September 1, 2011....................................(post and read comments)
Because Bob Brinker did not host Moneytalk last Sunday (the program was re-runs of old calls), I have a special treat for you.
Because Bob Brinker did not host Moneytalk last Sunday (the program was re-runs of old calls), I have a special treat for you.
David Korn's weekly newsletter includes a summary of Bob Brinker's Moneytalk, and sometimes when the guests are important enough, David will cover those interviews too. This week, he reviewed what he had written about Burton Malkiel, Nassim Nicholas Taleb and John Bogle. I chose investment legend, John Bogle, to share with you. Posted with his permission, David Korn wrote the following:
I did some digging into the 12-years of newsletter writing and found interviews from three Wall Street legends and great investment thinkers: Nassim Nicholas Taleb, Burton Malkiel, and John Bogle. I spent some time this weekend editing the interviews to bring the editorial comments up-to-date.....I think and hope and really believe you will enjoy reading them.
JOHN BOGLE
Bob opened the interview telling John Bogle that even after all these years of Bogle preaching the advantages of index funds, there is still the hype to "beat the market." Bogle agreed and noted that traditional classic index funds like the S&P 500 Index isn't growing proportionate to the growth of other managed funds. Instead, exchange traded funds are the rage which can be traded all day long in real time. Bogle said the people that are going to be making money from the exchange traded funds are the people that benefit from active trading -- the brokers who earn the commissions from the trading.
Bogle discussed a fascinating point from his new book. During the last 25 years, the stock market grew at around 12.5% a year as measured by the S&P 500 Index. During that sane time frame, the average equity mutual fund grew at 10% a year which is 2.5% less. Is that a surprise? It shouldn't be because the average mutual fund manager turns out to be average. Of course, there are winners and losers, but the average fund still underperforms. The primary culprit is that the average cost of owning a managed mutual fund is 1.5%. They are also paying high turnover costs. Mutual fund managers tend to turn over their investment portfolio 100% per year, which means that the average stock is only held for a year which Bogle views as speculation, not investing. Finally, most funds (about 60% of them) charge a load, or sales charge, that averages about 1% a year.
It gets even worse. The average fund is returning 10% a year, but the average investor is only earning 6% a year. Why? Because many individuals put little money when the stocks are way down as in the early 1980s, then they pour their money into funds in the late 1999s, and then they take their money out when the market is down again. Thus, investors can be their own worst enemy. Warren Buffet puts it this way: The two worst enemies of the investor are (1) expenses and (2) emotions. We hurt ourselves by being optimistic when stocks are high and pessimistic when stocks are low. We all think we are above average, and we are not.
Bob asked Bogle to explain the unique set up at Vanguard where the shareholders own the management company. Bogle said most mutual funds are set up the following way. A financial company starts a bunch of mutual funds and negotiates with itself an amount to charge for a fee, such as 1% a year to manage the assets of the fund. They are in business to make sure they make money. In that situation, the fund manager has two duties. One duty is to the shareholder, but the other duty is to the investors in the management company. When Vanguard was founded, they didn't like the idea of serving "two masters." Thus, at Vanguard they created a fund company where the managers, directors and staff of Vanguard are all working for the fund shareholders, not a separately owned company. Vanguard operates at cost. Sure, the officers and staff are well paid, but they are not operating in such a manner to charge a lot more. Bogle said the average mutual fund company charges about 1.25% fees of total assets per year. At Vanguard, that same fee comes out to less than 0.25%. As such, Vanguard saves their investors 1% a year.
Caller: This caller is on the management team to select investments for his company's retirement plan. He said there is a lot of resistance to getting index funds and there is a lot of pressure from a big consulting firm to go with managed funds with the promise of "beating the market." Bogle related a poll of investment managers who were asked how many of them had beaten the S&P 500 in the last 10 years. Of those polled, 85% said they had failed to beat the index during that time frame. The same group was asked how many thought they would beat the S&P 500 in the next 10 years, and 90% said they fully expected to. Bogle called that the triumph of hope over experience!!!
Caller: This caller wanted Bogle's opinion of TIAA-CREF and how it ranked compared to Vanguard. Bogle said he has great respect for TIAA-CREF. Its big equity fund has a slightly higher expense ratios (about 30 basis points) than the Vanguard Index funds which are about half that. However, the TIAA-CREF annuity is the best bargain out there. Vanguard has the second best cost structure and expenses are extremely important when it comes annuities.
(David) EC: Interesting. You have to hand it to Bogle for praising a competitor. Maybe daBrink can take that lesson to heart. :) Bob has recommended the Vanguard annuity in the past, but going forward, perhaps he will also recommend TIAA-CREF given what Bogle said today.
Brinker: Bob asked Bogle to comment on Occam's Razor (also spelled Ockham's razor) in the investment context. Bogle said that refers to the principle attributed to William of Ockham that says when there are multiple solutions to a problem, choose the simplest one. Bogle says index funds are the simplist ways to invest and a lot of good things flow from that simplicity, including low turnover, tax efficiency and dividends flowing to the shareholder.
Bogle pointed out that the typical equity mutual fund consumes 80% of the dividend income. The stock market has a dividend yield of about 1.8%, and the average equity mutual fund takes about 1.5%, leaving a dividend yield of only 0.3%!
Bogle noted that the long term return on stocks in nominal terms has been about 9.5%. That 9% was made up of 5% earnings growth, and 4% dividend yield. Today, however, the dividend yield on stocks is less than 2%. Thus, Bogle thinks you can conclude that returns on stocks will be about 2.5% less going forward. That means instead of getting a 9.5% return on stocks, you will get a 7% rate of return. Then you have to take out 2.5% for inflation, which brings your return down from 7% to 4.5%. This is all before taxes! It is also before the charges these mutual funds charge. Bob said he recommends a 4% withdrawal rate, and believes that Bogle's explanation justifies this position and Bogle agreed.
