Moneytalk Bob Brinker Summaries - Information ONLY

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Top 91. Jan 30, 1999 7:44 PM

» SteveT - Saturday Jan. 30 1999

Another week has pasted very quickly. The next few are going to be even quicker for me, this will be my last summary for at least two weeks. I am hoping someone else will volunteer to post their version of Bob’s show. It would be my suggestion for the volunteer to post their intentions on this thread ASAP. I think anything is improved by diversity and varying points of view . I am looking forward to reading others impressions of Money Talk. Again I will include time reference points so you may refer to the archives for more detail info.

http://www.broadcast.com/radio/archives/...

:10 Bob opened stating the S&P 500 was at a record high and that the Dow was bogged down by the cyclical stocks. The NASDAQ is up 70%+ in less than 4 months, due in large part to 5 stocks. Mention was made of Greenspan’s testimony and remarks. Stock split mania was also mentioned it seems some investors think this creates value when it is really a paper transaction. IMPORTANT Bob stated it is less important to guess which way the next 10% move in the market will be than to make sure your asset allocation is were you want it. Corrections are a buying opportunity and we must accept that Bull market do have corrections. We can use our asset allocation as a way strategically position our self. Many Trekkies have done this in the past and Bob thinks it makes a lot of sense.

:20 Caller has 50K to put in equities available this week and is planning on DCA should he put in a MM fund or GNMA? Bob likes the Money Market fund approach and recommended Vanguard Prime MM. If we get a buying opportunity can easily put it in. Also brief talk about which funds to go with. Bob said to pick funds to use funds he likes and keep an allocation that makes sense.

:23 Caller had over half of net worth in Coke and wondered what to do sell or hold? Bob said he should have been doing a sell program the last couple years. Bob thought it prudent to start a plan to get it down to sleeping level and put proceeds in a diversified portfolio like VTSMX.. Also asked caller how do you sleep. The caller said it was long term money and didn’t seem overly worried.

:26 Talked about amazon.com and it had a volatile week and the P/E is still at infinite. The sales growth is rapid but no earnings. Referenced a joke about going on the net and selling dollar bills for 95 cents. You would have fast sales growth but still be losing money.

:32 Caller caller was going in to the active passive portfolio and wondered if he should lump sum or DCA? Bob said lump sum international and DCA US portion unless we get a buying opportunity.

:34 Called admitted to overusing credit cards. Had a debt of 10K and has it down to 5K in the last year. Was wondering if there is a way to save on the interest expense and if should invest some money instead of prepay debt? Bob really applauded the guy for doing so well in getting it down and thought he should continue and try to get it to 0 in a year. Stated he was getting 18% return on money by prepaying. Should call back next year when debt free and talk about investments at that time.

:41 Bob talked about an article in Barron’s Feb.1 1999 by Andrew Bary About stock splits. It seems some people are carrying around beepers that alert them to news of stock splits. Small caps were up 1.3% in Jan. and are lagging other Indices. The Market Cap of GE and MSFT are now equal to the Russell 2000. The P/E of the S&P 500 is now at 25 using ’99 estimate of 51.50 earnings. If we were to remove MSFT the P/E would fall to 23.5

:53 Caller thought the health sector was down this last month and wanted Bob’s opinion versus the total market. Bob stated the sector has had a good three year record and it will be volatile. Bob said why take the risk would rather diversify with VTSMX.

:55 Caller was checking to see if he heard Bob correctly last week and wondered if we would need a correction before we saw new highs? Bob said we could see a correction up to the mid teens %. Bob stated the timing model sees no meaningful risk of a bear market in the fore see able future. We must accept the risk of profit taking pullback of some significance in the market

1:10 Bob opened hour 2 talking about how most of the new money is going in to the NASDAQ big 5. Energy sector not doing well along with cyclical stocks in general doing poor. Technology are doing much better. Bob recommends using VTSMX and cruising with the Bull and building capital over time.

1:18 The S&P tech. Index subset (new term to me maybe Jack’s tech spiders?) was up 16.7% in Jan. or annualized over 200%. Communication was up 8.2% and financials up 2%. Money seems to be pouring into rapid growth companies. Caller was 58 and retiring in 4-5 years and needed help with asset allocation. Bob thought about 60-65 % equities with a top down approach including all of your assets as one big pie so to speak with all components included i.e. Personal, 401K , IRA’s etc. we should be willing to ride out some short term hits. Thinks many people don’t realize what has happened in the markets the last 4 months, be careful, don’t chase the market. Prepare for profit taking may change allocation on corrections. Caller asked about M-2 and M-3 money supply Bob said the M-2 is a broad and the M-3 is the broadest measure of money supply. We like to see money supply growing the Fed watches this and it helps the market by adding liquidity. Bob mentioned the GDP was up3.9% for ’98 and this was faster than anyone thought it would be but may be revised down. Economists consensus estimates are for slower growth in ’99. We don’t want fast growth as this is bad for the Bull. Caller also asked if he should be in Muni’s or GNMAs Bob said it is hard to beat the GNMAs because of his tax bracket. Not sure what caller said for a bracket think it may have been 28%.

