Bob Brinker, Neal Boortz and the FairTax

Bob Brinker pooh-poohed the FairTax as hardly worth mentioning. Neal Boortz called Bob Brinker a clown. But the truth is, there seems to be a lot of interest in it. Neal Boortz has a very interesting column about it this morning. Here are a couple of excerpts. Neal Boortz wrote:
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"Now to make this column worth reading for those of you who are not familiar with the FairTax, a very quick introduction is in order.
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Since Congressman John Linder, the author of H.R. 25, The FairTax Act, and I wrote “The FairTax Book” in 2005 we’ve seen an unprecedented and ever-growing nationwide interest in this tax reform idea. Let’s face it, you have to be doing something to capture the imagination of the American people to have a book on taxes debut No. 1 on The New York Times Bestsellers List.
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The FairTax eliminates all corporate, business and personal federal income taxes, all payroll taxes, capital gains taxes, dividend taxes and estate taxes, and replaces them all with one embedded sales tax on the sale of all goods and services at the retail level. Tens of millions of dollars in research show that the corporate and personal income and payroll taxes that will be eliminated by the FairTax end up being paid by consumers at the retail level. The average amount of embedded taxes in the cost of everything we buy at retail is approximately 22 percent. This would mean that we are replacing the embedded cost of our present tax system (22 percent) with the embedded FairTax (23 percent).

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You can read Boortz' column here:
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(Link removed because it is no longer valid.)
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Bob Brinker "Bold Bull"

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This morning, Peter Brimelow wrote a review titled "Wild ride -- but Bold Bulls aren't budging"

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Here is an excerpt about Bob Brinker:

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Commentary: Checking in with three letters during manic-market moment
By Peter Brimelow, MarketWatch
Last Update: 12:01 AM ET Nov 26, 2007

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"Marketimer doesn't seem to have bothered with a hot line at all recently. In its issue dated Nov. 5, Marketimer summarized: "We remain bullish as we move toward the winter season. We continue to rank the stock market as attractive for purchase on any weakness into the area of the S&P 500 Index mid-1400s, in the event such weakness occurs. In the absence of such weakness, we prefer a dollar-cost-average approach for investing new stock-market money. All Marketimer model portfolios remain fully invested."
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Marketimer says flatly that it thinks the risk of a recession is low, although it expects housing difficulties to continue "well into next year." "

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http://www.marketwatch.com/news/story/wild-ride----bold-bulls/story.aspx?guid=%7B07CF0C2B-5BA6-4E34-BBAF-442BFDEFF0E0%7D
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Honey here: In addition to what Peter Brimelow wrote about Brinker's market views, in the November issue of Marketimer, Page One; Paragraph One: Bob Brinker wrote the following:
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"..........we expect that the cyclical bull market that began shortly after our major buy signal on March 11, 2003 ..............has further to go in terms of percentage gains and durations. We continue to believe that there is no risk of a cyclical bear market............."
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It is worth noting that Bob Brinker has never informed Moneytalk listeners that he no longer believes the cyclical bull market is running concurrently with a "secular bear megatrend." He never told his audience that in June, 2007, he declared an end to "a secular bear megatrend" retroactively, as of June, 2006. (Even though he had talked at length about it on Moneytalk.) Bob Brinker repeatedly predicted that this so-called secular bear which he claimed began in "March 2000," would run 8 - 20 years and would include several cyclical bull and cyclical bear markets.
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It is also worth noting that Bob Brinker has not once written about "secular trends" in Marketimer since the June, 2007 issue, where he tucked away a short notice that the secular bear market had ended as of a year ago.
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Bob Brinker's Moneytalk Summary and Commentary, November 25-25, 2007

Bob Brinker's Guest Host for Thanksgiving Weekend: Bill Flanagan

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Here is an excerpt of Bill Flanagan's opening comments:
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“Well, not a lot of cheering on Wall Street this week as the bad news about the credit crunch crisis continues and some other nasty problems persist as the Dow slid below 13,000. Course, Friday was an encouraging half day – closing up 181 points for the day. In fact, since most recent sessions of the market day have started off very good, very strong, and then plunged in the later hours. Some have joked that we should only have half days of trading. I don’t know about that, but certainly anything to stop the carnage. So where do we stand? For the year, Dow Jones Industrials still up 4.15%; Standard and Poor’s 500 stocks up 1.58%; the Nasdaq 100 up 15.48% for the year, the Composite Index, 7.51% to the plus for the year; the Russell 2000, off 4.14%; and the Dow Jones Wilshire 5000, up 1.83. Those are not the greatest numbers on Earth and they were quite a bit better just a few months ago – before we started this plunge. But it’s hardly worth slashing your wrists over, folks.”

