Search Bob Brinker Blogs

Monday, January 31, 2011

January 31, 2011, David Korn's Summary of Charlie Maxwell Interview

Wow, do I have a treat for everyone!

David Korn writes an outstanding weekly newsletter that includes summaries of Bob Brinker's Moneytalk. This week Bob Brinker's
"Super Star" guest was Charlie Maxwell. In David's just-published newsletter, he has done a complete summary of the Charlie Maxwell interview. (You can download and listen to the interview from KGO810 for free until February 5th. It's in the 3-4pm hour)

Here is David Korn's summary. Posted with his permission:

Introduction: Charlie Maxwell is the Senior Energy Analyst for Weedon & Co. Charlie was educated at Princeton and then Oxford. He has been working in the oil industry since the 1950s. In the 1960s he became an analyst on Wall Street and has been rated the #1 energy and oil analyst on many occasions.

Bob/Charlie: Bob asked Charlie to discuss how he sees the situation in Egypt impacting the United States. Charlie said about 3.3% of total world production in the oil goes through the Suez Canal which is not all that much. About 19.5% of the oil comes through the Strait of Hormuz which is a greater distance from Egypt but if there is fighting in the Middle East, one way or another there would likely be a closure of the Straight of Hormuz, particularly if Israel and Iran. It is a more remote issue, but one that is very worrisome particularly given Iran's nuclear capabilities.

(Korn) EC: The Strait of Hormuz is the only sea passage to the open ocean for large areas of the Persian Gulf. According to the U.S. Energy Information Administration an average of about 15 tankers carrying about 17 million barrels of crude oil pass through every day. This represents 40% of the world's seaborne oil shipments and 20% of all world oil shipments. It is important!

Charlie: There was a blow up of an ammunition dump over the weekend in Venezuela which Charlie thinks was a major act of sabotage against the Chavez regime. If it is followed by more unrest in Venezuela, that would be another set of cases in which their production could be cut off by civil war. There are also problems in other oil producing nations such as Nigeria, Algeria and even Egypt which produces 700,000 barrels a day which could be closed down. And all of the uncertainty in Iran and Iraq. The Muslim world is full of turmoil right now and it could lead to a general escalade that involves a cut back of oil production and transportation. That would have a serious impact on our economy. The other thing to consider is that Egypt is a force for peace in the Middle East. If an anti-Israel comes into Egypt, they could lead us into war that would force us to take action in the Middle East which would be very hard game for us given what we are doing in Iraq and Afghanistan.

Bob/Charlie: The largest group in Egypt is the Muslim Brotherhood and they are quite united and normally stand as the main opposition. They say that were it not for the interference of Hosni Mubarek in the electoral process we would see the Muslim Brotherhood elect their choice to the top. If that were the case, we would have a group that is anti-Israel in control of
Egypt. The country is bound by an agreement to keep peace with Israel, but one wonders whether that peace treaty is only as good as the paper it is written on if a new regime comes in.

(Korn) EC: The peace treaty, executed in 1979, made Egypt the first Arab country to officially recognize Israel. text of the Treaty between Israel and Egypt can be read at this url:

Israel-Egypt Peace Treaty

Charlie: When you look at the major oil importers such as Canada, US and Mexico, one of the biggest suppliers is Saudi Arabia. Charlie said they also produce very valuable oil so a switch away from Saudi Arabia would involve a huge cost. Other countries that we import a lot include Venezuela where the situation could explode over night with an assassination or attempted assassination of Hugo Chavez. In any event, he is unpredictable and may one day decide to sell all of his oil to the Chinese and they very well may buy it.

Bob/Charlie: What do you see as supply and demand right now? Charlie says right now we have sufficient supplies. We have surpluses of about 3-4 million barrels a day in a world using about 87 million a day. But it suggests that if 1-2 of the large suppliers such as Nigeria or Saudi Arabia or Libya, or Venezuela closed down it could lead us short. People are fearful and begin to horde oil and to do that they require more oil than they want to use each day so they have some extra to put in storage and that puts pressure onto the oil market and prices begin to rise even though nothing might materialize. So we could see above $100 barrel easily and that is costly for all of us because we use lots of oil-based products.

(Korn) EC: The price of Brent crude rose $1.59 to settle at $101.01 a barrel on the ICE Futures exchange in London. This is the first time it has topped $100 a barrel since 2008.

Bob/Charlie: How stable is Saudi Arabia? Charlie said it is quite stable ‹ perhaps the most stable in the Middle East. The grounds for worry would be assassination which is a very common way of changing regimes in the Middle East and any nation is subject to that. There is a family in Saudi Arabia of royals that have been in power since the mid-1920s and have done a pretty good job but there is always those who don't agree with the royals and don't want them there. Bin Laden who is a Saudi is fighting tooth and nail to bring the royal family down. And lest we forget, 1 people were aboard the airliner that smashed into the world trade center were Saudis so we have to remember that within a very stable political environment interested and dependent upon America but nevertheless in life nothing is completely stable and things change all the time that we are not aware of.

Caller: Why isn't the US bringing in its aircraft carriers to let them know we aren't going to let them shut down the flow of oil. Charlie said he thinks President Obama believes we should be quietly suggesting that Mubarek allow more democratic initiatives and this might be the opportunity to push him in that direction. We don't want to seem to be the big bully on the block and that is probably a good idea. We do have the carriers but don't want to play that role yet. There is no yet blockage of the Suez canal so things look ok and if this dies down in a few days the whole thing could subside.

(Korn) EC: Read the article, "Egypt crises a fresh dilemma for Obama policy team"

Caller: Brazil just had the largest discovery of oil. Shouldn't that keep the price of oil down? Charlie said these are wonderful finds, but the biggest fields are in the Middle East and in Venezuela are all in political danger zones and depleting fast. Many of them have reached peak production and as a group will peak in 6-8 years and then as a group begin their decline. So we need a number of Brazils to make up for what we are expecting in declines over the next decade.

(Korn) EC: Charlie is on record stating that agrees with the viewpoint of the renown Shell geologist, Dr. Marion King Hubbert, who predicted that the world oil production would reach a peak and then rapidly decline. Hubbert said the amount of oil given to our planet when it was formed is finite. When an individual field has produced 50% of its oil, you cannot force it to produce more oil on a daily basis. Charlie thinks the we are not far away from when more countries have declining production versus those that have rising production. Charlie thinks we are going to have peak production possibly sometime in the next 10-15 years. When that happens, we will be producing less oil than we consume.

Caller: A caller said she read all over the Internet that the United States is actually exporting oil to other countries but nobody talks about that. Charlie said the truth is the United States exports very little oil and usually it is in the form of specialized products like special lubricants that are not made elsewhere. We export a little liquefied natural gas from Alaska. This is less than 1% of our total production.

Bob/Charlie: What do you know about the big find of oil near Israel? Charlie said it is a huge find and we will need it. However, it is gas not oil. We wish it were oil because gas is expensive to carry long distance in a pipeline and is not a dense energy source but it is big find and there will probably be more found near it. It will be of huge help to Israel.

