Bob Brinker Moneytalk Summary

These are my observations of what Bob Brinker said of note during "Moneytalk" on Saturday November 11, 2009.

Bob quoted statistics on how well the market has done this year. He didn't say it remains down considerably from its 2007 highs. Here are the returns without dividends:

Index	YTD %
DJIA	17.0
Nasdaq	37.5
S&P 500	21.1
Russell 2000	17.4

With dividends included, the S&P500 fund at Vanguard, VFINX, is up 23.69% and the total stock market is up 25.12%.

What I find amazing is Vanguard's Emerging Markets index fund (VIEIX that I recommend in my newsletter for your core portfolios) is up 72.24%! Vanguard's Total International index funds, VGTSX, is up 36.89%. By owning international funds, we've benefited from a falling dollar.

This chart of the S&P500 shows it remains down considerably.

Click chart courtesy of stockcharts.com for full size image

Bob took a call about iBonds where he acknowledged that the inflation adjustment for the last 6 months was 3.06%. See my article:

• "I-Bond Rates: November 2, 2009 through April 30, 2010."

Brinker said we have slight deflation on a year-over-year basis due to the problems in the financial market meltdown but now we are returning to more normal inflation. He said those who had been predicting "runaway inflation" were wrong. He said he now predicts inflation will be "moderate" going forward but he didn't define exactly what moderate means.

Kirk's Comment: The Federal Reserve is comfortable with core inflation (inflation without food and energy) between one and two percent. One reason inflation came in so high (3.06%) for the last six months is the price of oil about doubled over the 6-month period (March to Sept 2009) used to calculate the iBond inflation adjustment.

Click chart courtesy of stockcharts.com for full size image

Calls on Brinker's Favorite GNMA Fund from Vanguard, VFIIX ( Charts).

Bob noted that the fund is trading at an all time high of $10.84.

• In past shows (you can search this blog to find summaries) he had predicted the fund would range between $9.50 and $10.50.
• He currently says the fund can trade "in the nines and tens"
  

Kirk's Comment: A rage of "nines and tens" equates to $9.01 to $10.99. If VFIIX drops to $9.01 from its current net asset value (NAV) of $10.84, this will be a decline of

($10.84 - $9.01) / $10.84 x 100% = 16.9%!!!

I recently sold my personal and newsletter explore portfolio position in VFIIX and bought a 5-year TIPS directly from the US Treasury at the recent auction. The last time I looked, the TIPS went up a bit more in value than the GNMA fund but what is more important, the TIPS will do well when "moderate inflation" translates into higher interest rates while GNMAs could have low to negative returns. If you have $10,000 to invest, then $5,000 each in paper and electronic iBonds seems a good choice to me compared with money funds or Bob's GNMA fund.

For more information, see:

• I Bonds Explained
  
  
• Current iBond Rates
  
  
• iBond Rate History

Bob began the third hour talking about municipal (muni) bonds. He said there are two types of muni bonds to consider:

GO Bonds or "General Obligation" bonds are backed by the full faith and taxing power of the issuing government. He said states that issue GO bonds historically have a very low default rate because they want to protect their credit rating.

Revenue Bonds are backed by the proceeds of a particular project. Bob gave an example of the Pennsylvania Turnpike where revenue bonds were issued to build the toll road then the collected tolls are used to repay the bonds. These work as long as the project is successful defined as generating the revenue necessary to repay the bonds.

Kirk Comment: Even GO bonds can default!

• The most famous defaults of GO bonds are New York City's default in 1975 and Cleveland in 1978.
  
• The largest default in the history of the municipal bond market was the Washington Public Power Supply System's (WPPSS or "Whoops") default on $2.25 billion in revenue bonds. WPPSS sold revenue bonds to build five nuclear power plants in the 1970s to supply electricity to the Pacific Northwest. Only one of the five planned nuclear plants was completed so there was insufficient revenue to repay the bonds. (Whoops Default)
  

Bob's guest was Jim Lebenthal, author of the book Lebenthal On Munis: Straight Talk About Tax-Free Municipal Bonds for the Troubled Investor Deciding

Current Price: $10.17 & eligible for FREE Super Saver Shipping
(Click to order and support this blog)

Jim said he was in New York when they defaulted on their General Obligation bonds. He said the only way New York was able to get over deficit spending and borrowing was to default (I believe they missed some interest payments.) Jim said the courts ordered the state to repay the bond holders. Nobody would lend New York new money so they were forced to make cuts in spending to balance their budget.

