Wednesday, August 31, 2011

September 1, 2011, Moneytalk Guest-Speaker: John Bogle, Vanguard Group

September 1, 2011....................................(post and read comments)

Because Bob Brinker did not host Moneytalk last Sunday (the program was re-runs of old calls),  I have a special treat for you. 

David Korn's  weekly newsletter includes a summary of Bob Brinker's Moneytalk, and sometimes when the guests are important enough,  David will cover those interviews too. This week, he reviewed what he had written about  Burton Malkiel, Nassim Nicholas Taleb and John Bogle. I chose investment legend,  John Bogle, to share with you.  Posted with his permission, David Korn wrote the following:

"This weekend's Moneytalk Broadcast was not a live show.  Bob was the host, but what he did was basically use calls from previous shows that I covered in past newsletters.  This isn't unprecedented.  The stuff this weekend was generic non-time sensitive stuff really such that if you were a casual listener, you might not realize it.  Bob has done this a handful of times in the 12 years I have been tracking him.  In the past, he has always returned live the following week.

I did some digging into the 12-years of newsletter writing and found interviews from three Wall Street legends and great investment thinkers: Nassim Nicholas Taleb, Burton Malkiel, and John Bogle.  I spent some time this weekend editing the interviews to bring the editorial comments up-to-date.....I think and hope and really believe you will enjoy reading them.

JOHN BOGLE

Bob opened the interview telling John Bogle that even after all these years  of Bogle preaching the advantages of index funds, there is still the hype to  "beat the market."  Bogle agreed and noted that traditional classic index funds like the S&P 500 Index isn't growing proportionate to the growth of  other managed funds.  Instead, exchange traded funds are the rage which can  be traded all day long in real time.  Bogle said the people that are going  to be making money from the exchange traded funds are the people that  benefit from active trading -- the brokers who earn the commissions from the trading.

Bogle discussed a fascinating point from his new book.  During the last 25  years, the stock market grew at around 12.5% a year as measured by the S&P  500 Index.  During that sane time frame, the average equity mutual fund grew  at 10% a year which is 2.5% less.   Is that a surprise?  It shouldn't be  because the average mutual fund manager turns out to be average.  Of course,  there are winners and losers, but the average fund still underperforms.  The  primary culprit is that the average cost of owning a managed mutual fund is  1.5%.  They are also paying high turnover costs.  Mutual fund managers tend  to turn over their investment portfolio 100% per year, which means that the  average stock is only held for a year which Bogle views as speculation, not  investing.  Finally, most funds (about 60% of them) charge a load, or sales  charge, that averages about 1% a year.

It gets even worse.  The average fund is returning 10% a year, but the  average investor is only earning 6% a year.  Why?  Because many individuals  put little money when the stocks are way down as in the early 1980s, then  they pour their money into funds in the late 1999s, and then they take their  money out when the market is down again.  Thus, investors can be their own  worst enemy.  Warren Buffet puts it this way:  The two worst enemies of the  investor are (1) expenses and (2) emotions.  We hurt ourselves by being optimistic when stocks are high and pessimistic when stocks are low.   We  all think we are above average, and we are not.

Bob asked Bogle to explain the unique set up at Vanguard where the  shareholders own the management company.  Bogle said most mutual funds are  set up the following way.  A financial company starts a bunch of mutual  funds and negotiates with itself an amount to charge for a fee, such as 1% a  year to manage the assets of the fund.  They are in business to make sure  they make money.  In that situation, the fund manager has two duties.  One  duty is to the shareholder, but the other duty is to the investors in the management company.  When Vanguard was founded, they didn't like the idea of  serving "two masters." Thus, at Vanguard they created a fund company where  the managers, directors and staff of Vanguard are all working for the fund  shareholders, not a separately owned company.  Vanguard operates at cost.  Sure, the officers and staff are well paid, but they are not operating in  such a manner to charge a lot more. Bogle said the average mutual fund  company charges about 1.25% fees of total assets per year.  At Vanguard,  that same fee comes out to less than 0.25%.  As such, Vanguard saves their  investors 1% a year.

Caller:  This caller is on the management team to select investments for his  company's retirement plan.  He said there is a lot of resistance to getting  index funds and there is a lot of pressure from a big consulting firm to go  with managed funds with the promise of "beating the market."  Bogle related  a poll of investment managers who were asked how many of them had beaten the  S&P 500 in the last 10 years. Of those polled, 85% said they had failed to  beat the index during that time frame.  The same group was asked how many  thought they would beat the S&P 500 in the next 10 years, and 90% said they  fully expected to.  Bogle called that the triumph of hope over experience!!!

Caller:  This caller wanted Bogle's opinion of TIAA-CREF and how it ranked  compared to Vanguard.  Bogle said he has great respect for TIAA-CREF.  Its  big equity fund has a slightly higher expense ratios (about 30 basis points)  than the Vanguard Index funds which are about half that.  However, the  TIAA-CREF annuity is the best bargain out there.  Vanguard has the second  best cost structure and expenses are extremely important when it comes  annuities.

(David) EC:  Interesting.  You have to hand it to Bogle for praising a competitor.   Maybe daBrink can take that lesson to heart. :)  Bob has recommended the  Vanguard annuity in the past, but going forward, perhaps he will also  recommend TIAA-CREF given what Bogle said today.

Brinker:  Bob asked Bogle to comment on Occam's Razor  (also spelled  Ockham's razor) in the investment context.  Bogle said that refers to the  principle attributed to William of Ockham that says when there are multiple  solutions to a problem, choose the simplest one.  Bogle says index funds are  the simplist ways to invest and a lot of good things flow from that  simplicity, including low turnover, tax efficiency and dividends flowing to  the shareholder.

Bogle pointed out that the typical equity mutual fund consumes 80% of the  dividend income.  The stock market has a dividend yield of about 1.8%, and  the average equity mutual fund takes about 1.5%, leaving a dividend yield of  only 0.3%! 

Bogle noted that the long term return on stocks in nominal terms has been  about 9.5%.  That 9% was made up of 5% earnings growth, and 4% dividend  yield.  Today, however, the dividend yield on stocks is less than 2%.  Thus,  Bogle thinks you can conclude that returns on stocks will be about 2.5% less  going forward.  That means instead of getting a 9.5% return on stocks, you  will get a 7% rate of return.  Then you have to take out 2.5% for inflation,  which brings your return down from 7% to 4.5%.  This is all before taxes!   It is also before the charges these mutual funds charge.  Bob said he  recommends a 4% withdrawal rate, and believes that Bogle's explanation  justifies this position and Bogle agreed.

(David) EC:  Wow.  Bogle's logic is compelling and disconcerting, but definitely  jives with the view of a secular bear market, or at least a period of  sub-par returns going forward.  Warren Buffet has publicly stated a similar  long term projection of returns on stocks.  Between Bogle and Buffet, you  got two of the giants in the financial industry saying the same thing -- and  it is a far different cry than what you hear from many on Wall Street.

Caller:  This caller wanted to know how Bogle would invest for a  grandchildren's college education.  Bogle said what he does for his own  grandchildren is put 60% in the Vanguard Total Stock Market Index Fund and  40% in the Vanguard Total Bond Index Fund.  Bogle said it is a little  conservative, but when you get close to college and the bills come due, you  don't want to be too aggressive.  Bogle said you can start more  aggressively, and then slowly reduce the amount of equities as you get  closer to the day for college recognizing that the stock market can go down  significantly right around the time college begins.

Bogle emphasized the importance of diversification with largely U.S. index  funds with up to 20% international.  Bogle says at his age, he has 40% in  stocks, 60% in bonds.  Bogle said he doesn't like to make quick moves, and  is going to slowly move up to a 15% allocation in the international arena.

Bogle discussed his new book, "The Battle for the Soul of Capitalism."   Bogle said that capitalism has had a wonderful history of being trusted back  to the 19th century and it worked because we had "owners" capitalism.   Owners put up the capital and took the risk and got the reward.   In the  latter part of the 20th century, that system turned upside down and now most  of the rewards go to the managers.  We now have "managers capitalism"  instead of "owners capitalism."  We can see evidence of this change in  executive compensation, financial engineering and manipulation of corporate  earnings.  It is also in the mutual fund industry where management companies  get far too large a share of the returns.

