Best of Bob Brinker's Moneytalk in 2010 and 2011 Projections

HAPPY NEW YEAR!

[In edit, January 1, 2011] SJ_Al sent this picture and this message to Mr. Pig, but is of interest to anyone who likes to ski:

"Mr. Pig, there is plenty of snow this year, so hurry on out. On Tuesday, the snow pack at the ski lodge was a good 48”.

Then on Wednesday, this is what we woke up to at our cabin…. and it snowed more during the day. We got about 20” total, and that is less than half what they had higher, as we had hours of rain before it turned to snow. We are 18 miles from and 2500’ lower than the ski area."

BUYING GOLD FOR HEDGE AGAINST DECLINING DOLLAR...November 7, 2010, Moneytalk, Bob Brinker said: "Hedging the portfolio against decline in foreign exchange, and there is a way to do that. It is a speculation, but there is a way to do it. And that is to put some GLD, the Exchange Traded Fund for gold in your portfolio, a few percentage point perhaps, if you elect to do this. And that will give you a precious metal in the name of gold bullion-hedge in your portfolio against the dollar.

SILVER CAN SUBSTITUTE FOR GOLD AS HEDGE....November 7th, 2010, Moneytalk, Brinker said: "As far as silver is concerned, I think it could be considered as an alternative[to gold] form of hedging in a portfolio......The preferred way for those who wish to have a silver hedge in their portfolio would be the Exchange Traded Fund that holds the silver bullion -- that trades under the symbol SLV.....the Ishares Silver Trust."

BONDS, November 14, 2010, Moneytalk, Brinker said: "You want to keep the maturities toward the shorter end.....This is not a time when one should be looking to extend their durations and maturities."

November 21, 2010, Moneytalk, Brinker said: "My advice has been to stay away from long-term bonds right now. I don't think long-term bonds are a good place to invest right now. Short-term is another story....."

HIGH YIELD BOND FUND (VWEHX)...Moneytalk, August 29, 2010, Brinker said: "High yield bonds have been doing very well. We've included those in our Fixed Income only portfolio on Page 7 of the investment letter each month."

CALIFORNIA GENERAL OBLIGATION BONDS, Moneytalk, November 21, 2010, Bob Brinker said: "I don't think there is any financial stability at all in the State of California. I think that the state of California is as dysfunctional as you can possibly get.....And when I look at the results of this last election in California, I don't see any reason to change my view that California is fiscally unstable......They cannot continue to do what they have been doing without becoming insolvent...... you're buying the full faith and credit of the State of California when you buy one of these Build-America Bonds........

.....Yes, they get a 35% of the interest cost rebate from the Federal Government, but the principle is on the backs of the taxpayers of the State of California......There is so much uncertainty about how in the world the state is going to meet all of the promises it has made to so many people over the years. Including those who have worked for the state and are eligible for benefit packages for many years to come. Who's going to pay for all that? Investors are worried about that, as they should be......The way people are looking at California right now is, it's basically a debt machine. As a matter of fact, this coming week, they are scheduled to sell another $billion of tax-exempt General Obligation Bonds. And another $100 million of taxable-lease revenue bonds......The investor has legitimate questions now about the long-term solvency of issuers like the State of California."

STOCK MARKET CORRECTION ENDED IN JULY.... Moneytalk, Bob Brinker said: "If you've been with us on the program, you are aware of my view that we had a correction in 2010. I know many were forecasting a bear market. I never believed that. We thought it was a correction, and the S&P 500 corrected 16% and the Dow corrected 13 1/2%.....And that correction ended July 6th and that is when the market was down in the 1030 area.....

STOCK MARKET IN 2011:

Moneytalk, September 26, 2010, Brinker said: "I certainly underscored my bullishness on the market by upgrading the market to an outright-buy on the first of July.....I'm expecting to see a good stock market in the next year.

November 2, 2010 Marketimer, Page 3, Paragraph 2, Bob Brinker wrote: "Based on the excellent corporate earnings progress we are seeing and our estimate of real GDP growth in the 2% to 2.5% range next year, we are increasing our S&P 500 Operating earnings estimates to $78 in 2010 and $87 in 2011."

December 3, 2010, Marketimer, Bob Brinker said: "....we project a target range in the low-to-mid 1300's for the S&P 500 Index as we move forward in 2011."

BRINKER'S LATEST "ATTRACTIVE FOR PURCHASE" STOCK BUY....Bob Brinker said: "Anybody listening to this broadcast is already aware that I have been bullish on the market to the extent that in the early part of July in my investment letter, I upgraded the market at that time, down in the 1030 area of the S&P 500, to attractive for purchase. Now of course, we've gone back to dollar-cost-average with the tremendous run we've had since early July...."

BOB BRINKER IS FULLY INVESTED WHEN HE MAKES THOSE "LUMP SUM" BUYS.... Moneytalk, August 1, 2010, Brinker said: "Now there have been various levels along the way since that time where we have made lump sum recommendations, or in other words recommended the market attractive for purchase. We've done this at various level, but you have to understand, each time we did that, we were fully invested. Every single time we made a lump-sum recommendation since March 11, 2003 to the present, every time, we were already fully invested when we made the recommendation so it would only have applied to money that would have come in the interim."

STOCK MARKET OVER THE LAST DECADE.....December 12, 2010, Bob Brinker commented that the S&P 500 Index is "at about the same level it was 10 years ago."

GOLDEN CROSS VS MARKET-TIMING.... Moneytalk, Bob Brinker said: "But from my point of view, I would rather use a market-timing approach to try to identify the bottom of a correction as I did at the beginning of July as opposed to the golden cross. The problem with the golden cross is, it's very, very late to the party. The S&P 500 is at 1183.....I would much prefer using a market-timing approach to identify areas of entry - you're not always going to be right, we know that. But that's not the point. The point is, you should be able to hit some very, very well. And as a result, you should be able to take positions as we were able to do at the beginning of July when the market was at its lows for 2010. And that's an example of using market-timing as opposed to using a technical tool like a golden cross."

QUANTITATIVE EASING.....Will it control inflation and help the economy? Moneytalk, November 21, 2010, Brinker said: "Well, I think it's an unknown. I don't think Ben Bernanke himself knows what the value of QE2 is -- buying Treasury securities and printing additional dollars to do so. I don't think Ben himself knows. I think he's functioning under the dual mandate."

RISING OIL PRICES DON'T CAUSE INFLATION.....Moneytalk, November 21, 2010, Brinker said: "Energy is way up in the past year. Energy, commodities up about 10%. Gasoline is up a big number. Fuel oil is up double-digit in the last year. But of course, rising energy prices alone don't produce inflation because they are weighted into the overall index."

DOUBLE-DIP RECESSION COMING? Moneytalk, September 26, 2010, Brinker said: "We have been very clear on this broadcast this year that there will not be, in my opinion, a double-dip recession. I've said it ad nauseam."

