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Sunday, February 21, 2010

Bob Brinker on Government Encouraging Savers to put 401K and IRA assets into annuities.

Bob Brinker spent a good part of this weekend discussing government's efforts to "encourage" savers to buy annuities. Many message boards are abuzz claiming the government wants to confiscate your 401(k) and IRA savings accounts. With ratings for Brinker's Moneytalk in the tank, it appears Brinker has used this issue to get his listeners riled up.

First some background information. Here is the January 8, 2010 article on Bloomberg:
  • Retiree Annuities May Be Promoted by Obama Aides
    The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.

    There is “a tremendous amount of interest in the White House” in retirement-security initiatives, Borzi, who heads the Labor Department’s Employee Benefits Security Administration, said in an interview.

    “There’s been a fair amount of discussion in the literature taking the view that perhaps there ought to be more lifetime income,” Iwry, a senior adviser to Treasury Secretary Timothy Geithner, said in an interview.

    “The question is how to encourage it, and whether the government can and should be helpful in that regard,” Iwry said.
January 14, 2010:
Here is a compilation of Jeff Christie's summary of the call and discussion taken from several posts in the comment section of Honeybee's Moneytalk summary.

Kevin in Kalamazoo called in and asked Bob about the government taking over IRAs and 401k's. This subject was first discussed back in November of 2008 and Honey documented it here at the Bee hive. Here is what took place back then:

I am going to cover the call from Ken in depth because the subject is very important and I know that some of you are concerned. I have included excerpts from Brinker's very interesting comments:

Caller Ken said he had met Brinker a few years back in San Jose at the Lukemia "Curathon" and had been a Moneytalk listener since 1986. He thanked Brinker for making his road to CRITICAL MASS very smooth. (Honeybee EC: That's about the time that I began listening to Moneytalk -- late 1986 or early 1987). Ken asked Brinker about the House of Representative plan involving George Miller and Jim McDermott to eliminate the 401K system and replace it with a mandatory federal program.....

Brinker said: "This basically started with hearings that were held by committees involving the politicians you mentioned....... And what they did, they had a witness come into the hearing from the New School in Manhattan, and her name was Theresa Ghillarducci. (Honeybee EC: Some are calling her the most dangerous woman in America.) Theresa's idea is to develop a program that would allow 401K convert those accounts to government retirement programs. Now what that would involve, if you elected to convert your account, you would give all the money in your 401K to the United States government.......and in return for that, you would recieve a guaranteed retirement payout for the rest of your life once you became eligible........On the program........we suggested that one of reasons that you would invite Ms. Ghilarducci into your hearings to present this scheme would be that you think it's a pretty good idea. I think it's a reasonable leap of faith to think that some of the people, either chairing or on the committee, think this might be a pretty good idea, and that's the reason they invited Theresa Ghilarducci in to present her scheme -- and that's what it's all about."

Ken pointed out that even though they are saying it's not going to be mandatory, if it doesn't get much participation, they will turn around and make it mandatory -- that's scary.

Brinker responded: "I think that if it's not voluntary that you are absolutely right.......Not only would I oppose it vehemently, but I would expect that large numbers of 401K holders people across America would rise up in protest of a mandatory confiscation -- that's what it would be........If they made it mandatory that would mean that the United States Government.......would confiscate all assets in 401K and replace those assets with a guaranteed retirement payout. Now I think if they proposed that to be mandatory that would be a dramatic step toward basically a Socialist system in Washington."

Ken said that would be just like they did in Argentina.

Brinker replied: "Yeah, I wonder, and I don't know where Ms. Ghilarducci got her idea, but I noticed that her testimony occurred not that far away from El Presidente Christina in Argentina announcing that the government of Argentina -- and this just happened within the last several weeks -- has announced that they are confiscating all pension fund assets in the country of Argentina -- it is a government confiscation of funds."

Ken said that with all the programs that are currently being proposed, suddenly there is a $3Billion pot of money out there that they could go get, and that they have been saying we are all going to have our own little account in the Social Security Trust Fund, and we all know that is just a bunch of IOUs.

Brinker agreed that Ken was exactly right -- the Social Security "Trust Fund" is a pile of IOUs. He said this whole 401K thing does bear monitoring, but that he had not heard the president-elect give any opinion on it yet. Brinker said that he had done some research and the only connection he made was with the two House of Representative members and Ms. Ghilarducci -- but he found nothing coming out of the White House or White House-elect. Brinker repeated that he has no problem with it if it is voluntary, but mandatory is a different story.

Ken said that if they stop the tax breaks that you get with a 401Ks, and stop the tax-breaks to companies that do a match to 401Ks -- you are "out of luck."

