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Saturday, December 15, 2007

What Bob Brinker Doesn't Say About Buy Signal

Bob Brinker talks about his March 2003 buy signal on almost every Moneytalk program--sometimes more than once. That was a good call, and one can hardly blame him for spinning it to his best advantage. However, in the interest of being honest and trustworthy, if he is going to tout this good call, he should talk about his prior calls that played an integral part in how much subscribers could benefit from it.
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Moneytalk, December 1, 2007, Bob Brinker said: "As a matter of fact, the S&P 500 – if you go back to our major buy signal, March 11, 2003, which was a couple of days prior to the start of this great bull market run – the S&P at that time was sitting in at around 800, now sitting in about 1481, and adding in the cash dividends paid over that period, the total return now, during that period, is in excess of 90%.”
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On December 8, 2007, during Sunday’s opening monologue Bob Brinker re-iterated his "March 11, 2003 buy signal.” He said that he recommended the return of “all available stock market cash reserves” to the market.
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Unfortunately, Bob Brinker has never told listeners that subscribers who followed his model portfolio recommendations from January 2000 had only a portion (perhaps as little as 50%) of their equity cash reserves available to return to the stock market.
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Additionally, there were subscribers who did not return to the market because they either missed Brinker's bulletin or simply waited for “weakness” according to Brinker’s follow-up advice. In April and May, 2003, Brinker advised those who missed the buy-signal bulletin to wait for WEAKNESS below 810 on the S&P 500 Index before dollar-cost-averaging into the market.
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May, 2003, Marketimer: “……we recommend against chasing rallies in order to invest new money. In the event another test of the area of the bear market lows occurs below the 810 level for the Standard and Poor’s 500 Index, we would regard such weakness as an additional buying opportunity.”
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Beginning about the same time and continuing for the next six years, Brinker told both subscribers and listeners that the market had entered a “secular bear megatrend” as of March, 2000. He maintained this belief and touted it at length in several Marketimers and on Moneytalk.
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In the April 2003 issue, Brinker stated unequivocally that Marketimer “believes that the secular bear megatrend that started in early 2000 will last for 8 to 20 years, and will include a series of cyclical bear and cyclical bull markets.”
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Here is what Brinker told a Moneytalk caller in February, 2007:
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“……..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%.......”
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Obviously, the market has proven that Brinker was completely mistaken about the “cyclical bull market" running simultaneously with a “secular bear market." It never happened. A look at market history from March, 2000 to October, 2002 will show that the market simply entered and exited a cyclical bear; and that the secular bull market which started in 1982 never ended.
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However, Brinker milked this premise as long as he could; and probably sold a lot of newsletters to those who were fearful and believed Brinker could save them from the bear when it returned. This is how he did it:
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  • He originally claimed the bear would return in 1 to 2 years.
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  • Then he extended the time frame to 1 to 3 years.
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  • Then he called it an “outlier.”
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Finally, as the Dow and S&P broke through prior closing highs, it must have become apparent to Brinker that he had been mistaken all along. He put a short notice in the June, 2007 issue of Marketimer stating that the secular bear megatrend which had begun in March, 2000, had ended the previous year (in June 2006). One can only speculate as to how many investors stayed out of the stock market all of those years because of Brinker’s dire secular bear market warnings.
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Even though what Brinker says about the buy signal, the S&P gains, and returning “all available cash reserves” to the stock market on March 11, 2003, is technically true, the way he says it is very misleading and deceptive. He leaves out some very important facts that have a direct bearing on how profitable the “buy signal” really was to subscribers.
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So let’s take a look at what Brinker doesn't say about those “available cash reserves." He doesn't say that subscribers (who followed his advice as given in Marketimer since January 2000) had only a fraction of their cash reserves available to put into equities in March, 2003.
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Here is how it happened:
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January 2000, Brinker recommended selling 60% of model portfolio equity holdings. August 2000, Brinker raised that percentage to 65%. He Reflected these changes in his Model Porfolios, as the August 2000 issue of Marketimer shows:
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• Model Portfolio I: "Money Market @ 65%."
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• Model Portfolio II: "Money Market @ 65%."
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In October 2000, he sent a special bulletin to subscribers recommending that they use 20-50% of the 65% “available cash reserves” to buy QQQ.
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http://honeysbobbrinkerbeehivebuzz.blogspot.com/search?updated-min=2000-01-01T00%3A00%3A00-08%3A00&updated-max=2001-01-01T00%3A00%3A00-08%3A00&max-results=2
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The following instructions were included in several issues of Marketimer:
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November 6, 2000, Bob Brinker said: "Marketimer subscribers with aggressive objectives can invest up to 30% to 50% of cash reserves in either the QQQ shares or Rydex OTC Fund in order to participate in this recommendations. That translates into potential exposure of 19.5% to 32.5% of a TOTAL AGGRESSIVE PORTFOLIO. (30% of 65% CASH RESERVES equals 19.5%. 50% of 65% cash reserves equals 32.4%). The balance of reserves remain in money market funds..
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Conservative subscribers can invest up to 20% to 30% of cash reserves in this recommendation, using either QQQ shares or Rydex OTC Fund shares. That translates into potential exposure of 6.5% to 9.75% of a total BALANCE PORTFOLIO. (20% of 32.5% cash reserves equals 6.5%, 30% of 32.5% CASH RESERVES equals 9.75% of a BALANCED PORTFOLIO. The balance of reserves remain in money market funds."

