Wednesday, October 29, 2014

October 29, 2014, Bob Brinker's Market Timing Record Laid Bare at Barron's

October 29, 2014....Yesterday, Barron's published an article that clearly shows how questionable stock market timing really is -- even by the best of the best. Here are some excerpts:


Market timers will often use stock charts, fundamental analysis, or economic trends to divine where stocks are heading in the coming months. Pundits such as Nouriel Roubini, Laszlo Birinyi, Doug Kass, John Hussman, are well known for their market calls, and the list goes on. (Check out Website Pundit Tracker to learn more about their calls.)

Even Jim Cramer, a popular pundit with CNBC and TheStreet known mostly for individual stock predictions, will occasionally make broad market timing calls.

But many seasoned investors, including Warren Buffett, argue that it’s a big mistake to shift radically in and out of stocks based on nothing more than an educated guess about what the future will bring. The future, after all, is a complex beast to behold, with an incalculable number of shifting variables. How many investors in late 2007 saw the Great Recession and a dramatic and deep collapse in the stock market coming?

“My clients pay me a lot of money so I can tell them that I don’t know the future,” says Allan Roth, a certified financial planner based in Colorado Springs, Colo. “The more we try to time the market, the worse we do.”


If ever there was someone with a personal interest in seeing value in market timing, it’s Mark Hulbert, who has made a business out of tracking the performance of investment newsletters since 1980. Many of these newsletters engage in market timing.

(Hulbert is also a columnist for and MarketWatch.)

But Hulbert thinks it’s an inherently flawed approach to investing. In March 2013, Hulbert wrote a column for in which he studied the returns since October 2007 of the more than 100 market-timing newsletters and Web-based advisors monitored by the Hulbert Financial Digest (HFD).

Among his conclusions reached in his story last year: Only one in four of the HFD-monitored market timers succeeded in turning a small profit over the last five-and-a-half years and, therefore, beat a buy-and-hold strategy. “But none of them did so by getting out at or near the top and getting in at or near the bottom,” he concluded.

On Wednesday, Hulbert said that it’s easy to time markets occasionally but not consistently.

He points to Bob Brinker, a popular nationwide radio host and market timer who correctly called the top of the bull market in January 2000 and called the bottom in March 2003. But Brinker didn’t see the credit crisis coming and thus remained bullish on stocks from October 2007 through March 2009. And until that very big mistake, writes Hulbert, he was among the best market timers working.

“The knock about market timing is that you have to get out at the right time and then get back in time near the bottom,” Hulbert says. “Even among those few who get out at the right time, they don’t get back in at the right time.”

 Read more here:  The Timeless Allure of Stock Market Timers - Barrons

Sunday, October 26, 2014

October 26, 2014, Bob Brinker's Moneytalk: Show Summary and Commentary

October 26, 2014....Bob Brinker hosted Moneytalk live today. (comments welcome)

Please note that I have paraphrased Brinker's comments from the first two hours of Moneytalk

*  Max out all tax-advantages in tax-privileged accounts...

*  View Social Security as a "survival program" not as total retirement....instead save in tax-privileged accounts and provide for your "young sprouts" I (Brinker) was by an aunt and uncle....two people I think of all the time and will never forget.

*  Very disappointed that the White House made a proposal to change the rules in tax-privileged accounts. But right now there is no majority vote available in is not right to change rules after they have been established....this was talked about in detail on an earlier program.

*  This was a good week in the stock market. This week S&P 500 went up more than 4%....A lot of Ebola fear and angst was eased....The US stock market cares more about what goes on in US than in Africa.

*  Stocks/bonds in model portfolio III....We prefer when possible to put equities in taxable accounts and fixed income in tax-sheltered accounts.....because existing tax law benefits equities in taxable accounts...

