Moneytalk Bob Brinker Summaries - Information ONLY

Top 267. May 31, 1999 5:55 PM

» TONYBRIG - Will he be on time or after the fact?

BB do you think he will do a Post Mortem or
b4 the 20 dip?
If it comes.
Is it true his one and only seel many yrs ago
came late?

VBOLHH

-- posted by TONYBRIG

Top 268. May 31, 1999 6:26 PM

» _Glen - thanks for teh summary

From someone who is on vacation this week, thank you VERY much for the show summary!

I believe Bob hosts the show from Cocoa Beach, FL and, oddly, I was unable to find a radio station in that area which carried the show. I couldn't recieve the Daytona Beach station on a car radio.

Observation: we've all heard Bob praise Florida for not having an income tax, but the highway tolls will easily make up for it. In a way, I'll be a little less unhappy to go back to forking over ~7% income + ~$200/yr license tabs (I drive a 1998 Honda Civic) to Jessee Ventura (MN Gov.). It cost me $2 each way from Orlando Airport (MCO) to/from Kennedy Space Center, and another $2 from the Airport to the Disney World area. Now, doing that once isn't bad, but if it was every day... wow! That would be just like paying income tax!

BTW, Kirk, gas here is in the $1.10 range. I knew you'd ask :-)

-- posted by _Glen

Top 269. Jun 3, 1999 4:22 AM

» TONYBRIG - It would have to be Monumental (Bb model)

For him to put out a sell call.
I wouldnt want to be in his shoes.
But then he is a master at hedging.
He could do well at the track (dutching)
the race................................
The art of playing all the live combos
or horses to cover.

VBOLHH

-- posted by TONYBRIG

Top 270. Jun 3, 1999 7:03 AM

» KirkL - Taxing Discussion

Taxing Discussion

I moved the discussion of gas prices and taxes to here as taxes is really politics.

I think posting gas prices is also a good thing to do in the energy discussion thread too.

I don't want to be too rigid, but we did try to make this site just for posting summaries where comments on the shows should go to the BB-5 thread

Go HWP!

-- posted by KirkL

Top 271. Jun 14, 1999 6:57 AM

» KirkL - Hike or no hike?

Bob Brinker says a 50 basis point hike possible at the next FOMC meeting.

Roger Babson predicts no hike.

Do I hear a bid for lowering of rates? 8)

-- posted by KirkL

Top 272. Jun 14, 1999 8:29 AM

» Roger_Babson - Rate hike and derivatives...

I wade into the hedging pool by saying that a 50 bp rate hike would not correct the panic rate cuts from last fall during which time the Fed cut rates by 75 bp. In some respects, a rate hike here would be an admission by the Fed that they made a mistake last fall.

This would likely create a stronger dollar at the same time the Chinese and Japanese are trying to reduce the value of their currencies to export more to the U.S.

However, our economy is at a demographic constraint and the likelihood is low that we can continue consuming with credit all of the exports that the world can ship to us. Higher rates would have the effect of slowing U.S. consumption and hurting Asian export countries.

As most here know, history instructs us that when the Fed begins moving in one direction on rates it is usually by more than one action (several is the norm).

Contrary to what many here think of me, I do not WANT a bear market, however, at current levels of overvaluation and manic speculation, a severe bear market is inevitable.

Moreover, given that I place a great deal of credence in the Long Wave, and I contend that we are in the late stages of a Plateau of a K-Wave "Fall Season" (like the late 1810s, mid 1870s, and late 1920s), I believe that the Fed should maintain a bias to "cut rates" and purchase securities to maintain liquid reserves.

The great problem that existed in the late 1920s and in Japan in the late 1980s is that central banks have few tools to discourage rampant financial market speculation and the eventual creation of severe systemic risk. Today, the risk is centered around derivatives trading and the excessive amount of credit underlying these markets.

Virtually unregulated and enjoying no oversight from a dispassionate third-party entity, it is not the LTCMs of the world that are the issue, it is the imprudence of large commercial bankers, who precieve derivatives speculating as easy money while engaging in "risk management". On the face of it, the premise is dubious. However, with the evolution of the high-risk activities in these markets, the idea is pure folly.