WHICH CURRENCY TO USE? Moneytalk, November 21, 2010, Bob Brinker said: "Well I'm a strong believer in having the main currency in your portfolio.......in the country that you reside.....I like to match currencies in the currency that you are trading in... Firstly, keep in mind that unless you plan to spend your money in foreign currencies, then it should work for you here in the United States buying goods and services.....This would only be a major problem if your liabilities were in Euros, or Yens or some other currency. But if your liabilities are in dollars, then you are in the currency that will cover that....."

SECULAR BEAR ON AGAIN AFTER BEING DECLARED OVER FOR FOUR YEARS:

April 5, 2010, Marketimer, Brinker said: "The current secular bear megatrend began during the first quarter of Year 2000, and is now entering its eleventh year."

* [June, 2007 Marketimer, Brinker said: "In our view, the valuation based secular bear market that was established following the March, 2000 closing high reached its conclusion on June 13, 2006 ]

SECULAR DYNAMICS INTERESTING, BUT BRINKER LOOKS TO CYCLICAL TRENDS AND TIMING MODEL..... Marketimer, April 5, 2010, S&P 1169, Bob Brinker said: “While we have always taken an interest in the underlying secular market dynamics and market history, all Marketimer model portfolio asset allocation decisions are based on our cyclical stock market outlook and the Marketimer stock market timing model.”

FIVE ROOT CAUSES OF A BEAR MARKET.....Moneytalk, August 8, 2010, Brinker said: But you are right, we did write in the investment letter this month about several causes and one of those causes of a bear market is rapid growth. [Explained and itemized: LINK]

BOB BRINKER DID NOT AVOID 2008-2009 BEAR MARKET... Caller Frank from San Mateo asked: "As a market-timer, how successful were you in avoiding the horrific bear market of '08 - '09?" Bob Brinker replied: "I did not avoid it."

BRINKER STATES HOW HIS PERFORMANCE IS TRACKED.....Moneytalk, December 12, 2010, Brinker said: "All of my official portfolio recommendations that I make, on which I am tracked for performance purposes, are made within the context of the investment letter. And I publish a new letter every month toward the beginning of the month. And it is within the context of the investment letter that I make those kinds of specific recommendations......"

RADIO LISTENERS ARE "HORSES OF ANOTHER COLOR" (I just watched one of my favorites, "The Wizard of Oz")......Moneytalk, December 12, 2010, Brinker said: "Now in terms of radio listeners who happen to have bond funds, my recommendation has been very clear that if you have any concerns about net-asset-value volatility, net-asset-value deterioration.....then you need to protect yourself. And the way that I recommend you protect yourself is with what is called a mental stop. And a mental stop is very simple.....You come up with a price on each of your bond fund holdings below which you are not willing to maintain the position, and if that price is published on any given night..... If you see your price then at that point, the next day, you liquidate your position......

LOSSES ARE IDEAL WAY TO FINISH THE YEAR FOR TAX PURPOSES.... Moneytalk, December 19, 2010, Bob Brinker said: "If you are in the position to do so, if you're looking for the ultimate, ideal position to finish the year - not everybody can do this - some people have portfolios that are nothing but gains and that's wonderful too.....But the ideal position to get yourself in for tax purposes is to finish the year with a $3,000 loss. Anything more than that can be carried forward to future years.

BRINKER'S POLITICAL PERSPECTIVE....Caller Tom from Albany asked Brinker if his radio program is liberal or conservative. Brinker responded: "We're right down the middle, Tom."


Some of my favorite Brinker quotes from 2010:

* "Texting while driving is suicidal."__Bob Brinker

* "I am a Capitalist. I would not be promoting Socialist policies." __Bob Brinker

* "Now I don't believe in short-term or day-trader activity. I think it's a waste of time."__Bob Brinker

* "I would much prefer using a market-timing approach to identify areas of entry - you're not always going to be right, we know that. But that's not the point."__Bob Brinker

* "But if you can get some right, you can finish way ahead of the pack because the pack is buying and holding forever."__Bob Brinker

* "If you are not fully disclosing what's going on, you are in the snake oil business and not to be trusted." __Bob Brinker

* "It's all about the money."__Bob Brinker

[Please notice that I posted this review with no editorial comments, but it's very likely that I will have a few things to say in the comments section later.] :)

The National Debt:

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December 26, 2010 Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

December 26, 2010...Bob Brinker did not host Moneytalk live today. The program appeared to be pieces of various broadcasts which were spliced together. There was no political punditry or any discussion of current market data. And there was none of the usual itemized Treasury yields or announcements of the upcoming economic calendar for next week.

Strangely, there were no announcements that the program was made up of re-runs from previous broadcasts. It's quite possible that casual listeners would not even realize that the program was pre-recorded.

I've never heard of that kind of deception on other talk shows -- they usually announce that these programs are the "best of" or "pre-recorded" programming -- but perhaps it helped to keep those who pay Brinker for "Moneytalk on Demand," happy. I'm sure he didn't lower the cost of it by half now that Moneytalk is on only one day per week. (KGO810 radio offers Moneytalk on demand at no cost for seven days after broadcast. See link below.)


Bob Brinker's latest stock market views:

* Brinker is bullish on the stock market, his portfolios are fully invested and his S&P 500 Index target range for 2011 is: Marketimer, December 3, 2010, Bob Brinker said: "....we project a target range in the low-to-mid 1300's for the S&P 500 Index as we move forward in 2011."

Interesting to compare what Brinker was saying three years ago before the market dropped over 57%:

January 4, 2008 Marketimer, Page 3; Paragraph 1; (S&P 1468.36), Bob Brinker said: "In summary....conditions are favorable for the market as we enter 2008. We expect the S&P 500 Index to achieve new record highs this year and to reach the 1600's range in the process. We continue to rate the market attractive for purchase on any weakness into the S&P 500 index mid-1400's range. Above that range we prefer a dollar-cost- average approach for new purchases. All Marketimer Model Portfolios remain fully invested as we enter 2008......And I believe those new all-time-historic-record highs will develop as we move into 2009."

Chart courtesy of Kirk Lindstrom. Click to enlarge:


Bob Brinker's latest bond market views:

* Brinker has made no changes in his bond asset allocations in Marketimer, but here is his advice for Moneytalk listeners who are concerned about fluctuations in bond fund net-asset-value (specifically VFIIX): "..... the way that I recommend you protect yourself is with what is called a mental stop. And a mental stop is very simple.....You come up with a price on each of your bond fund holdings below which you are not willing to maintain the position, and if that price is published on any given night..... If you see your price then at that point, the next day, you liquidate your position......"

Moneytalk is FREE and available on demand at KGO810 radio for seven days after broadcast. The now once-weekly Sunday program is archived in the 1-4pm time-slots. You can listen or download to your mp3 player, computer or flash drive, and listen at your leisure. KGO: Moneytalk Download

According to Paul from Sante Fe last week, this is the "national treasure" Maestro Brinker, :)




Bob Brinker May 29, 2009 Class of 1959
Old York Road Country Club, LaSalle High School, and the Sullivan Nursery
photos: 390 – 51 MB
Public on the web

50th Reunion of the 1959 class of LaSalle College High School

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Merry Christmas

I wish you all a Charlie Brown Christmas. Thanks to TFB for sending this:


"And there were in the same country shepherds abiding in the field, keeping watch over their flock by night. And, lo, the angel of the Lord came upon them, and the glory of the Lord shone round about them: and they were sore afraid. And the angel said unto them, Fear not: for, behold, I bring you tidings of great joy, which shall be to all people. For unto you is born this day in the city of David a Savior, which is Christ the Lord. And this shall be a sign unto you; Ye shall find the babe wrapped in swaddling clothes, lying in a manger. And suddenly there was with the angel a multitude of the heavenly host praising God, and saying, 'Glory to God in the highest, and on earth peace and goodwill towards men.'

