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Sunday, January 27, 2008

Bob Brinker's Moneytalk Summary January, 26-27, 2008

Brief Summary, Commentary and Moneytalk Excerpts, January 26-27, 2008
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EXCERPTS FROM OPENING MONOLOGUE
Bob Brinker said: “Well the stock market had volatile sessions on Tuesday and Wednesday of this week following the holiday on Monday and the chaos at Societe’ Generale’ on Monday where they dumped tens of $Billions of securities on the market in an effort to unwind a fraudulent trade that was put together by a 31 year old individual working in the bank who took positions of up to $80Billion, that is said, lost over $7Billion of company money and was found out last weekend in a routine audit check.
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It wasn’t a good day for the people who manage the second largest bank in France….because they had to unwind — sell at the market -- positions in the tens of $Billions that caused the European market to cascade lower on Monday….and spread all over the globe…….
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Tuesday and Wednesday were “tremendously volatile. We had some stability return, some normalization return to the U.S. marketplace on Thursday and Friday. Ironically, the day to day price changes at the close, which is what we study very closely, were small…..to finish the week up a fraction of 1% -- about 5 points on the S&P 500 gained on the week……..What we had was fear and emotion driving the market.………………

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There are some key fundamentals that play into what we’ve been seeing in the stock market in the United States. And as usual, if you’re a Moneytalk listener for a good portion of the past two decades, you know it usually starts with Federal Reserve monetary policy, which is currently under the control of, by far, the most powerful man in the world. His name is Chairman Ben Bernanke, out of Princeton University in Princeton, New Jersey. And this new Fed Chairman decided when he took over the rains from the maestro a while back that he would continue to raise short-term interest rates. And so he raised them and he raised them and took them up their high point in the summer of 2006 of 5 ¼%. After he was done raising rates to 5 ¼%, he held the rates at that level for over one year.

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And if you’re a Moneytalk listener you know that I disagreed vehemently with the Chairman’s decision to raise rates to 5 ¼. I said it on this program many, many times. That I believe that rates could easily been held in check as low as the 4 ¼ to 4 ½% area back then.”

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Honey sez: It is certainly true that Brinker has been negative about Bernanke from the time he was first appointed as Fed chair. So why doesn’t Brinker explain why (until last week) he has recommended the S&P mid-1400’s level as “attractive for purchase” every month since last August? Why doesn’t he explain why he was 100% BULLISH (short-term, intermediate term and long-term) until last week when he said that he had not "expected" the market decline. Subsequently he removed the mid-1400's buy level, recommends only dollar-cost-averaging, and is now working to identify the “area of a meaningful market bottom.”
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Brinker continued: “So after taking the Federal Funds rate, which governs short-term interest rates in the United States, up to this 5 ¼ level, the Federal Reserve Chairman found himself behind the curve of economic growth – behind the curve of this economy. This economy had to deal with the housing recession and consumers were dealing with high gasoline prices, high heating oil prices, high energy prices in general. And of course, how many times have we pointed this out – just stating the obvious – that these high energy prices simply tax consumers……..because of the higher prices which acted the same as a tax. This was a factor, of course, in slowing down the economy.
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We’ve talked about the slowing down in the economy, which we are now seeing. However, with all of this going on, Federal Reserve Chairman Ben Bernanke was moving more slowly than a tortoise in lowering rates. He had taken them down some, but not much. Then last weekend, they were still at 4 ¼%. And then on Monday, perhaps related to what he was seeing in the European market –although at the time, he certainly did not know it was a fraud –doesn’t matter much – at the time on Monday he staged a conference call between the members of the Federal Open Market Committee that govern monetary policy for all Americans. In this conference call, they reached a decision – not far from the decision we suggested should be done on last weekend’s Moneytalk, almost identical -- and the decision was announced Tuesday morning. And that was the decision for a record breaking 75 basis point Federal Fund rate cut which came on Tuesday.

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As far as I’m concerned the Federal Reserve Chairman made the mistake of holding short-term rates too high for too long because he misinterpreted high oil prices as an inflation threat, when in fact, it is an economic threat – certainly combined with the housing recession. But it is an economic threat to see prices high for oil…it taxes consumers and reduces their consumer discretionary spending power."