There has been some improvement of late with the passage of Sarbanes-Oxley,  greater board room accountability and the inability now for auditors to be  part of management.  In the mutual fund area, there is an attempt (which is  being bitterly resisted) to make mutual fund boards of directors more  responsible to the shareholder.  The law states that mutual funds should be  formed in the interest of their shareholders, but that has often not been  done.  We would need an independent chairman of the board, the use of  independent consultants, etc.  These are little things that can bring the  system back to balance.

Bob referred to Bogle's investment classic, "Common Sense on Mutual Funds."   Bogle said he has been pleased the books have done well, and the proceeds go  to charity.  Bogle said that book is designed to present common sense  intelligent ideas about investing.  Themes like investing for the long term,  don't pay a lot of money to your fund manager, not moving your money from  one fund to another, not hovering over the rankings of mutual funds, and to  own Americn business and hold it foreover.  Don't trade, don't do anything.   Bogle remarked that he knows that Bob shares at least some of the same  investment philosopy. 

About 30-years ago, Bogle created the "First Index Investment Trust" which  is now known as the Vanguard S&P 500 Fund.  People laughed at the idea when  he first came out with  it.  In fact, people referred to it as "Bogle's folly."  Today, it is the largest fund in the world.

(David) EC:  Bogle and Brinker have both done a great service in educating the  public about the importance of watching expenses in your investment  portfolio, the benefits of using index funds, and the necessity of  diversification.  The two individals, however, have different philosopies  toward market timing.  Of course, Bob is a practitioner of market timing,  and even uses the name for his newsletter.  Bogle, on the other hand, has  this to say about market timers in his book, Common Sense on Mutual Funds,: 
"The idea that a bell rings to signal when investors should get into or out  of the stock market is simply not credible.  After nearly fifty years in  this business, I do not know of anybody that has done it successfully or  consistently.  I don't even know anybody who knows anybody who has done it successfully and consistently.  Yet market timing appears to be increasingly  embraced by mutual fund investors and the professional managers of fund  portfolios alike."
Bogle said there is a way to think about investing that he likes to share  with individuals.  Investors tend to pay about 2.5% in expenses, which is an  incredible amout of money over an investment lifetime.  Think about  investing one dollar over your entire investment horizon which is around 65  years.  You figure that you work for about 40 years, saving and investing  your money, and then live another 20 years after that.  If you invest $1  over 65 years without expenses, it grows to about $131, using a compound  growth rate of about 8%.  That's the magic of compounding.  However, if you pay 2.5% in expenses, than your $1 will only grow to about $25!  That's what  we call the "tyranny of compounding costs."  It utterly overwhelms the magic  of compounding.   After you consider the costs, you realize that instead of  you, the managers get the lion's share of the returns.

A caller asked Bogle how the Vanguard Total Stock Market Fund has  outperformed other similar funds that also track the market.  Bogle said  there are two reasons why.   First, they charge less expenses overall, so  they take less out in terms of returns.  Second, in recent years they have  been able to manage the changes in the index better than their competitors.   The man in charge has been a very good administrator of these funds.  By and  large, however, its the lower expenses that account for the better performance.

Another caller asked Bogle for his opinion on the long-term prospects of the  international markets versus the U.S. stock market, as well as his outlook  for the dollar.  Bogle said he is a low risk-taker in terms of moving in and  out of international markets.  Bogle said the first question is whether you  even want to have exposure to the international markets.  Many investors  aren't aware that 25% of the revenue for U.S. companies is derived from  international sales.  That said, Bogle said he understands the logic of diversifying into the international arena.  With respect to the dollar, if  you look at the long run, the returns of international markets are not that  different compared to the U.S. market.  There are cycles where there is  outperformance in international markets.  Bogle said if you are going to  invest internationally, he recommends going with an international index fund  and sticking with it for the long term.   Vanguard has such a fund. 

Bob asked Bogle to explain how the structure of a Vanguard fund works for  investors.  Bogle said when you buy a typical mutual fund, it is really like  a corporate shell that holds a package of stocks and bonds. The chairman of  the board is usually chairman of the management company that determines the portfolio.  The officers are provided by the managers.  In otherwords, the  fund is captive of the management company.  The rewards are enormous for  those managers.  For example, the typical equity fund costs 1.5% each year,  plus another 1% in hidden costs.  Contrast that with Vanguard where the  funds are directly owned by the shareholders.  Bogle said you should always  determine whether the manager's interests are paramount, or whether the  individual investor's interests are.  Of course, in the case of Vanguard,  Bogle said they look after the individual.

A caller asked Bogle about the Vanguard GNMA fund and how interest rates  will impact the net asset value.  Bogle said that when interest rates go up,  bonds go down as a general rule.  Over the long term, however, keep in mind  that interest rates will fluctuate and in most cases, the returns generated  will be entirely a function of the income generated.  That is the mathematics of bond investing.  The net asset value will fluctuate in the  GNMA.  The net asset value is not guaranteed, and you shouldn't look at it  that way, but you should view it as an investment that provides a steady  stream of income over the very long term.  If you really want stability of  capital, you can't get stability of income.   You can go with Treasuries where the capital is guaranteed, but the income provided by treasuries is  very low.  When you go with a fund like GNMA, the trade off is you get  higher yield, but you have to deal with the fluctuations of the net asset value.

A caller asked Bogle about the Vanguard Extended Market Index exchange  traded fund and was concerned about the low volume of trades.  Bogle said if  you are buying it as an investment, you do not need to be concerned.  In the  exchange traded fund (ETF) arena, there is a lot of trading going on, and  Bogle doesn't favor that.  Long term success is about investing, not  speculating.  The ETF is actually a little cheaper than the actual fund (not  including brokerage commissions), but Bogle said he has not changed any of  his holdings to ETFs. 

(David) EC:  The caller and Bogle were referring to the Vanguard Vipers (ticker:  VTI) which I own in my newsletter portfolio.  They track the Total Stock  Market Index.  I like owning the Vipers because I could sell them (or buy  them) in real time.  The other benefit they have over the fund, is you can  short the Vipers if you wanted to.  The caller is correct though in that the  volume of Vipers isn't that great, with the average volume of far less than  the SPDRs (a/k/a Spiders), which track the S&P 500 (ticker: SPY).

Bob commented about how many shares are traded daily of the Spiders, to  which Bogle said this just goes to show you that there are thousands of  people shuffling money around each day.  Bogle quoted Warren Buffet who said  that the two greatest enemies of individual investors are expenses and  emotion. Bogle said the Vipers take care of the first one, and its up to  the investor not to be pulled into the latest hottest fund, whether it is  energy, real estate, or whatever.  Its hard to do timing, especially when commissions are involved......Indeed."
David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service.  Copyright David Korn, L.L.C. 2011
Honey here: If you want complimentary issues of David Korn's Brinker-related newsletter or The Retirement Advisor that he co-edits with Kirk Lindstrom,  they are available: here 

 Moneytalk on demand and to go with Bob Brinker, is available for FREE audio/podcasting at KGO810 radio for seven days after broadcast.  I download and save all three hours, including the third hour guest-speaker. (The program is archived in the 1-4pm time-slots.) If you don't download it from KGO within seven day, it's available at bobbrinker.com by paid subscription. KGO Radio Sunday Archives

Sunday, August 28, 2011

August 28, 2011 Bob Brinker's Moneytalk, Summary, Commentary, Excerpts and Discussion

August 28, 2011..............................................(post and read comments)

Today, Bob Brinker's Moneytalk was  spliced-together recorded calls from old  programs.  However, there was never an announcement saying it was  pre-recorded.    One has to wonder why not? It seems very deceptive....

IN EDIT: Some have questioned what I said above. My answer is this:  
The spliced-together calls were from different programs. I was able to identify one that went back to 2009 -- that was the one where Brinker talked about the Pennsylvania Turnpike.  Some were even earlier because Bernie Madoff was still one of the main topics for discussion.

Consider this: If it had  been only the network  involved in choosing what to broadcast as a re-run, they would simply have chosen an old program and run it in total.

All of the calls appeared to be carefully chosen, either by a Brinker or a Brinker-producer, to promote Marketimer.
 

