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Sunday, October 28, 2007

Moneytalk Summary October 28, 2007

Brief Summary, Commentary and Bob Brinker Excerpts From Moneytalk, October 28, 2007
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STOCK MARKET: Bob Brinker said:
"Well, another good week in the stock market and S&P 500 trading just 1.9% below its all time historic record high. The S&P500 sitting in at the 1535 level as we speak and acting very, very nicely. We like to see the kind of a thing that we saw the week before last where we had just a momentary shake-out – one big down day. People running for the windows; running for the exits; panicking for a few hours – this is a wonderful sight for investors, because this is how you rid the market of people who should not be in the market -- people who don’t understand the words of J.P. Morgan. You remember the words of J.P., quote: ‘stocks tend to fluctuate’ unquote – the wise words of J. P. Morgan. And it’s true that stocks tend to fluctuate and so when you run into people who make a big deal out of small potatoes – short term fluctuations, well, they don’t belong in the market in the first place. They don’t understand what it means to invest in the stock market. After all if they did understand, they wouldn’t be making a big deal about a short-term market fluctuation.”
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FED MEETING NEXT WEEK: Brinker said that a 25 basis interest rate point cut is "baked in the cake." Beyond that amount, he doesn't know.
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HOUSING RECESSION: "Serious."
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MICROSOFT EARNINGS: Reported on Thursday. “It was a great week for Microsoft.” Vista, the new version of Windows, has increased the growth rate at Microsoft. Sales of Windows Vista for personal computers up 25%; net income up 23%; Revenues up 27%. If you had invested $7000 in Microsoft in the early 1990s, it would now be worth $252,000.
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APPLE: Reported earnings this past week were way ahead of optimistic expectations. “McIntosh computers selling like hotcakes.” If you had bought APPLE two years ago, you could have bought the stock in the $30. It is selling for $185 a share -- up 400% in the past two years. Quarterly profit of $904million, which is a little over a $1 per share—up from $542million.
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Globalization and Job Security:There is no such thing as job security or job protection in a globalized world.” Brinker recommends that when you are standing on the track watching the train coming towards you, it’s best to re-tool, learn new skills or do whatever it takes to survive in a global economy.
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Vanguard California Tax-exempt Money Market Fund: It’s a "good fund for Californians in a high bracket." It pays 3.3% right now.
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ETF Capital Gains Taxes: “…..transactions that are made in the exchange traded fund when they re-balance to keep the portfolio in sync-----those gains have to be passed along to shareholders.” But capital gains distributions are low, just like in a no-load index fund.
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BRINKER TIP: Vanguard offers free stock trades for “good customers." He said to inquire about their “Flagship Accounts.”
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SPY and VTI: May be used in place of Vanguard Total Stock Market Index Fund if you want to buy/trade ETFs rather than Mutual Funds
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HOME OWNERSHIP:On the downturn…dropping for the 4th consecutive quarter…..that’s the longest streak on the downside in 26 years.” Home ownership is now at 68%, so it hasn’t been a big drop because the record was reached in 2004 at 69.3% -- it's just a gradual slide down.
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POLITICS: Bob Brinker said: “Barring a train wreck of immense proportions, Hillary is heading for the nomination. But it’s not really going to be a nomination. It’s going to be a coronation and I expect that unless something dramatic happens, that next summer, Hillary Diane Evita Rodham Clinton will be crowned the Democratic presidential nominee. As for the Republicans, I have no idea who they are going to nominate.”
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HILLARY AND TAX ON ASSETS: "She is the one presidential candidate that has discussed a tax on assets and is the most likely to do it." Can she get it through congress?
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HILARY AND CAPITAL GAINS TAX: Brinker guessed that she would settle for 20%, but she might want more, “……..because she is a big believer in re-distributing the wealth. She really loves that notion of re-distributing, so she might want more.” On dividends, “She hasn’t made it clear." On income tax, “Over $200,000, you are getting a tax increase.”
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BOB BRINKER TAX WARNING: “So what does this mean? It means you have the balance of this year and all of next year to make money at today’s income tax rates – maximum federal 35, capital gains 15, dividends, qualified dividends, 15-Federal. You have until the end of 2008 because George W. Bush is not going to raise your taxes. "
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CHARLIE RANGEL’S TAX INCREASES: Bob Brinker said: “….proposing a $3 ½ trillion tax increase over the next ten years. Proposing a set of tax laws that would propel the top federal bracket to 44% in the next few years…..in the top bracket in California, if you paid 44 to the Feds and 9.3 to Sacramento, you’re tax bracket is over half –over 50%.”
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NATIONAL DEBT: “The Treasury Gross Public Debt, which is the all-inclusive measure of our indebtedness, one year ago was $8.5trillion, today it is $9.054trillion--that is, unbelievably, that is $503billion higher in the past year." Interest on this debt is about a billion a day.
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OIL IN DARFUR: Thanks to JeffChristy for this link that proves that Bob Brinker is very mistaken when he claims there is no oil in Darfur and says that is “the reason we are not involved in a big way”: http://www.twf.org/News/Y2004/0807-Darfur.html
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San Jose, California Housing Market: Bob Brinker told a caller not to expect home prices to rise very soon. Bob Brinker obviously knows very little about the housing market in the South San Francisco Bay Area.
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http://www.sjhousing.org/report/Misc/Housing_Statistics.pdf
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Bob Brinker’s amusing quote for the day: “Total return, we talk about a withdrawal that’s conservative which is 4%.............That’s the kind of rate on a million and a half nest egg that generates $60,000 a year – walking around money.”
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____Honeybee


