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Sunday, January 20, 2008

Bob Brinker's Moneytalk Summary January, 19-20, 2008

Brief Summary, Commentary and Moneytalk Excerpts, January 19-20, 2008
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The opening monologue on Saturday was quite lengthy -- much of it was spent bashing Ben Bernanke and the Fed. Brinker places most of the blame for the recent stock market decline squarely on the shoulders of Ben Bernanke.
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Here are some excerpts of Brinker's comments:
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Bob Brinker said: ".......Let’s take a look at what’s going on in terms of fundamentals out there? First of all, we have the Federal Reserve – we’ve talked about this many times over the past several months. We have the new chairman, Ben Bernanke, at the helm of the Federal Reserve. Ben Bernanke made a decision when he came in to continue to hike rates -- to pick up the baton from the Maestro and continue to hike rates. He hiked them all the way up to 5 1/4 %. You remember the criticism that I leveled at the new chairman, feeling that he’d gone too far. Then he held them there for a year, and now he has taken them down 1% -- down to 4 1/4 % as we speak.
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So the new chairman has been slow getting it together—getting his act together as the boss at the Fed. We have discussed this subject ad nauseam on Moneytalk. Why did he make this mistake? He made this mistake of being too slow in getting the Fed where it should be by misinterpreting high oil prices as inflationary.

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When you say that high oil prices are inflationary and therefore, you cannot reduce rates because you are worried about inflation, you are so wrong when you say that that it’s hard to believe that a Fed Chairman could make that mistake, but my opinion is that was the core mistake that the Fed Chairman made in failing to properly manage the short-term interest rate situation – driving rates too high, holding them there too long, cutting them too slowly. And that’s why we are where we are right now, in my opinion.
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Because when you misinterpret high oil prices as inflationary, and therefore, make the mistake of failing to adequately ease monetary policy in favor of economic growth, while fighting these imaginary inflation gremlins that are running around in your head or in your dreams, then you tax consumers, because the high oil prices tax consumers and they don’t get any relief when interest rates are held too high. Their discretionary spending power is reduced because they are leaving their money at the pump. They are leaving their money with the power company. Have you seen some of the power bills? They are leaving their money with the heating oil dealer.

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And instead of focusing on providing some help to the economy by lowering rates, in an adequate fashion – not just 1%, so far – what they do is they cause a problem......the problem that we have right now, which is the Fed has not done a very good job under this new Chairman. Which is unfortunate, but it’s in my opinion dead on straight, accurate talk about the situation with the Fed Chairman – and I like Ben Bernanke and I wish him well. I just don’t think he’s done a very good job, so far.
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Now of course it is absurd for the Federal Reserve to try to take on oil prices. Why would a Fed take on oil prices? First of all, they’re a tax on consumers so that’s going to slow the economy. Second of all, the Fed has no power whatsoever, zero, to impact oil prices. Oil prices are established by oil transactions on a global basis and therefore, the notion that the Federal Reserve controls oil prices is ridiculous – totally ridiculous. They are established by global supply and global demand. Not through Fed policy. So for the Fed to take on oil prices in the name of inflation worries while ignoring economic growth is really a huge mistake. I think that’s what they did……..and I think that’s the reason we are where we are.

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Now obviously they need to lower rates. They’re going to have to take them well under 4% --maybe they’re going to have to look at 3, 3¼% 3½% -- pretty soon, over the next couple of meetings, I certainly would expect we’d be into the 3-3½ range. In fact, I think at this meeting coming up January 30th or by then, I think you’ll see the Federal Funds rate down 50-75 basis points…….And I think that’s what the Federal Reserve has to do with what’s going on in Wall Street......."
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ECONOMY: Saturday, Brinker said he hadn’t changed his views on the outlook for the economy. He said that he expected “very little or no growth” during the first half of 2008. (Honeybee sez: This was the first time I ever heard him say "no" growth.) Sunday, Brinker said that the economy was "very close to the flat line in the first half of 2008," and expects the 4th quarter GDP number to come out very low-- single digit number. He expects some economic recovery in the second half of 2008 or into 2009.
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EXPECTED FED FUND RATE CHANGES Sunday Brinker excerpts: “I think that he (Ben Bernanke) should have never taken rates to 5 ¼ and brought them down more already than he did, while he thinks that 4 ¼, at least for the moment is the appropriate rate. Think about what I just said, if he does not believe that 4 ¼ is the appropriate rate today, let me ask you a question, why is it 4 ¼? (Honeybee sez: Brinker's question makes no sense to me, even after listening repeatedly) That’s a good question with not a very good answer likely……. By the 30th of this month, they’ll be 50-75 basis points lower – I don’t think there’s any question about that. And I think by the March meeting, we could see another….rate reduction. I would not be surprised to see the Federal Funds rate at 3-3 1/2 % by March."
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MYSTERY CALL OF THE WEEKEND Darryl said: “I really want to thank you, one thing I delayed the sale of my real estate –a small farm from 07 into 08 and I’m going to save myself a lot of money. And I thank you for that. (Brinker: “Thank youself, I didn’t do it.”) "You got me looking into it." (Brinker: “You are very kind….to share the credit.”) Darryl continues: “I’m a subscriber to your Fixed Income Advisor and your Marketimer……..”
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Honeybee asks: Does anyone have a clue what the caller and Brinker were talking about?
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19 comments:

Wonder said...

