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Bob Brinker’s Moneytalk was pre-empted on KGO for their yearly Leukemia Cure-a-thon, which has raised $millions for cancer research. You can make a donation by going to the website.
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http://www.kgoam810.com/
STOCK MARKET Bob Brinker only mentioned the stock market once today. In his opening monologue he said: “The S&P 500 standing in at 1315. The Dow Jones Industrial Average standing in at 12,216 and the Nasdaq Composite Index standing in at 2261."
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Honeybee EC: This is the first time that Brinker has given the data on the Nasdaq Index since the correction began in January. However he did not give the percentage of the correction on any of the indexes. (Those percentages are available in Kirk's article just previous to this one.) While Brinker uses the S&P as a monitoring gauge for the stock market, the Nasdaq is important because his Model Portfolios I and II are holding a small percentage of RYOCX. More importantly, Brinker has never closed the 2000-QQQQ trade. So for those still holding Q’s purchased at $83, as per Brinker's recommendation, this correction has to be especially painful.
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TREASURY YIELD Bob Brinker said: “The 3-month Treasury Bill yield which was down as low as .39, a 50-year low, has rebounded and stands at 1.37. The 10-year Note at 3.46, and the 30-year Treasury Bond at 4.34. Notice there’s almost a full 3% positive slope between the 91-day Treasury Bill and the 30-year Treasury Bond. Now obviously, when we saw the Treasury Bills down there below ½ of 1%, we had to view that as a short-term aberration as the flight to quality was going on in Wall Street, but things have settled down a bit now. As a matter of fact, the primary dealers offered only $86billion of bids at Thursday Fed auction of Treasuries. They auctioned off $75billion of Treasuries for 28 days. So that was actually less than expected. The Fed now has direct loans to security firms through the discount window at about 28% week over week. And all in all, there are considerable write-downs going on, as you know, in the financial sector.”
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ECONOMY Bob Brinker said: “We did get news on the economy this week about consumer spending. It rose 1/10 of 1% in February after rising 4/10 of 1% in January. All of this is consistent, as we have been talking about on Moneytalk, with a real possibility that we could see a negative first quarter real GDP. We certainly know that even if the real GDP number in the first quarter does not drop, it’s not going up very much, that there’s a real possibility we could see a negative real GDP number in the first quarter. And as for the second quarter, that will depend on how much impact those stimulus package checks have on consumer spending in the second quarter. I think that will probably be the key determinate of whether we get an official recession, defined historically as two consecutive quarters of negative GDP.”
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Brinker explained that he prefers to stick to the “historical definition” of a recession -- that he’d rather not change the rules. Because if slowdowns are defined as recessions, we could look back and say there had been hundreds of recessions and it becomes completely subjective.
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2008 ECONOMIC STIMULUS PACKAGE Legislation that will result in checks being sent to over 130 million American households. This is one of the most massive infusing of capital in the history of the U.S. The checks are expected to go out in May. Many taxpayers will get $600 ($1200 per married couple), and each qualified child $300 (no limit on number of children). All you need to do is “qualify” and file a tax return (even if you don’t normally file a tax return) to get your check in the mail. This is not connected to refunds and refunds will be made separately.
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Brinker is convinced that this money will all be spent, even if people use it to pay down credit cards, he believes they will just run the cards back up.
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Caller: Opposed to any kind of government bail-out, such as with Bear Stearns. Brinker explained that the government did not bail out Bear Stearns with tax money – rather, the Bear Stearns stock holders will be receiving J.P. Morgan stock. Brinker again touted the use of Keynesian economics and the advantages of government intervention when it is needed to help the economy. Brinker also said that he had heard Hillary Clinton mistakenly refer to Bear Stearns as a government bailout.
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Caller: Asked about the $5,000 limit on buying I-Bonds. Brinker said that he had been critical of the Treasury for reducing the limit from $30,000 to $5,000 in order to accommodate the small investor, and he thinks it was just another mistake on their part. He also talked about the high-yielding non-callable Treasuries that are still out there – another “bizarre” mistake by the U.S. Treasury.
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Caller: Wanted to know if she could give $12,000 to her son and another $12,000 to her daughter-in-law in the same year with no taxes. Brinker explained that the answer is yes, she could give $12,000 tax to anyone she wants to – a relative or a stranger -- with no income tax consequences.
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Caller: IRA question. Brinker told the caller if he qualified, he would recommend the Roth over the traditional IRA.