"That's what Christmas is all about, Charlie Brown."

Jeff S. (family member) took this picture of Bridal Veil Falls in Yosemite the day after Thanksgiving. (Jeff also took the picture of Jenny and her snowman posted on the previous page.) Both Jenny and Jeff are Leukemia IronMan champs. Click on picture to enlarge:

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Bob Brinker's Moneytalk: Don't Expect Answers Until You Pay Up

December 20, 2010....Bob Brinker's Moneytalk program, which is now down to only two hours, plus a guest hour, per week, almost always has what appears to be a set-up call, sometimes more than one.

These calls always offer perfect opportunities for Bob Brinker to dangle some investment-letter shark bait. No doubt that shark bait reels in a very full net each week.

The fact that it is done in a manner that ( in my opinion) is nefarious, doesn't seem to matter one little bit to Bob Brinker. Perhaps he does it for all those "young sprouts" and he feels that makes the ends justify the means.

Sunday, December 12th, Paul from Santa Fe said: "Mr. Brinker, first of all, I think you should be declared a national treasure. (Brinker: "You are very kind.") "The question I have is, I have about $650,000 in the Ginnie Mae Fund. I don't rely on it for current income. In fact, I just have the dividends re-invested, but I know that it's going to take a price hit. I wonder if you would recommend getting out of bonds completely, or if you'd just recommend moving into a shorter duration bond fund."

Honey EC: Even though Brinker tells Paul there are two answers, notice that he does NOT ANSWER his question at all! Paul did not even mention Brinker's "portfolios," he simply wanted to know if Brinker recommended "getting out of bonds completely," or moving into a fund with shorter duration than Ginnie Mae Funds.

But Brinker, ever the opportunist, jumped right in and gave Paul a spiel which basically gave him and all listeners this message: You are just a lowly "freeloader" (Brinker's own word, if you want the quote, ask me for it) radio listener. It doesn't matter that (through radio station advertising) listeners have paid my salary for 25 years and made me a multi-millionaire many times over via newsletter sales and my BJ Group, if you want to know the answer to your SIMPLE question, you will need to send me $185 bucks, ASAP!

Here are Brinker's exact words to Paul: "There are two answers to that question, Paul. Obviously, for years, I have had a recommendation in the Vanguard Ginnie Mae Fund included in my model portfolio III and I've also placed it in my page 7 fixed income portfolio.....Those are my official portfolio recommendations on which my performance record is based. All of my official portfolio recommendations that I make, on which I am tracked for performance purposes, are made within the context of the investment letter. And I publish a new letter every month toward the beginning of the month. And it is within the context of the investment letter that I make those kinds of specific recommendations......"

Honey EC: That shark attack was good for a big laugh-out-loud. It's been years since Brinker changed portfolio percentages of Vanguard Ginnie Mae Fund (VFIIX). It was 2003 to be exact (and another 5% added in 2004). How many thousands of dollars would it have cost Brinker in new subscriptions to simply tell Paul that he has no sell recommendations on bonds? How much integrity would it have taken?

Poor Paul, he could save himself writing Brinker a check to find out if he recommends selling bonds if only he knew that's about as likely to happen as it is that Brinker will ever again sell stocks from his model portfolios. There's not a snowballs chance in Death Valley that he will ever sell stock again after riding down fully invested one of the three worst over-50% bear markets in the history of the stock market.

* In April, 2003 Brinker traded 15% of VFIIX for a 15% purchase of Vanguard High Yield Fund (VWEHX).

* The last change he made to his fixed income portfolio was in April, 2004 when he reduced Vanguard Inflation Protected (VIPSX) from 25% to 10%. He reinvested 5% of that into VFIIX, bringing it up to 40% where it's been ever since. (And the other 10% from TIPS went into Vanguard Short-Term Corporate Fund (VFSTX).)

* As for portfolio III, the balanced portfolio, Ginnie Maes have been at 20% for years.

Brinker continued talking to Paul from Santa Fe: Now in terms of radio listeners who happen to have bond funds, my recommendation has been very clear that if you have any concerns about net-asset-value volatility, net-asset-value deterioration.....then you need to protect yourself. And the way that I recommend you protect yourself is with what is called a mental stop. And a mental stop is very simple.....You come up with a price on each of your bond fund holdings below which you are not willing to maintain the position, and if that price is published on any given night..... If you see your price then at that point, the next day, you liquidate your position......

...... Now obviously, if you liquidate a position in Ginnie Maes today, which are yielding over 3%, and you want to go with a high-quality investment - that's a triple-A grade investment - then you're probably going to wind up with a lower investment return, a lower yield, on whatever you decide to do with the money. In return for that, you get, if you go with a money fund or FDIC insured CD, you get principle protection because you aren't going to see any more price changes past the day you liquidate.......Always remember if there is a distribution in your bond fund, or any fund, then you need to adjust your mental stop for the distribution......This week Vanguard updated their estimate for their Ginnie Mae Fund, which is going to happen around the 29th of December......to 23-cents......18-cents short-term and 5-cents long-term......The money is in your account......Never adjust your mental stop by a tax-distribution. Only by price change."

Paul continued: "I appreciate the insight, Maestro, and can I subscribe to your newsletter?"

Brinker said: "Oh absolutely. All you have to do is go to bobbrinker.com. The information is all right there, Paul."

Paul continued: "Okay, I've been listening for about six weeks."

Brinker said: "We just completed our 25th year. We welcome you aboard."

Paul said: "That says a lot about you that you can last 25 years because it's performance and meritocracy in this business."

Brinker said: "Thank you Paul, appreciate the call, good to hear from ya."

Honey EC: Caching! At first, I didn't think this was one of Brinker's set-up calls until Paul made that last statement. I simply cannot believe that a person who sounded as intelligent as Paul did, and who has built a nice nest egg (we know he said he didn't even need the income on $650,000 invested in GNMAs), could be that naive and gullible or that easily suckered in. Didn't people used to ask Bernie Madoff if they could "subscribe" to his marketing plan? -- Just a thought.

To Paul, I would say, sure it's about performance with Brinker, but not his market-timing performance which is almost non-existent. It's about his dog-n-pony show on national radio-performance. He's been a buy-and-holder for the past seven years.

And as for Brinker's "meritocracy," one has to have integrity, honesty and character for merit to count. Merit hasn't kept Brinker on the air. Spin, half-truths and cover-ups have kept him on the air. And remember this, being a master wordsmith with a nice voice and talent behind a microphone, with the censor button in hand, does not equal merit. It only equals a 25 year song-and-dance marketing plan that probably worked out well beyond even Brinker's wildest expectations.