The calls were obviously carefully selected because many callers said they were Marketimer subscribers, had been following Brinker's advice for many years, were worth  $millions,  and living in the Land of Critical Mass. LOL!  Strangely, these callers  needed to ask Brinker about inherited $millions, divorce settlements,  inherited condos and other real estate, IRA's, muni bonds, and asset allocation.

The first call went way back to the infamous Bernie Madoff days.  One of the calls was from 2009 when Brinker had talked about watching the Pennsylvania Turnpike being built.

Since Brinker chose to include  a couple of calls about asset allocation,  let's take this opportunity to review the complete record of his stock market-cash asset-allocations back to 1982.  This data was compiled and first  documented several years ago at the Suite 101 Brinker discussion forums.

Pen-name Math Junkie wrote: “Some have raised questions about the allocation percentage from 1982 to 1987, so I have added a question mark to reflect this. As Steve did, I am retaining information from radio broadcasts, and it is labeled as such.”
    
Aug 14, 1982….equities @ 100% (?)……....777
(Announced on local radio in New York he recommended being fully invested. He had been mildly bullish to bullish on NBR the previous April, and is said to have been recommending dollar cost averaging prior to August 14th.)
Aug 21, 1987…..equities @ 100% ................2710

Oct 19, 1987……equities @ 100%................1841
(Black Monday: Dow Down 695  or 25.6% From Top.)
Jan. 1988…….equities @  Zero.…………...2015
 (Went to 100% cash & told listeners he was  
   bearish after the market was 9.5% above
   bottom, taking the brunt of most of the
   bear decline.) 
 Feb. 1989… equities @ 50%........................2342
(Market up 27% from the bottom.)
Nov 1989....equities @ 75%.........................2650
Feb  1990…. equities @ 40%..................2559
Mar.1990…..equities @ 50%..................2635
Apr. 1990….. equities @ 65%.................2687
May 1990…...equities @ 75%.................2656
July..1990…...equities @ 85%.................2840
July 18, 1990: Dow @ 3016....(Bull  peak: up 50% since Jan. 1988)

Oct. 12, 1990: Dow @ 2398
(Gulf War bear bottom. Down 20.5% since bull peak.Market is back to where it was in Feb 1989 where Brinker went form 0% to 50%)
 Dec. 1990....equities @ 95%......2565

Jan. 1991…. equities @ 100%..................2550
(Finally back to fully invested: Dow up 26.7% since going to 0% equities.
Missed out on a large portion of market gains from when he went to 100% cash at 2015 in January 1988.)
For the next nine years (January 1991 to January 2000),  Brinker remained fully invested and made himself a legend. (Rode out the 19% selloff in 1998.)

Jan. 2000… equities @ 40% ………Dow: 11, 122
(Lowered equities 60% within 5.1% of S&P top, 
and recommended putting cash in money market funds .)
Aug. 2000… equities @ 35% ...........Dow: 10,688
(65% now in cash reserves)
 Oct. 16, 2000…equities @ 35%......QQQ = $83
(Told subscribers to put 20% - 50% of (the 65%)  cash reserves into QQQ for counter-trend rally.)
Jan. 8, 2001…equities @35%....QQQ = $62.44
(Again suggested putting 20% to 50% of cash reserves into QQQ.
Repeated same recommendation in February through May 2001 issues.)
 June 8, 2001….QQQ = 47.35 (Placed  on hold)

Sept. 21, 2001…equities @ 35%...(Dow 8236 – hit 7926.93 intraday.)

Oct. 2002…equities @ 35%...21% actually remaining in   equities…Dow 8950
(Still recommended 35% equities, but P1 in newsletter is 21% equities (not counting QQQ trades apparently due to lack of rebalancing.)

March 12, 2002…23% actual balance in equities …Dow 10,586
(DJIA +28.5% from 9/23/01 closing.
DJIA same level as August 2000 5% sell.)
Oct 9, 2002…19% balance in equities…Dow 7286
(Cyclical low so far. QQQ = 20.06, down 75.8% from
10/16/00 buy at $83.)
 March 11, 2003: equities @ 100% …Dow 7568; S&P 807.48.
(Issued bulletin on website before open based on March 10th close. QQQ = 24.01; S&P500 = 807.48; SPY = 81.32. He ended all  guidance for existing QQQ positions in March, 2003.)
March 15, 2003….Announced 100% to weekend audience.

March 17, 2003 (Monday)….Dow 8142
(QQQ = 26.60; S&P500 = 862.79; SPY = 86.78
typical buy levels for weekend and snail mail
followers who use mutual funds.)
April 5, 2003….100%...(Recommended new equity purchases below S&P 810,
 and dollar cost averaging otherwise. Stopped mentioning existing QQQ
 positions in the newsletter text. It was never again accounted for in his
reports of newsletter performance.)

Bob Brinker's Marketimer model portfolio stock allocations have  remained 100% invested since March 10, 2003.
[This data was  compiled by PETE from STAMFORD, CT, MrGreenJeans, DanG.
Kirk Lindstrom and SteveT.
Data between 1982 and 1987 compiled by Math Junkie.
Data between 1986 and Dec. 2000 compiled by Dan G.
Data between Dec. 2000 and July 2002 compiled by Kirk Lindstrom
Data between July 2002 and 2003 compiled by Steve T.]

Moneytalk on demand and to go with Bob Brinker, is available for FREE audio/podcasting at KGO810 radio for seven days after broadcast.  I download and save all three hours, including the third hour guest-speaker. (The program is archived in the 1-4pm time-slots.) If you don't download it from KGO within seven day, it's available at bobbrinker.com by paid subscription. KGO Radio Sunday Archives

Wednesday, August 24, 2011

August 24, 2011, What About Bob Brinker's Special Bulletins?

August 24, 2011....Bob Brinker has only sent a few special bulletins over the past eleven years. The most costly one was in October, 2000. That was when he recommended buying QQQ at $83  and recommended holding all the way to $24. In March 2003, Brinker cleverly disguised the trade without closing it, recommended "hold for recovery"  and never mentioned it again.

Mark Hulbert still uses a footnote to explain why he ranks Marketimer without accounting for that trade. The footnote claims that Brinker "chose" not to take responsibility for the trade in his model portfolios at the time he sent the bulletin. That is simply not true. Brinker "chose" not to take responsibility weeks later.   I have informed Mark of that, but he "chooses" to ignore the facts.

Will Brinker ever again raise cash in his newsletter model portfolios?  Why should he?  He is on record saying that if you can't tolerate a 10% drop in the stock market, you should not invest in it. And he considers up to a 20% drop an intermediate correction which  only becomes a bear market when it drops more than 20%.

With that in mind, recall that he says never sell  into weakness and he seems to be perpetually bullish. If the market goes into another bear, he always has those pesky "exogenous events" to fall back on like he did the 2008-early 2009 megabear. 

Beware of  Bob's "special bulletins."  This one was sent in February 2008 just as the megabear market was getting started. Excerpts:

February 10, 2008
S&P 500 Index: 1331.29
We view any such stock market weakness as an attractive buying opportunity for subscribers seeking to add to stock market positions. We regard any additional testing and probing in this S&P 500 Index price range as an opportunity to purchase equities at what we regard as bargain level prices."

The following "special bulletin" was sent a year later when the S&P was below 900. This was his fifth and final bear-market buy level and it was 150 points above the March 2009 market bottom. Excerpts;
January 15, 2009

In the January edition of Marketimer we stated that "when the conditions fall into place to justify a renewed buy recommendation, we will post a Special Subscriber Message" at the website. We also stated that  "we believe the most likely area for a successful test to occur is within the low-to-mid 800's S&P 500 Index price range...............The return of the S&P 500 Index to that price range is an encouraging development, in our view. We regard any weakness in the low-to-mid 800's S&P 500 Index price range as an opportunity to buy into the stock market at favorable price levels."

Brinker's most recent bulletin on August 10th, which he basically covered on Moneytalk  two weeks ago (reviewed  here), didn't give any new buy level.

Conclusion: Be very careful about following Brinker's "special bulletins"! Ask yourself why would he  bother to issue new "buying opportunities" without issuing a "sell-signal" first.

