Bob Brinker's comments summarized, paraphrased or excerpted:
WALL STREET FINANCIAL NEWS....Brinker said: "A mega-merger in the energy business has been announced this weekend. Alpha Natural Resources is the third biggest coal producer in the United States, and it has agreed to purchase Massey Energy. This is a $7 billion cash and stock deal. Massey Energy is the largest coal company in the central Appalachian region, and it is being acquired by Alpha Natural Resources. If you are a share-holder of Massey Energy, you will receive 1.025 Alpha Natural shares. And you will also receive $10 in cash for each Massey share....Massey valued based on this takeover at $69.33 a share. That's a lot more than Friday's close of $57.23 a share...."
CORE PERSONAL CONSUMPTION INDEX.... Expected to remain at the current year-over-year rate of 0.8% in next week's report.
UNEMPLOYMENT RATE....Estimated to come in Friday at 9.5%; under-employment rate is in the teens.
FEDERAL OPEN MARKET COMMITTEE MEETING....Last week, they held the Federal Funds rate (the rate banks use to lend to other banks) steady at between zero and 25 basis points.
IF YOU DON'T WANT TO TAKE RISK IN FIXED INCOME....Brinker recommends putting together a fully (FDIC) insured ladder of Certificates of Deposit.
STATE MUNI-BONDS: BRINKER'S LIST OF ELEVEN TRIPLE-A STATE.....Delaware ; Indiana; Maryland; Missouri; Utah; Florida; Iowa; Minnesota; North Carolina; Georgia; Virginia.
* MUNICIPAL MONEY MARKET FUND: Caller Lance from Las Vegas said: "We feel you are da man! I'm concerned about the municipal money market fund, and I hear there are people bailing out, and I got about 400K in, so I'd like your opinion."
Brinker asked: "Now which fund is that?"
Lance answered: "Uhhhh, what the heck's wrong with me. The one with the horses?"
Brinker replied: "Well horses aside, a municipal money fund would be a fund with very, very short-term maturities. Now anything is possible in the municipal market, as we have said, but I have not heard of any difficulties in the municipal money market sector."
* BRINKER'S VANGUARD GINNIE MAE PORTFOLIO HOLDINGS: Larry from Sacramento told Brinker that he had the entire fixed-income portion of model portfolio III in (Vanguard) Ginnie Mae Fund. He said he bought the fund when it was in the low part of the price range that Brinker used to talk about ($9.50-$10.50) and would hate hold it as dropped back down there again.
Brinker replied: "That certainly is a big weighting in that one area....I'm taking a completely different approach than you are with reference to Ginnie Maes. The absolute maximum holding that we have right now in our investment letter model portfolio is 25%.......And we have even a lower weighting than that in our balanced model portfolio III....So definitely, you're taking a lot more Ginnie Mae exposure than I'm comfortable with or what I recommend."
Honey EC: Brinker is correct. Model Portfolio III has a 20% weighting in Ginnie Maes. It's his fixed-income portfolio that now has 25%. In the January, 2011 issue of Marketimer, he sold 15% of the Ginnie Mae holdings, dropping it from 40% to 25%. He added Vanguard Wellesley Fund to both portfolios even though it is about 30% stock. Why would a financial guru add stock to a fixed-income portfolio and to a balanced portfolio that is already well above 50% stock?
* HOW THE FDIC INSURANCE WORKS.....Elizabeth in Albuquerque said: "I'm sure that you heard of our bank that was taken over by the FDIC. I believe it was Friday."
Brinker replied to Elizabeth: "Here's the way it's supposed to work. The FDIC guarantees paying off up to $250,000 principal and interest combined, per insured account."
* HOW BEGINNER INVESTORS CAN GET STARTED: Caller Ashley from San Francisco, who is 25 years old, said she has $200 a month to put into an investment account. Brinker recommended the total stock market index, but pointed out that there is usually a $3,000 minimum to open an account. Brinker told her to check into the Fidelity Spartan Total Stock Market Fund.
