June 5, 2011, Bob Brinker's Moneytalk: Summary, Commentary and Excerpts

[honeybee]

Bob Brinker hosted Moneytalk today. Two weeks ago, when Brinker was
last on the air, he was hyping Andrew Ross Sorkin's book, "Too Big
to Fail" and the HBO movie, "Too Big to Fail," which aired on May
23rd. Surprisingly, Brinker did not mention the movie on the program
today.

Honey EC: I for one, was very disappointed that Brinker did not say
what he thought about the movie after having hyped it for several
weeks. I saw the movie and so have several others. Most of us think
that it was very well done and educational -- with a great cast.
Wonder if there was something in it that Brinker did not approve of --
like the fact that it clearly showed that every effort was made to
save Lehman Brothers, but that it was simply not possible.

Brinker's comments summarized, paraphrased or excerpted:

STOCK MARKET....No "Ground Hog Day" today.....Brinker made no mention
of the stock market and did not recite the closing numbers. Stocks
have been down every week for the last five weeks. The Dow was
down 2.3% for the week; S&P 500 Index was down 2.3%; Nasdaq down
2.2%. The Dow has had its longest weekly decline since 2004 and the
S&P has had the biggest 5 week decline since 2002.

Honey EC: ==> As of the June 4, 2011, Marketimer, Brinker's model
portfolios continue to be fully invested and he still recommends
dollar-cost-averaging new money into the market. Brinker forecasts
"...new recovery highs in the S&P 500 Index 1400s range as part of the
ongoing cyclical bull market trend."

MAY UNEMPLOYMENT REPORT.... Brinker said that private payroll rose by
83,000, and government jobs continued to shrink, losing 29,000. Net
non-farm payroll was 52,000. The national unemployment rate is 9.1%.

Brinker recited unemployment by racial demographics: White =
8.0%; Black = 16.2%; Hispanic = 11.9%; Asian = 7.0%; Teens 16-19
years = 24.2%.

Brinker recited unemployment educational demographics: College
graduate = 4.5%; some college = 8.0%; high school = 9.5%; less than
high school = 14.7%.

BLAME COMMODITY FUTURES MODERNIZATION ACT OF 2000 FOR LOSS OF 8
MILLION JOBS... Brinker said: "I think if you had to put something at
the top of the list of the culprits that brought about the loss of 8
millions jobs, back there in 2008-2009 when the economy went into free
fall, you would have to put it at the top of your list. Because this
diabolical legislation, and we all know we have the best government
money can buy, and that's why Washington policians vote on these
ridiculous policies that they come up with. Policies like doing away
with Glass Steagall legislation at the end of 1999, a bi-partisan
effort, of course. And so was the Commodity Futures Modernization Act
of 2000. ......Bill Clinton....the Maestro.....the former Fed Chair.
This was the act that deregulating derivatives....and credit default
swaps.....I contend both parties are messing up the country...In
effect the Federal government created legalized gambling on Wall
Street in the form of derivatives and credit default swaps....

There was no meaningful reserve established for the paying for the
credit default swap insurance contracts.....When the credit markets
collapsed, which happened instantly when Lehman went under in mid-
September of '08......The inevitable happened, the government had to
step into the black hole which was called AIG, and provide the money.
Otherwise the counter-party risk spreading across the financial system
would have taken it down......It cost the taxpayers over 100,000
billion dollars to bail out AIG.....AIG was deemed to big to fail
because it had its insurance tentacles all over the globe....

So even though in March of -08, the Federal Reserve had stepped in
with its 29 billion dollar de facto backstop of the J.P. Morgan
takeover.....agreed to take over Bear Stearns which was under extreme
duress.....on the terms that were agreed upon, which were that Bear
Stearns first billion dollars in losses would be eaten by J.P.
Morgan....a lead pipe cinch....call it the cost of the takeover. But
the next 29 billion was backstopped by the Federal Reserve.....Then we
got to September and Lehman Brothers was unable to put together
anything and they were gone in mid-September of 2008....

And almost immediately the AIG, within hours, problem became front and
center.....Then people realized, whoa.....look at these Lehman books,
there are almost no reserves... All this money has to be paid out as
all these companies go belly up. And AIG did not have the money. And
taxpayers had to step up.....And in the process, they made firms like
Goldman Sachs whole at a 100 cents on the dollar, believe it or
not.....So what we had here is casino capitalism. I'm all for
capitalism, not for casino capitalism on Wall Street, no way....Of
course, Wall Street lobbied for this legislation, they paid for
it.....And as happened with the Glass Steagall situation, it was a bi-
partisan effort to change the law.

But they really had to push on this deal. They had to go the extra
mile to push the states from regulating the derivatives and the credit
default swaps.They had to grant immunity from the state gambling laws.
With an almost unbelievable foundation for what was to follow within
not that many years later, and I think it's a big piece of the
puzzle."

Honey EC: Here is a June 3, 2011 Bloomberg article that says, "Lehman
May Never Face Court Reckoning as SEC Enforcers Lean Toward Rebuke."

Also from Bloomberg, what are they preparing for? Volcker Named to
Panel That Will Advise on Too-Big-to-Fail "Former Federal Reserve
Chairman Paul Volcker and former Citigroup Inc. (C) co-chairman John
Reed have been named to a Federal Deposit Insurance Corp. panel that
will help the agency map strategy for unwinding too-big-to-fail
financial firms when they collapse."