Blog poster, Joel from Dallas, asked a very good question: "....and Bob said to subscribe to his newsletter as that is where the information goes first. Why are we listening?

Moneytalk is FREE and available on demand at KGO810 radio for seven days after broadcast. The now once-weekly Sunday program is archived in the 1-4pm time-slots. KGO: Moneytalk Download Don't forget to download the Barbara Weltman editor of the J K Lasser tax guide interview in the 3-4 hour of the program.

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December 19, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

December 19, 2010.....Bob Brinker hosted Moneytalk today.

Due to previous plans to attend a program by the San Jose Choral Project, San Jose Chamber Orchestra, and world famous Sonos Handbell Ensemble at Mission Santa Clara Sunday evening, Jeffchristie has written a brief summary of the program for us. (Tuesday: I've added my program commentary below.)

"Bob started the show by quoting the latest stock and government bond numbers. He noted that a new tax law for the next two years was finally enacted. He feels that capital gains and dividends should not be taxed.

John was the first caller. He is said the middle class is losing ground and the rich are getting richer. Bob said the high income people should be thrilled with the new tax bill.

Don called from Oklahoma. He wanted to know if the zero percent capital gains rate for the people in the lower bracket was extended for the next two years. Bob told him it was.

Bob ended the segment by plugging Andrew Sorkins book "Too big to fail".

Vince called from KGO country. He ask about the 2 percent reduction in the social security tax. Bob said that it just applied to the employee portion. Employees would pay 4.2% and the employers would still be paying 6.2%.

Tom called from Albany. He ask Bob if this was a liberal talk show or a conservative one. He stated that he was a small business owner and up until last week he couldn't figure out what his income would be next year. He didn't know if he should be hiring someone or getting a temp. He then said something that Bob didn't like. Bob said he would not allow that kind of language on the program. I didn't hear what Tom said that had Bob worked up. I am not sure if Bob edited it out or if I just missed it.

Bob's guest in the third hour was Barbara Weltman editor of the J K Lasser tax guide. One caller ask if the 1099 provision in the new health care law goes into effect next year. She said it does not. Both Bob and her said this was the most bizarre thing they had ever seen in tax legislation. Barbara felt that it proves that the people in congress don't understand business."

Honey.....in edit Tuesday 12/21/10

Many thanks to Jeffchristie for his great summary. I have now listened to the whole program and want to add my comments:

POLITICS: Bob Brinker, as he often does, devoted a lot of the program to espousing his political views. He still sees the government as dysfunctional because they, "lowered taxes and raised spending." The lower taxes he referred to is the payroll tax cut -- even though he used to be all for cutting payroll taxes.

Brinker claims that the biggest winner in extending the Bush tax cuts for two more years is Obama, because it will create jobs and help the economy going forward toward the next election.

THE NEW TAX DEAL: Brinker went into great detail on this. The information is available on the internet. Here's one site that talks about some of the benefits: How the new tax law will benefit you

YEAR END TAX STRATEGIES: Brinker said: "If you are in the position to do so, if you're looking for the ultimate, ideal position to finish the year - not everybody can do this - some people have portfolios that are nothing but gains and that's wonderful too.....But the ideal position to get yourself in for tax purposes is to finish the year with a $3,000 loss. Anything more than that can be carried forward to future years. .....You can take that $3,000 off directly.... Does not apply to personal residence." Brinker also reminded listeners that each individual is allowed to give away up to $13,000 each year to anyone, with no tax consequences.

MINIMUM IRA DISTRIBUTIONS: Last year there was a one-year suspension of the required distributions for those over 70 1/2. But this year if you fail to do it, according to IRS publication 590, you will be hit with a 50% tax rate on your withdrawal.

SOCIAL SECURITY PAYROLL TAX CUT: The 2% cut next year will only apply to employees. Instead of 6.2%, they will pay 4.2%. The employer will continue to pay the usual 6.2%.

IS BRINKER LIBERAL OR CONSERVATIVE? Caller Tom from Albany asked Brinker if the radio show was liberal or conservative. Brinker responded: "We're right down the middle, Tom." (That must have been Brinker's joke of the day). Tom was explaining something that was not in agreement with some of Brinker's views and made the mistake of using a word that Brinker found offensive, so Brinker cut him off immediately.

Too bad, I wanted to hear the rest of what Tom had to say. But it's not a good idea to tell Brinker that he is "full of crap" if you expect to remain on the air. I have heard Brinker use words that I find much more offensive than that one. Matter of fact, the very next caller used a word that offended me.....Brinker didn't seem to hear it.

Caller Andy from Redwood City disagreed with Brinker that the tax cut extension will create jobs and he was for tariffs to protect union jobs. Brinker told him that he had recited all of the Democrat talking points very well and suggested that he contact Senator Bernie Sanders of Vermont who spent 8 1/2 hours filibustering against the bill. Brinker also pointed out that "globalization had already happened and was here to stay."

CURRENT CAPITAL GAINS TAX RATES: Have been extended for two more years for all tax payers. So if you are in zero bracket now, it will hold for at least two more years.

BRINKER'S S&P TRADING RANGE: Matt in Chicago asked Brinker if dividend rates were also extended for next two years (they are) and added, "Also, do you have an expected trading range on the S&P for the next twelve months?" Brinker answered the dividend question then hung up on Matt and moved on. [Marketimer, December 3, 2010, Bob Brinker said: "....we project a target range in the low-to-mid 1300's for the S&P 500 Index as we move forward in 2011."]

Jenny and her snowman in Yosemite the day after Thanksgiving. Please click to enlarge:


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Bob Brinker's Latest Vanguard Ginnie Mae Fund Advice

December 15, 2010....Bob Brinker has been recommending Vanguard GNMA Fund (VFIIX) on Moneytalk for several years now. Bob Brinker has always said that he believed the trading range for this fund was $9.50 to $10.50. Obviously, he was way off on the upside. The fund topped out at $11.13 on November 4th.

Brinker could just as easily be off on the down side. By December 6th, the fund had dropped from $11.13 to $11.05 and today it closed at $10.83.

As Brinker has pointed out, some investors don't care about the net-asset-value fluctuations -- they just want to collect the dividends. Of course, the dividends have dropped a lot from last year. According to Brinker, the fund is now paying 3.2%. But that is sure a lot more than money-market funds or short-term CDs.

I'm not sure how fast the dividends rebound as the net-asset-value drops. Brinker made this comment about it: "Oh yes. What you will see if you see a decline in the net asset-value of the Ginnie-Mae Fund, you would see a gradual increase in the yield."

As of the December issue of Marketimer, Brinker has made no changes in his portfolio GNMA allocations. His Marketimer fixed income investing portfolio holds 40% and his balanced portfolio III holding is at 20%.

Brinker has recently, repeated, recommended that those who own Vanguard Ginnie Mae Fund (VFIIX) and are concerned about dropping net-asset-value use a mental stop-loss at a chosen sell-price.

In my September 17, 2010 Moneytalk Summary, I wrote:

"Brinker rather adamantly explained that what he cares about for that fund is the net-asset-value and beyond that, he defers to the fund managers. And Brinker said that the duration of the holdings in the fund has come down over a period of years which demonstrates to him that the fund managers are aware of interest rate risk and know that if interest rates rise the NAV will decline.