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Honeybee sez: We know that Brinker has been aware of Fed policy all along, and has been ridiculing the “bad news bears” for months.
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This is from my November 18, 2007 Summary: Bob Brinker said: “Well it’s been an interesting week in the stock market….remember last week the bad news bears were telling us, it’s all over now – we were in big trouble now. Well that’ what they were saying a week ago. Of course, it did not turn out that way. We talked about this last weekend. About those bad news bears and how wrong they have been for several years every year as they have been screaming fire in a crowded market only to find that their views were wrong again. This week the S&P 500 chalking up a gain to 1458.74 – a gain of about 1/3 of a percent. The Dow going up 1% to 13,176 and the Nasdaq gaining close to ½ percent, at the 2637 level…….”
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Brinker continued yesterday: "The United States Congress and the President seems to understand this fact, that’s why they are fast-tracking a stimulus package to get money into the pockets of the consumer……..but the Fed Chairman did not understand this fact. As smart as he is, he did not understand it, as far as I can see. He preferred, at least until Monday, to fight his imaginary inflation gremlins and did not ease monetary policy earlier. The Federal Reserve fell behind the economic curve. And I believe that mistake by the Federal Reserve was the core mistake that produced the loss of confidence in the Federal Reserve that forced them to capitulate and reduce rates 75 basis points this past Monday.
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It is the job of the Federal Reserve to anticipate economic developments. They have things to go on – they have the stats on the housing recession, irrefutable statistics. They have the statistics on what it is costing people to buy gasoline, heating oil and pay their energy bills. They have all of this information……. It is not just the job of the Federal Reserve to react to what happened, which of course is what we’ve been looking at.

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Now the Federal Open Market Committee has a regularly scheduled meeting coming up this Wednesday, January 30th. And it’s very likely that an additional rate reduction will be announced at 2:15 Eastern…….and if another rate reduction is announced, as is likely, that would take the Federal Fund rate down below its current 3 ½%. And that will bring the Federal Reserve closer to where they should be – where they should have been recently in terms of their monetary policy.”

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President Bush’ Stimulus Package: Bob Brinker thinks it’s a good idea as long as it targets those who will spend it. He also likes the incentives for businesses to invest in new equipment with an increase in allowable deduction. Brinker thinks this should be put on the fast track, but the bill still has to be signed. Brinker said: "So I think it’s a good package. I think it’s an extraordinary example – and it’s a piece, none of these things are meant to be deliverance from economic problems, it’s a piece of the puzzle, but I think it’s a good one. And I think the most remarkable thing to me – in fact this is exactly what we recommended on the first weekend of January right here on Moneytalk that they get a stimulus package out there. We talked a lot about it just three weekends ago right here. Congratulations to them, where they’ve come this far."
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Here are excerpts from David Korn’s Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service. Copyright David Korn, L.L.C. 2008
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http://david-korn.blogspot.com/