(David) EC: Wow. Bogle's logic is compelling and disconcerting, but definitely jives with the view of a secular bear market, or at least a period of sub-par returns going forward. Warren Buffet has publicly stated a similar long term projection of returns on stocks. Between Bogle and Buffet, you got two of the giants in the financial industry saying the same thing -- and it is a far different cry than what you hear from many on Wall Street.
Caller: This caller wanted to know how Bogle would invest for a grandchildren's college education. Bogle said what he does for his own grandchildren is put 60% in the Vanguard Total Stock Market Index Fund and 40% in the Vanguard Total Bond Index Fund. Bogle said it is a little conservative, but when you get close to college and the bills come due, you don't want to be too aggressive. Bogle said you can start more aggressively, and then slowly reduce the amount of equities as you get closer to the day for college recognizing that the stock market can go down significantly right around the time college begins.
Bogle emphasized the importance of diversification with largely U.S. index funds with up to 20% international. Bogle says at his age, he has 40% in stocks, 60% in bonds. Bogle said he doesn't like to make quick moves, and is going to slowly move up to a 15% allocation in the international arena.
Bogle discussed his new book, "The Battle for the Soul of Capitalism." Bogle said that capitalism has had a wonderful history of being trusted back to the 19th century and it worked because we had "owners" capitalism. Owners put up the capital and took the risk and got the reward. In the latter part of the 20th century, that system turned upside down and now most of the rewards go to the managers. We now have "managers capitalism" instead of "owners capitalism." We can see evidence of this change in executive compensation, financial engineering and manipulation of corporate earnings. It is also in the mutual fund industry where management companies get far too large a share of the returns.
There has been some improvement of late with the passage of Sarbanes-Oxley, greater board room accountability and the inability now for auditors to be part of management. In the mutual fund area, there is an attempt (which is being bitterly resisted) to make mutual fund boards of directors more responsible to the shareholder. The law states that mutual funds should be formed in the interest of their shareholders, but that has often not been done. We would need an independent chairman of the board, the use of independent consultants, etc. These are little things that can bring the system back to balance.
Bob referred to Bogle's investment classic, "Common Sense on Mutual Funds." Bogle said he has been pleased the books have done well, and the proceeds go to charity. Bogle said that book is designed to present common sense intelligent ideas about investing. Themes like investing for the long term, don't pay a lot of money to your fund manager, not moving your money from one fund to another, not hovering over the rankings of mutual funds, and to own Americn business and hold it foreover. Don't trade, don't do anything. Bogle remarked that he knows that Bob shares at least some of the same investment philosopy.
About 30-years ago, Bogle created the "First Index Investment Trust" which is now known as the Vanguard S&P 500 Fund. People laughed at the idea when he first came out with it. In fact, people referred to it as "Bogle's folly." Today, it is the largest fund in the world.
(David) EC: Bogle and Brinker have both done a great service in educating the public about the importance of watching expenses in your investment portfolio, the benefits of using index funds, and the necessity of diversification. The two individals, however, have different philosopies toward market timing. Of course, Bob is a practitioner of market timing, and even uses the name for his newsletter. Bogle, on the other hand, has this to say about market timers in his book, Common Sense on Mutual Funds,:
"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 fifty years in this business, I do not know of anybody that has done it successfully or consistently. I don't even know anybody who knows anybody who has done it successfully and consistently. Yet market timing appears to be increasingly embraced by mutual fund investors and the professional managers of fund portfolios alike."Bogle said there is a way to think about investing that he likes to share with individuals. Investors tend to pay about 2.5% in expenses, which is an incredible amout of money over an investment lifetime. Think about investing one dollar over your entire investment horizon which is around 65 years. You figure that you work for about 40 years, saving and investing your money, and then live another 20 years after that. If you invest $1 over 65 years without expenses, it grows to about $131, using a compound growth rate of about 8%. That's the magic of compounding. However, if you pay 2.5% in expenses, than your $1 will only grow to about $25! That's what we call the "tyranny of compounding costs." It utterly overwhelms the magic of compounding. After you consider the costs, you realize that instead of you, the managers get the lion's share of the returns.
A caller asked Bogle how the Vanguard Total Stock Market Fund has outperformed other similar funds that also track the market. Bogle said there are two reasons why. First, they charge less expenses overall, so they take less out in terms of returns. Second, in recent years they have been able to manage the changes in the index better than their competitors. The man in charge has been a very good administrator of these funds. By and large, however, its the lower expenses that account for the better performance.
Another caller asked Bogle for his opinion on the long-term prospects of the international markets versus the U.S. stock market, as well as his outlook for the dollar. Bogle said he is a low risk-taker in terms of moving in and out of international markets. Bogle said the first question is whether you even want to have exposure to the international markets. Many investors aren't aware that 25% of the revenue for U.S. companies is derived from international sales. That said, Bogle said he understands the logic of diversifying into the international arena. With respect to the dollar, if you look at the long run, the returns of international markets are not that different compared to the U.S. market. There are cycles where there is outperformance in international markets. Bogle said if you are going to invest internationally, he recommends going with an international index fund and sticking with it for the long term. Vanguard has such a fund.
Bob asked Bogle to explain how the structure of a Vanguard fund works for investors. Bogle said when you buy a typical mutual fund, it is really like a corporate shell that holds a package of stocks and bonds. The chairman of the board is usually chairman of the management company that determines the portfolio. The officers are provided by the managers. In otherwords, the fund is captive of the management company. The rewards are enormous for those managers. For example, the typical equity fund costs 1.5% each year, plus another 1% in hidden costs. Contrast that with Vanguard where the funds are directly owned by the shareholders. Bogle said you should always determine whether the manager's interests are paramount, or whether the individual investor's interests are. Of course, in the case of Vanguard, Bogle said they look after the individual.
