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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