Moneytalk (Bob Brinker Host) Interpretations II

Top 179. Oct 7, 2002 7:08 PM

» David_Korn - Moneytalk

ABC Radio is preparing to offer an online Moneytalk multimedia service very soon.

Stay tuned!

-- posted by David_Korn

Top 180. Oct 7, 2002 7:58 PM

» Kirk - Re: Moneytalk

In response to message posted by David_Korn:

I wonder if they would like to post these links at their new web site?

2000 1019 BJG_QQQ_Memo: http://home.ix.netcom.com/~mlee1984/Brin...
2000 1016 Act_ImmediatelyQQQ: http://home.ix.netcom.com/~mlee1984/Brin...

2002 0122 Brinkermanship Forbes Article: http://www.suite101.com/discussion.cfm/i...
2002 0122 Brinkmanship Original Article on Yahoo: http://biz.yahoo.com/fo/020122/0122watch...
2002 0122 Brinkmanship rewritten at Forbes: http://www.forbes.com/2002/01/22/0122wat...
2002 0122 Brinkmanship modified article at Forbes: http://63.240.4.200/2002/01/22/0122watch...
2002 0211 Forbes/Hulbert Honor Roll Article: http://63.240.4.200/2002/02/11/0211watch...
2002 0306 CBS Market Watch: The woeful wait to break even: http://www.marketwatch.com/news/story.as...
QQQ Poll Results: http://www.suite101.com/discussion.cfm/i...
2002 0815 Brimelow - Bugging Bob Brinker http://cbs.marketwatch.com/news/story.as...
2002 0822 Brimelow: The Bob Brinker brawl: Round 2: http://www.suite101.com/discussion.cfm/i...
2002 0822 The Bob Brinker brawl: Round 2 At CBS MW: http://cbs.marketwatch.com/news/story.as...
David Korn on Brinker the Trader (UTEK & QQQ) http://www.siliconinvestor.com/stocktalk...

Good stuff there!

Perhaps people will send these links to the webmaster? smile

Oh lets not forget the Bob Brinker Fan Club here http://www.suite101.com/myhome.cfm/Brink...

-- posted by Kirk

http://www.forbes.com/2002/09/13/0913adv...

Top 181. Oct 8, 2002 9:55 PM

» David_Korn - Moneytalk Interpretation

Excerpt from David Korn's Stock Market Commentary, Interpretation of Moneytalk, Financial Education, Helpful Links, Guest Editorials and Special Alert E-mail Service.
Website: http://www.begininvesting.com/
September 28-29, 2002 Edition
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TACTICAL ASSET ALLOCATION WATCH
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Editorial Comment ("EC"): Here is how the major market indexes have played out since Bob Brinker's timing model turned "unfavorable" based on the S&P500 Index's close on December 31, 1999 and he recommended investors sell equities to raise 60% cash reserves (later increased to 65% cash reserves in August, 2000):

S&P500 Index: Down 43.69%
Dow Jones Industrial Average: Down 33.02%
Nasdaq Composite: Down 70.53%

NOTE: In October, 2000, Bob Brinker recommended to his subscribers with aggressive objectives that they invest 30% to 50% of their cash reserves in the Nasdaq 100 (QQQ shares). He also recommended to his subscribers with conservative investment objectives that they invest 20% to 30% of their cash reserves in the QQQ shares. That recommendation was repeated in January, 2001. He has maintained a hold on the QQQ shares ever since.

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

BOB'S STOCK MARKET TIMING MODEL

Caller: This caller has heard Bob say that he expects to recommend going back into the market within a year or so. The caller asked Bob to give an update as to where the various indicators in his long-term stock market timing model stand at this time. Bob said he was going to update his model this coming week in connection with the publication of the October Marketimer newsletter which he plans on completing toward the end of next week. Bob noted that his model is "far too detailed" to go into on the radio, but in general, he studies many disciplines in his long term stock market timing model. Bob said he looks at the economic cycle, monetary policy, valuation and sentiment, among "many other factors" when he is looking at the market outlook. It is a complex subject due the number of variables. Bob concluded by reiterating that "down the road" he will recommend going to a fully invested stock market position in anticipation of a cyclical bull market.

EC: Bob played a little coy here, as I suspected he would. My guess is that in October's newsletter, he will imply that the indicators in his model are improving, and that subscribers should be on the look out for a special Bulletin in which he will post on his web site any change to his model portfolios based on his model turning favorable.

GNMA CAUTION!!!!

Caller: This caller has been reading about "duration gaps" and Fannie Maes and how they deal with that in connection with callable debt and hedging. In the Ginnie Maes, do they have similar mechanisms? Bob said you would have to check with each fund manager. Some funds are out-there doing exotic moves. Bob prefers the funds that keep it simple in this area -- Vanguard, for example, is conservative in their Ginnie Mae fund.

Brinker Comment: The important thing to recognize now with Ginnie Maes, is that yields are down under 5%. The yield has been slipping as interest rates have fallen. In addition, mortgage rates are way down. All of this suggests, that if we see rising rates, that will negatively impact the net asset value of Ginnie Mae funds. Therefore, you want to make sure your portfolio is adequately diversified, so you don't have all your eggs in one basket. A caller pointed out that if interest rates rise, so will the yield on the Ginnie Mae Fund. Bob agreed, but pointed out that the increase in yield will NOT make up for the decline in net asset value if/when interest rates rise.

EC: Bob sounded more cautious about the Ginnie Maes than I have ever heard him before! I am not surprised, given that interest rates are at historic lows. At some point, the only place for interest rates to go will be up. And when that happens, the Ginnie Mae net asset value will suffer. Check out the next call which buttresses my interpretation of Bob's cautionary outlook toward Ginnie.

Caller: This caller wanted to transfer some money from one GNMA fund family to another. She noted that the net asset value of the GNMA fund she was looking at, was trading near its 52-week high and wanted to know if she should dollar cost average into it or just lump sum invest it. Bob didn't address that question specifically, and instead asked the caller if she had some Treasury Inflation Protected Securities (which she didn't), so Bob recommended she invest some of her fixed income money into TIPS to ensure that her bond portfolio was diversified.

EC: The Vanguard GNMA Fund Investor Shares (VFIIX) which I imagine that some of you probably own, closed Friday at $10.76 - a 52-week high! Notice how Bob specifically recommended the caller allocate a portion of her fixed-income portfolio to TIPS -- which protect against interest rates rising. It would appear that Bob believes that the risks favor rising interest rates, versus falling interest rates going forward.

Brinker Comment/Caller: One last comment relative to the Ginnie Maes came up in the context of stock market cash reserves. A caller wanted to know if he should keep his stock market cash reserves in Ginnie Maes, or in a money market account. Bob said at this juncture, he would recommend cash reserves be kept in money market accounts.

EC: This marks a shift in Bob's prior position on stock market cash reserves. Prior to this weekend, Bob said he didn't have a problem with people keeping their cash reserves in Ginnie Maes. This weekend, he made clear that any stock market cash reserves should be held in money market accounts where the principal will not be at risk.

SIDEWAYS MOVE OUT OF VANGUARD U.S. GROWTH FUND

Caller: This caller owns the Vanguard U.S. Growth Fund. The fund is under performing the index that it tracks. He wants to know how long he should wait before making a sideways move into another mutual fund. He heard you should wait 3 years before you transfer from one fund to another. There will be no tax consequences since he owns the fund in a tax-deferred account. Bob doesn't think you need to wait to transfer the money once you have made up your mind to make a sideways move from one fund to another because of under-performance.

EC: The Vanguard U.S. Growth Fund (ticker: VWUSX) has performed horribly this year, down 38.57% year-to-date versus a negative return of 19.40% for the S&P500 Index. According to an interview given by Dan Wiener, editor of The Independent Advisor for Vanguard Investors, the U.S. Growth fund has seen significant outflows this year. If you own a lot of Vanguard funds, his interview is worth reading:

PHILIP MORRIS COMPANIES, INC.

Brinker Comment: Philip Morris' shares fell to a 52-week low on Friday, and they have been creamed the last few months. The company has faced difficulties with California verdicts in court. They had another verdict go against them last week. Wall Street had a consensus growth rate estimate for the company of 19%. However, the company announced that it is only going to increase earnings by 3% to 5%. The company is going through much more difficult times than Wall Street was predicting. Bob said he hopes their sales go to zero. (Bob hates tobacco companies).

EC: The 12-member jury in Los Angeles awarded $850,000 in compensatory damages to a 64-year woman with lung cancer who blamed Philip Morris (NYSE: MO) with her tobacco addiction and for failing to warn her of the risks of smoking. If you think the award is high, you better be sitting down. The jury hasn't even begun deliberating on punitive damages. In my opinion, they are going to award punitive damages. Of course, I don't know for certain, but I did read the jury's verdict, and they found that Phillip Morris had committed "fraud, malice, or oppression by clear and convincing evidence." You don't make that kind of statement, if you aren't prepared to slap some punitive damages down. This is an important case, because it is the first trial since a California court ruled that smokers could not use evidence of deception from 1998-1998 when a legislative ban on cigarette maker liability was in place. More on the verdict at this link:

http://biz.yahoo.com/rb/020926/tobacco_p...

GAIL DUDACK

Caller: This caller wanted to know if Bob had seen Gail Dudack on CNBC last week. Bob said he didn't watch it. The caller said that Gail said hope for the best, but prepare for the worst. That was the end of this call.

