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Friday, February 15, 2008
Thursday, February 14, 2008
Marketiming Stumbles
When Bob Brinker's Market Timing Stumbles
Right up until the time that the market dropped over 15% in January, Bob Brinker had been repeatedly predicting new all-time-highs. He even said that the market looked "favorable" as we entered Y-2008.
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On Moneytalk, Brinker said that the correction was more than he had "expected." That is quite an understatement. Brinker had not been expecting ANY correction. Indeed, he said that the correction from last summer had been "health-restoring" to the stock market.
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So how has he reacted to this unexpected correction -- besides letting Bill Flanagan do Moneytalk? 8^)
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Firstly, it is important to note that Bob Brinker has not recommended raising any cash reserves since January/August 2000, when he went to 65% cash reserves and 35% remained in equities throughout the bear market between 2000-2002. His Model Portfolios have been 100% invested since March, 2003.
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On January 20, 2008, he removed his "attractive for purchase at mid-1400's" buy-signal which he has advised each month since August, 2007, and advised only dollar-cost-averaging into the market. At the same time, he said he was looking for a new market bottom.
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As of February 10th, Brinker has issued a new buy level in the "low 1300's." This is not only way below the prior buy level of mid-1400's, it's below the one prior to that--which was "1380 or lower."
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Brinker now says that we may not see any new stock market highs until 2008 or into 2009. That is quite a change for him because he has been predicting new highs ahead for at least 8 months...
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He has also changed his recession views. He formerly was saying there was zero chance for one. He now says there is a chance of a mild and brief recession -- during the first half of 2008.
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Pity the people who might have come into a large chunk of money during the last couple of months of 2007 and sunk it into the stock market on Brinker's advice, just to ride it down almost 20% intraday and 16% on a closing basis....
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Kirk Lindstrom posted these market statistics the day after Brinker's last bulletin:
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Correction Statistics for 02/11/08 S&P 500 Chart (Using Intraday prices):
http://home.netcom.com/~kirklindstrom/Charts/SnP500.html
Last Market High 10/10/07 at 1,576.09
Last Market low 01/23/08 at 1,270.05
Current S&P500 Price 1,339.13
Decline in Pts 236.96
Decline in % 15.0%
Max Decline 19.4%
This means the correction from intraday high to intraday low is 19.4% and we are currently 15.0% off the peak. The decline from the high to the low on a closing basis is 16.3%
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DJIA Chart (Using Intraday prices): http://home.netcom.com/~kirklindstrom/Charts/DJIA.html
Last Market High 10/10/07 at 14,198.10
Last Market Low 01/22/08 at 11,634.82
Current DJIA Price 12,240.01
Decline in Pts 1958.09
Decline in % 13.8%
Max Decline 18.1%
This means the correction from high to low has been 18.1% and we are currently 13.8% off the peak. The decline off the high on a closing basis has been 15.5%
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"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
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"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.____Professor Burton Malkiel.
Monday, February 11, 2008
Bottom Calls or Using Asset Allocation To Make Money Trading Ups and Downs
Bob Brinker writes a newsletter called "Marketimer" which implies he attempts to time the stock market. To me, "Market timing is entertainment." It is something fun to discuss such as “I think we might have made a bottom for now” or “this chart will get some bears scared they missed a bottom” but the performance beating returns over the long term come from asset allocation and stock selection.
If anyone is interested in making money from the market’s ups and downs, then they should sell something when the market is up so they can buy it or some other security back when the market is down if they want to do anything other than buy-and-hold. Anything else is just a lot of noise to generate interest.
Brinker advised a fully invested position for his subscribers when the market was at a record high of 1565.
He then "called an all in" when the market was in the mid 1400's which some call a "buy signal" or a "bottom call." I call it good advertising since he already told people "all in the pool" at 1565. Granted it can be helpful for new subscribers who were dollar cost averaging to a fully invested position.
Unless you inherited great wealth, few people get meaningful infusions of new cash to lump sum into the market. Your 401K investments look like dollar cost averaging, but they are mini lump sums the day you get them.
Other than advertising, what good in “yet another all in the pool” call here in the low 1300’s after we already had advice to be fully invested when the S&P500 was 1565 and told to “go all in” when it “corrected” to the mid 1400s?
I, on the other hand, use asset allocation to guide me when to buy and sell. I'll often say something like "the market is up and I am taking profits" just like I will say "the market is down, we probably have a local bottom and I'll buy something now with the cash I have from taking profits earlier."
I will use an example of one of the stocks I trade around a core position, VLNC.
In January 2000, the stock was down so I added 1000 shares to my newsletter explore position at $1.37. By October 22, 2007 Valence was at $1.97 so I sold those shares for a nice $600 gain before counting the $24 in round trip commissions. I wrote in my newsletter that there was a gap in the stock back around $1.64 that I’d wait for a potential correction to fill where I might buy the share back. Sure enough, in January 2008 the market corrected hard and I was able to buy those 1,000 shares back at $1.64. We used an "Auto Buy" to pick up the shares. This is simply a "Buy Limit Order" you set at your broker (online or over the phone) ahead of time so your shares are purchases automatically. It helps buy in times of fear.
Last week great news came out for Valence and it soared to today’s closing price of $2.44!! Friday I put in a stop loss for those shares just below $2 that I might raise if it runs out of momentum.
Am I calling a “top” or a “bottom” just because I say “this or that chart looks like it could be a bottom” doesn’t matter. Of course not!
The chart above shows I did not buy VLNC at the "optimum" time but I did "good enough” to make nearly $600 on at $1370 investment (less $24 commissions.)
