SUMMARY BOB BRINKER'S MONEYTALK DECEMBER 8-9, 2007

Brief Summary, Commentary and Bob Brinker Excerpts From Moneytalk, December 8-9, 2007:
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OPENING MONOLOGUE EXCERPTS Bob Brinker said: “The big story as we get this weekend underway is the George W. Bush presidential bailout plan for the sub-prime mortgage set. Not everybody will be helped by this, but a lot of people will – kind of an ironic thing. Only a few weeks ago the leader for the democratic (sic) presidential nomination, Hilary Diane Evita Christina Rodham Clinton urged the president to take some action.
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Well I don’t know whether he even knows about Hilary’s imploring him to take action…...but he sure took action, as he has announced a plan to bailout sub-prime mortgage holders up to 1,200,000 such troubled mortgage holders could be helped by this plan.......people in the industry say less – maybe a quarter million, maybe ¾ million that could be helped by this. How many sub-prime borrowers are out there? About 6 ½ million in total.......This plan will allegedly not cost taxpayers any money, we shall see about that…….basically consists of three prongs. The first is a freeze on adjustable rates of sub-prime mortgages for a period of five years. It goes back to January 1, 2005 and extends out to July 2010......Then it consists of a re-financing program for some of these mortgage holders into fixed rate mortgages.......FHA insured loans....... So there you have it.
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The eligibility rules are fairly defined. Firstly, the beneficiaries have to live in their homes and secondly, they have to be current on their payments, or not have missed more than one payment in the previous twelve months. So there you have it.
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Now these adjustable rate sub-prime mortgages are very, very rough once they re-set, and that is what this is all about – grabbing the re-set problem going forward. Usually these sub-prime ARMS start in the 7,8,9% range, but when they are normalized, they get up into the 11, 12, 13% range. Well, the ones that come under this program would be frozen at that lower rate for the five periods under discussion…for the loans falling within that five year period. Now there are a tremendous number of these adjustable rate sub-prime mortgages that are due within the next year or so.
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You ask, why now? Why President Bush to the microphone now to announce this program. It’s a very easy question to answer.......We are going into a general election in early November of next year.......It is true the President of the United States had the wrong phone number when he had his press conference announcing how to get help with this plan. So let me give you the right phone number: 888-995-4673 (HOPE). That’s the Home Ownership Preservation Foundation, a non-profit group offering free housing counseling.......
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We’re told by the Treasury Secretary it won’t cost taxpayers a dime. That means it would cost those who invested in these ill-advised mortgages. And for the most part, that would be institutions around the world that bought packages of these mortgages as they are securitized into packages for investment purposes. And based on what we know, that is what happened. A lot of these mortgages have been packaged, securitized, purchased by investors around the world, many of those by institutional investors.”
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STOCK MARKET HINDSIGHT Excerpt of Brinker's comments: "Another good week for the financial markets. The S&P 500 Index now back over the 1500 mark. It’s just a little over 3 ½% under its all-time-historic high. And the S&P 500 having another very, very good week…….. If you go back to March 11, 2003, when we issued our major buy signal on the stock, the S&P 500 was around 800 then, now it’s over 1500. That gives you a total return, so far, including the cash dividends, well in excess of 90% -- or as they say, how sweet it is."
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MARCH 2003 BUY SIGNAL During Sunday’s opening monologue Bob Brinker re-iterated his "March 11, 2003 buy signal.” He said that he recommended the return of “all available stock market cash reserves” to the market.
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LIAR LOANS Bob Brinker excerpt: “A liar loan is a loan where the borrower provides little or no documentation of their income stream. Therefore, they can lie as much as they want since there’s no verification of the information. One thing we don’t know is how many of the loans are liar loans. But there’s no question that over 50% of the borrowers who have sub-prime adjustable rate mortgages for 2006, the ones that got them last year, and they’re in this group that is eligible for help – over 50% of them provided basically liar loan backgrounds. So if you’re saying that this is a moral hazard – we are rewarding the liars –you’re absolutely right.”
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CNBC “YELL-FEST” A caller asked if Brinker had noticed that the financial shows have become mostly a “yell-fest” by the reporters who think the world is “hanging on their every word.” Brinker said that he had moved “away from financial TV largely” but likes Joe Kernen and David Faber.
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POLITICAL COMMENTS Bob Brinker paraphrase: President Bush took action on the sub prime mortgage problem because he realized a Republican candidate could not be elected with it hanging over his head –IOW, it’s “all politics.” Brinker also commented on how frustrated Hillary is because after she called for President Bush to take action on sub-prime mortgage problems -- he did just that and will get the credit for it. This is a “colossal gaff going into an election year,” so she has tried to throw in a “new wrinkle” –the 90 day moratorium on foreclosure— which is “ridiculous” but “it’s not going to happen.” Bush “stole the thunder” from democrat candidates.
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Over this weekend, Brinker left no politician unscathed except Barack Hussein Obama whom he said is “flying like an eagle.” Brinker bashed President Bush for not giving the correct phone number to get help on mortgages—three different times. He also bashed the “irresponsible” congress and he bashed some of the leading presidential candidates. Ron Paul was subjected to a real dose of Brinker’s ridicule. Brinker said Ron Paul had as much chance of being elected president as there is a chance that Elvis will come back and win the presidency. Brinker repeated his contempt for a “country”that fights wars and “asks sacrifice only of its military personnel and nobody else.”