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Brinker actually made this same “countertrend rally” prediction two more times over the following months.
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In the January 2001, Marketimer: Bob Brinker said, "We continue to emphasize the guidelines we have recommended with regard to the exposure in the Nasdaq 100 Index for the countertrend rally phase we expect.......we are expecting potential gains for the Nasdaq 100 Index of up to 50% or more as measured from the January 2 closing low....." (January 1, 2001, QQQQ closed at $64.30).
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March, 2001, Marketimer begins with Bob Brinker admitting that "we were wrong in our earlier expectations that a countertrend rally would develop late last year...." He then admits that even his call for a new bear market rally beginning on January 3 "was unable to sustain" upward progress in February. In spite of these admissions of being "wrong," in the same issue of Marketimer, Bob Brinker made the following recommendation to subscribers: "In our view, the probabilities favor a three to six month bear market rally phase beginning shortly. Such a rally has the potential to carry the Nasdaq composite Index above the 3000 level by spring or summer as measured from the closing lows." (March 1, 2001, QQQQ closed at $39.15)"
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April 6, 2001, Marketimer, Bob Brinker said, "Recent weakness in the Nasdaq 100 Index (QQQ) shares has far exceeded our expectations. However, we believe subscribers holding a position in these shares will eventually be rewarded, although this holding will require both time and patience. With or without a buy signal from our long-term model, we expect the Nasdaq Composite and Nasdaq 100 Index to stage a significant recovery over the next several months."
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May 7, 2001 Marketimer: Bob Brinker said, "As we stated last month, with or without a buy signal from our long-term model, we expect the Nasdaq Composite and Nasdaq 100 Index to stage a significant recovery over the next several months."
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For the next (almost) two years, the only “guidance” that Marketimer offered subscribers was to simply “hold for recovery” all existing positions in shares of Nasdaq 100 Index.
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The following is Brinker’s final guidance on these shares—just FOUR DAYS before he issued his March 11, 2003, buy signal:
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March 7, 2003, Marketimer, Bob Brinker said: "For subscribers holding Nasdaq 100 (QQQ) shares, we recommend holding for a significant recovery in the shares in the next cyclical bull market."
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March 11, 2003, with no mention of the prior QQQ-purchases, Brinker added RYOCX to his model portfolios in the mid-$20 range. He never again mentioned “those holding Nasdaq 100 (QQQ) shares." (RYOCX is a Nasdaq 100 Index fund, equivalent to QQQQ.)
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Brinker never added any the QQQ-trades to his model portfolios performance record and has never recognized that they happened or accounted for them in any way. The trades were NEVER closed and all follow-up guidance ended in March 2003 when he issued a new buy signal after QQQ lost over 70% of its value.
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Bob Brinker uses Mark Hulbert’s performance ranking in his newsletter advertising. Mark Hulbert rates Brinker on an average of his model portfolios. Hulbert initially added the October 2000 trade to Brinker's model portfolios, but soon took it out when he realized that Brinker was not going to account for the trade in his model portfolios.
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With some pressure from his subscribers, Mark Hulbert decided to use a footnote in Hulbert’s Financial Digest to justify giving Bob Brinker’s model portfolios a “mulligan” on the double-use of model portfolio cash reserves. Hulbert asserts that Brinker announced at the time of the “forecast” that he was not including the trade in his model portfolios--that is blatantly FALSE as Brinker’s bulletin clearly shows. But it is certainly true that Brinker recommended using MODEL PORTFOLIO CASH RESERVES for the trade.
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Mark Hulbert’s HFD footnote:
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"PLEASE NOTE: In late 2000, Brinker forecasted a several-month bear market rally and recommended an investment in the NASDAQ 100-Index--a trade that turned out quite unprofitably. However, because Brinker, at the time of making this forecast, chose not to make this trade part of his model portfolios, his HFD record has not suffered as a result.”
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Brinker uses Hulbert’s Financial Digest rankings as a source in his advertising, but never mentions that Hulbert uses the footnote about his trade. So it seems like a rather circular way of advertising with misleading information.
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The bottom line is that Bob Brinker’s “official performance record” is approximately 30% higher than it would be if he had not "chosen" to keep this unique and disastrous trade “off the books.”
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Kirk Lindstrom said: “Thus, anyone who followed Brinker's advice with 50% of cash reserves that was also in his "model portfolio for aggressive investors" saw their totals reduced 29.5% from what Brinker reports in his advertising………………… Conclusion: I calculate the QQQQ advice caused Brinker's reported total to drop by 29% and his APR to drop 2.0% a year such that his portfolio under performs the buy and holders of the Wilshire 5000 by 1.3% per year since the inception of P1.” To see Kirk’s complete analysis and how he arrived at his conclusion go here:
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http://home.netcom.com/~fanclubs/BobBrinker/Kirk/QQQQEffectOnPortfolios.html
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Many people were damaged financially by taking Brinker’s advice on the QQQ trade and holding while they dropped from $87 to below $20. Some even had to postpone retirement. There was talk about possible lawsuits. Brinker shut down his message boards because of all the complaints. Brinker stopped all libraries from offering Marketimers shortly after the QQQ-Bulletin was issued.
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There has been no information in Marketimers since March 2003, and guidance was never offered on Moneytalk. It defies logic to believe that people who were “holding” those shares of QQQ would not call Moneytalk and ask for help.
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Here are some samples of what people were writing on message boards at the time:
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April, 2001: In response to message posted by ectopia:
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"I just received my Market Slimer. The "Brilliant One" doesn't even mention the Qube "trade" until the middle of page two. He spends the first page and a half reviewing his January 2000 Bear Market call and then stating his belief that the Market internals are improving. He states that if they keep heading in the same direction the "model" could signal a long term buy sometime this spring. That's right folks, just as Will predicted the QQQ "trade" is now an investment in which we will "be amply rewarded if we show patience." Yeah, like about sometime in 2010. Remember all that garbage he was spewing about "capital preservation" being preeminent all last year prior to his CTR call? Why in God's name didn't he take his own advice??? Does he realize how his hubris and arrogance has cost so much financial and emotional pain? Mr. Brinker, sir, you are one world-class unprincipled jerk. You have no conscience because if you had even a trace of one, you'd slink away never to be heard from again. We've been the prey of one of the greatest shark attacks of all times. What a piece of work you are! -- .
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posted by MichaelJohn64 507.
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I really think we should organize a class action law suit against the SOB for misrepresentation and fraud. I think the suit would be valid because he censored contrary posts from his Web discussion, causing the unsuspecting viewer to believe that his record and tactics were widely supported. Similarly, he culls the talk show participants and misleads the listening public into believing that his record, views, etc. are widely supported. I know this has been brought up here before; most have said that we wouldn't get anywhere with this sort of thing but I don't understand why this couldn't be a valid case.
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-- posted by ectopia
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In response to Bob Brinker posted by skeptic101:Skeptic101 said "I thought your retirement was ruined in Oct. 2000??????"
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For those who don't follow my life as closely as Skeptic101 apparantly does, he is referring to the several hundred thousand dollar loss we suffered by following Bob Brinkers ill fated QQQ call shortly after we retired in 2000. Well, Skeptic101, the answer is that we went back to work part time for 5 yrs (consulting)and drastically cut our budget while saving and investing to make back the defecit. NOW we are fully retired again and my comments about spending 4% inflation adjusted per year stand... So, YES, my original retirement plans and budget were ruined by Brinker but after 7 years we have recovered on our own. Now go question someone elses veracity...:) ""
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"» retiredinprescot -