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Flanagan made some rather lengthy comments about Warren Buffett, labeling him "the $57billion man” (Honeybee sez: According to gurufocus.com that should be $65Billion). Flanagan went on to say that since Buffett and Bill Gates had gotten together it’s become "a bit too much.” That Buffett had gone from being the “sage of Omaha” to being the “Donald Trump of investing.” Flanagan said he wouldn’t be surprised to see Buffett pop up on Dancing with Stars one of these days since Buffett seems to be popping up everywhere else – even in TV ads. Even so, Flanagan says “good for Warren,” but thinks he might have recently gone a “bit strange” with all of his tax talk.
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(Honeybee sez: Many who left comments here last week about Warren Buffet feel a lot more strongly--both pro and con-- than Flanagan does.)
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Flanagan pointed out that if more tax increases are coming, they will no doubt be directed at “that big lump in the middle,” because that is where the most money can be raised. His reasoning goes like this: you can take everything away from the poor (1/3 pay no tax at all) and make nothing, while the top 50% of earners already pay 97% of Federal taxes, so raising taxes on the rich won’t generate that much income.

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Here are some miscellaneous points Bill Flanagan made that might be of interest:

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  * The AMT is going to hit millions more middle-income tax payers this year.
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  * Steve Forbes has written a book on the flat tax. Forbes' is similar to the FairTax, but Flanagan thinks it would be better.
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  * If elected, expect Democrats to change capital gains and dividend tax rates, which will “throw a monkey wrench in our economy.”
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  * Stockpickr.com was purchased in excess of $10million by thestreet.com, which means that Warren Buffett owns it now. (Correction: Jim Cramer owns "stockpickr.com." Please see Kirk's comments below.) However, it is a good site to view the portfolios of Buffett, Soros and others. Here is Buffett’s portfolio:

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http://www.stockpickr.com/port/Warren-Buffett/
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* Another site that gives lots of stock picks and big guru portfolios:
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http://www.gurufocus.com/
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The subject of estate taxes came up a few times and every person that called had their own idea about what would be a fair level. It occurred to me that when it comes to taking money away from people in the form of taxes, that anything beyond what the Constitution allows is nothing but legalized theft—and opinions largely depend on whose ox is being gored—so to speak. It seems to boil down to a matter of degrees/amounts, and who has the POWER to make the choices.
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For the first 137 years the United States existed, the Constitution did not allow for the income tax. It began in 1913 with the passage of the 16th Amendment. Originally the income tax only affected a handful of people. (Take a look at what it has led to in the past 95 or so years -- it’s astounding.)
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http://caselaw.lp.findlaw.com/data/constitution/amendment16/01.html#2

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As Professor Walter Williams often points out (paraphrase): "When is it ever right to take money away from one person and give it to another?"

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http://gmu.edu/departments/economics/wew/index.html
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Most of Flanagan's Moneytalk calls this weekend were lengthy, repetitive and for the most part, so esoteric that they were of little interest to most people. Here are three that were somewhat fascinating--for various reasons. 8^)
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* A caller offered a definition of the “rich”: “If you are debt-free and you can write a check up to $20,000-$50,000, you are a rich person.”
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* A caller said that people should not be allowed to give their money to their own kids as an inheritance—that it should all have to be given away to charity or paid in taxes.
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*The very next caller disagreed and said that to be forced to give all of one's money to the government to spend was “absolutely ridiculous” and that it’s foolish to think the government can spend your money more wisely than your own children can spend it.
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Sunday, Flanagan talked about wanting a wireless reading device and he mentioned that Amazon offers one called an Amazon Kindle. It sells for about $400 now, and seems to have a lot of pros and cons according to some of the customer reviews. It looks like something I might like to own as soon as some bugs get worked out and maybe the price come down a bit. 8^) (Amazon Kindle is out of stock at the present time.)
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In hour-two on Sunday, Flanagan’s guest was Jason Swieg , author of “Your Money and Your Brain.” Way too far out to be of interest to me____Honeybee
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Kirk Lindstrom wrote:

"James (Jim) Cramer owns TheStreet.com, not Warren Buffett.http://finance.yahoo.com/q/mh?s=TSCMJim has about 2M shares at $12.80"TheStreet.com's proprietary network includes RealMoney.com, Stockpickr.com, TheStreet.com Ratings, TheStreet.com TV, and Promotions.com."I heard a little bit of the show this weekend (while changing a fluorescent light in the garage) and I think I heard Bill say something like "and you know who owns that" for this call. Perhaps he was told to not discuss Jim Cramer on Bob's show so he didn't mention him by name. Bob has been "a bit sensitive" about his competition be it someone tiny like me with a competing newsletter and small but loyal subscriber base or a major media figure like Jim Cramer with far more popularity with the young demographic advertisers covet. Here is a link showing how many search for Cramer vs Brinker It is amazing how you only get Jim Cramer if you have cable yet his much smaller audience is much more active on the internet.... probably 30 years or more younger, thus the demographic advertisers want."