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FAIRTAX Bob Brinker excerpt: “We’ve all been exposed to this fraud known as the FairTax. It’s the unfair tax, in reality. And this is the kind of propaganda that’s out there……but I’m going to speak out against it because I think it’s wrong.”
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AMT Bob Brinker excerpt: “They are working on adopting a patch to delay for another year this Alternative Minimum Tax becoming even more of a nightmare than it already is. It is amazing to watch in Washington the way Congress will fiddle and diddle with something that they screwed up to begin with. You know the big mistake they made with the AMT back in 1969, believe it or not. The big mistake that they made is that they failed to index it to inflation. Now my pet theory is they did it on purpose because they knew it would generate higher revenue projections and that’s exactly what it did. But of course, they don’t collect the revenue because they come up with an annual patch, which is what they’re in the process of doing right now even though it’s the end of the year here in December. ……..and yet even though they know they’re not going to collect the AMT from every Tom, Dick and Harry that’s getting hit by it, they still continue........ It’s still in the 10-year revenue projections, even though they know they won’t collect it. That means that the revenue projections – the budget deficit projections are bogus. They’re silly putty – they don’t mean anything because they are including tremendous amounts of money from and AMT that they’re not going to collect anyway. This is the way that they conduct fiscal policy in Washington. It is a disgrace. I know you think it’s a disgrace – the way they over spend, but it’s also a disgrace the way they handle fiscal policy in general with this kind of bogus fiscal policy.”
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THIS JUST IN “The democrats are now pressing forward to give judges the (unilateral) power to change the terms of mortgage contracts.” Caller reply: “unbelievable.”
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I-BONDS Brinker not real excited about buying new ones, but would hold on to the ones that he has.
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BUYING BONDS Keep duration low, or ladder maturities– don’t go out long term.
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AFTER HOURS MARKET The caller asked where the actually trading occurred. Brinker said it was “over the counter.” Brinker said that they are “negotiated trades between traders usually based at brokerage houses.” But it’s a thin and volatile market. Brinker said if he needed to “characterize it,” he would call it the “under the counter, over the counter market.” But one of the places where you might see some volume is if “some guru gets on television…..and touts some stock.” Brinker said there have been some cases recently where some “tout” goes on TV and “touts” some stock which causes the stock to go up “30, 40, 50% in aftermarket trading” and usually give it all back in a couple of days.
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GNMA “…...gilt-edged securities” not affected by sub-prime problems. The fund that Brinker recommends (Vanguard GNMA Fund) is fine for those who have “tolerance for asset value fluctuations”.
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RECESSION Bob Brinker excerpt: “With the financial media in a frenzy, telling everyone we are going into recession, people have panicked and are actually are wondering whether the financial media is getting it right. Of course, they are not getting it right, in my opinion – they are completely wrong. But the fact of the matter is some people worry that financial media creating this panic about a recession – they are starting to believe it.”
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JOBS REPORT Brinker's statistics: First Friday of the month –November new jobs up 94,000; October revised upward very slightly at 170,000; September positive 144,000; three month moving average 100,000; 30,00 of the 94,000 November new jobs were government jobs; 38,000 of the October new jobs were government jobs; Construction jobs dropped 24,000 in November; Bigger paying manufacturing jobs lost 11,000—15,000 in October.
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FOMC MEETING It will take place on Tuesday. Bob Brinker predicts (with certainty) a cut of at least 25 basis points, which will take it to 4 ¼. The only reason he thinks that they might take it to a 50 basis point cut would be to “compliment the president’s sub-prime mortgage bailout program.” The interest rate markets have already anticipated the cut….
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OIL PRICES AND INFLATION Bob Brinker excerpt: “Although people feared that rising oil prices would drive core inflation, we told you they were wrong. Right here on Moneytalk, we told you that the people who said rising oil prices would push core inflation were wrong. And the reason they were wrong is because when you have rising oil prices you tax consumers. You tax them on their energy bills including at the pump. And that takes money out of their pocket and they go with emptier prices to the Mall and they can’t push prices higher. That’s why it acts as a tax. And that’s why like all taxes, it is counter-economic growth. It counters economic growth. That is exactly, exactly what we have seen. And it’s good to see some of the Federal Reserve Open Market Committee members are now agreeing with our view that has been expressed for the past year here on Moneytalk – that rising oil prices act as a tax on the economy and like all taxes they serve to slow down economic development. But we also told you that for that reason, they would not spill over materially into core inflation, and they have not…………….core inflation, year over year right now on the key personal consumption expenditure gauge is up only 1.9%........”
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BOB BRINKER SATURDAY QUOTE OF THE DAY “Never underestimate the ability of a politician to postpone the inevitable.”
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BOB BRINKER SUNDAY QUOTE OF THE DAY “We can agree to disagree in Las Vegas, Nevada. There’s a lot of that going on every day.”
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BOB BRINKER MOVIE RECOMMENDATION “No Country For Old Men” (contains violence)
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BOB BRINKER LIGHT-READING RECOMMENDATION Bob Newhart’s “ I Shouldn’t Even Be Doing This: And Other Things That Make Me Laugh”

BOB BRINKER’S NEWLY-CREATED FAVORITE JARGON “Mortgage brokers gone wild.”