Moneytalk Bob Brinker Summaries - Information ONLY

Top 97. Feb 8, 1999 5:42 AM

» TONYBRIG - Sunday Show

Not bad! Unbiased.
Didnt blast the Net's.
Specially Amazon.
Actually talked good bout the Nets and how 12 billion in revenue for 99 up from 7.
Why no amazon commercial?
Thanks
Tony

-- posted by TONYBRIG

Top 98. Feb 8, 1999 6:53 AM

» BillR_5 - Critical Mass

Interesting discussion on critical mass near the beginning of show. Caller had an inheritance coming in of 2 million net. BB said this was critical mass. Bob said put 1m in GNMA and 1m in total stock market. This would yield 60k per year from bonds and 10k per year from stock div's for an income of 70k. Then sell one-half of the growth portion of the stock fund, estimated to be 8% per year. That would give another 40k in income for a total of 110k, and leave the 2m intact and growing at 4%.

We discussed this a few months ago here (also using 2m) and I will reiterate my opinion. This caller was 34. Is 110k annually enough income for life? I don't think so. In 20 years that will not even be middle income. And don't forget it's all taxable. Bob has ignored inflation in his plan. If he was 64 that would be different.

-- posted by BillR_5

Top 99. Feb 8, 1999 7:18 AM

» Karin - Bill

I agree with you on this 100%.

-- posted by Karin

Top 100. Feb 8, 1999 7:21 AM

» RandeS - Under Bob's assumptions, $150,000 per year with no growth ($2 m

Under Bob's assumptions, $150,000 per year with no growth ($2 million inatct). $110,000 per year allows for 4% growth on equity side. If $110,000 per year with growth projected isn't enough for most, things are going to be pretty tough for the masses. Guess it's all a matter of perspective. I have a number of clients with 8-figure incomes. Just got finished with a return that has a combined fed/CA liability due of over $5 million. Hard to grasp an annual tax liability that's over twice what most would gladly accept as "critical mass." Such is life.

-- posted by RandeS

Top 101. Feb 8, 1999 7:27 AM

» KirkL - Inflation

4% growth of 50% of portfolio is a net 2% growth of $2M portfolio. With 0 to 2% inflation for the next few years, this seems good enough.

Also, caller was driving a truck for $50K and living in Sacramento CA where land is relatively cheap and $200K buys a very nice home. Thus, caller will be at critical mass unless the sharks get to him.

Caller could also annuitize the $2M (i.e. die broke) if inflation started to eat more of his money.

Bob SHOULD have said:

Put it into a Vanguard or Strong MM Fund and Do NOTHING for 1 yr with the money except spend interest and maybe pay off your house.
Listen to Moneytalk on Saturday and Sunday and consider taping the show.
Go to Suite101.com and ask the friendly folks for advice
Ask questions at the BB website (he just said to go there to look for information).
Look for a good, fee only planner to look over your shoulder as you get started on the first yr. Pay only by the hour and make sure he/she does not recommend loaded (front or back) mutual funds.
The majority of your equity portfolio should be in index funds to keep your tax hits low.

Bob's warning to keep the inheritance secret was good (to keep sharks at bay) though I suppose it is like refinancing where there is some way they find out....unfortunatly

-- posted by KirkL

Top 102. Feb 8, 1999 8:34 AM

» tele - Bill & Karin, You Both Have A Taste For The Good Life

But I think the caller will be just fine unless he decides to drastically change his lifestyle.

-- posted by tele

Top 103. Feb 8, 1999 10:05 AM

» Jaybird248 - MoneyTalk Summary/Saturday Feb 6, 1999

In the chat room, I said I would do the Saturday summary, which follows. Sorry I am unable to do the Sunday. I hope someone else can pick that up til Steve, Master of Summaries, returns.

Hour 1:
Monologue:

Discussed "market gyrations digesting some of the fastest gains in any short term period," e.g. 75% in Nasdaq and 30+% S+P since Oct. lows.
Biggest losses can be expected in fastest gaining stocks, and Nasdaq investors "not bashful at all taking profits" in high fliers, e.g AMZN, EBAY and especially BCOM, which has lost 55% of its market value in a short period of time.

"What we're looking at here is major profittaking in names that have had hysterical runups"

"As usual, profittaking spreads to previoiusly unthinkable stocks to sell, eg INTC, now down 11%"

Broad market declines "much more tepid" about 3%, Nasdaq 5.5%

"Profit taking correction of 10% or a bit more if indiscriminate selling occurs is a health restoring measure to set the stage for a higher run.."