EC: Bob has mentioned Gail Dudack many times throughout the years. He teased her bearishness in the 90s, referring to her as the "Wall Street Honey Bear." He defended her when she got kicked off as an Elf on Wall Street Week with Louis Rukeyser. Gail is the Managing Director of Research and Chief Investment Strategist for SunGard Institutional Brokerage, Inc. Prior to SunGard, Gail was the Chief Investment Strategist for UBS Warburg. She is a founding member of the International Federation of Technical Analysis and a former president of the Market Technicians Association.

EC#2: One of my subscribers, who is in the investment advisory business, got to spend about 2 hours with Gail Dudack last week and she had some very interesting things to say about the market. He graciously agreed to post his notes under the "Market Gurus" section of the discussion threads on BeginInvesting.com. One of the most interesting comments she made, is that she recognizes that she is known as a bear, bit that she is close to becoming a bull. I am in her camp on this one. Make sure you check out the post by "Investingbob" on the Market Guru thread to read his notes from his meeting with Gail Dudack.

http://www.begininvesting.com/

HEWLETT-PACKARD COMPANY

Brinker Comment: Hewlett-Packard (NYSE HPQ) announced that it would accelerate the number of lay-offs and let go another 1,800 employees on top of the 15,000 employees already scheduled to be laid off. The company's management said the additional job cuts are due to a continued market slowdown. On top of their other problems, they now will face head-to-head competition from Dell Computer. Hewlett-Packard has been under tremendous pressure during this bear market and their stock price reflects that pressure.

EC: The competition Hewlett-Packard (HP) is expecting from Dell is in the printer market. This is obviously HP's bread and butter, as everyone knows HP makes top quality printers. Dell entered into a deal with Lexmark International (NYSE: LXK) for the two companies to develop and produce Dell-branded printers. Lexmark is already the No. 2 printer maker behind HP, so it should be interesting to see if the combination of Dell/Lexmark will unseat HP from their number 1 dominant position in the printer market which they have held for so long. More on this story at the following link:

http://biz.yahoo.com/rf/020924/tech_dell...

SBC Communications

Brinker Comment: SBC Communications (NYSE: SBC) announced that it was going to cut 11,000 jobs citing increased competition and slower economic growth. About 9,000 of those job cuts will come in the 4th quarter of this year. They had already cut 10,000 jobs this year, prior to this most recent announcement.

EC: The baby-bells came under pressure Friday following SBC's announcement. More on this story at the following link:

http://biz.yahoo.com/rb/020927/telecoms_...

CALLABLE BONDS

Caller: This caller has Bank of America bonds which she originally purchased for $46,000. Their market value now is about $48,000. Her broker told her that the bonds were "called" for $46,000. What's the deal? Bob said it sounds like the bonds were called prior to their maturity date which allows the issuer to call the bond at a certain price. Bob noted that when you consider purchasing a bond, you always should determine whether the bond is callable. Not all bonds are. Most Treasury bonds are not callable. That means you don't have to worry about losing the rate of interest you are generating on the bonds. "Callable" simply means the bond is redeemable by the issuer prior to the scheduled maturity date. The issuer must pay the holder a premium price which is called the "call price." Bob noted that it is not uncommon in this type of interest rate environment for an issuer to call in the existing bond, and issue new bonds at lower rates. It makes sense for the issuer, because they can essentially lend the money out at a lower rate.

EC: Here is an good article entitled, "Understanding Callable Bonds -- Know Your Bets In The Investment Portfolio":

http://www.cbai.org/Newsletter/AugustSep...

ZERO COUPON BONDS

Caller: What do you think of short-term zero coupon bonds right now? Bob said he isn't enthusiastic about that investment at this time.

EC: Learn how a zero-coupon bond works at the following link:

http://www.open-ira.com/Bonds/Zero_Coupo...

CALLER OF THE DAY!

Caller: This caller raised a interesting point, which got Bob all excited. The caller pointed out that after Bob has recommended a fully invested position, if you are in retirement and have a balanced portfolio (50% stocks and 50% bonds), why is there a need to maintain 50% of your money in stocks, when you now have the option to invest in Treasury Inflation Protected Securities which would protect you against the risk of inflation. Bob praised the caller for bringing this to the attention of listeners world-wide. Bob referenced one of the old axioms on Wall Street which was told to people over and over again. That axiom was that you need to invest in the stock market because that is the only way your money will grow and outpace inflation. Bob pointed out that this axiom is no longer true. In a tax-deferred account, you can get complete inflation protection through TIPS. The issuance of Inflation Protected Securities by the U.S. treasury has changed the investing landscape. TIPS afford a new mechanism which can limit the amount of risk that an individual might need to take in the stock market. Bob said he has never heard anyone on Wall Street make this point. Bob then ranked this call as one of the most important calls ever made in the 16-year history of the Moneytalk Program!!!

EC: Wow. I am breathless. Not because of the call, but because I am eating a DoubleStack Wendy's cheeseburger and typing at the same time.

EC#2: In all seriousness, the caller did raise an excellent point. For people in or approaching retirement, TIPS provide a vehicle to protect you against inflation, without the risks associated with equities. In a secular bear market, this investment strategy has a lot of appeal. For those of you who have never considered TIPS, here is a good introductory article from the Fool.com, which provides a nice overview of how they work:

http://www.fool.com/retirement/retireepo...

BAD NEWS BEARS

Brinker Comment: For the first time in a while, Bob referenced the "bad news bears" or "doomsdayers" who are predicting Armageddon for the U.S. economy and massive declines in the stock market going forward. Without mentioning Bill Gross by name, Bob derided "that bond guy," who was predicting 5000 in the Dow. Bob also sarcastically referred to the "Georgia Peach Bear" who is sticking with his decade-long forecast that the Dow will fall to 400. Bob doesn't think any of these doomsdayers will be correct, UNLESS the housing market falls apart.

EC: Bob's comments here are but another sign to me that he is growing more confident that the bear is coming to an end soon. Bob's reference to the "Georgia Peach Bear" is a nickname Bob gave a long time ago to Bob Prechter. Mr. Prechter is an infamous market timer who publishes the newsletter, "The Elliot Wave Theorist." He also is author of the book, "Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression." Mr. Prechter gained some notoriety in the 1980s with some very accurate market calls, but during the 1990s, his bearish outlook tarnished his credibility. This link brings you to an interview Mr. Prechter gave this summer:

http://www.businessweek.com/bwdaily/dnfl...

WAR WITH IRAQ

Brinker Comment: The United States is pushing for a UN resolution establishing a 30-day deadline for Baghdad to comply with weapon inspections. Bob pointed out that in prior weeks, he said he didn't think a war with Iraq would begin until November. Bob said he forecast that war with Iraq would begin no earlier than November, but no later than the end of the first quarter of 2003. Bob said that everything is in place for his prediction to come true.

EC: Perhaps Bob will begin offering a newsletter called "WarTimer."

AIRLINE COMPANIES

Brinker Comment: Bob began this segment by asking a rhetorical question: How many times has he said on the program that the airline's business model's don't work anymore. (Why is nobody listening to Bob?) Despite the failure of these models, the airlines keep flying, they keep losing money, and they keep asking for money. Bob does not think we should give any more taxpayer money to the airlines. If your company does not have a business model that works, it should not exist. U.S. Airways has already filed for bankruptcy. United Airlines may have to file for bankruptcy. This week, Delta Airlines -- once considered a blue-chip airline -- announced that they will lose $350 million in the third quarter due to sluggish revenue and demand. Delta has decided to cut 1,500 flight attendant jobs. Delta has warned that the airline industry may lose $8 billion this year. Delta's shares are now down to $9.16.

EC: Bob may have had a misquote, because the closing price I see on Delta's shares is $8.69. More on Delta's announcement this week at this link:

http://biz.yahoo.com/ap/020928/delta_cut...

GREENSPAN KNIGHTED

Brinker Comment: Bob had some fun with the report that U.S. Federal Reserve Chairman Alan Greenspan received an honorary knighthood from Queen Elizabeth. Greenspan received the Knighthood in recognition of his contribution to global economic stability. In a back-handed compliment to Dr. Greenshades, Bob proclaimed him "King of All Financial Media."

EC: That's a title that would make even Howard Stern proud. While over in London, Dr. Greenspan gave two speeches. They are actually kind of interesting if you have time to read them. The first speech he gave was to the Society of Business Economists entitled, "Regulation, Innovation and Wealth Creation." You can read that speech at this link:

http://www.federalreserve.gov/boarddocs/...

The second speech he gave was at Lancaster House, entitled, "World Finance and Risk Management." You can read that speech at this link:

http://www.federalreserve.gov/boarddocs/...

SAVING FOR COLLEGE

Caller: This caller has a 2 month old baby, and wants to start a saving's plan for his child's education. Bob referred him to the web site SavingForCollege.com as a great resource on the Internet to learn about 529 Plans. Bob also plugged the book, "The Best Way to Save for College" written by Joe Hurley, a CPA who runs SavingforCollege.com.

EC: SavingForCollege.com now has a place on its web site where you can select the state you live in and view the college savings programs offered by that state. If you go to this link, you fill find the section I am referring to on the bottom right side of the page:

http://www.savingforcollege.com/

TAKING ADVANTAGE OF INTEREST RATE SPREADS

Caller: There is a giant spread on the interest rates being offered for certificates of deposit. For example, the caller found a 7-year CD for 5%. On the other hand, a 2-3 year CD is only offering 2-3%. What choice would you make? Bob pointed out that 2-3 years in this type of interest rate environment is like an eternity. To try and project where rates will be 2-3 years from now is virtually impossible. The caller had an idea -- why not go with the 7-year CD, get the higher rate, and if interest rates start to jump, sell the CD, and pay the penalty. If rates stay low, keep the CD. Bob said he thought a lot of people were adopting this type of strategy, and that the risk of this strategy is that you pay a hefty penalty when you sell your CD early. Make sure you read the fine print VERY VERY carefully. Bob noted that the banks are aware of this strategy, and don't want people doing this, so they are going to make it difficult to do.