Bob/Charlie: Canada has not depleted its supplies of oil over the last 100 years and is now in a position to give us a lot of support. They are close, politically stable and have plenty of resources. Oil is flowing into the US through pipelines every day under contracts that are favorable to both countries with no political instability.

Caller: What do you think about the idea of focusing more on natural gas and alternative energies such as what T. Boone Pickens proposes. Charlie says there are a lot of good ideas out there. As far as natural gas, we are working on finding out new ways of getting a lot of natural gas from under the ground. Over the last five years, there have been some incredible new horizontal drilling methods. Using new cracking techniques with sand, we are getting a lot more gas than we got in the past 20 years. We are trying to figure out ways to release gas from shale. Technological developments are going to give us access to natural gas in the future. Natural gas and energy conservation will be significant solutions to our energy problems.

(Korn) EC: Read T. Boone Pickens Plan

Caller: What do you think of our energy policy? Charlie says the country is pretty well divided on what our energy policy should be so we have gridlock on making any major changes. Energy conservation is very important because a barrel of oil saved is much more valuable than a barrel found because we still have to have lifted the oil, transported it and we lose some in transit and it has to be processed, pumped, etc. Thus the barrel saved is a hugely important concept and our country is in a position to invent ways to produce power that is more efficient than has ever been produced in the past.

Bob/Charlie: As long as people can pay $3.50 a gallon for gas, there won't be any pressing demand from the American public for change. It will take an energy crises and it may not be far away.

Caller: Is the answer to our energy problems solar and wind energy? Charlie says these are good ideas, but solar power is only 0.1% of energy produced in the United States. Even if we increase 10-fold, we are only going to have 1%. Charlie said that even by spending a lot of money on it at best over the next 20 years, solar could only provide 1.5%-2.0% of our energy needs, so it is also not something we can rely on.

Bob/Charlie: Charlie said a lot of people think private corporations have a lot to do with the price of gasoline; however, much of the oil is owned by nationalized entities. This is true in China, Nigeria, Venezuela. 80% of the world reserves are owned by national companies, the rest is owned by the Chevrons, Conoco Phillips, etc. These governments are short of money and so they are not active in developing new reserves. So in places like Mexico where we know there are additional reserves, it remains only potential and may take years for governments to get the oil out and to the United States.

Bob/Charlie: Charlie said that West Texas Intermediate crude oil was about $78 a barrel. This year Charlie expects it to be about $85, next year $95 and the following year $115. We are on the road toward higher oil and we have to be prepared because we can¹t find it fast enough and it can't be developed fast enough for the oil we do have.

(Korn) EC: I always enjoy it when Charlie Maxwell is on the show. He is a real class act. Charles Maxwell's bio is at this link:
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. 2011
For complimentary issue of David Korn's newsletter go here [LINK]

Dixiegeezer took this beautiful picture and framed it for us. Click to enlarge:

Sunday, January 30, 2011

January 30, 2011, Bob Brinker's Moneytalk: Summary, Commentary and Excerpts

January 30, 2011....Bob Brinker hosted Moneytalk today.

Bob Brinker's comments summarized, paraphrased or excerpted

"A mega-merger in the energy business has been announced this weekend. Alpha Natural Resources is the third biggest coal producer in the United States, and it has agreed to purchase Massey Energy. This is a $7 billion cash and stock deal. Massey Energy is the largest coal company in the central Appalachian region, and it is being acquired by Alpha Natural Resources. If you are a share-holder of Massey Energy, you will receive 1.025 Alpha Natural shares. And you will also receive $10 in cash for each Massey share....Massey valued based on this takeover at $69.33 a share. That's a lot more than Friday's close of $57.23 a share...."

Expected to remain at the current year-over-year rate of 0.8% in next week's report.

.Estimated to come in Friday at 9.5%; under-employment rate is in the teens.

Last week, they held the Federal Funds rate (the rate banks use to lend to other banks) steady at between zero and 25 basis points.

Brinker recommends putting together a fully (FDIC) insured ladder of Certificates of Deposit.

.Delaware ; Indiana; Maryland; Missouri; Utah; Florida; Iowa; Minnesota; North Carolina; Georgia; Virginia.

Caller Lance from Las Vegas said: "We feel you are da man! I'm concerned about the municipal money market fund, and I hear there are people bailing out, and I got about 400K in, so I'd like your opinion."

Brinker asked:
"Now which fund is that?"

Lance answered:
"Uhhhh, what the heck's wrong with me. The one with the horses?"

Brinker replied:
"Well horses aside, a municipal money fund would be a fund with very, very short-term maturities. Now anything is possible in the municipal market, as we have said, but I have not heard of any difficulties in the municipal money market sector."

told Brinker that he had the entire fixed-income portion of model portfolio III in (Vanguard) Ginnie Mae Fund. He said he bought the fund when it was in the low part of the price range that Brinker used to talk about ($9.50-$10.50) and would hate hold it as dropped back down there again.

Brinker replied:
"That certainly is a big weighting in that one area....I'm taking a completely different approach than you are with reference to Ginnie Maes. The absolute maximum holding that we have right now in our investment letter model portfolio is 25%.......And we have even a lower weighting than that in our balanced model portfolio III....So definitely, you're taking a lot more Ginnie Mae exposure than I'm comfortable with or what I recommend."

Honey EC:
Brinker is correct. Model Portfolio III has a 20% weighting in Ginnie Maes. It's his fixed-income portfolio that now has 25%. In the January, 2011 issue of Marketimer, he sold 15% of the Ginnie Mae holdings, dropping it from 40% to 25%. He added Vanguard Wellesley Fund to both portfolios even though it is about 30% stock. Why would a financial guru add stock to a fixed-income portfolio and to a balanced portfolio that is already well above 50% stock?

* HOW THE FDIC INSURANCE WORKS.....Elizabeth in Albuquerque said
: "I'm sure that you heard of our bank that was taken over by the FDIC. I believe it was Friday."

Brinker replied to Elizabeth: "Here's the way it's supposed to work. The FDIC guarantees paying off up to $250,000 principal and interest combined, per insured account."

* HOW BEGINNER INVESTORS CAN GET STARTED: Caller Ashley from San Francisco
, who is 25 years old, said she has $200 a month to put into an investment account. Brinker recommended the total stock market index, but pointed out that there is usually a $3,000 minimum to open an account. Brinker told her to check into the Fidelity Spartan Total Stock Market Fund.

Honey EC:
I briefly looked at the Fidelity Fund Brinker mentioned and it appears to have a $10,000 minimum. Vanguard's is only $3000. However, I have a better idea for Ashley to get started in the stock or bond market without having to wait until she saves her first $3000. She could check into ING Direct where there are no fees or minimums. At ING Direct, she can dollar-cost-average each month and only pay a $4 transaction fee. This would be great way for her to buy the total stock market ETF (VTI).

* RETURNING FDIC TO $100,000 and GLASS STEAGALL: Carl from Chicago
brought up the subject of banks that are too big to fail, the Glass Steagall Act and the uptick rule. He asked Brinker if he thought that it might be a good time to drop FDIC insurance back to the original $100,000 from the current $250,000.

