Bob Brinker's Moneytalk: Excerpts, Summary and Commentary, April 18, 2009

April 18, 2009: Bob Brinker's Moneytalk was hosted by Bill Flanagan today.

The stock market has risen for six straight weeks. The Dow closed at 8131.33, gaining 0.6% for the week; the S&P 500 Index closed at 8869.60, gaining 0.5% for the week; The Nasdaq gained 1.2%, closing at 1673.07; GLD closed at $85.33.

Bill Flanagan's opening monologue was very interesting. I have transcribed excerpts from all of it. I think you will enjoy reading them.

Firstly, he mentioned the April 15th tax deadline and the Tea Parties that took place all over the country on that day. He said people were "acting out their anger." There were actually about 250,000 Americans who "acted out their anger," and in my opinion, some fear for the future of the United States.

Bill Flanagan said: "The tax system obviously stinks. It stinks to high heaven and only gets worse. I especially love a quote that appeared in Tom Dolan's editorial in Barron's today. He turns to none other than Plato for inspiration. Quote: 'When there is an income tax.....the just man will pay more, and the unjust less on the same amount of income.' Plato knew this. Anybody who's got enough common sense to get out of the rain, knows this. Congress knows this. Tax cheats know this. Members of the Obama administration who are tax cheats know this. And yet we have a system that is allowed to get worse and worse and worse. And compliance becomes a bigger and bigger problem, getting the just man angrier and angrier and angrier -- and poorer.....

..... The tax code which continues to grow at astronomical lengths.....is now 70,323 pages. In 1984.....it was only 26,000. This thing is growing exponentially......The average guy can't do his taxes anymore. More than 60% of all individual returns are done by professional preparers now. Up from 46% in the mid-80's.....Pay someone on average $300 -$400 bucks because you are completely baffled.....It's bad enough we have to pay a lot in taxes....the fact that somebody is not paying their fair share, that's even worse.....

.....It's a system that is crying outrageously for change. And once again, we have these promises, promises, promises, Obama promises, Obama promises, Obama promises. And now he's promising he's going to simplify the tax code -- got that? -- Sometime by December. Let's wait folks. He's already made a mockery of it. With these new tax credits, it's been called the H.R. Block and Liberty Tax Stimulus Plan. Those are the two biggest agencies that handle tax preparation.....

.....Well of course, we have to go to the source and that is our friends in Congress -- our inept Congress people who don't give a darn about anything but themselves. They have an approval rating which is lower than whale manure and going down by the moment. Nothing is ever done to fix the most egregious problems that we have in this country -- they can't be bothered.....

.....After all, they have plenty of money, they've got plenty of help, they've got plenty of assistance. They have platoons of people to help them do anything that they want to do. They get special considerations. They don't pay the same kinds of things that we do. Why should they want to change anything when those lobbyists keep on dropping all those dollars in their campaign chests to get special consideration? And of course, they get it. They get it left and right and center......

.....This is what happens with our inept congress. If Obama thinks it's going to be easy to lower taxes, wait until he finds out how difficult it is to try to be green and fair. So they were giving tax credits to companies for using more desirable fuels, and the paper industry..... has a by-product for making paper -- it's called black liquor. And this black liquor they pour into the engines of the equipment they need to run the paper mills, and run the heating plants..... And it turns out to be a pretty efficient fuel.....

.....Well, in their infinite wisdom, our guys say.....that's a pretty good idea -- see businesses should use things like this, even though they've been doing this in the paper industry for eons. So [now] there's a special tax credit for using this black liquor -- provided -- get this folks -- it's mixed a little bit with diesel oil. So then this alternative fuel gets a tax credit of 50-cents a gallon. The net windfall to the paper companies is huge! So big it's driven the price of the whole industries' stocks up......

...... Didn't anybody think this through? The one year cost of this is THREE BILLION DOLLARS! Wall Street says it may be six billion....You know those geniuses at the Senate Finance Committee, the ones that are so friendly with those folks that gave us sub-prime mortgages......says that they are aware of it. They're really not that happy with it, but they're working to do something to fix it -- $6 to 9billion worth of alternative fuel tax credits didn't dawn on them.......

.....There's more! The EPA now wants a higher ethanol mix......We all know that it requires more energy to create a gallon of ethanol than it does virtually any other fuel, except perhaps brain-power from congress because you'd need a awful lot of brains to make a gallon of fuel out of that. They want 15% gasoline blends. Why? Because the farmers want it, that's why. And because Archer Daniels Midlands want it, that's why. Now the auto makers are saying wait a minute, 15%, we may have trouble with the cars running right. No problem. Of course remember, Obama and his ilk want us to all drive $40,000 electric cars around. Never mind that electricity costs by the time that happens will be about $700 a kilowatt hour.......

.....Do you know how much corn in the United States is produced simply for making ethanol? One quarter of all the corn produced in the United States -- it used to be known as FOOD. Food for us and for cattle and for the rest of the world now winds up in gas tanks. That's roughly double what it was in 2004. Now tell me the ethanol companies have really not been doing a good job of lobbying, huh? They should all get awards. Hey, let's do it all. Let's use every single kernel of corn that we grow. No more in the movies. No more anywhere. Let's pump it all into the manufacture of ethanol. That would make some people very, very happy. The farmers would be delighted, except they really couldn't eat steak could they? Not corn-fed steak anyway."

[Honeybee EC: Agree or disagree with Bill Flanagan, kudos to him for some refreshing straight talk.]

STOCK MARKET... Bill said: "This has been a real bad market, folks, and it's very hard to stick to your guns when there is no powder left and cannon balls around and it seems that the end is near. Of course, the market over the last 6 weeks has been up, which is always encouraging. Although we still continue to have discouraging news -- unemployment is up. Well there's been a little bit of movement in retail sales but unemployment is just dreadful. Well beyond 10% in California and on the west coast. This is not good. People don't have jobs, they can't buy things. We are a consumer driven economy. You can talk about all the hoopla about the financials doing this, that, and the other thing, but I think that's hysterical money jumping up and down trying to get some life pumped into a system that obviously has been very, very seriously injured."

DOLLAR-COST-AVERAGE....Bill told a caller who wanted to move money out of bonds into equities that the way to do it is to dollar-cost-average in at opportune times. He pointed out that historically, the market is a lot lower than it has been for a long time.

INTEREST RATES... Bill said that the "handwriting is on the wall." That you simply can't have this kind of profligate spending without an eventual increase in interest rates. He said the questions are, how much will it be and when -- that it could be quite awhile and it could be very incremental.

CALIFORNIA GENERAL OBLIGATION BONDS: Bill said: "If you are talking California, I'd be concerned."

INFLATION....Bill said that it is an inevitable fact that we are going to get some inflation down the road.

There was no guest-speaker today.

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