes 3-year performance on his website.]
Portfolio 1: Dec. 31, 2006 = $260,032. On Dec. 31, 2009 = $230.915 for a difference of ($29,117) down 11.2%.
Portfolio 2: Dec. 31, 2006 = $210,074. On Dec. 31, 2009 = $193,172 for a difference of ($16,903) down 8.0%.
Portfolio 3: Dec. 31, 2006 = $197,479. On Dec. 31, 2009 $198,066 for a difference of $587 up 0.3%.
Bob Brinker has made NO market-timing changes to his model portfolios since March 2003. They have been fully invested since then. His stock portfolios dropped 39% in 2008 and another 10% in 2009 before the market turned up.
Included in his Barron's article, Mark Hulbert published this from Bob Brinker's January, 2010 issue of Marketimer:
Here's a link to Mark Hulbert's Barrons article: Top Market Timers Give 2010 Outlook
Dixiegeezer took this "windsurfers" picture. I think what he did with the framing is beautiful because it gives the artistic feeling of water (click to see it enlarged):
However, in spite of the above fact, according to Mark Hulbert's January 6, 2010 Barron's column, he includes Bob Brinker among a panel of top-5 market-timers who "jumped over three hurdles" to qualify as a "top market timer."
Mark Hulbert wrote:
"For guidance, I decided -- as I often do -- to turn to those investment newsletters with the best market timing records in the Hulbert Financial Digest's ranking system. Specifically, I determined which newsletters were able to jump over three market timing performance hurdles....."If Brinker missed on even one "hurdle," Mark infers he would have been out. So let's look at the following "hurdle": Mark Hulbert wrote: *market timing performance ahead of a buy-and-hold on a risk-adjusted basis during the 2007-2009 bear market...."
Hey, Mark, here's a newsflash for you! Bob Brinker WAS a buy-and-holder during the 2007-2009 BEAR MARKET! What's up with that?
Bob Brinker's model portfolio three year performance numbers. [Courtesy of Jeffchristie. Brinker no longer includes 3-year performance on his website.]
Portfolio 1: Dec. 31, 2006 = $260,032. On Dec. 31, 2009 = $230.915 for a difference of ($29,117) down 11.2%.
Portfolio 2: Dec. 31, 2006 = $210,074. On Dec. 31, 2009 = $193,172 for a difference of ($16,903) down 8.0%.
Portfolio 3: Dec. 31, 2006 = $197,479. On Dec. 31, 2009 $198,066 for a difference of $587 up 0.3%.
Bob Brinker has made NO market-timing changes to his model portfolios since March 2003. They have been fully invested since then. His stock portfolios dropped 39% in 2008 and another 10% in 2009 before the market turned up.
Included in his Barron's article, Mark Hulbert published this from Bob Brinker's January, 2010 issue of Marketimer:
*Bob Brinker's Marketimer (Robert Brinker) -- Bullish. In his latest issue, published earlier this week, in which he reported that his market timing model is bullish and his model portfolios are fully invested, Brinker wrote: "Our indicators suggest that a new cyclical bear market decline in excess of 20% is not likely to begin during the winter season. While it is true that cyclical bull market corrections can occur at any time, we would regard any such pullback as a health restoring event if it were to occur in the weeks ahead. Cyclical bull market corrections are usually contained with a range of five to ten percent, and are followed by significant rallies to new cyclical bull market highs."For Mark Hulbert to even call Brinker a market-timer without pointing out how long he has been a "buy and holder," is playing fast and loose with honesty. Mark Hulbert has a long-standing habit of overlooking important facts that would be detrimental to "Robert Brinker." Symbiotic relationship??
Here's a link to Mark Hulbert's Barrons article: Top Market Timers Give 2010 Outlook
Dixiegeezer took this "windsurfers" picture. I think what he did with the framing is beautiful because it gives the artistic feeling of water (click to see it enlarged):
Saturday, January 2, 2010
January 2, 2010, Bob Brinker's Moneytalk: Summary, Commentary and Excerpts
January 2, 2010....Bob Brinker hosted Moneytalk live Saturday. In edit: Lynn Jimenez filled in for Brinker on Sunday. (Lynn believes in "staying invested.")