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(Honey here: Please click on "comments" to read all of Kirk's comments .)

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Bill Flanagan Does Moneytalk Thanksgiving Weekend

I said in my last post: "Only time will tell if Brinker will be on this weekend. My inside source has told me that he will not be--and the "source" is more often correct than not."

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Yep, my "source" was correct. 8^) I'll post a few of the high points of Flanagan's monologue, but most of the discussions in the first hour had to do with Warren Buffett and the estate tax.

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Sure sounds to me like Flanagan is a Buffett fan. But it also sounds like Flanagan doesn't have a clue what Buffett's agenda really is....

Bob Brinker: Stock Market Correction

Bob Brinker is 100% bullish and his model portfolios are 100% invested. Here are some of his comments that I have excerpted in my weekly summary/commentary of Moneytalk:
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October 28, 2007, Brinker was equating the market correction to "small potatoes." Of course that was before the S&P went flat for the year on Wednesday, November 21st--reaching a 10% correction decline.
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Excerpt from Bob Brinker's October 28th opening monologue:
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"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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November 10-11, 2007 comments and some Brinker quotes:
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STOCK MARKET: Bob Brinker opened the program today by looking at the stock market in the rear view mirror. The S&P 500 Index is sitting very close to the 1450 level which is 7% below the all-time-historic record high from just a few weeks ago – which was 1565. Brinker explained that we have seen a number of similar corrections like this in recent years in terms of “magnitude.
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BEAR MARKET: Bob Brinker said: “For those betting on a bear market right now, I’m taking the other side of that wager. I think the bad news bears are wrong again about their forecast out there of Armageddon right now."

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STOCK MARKET (November 10-11): 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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So what does Bob Brinker expect the market to do in the remainder of this year and into next year?
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On Moneytalk and in Marketimer, he has said he rates the S&P 500 Index “attractive for purchase on any weakness that occurs in the area of mid-1400’s.” Above that level, he recommends a “dollar-cost-average approach.”
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In the August 2007 Marketimer, Brinker said he believed the S&P 500 Index would be trading in the “1600’s by next year.”
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In the September 2007 Marketimer, Bob
Brinker said that he expected “….the S&P 500 Index to
register a series of new historic highs into next year."
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Bob Brinker has recently stated that there is ZERO risk of a cyclical bear market (20% decline of the S&P 500 Index) in 2007, and “……in the months ahead.”
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Only time will tell if Brinker will be on this weekend. My inside source has told me that he will not be--and the "source" is more often correct than not. 8^) But if Brinker is on this weekend, what will he have to say about the market's "behavior"?

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Bob Brinker's Moneytalk Summary, November 17-18, 2007

Brief Summary, Commentary and Bob Brinker Excerpts From Moneytalk, November 17-18, 2007.
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Bob Brinker began the Moneytalk monologue by saying that listening to the “Star Ship Moneytalk” is the way to learn how to become your own personal financial manager so that you can “take charge” and avoid becoming “shark bait,” and that this is one of the "greatest gifts" you can give yourself and "your loved ones."
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CRITICAL MASS: Brinker said that the smart way to get to the Land of Critical is get there slowly “.......using patience and discipline along the way. Leave the fast-buck artists aside. You don’t need that kind of an approach – doesn’t work anyway.”

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STOCK MARKET: 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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QUALITY BONDS: Bob Brinker segued from the stock market to the bond market, saying, “.......quality bonds continue to lead the way.“ The GNMA Fund that Brinker recommends is trading within one penny of a 52 week high. And is "......acting in outstanding fashion for all GNMA investors.” The 3-month Treasury Bill Yield is at 3.3%; the 10-year note at 4.5%; the 30-year Treasury Bond at 4 1/2% -- creating a positive yield slope of 120 basis points. The low yield is partly due to “.......demand from foreign governments.....” but some of it is due the expectation of “.....lower inflation down the road.”
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CORE INFLATION: Has held “relatively steady” despite the fact that the price of oil has risen into the mid-$90s. Brinker said: “Now of course, the inflation junkies told us – they were totally wrong about this, but they told us that rising oil prices would drive core inflation. It has not turned out that way.” Brinker believes that rising oil prices rob consumers of discretionary income and make it impossible for consumers to drive up other prices and thereby cause inflation. He says that high oil prices “....act like a de facto tax on consumers” -- and that is why the core inflation index has held relatively level. The housing “recession” has also been a contributing factor.
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WHY SO MUCH PESSIMISM ABOUT THE ECONOMY: A caller pointed out that he didn’t understand why there is so much pessimism in the country in light of the fact that he has observed that there is often difficulty in hiring enough people because everyone is so busy. Brinker mentioned a guest that he had on Moneytalk a few weeks ago (the author of “Richestan”) and pointed out that if you are lucky enough to reside in Richestan with the extremely well off, then the caller would likely be correct. Bob Brinker said: "Things have never been better for the extremely well off, but if you are talking rank and file, you get a lot of disagreement about what you just said.” Brinker told the caller that he does not think that we are in an economic boom – and he added, “Thank goodness, we are not in a boom, because the worst thing that can happen is economic boom, because that’s always followed by intense pain.”.