Brinker pointed out that the fund had done exceptionally well, but suggests that anyone who is nervous about the fund's NAV, establish a mental stop loss, such as $10.90 which is about 1% below the current price.

Last week, Brinker announced that VFIIX would go ex-dividend on December 29th. He said that those who have taken his suggestion to set mental-stops need to re-set the number lower based on the announced 23-cent ex-dividend.

So to me, the question is, what does one do now that the fund has dropped 30-cents from the high and is now below the $10.90 price and more than the 1% that Brinker mentioned as an example. Does one sell now or wait for the upcoming ex-dividend and THEN see what happens?

Kirk Lindstrom sees it this way: "Accounting for going x-dividend means you lower the stop to account for the price drop which happens AFTER it is paid. It would make no sense to subtract the dividend from the stop price before the dividend is paid."

Personally, I don't think it's quite that cut-n-dried since the fund has already dropped more than the ex-dividend. I suspect many may be totally confused -- and Brinker was not clear about what to do if this happened.

Some points about Brinker's GNMA history to consider when making your decision:

In 2003, the one time that Brinker actually raised some cash (65%) just before a bear market, he did not recommend putting those cash reserves into Ginnie Mae Funds. Instead, he recommended Money Market Funds.

It's been years since Brinker changed the percentage of Vanguard Ginnie Mae Fund (VFIIX) in his fixed income investing. In April, 2003 he traded 15% of VFIIX for a 15% purchase of Vanguard High Yield Fund (VWEHX).

The next and last change was in April, 2004, when he reduced Vanguard Inflation Protected (VIPSX) from 25% to 10%. He reinvested 5% of that into VFIIX, bringing it up to 40% where it's been ever since. (And the other 10% from TIPS went into Vanguard Short-Term Corporate Fund (VFSTX).)

As for portfolio III, the balanced portfolio, Ginnie Maes have been at 20% for years.

There is one more thing that one needs to take into consideration when deciding when/if to sell VFIIX: What will you do with the money? You will no longer receive the relatively generous dividends, so that cost needs to be remembered as you do your due diligence and weigh your options.


A chuckle from RR: "Oh no, Lynn is hosting."


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Bob Brinker's Reading List: What You Probably Won't See on it

December 13, 2010....Bob Brinker's website promotes a long list of books that he has recommended over the years.

To be fair, some of the books on it are by people who do not agree with Bob Brinker. Some do not believe that timing the stock market consistently can be done. However, pen-name, Birdbrain, is probably correct, this book will not make Brinker's recommended reading list. And we can be sure that the author will not make a guest appearance on Moneytalk . :)

birdbrain said...

An interesting read from your local bookstore or library is "How a Second Grader Beats Wall Street" by Allan Roth. The CPA author teaches his son about index investing through Vanguard funds, initially allocating 60/30/10 in total US stock market, total bond market, and international stocks.

He also points out the many mistakes investors make and how Wall Street makes financial matters seem so complicated that you are better off handing your money to them, with all the loads and fees.

The book follows much of what Mr B preaches about keeping it simple and managing your own money, but don't look for it on his recommended reading list. I'd wager that the three fund allocation over a ten year period would come close if not outperform his Portfolio 2, while saving $1850 in Marketimer subscription cost.

December 13, 2010 12:45 PM (Originally posted here)

Honey here: Yesterday on Moneytalk, Bob Brinker made the comment that the S&P 500 Index is "at about the same level it was 10 years ago." Hearing those words coming from the mouth of a "guru" who has been selling market-timing all of those years is almost astonishing.

I wondered if he blushed or felt any guilt because of all the times over those ten years that he has hawked his newsletter by touting gift-horses, mother-of-all-buying opportunities, counter-trend rallies, cyclical bulls, outliers, secular bears on/off/on, act immediately and "timing updates," all of which were WRONG.

It's not in my nature to be critical, but it's enough to make a Windsor Castle Guard laugh his head off. Of course, $1850 for ten years of wasted market-timing advice is not funny to those who dished it out. But those on the receiving end probably laughed "all the way to the bank."

Last night (December 14th), TFB shared this with us:

"I am really bummed. My cat of 22 or 23 years passed away today. He was such a joy in everyone's life. Love ya Grizzly. tfb"

With sincere sympathy, a eulogy to Grizzly who was obviously a very special and beautiful cat that loved and comforted all of his people:

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December 12, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

December 12, 2010 at 11:30am....Bob Brinker hosted Moneytalk today. However, I was not available to listen to or write a full summary of the program because of other commitments.

The Hand-bell choir I belong to performed in a Christmas program -- along with a singing choir. (And family and friends attended and spent the day with me.)

My friend and consultant, Jeffchristie, wrote a brief synopsis of some of the high-points of the program for us:

* Bob Brinker began by talking about the tax extension compromise worked out between the Whitehouse and the GOP. He said that president Obama was the big winner since the bill contained stimulus that would improve the economy thus helping him to be reelected in 2012. He went on to say that the big loser was the tea party and people in favor of fiscal responsibility. It will bring the debt close to $14 trillion and put us on a faster pace to $20 trillion in a few years.

* The first caller was from Fairbanks. There was a problem with the line and Bob went on to the next caller.

* Carol was calling from Massachusetts. She ask about paying back money she had received from Social Security, which she took early, so she would get a larger monthly check going forward. Brinker said she better act quickly since the government was going to drop this tax free loan option. Later in the program he noted that the government has already ended it.

* The next caller was in a low tax bracket and ask about the zero capital gains rate. Brinker said he felt that all capital gains should not be taxed.

* Paul called in from Santa Fe. He was worried that his Ginnie Mae fund was going to take a big hit. Bob talked about using a mental stop and how it has to be adjusted for the yearly distribution.

* Herman ask if Coverdale program was going to be extended. Bob said the senate bill would do so but the caller needs to wait a see if it is in the final version. If not the maximum yearly contribution will be limited to $500.

*The guest in the third hour was Josh Kosman. His book is "The buyout of American". It is about private equity firms. They talked about tax policies. Bob said that Warren Buffet has never been one to back away from a tax loophole.

Moneytalk is FREE and available on demand at KGO810 radio for seven days after broadcast. The now once-weekly Sunday program is archived in the 1-4pm time-slots. You can listen or download to your mp3 player, computer or flash drive, and listen at your leisure. KGO: Moneytalk Download (Don't forget to download the Josh Kosman interview in the 3-4 hour of the program.)

Dixiegeezer's red cardinal looks very Christmas-y.


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December 5, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

December 5, 2010....After taking last Sunday off, Bob Brinker hosted Moneytalk today.

Bob Brinker's comments paraphrased, summarized or excerpted:

There is news of a possible compromise between the GOP leadership who want no tax increases on anyone, and Obama, who wants to extend unemployment benefits beyond the current 99 weeks. The way it looks now, if the deal is made, the current lower Bush tax brackets will remain the same for one or two years. Investors will receive this news positively because it will take an "uncertainty off the table."