EC: Interesting strategy. Along those lines, I found a product offered by RBC Centura Banks which began offering a two-year Rising Rate certificate of deposit which provides a schedule of graduated rate increases until maturity with the option to redeem funds every six months without penalty. As always, do your own due diligence. Here is a link to the article describing this product:

http://biz.yahoo.com/prnews/020802/atf00...

GOLD

Caller: Do you have any gold investments you like right now? Bob said the problem with gold is that we have low inflation, and the prospects for inflation are that it will remain benign. For that reason, the fundamentals don't support an investment in gold. Investing in gold right now, is really a "disaster" investment at this time. If you get a prolonged war or nuclear disaster there could be a flight to gold. Bob opined that if we don't get a nuclear war between India and Pakistan, and the United States takes care of Iraq relatively quickly, then gold will face pressure. Gold faces the headwinds of low inflation. Bob said IF you were going to invest in gold, he would go with an index fund.

EC:The Fidelity Select Gold Fund (FSAGX) is the largest gold mutual fund. Other gold mutual funds include The Midas Fund (MIDSX), Tocqueville Gold (TGLDX), and Gabellie Gold (GOLDX). Compare these funds to each other at the following link:

http://cbs.marketwatch.com/tools/mutualf...

MORTGAGE RATES & REAL ESTATE

Brinker Comment: Bob thinks the current mortgage rates are "remarkable." Interest rates remain at 40-year lows with the economy faltering. Bob noted that the 15-year mortgage rate is now at 5.25%. Six months ago it was over 6%. In addition, 30-year mortgages are now averaging 5.75%. These are historic lows for mortgages in the modern era. The one-year adjustable rate is at 4.18%. The mortgage bankers are handling record number of home owner applications as people refinance to get the lower rate.

EC: Want to check out the mortgage rates for your state? Go to this link, choose your state, and presto - you will have rates for the 30-year, 15-year and one-year adjustable mortgage in your state:

http://www.bankrate.com/brm/rate/mtg_hom...

Brinker Comment: For the month of September, there was a record number of mortgage refinancing. To give you an idea of how this translates into more money for consumers, consider the following. Six months ago, if you had a 30-year mortgage for $150,000 at interest rates, you could refinance now and save about $100 per month. Property values have held up, which has encouraged people to go out and borrow more money to purchase housing. Unlike other recessionary periods, we haven't seen the kind of personal savings during this economic contraction. When your home increases in value, you can borrow money against it, and go out and use that money to make improvements in the property, or just go out and spend spend spend.

According to the National Association of Realtors, the medium value of a home in the United States is $157,700. That is a 7.5% increase from last year. There is so much demand for refinancing mortgages, that the time frame for submitting a loan application, and getting it approved, has grown from 2 months to 4 months. One of the reasons for this delay, is the lack of qualified appraisers.

Brinker Comment: In response to another caller who felt like he might be getting taken from his mortgage lender, Bob suggested the caller pay a nominal fee to find out the most competitive rates in his area. Bob recommended the caller take advantage of HSH Associates.

EC: HSH Associates is the nation's largest publisher of consumer loan information. Their web site has a ton of useful information on it. Check it out at the following link:

http://www.hsh.com/

Brinker Comment: Another caller was considering waiting to get even a lower mortgage interest rate, because he didn't think the economy would improve. Bob didn't think that was realistic. With rates at these levels, you would have to be betting on the United States undergoing a depression, and Bob said he doesn't see anything that suggests a depression will occur.

EC: Although I share Bob's opinion that a depression is not likely in the United States, I would like to point out listeners should be skeptical of anyone who tries to predict interest rates, including Bob Brinker. Sure, some people can correctly guess on the direction of interest rates, but you don't often hear them admit when they were wrong. Predicting interest rates is tantamount to predicting where the economy is headed, and you have seen how even the best economic minds in the world can completely screw that up. According to my notes, Bob pretty much said he thought mortgage rates had bottomed within the last year, and they have gone significantly lower since then. Bottom line? If anyone could predict with accuracy the direction of interest rates, they would be the wealthiest person in the world so be wary of any such predictions. I don't mean to take away from Bob's view (and mine), that mortgage rates are incredibly attractive at these levels -- unbelievable really in terms of historical norms.

***********
Next Week
***********

Brinker Comment: Bob noted that the consensus of economists is that there will be no job growth when we get the unemployment report this coming Friday. We have certainly not seen much new job activity. There have been some minor increases in payrolls, but overall, new job growth area has been discouraging. Some people are calling our economy, a "Jobless expansion." We had a 9-month documented recession. Usually, when you come out of a recession you see a lot of activity on the upside in the job market. We haven't seen that this time. When you factor in all the variables in the economy, new jobs is absolutely critical.

EC: This link brings you to the economic calendar for next week:

http://mam.econoday.com/calendar/US/EN/N...

EC: Not much coming up in terms or company's reporting earnings next week. Keep an ear out for earnings pre-announcements. Link to earnings calendar follows:

http://biz.yahoo.com/research/earncal/20...

My e-mail

mailto:davidk555@earthlink.net

DISCLAIMER: I am not associated with ABC Radio Networks, Moneytalk or Bob Brinker and this service is neither sanctioned by, nor written under the auspices of ABC Radio Networks, Moneytalk or Bob Brinker. This e-mail is not a substitute for listening to Moneytalk. It is only my interpretation and commentary of some of what is discussed on Moneytalk, along with additional educational information that I include, editorial comments about the market, helpful financial links, guest contributors and even humorous remarks. I also provide Special Alerts to my subscribers as part of my e-mail service and give them access to my web site, www.BeginInvesting.com. If you want to know what was actually said verbatim on Moneytalk, listen to the show live. The web site www.bobbrinker.com has all the links to the ABC Radio Network Stations that broadcast the show live and via the Internet. There are also free summaries of the Moneytalk shows on that web site. The information contained in this e-mail is not intended to constitute financial advice and is not a recommendation or solicitation to buy, sell or hold any security. This article is strictly informational and educational and is not to be construed as any kind of financial advice, investment advice or legal advice.

-- posted by David_Korn

Top 182. Oct 8, 2002 10:05 PM

» Richard_Palm - Re: BB Oct 2000 QQQ Bulletin

In response to message posted by wardcommajh:

QQQ is still listed as a hold on page 7.

-- posted by Richard_Palm

Top 183. Oct 27, 2002 9:00 PM

» Kirk - On Tempelton Allocation.

.
From David's weekly newsletter:

The caller said he was perplexed by Templeton's suggestion that he would be 50% U.S Treasuries, and 25% short the S&P 500, with 25% long in a managed mutual fund. Bob said he saw the show, and didn't understand Templeton's position given that the short position would offset the long position, and that he may do even worse than break even if the managed mutual fund underperformed.

Actually, Tempelton said he recommends 50% bonds and 50% long a good managed mutual fund and then short AN Equal amount of SPY to offset the equity mutual fund.

The reason is to remove market return and just get the return of good stock pickers with the equity half. Tempelton thinks the market is going down and good active managers should go down less. This way, you win even if your managed fund goes down. For example, if you have Fidelity Contra Fund (one of my largest holdings) that is down 6.5% and then are short an equal amount of SPY that is down 21%, then you are ahead almost 15% YTD with Sir John's method!

-- posted by Kirk

http://www.chartoftheday.com/20050518.ht...

Top 184. Aug 1, 2005 7:07 AM

» Kirk - June 18-19, 2005 Newsletter

.
Author: David_Korn
Date: June 26, 2005 9:19 AM
Subject: Bob Brinker's Moneytalk (summary and commentary

"If you would like to learn about my service and how to subscribe, visit the Bob Brinker Fan Club "

Here is an excerpt of my newsletter from last week. Enjoy!

Excerpt from David Korn's Interpretation of Moneytalk (Bob Brinker Host)

June 18-19, 2005 Newsletter

CYCLICAL BULL MARKET CONTINUES AND BOB'S CURRENT ADVICE

Brinker Comment: Bob told his listening audience that said since March 11, 2003, his conviction has been that we are in a cyclical bull market. That is important because it means we are in the midst of a major money making opportunity. As we speak, despite the whining bears who have been dead wrong, the S&P 500 has made another new recovery high closing at 1,216.96. That brings the total return for the S&P 500 since the lows of March 2003 to 52%, not including dividends. If you include dividends, the total return is about 55%. How sweet it is!

Caller: This 57-year old caller has $100,000 in cash and he thinks it should be invested in the market and wants to invest in one of Bob's Model Portfolios. Bob noted that you want to pick a model portfolio that is consistent with your risk tolerance. At age 57, you would generally not choose Model Portfolio I because that is designed for the aggressive investor. Bob noted that he is positive on the market at this time, but as far as adding new money into stocks now, Bob has not encouraged people to chase the market. When the S&P 500 was around 800, Bob recommended buying into the market. Last year, Bob looked for weakness and recommended looking for the S&P 500 below 1100. There were 25 opportunities between June and October of last year when the S&P 500 got below 1100. That was an opportunity to add on weakness. This year, again Bob recommended investing new money in when the S&P 500 went below 1160, which it did on a closing basis on May 12th and 13th and provided another opportunity to invest at a beneficial level. That has been Bob's approach, not to "chase the market." At these levels, Bob recommends dollar cost averaging into the market over time on a monthly basis. This is Bob's philosophy. You try to put a lump sum of money into the market on weakness. Now, with the market at the highest level its been during this cyclical bull market, is the time to adopt a gradual approach to putting your money to work.

