Hello all. I have been away from the boards for some time. I am pleased to post this excerpt from my newsletter which tracks Bob Brinker. This was from last week's show. Enjoy! - David Korn (Click on my Silicon Investor Profile to learn about me)
Excerpt from David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service.
October 27-28, 2007 Newsletter
STOCK MARKET LOOKS GOOD
Brinker Comment: The stock market had another good week. The S&P 500 is just 1.9% below its all-time record high. The S&P 500 closed Friday at 1535 and is acting very nicely. The Dow is at 13806. We have seen volatility in the market, but part of that is due to the fact that we are at very high levels. The financial media might make a big deal out of the number of point move in an index, but the number of points is not as important as the percentage move. If the Dow were trading at 100,000, and it was down 1,000 points that would only be 1%. Today, a 1% move in the Dow is 138 points. In 1982, a 1% move was 8 points. When the financial media gets focused on the number of points the Dow is down, ignore it. Focus on the percentages.
Brinker Comment: We like to see what we had a week before last where we had a big down day which shook out some investors. This is a good development because it rids people who should not be in the market. "Stocks tend to fluctuate" as J.P. Morgan once said, and that is an absolute truth. The investors who get bent out of shape over short term fluctuations in the market should not be in the market.
EC: Bob remains bullish on U.S. equities. In his opening remarks, he gives some insights into how he views quick drops in the market during an ongoing bull market. Remember we had over a 300 point drop in the Dow on October 19th? For some market-timers (particularly the momentum type), that kind of drop can trigger sell signals. For some technical types, it also doesn't bode well because it is usually accompanied by horrible market internals. For purposes of Bob's long term stock market timing, this kind of down day in the context of a bull market is a healthy development.
MICROSOFT
Brinker Comment: Microsoft reported earnings on Thursday night and it was a great report! The new version of Windows has really increased the growth rate at the company. The Vista version has really been on a tear. Sales of Windows Vista are up 25%. Net income is up 23%. Revenues are up 27%. Every one of the company's five divisions exceeded goals. Coming up in February, Microsoft will issue updates to its products. If you go back to the early 1990s, Microsoft has been an incredible stock. If you invested $7,000 in Microsoft in 100 shares in the 1990s, that would be worth $252,000 today. How can that be? The stock split so many times that you would now have a quarter of a million dollars. The stock rose 9.5% on Friday alone, bringing the stock up into the mid-$30s. All in all a great report for Microsoft.
EC: Microsoft is one of only two stocks that Bob has maintained a "hold" rating on in his newsletter for many many years. The last stock he recommended was UTEK, and given the fiasco surrounding that stock, I think he is gun shy over picking another individual stock, and I think it is possible that he never will again. As far as Microsoft is concerned, it has underperformed the market until recently, but the earnings report was wonderful. Bob recommended it for purchase many years ago, then switched to a hold, and then in March 2003 recommended it as a buy again, and now it is a hold. He hasn't really talked about it for a long time, but in the wake of this great earnings report, I think he wanted to remind listeners that he still covers it in his newsletter.
EC#2: You may recall that I purchased Microsoft for my newsletter portfolio not all that long ago based on my view that Vista would be an earnings boost. I sold Microsoft for a gain, after my stop loss was executed during the correction process this summer. Should have bought back in, but I am happy about putting some of the cash reserves into the QQQQ shares which are up almost 11% since my purchase, and include shares of Microsoft. In fact, QQQQ constitutes over 5% of that index. The Spiders Select Technology (Ticker: XLK) which I also own in my newsletter portfolio has a ton of Microsoft in it, almost 10% of that exchange traded fund holds Microsoft, so it has benefitted from that company's performance as well. Here is a link to Microsoft's Investor Relations web site where you can download the earnings report listen to the webcast and read the 2007 annual report:
tinyurl.com
EC#3: Another interesting development in Microsoft is its announcement that it is taking a $240 million equity stake in Facebook's next round of finance at a $15 billion valuation. Microsoft is being given exclusive third-party advertising platform partner to Facebook and will begin to sell advertising for Facebook internationally in addition to the U.S. Read more about it here:
tinyurl.com
EC#4: Microsoft is also getting a lot of interest from the gamers for its latest video game Halo 3 on the Xbox 360. This game is big big business. Halo 3 sold more than $300 million in sales in the FIRST WEEK ALONE! That makes it the fastest selling video game ever. I may have to purchase that game -- for my kids of course, not me. Really. Learn more about it here:
tinyurl.com
APPLE COMPUTER
Brinker Comment: We also saw an outstanding report from Apple Computer. Apple reported earnings this past week which were way ahead of already optimistic expectations. Macintosh computers are selling like hotcakes. And then there is the iPod, the iPhone. If you invested in 2005, the stock is up 400% in the last two years. They reported quarterly profits of $940 million. An absolutely stellar report.
