Moneytalk Bob Brinker Summaries - Information ONLY

This archived discussion is "read only".
For the corresponding "live" discussions, post in the active topic forum here.

Top 115. Feb 21, 1999 6:10 AM

» SteveT - Saturay Feb. 20 1999

Hi all. I thought todays show was one of the best in a long while. It had a good variety of calls on a wide range of topics. I will again use time reference points so you may check the archives for more info.

http://www.bobbrinker.com/archive.asp

:10 Bob opened talking about the good news out this week on inflation up .1% for Jan. and 1.7 trailing 12 months. San Franciso had 3% and Houston .3% trailing 12 months. This low inflation helps keep interest rates down making it possible to justify higher P/Es, S&P 500 current P/E is 24 times 1999 est. earnings despite the correction. There also seems to be lack of pressure on prices due to Increased productivity, lower insurance costs for un-employment and workers comp., lower borrowing costs, This favorable news long term for the markets. The trade deficit was up to 169 billion last month and for the first time in ten years exports were down.

:20 Caller asked if a broad based fund like the Domini Social responsibility Fund DSEFX that don’t invest in tobacco stocks are a good substitute for the S&P500? Bob looked up the expense ratio and found it at 1.7%. Bob pointed out when buying stocks on the secondary market the money goes to the seller of the shares not the Company unless it is an IPO or issue of new shares. Bob thought he may buy the 500 and donate the difference in expense ratio in this case about 1.5% to charity.

:25 Caller asked Bob to recap the indicators in his timing model? No change, make sure asset allocation is where you want it. Caller asked if now is the time to over weight in Value vs. Growth? Bob thinks this is risky and doesn’t recommend.

:33 Caller asked about Intel INTC as a trading stock and what makes that a good one for trading proposes? No has no view on INTC now but did give some guide lines on what to look for in trading stock in general. Making major price moves in both directions, short term volatility, Good long term prospects, down turn in a cycle, Heavy trading volume, liquidity, Much info from the company and analysts, and being a student of that industry sector were some things Bob mentioned. Caller asked what sectors are good going forward? That is hard due to the high market P/E Mention was made of Semi conductor cap equip and drug stocks but with run ups in the last several months Bob thinks these have gotten ahead of them self and need to wait for earnings to catch up. The correction may not be over.

:41 Caller asked again about indicators (missed answer while on hold) No change correction in process, doubt correction over, may see Dow at 10,000 this year once get through correction, Can see relief rallies, Market breath is pathetic, and chance of a bear market is near Zero.

:44 Caller has 401K options that are under performing. Bob said not choice good ahead and keep adding to, it is better than nothing and pointed out the tax advantages.

:46 Caller asked about tele- com companies Global Star and Iridium? Bob follows neither but focuses on wireless and band width companies

:51 Caller asked about a Mining Company soon to go public Pinnacle resources should go public @ $2.00. Bob said write off any money put in a penny stock to Zero. This is not investing but speculating.

:53 Caller had Corporate Bonds recently called and need income in a personal account? GNMA would be perfect for this caller due to being in a low tax bracket.

:57 Caller was maxed out on a thrift plan at work and wondered if it would be wise to do an IRA? Bob said yes do as much deferred investing as you can.

1:10 Bob talked about day traders and the affect they have on the market, they are estimated to account for 15% of the volume on NASDAQ. This is not easy but is risky. Currently we have about 5 million on line investors, this does have an impact. What if they all decide to sell or buy at the same time? Day traders some days control half the daily volume. In Dell a year ago 1/8 daily volume was on line trades now it is ¼. The NASDAQ has average volume of 800 million 19% more than NYSE. In 1998 57% of NYSE trades were less than 10,000 shares. In a Forbes survey average investor expected returns were 18.5 % in 1929 the number was 10% WOW. How long can this enthusiasm last?

1:23 Caller asked about Pfizer and Merck. Bob’s answer dealt with Pfizer. He said it was one of his favorites and was the strongest in that industry. It has a lot of new product coming, only a few points off recent highs. The P/E is high and it will take time for earnings to catch up. Bob thinks it is entitled to a correction after the run up the last six months. Bob then reviewed the last six months for the major market indices and the timing calls he made concerning that period.

