Moneytalk Bob Brinker Summaries - Information ONLY

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Top 327. Aug 2, 1999 4:07 AM

» KirkL - Moneytalk Summary for Saturday, July 31, 1999 (DavidK)

Kirk's note. I had to modify David's original slightly so it would load faster.

Summary and Interpretation of Bob Brinker's Moneytalk for Saturday, July 31, 1999 by David K. (E-Mail: davidk555@earthlink.net)

OPENING MONOLOGUE: Bob began his show with an inspirational speech, rather than providing his current market outlook. Bob gave the Moneytalk mantra: take control of your own personal financial situation. Educate yourself so you don't become shark bait. Start now, so you can reach the land of critical mass. What is critical mass? Critical mass is when your asset base is large enough such that you can live off the return on your investments without ever needing to work again while maintaining a lifestyle you are accustomed to.

Editorial Comment, hereinafter "EC": An easy way to figure out how much money you need to reach critical mass is by considering the following example. If you are content living off $60,000 a year, you could reach critical mass if you accumulate one million dollars. Why? Investing one million dollars in very safe securities such as treasuries (at a current rate of around six percent) would earn you $60,000 a year just from the interest alone! See, its not that hard, just get a million dollars!

EC #2: I think many people pay particular attention to Bob's opening monologue to catch his current market viewpoint. For listeners to Saturday's show, you didn't get the quick fix. However, by listening to callers throughout the show, Bob invariably will provide his market outlook in response to a question. Perhaps Bob likes to leave something for Sunday's show. For people who were able to listen to both shows this weekend, I think most would concur that Sunday's show was more exciting. Often that can be purely the result of the callers to the show, rather than the content Bob has planned.

Caller #1 Janet: This caller had a lot of her money in Microsoft and Intel and wanted Bob's opinion on whether she should sell some of her investments to buy a house. Bob went through the caller's net worth and pointed out that she had 29% of her entire holdings in those individual stocks. Bob said she should sell enough of those stocks to raise the money to put into her house. (EC: Bob believes that individual investors should limit their holdings in individual stocks to 4% of their total holdings, barring unusual circumstances such as when you work for the company of the stock you own).

Caller #2 Jonathon: This caller wanted to know what to do in a bear market. The caller has 2/3 of his portfolio in personal accounts and 1/3 in retirement accounts. He doesn't have enough money to short the S&P500 and wanted to know if he could sell the retirement accounts and purchase the Rydex Ursa Fund. Bob says that is a very aggressive move. Not only is the caller eliminating a long position, but also shorting the market. Bob says that is a decision only an aggressive investor would make. Bob noted that the Rydex fund attempts to have a one to one inverse relationship with the S&P500, but does not always correlate a 100%.

EC: If you are a regular Moneytalk treckie, you should know about the Rydex Ursa Fund. That fund is a no-load fund designed to provide investment results that will inversely correlate to the price movement of the S&P500 Index. The fund is designed primarily for investment advisors and their clients who seek to benefit from anticipated decreases in the S&P500 Index or to hedge an existing portfolio of securities or mutual fund shares. Say what David K? Simply stated, if you think the market is going to tank, you can buy this fund and it should hopefully do the exact opposite of the S&P500. If you want to learn more about the Rydex Funds, check out their web site at the following link:

Caller #3 Ben: This 67 year old caller is one year away from retirement. He has $1.6 million with $800,000 in individual equities and about $300,000 in mutual funds. The caller says his financial manager likes to keep him in individual equities, rather than mutual funds. Bob said the caller should take a close look at his individual stocks and compare how they have done to the total stock market index (the Wilshire 5000). Bob said he can get more diversification and mirror the market through index funds at less expense than the commissions probably generated through his broker.

Caller #4 Gary: This 61 year old caller will gain $540,000 from sale of real estate on Monday morning. He is going to put the money in a Vanguard Money market account and then dollar cost out of that account into the Total Market Index Fund, Ginnie Mae Fund and an International Fund in accordance with Bob's recommended asset allocation for someone his age. Bob said he would be willing to put the money in the Ginnie Mae Fund at this time since it is an attractive place for those seeking current income on their money in a triple A rated fund. Bob said he doesn't have any criticism of the plan, but would continually monitor the market and if the market outlook changes, be ready to revert to a risk adverse position. Bob said we are taking a conservative stance about putting new money into the market. At this time, with new money, we are dollar cost averaging into the market. For example, if you have $12,000 to invest, you would put $1,000 in a month into the market until there is a change in the market outlook. If the market outlook turns negative, we would put our money into money market reserves and become risk adverse. On the other hand, if there is a buying opportunity down the road, we could lump sum our money into the market. Bob reviewed the instances in recent times where he recommended buying opportunities.

