Friday, September 14, 2007

What Happened to Bob Brinker's Secular Bear Market Megatrend?

From 2001 to June 2007, Bob Brinker claimed that the stock market had entered a "secular bear market megatrend" in March 2000.
In June 2007, Bob Brinker claimed that this secular bear megatrend had ended the previous year-- in June, 2006.
Stock market action over the past seven years has proven that there never was a secular bear megatrend as Bob Brinker adamantly proclaimed for so long. No doubt Brinker knows that now, but it's very likely that many Moneytalk listeners are still in the dark about it. Why wouldn't he tell his listeners about this change of views? Right now, it's been almost three months since he informed Marketimer subscribers that, in his opinion, a secular bear megatrend had ended in June 2006.
It's very likely that some people (possibly many) have stayed out of the stock market because they trusted Bob Brinker's "market-timing" abilities and they still believe that he sees a big bear just around the corner. On the other hand, in March 2003, when Brinker gave his buy signal, there were some who knew how completely Brinker blew the QQQ "counter trend rally" and didn't trust him to call this "counter trend rally in a secular bear market" any better than he had done the last one so they didn't jump in to 100% invested as Brinker recommended.
Now that the stock market has proven that there was no secular bear market beginning in 2000, Bob Brinker is dealing with the issue the same way he dealt with the QQQ-trades that damaged so many of his subscribers-he is distancing himself from the whole thing.

Here is how it all happened:
Bob Brinker began speculating about the possibility of a "secular bear megatrend" in the early 2001 Marketimers. Then in the October 2001 Marketimer, Brinker devoted almost two pages to the "history of the two major secular bear market periods that have occurred in the United States over the past seven decades." He focused primarily on the 1929-1949 and 1966-1982 secular bear markets.
Bob Brinker laid out a scenario that was designed to make subscribers believe that there would be "several" cyclical bull and cyclical bear markets cycles occurring during a secular bear market. In October 2001 he said: "Although the probabilities suggest to us that a new secular bear market began in the first quarter of 2000, we anticipate several cyclical bull and bear markets will occur within the context of a secular bear trend."
It wasn't until August, 2001 that Bob Brinker unequivocally stated that the stock market had entered a secular bear. He said this:
"U.S. stock market entered a secular bear market in the first
quarter of year 2000.
Standard and Poor's 500 Index: 1527.46 = March 24, 2000
Dow Jones Industrial Average 11722.98 = January 14, 2000 "

Bob Brinker re-stated his analysis of the ongoing stock market, and again explained what investors should expect in the September 2002 Marketimer, he said:
"We believe the ongoing secular megatrend we are now experiencing will see a succession of cyclical bull and bear markets lasting approximately one-to-three years each."
In March 2003 Bob Brinker issued a buy signal and predicted the beginning of a cyclical bull market. However, he repeatedly cautioned subscribers and listeners that the cyclical bull was part of an ongoing bear market megatrend and would last 1-2 years. He later changed that to 1-3 years. However, as the cyclical bull became long-in-the-tooth and showed no indication that it would be ending (as he had predicted), Brinker declared that it was an "outlier" within a secular bear megatrend.
It's interesting to note that only four months before Bob Brinker later claimed that the secular bear megatrend had ended, he clearly stated that the cyclical bull market was an "outlier" and was "within the context of the four cyclical bull markets that occurred during the 1966-1982 secular bear megatrend....."
On Moneytalk, Brinker was very clear about what would signal the ending of the secular bear megatrend. Here are some excerpts from a call to Moneytalk in February, 2007 (Please note, this was eight months AFTER Brinker now claims the secular bear megatrend ended:
Peter in Scottsdale: "I'm a subscriber too, and I guess I started just somewhere prior to 0-3 and I really appreciate all your letters and information you have."
Bob Brinker: "Well, Peter, thank you for that. We'll have the February letter out by Monday afternoon, so make a note of that. We'll, we will have it out by Monday afternoon."
Peter: "Just a quick question. It's kind of a philosophy of what you do - the secular bear, cyclical bull thing." (Brinker: "Yeah, sure.") "I'm curious because I've read previous letters and it may be some time ago, but I think you gave some kind of an actual projection what you thought the S&P would actually get up to before it may roll over into the bear cycle."
Bob Brinker: "Well, we haven't put a final number on that, and we'll certainly update that by the way on a continuing basis in the monthly letter, which is just part of what we do. But no, we have not put a final number on that. But what we do know is within secular trends there are no cases where a secular trend has gone beyond the previous peak by more than, by more than 10%. It's never happened, so I think it's fair to say that until that happens, the secular trend is intact."
Now the secular trend that began in year 2000 when the S&P was up in the 1500s, awww, that remains intact. The S&P 500 Index - and this is measured by the Index itself - has not gone above the prior high of 1527 close. In fact, in remains in the mid-1400s at this point. In order for it to move beyond an existing secular trend, such as the one we've had the past seven years, you would have to exceed it, I would think, by at least 10%. There are many cases, Peter, where we have exceeded it in the single digits. There are many cases, for example, go back to 1966-1982-that was a secular bear trend. And there were many cases during that trend, where the Index exceeded the prior cyclical bull market high during that secular trend by let's say, 4%, 5%, 6%, but there were no cases where it was exceeded by 10% or more. So for now, the secular trend remains intact because the S&P has been unable to exceed the prior high of 1527 by anything close to 10%. In fact, it's never even been back to that level and even today remains below that level."____Bob Brinker