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“January 5-6, 2008 Newsletter
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GOVERNMENT STIMULUS PACKAGE NEEDED
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Brinker Comment: A slowdown in the economy means lower interest rates. It means the Federal Reserve will continue to cut rates, adopting an accommodative monetary policy to stimulate the economy. In addition, thereis even word out of Washington of the possibility of a stimulus package forthe economy. Bob said if there is a package proposed, we would hope that itis aimed at the people who have 100% propensity to consume, and not just to the wealthy so they can put more into their retirement accounts. We need a middle class tax cut which could help consumer spending which is under pressure from the higher cost of gasoline, heating oil and issues related tohousing. In response to a caller, Bob said when he refers to the middle class he is including everyone in the 15% tax bracket and possibly some inthe 25% bracket. Bob said to maximize the impact of a stimulus package, it should come out in the first quarter, and if he were in charge, the proposal would come out tomorrow.”
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TAX CUTS PERMANENT? Brinker said that the president was right to drop the subject off the table because it is irrelevant to this issue -- this issue is about stimulus for 2008. The tax cuts are on the book until 2010 under current law.
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HOUSING RECESSION: Brinker said: “In terms of the housing market, which is in recession--the housing market is now in recession – I think they’ve done something good here too.” The proposal allows Fannie Mae and Freddie Mac to purchase mortgages of up to $729,750, which is way over $417,000 – a big increase over current limit. This throws a lifeline into the jumbo loan category, which is needed because some areas around the U.S. are VERY expensive, such as Honolulu, San Francisco, NY, Los Angeles, Silicon Valley.
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Honeybee sez: It seems disingenuous to me for Brinker to say that the “housing market is NOW in a recession” as though this is something new. As my previous Moneytalk summaries show, for months now, he has said the housing market was in a recession.
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Here is what Bob Brinker was saying about the economy January 5-6, 2008, as summarized by David Korn. (See information above) Posted with the author’s permission. The following was written by David Korn:
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"OPENING MONOLOGUE - BOB'S TAKE ON THE ECONOMY
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Brinker Comment: Bob opened the weekend off saying that he was expecting a poor job's report and we got it as expected. Bob said he has been talking about a slow down in the U.S. economy. A lot of people were still looking at the 4.9% growth rate in the gross domestic product that we got in the third quarter, but that number really means nothing. You won't see that kind of a number for a while. Instead, you should be of the mindset that there is a real slow down in the economy. How much of a slow down are we looking at? Bob said he expects to see hardly any growth in real GDP growth in the fourth quarter of 2007. In addition, Bob said he doesn't see much growth in the first quarter of 2008 and probably the second quarter of 2008.
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That is three quarters, all of which will show very little real GDP growth. When we average those three months, we will see clearly that there will be a nine-month period from October 2007-June 2008, where we will see very little economic growth. Certainly, it will be below the long term trend rate of 3-3.5%. In fact, it should be well below that level and the average will be a very low single digit number.
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EC: A little spin by Bob and a change somewhat in his outlook in this opening remark. Bob's comments implied that he was predicting a reduction in the new jobs growth which was announced Friday. I recall no such prediction and if you read his January Marketimer, he only discusses the fact that jobs growth is the key to 2008 growth rate. If Bob had been expecting this big down drop in new jobs on Friday, I think he would have said something.
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EC#2: More importantly, is Bob's outlook for the economy because that plays an important role in Bob's long term stock market timing model. Bob has predicted real gross domestic product to come in a range of 1.7% to 2.7% in 2008. Given his comments today about the first two quarters having very little growth, he would need a good pick up in GDP in the second two quarters for this projection to come true.

Brinker Comment: Later on in the weekend, Bob made a prediction that when we get the GDP report out for the fourth quarter, he expects it will show that the economy grew at about 1% rate in real terms (adjusted for inflation) which is very low and way below trend. That slowdown will continue in the first quarter and second quarter. However, Bob said he thinks we can see a rebound in the economy in the second half of 2008. And if you study the stock market, you know that the stock market discounts the future by about 6-7 months in advance. So if we were to see a recovery in the second half of 2008, following this slow period, then the stock market would be in the process of having discounted that as we speak.

EC: I listened to that last segment a few times to make sure I had Bob's words absolutely correct. This last comment by Bob is really the foundation for his bullish outlook on the stock market. If Bob was expecting the economy to weaken further in the second half, presumably he would be forecasting a recession and that would throw his timing model into bearish territory. As he said today, he is expecting a rebound in the second half of this year."

25 comments:

customeryachts said...

Thank you for holding Brinker's feet to the fire. He reminds me of the little boy who has been terribly bad and wants to blame it on someone else. Recall that Brinker announced that there was no such thing as a secular bear market exactly at the time that we reached a market top. Any careful reader of IBD can spot a top 80% of the time. Likewise, Brinker announced a market bottom of "mid-1400's" BEFORE it occurred. This is something only a fool would do; again, a market bottom can be spotted by a student of the market the majority of the time WHEN IT
OCCURS, but not weeks before. I feel embarassed for this man who is trying to run with his pants down.

Alan said...

Brinker has been in denial. He has been a blatant political supporter of Republican policies and was blinded by their failure. Now with all the chickens of 7 years of Republican decision making coming home to roost and hit upside the head with the results, the economic disaster that has been unfolded can no longer be ignored. Of course it is not the failure of Bush. Now it's all Bernanke's fault. Right.

rdk573 said...