WILL THE HOUSING DEPRESSION TURN INTO A GENERAL DEPRESSION? Brinker does not see that happening.
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WHAT TO DO DURING THE HOUSING RECESSION: Brinker told the caller that all we can do is ride it out. He said that is what we have to do because, “It’s not going away and there is nothing to make it go away.” Brinker said that the best we can hope for is that the government will come up with some kind of a proposal to lessen the pain of all the foreclosures that are going to happen over the next year as mortgages reset. Sunday, Brinker said that the housing recession will last into 2008 and that housing starts are at a 14 year low.
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GOLD: Bob Brinker said: “Now a long time ago, when these shares were trading in the low to mid-$50s, I gave that recommendation on this program. That for listeners who desire to have a hedge in the gold market that I thought the security to use was the shares that trade under the ticker symbol GLD. Those are the Exchange Traded Fund Gold Shares. And at the time I first gave that recommendation to listeners that were looking for a hedge in gold, those shares were trading in the low to mid-$50s. They are currently trading at $77.75. So obviously, anybody that chose to put on a hedge in the gold market has done very well.”
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Barack Hussein Obama: Bob Brinker pointed out that at the most recent Democrat debate, Obama made a proposal to raise the income limit for paying Social Security taxes above $97,000 a year. Obama implied that his proposal would tax only the "upper class.” Here is an excerpt of what Obama said:

“I've heard you say this is a trillion dollar tax cut on the middle class by adjusting the cap. Understand that only 6 percent of Americans make more than $97,000 — (cheers, applause) — so 6 percent is not the middle class — it's the upper class.”

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“Hillary Diane Evita Christine Rodham Clinton” (that is Brinker’s title for Hillary—I do not know where he gets the “Christine”) did not agree with Obama. 8^)
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http://www.factcheck.org/clinton_vs_obama.html
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ESTATE TAX: Over the weekend, there was a lot of talk about the estate tax and Warren Buffett’s comments to Congress. Warren Buffett said: "A meaningful estate tax is needed to prevent our democracy from becoming a dynastic plutocracy." As Brinker pointed out several times, the very fact that Buffet can fly to Washington D.C. and try to persuade congress to adopt his views on the estate tax proves that we are already in a plutocracy. Bob Brinker pointed out that Buffett has chosen to give a large percentage of his assets ($37BILLION at last count) to the Gates Foundation. (It was reported in 2006 that Bill Gates will retire from Microsoft in 2008 to “manage” the spending of his Foundation’s huge resources. I can’t find anything more recent about Gates plans.) A caller also pointed out that Buffett is giving huge amounts of money to his own family foundations.
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Honey comment…(sorry, can’t help myself): So while Buffett wants others to be taxed, he gets his choice about how to dispose of his own wealth. Many don’t get to make their own choices, especially if their assets are in family businesses or family farms. If Buffett wanted to be intellectually honest, he would simply put his money into the Federal coffers and let Congress choose who to pass it out to..... 8^) Instead, Buffett whines about others forming "dynasties" and then proceeds to give the Bill Gates dynasty (the largest in the U.S.??) the power to decide where the Buffett $billions will be spent. Personally, looking at some of Gate’s philanthropic choices, I think some are good, some not so good. I guess it’s not so different from government after all.