David Korn wrote the following:
"Bob Brinker on the Secular Bear Market." February 2007
"Just a few months ago, Bob Brinker discussed on Moneytalk his view
that we are still in a secular bear market. Here is an excerpt from my
newsletter where that was discussed. Enjoy! - David
David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob
Brinker Host), Financial Education, Helpful Links, Guest Editorials,
and Special Alert E-Mail Service. Copyright David Korn, L.L.C. 2007
February 3-4, 2007 Newsletter
Caller: This caller asked Bob how he handles cyclical markets within
the longer term secular markets and what level he thought the S&P 500
would go to before the bear market arrives. Bob said he hasn't put a
final number on where the S&P 500 will go to and that is something he
evaluates on a continuous basis in his newsletter. However, Bob said
that what we do know is that within secular trends, there are no cases
where a trend has gone beyond the previous peak by more than 10%. That
has never happened and so until it happens, Bob said the secular trend
is intact.
EC: When the bear market came in 2000-2002, Bob said he would stay
with his forecast of a secular bear market unless the market exceeded
its prior high by 5%. Today's statement marks a change in that Bob now
says the new highs must be breached by 10%. Perhaps Bob did more study
of secular markets to come up with this number. Whatever the case, Bob
remains convinced that the secular bear market is still here.
Brinker Comment: The secular bear market trend began in 2000 when the
S&P 500 was up in the 1500s. The S&P 500 has not gone above the prior
high of 1527 on a closing basis. In fact, it remains in the mid-1400s
at this point. In order for it to move beyond an existing secular
trend, such as the one we've had the past seven years, you would have
to exceed it by at least 10%.
EC: This comment clarifies that Bob does not include dividends in his
secular forecast. Why? I have no idea. He lambasted advisors who don't
include dividends when making calculations a few weeks ago. Perhaps he
realizes that when you include dividends, the Wilshire 5000 is already
above its prior highs. Or, maybe he just analyzes price (excluding
dividends) when conducting cyclical/secular market analysis. I don't
include dividends when doing my studies of past cyclical bull/bear
Brinker Comment: There are many cases where the market has exceeded
the prior secular highs in terms of single digit percentages. This
happened, for example, back in the 1966--1982 secular bear trend.
There were many times when the cyclical bull market high exceeded the
secular trend by 4%, 5% or even 6%; however, there was no case where
it exceeded the high by 10% or more. So for now, the secular trend
remains intact because the S&P 500 has been unable to exceed the prior
high of 1527 by anything close to 10%. In fact, it's never even been
back to that level and remains below that level today.
Caller: If the S&P 500 did get above the prior secular bull market
high, would that get you trigger-finger happy about viewing the trend
as over? Bob said he doesn't have to worry about that. Bob noted that
he has been fully invested since March 11, 2003 when the S&P 500
closed at 800.73. In fact, the S&P 500 is up now 80%, not counting
cash dividends. This is a cyclical bull market and it has been a
really good one. Bob said he remains fully invested for now, and the
cyclical bull market remains intact.
EC: Well there you have it. The cyclical bull market continues. I
suspect that in Bob's next newsletter which is published in two days,
that he may even raise his target for the S&P 500."_____David Korn (To
subscribe to David Korn's outstanding newsletter go to this website at
Bob Brinker also told subscribers exactly what would signal the end of the secular bear megatrend. In the May 2006 Issue of Marketimer (just one month before Bob Brinker now claims the secular bear megatrend ended), Bob Brinker said,
"The current cyclical bull market, which in our view is unusual in terms of its length, has had to battle the headwinds of the secular bear megatrend that began in the first quarter of Year 2000. definition, the secular bear megatrend will continue as long as the S&P 500 Index is unable to achieve a significant breakthrough of its March, 2000 historic high. We estimate the likely duration of this secular bear megatrend within a broad range of eight to twenty years, and we are now into year......"

Here is what happened next:
In June and July 2007, the Dow and the S&P 500 Index closed above the Y-2000 closing highs. In the June 2007 Marketimer, Bob Brinker said:
"In our view, the valuation based secular bear market that was
established following the March, 2000 closing high for the S&P500
index (1527.46) and following the January, 2000 closing high for the
DJIA (11723), reached its conclusion on June 13, 2006 at the bottom
of the mid-term off-presidential election year correction."