A caller asked Bogle about the Vanguard GNMA fund and how interest rates will impact the net asset value. Bogle said that when interest rates go up, bonds go down as a general rule. Over the long term, however, keep in mind that interest rates will fluctuate and in most cases, the returns generated will be entirely a function of the income generated. That is the mathematics of bond investing. The net asset value will fluctuate in the GNMA. The net asset value is not guaranteed, and you shouldn't look at it that way, but you should view it as an investment that provides a steady stream of income over the very long term. If you really want stability of capital, you can't get stability of income. You can go with Treasuries where the capital is guaranteed, but the income provided by treasuries is very low. When you go with a fund like GNMA, the trade off is you get higher yield, but you have to deal with the fluctuations of the net asset value.
A caller asked Bogle about the Vanguard Extended Market Index exchange traded fund and was concerned about the low volume of trades. Bogle said if you are buying it as an investment, you do not need to be concerned. In the exchange traded fund (ETF) arena, there is a lot of trading going on, and Bogle doesn't favor that. Long term success is about investing, not speculating. The ETF is actually a little cheaper than the actual fund (not including brokerage commissions), but Bogle said he has not changed any of his holdings to ETFs.
(David) EC: The caller and Bogle were referring to the Vanguard Vipers (ticker: VTI) which I own in my newsletter portfolio. They track the Total Stock Market Index. I like owning the Vipers because I could sell them (or buy them) in real time. The other benefit they have over the fund, is you can short the Vipers if you wanted to. The caller is correct though in that the volume of Vipers isn't that great, with the average volume of far less than the SPDRs (a/k/a Spiders), which track the S&P 500 (ticker: SPY).
Bob commented about how many shares are traded daily of the Spiders, to which Bogle said this just goes to show you that there are thousands of people shuffling money around each day. Bogle quoted Warren Buffet who said that the two greatest enemies of individual investors are expenses and emotion. Bogle said the Vipers take care of the first one, and its up to the investor not to be pulled into the latest hottest fund, whether it is energy, real estate, or whatever. Its hard to do timing, especially when commissions are involved......Indeed."
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. 2011
Honey here: If you want complimentary issues of David Korn's Brinker-related newsletter or The Retirement Advisor that he co-edits with Kirk Lindstrom, they are available: here
Moneytalk on demand and to go with Bob Brinker, is available for FREE audio/podcasting at KGO810 radio for seven days after broadcast. I download and save all three hours, including the third hour guest-speaker. (The program is archived in the 1-4pm time-slots.) If you don't download it from KGO within seven day, it's available at bobbrinker.com by paid subscription. KGO Radio Sunday Archives
59 comments:
Big thumbs up. Thank you David Korn and HoneyBee. The Bogle article made good reading this AM while I ate my Wheaties.
Col. D Brewski
So Bob Brinker broadcasts re-runs for which he is roundly criticized while David Korn publishes rehashed old articles which are then re-copied by HB which is supposed to be a treat?
What's the difference?
Frankj:
Ditto to the Col.'s comment.
I also enjoyed the Bogle interview.
Common sense and patience wins out.
Brought me back to a book I mentioned here a while ago, Allan Roth's How a Second Grader Beats Wall Street, using three Vanguard index funds.
Have always found it amazing that so few fund managers, with all their charts, company info and supposed intellect, fail to beat the market over the long term.
One strategy I think has a better chance for success is to, instead of picking stocks to outperform the S&P 500, start with those 500
stocks and depending on the economy, eliminate the higher P/E or overpriced companies in unfavorable industries. So a manager may have 300-400 better quality selections to compete against the index.
But I suppose it's just as difficult to predict the laggards as it is the winners.
Well Anonymous, I'll tell you what the difference is.
BB advertises himself as the nation's most respected financial advisor. People subscribe to his newsletter and listen to the show hoping to pick up a useful bit of information on the direction of the market.
(Let me insert here that I think some of the regulars on this board do not bother to subscribe, and listen out of idle curiousity).
So BB insults his listeners by putting on a canned program with no announcement identifying it as such. Were the "calls" generic enough to be useful to a wide group? Maybe. Were the "calls" springboards for a quick mention of his newsletter? I think so.
On the other hand, Bogle is a respected figure in the investment world and he pioneered index funds. When he speaks he has worthwhile things to say and the individual investor can learn a lot about costs and performance simply by listening to him or reading one of his books.
He does not pull any punches in describing the performance and costs associated with mutual fund investments, as evidenced by what was posted here.
Try this thought experiment, Anonymous: Imagine you are starting out in your working life and you want to invest but you know little to nothing, or that you come into some money and now have to do some investing while surrounded by sharks.
Would you have been better served by listening to last Sunday's rerun of BB's show, or would you be better off reading the summary of the Bogle interview?
I think the honest answer to this is the Bogle advice would be far more useful to someone who wants to get off on the right foot and that is the reason it was worthwhile to reproduce it here.
-- Frankj
ANON, crying and whimpering AGAIN, squeaks out:"?What's the difference?
If you need to aks, even I can't help you.
Start with honesty, then go to integrity, throw in a few principles, add a dash of TRUTH, and mix well.
HTH, but I seriously doubt it, if you keep coming back to be slapped around some more.
"On the other hand, Bogle is a respected figure in the investment world and he pioneered index funds. When he speaks he has worthwhile things to say and the individual investor can learn a lot about costs and performance simply by listening to him or reading one of his books."
He is an old man whose time has past and was even ousted from his own company because he could not keep up with the times.
He railed agains ETFs as the devils work and Vanguaurd didn't even offer then until Bogle was booted out.
He touts buy-and-hold as the best approach to investing and why shouldn't he? He wants to to buy all the Vanguards funds possible and hold them forever. He doesn't want you to sell because he can't collect managment fees if people don't hold his funds.
If you bought and held with Bogle during the past decade, you lost money.
BTW, ANON, you and your braindead sidekick can send Ms Honey all of the filthy, perverted, scummy posts that you want. I told her that I don't want to see them NOOMORE since you can't even curse or be filthy like a MAN. They are pretty borrrrriiing.