Chart courtesy of Kirk Lindstrom  Please click to enlarge:

P



Sunday, August 21, 2011

August 21, 2011, Bob Brinker's Moneytalk: Summary, Commentary, Excerpts and Discussion

August 21, 2011......................................(post and read comments)

Bob Brinker, host of Moneytalk today,  said: "This is the program that helps you become your own personal financial manager.  And that is the magic moment where you can take charge of your personal financial future. No longer will you be shark-bait for those out there trying to take a giant bite out of your wallet.......So that hopefully, if you're not already there, you can reside in that land of critical mass."

FINANCIAL  MARKETS:  Bob said:  "The financial markets continue extremely volatile. Stock market remaining highly volatile. The roller-coaster opened a couple of weeks ago and it's remained open this past week.......The Dow Industrial closing the week at 10,817. The S&P closing at 1123. And interest rates remaining at or near record lows.....Despite the opinion of Standard and Poors, the flight to quality has gone to US Treasurys to the extent that money is flowing into 3-month Treasury Bills for no yield on the assurance that the money will be returned dollar for dollar, principle wise on maturity." 

Honey EC: That was the only time today that the stock market was mentioned -- no calls, no further comments about it. Brinker couldn't have said much less than "the market was volatile," but if stocks continue to decline, expect him to make no mention of it at all -- like he did in 2008-2009 for many months.  

Bob reiterated what he said on Doug McIntire's WABC Red Eye program where he made a guest appearance last Friday. Please see my last article because I covered it there. Basically, Brinker is blaming the market volatility on two things: the slow US economy and concern for what's going on in Europe. 

To add to what Bob said about the stock market, the Dow has had 4 weeks of losses. The S&P 500 Index is down 16% in 4 weeks-- the second worst 4-week loss since 1950. The Nasdaq is at 2341.84 -- a 10-month low. 

Bob has zipped his lip about what he said on July 31st.  The day before the Dow began the "roller-coaster ride" he said he had been buying in the 1200's   Wonder why he would zip his lip about that?  Maybe because he knew back then  about the slowing  US economy? I know that  because just  a day later when the August Marketimer was published, he had lowered his real GDP forecast to 1% to 2% -- as he said later in this program.


 CREATING JOBS: PRIVATE VS PUBLIC....Bob said:  "There is an inherent contradiction in policies when a country embarks on government austerity at the same time they are trying to grow the economy.....and it is very apparent in the United States in the July jobs report.....The private sector in July pulled its weight by creating 154,000 new private sector jobs.......But the policy in the United States right now is to move to smaller government -- less government jobs.....That's what we saw in July.  Federal, state and local lost a total of 37,000 jobs in July. So instead of finishing July with a terrific number.....we wind up with 117,000, which is a fair number but not going to get the job done......with our rates of unemployment, 9.1 and 16.1 for underemployment.  And this is what I mean by contradiction in policies.

And this could also make you want to bat your head against the wall to try to gather the sense of what these policies are aiming for. Think about it, on one hand, you have people in government......talking about growing the economy....growing the country out of these huge annual deficits....they talk about it 24/7....creating jobs. But on the other side of the ledger, we have a government policy of shrinking the government....let's have a more limited government.....And that means less government jobs....more minus signs in the government jobs market.....

On the one hand we want private sector job growth. On the other hand, we want smaller government. At least this is the policy coming out of Washington.  And this subtraction comes off the private sector and we wind up with lackluster jobs growth....Government austerity is in in Washington. Budget cutting is in in Washington as is the move to smaller government. And that is a counter growth economic policy, which means the private sector has to pull all the weight on the economy.

And remember, we are in an economy where we are borrowing 40 cents of every dollar we spend. We are taking in about $2.3 trillion in revenue. And we're spending aobut  $3.7 trillion on all of the government outgo. And that's how we get a deficit of about $1.4 trillion in the current fiscal year....." (continued next paragraph)

ECONOMIC GROWTH FOR 2011: Bob continued:  "......And that is why I downgraded the growth rate of the US economy several weeks ago in my investment letter to a range of 1% to 2%, and that is what I think we are going to get in 2011 -- real Gross Domestic Product, total good and services growth in 2011.....And if you think that kind of growth is going to cure the unemployment problem - it's not going to happen. We will not cure the unemployment with growth in the range of 1% to 2%, and with government austerity the law of the land."

Honey EC:  Bob is right that he lowered his  real GDP growth target range to 1 to 2% in the August 3rd edition of Marketimer.  However, what he didn't say was that just the prior month in the July issue, he was predicting real GDP growth of 2% to 3%, which he said was slightly more conservative than the revised Federal Reserve forecast of 2.7& to 2.9% in 2011.  

S&P DOWNGRADE....Caller Craig from Cupertino said that the S&P downgrade was a vote against the politicians. Bob said that yes, they did everyone a favor because it was a "shot across the bow for the politicians" and he was all for that because the politicians created the problem.  Bob thinks that the AA rating is an excellent rating. 

RECESSION COMING? Caller John from Illinois asked Bob if he thought the chance of another recession is greater now than ever.  Bob said:  "I think the greatest chance of going into recession, when you look back at what happened with the subprime meltdown, I think the greatest chance of going into recession, with the modern era here,  would be 2008. You would probably have to go back to 1974 to find as great a chance of going into recession. But obviously there are risks in the economy. My forecast is 1% to 2% growth....very slow growth....There is also a lot of stimulus going on....Anything that the government spends above revenue is stimulus spending...." 

UPTICK RULE....Caller Collette from Carmel asked Bob about petitioning the government to re-instate the uptick rule. Bob said that it was lobbying money  that had paid to get it removed in 2007, and the same money had overturned the Glass Steagall in 1999. He is all for it being re-instated, but thinks that the average American's one vote probably isn't powerful enough to over-rule the power of the big-money lobbying movement. 

NATURAL GAS AND $2 A GALLON GASOLINE.  Collette second question:  "When I reread Dr Bill Wattenberg's letter, he said we could have $2 a gallon gasoline, which of course, would boost this economy incredibly...Maybe that's what Michelle Bachmann's talking about if she becomes president. She mentioned $2 a gallon gasoline. Isn't that interesting?"

Bob replied:  "If you want to see gasoline prices come down, you watch what would happen the day that an executive  order was signed by the president to run all government vehicles going forward on natural gas. Because the next year, we could move that to the state and municipal level, and then to the consumer level, and we could stop spending hundreds of billions of dollars and sending that money to places like Venezuela and Saudi Arabia." 

FREEZE FEDERAL EMPLOYEE SALARIES?  Caller Sylvia suggested a 5% pay cut for all federal employees. Bob said: "It would be fully appropriate to put in a salary and benefit freeze on government employees at the federal level." 

DON'T MESS WITH FOOD CHAIN...Caller Bill from Stockton said that in San Joaquin County, they have more cows than people and the ethanol subsidies have put 250 dairies out of business in the last couple of  years in California because of the feed prices.  He said that even Castro says that ethanol equals genocide.  

Bob replied that they should never mess with food supply, food chain -- that  when you start using corn for energy, you are messing with the food chain and running the risk of food price inflation worldwide. "It is a disastrous policy"  and he hates to agree with a "ruthless, Communist Dictator like Fidel Castro, but in terms of messing with the food chain, it's something you just never do." 

GOVERNMENT SELL GOLD RESERVES?  Caller Dave from Rockford wanted to know why the government couldn't sell  reserve gold bars to help with the debt. Bob said he didn't think it would have any effect on the economy because there is no shortage of money in the economy. In fact, the banks are flush with money they are not lending out. They have become risk averse and will only lend to those who don't need it. Also corporations have over  a $trillion in their coffers and are "lean and mean."

COMMON EURO BOND?  Bob said: (German Chancellor) "Angela Merkel is speaking loudly and clearly that she is not ready to agree to the issuance of common Euro-area bonds.....Those would be bonds denominated in Euros and therefore payable by the members of the European Union. Seventeen countries use the Euro as a currency today." 

BAN SHORT-SELLING? Caller George in Tennessee said that many countries around the world are banning short-selling and wanted to know if that would be a good idea here. Bob said that he would not be for banning short selling, but he was certainly for re-instating the uptick rule.  It was  "happy hour for the bear raiders" when they removed it. 