Bob Brinker has never informed Moneytalk listeners that he retroactively declared that a secular bear market ended over a year ago, in spite of the fact that, as I have shown, he has regularly talked about it on Moneytalk.
One might wonder why Bob Brinker would be silent about this? Could it be because he is now EXTREMELY bullish and has been for several months? Did he finally realize as the market kept charging ahead-- breaking Y-2000 closing highs--that he had been totally mistaken about the stock market's secular trends?
Anyone who has listened to Moneytalk for any length of time, knows that Brinker seems to find it difficult to admit when he is wrong- especially about his market-timing "skills." This is not the first time that he has basically covered-up major market-timing blunders and mistakes. (More about that later.)
I believe that he was caught between a rock and a hard place because as the stock market continued to charge forward even beyond his "outlier," scenario, and he continued to see more gains ahead, he had to become 100% bullish. And the only way he could do that was to make the secular bear megatrend disappear.
No way could he continue to warn subscribers about a big bear hiding just around the corner without looking really ridiculous. So rather than explain the truth to listeners and subscribers--that he had been mistaken because the market never entered a secular bear megatrend Brinker simply said that it had ended a year ago--June 2006. (The stock market actually underwent a cyclical bear between 2000-2002, but the secular bull that began in 1982, never ended.)
To listen to him now, one would not suspect that just mere months before he now claims the secular bear megatrend ended, he was claiming that it would last "eight to twenty years."
Is it possible to "time" the market. These two giants in the industry have this to about it:
John Bogle said:
"The idea that a bell rings to signal when investors should get into
or out of the stock market is simply not credible. After nearly 50
years in this business, I do not know of anybody who has done it
successfully and consistently. I don't even know anybody who knows
anybody who has done it successfully and consistently."_________John
C. Bogle

Professor Burton Malkiel said:
"Well, let me tell you, I have been following markets for about 50
years, and I've never met anybody who could time the market correctly.
And I say, stay the course............. And what I'm absolutely
convinced of is: You'll NEVER, NEVER, NEVER be able to time the
market."_____Burton Malkiel


Anonymous said...

Sorry, I have to Disagree.....
Give it a rest & Spin Doctoring...BB's % allocation in the Q's was Minimal vs the rest of one's portfolio.. You want someone to be 100% on all his Investments?

As for A Bear market? Haven't heard Bob talking about that for why focus on the past? He is POSITVE on the market and is "Fully Invested"..

His 3 main Ports are As good as or better than His Peers...
You want to make more?
Add CGMFX, MACHX,FICDX,PRLAX,VGENX, or ICENX to your Port. I did...;>)

Kirk Lindstrom said...

"BB's % allocation in the Q's was Minimal vs the rest of one's portfolio... .... His 3 main Ports are As good as or better than His Peers... "

It amazes me how some people use the cloak of anonymity to post nonsense.

Three different people have calculated the affect of his QQQQ advice on his best performing portfolio #1 and the results do not agree with what you wrote.

Read "Affect of Bob Brinker's QQQQ advice on his Reported Model Portfolio Returns and the comments for two methods that conclude:

Brinker's P1 with QQQQ did 10.7% APR

The Wilshire 5000 over the same period did 12.0%

$10,000 compounding at 10.7% between 1/1/88 and 7/27/07 grows to $73,181

$10,000 compounding at 12.0% between 1/1/88 and 7/27/07 grows to $91,848

(Please check my math)

Why market time with Brinker if those paying for his best advice under perform the Wilshire 5000 over the long term before taxes and expenses are considered?

Anonymous said...

Kirk said...

The Wilshire 5000 over the same period did 12.0%

$10,000 compounding at 10.7% between 1/1/88 and 7/27/07 grows to $73,181

$10,000 compounding at 12.0% between 1/1/88 and 7/27/07 grows to $91,848

(Please check my math)

That's ridiculous. How can buying cubes affect the portfolio since 1988?

Kirk hasn't shown the effect (and he should learn the correct usage...not affect) of the QQQQ purchase at all.

Anonymous said...

Sounds like the author got caught afraid of the market in 2003. I never heard 'caution' in his recommendation re the secular bear. In 2003, he clearly said to put everything into the market-- just as he did on several occasions since by e-mail alerts, the most recent a few weeks ago. Sure, he has described the historical megatrends of the past and expected a similar scenario... but rolling with an odd market is a virtue, not a sin. Regarding the q's, he presented that as a trade only for aggressive investors who want to try some short term trading. It didn't work out. But for those of us who were fully in during the run up in 2000, and then got out at the top and got in at the bottom in 2003, the q trade was minor disappointment, nothing more. said...