Brinker agreed that it should be returned to $100,000, but he thinks we should get "further into recovery" first. Brinker repeated what he has said many times about the repeal of Glass Steagall. He called it a federal monument to the fact that the United States has "the best government money can buy."

STOCK MARKET (This was the only time the stock market was even indirectly mentioned today.)
: Caller John (from ?) said: "I am a subscriber to your Marketimer. I have about $115,000 in an account patterned after your portfolio model III (Brinker interjected: "That's the balanced portfolio") and I want your opinion about how the turmoil in Egypt might affect that portfolio."

Brinker replied:
"I'd say watch how the turmoil in the mid-east could affect the price of oil. between what happens with the price of oil is the obvious link to not only the economy in the United States, but the economy around the world. In other words, you have the Suez Canal right there and obviously, we have a certain amount of oil that is transported each day through the Suez Canal, so you have that consideration. Egypt itself, is not a major oil producing country. The United States does not import a material amount of oil each day from Egypt......

......But the price of oil is a significant factor for the US economy.....As far as I'm concerned, there's a direct linkage between extraordinary moves in the price of oil and the level of economic activity.....Consumers buy a lot of energy products. If the price of oil were to skyrocket, even though those who own oil stocks......would benefit.....But the general economy would have to deal with the fact that it would act as a tax increase.......

.......So far oil has been in the area of $90 a barrel as of Friday night. And even recently, it's been above that price, so so far, we haven't seen a dramatic change in the level of the price of oil. Of course, it is something we monitor on a regular basis. "

Honey EC:
As he often does, Brinker began the program today by explaining one of Moneytalk's primary purposes. I decided to transcribe excerpts of it because I believe teaching people that they CAN learn to be their own financial manager has been the single greatest service that he has provided to Moneytalk listeners over the 25 years he has been on the air.....

.....About 23 years ago,
soon after I first started listening to Moneytalk, Brinker opened this door for me and I started down the learning curve he often speaks about. Matter of fact, I learned about shark attacks very well. With some difficulty, I escaped a huge one at a big brokerage house. In the ensuing years after the internet was invented (thanks, Al), I learned a hard lesson -- that even the teacher might have a pointy fin and big teeth.

Brinker said:
"We work with you on our Moneytalk broadcast so that you can learn how to become your own personal financial manager. What a gift that is, not only for yourself, but for the members of your family to have somebody that can handle the personal finances of the family unit in the right way. And that way, you can take charge of your personal financial future. No longer will you be shark-bait for the next shark coming along trying to take a giant bite out of your wallet - trying to take advantage of your lack of knowledge about investing. Don't let people do that to you. It doesn't have to be that way. You can get the job done. You can manage your money by acquiring the knowledge that will empower you to take control of your personal financial future.......So that some day you can reside in the Land of Critical Mass."

Brinker guest-speaker today was Charlie Maxwell, Senior Energy Analyst at Weeden and Co.

Moneytalk is FREE and available on demand at KGO810 radio for seven days after broadcast. The now Sunday-only broadcast is archived in the 1-4pm time-slots. (REMEMBER TO DOWNLOAD CHARLIE MAXWELL IN THE 3PM HOUR) KGO: Moneytalk, it's Downloadable

Two times today, Brinker touted Andrew Ross Sorkin's book "Too Big Too Fail"

This is Havoc, a friend of my daughter's, who won Best of Breed at the Cow Palace last week:


Friday, January 28, 2011

Bob Brinker's Latest Bond Market Advice

January 28, 2011....Brinker's latest bond market oratories and adjustments.....

Vanguard Ginnie Mae Bond Fund (VFIIX)

On Moneytalk, Bob Brinker has recommended Vanguard Ginnie Mae Bond Fund (VFIIX) for several years now. Until the net-asset-value recently began dropping, Brinker usually took several calls about Ginnie Maes on each program. There haven't been any GNMA calls lately.

Brinker said: "Ginnie Maes are guaranteed by the full faith and credit of the Treasury." However, he has cautioned that even though there is no credit risk, there is interest rate risk. Brinker said: "I would say that the principle variable in the bond market for quality holdings is going to be the overall direction of interest rates.......Now in terms of the direction of interest rates.......that's where you look at the economy.

Brinker used to repeatedly say that the Vanguard Ginnie Mae Fund fluctuated between $9.50-$10.50 in the past, and that he expected those prices to hold in the future. He stopped saying that when the net-asset-value climbed higher than his upper parameter in 2009 and made a recent top of $11.16 on November 4, 2010.

Now the 64-dollar question is, will the bottom number on his prediction hold or will the fund drop below $9.50. No one knows because it depends on what interest rates do in the future.

Brinker's advice for those who are concerned about loss of principal in Ginnie Mae Funds is to set a "mental stop." Moneytalk, December 20, 2010, Brinker said: "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......"

(Of course, the next question is, what do you invest that money in if you sell? Some just don't care about price fluctuations because they are only interested in the dividends.)

In the January, 2011 issue of Marketimer, Bob Brinker sold 15% of the Ginnie Mae holdings in his Fixed Income Portfolio, thus dropping the newsletter total holdings to 25%.

Vanguard Inflation-Protected Securities (VIPSX)

On Moneytalk, Brinker has often talked quite favorably about TIPS and he has told callers who are worried about inflation, that they could get total inflation protection by owning TIPS and I-Bonds.

So based on that, one would have to conclude that Brinker is not worried about inflation because in the January issue of Marketimer, he sold all holdings of Vanguard Inflation-Protected Securities in the Fixed Income and Balanced Model Portfolios. But the actual reason that he gave was that he believes they are "over-valued based on its extremely low base interest rate of 0.38%." He now has no recommendations for TIPS or I-Bonds in Marketimer.

Vanguard High-Yield Corporate Bond Fund (VWEHX)

Brinker has taken a few calls about Vanguard High-Yield Bond Fund lately so that he can talk about how well they have done in recent months. In April, 2003 Brinker traded 15% of VFIIX for a 15% purchase of Vanguard High Yield Fund (VWEHX).

Moneytalk, August 29, 2010, Brinker said: "High yield bonds have been doing very well. We've included those in our Fixed Income only portfolio on Page 7 of the investment letter each month. We've included for some time a high yield bond fund in there. And I'll tell you what, even today, the yield on that fund is about 7% taxable.....But we have taken a conservative position where we use that for fixed income only investors..."

However, if you check back through my summaries in 2008-2009, you will find that Brinker took no calls about the drastic net-asset-value drop in the High-Yield Fund. I got letters from people asking for advice as to whether to sell or hold, so I'm sure people were trying to get to talk to Brinker about it.

Marketimer, January 6, 2011, Brinker added a 10% wieghting in Vanguard High-Yield Corporate Bond Fund (VWEHX) to his Fixed-Income Portfolio, thus increasing the weighting from 15% to 25%.