Caller #5 Jay: This caller took his pension at age 55 and retired. His pension provides him about $1,200 per month for life. He wants to know when you are determining your asset allocation if it is appropriate to include the present value of your portfolio. Bob says one way to evaluate his pension is to compare it to owning a $250,000 portfolio of treasuries which would yield a similar amount to his pension. Therefore, when formulating your asset allocation, it is reasonable to assume that he has the same position as if he had a long term treasury bond paying this money on a guaranteed amount each year. Bob says to consider this fact in a phantom balance sheet sense. This type of analysis can justify a slightly higher equity ratio then you ordinarily might have.

The caller's second question was to ask what Bob thought in general of junk bond funds (also referred to as high yield corporate bond funds). Bob said he certainly would not be going into a junk bond portfolio at a time when the Federal Reserve is tightening the monetary supply and taking a posture of raising short term interest rates. Bob said he has not been impressed with returns on junk bond funds. He measures junk bond funds by comparing their returns to the total return to a Ginnie Mae over an extended period of time. Bob says junk bond fund returns are not that impressive given the extra risk associated with such investments.

Caller # 6 Joanne: She and her husband are in their 60s contemplating retirement. Their biggest problem is that 80% of hubby's retirement portfolio is in his company stock. They had no choice, they had to buy the company stock. They have lost money on this stock during the bull market. Should she put her IRA money into a moneymarket account given her husband's high weighting in one stock. Bob said she could consider Ginnie Maes instead of a moneymarket account. At this juncture, the caller didn't know her net worth so Bob gave her a quick lesson on how to figure it out.

EC: One of the reasons I enjoy Bob's show so much is that he makes investing easy to understand. I try to write in such a way so that people are able to comprehend issues quickly and easily as well. For example, what is net worth? Quite simply, it is the total value of your assets, less the value of any outstanding debts. Stated otherwise, net worth is what you have, minus what you owe. That's it, no mystery at all.

Caller #7 Diane: This 71 year old caller recently retired and has about $1.5 million, but about 78% of it is tied up in five technology stocks. Bob said that is an extremely high equity ratio for her age and she needs to diversify big time within her equity portion of her portfolio. (EC: every call can't be a home run!)

Brinker Comment: In the July 31st New York Times, Section A, Page 9, there is an article entitled "Daytrading Not Usually Worth The Risk." The article notes that hordes of people have taken up daytrading. Officials who have reviewed the records of daytrading companies have concluded that 90% of daytraders lose money! There could be as many as 10 million daytraders. Daytraders average about 35 trades per day. About 15% of Nasdaq volume is accounted for by daytraders. The North American Securities Administrator Association has warned investors against daytraders calling it a form of gambling. (Duh!)

EC: The North American Securities Administrators Association (NASAA, not NASA), is the oldest international organization devoted to investor protection. They are a voluntary organization. In the United States, NASAA is the voice of 50 state securities agencies responsible for efficient capital formation and grass-roots investor protection. NOTE: If you are an entrepreneur you can find valuable information on NASAA's web site about raising capitol. You can also learn about "blue sky" securities law. Check out their web site at the following:

http://www.nasaa.org

Caller #8 John: This somewhat clueless caller nonchalantly noted that he had a $100,000 annual cash flow from guaranteed pension accounts. Bob asked him if he realized that the pension was tantamount to a phantom asset of 1.7 million in treasuries at current rates. "Oh, I didn't realize that." Must be nice. The caller also has about $600,000 in net worth with only $50,000 in stocks. Bob said it almost makes what the caller does with the rest of his money academic. If Bob was the caller at this point, he would look into the possibility of dollar cost averaging excess monies into index funds.