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Caller: Question about TIPS. Brinker said that real yields on TIPS (which you are stuck with for the entire duration of the ownership) are at record lows now – but he is okay with up to 10% weighting in TIPS for established positions.
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Caller: Where to buy new issue bonds? Brinker said to go to Treasury Direct (no commission). http://www.treasurydirect.gov/ For munis, you need to go through a broker who is involved directly in bringing out new issues. Seller pays commission on new muni issues.
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Caller: Retiring in a couple of years, and wanted detailed help with his portfolio. Brinker advised him to do a “top-down” analysis and then work toward a “balanced portfolio.”
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At the beginning of the second hour, Brinker talked at length about the candidates and the election. He asked, “Are the Democrats snatching defeat from the jaws of victory?.......when you look at the polls right now, it certainly looks like they’re on their way to doing that. It’s kind like Democrats fight while Republicans unite.......” Brinker said that Hillary has a 10 point lead in Pennsylvania and may be headed for victory there. Brinker gave a lot of tracking poll results. In the general election, “Cactus John McCain” is leading Obama by a 7 point lead and the figures are very similar against Hillary.
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Brinker commented that the Swift Boat Campaign may look like “child’s play” when it comes time for the 527 political organization advertising. Brinker said to just wait until you see what they do to Obama with the “reverend” Wright speeches.
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Brinker announced that there are big differences opening up between “Cactus John” and the democrat contenders. Brinker said: “Cactus John now supports extending the George Bush tax cuts, including the 35% cap on top earners. John McCain opposed that tax cut when it went in, now he’s for it.......On the Democrat side, in both cases.......they want to raise taxes on those making above $250,000 a year. And the most rumored number is 39.6, when it comes to the top bracket. Capital gains, qualified dividends, same thing. John McCain wants to extend the 15% top Federal capital gains tax. He wants to extend the top qualified dividends tax. In both cases, the democrat nominees would like to see those taxes go up. Now it’s presumed that 20% would be the number, but that hasn’t really been addressed........the amount of money they want to spend – these democrats – they want to spend money on health care. And to get the money they want to spend, they want to jack up the tax rates, so whether they will stop at 20% or not is conjecture.......right now Cactus John is in a pretty strong place going into the general election, even though many Republicans can’t stand the guy.”
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Caller: Second time today a caller referred to the “government bail-out of Bear Stearns.” It would have been understandable it Brinker felt some exasperation as he explained again that Bear Stearns shareholders are being paid with J.P. Morgan common stock and it was NOT a government bail-out. He also repeated that Hillary Clinton had made the same mistake this week.
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Caller: Asked about FDIC coverage. Brinker cautioned listeners never to have a “penny” in the bank unless it has complete FDIC coverage. Brinker issued a warning about Fremont General Investment and Loan in California. It has been given a notice to take “prompt corrective action” by the FDIC. They were given the directive to raise capital or find a buyer in the next two months – by May 26th. Brinker commented that this has happened 14 times in the past 15 years – about once a year. In 6 cases the targets of these directives have failed very soon thereafter. He also noted that the stock is down to 52 cents from over $20 a couple of years ago.
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http://www.fremontgeneral.com/phoenix.zhtml?c=106265&p=irol-fremontHome
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Caller: Wanted to know if he should sell his shares of Bear Stearns. Brinker commented that the only reason why Bear Stearns might sell higher than $10 a share would be if someone came in with a better offer -- but he sees no reason why anyone would do that, or why J.P.Morgan would raise its offer. Brinker said: “Bear Stearns is a stock that has had consequences to the shareholders. It traded at $170 a share last year. It’s $10.78, and as that caller noted, it’s worth even less in terms J.P.Morgan shares which is a fixed number of shares time the price of J.P.Morgan. J.P.Morgan stock, after having an initial bounce has been weak – has come down to $42.71. So taking the specific share offering for Bear Stearns, actually comes out to less than $10 a share now. And this is how it works out there in a situation like this – highly volatile situation.”
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Caller: Asked about SIPC insurance at brokerage houses. Brinker said that SIPC covers up to $500,000, of which up to $100,000 can be in cash.
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In Brinker’s third hour monologue, he made some comments about the national debt (which is the accumulation of all of the money that has been borrowed by the Federal government from day one). Right now that is over $9Trillion and taxpayers have to pay interest on it to the tune of $100's of Billion a year. The national debt is mostly represented by Treasury Bills, Treasury Notes, Treasury Bonds, Saving Bonds, etc. The deficit (how much we are in the red every year) is in the $100s of Billions. This is added onto the national debt.
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http://www.washingtonbudgetreport.com/