WILL THE GOVERNMENT TAKE AWAY THE MORTGAGE DEDUCTION? Joe in California asked Bob if he thought it might be taken away. Bob said he thought it was "on the table" because it wass being discussed as one of the ways to close the budget deficit. 

WILL THE GOVERNMENT CONFISCATE GOLD, SILVER, PLATINUM OR CLASSIC CARS?  Joe in California said that in the 1930's when they confiscated gold, they did not confiscate silver or classic cars.  Bob said he had not seen any evidence that the government was going to move to confiscate gold.

Bob said: "If you recall what happened in the 1930's the confiscation had a purpose. The purpose was because they wanted people to use the green back, fiat currency. That was accomplished 7 or 8 decades ago. So there is no purpose to confiscate gold to encourage the use of fiat currency. People don't buy things with gold.....So I don't see any reason for the government to confiscate gold. The reason you hear about this mainly it's from gold coin sellers...don't be surprised if a gold coin are marked up 50 or 100% the day you buy it......You have a speculative metal and you have some people who are using gold as a hedge against fiat currency because they think fiat currencies are going to be worthless.....It's virtually impossible to forecast the price of gold because you have this speculative furor out there right now that's dominating the market price in gold."  (Bob said the same applies to silver and platinum.)  

WHAT HAPPENS TO ECONOMY IF INTEREST RATES GO UP? Bob said: "The reason you've  seen interest rates come down is because the economy is very sluggish....I do expect we'll finish out the year between 1% and 2%, so consequently we've seen interest rates come down because there is no risk that the rate of inflation is going to skyrocket. Core inflation over the past twelve.... is 1.3% and they are tolerating core inflation rate of up to 2%.....I think there's a lot of people that would be happy to see higher level of interest rates.....If the Federal Reserve were to raise the Federal Funds rate from 0 to 25 basis points, up to 100 basis points,  in response to a better economy, no, I don't believe that that would hurt an already improving economy which is probably a precursor to that kind of a policy change."

Bob's guest today was Bob Lutz, "Car Guys Versus Bean Counters: The Battle for the Soul of American Business."   (Honey EC: In Edit: After reviewing this guest interview, I decided it was mostly just rehashing the GM bailout and political posturing by both Bobs -- not worth the time to even summarize.)
  Moneytalk on demand and to go with Bob Brinker, is available for FREE audio/podcasting at KGO810 radio for seven days after broadcast.  I download and save all three hours, including the third hour guest-speaker. (The program is archived in the 1-4pm time-slots.) If you don't download it from KGO within seven day, it's available at bobbrinker.com by paid subscription. KGO Radio Sunday Archives

Friday, August 19, 2011

August 19, 2011, Bob Brinker Makes Another 1am Guest Appearance and Other Items of Interest

August 19, 2011.......................................(post and read comments for this article)

Item One:

Bob Brinker's middle-of-the-night appearance on WABC

Bob Brinker was a guest on Doug McIntyre's Red Eye late night radio show again. This is the third time -- to my knowledge.  Thanks to Rob from Pasadena for letting us know about it.

I listened to Bob Brinker's whole interview. Doug McIntyre asked a few questions and took questions from 3 callers. It seemed like a relatively short interview. Doug mentioned the Dow had dropped 417 points (August 18th)  and asked Brinker what that was all about.

Brinker said that there are "two key worries that investors are looking at right now." Americans really can't do much about the first one -- the worry about what is going on with  the European bank's lack of sufficient capital to overcome their exposure to the investments they have in places like Greece, Ireland, and Portugal and maybe Italy and Spain.

The second concern has to do with the growth rate in the United States economy. In the first half of this year, the economy only grew just under 1% annualized.

Doug asked Brinker about Bank of America. Brinker said he thinks it is in the "too big to fail" category, along with J.P. Morgan, Wells Fargo and Citigroup.

Brinker repeated what he said on Moneytalk about how Standard and Poors erred when they downgraded the Treasury credit rating -- and the proof is that people all over the world are "tripping over one another buying Treasurys."

Doug asked Brinker why he thought gold was on fire. Brinker repeated what he has said many times on Moneytalk. That it is a speculative metal, but is now being used by some as an alternative currency. He said they perceive it as safety, but whether or not it really is, remains to be seen. "It's worth what people are willing to pay for it and you can't go into Walmart and give them a gold bar, they won't take it,  it's not currency."

The rest of the interview was devoted to topics that Brinker has discussed on Moneytalk many times -- Glass Steagall, AIG, politics, etc.

If you want to hear the program, it is archived at WABC in the 1am time-slot on  August 19th. Here is the link.


Item Two: 
SUNCOR (SU)

Brinker first added Suncor to his off-the-books list of recommended  "individual issues" in May 2009. His latest advice to "hold" was in the June Marketimer.  Suncor did very well over the past couple of years, getting into the mid $40 range, but it closed below $30 today.  Another  Bob Brinker recommendation round-trip:



Item Three:

A  Case of Mistaken Identity

Anonymous sent this post to the comments section (LINK) 
DeleteAnonymous said...
Are you sure Jr. writes the fixed income letter. I checked at the Arlington Heights library website and found this: ..... The Brinker Fixed Income Advi$or We now have a subscription to the Brinker Fixed Income Advi$or, a monthly investment letter that covers a variety of fixed-income topics including U.S. Treasuries, Certificates of Deposit, Municipal Bonds, No-Load Mutual Funds and Exchange Traded Funds. The investment letter also includes taxable and tax-exempt model portfolio recommendations for a variety of risk profiles. The editor of this letter is Bob Brinker, the host of the weekend financial radio talk program Money Talk. You can find the Brinker Fixed Income Advi$or and all of our investment newsletters in the Business Center.
August 19, 2011 12:57 PM
Photocopy:

I answered: So even educated librarians are victims of the Big Brinker Identity Deception, where slowly but surely the reputation of the first one is absorbed by the second one.

To answer your question: Yes, I'm positive. But to find that out for sure, one has to be computer savvy and  many older, retired people are not.....

And one has to dig down deep on the fixed income advisor website to find the whole truth because Jr has put a red herring up front which only says that Robert M. Brinker is the publisher. How many know the initials of the two Bob Brinkers are different?

Here's your proof. As I said, it's not easy to find on his website:

Robert M. Brinker, CFS
Editor & Publisher

Robert M. Brinker has been the editor and publisher of the Brinker Fixed Income Advisor since the inaugural issue in April 2005. The Brinker Fixed Income Advisor monthly investment letter covers a variety of fixed-income related topics including U.S. Treasuries, Certificates of Deposit, Municipal Bonds, No-Load Mutual Funds, and Exchange Traded Funds. The investment letter also includes taxable and tax-exempt model portfolio recommendations for a variety of risk profiles.

Robert earned his Bachelor of Science in Business Administration from Old Dominion University. He then went on to earn his Master of Science in Information Systems from the University of Colorado. Robert earned his designation as a Certified Fund Specialist © from the Institute of Business & Finance.

Lisa J. Brinker
Editor

Lisa J. Brinker has been an editor of the Brinker Fixed Income Advisor since the monthly investment letter began in April 2005. Lisa earned her Bachelor of Arts in English and German from Old Dominion University. She earned her Master of Arts in Linguistics from the University of Colorado.

Robert J. Brinker
Consultant

Bob Brinker has been a consultant to the Brinker Fixed Income Advisor since inception. He has more than twenty five years of investment management experience. He is the host of the weekend financial talk program MoneyTalk. In addition to hosting Moneytalk, Bob Brinker publishes Marketimer, his monthly investment newsletter.
Mr Pig added the humor 
Blogger Pig said...
How many know the initials of the the Bob Brinker's are different? ...... Holy Initials, BatBee. What a dastardly deed and diabolical plan to defraud Goobers and Geezers. Do you think they sleep well at night doing this just to make zillions of dollars?
August 19, 2011 3:27 PM

One more item:

DanG's prediction for Sunday's show
 Delete
Blogger Dan G said...
Bob will have a tough time explaining the market this weekend...if he dares to come on. ..... But here's my prediction. He will claim that the current action is just a "re-test of the lows", and he will be prepared to call the exact bottom as it occurs...but only in a "special bulletin", so get those $185 checks in the mail pronto!
August 19, 2011 12:48 PM

Thursday, August 18, 2011

August 18, 2011, Review of Bob Brinker's Stock Market Advice

Posted August 18, 2011....................................(post and read comments)

Will Bob Brinker's Marketimer stock model portfolios ever get back to where they were four years ago?  Will they ever regain the 57%+  losses suffered during the 2008-2009 mega-bear market?

