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Saturday, October 11, 2008

Moneytalk Saturday October 11, 2008 Comments

Bob Brinker said he did not forecast this bear market.
"My work did not forecast this bear market decline. I have no way of forecasting a global banking crisis."
That was no surprise to readers here. When the S&P500 rallied to 1400s earlier this year, Brinker made fun of those who were predicting a meltdown on his show calling them "Cassandras." [See May 31st Cassandra Rant]
Brinker said: “What we have right in here now is evidence that the Cassandras, who earlier this year, were telling us we were in recession – right now they’ve basically – well I’ll be kind, basically, they look like fools right now. Because all that they’ve accomplished with their talk about recession…………all that they have to show for their efforts is that they scared the people who listened to them out of the stock market this past winter……….”
Don't you wish you were so lucky to have been scared out of the market when the S&P500 was way, way up at 1300?

Not once did he mention the price of oil today which he blamed when the market fell its first 20%. Now that the market was down as much as 47%, Brinker now agrees with those of us who said it was troubles in the banking/Financial sector that was responsible for the market's problems. BTW, long ago I heard Warren Buffett say financial derivatives were "weapons of financial destruction." Buffett had 20 or 30% of his Berkshire Hathaway in cash waiting for a fat pitch. He's been picking through the wreckage lately buy at dimes on the dollar the top quality firms by supplying capital at a high rate in exchange for warrants to buy stock.

Other than that, I enjoyed the show a great deal even though he didn't talk about the stock market, just the problems he will use as an excuse for missing the bear market the "fools" he ridiculed earlier were right about.

Brinker talked about LIBOR and the TED Spread. From Wiki:

The TED spread is the difference between the interest rates on interbank loans and short-term U.S. government debt ("T-bills"). Initially, the TED spread was the difference between the interest rates for three-month U.S. Treasuries contracts and the three-month Eurodollars contract as represented by the London Inter Bank Offered Rate (LIBOR). However, since the Chicago Mercantile Exchange dropped T-bill futures, the TED spread is now calculated as the difference between the three-month T-bill interest rate and three-month LIBOR.
and from
LIBOR is the London Interbank Offered Rate. It is a daily reference rate based on the interest rates banks in the London wholesale money market (or interbank market) offer to lend unsecured funds to each other. LIBOR is usually slightly higher than the London Interbank Bid Rate (LIBID). LIBID is the rate the same banks are prepared to accept deposits.
Brinker's guest was Charles Ellis whom Bob called a "Wall Street Legend." Ellis was there to plug his new book, "The Partnership: The Making of Goldman Sachs." Bob Brinker strongly recommended the book "Winning the Loser's Game: Timeless Strategies for Successful Investing by Charles Ellis.

The most interesting thing from the interview was Ellis said he thinks the World of Warren Buffett and has his own money invested in Buffett's stock. Berkshire Hathaway (Ticker symbol BRKA Charts) is the company. Brinker was quick to change the subject!

The Partnership: The Making of Goldman Sachs (Hardcover)

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  • "This remarkably insightful and lucidly written investment classic should be required reading for every serious investor."--Burton G. Malkiel, Author, A Random Walk Down Wall Street

  • "Ellis has written a liberating book about investing. This book will enable you to face your money matters squarely, with intelligence and vision, and help you create a plan that will increase the security and freedom of your later years."--Byron R. Wien, Morgan Stanley
Q: "What can I do to beat the markets?"

It's one of today's most often asked questions. And the answer, maddening in both its simplicity and its complexity, is simple: Instead of playing the loser's game of trying to "beat the markets," enjoy winning investing by learning how to get the markets to work for you.

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