WILL THE GOVERNMENT MAKE BUDGET CUTS OR KEEP PRINTING MONEY....
Brinker commented that he is waiting to see some evidence of
Washington getting serious about balancing expenditures with revenues
-- at least within 3% of Gross Domestic Product instead of the 9 and
10% that there is right now. It's a real national disgrace.
There's been lots of demagoguery, but no serious efforts.

Brinker said: "If they don't get serious about moving toward a
balanced budget, in the long term, then we do run the risk that they
could print their way out.....They would inflate their way out. And
the way you print your way out of a major debt problem is you let
inflation run high and that reduces the real cost of what you have to
repay because you are paying it back in inflated dollars. And
obviously, that also reduces the value of everybody's money in terms
of what you can buy.....It's a 100% chance they are going to print
more money because they have to accommodate Gross Domestic Product
expansion. If they don't, the economy will go into a nose-dive.....The
question is, will they do it responsibly and I think the jury is out."

HOW TO BUY GOLD....Caller John from St. Louis said he is worried
about the dollar possibly losing much of its value, and that he had
contacted a gold dealer because he is thinking of moving half of his
model portfolio III holdings into gold coins. Now the gold coin
dealer is pressuring him to buy. Brinker responded by quoting from
"Mack the Knife," Bobby Darin's old song: "When the shark bites
with his teeth dear, scarlet billows start to spread." Brinker told
John that he had warned against buying numismatic coins many times on
the program. Because of the mark ups, coins may be worth half what
is paid for them. Brinker recommends GLD for those who want to own
gold for a hedge.

GOVERNMENT COULD INTERFERE WITH GOLD AND SILVER MARKET....Caller Jack
from San Diego said buyers should beware when it comes to buying gold
and silver because the government could interfere as they have done
in the past and that could dramatically change values. For example,
the margin requirements were changed on silver future contracts
recently and silver collapsed about 30% in a week. Jack also pointed
out that since the Federal Reserve alone decides when to print
money, they will make the decision whether or not to print our way
out of this debt problem. He also said pointed out that the
Federal Reserve makes profits. Brinker commented that the Fed has to
turn all profits over to the US Treasury every year and then he
ended the call.

SHOULD INVESTORS WORRY ABOUT MONEY MARKET FUNDS....Caller Ron asked
Brinker if one should worry about money funds. Brinker replied that he
thinks one should "worry about everything" and that only a fool
doesn't worry. He then explained that money market funds are short-
term portfolios of Treasuries, commercial paper and bank deposits.
It's always best to deal with quality companies -- such as Schwab
or Fidelity.

WHOLE LIFE INSURANCE POLICY.....Caller Ted from San Jose said that his
in-laws invested in whole life insurance policies to save for his two
kids college educations. He asked Brinker what he thought of that
method of investing. Brinker responded that it was not a method he
would recommend "even for his worst enemy," however, it would make a
life insurance salesman really happy. He recommended paying an hourly
fee to a Certified Public Accountant to find out how to shut it down.

BI-PARTISAN EFFORT TO SELL U.S. DOWN THE RIVER...Caller Andy from
Redwood City said he agreed with Brinker's monologue about the
Commodity Futures Modernization Act. Brinker said: "I know I'm
correct.....This is what drives me nuts, so many people out there are
missing the point I made earlier. This is a bi-partisan effort to sell
the United States down the river. It's not one party or the other.
It's both of them."

Andy continued: "They are both against us. Phil Graham, Robert Rubin,
Bill Clinton and Alan Greenspan did us in." Brinker replied: "There
you go, you have two Democrats and two Republicans right there."

OIL AND GASOLINE PRICES....Brinker said: "I'm completely opposed to
any manipulation whatsoever in the commodities market..... I get upset
when oil goes to $115 a barrel, as it did a few weeks ago and people
yell manipulation. But then it goes back down to $100 a barrel, where
it is now and nobody says they manipulated the price down. It has to
be a two-way street....Let me say this.....it has been amazing to see
oil come off its speculative $115 very recent high and come back down
to $100 and see pump prices go down so little."

WHO (OR WHAT) COULD GET HIT WITH NEW TAXES? Caller Mark in Carson
City wanted to know if the internet was getting a free ride on taxes
and then asked about taxes on stock transactions. After pointing
out that the internet had been around since Al Gore invented it,
Brinker said: "I don't think that the financial markets would
celebrate any new tax on transactions.....But everything is at risk.
We are running annual deficits of 1 1/2 trillion. I can't believe I
just said that.....Mind boggling numbers. That's how the national debt
get over 14 trillion so quickly.....There's such a massive gap between
expenditures and revenues that nothing would surprise me. It would not
surprise me to see tax on high-earners, if you see on transactions on
Wall Street, if somebody decides to tax internet activity because the
level of dysfunctionality in Washington has never been this high."

BIGGEST POLITICAL NEWS FOR THE MONTH OF JUNE....Brinker said: "The big
news for the month of June, this is laughable, is that President
Obama and Speaker Boehner are going to play golf on June 18th. I mean
they must be laughing at us all over the world right now. Who cares
whether they play golf? How about getting the green eye shade down and
getting to work? It's comical."

Brinker's third-hour guest-speaker was Michael Hirsh, "Capital
Offense: How Washington's Wise Men Turned America's Future Over to
Wall Street"

Moneytalk on demand with Bob Brinker, is available for FREE audio/
podcasting at KGO810 radio for seven days after broadcast. I download
and save all three hours, including the third hour guest-speaker. (The
program is archived in the 1-4pm time-slots.) Bob Brinker also
offers it by paid subscription at bobbrinker.com - free for seven
day archives at KGO Radio Sunday Archives


http://tinyurl.com/4xq9nk4