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Sunday, February 27, 2011

February 27, 2011, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

February 27, 2011....Bob Brinker hosted Moneytalk today.


BUDGET DEFICIT....Brinker said: "It is estimated this fiscal year that we will have the largest annual budget deficit in the history of the United States. Now the latest number out is estimated at one trillion six hundred fifty billion dollars to be added to the national debt as a result of this year's deficit. So that give rise to the question that we ask from time to time on the program: 'How high's the deficit, mama?' Fourteen trillion and rising to paraphrase the old Johnny Cash song."

MANAGING FISCAL AFFAIRS IN WASHINGTON: Brinker said: "We live in a country that is fiscally operated like a train wreck of the first order. That's the way they manage the fiscal affairs in Washington."

VANGUARD GINNIE MAE FUND: Brinker told a caller that he had a percentage of Ginnie Maes in his investment letter portfolio. He said that it has been an "amazing" fund.

Honey EC: In January 2011, Brinker cut weightings of the Vanguard Ginnie Mae Fund down to 25% from 40% in his fixed income fund. Wonder why? He gave the caller the impression he was a raging bull on the fund. Hope the caller (and audience) wasn't mislead....

PRICE OF way up this week. Brinker said: "What we have right now is a situation where we are hostage to the world oil price. And without any doubt, this runs up the amount of money we have to ship overseas every day in order to pay for that oil. What's amazing to me is here we are just two years now after the ad ran in the Washington Post, courtesy of Dr. Bill Wattenburg of KGO radio. The open letter to President Barack Obama about something that could be done about the problem that still has not been done. His predecessors did not take action and he has not take action......

......Billions of dollars being spent on alternative wind and solar solutions which today, combined, produce less than 1% of all the energy produced in the United States.....About one tenth of 1% of the power generated in the United States is solar.....We still have the same 103 very clean nuclear facilities still operating around the country that were operating two years ago, but no new operating facilities. We still have our cleaner burning natural gas reserves multiplying. They've doubled in the last 5 years and yet we don't exploit these reserves the way we should....."


* Ray from Chicago, who said he was an investment letter subscriber nearing retirement, asked Brinker if he approved of his basically balanced portfolio positioning.

Brinker told Ray yes, then again mentioned the Stephanie Pomboy article in Barrons and said that even though he intended to read the article, the fact that she has been bearish the past couple of years made him cynical about "that kind of writing."

Ray followed up by asking if Brinker thought a stock market correction could happen at any time.

Brinker replied to Ray: "I have even made comments on the broadcast about this subject.... The market, and the areas of risk we could be seeing in the market from time to time that would be normal expectation.....As a matter of fact, last month right here on the broadcast, I pointed out that there are going to be along the way, and they might be small -- they might not be as small as what we've seen, which has been minuscule. Right now, we're 1.7% below the recovery's almost nothing at all......

.....Of course there are going to be short-term corrections in the market. I also pointed out that my guess was that at this point, the likelihood would be that they would be single-digit percentage corrections. So far, that has been correct......I view it as a health-restoring event in a cyclical bull market, which is what I believe we're in. It's a heck of a one, but I think that's what it is -- a cyclical bull market. We've had ones greater than the one we're in right now and we certainly had a lot that were smaller than this. I just don't see any reason right now to sign on to the doomsday machine. If I did, I would tell you."

Honey EC:
Brinker is back in full swing with his cyclical bull market within a secular bear market-timing shtick. In order for him to claim to be watching for the end of a cyclical bull market, there needs to be a secular bear market waiting in the wings -- so to speak. How else can he convince people that he is a market-timer when the fact is that he has made no change in his equity allocation for the past eight years?

However, Brinker has flip-flopped on the secular bear market three times in the past decade at times when the market threatened to make a complete joke of it all.

First he said a secular bear began in 2000. Then in June 2007, he retroactively claimed it had ended in June 2006.

June, 2007 Marketimer, Brinker said: "In our view, the valuation based secular bear market that was established following the March, 2000 closing high reached its conclusion on June 13, 2006."
Then in May 2009, he said that the secular bear market hadn't ended after all:

May 2009, Marketimer, Brinker wrote: "Although it appeared to us that the secular bear megatrend that began in Year 2000 had reached its conclusion, there is no question that the secular bear megatrend remains intact. We define a secular bear megatrend as one during which the major indexes make no material and sustainable progress above their historic highs."


* Caller Anthony from Buffalo
, stated that the United States is not allowed to use its own available oil reserves then said: "I think those who control the price of oil worldwide want to get it up to $200 a barrel so they're going to be making a heck of a lot more profit."

Brinker replied: "Well Anthony, you and I will agree to disagree right up front because first of all, I do not believe there is a conspiracy in the United States to not extract oil. On the contrary, we are extracting many millions of barrels of oil every single day....and we just have the new find in the North Dakota- Montana region -- the Bakken find that I mentioned. So there is plenty of willingness to go out there and extract oil if it's a good find."