EC: It is nice to see Bob be clear in his advice. In addition, his timing efforts this bull market have been excellent. Bob is officially in dollar cost average approach for new money, and I suspect he will stick with that recommendation until we have another significant correction (if we have one). Bob made one minor error in that we are a little shy of the highest level for this cyclical bull market, although not by much. In fact, the S&P 500 is less than 10 points away from its closing cyclical bull market high, which occurred on March 4, 2005, when the S&P 500 closed at 1,225.31.

OIL AND INFLATION

Brinker Comment: There is a lot of talk about the price of oil which reached an all time record closing level in nominal terms (today's dollars), not adjusted for inflation. The price of light sweet crude for July delivery closed at $58.47 on the New York Mercantile Exchange. This is the kind of oil that gets run through the refineries to produce gasoline which is so widely consumed by the U.S.

Even though this is the highest closing price of oil in the recent run, we are nowhere near the level to match the previous "real" high, as adjusted for inflation which occurred in 1981. If it were adjusted for inflation, the price of oil would have to go to $90 a barrel to reach a record high.

The oil price spike in 1981 was precipitated by a crises in the Middle East and here we are again, with war in Iraq and problems in the axis-of-evil states. In the late 1990s, the price of oil, adjusted for inflation, went as low as about $14 a barrel. When you consider the run up to the current price of $58, that is a big deal, as the price has quadrupled. People who are dependent on oil in their every day lives are being impacted. Certainly, the transportation industry, airline, truckers, etc. are being hurt by higher oil prices. Nevertheless, Bob said oil has not impacted the economy as much as it did 30 years ago when we had the oil embargo.

EC: A picture is worth a thousand ECs and the folks over at ChartofTheDay have a chart out this week showing the price of oil inflation-adjusted since 1970. The chart illustrates that most oil price spikes were a result of Meddle East crises and often preceded or coincided with a U.S. Recession. Worth a look in my opinion at the following url:

Brinker Comment: We got the Consumer Price Index (CPI) report for the month of May this past week. Bob pointed out that the price of oil was declining during the month of May which helped lower the CPI. For the month of May, the CPI decreased 0.1 percent. Energy was the real mover in that report, down 2.0% for the month. The "core" rate of inflation, after being unchanged in April, rose only 0.1% in May. Year-over-year, the CPI is only up 2.8%, and it doesn't get much better than that. It had gotten up to 3.5% in recent months, but is back down to what Bob referred to as a "very very low number." Core inflation, on a year-over-year basis, is up 2.2% and remains "benign." Food prices are only up 2.4% on a year-over-year basis and have behaved very well.

EC: Read the CPI report for May at the following link:

http://stats.bls.gov/news.release/cpi.nr...

Brinker Comment: The components of the CPI that are going up faster than the entire rate should come as no surprise. Energy prices are up 9.9% on a year-over-year basis and for the three months ending May, energy is up a whopping 28.7% on an annualized basis. Transportation, which is impacted by energy, is up 4.2% on a year-over-year basis. Medical care continues to be a big contributor to consumer prices, and was up 4.3% on a year-over-year basis. Housing is only up 3% on a year-over-year basis. Many people think the CPI understates the cost of housing because they use a rental equipment formula. However, Bob said there are signs that we are seeing a "cooling off" in housing price appreciation. There is some evidence of pricing levels topping off in Beverly Hills, California. Looking forward, with energy prices on the rise, it could be a big contributor to the June CPI.

EC: Remember two weeks ago I referenced the "Future Inflation Gauge" tracked by the Economic Cycle Research Institute (ECRI) which had reached a 10-month low? Looks like that indicator has been on the mark lately. It will be interesting to see if the upturn in the price of oil is reflected in the next projections from the big FIG Newton.

Brinker Comment: There is still a couple of weeks left in June during which oil prices could jump around some more. Bob referenced a recent guest to Moneytalk, Charlie Maxwell, who some think is the number one oil analyst. Mr. Maxwell said that he thinks that oil could remain in the 40s to 50s for some period of time; however, he believes that it will eventually go higher. Bob noted that it still is in the 50s, but close to breaking out. Mr. Maxwell said when oil does break out, it will break out to the upside.

EC: It will be interesting to see if Bob stops criticizing the people who have been predicting much higher oil prices. You may recall that Bob for a while was predicting that oil would not even go back into the $50s. He then gave the analyst from Goldman Sachs who was predicting a spike in oil above $105 a lot of grief on the show and scoffed at the notion that oil would ever go near that high. Well, now that oil is almost to $60, and one of his guests is predicting even higher oil prices, do you think Bob will change his tune? My bet is we get the "BH" -- a/k/a the Brinker Hedge. If oil falls back down, he can say "I told you so." On the other hand, if oil goes up, he can point out that this is exactly what a special guest on his show said. Either way, the BH makes the BB look just dandy!

Caller: Are you saying that oil will have to go to $90 a barrel before it presents a problem for our economy? Bob fumed a little and said he never said that. In fact, go to any airline and they will tell you that the price of oil is a problem right now. Oil prices have been a problem for a long time now for people in the transportation business. The caller said oil in the $50s is a problem for most people. Bob said oil at $58 is a problem, but it is not as big a problem as people expected. The fact remains that we had high oil prices in the first quarter of this year and we still had 3.5% real GDP growth. The caller noted that many farmers are getting hard hit, and would like to see oil go back to the $20s. Bob retorted that this is exactly why he mentioned food prices when analyzing the CPI and said that he was glad to see food prices up only 2.4% on a year-over-year basis.

Brinker Comment: Our economy grew at a 3.5% clip in the first quarter as measured by GDP which Bob refers to as the "sweet spot." We don't want an overheated economy. The growth that we have had keeps us from excesses in inflation, job growth and bottlenecks in the economy. We don't want a "boom" economy because they always lead to busts.

EC: Both the GDP and Inflation are important components that factor into Bob's long-term stock market timing model. As it stands right now, both GDP and inflation are looking good, which I think is part of the reason that Bob remains bullish at this juncture.

Brinker Comment: Bob said he doesn't know anyone with any credibility that is expecting to see oil in the $20s anytime soon. Bob said it seems extremely unlikely to expect that kind of move. What is going on in the oil market is reflecting uncertainty in the oil pits. On Friday, there was a rumor of a terror threat in Nigeria. That is a big deal when it comes to oil because Nigeria is one of the primary supplies of light sweet crude -- which is the oil that gets to the refineries to make the gasoline that we all want. When you get a terror threat rumor floating around on the New York Mercantile Exchange on a Friday where it is a summer-type atmosphere, you can expect this kind of volatility. We import 1.1 million barrels of oil a day from Nigeria. Virtually everyone of those barrels translates into gasoline for U.S. consumers. Remember, we consume about 45% of all the gasoline that is consumed in the world.

Our voracious appetite for gasoline is supposed to be one of the reasons that oil prices are going up. The other nation to blame is China. However, Bob noted that Chinese oil imports declined in the first five months of 2005 by 1.2%. That was not expected. Traders in the oil pits on Friday simply became paranoid that Nigeria would be hit by a terror attack and that would create more problems with oil prices. If we continue to get these types of stories, you can expect further pressure on the price of oil. The good news is we are using much less oil as a percentage of the gross domestic product than we did 20 years ago. Of course, when you see these huge numbers in our trade gap, a lot of that is caused by our imports of oil.

EC: Another reason given for higher oil prices of late, was the Energy Department's weekly petroleum report which showed that gasoline demand in the U.S. has averaged nearly 9.5 million barrels a day over the last four weeks which is 3 percent above the same period last year

Caller: At the time of the last oil crises, the country of Brazil couldn't afford gasoline, so they started producing biofuel for motor vehicles which was alcohol, derived from the suger-cane they grow (a/k/a ethanol). Now, their cars have a switch that allows them to run on gas or ethanol. Why can't we do what Brazil has done? Bob expressed his frustration over the fact that the U.S. has not addressed their dependence on foreign nations for petroleum. Where is the leadership on conservation? Politicians apparently consider the term "conservation" as poison.

EC: The caller is right. Today, about 40% of all fuel the Brazilians pump into their vehicles is ethanol, compared with about 3% in the United States. The LA Times has an article out this week entitled, "Homegrown Fuel Supply Helps Brazil Breathe Easy." Its an interesting article, and I must confess my own ignorance until I read this article over how far Brazil has come on this front. Read it here:

http://tinyurl.com/7h2aw

Caller: This caller said he doesn't think too many people understand or are aware of our nation's Strategic Petroleum Reserve ("SPR"). Bob agreed. Generally, the SPR is only supposed to be used during national emergencies. We used it once under Bill Clinton. We haven't really seen it used by George W. Bush. In fact, the SPR is almost topped off. There is no indication that our administration will use it to impact the price of oil. If we did, it might have a short-term effect, but probably not the longer-term effect. Bob noted that the SPR only covers about 65 days of our entire nation's import of oil. In addition, it cost about $21 million to administer the SPR and there is quite a government bureaucracy just to maintain it.

