STOCK MARKET:
Brinker reported that the financial markets are doing very well -- that the S&P 500 Index is currently just a hair away from its 2011 high, and the Dow is now at a new high for 2011.
Brinker said: "You've seen a tremendous come-back in the market over the past 25 months. .....It's rather remarkable. If you take the all-time closing high in the S&P 500 of 1565 which of course was back in 2007.....and then you take the current level of 1337....you will find in terms of the index right now, the S&P 500 Index is 14 1/2% below its all-time-high. However, you have earned 3 1/2 years of dividends which is 7%, so that cuts that in half. On a total return basis......the S&P is only 7% under its all-time-high."
Honey EC: When the S&P hit its all-time-high in October, 2007, Brinker was projecting it would reach mid-1600's. He was also repeatedly calling mid-1400's a "gift-horse buying opportunity." So for those who actually follow his advice, it must feel good to finally be just 7% under what you were almost four years ago.
[Jim's comments added in edit.]
Jim said...S&P DOWNGRADES US DEBT: Brinker reported that just a few hours after last week's broadcast, the S&P Rating Agency downgraded the credit rating of the United States of America. They said that there is a "....1 in 3 likelihood that we could lower our long-term rating on the US within two years." They have reduced their outlook on US debt from stable to negative. Brinker pointed out that this was no surprise to anyone who listens to Moneytalk because he has been talking about the disgraceful mismanagement of the deficit in Washington.
My take on this statement is that it is just another example of how Bob Brinker trys to save face when being wrong.When Brinker first realized he got himself and his subscribers caught in a bear market he tried to say it was a bear market nobody could have predicted. Now he seems to be suggesting that the bear market was no big deal because eveyone is within 7% of where they were before. What's a bit of a contradiction is that while Brinker claims to be a marketimer, anytime someone starts saying bear markets cannot be predicted and points out how the market always recovers from heavy losses is someone who fits the perfect description of a " buy and holder". [Originally posted here: link]
DEFICIT GROWING...It will grow $1.6 Trillion through the 30th of September. Brinker said: "Obviously they are going to have to restructure Medicare and reduce benefits. The are going to have to make changes to Social Security. They may also have to make changes to Medicaid. It is a colossal situation." And S&P is reacting to that as they should after the mess they made of the sub-prime. They and Moodys and others, the bogus triple-A ratings that they gave out on the sub-prime junk...."
BOND MARKET, ECONOMIC SLOWING AND INFLATION....Brinker said: "Bond market is starting to act a little better and that's of course because people are wondering whether there will be some austerity measures in the US. Any austerity measures coming out of Washington would slow down economic growth. Less money in circulation in terms of fiscal stimulus.....No question that would have a restraining impact on the US economy. Investors are starting to look at that and they know that if the Federal Government starts to pull back, and there's a lot of pressure on them now with this S&P downgrade....and that's a good thing.
Well if we have any kind of austerity steps in the budget that reduces the growth rate of the economy, it also reduces inflationary pressures. So bond investors are liking what they see when it comes to the subject of the possibility of reducing fiscal stimulus and the possibility of moving away from the risk of inflating the economy. So all of this is going to be something that investors will focus on."
WHERE TO FIND SAFETY IF THE GOVERNMENT DEFAULTS.....Caller Shawn asked if the United States government should default on its debt, would there be any safe place to invest. Brinker told her that was a tough question but the good news is that we don't have to answer that question right now because we aren't in that situation, and not even close to it at this point. Although, on a longer term basis, it is something that people will be thinking about because up until now the US has been the ultimate safe haven -- the global reserve currency.
Brinker told Shawn: "One can hope that they'll get their act together in Washington in such a way that we won't have to go down that road. But I think that it's important for people to recognize that the irresponsibility of the Washington politicians is at a level which flashes a lot of caution signs."
CHANGING MEDICARE.....Caller Tom in Santa Rosa asked Brinker what he would do to reform Medicare and Social Security. Brinker explained that he would gradually push out the retirement age, but make no changes for those in, or near to, retirement. Brinker talked at length about an New York Times article by David Leonhardt that made the claim that someone in their late 50's would collect triple what they paid in.