Honey EC: I guess Brinker never heard of the radical environmental movements that largely control where the US can drill for oil. And I guess he isn't aware that by the stroke of a pen Obama banned drilling in the gulf coast. The ban may now be lifted (however, I think Obama is ignoring the courts' decision), but how many jobs did that ban cost the US? And as Brinker likes to quote Johnny Cash: "How high is the price of gasoline now, mama?" It's between $3.50 and $4.00 in the San Jose/Santa Cruz areas and rising. Wonder why the media doesn't report every penny increase like they did during the previous presidential administration?

* Caller Mike from Kalamazoo wanted to know what company Brinker would recommend he use to set up a self-directed 401K program. Brinker said he should go with one of the major companies that has an array of no-load mutual funds. He specifically named Vanguard and Fidelity.

Honey EC: Brinker has only recently begun mentioning Fidelity on the broadcast. Could the fact that his son (the computer expert), who publishes a fixed income newsletter, uses Fidelity Funds as well as Vanguard Funds? And I wonder why Brinker never recommends Charles Schwab, a company that has a much broader choice of all investment vehicles and offers competitively priced funds and ETFs. Could it be because Brinker's model portfolios largely use only Vanguard mutual funds?

* Caller Steve from Chicago, an investment letter subscriber, asked Brinker if he had read the Barron's article by Stephanie Pomboy. He said that she is bearish on the stock market and is pro-Treasurys, gold and oil.

Brinker said: "How long has she been down on the market while the market has been going straight up? (Steve: "a couple of years"). Brinker said: "Holy mackerel. The market has doubled in the last two years.....Why would anybody want to listen to somebody like that? I will read the article tonight, but how much credence would you give to someone who has been looking for the dark side for the past two years while we've seen the market basically double in price......I do think it's a valid approach to reading the article to at least be a little bit cynical going in, but I do appreciate the call."

Honey EC: How ironic that Brinker would slam Stephanie Pomboy for being bearish on the stock market for the past two years while it doubled. Did he forget that he was bullish on the market over the prior two years when the market was more than cut in half? You couldn't make this stuff up. Brinker-truth is stranger than fiction. :)

* Caller Carl in Rochester asked Brinker what fund or ETF he would recommend to invest in oil or commodities. Brinker said that he didn't usually take "sector-approach" to investments, but that the XLE was a widely-traded index-oriented energy sector Spyder.

* Rick from Hartford recited what Brinker called talking points about the lack of action by Department of Energy. Rick began by saying that we just had "8 years of a failed presidency" etc.

Brinker replied: "Let me ask a question, since they've had the better part of 3 decades to resolve the problem, what was this Energy Department doing under 8 years of William Jefferson Clinton?

Rick responded: "I try to keep it in perspective that it was also under Reagan, who..." Brinker interrupted and pointed out that Rick did not answer his question, probably because he was "too caught up in his talking points."

Honey EC: Jeffchristie also has a question for Rick: "You want to talk about Ronald Reagan, the man voted the greatest president in US history in a recent Gallup poll? He beat out Abraham Lincoln by 5 percentage points. Is that who you want to talk about?"

* Caller Fred from Colorado said he'd like to see purely electric battery-powered cars. And to extend the driving range, have battery exchange stations every 30 to 60 miles where people could pull in, pay a fee and have their batteries removed by a forklift and a fresh battery installed.

Brinker replied that it might be just a "little inconvenient" to have to pull in and wait in line to get a battery exchanged. He also pointed out that if they were plugging into a coal-fired energy center, it would just create another pollution disaster...

Honey's reaction to Fred's suggestion: Laughing out loud! :)

A BRINKER FISH-STORY? Brinker started the second hour of the program today by reading a letter that he said he had received. Is there anyone willing to do the math and let us know how this could be anything except a fairy tale? Brinker presented this story as fact:

Brinker said: "I want to share with you a nice I received from one of our Moneytalk regulars, who listens to our broadcast up in the Pacific Northwest. Her name is Lynn.........

....She writes that she first started listening to Moneytalk when she was in her early thirties and single, and had total assets to her name of $5,000. And she writes that she listened to our broadcast religiously and eventually she scrounged up enough cash to start as an investor. Well, here she is 20 years later. It's a nice story. ....

.....She writes, your advice has seen me through marriage, a daughter, saving for college, unexpected widowhood in my 40's, recent re-marriage, and arrival at my own critical mass of approximately two million dollars in assets today. I would have to give you enormous credit for helping me get to where I am today. Excellent advice, first rate book recommendations, and interesting and informative guests on your broadcast. Please know that your work has been a blessing to me and my daughter."

Bob Brinker's guest-speaker was Matthew Lynn from London, "Bust: Greece, the Euro and the Sovereign Debt Crisis" (Bloomberg (UK))

Moneytalk is FREE and available for downloading at KGO810 radio up to seven days after broadcast. The program is archived in the 1-4pm time-slots: KGO: Moneytalk free on Demand

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