It's still amazes me sometimes that Brinker does not even listen to what he is saying and the logical contradictions of his positions. He believes that the economy will recover in the second half of the year and that the stock market will soon discount this recovery and start rising because of it.... But wait a minute, if the market is a discounting mechanism, why is it down now??... Under his market discounting logic, the market is discounting a recession 6 to nine months from now...As such, the earliest that the market would start rising because of a belief of a recovery would be in the second half of the year...not now...Think about it BB before you open your mouth...In the final analysis, his market timing model blew it...And, I believe the reason he blew it is that none of his indicators take into account the impact of the housing market on the economy and the speculative bubble that has been building in housing during the last few years(I will discuss in more detail this issue in my next post)

absolutereturns said...

Bob B's blaming the Fed will look foolish when the Fed takes rates down to 2.5% or lower....and we still have economic contraction. What will Bob B say then....? '' It's all b/c the Fed was too late '' ?
That will be as silly as his saying rates went too high in 2007 through 8/07. The previous cycle high for Fed funds rates was 6.5%. They didn't get too high. BB doesn't 'get' the credit bubble that materialized in housing, structured debt, LBO's, HF's, commercial RE, etc., etc., etc. His focus on oil, energy and politics is a waste of time. If he wants to talk about that he should have a daily radio show about current events.....not on how to invest in the market.

princepro110 said...

I was only able to catch a little Brinkers show this weekend so again, thanks for the recaps.

One type caller that called yesterday has always baffled me. The guy is calling a radio show asking Bob about his bond funds that have a market value of over 7 million. Why in the world would someone call a radio station for advice with that size portfolio? A shill?

Bob balming the Fed is getting old............I remember him cutting Ben a lot of slack this summer saying he was making "rookie mistakes"...........but NEVER predicting this market would result.......very convenient.

The "experts" now are calling the subprime mess on Greenspans policies in that Bob continued to call the Mistro for years!!!!!!

jumpnjoey said...

Oh boy. Now Brinker is trying to be an expert on European Central Banking.

He does not understand that most of Europe is experiencing 18% food inflation and their job market is extremely tight.

StevieD said...

Sunday's show

http://abcrad.vo.llnwd.net/o1/bobbrinker/brinker01272008.mp3

Dan said...

BrinKer blames the stock market for going in the wrong direction on every conceivable person or entity in the world. How about taking a little blame yourself Mr. BrinKer. How about admitting that your StoCK MarKeT timing model is delinquent and that you should be embarrased by what you've done to people's investments. Where was his exit strategy? What should people who bought in with your QQQ trade at 75 (again your recommmendation) be doing?

Yesterday BrinKer was putting blame on mutual fund managers who don't do a good job of managing their mutual funds.

Mr. BrinKer can put blame on so many others. How about putting a little blame on himself.

He is very good at pointing the finger, except at himself.

princepro110 said...

Honey,
Has Brinker in the past weeks given a percentage as to the probability of the US falling into recession........I remember your "foggy" quote but that is all. I was only able to catch about 10% of this weekends callers questions.

The world bankers meeting in Davos this past week have quotes from Goldman, Morgan & Merrill saying we are in or soon to be in recession. A stat that came out of those meetings shows the importance of the American consumer to the world economy:

US Household consumption: 9.5 trillion

China Household consumption: 1 trillion

India Household consumption: 650 billion

WOW!!!!

jeffchristie said...

At the beginning of the third hour on Sunday Bob Brinker said that president Bush has NEVER vetoed a spending bill that wasn't paid for. Now that is an outright LIE Mr. Brinker and you should be ashamed of yourself for spreading it nation wide. President Bush vetoed the SCHIP child health care bill when the democrats tried to increase it by $35 billion.



Healthcare Finance News
By Chip Means, Web Editor 10/03/07

Loading story...
WASHINGTON - President Bush today has delivered on his promise to veto Senate's $35 billion expansion of the State Children's Health Insurance Program - an expansion he feels is too close to universal, single-payer healthcare.


He also vetoed a $23 billion water resource bill.


Associated Press By CHARLES BABINGTON Associated Press Writer
WASHINGTON Nov 8, 2007 (AP)

President Bush suffered the first veto override of his seven-year-old presidency Thursday as the Senate enacted a $23 billion water resources bill despite his protest that it was filled with unnecessary projects.

betty said...

I just love all of you Monday morning quarterbacks.

One tells us how easy it is to call the top, another says Brinker's politics are at fault and yet another just calls him a liar.

The internet is full of gabby fools I guess and some even try to sell you their own brand of crap.