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18 comments:

gimpy said...

Than you for doing these summaries. I really appreciate the time and effort that it takes.

Anonymous said...

Thanks for taking one for the team.

I can't stomach listening to him.

Honeybee said...

Gimpy and Anonymous: Thank you for your comments.
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Yep, Gimpy, it does take a strong stomach to listen to 2 hours of Moneytalk these days.

The repetitive monologues, political talk and the calls about IRAs/401Ks/real estate holdings/mortgage payoffs/retirement withdrawals and other esoteric subjects are grindingly boring--for the most part.

What a change from the days when Brinker would actually take calls from savvy investors and discuss current market activity and the possible future of the stock market.

Now he wants to sell that information. I think he would sell more newsletter if he would build good will with his subscribers--but that's just me--what do I know? 8^)

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wejomerv said...

Great summary. I'm a big Bob fan and look forward to reading your blog in the future.

I got a question for you from what Bob said on the show this weekend.

She is the one presidential candidate that has discussed a tax on assets and is the most likely to do it

Do you know where Bob got this information. I cannot find anywhere where Hillary Clinton proposed a tax on assets. Is he talking about estate taxes?

Honeybee said...

Wejomerv asked: "Do you know where Bob got this information. I cannot find anywhere where Hillary Clinton proposed a tax on assets. Is he talking about estate taxes?"

Hi Wejomerv...thank you for your comments. I did some online searching and could not find any documentation to back up what Brinker said about HRC wanting to tax assets.

I have heard Brinker say that about Hillary more than once, so I am assuming that he has heard her say it. (It might be a good question for Moneytalk--to ask him where he got the information.)

I did not interpret his meaning to be about estate taxes because he has been very specific when he talks about estate taxes.

My interpretation is that he believes that HRC wants to propose a way to tap into total net worth--which would include tax-sheltered retirement accounts.

Thoughts of a genius mind said...

The one thing I noticed is how many callers called concerned about a Clinton presidency. It tells you the fear out there

J said...

Honeybee, if you think the SJ housing market is going to rise anytime soon, you are either:
1 - on drugs
2 - a realtor
3 - a f'd buyer with a mortgage you can barely afford

The theme for the SJ housing market for the next couple of years will be "look out below". It's already happening in Santa Clara county, everywhere except the Sunnyvale/MV area.

Burk said...

Honey, you obviously are an idiot wiht regard to how the housing market works...there's won't be new highs in housing in San Jose for 5 years at least..

Mark my word!!

Honeybee said...

Hello J.,

I am none of the three things that you mentioned. Not even close on any of your suggestions.

