Bob Brinker Free Discussion Site 59,820+

Top 404. Jul 20, 2005 12:55 PM

» JIMMY62 - Re: bob brinker

In response to bob brinker posted by managerisk:

I have listened to Bob Brinker over the past 7 years. He is a great teacher of finance.

Me too, I agree.

-- posted by JIMMY62

Top 405. Jul 21, 2005 2:15 AM

» azxcvbnm - Re: Re: bob brinker

In response to Re: bob brinker posted by JIMMY62:

Bob is getting his swagger back. Someone asked him about his QQQQ call, and Bob didn't get angry, rather he sounded amused and asked how many times he had to apologize for that move. Bob is finally getting the courage back to make some predictions on his radio show--the show's been so boring the past few years, I'm surprised he still has an audience. Maybe now, he can cut down on the politics, and get to more financial predictions.

-- posted by azxcvbnm

Top 406. Jul 21, 2005 9:30 AM

» bbaddict - Chinese Yuan revaluation

OK, guys, here it comes...

China has untethered their Renminbi from the US Dollar. This means that the Yuan (Renminbi) will float to its real value, which is much higher than currently set.

The revaluation is just an immediate 2%, which is not much. More significant is the 0.3% that it can move EACH day. The final settled value may be 20-30% higher. Some say 40%.

What does this mean? Inflation, as many imported goods will get more expensive. Inflation leads to higher rates.

China has been a big buyer of US Govt bonds. With the dollar devalued, the bond rates will need to rise to attract more investment. Higher long term bond rates mean higher mortgage rates. Higher mortgage rates will be what drastically slows down our economy.

If you've seen the stats lately, there is an alarming number of home mortgages which are adjustable rate, interest only, or some other leveraged artform. With house prices where they are, it is presumed that the reason for this is that the buyers are at the breaking point, barely able to afford the mortgage. Rising rates = more defaults, higher payments, less discretionary spending, lower home prices, less refinancing, etc.

So, which will win? Devalued dollar is inflationary. Later, the slowing economy will be recessionary.

Our economy's strength is very much determined by the long bond rates. Where do they go from here?

My bet is that rates will be heading higher, and the secular bear will come out of hibernation in 2006.

-- posted by bbaddict

Top 407. Jul 24, 2005 12:44 AM

» jamesj24 - Re:

In response to Chinese Yuan revaluation posted by bbaddict:

What does this mean? Inflation, as many imported goods will get more expensive. Inflation leads to higher rates. China has been a big buyer of US Govt bonds.

Higher mortgage rates will be what drastically slows down our economy.

I completely agree with you about the slowing of the economy, but not necessarily about inflation. Thus far, it appears the economy reacts differently to higher prices than it did, say in the 70's and especially in 1980-1981. Price increases (such as the increase in petroleum) tend to slow down the economy, such that the push of prices higher is partly offset by the depressing effect of lower demand on prices. A primary reason for this is that, as the economy slows, fewer jobs are generated. The pullback in demand, especially for U.S. labor, is the balancing factor. In the face of economic weakness, service sector jobs are being outsourced to other countries, and the workforce has little bargaining power for wage increases. We import massive quantities of goods made in China by workers making $.40 per hour. The salaries of Indian professionals cost less than half those of U.S. professionals. Work outsourced to India is further outsourced by Indian entrepreneurs to labor forces that cost even less in such places as Malaysia, Singapore and the Philippines.

The other factor containing growth is the threat of terrorism that still overhangs the economy, although it seems to me that people are less and less worried about this daily. Look at how the market shrugged off the London bombing recently. Given the general malaise of the economy, the traditional generators of inflation seem to be contained and the economy slows down instead of overheating, thereby helping to contain prices.

The dollar has depreciated 20%-30% or more in relation to the Euro and other currencies since the beginning of the second Iraq War, and crude oil, traded in dollars, has more than doubled in price, yet the U.S. has had very tame inflation. I think much of the so-called growth in the economy has been artificial, due to artificially low interest rates, taxes, and artificially high government spending. Recession has been avoided by deficit government spending. This can only continue for as long as the deficits can be financed, now largely by social security funds and by China and other foreign buyers of U.S. treasury bonds. Eventually, we will exhaust or strain these credit supplies, especially with further devaluations in the dollar, and, if this continues, we will have higher interest rates, and most likely a recession. We will also probably be means tested out of social security and medicare benefits. At some point, inflation might be a factor, and the Fed would then have to raise short term rates. But if the economy remains sluggish, inflation will probably remain in check, and neither rates nor inflation need rise. It will probably be the poor growth or shrinkage of the economy that causes the end of this cyclical bull market.

One reason that the Soviet Union fell apart is that it had depended on massive government spending to keep its population employed. One difference between the USSR and us is that we have been able to continue to borrow to finance our deficits. The USSR ran out of credit.

