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Sunday, October 21, 2007

Moneytalk Summary October 20, 2007

Brief Summary, Commentary and Bob Brinker Excerpts From Moneytalk, October 20, 2007

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Saturday’s opening monologue began with Bob Brinker explaining what his program “has always been about.” Brinker said: We talk about everything from investing in your 401K, or your 403B, to saving for all your future goals. And you can get that job done through knowledge. It’s the knowledge that empowers you to manage your personal financial future. That’s what it’s all about. We have no interest here in the get-rich-quick schemes. We’ll leave those to the sharks. We’re happy to get rich slowly, but that takes patience along with discipline….…..so that someday, you can arrive in the land of critical mass.”

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INFLATION NEWS: For September, CPI figures were "good." Core inflation rose 2/10 of 1%. Bob said there was more good news this week and this: “Now the year-over-year on core consumer price inflation stands at 2.1. But there’s a better gauge of core inflation -- the Personal Consumption Expenditure Index -- that’s only at 1.8 -- this despite the fact that we’re looking at a barrel of oil flirting with the $90 level.” Food was up 4 ½ YOY – effected by the ethanol craze. Medical care expenses up 4.6 YOY basis – that’s the second highest rate of inflation in the index.

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OIL IMPORTS: Brinker reminded listeners of the long gas lines in 1974 when people sometimes waited an hour to buy just a few gallons of gasoline. Brinker said that to this day, we still pathetically have to “cow-tow” to the Saudi Arabian royal family because after 33 years we haven’t gotten off the “Middle-East oil habit.” We import 12 million barrels per day—much of it from the Middle East. We get another 8 million barrels domestically. Brinker said that unfortunately, we don’t hear much about this subject from either Party. Among other things (nuclear), he believes we should be going into Anwar, but pointed out that politicians can’t even reach an agreement on that.
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http://www.politicalgateway.com/main/columns/read.html?col=59

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ECONOMIC GROWTH: Because of the pressure on the economy from higher energy prices, we are seeing “below trend growth"—acerbated by the housing recession.

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S&P 500 INDEX: Brinker said: “Now amazingly, despite all of this – albeit volatile, which is not that surprising, the S&P 500 Index today. sets at 1500. Now anybody hearing what I just talked about would say you must be joking. The S&P 500 Index is at 1500? Yes it is. Not only that, it’s only 4% off its record high which was registered in this very month of October. And so we’ve seen tremendous resilience in the stock market.”

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BONDS: Brinker said: “Quality bonds are acting extremely well as investors are fleeing risky credit holdings to get into quality credit. Who can blame them with the sub-prime meltdown and all that goes with it.”

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MODEL PORTFOLIO THREE: Caller Tom said he was a subscriber and asked how well Model Portfolio III might be expected to keep up with inflation during his retirement.
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Excerpt of Bob Brinker's answer to Tom's question: “Well if you take a look at that portfolio for the ten years – the last ten calendar years — complete calendar years through 2006, and I might add that portfolio is doing very well in 2007 as well with reference to its conservative balanced objective. But if you take a look at the last ten years, you have a 145% total rate of return on that portfolio. Now this is kind of unusual, but that portfolio for the last ten calendar years has actually beaten the total stock market index. That would not normally occur over the very long term because that portfolio has a good chunk of bonds in it. But it’s actually beaten the total market index for that ten year period by 145% versus 127% for the total market index. Again that has happened because of the fact that there was a period in there - a good solid long period in there in the early part of the decade when that portfolio was largely in cash reserves in terms of its equity position and as a result it benefited from that before it went back to fully invested on the March 11, 2003 buy signal.” (Honeybee sez: The portfolio that Brinker was advertising via this caller was 32.5% in money market funds between January 2000 and March 2003, and the remainder was in 25% VIPSX; 25% VFIIX; 5% European/International Funds; 12.5% Stock Mutual Funds.)

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FED, INTEREST RATES and FALLING DOLLAR: Brinker expects the trend of the dollar to be gradually lower and sees know reason to change that anticipation. He expects the Fed to decrease rates by ¼ of 1% at the meeting on October 30th and will be surprised if they did more than that. He does not believe it’s the Fed’s job to defend the dollar. How high can the Euro go versus the dollar? Brinker said it will have to be dealt with in Europe—they are the ones being hurt by it.

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FED’S JOB ACCORDING TO BRINKER: “The Federal Reserves mission is to support maximum sustainable economic growth consistent with low inflation.”

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SMALL CAPS: A caller wanted to know if we are “coming out of the small cap era” and should we now expect more growth in mid-cap or large cap. Brinker said he’d been hearing this theory every year for several years and like a clock, sooner or later the pundits have to be right. Brinker said that the way to stay away from that kind of thinking is to have a diversified portfolio. “For example, if you have the total stock market index today, you have close to ¾ in the large cap, about 15% mid-cap and about 10% small cap.”