Caller #9 Herb: The 75 year old caller's net worth is $300,000, with $200,000 in equities and $100,000 in the Vanguard High Yield Fund. The caller wants to move the money from High Yield Fund to stock funds. Bob asked why in the world would he want to do that? Bob said he would switch those monies into Ginnie Mae funds and continue diversification.

Caller #10 Ray: This caller asked about Greenspan's concern over the employment cost index and its impact on inflation. Bob said he thought the June quarter report on employment cost index data resulted in a smile on Dr. Greenspan's face. Bob further noted that the best thing that could happen now to extend the sustainability of this bull market would be to get a declining interest rate trend in the absence of the fear of recession. Bob noted that we do not have that present at this time.

EC: The Employment Cost Index is a measure of the change in the cost of labor, free from the influence of employment shifts among occupations and industries. The compensation series includes changes in wages and salaries and employer costs for employee benefits. The wage and salary series and benefit cost series provide the change for the two components of compensation. To access the full Employment Cost Index news release, check out the following cite sponsored by the Bureau of Labor Statistics, which happens to be an agency within the U.S. Department of Labor. Ahh, the beauty of bureaucracy:

http://stats.bls.gov/news.release/eci.nws.htm

Caller #11 Al: This caller receives about $4,200 a month in his pension which is the equivalent of a $800,000 phantom asset. His question is whether it is fair to use that $800,000 when he goes to compute his net worth. Bob says you do a pure balance sheet not reflecting that asset; then, you do a phantom balance sheet which does reflect that asset. The value of the phantom balance sheet is that it gives you the ability to consider raising your equity ratio if it is appropriate.

EC: Where are all of these people getting these great pensions??? I wish Bob would ask these people what they did for a living. Are they in public service? Did they work for a big corporation? I doubt they were daytraders!

Moneytalk History Lesson: Did you know the first Moneytalk show was broadcast in 1986 on Superbowl Sunday right after I lost my bet on the Patriots to the Chicago Bears. Does anyone remember the point spread on that game?

Caller #12 Mary: Mary and husband have $35,000 in credit card debt and want to know if they should get a home equity loan to pay of the debt. Husband is not working because of a back injury. Husband has $50,000 in a tax deferred account. Mary has $20,000 in retirement account. They have a $400,000 house and about $60,000 equity in the house. They are paying anywhere from 4% -14% interest rates on credit cards and are spending all of their income. Bob's concern about adding more debt by taking a home equity loan involves the concept of the institutionalization of debt. That term refers to taking a short term loan and converting it into a long term loan. For example, let's say you buy $100 in groceries, pay for it with a credit card, then convert the credit card to a home equity loan payable over a 30 year period. That means you will be paying for those groceries in the year 2029 and you would have paid for those groceries multiple times of their initial cost. That said, Bob doesn't have a problem with the caller taking out the home equity loan to pay off the credit card debt as long as: (1) they can definitely afford the payments so they don't lose their house; and, (2) they can do it in the confines of a 5 year program.

Caller #13 name?: This caller asked about beginning an investment program. Bob says investing in a 401(k) plan is a great start, investing in IRA is also a great step. This caller has a $40,000 student loan at a 7.4% rate in deferment. Bob noted that paying off the student loan is like getting a guaranteed 7.4% rate of return. (Where is Tony the caller when we need him!)

Caller #14 Derek: This caller wanted to know about the new internet banks and the high 7-8% rates they pay for their Certificates of Deposit. Bob says to the extent these banks are FDIC insured (up to a $100,000), it might be a good idea. Bob would want written documentation and confirm it with the FDIC.

Brinker Comment: Bob opened this portion of the show with his favorite Chinese Proverb:
"May you live in interesting times."

EC: I knew it, Bob can't resist quoting those proverbs! And you know, whenever Bob gives a proverb, so will David K. Try this one out:
"He who seeks revenge should remember to dig two graves."