Challenge of beating Dow 10K this year very realistic, but not without pullbacks along the way.

CALLS:

--Caller about to retire wants to live on bond interest but guarantee return of principal on his bonds. Only way to do this is buy "date certain" bonds. No stock funds offer a guarantee of principal due to daily fluctuation of underlying securities. Caller cautioned to look at asset allocation. "A lot of people start, when about to restucture their lives" at 50/50, then fine tune.

--Caller pulled cash out of SP500 at 1265, when should he put it back. BB cautioned against short term switching back and forth, especially as no bear market evident. In light of market rise, we're prepared to accept normal profittaking, which he does expect. Again, a pullback of 10% would be healthy. If you do see S+P go down to 1120, that's an outright buy.
We're nowhere near there yet.

--Caller asked for comparison of owning
SPDRs vs SP500 Index funds. BB says no difference in safety factor, and only real difference being commission expense. That's minimal using online or discount brokerage. Other fees are a wash. SPDRs can be shorted as a hedge on a market trading order, no uptick needed and deal in real time. You can also trade on margin.

Funds can't do that. SPDRs price at a 10/1 ratio to SP500. The 124 price on SPDRs = 1240 SP500. SPDRs are extremely liquid, easy to trade at any time. .

--Caller, a listener since 1985 has sixtupled investment over 15 years. Bought VODA in 1985, has held per BBs advice except allocation sales. Has a nine bagger in the stock. Bought MSFT in 93, has an eight-bagger, attributed to BBs advice. Guy is a Broadway show musician.

--Caller asked if it was time to buy net stocks. BB said not at this time. Profittaking still going on, with a lot more to come. BB has no desire to be in "companies that are a lot of hot air... 'rank speculation'". Anyone in the nets has to admit there's a gambling aspect here.

--Caller asked how well he was doing in Pimco Target and two other funds. BB suggested checking performance against index funds. Pimco up 58% in 3 years, down this year. VG 500 up 103% in 3 years, TSM up 89%, without paying a manager as Pimco does. Index has the advantage. But check to see if Pimco Target is a straight equity fund. Must compare apples to apples.

--Caller trusts his broker, but the broker's brother now wants him to invest in SP500 stocks through him. BB says stay with the brother long enough and be prepared to walk away with no money and a giant pile of commission slips.

--Caller asked about Perot Systems. BB says the stock well received, but a lot of speculation going on. BB did not know earnings. Discussion about change in profile of labor market. BB confirmed we now have far more of a service economy.

Hour 2:

Monologue:

Off a NY Times article, BB discussed Bill Gates giving $3.3B to his two private foundations, bringing total assets to 5B+. This puts Gates foundations into the top 10 wealthiest foundations. Only age 43, Gates has stated publically he expects to give away 95% of his money. He has already given away more money than any other living American. Recipients include Seattle Library system, Duke U, and health research into AIDS.

Gates owns 515MM shares of MSFT, market value $80B. Foundation run by Gates' dad.
Gifts are in MSFTstock.

Calls:

--Caller commented on last week's spike in bond yields and felt it irrational. Why is this happening? BB said worry over too fast growth in GDP, coming from 4Q growth that indeed was 'entirely too fast' at 5.6% annualized.

Atop that, more gas on the fire from the Friday employment report with fast job growth and stabilizing in manufacturing. This could bid up labor costs.

The yield spike is a kneejerk reaction to these factors, BB says.

Caller asked if coming refunding would make things worse. BB said this was just a rollover, and would have little effect.

Asked why stock market so affected, BB said current market is "priced for nirvana", so any disappointment is going to throw it for a loss..
Caller asked about Janus Olympus which owns net stocks. BB says they "caught a rising tide" with a 57% gain in 98. Olympus up 8% for 99... still pretty good!

--54 year old caller asked if asset allocation correct. BB told him to count savings bonds at face value in fixed and check with a bank for current worth, with interest. Guy has a 40/60 allocation, which BB calls "ultra conservative" at age 54. Suggested working from a 50/50.

--Caller disappointed in his midcap fund, Mutual Qualified Z. BB says that family having problems.
Up just 46% in 3 years, vs TSM 89%. BB suggests "making a decision" if you'd do better to buy the TSM.