The greatest danger, IMO, is that Greenspan long ago became seduced by the seeming efficienies and flexibility of derivatives and has on numerous occasions spoken in laudable terms of these instruments. This may be his sad legacy, were the markets to decline and the economy fall on hard times as I expect over the next decade or more.

Thus, I believe it is past time that the Fed, SEC, and Congress should institute restrictions on financial market speculation (margin debt, unsecured derivatives borrowing, and accounting reforms to discourage corporations from trading their own stocks) at the same time maintain a bias to provide liquidity.

Of course, I don't expect this to occur, as it will only happen after it is too late and the markets have imploded.

Regards,

-- posted by Roger_Babson

Top 273. Jun 14, 1999 9:10 AM

» litab16 - Warning Signs

There are definitely warning signs for a possible economic downturn and I agree the debt levels are scary. Yet the technology revolution might have changed the rules of the game for the wave or extended it's length. Here are some interesting excerpts from today's Testimony of Chairman Alan Greenspan before the Joint Economic Committee, United States Congress:

As this century comes to an end, the defining characteristic of the current wave of technology is the role of information. Prior to this IT revolution most of twentieth century business decisionmaking had been hampered by limited information. Owing to the paucity of timely knowledge of customers' needs and of the location of inventories and materials flows throughout complex production systems, businesses required substantial programmed redundancies to function effectively.

Of course, it often takes time before a specific innovation manifests itself as an increase in measured productivity. Although some new technologies can be implemented quickly and have an immediate payoff, others may take years or even decades before achieving their full influence on productivity as new capital is put in place that can take advantage of these creations and their spillovers. Hence, the productivity growth seen in recent years likely represents the benefits of the ongoing diffusion and implementation of a succession of technological advances; likewise, the innovative breakthroughs of today will continue to bear fruit in the future. The newer technologies and foreshortened lead-times have, thus, apparently made capital investment distinctly more profitable, enabling firms to substitute capital for labor and other inputs far more productively than they could have a decade or two ago. Capital, as economists like to say, has deepened significantly since 1995.

The surge in investment not only has restrained costs, it has also increased industrial capacity faster than the rise in factory output. The resulting slack in product markets has put greater competitive pressure on businesses to hold down prices.

A key question that we need to answer in order to appropriately evaluate the connection between technological innovations and productivity growth is why have not the same available technologies allowed productivity in Europe and Japan to catch up to U.S. levels. While productivity in some foreign industrial countries appears to have accelerated in recent years, a significant gap between U.S. productivity and that abroad persists.

One hypothesis is that a necessary condition for information technology to increase output per hour is a willingness to discharge or retrain workers that the newer technologies have rendered redundant. Countries with less flexible labor markets than the United States enjoys may have been inhibited in this regard.

Another hypothesis is that regulations, systems of corporate governance, trade restrictions, and government subsidies have prevented competition from being sufficiently keen to induce firms in Europe and Japan to take full advantage of the efficiencies offered by the latest advances in information technology and other innovations.

-- posted by litab16

Top 274. Jun 18, 1999 7:12 AM

» KirkL - Weekend Summary Snippet- Internets

Interesting. I listened to parts of my tapes of the shows. (I just don't enjoy the show as much lately...) There was much talk given to Internets and how much famous people were getting to lend their names to a company. Mr. Brinker was much impressed that ex US Surgeon General, Dr. Koop, was getting a small fortune to lend his name to an Internet company. Another monologue went on about how "Captian Kirk", not Bill Shatner, was making a ton on endorsing another Internet site.

My thoughts: I wonder if Mr. Brinker has any idea how much Michael Jorden gets from Nike? I didn't pay attention to the numbers, but it has struck me that the reports I have read for Michael Jorden say he is paid more in endorsements every year than the market capitalization of BOWG. Since I don't recall the numbers, or if they were given, it would be interesting to make the comparison.