What matters is do I buy or sell and take advantage of the situation to make money.
Read my article Valence Technology: A Green Stock with Potential for more info on this company.
Remember past performance is no guarantee of future success, but someone has paid the bills for me to have a great life and leave the workforce at the age of 41 and still write about it for extra income at the age of 50 while living in a very nice place. If given a choice who to listen to, I would pick someone who has shown they are successful investingWhat matters is do I buy or sell and take advantage of the situation to make money.
Read my article Valence Technology: A Green Stock with Potential for more info on this company.
Remember past performance is no guarantee of future success, but someone has paid the bills for me to have a great life and leave the workforce at the age of 41 and still write about it for extra income at the age of 50 while living in a very nice place. If given a choice who to listen to, I would pick someone who has shown they are successful investing.
I don't monitor this forum so if anyone wants to discuss how I invest, then they are welcome to join me in "Kirk's Market Thoughts" at facebook's "Investing for the Long Term" to dicuss this article.
If anyone is interested in making money from the market’s ups and downs, then they should sell something when the market is up so they can buy it or some other security back when the market is down if they want to do anything other than buy-and-hold. Anything else is just a lot of noise to generate interest.
Brinker advised a fully invested position for his subscribers when the market was at a record high of 1565.
He then "called an all in" when the market was in the mid 1400's which some call a "buy signal" or a "bottom call." I call it good advertising since he already told people "all in the pool" at 1565. Granted it can be helpful for new subscribers who were dollar cost averaging to a fully invested position.
Unless you inherited great wealth, few people get meaningful infusions of new cash to lump sum into the market. Your 401K investments look like dollar cost averaging, but they are mini lump sums the day you get them.
Other than advertising, what good in “yet another all in the pool” call here in the low 1300’s after we already had advice to be fully invested when the S&P500 was 1565 and told to “go all in” when it “corrected” to the mid 1400s?
I, on the other hand, use asset allocation to guide me when to buy and sell. I'll often say something like "the market is up and I am taking profits" just like I will say "the market is down, we probably have a local bottom and I'll buy something now with the cash I have from taking profits earlier."
I will use an example of one of the stocks I trade around a core position, VLNC.
In January 2000, the stock was down so I added 1000 shares to my newsletter explore position at $1.37. By October 22, 2007 Valence was at $1.97 so I sold those shares for a nice $600 gain before counting the $24 in round trip commissions. I wrote in my newsletter that there was a gap in the stock back around $1.64 that I’d wait for a potential correction to fill where I might buy the share back. Sure enough, in January 2008 the market corrected hard and I was able to buy those 1,000 shares back at $1.64. We used an "Auto Buy" to pick up the shares. This is simply a "Buy Limit Order" you set at your broker (online or over the phone) ahead of time so your shares are purchases automatically. It helps buy in times of fear.
Last week great news came out for Valence and it soared to today’s closing price of $2.44!! Friday I put in a stop loss for those shares just below $2 that I might raise if it runs out of momentum.
Am I calling a “top” or a “bottom” just because I say “this or that chart looks like it could be a bottom” doesn’t matter. Of course not!
The chart above shows I did not buy VLNC at the "optimum" time but I did "good enough” to make nearly $600 on at $1370 investment (less $24 commissions.)
What matters is do I buy or sell and take advantage of the situation to make money.
Read my article Valence Technology: A Green Stock with Potential for more info on this company.
Remember past performance is no guarantee of future success, but someone has paid the bills for me to have a great life and leave the workforce at the age of 41 and still write about it for extra income at the age of 50 while living in a very nice place. If given a choice who to listen to, I would pick someone who has shown they are successful investingWhat matters is do I buy or sell and take advantage of the situation to make money.
Read my article Valence Technology: A Green Stock with Potential for more info on this company.
Remember past performance is no guarantee of future success, but someone has paid the bills for me to have a great life and leave the workforce at the age of 41 and still write about it for extra income at the age of 50 while living in a very nice place. If given a choice who to listen to, I would pick someone who has shown they are successful investing.
I don't monitor this forum so if anyone wants to discuss how I invest, then they are welcome to join me in "Kirk's Market Thoughts" at facebook's "Investing for the Long Term" to dicuss this article.
Sunday, February 10, 2008
Moneytalk Commentary February 9-10, 2008
Bob Brinker did not do Moneytalk this weekend. This is the 4th time that Bill Flanagan has replaced Brinker since the weekend before Christmas.
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Flanagan made the point that this was the worst week in Dow performance since March 2003 and he said: “I’m beginning to think that when I fill in for Bob, I’m kind of a negative indicator, but this week really was one we’d rather forgot………Ugly, ugly, ugly, as we watch our portfolios shrink.”
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Flanagan does not expect the market to change direction very soon -- "perhaps second, third, fourth quarter or even next year." He said, “But it’s not a very good time for sunny days on Wall Street.” However, unlike Bob Brinker, Bill Flanagan doesn't profess to be a market-timer.
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Renowned and entertaining Brinker-commentator, Will L. wrote the following:
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"As you know Brinker without explanation (and as far as I know never to be mentioned again) pulled a date in June 2006 out of his assets in the June 2007 Newsletter and proclaimed that the bear market ended on that June 06 day. Beyond silly of course --but look at the chart. From the time Brinker claims the secular bear market ended and the secular bull market began and today; you would have been better off in a money market fund.
