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Sunday, March 13, 2011

Bob Brinker on Earthquake & Tsunami in Japan

Bob Brinker came to work today and started off talking about the disaster in Japan.  Bob said, 
"In our lifetimes, we have rarely seen anything of this magnitude."
Kirk Comment:   As earthquakes go, this magnitude 8.9 shaker was the biggest quake in Japan's history and rates as the fifth largest earthquake in the World since 1900.  
Economic Impact:
Brinker tried to get a handle on how this disaster affects the world of money.  He said, "In terms of trying to quantify the economic impact of this.... I don't like doing this....  On a global scale it is about seven tenths of one percent of global business activity."
Brinker explained, "Japan is 8.7% of Global GDP"  and explained about eight percent of Japanese GDP was "in the path of the destruction."  So, 8% of 8.7% gives you about 0.7%.  (0.08x8.87=0.70%)
After the break, Brinker talked about the important data that will be released this week.    Brinker didn't go out on a limb and make any predictions but here is the data and what the market expects:
DateStatisticForMarket ExpectsPrior
Mar 15Empire ManufacturingMar17.015.43
Mar 15Export Prices ex-ag.FebNA0.9%
Mar 15Import Prices ex-oilFebNA0.8%
Mar 15Net Long-Term TIC FlowsJanNA$65.9B
Mar 15NAHB Housing Market IndexMar1716
Mar 15FOMC Rate DecisionMar0.25%0.25%
Mar 16MBA Mortgage Index03/11NA+15.5%
Mar 16Housing StartsFeb570K596K
Mar 16Building PermitsFeb573K562K
Mar 16PPIFeb0.6%0.8%
Mar 16Core PPIFeb0.2%0.5%
Mar 16Current Account BalanceQ4-$110.0B-$127.2B
Mar 16Crude Inventories03/12NA2.52M
Mar 17Initial Claims03/12387K397K
Mar 17Continuing Claims03/053750K3771K
Mar 17CPIFeb0.4%0.4%
Mar 17Core CPIFeb0.1%0.2%
Mar 17Industrial ProductionFeb0.6%-0.1%
Mar 17Capacity UtilizationFeb76.5%76.10%
Mar 17Leading IndicatorsFeb0.9%0.1%
Mar 17Philadelphia FedMar28.035.9

Top CD Rates at Largest US Banks

Interest rates are starting to go up on the long end while the short term rates are terribly low. This week's survey or CD rates at the largest US banks shows BofA advertises 2.25% for a 5-year CD with Citibank paying the lowest for 5-years at 2.0%.    Historical CD Rate Graphs

When we did our last survey of rates at the largest banks, a 5-year CD at the largest US Bank, Bank of America, was only 1.40%.  Chase and Citi paid 2.5% and 1.50%, respectively.  

Unfortunately, short term rates remain extremely low.  Thus, I've kept most of my "cash reserves" in high rate savings accounts with the top rate now 1.30% at American Express. See  Best Savings Account Rate Survey 

A half hour into the show, Brinker took his first call.   

Darin from Rohnnert Park told Brinker he thinks the dollar could become worthless if they keep buying US Treasuries with quantitative easing programs because he doesn't believe they can cut it off in time.  Brinker agreed that this would happen if they don't end the easing as planned but he didn't seem compared that the US dollar will lose its status as the World's reserve currency with all the troubles the Euro faces.  Darin worried the US was already going down the tubes following Greece.  Bob said the reason California can not pay its debt is because "they have a dysfunctional government that thought they could borrow their way to prosperity."

1800-934-2221 "Ed's on the Line from the Show Me State of Missouri."  Ed raised a point I thought of last week when took major profits in my TIPS mutual funds on Friday.  Ed suggested the Japanese would use their major US Treasury holdings as a source of funds for rebuilding.  Bob said it would not be an ongoing issue but it would be a source of funds.   My fear is the Japanese will not roll-over their US Treasuries into new issues so they don't take a loss.  They can then use these funds to rebuild their infrastructure and make low cost loans to rebuild homes and small businesses.  This will have the effect of countering the Federal Reserve's QE2 policy which will push rates higher.

I sold the majority of my managed TIPS mutual funds at Fidelity for my own "core portfolio" and may sell more held at Vanguard this week.  See:
I still hold some managed TIPS funds plus I have individual TIPS that I can hold to maturity and not lose money but I might sell those as they are in my "explore portfolio."

Check back later and I'll add more information as I have time to listen to more of the show I have recorded automatically on my PC with ReplayAV

1 comment:

  1. Did Brinker miss this? Maybe when you make $10M a year selling a near valueless newsletter the higher costs for gas, food and medical insurance are tiny so you don't see inflation like regular folks do.

    Consumer Price Index - February 2011

    The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in February on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.1 percent before seasonal adjustment.

    Keep that o.5% rate up for a year... and you could see 6% inflation!


    "Higher costs dent Nike earnings. Nike (NKE) shares fell 5.3% in after-hours trading yesterday, after the company reported Q3 earnings results slightly below consensus estimates (see details below). The company said higher costs for cotton, labor and transportation were responsible for its first earnings miss in 19 consecutive quarters, and that profit margins may be reduced this year as a result. To help offset its higher costs, Nike plans to raise prices on a broad variety of its products 'across the board,' a shift from the company's recent strategy of 'surgical' price increases that target specific products and markets."


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