STOCK MARKET: Bob Brinker said that "we got a great year in the stock market," then he recited the closing numbers and yearly gains. He pointed out that the Dow gave a "lagging performance," but that was not a surprise because it is such a narrow index.
MARKETIMER RETURNS: Two times today, Brinker did an infomercial about his newsletter during the program. He said: "For those of you interested in tracking the returns of my investment letter, you can do so by going to Bob Brinker. com..." That is a huge change from what Brinker did last year. Last year, as Brinker was a buy-and-holder during the worst bear market since the Great Depression, he NEVER posted 2008 model portfolio returns on his website. And he never talked about the stock market on Moneytalk during the whole month of January 2009.
Here are Bob Brinker's one year returns for 2008:
Model Portfolio 1 = down 39.7%
Model Portfolio 2 = down 37.4%
Model Portfolio 3 ("balanced") = down 23.9%
Total Market Index = down 37
Bob Brinker's two-year (2008-2009) returns:
Portfolio 1 = down 18.5%
Portfolio 2 = down 15.5%
Portfolio 3 = down 6.5%
How does this fit with the returns Brinker is showing on his website? From the October 2007 all-time-high to the February, 2009 (almost the low), Brinker's model portfolios 1&2 lost more than 50%. Here are the dollar values:
Model Portfolio I: Oct 2007 ATH = $302,561 - February 28, 2009 = $143,938
TAXES GOING UP: The top federal bracket of 35% will remain in place until a year from now, then rates will go up. The 35% will go up to 39.6%.....Brinker said: "Several tax increases have been put on the table in the last few weeks. None of them have yet been signed into law, but the only direction for taxes to go is up.....Because the overspending in Washington has reached epidemic proportions.....The Senate health care proposal is talking about raising the uncapped Medicare tax from the current 2.9 to 4.7.....
.....The House is proposing a surtax on high earners of about 5.4%....That would be added on top of the 39.6 that goes into effect next year. Right away, you're in 45. So if you are California....right away, you're in 55, plus what you're paying in uncapped Medicare....could be very close to 60% taxation.....This is what you need to be aware of....There is an income tax tsunami that is heading for the people of the United States.....The out of control spending is forcing the hand of the politicians to raise these revenues and that is why they are coming up with all these ideas.....Carl Levin came up with another new tax -- a war tax."
HEALTH SAVINGS ACCOUNTS: Dave in San Francisco asked about Health Savings Accounts. Brinker said he likes them, and that you could still fund for 2009 up until April 15th -- if you are in a position to do so. Singles can put in $3000 -- age 55 or older can put in an additional $1,000.
CALLERS: Most all of the callers asked personal IRA/credit card debt/lump sum versus annuity retirement questions -- far too esoteric to be of interest here. Brinker is still against rolling money from a regular IRA into a Roth IRA and paying tax on it, unless you are in a zero or very low bracket.
POLITICS: Scattered throughout the program, Brinker did some rather severe bashing of the U.S. Congress. He said that taxpayers have become Congress' "ATM machine." [Honeybee EC: I did not hear Brinker mention Barack Obama by name or even infer that Obama had any responsibility whatsoever for the "runaway freight train spending" in Washington.]
Brinker's Saturday guest-speaker was Joseph Hurley:
Honey's Market Report, January 1, 2010:
* Dow closed at 10,428 -- 19% higher in 2009; losing 9% over a decade.
* Nasdaq Composite Index closed at 2269 -- gaining 44% in 2009; losing 44% over a decade.
* S&P 500 Index closed at 1115, gaining 26.5% in 2009; losing 24% over a decade.
* Gold closed at $1095.70 -- up 24% in 2009 and gaining 280% over a decade.
* Light Crude: $79.62.
