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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Moneytalk Summary October 20, 2007

Brief Summary, Commentary and Bob Brinker Excerpts From Moneytalk, October 20, 2007

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Saturday’s opening monologue began with Bob Brinker explaining what his program “has always been about.” Brinker said: “We talk about everything from investing in your 401K, or your 403B, to saving for all your future goals. And you can get that job done through knowledge. It’s the knowledge that empowers you to manage your personal financial future. That’s what it’s all about. We have no interest here in the get-rich-quick schemes. We’ll leave those to the sharks. We’re happy to get rich slowly, but that takes patience along with discipline….…..so that someday, you can arrive in the land of critical mass.”

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INFLATION NEWS: For September, CPI figures were "good." Core inflation rose 2/10 of 1%. Bob said there was more good news this week and this: “Now the year-over-year on core consumer price inflation stands at 2.1. But there’s a better gauge of core inflation -- the Personal Consumption Expenditure Index -- that’s only at 1.8 -- this despite the fact that we’re looking at a barrel of oil flirting with the $90 level.” Food was up 4 ½ YOY – effected by the ethanol craze. Medical care expenses up 4.6 YOY basis – that’s the second highest rate of inflation in the index.

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OIL IMPORTS: Brinker reminded listeners of the long gas lines in 1974 when people sometimes waited an hour to buy just a few gallons of gasoline. Brinker said that to this day, we still pathetically have to “cow-tow” to the Saudi Arabian royal family because after 33 years we haven’t gotten off the “Middle-East oil habit.” We import 12 million barrels per day—much of it from the Middle East. We get another 8 million barrels domestically. Brinker said that unfortunately, we don’t hear much about this subject from either Party. Among other things (nuclear), he believes we should be going into Anwar, but pointed out that politicians can’t even reach an agreement on that.
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http://www.politicalgateway.com/main/columns/read.html?col=59

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ECONOMIC GROWTH: Because of the pressure on the economy from higher energy prices, we are seeing “below trend growth"—acerbated by the housing recession.

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S&P 500 INDEX: Brinker said: “Now amazingly, despite all of this – albeit volatile, which is not that surprising, the S&P 500 Index today. sets at 1500. Now anybody hearing what I just talked about would say you must be joking. The S&P 500 Index is at 1500? Yes it is. Not only that, it’s only 4% off its record high which was registered in this very month of October. And so we’ve seen tremendous resilience in the stock market.”

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BONDS: Brinker said: “Quality bonds are acting extremely well as investors are fleeing risky credit holdings to get into quality credit. Who can blame them with the sub-prime meltdown and all that goes with it.”

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MODEL PORTFOLIO THREE: Caller Tom said he was a subscriber and asked how well Model Portfolio III might be expected to keep up with inflation during his retirement.
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Excerpt of Bob Brinker's answer to Tom's question: “Well if you take a look at that portfolio for the ten years – the last ten calendar years — complete calendar years through 2006, and I might add that portfolio is doing very well in 2007 as well with reference to its conservative balanced objective. But if you take a look at the last ten years, you have a 145% total rate of return on that portfolio. Now this is kind of unusual, but that portfolio for the last ten calendar years has actually beaten the total stock market index. That would not normally occur over the very long term because that portfolio has a good chunk of bonds in it. But it’s actually beaten the total market index for that ten year period by 145% versus 127% for the total market index. Again that has happened because of the fact that there was a period in there - a good solid long period in there in the early part of the decade when that portfolio was largely in cash reserves in terms of its equity position and as a result it benefited from that before it went back to fully invested on the March 11, 2003 buy signal.” (Honeybee sez: The portfolio that Brinker was advertising via this caller was 32.5% in money market funds between January 2000 and March 2003, and the remainder was in 25% VIPSX; 25% VFIIX; 5% European/International Funds; 12.5% Stock Mutual Funds.)

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FED, INTEREST RATES and FALLING DOLLAR: Brinker expects the trend of the dollar to be gradually lower and sees know reason to change that anticipation. He expects the Fed to decrease rates by ¼ of 1% at the meeting on October 30^th and will be surprised if they did more than that. He does not believe it’s the Fed’s job to defend the dollar. How high can the Euro go versus the dollar? Brinker said it will have to be dealt with in Europe—they are the ones being hurt by it.

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FED’S JOB ACCORDING TO BRINKER: “The Federal Reserves mission is to support maximum sustainable economic growth consistent with low inflation.”

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SMALL CAPS: A caller wanted to know if we are “coming out of the small cap era” and should we now expect more growth in mid-cap or large cap. Brinker said he’d been hearing this theory every year for several years and like a clock, sooner or later the pundits have to be right. Brinker said that the way to stay away from that kind of thinking is to have a diversified portfolio. “For example, if you have the total stock market index today, you have close to ¾ in the large cap, about 15% mid-cap and about 10% small cap.”

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Most of the calls were about esoteric subjects, and unless one had similar circumstances to the caller, they were of very little interest. I had difficulty even getting the first two hours of the program because it was pre-empted for various reasons, so I don’t know who was the third-hour guest.

_____Honeybee

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