Brief Summary, Commentary and Moneytalk Excerpts, March 15-16, 2008
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STOCK MARKET Brinker’s only comments about the stock market on Saturday: “Lots going on in Wall Street. The Standard and Poor’s 500 Index, with a lot of volatility along the way, closed out the week 5 points lower than it was a week ago at 1288.14. That represents a 17.7% decline from its all-time-high of 1565. The Dow Jones Industrial Average for the week closed with a small gain of 58 points. Closing out at 11,951 and that index is 15.2% below its all-time-record-high.
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(Honeybee EC: Brinker did not give the stats for the Nasdaq even though two of his model portfolios include holdings in the Nasdaq Index Fund, RYOCX.) The Nasdaq has lost 693 points from its 52-week closing high of 2861 on 10/31/07, to its closing low on 3/10/08 of 2168. That is approximately 25%. It closed Friday at 2212.)
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Brinker continued: "Plenty going on in the financial markets – driving the markets. In fact, Friday was an amazing day in the sense that it started out so positively. When the market went into Friday trading, coming off Thursday’s close, it closed around the 1315 level for the S&P 500, which at that point represented a gain of about 22 points for the week – a little better than 1 ½%. And then the market was poised to add to those gains because of the exceedingly favorable news that we got on the Consumer Price Index......"
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INFLATION Brinker said: “.......The Consumer Price Index came through for the month of February with the best possible outcome – zero inflation for headline inflation, including everything.......and zero inflation for the Core Index, which excludes food and energy, for the month of February. And as a result of zero inflation reports for the month of February, the market was poised on Friday morning to go sharply higher. And that’s when the news broke in Wall Street.......”
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BEAR STEARNS Brinker said: “.......And it was news that created a tempestuous trading pattern all day long on Friday. And that of course was the news that the 85 year-old Wall Street firm, Bear Stearns.......was forced to hold a call with J.P. Morgan’s CEO on Thursday night to set up emergency funding for Bear Stearns. And the way it was established was that the Federal Reserve is channeling the money to Bear Stearns through J.P. Morgan. And this is now on record as the largest government bail-out of a United States investment firm in history.......shares declined about 47% in one day, down to about $30 per share.......stock was trading at $160 share early last year.”
Bear Stearns Monday, March 17 update (from Charles Schwab):
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JPMorgan (JPM $37 1) has acquired the fifth largest US investment bank Bear Stearns (BSC $31) for a dramatically low price of $2.00 per share, or about $236 million. According to the Wall Street Journal, Bear Stearns had a stock market value of $3.5 billion on Friday and was worth $20 billion in January 2007. The fire-sale price of the deal is related to the massive decrease in BSC's client confidence, which prompted a liquidity scare, forcing the brokerage firm to make a decision to sell the firm at any price or face bankruptcy. The Federal Reserve will also assume management of $30 billion of BSC's debt to help JPM finance the deal.
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This weekend, not one caller asked Brinker anything about the stock market. (Honeybee EC: It defies logic to believe that “noone” would make an effort to get on the program and ask about the stock market during this wild ride and almost 20% drop -- over 20% in the Nasdaq. IMO, stock market calls are screened and not accepted. Brinker’s subscribers who are fully invested with their equity-allocation (as per his advice) have lost a sizeable amount of money since January. In the past, Brinker would often allow questions about his model portfolios -- especially Portfolio III. Why none recently? Today, one caller mentioned that he was in Portfolio III, but Brinker did not respond to what he said, or offer a detailed explanation about the portfolio, like he has done at every opportunity in the past. What is Brinker afraid of?)
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A caller asked, with the market being the “way it is now,” would it be a good time to take money out and put it in GNMA’s. Brinker did not answer the question. Instead, he told the caller the current NAV of Vanguard’s GNMA Fund and explained that the NAV usually fluctuated between $9.50 and $10.50. He also explained that if the economy recovers, interest rates may rise and that would affect their NAV.
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A caller did not know what a money market was. Brinker patiently explained.
