Bob Brinker Questions We Needed Answered

September 29, 2010 ...There were several unanswered questions that popped up from Bob Brinker's Moneytalk on Sunday - which I added to my summary of the program. As usual, great answers arrived via the comments section of the summary.

1. Bob Brinker said: "His [Ted Turner] net worth went down to 1.8 billion dollars.....That's like having a hundred million dollars 18 times over.......That could have been avoided. All Ted had to do there was diversify. And he could have diversified by simply purchasing Put Options on his over-bloated Time-Warner position to protect him on the downside - as insurance. He could have purchased Put Options against his position, or against a sizable part of his position and those Put Options would have given him downside protection."

Honey asked: "I have a question about Brinker's "buy Put Options" advice for Turner. I hate to sound naive, but would that be legal under the circumstances that Brinker described about Turner's connection to the company?"

Kirk Lindstrom replied:

Kirk said...

Had Ted Turner, Bill Gates or anyone on the billionaire list "listened to Brinker" and diversified to 5% by selling their company shares every time they went up, then they would never have made it to the billionaire list, much less had the opportunity to see the drop Turner experienced.

Think about it. Should they diversify after they make their first million? Should they stay concentrated in their own stock until it is $10M or $10B?

This has ALWAYS bugged me about Brinker because after all these years he really doesn't seem to understand how great wealth is created.

Now if you are retired and don't want to go out and earn that wealth again, then you sell enough to be in good shape even if the stock crashes, but if a founder sells 95% of their stock, they have to disclose it and the stock will probably crater before they can cash in.

As for how they could purchase puts to protect their shares: That sounds absurd for someone like Ted Turner, Larry Ellison or Oracle or Bill Gates of Microsoft. Who would sell that many puts and have the cash to buy the shares should the economy crater? Also, they would have to disclose that position to the SEC which would be far worse for the stock than having a regular plan to sell 10% a year.

September 27, 2010 8:19 AM

2. Honey asked: " Brinker always uses the word "hedge' when he speaks to callers about buying gold. Hedge against WHAT? He tells us there is no inflation, and he doesn't expect any. So why would he recommend gold as a HEDGE?"

Jim replied:

Jim said...

Honey,
I think there are two reasons Brinker uses gold as a hedge. The first is to guard against world events that could cause a panic. These events would include a war or another major terrorist attack. For example if Israel and Iran would get in a conflict there would be a sudden drop in the stock market and a sudden spike in gold. That would be an event that probably will not happen but cannot be ruled out.

Second I think Brinker uses hedges simply to guard against being wrong. He says not to worry about inflation but I think he knows deep down that nothing is certain. He made a hedge on stocks back in 2000. His timing model turned unfavorable, but he kept 35% in the market. That was to hedge against his model being wrong.

Personally I do some hedging against Bob Brinker. Whenever the market drops and Brinker comes out with a buy, I always hold back a little extra cash in case Brinker is wrong and the market drops further.

Finally, I am a fan of The Honeymooners and I think the exact quote that Ralph gave Alice is: "One of these days...Pow! right in the kisser.

September 27, 2010 9:52 PM

3. Bob Brinker spoke disparagingly about the buy-and-hold "pack": Jim responded:

Jim said...

Brinker states: "But IF you can get some right, you can finish way ahead of the pack because the pack is buying and holding forever."

Brinker is basically a buy and holder. Only one time was he ever 100% cash and that time he was wrong and missed a 20% rally. The only time he was "semi" right about a bear was 2000. There was very little cash reserves left to invest in 2003 because much of it was lost in the QQQQ trade earlier.

If Brinker was honest he would always say that his July 1 buy was only for subscribers who had new money. However by not saying that, he lets listeners believe that he was sitting on a lot of cash that he put to work on July 1. Very misleading.

September 27, 2010 9:20 AM

Jim is absolutely right that there has been only ONE TIME that Brinker went to 100% cash since the beginning of Moneytalk (26 years ago). That was shortly after the market crashed in October, 1987.

It was a costly mistake for Brinker's followers because the market began climbing right after he went to cash and made considerable gains by the time he was back to fully invested.


4. Bob Brinker said: "If the election were held today, it appears that the Senate would be something in the area of 52-48, with the same majority party it has today, but a much slimmer majority.....As Jackie Gleason's Ralph Kramden character would say, "What a Revolting Development."

There was a whole bunch of hilarious replies about the Jackie Gleason program. I think all my readers must watch a lot of late-night re-runs. 8) Here's the [link].

Friend Laura, traveling across Canada, sent these pictures (click to enlarge):

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

September 26, 2010...Bob Brinker hosted the Moneytalk Starship on the way to the "Land of Critical Mass."

TAX POLICIES

Bob Brinker reported that the Senate voted this past week to take no action on tax policy prior to the November election. That leaves the 2011 tax policy unknowable until then. Brinker said: "It could only happen in a country with a dysfunctional government, otherwise it could never happen. The name of the country, the United States of America......Where investors and everybody else have no visibility at all on what tax policy will in just 3 months when the ball comes down in Gotham City's Times Square.....

.....And some Senate members up for re-election are worried if they vote to increase taxes on those making over $250,000 that they will lose their re-election campaign, so they are not going to vote at all. And we all know that there will a large of congressional members who will be joining the unemployment line in January when the new congress is sworn in. Now the president and Democratic leaders support raising taxes on those making over $200,000 a year effective the first of the year. Republicans favor extending the current tax rate structure for at least another one year or two years or permanently....

....Now the (spanner?) in the works here is that all of this is going on in an economy that is growing at a very slow rate, with under-employment and unemployment holding way up. Under-employment up in the 16th percentile, making the entire issue of increasing income taxes a very sticky wicket....

.....Republican House leader John Boehner of Ohio says that he favors continuation of the current income tax brackets, with no increase. He also says he will accept the increase on those making over $200,000..... if that's the only choice he has when the time comes to cast his vote - whenever that is - nobody knows....

....Also nobody knows what congress will do at all about taxes....Remember when they said they would deal with the estate tax and then they never did?.....That's the reason that all those super wealthy meeting their Maker this year, including George Steinbrenner, pay zero Federal estate tax......