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Now Brinker just weeks ago when the market was at it's high of the year was very bullish. When others were getting nervous in October, Brinker began to make fun of them. He called for highs in 1600s in 08 and encouraged a huge "go all in" gamble at 1450 on the S&P. He was BULLISH to the max. And curiously he was nearly back to his old boisterous self, Yammering at the "bad news bears", ragging on anyone who disagreed with his very bullish stance.
Well here we are at the weekend. If Brinker shows up today (Honeybee sez: he didn't) do you think he will:
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Brinker I don't believe ever talks about his timing model these days. It's the biggest trough of hogswill (apologies to pig) anywhere. This "timing model" that said the market turned bullish in June 2006 and we are in a secular bull market since then? The timing model that issued a buy signal at 1380--after the market was at 1400 or so...and issued another buy signal weeks ago at mid 1400s? The s&p is at 1330 now. LOL Off about 15% from the extreme top.
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Now Brinker used to boast that his timing model was "designed" to call market bottoms within 3% of the final "closing low". If that were true--why would he not he be in cash? After all I believe Brinker claimed that only up to 10% corrections were "normal" market movement. Indeed wasn't Brinker hammering the "bad news bears" just a couple weeks ago? Foggy? Perhaps Old Foggy? At what point do people realize the emperor hasn't had a stitch on for years??"
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Flanagan made the point that this was the worst week in Dow performance since March 2003 and he said: “I’m beginning to think that when I fill in for Bob, I’m kind of a negative indicator, but this week really was one we’d rather forgot………Ugly, ugly, ugly, as we watch our portfolios shrink.”
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Flanagan does not expect the market to change direction very soon -- "perhaps second, third, fourth quarter or even next year." He said, “But it’s not a very good time for sunny days on Wall Street.” However, unlike Bob Brinker, Bill Flanagan doesn't profess to be a market-timer.
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Renowned and entertaining Brinker-commentator, Will L. wrote the following:
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"As you know Brinker without explanation (and as far as I know never to be mentioned again) pulled a date in June 2006 out of his assets in the June 2007 Newsletter and proclaimed that the bear market ended on that June 06 day. Beyond silly of course --but look at the chart. From the time Brinker claims the secular bear market ended and the secular bull market began and today; you would have been better off in a money market fund.
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Now Brinker just weeks ago when the market was at it's high of the year was very bullish. When others were getting nervous in October, Brinker began to make fun of them. He called for highs in 1600s in 08 and encouraged a huge "go all in" gamble at 1450 on the S&P. He was BULLISH to the max. And curiously he was nearly back to his old boisterous self, Yammering at the "bad news bears", ragging on anyone who disagreed with his very bullish stance.
Well here we are at the weekend. If Brinker shows up today (Honeybee sez: he didn't) do you think he will:
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- 1) Act as though the market is doing exactly as he predicted and there is no concern?
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- 2) Continue saying the market future is "foggy" (LOL that's sure investable information isn't it?)
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- 3) Blame the fed, or the greedy condo flippers or developers or hedge funds ---etc etc for this "exogenous event" that "noone" could have predicted? (Honeybee sez: don't forget the French "rogue" trader. LOL)
Brinker I don't believe ever talks about his timing model these days. It's the biggest trough of hogswill (apologies to pig) anywhere. This "timing model" that said the market turned bullish in June 2006 and we are in a secular bull market since then? The timing model that issued a buy signal at 1380--after the market was at 1400 or so...and issued another buy signal weeks ago at mid 1400s? The s&p is at 1330 now. LOL Off about 15% from the extreme top.
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Now Brinker used to boast that his timing model was "designed" to call market bottoms within 3% of the final "closing low". If that were true--why would he not he be in cash? After all I believe Brinker claimed that only up to 10% corrections were "normal" market movement. Indeed wasn't Brinker hammering the "bad news bears" just a couple weeks ago? Foggy? Perhaps Old Foggy? At what point do people realize the emperor hasn't had a stitch on for years??"
Saturday, February 9, 2008
Flanagan on Moneytalk Today
Bob Brinker is not on Moneytalk today. Bill Flanagan is on.
Bob Brinker is on record saying he did not expect this correction. How much has the stock market declined so far?
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I posted this on Kirk's Facebook Brinker Discussion Forum: "The Dow had its worst week since 2003, I'd sure be interested in knowing what the percentages are now."
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Kirk Lindstrom replied:
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"I am working on this spreadsheet to put the numbers in with words to post. Hopefully there are no mistakes: Correction Statistics for 02/08/08 S&P 500 Chart (Using Intraday prices):
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http://home.netcom.com/~kirklindstrom/Charts/SnP500.html
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Last Market High 10/10/07 at 1,576.09
Last Market low 01/23/08 at 1,270.05
Current S&P500 Price 1,331.29
Decline in Pts 244.80
Decline in % 15.5%
Max Decline 19.4%
This means the correction from intraday high to intraday low is 19.4% and we are currently 15.5% off the peak.
The decline from the high to the low on a closing basis is 16.3%.
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DJIA Chart (Using Intraday prices): http://home.netcom.com/~kirklindstrom/Charts/DJIA.html
Last Market High 10/10/07 at 14,198.10
Last Market Low 01/22/08 at 11,634.82
Current DJIA Price 12,182.13
Decline in Pts 2015.97 Decline in % 14.2%
Max Decline 18.1%
This means the correction from high to low has been 18.1% and we are currently 14.2% off the peak.
The decline off the high on a closing basis has been 15.5%"
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Bob Brinker is on record saying he did not expect this correction. How much has the stock market declined so far?