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Most of the calls were about esoteric subjects, and unless one had similar circumstances to the caller, they were of very little interest. I had difficulty even getting the first two hours of the program because it was pre-empted for various reasons, so I don’t know who was the third-hour guest.

_____Honeybee

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11 comments:

Kirk Lindstrom said...

You said Brinker said:
"But it’s actually beaten the total market index for that ten year period by 145% versus 127% for the total market index. Again that has happened because of the fact that there was a period in there - a good solid long period in there in the early part of the decade when that portfolio was largely in cash reserves in terms of its equity position and as a result it benefited from that before it went back to fully invested on the March 11, 2003 buy signal.”

Don't forget that Model Portfolio #3 subscribers were told to put 20 to 30% of their cash reserves into QQQQ and that lost quite a bit.

It is a mystery to me how Brinker used every newsletter for many months after the October 2000 advice to buy QQQQ as high as $87 to tell subscribers to buy this ETF or related mutual fund, and yet he didn't account for it in his portfolio results? He gets it both ways.

See QQQ Update and Effect of QQQQ on Model Portfolio Returns. Maybe one of your "math junkie friends" will run the numbers for P3 with 20 and 30% of cash reserves into QQQQ to see if it still has a 145 to to 127 advantage...

Anonymous said...

Great weekly update honey as always.
Pete

Anonymous said...

Thanks for the great weekly update!
Pete

Anonymous said...

Thanks for the review, Honey - always look forward to your recap, and especially your interpretations to see if I missed something.

Bob's avoidance of discussing the big drop Friday was very obvious...

Honeybee said...

Good morning to all,

Thanks for the nice comments.

I agree that Brinker's unwillingness to discuss the previous week's stock market activity (when it is down) tells a lot about the man.

I think he clearly doesn't want to open the door for any questions about the stock market because then he might be in the position of having to give his forward-looking market views.

He carefully avoids doing that and will only talk about where the market has been--and usually only in the long-term. He never gives any commentary on what he thinks might have caused any market drops.

I believe this is a carefully crafted "carrot on a stick" plan to sell his newsletters. I believe this because all during the 1990's he freely allowed calls and discussions about his market views.

It was so exciting back then to anticipate hearing his take on recent market activity--and where he thought it might be going.

For the most part, his program has become so grindingly boring and repetitious that one has to wonder how much longer he will be on the air.

Anonymous said...

I have just plained stopped listening to him. However, I enjoy Honey's recap

Mark

Anonymous said...

As a long, long, long time grateful listener, I think you all miss the point of the show. Bob considers short-term market activity to be meaningless, and has said that exact statement many times. He has repeatedly said over the years that weekly or monthly timing is impossible, or at least not his thing. He clearly predicts the major turning points, though, with amazing accuracy.
Regarding the Qs, they were always held apart from his 'regular' portfolios. He did not recommend a specific amount-- I remember, because I remember trying to decide what to do. He put the trade out as a special situation for aggressive investors who could afford taking the risk. He repeated the warning several times that such a trade was only for those with the tolerance and financial position to take the risk. It didn't pan out-- that's how it goes sometimes. Everybody says they can tolerate risk, but when it turns against them they whine about it.

donald j pierce said...

BB is a sanctimoniuos bore. In the early and mid 90's his show was exciting informative and non-predictable. Today it is very clear that he will not have discussions on specific stocks,sectors or decision-making. He only will offer up info that requires you to purchase his over priced NL.

Kirk said...

Anonymous said... "Bob considers short-term market activity to be meaningless, and has said that exact statement many times. He has repeatedly said over the years that weekly or monthly timing is impossible, or at least not his thing. "

Nice try but take some truth syrup before your next post.

The two letters posted here PROVE that not only did Brinker think "short term monthly timing" was possible, but he felt confident enough to attempt to do it with up to a third of his subscribers investment assets.

The second letter on that link show he also attempted to do short time market timing for his managed accounts... those accounts people pay about 2% for the first $100,000 to $250,000 managed....

Unless you think Brinker had some other motive for that advice, you are flat out wrong.

But thanks for sharing. Even wrong statements are welcome here when posted in a friendly manor.

Anonymous said...

Brinker has stated numerous times in his newsletter that he believes the S&P 500 will trade in the mid- 1600's next yr., 2008. Fairly specific.

Anonymous said...

Brinker has stated numerous times in his newsletter that he believes the S&P 500 will trade into the mid-1600's in 2008. Fairly specific. Don't have to purchase his newsletter or listen to him.

Ed