.....Now since the Senate has voted to do nothing prior to the election, the 2011 tax rates will have to be established in the lame-duck session of Congress after the election, which is really incredible.....

.....If the election were held today, it appears that the Republicans could take control of the House. And if they did, then the MAN WITH THE TAN, Ohio Congressman, John Boehner, would be the new Speaker of the House....

Honey EC: I did not know what Brinker meant when he called Boehner, "the man with the tan," so I did a quick Google search. What a low-class thing for Brinker to use a label that has been used to demean Boehner for his skin color - low-class and unnecessary and opportunistic.

Brinker continued: "If the election were held today, it appears that the Senate would be something in the area of 52-48, with the same majority party it has today, but a much slimmer majority.....As Jackie Gleason's Ralph Kramden character would say, "What a Revolting Development."

Honey EC: Later in the program, a caller pointed out to Mr. Brinker that that saying was actually used by William Bendix in "The Life of Reilly." I think Brinker also misquoted "Ralph Kramden" a second time when he claimed he said: "Smack in the Kisser." Brinker said he was referring to what "Ralph" would say to Congress today -- comically speaking, of course. I think Kramden actually said something like, "One of these days, Alice, over the moon."

SOCIAL SECURITY COST OF LIVING PAYOUTS

A caller said that he had not gotten any Social Security cost of living increase, and asked Brinker if he thought there might be one for next year. Brinker told the caller that it is "unlikely" because right now inflation is a "dead duck," -- but the good news is that there are no cost increases on "the other side" because inflation is only about 1% now.

BRINKER'S VIEWS OF TED TURNER: "AS BRIGHT AS YOU GET" AND "QUITE A GUY"

Brinker said: "Ted Turner, who's probably as bright as you get when it comes to new ideas.....Here's a guy who ran his net worth up to 10 billion dollars after he merged with Time-Warner and after Time-Warner merged with AOL. And for a very short time, there was a run-up in price.....The problem was concentration. He had almost all of his money in the stock of AOL-Time-Warner......in the winter of 2000......He will sometimes say that he lost his fortune in the dot-com bust....His net worth went down to 1.8 billion dollars.....That's like having a hundred million dollars 18 times over.......

.....That could have been avoided. All Ted had to do there was diversify. And he could have diversified by simply purchasing Put Options on his over-bloated Time-Warner position to protect him on the downside - as insurance. He could have purchased Put Options against his position, or against a sizable part of his position and those Put Options would have given him downside protection. Obviously, that did not happen, but it's a lesson that we've taught for 25 years on this broadcast. Diversification is key - concentration in one stock is insanity....This is Moneytalk....

Later, Brinker said to another caller: "Ted took the Time-Warner stock for his Turner Broadcasting stock in the mid-90's and he did okay with that, but then he to the AOL-Time-Warner stock for his Time-Warner stock in the AOL-Time-Warner merger. And when that stock imploded, he had most of his money in that stock and that's where he got clobbered. He did not take the cash. Now the way for him to have taken cash would have been awkward because he remained a senior executive of the company. When you are a senior executive with the company and you take the cash then people start looking at you like what's the matter with you? Don't you believe in the company? Don't you want to invest in the company? Ted was in an awkward position in the sense that he stayed with the company."

Honey EC: Firstly, I have a question about Brinker's "buy Put Options" advice for Turner. I hate to sound naive, but would that be legal under the circumstances that Brinker described about Turner's connection to the company? Brinker explained why Turner couldn't/shouldn't sell the stock, but can these greedy billionaires buy Put Options on their companies?

IN EDIT

Kirk wrote the answer to my Put Options question in comments. Kirk said:

"As for how they could purchase puts to protect their shares: That sounds absurd for someone like Ted Turner, Larry Ellison or Oracle or Bill Gates of Microsoft. Who would sell that many puts and have the cash to buy the shares should the economy crater? Also, they would have to disclose that position to the SEC which would be far worse for the stock than having a regular plan to sell 10% a year."

"Secondly, I never cease to be amazed at the people that Brinker chooses to praise and glorify. For instance, Bloomberg (who is gung-ho to build a mosque near Ground Zero, Warren Buffet (who never saw a tax he didn't love for others while he avoids taxes by giving his money to Bill Gates to spend on causes that promote liberal/leftist views.), and now Ted Turner is Brinker's latest hero....

.....Brinker evidently isn't aware that this "great and brilliant" guy has been systematically buying up millions of acres of prime American heartland. Here's an excerpt from a story reported at the Fox News website. If you want to know more, just do a Google search - there's plenty more written about it:

"Turner has amassed 2 million acres over the past two decades to become the largest private landowner in the country. He owns land in at least nine states, with most of his holdings in New Mexico, Nebraska, Montana and South Dakota...His front men say their boss doesn't have a secret agenda — he just wants to be a rancher. But each big buy only heightens the anxiety and gives rise to conspiracy theories....." [LINK]

Acres of land holdings of Ted Turner as of September 2008:
New Mexico: 1,105,905
Nebraska: 425,221
Montana: 153,963
South Dakota: 141,357
Kansas: 42,479
Oklahoma: 41,689
Colorado: 34,868
Florida: 29,530
South Carolina: 10,757
Arkansas: 1,323
Georgia: 537

BUBBLEMANIA

Brinker said: "We have in the United States, the mentality right now is Bubblemania.......As far as I'm concerned, we've had two clear cut bubbles, dot-com and real estate. I think that it's a stretch when they talk about the other bubbles.....Some people talk about the bond bubble. Well if you go back over the past 100 years, you will see that there's a long history of rates going up and down.......

.....We certainly had the two.....Obviously, the first one was caused by the irrational exuberance of paying hundreds of times earning for companies that were earning very little....sometimes there were no earnings. That was going on commonly in the first quarter 2000 at the dotcom bubble peak. And there is no question that we had a real estate bubble, and we know what happened now. We know about all these liar loans that were made, and ninja loans, no down payment loans.... It's one ugly picture....."

DOUBLE-DIP RECESSION?

