Summary: Bob Brinker's Moneytalk, August 2-3, 2008

Summary, Commentary and Moneytalk Excerpts, August 2-3, 2008

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Bob Brinker’s Moneytalk opening monologue was the only time today that Brinker mentioned the stock market. However, he had nothing to say about it being "directly correlated" to the price of oil. Indeed, he did not mention the price of oil or the fact that it dropped about 12% during July, but the S&P did not go up. Instead the S&P also dropped in July -- about 1%.

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Brinker’s comments paraphrased: The closing number for the S&P was 1260 and a fraction, which is a “small gain on the week." Treasury rates are way down. The jobs report showed a loss of 51,000 jobs in July – a little bit lighter than expected – unemployment rate is at 5.7%. Economy is “flat on its back.” Brinker gives credit to the stimulus package for the Gross Domestic Product second quarter gain of 1.9%.

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About inflation, Brinker said: “Ten-year Treasury Inflation Protected Securities are implying a headline inflation rate for the next decade of 2.3%. They have a base rate of 1.6 and when you subtract that from the 10-year conventional Treasury Note yield of 3.9, you get a differential of 2.3. That differential is the implied inflation expectation over the next 10 years. So that’s where we are in terms of what’s going out there in the stock market, in the bond market, in the jobs market.”

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The FOMC will meet on August 5th and Brinker expects them to make no change in the Federal Funds rate. Brinker said that "one" would be almost willing to bet the “family jewels” that the FOMC will leave rates unchanged. (Honeybee EC: LOL! Not me, Bpb. I love my diamonds, pearls, rubies.....)
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At this point in the monologue, Brinker went into political talk. He said he would give two examples of “really dumb, really stupid” things the candidates had said – one on each side:
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• Barack Obama made the statement that instead of drilling for oil, we should tune our engines and inflate our tires and "it would be just the same." Brinker called it “poppycock.” (Honeybee EC: I agree, Bob.)
• John McCain ran an ad comparing Obama to Brittany Spears, Paris Hilton. Brinker called it a dumb comparison to make. (Honeybee EC: You may not like the ad, Bob, but ads do not hurt our pocketbooks as do politicians who don’t have good judgment about serious matters like drilling for oil.)

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Bob Brinker devoted the second-hour monologue entirely to talking politics and energy. He talked at length about congress leaving for a 5-week vacation and not getting anything done about the “energy crisis," and he explained in much detail what he thinks they should and should not be doing. (Honeybee EC: I mostly agree with Brinker on these subjects, but I don’t think it's what my Blog readers are interested in reading. I think those who read these Summaries would be more interested in hearing Brinker talk about why he was caught off guard by this bear market. And/or whether or not he believes a new bottom has been established -- obviously, the bottom he called in March didn’t hold.)

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Most of the calls on Saturday were either very esoteric, and consequently of no interest in general, or were on the subjects Brinker talked about the most -- energy and politics. Brinker has been over these subjects many times before. We know that he enthusiastically touts a “comprehensive energy plan” which includes nuclear, drilling in ANWR and using natural gas for fuel in our cars.
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Another subject (GNMAs) that is covered often was asked about a couple of times. One caller asked Brinker to give the number for his favorite GNMA Fund. Brinker did his usual spiel about Vanguard’s GNMA Fund (VFIIX) and again explained the NAV range that he expects it to trade in ($9.50-$10.50). Just go to Vanguard.com for info.
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This was an interesting call about the solvency of the FDIC:
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Caller: “If the FDIC originally had $49billion in assets and they spent $6.7Billion to bail out IndyMac, that means they have $42billion left. How can they insure $3trillion in bank deposits when they only have $42billion in assets?”
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Brinker said: “It’s a good question with a good answer with a good answer and there are two parts to the answer. Firstly, they make an assumption that they’re not going to have to pay out every deposit tomorrow on every deposit that they cover……..The second assumption that they’re making that under the FDIC guidelines, that if they need additional capital to bail out banks, and they are going to bail out plenty of banks, I guarantee you…….they can go back to congress and get that money.”
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Caller responded: “Hmm, doesn’t sound good, does it?”
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Brinker answered: “Well it depends what you are talking about. If you’re talking about banks going out of business, we hate to see that – people lose their jobs and uninsured deposits go to the receiver……….That’s why we recommend ALL of your money in a deposit, in any bank….be FDIC covered.”

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Another caller asked Brinker what he thought would be the best way to handle Exxon stock if Obama gets elected. The caller said that 39% of his net worth was in the stock, but that he had not actually purchased it.
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Brinker did not answer the question about Obama. Instead he talked about Exxon being at a 52-week low, and then reviewed his policy for managing specific stock risk -- which is to limit each individual stock holding to 4% of net worth.

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Brinker’s Saturday guest-speaker was Dr. Bill Wattenburg. One of Brinker’s “favorite people on planet Earth and one of the smartest individuals” that he knows. (Honeybee EC: I too, have the highest respect for Dr. Bill, and really enjoy listening to his radio program.)
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Miscellaneous point of interest
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This ad for Vanguard funds played on the third hour of Moneytalk Saturday:
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“Here’s a simple truth from Vanguard. Performance chasing is a losing investment strategy. We recommend a sensible buy-and-hold approach. And when considering what to buy, consider this, over 3 dozen Vanguard Funds appear on latest Forbes list of best-buys. Visit Vanguard.com to obtain a prospectus………”

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Honeybee's Guest Brinker-Commentator
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Pen-name Newslettercheat wrote:

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"The first month after Bpb declared that the stock market was "directly correlated" to the "wildcard" oil, this is what happened:

* For the month of July, the S&P declined 1%
* For the month of July, the price of Oil declined about 12% "

Who would buy such an obvious alibi from the two bit radio host who just a couple weeks before picking this alibi claimed he knew the bottom was in last March and that those idiots who did not were "false prophets" and "Cassandras".

Obviously what anyone with a brain knows is that Brinker will say what he will say and if turns out wrong; he will do the expedient thing to make it seem like he was not wrong. Currently that is to claim that "nobody can predict oil prices, oil prices control the stock market, so nobody can predict the stock market"

Has anyone recieved a refund from Brinker since in the revelation he admits to not being able to time the market

Btw when did he mention that the market entered bear market territory with him fully invested?

oh he did not? Why would that be? I understand he talked about the market being up a % or two week before last --why wouldn't the worst June since the 30s and a bear market be bigger news?

Oh that's right Brinker was extremely bullish and making fun of the bears just a couple weeks earlier.

You can't make this stuff up. No wonder he wants to shut down sites discussing his alchemy." __Newslettercheat

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Sunday Moneytalk

Bob Brinker did not talk about the stock market on Sunday. He did mention that the price of oil had dropped a bit, but he made no connection to the stock market.

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The entire program was devoted to talking about oil, energy and politics. I think one GNMA call was thrown in for good measure. (Honeybee EC: I was so bored, I could hardly stay awake.) 8~)

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Brinker's guest-speaker on Sunday was Sarah Lowry who authored: Once You're Lucky, Twice You're Good: The Rebirth of Silicon Valley and Rise of Web 2.0

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I took this picture from near the end of the Santa Cruz Wharf looking toward the 100-year old Beach Boardwalk. Double-click on it and you get a good close-up of the Boardwalk and the beautiful Santa Cruz Mountains at a distance in the background:

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