EC: The Strategic Petroleum Reserve is our nation's emergency supply of oil stored in enormous underground salt caverns along the coastline of the Gulf of Mexico. Just last week, Secretary of Energy Samuel Bodman announced that the planned fill of the SPR will be complete in August, when the SPR reaches 700 million barrels of oil. More about the SPR at this link:

http://tinyurl.com/7po66

MORTGAGE AND PROPERTY QUESTIONS

Caller: This caller took out an "interest only" mortgage on a house that cost $184,000 because he is only going to be in the house for 28 months while he attends school. Did he do the right thing in purchasing a house for this short period of time? Bob said the first computation to do, is to figure out how much you would have paid if you had rented during this time. Based on what the caller said, Bob figured that it was pretty much a wash in terms of the out of pocket cost for renting versus purchasing the house, and as long as the property did not decline in value after the sale (including commissions), it would be ok to have purchased the house and taken out that loan.

EC: Bob generally recommends against interest-only loans, unless you are know that you are only going to be in the property for a very short period of time. Otherwise, you face the risk of interest rates rising. In this environment where long-term interest rates are very low, Bob likes to put the risk on the banks who are lending the money.

EC#2: A mortgage is "interest only" if the monthly mortgage payment does not include any repayment of principal for some period. Thus, during the period you are paying only interest, the loan balance remains unchanged. Can you handle an interest only mortgage? If you aren't sure, check out this article that attempts to answer the question for you:

http://tinyurl.com/8zf9z

Caller: This caller has rental property in Florida and is thinking of selling it to take advantage of high real estate values, plus he is a little gun-shy after all of the hurricanes to hit the Florida coast. He bought the property 15 years ago at $89,000 and he can sell it now for about $230,000. There is no mortgage on the property It is a single-family home in a great neighborhood. The net rental per year is about $7,000. Bob noted that if the caller could live in the property for two years as his principal residence, he could take the gains tax free. The caller said he had no plans of living there, which Bob wasn't too thrilled about, noting that he would then be obligated to pay 15% taxes on the gains as a rental property, plus any adjustments for depreciation expenses. Bob urged the caller to seriously consider making the rental property his principal residence for two years to avoid the tax consequences.

EC: For people who have a second home, here is an article entitled, "Selling that vacation home: How to avoid capital gains tax" which you can access here:

http://tinyurl.com/a998w

Caller: This caller is considering purchasing a resort timeshare Villa in Cancun, Mexico for $35,000 which entitles her to access it one week per year. Bob noted that this would give the property the equivalent value of $1.8 million! Bob asked what you get for this? The caller said it was a one bedroom, one bath, and Bob said he couldn't believe what he was hearing. Bob said he would rather be the seller, not the buyer. Think of what you could do with $35,000. This could buy you quite a few weeks in Cancun. Even if it cost you $3,500 to stay at a first class hotel, you could do it for 10 years. Moreover, you could put the $35,000 in a fixed-income investment and since you aren't going to use all the money at once, the income you generate could be used for other purposes. The caller said she was also looking it the timeshare as an investment that could pay off down the road. Bob said if it was a stand-alone unit, he could understand; however, the historical resale value of timeshares has not been pretty.

EC: Here is a link to the "Timeshare User's Group" web site:

http://www.tug2.net/reviews.shtml

YIELD CURVE

Caller/Brinker Comment: A caller brought up the point that short term and long term rates are getting pretty close. Bob noted that there is still in excess of a 100 basis point spread between short and long rates. Although historically, an inverted-yield curve is something to get your attention, at this juncture we don't even have a flat yield curve, much less an inverted yield curve.

EC: Two weeks ago, I referenced the seminal 1996 article written in the Journal of Economics and Finance, entitled, The Yield Curve as a Predictor of U.S. Recessions. For a more recent analysis of the current yield curve, check out this site which has some interesting views on the issue:

http://tinyurl.com/a6h2y

MUTUAL FUND, INDEX FUND AND EXCHANGE TRADED FUND QUESTIONS

Caller: This caller is invested in poor performing mutual funds and wants to know what kind of funds Bob would recommend. Bob said their are mutual funds that track index funds and even exchange traded funds that track the indices. Bob mentioned the S&P 500 Index Depository Receipts a/k/a "Spiders" which trade under the ticker symbol, SPY. They have a very very low expense ratio and are very liquid. They track the S&P 500 Index and pay dividends on a quarterly basis. In fact, they just paid a dividend this past Friday of a little over 48 cents per share held. This represents the dividend paid by the S&P 500, less a very small expense ratio that comes out. There is also an exchange traded fund that tracks the Wilshire 5000 which trades under the symbol, VTI. It also gives you the dividend on a quarterly basis. In addition, you can purchase index funds through the major fund families.

Caller: If a fund reports a "total return" of 9%, but has a 1% annual expense ratio, does that mean you walk away with 9%, or do you get 8%? Bob said if the mutual fund company is claiming total return, that should mean the return including any expenses. However, that isn't he end of the story. Each shareholder has to compute his tax liability. If you are in a tax-deferred account, you won't know your tax liability until retirement. If you have the money in a Roth IRA and follow the rules, you won't ever have to pay taxes. If you have money in a personal account and hold the money long term, the maximum federal rate is 15%. When a mutual funds reports "total return" that is supposed to be the money earned (or lost for you) after expenses.

Caller: What does it mean if a mutual fund charges a 5.7% load? Bob said that is very sad. It means you paid 5.8% of your investment when you purchased it (known as a front-end load), or on the day you sell (known as a back-end load). This is an extremely high load. For example, if you invested $107,000, you would pay the fund $5,750 just in expenses. Unfortunately, the load funds often report the "total return" which does NOT include the load charge in the performance. That is why Bob only invests in no load funds.

EC: The U.S. Securities and Exchange Commission publishes a free periodical about mutual funds that I referred to a lot when I was first learning about investing. Entitled, "Invest Wisely: An Introduction to Mutual Funds" you can read it without paying any expense ratio at this url:

http://www.sec.gov/investor/pubs/inwsmf....

Caller: Why did the Vanguard Tax-exempt Money Market Fund have such a big decline in its yield? Bob said if you look at the tax-exempt funds in general, you can see what happened. A lot of the bond/tax anticipation notes that were issued by municipalities in anticipation of the tax money coming in was paid off. The yield was pretty ridiculous, and almost as high as the taxable money market fund which was a condition that could not last forever. The yield on that fund is now about 2.1% and on the taxable it is about 2.8%. It is still yielding about 75% of the taxable, so for people that are paying federal taxes above 25%, they are still better off in the tax-exempt fund, assuming no state tax liability. Right now, there is a more normalized relationship between the tax-exempt and taxable fund. Bob added that the tax-exempt fund is very high quality, with about 85% of its investments in the top grade paper.

EC: The Vanguard Tax-Exempt Money Market Fund (Ticker: VMSXX) is now yielding 2.09%. The Vanguard Prime Money Market Reserves Fund (which I use for part of my newsletter portfolio cash reserves) is yielding 2.84%.

MONEYTALK GUEST - DAVID L. SCOTT

On Saturday's broadcast, Bob introduced David L. Scott, author of the book, "Wall Street Words: An Essential A to Z Guide for Today's Investor." A synopsis of the salient points follows.

Brinker: Bob expressed his dismay that our educational system does little to teach students about personal finance.

Scott: Its not only in high school, but also at Universities and even in graduate programs that personal finance education is ignored. There are many students, even in business school, that don't have a clue about personal finances, credit cards and insurance.

Brinker: One thing that should be taught is the notion of expenses associated with investing.

Scott: Agreed. The majority of people who have financial difficulties, have them on the expenditure side, not the income side. People who make good income, still end up in financial distress because they do not curb their spending habits in a variety of areas.

Brinker: We had a caller who didn't realize that the load charged by the fund came out of the total return. What message did you want to send out when you published the book, "David Scott's Guide to Investing in Mutual Funds"?

Scott: Part of the problem is many people don't understand mutual funds, and therefore rely on the advice of the people selling their find which is not always advice given in your best interest. Part of what I try to do in my books is present complicated topics in an easy to understand way. I emphasize the importance of selecting a fund that meets your investment objectives, and minimizing fees. These are basic books on financial topics that people can understand.

Brinker: What do you think about "false prophets" who promise they can beat the market?

Scott: We all get greedy and we get caught up in the idea that we can beat the market, but its not easy.

EC: Note to Scott -- that's Bob's mission as a market timer.

Brinker: John Bogle expressed the idea that many funds as they get bigger, charge even higher expenses, when it should be the other way around.

Scott: Its sad but true. For example, the 12b-1 fee was designed to help a fund attract new investors. It hasn't worked out that way. As mutual funds have become more popular, the managers have found they can charge higher fees and get away with it.

EC: Here is a link that provides some good background information about 12b-1 Fees:

http://www.ici.org/funds/abt/ref_12b1_fe...

Brinker: Bob noted that David Scott had recently published a book entitled, "David Scott's Guide to Investing in Bonds" and then opened the phone lines.

Caller: This 54-year old caller wants to know if now is a good time to start investing in bonds?

Scott: Bonds have a place in most people's portfolios. Scott qualified his comments by admitting that he was wrong over the last year in that he thought interest rates were going higher. For most people, the way to buy bonds is through mutual funds. If you are wealthy, you can probably get individual bonds. Scott said that he still has been unwilling to invest in bonds or bond funds with long maturities. If you are going to invest, he would go with short or medium term maturities. Everyone can benefit from some bonds, it just depends on your age and need for income.

Brinker: What do you think has kept long-term interest rates down over this past year?

Scott: I think part of the reason is the foreign investment money that is flowing into U.S. Treasuries. Also, nobody is certain our country's economy is all that strong. I see nothing good about interest rates -- especially long-term rates. I am concerned about the balance of payments. I am concerned about the federal deficit. Basically, we have foreign investors financing our consumption. At some point in time, this will end and interest rates will go up. In fact, I thought they would have gone up by now.