General Obligation Muni-funds (Tax-Exempt)

Last Sunday on Moneytalk, Brinker said: "I have no recommendation in my investment letter, and I have not had for a long, long time any recommendation in my investment letter to tell subscribers put their money into municipal bond funds.....The kind of investments we have in the investment letter, for the most part, are very high quality with the exception of an allocation we've had to high-yield bonds that have done very, very well, by the way....."

While that is true, what Brinker did not say is that he is consultant for a newsletter that callers often mistakenly think is his own, which has a whole portfolio of Tax-exempt bonds. It seems disingenuous for him to claim he does not recommend muni-bonds under those circumstances. Please see the previous post and its comments section for more details.

Here is another picture I took in Mexico. I think it was Cabo San Lucas. Click to enlarge:


Tuesday, January 25, 2011

January 25, 2011 Bob Brinker Warns About Muni-Bonds But Brinker Tax-Exempt Porfolio is Losing Money

January 26, 2011....On Moneytalk Sunday, Bob Brinker expressed very serious concerns about the future of the state, city and county muni-bond market. He offered evidence that congress is looking for a way to make it legal for states to go bankrupt, which would make it possible for bond debt to be restructured. (You can read some excerpts of what Brinker had to say about this topic in the January 23rd summary.)

(For the purpose of avoiding the identity confusion that results from both men being known by the same name, I will refer to the radio host as Bob Brinker#One. And I will refer to his son, the computer expert, as Bob Brinker#Two = BB#2. The Fixed Income Advisor co-editor is BB#2's wife, Lisa Brinker, who is a linguist.)

Bob Brinker's Marketimer does not have any tax-exempt bond funds, but according to the November 2011 issue, the newsletter that his son and daughter-in-law publish (BB#1 acts as consultant) has a "Tax-Exempt Portfolio." So the Brinker's subscribers are already suffering losses from tax-exempt bond funds.

In 2008, all of BB#2 and Lisa's model portfolios lost money. Since then, they have added a fund that contains stocks which has helped their performance over the past couple of years (Vanguard Wellesley Income Fund "VWINX" that is about 1/3 stocks.). Some might wonder how honest it is to claim your portfolios are fixed income while having them partially invested in stocks.

The following information and excerpts are from the November 2010 issue of Brinker Fixed Income Advisor which is available for free download on the website:

"Aggressive Portfolio seeks to maximize fixed income returns" -- Contains: Wellesley, FCVSX, LSBRX, RPIBX, VFIIX (10%), VWEHX (25%).

"Moderate Porfolio seeks higher fixed income returns" -- Contains: Wellesley, FCVSX, RPIBX, VFIIX (15%), VWEHX (25%), VIPSX, VFSTX.

"Conservative Portfolio invests in the safest investment vehicles. This portfolio is best suited for fixed income investors who wish to minimize risk." -- Contains: Wellesley, RPIBX, VCVSX, VFIIX (20%), VWEHX (15%), VIPSX, VFSTX.

While Bob Brinker#1 is warning radio listeners about general obligation bonds, the Brinker Fixed Income Advisor Tax-Exempt Portfolio is losing money. Here is the Tax-Exempt Portfolio as of November 2011 (VMLTX, VWITX, VWAHX, VWLTX). Click to enlarge:

If you are interested in fixed income guidance, I suggest that you compare The Retirement Advisor to the Brinker Fixed Income Advisor. I think you will agree with me that The Retirement Advisor is greatly superior. While the Brinker's did not post their 2008 losing returns on their website, Kirk Lindstrom and David Korn have posted their returns every year.

Dixiegeezer took this picture and sent it for "you know who." :)


Sunday, January 23, 2011

January 23, 2011, Bob Brinker's Moneytalk: Summary, Commentary and Excerpts

January 23. 2011....Bob Brinker hosted Moneytalk today.

This was an important program for anyone who has concerns about the National Debt, and the fiscal viability of states, counties or cities. California and Illinois bonds were the main topics, but what is happening in those states is already impacting the whole nation.

.....The only mention of the stock market was at the beginning of hour three -- Brinker recited the latest stock market closing numbers.

STATE BANKRUPTCY: "Brinker said:
"States are not allowed to seek protection in Federal Bankruptcy Court under current law. If they try to change it. And I think they might try to change that, they are going to have to clear hurdles in the Constitution because each state is considered a sovereign entity, just like Greece is considered a sovereign state.....So they will probably have a lot of legal work to do to try to get this changed....."

: Brinker reported some news that is a few days old and was previously covered in the comments section of the prior summary: (See Pig's post at this [LINK]) The old-new governor of California has declared a fiscal emergency in the State of California. California's budget gap deficit is about $25 billion per year....

.....Brinker said:
"There are some very deep structural problems in California. For example, insolvent pension funds......But not only in California. There are other places as well that have that problem.....But if they can work out a way for the States to declare bankruptcy or insolvency or whatever they come up with, that would allow a state to change it's contractual promises to retirees. This is one thing that is costing huge amounts of red ink for various states like California."

....Brinker said:
"If California were to become insolvent, unable to meet their obligations, I think they would probably try to re-structure their obligations......An example of that might be that if someone owned $10,000 in California general obligations, if the state went into a condition of insolvency.......They might offer you in return new general obligations of the state that would be worth less than the ones you own now. This is one of the ways this is handled in corporate bankruptcies......"

: "This is a new risk factor that all listeners should be aware of in the municipal bond market.....The idea that they might come up with an insolvency plan for the states which would change the landscape of investing in state general obligations......

.....Now there are eleven states around the USA that have a triple-A rating...And those are Delaware, also Indiana, also Maryland and Missouri, Utah, Florida, Iowa, Minnesota and North Carolina and Georgia and Virginia. And I personally own general obligations of the Commonwealth of Virginia, triple-A rated, and the State of Georgia that is also triple-A rated....

......There are a lot of states out there with double-A ratings and I think that generally speaking, as long as they maintain those double-A ratings, can be held in a portfolio......

.....But then you have states out there with clear cut fiscal issues and I think it's best to stay away from those issues....The six that really jump out for me would be Arizona, California, Illinois, Louisiana, New York and New Jersey.... I would not purchase their municipal securities.....that's just my opinion."

"The cities are already allowed to declare bankruptcy. And we've already seen what happened in Vallejo, California. They went into Chapter Nine a couple of years ago."

"They (states) have given up their fiscal futures to entities such as unionized public workers who are so powerful -- there is no way to describe the power of unionized public workers. And as I've said before, the reason they have so much power is because when they go to the bargaining table, the side that is representing the taxpayer, is just milquetoast. They don't have a horse in the race. They don't have a dog in the hunt and so it's just give, give, give..... And now it's coming time to pay off these obligations and the money is not there......

.....If they could declare bankruptcy, then they could simply walk away from these contracts. They wouldn't have to pay these benefits.....but the law doesn't provide that right now for the states because of their sovereign status, and I think that's what they are exploring is a way to change that."

"I want to mention on the subject of municipal bonds. I had a chat about this in the past week with someone who owns a lot of municipal bonds, but this individual's California Municipal Bonds are pre-refunded in almost all cases......And so he's in good shape.....