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I posted this on Kirk's Facebook Brinker Discussion Forum: "The Dow had its worst week since 2003, I'd sure be interested in knowing what the percentages are now."
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Kirk Lindstrom replied:
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"I am working on this spreadsheet to put the numbers in with words to post. Hopefully there are no mistakes: Correction Statistics for 02/08/08 S&P 500 Chart (Using Intraday prices):
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http://home.netcom.com/~kirklindstrom/Charts/SnP500.html
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Last Market High 10/10/07 at 1,576.09
Last Market low 01/23/08 at 1,270.05
Current S&P500 Price 1,331.29
Decline in Pts 244.80
Decline in % 15.5%
Max Decline 19.4%
This means the correction from intraday high to intraday low is 19.4% and we are currently 15.5% off the peak.
The decline from the high to the low on a closing basis is 16.3%.
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DJIA Chart (Using Intraday prices): http://home.netcom.com/~kirklindstrom/Charts/DJIA.html
Last Market High 10/10/07 at 14,198.10
Last Market Low 01/22/08 at 11,634.82
Current DJIA Price 12,182.13
Decline in Pts 2015.97 Decline in % 14.2%
Max Decline 18.1%
This means the correction from high to low has been 18.1% and we are currently 14.2% off the peak.
The decline off the high on a closing basis has been 15.5%"
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Friday, February 8, 2008
Bob Brinker's Market-Timing
Bob Brinker's Bungled Market-timing
Jumpnjoey left this comment on the previous thread: "S&P 500 closed at the same price it was on 26 Sep 06. 16 months worth of gains - bye bye. "
Hi Jumpnjoey,
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According to Bob Brinker, the stock market has been in a “secular bull” trend since June, 2006.
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Between January, 2000 and June, 2007, Brinker claimed that the stock market was in a “secular bear megatrend” (In June, 2007, he retroactively declared the secular bear megatrend had ended as of June, 2006 -- oops).
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In August 2007, Bob Brinker raised his buy level for all new money to the “mid-1400’s range."
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He was 100% bullish throughout 2007 (seemingly more so as the year progressed), and in the January, 2008 issue of Marketimer, he said this:
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January 4, 2008, Page Three, Paragraph One: (S&P 1468): “In every case, despite dire warnings from the bad news bears, subscribers who used these corrections as buying opportunities were on the right side of the market."
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After the market dropped over 15% in January, on Moneytalk, Brinker said that it was more than he had "expected." He removed the buy in the "mid-1400's range" signal, and now recommends only dollar-cost-averaging new money into the market, and he's supposedly looking for the market bottom.
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Throughout most of 2007, Brinker repeatedly said there was no chance of a recession or a bear market correction.
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Now he thinks that it may be the end of 2008 or into 2009 before we see any new highs. This is quite a change for him because he was repeatedly predicting new highs during the last half of 2007.
He has also changed his recession views from "zero chance"of one happening, to yes, there is a chance of one after all, albeit, a mild and brief one -- during the first half of 2008.
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Wednesday, February 6, 2008
Market Similarities Between 1998 and 2008
Bob Brinker would take calls about the stock market and discuss his views on Moneytalk back in 1998. Steve T, a "Guest Contributor" to David Korn's most recent newsletter, has shared an archived record of a conversation that Brinker had with a caller about the 1998 market correction which was very similar to the one that is occurring now -- both would definitely fit into the description of an "intermediate-term correction."
Even though this call was 10 years ago, Brinker's "Timing Model" has not substantially changed for 20 years. What Brinker says to this caller may offer some insight in how he actually views the current stock market activity.
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Here are excerpts 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. Copyright David Korn, L.L.C. 2008 http://david-korn.blogspot.com/
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All of the following is posted with David Korn's permission from his February 2-3, 2008 Newsletter:
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(Guest Contributor) Steve T. comments on Brinker's Timing Model Indicators: As I see it, Bob Brinker would interpret his model with three our of four indicators in the bullish camp. I don't think Bob will turn bearish yet, but like many of you perhaps, I am sure he is watching and listening to the data very closely as it becomes available. Many of us have been worried that this decline of over 10% will turn into a full blown bear market. Based on what I see of his model, I don't think the time is yet upon us.
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I would like to leave you with an interesting call to Moneytalk from years back which is relevant to today's market action. During the heydays of Moneytalk, before the QQQQ debacle, Bob used to talk in depth about the market and his model. Back then, I used to follow his show very carefully and I had kept a summary of a caller to the show back in March 1998. During that show, Bob had a question about asset allocation from a 55-year old caller that was 100% invested in equities. Bob advised the caller to reduce his equity exposure to 80% and move 20% into fixed income. The rest of the call was very interesting as it brought up the issue of intermediate corrections and I thought David's subscribers would enjoy reading it, so here it is:
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CALL TO MONEYTALK MARCH 1998
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BRINKER: I would be willing to stay at your age of 55 still at a very aggressive 80/20. After making that adjustment, which I would make at current strength. Then I would say what I would do is take the following approach. I'd take that approach that I am going to go 60/50 if we get a final top in the bull.
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CALLER: I see.
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BRINKER: Or even if we get the likelihood of a major intermediate correction. Now we've talked about this many times. There are three types of pull backs in the markets. And this is always true. You can get a short term pull back, which is generally 10% or less. And by the way as measured by the New York Stock Exchange, even the last pullback was only 9.9%. So you can get a short-term pull back generally about 10% or less. That usually in a bull market is always a buying opportunity. And we've had many of those over this bull market. You can get an intermediate term correction,which is defined as a correction lasting let us say between several weeks and several months. That could be along the magnitude of let us say, let's put out numbers of less than 20% but more than 10%. So we call it over 10%, but less than 20% for an intermediate term correction. And then of course you can have the bear market which is generally speaking a decline of 20% or more. But a bear market can be a decline of 30%, or 40 or even more. So these are the scenarios you are looking at.