Are you a little limp-wristed and still trying to hide it? You're not doing very well.
HTH, but as I keep saying, you are beyond being helped by anybody with testosterone.
He does not pull any punches in describing the performance and costs associated with mutual fund investments, as evidenced by what was posted here.
One point here. Bogel is commonly associated with mutual funds but if you read his works he offers some very intelligent alternative for forming portfolios.
I mention this as I woudl hate to see him only relegated to the category of passively manged index funds.
tfb
Pig said:
"Start with honesty, then go to integrity, throw in a few principles, add a dash of TRUTH, and mix well."
The best way to explain how Brinker operates is a quote from J. R. Ewing.
"Once you lose your integrity the rest is easy."
Anonymous:
The circumstances under which he left Vanguard have nothing to do with the knowledge he has. Look around you and you will see that people at the top do retire or get eased out from time to time, or booted out as you put it.
Second: So he doesn't particularly like ETFs, for the reasons stated, too much trading. So what? What would you expect from a mutual fund guy? He may just be right, when it comes to ease of trading it quite possibly tempts people to make poor timing decisions based on emotion.
Your shot at someone who bought at Vanguard and held for 10 years...Vanguard SP 500 (VFINX) closed at 104.87 on Aug 31 2001. The close today was 111.34.
So, factually, you are incorrect. Could you have made more elsewhere? Of course. But your statement, as posted, was wrong.
Keep posting though, your cyber tantrums are entertaining.
the 6:19 pm post was from Frankj, forgot to sign it.
I don't need to by anonymous.
-- Frankj
So Bob Brinker broadcasts re-runs for which he is roundly criticized while David Korn publishes rehashed old articles which are then re-copied by HB which is supposed to be a treat?
What's the difference?
well on the one hand you have David Korn and on the other hand you have Bob Brinker, also know as the:
Where we dare to answer the question: What is Bob Brinker's also known as?
tfb
"Your shot at someone who bought at Vanguard and held for 10 years...Vanguard SP 500 (VFINX) closed at 104.87 on Aug 31 2001. The close today was 111.34.
So, factually, you are incorrect. Could you have made more elsewhere? Of course. But your statement, as posted, was wrong."
Talk about quibbling! Wait 'til today's close we may get there.
Most people acknowledge that the past decade did nothing for the buy-and-hold crowd. Zilch, stinko.
If you want to quibble over a few lousy points one way or the other go for it.
But for the Bogle worshipers, they got precious little for their devotion over the past decade.
Brinker at least sidestepped a bear with most of his portfolio.
OK, here's where all the bashers come out and trip all over themselves with ramblings about the optional QQQ trade, optional stock picks, etc etc etc.
Some of the slower ones even actually claim that they are SUPPOSED to lose money in a bear market because they are not market timers. LOL
Have fun!
Brinker at least sidestepped a bear with most of his portfolio.
And just as significant he sat out a bull market after 1987 after he got out after the fall! Oh sort of forgot that did ya. See - no reference to his disastrous QQQ trade nor his disastrous stock picks, we can just look at this so called market timing - it is a joke.
The only thing Brinker knows is how to sell a market timing newsletter to put money into his own pocket. The fact that you could get the same result by interpreting the growth pattern of mold is lost on those subscribing to his voodoo nonsense.
tfb
"And just as significant he sat out a bull market after 1987 after he got out after the fall! Oh sort of forgot that did ya" -tfb-
That's true...some 25 years ago.
But even if Brinker sidestepped only ONE bear market...that's more than you or the other buy-and-hopers.
Are you one of those who is just resigned to losing money in a bear market? One of the posters here likes to brag how good he is because he didn't lose as MUCH as somebody else. LOL.
BTW, tfb, that link you posted to bash Brinker is actually a swipe at organized religion. Calls it a "douche". Is that really what you want to post?
ANON, giving us the same old rethread line, says again:"Brinker at least sidestepped a bear with most of his portfolio.
Firstly, you have no idea what Brinker did with his portfolio, unless you are Brinker.
Nextly, if you are saying that Brinker followers sidestepped one bear........please fill me on how they are doing today, following ALL OF THE REST of Brinker's advice since then. ALL OF IT!
Do NOT cherry pick, do NOT slither, do NOT spin, do NOT lie, and do NOT embarrass yourself anymore by trying to pretend that you are clever and smarter than the "slow ones".
Please get your name calling out of the way first, then try to string 2 or 3 intelligent sentences together.........thanks.
Really enjoying the Bogle vs. Brinker slap down.
But with today’s market, the prime question is; where is DanG? Dan, are you on vacation going into Labor Day? I’ve been waiting for your market update. Did trading action on Thursday and today cause you to place a big bet on a short? I’m cheering for you. You could be my new American Idol. Please tell me your trading desk is not idle.
Col. D Brewski
Regarding DanG's posts....Copied from last thread:
Blogger Dan G said...
Oh no, Frank! The Feline indicator is bullish?
Well, trouble is, after my nap I tried an SDS "short" once again, and this time it appears to be successful! At least so far. Not outrageously, but $205 worth. That makes up for yesterday's boo-boo.
There is lots of free TA info on IBD's site http://www.investors.com/.
One caveat, don't follow too many indicators or they will drive you nuts! I look at chart patterns, Moving averages, Stochastic Oscillators for overbought/oversold indications, and MACD for trend, daily for short term, and monthly for long term.
I do also pay attention to seasonals such as the old "Sell in May" which has a pretty good, but not perfect, record.
Good luck. But I might add that you can also get good results with far less work just by using diversification and proper asset allocation, rebalancing occasionally.
- Dan G
September 1, 2011 2:08 PM
Copy from prior thread:
September 1, 2011 8:25 PM
Dan G said...
Sorry for the duplicate comment, which I deleted.