1:25 Caller age 42 was in equities 75%. Bob described his approach to allocation. Caller was going back to school in computer area, Bob thought he couldn’t be in a better area.

1:33 Caller had 66% of money in US Index Funds and balance in managed funds that were ( radio blanked out intermittently the remainder of this call may not be totally accurate but I believe I got it right from the context of the total conversation) not performing well. Would cost about 25K in taxes to move to all Index Funds. One of the funds may have been Montgomery US emerging growth. Bob thought it a tough decision and asked if there maybe gains to offset the loses. Thought maybe could do 1 fund at a time change over to Index funds. Bob talked of the value of diversification and how that can overcome one bad fund having a tough time. Not all things go up together .

1:38 Caller had Nestle ADR’s and asked if they also can split. Yes was the answer. Also caller had an annuity that could be moved and asked if Bob thought Vanguard a good choice. Of course we all know Bob’s answer , a no brainier.

1:43 Caller asked to explain the S&P futures and what determines the price. Bob simply stated supply and demand. There are traded around the world at all hours of the day and night. Some people short them as a hedge. Caller was retired and asked if Bob knew of a newsletter for preferred stocks for income investors? Bob said he knew of none and thought that a risky way to proceed. Likes GNMAs with excellent return and little risk.

1:46 Caller sold some real estate and needed the money in six months and in a 30% tax bracket. Bob likes Vanguard Prime Money Market. Pointed out advantages of a big company when selecting a MM fund.

1:52 caller is 22 years young and opened a Roth IRA in an S&P 500 index fund and has 6K in fixed income investments and has 3K in new money to invest. Bob said use VTSMX. And asked how she got so smart a an early age and said she should go to the head of the class. Bob could have gone the the Super Bowl but couldn’t get out of working, doing his 13th anniversary show duty calls.

1:57 Bob finished the hour talking about the NASDAQ rise of the last month it reminded him of the early 70’s and the nifty 50 except this time it is the nifty 5 or 10.

2:10 The US economy is strong real GDP growth was 3.9% in 98. We have been in a 2-4% range since the 90 recession . Inflation is at a 40 year low. GDP has been in the high 3’s the last 3 years. Inflation + strong growth = a very pretty picture according to Bob. We are not concerned about a recession new technology and consumer spending may off set the slow down from emerging Markets problems to give us that growth rate we like to see in the 2-4% range. Some of the extra money consumers are spending may be coming from lower energy costs. Sales for big ticket items like autos and houses are rising. Bob stated the last time consumers spent this freely was in 1982-3, when the great bull market began. In the 4th Quarter business spent more on new equipment, The trade deficit has not been a lot of trouble.

2:22 A caller age 49 was experiencing declining income due to medical a condition. Would like to retire in ten years. Has 1.2 Million and wondering what rate to figure for compounding forward. Bob thought 8-10% . This will double in about 9 years and produce and annual income of about 150,000. Bob thought he was on the way to critical mass and encouraged him to enjoy the fruits of his labor.

2:33 caller asked bob to explain DCA? Bob said Dollar Cost Averaging is a time diversification tool. Putting money in regularly and building wealth over time like in a 401K etc. Putting one twelfth of new money every month for a year is another example of DCA. If we get a buying opportunity you put in the balance of your "new money" in at a cheaper price, kind of like a blue light special at K-mart. Bob reviewed the many buying opportunities we had in the 90’s.

2:37Caller asked about a hold or sell on Venator (the old Woolworth’s) ? Bob don’t follow recommended a library and checking Value line. Maybe use as a tax lose.

2:42 Caller had 150K in funds mostly at Vanguard and 70K in private business, his fathers. Has been unemployed for 18 months and not willing to relocate to an area were employment opportunities are much better mostly out of loyalty for family and loved ones. (you gotta respect that, it ain’t always about $$$) Bob thought he should update his skills and take some classes and keep interviewing. The good news is he is happy and has good relationships with the people that matter the most in his life.

2:53 Caller asked about asset allocation for a retiree with a annual pension of 11K . Bob said this is equal to having 200K in treasuries We should do our asset allocation top down, this is not part of his estate but a Phantom asset. Use a secondary balance sheet taking those phantom assets in to account. This can allow one to increase equity portion as we will in this example have an extra 200k in the fixed side of the ledger so to speak.

2:57 Bob closed reminding us to be fully invested, keep an eye on allocation, never lose sight of the relationship of risk vs. Reward. The S&P is up only single digit gain since last July, Lot of the explosiveness in the NASDAQ has disguised that. That’s all she wrote. Again I do hope another trekkie will post a summary of next weekends shows bye for now

-- posted by SteveT

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