Summary, Commentary and Excepts: Bob Brinker's Moneytalk; June 21-22, 2008 (See Sunday Commentary below)
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Bob Brinker began his Moneytalk opening monologue Saturday by giving Friday’s stock market closing numbers, but he made no further comments about it.
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June 20, 2008, Dow: 11,842.69; S&P 500: 1317.93; Nasdaq: 2406
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Brinker did not make any direct comments about inflation, recession or the economy today, but I have transcribed some excerpts that may indicate some of his current outlooks.
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After speaking at length about the situation in the Middle East between Iran and Israel (and the U.S.), Brinker said: “………….Now obviously, Wall Street doesn’t like any of this because it feeds right over into the situation in the energy complex. And of course, the oil situation has been really on a roll. We have this latest news out of Israel on Friday – rallying oil back into the mid-$130’s. Highest it’s been is the upper-$130’s so it’s close to its all time high. And people are looking at this situation, and obviously if oil stabilize or come down, that would be something that Wall Street would like to see. But that has not happened yet, and now the drums are beating in the mid-East for a possible Israeli attack on Iran. And even the thought of that situation has a lot of people worried about mid-East stability….
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…..And of course, they are beating the drums on the other side too. The Ayatollah (?) in Tehran, yesterday saying that if enemies, especially Israel and their U.S. supporters, wish to speak in the language of force, they should rest assured they will be dealt a heavy blow on the face by the Iranian nation. This is not the dialogue that Wall Street is looking for – needless to say -- with oil sitting in close to $135 a share....
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....And oil is important. We’ve talked about it on Moneytalk because oil is the basis for the U.S. economy. It is a petroleum based economy. Yes, other fuels are used. Coal is used. Natural gas is used. But when you get into the transportation area, you are talking massive use of petroleum…………..Obviously the price of oil matters. You know it’s doubled in the past year. I think you have to give a lot of credit to American consumers for adjusting and dealing with it as retail sales have held up quite well, considering what’s going on in the energy complex……….”
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(Honeybee EC: It sure seems to me like Brinker is trying to indicate that the price of oil and the Middle East situations are to blame for the stock market's difficulties -- but as a good friend often says: "What the heck do I know?") 8~)
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MODEL PORTFOLIOS….Brinker said: “A balanced portfolio would be 50-60% in the equity market, with the balance in quality fixed income….….something like the Total Stock Market Index…….Obviously depending on how many wrinkles you want to put into a portfolio, the way we invest the Balanced Portfolio in the investment letter that I write is we put part of it in the Total Stock Market Index (Honeybee EC: VTI is a good ETF substitute for the Total Stock Market Fund that Brinker likes.) We put part of it in managed equity funds. We put part of it fixed income funds and we put part of it in international equities, which is something you can also do.”
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There was an outstanding caller during the second hour. He said he was a retired airline pilot. Brinker engaged him in a discussion about which airports are the most difficult to land in (surprisingly, it is not San Diego). He talked about some of his close calls, and said that fortunately, he had a landing for every take-off. The conversation went on for a long time and was very interesting...
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Brinker's guest speaker on Saturday was Micheline Maynard: "The End of Detroit: How the Big Three Lost Their Grip on the American Car Market."
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Bob Brinker said: “…..consumers are trying to deal with one major problem in their budget and that is, here we go again right, energy. That’s the thing that’s really changed. You know we hear a lot about the housing recession. It’s certainly a doozie, there’s no doubt about that.
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Remember when we talked about, so many times we talked about the fact that housing prices in California declined five years in a row in the early 90’s. We were talking about this during the bubble in housing a few years ago to try to remind people that this was not going to last forever. And we’ve seen it all before. There’s nothing new in any of this.
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But even with the housing recession, that doesn’t affect everybody. It only affects the people who are in the foreclosed properties or underwater on a mortgage. Yeah, they are affected, and they are affected deeply, but that’s a small percentage of the consumer population. Everybody is affected, except for the rich, which is a very small percentage of the country. Everybody is affected by what’s happened to energy prices. Everybody is affected by it that’s in the middle class. The entire middle-class is impacted.
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You know there are people who are reducing their automobile use now as a result of fuel prices. It’s gone beyond what I said months ago where there were people that could not afford to fill their gas tank and they would put in $10 or $20 at a time because they couldn’t afford the $50, $60, $70, $80 to fill the gas tank, so they would put in small amounts. Well, of course you don’t get much gas for small amounts anymore, do you? If you put in $20, you get what, 5 gallons? Well you’re not going from Des Moines to Baton Rouge on 5 gallons of gasoline. So the bottom line is, people are cutting back………
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…….It’s gone beyond that – people are driving less now because they can’t afford it and they have to cut back so they still have enough money for food which is going up way too fast, because we’ve made another mistake. We’ve mixed our food chain in with our energy problem, with things like corn-based ethanol. Now that’s feeding through the system. And one of the reasons food is up 5.1 in the last year is because of that. So we are doing all of these things and it’s impacting consumers to the point where they are actually cutting back on the use of their vehicle and changing their behavior patterns.
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Now how in the world could we be in a situation like this. Well, I would send your thank you note to people who think like they think at the Sierra Club, where they demonize the most important solution out there today to the energy crises which is nuclear power in the United States. Demonized for decades by the Sierra Club. Although if you go back far enough, you will find they actually flip-flopped on the issue. They were FOR nuclear power before they were AGAINST it……. But they demonize it now, as they have for decades. And here we are, here we are. Welcome to 2008 in the United States.
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And we have a congress that decides…….We ought to take a nice summer recess like we do every year, not even paying attention to the situation. And for some reason, these high-powered think tanks in Washington, apparently they forgot to ask the $64 question years ago – gee what happens if oil goes through the roof. Yeah, they forgot to ask that one, which of course pretty much negated anything they were trying to accomplish in those sessions. And so here we are.
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The president’s a lame duck. He has one foot out the door. He’s on his way to Crawford and he’s looking forward to it. He’s put in his time. He figures he’s done -- few months to go -- clean out the closet. So don’t look to the White House to solve this. And congress, their priority? Hey, let’s take a summer recess. If you didn’t see it, you couldn’t believe it…..This is Moneytalk”__Bob Brinker
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Sunday Moneytalk guest speaker was Joseph F. Hurley, “Best Way to Save for College 2007: A Complete Guide to 529 Plans”
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Bob Brinker June 21, 2008, quotes:
- “Where is the U.S. energy security? Well, right now it’s out the window.”
- "Being in favor of nuclear power in today's country of the United States is a no-brainer"
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