Excerpt from David K's Stock Market Commentary, Interpretation of Moneytalk, Financial Education, Helpful Links, Guest Editorials and Special Alert E-mail Service.
August 25-26, 2001 Edition
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CALLER OF THE DAY!
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Caller: This caller prefaced his question by noting that he is aware Bob prefers that investors waiting for MOABO have their cash in money market reserves to ensure capital preservation. That said, the caller posed the question of whether it wouldn't be easy to "time" a move into an ultra short bond fund and thereby pick up an extra one or more percentage yield and perhaps some capital appreciation as well. The caller used an example of having $500,000 in cash reserves, and each percentage point he could pick up would be an extra $5,000. Why don't you recommend this alternative strategy? Bob took issue with the caller's point, saying that he has already covered this point by noting that those who have the tolerance for risk and changes in asset value, they can use Ginnie Maes for a "portion" of their cash reserves. Bob said he is comfortable having his cash reserves in money market funds, but he has discussed on the program the alternative of investing in Ginnie Maes to pick up additional yield for those so inclined to take on the extra risk. The caller pointed out that Ginnie Maes actually have more risk than a bond fund which has a one year or less average maturity. Bob agreed, but noted that the yield would be lower as well. Bob added that he didn't think the caller would be able to find a AAA government backed guaranteed fund with an average maturity of one year which yields over 6%. Bob concluded the call with his main point. If you have money in cash reserves set aside awaiting for future investment in the stock market, a quality money market fund is a great strategy.
EC: When I first heard this caller use the words "ultra short" I thought he was going to refer to one of the Rydex funds that shorts the market (i.e. bets the market is going to go down). Then I realized the caller was referring to a bond fund with short maturities. My first reaction though brings up a point that hasn't been made in a while. For years, Bob Brinker discussed on the show and in his newsletter the use of bear market mutual funds during a bear market. These funds basically go up in value as the market goes down. When Bob made the "tactical asset allocation" call back in January, 2000, I figured he would recommend purchase of such a fund, but he never did. If you had invested in such a fund, you would have made a bundle while the market tanked. I did a fairly extensive editorial listing all the bear market mutual funds I could locate in one of my Interpretations a while back and I plan on updating it at some point. I know that some of my subscribers use bear market mutual funds as a way to generate additional capital during a bear market. Heck, it has worked better than owning the QQQ shares right?
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Disclaimer: This e-mail is not a substitute for listening to Moneytalk. It is only my interpretation and commentary of some of what is discussed on Moneytalk, along with additional educational information that I include, editorial comments about the market, helpful financial links, guest contributors and even humorous remarks. I also provide Special Alerts to my subscribers as part of my service to notify them of important events impacting the stock market. If you want to know what was actually said verbatim on Moneytalk, listen to the show live. You can even listen to a re-broadcast of past Moneytalk shows on the Internet via the archives. The web site www.bobbrinker.com has all the links to the ABC Radio Network Stations that broadcast the show live and via the Internet. There are also free summaries of the Moneytalk shows on that web site. I am just a listener to Moneytalk and provide this service on my own volition. I am not associated with ABC Radio Networks, Moneytalk or Bob Brinker and this service is neither sanctioned by, nor written under the auspices of ABC Radio Networks, Moneytalk or Bob Brinker. This e-mail is simply my own interpretation and commentary of some of what is discussed on the show, along with educational information I provide that I think is useful to help better understand financial issues. There are also editorial comments, useful financial links and contributing editors and Special Alerts. I am also a frustrated writer and comic and try to weave humor throughout. You should not rely on any statement made in David K's Stock Market Commentary, Interpretation of Moneytalk, Financial Education, Helpful Links, Guest Editorials and Special Alert E-mail Service as constituting financial advice or as a recommendation to buy or sell stocks. Finally, this e-mail is strictly informational and educational and is not to be construed as any kind of financial advice, investment advice or legal advice. Copyright David Korn, L.L.C. 2001 |