It did seem that he constructed a straw man for what Chairman Greenspan would be worth under some logic I did not follow. I think he refereed to an Abbelson Barrons article.

What was interesting is several callers had good points. One did very well investing a portion of his portfolio in Internet stocks. Mr. Brinker asked how did he feel when the stock took a dive from the peak. The caller said it was not too bad since he felt prices were ahead of themselves. There was some comment from Mr. Brinker about "how did the people feel that bought at the top and were wiped out?"

Another caller thanked Mr Brinker for his good advice over the years and said he was in a dilemma. 42 Analysts said that AOL will be $250 in a year and it is now at $90. He asked "Who should I believe - 42 paid experts or you?" They discussed how the analysts have their reputations and jobs on the line so they are not apt to advise extremely risky investments as Mr. Brinker is painting it. Mr. Brinker went on to concede that there could be a good trade in AOL, but he did not recommend or endorse it. Those that would buy and would be successful spend every waking moment in front of their PCs to follow the stock

-- posted by KirkL

Top 275. Jun 19, 1999 9:38 PM

» David_Korn - Saturday's Show: June 19, 1999

Summary and Interpretation of
Bob Brinker’s Radio Broadcast
for Saturday, (June 19, 1999
by David K.)

Opening Monologue: Bob began his show by discussing last week’s announcement by Intel informed personal computer manufactures that the the faster version of the pentium 3 processor would be delayed two months. Intel dropped over $3 to just under $55. Analysts lowered earnings estimates, although the consensus remained at 54 cents per diluted share. This will affect a version of pentium 3 that achieves increased speeds by using the tinier circuits which require the new manufacturing process that reduces the width of the wire etched into silicon into .18micron from the previous .25 micron. Could see slow down in revenue growth in second half of 199 at Intel as a result of this development. Intel is well known for being ahead of the curve in manufacturing technology. Lot of people were disappointed, as evidenced by the drop in Intel’s share price. Analysis Mark Edelstone at Morgan Stansly said the new technology is a delay because Intel is not able to carry off as rapidly the new technology. Mark doesn’t think there is a lot of downside risk, but this will diminish what would have been growth catalysts for Intel over the next few months.

Bob also noted that the market closed near all time record highs. The Dow Jones is only 250 points away from the all time record of 11,107 which is only 2% from a record closing high. Same story for S&P. The former all time S&P high is 1367.5, only 24 1/2 points away, less than 2% away from closing high. With respect to the Nasdaq, 2652 was the former high and we are only 3.5% away from that. Bob says we are watching these indexes closely because at the point which these indexes reach all new time closing highs, we would have to closely look at long term timing model for possible changes in market outlook.

Finally, Bob noted that we had our correction of roughly 6% in Dow, 6% in S&P and 10% in Nasdaq. The test of prior short term correction has stood. The market is now making a run at record highs.

Caller # 1 Ed: This inarticulate caller finally asked Bob what you do when the market reaches the all time high if Bob’s timing model changes?” Bob said we continue to be fully invested in anticipation of forthcoming all time highs and when the market turns, its your own personal decision. You have three choices: (1) be out of the market; (2) be in the market; or, (3) short the market. Bob, however, has no interest in riding out a bear market intentionally. According to Bob, “how can I stay in the market if my timing model predicts a 20% correction in the markets.” Of note, Bob said if his model does predict a bear market, it would project a decline of 20% up to 50%,

Caller #2 Bill: Bill echoed Bob’s thoughts on internet stocks. Bill made a lot of money since October picking stocks and believes that the nirvana will not continue. He asked Bob if he has any prediction targets for the new highs. Bob said yes, he anticipates all closing new highs, but since he doesn’t have crystal ball, he doesn’t know. After this, the caller praised Bob as much as is humanly possible, almost to the point of nausea. Bob even got spooked by this guy’s idolatry and closed with, words of caution, “The market will do what the market will do.”