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ESTATE TAX EXEMPTIONS: Estates worth up to $2million are exempt in 2007 and 2008. The exemption slated for 2009 will rise to $3.5million, and by 2010 it will be repealed – but only for a year. Unless Congress acts, in 2011, the tax will roll back to $1million with a top tax rate of 55 percent. Brinker pointed out that there is a movement to abolish the estate tax completely, but it doesn’t sound like he would be for that happening. Bob Brinker said: “I’m comfortable with 3-$5 million as the cap on it.” But he believes if the democrats are in power, they will “......probably shoot lower than that."
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REVERSE MORTGAGES: Brinker said it boils down to the terms--such as what value will be placed on the property, and what time line the payments cover. He recommends getting some comparables and then checking with a CPA or enrolled agent.
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DATA FLOW COMING UP THIS WEEK: Market is open on Friday; expect light trading. Housing starts for October on Tuesday morning – estimated to be 1.17million. Leading indicators Wednesday morning – expected to be down “perhaps” 3/10 of 1%.
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_____Honeybee

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Bob Brinker’s HFD Performance Rankings

Bob Brinker's Marketimer Performance

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The following is excerpted from the November issue of Hulbert’s Financial Digest.
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Bob Brinker’s Marketimer Mutual Fund Performance"
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Mark Hulbert rates the performance of newsletter mutual funds. The top 5 are ranked over various time periods consisting of 15 years, 10 years, and 5 years—for both "Risk-Adjusted" and "Not Risk-Adjusted."
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Here are Bob Brinker's rankings for the "average" of his model portfolio mutual funds through 10/31/2007 according to HFD:
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“Total Return Ranking (Not adjusted for Risk)”
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15 Years: Bob Brinker = 3rd place
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10 Years: Bob Brinker = 5th place
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5 Years: Bob Brinker's Marketimer is not in the top five newsletters
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“Total Return Ranking (Risk-Adjusted Ranking)”
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15 Years: Bob Brinker = 3rd place
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10 Years: Bob Brinker = 2nd place
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5 Years: Bob Brinker's Marketimer is not in the top five newsletters
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Under HFD's category that ranks the TOTAL performance of the "average" of model portfolios, Bob Brinker did not make any of Hulbert’s "Performance Scoreboards" in the “Not adjusted for risk” column for the past 25, 20, 15, 10 or 5 years.
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However, Hulbert created a special “Risk-Adjusted" method for ranking performance. Bob Brinker's Marketimer shows up under that category. (One could question the objectivity of Hulbert’s “Risk-Adjusted Ranking” since he does not clearly explain exactly what the term means.)

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Marketimer Model Portfolio Average “Risk-Adjusted Ranking”:
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25 Years: Bob Brinker's Marketimer is not in the top five newsletters
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20 Years: Bob Brinker = 5th place
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15 Years: Bob Brinker = 3rd place
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10 Years: Bob Brinker = 2nd place

5 Years: Bob Brinker's Marketimer is not in the top five newsletters
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Additionally, in the November issue of HFD, Hulbert charts the top 5 newsletters for the past 10-year top performance and compares annual subscription prices then and now. Bob Brinker's Marketimer was not included in the top 5 newsletters and it was not included in the bottom 5 newsletters.

Boortz Sez Bob Brinker is a Clown

Bob Brinker and the Fairtax.
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Bob Brinker's political opinions, which he seems to be sharing with Moneytalk listeners more and more frequently, make him fair game for criticism. Because after all is said and done, they are only his OPINIONs. And it's worth noting that Bob Brinker seldom allows any desenting opinions on the air for very long.
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In my weekend Moneytalk summary, I reported the bare-bones basics of Bob Brinker’s comments about the FAIRTAX when I wrote:
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FAIRTAX: This is a 30% sales tax that some are proposing, but seems to go nowhere. Brinker said it is “absurd” and a “giant waste of time” because “it is not going to happen.”
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The following is excerpted 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. 2007 November 10-11, 2007 Newsletter. To subscribe go to www.begininvesting.com

