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Sunday, August 08, 2010

Bob Brinker Still Bullish - US Treasury Rates

On today's Moneytalk, in response to a caller asking Bob Brinker about his discussion of "rapid growth" as one of the five root causes of a bear market, Brinker said:
"I do not believe we are entering a new bear market at this time."
Brinker elaborated by saying rapid economic growth has many fallout factors that can lead to a bear market such as:
  • Inflation pressure.
    Certainly not a problem now!
  • Interest rate problems. 
    Investors can get higher rates in fixed income investments that can better compete with equities.
  • The economy starts to run at full capacity since factories are working overtime and it gets hard to hire quality workers so costs start to escalate and bottlenecks form.
Currently, rapid growth is not an issue. In fact, Brinker said the worry now is economic growth is so slow the economy is not creating enough new jobs to keep pace with new workers entering the workforce.

I did a write up a few weeks ago about Brinker's coverage of his "five root causes of a bear market" at
About the only thing that has changes between that summary and now is economic growth is decelerating. To prevent a double dip recession, the FOMC is again looking to increase the money supply via "quantitative easing" or QE. QE (from wikipedia)
"describes a form of monetary policy used by central banks to increase the supply of money in an economy when the bank interest rate, discount rate and/or interbank interest rate are either at, or close to, zero. A central bank does this by first crediting its own account with money it has created ex nihilo ("out of nothing"). It then purchases financial assets, including government bonds and corporate bonds, from banks and other financial institutions in a process referred to as open market operations."
The Federal Reserve said in the minutes of their last meeting that they could start  another round of QE by repurchasing debit  securities as they come due rather than retiring them.  They still have room under QE1 to purchase considerably more debt and some believe they could do a new, QE2.  All this pushed rates considerably lower Friday.

U.S. Treasury Rates as of August 8, 2010

TermCOUPON MATURITY YIELD %
3-Month 0.000 11/04/2010 0.14
6-Month 0.000 02/03/2011 0.18
12-Month 0.000 07/28/2011 0.24
2-Year 0.625 07/31/2012 0.51
3-Year 1.000 07/15/2013 0.75
5-Year 1.750 07/31/2015 1.50
7-Year 2.375 07/31/2017 2.20
10-Year 3.500 05/15/2020 2.82
30-Year 4.375 05/15/2040 3.99

For more, see
US Treasury: Rate Quotes and Rates at a Glance
I will add more comments later after I've had time to listen to the show via ReplayAV.

Before you get too excited about Brinker being bullish now, remember Brinker's newsletter model portfolios one and two have been FULLY invested in equities since March 2003.  His normally 50:50 portfolio three was nearly two thirds in equity at the top and he told callers he was so bullish he did not recommend rebalancing back to 50% equities and 50% fixed income!  Brinker did not see the 2008-2009 bear market coming and was so bullish at the top that he issued a "gift horse" buying opportunity when the SandP500 was in the mid 1400s then he bashed the bad news bears and people like myself warning of a coming recession as "Cassandras."  For proof, see:

5 comments:

  1. Leave Brinker alone, no one takes him seriously anymore.

    ReplyDelete
  2. I followed Brinker for a long time, but grew discouraged as he erred, complicated by his increasing emotional withdrawal that limited who he talked to from the call line and the openness that he historically had. Sigh. But I SOOOOOOO enjoy your analysis -- very helpful indeed.

    ReplyDelete
  3. Thanks to our friend Bob brinker, I lost a great deal of money with his qqq call, back when. I had just sold my home and had my broker invest in stocks, and guess what? The market crashed. Since then with whatever I have left ,I do my own investing, and rule the day I listened to Bob brinker.I was retired, now I work 6 days a week!

    ReplyDelete
  4. Not everyone is as bullish as Brinker

    Soros Cuts Stock Exposure including Suncor Energy

    Excerpts:

    Billionaire investor George Soros in the second quarter stuck with his big bet on gold but slashed his holdings in dozens of major U.S. companies from Verizon Communications to Pfizer.

    In a quarterly securities filing on Monday, Soros Fund Management reported owning substantially fewer U.S. listed stocks than three months earlier. The fund listed $5.1 billion of equities as of June 30, down 42 percent from $8.8 billion at the end of March.
    Top holdings from the first quarter including energy producers Hess Corp (HES.N: Quote) and Suncor Energy (SU.TO: Quote) and telecommunications giant Verizon were slashed. At the end of the second quarter he had $1.5 million worth of Hess, down from $302.5 million, $13.6 million of Suncor, down from $285.3 million and $395,000 worth of Verizon (VZ.N: Quote), down from $175.1 million.

    The firm also cut back on drugmaker Pfizer (PFE.N: Quote), with holdings worth $4.7 million down from $91.4 million, banking company, JPMorgan Chase (JPM.N: Quote), cut to $3.9 million from $114.9 million, and Wal-Mart Stores (WMT.N: Quote), down to $673,000 from $72.9 million.

    With the sale of so many other holdings, the Gold ETF constituted almost 13 percent of the firm's total equities, up from 7 percent at the end of the first quarter.

    ReplyDelete
  5. I believe SU - Suncor Energy Inc. at $31.71 (SU Charts and Quote) is down since Brinker recommended it where his readers could buy it. It appears George Soros is not as bullish on Suncor or the market as Bob Brinker.

    ReplyDelete

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