.....The reason he's in good shape, and I've mentioned this before, it's very important. When you have a pre-refunded municipal, that means that the original municipal issue, which you may have purchased, has subsequently been backed by Treasury securities through the sale of a new issue by that entity at a lower rate where they took the proceeds of the money they raised at the lower rate, because rates went down.....and they buy Treasuries with it. And they pledge those Treasuries against your holding, which means you're backed by Treasuries......

......So you're sitting on Triple-A Treasury paper while you're still collecting your municipal interest......So you're in the catbird seat.....In your monthly statement, you will see that the prices of your bonds will be way higher than the prices of bonds that are not pre-refunded.....You should have that marked on your monthly statement. It should say PR or something along that line...."

Honey EC: I sure don't know who the man was that Brinker said he was talking to that owns all the pre-refunded California munis he mentioned. But I do recall that several times in the past, Brinker has stated on Moneytalk that he owns them. In the past, he recommended California general obligation bonds highly, but he did a very fast about face when things started looking dicey for California budget-wise. All of a sudden, he began telling callers how nicely he was situated because HIS bonds were Treasury-backed. That is from the "You can't make this stuff up, no one would believe you" file....

Several callers from Illinois were very angry about the recent income tax increase. Mark said he had already lost money on a $10,000 State of Illinois bond and wanted to know if he should sell it. Brinker told him no, but advised him to "Watch the Moody and S&P rating trends" because "they are all over it."

Brinker asked Irwin from Skokie, Illinois what people are saying about the tax increase. Irwin said that many people are very upset and angry, and even talking about recalling the governor. They, like Californians, want costs cut instead of tax increases. Irwin said this tax was passed in a lame duck session.

Malinda from Chicago said that she was extremely unhappy when she heard that the bill the governor signed "in the middle of the night also provided for a 2% increase in spending, rather than a decrease."

Susan from Skokie, Illinois said:
"I'd like to let you know there is a grass-roots movement here in Illinois.... among businesses and individuals who are thinking about withholding this additional 2% increase. For the reason that, we are aware that it is the exorbitant pensions and salaries that are paid to state and government employees. And they are structured in the manner in which many employees double their salaries within four years, contrary to what goes on in the private sector for similar and identical work.....We have been having so many tax increases on everything. A real estate taxes, gasoline, sales tax. In fact, one of the more absurd taxes is on shampoo. In addition to the regular sales tax, there's an additional tax on shampoo, along with some other items."

Brinker commented that while it had no effect on him personally, anyone who has money invested in Illinois bonds will be tracking any kind of a possible tax-revolt. More importantly, Standard & Poors and Moodys will be tracking it very closely because it could have ramifications if it catches on.

..Brinker explained that even if they are high quality, there is interest rate risk. Assuming a 14 year maturity, if rates went up 1%, the net-asset-value would probably go down about 8 or 9% -- depending on the funds actual duration.

Brinker talked about this rather chilling front page piece in the January 20th New York Times by Mary Williams Walsh, titled "A Path is Sought For States to Escape Their Debt Burdens." See: "State Bankruptcy Option is Sought, Quietly" Excerpt:
Policymakers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
Brinker said: "What they are really trying to do here is to find a path, since under current law they can't declare bankruptcy today because they are sovereign states, they are trying to find a way to change the law. It will be difficult to do it because of Constitutional issues......And according to the article, they are working on this behind the scenes in congress. We are told in the article in the New York Times, it is being done behind the scenes because they are afraid of creating a panic reaction in the municipal bond market if the word gets out. Well as far as I'm concerned, we're talking about it across America today on Moneytalk, so the word is out."

For the second week in a row, Brinker touted Alan Ross Sorkin's book. Brinker said that as he went through the book, he got a kick out of reading about a meeting with the "Maestro," Alan Greenspan, where he suggested that excess houses be burned down to get rid of the housing supply-demand imbalance. Brinker said he thought it was a possibility that Greenspan said it in jest.

Brinker guest-speaker was Perry Mehrling:

[PS, When you make your Amazon purchases from links on this blog, I alone, get the credit for it. Thank you.]
I took this picture a few years ago in Cabo San Lucas when there on a cruise. Click to enlarge:

Sunday, January 16, 2011

January 16, 2011, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

January 16, 2011....Bob Brinker hosted Moneytalk today.

Bob Brinker's comments are paraphrased, excerpted or summarized

Brinker reassured caller Olan from NY, that the US dollar was just fine and would remain the world currency because it is superior to all other world currencies.

...Headline number for 2010 - 1.5% counting all items "despite the fact that energy prices are up." Brinker said: "You cannot get runaway inflation by simply having higher energy prices. You need the whole basket to rise enough to make higher inflation numbers an issue and you don't have that here."

..."Extremely low."

STOCK MARKET....Bob Brinker said:
"The S&P Index now sitting in at another new recovery high here in 2011. And it's higher than it ever traded in 2010. And it's higher than it ever traded in 2009. The S&P at 1293, actually with a 3% total return year-to-date in 2011.....This on the heels of a 15% total return in 2010, and a total return in 2009 in excess of 25%.....This market has been doing some serious bidding on the upside since the recession in 2008......"

Honey EC: First, let me say that no doubt all
stock market investors are happy campers. But I'm sure that the Brinker's are especially happy because their subscribers are recouping money that they lost following Brinker's newsletter advice over the past three years.

Even with the huge gains in 2009-2010, Brinker's two equity model portfolios are still below where they were at the all-time-high in 2007 -- because Brinker's "timing model" did not see the 2008 (to March 2009) recession or stock market crash coming.

"Are there going to be short-term corrections in here? Of course there are. It's my guess that there are going to be single-digit corrections. That's my best guess right here. That if we get corrections in this market, and we're talking about a market that's been horrendously strong as it's reached its new recovery high in the S&P at 1293. But we're certainly in a position where we could easily see short-term corrections in this market because it's always been that way. There's nothing new about this. But my personal view would be that they would be single-digit corrections based on what I'm seeing."

.Brinker recommends limiting holdings to 1% of net worth. Brinker said: "My salute goes out to the governor to the State of New Jersey, Chris Christie who had the good sense to simply come out and say it.....What he said is 'healthcare spending will bankrupt the State of New Jersey unless workers pay more for medical coverage.' What do you think the chances are that state employees are going to volunteer to pay more for their medical coverage?......California, Illinois, New York, New Jersey and so many others have this problem......

.....We need somebody in California to stand up to a microphone and say that if the government in Sacramento continues to do what it's doing the State of California will be insolvent. We need someone to tell that to the people of California because there is no money in Washington to bail these people out. Because the Senate leader has spoken, that's
Mitch McConnell, the Republican Senator from Kentucky said it. He said there's not going to be any government bailout for the states, and the cities, and the counties and the municipalities......If the taxpayers start re-locating into states and municipalities that don't have this problem, then what happens?"

"I think we are already seeing selling in municipal bonds because we can see it in the price level of the bonds, and yield levels. We're already seeing selling and I think that is coming from credibility problems and concerns about insolvency......"