EC: A rather grim outlook, but one that is shared by several other heavy hitters in the investment community. The Boston Globe had an article out last month entitled, "Are declining long-term rates in our best interest" which explores some of these issues. You can access it at this url:

http://tinyurl.com/8wmgm

Brinker: What do you think of the I-Bonds. The base rate is even beating the TIPS, and you get the tax deferral.

Scott: I like I-Bonds so much, I own some. They are very easy to buy and a good deal for investors. The tax is deferred until you cash in the bonds. Of course, you shouldn't put all of your money in them, but for fixed-income investors, they are a real attractive investment.

EC: I-Bonds earn 4.80% when bought from May through October 2005. I agree with Bob and David Scott. They are very attractive for a conservative fixed-income investment. Learn more about the current rate, and how to buy them at this url:

http://www.publicdebt.treas.gov/com/comi...

Brinker: What's your feeling on buying new issue bonds?

Scott: Its always better to buy new issues of bonds because the commission is absorbed by the seller not the buyer. However, if a broker calls me about a new bond and they quote what they think the rates will be -- especially if its a municipal bond -- I will always ask them to look in the secondary market to see if there are any better deals. There usually aren't, but once in a while if you are buying a small amount of bonds (like $5,000 or less), some broker dealers want to get rid of inventory because they don't want to hold a very small amount which can result in a great deal for you. Most of the time, however, you do want to try and get new issues if you can.

EC: Interesting piece of advice. That is something I never thought of, but I checked with a broker I know, and he confirmed that they will occasionally offer deals to get rid of the bond "crumbs" as he calls them. These are small dollar amounts, but can be exactly what an individual retail investor is looking for.

Caller: What do you think of closed-end mutual funds that can be bought like a stock and traded like a stock on the NYSE, for example Nuveen and Eaton? The caller said he has bought these closed-end funds using a discount brokerage account, and they offer him income, and many are insured.

Scott: It depends. If you buy stocks on the NYSE, you have to pay a commission and sometimes it would be better just to buy a fund. It also depends on what tax rate you are in.

EC: Frankly, I didn't think Scott really understood closed-end mutual funds, or he wasn't really listening to the question. The caller was referring to the Nuveen New Jersey Investment Quality Municipal Fund (Ticker: NQJ) and the Eaton Vance Tax-Managed Buy-Write Income Fund (Ticker: ETB). Here is a recent article about closed-end bond funds from TheStreet.Com which is worth reading:

http://tinyurl.com/b2hbf

EC: David L. Scott is a Professor of Finance at Valdosta State University. You can learn about him, and even e-mail him, by going to his home page at the following link:

http://www.valdosta.edu/coba/fac/acctfin...

FINAL THOUGHTS FROM DAVID KORN: I am starting a new subscription period to my newsletter shortly. If you would like to learn about my service and how to subscribe, visit the Bob Brinker Fan Club

- David Korn, editor

DISCLAIMER: This e-mail is neither sanctioned by, nor written under the auspices of ABC Radio Networks, Moneytalk or Bob Brinker. This e-mail is not a substitute for listening to Moneytalk, it is only my interpretation and commentary of some of what is discussed on Moneytalk, along with additional educational information that I include, editorial comments about the market and helpful financial links. If you want to know what was said verbatim on Moneytalk, listen to the show live or subscribe to "Moneytalk on Demand" which allows you to listen to the show in case you missed it live. The web site, bobbrinker.com has all the links to the ABC Radio Network stations that broadcast the show live. Copyright David Korn, L.L.C. 2005.

-- posted by Kirk

Top 185. Aug 1, 2005 7:11 AM

» Kirk - Bob Brinker Fan Club

.
From the Bob Brinker Fan Club

Excerpt from David K's Interpretation of Moneytalk (Bob Brinker Host)June 18-19, 2005 Newsletter

CYCLICAL BULL MARKET CONTINUES AND BOB'S CURRENT ADVICE

Caller: This 57-year old caller has $100,000 in cash and he thinks it should be invested in the market and wants to invest in one of Bob's Model Portfolios. Bob noted that.....

for the rest, visit this link.

-- posted by Kirk

http://www.publicdebt.treas.gov/com/comi...

Top 186. Nov 4, 2005 8:48 PM

» David_Korn - Summary and Commentary of Bob Brinker's Moneytalk

David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service.
Web site: http://www.BeginInvesting.com

BOB BRINKER STRONGLY RECOMMENDS I-BONDS!

Brinker Comment: The high headline inflation number is making the I-Bonds more attractive than they have been in a long time. If you purchase I-Bonds prior to the close of business on October 31st, you will get an annualized rate of return of 4.8% for the first six months that you own them. After that, the rate is reset every six months. The current rate consists of a 1.2% base rate and a 3.6% inflation component. You can purchase up to $60,000 per individual if you follow the rules, which means a married couple could purchase $120,000 per year.

Bob predicted that after October 31st, there would be a HUGE jump in the November rate given the recent inflation figures. Bob thinks the rate on those I-Bonds would go way way up, and the annualized rate of interest on the new I-Bonds being issued in November could be as high as 6.7% to 7% which would be paid on the first six months that you owned them. Bob thinks the differential is so much from current rates, it argues in favor of purchasing them on November 1st. There is no risk in holding the I-Bond, the government will pay it off.

Editorial Comment ("EC"): That's a major endorsement from Bob and I agree with him. Bob's last prediction of the I-Bonds in November was for the annualized rate to be around 5%. That prediction was made just a few weeks ago. Clearly, he has modified that prediction by a significant amount. To find out about purchasing I-Bonds, go to the Treasury Department's web site at this link:

Caller: This caller noted that you can't compare the I-Bond rate of return during a six month period to a long bond, since the rate will be reset every six months. Bob noted that you can always cash your I-Bonds in after five years without a penalty if they become an unattractive investment.

Caller: Do you recommend holding I-Bonds in a self-directed IRA? Bob said he didn't like that idea because they can already be used tax-deferred. If you buy them, you can place them in a taxable account and defer the taxable interest for up to 30 years. For that reason, there is no point in holding them in an IRA and for that reason, Bob wouldn't do it.

Caller: If we purchase the I-Bonds, are we responsible for their physical protection? Bob said if he bought them outright, he would put them in a safe deposit box.

EC: Physical protection? Maybe hire a bouncer. You don't even need to take possession of the I-Bonds. In a galaxy far far away, they were once sold and redeemed only as a paper security. However, now they are also available in electronic, paperless form. As a TreasuryDirect account holder, you can buy, manage, and redeem I-Bonds online. Learn more about it here:

http://tinyurl.com/bfsy7

Caller: If we get these great rate on the I-Bonds purchased on or after November 1st, how long will we keep that rate? Bob noted that they reset the inflation-pay-through rate every six months. If you buy the I-Bond on November 1st, you will get the new setting which could bring the rate close to 7%. After that, the inflation pay through will be reset on May 1st. The caller then asked if the government might run out of I-Bonds if there was a huge demand for them. Bob said the government needs to borrow money to pay for all of its spending, so it is doubtful that at this point in time they will limit the amount of I-bonds they sell to the public. The only limit is the maximum of $60,000 per person.

EC: I would like to point out that you can also purchase I-bonds with as little as $25. This is a great conservative investment and makes a good gift for children and grandchildren because they are easy to buy and don't require any tax reporting until they are redeemed.

ENERGY PRICES

Caller: Do you see us getting any break in the price of energy? Bob said he saw something fascinating happen with respect to energy prices in September. When Hurricane Rita became a category 5 hurricane, it was threatening the energy infrastructure in Houston. During that time, oil was unable to make a new high and showed "relative weakness." The price of oil had reached about $70 a barrel on August 31st-September 1st in response to Hurricane Katrina, but it was unable to make a new high when Rita was barreling toward Houston. Bob thought that was an indication that there was some inherent weakness in the price of oil at the upper levels. Low and behold, what has happened since then is that oil really has weakened, and has been spending most of its time in the low $60s.

EC: Interesting comments from Bob, albeit made in hindsight as far as I am aware. Bob applies this same type of analysis to the stock market when he is trying to pick a market top. Its a theory that old Jesse Livermore first discussed when trying to time the market. Livermore would carefully study individual stocks after they made a new high. When the stock made an attempt to break through to a new high but was unable to do so, that suggested to Livermore that there was too much selling pressure at the high level and posed the possibility that the stock had reached its peak and would begin a new downward trend. Keep in mind that there are many more variables at play than simply the one Bob mentioned. I could give you many examples, but if terrorists hit the oil refineries, that is one example of how oil prices could easily spike to new highs, regardless of what they had done in the past. For now, however, let's hope that oil prices have peaked.

Caller: Do you think we will get some relief from high natural gas prices. Bob said that natural gas is a totally different animal than oil. It is very hard to predict because we don't have reserves like we do with oil. Natural gas is a wild card and Bob thinks people are going to be paying a lot for natural gas.

EC: According to the Energy Department's annual fuels outlook released on Wednesday, households that heat with natural gas could expect to see their fuel bills rise 48% this winter! A typical household heating with natural gas is projected to spend an additional $350 this winter. That's cold man. More on this story here:

http://tinyurl.com/73ehl

BOND INVESTMENTS

Caller: This caller just retired and is transferring her retirement account to a Vanguard IRA. She asked Bob why he didn't recommend the Vanguard Total Bond Index. Bob said he hasn't needed that fund because for that portion of his bond allocation he has been extremely pleased with the performance of the GNMAs which have payed a premium yield due to the mortgage interest pay-through. This year, the GNMAs are out-performing the total bond index by 70 basis points which is a big difference and Bob is going to stay with the GNMAs.