Some people are unhappy about extending unemployment further because reports are showing that often people do not look for work until they get near the end of their benefits. [Honey EC: My garage owner-mechanic told me he is having difficulty hiring help because everyone he interviews tells him they won't go to work until their unemployment runs out.]

STOCK MARKET.....Brinker said: "I think that taking that uncertainty off the table about tax rates in 2011 is very good thing. Because the reality is that those who have been betting against this stock market and shorting this stock market, they have been riding on Don Gibson's sea of heartbreak......And the reason is because as we speak, the S&P Index sits at 1224.71, showing a total rat of return this year, including dividends, of 11.8%.......We still have 3-4 weeks to go in 2010.....And those who are fully invested in this market, have broad smiles at this juncture. And this comes after a fantastic year in 2009 as the market bounced back from the 2008 recession.....

.............The stock market is celebrating quantitative easing, there's no question about that. Because it creates all this liquidity sloshing around out there. Some of which inevitably winds up in the stock market.....And you have to watch it all the way down the line. You have to keep your eye on the tiger because these are crazy times in the financial markets around the world."

INTEREST RATES.....At rock bottom level where they have been for some time now.

GNMA FUND (VFIIX) Brinker said: "It's yielding 3.2% cash....The year-to-date is 7.16%......For those who have talked about setting a mental stop, this fund is going to go ex-dividend around December 29th. And the estimate is as follows: [22-cent] ex-dividend from capital appreciation to be paid out into shareholder accounts....Now breakdown looks like an estimated 17-cent short-term gain, 5-cent long-term gain......That's approximately a 22-cent distribution. So if you have called in and asked about protecting yourself in terms of a mental stop, adjust your mental stop in advance for any distribution. This goes for any fixed income fund you own -- or any fund you own...."

Thursday, IN EDIT...Jim reported this from Vanguard website: [VFIIX] "...... 18 cent SHORT term and 5 cent LONG term for a total of 23."

GOLD....Brinker recommends NOT buying numismatic gold coins because the mark-ups can be huge (he made it clear he was not talking about gold-content coins). For those who want to own gold as a hedge, Brinker recommends GLD, the ETF that deals in gold bullion.

TAX-FREE GIFTING....Anyone can give $13,000 to anybody he/she wishes by December 31 with no taxes whatsoever.

LONG-TERM BONDS...... Brinker recommends staying away from them right now.

QUANTITATIVE EASING, ECONOMY, JOBS.....Brinker said: "Whether or not that's going to work, remains to be seen. Believe me, Fed Chair Ben Bernanke doesn't know either. Did you see his comments on Sixty-Minutes? He came out and he said, 'hey, I'm not saying we won't do round three of quantitative easing. Maybe we will.' So he's not putting any cards away. He's keeping all of his cards in his hand, and he's basically saying, 'I never said quantitative easing two was the last round." And the reason he's saying that is he doesn't know what the result of it will be because the economy is going real slow. You saw the jobs report Friday. It was pretty slow......."

POLITICS: Brinker said: "Keep this in mind that anything can happen in Washington. Especially when you have a gridlocked government such as we have right now. Even though the lame ducks are still in power, they're on their way out and they know it. In fact, a lot of them will be filing for unemployment insurance if they don't find other work in January. And that's okay with me. I think a lot of the people that have been thrown out were asking for it and they got what they asked for......

.....See if they do something about the estate tax and give us some clarity, some transparency, these morons in Washington that are holding us up. We don't even know what the tax rate is going to be on New Years Day. These people, they make me ill. I don't even like to think about these people in Washington.....

.....By the way, for those who are celebrating that they might reach a compromise on this deal, I want you to consider something. That if they do reach this compromise, they will agree to increase spending while raising no revenues whatsoever to offset the increase in spending. Now the increase in spending will come about as a result of extension of unemployment benefit checks......but there will be no revenue raised to pay for that increased spending because there aren't going to be any changes in the tax brackets under the compromise proposal. So here we are heading very quickly for a 14 trillion dollar deficit and we are adding even more. These people are incredible.....

......It seems to me that the Republicans have won their point if they get the compromise. Their point is nobody should have a tax increase. Nobody, Warren Buffett, Bill Gates, Ross Perot, you name it, Brittany Spears, Justin Beaver, Ryan Seacrest. Nobody should get a tax increase because of the economy. It seems to me they're about to win it if they get this compromise."

Honey EC: Yo, Mr. Brinker, didn't you forget one little detail? How about the SPENDING side of the "compromise." Nothing to say about that? Why not?

SARAH PALIN.....Brinker asked Garvin from Wasilla, Alaska, "How's Sarah?" Garvin said that he hadn't seen her much since she was the mayor of his city. Brinker said: "Well, we certainly wish her well and we hope that the former half-term governor of Alaska is doing well."

Honey EC: Hey, Mr. Brinker! Did you ever think about just TRYING to control yourself from taking cheap-shots at strong women? When can we expect to hear your first cheap-shot at the sitting president who makes gaffs regularly? I expect never! But I can only imagine the hay-day you will have if Sarah Palin should actually run for office.

BRINKER'S MODEL PORTFOLIO I and III: Caller Bill from Harford, wanted to know if he should change from model portfolio I into model portfolio III, and asked how to go about doing it.

Brinker replied: "Well Bill, that's a pretty big change in asset allocation......For those that are listening, wondering what Bill is talking about, Bill is referring to our model portfolios that we publish on page 8 of my investment letter. The model portfolio I is designed for the investors with aggressive growth objectives......Now you are talking about going over to model portfolio III, which is our balanced portfolio, which by definition very different....capital preservation is one of the primary objectives of the portfolio.....We are extremely happy about the results of the model portfolios this year. As was also the case in 2009 as this market has come back." (Brinker recommended that Bill wait until next year to make the changes.)

Honey EC: My consultant (Jeffchristie) and I agreed that this was a "set-up" call, designed to give Brinker an opportunity to hawk his investment letter. There is usually at least one set-up call on each program.

As Brinker so "subtly" said: (LOL) "For those who are wondering," there is nothing mysterious about Brinker's model portfolios. Indeed, he has at various times mentioned most of what is in them on the air as he attempts to sell newsletters. We know that his favorite stock fund is the Vanguard Total Market Fund (VTSMX, or VTI, if you prefer an ETF).

We know that his likes Vanguard Bond Funds, especially Ginnie Mae (VFIIX). He has not lowered the 20% holdings of this fund in Port III. We know that he recommends staying with short-term bond funds and TIPS.

And as he said, Port I is for aggressive investors who want to be 100% equities -- no fixed income. Again, Brinker uses Vanguard Funds for the major holdings, including 15% in international.

Brinker "forgot" to post his model portfolio 2008 returns on his website This may be why:

Model Portfolio 1 = down 39.7%
Model Portfolio 2 = down 37.4%
Model Portfolio 3 ("balanced") = down 23.9%

Brinker's portfolios have done well since the market turned up in April 2009, but they are still UNDERWATER from the market high three years ago:

October 2007: Port I = 302,561
November 30, 2010: Port I = $259,366

October 2007: Port II = 241,994
November 30, 2010: Port II = $214,792

October 2007: Port III = 219,263
November 30, 2010: Port III = $214,996

Bob Brinker's guest-speaker was Darrell Duffie:




Moneytalk is FREE and available on demand at KGO810 radio for seven days after broadcast. The now once-weekly Sunday program is archived in the 1-4pm time-slots. To download and listen at your convenience, right click on the hour and use "Save Link as." KGO: Moneytalk Download Don't forget to download the Darrell Duffie interview in the 3-4 hour of the program.

