Google
 

Monday, September 10, 2007

Honeybee's Commentary and Brinker Quotes September 8,9, 2007

.

Honeybee’s Commentary on Moneytalk Saturday, September 8, 2007:

.

Firstly, let's talk about some of the things Bob Brinker did NOT talk about today. He did not talk about the stock market activity from the past week and certainly didn’t mention Friday’s 250 point drop (a caller mentioned it, but Brinker ignored the comment). Of course, he is on record as saying that he thinks anything up to 10% correction is “health-restoring” for the stock market. In the good old days before Y-2000, Brinker would have offered some stock market commentary and perhaps some reassurance to his Moneytalk listeners.

.

Second, he did not talk about his recent declaration that a “secular bear megatrend” had ended a year ago. (I’ll post more information about that later.)

.

In the opening monologue, Brinker talked about the jobs report at length and he relentlessly slammed Ben Bernanke, even calling him a “rookie” again. Brinker is outraged that the Fed has been targeting inflation and feels that they raised interest rates too high and have not lowered them quickly enough.

.

Brinker believes that the Fed will be “dragged kicking and screaming” into lowering the discount rate on September 18th. The only thing that Bob Brinker is NOT certain about is how much they will lower rates--1/4 or 1/2 of 1%.

.

OTOH, Bob Brinker says that there is no chance that we are headed for a recession, which he defines as two consecutive quarters of declining GDP.

.

Caller John asked Brinker what he thought about cutting equity allocations. Bob Brinker said that was NOT his recommendation. (Bob Brinker is very bullish on the stock market right now.)

.

Caller Matt, a subscriber who follows Brinker’s Model Portfolio Three, asked Brinker about moving his money out of the “inflation protected” fund and into a money market fund.

.

Brinker said that the fund he recommended was near an all time high. Brinker said that while it was not his recommendation, if the caller wanted to make that kind of change in Portfolio Three, he would advise going into GNMA’s instead of a money market in order to benefit from expected interest rate cuts. (Brinker recommends Vanguard Inflation-Protected Securities (VIPSX) in his fixed-income portfolio and in Model Portfolio Three.)

.

Caller David who is in real estate tried to politely ask Brinker not to be so negative about the status of the real estate market. It seemed to go right over Brinker’s head. Brinker said the “housing recession” is well under way and may extend into 2008.

.

A caller asked about buying gold. Brinker said that if the caller was expecting “run away inflation” and wanted to buy gold, that he would advise using the exchange traded fund, GLD as a way to invest in gold in the stock market. Bob Brinker said he regards “hyper-inflation at this time as impossibility.”

.

Caller Jim said he agreed with Ben Bernanke about inflation. That is not something Brinker wants to hear, so he replied by saying that was “nonsense.”

.

Another caller raved about how right Brinker has been about inflation calling Brinker a “really sharp cookie.” Bob Brinker replied, “Well, you know, if you’re a listener then you know it’s completely against my nature to brag, right?”

.

Brinker’s guest today was Charlie Maxwell.

.

Moneytalk Caller Excerpts Sunday, September 9, 2007:
.

Dennis in Michigan: “After the release of the job numbers on Friday, do you think we are getting dangerously close to recession and at least a sharp market downturn?”

.

Bob Brinker: “Well, we certainly have a slowdown in the economy – that we know and that we have expected. Now in terms of the initial 4000 decline in jobs in August, that is not enough to give you a recession. You need a lot more than that. You need several months of huge decline in employment to give you are recession. Remember a recession is defined officially as two consecutive quarters of down real GDP. Now let’s look at the numbers: First quarter real GDP 0.6 positive, so that was not a recession quarter--second quarter real GDP up 4%, which gave the first half an increase of 2.3 on average – certainly no recession there. So we are looking for a positive number on third quarter real Gross Domestic Product at this time, and so we don’t have the material in hand to forecast a recession, so we can’t do it.”

.

Dennis: “Do you think the stock market is going to survive long enough for the Fed to react?”

.

Bob Brinker: “Oh, I think the stock market is going to survive a hundred years from now. I don’t think the stock market going out of business – no.”