HIGH-YIELD BOND FUNDS.....Brinker continued:
"The irony here is that people are looking at corporate high-yield bonds today.... That have lousy ratings, by definition. They're looking at them in the form of a high-yield bond fund....And they've been doing very, very nicely. Very nicely indeed. And they have these generous yields, yes they're taxable....They have this firm net-asset-value trends.....And this is an irony: they have higher value in the market today in the minds of many investors when compared to higher rated municipals like states where the underlying securities are under selling pressure....People are losing confidence in state governments."

Honey EC: Brinker exclusively recommends Vanguard High-Yield Bond Fund (VWEHX). I also own the SPDR High-Yield ETF (JNK). The advantage an ETF has over a mutual fund is that it can be bought and sold throughout the day like a stock. Whereas, a mutual fund always transacts at the closing price on the day of the purchase or sale. On the other hand, there may be an advantage to having a fund manager rather than an index of these bonds.

"I have no recommendation in my investment letter, and I have not had for a long, long time any recommendation in my investment letter to tell subscribers put their money into municipal bond funds.....The kind of investments we have in the investment letter, for the most part, are very high quality with the exception of an allocation we've had to high-yield bonds that have done very, very well, by the way....."

Honey EC: Brinker's Marketimer (off-the-books) fixed-income portfolio contains about 25% Vanguard High-Yield Fund (VWEHX). As per what he said last Sunday, he has now sold all TIPS and remains very short-term in the other Vanguard bond funds. However, be aware that even though he calls this a fixed-income portfolio, the newly added Vanguard Wellesley Fund (VWINX) contains about 1/3 equities.

.....Brinker explained to caller Robert from Fresno that California has the worst budget gap in the United States: One year at $25-28 billion = 21.3%, the difference between money coming in and money going out. The second largest is Arizona at 17.8%.

Brinker said:
"Quite alarming..... The states, the municipalities have made these deals with the worker unions. And they basically have given away benefits that they can't afford. These benefits might be in the form of pensions. They might be in the form of health care benefits. They might be in the form of other perks......Now they are in an embarrassing position where they have to go back to the taxpayers in their domicile, and they have to ask the taxpayers to pony up. And I think a lot of the taxpayers are going to look at this obligation and say, you know something, I think I'll go over here where I don't have this problem. Because I think a lot of the taxpayers will say I did not negotiate these give-away programs. I think a lot of the taxpayers will say I had nothing to do with this. It was your incompetence that created this problem.....I'm outta here."

ILLINOIS STATE INCOME TAX tax rate is now 5%, which is a 2% increase that completely wipes out the 2% payroll tax cut that the government put in for 2011.

Caller John from Walnut Creek
said he thought that raising the debt ceiling would not install confidence in ANY of the markets. Brinker told him that considering the alternative, he thought it would be applauded because if they do not raise the debt ceiling, the US government "will shut down, turn out the lights and lock the doors."

Caller Don from San Mateo
told Brinker that he was a long-time Marketimer subscriber and had listened to Brinker "religiously" but was getting very nervous about holding $2 million in California tax-free bonds -- 40% of his net worth. Brinker told Don that he was "making a really, really big bet - a tremendous wager."

Honey EC: One has to chuckle at someone so devoted to Brinker that he would spend $185 per year and listen "religiously" to Moneytalk but then do exactly the opposite of what Brinker has been recommending for some time now: Be wary of California bonds!

Brinker told Don
: "Now I have small investment on a percentage basis in general obligations of the State of California. But I'm protected because the state pre-refunded my bonds. That means my bonds are backed by United States Treasury Securities that were purchased with the proceeds of a later sale by the state to back up my bonds.....But if you own general obligations of California that have not been pre-refunded, then you really are making a loan to Sacramento. How do you feel about that?"

Caller Paul from
Alabama said that the fact is the government has been bailing out states (like Alabama) for years and that McConnell might end up eating his words.

Brinker told Paul
that he had personally heard what McConnell said and saw no reason to doubt his word. Then Brinker said: "Let me just say something. I don't like to quote the right-reverend Wright, but in this case, it may be appropriate, 'The chickens may be coming home to roost.'"

Honey EC: Brinker cavalierly quoted a man who not only preached G-d damn America, but preaches hatred for Israel, racism against white people, and has accused the United States of multiple atrocities and heinous crimes. Brinker could have used that very old metaphor about "chickens coming home to roost" without assigning Jeremiah Wright an oh-so clever title and inserting him into the conversation. Here is what Wright actually said:
".....the stuff we have done overseas is now brought right back to our own front yards. America's chickens are coming home to roost..."

Mr. Brinker, you said you don't like to quote him, so why did you? You used that same metaphor twice more during the program without attributing it to Wright. You know he did not invent it. My mother was always saying that, but she sure didn't say it to damn America. She used it to teach honesty, decency and truthfulness. Be anything less than that, and in her book, your "chickens would eventually come home to roost."

MODEL PORTFOLIO III....Brinker said:
"Now the model III porfolio that you heard Mary refer to, that is a portfolio that has two types of assets in it at this time. It has stock market assets in the form of no-load mutual funds, and it also has a fixed-income component and so the two work together in a balanced portfolio. So that really matches up with Mary's profile where she says she's nearing retirement. We've talked about it many times."

1/3 - 2/3 EQUALS BALANCED PORTFOLIO....Brinker said, "My opinion is that in a balanced portfolio that you can range from 1/3 to 2/3rds in the equity market. That would also depend on age.....I could see a situation where I could look at a balanced portfolio and I could say in this situation I might want to have 1/3 in equities and 2/3 in fixed income. I could also see a situation where I would say the opposite....That could have to do with market outlooks, with market levels, with bond market levels as well. All of those factors could come into play. And certainly on top of that, you could bring in the age of the investor, the risk tolerance and circumstances of the investor."

Most amusing call of the day

Caller Bob from Chicago,
a brave soul, was definitely annoyed at Brinker's repeated comments that there is no inflation, so he challenged him on it. He asked Brinker when was the last he was ever in a store and bought hamburger meat.

Brinker emphatically told Bob from Chicago
that he didn't eat hamburger meat, but he was in a grocery store to make purchases just "two days ago." Brinker said: "When it comes to inflation, I certainly don't go on what I'm going to put in the market basket myself. What I want to do when I'm looking at inflation is look at as many numbers that I can find that are based on a broad basket of consumer purchases. Now there are two figures that I rely on heavily that happen to be the same figures the Federal Reserve watches when they monitor inflation. And those are the Personal Consumption Expenditures Index and the Consumer Price Index. Now when those two indexes are close together, for me, they have a high degree of credibility."

Bob from Chicago
said he did not believe the numbers because he thinks prices have tripled. Then Bob from Chicago really stuck his neck out (LOL). He asked Brinker when was the last time he went to a gas pump and put gas in his car himself.