--Caller tempted to "play a fool's game"... selling in and out. Would sell SPYs bought at 93, and then come back later and lower. In a tax-deferred account, so no consequences there.

Reply: Looking at is as a trader, it's already worked, but BB said he would not sell into weakness. You've already missed selling from the high. But the selling will go farther. The most significant thing about the recent mini-rallies is they haven't stopped the downtrend.

---------------->
If you see an overall 10-14% drop in SP500, expect a LARGER DROP IN THE NASDAQ.
---------------->

Caller sold out of technology fund, now wondered if he should DCA into broad market, not techs again. BB said watch for an appropriate entry point and decide then. Small DCAs can go in either fund.

--Caller asked if she should transfer her IRA equities into fixed since correction expected.
BB says avoid short term manuvers, and since profittaking already underway, do not make move in the absence of a bear market outlook.

--Recent retired caller has 25% of his equity in GE. BB says many people view GE as a surrogate for the US economy so not so much a problem as usual holding a high percentage of assets in one stock. Still recommends going to a diversified fund, eg TSM, especially since its in a tax deferred account.

--Caller has most of his money in Merck and TCI, both appreciated at up to 100%. Should he diversify down to the 4% rule. BB says yes, go for a broadbased, well performing, low cost fund...TSM. Keep 4% in each single issue.

Reason: Studies show that on a risk/reward ratio, you are not rewarded appropriately for concentrating more than that in any stock. You are not precluded from getting a big winner, but the rule keeps you from putting all eggs in one basket.

--Caller asked about VG variable annuity, citing no load, low fees and no surrender charge. BB says that's the best annuity around, but why an annuity? Invest in TSM instead as annual distributions are low anyway. Even lower cost than annuity.

Hour 3:

Monologue:

Discussion of T-bond yield spike emanating from considerable 'boyancy' of the economy, despite bad weather and international problems, shown in 28 year low for unemployment rate...4.3%. Some 3MM new jobs added in the past year. Labor market stronger than anytime since guns and butter years of the Vietnam War.

Most economists expect a slowdown in 99, with long term GDP growth at 2.5%. Has been 4%, but inflation remains low. May grow at 3% in 99. Key question: do we have "warm bodies" to fuel this growth without inflation. 64% of Americans now work. Germany/France have 50%.

Jobs largely from professional/managerial. Unemployment among college grads just 2%.
Wages have risen 4%, but productivity up 2%. Combo holding down inflation, but surveys show 77% of employers citing shorage of workers, especially in financial, computer, medical, sales.
Companies increasing capital spending on technology that does the same jobs they can't find the people to do.

Global economy sluggish, keeping inflation down, but we can continue to grow our own economy, as long as we can fill the jobs.

CALLS:

-- Caller says he doesn't see net companies correcting very much. Why say they are?

BB disagreed, citing examples e.g. AMZN. Caller maintained it still has great appreciation over time. BB and caller, who shorts these stocks, agreed that huge corrections are still coming, and some companies won't be around in the future. LCOS may still go up since takeover rumors are rampant. Caller points out that splits both reduce apparent price and apparent loss per share.

Caller then asked if BB if he would take email questions. Reply: "If I did, I'd drown in email".

-- Caller asked opinion of select sector spyders. BB said he'd rather go with market sector so he didn't pick the wrong sector.

--Caller asked if AOL or other stock splits help purchase opportunities. BB says they show company optimism for the future, but create no more value. You are paying the same real price, so no need to go around wearing split notification beepers.

--Retired caller lost $12K in mutuals in 97, then invested $100K in Pioneer Funds and has now lost $3K of that. BB asked how can you lose money in the greatest bull market of all time? Her funds did have positive performance. She is dealing with an "investment advisor".

BB wonders what kind of commissions she is paying. Looks like her trading or being traded in and out, with high 4% redemption and other charges, are the problem. BB: Consider it your tuition in the school of hard knocks and look into educating yourself with 1/11/99 Barrons, and into no load funds.

-- Caller has 35M shares of bank stock @$40 obtained as an insider at $5-6 a share. $1.2MM+ in cap gains. Discussion of tax liability. Total net worth is $1.8MM, so too much risk in one stock. Need to reallocate. BB's reco: To reduce risk:

* sell 9M shares in tax deferred immediately.
* sell remainder to take tax hit gradually and replace by TSM.

That's all she wrote!

-- posted by Jaybird248