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FAIR TAX
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Caller: This caller said the solution to the tax problems is to get rid of the income tax and adopt a national sales tax. Bob asked what you would do to the people who get the deduction for mortgages on their houses? The caller said people would save money from their income taxes and so it wouldn't be a big issue. The caller said simply doing away with all of the paperwork would make everything more efficient and save all of us money. Bob disagreed and said the whole notion was ridiculous and cut the caller off just as he was trying to give a website for more information about the fair tax.
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Brinker Comment: People been talking about fair tax for years, but it has never gone anywhere. Why? Because it is absurd. For one thing, if you do the math the actual number required on sales tax solution is around 30%. Can you imagine paying 30% on everything you purchased? Obviously, the more money you spend the more you would pay. In that sense, it is a progressive tax and would redistribute income even if that was not the intent. We are told it would do away with the IRS, but so what? It would be replaced with the Bureau of Sales Tax collection. Placing a 30% sales tax on everything is not going to solve our problems. Don't lose sleep over this. We aren't going to replace the current tax system with this. There is way too much money invested in the current tax code and the lobbyists in Washington are hard at work. What we need to do is to raise enough money to pay our country's debt. The solution is not to change to a sales tax system. The solution is to curb our spending -- something neither political party in Washington has been willing to do.
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EC: If you are interested in learning more about the fair tax, I suggest
this web site:
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http://www.fairtax.org/
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Honeybee here: The following is excerpted from Neal Boortz’ column, called “Daily Nuze” to read the whole column go to:
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http://boortz.com/nuze/200711/11122007.html
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"Monday, November 12, 2007
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BOB BRINKER?
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Sorry ... but I've never heard of him. We did get this email last
night about Bob Brinker though .. so I thought that I would print the
email and respond.
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First ... here's the text of the email:
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‘Bob Brinker, a widely listened to financial advisor and talk show
host, knocked the Fair Tax big time on his show today. He seemed to
think that the tax rate would be 30% and that no one would be willing
to give up their home mortgage deduction. I don't think it would do
too much good for me to e-mail him and protest since he reamed the
Fair Tax advocating caller a new one and then cut him off. Perhaps
you could straighten him out talk show host to talk show host. Other
than the Fair Tax his financial advise has been outstanding.’
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Now .. my response. Be forewarned, I'm getting a little weary of
responding to people who bring up this 30 percent argument and the
home mortgage interest deduction.
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First .. the idiotic 30 percent argument. The FairTax replaces the
income tax. The income tax is quoted as an inclusive tax, so is the
FairTax. If some critics out there want to quote the FairTax as
excusive, then at least have the intellectual honesty to quote the
income tax the same way.
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Now .. the home mortgage interest deduction. If Bob Brinker is such
an amazing financial guru, maybe he could explain to all of us just
what possible value a deduction for interest paid on your home
mortgage has to a person who pays no income taxes. When Brinker
answer's that question we might take some of his other criticisms
somewhat seriously. For now, he's a clown."___Neal Boortz
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Honeybee here: Yep, Neal must have seen that picture of Bob Brinker all decked out as a clown. Someone who has a sense of humor created it years ago, and I'm sure even Bob has chuckled about it--well maybe once or twice... 8^)

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Moneytalk Summary November 10-11, 2007

Brief Summary, Commentary and Bob Brinker Excerpts From Moneytalk, November 10-11, 2007
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STOCK MARKET: Bob Brinker opened the program today by looking at the stock market in the rear view mirror. The S&P 500 Index is sitting very close to the 1450 level which is 7% below the all-time-historic record high from just a few weeks ago – which was 1565. Brinker explained that we have seen a number of similar corrections like this in recent years in terms of “magnitude.”
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In 2004, “the bad news bears were telling us to run for the hills because the S&P 500 Index declined 8.1% from its high of that year to a correction low.” The “bad news bears” were wrong. (People who sold out after the correction in 2004 got out at S&P 1064.)
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In 2005 the S&P moved up to its new recovery high and corrected again by 7.2%. The “bad news bears told us get out while the getting is good, this thing is toast—and they were wrong again.” (People who panicked out after the correction in 2005, got out at S&P 1138.)
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In the spring of last year the S&P made another recover high and corrected 7.7%, and the “bad news bears said this is it, get out of Dodge—and they were wrong again.” (Last spring, people who panicked out after the correction, got out at S&P 1224.)
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This summer the S&P corrected by 9.4%. and the “……bad news bears told us if you don’t get out of the market now, you are crazy and they were wrong again.”