.

Dennis: “Do you think in the short-term?”

.

Bob Brinker: “What about the short term?”

.

Dennis: “What you think about the short-term of how the market is going to react to this?”

.

Bob Brinker: “Well, I don’t think there’s anything that the market doesn’t know. The market knows that the jobs number was negative for the month of August. The market knows that there was a downward revision for June and July. The market knows that the Fed has been very slow to change its monetary policy. I mean, I don’t think there’s anything out there that is not in the market. I think that the market is well aware of what has been going on with the economy and what has been going on with the Federal Reserve. And I think that if you believe there is definitely going to be a recession then you have to react to that accordingly. But I sorry, I cannot agree with you, I don’t believe we are in for a recession based on what we have in hand right now. I don’t think we have the economic fundamentals right now that would produce a recession. We have a housing recession—that we know, but to have a general recession throughout the economy that would drive real Gross Domestic Product into negative territory for two consecutive quarters. Wow I mean that would be a leap of faith to take a 4000 month decline in new jobs in August and to project that into a recession -- that would be a gigantic leap of faith in the direction of a recession that I’m not willing to make. Moneytalk on…………..”

.

Honey Sez: Bob Brinker is very adept at avoiding any questions about his stock market views going forward. He dances around those questions so well that he makes Fred Astaire look clumsy. :) Actually, since Y-2000, he has cleverly talked about the stock market only as it appears in the rearview mirror. One might even think that he is using his National radio program as a six-hour infomercial.

.

Was this Sunday call a setup? I report--you decide:
.


Bruce in
Baton Rouge told Brinker that he'd be retiring soon and
wanted to put his money--about $1.5M (Nice number, did Brinker's
ears perk up?)--into Vanguard Mutual Funds or possibly American
Funds. He said he was looking for "good, solid returns," but with
"maximum safety" and wanted to know what direction Bob Brinker thought
would be the best.
.
Bob Brinker asked if it was tax-deferred money (yes) and then told
the caller that he would be VERY comfortable with his using the
Total Stock Market Index for stock market allocation and Vanguard GNMA
Fund for bond allocation.
.
Then Bob Brinker did a FREEBEE PITCH for his newsletter:

.

"As you well know I make recommendations in my letter about funds as well. But that depends on what investment objective you are taking. I mean if you are taking a balanced approach with the money, it would be the approach that I described. If you are going to take a different approach, you could look at the Model Portfolio, select an investment objective that works for you."


Bruce ended his call to Brinker by saying a very strange thing in light of the fact that Brinker does NOT recommend any American Funds in his newsletter: Bruce said: "Yeah, well, I like them both, I really do. That explains them-good newsletter."

.

Excerpts from Bob Brinker Moneytalk Monologue About "Tone of Callers," Sunday, September 09, 2007
.

Bob Brinker said: “I want our Moneytalk listeners to take note of the tone of the calls on this weekend’s Moneytalk broadcasts. Sometimes the tone of the calls can be fascinating. This weekend we are getting calls from people who want to borrow on their 401Ks to pay off $50-$100,000 in credit card debt. This weekend we are getting calls from Moneytalk listeners who want to know what they should do when their mortgage company goes bankrupt. One caller wanted to know what she should do if her mortgage company – Countrywide Mortgage – Countrywide Financial goes bankrupt, and of course, Countrywide is not bankrupt.

.

We’ve had calls this weekend asking about what happens if their broker goes bankrupt. Listen to the tone of the calls this weekend. Listen to the mind-set of the Moneytalk listeners this weekend. This is all a direct result—direct fallout of the sub-prime mortgage meltdown and the housing recession. People can see now houses in general are not going up in value anymore and some of them are going down. People can see now, because we had a call recently from someone that now owes more money on the mortgage—he owes a $150,000 on his mortgage, but his house is only worth $137,000—so he’s in the red $13,000 right now and maybe more if he sold though a broker. And so all of this is direct fallout from what’s happened in the housing recession, from what’s happened in the mortgage debacle—especially in the sub-prime and from what’s been happening even more recently in the jobs report. Notice how people react very rapidly to the news of the day.”