* U.S. Dollar: $77.86 -- Jan. 1 (Bloomberg) -- The dollar posted its first monthly gain since June versus the currencies of major U.S. trading partners as the Federal Reserve moved closer to withdrawing stimulus measures that helped cause the greenback to fall 4.2 percent for the year.
* Treasury Bond rates, TIPS, munis [LINK],
* Fed Funds, Mortgage, CD rates [LINK]
* Daily Treasury Statement [LINK]
Moneytalk Available on Demand totally free at KGO810 radio for seven days after broadcast. The three hours of the programs are archived Saturday and Sunday 1-4pm. To download the programs and listen later, just choose the day, right click on each hour that you want and use "Save Link as." KGO Moneytalk Archives [Link] If you want to call KGO and complain about (or praise) Bob Brinker's Moneytalk, here are the numbers: Comments line: 415-216-1052....Listener services: 415-216-1050. Here is the KGO email address -- cut-and-paste it into your email compose window: kgofeedback@yahoo.com
A couple of days ago, I posted a picture of a Florida sunrise that Dixiegeezer sent to us that is very similar to this one. This one does not have the birds in it and I think it is spectacular because it seems to have been taken just a moment or two later -- the sun is a bit brighter. Click to enlarge:
STOCK MARKET: Bob Brinker said that "we got a great year in the stock market," then he recited the closing numbers and yearly gains. He pointed out that the Dow gave a "lagging performance," but that was not a surprise because it is such a narrow index.
MARKETIMER RETURNS: Two times today, Brinker did an infomercial about his newsletter during the program. He said: "For those of you interested in tracking the returns of my investment letter, you can do so by going to Bob Brinker. com..." That is a huge change from what Brinker did last year. Last year, as Brinker was a buy-and-holder during the worst bear market since the Great Depression, he NEVER posted 2008 model portfolio returns on his website. And he never talked about the stock market on Moneytalk during the whole month of January 2009.
Here are Bob Brinker's one year returns for 2008:
Model Portfolio 1 = down 39.7%
Model Portfolio 2 = down 37.4%
Model Portfolio 3 ("balanced") = down 23.9%
Total Market Index = down 37
Bob Brinker's two-year (2008-2009) returns:
Portfolio 1 = down 18.5%
Portfolio 2 = down 15.5%
Portfolio 3 = down 6.5%
How does this fit with the returns Brinker is showing on his website? From the October 2007 all-time-high to the February, 2009 (almost the low), Brinker's model portfolios 1&2 lost more than 50%. Here are the dollar values:
Model Portfolio I: Oct 2007 ATH = $302,561 - February 28, 2009 = $143,938
Model Portfolio II: October 2007 ATH = $241,99 - February 28, 2009 = $119, 105
Model Portfolio III: October 2007 ATH = $219,263 - February 28, 2009 = $147,013 (balanced)
Chart courtesy of Kirk Lindstrom (click to enlarge):
FIXED INCOME/IMPLIED INFLATION RATE: Brinker also discussed the fixed income market and recited all of the yields. He pointed out that it had been a good year for fixed income and that investors are "happy campers" with what they made in 2009. Treasuries are at historical lows. Brinker said: "The market is saying the implied inflation rate over the next ten years is 2.4% annual. You can compare that with the current year-over-year consumer price inflation rate, that's 1.8. So you see these things are getting pretty close now. Remember we went through a period of deflation where there was a pretty big gap between the implied inflation rate and the actual deflation rate. Well that's now coming very close....."
TAXES GOING UP: The top federal bracket of 35% will remain in place until a year from now, then rates will go up. The 35% will go up to 39.6%.....Brinker said: "Several tax increases have been put on the table in the last few weeks. None of them have yet been signed into law, but the only direction for taxes to go is up.....Because the overspending in Washington has reached epidemic proportions.....The Senate health care proposal is talking about raising the uncapped Medicare tax from the current 2.9 to 4.7.....