Brinker Comment Continued: One of the things that happened on Friday was the approval by the Senate of the House of Representatives bill for a 792 billion dollar tax cut spread over 10 years. The tax cut is back-end loaded and only 4 billion would come into effect in year 2000. This is a program which Clinton has vowed to veto. Bob says why would you want to cut taxes when the Fed. Chairman is trying to slow the economy down. There are a number of provisions of the bill that are interesting to be aware of because they might come up again in the context of other legislation. One is a reduction in the personal income tax rate from 15% to 14% in 2001 and beyond. Also, there is a provision to get rid of the marriage tax penalty. (Why the heck is that tax on the books!). Why should the federal government penalize couples for getting married? EC: Does are government favor couples living together? Also, they want to expand the IRA program and create a deduction for health insurance costs and reduce the inheritance tax on large estates. Did you know if you die with a certain amount of money, the Federal Government can take 50 cents on every dollar left in your estate! "Its a giant step forward" according to the bill's author. Dr. Greenspan doesn't think its a good idea. He thinks we should pay down the national debt.

Caller #15 Margaret: Husband recently died and left her a $1 million dollar portfolio with about 75% in equities, all of it is in high tech stocks. She has 56% of her portfolio in Tellabs and CISCO. Bob recommends that she sell her stocks so that none of them account for more than 4% of her portfolio. Bob told her to check with a CPA to determine the capitol gains tax that will result from the sales of these stocks, and then escrow the amount to cover the taxes. Bob says given her circumstances this course of action will greatly reduce equity exposure risk.

Brinker Comment: Bob compared the U.S. economy to the Energizer Bunny, it just keeps going and going. Personal income surged .7% in the month of June. Also, a nice improvement in sales of new homes.

EC: Do you want an energizer bunny screensaver? You know you secretly do! You can get one for free at the following web site:

http://www.energizer.com/bunnystuff/screensaver

Brinker Comment Continued: Bob devoted most of this comment to his praise of Dr. Greenspan, a/k/a Dr. Greenpeas, a/k/a its not easy being Dr. Green. Bob thinks about the Dr. Greenpeace a lot! In fact, he thinks about him all the time! (except probably when he is golfing). Bob believes that the Green Doctor should receive the Nobel Prize in Economics. He is by far the most powerful person in the world, even more so than the President. Bob often thinks about the Chairman and Don Knotts together. Bob wonders if Dr. Greenspan reads these tidbits of economic data and gets all nervous like Don Knotts used to get in his comic routines.

EC: I love that movie where Don Knotts turns into a fish, The Incredible Mr. Limpett. Anyway, since Bob thinks a lot about Dr. Greenspan and Don Knotts, I am posting the following links specifically for Bob Brinker:

The Shrine to Don Knotts:
http://www.worldofcheese.org/knotts/index.html

Get Exuberant at the Unofficial Greenspan Fan Club Home Page:
http://members.tripod.com/~alsfans/index.html

Brinker Comment Concluded: Bob mentioned the strong new home sales in June at 3.1%. We are currently at a 929,000 new home annual rate right now. Look at some of the booming cities like Las Vegas (Bob's favorite I think), Phoenix and Scottsdale, Arizona. Solid growth in the south and west and some slippage in the northeast and midwest. The average new home price is up 4.7% in the month of June at $157,000! We just had a report from the National Association of Purchasing Management-Chicago Index which rose to 60.5 in July from 60.0 in June (vs. a forecast decline to 58.5). Anytime you get a reading above 50, that is a signal for economic expansion.

EC: The National Association of Purchasing Managers (NAPM) index is a leading indictor of economic activity. It is based on a survey of over 250 companies within twenty-one industries covering all 50 states. Its importance derives form the fact that it is the first indicator each month of manufacturing performance during the past 30-day period and is also a leading indicator of future economic activity and pricing decisions. Learn more at the following link:

http://www.stern.nyu.edu/~nroubini/bci/NAPM.htm

Caller #16 Paul: Bob and this caller generally discussed the problem with the marriage penalty, the need for greater IRA contributions and Dr. Greenspan's greatness. The caller said the problem is if we don't do something (i.e. cut taxes), the politicians will spend the surplus. The caller and Bob disagreed over whether Social Security has been a good deal- Bob thinks it has been a great deal for people who receive the benefits.

EC: The marriage tax penalty results from several factors in the tax code, including its diminishing deduction and exemption amounts for married couples compared to singles. In general, married couples who earn similar income amounts are more likely to incur a marriage tax penalty than they would if they were single. For example, if one spouse earns $45,000 annually and the other earns $30,000, this couple will end up paying an additional $1,256 in federal taxes due to their marital status.