Brinker told Ken that he thought there were two reasons that would make this an especially appealing option to members of congress. Firstly, if they make it mandatory, they could confiscate $trillions of dollars of 401K assets and put that money into the coffers of the United States Government. And Brinker said that you know "the government spends every penny it gets its hands on -- then they go out and borrow and spend more."

Brinker said: "I think there are members of congress who look at these $trillions of dollars of assets and they salivate at the thought of spending that money, which they would........The second thing that I think appeals to certain members of congress is if they establish a mandatory program, that would de facto eliminate your ability to deduct a portion of your income from your taxable income in the form of a 401K contribution. That means that would be an immediate increase in annual revenue for the federal government because you would no longer have that deduction. I think there are CERTAIN members of congress who salivate at the thought of spending that additional revenue."

Honeybee commented on the story:
In my opinion, they will of course start out with a voluntary program to get their noses under the tent, but it won't stay that way. It's astonishing to read about the original Social Security Act and compare it to what it is now. Does anyone know what the original payroll tax withholding was?
I remember in early 2000s the government wanted to "encourage" savers to buy stocks since they had such a good run. There was talk of putting Social Security savings into the stock market. Since then we've had a tremendous bull market run in bonds so it only seems natural that some would want to encourage people to buy fixed income over equities.

Hopefully the government is doing the responsible thing and looking at options to make sure savers are invested well for retirement. I have no problem with the government having hearings and making recommendations but I don't need or want a "nanny government" forcing us savers to do anything. If we saved voluntarily for retirement, then we should have full discretion on how to invest and spend it. PERIOD.

If the government thinks we need more income in retirement, then they should collect more via Social Security and then pay more Social Security benefits when we retire. Most importantly, they should do this FOR EVERYONE, not just the voluntary savers!

Sunday, February 07, 2010

SIPC Insurance, Bernie Madoff Ponzi Scheme and BJ Group Class Action; What do they have in common?

Bob Brinker spent the first hour of today's program talking about Bernie Madoff's ponzi scheme and how the trustee is trying to get what little money is left to distribute to victims. Bob highly recommended The Madoff Chronicles: Inside the Secret World of Bernie and Ruth

Brinker said:
"I would like as many Moneytalk listeners as possible to read The Madoff Chronicles: and I'll tell you why. Because when you read this book very, very uh reader friendly book... its not going to take you a lifetime to digest this one... It's also entertaining because its a true life crime story... an ongoing crime story. Ongoing drama playing out.... I think The Madoff Chronicles is a fun read as well as an educational read.... it underscores importance of knowing what you are doing with your money... diversifying your investments, know where your money is... Brian Ross is one of the finest in the business.. For a first book, what a heck of a job he did."
Currently, the book is only $13.59 at where it is eligible for FREE Super Saver Shipping on orders over $25.

Perhaps get Madoff's Other Secret: Love, Money, Bernie, and Me or or Too Good to Be True: The Rise and Fall of Bernie Madoff to save the shipping and handling fees.

One caller suggested that anyone who got anything out should be subject to "clawback" just as anyone who was paid with counterfeit money wouldn't be able to spend it. I wonder if he would go after the janitor who cleaned the offices or the receptionists who were paid with money collected by Madoff? Paying office staff is just as important as paying investors who withdraw from their accounts to perpetuate a fraud.

What about the old, retired people who gave Madoff say $1,000,000 then took 5% a year out to live one while they allowed the rest to grow as any honest investor would? Lets say one of those honest investors used the money to pay the mortgage on their home, should they have to give their home back? I don't think so but I am not a legal expert by anyone's definition. What do you think?

Also, how does SIPC insurance work on this? Lets say "investor J" retired, put in $1,000,000 and took out 10% a year to live for 10 years. Over the 10 years, "Investor J" got out a bit over $1,000,000 and "investor J'" statement said he had over $1,100,000 since the actual return was supposed to be about 11% a year. Should "investor J" still get SIPC insurance for the $500,000?

Finally, we find it interesting that just days after publishing an article here titled BJ Group - Genworth Financial Class Action, Bob Brinker choose to talk again about the Madoff case as if there wasn't been enough new and more important economic issues this week to discuss. Coincidence? I think not.

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Thursday, February 04, 2010

Gil Gross Replaced Bob Brinker at WABC-NY

We get a lot of emails asking what happened to "Moneytalk" hosted by Bob Brinker on WABC in New York and why was KGO-AM in San Francisco's business reporter Lynn Jimenez chosen as a permanent guest host for Moneytalk. I believe the answers to both questions are very much related.