Anyway, it doesn't look good for bulls this morning. My only gripe is that I didn't have a good opportunity this morning to add to the SDS position. But I guess the bulls have even bigger gripes, so I'll shut up!
September 2, 2011 7:29 AM
“The true engine of economic growth will always be companies like Solyndra.” - President Obama
This weekend I expect Brinker to go on and on about the economy NOT creating jobs. I wonder if he will discuss the failure of the government to spend BILLIONS AND BILLIONS of taxpayer dollars to create jobs?
Solyndra solar company fails after getting controversial federal loan guarantees
Last year President Obama made a speech from the Solyndra “green jobs” plant here in California where he announced his support for a $535,000,000.00 loan guarantee.
That’s over HALF A BILLION TAXPAYER DOLLARS – gone – in one year for one plant!
10,000 jobs x $50/year salary = $500,000,000
Hopefully we taxpayers get SOME money back from selling land, inventory and equipment in the plant....
Kirk said:
"This weekend I expect Brinker to go on and on about the economy NOT creating jobs. I wonder if he will discuss the failure of the government to spend BILLIONS AND BILLIONS of taxpayer dollars to create jobs?'
Sorry but I have it from high placed source that Brinker will not be on this weekend.
"Nextly, if you are saying that Brinker followers sidestepped one bear........please fill me on how they are doing today, following ALL OF THE REST of Brinker's advice since then. ALL OF IT!"
Who knows? I don't know what OPTIONAL plays they made and neither do you.
Just take the offical advice as reflected in the official portfolios and you can see that sidestepping that one bear market was very beneficial.
I know you took the OPTIONAL QQQ trade and got burned. Maybe that's why you are so bitter to this day...ya think?
Folks, I think "Anonymous" is just pulling your collective legs. I recognize his "chain pulling" from another site, where he is just as antagonistic and argumentative as he is here. But at least he signs his name over there.
anonymous (who refuses to use any kind of identifying handle for some reason) said: "Just take the offical advice as reflected in the official portfolios and you can see that sidestepping that one bear market was very beneficial."
Oh Baloney!!!!! Are you aware that the S&P 500 closed 130 points below where it was when Bob Brinker returned what was left of those Year-2000 cash reserves to fully invested?
His buy price in March 11, 2003 was 807. The S&P topped out in October 2007 at 1565 and then gave it all back down to 677 SIX YEARS later (March 2009).
All the while, he was firmly ensconced in a front row seat of the "church-of-buy-and-hold."
While "Anonymous" is pulling your chain, I pulled the trigger on SDS and raked in a nice $1k profit. Not a lot, but it was only at risk for 2 days.
I'd normally hang on, but this is a 3-day weekend, and who knows what can happen in that time, and in this volatile market. So going into great Labor Day weekend flat. Feels good!
Bob Brinker's Retirement Portfolio #3 vs Our Alternatives
David Korn and I started "The Retirement Advisor" in January 2007 partially because we believed people like Bob Brinker were recommending too much equity risk to their retired audience. Lets see how we've done.
Our "Balanced Model Portfolio #1" should be compared to Bob Brinker's "Balanced Model Portfolio #3" since both typically have 50% in equities.
Brinker's "balanced" Portfolio #3 on 1/1/07 was $197,794.
Brinker's "balanced" Portfolio #3 on 8/31/11 was $221,835, up 12.2%.
"The Retirement Advisor "balanced" Portfolio since 1/1/07 is up 19.1%, 57% higher than Brinker's balanced portfolio!
Even better, we thought there were "safer" ways to guard a portfolio against inflation (mostly using TIPS in place of equities) so we had two other "retirement portfolios" with less than 50% in equities.
Our two "safer portfolios are up 23.5% and 29.9% since 1/1/07! See Retirement Advisor Performance where we, unlike Brinker, are not afraid to show our returns by year.
The KEY for us is we believe people who have retired should look to maintain buying power over taking added risk to increase their standard of living. Brinker seems to target higher risk and volatility to advertise higher long term returns. We think OUR APPROACH IS BETTER but we know not all agree.
But even if Brinker sidestepped only ONE bear market...that's more than you or the other buy-and-hopers.
LOL!!! Where did you get that idea? My portfolios are all up substantially and my return for the last 10 years is about 13%. That sounds GOOD until you adjust for risk and with that consideration I underperformed in my estimation. The concept of risk adjusted returns can be very unsettling – LOL!
And the little old lady purse snatcher did not side step the bear market he just lost less than those fully invested in it - and that is because even he knows he cannot time the market - that is why he hedged rather than getting out of the market. Get it through your head, Brinker would be challenged to time a three minute egg. And that is why he is the female hygienic device of the universe as per the SouthPark link!
And that link had nothing to do with attacking a religion, it has to do with another charlatan who rips off little old ladies known as Jonathan Edwards. The similarities between Brinker and the charlatan Edwards are amazing. Both prey on the fears and sensibilities of the feeble minded and ignorant. Which is why I selected it.
You know you are puzzling. You do not seem like an idiot and yet you cling to this ridiculous charade of Bob Brinkers. I mean seriously, the guy hasn't done squat in terms of anything that any rational person could think resembles effective market timing and yet you persist in perpetuating his hocus-pocus.
tfb
Our "Balanced Model Portfolio #1" should be compared to Bob Brinker's "Balanced Model Portfolio #3" since both typically have 50% in equities.
Maybe, maybe not. I believe in order to make that assertion accurate you need to compare the portfolios in term of risk. A 10% return in a S&P500 mutual fund or index is clearly superior to a 10% return in a single stock (as an example). Additionally comparing the return on a samll capo index vs a Dow index is very different and I believe you would need to adjust the returns accordingly to get parity.
I am not disagreeing with your comments as I do not know what the consist of, but I would suggest you go the extra yard in the future to look at an appropriate benchmark (or maybe your benchmark is correct).
