STOCK MARKET.....Honey comments: Today, I have focused on the plentiful stock market talk because I am sure that is what you are interested in right now. Most of the calls were repetitious, esoteric or political. Brinker mentioned dollar-cost-averaging today and 50-50 balanced for those who are in or near retirement. So no change in his fully invested positions.
STOCK MARKET CORRECTION IS HERE.....Brinker comments: This week qualifies as interesting times, for sure. The long-awaited stock market correction is with us. It has been four years since the stock market had a major correction… Back in the summer of 2011 the Dow Jones Industrial Average closed at a closing low of 10,720. And then there was a bounce off of that closing low. And then the bounce rolled over in the market return to the area of the initial closing low and formed a second closing low at 10,000 655.… And then the correction was over. And on the S&P 500 index, that was right around the low 1100s… The same thing always happens during a correction.
PERMA-BEARS SCARING PEOPLE OUT OF THEIR WITS....Brinker continued: The perma-bears who have been wrong now for over 6 consecutive years, they start hollering fire in a crowded market. They scare investors out of their wits, in many cases. Another thing that happens in a correction, is that the weak holders – who either don't belong in the stock market in the first place, or else have no idea what they are doing in the stock market in terms of risk – they sell out on weakness and move off to the sidelines without mentioning that the market has risen from 676 in the S&P 500 in March 2009 to the current level over the six past years while they were out of the market. So they have managed to miss out on almost all of the gains of the past six years. So they are always happy to be out of the market.
Honey EC: Brinker appears to be a perma-bull. He has been fully invested since March 2003.
MARKETIMER ADVICE IN 2010 CORRECTION.....Brinker continued: It's important to remember that a correction is a process. It's not over and done with in an instant. It involves patience in order to work toward a point in the correction where a buying opportunity can be identified. Now in the major correction in the summer of 2010, there was a buying opportunity in July, and that buying opportunity appeared in the Marketimer investment letter. Here is what I wrote in the July 2010 Marketimer: "In view of the 15% correction that has occurred in the S&P 500 index, we now rate the stock market attractive for purchase. On a risk reward basis we believe there is substantial upside potential to stock prices." The S&P 500 was at 1030 at that time, less than 2% from the final closing low of 1010 during that correction.
MARKETIMER SPECIAL BULLETIN IN 2011.... Brinker continued: In the summer of 2011, there was another buying opportunity following a correction that lasted into the autumn season. Here is what I wrote at the Bob Brinker website special subscriber message on September 22, 2011 for subscribers. "The conditions are now in place to justify an upgrade of our stock market view to attractive for purchase for subscribers looking forward for an opportunity to invest new money into the market at attractive prices." Where was the S&P 500 when that was written – 1129. Less than 3% from the final correction low, less than two weeks later.… Both of these buy signals were made possible by analyzing a tsunami of stock market indicators to lead to the identification of those correction bottoms.
CAN BRINKER CALL A BUYING OPPORTUNITY THIS TIME....Brinker continued: It's fair to ask, will it be possible this time? The answer is, I'll do everything I can to work toward that outcome. We shall see. For now it's fair to say that the monitoring process is underway and will continue as the correction unfolds. Corrections are the reason that stock market investors make lots of money over time and perma-bears just make lots of noise.… The risk inherent in stock market investing is the reason that stock market investors do well over time while the perma-bears and nattering nabobs of negativism just wine and spin their wheels. Because corrections are part of stock market investing. I'm Bob Brinker – this is Moneytalk.
Honey EC: It is not only fair to ask if Brinker can do it again, one can ask what are the chances he would be correct again. He brags about spotting two bottoms just 2 or 3% away, but he never mentions that he missed a 57% decline, and issued buy signals all the way down in 2008-2009. Here is a list of buy signals that he issued from the start of the megabear to the end when he finally gave up:
January 4, 2008, S&P @ 1411: "Mid-1400's"When did Brinker's three fully invested Marketimer model portfolios get back to even after losing over 50% of their value in 2008-2009? It was February 2012. Documented here.