.....The House is proposing a surtax on high earners of about 5.4%....That would be added on top of the 39.6 that goes into effect next year. Right away, you're in 45. So if you are California....right away, you're in 55, plus what you're paying in uncapped Medicare....could be very close to 60% taxation.....This is what you need to be aware of....There is an income tax tsunami that is heading for the people of the United States.....The out of control spending is forcing the hand of the politicians to raise these revenues and that is why they are coming up with all these ideas.....Carl Levin came up with another new tax -- a war tax."
HEALTH SAVINGS ACCOUNTS: Dave in San Francisco asked about Health Savings Accounts. Brinker said he likes them, and that you could still fund for 2009 up until April 15th -- if you are in a position to do so. Singles can put in $3000 -- age 55 or older can put in an additional $1,000.
CALLERS: Most all of the callers asked personal IRA/credit card debt/lump sum versus annuity retirement questions -- far too esoteric to be of interest here. Brinker is still against rolling money from a regular IRA into a Roth IRA and paying tax on it, unless you are in a zero or very low bracket.
POLITICS: Scattered throughout the program, Brinker did some rather severe bashing of the U.S. Congress. He said that taxpayers have become Congress' "ATM machine." [Honeybee EC: I did not hear Brinker mention Barack Obama by name or even infer that Obama had any responsibility whatsoever for the "runaway freight train spending" in Washington.]
Brinker's Saturday guest-speaker was Joseph Hurley:
Honey's Market Report, January 1, 2010:
* Dow closed at 10,428 -- 19% higher in 2009; losing 9% over a decade.
* Nasdaq Composite Index closed at 2269 -- gaining 44% in 2009; losing 44% over a decade.
* S&P 500 Index closed at 1115, gaining 26.5% in 2009; losing 24% over a decade.
* Gold closed at $1095.70 -- up 24% in 2009 and gaining 280% over a decade.
* Light Crude: $79.62.
* U.S. Dollar: $77.86 -- Jan. 1 (Bloomberg) -- The dollar posted its first monthly gain since June versus the currencies of major U.S. trading partners as the Federal Reserve moved closer to withdrawing stimulus measures that helped cause the greenback to fall 4.2 percent for the year.
* Treasury Bond rates, TIPS, munis [LINK],
* Fed Funds, Mortgage, CD rates [LINK]
* Daily Treasury Statement [LINK]
Moneytalk Available on Demand totally free at KGO810 radio for seven days after broadcast. The three hours of the programs are archived Saturday and Sunday 1-4pm. To download the programs and listen later, just choose the day, right click on each hour that you want and use "Save Link as." KGO Moneytalk Archives [Link] If you want to call KGO and complain about (or praise) Bob Brinker's Moneytalk, here are the numbers: Comments line: 415-216-1052....Listener services: 415-216-1050. Here is the KGO email address -- cut-and-paste it into your email compose window: kgofeedback@yahoo.com
A couple of days ago, I posted a picture of a Florida sunrise that Dixiegeezer sent to us that is very similar to this one. This one does not have the birds in it and I think it is spectacular because it seems to have been taken just a moment or two later -- the sun is a bit brighter. Click to enlarge:
Friday, January 1, 2010
Reviewing Bob Brinker's Two-year Market-Timing Record, Part II
January 1, 2009....The topic I'm going to focus on in this article is Bob Brinker's market-timing predictions/forecasts and what he said about them in 2009. I intend to pull no punches in my editorial comments. I believe Brinker's radio audience contains a lot of shark bait and he has complete control over how the chum is put in the waters. This little blog points out where to look for it.
Let's review Brinker's market-timing predictions for 2009. [I posted a summary of Bob Brinker's 2008 market-timing calls on the previous page. They need to be compared side by side because in these two years, there was the worst bear market since the Great Depression and then a 60%+ bounce back!
On Moneytalk in January, February and March 2009, Brinker was almost totally silent about the stock market. (You can verify this by reading through my summaries -- I ALWAYS report when/if Brinker talks about the stock market.) He had nothing to say as the market dropped to 677!
