Summary: Bob Brinker's Moneytalk June 7, 2008

Moneytalk Summary, Commentary and Excerpts, June 7, 2008

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Bob Brinker only indirectly referred to the stock market today in his opening monologue. He never mentioned it again during the whole three hour program. He basically inferred that the big run up in the price of oil, which he opined was caused by the “nerve-wrecking” news out of Israel (more on this later), spilled over into the “market.”
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Brinker, began his monologue with a discussion about the jobs report and unemployment data. Apparently choosing to see the glass half-full, he said the job-losses were better than expected (49,000 for the month of May; 324,000 cumulative for this year). That is not the way it was presented on CNN:

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“NEW YORK (CNNMoney.com) -- A spike in the unemployment rate - the biggest in more than two decades - raised new concerns Friday that a weak labor outlook, high oil prices and continuing woes in the housing and credit markets are leading the U.S. economy into a painful recession.

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The government said Friday that the unemployment rate soared to 5.5% in May from 5% in April - much higher than economists had forecast.

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The surge marked the biggest one-month jump in unemployment since February 1986, and the 5.5% rate is the highest level seen since October 2004. Unemployment is now a full percentage point higher than it was a year ago.

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"You're not going to have a lot of people arguing 'no recession' with this data," said Lakshman Achuthan, managing director of the Economic Cycle Research Institute. The prolonged job loss and jump in unemployment are better indicators that the economy is in a downturn than is the traditional thumbnail rule of two quarters of falling……” Full Article

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Brinker commented on the fact that manufacturing jobs are in decline because they are moving out of the United States. He reminded us of the old “Hubcap Theory,” which says that if someone in Detroit wants $25.00 an hour to put on hubcaps, someone else will come along and offer to do it for much less, and eventually someone in a third-world country will be willing to do it for 25 cents an hour.

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Brinker gave the following breakdown of the demographics of the unemployment rate.

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Racial:

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White: 4.9%

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African-American: 9.7%

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Hispanic (which according to Brinker, includes any race that is not white or black) 6.9%

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Asian: 3.8%

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Teens ("yon"?): 18.7%

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Educational:

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No high school diploma: 8.3%

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High school diploma: 5.2%

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Some College: 4.3%

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Bachelor’s Degree or higher: 2.2%

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Bob Brinker quote: “The best money you will ever spend is the money you spend on education. The best deed you will ever do is to help another get a good education because this is the old story about teaching a person to fish. Once you’ve taught a person to fish, they can feed themselves for the rest of their lives. They even need you anymore. What greater gift could you give to someone than the ability to take care of themselves for the rest of their life?”

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Brinker continued his monologue: “Certainly there was some extremely nerve-wracking news for the market, especially the oil market, and that spilled into the other markets that came out of Israel on early Friday before the markets opened. Brinker said this report drove the oil markets “into a frenzy yesterday with an $11.00 per barrel single day record increase to about $138.00 a barrel." Here is an excerpt from an article about the incident Brinker was referring to:

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"Israel has said a strike on Iran will be "unavoidable" if the Islamic regime continues to press ahead with alleged plans for building an atom-bomb.

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The warning, from Israeli transport minister Shaul Mofaz, is the bluntest threat yet against Tehran from any member of prime minister Ehud Olmert's administration.

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In an interview with the mass-circulation Yedioth Ahronoth newspaper on Friday, Mr Mofaz said that Iranian president Mahmoud Ahmadinejad - who has called for Israel to be wiped off the map - "would disappear before Israel does".

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If Iran continues with its programme for developing nuclear weapons, we will attack it. The sanctions are ineffective," said Mr Mofaz, referring to pressure by the United Nations security council to end Iran's disputed programme of uranium enrichment. "Attacking Iran, in order to stop its nuclear plans, will be unavoidable."" (Full Article)

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Brinker continued: “Now my view on oil has not changed. I view oil as a wildcard. The higher the price of oil goes, the stronger the headwinds blow against economies all over the world and especially here in the United States because we don’t have a realistic energy policy…….we just drift along, importing 12 million barrels a day. As a consequence the United States is basically held hostage by the price of a barrel of oil in terms of what happens to the economy. Now give consumers credit, retail sales for May were better than expected..........It's still a headwind against economic growth, so oil is and will remain a wildcard. I don't see anything out there that will change that. Now obviously, as we've said, we need a Manhattan Project here in the United States to develop a major change in the way we deal with energy.”