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A caller gave Brinker credit for having sold commercial real estate in California last fall. (Honeybee EC: I do not recall ever hearing Brinker recommend selling real estate unless it was on an individual basis and based on a “spreadsheet” analysis of a particular property. Perhaps that is what happened.)
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A caller thanked Brinker for recommending I-bonds in 2001. She had invested $10,000 in them. Brinker said that she had “sunk the battle ship” with this purchase and should hold them until maturity.
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Several callers, some with $multi-millions, were concerned about FDIC and/or SIPC insurance. Brinker recommended that they not exceed the limits of the insurance, and to have it in writing.
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Bob Brinker’s Moneytalk guest on Saturday was Stephen McClelland, who wrote: “Full of Bull: Do What Wall Street Does, Not What It Say, To Make Money in the Market.”
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Stephen McClelland said: “I think we are in a severe, difficult economic scenario over the next two or three years. Probably the worst economic period we’ve had in 30 years or so – since the early ‘70’s. I think you are going to see some companies go bankrupt. We are already talking about companies in the financial sector and maybe homebuilding other sectors like that.......I think this is going to be a somewhat extended bear market. It’s not a six-month wonder. We’re not looking for second half of this year everything to turn up nice and rosy and so forth.......it’s going to take a long time to work out.”
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Brinker asked: “Are you actually expecting the market to go down 50%?”
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Stephen said: “Well, I don’t know about 50%, but 18% is relatively mild in my view. I think there’s a long way to go yet, both in direction downward and in time spent. And these bear markets are always tricky…….I just think this market has a ways to go yet before we are out of the woods – quite a ways……..I have been cautious a long time. I didn’t get cautious a month ago……..Maybe I got cautious a little early, but better early than late…….My sound investment philosophy is all about preserving capital – even in a good times, but now especially. And now I think the first thing to do, you need to recognize that we are in a bear market. And the evidence is pretty obvious if you talk about the sub-prime loans, the financial sector, the bank problems, the mortgage problems, the real estate home problems, the consumer spending, the recession. Now corporate profits rolling over, even, I suspect inflation is there. Maybe we’ll call if stagflation. It’s…. the deficits, it’s unbelievable. So, you have to open up your eyes and admit that we are in a bear market…..You have to really look at your portfolio to preserve your capital, you have to focus on value stocks, low-multiple stocks, dividend – high yielding stocks, cash, other things……..”
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Brinker replied: "Why do you think that the brokerage firm recommendations over the long term have failed to keep up with the indexes?"
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Stephen said: “…….Analysts are notorious bad stock pickers.”
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Brinker made this disclaimer after the interview ended: “I want to thank our guest, Steve McClelland for joining us. Let me also comment to our Moneytalk listeners that we like to have guests on the program to give their opinions. They give their own opinions and their opinions are theirs and theirs alone. Anybody who knows my views, know that they differ significantly in many, many cases – just like today. So I exposed you the various views out there, and you make your own judgment as you hear them along the way."
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Today, Brinker’s politic-talk was lengthy and frequent. He bashed the White House for not “getting involved” in bailing out bad mortgage holders. He gave the latest Rasmussen poll which has swung decidedly away from Barack Hussein Obama and toward Hillary Rodham Clinton. Brinker called it a “sea change,” which he attributed to Obama’s connection to the racist “minister” of the church that Obama has attended for 20 years. Brinker said some of the comments by this “minister” were the most “hateful” he had ever heard toward the United States. (Honeybee EC: I agree and then some!!)
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Sunday, March 16, 2008
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Brinker said: "I am not a seller of stocks. I'm not going to recommend sale of stocks."
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Brinker does not recommend high yield bond funds. Even though -- as he explained Sunday -- his Marketimer fixed-income portfolio, which does not include any stocks, is weighted 15% in the Vanguard High Yield Corporate Fund.
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Of course, we all know he likes Vanguard GNMA Fund too. And he does not recommend going long-term on investment grade bond funds.
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