Finally in the first week of April when the S&P had recovered to his January buy-level of mid-800's, Brinker had this to say --from my April 4, 2009 Moneytalk Summary:
Brinker said: "The S&P 500 is setting in at 842 1/2. And as I mentioned to a caller, if you go all the way back to the October 2007 high and you add back the cash dividends that you've received over that year and a half period, the S&P 500 has declined on a total return basis a little bit over, just slightly over 40% counting everything. If you go back to the March low, which was just less than a month ago, you've had a rebound of about 24.7 including the cash dividend. And about 25.5 in the total stock market......"
..... "It is my opinion that the decline that occurred in mid-to-late February into early March was a direct result of bear raids on financial stocks that spilled over into other stocks during that time. That's when you saw that very brief period of time from late-February to early-March where you saw the S&P 500 dip down to close at the benchmark low of 676. [In retrospect, and even without any "sequence of events" Brinker declared 676 the market "benchmark low."] Now there's no question in my mind that that drop below the 700's, where there was strong support for the market off the November 20th lows.....that brief dip that we had from the mid-700's to 676, and then it snapped right back, was due to the fact that there were bear-raiders at work. [Blamed the drop below his mid-800's buy level on bear raids.]
April 25, 2009 Moneytalk was the first time Brinker began to brag that he had made a call to "buy on weakness." He said: "Well our recommendation to our subscribers has been to be a buyer on weakness. We have regarded the market as a buy on weakness. That is our view and that's certainly a view that has not changed in recent weeks. FALSE! He waited until the market had rebounded the last two weeks of March. Then in the April 3, 2009 Marketimer, Bob Brinker wrote: "....we would view any short-term weakness that occurs in the S&P 500 Index as a buying opportunity for those looking to add to equity positions......All of our model portfolios remain fully invested...."
I admit I was flabbergasted the first time I heard that truth twisting...
It was May 10, 2009 that Brinker introduced his next unscrupulous market-timing ploy which he continued throughout the remainder of the year:
Brinker missed the beginning of the bear market, he missed when he called several market bottoms, and he then missed calling the real market bottom. Common sense told him that the market either had to correct or it might be tragedy for the U.S. financial system. He rolled the dice one more time and said 2009 would be a good year -- just as he did in 2008. He was long overdue to get something right, but wouldn't it be nice if he had enough integrity to be balanced with his bragging.
Brinker has cleverly covered up the fact that he NEVER posted his 2008 bear market one-year model portfolio performance on his website. He did this by now posting the 2009 one-year performance. Do you trust a financial advisor who does something that deceptive?
What he doesn't want you to know is: because he rode the bear market down in 2008, all of his portfolios are still well underwater even after the market gains of 2009.
Kudos to JeffChristie for crunching Brinker's model portfolio two-year performance numbers for us. JeffChristie wrote:
I start with the values as of 31 Dec 08.
Portfolio 1 was at $171,451. Brinker says it was up 35% in 09. $171,451 X 1.35 = $231,458. The value on 31 Dec 07 was $283,874. $283,874 - $231,458 = ($52,416).
$52,416 divided by $283,874 = (18.5%)
Portfolio 2 was at $143,294. Brinker says it was up 35% in 09. $143,294 X 1.35 = $193,447. The value on 31 Dec 07 was $229,074. $229,074 - $193,447 = ($35,627) $35,627 divided by $229,074 = (15.5%)
Portfolio 3 was at $163,563. Brinker says it was up 22% in 09. $163,563 X 1.22 = $199,546. The value on 31 Dec 07 was $213,493. $213,493 - $199,546 = $13,947.
$13,947 divided by $199,546 = (6.5%).
In summary the two year results from 31 Dec 2007 through 31 Dec 2009 are as follows:
Portfolio 1 (18.5%)
Portfolio 2 (15.5%)
Portfolio 3 (6.5%)
[Honey here: As of January 2, Brinker has not posted December 31 portfolio dollar values on his Marketimer website. He posted what he claims are 2009 percentage gains -- that is why Jeff had to use Brinker's percentage gain numbers to compute the two-year losses.]