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.....Despite that, the financial media out there has been declaring a double dip in many quarters since summertime.....A double dip would mean a brand new recession, which means two consecutive quarters of negative real Gross Domestic Product growth......The durable goods report Friday morning was better than expected and the market celebrated that. ...."

STOCK MARKET

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. And I think people who are in the market fully invested are going to do very, very well. The buy-range that we identified was actually quite specific......We upgraded the market to attractive for purchase based on that June 30th close of 1030......That provided those who follow my recommendations with what amounted to a golden opportunity to acquire bargain price shares down there......Now if I were going into the market at this time, it's at a whole different level now. It's at 1148. So right now, I'd be taking a dollar-cost-average approach because of the terrific rally that we have seen since early July.....

......That's what market-timing is all about. Trying to identify areas of the market that are especially attractive. Are you going to get them all right? No......But if you can get some right, you can finish way ahead of the pack because the pack is buying and holding forever. So they can never do any better than the market because they in the market all the time. And that's the difference between market-timing and buy and hold. Now I don't believe in short-term or day-trader activity - I think it's a waste of time. But I think you can practice long-term market-timing by identifying key points. And I would suggest that that was a key point in 2010, early July, when I believe we recorded the closing lows for calendar year 2010."

Honey EC: One has to wonder about the desperation and/or honesty of a man who could make the statements in those two paragraphs above to a worldwide audience. Brinker is either in total denial of the fact that he has been in a buy-and-hold position since March, 2003, or he thinks he can "come out ahead of the pack" by simply having pipe dreams while his model portfolios remain FULLY INVESTED!

For instance, Bob Brinker's Marketimer is nowhere to be found in the Top-5 "Pack" that Hulbert Financial Digest ranked for "Overall Performance" for the last 25, 15 and 5 years. Riding the market down (with fully invested model portfolios) 57% in about 15 months, like you did in 2008-2009, will tend to do that to "market-timers," Mr. Brinker....

GOLD

David Korn covered this subject outstandingly well in his hot-off-the-press weekly newsletter. Posted with David's permission. David wrote:

"Caller: This caller wanted Bob's opinion about whether she should invest 30% in gold to protect against the dollar devaluation. Bob said if you want to put a small percentage of your portfolio in gold as a hedge, he suggests using the exchange traded fund GLD that tracks the price of gold bullion. Do not purchase gold coins because the mark up on gold coins can be astronomical. Bob said he recently heard someone pay a 75% premium mark up on gold content to purchase gold coins. Don't go there unless you want to see your money go away. Bob also said he has never suggested someone should put 30% of their portfolio in gold. If you want a hedge, perhaps 5% of your portfolio maximum.

[Korn] EC: Bob has not recommended gold in any of his model portfolios. Meanwhile, gold has reached new record highs and the GLD shares are also trading at a high closing Friday at $126.69. Seems like a lot more callers are bringing up gold on Moneytalk. In the past, this has been an indication of over-valued investments."

You can get a complimentary issue of David Korn's newsletter. Be sure to look in the right-hand column for link to David's weekly newsletter on the page at this: [LINK]

Honey here: As David said, Brinker has never put gold in any of his portfolios. But "off-the-books," Brinker added GLD to his "Individual Issues" list -- no buy level, no sell level, no reason given for owning it.

However, Brinker always uses the word "hedge' when he speaks to callers about buying gold. Hedge against WHAT? He tells us there is no inflation, and he doesn't expect any. So why would he recommend gold as a HEDGE?!

HOW TO BUY UTILITIES

Brinker recommends that those who want to include utilities in their portfolios in order to generate income use quality no-load fund or ETF. Vanguard has a low-cost utility fund.

LONG-TERM BONDS

Brinker said that he has ZERO recommendations on long-term bonds right now.

MOVIE: "WALL STREET: MONEY NEVER SLEEPS"

Brinker said this movie was number one in the United States and Canada this weekend. Brinker talked about the Wall Street greed that was portrayed in the original movie 20 years ago. Many times over the years, Brinker has referred to "Gordon Gecko" and quoted his "greed is good" line repeatedly -- usually to disparage someone else.

Honey EC: Truly, greed is not a good thing. It can destroys the lives of its victims and the chickens always come home to roost on the greedy. There are many forms of greed. One of the most detestable is to spin the truth so that what the listener interprets is a lie.

Bob Brinker's guest-speaker was George Akerlog:

Moneytalk To Go is Available on Demand Totally Free 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 Here

My daughter took these while bike-riding in the Livermore area this weekend. Click to enlarge:


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Has Bob Brinker Ever Recommended Buying Gold?

Nope, Bob Brinker has never recommended buying gold. But he sure would like you to think he has. If he had recommended gold ten years ago, he'd look like a genius now instead of a market-timer who missed the worst bear market of our lifetime. Instead, he wants you to think he recommended gold when it was 50% lower. Here's the truth you didn't get from Bob Brinker last Sunday:

For at least two decades before gold began a relentless climb in 2007, Bob Brinker would tell callers that owning gold was "dead money." A number of times before 2007, Bob Brinker told the Moneytalk audience that anyone who had invested in gold in the last 20 years was underwater.

He would regularly tell callers that he did not own gold and had never recommended buying it, but IF someone was determined to own a "small amount as a hedge,” then he recommended using the gold ETF as a purchasing vehicle. [GLD]

So it wasn't buying gold that was his recommendation, it was using GLD to purchase it, IF you were determined to do it. See the difference? I'm sure Mr. Brinker does too, but seems willing to slickly overlook it. (What is that old saying about people rob banks because that's where the money is? That might apply to Brinker's willingness to taking credit even when it's not due -- that's where the money is.)

This Sunday, for the second time, Brinker mislead his audience into thinking that he had recommended gold back when it was 50% lower. Notice the CAREFULLY chosen words that Brinker used on Sunday:

Brinker said: "I've said many times that if someone wants to have a small percentage of a portfolio in a gold hedge -- and I like GLD, the Exchange-traded-fund ..... GLD is the favored recommendation. I remember when I first mentioned GLD on the program in connection with a recommendation as a hedge, it was about $50 a share and now it is well over $100."