This was an excellent chronilogical rendition of BB calls and perhaps some insight into the reason d'etre

No fan of BBs and his understated braggadocio or BB recommendations once a call is made such as dont get back in until the dip which never comes like in 2003 and seldom yields until overwhelmed by subscriber calls for guidance, there seems to be 2 issues the this dicussion.

One is BB calls. One cannot take away from his 50% get outin 2000 which was a good call to save money for many many people. Then of course the March 11, 2003 BB call to get back in 100% was a brilliant call by BB. I missed the day and waited as BB said dont buy until it dips back below 800 and of course it never did. He yielded to subscriber calls to avg in much much later in the year. Then at the end of the year BB said it was the mother of all cyclic bull mkts. He never mentioned that it was the mother during the year and jump back in no matter what. Then BB came up with outlier cyclic crap which was a new one to explain how long this bull has been running.

That said give BB his due, if yu are in at the very beginning of the call go for it - otherwise perhaps like me and others, his signals are very mixed at best.

There is a simple economic reason behind BB recalcatrance to admit he is wrong or hedge especially after he called one right or getting clobbered with calling one wrong such as the QQQ. Add it up, I heard, read where BB is way north of 10K yearly subscribers at round it off say $200 per year (actually $187 last time I subscribed to it). Hey just do that math 10k times 200 a year is a cool $2 mil yearly in subscriber fees.If BB is only calling cyclic trends of every 2-5 years or secular trends of every 15 years he only has to be right a couple times to do the Kaching!!! and ring up the cash register at 2 mil a clip. Why admit he is wrong. Why do anything except be a blowheart for 3 hours twice a week.

So BB makes some good calls - true and most of his subscribers love him. BB may blow some calls in real time or terminology and most people are like Stepford denisens and march in a single straight line like good repubs they are. He like the right wing will never admit to a failure as admitting failure as opposed to mkting will hasten the demise of his subscriber empire.

So Honey dont be toooooooooo harsh on ole BB. There is a method to his madness and he has us all hoodwinked for sure. I am just crying in my soup I missed his last 2 calls even though I read them in his newsletter due to my own pigheadedness and then followed BB by the absolute suggestions and not understanding until much much later what he is protecting and why he will always hedge once he scored with a homer.

One wud ask where was BB in Oct 2002 when that first bottom hit. In fact, I had a lengthy convo with several of my peers that BB had seemed to miss this cyclic bull sailing. BB got a reprieve on the double bottom in March 2003.

That is one novice's take.

P.S. I wonder why BB dont chart some of the international mkts since that is the true bull or why doesnt BB have an email address or snail mail address to contact him. I wrote him a couple letters and he never responded. BB isnt going to gravel in the mud with commoners when he has that 2-4 mil off of his 20K plus yearly subcribers sending checks every year. Wud yu Honey...

So that is one novice's take on our Timing Mkt Leader the Brinksters.

Perhpas trend following to get in/out of mkt is a better strategy. Any suggestions about that aspect of investing

smile_1 said...

Anonymous said... That's ridiculous. How can buying cubes affect the portfolio since 1988?

smile responds... it is only ridiculous if you can either prove the input is incorrect or the math is wrong. My bet is you will silently fade away into your gut feel realm.

If you need some help with the math either Kirk or I can help you or you can use the XIRR function in Excel.

Go here: and if you can prove any of the input is incorrect you might have a basis for your outcry of ridiculous.

Without the facts and numbers on your side, you are done.

The input variables are correct and so is the math.

BB was outperformed by his favorite benchmark index the Wilshire 5000.

The above is bad enough, because if you simply put your money in the W5k your money would have doubled every 6 years using the quick estimation tool of the rule of 72 over the last 19+ years.

What really sucks is if you have subscribed to Brinker's Marketimer over the past 19+ years, then you are even deeper in the hole when you include the opportunity costs of your subscription.

samule said...

Bob always said nobody could accurately call a secular bear market until it was over. He also always said he didn't have a crystal ball.

I think the important thing to remember here is that no asset allocation changes were made. No recommendations were made based on the prospect of a secular bear market.

It didn't really matter one way or another.

David Korn, Kirk Lindstrom and others say they have figured out Brinker's model yet none of them ever refuted the prospect of a secular bear market. Maybe they don't really have Bob's model figured out after all.

Kirk Lindstrom said...

Samule wrote: "David Korn, Kirk Lindstrom and others say they have figured out Brinker's model yet none of them ever refuted the prospect of a secular bear market. Maybe they don't really have Bob's model figured out after all."

Is that "Bobspeak" or was it meant as a joke?

How do you refute a prospect?

Bobspeak: Saying in the January 2001 Marketimer the QQQQs could rally "Up to 50% or more" to say "zero to infinity" was my all time favorite.