Q&A w/Larry: Q: The Dollar, why isn't it going up?

A: Because to go up, you need people to sell out of other currencies and buy the dollar. Q: That's not happening? A: Evidently not, the dollar's not going up is it? Q: Well why not? Treasurys are bid higher everyday, new low yields everyday, who's buying them? A: Not foreigners. Q: Stocks are down 18% and bonds are up 18%, is that a coincidence? A: I think you just answered your last question about who is buying bonds. But that's only half of the storyQ: While stocks have been going down, their dividend yields have been going up? A: Yes! Of the Dow 30 Industrials, 28 have higher after-tax yields than the 10 year T-note. Q: Bonds don't change their payouts, stocks can change their payouts? A: Yes, and over the past year they have raised the average dividend 10%. Of course, many stocks lowered their dividends in Q: People on Social Security and Pension Plans like to see their checks go up each yearA: Then they should buy top quality dividend paying stocks. Bonds will never increase the payout, and each time you roll them over the yield actually goes down. Q: So what's wrong with these people, this defies logical explanation, why are stocks selling off? A: There's no short answer, except to create fear of some kind. When that fright wears off, stocks will have one hell of a rally. A Buy and Hold Forever rally, because the dividends paid 10 -15 years out will be double-triple what they are today, so you'll never give up that income stream- you won't be able to replace it. Q: Buy and Hold Forever? Like marriage? A: Only better, the money comes IN not out. Q: SeriouslyA: Well think about it, this is not new, this describes the rally from March 2009- Big moves up Q: And no volume on the selloffs until recently. A: Exactly, people don't want to part with their cost basis, are more importantly, their dividend basis. Dividends were lower in 2009, but stock prices were much lower, so yield % were higher than today. Q: Treasury yields were higher last year? A: Yes much higher 3.20% for the 10 yr note. Q: Stocks are much more attractive on a competing yield basis today than last year? A: Yes, but part of the fear is that the Bush Taxation rate of 15% will be raised to 38% making stocks less desirable, relatively speaking. Q: Any chance the cuts will be extended and the 15% rate will still apply in 2012 and beyond? A: Yes, a very good chance- Obie got the debt ceiling (his credit card limit) extended $2.4 Trillion, and for sure he will use part of that to make stocks look attractive against bonds. Q: What about a QE3? A: There's a very good chance, and this is what it will be. Buy Stocks.

Q: But what happens when rates go back up? Won't people sell stocks and buy bonds again? A: Ha! Yeah, sure, rates go back up, ahem, after all the work Bernanke has done to LOWER rates? And don't forget, bonds move inversley to rates, Bernanke has a giant portfolio of Tbonds, bigger than China's. He's not going to crush himself. Q: That's a good point, I'll have to ask myself that question. A: Feel free, I'll wait. Q: Well, if rates stay low forever, than the Treasury rolls all their debt over at lower cost to them, right? A: Exactly, and theoretically, if your credit card is charging you 0.000001% rate, why would you ever pay them off? Just roll the debt. Q: If $14 Trillion in Tbonds never have to be paid back....well, what are we worried about? A: We should be worried about missing the boat again. Look at a chart of the S&P 500- this is a correction of the 2009 rally. Q: How can we buy stocks if all our money is tied up in Tbonds? A: Easy- open a margin account and borrow the money. Use those bonds as collateral, they will lend up to 90% face value.

Q: Could you be wrong? A: Have I ever been right? It could happen. Listen, Bernanke can borrow at a margin loan rate of 0% I think hell be buying more bank stocks. And i think hell let the banks buy S&P 500 stocks, as long as they pay a dividend. Q: With everybody buying stocks, there wont be any left A: Great point, Bernanke has been trying to corner the bond market for years now, but he see the future- he wont get repaid, hell roll into new bonds at lower yield. Becoming an investor is the best part of his experiment that could have happened- now he wants to corner stocks. Q: But again I ask, wont rates go up and clobber bonds? A: Rates wont go up unless the economy gets better and house prices begin to rise- good luck with that. Q: Its all about the buyers... A: Yes, and no sellers. Lock up the bonds, use them to buy stocks, let the dividends pay the margin loan interest, and watch the income stream increase over the years. It locks up the stocks, too. Nobody will want to sell. Q: Brilliant? A: BRILLIANT! Q: Past performance is not a prediction of future results.... A: Thank goodness for that-I think my clock is broken.

Q: Our guest today has been Larry, thank you Larry. A: You're welcome, Larry.