Options Predict The Fed Will Cut Rates

Last weekend Bob Brinker said that a 25 basis interest rate point cut is "baked in the cake." Beyond that amount, he doesn't know. How does he predict this?

The Cleveland Fed has a nice page that shows what the futures predict for rates over time: "Monetary Policy :: Fed Funds Rate Predictions." On that page they currently show this graph:

Click to view larger graph
The odds can be read off the side of the graph. The odds are now:

• 70% for a 0.25% cut to 4.50%
• 15% for a 0.50% cut to 4.25%
• 15% they leave rates unchanged at 4.75%

So... there is an 85% chance we get a rate cut of 0.25 to 0.50% and 15% chance they keep rates at 4.75%. So, Bob's rate cut cake is "85% baked" as of yesterday's data.

Bob Brinker's Bad News Bear Mahendra Sharma Predicts Market Melt-down

Mahendra Sharma predicts that all stock markets will "Melt-down" and everyone should exit all positions today. Sharma advises "Get out from all position before 18 October including metals, Uranium and Alternative energy stocks."

I found this interesting post on Silicon Investor.

To: da_cheif™ who wrote (28242) 10/18/2007 10:54:54 AM
From: Chip McVickar Read Replies (1) of 28249

Here's some entertainment and a posting for the wall


My date for melt-down in all financial area has arrived, we are 24 hours away from it...it shall start with asia.....
More -
Thursday, October 18, 2007, Mahendra Sharma

**********************************************

Prophecy - i am warning to every one as i see great fall in all..i am buying us dollar.....
More -
Thursday, October 11, 2007, Mahendra Sharma

**********************************************

Free- "CRASH" Worst period like 1929/1987 will repeat again any time after 11, October 2008
but this time fall will be so huge in all...


Thursday, October 11, 2007


Dear Member,

We are approaching toward worst volatile period like 1929 and 1987. I advise please stay alert and just watch market. Hold cash as many will fall with fall of commodities, stock market and hot bubble currencies. This will happen in the next two weeks.

As predicted today ....

I predicted major crash in all stock market from 18 October so watch this date closely and plan your trades accordingly. There will blood-bath in Asian market and may few of the market will close down for few days so watch carefully. Get out from all position before 18 October including metals, Uranium and Alternative energy stocks.

........

Thanks & God Bless
Mahendra Sharma,

11 Oct 5.50AM

http://www.mahendraprophecy.com/

Mahendra Sharma must be one of those "Bad News Bears" that Bob Brinker Talks about.

Bob Brinker on California Municipal Bonds

October 13-14, 2007 Moneytalk with Bob Brinker Commentary by David Korn (newsletter excerpt)

LEGAL DEVELOPMENT FOR MUNICIPAL BONDS

Caller: This caller owns some California municipal bonds and asked Bob whether he should make any additional investments in the municipal bond market pending a decision by the Supreme Court on the case that is testing the taxability of municipal bonds issued by other states. Bob said if you are a California resident and purchase a municipal bond from another state you are going to get hit over the head with up to a 9.3% tax depending on your tax bracket. Bob said we may have to wait until spring before we get a decision, which means May or June of 2008. Bob said we don't know what the court decision will be, or the impact of the court's decision. There are a lot of unknowables. The one thing we do know is that if you go out of state right now, you are going to have to pay the tax.

David Korn: Bob didn't seem too enthusiastic about making such purchases before the Supreme Court weights in on the issue. Here is an article out this month discussing the case entitled, "Municipal bonds making big wages."

- David Korn

More articles by David Korn:

• Bob Brinker Biography, Part 1
• You missed the Buy Signal in 2003, what should you do?
  Excerpt from David K's Interpretation of Moneytalk (Bob Brinker Host) March 23, 2003 Newsletter

Discuss Bob Brinker with others: Request Invitation to facebook discussion group to participate in our "Bob Brinker Discussion Forum."

[ David's Newsletter: People on the Bob Brinker Fan Club mailing list get a discount on David Korn’s newsletter. Details on the discount are in the introductory mailing. ]

Talker Magazine says 1.75 Million Listen to Moneytalk with Bob Brinker

Bob has 1.75 listeners according to Talker Magazine.Brinker may not be in the "Heavy Hundred" but his audience size is still listed at 1.75 million, the same audience size estimated by Talker Magazine in their 2005 and 2006 surveys.

Howard Stern tied for third place with Michael Savage in 2005 with an estimated audience of 8.75 million, but he is not included on the 2006 and 2007 lists because of his move to satellite radio.

Audience (in millions):

The top 12 Slots for spring 2007:

1. Rush Limbaugh, at least 13.5 million
2. Sean Hannity, 12.5 million
3. Michael Savage & Dr. Laura Schlessinger, 8 million
4. Glenn Beck, Laura Ingraham, 5 million
5. Neal Boortz, Mark Levin, Dave Ramsey, 4 million
6. Mike Gallagher, Michael Medved, 3.75 million
7. Jim Bohannon, Clark Howard, Bill O'Reilly, Ed Schultz, Doug Stephan, 3.25 million
8. Bill Bennett, Jerry Doyle, George Noory, 3 million
9. Rusty Humphries, Kim Komando, Lars Larsen, Jim Rome, 2.25 million
10. Bob Brinker, Dr. Joy Browne, Tom Leykis, Mancow, 1.75 million
11. Alan Colmes, Thom Hartmann, Hugh Hewitt, Lionel, G. Gordon Liddy, Stephanie Miller, Randi Rhodes, 1.5 million
12. Dr. Dean Edell, Bill Handel, Opie & Anthony, Michael Reagan, 1 million.