Honey EC: I briefly looked at the Fidelity Fund Brinker mentioned and it appears to have a $10,000 minimum. Vanguard's is only $3000. However, I have a better idea for Ashley to get started in the stock or bond market without having to wait until she saves her first $3000. She could check into ING Direct where there are no fees or minimums. At ING Direct, she can dollar-cost-average each month and only pay a $4 transaction fee. This would be great way for her to buy the total stock market ETF (VTI).
* RETURNING FDIC TO $100,000 and GLASS STEAGALL: Carl from Chicago brought up the subject of banks that are too big to fail, the Glass Steagall Act and the uptick rule. He asked Brinker if he thought that it might be a good time to drop FDIC insurance back to the original $100,000 from the current $250,000.
Brinker agreed that it should be returned to $100,000, but he thinks we should get "further into recovery" first. Brinker repeated what he has said many times about the repeal of Glass Steagall. He called it a federal monument to the fact that the United States has "the best government money can buy."
STOCK MARKET (This was the only time the stock market was even indirectly mentioned today.): Caller John (from ?) said: "I am a subscriber to your Marketimer. I have about $115,000 in an account patterned after your portfolio model III (Brinker interjected: "That's the balanced portfolio") and I want your opinion about how the turmoil in Egypt might affect that portfolio."
Brinker replied: "I'd say watch how the turmoil in the mid-east could affect the price of oil. between what happens with the price of oil is the obvious link to not only the economy in the United States, but the economy around the world. In other words, you have the Suez Canal right there and obviously, we have a certain amount of oil that is transported each day through the Suez Canal, so you have that consideration. Egypt itself, is not a major oil producing country. The United States does not import a material amount of oil each day from Egypt......
......But the price of oil is a significant factor for the US economy.....As far as I'm concerned, there's a direct linkage between extraordinary moves in the price of oil and the level of economic activity.....Consumers buy a lot of energy products. If the price of oil were to skyrocket, even though those who own oil stocks......would benefit.....But the general economy would have to deal with the fact that it would act as a tax increase.......
.......So far oil has been in the area of $90 a barrel as of Friday night. And even recently, it's been above that price, so so far, we haven't seen a dramatic change in the level of the price of oil. Of course, it is something we monitor on a regular basis. "
Honey EC: As he often does, Brinker began the program today by explaining one of Moneytalk's primary purposes. I decided to transcribe excerpts of it because I believe teaching people that they CAN learn to be their own financial manager has been the single greatest service that he has provided to Moneytalk listeners over the 25 years he has been on the air.....
.....About 23 years ago, soon after I first started listening to Moneytalk, Brinker opened this door for me and I started down the learning curve he often speaks about. Matter of fact, I learned about shark attacks very well. With some difficulty, I escaped a huge one at a big brokerage house. In the ensuing years after the internet was invented (thanks, Al), I learned a hard lesson -- that even the teacher might have a pointy fin and big teeth.
Brinker said: "We work with you on our Moneytalk broadcast so that you can learn how to become your own personal financial manager. What a gift that is, not only for yourself, but for the members of your family to have somebody that can handle the personal finances of the family unit in the right way. And that way, you can take charge of your personal financial future. No longer will you be shark-bait for the next shark coming along trying to take a giant bite out of your wallet - trying to take advantage of your lack of knowledge about investing. Don't let people do that to you. It doesn't have to be that way. You can get the job done. You can manage your money by acquiring the knowledge that will empower you to take control of your personal financial future.......So that some day you can reside in the Land of Critical Mass."
Brinker guest-speaker today was Charlie Maxwell, Senior Energy Analyst at Weeden and Co.
Moneytalk is FREE and available on demand at KGO810 radio for seven days after broadcast. The now Sunday-only broadcast is archived in the 1-4pm time-slots. (REMEMBER TO DOWNLOAD CHARLIE MAXWELL IN THE 3PM HOUR) KGO: Moneytalk, it's Downloadable
Two times today, Brinker touted Andrew Ross Sorkin's book "Too Big Too Fail"
This is Havoc, a friend of my daughter's, who won Best of Breed at the Cow Palace last week:
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