Brinker Comment: Alan Greenspan testified this week before Congress. Bob noted that the questioning from Congress is sometimes outright embarrassing in that they cannot even hire staff to put them in a position to ask intelligent questions. Bob views Greenspan’s comments has pretty much told us that rates are going up at least in the short term at the end of June.

Caller #3 Robin: This caller said she and her husband work with a financial planner whose recommends that for tax purposes we work in an annuity to reduce capital gains liability. Bob says did he tell you about index funds through which you can reduce capital gains to a minimal amount. Bob says if you are going to use an annuity, don’t do it before you look at Vanguard noload annuities. You should never buy an annuity with a surrender charge. Also, Bob said look at program offered by TIAA/CREF Group. Compare those programs with any you are being sold, and your eyes will probably drop out of your socket.

Caller #4 Ron: This caller questioned the relationship between rate of inflation versus the market performance. Bob said the best answer to this question would come from history. In 1982, we had the Dow Jones at 777, with extremely high inflation. Since then we have had inflation come down to 2-2.5% going forward and now the market is at 11,000. No coincidence.

Caller # 5 Anita: This caller is in her 30s, with 25% of her portfolio in individual stocks. She is mainly in AOL and MSFT and few others. Recently she purchased additional shares of AOL at 160. per share. Bob said to figure out what portion of her portfolio is in a particular stock, she needs to divide the total value of her equities by the value of a particular stock she owns individually. Bob then took a shot at AOL by noting that it is currently trading at approximately 200 times year 2000 earnings. If someone could explain to Bob why it is worth 200 times next years earnings, they would go to the head of the class for Bob, because he can’t figure out why.

Caller #6 Barbara: Babs is a 52 year old employee of Marriot who had about $140,000 in 401(K), including lots in Marriot stock. In April, 1999, the market was at 10466 and she listened to an adviser who said based on market technicals, to get out of market. She moved all her investments out of stocks, to some type of money market fund. The next day, Marriot goes up 10 points and market eventually goes to 11,000. She asked Bob if she should get back into the market at this point in time? Although Bob didn’t answer her question directly, he did tell her that if she continues to trade like this, she will not make money and that there will always be bears who predict market crashes. He also said that technical analysis is ok, but only if it is used as a back up to fundamental analysis. Barbara then asked if we would get another dip after we reach the all time highs? Bob said when the After we reach those all time highs, do you expect another dip? Bob says the Dow and S&P have potential to reach closing highs in close proximity, and the Nasdaq will probably not be too far behind. Only at that point, Bob will have to very judicially examine status of long term model, for major change in market outlook at that point.

Brinker Comment: New York Times reports that Long Term Capitol Management Hedge fund which almost collapsed, has notified its original investors that it will cash out their stake shortly. Bob notes that the fund under performed the S&P 500 for the same period by roughly 8% which is pretty amazing considering the hype surrounding that fund. Bob loves picking on these hedge funds!

Caller #7 (no name); Tells Bob that he agrees that valuations of internet stocks are two high, but isn’t internet is going to change world. Bob says yes, but that doesn’t mean you should pay super high evaluations. Just ask day traders or people who bought AMZN or AOL at all times high who are now getting margin calls.

Brinker Comment: Time for Bob’s weekly internet bashing. Bob notes that internet stock volatility is beyond pale. Bob reviewed how much the chairmen of the major internet companies have lost on paper in the recent internet decline. Rather than go through all of the numbers here, suffice it to say that CEO of AMZN, EBAY, YHOO, etc, all lost billions of dollars on paper. Bob also referenced recent decline in discount brokers, i.e. Schwab, but noted it was not as much as internet stocks. Bob notes that we have seen a resurgence in market, but not in internet stocks, which had tremendous declines. Bob than noted that Onsale (which went from 108 to 18) and UBID which went from 189 to 30).

