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Tuesday, October 01, 2013

Moneytalk Summary: Bob Brinker's Stock & Bond Advice

Despite the stock market closing Friday withing 2.2% of its record, all time high set on September 19, 2013, Bob Brinker didn't say a word about it during his Sunday, Sept. 29, 2013 show.  One would think he would get a sore arm patting himself on the back for "officially" recommending a fully invested position.  See Bob Brinker's Asset Allocation History
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Instead of discussing how well the stock market has done, Brinker took a few calls on his "income portfolio" where he explained why he was lowering the duration of his bond funds to reduce interest rate risk.   As a reminder, a duration of "8" means you can expect a bond fund to lose 8% if interest rates jump by 1% overnight.

Of course, the lowest duration is ZERO and you get that from FDIC insured CDs and Savings Accounts.  These are what I recommend in my newsletter.  You can find savings accounts that pay as much as 0.90% at this link:
    The majority of Sunday's show was devoted to the government shutdown.  As is his way to not offend any side that might buy a newsletter from him, he didn't offer any solutions while voicing his tremendous displeasure.

    It is too bad Brinker didn't discuss why he has remained fully invested in stocks since March 2003.  It sounds like his listeners are mostly out of the market, if you judge them by the calls Brinker lets on the radio.  For sure, we didn't hear any comments from Bob Brinker about "the Secular Bear Market" he predicted that didn't happen.  Perhaps most of his callers and listeners didn't want to risk Brinker missing the next bear market like he missed the 2008/2009 bear market so they went to his "income portfolio" that has no stock market exposure.  For sure, I'd love to hear Brinker honestly answer a call about this.  For more on the market read:
    For a good discussion of the Government Shutdown, here is what one of his guest hosts, Terry Savage, sent out via email.

     October 1, 2013:  You're likely waking up to headlines that the government is shut down.  Well, not all of the government.

    Essential services will continue.   Our military will still stand guard, social security will still be direct-deposited, and air traffic controllers are not being furloughed.  National parks will be closed and there will no doubt be other inconveniences -- but life will go on.


    This is not the first government shutdown, nor will it be the last.  There were 17 shutdowns from 1976 to 1996 -- totalling 110 days.  (And that doesn't count snow closings!)


    The most memorable shutdown was the three-week closure from mid-December 1995 to early January, 1996 under President Clinton. And that period included a huge East Coast blizzard.  Still the economy did not collapse,and economic growth was not  greatly impacted.


    Crying Wolf!


    Congress is like the little boy who cried wolf!  If a crisis were imminent you would see it in the stock and bond market where fearful global sellers would dump American assets.  You'd see it in soaring gold prices and a huge decline in the value of the dollar.


    But so far, like all of us (except the media) the world senses that the politicians are crying wolf.


    The government can shut down for a few weeks, without calamity.  But you wouldn't know that from this morning's headlines -- all about the intransigence of our political parties.


    Hey, we settle our political disagreements in a far less ugly way than they do in Egypt, or Syria.  Democracy is messy.


    Get Real


    Yes, there is deep disagreement about the role of government, and the overall level of spending.  It has come to a head in the attempt to delay the individual mandate for Obamacare.


    On a logical basis, you would think the President would welcome this excuse for at least a temporary pause to get the systems working.  After all, large businesses and unions already have been granted exemptions to take a delay of game without penalty.


    And on a logical basis, you would think all Americans would support a plan to make sure Congress and the administration were forced to use the same healthcare program as the rest of America -- without subsidies to defray their costs.  If it's good enough for us, why not for them?


    Look, we all know they will work it out.


    A Budget Fight?


    It's not really a budget fight. The word “budget” implies some kind of thoughtful plan to guide future spending. Congress hasn’t passed a real Federal budget in the past four years.  Instead they’ve gotten by with “continuing resolutions” that allow Washington to keep on spending, and over-spending, so they have added at least $1 trillion to the national debt every year for the past four years


    The real issue is the “debt ceiling” – the official limitation on how much the government can borrow.  That limit has been raised time and again to accommodate Congressional overspending.  In fact, the debt ceiling was reached late last spring, but through a complex series of financial maneuvers the Treasury was able to continue to borrow money to fund spending.


     There will be another confrontation later this month, with the threat that if the debt ceiling isn’t raised, the United States will have to default on its debt, and be unable to borrow more money to keep the government going.  That too, is likely to be dealt with at the last minute.


    By then we will be totally bored with the drama.


    But too much delay in dealing with our debt could impact the global financial system, as it loses faith in the dollar and causes interest rates to soar.


    When confidence in the dollar is lost, the centerpiece of the world’s financial system will crumble – and it won’t be pretty for America when no one wants to give us full value for our money, when no one wants to lend us money and take promises of repayment in dollars.  Then spending cuts will be forced on us.  Either that or we will start “printing” the money we need – further destroying the value of the dollar.


    Think I’m just crying wolf?  Remember, eventually the real wolf did come.  And that’s The Savage Truth!


    More about Terry Savage:
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    3 comments:

    1. I have been a Marketimer subscriber for a short time now, and have money sitting on the sidelines waiting to invest. Every month, Bob says the same thing about being vigilant, never mentions putting new money in the market, and then the S&P keeps soaring past his targets until he catches up in the next newsletter. Meanwhile, I have missed most of this bull market because he has been saying that we are in a cyclical bull in a secular bear. I think he is wrong. I think we must be in a secular bull and that he has really blown it. I would really appreciate any thoughts/input.
      Thank you, Charlotte

      ReplyDelete
    2. Long Time SubscriberOctober 19, 2013 12:55 PM

      I am a long time subscriber who used to follow Bob's advice to the letter. I sold at the end of January '13 when the S&P was in the high 1400's. I had always closely watched for Bob's opinion regarding secular/cyclical bull/bear markets, and at that time he was still saying that we were in a "cyclical bull market" that was getting "long In the tooth." Had he rightfully predicted at that point, as did others who I assumed were wrong, that we were really in a secular bull, I doubt that I would have sold my stocks (though it's easy to have 20/20 hindsight!). Now he never mentions those trends where they used to be an integral part of his expertise. thanks for thoughts, C.

      ReplyDelete
    3. Bob Brinker (BB) Marketimer Subscriber Question

      I have said it here before and I'll say it again: I am very bothered by BB's lack of transparency.

      He really spooked me in the newsletter with: the monthly warnings of an impending correction of up to 15-20%, his gradually increasing targets on the S&P, which did not offer attractive buying opportunities, and his recurring emphasis on our being in a "long in the tooth cyclical bull bear market" in a "secular bear mega trend"...

      Because I haven't kept the paper versions of the newsletter, I cannot figure out how to reread old ones on his site. I really want to go back and study them to see when Bob dropped so many of his red flags and shifted into this bullish fervor.

      If anyone knows how to access the archives online, and /or has already figured out a timeline of BB's insidious changes, I'd really appreciate the input...

      best, Clo

      ReplyDelete

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