Caller #17 Andrew: First time investor who wants to invest in IBM and wants to know what Bob thinks about investing in stocks. Guess what Bob's advice was? That's right, go to school. Learn about no load mutual funds. Bob referred the caller to www.bobbrinker.com and vanguard.com. (EC: Kudos to Bob Jr. for winning the first round of his golf tournament with father).

BRINKER CONCLUDING REMARKS: We have witnessed an unprecedented bull market run for almost nine years. The market has gone up with only one intermediate correction defined as 10-20% in Autumn, 1998. (EC: NO BEAR MARKET CALL YET FOLKS!)

FINAL THOUGHTS FROM DAVID K. a/k/a/ David Korn: Admit it, you are a little bit addicted to my Editorial Comments. You secretly go to my suggested links late at night and read ancient proverbs quietly to yourself. You must know whether Bob was encouraged by Dr. Greenshades, tired of the bad news bears, or disgusted with the daytraders. Perhaps you are dying to know if Tony ever called back to give us an update on the net stocks. Whatever it may be, you must have David K's Summary and Interpretation. In the meantime, read, my DISCLAIMER below -- it works better than Tylenol PM.

DISCLAIMER: I am just a listener to Moneytalk and provide this summary/interpretation on my own volition. I am not associated with ABC Radio Networks, Moneytalk or Bob Brinker and this summary/interpretation is neither sanctioned by, nor written under the auspices of, ABC Radio Networks, Moneytalk or Bob Brinker. The summary/interpretation is simply my own interpretation of the show, along with information I provide that I think is useful to help better understand financial issues and to better understand the Captain of the Starship, Bob Brinker, as well as First Officer, Dr. Greenspock. Of course, you get the humorous antidotes as an added bonus. You should not rely on any statement made in David K's Summary and Interpretation of Bob Brinker's Moneytalk as constituting financial advice. God Bless the Lawyers!

Please keep this site just for summaries so they are easy to find for people that only come here on occasion.

Please use the Bob Brinker - Free Discussion Site site at Sutie101.com for discussion about this summary: http://www.suite101.com/discussion.cfm/i...

Thanks for the effort messages can be posted here: http://www.suite101.com/discussion.cfm/i...

Home Loan & Refinance Info Online from MSN

Day Trader Screen Example

-- posted by KirkL

Day Trader Screen Example

Top 328. Aug 2, 1999 4:30 AM

» KirkL - Shorter Summary of Moneytalk 7/31/99 Show

Kirk's note. This is a shorter version for those on a time budget (EC's removed).

Summary and Interpretation of Bob Brinker's Moneytalk for Saturday, July 31, 1999 by David K. (E-Mail: davidk555@earthlink.net)

Caller #11 Al: This caller receives about $4,200 a month in his pension which is the equivalent of a $800,000 phantom asset. His question is whether it is fair to use that $800,000 when he goes to compute his net worth. Bob says you do a pure balance sheet not reflecting that asset; then, you do a phantom balance sheet which does reflect that asset. The value of the phantom balance sheet is that it gives you the ability to consider raising your equity ratio if it is appropriate.

Brinker Comment: Bob opened this portion of the show with his favorite Chinese Proverb:
"May you live in interesting times."

First Moneytalk Use for "May you live in interesting times." wish/curse.

Brinker Comment: Bob compared the U.S. economy to the Energizer Bunny, it just keeps going and going. Personal income surged .7% in the month of June. Also, a nice improvement in sales of new homes.

DISCLAIMER: I am just a listener to Moneytalk and provide this summary/interpretation on my own volition. I am not associated with ABC Radio Networks, Moneytalk or Bob Brinker and this summary/interpretation is neither sanctioned by, nor written under the auspices of, ABC Radio Networks, Moneytalk or Bob Brinker. The summary/interpretation is simply my own interpretation of the show, along with information I provide that I think is useful to help better understand financial issues and to better understand the Captain of the Starship, Bob Brinker, as well as First Officer, Dr. Greenspock. Of course, you get the humorous antidotes as an added bonus. You should not rely on any statement made in David K's Summary and Interpretation of Bob Brinker's Moneytalk as constituting financial advice. God Bless the Lawyers!

Please keep this site just for summaries so they are easy to find for people that only come here on occasion.