Honey EC: Throughout the program Brinker talked about "56 year olds" getting Medicare. I did some research and found that the minimum age for collecting Medicare is 65 unless a person is on Social Security Disability for two years. So it looks to me like Brinker and the NY Times author are both blowing smoke. Here's the link to the article: "A Medicare Plan That Exempts Too Many")
IS IT TIME TO SELL STOCKS? Caller George said he had read an article in Business Week that suggested that the S&P price-earnings ratio was getting higher than historic levels, and that the stock market was entering bubble territory. He asked Brinker if he should move out of the stock market.
Brinker told George: "No. As a matter of fact, I draw a completely different conclusion than the article you read. Based on the work that I do, using 2011 operating earning estimates that I have a high level of confidence in at this point, after all it's already the month of April......I would say the S&P 500 is trading below its historic average multiple.....I use estimates for 2011....and I'm comfortable using those estimates."
WOULD IT HELP TO NATIONALIZE OIL? Bert asked Brinker about nationalizing the oil industry. Brinker explained that would make no difference because we are "beggar" buyers and would still use over 10 million barrels a day.
OIL NONSENSE COMING OUT OF THE OVAL OFFICE....Brinker said: "By the way, I saw some nonsense coming out of Washington this week, seemed to come out of the White House in this case, seemed to come out of the Oval Office actually. It seemed to be blaming the price of oil on oil traders. I ask you not to fall for this nonsense. It's political pap. And let's face it, the price of oil is a function of supply, demand and exogenous factors.
What are exogenous factors that can effect the price of oil? Certainly unrest in the oil-rich Middle-East..... How about the fact we have pretty much lost a million and half of supply out of Libya which remains at war between Quddafi and the Libyan resistance.....We have what amounts to a wholesale slaughter in Syria that's gone on in the past 48 hours.....I hate to see this kind of nonsense coming out of the White House because it shows desperation and you always hate to see that. Traders in the oil pits do not control the events in any of these countries.....So to blame the price of oil on oil traders is propaganda in this case coming from the good old USA..... Don't fall for it.....It's pre-election year smoke and mirrors....It's political trickery to cover up the fact that these same politicians have been unable to present you with what you deserve which is a viable energy policy......
Do you think that huge government subsidies for wind and solar are a viable energy policy? Not if you look at statistics. Let's bring it up to right now. You know how much wind and solar power is as a percent of United States power - 1.4%. What about the other 98.6%? And wind and solar are subsidized.....Solar is highly questionable as to whether it's even, global footprint-wise, a good policy. And I won't even go into the absurd support for the ethanol policies.....So don't fall for this trickery and this nonsense coming out of Washington. The reality is, the guys and gals in the oil-trading pits are not the reason oil is $112 a barrel. Nor are they the reason that the NY Times pictures $5 a gallon regular gasoline this week. I ask you not to fall for it."
Honey EC: I paid $4.23 for gasoline today near Santa Cruz. OUCH! I got no "CHANGE."
Caller Terry said he would be retiring in a couple of years and was in the Marketimer portfolio one, and that he also subscribed to the Fixed Income Advisor. Brinker recommended the Marketimer balanced portfolio.
Terry asked: "What about the funds in the Fixed Income Advisor? Would I be interested in any of those?
Brinker replied: "Well I think that uhhhhh....there are various approaches you can take. That is an income investment letter, and so that is a letter that focus completely, almost completely I should say, there's a little bit of convertible stuff in there, but for the most part, that's an income newsletter. I would say that, from my point of view, I'll go with what I said earlier, I think the balanced portfolio, model III on page 8 of the investment letter. I think that that is a portfolio that is certainly worth taking a good look at in terms developing a balance between the equity side and the fixed income side. That would be my thought on that. 1-800-934-2221......"
Honey EC: Deception is never funny, but I laughed out loud at Brinker's response to Terry's question about the Fixed Income Advisor. I don't blame Brinker for stammering. He had a choice, he could have told Terry to check with his son, the other Bob Brinker (a computer technician) and his daughter-in-law Lisa (a linguist), who edit and publish that newsletter -- or he could have done what he did....
Brinker's guest speaker was William D. Cohan.
You can take it with you! Moneytalk on demand, with Bob Brinker, is available for audio/podcasting FREE at KGO810 radio for seven days after broadcast. The program is archived in the 1-4pm time-slots. I download and save all three hours, including the third hour guest-speaker, so that I can refer back to them in the future. KGO Radio MP3 Sunday Archives
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Steve T took this great action shot:
