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Bob Brinker's Moneytalk guest speaker on Saturday was, Kevin Phillips, Author of “Bad Money, Reckless Finance, Failed Politics and the Global Crisis of American Capitalism”
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When Brinker asked Kevin Phillips about the strength of the dollar against the Euro, Phillips replied: “Well, I think they are getting very nervous about this. The Europeans are concerned that with the Euro at a $1.60 of our currency, it’s too over-valued and threatens their economy, and I think the Washington people are finally getting scared that they’ve got the dollar close to some further downward lurch that would really cause a global panic. But I think they’ve absolutely set it up. I think we’ve seen relentless lies about their intentions on the dollar.
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We’ve also seen relentless lies about whether we can expect inflation. I think the CPI numbers – this is another thing that is important – are flawed! And if we actually have 5 or 6% inflation today, then the government’s computation of economic growth during the first quarter would stop being 0.6% up and would be something like 1 ½% down. So that there is just massive negligence of an economic sort going on in Washington, in my opinion.”
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Brinker replied to Phillips: “Now we use the Personal Consumption Expenditure price index as a back-up to the CPI, and as you know, it’s the favorite gauge of the Federal Reserve. It shows 3.2 year-over-year inflation, 2.1 core inflation. I gather you don’t have any confidence in that either.”
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Phillips replied: “No, there’s a fellow named Williams who runs something called ‘shadow statistics’, who’s gone back and looked at the history of CPI and his argument, and I think it can be at least partially substantiated well, is that if you use the pre-1980 computations – fixed basket and all of the other things, you’d be running about 10 or 11%. It’s pretty clear that we’ve got about 5 to 7, and a lot of European investors who are worried about the dollar, think it’s 6 to 9”
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Brinker said: “But of course with Social Security tied into the CPI, there is some conflict of interest there.”
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Phillips replied: “The government has a massive, perhaps $250billion a year to lie. If they were to face the truth of even let’s say 5 or 6% inflation, the additional interest they would pay on the various debts, principally the national debt, but there’s more at stake than that, the increase that we’d have had to have seen over the years, and still probably need to see on Social Security, cost of living adjustment......... there’s just all kinds of things that would cost them money, so they’d just prefer just to fudge it.”
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When Brinker returned after the commercial, he asked Phillips what he thought about the disasters in Burma and then moved on to talking politics, so we got to hear Phillip's and Brinker’s opinions about McCain, Obama and Hillary.
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Sunday, (Honeybee EC: conveniently) a caller asked Brinker his opinion about what Kevin Phillips had said about inflation numbers being much higher than what the government is reporting.
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Brinker must have decided this was the time to dispute what his guest had said the day before. Here are some excerpts of what Brinker said: “Well, if you just had one indicator that would be better grounds for that view. I brought up the fact with the guest that there’s another indicator, which is the Federal Reserves favorite indicator, and that is the Personal Consumption Expenditure Index. And I think that the Personal Consumption Expenditure Index is an excellent gauge of inflation. It shows 3.2 year-over-year. It shows 2.1 year-over-year core. And in the CPI, it should be noted that nothing is really being hidden.
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Nothing is apparently hidden in the CPI in the sense that the energy component is up 17% year-over-year. So the energy component is showing tremendous run-up in the price of oil as part of that energy component. And certainly other parts of energy, like natural gas, have also risen in price and are part of that component. And without question that spills into the transportation sector as we’ve always said…….What has been remarkable is that it really has not bled into the core index very much at all because all of that, you know was supposed to bleed in and cause all of this inflation. It didn’t happen. It just hasn’t happened………..
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Look, we have people on the program that have different views than me, I’ve told you……I mentioned last week we had a recent guest on the program back when the market was at the lows – when the market was down around 1300 in the S&P……..he was bearish as a (unintelligible) bears. And I remember telling the audience, I said look, it’s a free and open exchange of ideas. This is not my view. I happened to be very bullish at that time.
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In fact, at that time, I happened to have a buy signal on the market when the market was down around 1300. But he was coming with his bearish views………”
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Honeybee Sez: The above statement is a blatant example of Bob Brinker's ability and more importantly, his willingness to mislead his audience about his market timing skills by carefully selecting certain facts and saying them in a way that gives a false impression.
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Here is the whole truth about Brinker's "buying opportunities" over the past year:
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1) April 4, 2007 Marketimer (S&P 1424) Bob Brinker said: “Marketimer currently rates the stock market as attractive for purchase during periods of weakness in the vicinity of the S&P 500 Index 1380 level or lower.”
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2) August 3, 2007 Marketimer (S&P 1455) Bob Brinker said: “We rate the stock market as attractive for purchase on any weakness that occurs in the area of the S&P 500 Index mid-1400’s.”
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3) January 4, 2008 Marketimer (S&P 1468) Bob Brinker said: “ We continue to rate the market attractive for purchase on any weakness into the S&P 500 Index mid-1400’s range."
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4) January 20, 2008 (in a special bulletin) after the steep market decline, Brinker did away with the mid-1400 gift-horse, recommended ONLY dollar-cost-averaging for new money, and said he was "looking for a bottom."
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5) February 10, 2008 (according to Hulbert's Marketwatch article) Bob Brinker said that the market had bottomed and he issued the buy signal in the low-1300's that he was bragging about this weekend.
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This Moneytalk Summary will be continued....Honeybee
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