Bob "It is not in my nature to critize" spent a large chunk of the show slamming the Fed for their destruction of wealth. Once again Brinker does not understand economics. For every long buyer there is a short seller. As that say "that is what makes a market". It is not a destruction of wealth it is a transfer of wealth. From people who understand economics to people who don't.

His second big message was about the Fed is causing the "huge write downs". If he understand economics the "huge write downs" are a signal that PE need to contract. When PEs contract that means stock prices come down. It is a simple economic concept. This is what happens.

We have gone over and over this but a number of times he said that Fed policy has nothing to do with the price of oil. Wow. It boggles.

My thoughts: Cheap credit is what got us into the mess. Brinker seems to think that is where we need to go so his precious stock market will reinflate.

The stock market from 2001 was based on easy money. The smart investor understood that and knew that the music was going to stop and to be sure to be near a chair not 100% invested and now a deer in the headlights.

Don't worry sports fans. 10 months from now 99% of his listeners will be that he called it right the whole time.

absolutereturns said...

I didn't listen to much of the call on Sunday, but I caught a bit. I can't get over thinking.....who screens his calls ? and how do they select what topics are let through ? I'm Shocked ! that every single call was not about the current Meltdown in the market.... ? there were calls about California tax policy and energy, etc, etc. I must say i think it's bs. I work with retail investment client for a financial services company, people who are invested in asset allocated portfolios, etc, etc. EVERY call for the last 5 weeks has been about the market. Every single one. It makes me think they are screening out many of the calls of people who want to ask 'Bob, are we in a Bear market?'
As far as Bob blaming the Fed, i agree w/ previous comments, he just doesn't get it, period, end. It's got zero to do with oil. It has to do with the previous Credit bubble which is no busted. It has to do with excess in housing, just like in '00 - '02 we had an excess in business equipment, tech infrastructure. this time the excess was in housing, structed debt, lbo's, PE, etc, etc,....all things that swelled to long due to too much cheap credit and easy $$. and now Bob wants the Fed to come to the rescue again ? Bob's reading of the 'core' inflation measure is almost criminal...it's so textbook economics it fails to see how $3 gas and your grocery bill that is up 25% impacts consumption.... For someone, Bob, who usually speaks out against govt waste, to have him crying for the fed to step in a bailout speculators is pathetic. poeple bought too much house and assumed house prices only went up. Bob is going to miss this one. Ihope it's not the case, but i wont be surprised if the sp500 sells off another 10-15% even with Ben B cutting rates down to 3%, which i think he will.

jumpnjoey said...

As I type this S&P 500 futures are down 3.9%.

Market makers did not put on down side risk hedges after options expired on Friday because they expect a Fed cut at anytime.

Receipe for a crash. Will be interesting to see how the PPT handles this. Either circuit breaks or emergency cut.

Love these free unfeathered markets.

jumpnjoey said...

S&P 500 futures now down 4.6%.

If Brinker is on this weekend all the blame will be placed squarely on the Fed and not his outdated monkey throw poo model.

Time to get a new monkey. Maybe one that has more then 3 credit hours of intro level economics.

Limoman said...

Afte a few yrs of listeing and Getting BB's Letter? Why doesn't he give Advice pertaining to his Newsltter and Portfolio's.. eg: If marekts look poor for at least 1 if not 2-3 qtrs? Why not adivse to Take any NEW $ and be More Into Bonds and less into Equities for now? God Forbid on taking callers talking about it and Nonsense callers about everything else..

Why? $.. he would defeat the purpose of selling his Newsletter and aggravte subscribers, if they didn't get this kind of Advice ahead of time at least..

He Missed 08's 'Correction' and just saying " GDP Growth will be Flat, etc. is trivial.. I will NOT be renwing my subscription..Not worth it..Not worth it to me

Limoman said...

I'm disappointed In BB.. Not advising his Subscribers, In Plain alnguage > 1st half of 08' will be a Correction Period or at the least? Invest new $ into Bonds for now...I think his Age is taking over and his best days are behind him.. Time to Retire Bob?

jeffchristie said...

jumpnjoey said...
"As I type this S&P 500 futures are down 3.9%.

