October 31, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

[honeybee]

October 31, 2010....Bob Brinker hosted Moneytalk today. Bob Brinker's
radio talk show is broadcast on Sundays only now.

BOB BRINKER'S COMMENTS SUMMARIZED, PARAPHRASED OR EXCERPTED:

STOCK MARKET: S&P 500 Index total year-to-date return, including
dividends: 7.7%; Wilshire 5000: 9%.

INTEREST RATES: Remain historically low. Three month Treasury Bill
annual: 0.11.

DEFICIT...Bob Brinker said: "Well, I was just looking at the deficit
as we move into the mid-term election and it will be interesting to
see what the new group of politicians that get sworn in in January do
that might be different than what the current crop has been doing to
the country. Well when you look at the deficit, you see the problem.
Runaway freight train government spending gone wild. Very few seem to
stand up for a balanced budget......

......Here's the arithmetic: Over the past 12 months, the national
debt has risen from $11.9 Trillion to $13.66 Trilion. Now that's a
increase in one year -- that's increased debt of $1 3/4 Trillion. And
that's the reason that if you are born into the United States today,
you are born with a pro-rata debt of over $40,000......So we are
draining capital from our country just for the purpose of paying
interest."

ECONOMIC GROWTH.....In the third quarter, the economy grew at 2% based
on the preliminary GDP report last Friday. Brinker said: "If you look
back through history, the economy tends to come quite strong out of a
deep recession which is what we had in 2008."

NEW JOBS....Brinker continued: "Instead, the economy is coming back
slowly......It has not even been able to create the 100,000 new jobs a
month to absorb new entrants to the labor force.....And we have had
private sector job growth every month in 2010, and that's a terrific
accomplishment for the country, coming out of what we came out of, but
it still has not been enough to get up to the threshold that would
absorb all the new entrants into the labor force. And that is why I
think that time is the most likely resolution."

ABOUT THE ELECTION NEXT TUESDAY: Bob Brinker said: "All kinds of
things on the ballot.....The House is very much on the line. The
Senate will assuredly tighten up big time, and there will be number of
governor's races as well. And we don't want to forget the infamous
California Proposition 19 to legalize the growing of marijuana on your
own 25 square foot marijuana factory. A POTHEAD'S DREAM, it's being
called by many......"

MERRILL LYNCH SURVEYS SO-CALLED AFFLUENT AMERICANS: This survey was
focused on those with more than $250,000 in investable assets. Brinker
said: "They say that 41% in the survey say that they feel better off
financially than they did a year ago. That's not surprising when you
consider what the stock market has done. Additionally, 78% are
confident their personal financial picture will improve in the year
ahead."

Honey EC: Brinker cherry-picked what he reported from this survey. I
found the whole article. Here is an excerpt and the link:

Merrill Lynch Affluent Insights Quarterly Survey Finds One in Five
Have Tapped into Long-Term Savings and Investments to Meet Immediate
Needs, and the Majority Now Expect to Retire Later [Daily Finance]

CALLERS*

LOWER PAYROLL TAX * Ian from Toronto proffered the idea of globally
raising personal income tax exemptions to stimulate the economy, and
suggested that the government print more money to finance it. Brinker
replied: "There's even a better way to stimulate the economy from a
fiscal side, and remember for the moment at least, fiscal measures to
help the economy are dead on arrival.....The way I'm talking about is
to lower the payroll tax. Since everybody pays the payroll tax, and
since the vast majority of consumers are at or close to 100%
propensity to consume, the idea of lowering the payroll tax actually
puts more money into the pockets of consumers right away.....

.... And this is the criticism that has been leveled at the $787
Billion stimulus package from last year. Only about 1/3 of that money
went into the tax cuts. The rest of it was spread about equally
between the state and local government and infrastructure spread out
over a period of time. And there's no question that that kind of
program is less effective than simply putting money into the pockets
of consumers.......As I said, 1/3 of the stimulus package from last
year very definitely went into the pockets of consumers because it was
in the form of changes in taxes that put more money into the pockets
of consumers. The tax structure was changed and over a couple hundred
billion of that stimulus package went back to the pockets of the
consumers......