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Bob Brinker's Manhattan Project Proposals:

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• Expansive nuclear-power program -- "If we start today, we can have plants online by 2014."

• Once the major nuclear program is going, free up natural gas from being wasted in power plants and use it in transportation..

• Coal to liquids program.
  

• Raise fleet café-standards/mileage.

• Immediately start drilling in the Arctic National Wildlife Reserve.

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Brinker said: "We should be drilling in ANWR now. President Clinton vetoed the ANWR drilling passed by congress in the mid-1990's. If President Clinton had signed that bill, today, we would be producing about 1 million barrels a day out of the ANWR preserve. Thank you, Mr. Clinton."

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Caller Jim: “I’ve been reading your Moneytalk newsletter and your Fixed Income Advisor for quite a long time……..” Brinker: “Thank you.”

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Honeybee EC: It seems very misleading when Brinker allows those kinds of comments to stand with no disclaimer. Robert M. Brinker is editor and publisher of the Brinker Fixed Income Advisor. and Lisa J. Brinker is an editor. Robert J. Brinker, host of Moneytalk, is a "consultant."

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I’d like to suggest that you apply for a complimentary copy of the Retirement Advisor (Editors: David Korn, Kirk Lindstrom & Henry To), and compare it to the free sample of the Brinker Fixed Income Advisor, then decide which is superior. I think you will find that Retirement Advisor contains more valuable information. (I also think you may see some redundancy between Marketimer and Fixed Income Advisor.)

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One of my favorite features in Retirement Advisor is the monthly Fund Family Review. The April 2008 issue, contained an extensive review of Loomis Sayles. Loomis Sayles was founded in 1926 by Robert Loomis and Ralph Sayles. Loomis Sayles has “approximately $130Trillion in mutual funds, separate accounts, and commingled funds.” I happen to own a sizable chunk of LSBRX, so I was very encouraged and reassured by the page-and-half in-depth report in the Retirement Advisor.

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Bob Brinker's guest speaker on saturday was David Cay Johnston, reporter for the New York Times, and Pulitzer prize-winning author of "Free Lunch, How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You With the Bill).

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Caller Marilyn asked David Cay Johnston: "I was just wondering if other people thought about the generosity of Warren Buffet, and maybe the Fisher Family, in their attempts of donating $billions of dollars and then avoiding the taxes that they would have had to pay had they declared this."

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David Cay Johnston said: "Well, Warren Buffet is in my book, less for his generosity than for the way he deals with the tax system in other areas. I tell about how Mr. Buffet got a hundred million dollar gift from the taxpayers in New York State for a business that cost him $40million dollars. How he got a interest-free loan for 28 years for for 2/3rds of a $billion dollars. You think about that for a second. Imagine where you are in San Francisco, where if you bought a house in 1980, you'd never made a payment on it -- didn't have to pay interest on it all these years, and this year, you finally had to pay half the price you agreed to in 1980. I mean, that deal alone would make you very, very well off.
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And then I show how Mr. Buffet has a utility, an electric utility that's trying to do two things. It wants to keep the taxes that are built into the rates you pay. Because utilities are legal monopolies, they have to collect every cost from you, including their income taxes. And he's been fighting to be able to pocket those taxes permanently.
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And then another of his electric companies, he's charging much higher prices than local businesses believe are appropriate. And he used his political muscle to shut off public debate about this by threatening an ally of the local business people with onerous legislation unless they passed a resolution promising to never help try and get out of the clutches of his business again.
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So Mr. Buffet is a very smart investor, but he's enhanced those returns by using the government to give him money, to extend him extraordinary loans, to charge rates that are higher than the market or normal regulation, and to pocket taxes that you are forced to pay if you are one of his companies......."
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Brinker said: "Steve is on the line in Virginia, Steve......"
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The vast majority of the calls on Saturday were about U.S. energy policies and who is to blame for our dependence on imported oil (Brinker places a lot of the blame on the Sierra Club for our lack of nuclear). Brinker talked a lot of politics, including how the candidates might handle tax increases. He has covered all of this territory before, and I didn't hear any change in his views -- or any new information about the candidates.
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