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PANIC STOCK SELLING: J. P. Morgan said: “Stocks tend to fluctuate.” Perhaps he made that statement during a correction sometime. True investors know about this principle and accept the volatility – others who sell out of the market often make bad decisions at the worst times.
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Bob Brinker said: "The wise investor has a diversified portfolio – they are not leveraged – they are not on margin and they know what they own.” However, like we are seeing in housing now, speculators always get "carried out." It’s just a matter of time and when it will happen—similar to driving a race car. “Sooner or later, you’re going over the fence or upside down.”
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BEAR MARKET: Bob Brinker said: “For those betting on a bear market right now, I’m taking the other side of that wager. I think the bad news bears are wrong again about their forecast out there of Armageddon right now."
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BORROWING TO BUY STOCK: Bob had a call from a woman who, along with her husband, had borrowed $50,000 on her home, which gave them $115,000 of investing capital for the purpose of “playing the stock” market. They used it to buy penny Stocks and have lost $35,000, which is a 30% decline in 10 ½ months Brinker said to “never” borrow money on your home to “play” the stock market and never invest in these “garbage portfolios.” Brinker identifies “penny stocks" as stocks which sell for less than $5. Bob Brinker said: “It’s not a professional way—it’s not a professional way to go about managing your money.”
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PENNY STOCKS: Brinker says to NEVER speculate in “penny stocks.” He defines penny stocks as those that sell for under $5 per share.
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RECESSION: The financial media is “pounding away that recession is coming and things look really bad……..." Brinker thinks this is irresponsible and creates the spectacle which can cause investors to panic and run for the exits. A recession is defined as two consecutive quarters during which inflation adjusted Gross Domestic Product – total goods and services, decline.
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FALLING DOLLAR: Caller said he was going to begin living in England next year. Bob Brinker said that buying the British Pound Sterling ETF might be a good way to hedge in case the dollar continues to fall. He suggested using the ETF – symbol FXB. After the caller moves, he should convert completely to the British Pound Sterling.
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ECONOMY: Grew at 3.9% annual for the second and third quarters--about 2 ½% growth for the year. “I think that we are going to have a slowdown and I think that the slowdown is going to be such that we are going to be looking at below trend growth despite the fact the fact that recent numbers have been pretty good.”.
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HOUSING MARKET: It’s too late to get bearish now. This is not the time to suddenly turn bearish because it’s already a “train wreck.“ We can expect below trend economic growth into 2008 caused principally by the “collapse of the housing market.”
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NEW JOBS: We have seen some slowdown in new job, but nothing dramatic. “We have seen very little evidence, on the payroll survey that there has been a lot of slippage – I expect there to be slippage. I think it would be surprising if we did not see slippage in the new jobs numbers.”
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FEDERAL RESERVE: The Federal Reserve is now “on the case” even though they “screwed up hugely up until mid-August.” Moneytalk listeners heard Brinker “…….pounding away at these guys locked up in their ivory tower acting like fools.” After mid-August conference call, they have done a much better job of paying attention, changed policy—and stopped the “silly policy of focusing on inflation, when in fact they don’t even have the luxury of prioritizing inflation at this time.”
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PEAK OIL: Brinker says we are way past Hubbert’s Peak—actually since the 1970s, and we need to pump oil from Anwar.
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FAIRTAX: This is a 30% sales tax that some are proposing, but seems to go nowhere. Brinker said it is “absurd” and a “giant waste of time” because it “is not going to happen.”.
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AMT PATCH: (Acronym for: Alternative Minimum Tax) Here is a paraphrase of some of Brinker’s comments: A one-year fix for taxpayers who are currently snagged in it all the way down to $50,00 income, which is being led by Charlie Rangel (congressman from Gotham City) to provide relief for 21 million American households that face the AMT this year because of inflation over the past four decades. The AMT was originally designed to catch 155 millionaires that were not paying income tax, has now morphed into people who are earning $50,000 a year. According to Brinker, Rangel’s AMT patch would be “.....raising revenue on these fat-cats that are benefiting from the 15% rate that on the income they make on their hedge funds and private equity funds—and knocking that rate up to 35. That would produce most of the revenue that would be lost by the AMT.“
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Here is an excerpt from an article by Amanda Carpenter about the AMT and Rangel's patch. For the whole article, go here:
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http://www.townhall.com/columnists/AmandaCarpenter/2007/11/08/rangels_amt_plan_would_hit_middle_class?page=full&comments=true
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Rangel's AMT Plan Would Hit Middle Class
By Amanda Carpenter
Thursday, November 8, 2007
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Seeking to beat back the “mother of all tax hikes,” House Republicans brandished a non-partisan government report that said if Rep. Charles Rangel’s (D.-N.Y.) alternative minimum tax elimination plan were enacted, 113 million Americans would be forced to pay higher taxes in 2011.
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According to the report, published by the Joint Committee on Taxation, which forecasts tax revenues for the government, 94 million families earning between $20,000 and $200,000 per year will pay more taxes if Rangel’s bill is passed and the Bush tax cuts expire as scheduled.
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Over ten years, this would cost taxpayers $1.3 trillion, prompting Republicans to call it the “mother of all tax hikes,” or MATH for short.
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Although most taxpayers would pay more money under the plan, the JCT report said 800,000 families would see a tax decrease.
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The White House said in a statement released by their budget office that it would veto the bill if passed. “The administration does not believe the appropriate way to protect 21 million additional taxpayers from AMT liability is to impose a tax increase on other taxpayers.”
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As Chairman of the Ways and Means Committee, Rangel has more power than anyone else to write tax policy, which must originate from the House of Representatives. The AMT was enacted in 1969 ensure that 155 wealthy households that were eligible for multiple tax breaks paid taxes. Since it was never adjusted for inflation, more and more Americans have been forced to pay the AMT each year, trapping some middle class families who earn $75,000.
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Last year, nearly 4 million people were hit by the AMT at a cost of $24 billion. The AMT is scheduled to reset in 2008, which would ensnare up to 23 million taxpayers.
To avoid this problem, Rangel’s bill seeks to repeal the AMT, but under the Democrats’ self-imposed “pay-as-you-go” rules, he must make up for the revenue through a tax increase or a spending cut.
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No significant spending cuts have yet been proposed.
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Despite Republicans complaints, Democrats are promoting the bill as a tax cut for the middle class......................."