The truth is there is not even a bear market yet and Brinker's calls to get in and out of the market have been excellent so far.

jumpnjoey said...

Betty - his newsletter is called "Market Timer". A "Market Timer" does not take 15% hits because you got to make 30% to get back to where you were. The S&P 500 is where it was in April 06. You have back nearly 18 months worth of gains in a couple months.

He use to talk about the alter of hold and hope. He is living it.

jeffchristie said...

Betty

".... and yet another calls him a liar."

Don't tell me you are standing by his bazaar statement that president Bush has never vetoed a spending bill. I proved that he did beyond a reasonable doubt. If he isn't a liar he is a gross incompetent for shooting off his mouth on a subject he knows nothing about. Either way I have no interest in a financial advisor who is lying or incompetent.

betty said...

"Betty - his newsletter is called "Market Timer". A "Market Timer" does not take 15% hits because you got to make 30% to get back to where you were."

You are a perfect example of someone who should not even be IN the market Joey!

A 15% hit is not even a bear market and Brinker never claimed to time noise like that.

And BTW please don't post again until you can figure out the math in your example.

You're wrong.

Honeybee said...

Hi Betty and welcome to my Blog. You said: "A 15% hit is not even a bear market and Brinker never claimed to time noise like that."
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Brinker may not "claim to time noise," but that doesn't mean that he doesn't "time noise."
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Are you aware that he regularly issues all-in buy signals even though he already recommends being "all in?"
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For example, August, 2007, he raised his buy signal from "1380 and lower" (which he issued AFTER the market was higher than 1380) to the "MID-1400's."
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Would you call that "timing the noise?" If not, what would you call it?
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As of now, he has cancelled all "buy signals" and recommends "dollar-cost-average" only, while he looks for his bottom. But unbelievable, he is still 100% bullish and 100% invested.
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One could almost conclude that it's ALL NOISE.... 8^)

Honeybee said...

Hi Princepro,

As of this weekend, Brinker is not predicting a recession. He is on record as saying that the economy will grow "very slowly" or flatline.

However, he has stated for months now that the housing market is in recession.

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betty said...

Oh Jeff, give me a break.

Last time I read your drivel, you had proved that you were smarter than Brinker because of some stock you bought that he didn't.

You spend so much time "proving" how smart you are it's disgusting.

Honeybee said...

Princepro said: "One type caller that called yesterday has always baffled me. The guy is calling a radio show asking Bob about his bond funds that have a market value of over 7 million. Why in the world would someone call a radio station for advice with that size portfolio? A shill?"
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Princepro...I heard that call too, and thought the same thing that you did--that it was likely a shill.

Honeybee said...

Jeffchristie wrote: "At the beginning of the third hour on Sunday Bob Brinker said that president Bush has NEVER vetoed a spending bill that wasn't paid for. Now that is an outright LIE Mr. Brinker and you should be ashamed of yourself for spreading it nation wide."
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Jeffchristie....it's a small step from lying by ommision to outright lying with impunity. Brinker regularly lies by ommision and spin.....so.....

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betty said...

Honeybee,

Of course Brinker adjusts his buy levels. The market is a fluid,dynamic animal subject to constant reevaluation.

Some amateur hucksters are so smug they actually set "auto-buy" levels thinking if a stock hits that price, it's a good thing.

These folks really don't have a clue what's happening are usually out literally begging for pennies before long.

Honeybee said...

Betty,

You are welcome to write anything you want about Bob Brinker, but I will not tolerate your insulting other posters here. Consider this your first and last warning.

Agreed?

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Honeybee said...

Okay, so "Betty" is your latest incarnation....stay on topic or you are outta here--AGAIN.

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jeffchristie said...

Betty

"You spent so much time "proving" how smart you are it's disgusting."

I am not the one who claims he is smarter than president Bush, Ben Bernanke and the president of the European Central Bank. You seem to be giving BrinKer a pass. I find BrinKer totally disgusting.

Dan said...

Betty

Is your last name BRINKER ?

LOL

Honeybee said...

"octavian"-name-thief wrote to Kirk: "--Oh, yes, I definitely have questions!"
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I deleted your post. If you want to post commments on this Blog, you will have to do it with your own handle--not handles that belong to someone else.

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