Caller #8 Steve: Excellent call. Steve asks why a new high in the market will trigger Bob to become so vigilant with respect to his market timing market. Bob says I never said if we get to new highs we will get a correction, I said we will need to take a serious look at the timing model. Why? Because one of the preconditions of the timing model is a new closing high. We will have to see a new closing high according to the model (which is based on history) before a possible decline. When looking at the market indicators, there are many factors that could lead to a change in outlook, such as extreme valuations, high level of sentiment complacency, tightening of monetary reigns, economic cycle, including, risk for shortage of workers. His model is based on four disciplines, including 25% economic, 25% monetary indicators, 25% valuation, 25% sentiment. However, there are a large number of factors that must fall into place before the market can signal change in directions, one of which would be a new closing high in DOW or S&P, although the weight the market is acting, it will probably be both.

Brinker Comment: We don’t know what indicators will tell us when closing high hits. We do know that there are a lot of things going on which are less than ideal, including highest rate of change in Columbia University CIBCR R inflation index, 4.5%. Another thing to concern Greenspan is we have had three consecutive increases in leading inflation index. The new Beige book which shows that there is an acute shortage of labor across America. And of course, the cardinal sin of complacency.

Caller #9 Bill: For Europe and international markets, should we be dollar cost averaging? Yes, what would happen to international markets if change happens in U.S Market. Does Y2K have anything in timing model? Bob says the macro policy he have adopted is good. It is impossible for anyone to predict fall out from Y2K at end of year. What we are doing is if market is bullish at year end, and presented with surprise sellers, we will take advantage of it. However, if market is in bearish position, then Y2K will become a non-event because we will be out of market.

Brinker Comment: Recovery in bond prices has contributed to rally in stock prices. One stock that held in recent correction is AT&T and found support during recent correction whenever it was trading in low 50s.

Caller #10 Wayne: Wayne says that there is a lot of sentiment that consumers may stop spending, and many newsletters say to pull out of stock market. Could a Y2K panic start the selling? Bob says people have already tried to start a panic, but have been relatively unsuccessful. Probably the major economic contribution of Y2K is the cottage industry trying to scare people out of their wits. The reality is if you are in the business of scaring people, your business plan would tell you to make your stories has scary as possible.

Caller #11 Ray: This caller wanted to know if it is ok to park money in CDs vs Ginnie Mae Funds. Bob notes that all interest on CDs is subject to state income tax. You do not have to pay that tax n treasury interest. Also, consider the illequidity and the inability to write a check on a CD. Last question, what makes Ginnie Mae Fund change . As a general rule, when you see a descending interest rate you will see an ascending Ginnie Mae price.

Caller # 12 Anthony: This caller says astrologists are predicting market will be at 7,000 at the end of the year. Bob says he would be hesitant to base a market forecast on the position of the planets.

Caller # 13 Peter: This caller is a first time home buyer and wants to know if he should cash out some mutual funds to avoid taking out PMI insurance. Bob thinks that this type of insurance is expensive and would be reluctant to sign on for PMI insurance.

Caller #14 Ida: Bob tells IDA that there is no way in the world that he can have a bear market sell signal while he is on the radio, since he is on the radio over the weekend when market is closed. The most likely change in his timing model will occur early in the week. If interest rate is of concern, we would go in money market funds in bear market. If a person has 100,000 in mutual funds and doesn’t want to touch them, they could short 100,000 in spiders.

Caller # 15 Neil: Another caller who mentioned the psychics predictions of the market falling thousands of points because of Y2K. This caller is almost at retirement and has everything is in stocks. Bob says your priority if you are close to retirement is to get a balanced portfolio of stocks and bonds. (Bob didn’t address the psychic’s prediction on this call).

Brinker Comment: During Greenspan’s testimony before Congress, he had to admit that inflation is currently tame, but held his ground why federal reserve must be a preemptive agency. There is a shortage of qualified workers and since we control immigration, we don’t have a flux of foreign workers, nor do we have them coming up through the ranks. Bob says that Greenspan is a workaholic, and deserving of the Nobel Prize of Economics. The FOMC will get together on June 29-30 and people believe that he will recommend .25% increase in short term rates. Steve Forbes attacked Greenspan warning him not to raise rates, because farmers have been hit hard and deflation is the real scare. Bob disagrees and thinks inflation is the real fear. Bob thinks the right thing to do would be to recommend the .25% increase which would calm the bond market and inflation fears.