TIME TO SELL STOCK? * Caller Richard from the Garden State said that
he thought the GOP would take over the House and possibly the Senate
and that this would be a very positive thing for the stock market. He
asked Brinker if he thought Wednesday would be a good time to sell
stock. Brinker asked Richard if he thought with all of the poll
unanimity which shows the GOP taking over the House and an even split
in the Senate, that there could be anybody who invests in the stock
market that doesn't already know all about it.

Brinker continued with his reply to Richard: "I do believe that the
market has discounted the results of this election, which will be a
GOP House, a very tight Senate, which is almost academic since the 60-
vote stealth rule has come into place in the Senate anyway. And I
can't imagine anybody out there that is a serious investor that would
be shocked to see that happen......It would only be a selling
opportunity if you believed that was the final high of the cyclical
bull market.....Let me rephrase your question: Do I think that any
spike that may occur, if at all on Wednesday morning as a result of
the elections results, do I think that any such hypothetical spike
would mark the final high for this cyclical bull market. Let me be
very clear, the answer is no."

* Jeannette from Reno told Brinker that money is the root of all evil.
Brinker either didn't hear it or ignored it. Honey EC: Jeannette
misquoted scripture. It's the "love of money" that is the root of all
evil.

* Bob from Chicago told Brinker that Austrian economist Robert Murphy
has challenged Paul Krugman, the NY Times "resident Keynesian to a
debate on economic cycles," and that Murphy has put up a bounty of
$100,000 to Paul Krugman and debate Murphy. Brinker had no comment and
just thanked Bob and hung up. Honey EC: In 2008, Brinker spent a lot
of air time singing the praises of Keynesian economics.

WHAT WILL LAME DUCK CONGRESS DO ABOUT TAXES IN 2011? Brinker said:
"Nobody knows what they are going to do. They should never have left
this to the last few weeks of the lame duck year for their session.
It's hard to believe what they've done. Then you'll get the new
congress coming in January -- I'm convinced it will be a GOP House and
a very divided Senate....There are three possibilities. they get
locked up in infighting and they do nothing and everybody's taxes go
up. Now that would be a bizarre development happening at the same time
the Federal Reserve is pulling every trick it has out of its hat in
order to stimulate the economy. I mean, you see the irony. If
everybody's taxes go up, that will completely void the efforts of the
Federal Reserve at stimulus......

.....Another possible outcome is, they get together and agree that
everybody but the top 2 brackets gets a tax cut extension, and there
would be no tax increase under $200,000 for individuals....

.....The third possibility is an interim compromise so that nobody
gets a tax increase.....The cost for the first year for not increasing
the rates on the top 2 brackets is about $40 Billion (in additional
national debt)....And they are certainly not going to find any way to
pay for this at this point with the red-ink tsunami in
Washington....There is nobody out there, including members of
congress, that knows what the tax brackets will be in 2011. Now to
make a comment like that on the eve of November 1st is
astounding......We have a dysfunctional government in Washington.
That's what it is. They cannot govern and they are not governing."

QUANTITATIVE EASING, UNEMPLOYMENT AND INFLATION * Walt in Wisconsin
asked how much quantitative easing it will take to get the
unemployment rate down. Brinker told Walt that the FOMC does not know
how much it will take to get the unemployment rate down -- that they
wanted it at 5%, but it is now at 9.6% and the underemployment rate is
at 17.1% -- an embarrassment to the country. There is basically no
inflation at 1.1% year-over-year.....

Brinker said: "They are really guessing here....Quantitative easing is
the only major tool that they have left -- they already took rates
down near zero, so that's that. So now they they have to look for
other ways. They found one which is quantitative easing and they went
out and bought over $1 1/2 Trillion security already in the first
round. Now they are coming back for a new round....This an admission
that they have not found any other tool in their arsenal that they
think will do a better job than quantitative easing.......

.....Alan Blinder has made it clear that there is no comparison
between effectiveness of the Fed lowering rates -- well we already did
that.....and the effectiveness of quantitative easing. So what he is
saying is quantitative easing is a much less effective way to
stimulate the economy. Well we can't lower interest rates anymore
because zero is zero....."

HOW WILL REPUBLICANS REIGN IN SPENDING AND BY HOW MUCH? * Mike from
Missouri asked Brinker if he thought the Republicans would reign in
spending if they take the House. Brinker said: "I don't think anybody
knows what they will do. We know what they have said. John Boehner has
indicated a $100billion spending reduction program.....Details are
hard to find......They include a reduction of $5 billion in Pell
Grants.....I've seen talks about reductions in health benefits.....I
can assure you this, that when you go on a government austerity
program, you will see pain because that is part and parcel of
government cutbacks.....