The top 37 Radio Shows for Spring 2007:

1 Limbaugh, at least 13.5 million
2 Hannity, 12.5 million
3-4 Savage & Schlessinger, 8 million
5-6 Glenn Beck, Laura Ingraham, 5 million
7-9 Neal Boortz, Mark Levin, Dave Ramsey, 4 million
10-11 Mike Gallagher, Michael Medved, 3.75 million
12-16 Jim Bohannon, Clark Howard, Bill O'Reilly, Ed Schultz, Doug Stephan, 3.25 million
17-19 Bill Bennett, Jerry Doyle, George Noory, 3 million
20-23 Rusty Humphries, Kim Komando, Lars Larsen, Jim Rome, 2.25 million
23-26 Bob Brinker, Dr. Joy Browne, Tom Leykis, Mancow, 1.75 million
27-33 Alan Colmes, Thom Hartmann, Hugh Hewitt, Lionel, G. Gordon Liddy, Stephanie Miller, Randi Rhodes, 1.5 million
34-37 Dr. Dean Edell, Bill Handel, Opie & Anthony, Michael Reagan, 1 million.

Reference: 2007 Talkers Magazine Talk Host Survey.

Why Continue to Talk About QQQQ Trade?

On Wednesday, October 10, 2007, Honeybee posted the article:

Two Important Bob Brinker Market-Timing Anniversaries

In the comments section, she was asked:

"Why do you and Kirk keep beating that dead horse that Bob has all ready laid to rest?"

My answer:

Saying "oops" does not mean it was "laid to rest."

Being laid to rest would be Bob Brinker reporting his results that included following his October 2000 NASDAQ 100 advice in his model portfolios such as we have done in this article: Effect of QQQ advice on reported results

The conclusion is anyone who followed Brinker's advice with 50% of cash reserves that was also in his "model portfolio for aggressive investors" saw their totals reduced 29.5% from what Brinker reports in his advertising.

• Brinker's P1 on 01/01/88 $20,000 Brinker's P1 on 07/27/07 $206,144
  Brinker's Reported APR 12.7 %
• QQQQ Effect is 29.0 % or $59,782
• Subtract QQQQ Effect $146,362
• QQQQ Adjusted APR 10.7 %
• Wilshire 5000 APR 12.0 %
  (Wilshire 5000 APR over the period 1/1/88 to 7/27/07 was calculated by Padraig Cremin of Wilshire Associates Inc and "Ivan Smile" in post #40. )

Someone doing due diligence should know that following Brinker's market timing advice for his best performing Portfolio #1 under performs the Wilshire5000 by 1.3% per year over nearly 20 years. With compounding, as shown HERE, this "performance penalty" means:

• $10,000 compounding at 10.7% between 1/1/88 and 7/27/07 grows to $73,181
• $10,000 compounding at 12.0% between 1/1/88 and 7/27/07 grows to $91,848

If you are fine paying for market timing advice to underperform the Wilshire5000, perhaps you do much worse on your own and value the hand holding, then that is fine. Read Winning on the zigs, losing on the zags to see that most people on their own significantly under perform. But you should be aware going in of the past historical record.

Bob Brinker Bullish and Fully Invested

Market Hulbert reported today at MarketWatch that the best long-term stock market timing newsletters are still "charging ahead." Mark reported of Bob Brinker's Marketimer:

"Bullish. In his most recent issue, published in early October, editor Bob Brinker wrote: "We expect significant additional stock market progress into next year as investors discount growing corporate earnings in an environment of low inflation and benign interest rates." His model portfolios are fully invested."

Mark reports that Bob Brinker is not a "lone voice in the wilderness" with his bullishness. Of the top nine market timers over the last decade according to Mark's formula, none of them are bearish! (See list below.)

S&P500 @ 1542.84
Click Graph to View Full Sized

The other market timers are:

1. Blue Chip Investor: Bullish. Editor Steven Check's model portfolio is 92% invested in equities.
   
2. Chartist and Chartist Mutual Fund Timer. Bullish. Editor Dan Sullivan. Sullivan's model stock portfolio currently is 72% invested, and his model fund portfolio is currently 98% invested.
   
3. Investors Guide to Closed-End Funds: Moderately bullish. Editor Thomas Herzfeld's "U.S. Equity Funds" model portfolio is around 48% invested.


4. Medical Technology Stock Letter: Bullish. McCamant's model portfolio currently is 93% invested, while his "Trader's" portfolio is aggressively bullish, with 183% invested (83% on margin, in other words).
   
5. No Load Fund Investor: Neutral. Editor Mark Salzinger is currently allocating 70% of his "Wealth Builder" portfolio (his most aggressive) to U.S. equities.
   
6. Timer Digest: Bullish. Editor Jim Schmidt bases this newsletter's market timing model on a consensus of the top market timers. The newsletter's model portfolios currently are about 60% invested in stocks, on average.
   
7. Vantage Point: Bullish. Editor John Harris's model stock portfolios are fully invested.

With today's great jobs report (US Economy Gains 110,000 Jobs in September 2007) we should expect the stock markets to rally to new all time highs today.

DJIA @ 13,974.31

Click Graph to View Full Sized

Mark Hulbert's Full Article: "Best long-term market timing newsletters still charging ahead."

© Kirk Lindstrom