However, I would be interested in knowing the reasons why you believe what you believe about the Santa Clara real estate market.

Honeybee said...

Hi Burk...thank you for your comments. You are correct that I may be "an idiot wiht [sic] regard to how the housing market works...", but I would be interested in why you think that there will be no new highs in "San Jose housing" for five years.

Have you actually lived in this area for any length of time? Do you own a home here?

What about any further drops in price? Do you think that may happen?

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Thoughts of a genius mind said...

I do not see a necessity in calling Honeybee an idiot especially when she is providing such an invaluable service to us all. She has an opinion. I also believe the housing market will not be shortlived, but will extend over a substantial period, and this is the reason. First, I think foreclosures are going to continue for sometime. Sure you will see some upticks, but that always happens in a down market. Banks are beefing up their loss reserves because they are anticipating future losses.

Once there is a bottom, and who can predict that? It will take awhile before people feel secure enough to step in to the market. Some investors will pick up houses on the cheap, but because of trepidation and tighter controls on credit, consumers will be hesitant to buy real estate.

In my opinion, it will be several years before we see the Real Estate market go up, and if Hillary becomes president and raises taxes like she has promised, that will make it worse, because I do not think the Real Estate market will have recovered by then.

Kirk said...

"Do you know where Bob got this information. I cannot find anywhere where Hillary Clinton proposed a tax on assets. Is he talking about estate taxes?"

Over the years I have written about an interview I heard in the 1990's with Hillary and I believe it was Laura De Angelo (sp?) Tyson. In that interview they asked how to raise the money to pay for Hillary's 1992 health plan. Hillary spoke out and said retirement accounts are untaxed assets. It sounded like she didn't approve of putting money away in 401Ks to delay taxes. She suggested a 2% "property tax" would be one way to start taxing this money without having to wait for people to actually retire and draw it down. I know Brinker reads what I write....

Honeybee said...

Hi thoughtsofageniusmind,

Thank you...it does seem rather unecessary to call names, doesn't it?

I enjoyed your comments and see a great deal of truth in them.

Perhaps there is an element of wishful thinking on my part about San Jose real estate.
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We shall know in the "fullness of time." 8^)

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Thoughts of a genius mind said...

Kirk,

If that is true. I think or at least I hope there will be an uproar if she tries to do that. That would defeat the purpose of owning a 401K, doesn't Hillary understand the concept of tax deferral. Probably not.

wejomerv said...

Kirk, thanks for the comment. So the quote is from something she said around 15 years ago?

I don't see how it would be legal to tax a Roth or 401(k) account before withdrawals are taken. It doesn't sound like something we should be too worried about.

wejomerv said...

I do not quite understand Bob's optimism with the benefits of the decline in the dollar.

I understand that if the dollar declines in value that goods in Europe become more expensive so we either import less from Europe or there will be inflation.

But what would prevent us from importing more from China or other Asia nation that floats its currency in a tight range with the dollar and that has lower labor costs in production than Europe has anyway?

It doesn't seem like the decline in the dollar will reduce the trade deficit that much with a country that floats its currency with the dollar. Am I missing something?

And what prevents Europe from buying cheap good from Asia instead of from the US? It seems like Asia will have much more competitive prices for manufactured goods even with the decline in the dollar.

Honeybee said...

Hi Kirk,

Thank you for clarifying that. I hope that anyone who can add to the subject of, Hillary and her "tax on assets" proposals, will do so.

Honeybee said...

Wejomerv said: "I don't see how it would be legal to tax a Roth or 401(k) account before withdrawals are taken."

Hi Wejomev,

It seems like anything the "gubmint" says is legal is legal.
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If I remember my history correctly, since the Federal income tax was first begun in 1913 there have been more than a few changes. 8^)
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MOF: I think that for years it only affected the very, very rich. And they were just a very small percentage of the population--so that helped to get the income tax passed into law.
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Not a nice concept, but unfortunately it is a concept that is still in operation today--even more than ever.

So I doubt that our IRAs are sacrosant from the "share the wealth" politicians if the need arises to support those who don't have them.

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