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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