Sunday, April 12, 2015

April 12, 2015, Bob Brinker's Moneytalk: Stocks, Bonds, Economic and Investing Summary

April 12, 2015....Bob Brinker was not live on the air, but he tried real hard to make us think he was -- twice, today's date was spliced in to the old recorded monologues. All the callers were from various old shows. (comments welcome)

THREE CALLS FROM TODAY THAT WERE FIRST BROADCAST OVER A YEAR AGO

1. Crack Blog-Researcher (CBR), Chris from ATL, said:   "I think the "Jerry from Binghamton" call was first broadcast on March 30, 2014." 

Sure enough, here is the transcription of this call from over a year ago. Note that it gives out information that is no longer true. Brinker sold all FFRHX in January 2015:
FIDELITY FLOATING RATE HIGH INCOME (FFRHX) VS VANGUARD GINNIE MAE FUND (VFIIX)... Caller Jerry from Binghamton (?) said: I'm a long time listener and a market time (SIC) subscriber. My wife and are retired and we pretty much have critical mass. Question for you is, our portfolio is -- the money is between model portfolio two and three. I kind of have a combination of both..... That leaves us with 20% in the Floating Rate Fund. Is that is conservative as the Ginnie Mae – over all these years we followed you on Ginnie Maes. I know I got weak there (non-discernable)..... but the Floating Rate, as I understand it, is a high-yield but is tied into the market rate. As interest rate goes up that fund should increase to have a high-yield. Is that correct?

Brinker replied: "I think that that would be accurate. And by the way as I said many times, we prefer credit risk at this time over interest rate risk. And that is the reason that we prefer not to be in Ginnie Maes at this time because we don't want that extended maturity that is generally found in a Ginnie Mae Fund. We like short-term maturities much much better. And the fund that you are talking about in that portfolio has a duration of only an average of three months. So that is extraordinarily low even though our overall duration is closer to one year. And we do prefer to control the duration aspect of the portfolio to minimize interest rate risk, but were perfectly comfortable with accepting some credit market risk in an expanding economy. So basically I would say yes, as rates go up the rate on the fund would go up. And this is what's most important, the net asset value of rates going up should be minimized in a fund of that nature because of the very low average duration in that fund. So that fund is giving us everything that we want in an income security at this time. A short duration, a reasonable yield, and certainly some credit risk in a portfolio, which again, in an expanding economy, I think that's the best place to be."
2. CBR Chris from ATL found a second call that was covered by this blog. He said:  "The current "Doris from Williamsburg" call was first broadcast on the Apr 20, 2014 show"   (Jeffchristie wrote the summary of this original call in April 2014)
 "Doris in Williamsburg ask about critical mass.  Bob told her that if you have assets that generate enough income to live the way you want you have reached it."
3. CBR Jeffchristie remembered caller Abraham from Albany who mentioned the "$16 trillion national debt. Take a look in the right hand column of this page and you will see that we are now well over $18 trillion national debt -- in one year! Now that is skeery!  Here is the original coverage of Abraham from Albany written in April 2014 by Jeffchristie:
 "Abraham from Albany said he attended a presentation where the speaker said the dollar was worthless.  Bob told him that was nonsense."
BRINKER'S LATEST ANALYSIS OF FIVE ROOT CAUSES OF A BEAR MARKET

Bob Brinker analyzed the five primary (root) causes of a bear market in the April issue of Marketimer.

1. Tight Money: Brinker has talked about rate normalization for over a year now. He likes to point out that the end of quantitative easing did not damage the stock market. He has said that the Fed is now interested in ZIRP (zero interest rate policy), but lately, he seems to be backing off a bit on his predictions for rising rates. He predicted that the Fed will remain accommodative "at least into 2016."

2. Rising Rates: Based on very low PCE and core inflation rates, Brinker said: "We expect any short-term interest rate increases this year to be minor.  Small rate increases would not impede the current economic expansion in our view."

3. High Inflation: Brinker said: "The incoming data continues to show a benign inflation pattern.…  As long as all of the major inflation indexes remain below the Federal Reserve inflation target of 2%, there is no pressure on the Fed to tighten monetary policy to any significant degree."

4. Rapid Growth: Brinker defines rapid growth as a rate of real gross domestic product (GDP) expansion above the historical average of 3% to 3 1/2%.  As he has said on Moneytalk, the impact of harsh winter weather is expected to dampen first-quarter activity.  He expects the full year of 2015 real GDP to be within a range of 2 to 3%.  However, he still expects the first quarter to be soft.

5. Overvaluation:  Brinker said; "Operating earnings estimates for the S&P 500 index extended $128 for 2015 and a preliminary figure of $135 for 2016"   Brinker agrees with the Federal Reserve 2016 real GDP forecast of 2.3% to 2.7%.

He concluded that the S&P 500 index has the potential to "Trade into the upper 2100s range going forward."    Brinker is maintaining his favorable stock market view, but is aware that there has not been a correction of 10% or more since the autumn of 2011.  He would regard such a correction as a "health-restoring event based on the current Marketimer stock market timing model outlook."  He still recommends dollar-cost-averaging for investing new money -- and he recommends taking advantage of short-term market weakness to dollar cost average.  Brinker's model portfolios remain fully invested as they have been since 2003.

Jeffchristie's Moneytalk Final Exam Question

Since today's Moneytalk was a repeat the final exam question will also be a repeat.