Caller # 16 Andy: This caller bought broadband wireless stock based on Bob’s recommendation (I assume he is referring to Stanford Telecom). The stock went from 12 -24 and Bob notes that as of Friday, it closed at a 52 week high. Bob says he would hold the stock as long as his current market view stays the same.

Caller # 17 Gary: This caller wanted Bob’s view on the pharmaceutical stocks. Merck, Pfizer and Lilly, why are they down, what do you like? Bob says in the case of drug stocks, they got ahead of themselves. For example, Pfizer was at 50 times next year earnings which from a valuation perspective is ridiculous. Expecting stock to go from 50 to 33 times earnings is more realistic. Out of the three stocks, if he were to choose, he would choose Pfizer because its long term R&D pipeline is rich. If he were embarking on a plan to purchase them (which he is not), he would dollar cost average into these stocks.

Caller # 18 Ira: First question was about Russia’s large gold reserve. Why don’t they mine more of that and use if for economy? Answer: rumor is that Russia’s central bank has been selling gold bullion in recent years which would account for gold’s low prices in recent years. Russia could face problem if it is more expensive to mine it than to sell it at market price. Second question, maintaining cash reserve in account, what does that mean? Answer: cash reserve depends on market outlook, as well as other factors such as your age. The only cash reserve at this point, would be contingency reserves for emergencies, not part of your financial portfolio. The amount of cash reserve depends on your ability to find another job quickly.

Caller # 19 Eric: This caller has $60,000 in money market and is looking at Dell Compaq and Legg Mason International Fund. Bob says depends on risk you want to take. Emerging markets might be one area where Y2K could hit . With respect to Compaq, they just stunned the market with announcement of losses, layoffs and redesigning business models and the jury is still out on Compaq and he wouldn’t want to be in that business. With respect to Dell, we talked about Dell at 55, he was attacked by Dell shareholders. He thinks it has a better business model than Compaq, but is still richly priced for a boxmaker. He can’t get excited about Dell. Legg Mason Value Trust has a great leader and the guy running it is one of the better money managers.

Caller # 20 Jeff: Has two many eggs in one basket. Jeff works at Real Networks and 95% of his portfolio is in that stock. He is 33 and has $1.2 million in the stock and expects the stock to go up to its high, but doesn’t know when. Bob says the question isn’t whether it is a great business, but its value, and whether Microsoft is a threat. Caller doesn’t know, but recognizes that Microsoft is always a potential threat. Since Bob has no idea what the company, or internet stocks are going to do, he cannot make recommendation. Bob thinks most internet companies are going to be used as trading stocks and not reach new highs and that many will go out of business. Bob says you need to look at two things, future earnings and the competitive environment. Bob thinks day traders will basically use these stocks as trading tools. Bob says it would be prudent to start diversifying, by starting with total stock market index.

Caller # 21 Reed: This caller addressed an article in WSJ about about Intel’s plan to retool wider wafers and wanted to know if Bob has addressed how it would affect. large capitol equipment companies. Bob said we addressed it last week and it would have a positive benefit and the move to 300 millimeter technology would be a plus for these companies. Bob noted these companies have already had great runs and already have this built into stock price.

Caller # 22 Patrick: Caller is retiring and wants to know Bob’s view on dollar cost averaging as a strategy for distribution. Assuming market remains favorable, would enlist total return concept. Take what you need out of your principle to complement your income to give you what you need. So, if you needed to liquidate 5% on an annual basis, you could do that.

Brinker’s concluding remarks: A lot of investors have become accustoms to high rates of returns due to recent bull market. As to whether this can continue indefinitely, who knows. But it is interesting that many people think we can. Sentiment indicators show that most people don’t think there is much risk anymore in market.

FINAL THOUGHTS FROM DAVID K. Hope you enjoyed this summary, it took me about 6 hours to do. If you did, let me know. I am considering making it a weekly habit but I am curious how many people actually would read this. - David K.

-- posted by David_Korn