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Right now, I'd go from 100% stocks and 0% fixed income, to 80% stocks and 20% fixed income at your age and you no tax consequences in doing so. Use the GNMAs for the fixed income interest. Then I would watch the market and ignore short term corrections except to buy. If we had a bear market, I certainly would go, well if I went, if we had a bear market, that would result in a sell signal. Which could produce no equities. And if we had an intermediate correction, you might have to also consider going to no equities if it could lead to a bear. Unfortunately, with intermediate corrections, they usually infrequently. Let me put it this way. Let me see if I can be very specific about this. In almost every case a bear market is preceded by an intermediate correction. Let me repeat this, because I am sure that I am confusing somebody. As long as I am not confusing myself, I'm all right. In virtually every single case a bear market is proceeded by an intermediate correction. All I just said was virtually every time the market goes down over 20% in a bear market, it is preceded by a decline of over 10% but lessthan 20%.
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CALLER: Over what time period though?
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BRINKER: The over 10 but less than 20 could last several months, but the bear market can last six to 24 months.
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CALLER: Are you saying you might see this thing drop between 10 and 20% and then come back up?
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BRINKER: That is a possibility. You could have, see that's the problem with intermediate corrections. And thank heavens we haven't had any in this bull market. We haven't had to worry about it. But that's the problem with intermediate corrections. Once you get an intermediate sell signal, that tells you that the market, if the model works, the market will do down more than 10%. That at least, I have to be very specific here to be accurate. If you get an intermediate term sell signal that tells you that the market will go down more than 10% but less than 20%.
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CALLER: OK
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BRINKER: There's always the possibility that can come after the market is in the tank. That can then be followed by a bear market sell signal which would by definition be over 20%, so I generally follow the principal that if you get an intermediate term sell signal you go to cash. Or, if you hedge your portfolio to zero equities, in the United States I am talking about. In order to avoid the risk that you could roll over into a big bear.
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CALLER: I think you just covered the strategy that I as an unsophisticated investor would probably follow. That was being a subscriber if theintermediate correction seems to be at hand my strategy would be very simply to take everything in equity and go right to a money market.
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BRINKER: Yea money market or depending on the reason for the decline you might be able to go to a bond fund, also it depends on the reason for the decline. But yes a money market or Treasury funds of some sort would be the answer in that scenario. And I would agree with that.
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CALLER: And that scenario we're talking about that would not affect at all GNMAs?
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BRINKER: Well no. Only if we thought rates were going to go up. You know only if the cause was over heating economy. And right now that doesn'tappear to be a problem. Although it could change in the future. If everything turns out to be copasetic in Asia and the economy comes roaring back out of the gate then we have to worry about that but not for the moment. I am Bob Brinker and this is Moneytalk.* * * *
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DavidK EC: Very interesting call! You know that call was back in March 1998 and there are some similarities between now and that year. The S&P 500 was trading around 1100 in March 1998 and during that year the global currency markets went crazy and stock markets caved. We had Asian Contagion and then the bankruptcy of Long Term Capital Management. The S&P 500 underwent just shy of a 20% decline on a closing basis (but slightly more on an intra-day basis). Bob never adjusted his asset allocation, staying fully invested and claimed victory for his model since he claimed there technically was not a bear market in the S&P 500 on a closing basis. Back then, the Fed cut the Fed funds rate from 5.5% to 4.75% and the S&P 500 rocketed 39% over the next12 months. I provide that information for historical purposes only, not to make a prediction.
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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. 2008 http://david-korn.blogspot.com/
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Even though this call was 10 years ago, Brinker's "Timing Model" has not substantially changed for 20 years. What Brinker says to this caller may offer some insight in how he actually views the current stock market activity.
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Here are excerpts 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. Copyright David Korn, L.L.C. 2008 http://david-korn.blogspot.com/
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All of the following is posted with David Korn's permission from his February 2-3, 2008 Newsletter:
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(Guest Contributor) Steve T. comments on Brinker's Timing Model Indicators: As I see it, Bob Brinker would interpret his model with three our of four indicators in the bullish camp. I don't think Bob will turn bearish yet, but like many of you perhaps, I am sure he is watching and listening to the data very closely as it becomes available. Many of us have been worried that this decline of over 10% will turn into a full blown bear market. Based on what I see of his model, I don't think the time is yet upon us.
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I would like to leave you with an interesting call to Moneytalk from years back which is relevant to today's market action. During the heydays of Moneytalk, before the QQQQ debacle, Bob used to talk in depth about the market and his model. Back then, I used to follow his show very carefully and I had kept a summary of a caller to the show back in March 1998. During that show, Bob had a question about asset allocation from a 55-year old caller that was 100% invested in equities. Bob advised the caller to reduce his equity exposure to 80% and move 20% into fixed income. The rest of the call was very interesting as it brought up the issue of intermediate corrections and I thought David's subscribers would enjoy reading it, so here it is:
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CALL TO MONEYTALK MARCH 1998
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BRINKER: I would be willing to stay at your age of 55 still at a very aggressive 80/20. After making that adjustment, which I would make at current strength. Then I would say what I would do is take the following approach. I'd take that approach that I am going to go 60/50 if we get a final top in the bull.
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CALLER: I see.