Bob Brinker calls Presidential candidate Hillary Clinton:

A) The Wicked Witch of the West Wing.
B) Evita
C) Madona
D) The Queen of Mean

ANSWER

                                                  Summary posted at 6:45pm PDT

Thursday, April 9, 2015

April 9, 2015, Bob Brinker "2014 Bond Timer of the Year" According to Timer Digest

April 9, 2015....Beware! There are lots of sharks out there waiting to "shark" your wallet. They swim as phony rating services or phony fan clubs or fabricated Brinker Groups

If I told you that I had declared Bob Brinker Bond Timer of the Year for 2014, it's likely that you would think I had been drinking the cooking sherry -- and rightfully so! But that's what Timer Digest has done in spite of Brinker's sad-sack performance last year. 

ETF1-Robert, one of the crack blog research team, sent an email to let me know that Kirk Lindstrom has done an article about Timer Digest naming Bob Brinker and James Stack  2014 "top bond timers."
Kirk said: "Congratulations to Bob Brinker!!!  2014 Bond Timer of the Year! On January 2, 2015 the venerable Timer Digest named James Stack and Bob Brinker as "Bond Timers of the Year." They were bullish all year and matched the T-Bond index.
I have no idea what method  Timer Digest  used to conclude that Brinker's Marketimer bond holdings "matched the T-Bond index."  Let's take a look at what Brinker did last year besides stay fully invested -- as he has been since March 2003.

Firstly, Brinker's Marketimer only has a fixed income portfolio that consists of four bond funds, and  a balanced fund that is approximately 50% invested in three of the same bond funds -- that's it! There are no other bonds in his portfolios. (NOTE: Brinker's income fund is off-the books of his performance record.)   Jim, a member of the blog crack-research team, did an analysis and  reported that the income fund performance for 2014 was 1.1% and the balanced model portfolio III only made 6%.

It's important to know that in 2013, Brinker moved into all low-duration, high-credit risk funds. Jim researched how much these moves cost Brinker's followers in missed profits. Please carefully read Jim's numbers:

Jim said...
I've taken a look at Bob Brinker's final performance numbers for his fixed income portfolio. For calendar year 2014 his Income portfolio was +1.10%. If he had not made any changes from his prior holdings he would have been +6.11%. Here is the breakdown: DLTNX +6.47 vs. DLSNX +1.35, DODIX +5.48% vs. OSTIX +1.26%, MWTRX +5.83% vs. MWLDX +1.39%, and finally VFIIX +6.65% vs. FFRHX +0.41%. All this was calculated using the numbers from M*.

Using the numbers from Yahoo Finance I've come up with the performance from the point he made his changes. They are as follows: DLTNX +7.66% vs. DLSNX +2.02%, DODIX +6.99% vs. OSTIX 1.79%, MWTRX +6.54% vs. MWLDX +2.09%, and finally VFIIX +8.2% vs. FFRHX +2.23%. Overall that computes to an average of 7.35% vs. 2.23%.

Using either time frame Brinker's funds that he sold outperformed the funds he bought by 5+%. It's going to be difficult for his followers to ever make up the 5+% of additional gains that they missed by following his bond timing advice.

January 2, 2015 at 9:44 AM
Brinker made some bond fund changes, backing off of the low-duration in January 2015. Here are some excerpts from my January 18th summary of Moneytalk:
BRINKER'S JANUARY 2015 MARKETIMER BOND FUND CHANGES.... Caller Jackie in Las Vegas (39 minutes into the second hour) asked about the Fidelity Floating  Rate High Income (FFRHX) and the Metrowest Unconstrained Bond Fund (MWCRX).

Brinker replied:   "We don't own the Floating Rate Fund anymore, so it's out of the portfolio.…  The Floating Rate Fund that we sold was a different fund and it was a different fund company also.  As far as the Unconstrained is concerned, there are many unconstrained funds out there.  If you're not comfortable, you should not make the change.…  I do believe that those who are investing in unconstrained, I think it has a place in the portfolio at this point.  That doesn't mean you have to do it.…  Because what you're talking about with unconstrained funds – and there are many of them out there – what you are talking about is a fun that is going to invest in a highly diversified portfolio.  They are going to use varying maturities.  They are going to be unconstrained by managing against an index.  They are not going to be held to investing against an index.  The duration of the portfolio can vary substantially with the management opinion at the time… And all of those things come into play." 

Brinker continued: "Unconstrained also in the sense than you are giving the portfolio manager considerable leeway in terms of how he or she wishes to invest the portfolio.  That's really what it means… Now again, anytime you are uncomfortable with any type of fund, you shouldn't be in it – period.  From my point of view, and anybody obviously that subscribing to the newsletter is interested in my point of view, I'm sharing with them my opinion that within the context of a diversified income only portfolio – because that fund only appears in the income portfolio (3 unintelligible  words).  And I'm saying that within the context of that type of portfolio, I think there's room for a plum like that at this point.

Honey EC: As Brinker said, he sold all Fidelity Floating High Income Fund from his Marketimer off-the-books income portfolio (BrinkerJr sold it last month) and also from Marketimer model portfolio III -- as of January 9, 2015.  He replaced it with DoubleLine Total Return Bond Fund (DLTNX)  which he had sold in 2013. He also sold MetroWest Low Duration (MWLDX) in model portfolio III and replaced it with MetroWest Unconstained (MWCRX). Notice that he did a bit of a sales pitch on the Unconstrained Fund.
My conclusion is that Timer Digest's "timer of the year awards" are not to be trusted, much like Hulbert's silly "Honor Roll" awards.  They are similar to so many other shark attacks from phony Brinker groups and fan clubs, it's all about selling newsletters by any means possible -- in my opinion.