Brinker said:
"Bob, you talk to me like I lead the life of some kind of a prince or king.....I go to the market, I pump my own gas every single time. So I think it's demeaning for you to talk to me like I'm some kind of king or prince. It's total fabrication on your part. If you knew the truth about me, which you don't, you would laugh. If you knew the truth about the fact that I drive a car that's 14 years old, you would laugh and say no that's not true. If you knew the truth of the fact that I really enjoy dressing down, as opposed to dressing up, you'd say, oh no, you dress like royalty. But it would be complete fabrication on your part....but we can agree to disagree....You think food prices have tripled in the past year, I think they're hardly changed at all. But I'm not going to call you any names for that. I'll leave that to you."

Honey EC: Based on Brinker's attire at his Class of 1959 fifty-year reunion, I'd certainly agree he likes to dress down. There's a picture of Brinker at the reunion here [LINK]

As for Brinker's other "truths":
Blogger jeffchristie said...

I am confused Mr. Brinker. You say you drive a car that is 14 years old. I though you said that you drive a Prius on several occasions right here on Moneytalk. The prius first went on sale in the United States in the year 2000. I do agree with you that you "dress down' based on the recent picture that was posted here from your high school reunion. I don't think you are a king or a prince but I do think you are a wealthy and successful business man. I suspect your adjusted gross income on last years form 1040 is a 7 or 8 figure number.

January 17, 2011 7:38 AM

Moneytalk is FREE and available on demand at KGO810 radio for seven days after broadcast. The now Sunday-only broadcast is archived in the 1-4pm time-slots.... KGO: Moneytalk, it's Downloadable

Brinker's guest speaker was Bethany McClean:


Sunday, January 9, 2011

January 9, 2011, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

January 9, 2011....After a two-week holiday vacation, Bob Brinker hosted Moneytalk today.

Bob Brinker's comments paraphrased, excerpted or summarized

STOCK MARKET....Brinker made no mention of the stock market today.

Net jobs addition for the month of December was 103,000 -- a very unhealthy unemployment rate. It's 9.4 right now, and the underemployment rate is very high at 16.7."

As he has done on several programs in the past, Brinker recited the breakdown of unemployment numbers based on the demographics of education and race.

Education: Bachelor's degree or higher have an unemployment rate of 4.8%; some college have a rate of 8.1%; high school diploma 9.8%; less than high school diploma 15.3%

Race: White unemployment is 8.5%; black unemployment is 15.8%; Hispanic unemployment is 13%; Asian unemployment is 7.2%. The biggest unemployed group is usually teenagers and that is no exception this month, coming in 25.4%. Remember the national average right now is 9.4%....

Now over 14 Trillion dollars. A year ago, it was $12.3 Trillion -- up $1.8 Trillion (14%) in a year. Brinker said: "The national debt ceiling has to be raised or they will simply shut down the US government."

BALANCED BUDGET... Brinker said:
"We need to have a political consensus in Washington that will formulate policies that will move in the direction of a balanced budget, and that will replace the current mentality that is run-away freight train spending mentality. And how that's going to happen, I don't have an answer for you. In my lifetime, I have seldom seen the level of vitriol between the two parties that we've seen over the past year....The two parties have become enemies of one another, and as a consequence, they've been unable to agree on very much at all.....Now they put in this last, second tax package in December to get through the next two years in the so-called compromise. But that's not what this is about. This is about long-term fiscal responsibility, which is a notion that seems to be lost on the current members of congress and they are responsible for budgeting."

Honey EC: Brinker seems a bit confused about who has been in control of the US Congress for the past three years. Bob may want to take a look at who has had enough power to do ANYTHING their little hearts desired since 2007....

..Brinker told a caller that there were still some issues because of foreclosures and short sales, but doesn't see any reason to be concerned about the bottom dropping out.

Caller Randy from Indiana
said he was in favor of extending the Bush' tax cuts, but wanted Brinker's opinion whether or not tax cuts always pay for themselves in increased revenue. Brinker said: "Basically, it's a lot of hokum."

Honey EC: I think that the caller was referring to the Laffer Curve which originated with Arthur Laffer. The Laffer Curve asserts that a decrease in taxes results in an increase in revenue to the government. Brinker obviously does not believe that theory.

Caller Ed from Madiera
wanted to know what would happen to the stock market if Congress does not raise the debt ceiling. Brinker replied: "We have history to look at. Back in the mid-90's, we had a government shutdown and it did not have much impact at all on the stock market."

Caller Sal in Huston said:
"Thanks for all your advice on the Marketimer for many, many years and I just started my subscription to the fixed income thing and I need a little education on bond funds. [Bob Brinker replied: [Thank you."] When interest rates rise and the yield on the bond decreases, it's price goes up. Does that happen to the bond fund too. Does the investor in a bond fund lose value on his total investment."

Brinker said:
"That's a great question....If interest rates rise, you should expect the net-asset-value of a bond fund to decline. Conversely if interest rates decline, you should expect the net-asset value of a bond fund to appreciate."

Honey EC: Let's think about that caller a bit... Sal has been a subscriber to Marketimer for years and did not know the most basic rules of bond fund net-asset-value fluctuations -- incredible!

Not only that, but Sal said he had just subscribed to the "fixed-income thing." He is speaking of the Fixed-Income Advisor that Brinker's son and daughter-in-law edit and publish. Notice that Bob Brinker did not correct the caller who obviously was under the impression that it was Brinker's own newsletter.
FrankJ commented: "Sal praises BB for the advice, mentions that he is a subscriber to Markettimer and the fixed income newsletter. BB humbly murmurs his thanks. This was an opportunity to mention that his son publishes the fixed income newsletter and thank Sal on behalf of his son. But he did not."

ILLINOIS AND CALIFORNIA GENERAL OBLIGATION BONDS....John from Illinois was concerned about his Illinois municipal bond holdings. Bob Brinker said: "I agree with you with reference to the fiscal train wreck that is known as the State of Illinois. There are others. The State of California with $28 Billion current fiscal year deficit is another example of a fiscal train wreck. This is why I have recommended limiting exposure to these municipal bond situations that are questionable to no more than 1%. That way if it goes the way of the buggy whip, you can't lose more than 1% of your capital. Meanwhile, you're collecting some good interest on the money.....

.....But hey, I'm limiting exposure in my recommendations on the broadcast here to 1% on these questionable issues, that includes the State of California. You cannot continue to borrow your way forever when you're running up these kinds of deficits. And unfortunately, you have some of the same problems they've had in California which is gross incompetence in terms of your governance and that's most unfortunate, and that's my opinion."


Caller Andy from Wichita said:
"I just got started here with the Bob Brinker program here." Then Andy asked which portfolio Brinker would recommend using for his kid's college savings money.

Brinker replied:
"This is a great question, Andy and I'll tell you where I lean on a college savings account. I lean toward the balanced portfolio. Especially now because our balanced portfolio is basically about, when you incorporate the changes that are going in at the close tomorrow on January 10th, when you incorporate those changes into the balanced portfolio, the balanced portfolio will be about 60% on the equity side and about 40% on the bond side.....So my answer to your question Andy, is that I would lean to the balanced portfolio. That's the model portfolio III on page 8, incorporating the changes.....which were published in the January investment letter. And I certainly do appreciate the call."