Let's review Brinker's market-timing predictions for 2009. [I posted a summary of Bob Brinker's 2008 market-timing calls on the previous page. They need to be compared side by side because in these two years, there was the worst bear market since the Great Depression and then a 60%+ bounce back!
COMPARE:
January 4, 2008 Marketimer (S&P: 1447.16) Brinker wrote: "....the risk of a cyclical bear market decline in excess of 20% is not likely to materalize anytime soon....We continue to rate the market attractive for purchase on any weakness into the S&P 500 Index mid-1400's range....All Marketimer model portfolios remain full invested as we enter 2008."That confirmation was forthcoming in a special bulletin on January 15, 2009. He basically repeated his "low-to-mid 800's" buy signal. That was based on his belief that the November 2008 low of 752.44 would hold and the bear market had bottomed. Notice the last sentence in this excerpt from the bulletin:
January 6, 2009 Marketimer (S&P: 927.45) Brinker wrote: "We believe the most likely area for a successful test to occur is within the low-to-mid 800's S&P 500 Index price range." [He recommended dollar-cost-average until he issued a confirmation that he believed the bottom was in.]
January 15, 2009 Marketimer Special Bulletin excerpts: "We regard any weakness in the low-to-mid 800's S&P 500 Index price range as an opportunity to buy into the stock market at favorable price levels. We expect calendar year 2009 to be a significant positive year for the stock market."The November low also failed, so he removed his last "buying opportunity" from the March 5, 2009 Marketimer. [The "low-to-mid 800's" was the last "attractive for purchase" level Brinker has specifically named. Since then, he simply gives the useless, untrackable, generalized advice: "buy on weakness."]
COMPARE:
March 4, 2008 Marketimer, Bob Brinker wrote: "This gives the S&P 500 Index the potential to trade into the 1600's range as we move closer to the time when investors will discount the 2009 earnings recovery."Wrong again! And he missed the bottom altogether. It was just four days later that the market bottomed at 677, turned around and never looked back during the rest of 2009!
March 5, 2009 Marketimer, Bob Brinker wrote: "Due to the fact that the November 20, 2008 S&P 500 Index closing low failed to hold during the testing process, we believe a new bottoming process will be necessary in order to put an end to the bear market. This means that in order to set the stage for a sustainable market advance, we need to see a sequence of events consisting of (a) the establishment of an initial closing low; (b) a short-term rally; (c) a test of the area of the initial closing low on reduced selling pressure."
On Moneytalk in January, February and March 2009, Brinker was almost totally silent about the stock market. (You can verify this by reading through my summaries -- I ALWAYS report when/if Brinker talks about the stock market.) He had nothing to say as the market dropped to 677!
Finally in the first week of April when the S&P had recovered to his January buy-level of mid-800's, Brinker had this to say --from my April 4, 2009 Moneytalk Summary:
Brinker said: "The S&P 500 is setting in at 842 1/2. And as I mentioned to a caller, if you go all the way back to the October 2007 high and you add back the cash dividends that you've received over that year and a half period, the S&P 500 has declined on a total return basis a little bit over, just slightly over 40% counting everything. If you go back to the March low, which was just less than a month ago, you've had a rebound of about 24.7 including the cash dividend. And about 25.5 in the total stock market......"
..... "It is my opinion that the decline that occurred in mid-to-late February into early March was a direct result of bear raids on financial stocks that spilled over into other stocks during that time. That's when you saw that very brief period of time from late-February to early-March where you saw the S&P 500 dip down to close at the benchmark low of 676. [In retrospect, and even without any "sequence of events" Brinker declared 676 the market "benchmark low."] Now there's no question in my mind that that drop below the 700's, where there was strong support for the market off the November 20th lows.....that brief dip that we had from the mid-700's to 676, and then it snapped right back, was due to the fact that there were bear-raiders at work. [Blamed the drop below his mid-800's buy level on bear raids.]