Feb 10, 2008 S&P @ 1331: "Low-1300's" (delivered via "special bulletin" - no mention of January Marketimer mid-1400's buying opportunity)
Aug 5, 2008 S&P @ 1285: "1240 or less"
Sept 2, 2008 S&P @ 1282: "Low-to-mid 1200's"
September 16th -- rescinded low-to-mid 1200's (recommended dollar cost-average only)
January 2009 S&P @ 931: “bear market bottom range of 750 to 850."
Feb. 2009 S&P @ 826: “low-to-mid 800’s"
March 5, 2009, S&P @ 696: waiting for a bottom and a test of that low. No DC or buy levels.
HOW MANY STOCK FUNDS TO BE DIVERSIFIED.....Brinker said: I would say that you could have a highly diversified portfolio of stocks by owning just one or two funds.. You would have a highly diversified portfolio in the US if you just owned the total Stock market Index. VTI would give you very broad diversification. Also you could do it with very low expenses – and you could do it with no load. If you wanted to have international exposure, you could simply buy something as basic as an international index fund with low expenses and also no load. So I would say that one or two is all you need to have a highly diversified portfolio.
HOW OFTEN STOCK MARKET CORRECTIONS HAPPEN.....Brinker comments: So how many times does the S&P 500 index usually decline over 5%? About four times every five years. Now of course it hasn't happened recently and that's why you've seen the reaction you've seen to it because people have been lulled into complacency, if you will, about how the market behaves – and the thought, well the market is pretty stable. That is something that you can get lulled into but few people that have been around the market a long time believe that.
THAT'S WHY THEY MAKE THE BIG BUCKS...Brinker continued: Fact is, there is risk and volatility in the ownership of stock. Fact is, that is one of the key reasons that stock market investors over time make a lot more money than investors in things like bonds or money market funds. That's just inherent in the nature of stock market investing, and it's not going to go away. It will always be there. Remember JP Morgan's words, 'stocks tend to fluctuate'. He certainly got that right.
WHY DOESN'T FED SHRINK MONEY SUPPLY....Bob in Albuquerque said: "I'd like to know why the Fed doesn't start shrinking the money supply or slowing it down."BRINKER THANKS TREKKIES AND BEAMS OUT.....Brinker said: Before they Beam Me out of here, let me thank all our Moneytalk Trekkies for cruising with us here on the Starship and…
Brinker replied: Because they don't want to create a recession. If somebody told you that the decline in the price of oil is going to create problems for fracking companies that are stretched, why would lead you to believe that there is hot money around. That sounds like just the opposite of hot money – that sounds like the destruction of money.
Caller follows-up: "Okay I was just listening to that famous short guy yesterday, and that was one of his scenarios."
Brinker replied: While I don't listen to that stuff so I have no idea what you are talking about.… There are people out there that are trying to scare you.… The reason people try to scare you is so that you will buy something that they are affiliated with aided with - period
COMMENTS BY FRANKJ:
Honey here: Thanks for your comments Frankj. Last week we had almost 150 comments, and I missed it, but someone has a free lunch on the Santa Cruz Wharf with me if they want to collect.
JEFFCHRISTIE'S MONEYTALK FINAL EXAM QUESTION
Caller Bob from Albuquerque told Bob that he was listening to a famous short guy who was negative on fracking. The short guy he was talking about is:
A) Billy Barty. B) Tiny Tim. C) Tom Thumb. D) Jim Rogers.
Honey EC: Thanks Jeff. Note to the person who asked who the caller was asking about, Jeff gave the answer.
Next Weeks Economic Calendar
Brinker's guest-speaker was Philip Zelikow. Brinker bills him as the author of this book: America's Moment: Creating Opportunity in the Connected Age
Los Angeles. KABC 790. Moneytalk plays two hours later in the evening. They podcast and ARCHIVE podcasts.
(summary posted at 6:55pm PDT)