.


Honey sez:
Sometimes the mighty fall fast and hard when they become too full of themselves or arrogantly sound like "know-it-alls" the way Bob Brinker did on Sunday when he pompously announced that "we only went to Iraq for the oil." Bob Brinker got slammed with a BIG DOSE OF REALITY just an hour or so after he said that when he asked his Moneytalk guest, Lieutenant Colonel John Nagl, an Iraq war veteran and author of a book about "counterinsurgency," if he thought that we went to Iraq because of oil.
.

Lieutenant Colonel John Nagl replied:
.
"The reason we went into Iraq had nothing to do with oil and everything to do with the thought that Saddam Hussein had weapons of mass destruction and had proven that we he was such an unstable regional influence that it was very likely that he would either use those weapons of mass destruction against us or provide them to enemies of the United States who would then use them against us or our friends. However, though I don't think oil had much, if anything to do with our initial decision to invade, I think it had a great deal to do with why--what happens in Iraq over the next five years, ten years, fifty years will continue to matter to the United States. Iraq and its oil fields, and even more importantly, the oil fields of Saudi Arabia, which are adjacent to Iraqi territory are incredibly important to the whole world's economy. And this why a broader regional war in Iraq would be such a horrific risk--not just to us, but to all the countries of the world that depend on oil and the free flow of oil to make their economies go. So oil, I don't think oil was important in the initial decision to invade, but guaranteeing access to Iraqi oil and to Saudi Arabian oil is a national security interest of the United States, and will remain one for at least the next 50 years."
.

Immediately Bob Brinker said: "Dave is on the line......"
.
Honey Sez: Regardless of your political views or your views on the Iraqi War, IMO, it is very wrong for Bob Brinker to use his "bully pulpit" microphone to promote his own political PROPAGANDA.

.








6 comments:

Kirk Lindstrom said...

Is there a funny face icon I can post to show I am in awe of your great formatting? !!!!!

That is probably one of the best looking first blog posts I've read ever... now I have to figure out how you did such nice, fancy formatting!

"Bob Brinker replied, “Well, you know, if you’re a listener then you know it’s completely against my nature to brag, right?”"

LOL!

Anonymous said...

Honeybee's commentary is very astute:
Brinker is a legend in his own mind by making predictions after the fact.

In his recent newsletter, Brinker says, "The one thing that equity investors do not want to see is accelerating economic growth." Other than belatedly acknowledging the housing recession, he has not addressed the
possibility of a general recession which is the obvious issue. (His constant bedfellow, Jack Bogle says there is a 75% of a downturn).

Here's hoping that in this case, arrogance does not preceed a fall.

Anonymous said...
This comment has been removed by a blog administrator.
pat said...

That was a fun blog. I do like to listen to Brinker's show, but I don't take it as gospel.

Patrick f

Fasteddy said...

I didn't know Jack Bogle was making predictions about the market. I did read in his recent book, Little Book of Common Sense", that he was expecting lower returns than the past 20 years, say a 6 to 7 percent return vs the 13% or so we had the last many years. What specifically did he say about a downturn ? Did he say recession and when and where did he say this ? Thanks

Anonymous said...

To Fast Eddy Felson:

Sir John Bogle made his comments about recession(75%)during an afternoon interview on CNBC. However, I would not put too much credibility in his macro-economic knowledge.

Brinker and Bogle have stumbled recently in picking the bottom of the correction. I believe it is because they do not use indicators such as the 50 and 200 day moving averages.....data that millions of investors use. The S&P is currently bouncing between these two curves.(See IBD). If investors are disappointed in a 25 basis point cut next Tuesday, coupled with further comments about inflation, the tape will likely drop below the 200 DMA. If the FOMC cuts by 50 basis points and doesn't emphasize inflation, the tape will likely go above the 50 DMA. Below 1430 the market will probably continue to correct, leading to further buying opportunities later. If the market closes around 1490, the correction will likely be over.