Brinker's model  portfolios I and II are still worth less than they were at the stock market all-time-high in October, 2007.

As of October 31, 2007, portfolio I was worth $302,561. According to the  Brinker's Marketimer website, portfolio I was worth $286,390 on 7/31/2011.

As of October 31, 2007, portfolio II was worth $241,994. According to Brinker's Marketimer website, portfolio II was worth $235,517 on 7/31/2011.

(Brinker's balanced portfolio III is $11,000 higher than it was October 31, 2007.)

Brinker likes to hearken back to his 1030 buy-signal in July, 2010, and brag about how much the S&P has gained since then.

For awhile, when the market was making great gains in 2011, he would talk about that. Then as the S&P gave back its year-to-date returns, Brinker started gauging the "correction" from the highs of 2011. I can't remember the last time he mentioned the S&P 2007 all-time-high at 1565.

While his model portfolios are fully invested (since 2003!), Bob Brinker has been recommending dollar-cost-averaging "on weakness" all along. So I guess if someone robs a bank or his great Aunt Tillie dies, he might have some new money for the market. Otherwise, how ridiculous for Brinker to now be dangling the carrot of a "new money buy signal." 

Three weeks ago on Moneytalk (S&P at 1290) he bragged that he had been buying. But remember that he never advised his subscribers to raise cash. Indeed, the last time he told Marketimer subscribers to raise cash was year-2000, and that was only 65%. So how can any intelligent person take the man's market-timing seriously anymore? The mind boggles.


In the August 2011 issue of Hulbert Financial Digest, in the "Overall Performance Scoreboard," Bob Brinker's Marketimer is not in the top-7 over 5-years or over 1-year.  

In order to find Bob Brinker's Marketimer, you have to go to the 20-year time slot where he ranks 6th. (Is that why Hulbert lengthened his list to include 7 instead of 5, like it was for so many years?)

(Brinker Fixed Income Advisor ranks 25th in the 5-year time slot - before Hulbert "adjusts for risk.") 

So to summarize where Brinker stands on the stock market right now:  All model portfolios remain fully invested.  He forecasts S&P 1400's "going forward," and  recommends dollar-cost-averaging for  new money. 

Sunday, August 14, 2011

August 14, 2011, Bob Brinker's Moneytalk: Summary, Commentary, Excerpts and Discussion

August 14, 2011...........................................(post and read comments)


Bob Brinker hosted Moneytalk today. Bob's comments summarized, paraphrased or quoted:

STOCK MARKET....Bob  said: "Well, the roller-coaster was open for business in the canyons of Wall Street. And what a roller-coaster ride it was....When you look at the indexes, the Dow for the week, down 1 1/2%. The S&P for the week down 1.7%. It doesn't look especially volatile but it was......Couple of big down days, couple of bid up days, and I mean huge volatility.....A two-day rally on Thursday and Friday was really one of the largest two-day rallies we've seen in many a moon.  The S&P 500 stands 13 1/2 % below its closing high for the year, and it's been a correction teenager since the 8th of August - Monday of last week.....It was volatility on steroids. What does that do for investor confidence? Probably nothing good. People look at that kind of volatility and say that's crazy and who can blame them."

Honey EC: Bob's clever, but beware. Everything he said was true, but it's what he didn't say that changes everything.  When the S&P was 1292, he said he had been buying (certainly not for Marketimer model portfolios. They remain fully invested). And he bragged that some listeners had been taking advantage of opportunities to dollar-cost-average. Of course, the market dropped like a rock the very next week. He also bragged how he had advised callers not to sell because of the debt ceiling crisis unless they wanted to buy back at  higher prices. As you read this from July 31st Moneytalk, remember that the S&P now stands at 1178.81, and that is after two huge up days last Thursday and Friday:
July 31st, Bob said: "Remember we had a caller when the market was at 1268 at the end of June who asked whether he should sell out of the market because of the debt ceiling debate......Of course, the market is now at 1292, a couple of percent higher than when that call came in at the end of June. So this is what happens. If that individual would have sold out at 1270 at that time, he would be faced now with either sitting it out or re-entering at a higher level."

Brinker's "buying-opportunities" defy logic, but he continues to sell newsletters based on his market-timing ability.  One has to be impressed with the SILLY SCHTICK of being fully invested, dollar-cost averaging regularly,  and still looking for "buying-opportunities." The only possible way that one could take advantage of them is if he/she came into money through rare occasions, like selling a home or inheriting a bundle. 

The truth is that any subscribers or listeners who actually FOLLOW Bob's ongoing advice are only recouping LOSSES when the market bottoms and turns up.  How amazing that he uses market bottoms (which he almost never calls) to pad his reputation, when the only advantage to them for his followers is to gain back money they LOST. 

 INTEREST RATES...Bob said: "And then when you look at interest rates, you say, wha' happened? Who let the dogs out? Three month Treasury Bills 0.1? Say again? No, I don't want to hear that number again. That's too low. Six-month Treasury Bill 0.7? These are annual yield boys and girls. One year Treasurys 1/10 of 1%? You mean I have to own a Treasury for a whole year to make 1/10 of 1%? Yes.....Two year Treasurys, 2/10 of 1%.  Five year Treasury, under 96 basis points.....These are rates to write down, they are historic."


IMPLIED TREASURY INFLATION RATE...Bob said: "Ten year Treasury yielding 2 1/4. Ten-year Treasury Inflation Protected with a negative yield of 3 basis points. That gives you a ten-year Treasury implied inflation rate of 2.3....... 2.7 on the thirty year."


TRIPLE-A MUNICIPAL GENERAL OBLIGATIONS....Bob said: "Gilt-edge quality triple-A, 2.3% average yield. If you are in the 35%  to federal bracket that is the equivalent of 3.5%."

LOOKING AT INTEREST RATES GOING FORWARD:  Bob said: "If you can believe the Federal Reserve, rates are going to be low.....The Federal Open Market Committee convened on Tuesday and issued a statement....They dropped from their language 'extended period of low rates.' ....They replaced it. They said they'd keep the Federal Funds rate at exceptionally low levels for quote,  'at least through middle 2013' unquote. ....They've never done that.....Obviously they're encouraging investors to take some kind of risk, whether it's going out longer term on curve or buying something besides a Treasury....."

ECONOMIC GROWTH:  Bob said: "What they  (the Fed) are expecting here is slow growth. Now many of you know I've been expecting slow growth. In fact, in the August investment letter.....we said that we had reduced our growth forecast to 1 to 2% for 2011.....That's very slow....It's not that it comes as a surprise, we already expected that we'd have slow growth. The surprise element is that the Fed would go out and say, basically for almost two years, they are going to keep rates close to zero."


Honey EC:  Yes indeed, Bob did reduce his growth projections -- by quite a lot!  Kirk Lindstrom wrote:
"In the July 2011 Marketimer, Bob Brinker projects US GDP will grow by two to three percent in 2011. He says he is "slightly more conservative than the revised Federal Reserve forecast of 2.7% to 2.9% growth in 2011."

BRINKER'S MARKETIMER SPECIAL MESSAGE:  Caller Tom from Nevada said: "I believe that your newsletter probably came for  publication electronically before the S&P downgrade because it wasn't reflected in that particular newsletter. So what are your thoughts regarding what Moody's and Fitch might do in their coming ways. I know they stuck with the triple-A, but do you think they might downgrade as well and how might that affect the market?"  

Bob answered:  "I appreciate you raising the question of the downgrade, because I think this has been the most misunderstood item of the week in the financial media. Chances are that you saw in the special subscriber message that we posted online for subscriber access early on Wednesday of this week. We did comment on that. And the comment we made on that was specifically what I just said, which is that this whole issue of the downgrade, I think has been misinterpreted in the financial media. And what I mean by that is, I think that this has really not been an underlying cause of the volatility that we saw this week to any material degree. I think the underlying cause of the volatility we have seen this week is quite obvious. 

