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Sunday, October 7, 2007

Moneytalk Summary October 6, 2007

Outline and Brief Summary of Bob Brinker’s Opinions From Moneytalk, October 6, 2007:

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S&P Index: Closed at highest closing level in history —“nice” 2% rise this week, closing at 1557.59 – coming off of the summer correction. “….it’s a good stock market. It’s trading at all time high record levels.”

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Employment Data from Friday: Revised for August. Instead of a decline of 4000 jobs, it’s an increase of 8900 jobs. September payrolls grew 110,000. Three month moving average – July, August, September = 9700 average new jobs. “It’s a good employment report.”

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Market Gains Since March 11, 3003 Buy Signal: Before dividends are added in, S&P Index has a gain of 94 ½%. With Dividends added in, total return in excess of 100%.

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Latest Buy Signal: “Mid-1400s.”

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Dollar-Cost-Average into stock market? Yes.

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Global Investors: “….are not morons.”

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Economy: “…..continues to grow.” Slow growth expected for remainder of year.

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Inflation: “Very low year over year – core inflation on the key index is less than 2%”

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Interest rates: “Outstanding.”

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Rising Oil Prices: “Counter inflationary.”

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Economy/ Recession outlook: “Growing below trend.” Bad news bears in the financial community are spreading “idiocy” and “nonsense” about a recession – it’s “fiction.” “There is no recession and there is no prospect at this time of a recession.”

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Stock Market is Recession Gauge: “You don’t a get record run on the stock market on the precipice of a recession – it doesn’t happen.” The stock market is a gauge for predicting recessions, and you don’t get all-time-highs when the market is headed for recession. “Those predicting recession are full of soup.”

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Negativity in a Bull Market: “Completely unjustified because in a bull market, you want to be invested. You want to be making money while the sun shines. And when you’re out there with this doom and gloom, it’s counter-productive and extremely costly.” “They don’t know what they are talking about.” Negative “talking heads” make “fools" of themselves because they don’t study “stock market history.”

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Term Life Insurance: “Like it” because it is a “death benefit policy to help those who need your income in the event of your absence.”

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Steve Forbes Prediction: May see a 3000 point loss in the Dow, similar to 1987, if the Fed doesn’t bring the price of gold back to $450 per ounce. Fed needs to soak up excess money it created in 2004, 2005, otherwise there will be a flight from the dollar. Brinker said that Forbes' prediction has been proved wrong because the market just closed at an all-time-high.

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Can Treasuries Become Junk Status within 20 Years: For that to happen, the “....full faith, credit and taxing power of the United States Government would have to become worthless." Hopes the people will put the politicians in a position over time where they will get the fiscal house in order.

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DVY versus SPY: SPY is doing better than DVY right now because of “financials” in DVY. DVY is more conservative because it's a good dividend-payer. SPY is broader-based and pays about half the dividends of DVY. It has been performing better recently partly because it contains technology, which has been doing well. Brinker said that he does not include DVY in his model portfolios because he seeks performance rather than cash dividends. (Honeybee comment: DVY is included in Brinker’s “Individual Issues” list and rated as a “hold” along with several other of the most popular ETFs.)

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Cash-Cow Money: “….is coming from business plans that are not growing as fast as the general market place. But they are still profitable and pay nice dividends which are paid out to the shareholders.” You get a lot of that in the financial sector, which are not growing as fast as the Industrials.

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Total Return Investor: “….can invest in the total stock market, which has certainly outperformed any of these dividend products. You get less cash dividends, but you can liquidate shares to make up the difference” First started talking about this method back in 1986….

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Bob Brinker’s March 11, 2003 Buy Signal: Returned all available stock market allocated-cash reserves to fully invested position. All “model portfolios” bought at that level. (Honeybee comment: Bob Brinker’s model portfolios held 35% equities throughout the 2000-2002 cyclical bear market. Additionally, in October 2000, many subscribers bought QQQQ on Bob Brinker’s recommendation with up to 50% of the 65% cash reserves that was raised from model portfolio holdings and other investments in January 2000.)

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The following was an interesting call and anyone who owns a home should take note:

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A caller said that while flying “under the radar,” the House of Representative has passed a Bill (HR 3648EH) as of October 4th that will allow people who have been forgiven mortgage debt not to have to pay Federal Income Tax on that forgiveness. But in order to pay for this tax break, the House Bill will change the present exclusion on principal residences—making it proportional to amount of time lived in the home. Right now, the exclusion is $250,000 for a single person and $500,000 for a married couple if the home is lived in 2 years out of past 5 years.. It’s almost certain to pass the Senate. Brinker said it is an de facto tax increase and it will be interesting to see if the President signs it. Brinker said that many in the Democrat Party think that taxes are too low.

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The Next President and Tax Increases: “Hillary Diane Rodham Evita Clinton is in a very commanding position right now." “It is pretty much looking right now like a coronation.” “She’s going after the people with the money.” “She’s going to jack up the rates with the help of congress.” As long as she leaves “Joe Sixpack” alone, it won’t have a major affect on the broad economy. Capital gains taxes could go from 15-20%. If the top bracket goes from 35% to 39.6, the wealthy will buy one less “Lamborghini” or a “smaller yacht.” “….will really pick up speed if we get a change in the Whitehouse in 2009.”

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What If Hilary Gets Elected? A tax increase is a “slam dunk” if Hillary is elected. “She will owe that election victory to her shirtless ones. They will put her in office and they don’t want to see their taxes go up. They will not tolerate a tax increase in their income bracket. And that’s why I don’t believe she can raise the taxes in the low brackets. If she does, I will be stunned and it will be a humongous political mistake for her if she were to do it, in my view.”

6 comments:

Shirtless in Seattle said...

"What If Hilary Gets Elected? A tax increase is a “slam dunk” if Hillary is elected. “She will owe that election victory to her shirtless ones."

What does Bob Brinker mean by "shirtless ones?"

Honeybee said...

He was talking about people in the 15% tax bracket, who he says will put Hillary in office.

Anonymous said...

The shirtless ones were the electoral base for Evita.

Honeybee said...

Anonymous...that is exactly what Bob Brinker was saying--that "Joe sixpack" would put her in office.

He did make an effort to pander to all the Joe Sixpacks in the audience because he said at least twice that "we" have all been in that category at some time--except for those who inherited a bundle.

Pehaps he was thinking of the Kennedys' or Bill Gates' children. Nope, no Joe sixpacks among those families. 8^)

Anonymous said...

Pandering or not, for the most part he's right. One of the balances that the Wall Street panderers seem never to acknowledge is that if you bifurcate the population into economic classes, polarize the least and most enfranchised, and push most of the middle toward the bottom (as has been happening for much of the past 30 years) an insuperable "shirtless" majority eventually takes whatever steps they see as necessary to try to level the playing field. I am certainly not "shirtless" these days, but I'll be out there, figuratively waving my torch and pitchfork. The alternative is to continue to move toward corporate feudalism, and eventually that may end in economic and social convulsions that are anything but figurative.

Honeybee said...

Thank you for your comments--very interesting. I agree that Brinker is "mostly" right on the "Hillary" subject.

The rest of what you said, I need to ponder some. 8^)

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