EC: Ah, Apple. Probably the best stock performance in the history of my newsletter, but alas I sold it after having over a triple in it. I wish I held it, but as they say, nobody ever went broke taking a profit. And there aren't many stocks that triple in a very short period of time. Apple has emerged as one of the leaders in this bull market and its performance continues to astound Wall Street. As for its products, I write my newsletter on a Mac computer and that is all I have ever used at home -- Macintosh computers. In the past, I have gotten some flack for it, but it does seem that Macs are starting to go more mainstream in the business world. read about Apple's quarterly results here:
apple.com
HILLARY CLINTON, TAXES & OTHER POLITICAL STUFF
Caller: What do you think the chances are that the Democrats will win the White House? Bob said right now the polls suggest a near certainty that Hillary Clinton will get the Democratic nomination. Bob believes that will happen. As for the Republicans, Bob said he has no idea who they will nominate. If you believe the polls right now, the edge over the whole cast of characters goes to Hillary. There is a year to go for sure, and Bob said he thinks when the campaign really gets in full swing, the Republicans will come up with some "issues" that concern Hillary which may change the landscape.
Caller: This caller and his wife are getting nervous about all of the talk of increasing capital gains and income tax increases. He said he has heard rumors of a possible tax on assets. Thoughts? Bob said the one Presidential candidate who has discussed this possibility is Hillary and she is the one person that would probably want to do it. That said, Bob thinks she might have trouble getting a tax on assets through Congress because there will be an uproar.
As far as the capital gains tax is concerned, Bob said he does think Hillary would promote increasing the capital gains tax, but might settle on an increase up to 20%. She might want more because she is a big believer in redistributing wealth. On the dividend tax, Bob said he is not sure how high she would go because she hasn't been clear on it. As far as the income tax, Bob said anyone making over $200,000 should expect a tax increase if Hillary takes office.
Brinker Comment: What does all this mean to you? It means that you have the balance of this year and all of next year to make money at today's income tax rates. Under the current tax laws, there is a maximum 35% federal income tax, a maximum 15% capital gains tax and 15% on qualified dividends. Those rates are good until the end of 2008 because President Bush is not going to raise taxes during his administrator. The other thing to consider is that your taxes are going up in 2009. Bob said if he had to guess, they would make it retroactive to January 1, 2009. Bob thinks the tax rate on capital gains, dividend rate and federal income tax (upper brackets) all go up. If the Hillary health plan goes through, the tax rates would have to go even higher because that is going to be an expensive package. Bob said he hopes that Hillary doesn't raise taxes on the lower income -- the people who have 100% propensity to consume -- you don't want to raise their taxes. Those people get paid and they spend it. Raising taxes on them could have a negative impact on the economy. Raising taxes on the wealthy doesn't have as much an impact. Bob noted that this is why rising oil prices slows the economy because joe American has less money to spend on other things after they fill up their car with gas. Bob said he read a story of how badly the department store industry is doing this year, especially in terms of their stocks which have tumbled since mid-April. Bob said he thought the article missed the point when the article blamed the housing recession. Sure, that has an impact, but oil has risen from $50-$90. This means people have less discretionary spending because more of their money is going toward higher energy costs.
EC: Goldman Sachs wrote a report about what they saw following the 2008 elections. The report is summarized in an article entitled, "Wall Street: Say Goodbye to the Bush Tax Cuts" which you can read at this url:
tinyurl.com
Caller: This caller said he hopes Hillary wins the Democratic nomination because he thinks she will lose in a landslide to the Republican candidate when all of the dirt comes out about her. Bob seemed a little bit taken aback by this comment and noted that he has read the entire 500 page book about Hillary written by Carl Bernstein and he is aware of her last 25 years since she entered politics as the first lady of Arkansas. This stuff has been out there and looked at by many people. In terms of legal proceedings against Hillary, Bob said he is doubtful you will see that come out during the election campaign.
EC: Bob was referring to the book entitled, "A Woman in Charge: The Life of Hillary Rodham Clinton" which you can learn about at this url:
tinyurl.com
Caller: Bob asked another caller if he thought Hillary would get creamed as the previous caller suggested. The caller said he is not going to vote for anyone named Clinton or Bush and was leaning toward Obama. Bob said he thinks the chances of Obama getting the nomination are slim or none and slim has left the building. Bob noted that Merle Haggard came out in support of Hillary this weekend which made a lot of headlines.
EC: Merle Haggard apparently wrote a song about Hillary. More on that story here:
tinyurl.com
Brinker Comment: Bob said Charlie Wrangel made a huge political mistake this week. One of the first rules is don't hand live ammunition to the enemy. Charlie this week was handing out free boxes of live ammunition to the enemy when he proposed a $3.5 trillion tax increase over the next few years. This proposal would propel the top federal bracket to 44%. The top bracket in California would then be 53% when you add in the California state income tax. Why would Charlie Wrangel do this in advance of a Presidential political election? This was a huge mistake by a guy who is otherwise likable and has served his country well.
EC: Read what others are saying about Wrangel's tax proposal here:
tinyurl.com
(More to be posted later!)
- David Korn (click on my Silicon Investor profile to learn more about me.
DISCLAIMER: This e-mail is neither sanctioned by, nor written under the auspices of ABC Radio Networks, Moneytalk or Bob Brinker. 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 and helpful financial links. I If you want to know what was said verbatim on Moneytalk, listen to the show live or subscribe to "Moneytalk on Demand" which allows you to listen to the show in case you missed it live. The web site, bobbrinker.com has all the links to the ABC Radio Network stations that broadcast the show live. The information contained in this newsletter is not intended to constitute financial advice and is not a recommendation or solicitation to buy, sell or hold any security. This newsletter is strictly informational and educational and is not to be construed as any kind of financial advice, investment advice or legal advice. |