The first time Brinker mislead the audience about his gold recommendations was on November 17, 2007 [LINK]:

Bob Brinker said: “Now a long time ago, when these shares were trading in the low to mid-$50s, I gave that recommendation on this program. That for listeners who desire to have a hedge in the gold market that I thought the security to use was the shares that trade under the ticker symbol GLD. Those are the Exchange Traded Fund Gold Shares. And at the time I first gave that recommendation to listeners that were looking for a hedge in gold, those shares were trading in the low to mid-$50s. They are currently trading at $77.75. So obviously, anybody that chose to put on a hedge in the gold market has done very well.”

David Korn wrote the following comments (in 2007) about what Brinker said in the paragraph above:

"Caller: This caller owns some gold and wanted Bob's opinion on whether to continue holding it or sell. ....As far as whether to stay with gold, Bob said if investors want to own it as a hedge, that is fine. In fact, Bob said he just checked the numbers and Bob said since he has been recommending gold as a hedge for those who want it as a hedge, it is up about 40% and so it has done very well. Bob said if you want to own it as a hedge against inflation or whatever, you can do that, but Bob said he doesn't own it and doesn't see inflation. Bob said he has not missed out being in gold because he has been invested in the stock market and it is up over 100% in the last few years.......[Honey EC: This was in November 2007 when the stock market was at an ALL-TIME-HIGH. It subsequently lost 57% in the next couple of years while gold continued to rise.]

........This is a new one for Bob -- taking credit for making a recommendation on something he doesn't own and wouldn't own and said specifically he would not make a recommendation to own.Bob has been steadfastly BEARISH on gold for as long as I have been doing my newsletter."__David Korn

David Korn has been writing summaries of Bob Brinker's Moneytalk for over 11 years, so if he says Brinker has always been bearish on gold, BRINKER HAS ALWAYS BEEN BEARISH ON GOLD! You can get a free issue of David Korn's weekly newsletter at this [LINK

Evidently, Bob Brinker is no longer bearish on gold because he added GLD to his list of "individual issues" in the May, 2009 issue of Marketimer. However, he has never recommended it as a buy. It was listed as a HOLD from the beginning, and he has never explained why he added it to this list or how much he recommends holding -- or at what price to buy it.



Click to view full size images.

As you can see from the May and June 2009 Marketimer excerpts above, Brinker actually issued a "buy" and "buy on weakness" on SU when he added it to the list at the same time he added GLD. He also recommended "purchase on weakness" for SPY, VTI, IWV and DIA, but there was never any buy recommendation for GLD. It was simply added to the list with no comment then or ever!

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

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

STOCK MARKET

Bob Brinker said: "The S&P 500 will be starting the week at around the 1125 area and we are very pleased with what we have seen in the market since we issued our most recent upgrade of the market to attractive for purchase making the market a buy. And that was back on the 1st of July. You might recall the S&P 500 closed at the 1030 area on June 30th. Based on that close, we upgraded our investment letter recommendation when we published that letter online on July 1st, making the market attractive for purchase. Well guess what, the market closed in the 1020s for the next 3 days......before it began its uptrend. And it has been doing very well since that time. And we're certainly pleased to see that and want to congratulate all of our listeners that took advantage of that buying opportunity that occurred back then at the beginning of July because I believe it truly was an exceptional opportunity to pick up bargain prices."

Honey EC: How lovely for Mr. Brinker and his listeners and subscribers that he seems to finally have gotten one of his buying opportunities right - for a change. His last 4 major buys have all been devastatingly WRONG.

After he made each one of them, the market dropped like a rock, so he had to make them always lower -- five times that happened. You have to pity those who took his "opportunity" to buy at S&P 1450, mid-1300s, low-1200s, and mid-800s as the market dropped from 1527 to 676!

Bob Brinker's comments summarized and excerpted:

TAXES

As of right now, all 6 tax brackets are scheduled to go up at the beginning of next year. Brinker said: "These increases are that are scheduled to go into affect on January 1st are huge. Remember we have a very slow growing economy here. An economy that is not really looking for an anti-stimulus program, which is what a tax increase would be -- anti-stimulus --taking money out of the pockets of consumers and turning it over to the Treasury black hole....

.....Well, guess what, a typical family of four, earning $50,000 a year taxable income, would get a $2,900 tax increase in 2011. A family of four making $100,000 would get a $4,500 tax increase in 2011.....They are going to have to act or taxes are going up on New Years Day. Not just those taxes -- a lot of other taxes. Capital gains are scheduled to go back to 20%. Taxes on dividends are scheduled to go to 39.6 unless something is done. Federal estate would go back to its former level of applied above $1 million per person -- with a very high tax rate on that money.....

.....By the way, these tax increases that the president wants to go for, the so-called middle-class -- they would apply to singles making under $200,000, couples making under $250,000 would not have a tax increase under the White House proposals. But this is really a brouhaha.....

..... Congressman Boehner, the minority leader -- probably soon to be majority leader -- says raising taxes on anybody, especially small businesses is the wrong thing to do in a struggling economy. Well at the same time last Sunday, he was quoted as saying.....he was willing to sign a tax increase in the top 2 brackets if that was the best deal that he could make......He has been pilloried, PILLORIED in the Republican Party for making that comment.....I think after the election we get an enhanced gridlock in Congress...."

Brinker quoted David Stockman, who is against extending the Bush tax cuts. Twice, Brinker pointed out that David Stockman identifies himself with the Republican Party but still wants to raise taxes and cut entitlements.

Honey EC: I guess Mr. Brinker never heard of a RINO. Mr. Stockman sounds like a half-rhino. LOL! And perhaps Mr. Brinker, who is so pro-Keynesian, doesn't understand that lower tax rates actually lead to an improved economy, more actual taxes paid to the government and more jobs.

Edward Harrison, wrote for Seeking Alpha: "......Now, if Stockman had said "cut spending and cut taxes" for recovery, that might have sounded believable. But he’s not saying that; he’s asking for a double dose of austerity. This doesn’t sound like a recipe for recovery to me – more likely a debt deflationary spiral and GD II. But, hey, it is the road I am saying we may be on soon.