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5 comments:

Kirk said...

Wow! That is quite a summary. Thanks for putting it all down to read.

One question to anyone who listens:

Bob Brinker said “……..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.

Has he addressed on the radio why he said the secular (bear market) trend would be intact until the markets were 10% higher then later declared in his newsletter that the secular bear market (that never was) ended a year earlier in 2006?

This chart of the S&P500 shows clearly it has not been 10% above the mid 1500's of March 2000.

Jim said...

Great Work Honey... thanks so much for "keeping the record straight" and articling the Brinker record.

Kirk -- you are right on!

Thoughts of a genius mind said...

I agree with Kirk and I say wow! Nice Job of putting all that together. I subscribed to Bob Brinker during that QQQ fiasco, but when the bulletin came out, I only put a small portion into the QQQ trade. It seemed like a risky venture at the time so I came out relatively unscathed. But remember his UTEK venture, the company he recommended. I bought that and saw the price go down down down. After the QQQ debacle, I stopped subscribing to Bob Brinker. Thanks for the post.

Mark

http://mark24609.blogspot.com/

Honeybee said...

Hi Jim!

Thanks for your comments....

8^)

Honeybee said...

Thank you for your comments.

Good for you in seeing that the QQQ-trade was a blunder and for cutting your losses.

Too bad that Brinker didn't make the same decision for his subscribers. However Brinker's mantra is to not sell on weakness. That is usually a good rule, but like most rules, there are exceptions.
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Sorry to hear that you lost money on UTEK. I still plan to put together a Brinker UTEK history, but it will probably be after the holidays.
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Did you get bit by Brinker's TEFQX recommendation?