EC: Um Bob. You "forgot" to mention that the Vanguard Total Bond Index has outperformed the Vanguard GNMAs over the last 5-years period.

Caller: So is it ok to put a huge chunk of money in the GNMAs, even with interest rates on the rise? Bob tempered his prior comments by noting that the GNMAs are included in his model portfolio as part of an overall diversified bond portfolio and it is up to each investor to determine their own appetite for risk.

EC: Please don't "interpret" my last EC to suggest that I dislike the GNMA fund. In fact, it has done very well over the long haul. I am just ribbing Bob because I know he likes to spin his recommendations to make them look as good as possible, and part of my job is to keep him honest and objectively evaluate his calls.

EC: Before I leave the topic of GNMAs, it should be noted that the Vanguard GNMA fund (ticker: VFIIX) has seen its net asset value fall to a 52-week low, closing at $10.25 on Friday. The culprit? Rising interest rates. See the chart here:

http://finance.yahoo.com/q/bc?s=VFIIX&t=...

INTERNATIONAL INVESTING

Caller: This caller owns 80% of his portfolio in the Putnam International Equity Fund Class "A" shares that he purchased through his work. Bob asked if they force him to pay a sales charge to pay the fund. The caller wasn't sure, but knew that there was a 2% penalty to leave the fund. Bob said he does not invest in funds that require a penalty to get out of them. Bob then said he has a much smaller percentage of his portfolio in the international arena, and the vast majority of his portfolios is in the United States and he has had that allocation since he issued his major buy signal in March, 2003. Bob said he would be much more comfortable with that type of allocation than what the caller had chosen to do.

EC: There are at least 6 different share classes of the Putnam International Equity Fund. I did some research on them, and they actually all appear to have outperformed the S&P 500 since March of 2003. I was actually wondering why Bob didn't do his usual fund-comparison analysis on the radio, and I think it might be that Putnam has outperformed the U.S. market! A bigger exposure to international markets is what several of Bob's guests have preached, but something Bob has not chosen to do.

REBALANCING

Caller: This caller is invested in Bob's Model Portfolio I, but the fund balances are no longer in line with the recommended weightings. Bob said he recommends rebalancing in January so it will show up on your tax return next year.

EC: I fond an article that might interest you if you follow Bob's advice. Entitled, "Rebalancing vs. Market Timing" you can find it at this link:

http://tinyurl.com/5ulfs

REAL ESTATE AND HOUSING

Caller: A caller with a second rental property wanted to know if Bob thought he should sell it given the run up in price, or hold onto it as a potential vacation house down the road. Bob ran some numbers, but in the end said he thought it was mostly about a quality of like decision. In general, Bob views vacation property as a quality of life question. If you are going to buy a home by the lake, ocean or whatever, as long as the finances work, the quality of life impact it brings to you and your family is far more important than whether it is a great financial investment. Bob added that many times properties that are purchased as vacation homes see their values increase over time and if you put in effort to fix them up, it can become another valuable asset that you own.

Caller: This caller heard that the Bush administration is studying the effect of changing the tax code which could possibly include eliminating the mortgage interest tax deduction. How do you think that would impact the housing market? Bob said there is absolutely no question that it would negatively impact the housing market. It would instantly increase the cost of borrowing money to pay for your house. Bob said from what he hears, there is talk about a dramatic reduction on the size of the loan you could deduct interest on, from $1 million to $300,000. Bob said it would be something they could probably get passed in Congress since there aren't many voters across the country that have a million dollar mortgage. The caller disagreed and said in California, many in the working class had homes worth over $300,000. Bob said they would be unhappy campers if the change was implemented.

EC: Currently, taxpayers can deduct the interest on mortgage loans up to $1 million. President Bush's tax-advisory commission is considering a new limit on the deduction -- using the levels that the maximum mortgage the Federal Housing Administration will insure, with a national average of $244,000. Here is an article that discusses the tax panel's target of mortgage interest deductions:

http://tinyurl.com/aou5p

Brinker Comment: Why is the government even considerning reducing the mortgage interest deductibility? Because our government is in a bind. They are spending money hand over fist. They even make up new programs, like the prescription drug program for seniors. We have to borrow the money to pay for it. The tax advisory commission is trying to come up with ideas for President Bush. One of the items they are struggling with is the problems the alternative minimum tax has created. It was originally implemented decades ago to catch a few hundred people who weren't paying taxes. Now, it is impacting millions of people who do pay taxes. The law of unintended consequences has taken over. Many of the proposals on the table are to limit various tax breaks.

One of the proposals on the table, is to increase the tax brackets for the wealthy. For example, if Congress takes no action by 2010 to make the tax cuts permanent, some of the tax cuts implemented by Bush will be reversed such as the top tax bracket which will go up from 35% to 39.6% again. In addition, if Congress does nothing by 2008, the capital gains and dividend tax rate will revert back. What we know at this juncture, is that the government is looking for ways to increase revenue. If you are hoping for more tax cuts, don't bank on it. Bob said he doesn't think any politician is going to stake their reputation on new tax reductions. We are bleeding red ink with a national debt of an unbelievable $8 trillion.

SOCIAL SECURITY CHECKS

Brinker Comment: If you are one of the 48 million people that receive social security, you will see a jump of 4.1 percent next year in your check, with the average check going up $39 a month -- the biggest increase in 15 years. The average social security check will be $1,002 beginning in January 2006. The 4.1% increase is designed to address the increased cost of living for social security recipients. That is a number that should serve as a reasonable offset to inflation. This is is the same fundamental underpinning that is going to make the I-Bonds go up to the 6-7% area. All of this is coming from headline inflation.

EC: Some critics point out that one-fourth of the new social security payouts will be eaten up by the rise in Medicare premiums which will grow by $10.30 per month starting in January. Here is an article that came out this weekend discussing the increase in social security and related issues:

http://tinyurl.com/drmwx

SELL SIGNAL QUESTION

Caller: This caller's retirement account at work only allows you to make changes once a quarter. If you issued a "sell signal" on the stock market at the beginning of a quarter, but I couldn't change my allocation for three months, should I just wait until the next quarter to sell my funds provided you are still on a sell recommendation? Bob said it would depend on the level of the market. Bob used as an example his sell signal in January of 2000. If someone had waited 2 years to sell, the market would have already have declined almost half. On the other hand, if the market moved sideways or slightly higher after the sell signal, and you were then able to implement the advice, then sure it would work out. If you are unable to take action in a tax-deferred account, you could take measures to hedge the portfolio in a taxable account.

EC#1: Bob's "tactical asset allocation" recommendation (later referred to as a "sell signal") was made based on the market's close in 1999, with Bob moving 60% of his equity portfolio into cash via money market reserves. He still kept 40% in stocks until August 2000, when he reduced his equity weighting by another 5%, and then in October recommended investing 20-50% of the cash raised into the QQQQ shares. If you had waited until the end of the first quarter of 2000 to sell, you would have done just fine. The market actually rose quite nicely following Bob's "sell signal." The S&P 500, Wilshire 5000 and Nasdaq didn't reach their all-time bull market highs until late March of 2000. Of course, following that point in time, the market began its downward descent in a brutal bear market that bottomed in October, 2002.

EC#2: The hedge that Bob is referring to, could involve shorting the market, or purchasing "bear" mutual funds in an amount equal to what you are long in your tax deferred account. This would essentially mean that any losses in your tax-deferred account would be offset by gains in your personal account. Obviously, there are tax considerations, as well as the risk always involved in such a strategy.

CREATING BALANCE

Caller: This caller wanted to know if creating a balanced portfolio could be as simple as buying a "balanced" mutual fund like the one offered by Vanguard. Bob said there is a very simplistic way to create a balanced portfolio without going into a managed mutual fund. First, you take the equity portion of your portfolio and invest it in a broad based no-load index fund that tracks the Wilshire 5000. Then, take the other 50% of your portfolio and invest it in the GNMA fund. Bob said he uses more diversity, but if you were looking for total simplicity, this is something you could do.

EC: You may recall that on Moneytalk two weeks ago Charles Ellis recommended these same investments if you wanted a simple way to create a balanced portfolio.

NEW BANKRUPTCY LAW

Brinker Comment: Bob noted that last week we saw thousands of people lined up outside the court house to file for bankruptcy before the new regulations go into effect on Monday. The new regulations make it harder and more expensive to use the bankruptcy code to run away from debt. This law was passed 6 months ago, and unfortunately is catching many victims of Hurricane Katrina and Rita off guard. From October 3-October 9th, there were over 103,000 bankruptcies. Contrast that to a year ago when there were 30,000 bankruptcies.

EC: If you have questions about the changes to the bankruptcy law, I found a very informative article on About.com which you can access here:

http://credit.about.com/cs/legal/a/04060...

CHILD'S EDUCATION

Caller: This caller already has a 529 plan for her 4-year old child that she contributes $100 per month to. She is about to have a second child, and wanted to know if she should open a second 529 account, or just split the proceeds of the first one. Bob said he would have a separate account for each child. Bob also suggested that she consider starting a Coverdell Savings Account which is tax-free savings account where the funds can be used for college and also for the costs of kindergarten through high school. So families who are planning on sending their kids to private school should be very interested in these accounts. You can invest $2,000 per child per year which is about $166 per month. The Coverdell has a lot of flexibility.

EC: Check out the Infernal Revenue's publication on Coverdell Education Savings Accounts at this url:

http://www.irs.gov/newsroom/article/0,,i...