Vanguard Fixed Income Fund Charts:

• GNMA (VFIIX),
  
• Total Bond (VBMFX)
• TIPS (VIPSX)
• High-Yield/Junk Bond (VWEAX)

From 1/1/1999 Through 11/15/09

Kirk's 80:20 Aggressive Core Portfolio is up 50.8%
Kirk's 50:50 Conservative Core Portfolio is up 67.3%
Kirk's 70:30 Explore Portfolio is up 146.1%
(not a typo... up one hundred forty six percent!)
80% Core Aggressive plus 20% Explore is up 69.8%
90% Core Conservative plus 10% Explore is up 75.1%

100% Total Stock Market (VTSMX) is up 18.2%
100% Total Bond Market (VBMFX) is up 78.2%
80% VTSMX and 20% VBMFX is up 30.2%
50% VTSMX and 50% VBMFX is up 48.2%

YTD through 11/15/09

Kirk's 80:20 Aggressive Core Portfolio is up 23.0%
Kirk's 50:50 Conservative Core Portfolio is up 16.4%
Kirk's typically 70:30 Explore Portfolio is up 26.7%

"Kirk Lindstrom's Investment Letter"

HURRY! Subscribe NOW and get the November 2009 Issue for FREE! !
(Your 1 year, 12 issue subscription will start with next month's issue.)

Kirk's Two Investment Letters

There may be some confusion because I write two different, but related, newsletters.

#1 "Kirk Lindstrom's Investment Letter" is $155 a year and uses the "core and explore" method to invest. It has two core portfolios plus an explore portfolio of individual stocks. My aggressive core portfolio has 80% equities while my "conservative" core portfolio has 50% in equities. My core portfolios are made of index funds and ETFs for the very lowest expenses.

I recommend people start by getting their proper core portfolio created THEN add individual stocks I cover in my explore portfolio to build your own explore portfolio for 5 to 20% of your investment portfolio total. I have target prices to buy and sell my explore stocks so I find I almost look forward to market declines to get really great prices for stocks I can sell later at higher prices. Of course, following this explore portfolio is more work than buying index funds and rebalancing once a year that I recommend for my core portfolios. Compared to "other newsletters" costing more, my core portfolios and general stock market coverage in the first 11 pages of the 35 page monthly letter offer significant value even for those who don't dabble in individual stocks.

#2 I write "The Retirement Advisor" with David Korn. We sell this for a very modest $99. We offer three model portfolios. We do not recommend individual stocks but we have articles that discuss current financial events such as economic data and Social Security COLAs. We also have articles to help you save money plus we find CDs with FDIC paying the highest rates. Our most aggressive portfolio has 50% in equities. Our most conservative portfolio contains no equity exposure.

Difference: The conservative (50:50) core portfolio in "Kirk Lindstrom's Investment Letter" is slightly more aggressive than the aggressive model portfolio #1 in "The Retirement Advisor." Over the very long term, you should expect the most aggressive portfolio to have the highest returns but at a price of higher volatility. When we started the "The Retirement Advisor" in 2007 we thought people like Bob Brinker were far too aggressive with equity exposure recommendations for retired people at such a risky time for the markets. If you recall, Brinker's Model Portfolio #3 was nearly 2/3rds in equities when the markets peaked. As our great returns show, we were right.

____

From 1/1/1999 Through 11/15/09

Kirk's 80:20 Aggressive Core Portfolio is up 50.8%
Kirk's 50:50 Conservative Core Portfolio is up 67.3%
Kirk's 70:30 Explore Portfolio is up 146.1%
80% Core Aggressive plus 20% Explore is up 69.8%
90% Core Conservative plus 10% Explore is up 75.1%

100% Total Stock Market (VTSMX) is up 18.2%
100% Total Bond Market (VBMFX) is up 78.2%
80% VTSMX and 20% VBMFX is up 30.2%
50% VTSMX and 50% VBMFX is up 48.2%

YTD through 11/15/09

Kirk's 80:20 Aggressive Core Portfolio is up 23.0%
Kirk's 50:50 Conservative Core Portfolio is up 16.4%
Kirk's typically 70:30 Explore Portfolio is up 26.7%