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BRINKER: Or even if we get the likelihood of a major intermediate correction. Now we've talked about this many times. There are three types of pull backs in the markets. And this is always true. You can get a short term pull back, which is generally 10% or less. And by the way as measured by the New York Stock Exchange, even the last pullback was only 9.9%. So you can get a short-term pull back generally about 10% or less. That usually in a bull market is always a buying opportunity. And we've had many of those over this bull market. You can get an intermediate term correction,which is defined as a correction lasting let us say between several weeks and several months. That could be along the magnitude of let us say, let's put out numbers of less than 20% but more than 10%. So we call it over 10%, but less than 20% for an intermediate term correction. And then of course you can have the bear market which is generally speaking a decline of 20% or more. But a bear market can be a decline of 30%, or 40 or even more. So these are the scenarios you are looking at.
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Right now, I'd go from 100% stocks and 0% fixed income, to 80% stocks and 20% fixed income at your age and you no tax consequences in doing so. Use the GNMAs for the fixed income interest. Then I would watch the market and ignore short term corrections except to buy. If we had a bear market, I certainly would go, well if I went, if we had a bear market, that would result in a sell signal. Which could produce no equities. And if we had an intermediate correction, you might have to also consider going to no equities if it could lead to a bear. Unfortunately, with intermediate corrections, they usually infrequently. Let me put it this way. Let me see if I can be very specific about this. In almost every case a bear market is preceded by an intermediate correction. Let me repeat this, because I am sure that I am confusing somebody. As long as I am not confusing myself, I'm all right. In virtually every single case a bear market is proceeded by an intermediate correction. All I just said was virtually every time the market goes down over 20% in a bear market, it is preceded by a decline of over 10% but lessthan 20%.
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CALLER: Over what time period though?
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BRINKER: The over 10 but less than 20 could last several months, but the bear market can last six to 24 months.
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CALLER: Are you saying you might see this thing drop between 10 and 20% and then come back up?
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BRINKER: That is a possibility. You could have, see that's the problem with intermediate corrections. And thank heavens we haven't had any in this bull market. We haven't had to worry about it. But that's the problem with intermediate corrections. Once you get an intermediate sell signal, that tells you that the market, if the model works, the market will do down more than 10%. That at least, I have to be very specific here to be accurate. If you get an intermediate term sell signal that tells you that the market will go down more than 10% but less than 20%.
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CALLER: OK
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BRINKER: There's always the possibility that can come after the market is in the tank. That can then be followed by a bear market sell signal which would by definition be over 20%, so I generally follow the principal that if you get an intermediate term sell signal you go to cash. Or, if you hedge your portfolio to zero equities, in the United States I am talking about. In order to avoid the risk that you could roll over into a big bear.
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CALLER: I think you just covered the strategy that I as an unsophisticated investor would probably follow. That was being a subscriber if theintermediate correction seems to be at hand my strategy would be very simply to take everything in equity and go right to a money market.
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BRINKER: Yea money market or depending on the reason for the decline you might be able to go to a bond fund, also it depends on the reason for the decline. But yes a money market or Treasury funds of some sort would be the answer in that scenario. And I would agree with that.
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CALLER: And that scenario we're talking about that would not affect at all GNMAs?
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BRINKER: Well no. Only if we thought rates were going to go up. You know only if the cause was over heating economy. And right now that doesn'tappear to be a problem. Although it could change in the future. If everything turns out to be copasetic in Asia and the economy comes roaring back out of the gate then we have to worry about that but not for the moment. I am Bob Brinker and this is Moneytalk.* * * *
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DavidK EC: Very interesting call! You know that call was back in March 1998 and there are some similarities between now and that year. The S&P 500 was trading around 1100 in March 1998 and during that year the global currency markets went crazy and stock markets caved. We had Asian Contagion and then the bankruptcy of Long Term Capital Management. The S&P 500 underwent just shy of a 20% decline on a closing basis (but slightly more on an intra-day basis). Bob never adjusted his asset allocation, staying fully invested and claimed victory for his model since he claimed there technically was not a bear market in the S&P 500 on a closing basis. Back then, the Fed cut the Fed funds rate from 5.5% to 4.75% and the S&P 500 rocketed 39% over the next12 months. I provide that information for historical purposes only, not to make a prediction.
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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. 2008 http://david-korn.blogspot.com/
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Tuesday, February 5, 2008
Brinker is Still Bullish, Recession Possible
Bob Brinker has readjusted his market-timing views since the first week in January. He has done away with his "mid-1400's" new money "all-in" buy-signal and recommends only dollar-cost-averaging into the market with new money. And he is busy looking for the "bottom" of this correction -- no doubt so he can issue a new buy signal. (His portfolios are still 100% invested.)- While putting the blame on Societe General for the stock market "debacle," Brinker remains bullish and believes the "bad news bears" are mistaken. However, he has pushed forward the time frame for his new high prediction of "into 1600's" into "late this year or in 2009" (this is down from 1650 which he predicted in October, November, 2007).
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- Conveniently, that is almost a two years forward-move for his goal post.
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- Brinker has also opened the door for a possible "brief and mild recession" during the first two quarters of 2008.
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Will L. comments: 8^)
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"Yes we know from experience that if Brinker's predictions for the market are not borne out by the facts and movement of the market, he 'changes the subject' --like the year he took off from discussing the stock market after the bone headed QQQ fiasco (which has never been closed out btw for up to 1/3 of an entire portfolio).
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Brinker obviously has been caught bloviating and seems to be totally clueless. His parlor games of naming buying points, like it is based on some great mathematical formula via that "timing model", have been embarassing for him.