CLOSED-END FUNDS USING COVERED CALLS

Caller: This caller wanted Bob's take on a new type of closed-end mutual fund that takes advantage of writing covered-calls on equities to generate income. Bob said the concern he would have on these funds is the amount of expenses they charge. If you are buying the funds on the new issue, Bob suspects you will have to pay 4-5% up front which Bob would not pay. The second problem Bob thought you might encounter would be the annual expense ratio. This is an income-oriented investment whereby the manager is trying to convert risk into investment income by taking in the call premiums on their option portfolio. Bob said he thinks more funds are adopting this approach because the market has been flat this year and they probably think we need to take advantage of that fact as well as the fact that rates are still low. Writing covered calls is a tricky business, and you have to really watch your expenses. In addition, if you get caught in a bear market with this type of strategy, it can cost you a lot of red ink.

EC: A couple of these funds that try to take advantage of writing covered calls including the Nuveen New Jersey Investment Quality Municipal Fund (Ticker: NQJ) and the Eaton Vance Tax-Managed Buy-Write Income Fund (Ticker: ETB). Here is a recent article about closed-end bond funds from TheStreet.Com which is worth reading if this type of an investment interests you:

http://tinyurl.com/b2hbf

MONEYTALK GUEST - JOHN BOGLE

On Saturday's show, Bob had on John Bogle, founder of the Vanguard Group. Bogle discussed his new book, "The Battle for the Soul of Capitalism." Bogle said that capitalism has had a wonderful history of being trusted back to the 19th century and it worked because we had "owners" capitalism. Owners put up the capital and took the risk and got the reward. In the latter part of the 20th century, that system turned upside down and now most of the rewards go to the managers. We now have "managers capitalism" instead of "owners capitalism." We can see evidence of this change in executive compensation, financial engineering and manipulation of corporate earnings. It is also in the mutual fund industry where management companies get far too large a share of the returns.

There has been some improvement of late with the passage of Sarbanes-Oxley, greater board room accountability and the inability now for auditors to be part of management. In the mutual fund area, there is an attempt (which is being bitterly resisted) to make mutual fund boards of directors more responsible to the shareholder. The law states that mutual funds should be formed in the interest of their shareholders, but that has often not been done. We would need an independent chairman of the board, the use of independent consultants, etc. These are little things that can bring the system back to balance.

Bob referred to Bogle's investment classic, "Common Sense on Mutual Funds." Bogle said he has been pleased the books have done well, and the proceeds go to charity. Bogle said that book is designed to present common sense intelligent ideas about investing. Themes like investing for the long term, don't pay a lot of money to your fund manager, not moving your money from one fund to another, not hovering over the rankings of mutual funds, and to own Americn business and hold it foreover. Don't trade, don't do anything. Bogle remarked that he knows that Bob shares at least some of the same investment philosopy.

About 30-years ago, Bogle created the "First Index Investment Trust" which is now known as the Vanguard S&P 500 Fund. People laughed at the idea when he first came out with it. In fact, people referred to it as "Bogle's folly." Today, it is the largest fund in the world.

EC: Bogle and Brinker have both done a great service in educating the public about the importance of watching expenses in your investment portfolio, the benefits of using index funds, and the necessity of diversification. The two individals, however, have different philosopies toward market timing. Of course, Bob is a practitioner of market timing, and even uses the name for his newsletter. Bogle, on the other hand, has this to say about market timers in his book, Common Sense on Mutual Funds,:

"The idea that a bell rings to signal when investors should get into or out of the stock market is simply not credible. After nearly fifty years in this business, I do not know of anybody that has done it successfully or consistently. I don't even know anybody who knows anybody who has done it successfully and consistently. Yet market timing appears to be increasingly embraced by mutual fund investors and the professional managers of fund portfolios alike."

Bogle said there is a way to think about investing that he likes to share with individuals. Investors tend to pay about 2.5% in expenses, which is an incredible amout of money over an investment lifetime. Think about investing one dollar over your entire investment horizon which is around 65 years. You figure that you work for about 40 years, saving and investing your money, and then live another 20 years after that. If you invest $1 over 65 years without expenses, it grows to about $131, using a compound growth rate of about 8%. That's the magic of compounding. However, if you pay 2.5% in expenses, than your $1 will only grow to about $25! That's what we call the "tyranny of compounding costs." It utterly overwhelms the magic of compounding. After you consider the costs, you realize that instead of you, the managers get the lion's share of the returns.

A caller asked Bogle how the Vanguard Total Stock Market Fund has outperformed other similar funds that also track the market. Bogle said there are two reasons why. First, they charge less expenses overall, so they take less out in terms of returns. Second, in recent years they have been able to manage the changes in the index better than their competitors. The man in charge has been a very good administrator of these funds. By and large, however, its the lower expenses that account for the better performance.

Another caller asked Bogle for his opinion on the long-term prospects of the international markets versus the U.S. stock market, as well as his outlook for the dollar. Bogle said he is a low risk-taker in terms of moving in and out of international markets. Bogle said the first question is whether you even want to have exposure to the international markets. Many investors aren't aware that 25% of the revenue for U.S. companies is derived from international sales. That said, Bogle said he understands the logic of diversifying into the international arena. With respect to the dollar, if you look at the long run, the returns of international markets are not that different compared to the U.S. market. There are cycles where there is outperformance in international markets. Bogle said if you are going to invest internationally, he recommends going with an international index fund and sticking with it for the long term. Vanguard has such a fund.

Bob asked Bogle to explain how the structure of a Vanguard fund works for investors. Bogle said when you buy a typical mutual fund, it is really like a corporate shell that holds a package of stocks and bonds. The chairman of the board is usually chairman of the management company that determines the portfolio. The officers are provided by the managers. In otherwords, the fund is captive of the management company. The rewards are enormous for those managers. For example, the typical equity fund costs 1.5% each year, plus another 1% in hidden costs. Contrast that with Vanguard where the funds are directly owned by the shareholders. Bogle said you should always determine whether the manager's interests are paramount, or whether the individual investor's interests are. Of course, in the case of Vanguard, Bogle said they look after the individual.

A caller asked Bogle about the Vanguard GNMA fund and how interest rates will impact the net asset value. Bogle said that when interest rates go up, bonds go down as a general rule. Over the long term, however, keep in mind that interest rates will fluctuate and in most cases, the returns generated will be entirely a function of the income generated. That is the mathematics of bond investing. The net asset value will fluctuate in the GNMA. The net asset value is not guaranteed, and you shouldn't look at it that way, but you should view it as an investment that provides a steady stream of income over the very long term. If you really want stability of capital, you can't get stability of income. You can go with Treasuries where the capital is guaranteed, but the income provided by treasuries is very low. When you go with a fund like GNMA, the trade off is you get higher yield, but you have to deal with the fluctuations of the net asset value.

A caller asked Bogle about the Vanguard Extended Market Index exchange traded fund and was concerned about the low volume of trades. Bogle said if you are buying it as an investment, you do not need to be concerned. In the exchange traded fund (ETF) arena, there is a lot of trading going on, and Bogle doesn't favor that. Long term success is about investing, not speculating. The ETF is actually a little cheaper than the actual fund (not including brokerage commissions), but Bogle said he has not changed any of his holdings to ETFs.

EC: The caller and Bogle were referring to the Vanguard Vipers (ticker: VTI) which I own in my newsletter portfolio. They track the Total Stock Market Index. I like owning the Vipers because I could sell them (or buy them) in real time as I did just last week for my newsletter portfolio. The other benefit they have over the fund, is you can short the Vipers if you wanted to. The caller is correct though in that the volume of Vipers isn't that great, with the average volume about 20,000 shares traded each day. Contrast this with the SPDRs (a/k/a Spiders), which track the S&P 500 (ticker: SPY) which have an average daily volume of about 63 million shares.

Bob commented about how many shares are traded daily of the Spiders, to which Bogle said this just goes to show you that there are thousands of people shuffling money around each day. Bogle quoted Warren Buffet who said that the two greatest enemies of individual investors are expenses and emotion. Bogle said the Vipers take care of the first one, and its up to the investor not to be pulled into the latest hotest fund, whether it is energy, real estate, or whatever. Its hard to do timing, especially when commissions are involved.

Indeed.

Good interview by Bogle. If you want to check out his latest book, "The Battle for the Soul of Capitalism," you can read about it here:

http://tinyurl.com/eyfdj

Also, you can listen to an audio clip of the Motley Fools interviewing Bogle on National Public Radio at thus url:

http://tinyurl.com/d9rwd

MESSAGE FROM DAVID KORN: If you would like to learn about my service, visit the Bob Brinker Fan Club Hosted by Suite101.com

DISCLAIMER: neither sanctioned by, nor written under the auspices of ABC Radio Networks, Moneytalk or Bob Brinker. This e-mail is not a substitute for listening to Moneytalk, it is only my interpretation and commentary of some of what is discussed on Moneytalk, along with additional educational information that I include, editorial comments about the market and helpful financial links. I also provide my own stock market commentary to subscribers as part of my service and give them access to my web site, www.BeginInvesting.com. If you want to know what was said verbatim on Moneytalk, listen to the show live or subscribe to "Moneytalk on Demand" which allows you to listen to the show in case you missed it live. The web site, bobbrinker.com has all the links to the ABC Radio Network stations that broadcast the show live. The information contained in this newsletter is not intended to constitute financial advice and is not a recommendation or solicitation to buy, sell or hold any security Copyright David Korn, LLC 2005

-- posted by David_Korn