This morning, I took this picture in my front yard as I was putting up some lights. This is right after a light shower, so you can see the diamond-like water glisten on the leaves of the Poinsetta. Click on it to enlarge, it's beautiful:

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Three of Bob Brinker's Most Devastating Stock Picks

Bob Brinker's worst off-the-books Marketimer stock recommendations:

1. TEFQX

Marketimer February, 2000, Bob Brinker said: "Firsthand e-Commerce fund is the newest addition to the marketimer No-Load Fund Recommended List on page four...............Marketimer views Firsthand e-Commerce Fund as an excellent vehicle for the B2B investment..........Due to our current risk adverse stock market stance, we are not placing this fund in any of our Model Portfolios at this time. Also, we would regard a five percent exposure to this fund as the maximum we would be willing to accept in the current difficult stock market environment................."

[After TEFQX lost almost 90%, Brinker put it on HOLD in the March, 2001, Marketimer (at $3.93) and never mentioned it again.]

Chart courtesy of Kirk Lindstrom:

2. DVY

Brinker first added DVY to the Marketimer Individual Issues list in January, 2005 when the price was $60.70 (it is still on the list). Like Brinker did when he added GLD in May, 2009, he gave no advice about it or any price range. Theoretically, there are no limits on DVY or GLD since Brinker regularly says this: "Marketimer recommends managing specific stock risk by holding individual stock positions to a weighting of four percent or less of equities. This does not apply to the exchange-traded funds listed in the table. MSFT and VOD are rated "hold"."

Chart courtesy of Kirk Lindstrom:

3. QQQQ

November 6, 2000 Marketimer Brinker said: "Marketimer subscribers with aggressive objectives can invest up to 30% to 50% of cash reserves in either the QQQ shares or Rydex OTC Fund in order to participate in this recommendations. That translates into potential exposure of 19.5% to 32.5% of a TOTAL AGGRESSIVE PORTFOLIO. (30% of 65% CASH RESERVES equals 19.5%. 50% of 65% cash reserves equals 32.4%). The balance of reserves remain in money market funds.

Conservative subscribers can invest up to 20% to 30% of cash reserves in this recommendation, using either QQQ shares or Rydex OTC Fund shares. That translates into potential exposure of 6.5% to 9.75% of a total BALANCE PORTFOLIO. (20% of 32.5% cash reserves equals 6.5%, 30% of 32.5% CASH RESERVES equals 9.75% of a BALANCED PORTFOLIO. The balance of reserves remain in money market funds." (October 15, 2000 when Brinker sent this advice in a special bulletin, QQQ closed at $81.70.)

The cash reserves that Brinker is referring to is the 65% he had raised from his model portfolios in January/August 2000. In other words, he advised both conservative and aggressive investors to put 30-50% of model portfolio cash reserves into QQQQ where they lost over 70% of their money. Brinker kept this out of the model portfolio official record, so all of his performance rankings for them are grossly over-stated TO THIS DAY.

Brinker offered follow up guidance for "those holding QQQ shares" in the next THIRTY issues of Marketimer. Here are a couple of samples from 2001:

January 2001, Marketimer: Bob Brinker said: "We continue to emphasize the guidelines we have recommended with regard to the exposure in the Nasdaq 100 Index for the countertrend rally phase we expect.......we are expecting potential gains for the Nasdaq 100 Index of up to 50% or more as measured from the January 2 closing low....." (January 1, 2001, QQQQ closed at $64.30)

November 2001, Marketimer: Bob Brinker said: ".....we recommend subscribers with a position in Nasdaq 100 (QQQ) shares hold these shares as we expect them to trade at much higher levels during the next cyclical bull market." (November 1, 2001, QQQQ closed at $39.65)

September 2002, Marketimer: Bob Brinker said: "We are maintaining our hold rating on Nasdaq 100 (QQQ) shares in anticipation of much higher prices for the shares in the next cyclical bull market." (October 7, 2002 QQQ closed at $20.16)

That last sample from 2002 is indicative of what was in every issue of Marketimer from November, 2000 to March, 2003, when Brinker suddenly "forgot" all about it and actually issued a new buy on QQQQ in the low $20 range. And as Gomer Pyle always said, "Surprise, surprise, surprise"! Brinker ADDED THIS $20 BUY to his model portfolios. Shocking? Yes! Did he get away with it? You betcha! Even Mark Hulbert gave him a mulligan on it. (The original $82 trade was never closed.)

So there you have three examples of Brinker's stock picks that went south and left trusting followers hanging out to dry. He never discusses these fiascoes, and he never allows calls about them on Moneytalk. They disappeared entirely from Marketimer, so new subscribers have no way of knowing about them. Indeed, Brinker pretends they never happened.

Chart courtesy of Kirk Lindstrom:


My Idaho sister-in-law has a lot more snow now and the quail families are enjoying it a lot -- not sure my brother is enjoying shoveling the snow. :) Enlarge to fully appreciate the cute baby quail. Two of them are trying to fly:

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November 28, 2010 Bob Brinker's Moneytalk: Lynn Jimenez Fill-in Host

November 28, 2010....Bob Brinker took this Thanksgiving Sunday off. Brinker's fill-in host was Lynn Jimenez. Ms. Jimenez is an excellent business reporter for KGO810 radio.

Sorry friends, I have better things to do than listen to Lynn Jimenez, but comments about her program are certainly welcome. :)

Here is a quick review Bob Brinker's current financial market views:

~ Brinker sez the stock market is in a cyclical bull within a secular bear -- his current target range is S&P 500 Index 1300 to 1350.

Please note: Not only is Brinker's current S&P target range about 7% below his January, 2008 mid-1400's buy signal, it is THREE HUNDRED points below his project S&P target range of late 2007!

November, 2007 Marketimer (S&P at 1549.38), Bob Brinker wrote: "Investors are increasingly looking forward to 2008 earnings prospects. Our current estimate for 2008 S&P operating earnings is $99.00. Based on this outlook, the index is currently valued at 15.6 times forward earnings. Using our estimated P/E range of 16 to 17 times operating earnings, the S&P 500 Index should rise at least into the mid-1600's range next year, in our view."

~ Brinker recommends that all stock market money be fully invested. (as his model portfolios have been since March, 2003).

~ Brinker recommends dollar-cost-averaging approach for new stock market money.

~ Brinker recommends staying short-term with bond funds. Nov 14th, Brinker said: "You want to keep the maturities toward the shorter end.....This is not a time when one should be looking to extend their durations and maturities."

~ Brinker recommends establishing a mental stop for Ginnie Mae Funds at a price where you want to sell when the net-asset-value begins dropping. He believes this offers psychologically protection from fear of catastrophic losses.