Harrison's article and a 12-minute video of Stockman's WSJ interview are available at this [LINK]

Peter Orszag is for extending Bush tax for two years. Brinker says the "flaw" in that plan would be that the tax cuts would then end just before the 2012 election. Honey EC: It sure sound to me like Brinker is concerned that the democrats may lose the Congress in November and Obama won't get a second term in 2012. He's always fretting about their "election" mistakes.

Brinker said that due to the inaction of Congress, George Steinbrenner, one of the hugely rich who met his Maker this year, will pay no Federal estate tax because there isn't any under current law. Honey EC: Brinker sure didn't sound happy about this.

TAX BRACKETS IN THE EISENHOWER AND REAGAN ERAS AND NOW

Brinker said: "Back in the 1950s when Dwight Eisenhower was the president of the United States, and I think he was a really good president -- you know that a lot of people forget that the top marginal bracket on the federal income taxes was 91%. Which means when you added in the state income taxes, it was even higher than that. And here we are today with a top federal bracket of 35%.....and people are very unhappy.....Back in the '50's people left the country rather than give all their money to the government......

......Ronald Reagan got the top bracket down to 28%. Remember a while back when we only had the two brackets? We had the 15% bracket and the 28% bracket. I'd still like to know who the financial engineer genius in Washington was who convinced congress to go to 6 brackets. And I think they lie to us when they talk tax-simplification......Because after you get it down to two brackets and you triple it up to six brackets, that's not tax-simplification."

Today, a caller said that he sat down and figured all of the taxes he paid on everything, including what his employer paid and it came to 80%. He simply decided to quit working. Later, a caller said that 80% taxation wasn't possible. Brinker seemed to believe that 80% might be possible the way the caller said he figured it.

REVENUE BONDS AND GENERAL OBLIGATION BONDS

Brinker said to caller Jim: "I don't know that anybody can ever say that a revenue bond is perfectly safe because a revenue bond is depending on ongoing cash flow from the business venture, whether it be a turnpike, or a bridge or whatever it is.....to pay principal and interest......In the municipal bond world, there certainly are higher levels of risk that are attendant to revenue bonds than is the case with top quality general obligations. Like a general obligation of the State of Virginia or Georgia is considered to be a gilt-edged investment. I would not compare that to any revenue bond....

....... Aside from that, I think that if you are going to be in a bond fund, you need to understand that you do accept interest rate risk......And the longer the duration -- you can check with the fund family....... to get your duration -- the greater your risk. And therefore, if your duration is 5, if rates go up 1%, you're going to probably see the net-asset-value go down 5%. And if that doesn't make you unhappy, 10% might do it if rates go up 2%......There's a way around that.....a mental stop, and that is simply a price below which you will not hold the shares......We've used $10.90 as an example of a hypothetical mental stop on the GNMA Fund [VFIIX] which is currently around $11 and has done so well.....Now the exception to that is if you don't care about the net-asset-value......you just want the interest, you don't care."

FEDERAL OPEN MARKET COMMITTEE MEETING

Brinker said that he already knows what they are going to do next weeek. With rates at zero, little or no inflation, and with the economy growing slowly, the Fed has no other options except to "keep on keeping on" and that Fed Funds rate will remain between zero-0.25 basis points -- and they will stay with their language which points out that rates will remain low for an extended period.

UNEMPLOYMENT

Brinker said: "Unemployment, based on the numbers coming out of the weekly unemployment insurance claims doesn't appear to be going anywhere in any measurable fashion.....In fact, the unemployment rate which right now is 9.6%, is likely to stay high for a long time. Now as far as the under-employment, that includes those working part-time and also the discouraged workers, that number has been up in the 16 percentile."

WHY AREN'T CORPORATIONS HIRING?

Brinker said: "Job creators are cautious here. The reason I think we know that is all of this cash, close to $2 Trillion sitting in cash sitting on balance sheets at corporations across America. Now what would be the reason.....? The reason would be uncertainty -- uncertainty about tax policy. Perhaps even uncertainty about the cost of hiring under the new health-care proposals that will be working their way in......And as long as CEOs have questions about sustainable demand, they have to really be careful about hiring....You don't want to hire people and then have to lay them off -- too much trauma there -- not good business......And there are some people in the business community today who believe the administration in Washington is anti-business."

INFLATION

Brinker says it is very low -- about 1/2 of 1% annualized over the last six months.

HOUSING

Brinker said the housing situation around the country is strained because there is a large stock of unsold homes, and behind that stock is a stealth market of houses that normally would be on the market. About 1/3 of the homes sold in the month of July were either foreclosures or short sales. This results in price pressure. Brinker expects the housing market to remain sluggish for some time.

CALLER DOUBLED MONEY IN GOLD

A caller said he had doubled his IRA money by investing it in gold -- it was about 2/3 of his net worth. He bought the gold at about $500 per ounce.

Brinker told the caller that it had been a speculation and that he had done well, but it was way outside the "parameters" of what he would recommend "for a gold hedge." Brinker said: "I've said many times that if someone wants to have a small percentage of a portfolio in a gold hedge -- and I like GLD, the Exchange-traded-fund -- for that, very low expenses and tracks the price of gold very nicely. I do not like gold coins because I've seen too many people ripped off on the prices they are paying.....Unless you are going to buy the gold content of coins only at or very close to their net asset value, but none of this gold coin numismatic gold coin nonsense.....

..... GLD is the favored recommendation. I remember when I first mentioned GLD on the program in connection with a recommendation as a hedge, it was about $50 a share and now it is well over $100."

Honey EC: I will soon be posting an article that discusses the history of Bob Brinker's gold recommendations - or lack thereof... In the meantime, anyone who wants to know some "truth" that Brinker left out today, here is the link to my Archived blog article -- it includes some of David Korn remarks on the subject.

Brinker announced in the first hour that he expected a "great guest segment" but as it turned out, there was no guest today. Brinker continued to take calls in the third hour.