And I mentioned it in the special subscriber message that I put up on Wednesday. And that has to do with a couple of things. One of them is certainly concern about the economy. That's a legitimate concern, 1 to 2% growth. The forecast that I have in the investment letter.......The other is what's going on with the sovereign debt situation and what's going on with the banks in Europe......Particularly with regard to Italy and Spain....

The other concern about the downgrade is off-base. I'll tell you why. When you look at the yields on  these securities, you can see that people are not worried about them not pay off or collecting their interest or their principal at maturity...... Nobody in their right mind would lend money to the Treasury for 30 years at 3.7% if they feared a default.....There is no fear whatsoever of default in the yields. Remember this is money coming in all around the world into Treasurys, not just Americans.....So what people are saying is Moody has a triple-A, Fitch has a triple-A, S& P has a double-A plus..... that's a just a notch below triple-A.....And I think people look at those ratings........and realize a lot of politics involved in this....And they don't see a default risk....."

Honey EC #1:  Thanks Bob, for  covering all of those special message points for the radio audience!  It won't cost you anything because you are dangling a much bigger bait, aren't you? It should be illegal, but it's not. I know you believe in Karma. I don't.  But I believe in ultimate just-desserts, and I know that selling a pig in a poke hurts people.

Honey EC #2: It is important to remember that Bob rarely sends out messages to subscribers (this time, he also sent it to many former subscribers.)   The last time he sent out a bulletin was in January 2009.  Those who acted on that "special" message, had the misery of riding the S&P down another 175 points to get to the final bottom. Excerpt from January 2009 bulletin: "We regard any weakness in the low-to-mid 800's S&P 500 Index price range as an opportunity to buy into the stock market at favorable price levels." That was Bob's 5th and final "buying-opportunity" during the 2008-2009 megabear market. His buys ranged from the mid-1400's to the mid-1300's, then the low-1200s as the market declined. That was no roller-coaster. That was a downhill ski-jump gone wild.

 S&P  TREASURY DOWNGRADE:  Bob said: "No question that we saw the financial media talking a lot about that rating downgrade this week. And I really want to go on record as disagreeing with that view that that was a primary reason for the volatility. I think it's connected almost entirely with what's going on in economic growth concerns there and what's going on in Europe.....Money is pouring into Treasurys at record rate.....and that pushes the yields down."

NOT ENOUGH FISCAL RESPONSIBILITY IN EXECUTIVE BRANCH: "Bob said: "I've been concerned that there is not enough concern in the executive branch of government right now. And as for congress, they are responsible for appropriating all the money, as you know.  They've done a terrible job of balancing the books. I mean a country that is taking in $2.3 trillion and spending $3.7 trillion....It doesn't even sound possible. And yet that is the way we are running the country right now."

SUPER COMMITTEE OF TWELVE:  Bob expressed great concern that they will not be able to reach any agreements, and that they will be influenced by lobbyists.  


JOBS NUMBER:  Bob said the jobs number on (August) 5th was a decent overall number of 117,000. The government lost 37,000 more jobs -- federal, state and local. Private sector gained 154,000.

VANGUARD GINNIE MAE FUND (VFIIX): Bill asked Bob if Ginnie Maes would be affected by the downgrade. Bob told him that Ginnie Maes are now trading at an historic high of $11.22 a share, so obviously no one was worried about default. He also said that the payout rates are record low.  He said that he had been recommending the fund basically "forever." 

Honey EC: Bob recently lowered Ginnie Mae holdings in his (fixed) income fund and his balanced model portfolio III. In its place, he added DoubleLine Total Return Fund, Wellesley Income Fund and increased Vanguard High-Yield Fund (VWEHX). 

FIDO KNOWS AND DESERVES A TREAT:  Caller Beck asked a question about the Fed and before Bob could answer, a dog could be heard barking loudly in the background.

Bob went ballistic with excitement and yelled: "Fido is with me. Fido already knows what I'm going to say. God bless him. God bless that dog. What a smart canine we have in Concord. I love that canine. He already knows, but you don't. I'll tell you what....The Fed did what they had to do.... But here is what I was going to say when Fido anticipated what I was going to say. He floored me. He floored me when he did that. He just floored me, doesn't happen every day.......Now I want you to do something for me. I want you to give Fido a nice cup of pinkberry tonight......Some of these canines, they go nuts for this pink berry. So your canine has already earned a large pinkberry tonight, or some alternate treat." 


Honey EC: I guess Bob loves dogs. LOL!!!


  Moneytalk on demand and to go with Bob Brinker, is available for FREE audio/podcasting at KGO810 radio for seven days after broadcast.  I download and save all three hours, including the third hour guest-speaker. (The program is archived in the 1-4pm time-slots.) If you don't download it from KGO within seven day, it's available at bobbrinker.com by paid subscription. KGO Radio Sunday Archives

Friday, August 12, 2011

August 12, 2011...Bob Brinker Emails Former Subscribers About No-Bulletin Bulletin

August 12, 2011...............................(read or post comments)

.Several people have sent emails and others have posted comments saying that they no longer subscribe to Bob Brinker's Marketimer but  that they had received an email from Marketimer stating that Bob Brinker had issued a special bulletin on August 9th.

Some of those people said that they haven't subscribed for several years and they wondered  why Bob Brinker had sent an email about a special bulletin now? That's a very good question. Why would he notify former subscribers?

And why would Bob Brinker bother sending his subscribers a special bulletin for no apparent reason?   We know he considers radio listeners "freeloaders"  (he has said so)  but what about subscribers? Why treat them so contemptuously?

Let's look at Brinker's latest Moneytalk stock market-timing prognostications and see if we can find a clue.    On July 31st (when Brinker was last on the show), he said this:
"Remember we had a caller when the market was at 1268 at the end of June who asked whether he should sell out of the market because of the debt ceiling debate......Of course, the market is now at 1292, a couple of percent higher than when that call came in at the end of June. So this is what happens. If that individual would have sold out at 1270 at that time, he would be faced now with either sitting it out or re-entering at a higher level.......And certainly we've seen some nice dollar-cost-average opportunities this past week in the market. I must admit on Friday I was taking advantage of some of the bargains that were out there with the market ............I know many of you also have been taking advantage of  the dollar-cost-averaging opportunities on short-term weakness - and certainly it's minor. I mean, 5% is really noise when you look at the market over time.......If you've been listening to this broadcast, we have not been part of the panic-brigade here on Moneytalk."

The S&P 500 Index has been down  as much as 18% from the year-to-date high (1363.61 on April 29th).  (Brinker likes to hearken back to the year-to-date numbers on Moneytalk.)   However, in  the past couple of days there has been some recovery, so the S&P is now down "only" about 15% from the high of the year. 

But in the past two weeks, the stock market has been on a frightening roller-coaster ride.   As of now, the S&P 500 Index is down 8.78% from the day that Brinker said he had been buying bargains and had bragged  about his listeners also "taking advantage" of the (at that time) 5% dip. 

So rather than giving you my conclusions, let me just ask some questions:
* How embarrassed is Brinker that the market dropped another 10% almost immediately after he bragged that he had advised callers not to sell, and said he was "buying bargains"? 
 * How many listeners and subscribers bought stocks first thing Monday morning after Brinker recommended it on Sunday and have  lost at least 10% of their money? 
 * Was there a rash of Marketimer cancellations when the market started dropping drastically?

* Was this  bulletin fabricated as a  "tough cheese" message to subscribers who were bugging him for reassurance and advice or for some other reason?

* Was this an opportunity to entice former subscribers to log in, and out of fear and anxiety, subscribe just to read this "bulletin"? 

 

Sunday, August 7, 2011

August 7, 2011, Bob Brinker's Moneytalk, Summary, Commentary, Excerpts and Discussions

August 7, 2011..............................(post or read comments)


Bob Brinker was not on the air today.  Lynn Jimenez was the fill-in host. She is a business reporter for KGO810 radio.  Lynn mentioned that she was getting emails during the program today. Here is her address: lynnjimenez@kgoradio.com

WHERE IS BOB BRINKER TODAY?  