Please use the Bob Brinker - Free Discussion Site site at Sutie101.com for discussion about this summary: http://www.suite101.com/discussion.cfm/i...

Thanks for the effort messages can be posted here: http://www.suite101.com/discussion.cfm/i...

Home Loan & Refinance Info Online from MSN

Day Trader Screen Example

-- posted by KirkL

Top 329. Aug 2, 1999 12:39 PM

» sierratioga - in answer to tony's Q of what's the big exclusion deal with br

in answer to tony's Q of what's the big exclusion deal with brinker...very very simple. he's far and away the BEST.

-- posted by sierratioga

Top 330. Aug 2, 1999 12:57 PM

» TONYBRIG - Best?

In what?
Prove your statement with facts showing better
STATS.

vbolhh

-- posted by TONYBRIG

Top 331. Aug 2, 1999 8:15 PM

» David_Korn - Correction and addition to Summary/Interpretation

I believe I erred in my summary. I think Caller #10 Ray, it should read "anything but a watermellon smile" to Greenspan's face.

Also, thanks to the post on the general discussion thread re: my simplification of critical mass. He is correct in that my comment assumes no inflation. David K. stands corrected on both points. -David K.

-- posted by David_Korn

Top 332. Aug 7, 1999 5:20 PM

» Kirk - Monologue & Show Summary 8/7/99

Still 100% invested - Still watching for the Bear

To: +marc ultra (7572 ) From: +Richard Palm
Saturday, Aug 7 1999 7:30PM ET

I thought Bob did a good job of explaining the risks in the market today, with the high points being:

high valuations
leading inflation indicators on the increase
productivity growth slowing
unemployment very low
job growth higher than expected
lots of complacency

To: +marc ultra (7569 ) From: +PETE from STAMFORD, CT
Saturday, Aug 7 1999 4:51PM ET

marc u: RE:

Concern about future inflation rose this week with the onslaught of bad data during the past 10 days:

Friday's report 300M new jobs 50% greater than consensus estimates.

Average hourly earnings rose .5 (6% / yr annualized rate)

Columbia University LeadingInflation Indicator up 5th consecutive time,

Productivity slipped.

Employemnt Cost Index (ECI) up.

If inflation rears its' ugly head, this could have huge ramifications on our investment portfolios.

FED seeking to get soft landing in the face of barrage of bad data.

Expect 1/4% rate hike at August FED meeting under Greenspan's gradualist approach.

Market visibility still poor.

-- posted by Kirk

Top 333. Aug 7, 1999 6:20 PM

» TONYBRIG - Wizard

John:

Thats only a very small part of the Show what
you mentioned and he is very clear to tell and
many times that his Charting is not based on
Fundamentals.
He also gives GREAT Investment Advice and what he
calls laws.
Have found no flaws whatever in his teachings!!
Listen more and closer and then come back and
we can hash it out if you wish.
He is not conservative like Brinker and actually
gives out opinions on actual Stocks.
The sponsors pay a fee which is told to the listeners and he also says to do DD on them also.
He doesnt suck listeners into buying anything!
Sometimes tho his enthusiasm shows thru on a
particular "Puppie" but he still says but "What
do I know"
"Im like a broken clock that is rite twice a day"
He says this often.
He takes all inquiries Penny or Blue-Chip but
gives the risk/reward Admonishments often.
Next Saturday (I believe) he goes head on with
Brinker.
My gut feeling is that in time he will beat
Brinker!!
Yes I certainly do endorse his Show.
He is much sharper then Brinker in a way that
he embraces all listeners and doesnt BASH ANYONE
for being interested in Pennys or other vehicles.
When he does attempt to correct he doesnt put one
down like BB has done many times.
My opinions!
I know that Wizard has his own thread but since
you posted here then thats where I answered!

VBOLHH

-- posted by TONYBRIG

Top 334. Aug 8, 1999 3:00 PM

» David_Korn - Status of David K's Preparations

I have been working on David K's Summary/Interpretation of Saturday's show all day. It will be completed and posted to this thread sometime this evening. - David K.

-- posted by David_Korn

Top 335. Aug 10, 1999 7:05 PM

» BullMaster - David K Brinker Summaries

What happened to the summaries? I can't find
a current one either here or on the "other site".

Has David been banished?

-- posted by BullMaster