Sunday, January 13, 2008

Moneytalk Market-Talk, January 12-13, 2008

Bill Flanagan filled in for Bob Brinker on Moneytalk, January 12-13, 2008
Bill called it "a rough week” and gave these statistics:
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    DJIA down 4.96%
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    S&P 500 down 4.59%
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    Nasdaq down 8.26%
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    Nasdaq Composite Index down 8.01%
  • .
    Russell 2000 down 8.01%
  • .
    Dow Jones Wilshire 5000 down 5.25%
A caller asked Bill about temporarily selling out his equity holdings. He explained that he was very concerned and had "lost a couple of thousand since January 1st”
Bill told the caller to first consider these points:
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    Capital gains taxes
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    The possibility of never getting back into the market.
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    Remember Jason Zwieg’s idea to wait two-weeks before making a trade in the market (if you are not a trader).
Bill Flanagan excerpts: “If you are a long-term investor…..and this is money you are not going to need for some time, I would be inclined to wait it out… may have suffered the worst already – you may not have. But the darn thing about the market is – and this is what makes it so much fun -- it never announces when it’s going to say alright let’s go, the lights are all green and we are off and running.
There’s no bell that goes off when it bottoms out. And it doesn’t tell you how fast it’s going to recover. We all look at all kinds of figures and some people are much better at reading tea leaves than others. And some people are terrific at looking at metrics and they can ferret out trends for awhile. But the bottom line is, nobody really knows for sure.
The full faith and credit of the United States economy is really what the market represents, as long as it doesn’t get fiddled with too much by some of the greedy, ummmmm, I’m chewing my words here, who have been entrusted with handling a lot of that money. But it does indeed bob back to the surface like it’s just too much energy, too many positive things going on in the economy. I think that will happen again. I can’t say when.

I don’t think there’s anybody in the world who thinks the market won’t recover from this. There are just too many good reasons why it will. When? It could be quite some time.

Certainly, this is a real blood bath. Let’s not kid ourselves….."


Wonder said...

Will Larry Kudlow be filling in next weekend?

Wonder said...

The gains for the last 12 years are gone. "Markettimer" indeed.

Jeff said...

What do you all think Brinker would say with the release of the CPI numbers today?

Headline CPI-U for the last 12 months was 4.1% seasonally adjusted.

Core CPI was 2.4%

Jeff said...

I couldn’t make it through listening to Bill. I tried for about 10 minutes while he talked about investing in a traditional IRA vs a Roth IRA.

Bob doesn’t seem to understand this point and Bill really didn’t seem to get it. It doesn’t matter which one you invest in *if* your are in the same tax bracket (and the bracket don’t change) when you put your money in and when you take distributions from your IRA.

The criteria to judge which is better for you is based upon what you think your tax rate will be when you take distributions vs now and if the rules change later.

For example, if a consumption tax is collected instead of income taxes your Roth won’t be much of a benefit.

Most people think it is wise to have money in both the Roth and a tax deferred acount to have tax diversification.

But I don’t know why Bill made this so complicated.

Simple math

Principal (1-tax rate) (1+ rate of return)^x number of years investing

It doesn’t matter whether you tax the principal at the start or the end if the tax rates remain constant.

John said...

How about that long term market call, New Lows for the last 14 months

Kirk said...

I couldn’t make it through listening to Bill. I tried for about 10 minutes while he talked about investing in a traditional IRA vs a Roth IRA.

Don't forget that if a spouse dies early then your tax bracket jumps when you retire. SO if you are not in the top bracket when you accumulate an IRA, you could easily get kicked into a higher bracket if your spouse dies early.

Don't forget, with Hilary or Obama running things, tax brackets are probably the lowest they are going to be right now... at least for anyone with sufficient assets to retire comfortably without Social Security.

I think a ROTH is a "no brainer" for couples that are not in top brackets now who have significant assets.

Thoughts of a genius mind said...

This may be health restoring for Bob Brinker, but it sure is gut wrenching for me.


"I see the quality and caliber of our presidential nominees, and I am not impressed. It raises the question of whether this country is even able to run itself anymore."

John Bogel - Founder of Vanguard Funds

Bill said...

I am very disappointed with Bob Brinker on this one. Never thought I'd prefer the almost-regular substitute host, Bill Flanagan, to Brinker, but Bill's comments on this 2008 market were very honest compared with Brinker's. I have no more confidence in Brinker's ability to call a bear market. And of course he weaseled out of doing the radio show both days last weekend. Didn't want to face a stream of angry callers I'm sure. I won't be surprised to hear another substitute host next weekend.

Honeybee said...

Wonder asked: "Will Larry Kudlow be filling in next weekend?"

I wonder. 8^)

Honeybee said...

Hi Jeff,

Thank you for the explanation about the Roth IRA vs traditional IRA. I've never before seen it explained that well.

Honeybee said...

John said: "How about that long term market call, New Lows for the last 14 months"

Yep, and it may not be over yet. As I type the S&P is at 1323 and dropping. 8^(

Honeybee said...

Hi Mark,

It's good to hear from you. I wonder if the possible candidates in the upcoming election aren't scaring investors out of the market early.

I think the democrats think they have it all wrapped up. And one thing Brinker is absolutely right about is that they will raise taxes as surely as night follows day.

And every other word out of Hillary, Obama or Edward's mouth is how they are going to give each "according to their need and take from each according to their ability" (paraphrase).

Honeybee said...

Bill said: "...but Bill's comments on this 2008 market were very honest compared with Brinker's."
I agree, and Flanagan sounded VERY negative. He seemed to be genuinely concerned.

No games or hocus-pocus with him--except he carefully tiptoes around any reference to Brinker's market-timing. I'm sure that is part of his job-description and unavoidable.

I'd love to know what he really thinks about Brinker.

jeffchristie said...


"I'd love to know what he really thinks about Brinker."

I don't know the answer to that one but I do know what Brinker thinks about him. Brinker posting as Don Lame called Bill the Eral of bordom. Maybe the Eral of candor would be more appropriate.

rdk573 said...

....Well the Russell 2000 has officially entered a bear market as it has dropped over 20% from its high...The Nasdeq close to 17% from its high an the S & P 500% over 15% from its high...If BB's marketimer was worth the paper its printed on, its indicators should have been neutral to negative when the indexes were at their high... not the screaming buy to which he proudly or pomoposuly indicated...and in no way should he have done a 180 and state that we entered a new secular bull market last year...he blew it...his subscribers should demand a refund...

Tom said...

What I find very interesting about the Russell 2000 is that it is now at the level of 2006 lows! Brinker, in June 2007, retroactively claimed that June 2006 corresponded to the END of the bear market. Revisiting those prices, especially for the Russell 2000 index, which was the MARKET LEADER in this whole rally, nows seems to invalidate this change of market view. If the 2006 lows don't hold for the Russell 2000, the secular bear market may in fact still be intact!

shadowclone said...

Jeff -

Your explanation on Roth & Traditional IRA is simple & correct.

I believe one should definitely own both types of account (Roth & deferred tax retirement) for tax diversification.

In addition to tax bracket and changes in the rules of income taxation, another consideration would be the terms of usage, withdrawal and inheritance.

Are the rules the same for Roth IRA and Traditional IRA for borrowing, withdrawal and inheritance? Just speaking off the top of my head, I seem to remember the Roth IRA has somewhat more favorite terms. (I could be wrong.)