Bob Brinker's comments summarized, paraphrased or excerpted:
STOCK MARKET....Has been doing very, very well. Year-to-date returns on the S&P 500 is 6.4% including dividends..... which is less than 1% from the 1343 closing high for the year. Last year returns were 15%.....2009 returns were 26%....
Honey EC: In March of 2009, the S&P 500 Index finally hit bottom in the worst bear market since 1929. It dropped 57% down to a low of 677. During the decline, Bob Brinker never recommended selling any stocks to raise cash. Brinker's Marketimer model portfolio-I lost over 50% in the 2008-2009 megabear. Based on numbers reported in the Marketimer, portfolio-I went from the Oct 2007 all-time-high value of $302,561 down to the February 2009 low of $143,938.
TREASURIES.... At rock bottom....you won't see rates like these very often in your lifetime.
ECONOMIC RECOVERY....Is happening without the help of the real estate market...The rate of recovery is modest....The 4th quarter annualized rate of real Gross Domestic Product was up at a rate of 3.1%....
S&P CASE-SHILLER REAL ESTATE 4-YEAR DECLINES....Atlanta - 25 1/2%; Boston - 9 1/2%; North Carolina - 14%; Chicago - 31%; Dallas, Texas - 7%; Denver, Colorado - 9.7%; Las Vegas - 57%; LA - 37%; Phoenix - 54%; Portland, Oregon - 24 1/2%; San Francisco - 37%; Seattle - 26 1/2%; Tampa - 44%; Washington DC - 23%.
JOBS REPORT.....For March, released last Friday...Payrolls up net 216,000 after subtracting losses of government jobs at the municipal and state levels.
UNEMPLOYMENT and UNDER-EMPLOYMENT RATES......Unemployment rate now at 8.8%, the lowest it's been in a long time. Under-employment still in the 15% range -- a big number and an important number.
DEMOGRAPHICS OF UNEMPLOYMENT (according to Bureau of Labor Statistics): White - 7.9%; Black - 15.5%; Hispanic - 11.3%; Asian - 7.1%; Bachelors degree or higher - 4.4% (half the national rate); Attended some college - 7.4%; High school - 9.5%; Less than high school diploma - 13.7%.
OBAMA ADMINISTRATION'S JOBS HOPE: Brinker opined that the Obama administration must be very pleased with what Brinker called a "very, very good jobs growth" in March, because if Obama hopes to be re-elected, he will need to have lower unemployment numbers.
Brinker said: "All of their re-election hopes have been pinned on their economic policies, starting with their stimulus package......certainly was not a perfect package, but it pushed a lot of money out there......And then the huge decision that the administration made to endorse the 2% reduction this year in the payroll tax, and that money flows right into the economy. Now they're getting the new jobs. We've averaged 188,000 new jobs for the first 3 months of 2011. So if they continue to see new jobs growth, they're going to be in a much better position in the event that they seek re-election. And everybody right now is assuming that they will seek a second term in the White House......8.8% is way, way too high for the unemployment rate, but hey! a couple of years ago, it was over 10%, so it's moving in the right direction."Honey EC: Firstly, Bob, who is "they" that you are referring to in the White House? Is it Barack Obama and Joe Biden? Or is it Barack Obama and BO? :)
BTW, you say that unemployment was "over 10% a couple of years ago." Are you sure about that? Two years ago, was March, 2009. Did it grow that much? The highest rate ever under President George W. Bush was 7.6% in December of 2007 -- his last month in office.
VANGUARD GINNIE MAE FUND (VFIIX): Brinker said: "That Vanguard Ginnie Mae Fund, wow, that fund has had an outstanding performance. I was just checking and added back the 27-cent distribution that was paid out for 2010......Adjusting for that distribution.....along with the current price of 10.73, that fund would be $11.00 per share adjusted for the distributions. And it's just been an outstanding fund in terms of the way it's held its value and at the same time throwing above average interest."
CALLERS
SAVING FOR YOUNG SPROUT'S EDUCATION.....Caller Joy from Illinois asked Brinker what she should chose to invest in for her three grandchildren, instead of "buying them toys." -- I-Bonds, bank account or stock? Brinker said that he hoped she would still buy them some toys -- that he didn't want to see the young sprouts grow up without toys because all of the money was in mutual funds. (Honey EC: Very funny, Bob. Big boys need toys too. LOL) He recommended that she look into the Coverdell Education Savings Accounts, Uniform Gift to Minors or the 529 Plans.
After finding out that Joy's grandchildren were all under 5 years old, Brinker replied: "You have a lot of time.....So I would choose the total stock market index . I'll give you a couple of examples. The Vanguard Total Stock Market Index. The Fidelity Spartan Total Stock Market Index. Or you can buy an Exchange Traded Fund, which trades like a common stock, ticker symbol, VTI......And this will follow the Wilshire 5000, so your return should duplicate the return of the total market.....You can dollar-cost-average...."
BRINKER'S COMEDY ACT FOR THE DAY....Ed from Marin, California wanted to know a safe place to park $50,000 while he waited to buy a house. Brinker recommended fully insured CD's, then when he found out that Ed was going to wait ten years to buy his house, he changed his mind and told Ed that he might want to use a balanced portfolio -- even though it would be possible to lose money in the stock portion.
Brinker said: "You may not want to do this. You could lose money, (dog barks in background) See that? Fido agrees! Fido is listening to Moneytalk and he's right on the money!......Boy, I'll tell you, these canines that listen to the program, they are so incredibly sharp. I mean, they are right on it!"GERMANY BUYING NYSE? Caller Michael in Carmel wanted to know about Germany buying the New York Stock Exchange -- would the United States lose any sovereignty. Brinker told him this had nothing to do with the sovereignty of the United States -- that malarkey was being spread by the fear-mongers.