~ Brinker recommends silver as an alternative to gold hedge. Nov. 7th, Brinker said: "As far as silver is concerned, I think it could be considered as an alternative form of hedging in a portfolio......The preferred way for those who wish to have a silver hedge in their portfolio would be the Exchange Traded Fund that holds the silver bullion -- that trades under the symbol SLV.....the Ishares Silver Trust."

~ Brinker likes the Vanguard High-Yield Bond Fund (VWEHX) and includes it in his Marketimer fixed income portfolio. Nov. 7th, caller Carl told Brinker that he was using Vanguard's High Yield Bond fund for part of his grand-child's college fund. Brinker replied: "I think you will see that it's done quite well. The yields have been excellent on that fund, and the net-asset-value is doing fine. Last time I checked it was like $5.83. I think that you'll be find that you'll be very happy when you look at the numbers."

~ November 2, 2010 Marketimer, Page 3, Paragraph 2, Bob Brinker wrote: "Based on the excellent corporate earnings progress we are seeing and our estimate of real GDP growth in the 2% to 2.5% range next year, we are increasing our S&P 500 Operating earnings estimates to $78 in 2010 and $87 in 2011."

Ms. Jimenez' book is bi-lingual. Here are some comments about it from Amazon.com:

"Whether you speak English or Spanish, you need to speak the "language of Money." ¿Se Habla Dinero? is a family guide in both languages to help you overcome your fears and to answer your questions about money, banking, budgeting, and borrowing. Use it as a quick reference as you join the millions of Latinos climbing the ladder to financial success.

"¿Se Habla Dinero? is written for the average Latino family that is struggling to meet daily needs while planning for the future.? Lynn Jimenez provides a comprehensive and commonsense, easy-to-follow road map for managing your money and achieving your family's financial goals.""

Moneytalk is totally free and available On Demand at KGO810 radio for seven days after broadcast. Moneytalk has been canceled on all Saturdays. The Sunday program is archived in the 1-4pm time-slots. To download and listen later, right click on each hour that you want and use "Save Link as." KGO: Download Moneytalk

Dixiegeezer's reminder of spring:


.

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Bob Brinker and The 4% Rule: Is it Always Good Advice?

November 27, 2010....Bob Brinker has always advised limiting one's ownership in any specific company stock to no more than 4% of total equity holdings. Bob Brinker said on Moneytalk and in Marketimer that this "rule" does not apply to mutual funds or ETFs.

Some have questioned the advisability of using the 4% rule in all cases. It might be wise in most cases, but is it always wise? And on the other hand, are there some mutual funds and ETFs that one should limit to 4%?

In his November 22nd weekly newsletter which includes a summary of Brinker's Moneytalk program, David Korn wrote the following:

"Caller: This caller wanted to know whether Bob's recommendation of limiting an individual stock holding to 4% of a portfolio would apply to something like a mutual fund from Vanguard. Bob said the 4% rule applies to an individual company stock, not to a mutual fund that already has diversification built in. The reason for the 4% rule is to manage the risk involved. If you were talking about something like the S&P 500 or Total Stock Market Index or other index fund, the 4% rule would not apply.

[David Korn] EC: Ever wonder what the genesis for the 4% rule is? It really derives from modern portfolio theory and the concepts of systematic and non-systematic risk. Let's take a closer look for a moment at these important concepts.

Systematic Risk: Think of "systematic risk" as the risk of just being invested in the market. This risk is the risk that all stocks face, regardless of what industry, sector, or price-to-earnings ratio they have. It is simply the overall risk of being in the market. For example, terrorist attacks, recessions, world wars, alien invasions to earth, all would create risk for the entire market.

Nonsystematic Risk: This is the risk that individual stocks face. Companies face all kinds of specific risks, such as lawsuits, strikes by employees, changing attitudes about a product. For example, Microsoft faced the nonsystematic risk of being sued by the Federal Government and in that case, the risk turned real! Another example of a nonsystematic risk for a company would be in the case of a product that loses favor with the public -- say a study revealed that drinking Coke caused cancer. That would be a seriously bad problem for Coke and provides a clear example of the nonsystematic risk than one stock faces.

4% Rule: Here is where it gets interesting (that is if you find any of this stuff interesting). Academics point out that you can not avoid systematic risk if you are going to invest in the stock market (other than by hedging techniques which is for another day). HOWEVER, you can avoid nonsystematic risk through diversification of stock holdings. When you think it through, it is kind of obvious. How can you avoid the nonsystematic risk of holding one stock? Easy, try to make your holdings more similar to the overall market -- own more stocks!

Now, here is the neat part. Studies have shown that you don't need to buy every stock in the market to avoid nonsystematic risk. In fact, there have been several studies that show if you own 20-40 stocks in different sectors and industries, you will be able to diversify your way out of nonsystematic risk. You will still have systematic risk, but that's the risk you always take by being invested in the market as a whole. Bob's "4%" rule would permit someone to own 25 stocks, each weighted 4% of the total portfolio which is well within the range of owning 20-40 stocks that academics say is needed to avoid nonsystematic risk. So there you have it -- the foundation to the 4% rule. Realize that this is a pretty simplistic explanation of the nonsystematic and systematic risk, but I hope it helps explain things."__David Korn

David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service. Copyright David Korn, L.L.C. 2010

Complimentary issues of David Korn's weekly newsletter and The Retirement Advisor published by David Korn and Kirk Lindstrom

Bob Brinker's Marketimer off-the-books "Individual Issues" list has contained only two stocks (MSFT and VOD) for many years. However in May, 2009, Brinker added Suncor and GLD. Here is his explanation for adding SU:

Marketimer May 2009 issue, Bob Brinker said: "This month we have added Suncor to our coverage. Suncor is a leading Canadian oil sands producer with vast reserves in the Athbasca Tar Sands of Alberta.....We view Suncor as an excellent way to protect portfolios against the rising oil prices in the future. As with all individual stock issues, holdings should not exceeed four percent of equities."

Unfortunately, Brinker has never offered any explanation as to why he added GLD to the list, and he has never said how much of it he recommends purchasing. Since he has made it clear that in his view, ETFs do not fit into the 4% rule, what category does GLD fit into? Subscribers have had to decide for themselves whether or not it's "to the moon, Alice." :)

Some of the ETFs that are on the Individual Issues List have taken a real beating over the past 5 years -- for instance, the ETF, DVY. Before the 2008-2009 megabear market, Brinker recommended DVY for those who wanted to own dividend-paying equities. He once told a Moneytalk caller that DVY could be used by conservative investors in place of the Total Stock Market because its dividends gave it a little more safety.

YIKES! What a ride those followers have had from October, 2007 in the $70 range, to March, 2009 in the $22 range. It's back up to the $48 range now. But the NAV is still down by about 1/3, even after the S&P 500 Index made some very nice gains in the past year and a half.

Brinker's DVY recommendation over the past 5 years compared to total market (VTI) and Dow (DIA). Don't hold your bref for any calls to get through to the program about this one -- like they used to when it was doing well. Brinker simply doesn't discuss his bombs:



Dixiegeezer's stunning photograph:

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