Regards,
tfb
"And the little old lady purse snatcher did not side step the bear market he just lost less than those fully invested in it -"
Bingo Bunny! That's exactly what I said when I said that by sidestepping only ONE bear, Brinker was ahead of the buy and hold crowd. Your comment shows that you get that point.
You also said you were disappointed that your "risk adjusted returns" did no meet your expectations.
Can you tell us how you arrive at those risk adjusted returns. Do you go through a lot of arithmetic hoops with the Sharpe ratio and things like that? Or do you just find what you consider to be a comparable benchmark?
I am still of the opinion that while risk adjusted returns are something to hide behind because you can't spend risk based returns. Only real hard returns are what you end up with in your pocket.
Odan
Can you tell us how you arrive at those risk adjusted returns. Do you go through a lot of arithmetic hoops with the Sharpe ratio and things like that? Or do you just find what you consider to be a comparable benchmark?
LOL!!! Sure, but let me put it in context. Back in the later part of the 80s I had returned to school and graduated with a finance degree with a emphasis on investments. The in vogue academic theory back then was the now semi-discredited Capital Asset Pricing Model, which is essentially what I still use as it serves my purpose well.
So in answer to your question the risk is calculated via standard deviation (that is where the discrediting comes in because lower beta stocks tend to do better than the model predicts and of course the returns are not around a normalized curve)per security and weighed by an individual securities percentage of the total portfolio. The expected return of the portfolio (which takes in account risk (that is the basis of CAPM)was not achieved. Therefore I either miscalculated the risk or I simply did not achieve the rate of return for the risk assumed (there are other possibilities).
I hope that makes some level of sense.
tfb
ANON repeats herself:
That's exactly what I said when I said that by sidestepping only ONE bear, Brinker was ahead of the buy and hold crowd. Your comment shows that you get that point.
Perhaps you missed this simple question from 24 hours ago? Allow me to refresh your poor memory.
Firstly, you have no idea what Brinker did with his portfolio, unless you are Brinker.
Nextly, if you are saying that Brinker followers sidestepped one bear........please fill me on how they are doing today, following ALL OF THE REST of Brinker's advice since then. ALL OF IT!
Do NOT cherry pick, do NOT slither, do NOT spin, do NOT lie, and do NOT embarrass yourself anymore by trying to pretend that you are clever and smarter than the "slow ones".
Please get your name calling out of the way first, then try to string 2 or 3 intelligent sentences together.........thanks.
Thanks tfb, that CAPM sure looks easy enough to me. All you have to do is guess about half a dozen variables, and PRESTO, out pops a number that is practically guaranteed to be meaningless.
Here is a calculator to let you try it out. You can find values for beta via the box below.
Benchmark Return Rates
Return available on an appropriate market benchmark investment (like the S&P 500): %
Return available on a risk-free investment (cash, or government bond): %
Risk Factor
Your investment's Beta (relative to the market benchmark above):
Results
Risk-adjusted discount rate: %
Carry result to DCF calculator...
Find Beta
Ticker:
You now plug this value for the discount rate into the discounted cash flow calculator - ignoring the advice underneath it about using conservative estimates for earnings.
Analysts sometimes use a more complicated value for beta, that grows with a company's debt level. There is also lots of controversy about whether beta, which measures past volatility, is sufficient or even relevant in predicting future risk. William F. Sharpe, who invented CAPM, discusses these issues in an online interview.
One big caveat: the sophistication of the sliding discount rate makes this approach potentially dangerous. If you get creative enough with the discount rate and long-term growth expectations, you can come up with some wildly unrealistic valuations. So if you do use this approach, you should check your results by using discounted cash flows the traditional way, just to make sure you aren't fooling yourself.
(And one more caveat: CAPM is part of Modern Portfolio Theory, whose adherents would prefer not to value individual stocks using CAPM or any other method: MPT fans like index funds, not stocks.)
http://www.moneychimp.com/articles/valuation/capm.htm
"Perhaps you missed this simple question from 24 hours ago? Allow me to refresh your poor memory."
I already answered your post pig. Please go back and read it.
Don't waste my time I still have some spam emails to read.
I already answered your post pig. Please go back and read it.
Do you need special decoder glasses to see the post?
Humor me because I'm STOOPID. Show me again where the answer is, after you are done reading your porno mail.
I totally do not understand your point, you asked me what I do and I told you. I never suggested you try it.
tfb
"I totally do not understand your point, you asked me what I do and I told you. I never suggested you try it."
I know that bunny, thanks for you explanation.
You know Markowitz invented that CAPM thing and EMT.
He was addressing some group and somebody asked him how he personally invested. He said he should have done this and that but he said that was just too much hassle so he just invested half of his portfolio in the total stock market and the other half in the total bond market.
My kind of guy!
A piece in todays WSJ weekend edition "How the Index Fund was Born," by John C. Bogle.
-- Frankj
Pig: "Nextly, if you are saying that Brinker followers sidestepped one bear........please fill me on how they are doing today, following ALL OF THE REST of Brinker's advice since then. ALL OF IT!"
Don't let him get away with letting you believe his followers sidestepped the bear. You know most of people posting on his web site at the time who were retired bought TEFQX with the 40% they kept in the market AND they owned MSFT that he advised holding. They were AGGRESSIVE P1 investors if they bought TEFQX....
Those folks were told to put 30 to 50% of cash reserves into QQQ. 50% gave their portfolios a beta of 1.0 so they were exposed to the full brunt. They did far worse if they bought TEFQX and held 4% in MSFT...
Read Effect of Bob Brinker's
QQQQ advice on his Reported Model Portfolio Returns that our old friend and huge Brinker supporter "Math Junkie" helped calculate.
Brinker under performed the market in the 1980s and 1990s up until 1999 due to poor market timing (selling at the bottom AFTER the 1987 bear) and picking poorly performing managed funds... so with his great call to lighten up AND ignoring his QQQ advice, he ONLY outperforms buy and hold the index fund by about a percent. Add in the QQQ and TEFQX advice and he does far worse...