During the Moneytalk program, Bob Brinker advertises that you can pay for "Moneytalk on Demand" and go back "many week's" for guest segments. Moneytalk is only on Sundays now - the Saturday show has been canceled. Did the price drop in half? I don't know. But in these economic times, why not just do a bit of planning and download the weekly three-hours for free at KGO810 and listen at your leisure. All you have to do is remember to do it within 7 days of the broadcasts. Here is the [link]

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Bob Brinker's Moneytalk: Summary, Part Two

Last Sunday, Bob Brinker's Moneytalk program covered some important miscellaneous information. Bob Brinker's comments paraphrased and summarized:

CONVERTING TO ROTH IRA

Beginning in 2010, anyone can convert to a Roth IRA, regardless of income. All converted income is taxed at ordinary income tax rates. If you convert before year-end, you may split the tax liability in equal amounts between 2011-2012. However, the value of deferring tax liability over those two years, could possibly be offset by tax rate increases.

GNMA QUESTIONS AND ANSWERS

A caller was concerned about the marked increase in the turn-over rate in the Vanguard GNMA Fund (VFIIX) based on something he read from Vanguard.

Brinker rather adamantly explained that he 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. [A couple of months ago Michael Garrett of Wellington Management Company was named sole manager of VFIIX. Before that, he was co-manager with Thomas Pappas from 2006-2009. Pappas is leaving Vanguard at the end of the year.]

MUNICIPAL BONDS

Brinker reminded listeners that he has warned about municipal bond investing where the issuing entity has precarious financial footing. He said that he is comfortable investing his personal money in state general obligations. The only bond that is not a state general obligation that he personally owns are GOs issued by the City of New York --he only buys quality.

There are many types of municipal bonds available for purchase but that can get you in trouble. For instance, Harrisburg, Pennsylvania is getting bailed out this month by the state so they can make a bond payment of $3.3 million. The city went down hill after borrowing $225 million from the state -- a shocking amount for a city even of that size. Brinker said he still doesn't know how they will pay their debt load, and noted that in the Commonwealth of Pennsylvania it is legal for a city to declare bankruptcy -- and no doubt, there will be Harrisburg bond holders that are totally caught of guard by this development.

Another caller asked Brinker what he would consider a good quality GO Bond. Brinker said that in his view, anything with a AA or higher would be a high quality general obligation bond. Two examples of states with that rating are Georgia and Virginia.

Forbes article speculating about other cities becoming "muni-bond deadbeats."

Brinker pointed out that this issue shows the critical difference between GOs and Treasuries. US Treasuries are backed by the power of the federal government printing press. Whereas, State and local governments are not. Some states, despite claiming a balanced budget are simply blowing smoke. For instance, Sacramento, California which plays budget-games almost every year.

WARREN BUFFET

A caller who said he was watching a biography of Warren Buffet, said that Buffet doesn't believe in market diversification. Brinker said that he simply did not believe that even though, he knew Buffet said it. Brinker said that Buffet is a sharp guy and knows the value of diversification because he has owned many companies -- although concentrating in the consumer and insurance area. Brinker went on to point out that Buffet has put a lot of money in Burlington Northern Railroad, which might explain why he said that about diversification. However, Brinker said that Buffet would never not recommend diversification.

Buffet has already made $14 million on his Burlington Northern investment -- the railroad industry is hot. If you are interested in reading about Buffet's $14 million haul, here's the link.

REAL ESTATE

A caller from the SF Bay Area said that in California, the inventory of homes are going back up and wondered if prices would decline further and create a real estate panic. Brinker said he was reading the second quarter S&P Case-Shiller Home Price Index and San Francisco has the number one position of the top 20 cities with year-over year gains of 14.3%. The caller was still concerned, so Brinker said that the tonic for this situation is just a matter of time.

I-BONDS

A caller asked Brinker what he thinks of redeeming I-Bonds to purchase the GNMA Fund. Brinker adamantly said that he would not redeem I-Bonds to exchange for the GNMA Fund.

DIVIDEND REINVESTMENT PLANS

A caller asked Brinker about dividend reinvestment plans offered by utilities, telecoms or health stocks. Brinker said he had no problem with this low-cost way to invest as long as you are diversified, but may be more work than some people are willing to do -- but some like it. If you want more information about DRPs, Motley Fool has a nice write-up.

INFLATION

Brinker said that inflation is as low as it is likely to be for a very long time -- and is the lowest in decades. Brinker said he expects the low CPI and PPI report numbers to continue to show low inflation.

Brinker's guest-speaker last Sunday was David L. Scott. Scott talked about this book. His interview is still available Saturday and until 3pm on Sunday for free downloading at KGO810:




FrankJ sent this picture of Bambi he took in his yard:


And here is Bambi's mom. Don't believe anything you might have heard. 8)

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September12, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

September 12, 2010....Bob Brinker hosted Moneytalk this week.

Hi to all my readers. I'm very sorry to say that due to a personal situation that developed Saturday that I'm still dealing with, I will be posting part one of my summary tonight and hope to add part two tomorrow.

I transcribed most of this call that took place late in the first hour and Bob Brinker's long responses because it was the high point of the program in my opinion. I will add my editorial commentaries about it later, and more information about the rest of the program:


Caller Jimmy from Concord, CA said: "It's quite easy to see the direction in the market during the 80s and the 90s, but this decade has been flat if anything, so I've decided to take the passive - slash- index approach. And could the passive approach be kind of dangerous because of volatility?"

Bob Brinker replied: "Let me give you an example of a passive approach. A core example of a passive approach would, let's say in a balanced portfolio, would be to have half of your money in a total stock market index or the S&P 500, and the other half in something like a Ginnie Mae Fund or rolling 5-year Treasuries or something like that. That would be a typical passive approach to investing....

.....Now there are two ways to take a passive approach investing. One is to simply be a buy and hold investor, which means you just take your position and you hold it forever and that's it. And the only other thing you might do is re-balance it if it got out of kilter......Be a buy and holder is passive because you're not going to make any changes.....

...... The other way is the way that I recommend in my investment letter for those who wish to do it this way, and some do, is to take what I termed and active-passive approach. An active-passive approach combines a simplified portfolio where you might own index fund like the total stock market index or something like that in the stock portfolio. And maybe also have some international in there. We have some international in our active-passive portfolio as well....