DOLLAR COST AVERAGE AND SIDEWAYS MOVES... Caller Donna from Des Moines (Brinker called her "Donna, the Prima Donna) wanted to know about dollar-cost-averaging.
Brinker said: "When we talk about dollar-cost-averaging at this level which is very close to it's recovery high and it's high for the year.....When we dollar-cost-averaging, that's new money....being introduced into the market. When we are talking about money that's in the market now being moved over to another fund, from one stock investment to another stock investment, we regard that as a sideways move.....and that would not require a dollar-cost-average approach......"
MARKETIMER PORTFOLIO III: Brinker continued talking to "the Prima Donna": "However, if we are talking about new money being introduced into the marketplace, I would regard that as dollar-cost-average money given the tremendous rally that we have seen in this market since we upgraded the market to attractive-for-purchase in early July of 2010. After all, at that time, the S&P 500 was around the 1030 level, and now here we are less than a year later, looking at the 1330 level.....
Honey EC: Good Job, Bob. Oops...I'm rhyming just like you did with Linda-Belinda when you said you sounded like Jesse Jackson. No seriously, after only FIVE prior "upgrades to attractive for purchase" during the bear market, you finally got one right.
And did you forget how you gave up altogether on making buy-signals in March 2009 (the very month the market bottomed) when you said you would begin looking for that elusive bottom? Those bottoms can be real hard to find sometimes, even for famous market-timers. :)
Brinker continued answering "Prima Donna"...... "As far as putting the money into model portfolio III of the investment letter which is on page 8, that is a balanced portfolio, which incorporates both stocks and income investments. If you want to make it an all Vanguard portfolio, I would just substitute the total stock market index for any funds in that portfolio that are not Vanguard domestic funds and I would substitute Vanguard International for the one fund in that portfolio that is a non-Vanguard International portfolio."
Caller Linda from Redwood city (Brinker called her Linda-Belinda) said she was in "sticker shock." She needed to raise $10,000 to pay her taxes this year because she had to take her first Required Minimum Distribution. She said her "social security piled up," still working, and now is in the 25% Federal bracket. She feels she can't retire and she's "scared to death." She also mentioned her Roth and having money in Wellington Fund. Brinker suggested that she invest in some investment grade, tax-exempt AA munis. He told her to disregard insurance ratings and only look at the underlying rating from firms like Moodys and Standard and Poors.
Brinker told "Linda-Belinda": "If you have double-A or better, I think you have a quality security, and then if you hold that security to maturity.....ah...I'm starting to sound like the Reverend Jesse Jackson and I didn't even try....if you hold that security to maturity, then what happens is, you should be able to get your money back if it's dollar good and the income is double tax-exempt."
SHARK BAIT.....Caller Diane said she had a half-million dollars that she didn't need that had been invested with Schwab in a "diverse portfolio" that since July, 2010 had gained 11.2% after fees. She asked if it would be simpler and less costly if she followed one of Brinker's portfolios or should she just diversify with total stock or bond funds. She asked if it was a "bad time to liquidate and leave Schwab" in order to make these changes.
Honey EC: Brinker's answer to Diane was just a snake oil pitch for his newsletter. It was a shameless attempt to take a bite out of Diane. I won't dignify his smooooth malarkey by repeating it. Diane, if by some miracle you read this, here are the answers to your questions:
Firstly, if you are paying someone to manage your half-million at Schwab and you have made 11.2% in a diversified portfolio since last July, you have done reasonably well.
Second, you do not have to leave Schwab if you want to buy total stock or bond funds. They are available at Schwab, the same as they are available at Vanguard -- some at even lower cost. But if you still want Vanguard Funds, you can purchase them through Schwab for a commission -- which if you hold for the long term is quite small -- certainly less than you would pay to subscribe to Marketimer. You can make at least 4 or 5 Vanguard purchases at Schwab for the price of one year of Marketimer.
MYSTERY OIL STOCK VERY PROFITABLE....Al from San Francisco, wanted to know if he should withdraw some needed cash from his money market fund or from the one oil stock where he has over half of his million-dollar net-worth invested....Brinker said that Al had fortunately done okay with his oil stock over the recent past, but that he would recommend taking money out of the oil stock rather than the money market fund.
Honey EC: LOL! I have a hunch Al did extremely well with his oil stock, but Brinker sounded very "displeased" with Al having so much money in one stock. Twice, he sarcastically pointed out that Al wouldn't be interested, but he recommended a maximum of 4% in any one stock.
HOW THE RICH AVOID TAXES ALTOGETHER....Caller Leonard from Tucson told Brinker that he went through withdrawal symptoms when they stopped broadcasting Moneytalk on Saturdays. He said that he sold his business which put him into the Land of Critical Mass. Then Leonard spelled out in detail how he set up an LLC and sheltered most of his income and actually got money back from the government instead of paying any taxes on the sale.
Brinker said: "What we are going to do is classify you at the head of the class at maximizing the tax code to your advantage...in terms of exploiting the legal way to reduce a tax bill."
Moneytalk on demand audio/podcasting is available for FREE at KGO810 radio for up to seven days after broadcast. The program is archived in the 1-4pm time-slots. You can take it with you! I download and save all three hours, including the third hour guest-speaker, so that I can refer back to them in the future if Bob Brinker mentions something about them on the air. KGO Radio MP3 Sunday Archives
Brinker's guest-speaker was Barbara Weltman:
Dixiegeezer went from this Croc in Costa Rica (click to enlarge):
To this in Clearwater, Florida:
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