TFB: I am not disagreeing with your comments as I do not know what the consist of, but I would suggest you go the extra yard in the future to look at an appropriate benchmark (or maybe your benchmark is correct).
Regards, tfb
You should check the Retirement Advisor web site for and get the free issue. Yesterday I uploaded our CURRENT issue so anyone can have it for free.
You will find we mostly use index funds from Vanguard, their TIPS fund (they don't offer a TIPS index fund) and cash in a savings account. Given the allocation to what nations, cash vs bonds you have to figure out exactly what your benchmark is.
I've exchanged emails several times with Bill Sharpe and he sent me a personally autographed copy of his latest book... he's of the mind you should have your equity assets allocated to match global market caps which is about 1/3 in US and 2/3rds overseas. We think this is too risky due to accounting issues and cheaters are probably worse outside the US so we sort of reversed that.
Brinker has even less outside the US... but I think the biggest reason Brinker's balanced P3 has under performed our balanced portfolio is he let it run to 2/3rds equities and was SO BULLISH at the top he REFUSED to rebalance to 50:50. We rebalanced so had the effect of selling at the top then rebalancing again in Jan 2009 to buy at the bottom... pretty simple.
"Don't let him get away with letting you believe his followers sidestepped the bear. You know most of people posting on his web site at the time who were retired bought TEFQX with the 40% they kept in the market AND they owned MSFT that he advised holding. They were AGGRESSIVE P1 investors if they bought TEFQX...."
I was a frequent visitor to Brinker's website, followed the regulars closely and saw NO EVIDENCE TO SUPPORT YOUR ASSERTION.
Now if you want to load up the "typical" Brinker follower portfolio with TEFQX, MSFT AND QQQs to support your own agenda then go for it.
But it's your PURE CONJECTURE because you couldn't have proven it at that time and you can't prove it now.
I remember full you and Rande and others figuring out how much your taxes would be if you sold on Brinker's sell signal.
Instead you rode the bear market down and didn't have to worry about taxes any longer.
I'll just point out Kirk's post of September 3, 2011 1:19 PM hit one of the three premier issues that most analysts with true credibility are arguing about. One being the U.S. verses rest of the world allocation, another the max up of asset classes (slicing vs S&P500 or Wilshire and total market bonds, and lastly when to rebalanced. My observation, the three taken together are some of the last areas of real debate in Modern Portfolio Theory. Implicit to that is the idea of market timing that occurs when you rebalance due to changes in the percentages of asset classes.
To the best of my knowledge market timing has been thoroughly discredited for various academic reasons that withstand the tests of scrutiny and common sense. And to the best of my knowledge Brinker is a wonderful case study for the follies of market timing when taken in totality.
regards,
tfb
Who is stuffing himself with a flush of Sudduth strain of Brandywine Tomatoes in the form of turkey bacon BLTs with a cheddar soy cheese - simply heaven and heart healthy. Yo ucan tell it is healthy by the glossy sheen my fur takes on : )
Anonymous, among other assertions said: "I was a frequent visitor to Brinker's website, followed the regulars closely and saw NO EVIDENCE TO SUPPORT YOUR ASSERTION."
Anonymous,
Please identify yourself, or I will advise everyone to consider what you wrote a complete joke.
If indeed, you were there on the Brinker message boards and later on Kirk's Brinker message boards, then you used a handle. Anonymous was not allowed.
Again, please identify yourself. I'm really getting sick of your making statements that you are not even willing to back up with an identity.
"Please identify yourself, or I will advise everyone to consider what you wrote a complete joke."
I said I was a frequent visitor...not a poster.
I was there when Rande, Will and you all got booted and I know the real story.
Brinker asked people to NOT post links to Suite 101. Rande posted his personal bio complete with a pic of him standing in front of a phony bookcase.
It was a link to 101 and he was booted off!
Now that's what REALLY HAPPENED...I saw it.
So you still refuse to identify yourself in any way.
Firstly, Bob...you are lying about why people were banned from the Brinker boards, both by omission and blatantly, and I can prove it with the first-person written testimony of dozens of people.
You may think you got that all wiped out when you pressured Suite 101 to "burn the books" that contained a wealth of information about the scummy tricks that Brinker has pulled over the years, but some of it got saved.
And! I have always prided myself on telling the truth and only the truth, and my reputation has been established for many years now.
I have an EXCELLENT memory, and I remember the shocking events at the Brinker boards like they were yesterday!
You see, I was a LOYAL fan until I saw the UGLY things that the Brinker's were doing. My eyes have been wide open ever since.
Plus, there are several who read and post on this blog who know the truth.
Someone is lying. I remember many were kicked off Bob Brinker's web site simply for asking "where is Rande?" after he stopped posting.
After they made the web site for REGISTERED subscribers only, Bob Jr. found a new profession deleting posts and members 24x7 as they asked what to do with their QQQ investments that were falling like rocks.
Brinker couldn't take the heat and the TRUTH about his telling subscribers to buy back into the NASDAQ near the top of the bubble was bad for business so they shut down the discussions with another lie about why.
Why anyone but a Brinker would lie about it ten years later is beyond me.
"...you are lying about why people were banned from the Brinker boards, both by omission and blatantly, and I can prove it with the first-person written testimony of dozens of people."
Not at all. I too have an excellent memory and you just don't like to hear the truth from somebody who was there also.
You must remember how many folks thought it was cute to attempt to divert readers to Suite 101 by posting cutesy little names like "sweet one oh one". That alone should have gotten the offenders banned.
There was a hard core band of troublemakers who's sole goal was to disrupt the smooth operation of the boards, and they succeeded.
Brinker finally decided policing those troublemakers 24/7 wasn't worth the hassle and shut the boards down entirely.
And he was right!