David in Lafayette said:
"I just rolled over my 401K plan from my old plan to Fidelity..... How would I re-allocate that money. In other words, would I go with portfolio III or stay with portfolio II model?"

After finding out that David is nearing retirement, Brinker replied:
"This has balanced portfolio written all over it. Remember David, without going into detail, we have a number of changes that we're putting into the portfolios tomorrow, Monday effective at the close and that includes some important changes that we're putting into the balanced model III portfolio."

Honey EC: Brinker must have laid in a good supply of carrots for the program today. He sure dangled a lot of them out there. Several times in the first hour alone, Brinker repeated himself ad nauseum about these so-called "important changes" in his balanced portfolio and his fixed income portfolio. Rest assured that these couple of changes are not nearly as important as Brinker would like for you to think they are. And if you have been reading the comments sections of my blog, you already know what one of the changes is because I quoted it from another website.

I believe that Brinker gave a huge hint here, so listen carefully to what he said about TIPS Funds and know that what he says here, he truly means:

Caller Harry from Fredericktown said:
"Would you give me an explanation of TIPS, and would they be a good investment if inflation comes back." Brinker replied: "Harry, I think that the best explanation of Treasury Inflation Protected Securities, known by the acronym TIPS, is that they provide you with protection against inflation....The other thing they provide you with is a base rate, which in the shorter maturities right now is pretty close to zero, near the lowest of all time.....

....So let's say you get your base rate of hypothetically of 1%.....So you'll get 1% for the life of the bond. Then in addition to that, you will get a consumer price pay-through, so if the CPI is about 1%....that would be what you would make.....

....But if you are in a bond fund, that's a different story, because if the base rate which right now is near historic lows, if the base rate goes up, the net-asset-value of the bond fund is likely to go down. So with the base rate having collapsed to close to zero in a number of the maturities, especially on the shorter end. That means if rates go up then you can expect the net-asset-value of that security to go down......For that reason, especially given the fact that the rates are near zero, I am not, I am not recommending TIPS.

..Caller Bob from Larkspur said he had a 4 step plan to solve unemployment and the housing problem. Brinker said for him to have at it because "we've been waiting for this for four years." So Bob itemized his ideas. First he wanted to stop all foreclosures; second, reduce all interest rates by two percentage points, but no lower than 4%; third, relax loan requirements for new home loans; fourth, well....then he "lost his train of thought."

Brinker reponded to Bob:
"We can all be thankful that this is not going to happen.....No disrespect Bob, but I think these are absurd notions that you are promoting on that call. I'm glad you called.... but I think that is the height of absurdity and any of these things would be very bad....I think that these are some of the worst ideas that I've ever heard on the broadcast."

Honey EC: I certainly agree with Brinker on this one. I just wonder what Bob's fourth idea was -- it must have been a doozie! LOL!

Brinker's guest speaker was Christopher Whalen

."I hate to hear myself talk."

Moneytalk is FREE and available on demand at KGO810 radio for seven days after broadcast.
The now Sunday-only broadcast is archived in the 1-4pm time-slots.... KGO: Moneytalk, it's Downloadable

This is my Dolly, perhaps the sweetest cat I've ever known. She now suffers with kitty-asthma and has to be on rather strong medicine so she can breathe. This was taken in 1998 when she was 5 months old:


Tuesday, January 4, 2011

January 4, 2011, Vanguard Wellesley Income Fund

January 4, 2011....On a recent Moneytalk program, Bob Brinker talked about the Vanguard Wellesley Income Fund (VWINX). He spoke very positively about it and said it was a great fund.

Vanguard Wellesley is one of the oldest Vanguard Funds. It was started 40 years ago. It is basically 1/3 stocks and 2/3 bonds.

Phillip Morris is included in its top-10 stock holdings. Its bond maturity is 9.4 years and duration 6.3, which is definitely not short-term.

While this may appear to be a conservative fund, it can be very volatile and the NAV can drop like a rock if interest rates go up and/or the stock market goes down.

Vanguard Wellesley Income Fund [LINK]

SJ Al sent this astonishingly beautiful picture of Yosemite Half-Dome:


Sunday, January 2, 2011

January 2, 2011, Bob Brinker's Moneytalk: Summary, Excerpts, and Commentary

January 2, 2011....Bob Brinker did not host Moneytalk today. Neale Godfrey was the guest host.

The major topic that Godfrey chose for Moneytalk was her proposal for a new Consumer tax -- in other words: A sales tax on everything we buy while doing away with the IRS.

Her plan would make sure that "poor people" are not hurt and would exclude those on food stamps from paying the sales tax -- at least on food and other necessities.

She would include the tax on homes, planes, boats and "large" cars. (Imagine a 20-30% tax added on to every home and car sale. Californians already pay almost 10% sales tax on cars!) Godfrey said she would exclude taxing "small cars."

She is for "really" taxing the upper income and actually said that the upper and middle incomes would be "picking up the whole tab for Social Security and Medicare."

In hour 3, Godfrey had a long discussion with caller Ron from Santa Cruz aboout politics. They both had a good time announcing that they were NOT for the Tea Party. Godfrey said: "I am not a "Teapartyist." Neither of them were specific in what they found objectionable about the Tea Party. Godfrey simply stated that she had "issues" with some of the things they advocate. (I'm quite sure that the Tea Party would have "issues" with some of the things Godfrey was advocating too.)

Caller Steve from El Paso pointed out how unfair a sales tax would be for those people who have worked and saved in IRAs, 401Ks etc. Godfrey replied by saying those kinds of accounts are "of course, sacred." (How's that going to work, ma'am? Are you saying the money that is taken out of IRA's won't be taxed? Or are you saying what is bought with money from IRA withdrawals will not be taxed?)

Caller Larry from Florida talked about the FAIR tax. Godfrey was aghast.

Caller Al asked Godfrey what were her "credentials" and had she "ever made any money." She explained that she is an "educator" who has written children's books.

Caller David from Iowa itemized his plans for creating income in his retirement. One of his plans was a first on Moneytalk. He said that he plans to donate blood plasma twice a week -- for which he will be paid $250 per month.

Godfrey sounds very surprised at first, but then made this comment: "If you could do this, it works." I wonder what Bob Brinker's response would have been. Just a guess, but I do not think he would have advised the caller to consider donating blood plasma as part of a retirement plan.

Most of the other callers were simply asking for sympathy and advice concerning dire real estate situations.

She pushed her website and is hoping to start a "grassroots blogging" movement to get her new tax plan rolling. But looking at the website, to me it appears to be mostly her views of the "ecology." Neale Godfrey echoaftereffect [link]

A quote from Godfrey's website: "Change a light and you help change the world." Honey replies: "You betcha." LOL!

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. You can listen, or download and listen at your leisure. KGO: Moneytalk Download

Jeff_S took these pictures. Yosemite Falls before the snowfall:

After the snowing started:


Top Rated Newsletter

Timer Digest Features
Kirk Lindstrom's Investment Letter
on its Cover

Cick to read the full page article!