1:33 Caller asked about 3 Oil services Companies Diamond, BJ, and Santa Fe, they are down about 30-40% caller thought now could be a good time to get in. Bob thought it a good question but is neutral on the sector due to the outlook for oil prices, has no desire to be in the sector now. Stated needs to see a catalyst and now is not seeing one.

1:35 Caller wanted clarification on where is money goes when he buys a stock or shares in a equity fund. This was in response to the earlier call about socially responsible investing. Bob restated if it is an IPO the money goes to the company, if they are secondary shares the money goes to the seller of the shares. When ever shares are bought it does create demand thus affecting the price of the stock.

1:41 Caller was moving money in a SEP IRA to a new custodian and was trying to decide on SPY or a mix of MDY, SPY and a couple stocks. Bob liked of the two choices all SPY because of the diversity, mentioned briefly his 4% rule and the need to only have to focus on market direction.

1:45 Caller was seeing a pattern when P/Es get so high then we get a correction, then a buying opportunity, then up again until we hit that wall of high P/Es again. Bob thought this a good question and stated it is to early to tell if it will work that way once again. Will monitor it and revisit this later this year. Bob can’t see a bear market on his radar screen, but did leave the door open down the road to a major bear market. Bob thinks this will perjure the market of day traders.

1:52 Caller had money in a 401K and converted to a Roth IRA also a SEP IRA and was putting it in Fidelity Contra and was thinking of the VTSMX. Bob liked the idea and saw no reason to pay the 3% sales charge in Contra.

Caller was wondering at what point a beginning investor should start going into International funds. Bob said right from the start at 15% International and 10% in Europe. Caller was concerned about economic and currency risks associated with foreign investing. Bob said the reason is the hope of achieving a better over all return on a portfolio relative to the risk and to diversify the sources of those returns. Bob reminded us the risk profile is different than US investing.

1:57 Caller asked about REITs and why they declined the last year. Bob said they got ahead of them self and the rise in the long Bond hurt them. They appear to be in a bear market and the outlook is not good at this time.

2:10 Bob opened the final hour talking about the technicality of when the millennium begins. Again the subject of day trading came up. About 15,000 new on line accounts open daily. Merrill Lynch this week purchased an on line brokerage firm. On line traders are trading twice as often as they did before going on line to trade. This does create demand for shares and is making it tough on some short sellers. Reference was make to the "on-line mob" and use of message boards and how some individuals put out false info trying to affect the price of stocks for personal gain. Bob simply said be aware of what is going on out there. (sure glad 101 has not been corrupted)

2:23 Caller asked for an opinion on CMPQ and the Alta Vista spin off. Bob said detail were few but has created a lot of excitement and could have been more attractive before the correction of the Inter nuts (my word). In addition many of the Box makers have also seen stock prices fall due to high P/Es and uncertain future revues like Dell. CMPQ does have a more realistic P/E but it is still high. Bob sees the more down side in the sector due to competition and lower selling prices and if the correction continues the tech sector will participate in the correction.

2:33 Caller wonder when the inevitable bear market strikes would it be better to hold stocks or sell and go to Bonds. Bob gave a quite detailed answer on how one could hedge a portfolio. (my suggestion is to go to the archives and record the answer for future reference really worth your time.)

2:37 Caller asked about Schwab 1000. Bob’s answer was one of the best, a real winner.

2:38Caller commented on the "budget surplus" and it being Excess Social Security tax collections. Our trade deficit and consumer spending on imported goods and we will eventually "pay for it". Also campaign finance reform being a way to remedy these problems.

2:46 The next caller stated Senator Fritz Hollings of South Carolina mentioned about 10 days ago the smoke and mirrors of the "budget surplus".

2:47 A woman called concerning her mother who had income to met her needs she was in good health, in early retirement, and has purchase long term care insurance. She has about 30K to invest and wondered if she should be more aggressive. Bob said she should spend more and be happy. They did go through a couple Mutual fund choices. They were the Vanguard funds of funds and life strategy funds. Bob did a performance analysis of the choices and said they were pretty close to being in line with VTSMX and VFIIX at the appropriate mix of fixed and equities she gave him for the funds she was considering. Bob thought them good choices for the Ultra conservative investor. ( I was surprised Bob didn’t recommend constructing her own blend with VFIIX and VTSMX and save some on the expense ratio)

That’s all she wrote.

-- posted by SteveT

Permalink

Print Discussion

Join the latest discussions