Perhaps the biggest crisis on the horizon is the eventual exhaustion of the supply of petroleum, which will no longer be able to keep up with demand. I’m not just talking about the effect of higher prices. Rather, the supply will simply not be available in the quantities needed to continue to satisfy the world’s gluttonous hunger for oil. Petroleum generates value in the economy that is significantly greater than the price we pay for it. We take for granted the amount of work gasoline does in relation to the price we pay for it. When the supply of oil is no longer sufficient to meet demand, we will face not only long term recession, but also probably austerity and significant changes in how we live. Sorry for the pessimism, but this is almost inevitable.

Having said all this, I hope you’re right about inflation, since I’ll probably be buying I-bonds in the near future if I don’t buy another house.

-- posted by jamesj24

Top 408. Jul 24, 2005 9:32 AM

» Normxxx - Re: Re:

In response to Re: posted by jamesj24:

Thus far, it appears the economy reacts differently to higher prices than it did, say in the 70's and especially in 1980-1981. ...

One difference between the USSR and us is that we have been able to continue to borrow to finance our deficits.

Ah… but all this depends on the kindness of strangers, primarily the Chinese— not the best of our 'friends—' and the other Asiatic countries.

P.S. It took about 3 years before Nixon's 'devaluation' hit the CPI in full force. Then, prices in the supermarkets changed so fast, that if you got on a long line at the checkout counter, the price could go up while you were waiting!

Rather, the supply will simply not be available in the quantities needed to continue to satisfy the world’s gluttonous hunger for oil.

There will never be a 'shortage' in a free market economy; there is far more than enough 'supply' ready to come online at the 'proper' price.

we will face not only long term recession, but also probably austerity and significant changes in how we live.

Yes, that will come to pass— and war and revolution. We are in the Kondratieff Winter season, after all. So far, these long economic cycles have never been denied, and there is no reason to think they will be in the future. But, hopefully, we will survive, one way or the other, and will (if the past is prolog) emerge the better for it.

-- posted by Normxxx

Top 409. Jul 24, 2005 10:15 AM

» Jeremy77 - Terry Savage, fill-in

Does anyone agree that Miss Savage, Brinker's fill-in a few weeks ago, is pathetic? I couldn't keep track of how many times she plugged her books for free.(Brinker pays for his on-radio newsletter commercials). She had a caller who said he lent someone 50k and hasn't gotton back a dime. She asked for the person's first name. Apparently she's filling in again in Aug.(?), and if the $ hasn't been ret. she'd like the lender to call in again, and she'll put out the guy's entire name over the airways. Strange?

-- posted by Jeremy77

Top 410. Jul 24, 2005 10:52 AM

» bbaddict - Re: Re:

In response to Re: posted by jamesj24:

I don't understand why higher oil prices is not inflationary. Bob has said that many times on the program, and he has been right. There has been no evidence of inflation caused by the higher prices.

The only explanation I can think of is that consumers are at the brink of insolvency. That they have little discretionary income left. They MUST buy the gasoline to get to work. So if their gas cost goes up $50 per month, then they must take $50 out of their discretionary spending. So, it slows down the economy.

If they had plenty of discretionary income, they would buy the more expensive gas, and still buy the new barbeque from China. So, overall, their costs would rise.

Currently, the higher fuel costs are coming out of spending elsewhere.

So, could the same be said about the goods from China? If the cost of the Chinese products go up 25%, will consumers just buy 25% less?

This leads me back to trying to figure out the real estate market, and if the bubble will burst. If consumers are really at their spending limit (and all counts say they are...A median income earner cannot buy a house in many places. They resort to interest-only, adjustable rate, etc. to make ends meet), then a rise in housing costs must come out of other spending. If there is nowhere left to cut spending, then they must sell the house, or walk away from the mortgage.

If this is the case, rising rates (from the Chinese not buying as many bonds, and the weaker dollar) and rising costs of Chinese goods will slow the economy, or burst the bubble. This will lead to lowering the rates again.

Where is the equilibrium?

-- posted by bbaddict

Top 411. Jul 24, 2005 11:11 AM

» Jeremy77 - Oil

Brinker has stated that the price of oil, risk- adjusted for inflation, is the same as in 1990. Overseas, people have been paying $5 and more a gallon for years. We're spoiled.

-- posted by Jeremy77

Top 412. Jul 24, 2005 11:15 AM

» bbaddict - Critical Mass

I am not at critical mass, but I think several of you are. I wonder if you can share any of your experiences?

For one, were there any surprises? Did you get bored, and go back to work? Were any of your expenses (travel, entertainment, etc.) more or less than planned?

Let's say a person has no mortgage (or rent), no car payments, etc. They of course still have property taxes, insurance, medical costs, food, utilities, travel, entertainment, and windsurfing. Any insights into how you budgeted for these? Obviously, a simple budget is rather easy, but any surprises?

-- posted by bbaddict