......And then you overlay that with stock market timing. Now we're not talking about short-term swings -- trading in and out, anything of that sort. The tax implications of that are brutal in today's tax environment. But if you're talking about long-term market-timing where you're going to try to identify opportunities to side-step major declines as we did from January 2000 to March of 2003, our model portfolio side-stepped that dotcom going down. They were mostly in cash. Now you're not going to get them all right. In2008, which certainly was challenging as I've said many times on this broadcast as anything I've seen.....

.....But you can still overlay that for people that have money available to invest. For example, this very year, we made a observation at the beginning of July that the market had reached the area of its 2010 mid-term bottom. And that was down in the low 1000s. We upgraded the market to buy or attractive for purchase, as we call it on the first of July and the market had closed at 1030 the night before. It closed in the 1020s three more days -- on the 1st, the 2nd and the 6th after the holiday, before it moved higher. And now it is up in the 1100 area and it's done very well since we upgraded at that point......

.......And for those that had money available, we also put an upgrade in in the first quarter of 2009 when we identified at that point -- although it was a rocky market for awhile in there, it did very well after it go through its very difficult period there in the first quarter. We had a buy signal out there in the low to mid-800s in the S&P, and again, now its up in the 1100 area. But that was one that would be used by someone who had available money. We were fully invested at that point. We had a fully invested point back in 2003 -- March 11th at the 800 level of the S&P 500. And again, the S&P right now is around 1100, so that's doing fine. But it's certainly had a roller coaster ride in there. ......

.....So that's the other opportunity if you can see a way to identify -- you're not going to make them all the time, but we certainly made a big one back there in 2000 to 2003. And if you can identify some, you're not going to make them all, but some of those opportunities, then you can take an active-passive approach with a portfolio like that."

Caller Jimmy asked: "Are you resigned to the fact that right now the markets quite difficult to see the advance like it was during the 80s and 90s. I mean, day to day, it's up and down. It's a roller coaster compared to then, correct?"

Brinker replied: "Well, I'm not sure that's true and let me tell you why. We had a great year in 2009. I've already pointed out 2008 was a tough year.....The calendar year 2009 was a terrific year for the market. And our model portfolios in the investment letter, they were posting gigantic gains in 2009. They were in the general area of 30% gains for model portfolio I, model portfolio II, which are the all-stock portfolios. And even the active-passive had a terrific year -- that was 2009. I'm answering your question -- 2010 -- right now we have a tiny positive total rate of return year to date-- that's where we are. With the S&P right now trading at 1109 and with the cash dividends that the S&P has generated, we have a small, very small positive return year to date. This is coming off a year where we made in the area of 30%. Even the S&P was up in the high 20s last year. I think frankly, it's been fairly typical......"

.......The fact of the matter is, we are in a very slow growth economy. We are in an economy that is dealing with high unemployment -- 9.6 it is now......We have an under-employment rate in the 16s percentile --very high -- that includes people who can't find full time jobs, but work part-time, and the discouraged workers are in that number. ....So you can call that a headwind....

.....We also have the headwind of housing. The housing market is very difficult and has to get through this inventory situation, which is overlayed with foreclosures and short sales. So it's time that will deal with the housing issue. So it's a slow-growth economy, and that's all reality. And I think that those who have been ignoring that are really off-base....This is America's money program. I'm Bob Brinker."

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10-Year U.S. Treasury Auction Results

Article by Kirk Lindstrom -
KirkLindstrom.com & Kirk's Two Investment Letters
 

Today's 10-Yr U.S. Treasury auction results

Today the US Treasury Department said it received bids totaling more than $67 billion for the $21 billion worth of 10-year (technically 9-years and 11-Months) notes sold. Thus the bid-to-cover ratio was 3.21, up from 3.04 for the 10-month auction on August 11. This indicates the demand for U.S. debt remains healthy.

10-Yr U.S. Treasury auction summary:

• Term and Type of Security: 10-Year Note
• CUSIP Number: 912828NT3
• Series E-2020
• Interest Rate 2-5/8%
• High Yield = 2.730%
• Allotted at High 10.57%
  (All tenders at lower yields were accepted in full.)
• Price 99.086655
• Accrued Interest per $1,000 = $0.07133
• Median Yield = 2.669%
  (50% of the amount of accepted competitive tenders was tendered at or below that yield.)
• Low Yield = 2.600%
  (5% of the amount of accepted competitive tenders was tendered at or below that yield)
• Issue Date August 16, 2010
• Maturity Date August 15, 2020
• Original Issue Date August 16, 2010
• Dated Date August 15, 2010

Bid-to-Cover Ratio: $67,438,329,700/$21,000,009,700 = 3.21

More Information:

• US Treasury Rate Quotes
• September 08, 2010 Announcement
• August 11, 2010 Announcement

Charts at time of post

Click for current Charts

For quotes rather than graphs, click US Treasury Rate Quotes

Related ETFs:

• iShares Barclays 1-3 Year Treasury Bond - SHY
• iShares Barclays 3-7 Year Treasury Bond - IEI
• iShares Barclays 7-10 Year Treasury - IEF
• iShares Barclays 10-20 Year Treasury Bond - TLH
• iShares Barclays 20+ Year Treas Bond - TLT

==> Very Best CD Rates with FDIC <==
Survey Updated Today

• LIBOR Rates at a Glance

 Disclosures:   

I am lucky. I have enough cash flow from my Two Investment Letters, people clicking ads on my blogs and websites plus commissions for products I recommend that I don't need yield to live on. (That is my goal is capital appreciation on the equity side and capital preservation, not yield, on the fixed side.) Thus, I take very little interest rate risk.  I've sold all my bonds and bond funds not indexed to inflation with my own money and in  "Kirk Lindstrom's Investment Letter." 

My personal iBond portfolio currently yields 5.43% (Majority are from Oct. 2001) but of course, I only get the interest at maturity, a great way to defer taxes.  The TIPS fund I got for my Vanguard ROTH by selling the GNMA fund is up 18.4% in under 2 years.  I also hold individual TIPS and a significant holding in the TIPS fund at Fidelity, FINPX, that is up 25.8%.  I suspect those TIPS funds will give back some when rates normalize, but rates probably won't normalize without a significant inflation component so I expect they will do better than bond funds not indexed to inflation.