On July 27, 2009 we reported
WABC Radio NY Drops Moneytalk Hosted by Bob Brinker.
Then on August 16, 2009 we reported and asked
Gil Gross' "Real Estate Today" Replaced Bob Brinker Moneytalk at WABC in NY. Is KGO in SF Next?
WABC replaced "Moneytalk" with Gill Gross's nationally syndicated, two hour "Real Estate Today" radio program. Gill Gross does the 2 to 4PM weekday slot on top ranked KGO-AM. (KGO is 810 on your radio dial in the San Francisco Bay Area.) Gross replaced the late Pete Wilson in 2007 at KGO and has done a fantastic job replacing a Bay Area icon.

In the Bay Area, "Real Estate Today" is now heard on "Hot Talk" KSFO 560-AM on Saturdays from 1 to 3PM. Los Angeles gets the show on "Talk Radio" 790 KABC-AM on Saturdays from 8 to 10AM.

Citadel owns KABC, KGO and KSFO plus Moneytalk. If they replaced "Moneytalk" with "Real Estate Today" in New York it was probably due to ratings since they own both shows. I believe Lynn Jimenez was picked as a permanent guest host for Moneytalk for several reasons including:
  • Brinker is getting old and could retire or die early like his parents did.
  • Demographics: Women and Hispanics are under represented on financial radio shows carried by major networks.
Several times in the past years, highly qualified Terry Savage was the guest host whom I thought was FAR better than Bob Brinker at actually listening to callers' questions and giving answers unbiased by the need to sell Marketimer newsletters. Terry would have made the ideal replacement, perhaps even moving Brinker to part time status in preparation for retirement.

From the "Terry Savage Fan Club"
Terry's financial knowledge comes from experience in the trenches. She started her career as a stockbroker, and became a founding member -- and the first woman trader -- on the Chicago Board Options Exchange. Savage was also a member of the Chicago Mercantile Exchange's International Monetary Market where she traded interest rate contracts and currency futures. She is a registered investment advisor for both stocks and futures.
I have exchanged emails with Terry and continue to get her regular emails on both her fans and friends lists. Terry had expressed an interest in doing Moneytalk as the regular guest host but I believe she was passed over for Lynn Jimenez because Lynn has the Hispanic demographic and, probably more importantly, Lynn is already an employee of Citadel through KGO in San Francisco. Similar to baseball, Citadel prefers to bring up cheaper talent through the farm system than going out to get a high priced, very talented free agent.

For more information, see:

Wednesday, February 03, 2010

BJ Group - Genworth Financial Class Action

It appears Bob Brinker wisely ended his relationship with Genworth Financial shortly before this class action was filed.


Class Period: Dec 22, 2003 to Dec 22, 2009

Lead Plaintiff Deadline: Mar 8, 2010

Summary of Case:

A securities class action has been filed against Genworth Financial Wealth Management (BJ Group Services Portfolios) ("Genworth" or the "Company") on behalf of all securities purchasers from December 22, 2003 through December 22, 2009, inclusive ("Class Period"), in the United States District Court for the Eastern District of New York.

The claims arise from the fraudulent scheme perpetrated by Defendants through Genworth's marketing, solicitation, sale and management of the Portfolio.

The complaint alleges that the scheme was facilitated by Defendants, who knowingly, recklessly and/or with intent to deceive disseminated to prospective and current investors materially misleading representations regarding the Portfolio and its "exclusive" management agreement with Robert "Bob" Brinker.

The complaint alleges that According to all of its sales, marketing and disclosure materials disseminated to prospective and current investors in Genworth's Private Client Group, "The BJ Group Service offers clients tactical asset allocation by implementing recommendations from Robert ("Bob") J. Brinker, author of Marketimer newsletter." Defendants represented that "Bob recommends asset allocations and fund selection for GF AM's management of accounts for the BJ Group Advisory Services." The materials explicitly state: "This portfolio is based on the Bob Brinker model, offered through our exclusive partnership with him" and that "[o]ur experienced professionals work to implement Bob's investment strategy utilizing his proprietary tactical asset allocation model."

The complaint further alleges that Contrary to Defendants' representations that the Portfolio was being managed based upon the Brinker recommendations, the percentage of non-Brinker recommended Funds being purchased for the Portfolio routinely exceeded 50%. By not implementing Brinker's tactical asset allocation and fund selection, Genworth was able to generate for itself extra revenues by selecting alternate mutual funds that paid higher administrative and service fees. Defendants purchased these funds, instead of purchasing funds recommended by Brinker, notwithstanding that these funds routinely underperformed Funds recommended by Brinker.

If you purchased this company's shares during the Class Period and suffered a loss, please contact Scott + Scott LLP here

The last issue we could find of Marketimer that advertised for Genworth Financial was June 2009.

Since this case came up, we noticed Bob Brinker no longer advertises money management on his website. Here is a picture of his web site from the past

Click images to see original size.

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