April 25, 2009 Moneytalk was the first time Brinker began to brag that he had made a call to "buy on weakness." He said: "Well our recommendation to our subscribers has been to be a buyer on weakness. We have regarded the market as a buy on weakness. That is our view and that's certainly a view that has not changed in recent weeks. FALSE! He waited until the market had rebounded the last two weeks of March. Then in the April 3, 2009 Marketimer, Bob Brinker wrote: "....we would view any short-term weakness that occurs in the S&P 500 Index as a buying opportunity for those looking to add to equity positions......All of our model portfolios remain fully invested...."
I admit I was flabbergasted the first time I heard that truth twisting...
It was May 10, 2009 that Brinker introduced his next unscrupulous market-timing ploy which he continued throughout the remainder of the year:
Moneytalk, Brinker said: "You know, I published a statement in January that I thought that 2009 could be a good year for the stock market – and that was back in January……A lot of people thought basically I had gone insane to make a comment like that. Look, it’s only May and we’re already in positive territory."Of course, Brinker is referring to the tag line he added to the January 15, 2009 Marketimer special bulletin I cited above. He did not say that in the January issue of Marketimer. As usual, Brinker doesn't blatantly lie, he simply picks and chooses what truth he will single out to hang his hat on.
Brinker missed the beginning of the bear market, he missed when he called several market bottoms, and he then missed calling the real market bottom. Common sense told him that the market either had to correct or it might be tragedy for the U.S. financial system. He rolled the dice one more time and said 2009 would be a good year -- just as he did in 2008. He was long overdue to get something right, but wouldn't it be nice if he had enough integrity to be balanced with his bragging.
Brinker has cleverly covered up the fact that he NEVER posted his 2008 bear market one-year model portfolio performance on his website. He did this by now posting the 2009 one-year performance. Do you trust a financial advisor who does something that deceptive?
What he doesn't want you to know is: because he rode the bear market down in 2008, all of his portfolios are still well underwater even after the market gains of 2009.
Kudos to JeffChristie for crunching Brinker's model portfolio two-year performance numbers for us. JeffChristie wrote:
I start with the values as of 31 Dec 08.
Portfolio 1 was at $171,451. Brinker says it was up 35% in 09. $171,451 X 1.35 = $231,458. The value on 31 Dec 07 was $283,874. $283,874 - $231,458 = ($52,416).
$52,416 divided by $283,874 = (18.5%)
Portfolio 2 was at $143,294. Brinker says it was up 35% in 09. $143,294 X 1.35 = $193,447. The value on 31 Dec 07 was $229,074. $229,074 - $193,447 = ($35,627) $35,627 divided by $229,074 = (15.5%)
Portfolio 3 was at $163,563. Brinker says it was up 22% in 09. $163,563 X 1.22 = $199,546. The value on 31 Dec 07 was $213,493. $213,493 - $199,546 = $13,947.
$13,947 divided by $199,546 = (6.5%).
In summary the two year results from 31 Dec 2007 through 31 Dec 2009 are as follows:
Portfolio 1 (18.5%)
Portfolio 2 (15.5%)
Portfolio 3 (6.5%)
[Honey here: As of January 2, Brinker has not posted December 31 portfolio dollar values on his Marketimer website. He posted what he claims are 2009 percentage gains -- that is why Jeff had to use Brinker's percentage gain numbers to compute the two-year losses.]
Happy New Year
Happy new year to all and remember, everyone is "free to wear sunscreen" even if you don't take the rest of this advice... How to live your life
Dixiegeezer took this Florida sunrise picture. Hopefully, 2010 will be this beautiful. Notice the early-rising birds. (click to enlarge):
Dixiegeezer took this Florida sunrise picture. Hopefully, 2010 will be this beautiful. Notice the early-rising birds. (click to enlarge):
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