Jim heard this call more clearly than I did. Here are his comments:
Blogger Jim said...
I have to question something that was said near the end of the first hour. A caller asked Bob where to put equities and fixed income between taxable and tax privileged accounts. At first, Bob correctly said to put equities in taxable and fixed income in tax privileged. Then the caller asked something like : " If a persons tax rate is LOWER than the capital gains rate would the reverse be true?" Bob seemed to then agree with the caller that the reverse would then be true. I think in such a case the reverse is still NOT true. For example, it is my understanding that a person in the 10% or 15% Federal Tax Bracket has a long-term capital gains rate of 0%. Apparently Bob was not aware of the 0% capital gains rate for those in a low tax bracket. So if I understand the tax law correctly it is still better for a person in a low tax bracket to have equities in taxable to take advantage of the 0% capital gains rate.
 ETF1-Robert sent these comments about asset allocation:
 He advised those in their mid-seventies [or maybe he just said age 75 and the caller said she and her husband are in their mid-seventies] to have an asset allocation of 30-50% stocks.  He told Mary from Anchorage, 2:49 pm, that 50% stocks, which is what she has, is aggressive, but still in his range of 30-50% for age 75.

I don't normally hear Brinker being that conservative, saying 50% is aggressive for age 75
*  Social Security increase for next year will be 1.7%....this year it was 1.5%....inflation remains very low...(Honey EC: Unless you like to eat.)

*  Mortgage-Backed Securities....from my point of view, there is risk...if rates go up you can take a hit on net-asset-value....I don't have any bonds in my portfolio that are long-term...

*  Moneytalk has always been about managing your own financial affairs, and letting the sharks swim by....So many over the years have done it....

*  Earnings reports coming in fast and furious....3/4...75% have exceeded  earnings expectations.

Honey EC: Those good earnings reports must please Brinker a lot. He wrote the following in the October 2014 Marketimer, Page 3, Paragraph 1:
 The Marketimer operating earnings estimate for the S&P 500 in 2014 remains at $121. In response to improved economic visibility into next year, we are increasing our 2015 S&P 500 operating earnings estimate to $131 (from $130). We expect real GDP growth of close to 3% as measured from the third quarter of2014 though the second quarter of 2015.

Paragraph 2: The average S&P 500 price/earnings ratio over the past half-century is within a range of 16 to 16.5. Although it is possible to make a case for slightly higher P/E ratio range given the low inflation figures, we prefer to use the 16 to 16.5 P/E valuation range based on its 50-year history. Based on our 2015 S&P 500 operating earnings estimate of $131, the index has the potential to challenge the 2100 level going forward.
*  Osterweiss (OSTIX) Fund (In Marketimer fixed income and model portfolio III)....Yield is the interest income....that fund pays comes off of share price....will vary from quarter to quarter....Total return is change of share price after factoring in what was paid out....

*  Shutting off football games to listen to Moneytalk is no big deal.....I do not know how many more years we will have football as we know it.... all of the coming lawsuits may cause it to not be around much longer.

*  No company should ever pay all of your health care benefits. Employees should pay a portion, so they will appreciate what the company pays....Companies that pay 100% are fools....

*  Wednesday announcement from FOMC...they are not going to change interest rates....there is no reason for them to make a change.....

Brinker's guest-speaker was Lawrence Cunningham about Warren Buffett: Berkshire Beyond Buffett: The Enduring Value of Values (Columbia Business School Publishing)

Honey's Update: Five years ago, I had a very bad reaction to antibiotics. I swore I'd never take them again, but unfortunately (STUPIDLY) I let a doctor reassure me that "this" one would not hurt me. As a result, I have had an even worse reaction. Of course I've undergone all of medical sciences' truly yucky tests and nothing else shows up -- that's the good news. The only treatment is taking a lot of probiotics and time.  So please bear with me.

I will listen to the show and take notes. I will post anything that I know you would not want to miss and some brief comments later today. Thanks to everyone who has wished me well. 

San Francisco, Ca. KSFO 560: 1-4pm (KSFO archives Moneytalk Free on Demand for seven days after broadcast. You can download and listen on the go.)