If Bob Brinker Wrote a Book, what would the title be?

September 6, 2010.....I hope you are all enjoying this beautiful Labor Day weekend. Let's lighten things up with some fun tips for Bob Brinker while we enjoy our barbecues and drinks of choice.

1. Some Moneytalk listeners say they are very tired of Brinker constantly having guests on who talk about what caused the financial meltdown of 2008-2009. Here are FrankJ's suggestions for Mr. Brinker:

Frankj sez:

I didn't listen to the interview with the author on Sunday, but I for one am getting tired of these Wall Street books, so here are some suggestions for third hour guests along with topics:

1) Rod Blagoevich: The Role of State Government in Senate Appointments.

2) Charlie Rangel: The Importance of Accurate Personal Financial Disclosure Statements.

3) Chris Dodd: How You Can Get the Best Possible Mortgage.

4) Tim Geithner: Does the Federal Income Tax Code Need Simplification?

5) Eddie Bernice Johnson: Where to Find Scholarship Money for Your Friends and Relatives.

2. It seems like Bob Brinker is almost retired now. Beginning June 6th, Moneytalk is broadcast on Sundays only, but since then Brinker has only worked 2 out of every 3 Sundays. Here's how his schedule looks:

June 6th: Bob Brinker
June 13th: Neale Godfrey
June 20th: Bob Brinker
June 27th: Bob Brinker
July 4th: Lynn Jimenez
July 11th: Bob Brinker
July 18th: Bob Brinker
July 25th: Lynn Jimenez
August 1st: Bob Brinker
August 8th: Bob Brinker
August 15th: Lynn Jimenez
August 22nd: Bob Brinker
August 29th: Bob Brinker
September 5th: Lynn Jimenez

So perhaps in his spare time, Brinker will want to write a book or publish some articles. If so, here are some title suggestions that he might use:

jeffchristie said...

TFB noted:

"No wonder Larry Swedroe's writing is published. Has anybody ever seen a published article by Bob Brinker? And what would he write about?"

How about these potential book titles?

- TIPS and I bonds for Dummies

- How to come up with the money to put that young sprout through college

- How the repeal of Glass Steagall led to the 2008 financial crisis

- The Princess of Wink

- How to deal with criticism at your website

- Guide to the purchase of Las Vegas real estate

- How to write a newsletter for fun and profit

- Finding a business that even your idiot son can run

- A guide to government insured CD's and GINNIE MAE's

AND:

How to convert dollars to pennies through Market Timing, by Bob Brinker.

tfb

AND:

Jim said...

That was a great post Jeffchristie!

I also thought of one he could write. He could base my book on both his QQQQ trade and his buy signal in 2003.

The title of the book would be:

"How to invest money you already lost."

3. Regarding Bob Brinker's on again-off again-on again secular bear market trends, here is an interpretation of Brinker-speak:

"So in essence: it is not that I was wrong per sey, it is just that I thought a bear was a bull and I told you to buy when you should have sold, anyone can make a simple mistake like that.

And we make all such forecast in my monthly newletter: Da Brink's Market Follies."

tfb

AND:

Honeybee said...

Here is my suggestion for a Bob Brinker best-selling book:

"Bob Brinker's Land of Critical Mass: How to Turn it into the Land of Critical Mess - For Dummies"

Or, Perhaps Mr. Brinker could write a real tear-jerker drama and it could be made into a movie:

"The Final Voyage of the Spaceship Moneytalk and How daBrink Beamed to the Golf Course"

[Some have sent more great book titles. Read them here]:
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September 5, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

Bob Brinker is not hosting Moneytalk today -- probably because it is Labor Day weekend. Bob Brinker's guest host was Lynn Jimenez, who is a business reporter for KGO810 radio.

Jimenez' main topic of the day was "jobs." It seemed to me like a topic that would only be interesting for those who might be unemployed at the present time. She also talked about the pros and cons of employers having the right to do credit checks on prospective employees.

Jimenez' third hour guest was John Challenger. He was recently quoted in Bloomberg Business Week: "The recovery may indeed be stalling, but any slowdown is unlikely to lead to a sudden resurgence in mass layoffs,” John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. “Unfortunately, a slowing recovery could be met with further delays in much-needed hiring.”

So if this subject is interesting to you and you missed Lynn Jimenez program, it is now available for listening and downloading at the link below.

Moneytalk To Go is Available on Demand Totally Free 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 Here



BOB BRINKER FIX: What does Brinker base his market-timing speculations on? Here is the answer:

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.”


Honey EC: Firstly, I would ask Mr. Brinker if that is the same "stock market timing model" that he admitted was predicting S&P 1650 at the market top in October 2007, and stayed fully invested all the way down to S&P 676 in March, 2009.

Secondly, I agree that Brinker certainly does find the "secular market dynamics" interesting, that is, if the amount of space he devotes to it in Marketimer is any indication of his interest and not just page fillers like some of the other pages that are simply recopied each month.

There have been numerous issues of Marketimer that were almost entirely devoted to the subject, including the April and June 2010 issues. And most of what is said about the secular/cyclical trends currently was already published in prior years of Marketimer. (Of course, not a word about the subject during the time after he said the secular bear trend had ended in June, 2007. Recall that it was on again beginning in May, 2009 -- I'm not making this up. LOL!)

WHERE DOES BRINKER CURRENTLY STAND ON STOCK MARKET:

Brinker's "timing model" that he says he bases his "asset allocation" on, must still be flashing green. In September, he raised his "attractive for purchase" buy-signal from S&P low-1000s to 1050. Recall that he told Moneytalk listeners that he had issued a buy signal on July 1st when the S&P was 1030. (Not that it matters to those following Brinker's advice unless they came into some new money. He's recommended a buy-and-hold stance since March, 2003.)

Chart of Bob Brinker's gift-horse buys, courtesy of Kirk Lindstrom:



My Idaho sister-in-law and brother watched a family of robins under their patio cover and took several photographs (they both said they felt "empty nest syndrome" when the babies flew away). I had previously posted a picture right after the babies were born, but in this one, they were a few days old and very hungry. They kept both mom and dad Robin very busy. Click to enlarge:


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