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Sunday, February 6, 2011

February 6, 2011, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

February 6, 2011....February 6, 2011....Bob Brinker hosted Moneytalk today -- Superbowl Sunday. Brinker said he was rooting for the Pittsburgh Steelers +3.

Brinker recited the closing numbers and said it has been doing exceedingly well.

Brinker said that the Fed continues to hold short-term rates at rock bottom levels.

: Brinker said they have come down to the low 400,00s which is better than mid-400,000, but he'd like to see them in the 300,000 which would indicate improvement in the labor market.

Came down to 16.1 in January.

Hundreds of thousands dropped out of the workforce in January, and that is a factor in the unemployment number dropping to 9.0 from 9.8 two months ago.

: Brinker expects to see improvement in the numbers as we move forward. He thinks the weather affected the January numbers.

: Brinker announced that the Senate had voted to repeal the "diabolical 1099 tsunami." and that he expects the Senate to do the same -- and he is sure the president will sign it. This legislation was scheduled to begin in 2012 and would have required 40 million businesses across America to issue 1099 forms on any purchases above $600 -- from any contractor.

: Regarding the 1099 potential financial disaster, Brinker said that the former Speaker of the House knew what she was talking about when she said that they'd have to pass the healthcare bill to find out what was in it.

Brinker recited the numbers for the top-10 cities (Honey EC: Those numbers, plus much more info, is available at this [LINK])

There were a couple of calls today asking about about the possibility of China taking over a US bank. Brinker said that there was no way that could happen.

Honey EC
: The Wall Street Journal reported that they are trying to do it: "CHICAGO—China's biggest bank signed an agreement that would make it the first Beijing-controlled financial institution to acquire retail bank branches in the U.S., though regulators could still block the deal."

* Tom from Florida said:
"I'm a long time listener and a Moneytimer [sic] subscriber......I met you at George Mason University and I followed your advice and I reached critical mass three years ago....I'm in a new home and I have enough money to pay off the balance on the mortgage at about $200K right now..... I could pay that off, thanks to you, Bob, on critical
mass. I haven't touched my, I have a big, big nest egg, thanks to you, Bob, and I could pay that off......Well I'm on Federal Retirement, US State Department (Brinker asked how much pension).....Over $100K." Brinker recommended that Tom pay off the mortgage.

Honey EC:
Brinker also asked about Tom about his health care benefits and found out he has full Blue Cross/Blue Shield paid for him -- and I'd betcha his whole family too. Brinker then asked about Tom's net worth. Tom said, "Over a few million." Brinker said taxpayers would appreciate his sharing this information since they are paying for it. I found it fascinating that instead of giving credit to a cushy Federal "State Department" job that no doubt contributed to those "few millions" he accumulated, and pays him a six-figure pension for life, he gave credit to Bob Brinker for his "critical mass."
TFB pointed out the ridiculous contradiction about the $millions that Tom said he had "not touched," while at the same time crediting Brinker for having "critical mass." Indeed, Brinker has recommended a fully invested equity allocation since March 2003, either by following his buy-signals or dollar-cost-averaging.

TFB wrote: "If this guy had any money sitting around and he followed Da Brink he would have thrown in up to his equity allocation at S&P 1450. So since he said he had a few million laying around,which I would equate to 3 million or so(and assuming a 60-40 allocation) even at today''s high he would be thanking Da Brink for losing his around 180k."

There was no guest-speaker today because the the third hour of Moneytalk was not a live broadcast. It was a series of spliced calls from previous programs, which I have confirmed by locating three of the calls in my past summaries.

A very large percentage of the calls they chose for the third-hour were from Marketimer subscribers. Otherwise, the calls were mostly generic, repetitious, no longer relevant or simply too esoteric to be of interest.

But I will cover one of them because I believe it is pertinent to Brinker's current advice on precious metals. Whoever chose this call from a year ago January 2010, may find him or herself getting a few lashes with Brinker's wet noodle for two reasons. :)

Firstly, Brinker is basically admitting that he added an ETF that is pure speculation to his Marketimer off-the-books list of "individual issues." He did that as of May, 2009 and has never given any follow-up guidance as to price or how much to buy.

Second, in the interim time between the following re-run call from January, 2010, when he said that he knew of no vehicle for silver that compares to GLD and November, Brinker has clearly stated that it's okay to use SLV as a substitute "hedge" for the dollar in place of GLD.

Caller David from Castle Rock, Colorado said:
"Over the many years that I've listened to you, I know that you have not been a proponent of precious metals, and though in light of the unprecedented debt financing that we see our country involved with these days, and some believe the potential devaluation of our currency, do you find that possibly that taking a modest position in Vanguard Precious Metals and Mining Mutual Funds to be a reasonable position these days?"

Brinker replied:
"There's been no change in my views that I've expressed frequently in recent years on Moneytalk, that if you're going to do anything in that area, my preferred vehicle for that is the Exchange Traded Fund which happens to be the second largest in the world, ticker symbol GLD. Because I think the GLD shares are an excellent way to provide a
vehicle for those who want to have a hedge in the gold market......

......Now my views have not changed. I view gold as a speculation. When I hear people saying buy gold, it's going to two or three thousand, I'm always amazed when I hear this kind of discussion because I don't know how they know that. By definition, the
price of gold is a speculation. And if you want to speculate on gold and use it as a small hedge in your portfolio, then it is your right to do so. But no matter how you look at it, it's a speculation.....

.....When you buy shares in a common stock, if you are an investor, you buy because you think there's an increasing earnings and dividend streams..... But when you buy gold, you don't have that increased earnings and dividend stream because gold does not pay dividends.
Gold bullion bars just sit and you pay for storage. So the bottom line is, it's speculation on what others will pay for a bar of gold. "

Caller David's follow up question:
"I've heard that there has been a historic correlation between the price of gold and the price of silver. Is there a similar Exchange Traded Fund in silver as there is with the GLD in gold?"

Brinker replied:
"I would say that the answer would be that GLD has become such large fund, as I said it's the second largest Exchange Traded Fund......I think when you look at the size of that fund, when you look at the volume of trading in that fund, I think we would have to say that in the precious metals category, as an Exchange Traded Fund and as a play on something like gold, it really does stand out. I don't know any Exchange Traded Fund in silver that would even be close to GLD in terms of its size, in terms of its level in turnover trading and things of that sort."

Here is the original summary of this very same call (written by
David Korn) posted at this blog on January 11, 2010 [LINK to original post]
"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."
And here is what he said about using SLV on November 7, 2010 [LINK to Summary post]
BUYING SILVER AS HEDGE Brinker said: "As far as silver is concerned, I think it could be considered as an alternative form of hedging in a portfolio......The preferred way for those who wish to have a silver hedge in their portfolio would be the Exchange Traded Fund that holds the silver bullion -- that trades under the symbol SLV.....the Ishares Silver Trust."

Congratulations to Bob Brinker for 25 years of Moneytalk. As he usually says these days: "It's all about the money."

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

Dixiegeezer sent this amazing picture of a snowy egret:


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