100% in VTSMX is up 25.1%
100% in VFINX (S&P500) is up 23.7%
100% in VBMFX (Total Bond) is up 6.6%
80% VTSMX and 20% VBMFX is up 21.4%
50% VTSMX and 50% VBMFX is up 15.9%

12/8/09 update:

As of December 8, 2009, "Kirk's Newsletter Explore Portfolio" is up 32.5% YTD vs. DJIA up 17.2% YTD

"Kirk Lindstrom's Investment Letter"

HURRY! Subscribe NOW and get the December 2009 Issue for FREE! !
(Your 1 year, 12 issue subscription will start with next month's issue.)
____

The Retirement Advisor Model Portfolios all began with $200,000 on 1/1/2007

The Retirement Advisor Portfolios	Dollar Value on 10/31/09	Change
Model Portfolio 1	$205,877	2.9%
Model Portfolio 2	$218,720	9.4%
Model Portfolio 3	$237,182	18.6%
DJIA 12,501.52 on 1/1/2007	$9,712	(24.0%)
S&P500 1,418.30 on 1/1/2007	$1,057.08	(28.0%)

FREE SAMPLE issue of The Retirement Advisor newsletter in pdf

Website for more information and our annual Performance Data

News You Can Use

US Treasury Auction Schedule - Upcoming Offerings

Charts of Historical CD Rate Data (click charts for full sized graphs)

1-Month CD Daily Chart	3-Month CD Daily Chart
6-Month CD Daily Chart

US Unemployment Rate

" Historical Chart 1948 to October 2009"

Best CD Rates - Survey of Largest US Banks

Bank	CD Rates - APY in % as of 11/04/09 for $10,000
	6- Mo	11-13 Mo	18-Mo	2-Yrs	3-Yrs	5-Yrs
Bank of America	0.50	1.25 Promo	1.00	2.01	2.30	3.01
JP Morgan Chase	0.75	1.25	1.50	2.00	NA	4yrs 3.00%
Citibank	0.65	1.30	1.35	2.00	2.15	3.00
Wells Fargo Bank	0.35	0.90 16 Mo	1.40 21 Mo	1.90 28 Mo	NA	NA
HSBC Bank North America	0.25	0.55	0.55 15-mo	0.75	0.75	1.01
HSBC Online Rates	1.10	1.50	1.50 15-mo	1.30	NA	NA
US Treasury Rates	0.16	0.36	NA	0.94	1.46	2.38

To see the table in full size with the current rates, click the

• Best CD Rate Survey of the Top US Banks

Inflation Protected Series I Bonds Now Pay 3.36%

The Bureau of the Public Debt today announced an earnings rate of 3.36% for Series I Savings Bonds issued from October 2, 2009 through April 30, 2010.

The 3.36% earnings rate for I bonds bought from November 2, 2009 through April 30, 2010 will apply for their first six months after issue. The earnings rate combines a 0.30% fixed rate of return with the 3.06% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). When the inflation rate is less than zero, a bond's earnings rate is less than its fixed rate (but the earnings rate is never less than zero).

Bob Brinker says on the radio we are seeing deflation but that is due to a bubble in inflation a year ago due to higher oil prices. Those good at math can easily see the bubble in the CPI-U data corresponding to oil prices near $150. If the CPI stays where it was for the last (Sept.'09) reading then we will see significant ANNUAL inflation in November and December. For example:

Dec. 2008 CPI-U = 210.228
Sept. 2009 CPI-U = 215.969
Change = 5.741 / 210.228 x 100%
or 2.73% annual inflation!
CPI-U Table

The fixed rate for Series-I Bonds applies for the 30-year life of I bonds purchased during this six-month period.

Minimum purchase:

• $50 for a $50 I Bond when purchasing paper bond certificates
• $25 for a $25 I bond when purchased electronically via TreasuryDirect

Maximum purchase(per calendar year):

• $5,000 in TreasuryDirect and $5,000 in paper bonds
• $10,000 total per social security number
  

Denominations:

• Paper bonds: $50, $75, $100, $200, $500, $1,000, and $5,000
• Electronic bonds via TreasuryDirect: purchase to the penny for $25 or more

For more information, see:

• I Bonds Explained
  
  
• Current iBond Rates
  
  
• iBond Rate History
  
  
• CPI-U Table
  
  
• IBOND Press Release

For older ibonds and what they will pay, see:

I Bond Composite Rates (iBonds)

Disclaimer: I own Series I Bonds in my personal account. Due to the small amount of i-bonds you can buy now, I own far more TIPS and TIPS funds in my personal and newsletter (FREE SAMPLE) portfolios.