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He now just has his fingers crossed (notice the shills all want to mitigate the damage in the market but using the Brinker alibi lingo "closing market basis"--the market was down 16.8% ) that the market doesn't drop more than 20%. He doesn't have a clue whether it will or not; nor does anyone else.
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If there is a bear market under his conditions, you will likely never hear him mention it. Anyone dispute that?
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If it is true that Brinker moved his "1600" forecast into 2009 as is reported here, that is quite a reminder to me of his handling of UTEK. He pounded the table for the stock and it tumbled--and when it was pointed out to him, he claimed in 97 "I never said it would go up now-- Utek is a 98 story". When it sucked in 98, Brinker said it was a 99 story. LOL
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Looks like soon we'll be predicting 1600 for "the next off year presidential election" in 2010. The whole timing silliness is a JOKE!"___Will L.
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Monday, February 4, 2008
Brinker's Portfolio Results YTD
"Kirk Lindstrom posted the following on his Facebook Bob Brinker Discussion Forum:
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"January Indicator.
I sure hope Brinker's results for January are not an indication of how the year will go.
Get someone to check my math before reposting this data, but here is my preliminary analysis for 200(8) YTD
Brinker's P1 down 7.3% YTD
Brinker's P2 down 6.7% YTD
Brinker's P3 down 3.2% YTDW
5000 Down 5.3% YTD
Total Bond UP 1.79% YTD
50:50 Total Bond - W5000 down 1.8%So P3 is trailing its benchmark due to not rebalancing.
The QQQs that helped Brinker's P1 and P2 last year are hurting them this year. Thanks for the summary of "Moneytalk.""
___________
Jeffchristie replied:
"I only track Brinkers portfolio 1. I got the same number YTD.
I also calculated his return from 31 December 2006 and it is up a meager 1.25% for the last 13 months."
February 5, 2008 6:45 AM
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"January Indicator.
I sure hope Brinker's results for January are not an indication of how the year will go.
Get someone to check my math before reposting this data, but here is my preliminary analysis for 200(8) YTD
Brinker's P1 down 7.3% YTD
Brinker's P2 down 6.7% YTD
Brinker's P3 down 3.2% YTDW
5000 Down 5.3% YTD
Total Bond UP 1.79% YTD
50:50 Total Bond - W5000 down 1.8%So P3 is trailing its benchmark due to not rebalancing.
The QQQs that helped Brinker's P1 and P2 last year are hurting them this year. Thanks for the summary of "Moneytalk.""
___________
Jeffchristie replied:
"I only track Brinkers portfolio 1. I got the same number YTD.
I also calculated his return from 31 December 2006 and it is up a meager 1.25% for the last 13 months."
February 5, 2008 6:45 AM
Sunday, February 3, 2008
Bob Brinker's Moneytalk Summary February 2, 3, 2008
Brief Summary, Commentary and Moneytalk Excerpts, February 2, 3, 2008:
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I did not hear Bob Brinker talk about the stock market all weekend. Did I miss it? Did anyone hear him mention it?
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Bob Brinker's opening monologue on Saturday began with him talking about the use of fiscal and monetary policies to control the U.S. economy, but he made no predictions about the future of economic growth -- that I could discern.
Brinker said: “What we have here is a two-pronged effort that is being delivered in the United States with reference to the U.S. economy. And a lot this goes right back to the legendary British economist, John Maynard Keynes.”
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http://en.wikipedia.org/wiki/John_Maynard_Keynes
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Brinker claims that he has talked about Keynesian economics many times on Moneytalk and definitely agrees that the federal government should take a pro-active fiscal-policy when the economy slows.
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Brinker talked about the new “pro-active fiscal measures” that congress is working on which will include a rebate check that will be sent “to many” and will include a provision to allow Fannie Mae and Freddy Mac to buy larger mortgages. It will also include a provision to allow businesses to make large purchases this year and qualify for tax breaks. Brinker believes that the stimulus package is still “a work in progress,” but that it will be into the economy by the second quarter of 2008.
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About this fiscal govenment-intervention policy Brinker said: “Now they did not just dream this up. This is classic Keynesian economic policy" and that is why it is so important to have a balanced budget during "normal times." Brinker went on to declare that balanced budget talk is not just "political pap, it’s a fundamental economic principle that is at the core of managing the U.S. economy—as Keynes would tell us." Instead, when these kinds of measures are needed, “Uncle Sam has to borrow a ton of money to help the economy through some rough times.”
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Brinker said, "The blocks we have to play with, the blocks that we are given, with are deficit spending blocks.” Then he spent some time bashing the 2001-2006 congress for “spending us into oblivion." National debt is over $9Trillion—spent irresponsibly. For instance, prescription drugs for Medicare recipients, which was done on borrowed money, was not paid for and was “fiscally irresponsible.”
Then it was time to bash the Fed again, Brinker said: “Now here we are, the government is in a position where well-founded Keynesian principles tell us that it makes sense for them (congress) to participate along with the Fed in the monetary policy, and you see what the rates are doing – just as we said they had to right here on Moneytalk. We said rates have to go down. These guys are in an ivory tower. They have to get real. How many times do we have to say it? Well they are finally down out of their ivory tower now. They have the short-term rates down to 3%. They are finally getting the message and that’s a good thing. It took them long enough though."
Brinker summarized by pointing out that the congressional stimulus package to aid the slowing economy is (Keynesian) fiscal policy and the Fed lowering interest rates is the other prong, which is monetary policy.