Market makers did not put on down side risk hedges after options expired on Friday because they expect a Fed cut at anytime."

If you are right and there is a Fed cut next week, you have just identified another scam that Brinker is running. This weekend he said that Bernanke shouldn't wait for the next meeting if he plans to cut rates. Brinker suggested a conference call followed by an announcement of a rate cut. I suspect he knew that this is likely to happen. Next week he will say the Fed cut interest rates just like we talked about it last week on Moneytalk. This guy is one of the greatest on artist I have ever seen.

absolutereturns said...

I don't think Bob B has any more insight into what the Fed will do, let alone what it should do. One area of Fed action Bob hasn't talked about, and i don't think he 'gets' is the TAF lending the Fed is doing. Short-version, the Fed is pumping Billions of $'s into the economy in order to drive down the Libor rate. Most resetting mortgages are tied to Libor, not the 10 yr trsy and not prime. The Fed has been Very effective at driving down Libor....this may help a bit, it will likely not be a cure.
Bob discounts too much the fact that people have for too long now rcvd credit outside of the tradtional banking system - some call it the 'shadow banking system' (pimco) - I don't think Bob gets it. I think with respect that his models, and clues on the market and economy are outdated. I think he'd be better off giving the excellent info he does about general asset allocation and risk tolerance and time horizon, etc ,etc. And skip the market timing stuff.

octavian said...

Bob Brinker issued a special message for subscribers on his web site...and 45 minutes LATER David Korn predicted Brinker would issue a special message.

LOL!

absolutereturns said...

What was the msg Bob B issued ? Anyone....?

rdk573 said...

See link for BB's new alert

http://bobbrinkerfanclub.blogspot.com/

StevieD said...
This comment has been removed by a blog administrator.
jkjk said...
This comment has been removed by the author.
calcpa said...

Re: Mystery Call Of The Weekend –
I didn't catch the call but Bob and the caller may have been talking about the temporary reduction in the federal capital gain tax rate, starting in 2008, for taxpayers in the lowest tax brackets (10% or 15%). For taxpayers in these brackets, the tax rate on qualifying capital gain is reduced from the current 5% to 0% in 2008. (The zero percent rate is scheduled to continue through 2010, subject to change by Congress, of course). If this is what Bob and the caller were talking about, then waiting until 2008 might save a single taxpayer up to about $1,600 and married taxpayers up to about $3,200. Nice, but not a huge number.

Some other possibilities: The caller may have been a few months short of qualifying for long-term gain treatment, or he may have been a few months away from having the property qualify as his primary residence. If so, then the potential tax savings from a decision to postpone the sale could be very significant.

Beyond these reasons, I’m not sure what they might have been talking about…

Honeybee said...

SteveD,

I really appreciate all of your contributions here, but in good conscience, I had to delete the copyrighted material that you posted from Brinker's bulletin that he put out yesterday.
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As we can see, most of what he had to say is available in my summary and commentary of Moneytalk from this weekend.
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The only new info that I see in it is that he told his subscribers that there were basically no changes to his bullish stance. So big deal. 8^)
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And he is definitely eating crow on his now infamous pile-all-new-money-in-the-market at mid-1400's call.
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Now he's busy looking for a "bottom." while you'all are DCAing.... LOL!!
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Ride'm cowboy and hold on to your hat.........it's going to be a bumpy ride.

Honeybee said...

Message to poster "stevieD"

Your comments are no longer welcome here and will be deleted ASAP.
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It seems that you deliberately posted copyrighted material here today so that you could go elsewhere, lie about my Blog and claim that I approved of doing that.

Honeybee said...

stevieD,
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Try to understand this: Your comments are not welcome on this Blog. Please stay away.

And just a word of warning. If you ever again post copyrighted material here, I will not delete it. I will report it to Bob Brinker and to Google.

Perhaps Bob Brinker will find it worthwhile to find out your identity and take action.

burt said...

This debate on whether oil is inflationary or a tax...seems to me it has always been both inflationary AND a tax at the same time, like light is both waves and particles. If something results in prices going up, it is inflationary. If something results in less discretionary income, it is like a tax. Oil moving up seems to qualify as both. Oil moves up and you have a cost increase at the pump, immediate flow of money out of pocket; plus imputed, lagged price increases as the costs, therefore prices to consumers, go up a tad later, assuming both of these aren't offset by higher wages collected by those collecting the higher prices. But both come under "reduced purchasing power" effects of both inflation and taxes. So what is the true story here?

Honeybee said...

Burt,

I think that most of what you wrote IS "the true story here."

I can't disagree with anything you said.

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