SweetoneOoner
Perhaps I missed this profound answer again from 24 AND 48 hours ago? Allow me to refresh your poor memory or my poor eyesight.
Firstly, you have no idea what Brinker did with his portfolio, unless you are Brinker.
Nextly, if you are saying that Brinker followers sidestepped one bear........please fill me on how they are doing today, following ALL OF THE REST of Brinker's advice since then. ALL OF IT!
Do NOT cherry pick, do NOT slither, do NOT spin, do NOT lie, and do NOT embarrass yourself anymore by trying to pretend that you are clever and smarter than the "slow ones".
Please get your name calling out of the way first, then try to string 2 or 3 intelligent sentences together.........thanks.
BTW, I really don't care if you use a name or not, since we know it anyway.
"I remember many were kicked off Bob Brinker's web site simply for asking "where is Rande?" after he stopped posting."
More often than not, those were troublemakers trying to skirt Brinker's ban on mentioning Suite 101.
If somebody responded with a cutesy spelling or other way to mention 101, both posters were banned.
The troublemakers were constantly disruptive 24/7 and I am surprised that Brinker put up with that crap for a long as he did.
I don't blame him one bit for shutting down those boards.
"Perhaps I missed this profound answer again from 24 AND 48 hours ago? Allow me to refresh your poor memory or my poor eyesight."
I answered your question and I am not going to respond to you anymore. Get lost pig. Don't waste my time, I still have a ton of spam email ads to read.
I answered your question and I am not going to respond to you anymore. Get lost pig. Don't waste my time, I still have a ton of spam email ads to read.
No you didn't answer it, because you tremble in fear at the results that it would show, and it would unmask the Charlatan.
Rather than get lost, I will refresh your memory, and everyone else, EACH and EVERY time that you try to spread the "brinker sidestep" bullcrap.
I will consider it an honor.
Another "anonymous" said: Someone is lying. I remember many were kicked off Bob Brinker's web site simply for asking "where is Rande?" after he stopped posting.
After they made the web site for REGISTERED subscribers only, Bob Jr. found a new profession deleting posts and members 24x7 as they asked what to do with their QQQ investments that were falling like rocks.
Brinker couldn't take the heat and the TRUTH about his telling subscribers to buy back into the NASDAQ near the top of the bubble was bad for business so they shut down the discussions with another lie about why.
Why anyone but a Brinker would lie about it ten years later is beyond me."
Indeed, it is certainly strange that someone would lie about the Brinker message boards all these years later.
Is it because he is still stinging from the fact that for the first time in his long career, his true character was exposed?
What this prevaricator is not telling is the fact that the message boards continued for some time after they closed it to registered members -- as you said.
Rande, David Korn and Will L. never said anything the least bit insulting about Brinker, but they were banned simply because they refused to kiss the Brinker-ring.
Will L. had his name stolen on the BB Boards and used to post all sorts of insulting crap, and when Will complained, he was banned.
As you said, the reason the Brinker's finally shut it down was because the remaining "registered" Bots were asking questions about the disastrous QQQ trade.
With the Brinkers, it's all about censorship and control. They used it on their own website and tried to enforce it on other websites, including Suite 101. They have succeeded to some extent on a few websites, by threatening and bullying.
Not only do they use censorship, they use the dirtiest tactics imaginable. I had my real name imped and used to post filth and lies. That is when I had to announce that I no longer used it and became "Honeybee."
At the Brinker message boards, I used my real name and only posted comments about investing. It was my first experience on a message board, so I sure didn't play any games.
I observed what Rande posted, and it was almost exclusively simple market data. I don't remember Kirk from that message board, but have always been grateful that he picked up my email address when I posted it before it was deleted. All of the best posters were leaving -- and I didn't know where they were going because as the prevaricator has stated, saying the name Suite101 was not allowed.
So Kirk sent me an invitation to his uncensored message boards. I made one post there about how I thought the censorship at Brinker's boards was horrible.
The next time I tried to log in at the BB Boards, I was banned!
Here is what I wrote about it in Year-2000 when the Brinker-flush was happening. (my real name redacted.):
3) Delxx_x I was kicked off because I posted on THIS site how I believe the censorship on the BB site is contemptible!
You've had your (completely false) say about the Brinker message boards. Now you are repeating yourself.
So I suggest you consider yourself fortunate that I let you post anything at all. I won't publish any more of what I know for a fact are lies.
The Brinker's would not have let you post anything.
BTW: Anyone that doubts Brinker uses censorship to make himself look "good," only needs to listen to Moneytalk.
How often does anyone get on the air to ask him why he was buying when the S&P was almost 200 points higher last July?
"How often does anyone get on the air to ask him why he was buying when the S&P was almost 200 points higher last July?"
Don't you think that would be kind of a silly question and a time-waster?
That's why Brinker needs call screeners.
"That's why" Brinker needs call-screeners???
LOL! Wait a minute, while I wipe up the coffee I spit all over my keyboard.
Yes, looking silly IS why Brinker needs call-screeners. However, the person who would look silly without them is Bob Brinker. ROFLOL!
How stupid would one have to be to pay an iota of attention to the market-timing of a financial advisor who has TWICE said he was buying in the S&P 1300's just before it dropped by hundreds of points.
The first time was in 2008, when he was still blind as a bat and claiming that the market had not entered the worst bear of our lifetime. And now again this July.
Yep, he sure needs the call-screeners to help him hide the awful truth that he couldn't find a bottom (or a top) with both hands.
So for all of us who were not part of that group can you explain what was the connection or lack their of between Brinker's board and Suit 101? Now I posted at Suite 101 toward the end, but I don't get why Brinker cared that someone ran a board. I sit simply because you discussed the QQQ at Suite 101?
Curious,
tfb
TFB,
I'm sorry to take so long to answer your question about the connection between the Brinker boards and Suite 101.
I will do that tomorrow....
Hey folks, Will likely be the U.S. considerably much better off keeping Syria's Assad?
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