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The calls on Saturday were either so esoteric that they were of no interest to anyone but the caller, or they were about the same subjects that have been repeated ad nauseam for some time now.
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Charlie Maxwell was Brinker’s guest speaker in hour three on Saturday.
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Brinker's Sunday opening monologue was devoted entirely to political speculation and personal opinions. He gave a lengthy rundown on the latest poll numbers for the leading candidates.
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Sunday, there were calls about CD’s, personal real estate questions, paying off mortgages, government health care, etc. This was followed by Brinker giving a report on political polls that he said “just keep rolling in” This seemed to prompt him to give more long-winded political-pontifications about which of the candidates will raise taxes and who is for or against the war in Iraq.
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This was followed by a caller who was worried about having bought a Bond Index Fund three weeks ago. Brinker told him that “for crying out” he should just invest in laddered CD’s and not worry about NAV fluctuation in the funds.
Sorry folks, I didn’t hear the last couple of hours of the program today. But I strongly suspect that the words “stock market” were not heard – at least spoken by Bob Brinker.
____Honeybee
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I did not hear Bob Brinker talk about the stock market all weekend. Did I miss it? Did anyone hear him mention it?
.
Bob Brinker's opening monologue on Saturday began with him talking about the use of fiscal and monetary policies to control the U.S. economy, but he made no predictions about the future of economic growth -- that I could discern.
Brinker said: “What we have here is a two-pronged effort that is being delivered in the United States with reference to the U.S. economy. And a lot this goes right back to the legendary British economist, John Maynard Keynes.”
.
http://en.wikipedia.org/wiki/John_Maynard_Keynes
.
Brinker claims that he has talked about Keynesian economics many times on Moneytalk and definitely agrees that the federal government should take a pro-active fiscal-policy when the economy slows.
.
Brinker talked about the new “pro-active fiscal measures” that congress is working on which will include a rebate check that will be sent “to many” and will include a provision to allow Fannie Mae and Freddy Mac to buy larger mortgages. It will also include a provision to allow businesses to make large purchases this year and qualify for tax breaks. Brinker believes that the stimulus package is still “a work in progress,” but that it will be into the economy by the second quarter of 2008.
.
About this fiscal govenment-intervention policy Brinker said: “Now they did not just dream this up. This is classic Keynesian economic policy" and that is why it is so important to have a balanced budget during "normal times." Brinker went on to declare that balanced budget talk is not just "political pap, it’s a fundamental economic principle that is at the core of managing the U.S. economy—as Keynes would tell us." Instead, when these kinds of measures are needed, “Uncle Sam has to borrow a ton of money to help the economy through some rough times.”
.
Brinker said, "The blocks we have to play with, the blocks that we are given, with are deficit spending blocks.” Then he spent some time bashing the 2001-2006 congress for “spending us into oblivion." National debt is over $9Trillion—spent irresponsibly. For instance, prescription drugs for Medicare recipients, which was done on borrowed money, was not paid for and was “fiscally irresponsible.”
Then it was time to bash the Fed again, Brinker said: “Now here we are, the government is in a position where well-founded Keynesian principles tell us that it makes sense for them (congress) to participate along with the Fed in the monetary policy, and you see what the rates are doing – just as we said they had to right here on Moneytalk. We said rates have to go down. These guys are in an ivory tower. They have to get real. How many times do we have to say it? Well they are finally down out of their ivory tower now. They have the short-term rates down to 3%. They are finally getting the message and that’s a good thing. It took them long enough though."
Brinker summarized by pointing out that the congressional stimulus package to aid the slowing economy is (Keynesian) fiscal policy and the Fed lowering interest rates is the other prong, which is monetary policy.
.
The calls on Saturday were either so esoteric that they were of no interest to anyone but the caller, or they were about the same subjects that have been repeated ad nauseam for some time now.
.
Charlie Maxwell was Brinker’s guest speaker in hour three on Saturday.
.
Brinker's Sunday opening monologue was devoted entirely to political speculation and personal opinions. He gave a lengthy rundown on the latest poll numbers for the leading candidates.
.
Sunday, there were calls about CD’s, personal real estate questions, paying off mortgages, government health care, etc. This was followed by Brinker giving a report on political polls that he said “just keep rolling in” This seemed to prompt him to give more long-winded political-pontifications about which of the candidates will raise taxes and who is for or against the war in Iraq.
.
This was followed by a caller who was worried about having bought a Bond Index Fund three weeks ago. Brinker told him that “for crying out” he should just invest in laddered CD’s and not worry about NAV fluctuation in the funds.
Sorry folks, I didn’t hear the last couple of hours of the program today. But I strongly suspect that the words “stock market” were not heard – at least spoken by Bob Brinker.
____Honeybee
Saturday, February 2, 2008
Friday, February 1, 2008
Bob Brinker's Buy Signals
Nice week in the stock market
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It's back above Bob Brinker's "1380 or lower buying opportunity" that he issued after the market was above that level. But it's still lower than the "mid-1400's buying opportunity" that he recommended in August, 2007, and removed on January 20th when he said he was looking for a bottom to this correction that he did not "expect." Perhaps he will have something to say about it if he is on Moneytalk this weekend.
- The Dow Jones Industrial Average up 92.83 points to close at 12,743.2 on Friday, for a 4.4% gain on the week.
- The Nasdaq climbed 23.5 points to 2,413.36 on Friday, marking a 3.7% gain for theweek.
- The Standard & Poor's 500 Index rose 16.87 points to close at 1,395.42 a gain of 4.9% for the week.
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