Bob Brinker Still 100% Bullish

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In the opening monologue on Moneytalk today, Bob Brinker said that he is still very bullish. He spent some time slamming the bad news bears....more to follow tomorrow.

Honeybee

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Bob Brinker's Latest Stock Market Views

Bob Brinker's October 28, 2007 Moneytalk discussion about the Stock Market. (Last weekend Bill Flanagan did Moneytalk.)
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Excerpt from Bob Brinker's opening monologue:
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"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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A week after Bob Brinker made those comments, in the November 5, 2007 issue of Marketimer, Brinker re-iterated that he remains "bullish as we move toward the winter season." He sees NO RISK of a cyclical bear "in the months ahead," and the "mid-1400's" buy signal is still in place--with a dollar-cost-average approach recommended for new money above that level.

Bob Brinker's Market Timing

Bob Brinker is currently very bullish on the stock market. As he has said on Moneytalk and in Marketimer, he rates the S&P 500 Index “attractive for purchase on any weakness that occurs in the area of mid-1400’s.” Above that level, he recommends a “dollar-cost-average approach.”
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So what does Bob Brinker expect the market to do in the remainder of this year and into next year?
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In the August 2007 Marketimer, Brinker mentioned the likely
possibility of the S&P trading in the “1600’s by next
year.”
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In the September 2007 Marketimer, Bob
Brinker said that he expected “….the S&P 500 Index to
register a series of new historic highs into next year."

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Bob Brinker is also on record stating that there is zero risk of a cyclical bear market (20% decline of the S&P 500 Index) in 2007, and “……in the months ahead.”
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Bob Brinker no longer talks about secular bear trends, “long-in-the-tooth” cyclical bull markets, or cyclical bull market “outliers,” like he did just a few months ago.
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When Bob Brinker made the March 2003 buy signal, he claimed the market had entered a cyclical bull market WITHIN a secular bear megatrend and:
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He initially predicted the cyclical bull market would last 1-2 years — and the market charged higher.
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He changed the cyclical bull time-frame to 1-3 years — and the market charged ahead.
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He said the cyclical bull was “long-in-the-tooth” —and the market charged ahead.
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He said cyclical bull market was an “outlier” — and the market charged ahead.

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In the February 2006 Marketimer, Brinker makes the following statement about "outliers" and his market recommendations:
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"We do believe that the current cyclical bull market has the potential to be an outlier within the context of the four cyclical bull markets that occurred during the 1966-1982 secular bear megatrend. During that period, the four cyclical bull markets registered gains ranging from 32% to 76%, and lasted from 12 months to 38 months."

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All this time, from 2000 to 2007, Bob Brinker said that the secular bear megatrend which began in March 2000 would end ONLY after the S&P breached the 2000 closing high of 1527.
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When first the Dow and then the S&P broke the 2000 closing highs in (about) July, 2007 by a small amount but looked like they would continue to be bullish, Bob Brinker, on page two of the June 2007 issue of Marketimer declared that the secular bear megatrend had ended a year earlier in June 2006.
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Bob Brinker has never mentioned the subject since then—either in Marketimer or on Moneytalk.

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Do these rather shocking mistakes made by a man whose claim to fame is understanding and analyzing the stock market mean anything in the long-term?
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In light of the fact that his model portfolios have been 100% invested since March 2003, there are those who think not and still trust Brinker's ability to time the market.
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I suppose each person needs to judge for themselves. But in order to reach an educated conclusion, listeners and readers need to know that Bob Brinker made a disastrous (to many and damaging to some) trade in October 2000, which was not accounted for in his official model portfolio performance record.
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Neither Bob Brinker nor Hulbert’s Financial Digest acknowledge this trade that used model portfolio cash reserves in Brinker's advertised newsletter performance. And the deception goes full circle because Bob Brinker uses Hulbert's Financial Digest performance ranking to advertise his newsletter model portfolio performance record.

_____Honeybee
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Bill Flanagan is filling in for Bob Brinker today. If you want to know if it adds value to attend an expensive college rather than a less expensive college, tune in right away. 8^)

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