.....The notion that the government can cut back spending without
anybody feeling anything is ridiculous.....They probably won't like
it, but that seems to be what the electorate seems to be up to on
Tuesday. Which by the way, is completely out of control.....We have to
do a lot of things to get to a balanced budget.....Now I'm not
suggesting we are going to get to a balanced budget soon. We are
running annual deficits of over $1 Trillion......

.....There was a package put together with various ideas on Social
Security....They wanted to gradually increase the retirement age to 70
and put in some disability eligibility for earlier periods for
laborers. They wanted to reduce the annual cost of living increase
formula for Social Security......They want to get medical courts
established for malpractice suits for health care....They want to cut
military significantly, reflecting what they call a post-cold war
restructure. And they want to reduce the presence in Iraq and
Afghanistan. .....They want a 5% reduction in the federal work force,
so that would be tens of thousands of jobs gone.....They want to lower
farm subsidies -- get rid of earmarks......They want to increase
gasoline tax by $1 per gallon starting in 2013.......It's gonna be a
donnybrook, I guarantee you......

.....So here we have John Boehner on eve of what should be a GOP
takeover of the House, his statement is that they could propose a $100
Billion reduction in spending.....What difference would that make? But
if you want to cause real pain, I can tell you how to do it. Put in a
massive government spending reductions in an economy that's limping
along with 17.1% underemployment.....That's a guaranteed formula for
causing pain."

IGNORANCE IN MID-TERM ELECTION VOTE.....Brinker talked at length about
a Bloomberg national poll taken through the 24th to the 26th, showing
that by a two to one margin, likely voters think taxes have gone up
and that the economy has shrunk in the past two years and that TARP
money will not be recovered. Brinker blamed the Democrats because they
"have not sold their program to the voters." Brinker said that taxes
have gone down $240 Billion in the last two years. Honey EC: Anybody
know what taxes Brinker is talking about that went down? If you want
to read about this poll here's the link: Bloomberg national survey.

* Caller Louisa from Illinois tried to point out to Brinker that
people are worried about FUTURE tax increases and that is what they
are thinking about as they go to the polls. Brinker said that isn't
what they told the pollsters. Honey EC: Brinker again selected parts
of the piece he was quoting and slanted it. Actually, the poll only
included 1000 likely voters and they were not asked if they were
worried about future taxes. However, they did say this about the Obama
administration: “He’s all about big government and big spending.” So
they must not be totally ignorant like Brinker said several times
today, since what they were quoted saying certainly agrees with what
Brinker has been espousing for months now.

SOCIAL SECURITY NOW AN ENTITLEMENT BECAUSE GOVERNMENT SPENT ALL THE
MONEY? Jim in Chicago said: "Some of the issues that are not being
discussed or admitted to is the dire situation that exists with under-
employed and unemployed. Percentages that I keep on hearing don't
match what the realities are. And I'm sure that is one of the big
contributing factors to the big reduction in taxes because people
aren't there to make the payments on such taxes." Jim also brought up
that the subject of cutting entitlements is not being addressed by any
of the candidates in Tuesday's election.

Brinker replied to Jim: "I hear from people who collect Social
Security who say it is not an entitlement. Well, it was not an
entitlement when it was started, but it certainly is an entitlement if
the government has to borrow to cut the checks. And to cut the 58
monthly benefit checks for Social Security, the government has to
borrow as soon as the payroll tax becomes less than the payout......We
are very close to getting there.....

.....And at that point, the only way the government can make the
checks to pay off the monthly checks is to go out and take all the
payroll tax money and then sell Treasuries to make up the difference.
In my opinion, Social Security has become an entitlement because the
federal government squandered the money on the general budget."

Brinker's guest-speaker today was John Zogby.

Moneytalk To Go is Available on Demand Totally Free at KGO810 radio
for seven days after broadcast. Moneytalk is broadcast only on Sunday.
The program is archived in the 1-4pm time-slots. To download and
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Link as." KGO: Download Moneytalk Here Don't forget to download the
John Zogby interview in the 3-4 hour of the program.

Dixiegeezer took this beautiful picture - click to enlarge:

http://honeysbobbrinkerbeehivebuzz2.blogspot.com/