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Post and Read Comments

Moneytalk With Bob Brinker Guests - November 2009 List of their Books

Bob Brinker, host of Moneytalk, usually interviews a guest in the final hour of his three hour weekend radio show. These guests usually have a new book to promote. Bob has become good at interviewing his guests to let them express their opinions. This has become the favorite segment of the show for many of us. Below is a list of the guests for this month with links to buy their books to support this site.

Saturday November 28, 2009: Henry Mintzberg: "Managing"

Academic Henry Mintzberg is ranked nine on the "Top 20 Business Thinkers" list of the Wall Street Journal and 16 on the Financial Times' "The Thinkers 50" list. Managing may be the most revealing book yet written about what managers do, how they do it, and how they can do it better. Mintzberg concludes, "to be effective in any managerial position, there is a need for thoughtfulness--not dogma, not greed risen to some high art, not fashionable technique, not "me too" strategies, not all that `leadership' hype, just plain old judgment." An excellent, must-read book for managers and aspiring managers" says Mary Whaley in Booklist, Sep 2009.

Sunday November 22, 2009: David DeLong: "Buddy Can You Spare a Job ­

The MetLife Study of the New Realities of the Job Market for Aging Baby
Boomers"

Saturday November 21, 2009: Barbara Weltman, contributing editor to "J.K. Lasser's Your Income Tax 2010: For Preparing Your 2009 Tax Return"

Sunday November 15, 2009: Leander Kahney: Inside Steve's Brain
An in-depth profile of Apple CEO Steven Jobs.

Saturday November 14, 2009: Jim Lebenthal: Lebenthal On Munis: Straight Talk About Tax-Free Municipal Bonds for the Troubled Investor Deciding

Saturday and Sunday November 7 & 8, 2009:
Guest Host Lynn Jimenez:
Book ¿Se Habla Dinero? The Everyday Guide to Financial Success (English and Spanish Edition)
A bilingual guide to the basics of financial success.

Lynn Jimenez Fan Club

Saturday October 31, 2009: David L. Scott: "The American Heritage Dictionary of Business Terms"

Sunday October 25, 2009: Dale Robyn Siegel, author of "The New Rules for Mortgages"
Bob said the switchboard lit up like a Christmas tree with a record number of callers wanting to ask Ms. Siegel questions.

Saturday October 24, 2009: "Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase"

Sunday October 18, 2009: Robert A. Hefner, III, author of the book "The Grand Energy Transition: The Rise of Energy Gases, Sustainable Life and Growth, and the Next Great Economic Expansion"

Saturday October 17, 2009: Micheline Maynard, senior business correspondent for the New York Times. Autor of new book "The Selling of the American Economy: How Foreign Companies Are Remaking the American Dream"

Sunday October 11, 2009: John Mullins, co-author of "Getting to Plan B: Breaking Through to a Better Business Model"

Saturday October 10, 2009: author of "Inside Larry and Sergey's Brain (English, Spanish, Japanese, Mandarin Chinese and Portuguese Edition)"


Sunday October 4, 2009: Steven Davidoff, author of the book, "Gods at War: Shotgun Takeovers, Government by Deal, and the Private Equity Implosion"

Saturday October 3, 2009: Gretchen Morgenson, author of the book "The Capitalist's Bible: The Essential Guide to Free Markets--and Why They Matter to You"

Guest Host Lynn Jimenez: Lynn Jimenez Fan Club : Book
¿Se Habla Dinero? The Everyday Guide to Financial Success (English and Spanish Edition)
A bilingual guide to the basics of financial success. ¿Se Habla Dinero? walks readers through the fundamentals of personal finance and money management and explains how to open and use bank accounts; establish and manage credit; save and borrow money for education; and master basic investing techniques. This bilingual guide makes intimidating topics easy and gives readers the confidence they need to move forward.

Buy from Amazon.com here



Disclaimer. I get a commission for books purchased with these links. Please show support and use the links.