Caller Larry asked: "Where's Bob? Like I'm a Marketimer subscriber. I would have liked to talk to him today."  

Lynn replied: "Oh, you know what. It never fails, doesn't it. I really hear what you are saying. Umm, Bob had this day off scheduled for a very long time. And it just never fails that the minute you get a break, boom, everything pops. I think that we were all hoping that there would be a better resolution to the debt limit issue and that this wouldn't have happened."

Honey EC: Over the years, there have been numerous times when "boom, everything pops" that Brinker has  conveniently been gone that weekend, especially if he had dug a hole for himself and there was no way for him to save face. I'm betting that he's hoping for some change by next week so that when he returns the market will look better.

POLITICAL VIEWS ON MONEYTALK:  

Caller Mike from Little, Colorado (Home of Marketimer) said: "The show you and Bob run is like the show for the independent, progressive voter,  for us normal people. That is why I like it so much."

Lynn giggled and exclaimed"Progressive? Oh Wow!  I've never been....okay."


Mike continued:  "There's Fox on the one wing and I don't know what's on the other, but you are right down the middle for normal people. A breath of fresh air, I love it."

Lynn with great joy said: "Thank you!"

Honey EC: Mike thinks Independents and Progressives are the same?  And Progressives are right down the middle, normal people? LOL!  My goodness,  Lynn was almost beside herself with joy over this caller from the home of Marketimer and  BB Jr's fixed income newsletter.   However, it's interesting that he graded  Moneytalk  as a political program. I thought it was supposed to be "all about the money."  I won't be covering Lynn's  progressive political points of view.


VANGUARD GINNIE MAE FUND (VFIIX) AND VANGUARD INFLATION-PROTECTED (VIPSX):


Caller Mike from Littleton (above) asked:  "I like TIPS and GNMA's. How safe are they going forward?"

Lynn's answer: "I don't know. I think Ginnie Mae's can be downgraded too. We are going to learn more from Standard and Poors tomorrow.  First of all, I would say that almost any US debt is safe, even with what's going on, money pours here, not in Europe. And we are much more transparent than any Asian bond. So I think we're okay on those. I just don't know what effect it's going to have on Ginnie Maes."

Honey EC: Brinker has sold all of the TIPS Fund from his Marketimer model portfolios.  And he has sold the Ginnie Mae weightings down to 15% in the off-the-books fixed income portfolio that now contains some stocks. And he sold the Ginnie Mae weighting in the Marketimer balanced - portfolio III down to 20% and added Vanguard Wellesley Income (VWINX), which contains about 38% stocks.

 VANGUARD HIGH YIELD BOND FUND (VWEHX) 

Caller Jack said: "I have about $90,000 in Vanguard high yield bonds....So far the high-yield has performed pretty well over the last few years.....I was told that the high-yield bonds act more like a stock, but I'm still nervous about the high-yield part of it." 

Lynn asked: "Let me ask you something. It would seem to me that since it's ahigh-yield bonds that it's primarily corporate bonds. Is that correct? (caller: "That's correct.") Alright. Corporations right now have an awful lot of cash on their balance sheets. And because of what they went through during the meltdown and the threat to the bottom line for so many of them, they had to clean up their acts.....So I would say that corporate bonds may continue to be very solid investments. What has been downgraded here is the federal debt.....I would think that your high-yields should be okay....but I'm not an expert.....I think you should take a deep breath and I think you're going to be okay."

Honey EC: I was astonished at Lynn's total lack of knowledge about the high-yield bond funds. 

DOUBLE LINE TOTAL RETURN  BOND (DLTNX)

Mike added another question: "How about the total bond market." 

Lynn replied: "I think the same thing. I'm not sure, I don't know.  If the intermediate is more tied to federal debt, there you may see something change. But you know, yields are going to go up, and that can only be good for you, right?"

Honey EC: First let me say that if yields go up, then net-asset-values go down on bond funds. So for Lynn to make the statement that it "can only be good" is beyond ignorant, in my opinion.   

Also, Mike had to be referring to the 20% weighting of Double Line Total Bond Fund that Brinker added to his Marketimer off-the-books income portfolio back in May, 2011. There are no other total bond fund holdings in any of Brinker's portfolios.

GOLD and SILVER: 

Caller Jason said: "I bought nothing but silver, I like silver over for the last ten years and I'm up over 800%. Gold and silver always was real money."

Lynn interrupted: "Jason, I'm going to cut you off here, I'm not one of those people who talks about religion on the radio......To me that's an ideology."

Jason replied:  "Please Lynn, one second.  If a person in the 1970's started working and bought one ounce of gold a month at $30 a month when Nixon took it off the gold standard, and put it in their retirement account, they would be sitting as multi-millionaires. They would be able to touch their assets whenever they wanted to without any penalties -- without any onerous tax burden. And they would be in a much better position, my parent's generation, because I'm 35 (unintelligible)....."

Lynn interrupted: "And where would they have stored it with no taxes. I mean, please....."

Honey EC: Wow! If Jason is right (I didn't check his numbers), that it a huge deal. Brinker has always been negative on buying gold for an investment even though he added it to his off-the-books list of individual issues back in May 2009 -- with no comment whatsoever about how much to buy.

At least three times today, Lynn said that talking about gold was "talking about religion." I guess her foray into gold timing back-fired on her. In February she made the statement that it was too late to buy gold.  Oops...

STOCK MARKET: IF YOU GOT OUT OF THE MARKET TWO WEEKS AGO, YOU ARE DOING FINE:

Lynn said: "Don't panic. That's the key. If you panic, you are totally out of luck. If you got out of the market two weeks ago, you are doing fine. If you are in it right now and you don't need that money for two years, stay in and let it recover."

Honey EC: July 17th on Moneytalk,  when asked this: "Given this debt ceiling crisis and what I see as a potential stock market drop for who knows how long, should we move that money into money market accounts for a little while?"  
  Brinker answered:  "We had this same question two weeks ago when the S&P was around 1270. And now the debt ceiling debate has heated up dramatically in the last two weeks and the S&P is up to 1316. Showing a total return year-to-date of close to  6%.  So I will repeat what I said to that caller at 1270, asked virtually identical question....I said to that caller, you need to be prepared, if you do that,  to re-enter the market at a higher level. Now if that caller re-entered today, he would be re-entering about 46 S&P  500 points higher than he exited the market two weeks ago....I have not exited the market until I see a resolution of the debt ceiling issue because I already know....what's going to happen...."
And in the August 2011, Marketimer, Brinker said: "We are maintaining our fully invested position in our model portfolios in anticipation that our S&P 500 target in the low-to-mid 1400s range can be achieved going forward." 

IS BRINKER CORRECT NOT TO RAISE ANY CASH THIS TIME? 

Caller Steve from Mountain View, who also called Lynn on February 13, 2011 (Thank you Jeffchristie, for tracking that down), talked about the S&P downgrade and ended his comments by saying this: "Well, Bob Brinker still thinks we should stay fully invested in the market, so I hope he's right this time."

Honey EC:  Indeed, let's join Steve in hoping that Brinker is "right THIS time."  Last Sunday, Brinker  was bragging that he had told callers not to sell stocks because of the debt ceiling issue unless they were prepared to buy back in at higher levels or stay out altogether.    He also  said that he had been buying stocks.  

Lynn's guest-speaker was Ken Rogoff, co-author:  "This Time is Different: Eight Centuries of  Financial Folly" 

Moneytalk on demand and to go with Bob Brinker, is available for FREE audio/podcasting at KGO810 radio for seven days after broadcast.  I download and save all three hours, including the third hour guest-speaker. (The program is archived in the 1-4pm time-slots.) If you don't download it from KGO within seven day, it's available at bobbrinker.com by paid subscription. KGO Radio Sunday Archives

[In Edit, August 8, 2011]  Bob Brinker said this two weeks ago:  "I said to that caller, you need to be prepared if you do that, [sell stock] to re-enter the market at a higher level. Now if that caller re-entered today, he would be re-entering about 46 S&P  500 points higher than he exited the market two weeks ago....I have not exited the market until I see a resolution of the debt ceiling issue because I already know....what's going to happen...."