February 10, 2012, Bob Brinker Answers Important Questions in Person

February 10, 2012.............................................................................(comments welcome)

In March 2005, Bob Brinker was the featured speaker at the KGO Radio Cure-a-Thon for Leukemia and Lymphoma Society.  On Saturday, he spoke at the Geary Theater in San Francisco,  and on Sunday, he was at the Fairmont in  San Jose.

A subscriber to David Korn's newsletter, known as Peter,  attended the event in San Jose and provided this summary  of Bob's charity appearance there.  David said: "From my experience, Bob has always been more candid about his market thoughts at these charity appearances, and they make for good outings.  This one is no exception!"

Bob Brinker's 2005 Charity Event Appearance in San Jose, California 

 Peter:  I attended Bob Brinker's live appearance at the Fairmont Hotel in San Jose, California on Sunday, March 13, 2005. The Fairmont donated their service and space for the event which benefits the KGO Radio Cure-A-Thon.  I estimate that there were about 1,000 people in the audience.  If I had to guess, I would say the average age was 45-55 years old, with about hal men and half women.  The event lasted from 9:30 a.m. until 10:45  a.m.  Bob was introduced by Michael Finney who is a consumer reporter for KGO Radio and TV.

Peter: Michael asked Bob some "canned" questions. Those questions and Bob's answers, as best as I can recall are below.

Question #1: What are the root causes of a Bear Market?

Answer to #1:  Bob said he discussed this  in his February, 2005 Marketimer newsletter.  The root causes of a bear market include: (1) Tight Money; (2) Rising Inflation; (3) Rapid Economic Growth; (4)  Overvaluation; and, (5) Rising Rates.

Honey EC: Here are Bob's latest Moneytalk comments:  Bob Brinker's Five Root Causes of a Bear Market.

Overall, Bob doesn't  see a bear  market on the horizon yet.  Bob said he believes short term interest rates should rise to 3% in May or June.  Bob said "overvaluation"  is a  pre-conditioner for a bear market.  He said when he last  talked in March  2000 in San Francisco, he was very uncomfortable because had forecast the bear market.  BOB SAID HE BELIEVES THE S&P 500 WILL GO INTO THE HIGH 1200s THROUGH THIS YEAR.  He said Alan Greenspan doesn't like long-term rates staying low. Although we are seeing higher gas prices, these are anti-inflationary because it takes money out of the pockets of consumers.

Honey EC: Bob was stretching the truth when he said that he had "forecast a bear in March 2000." He did not become bearish until August 2000. Before that he said that market upside was "limited" and raised only 60% cash reserves.

In the March 2003 issue of Marketimer Bob Brinker said: "The Marketimer stock market timing model continues to suggest underlying conditions remain unfavorable for the overall market....Our suggested equity weighting remains at 40%.....Subscribers involved in dollar-cost-average programs may continue to invest up to 40% level."

Peter:  Bob then discussed what he looks at in his stock market timing model.  He looks at (1) Economic Cycles; (2) Monetary Policy; (3) Valuation; and, (4) Sentiment. Bob said with  respect to Monetary  Policy, the Fed doesn't want to "rock the boat" by raising  rates too  much for fear of homeowners being unable to make their  monthly mortgage payments.  Bob said there is currently no problem with the Valuation Indicator.

Honey EC: So this was Bob Brinker's stock market timing model in 2005. I think it's safe to say it's still his stock market timing model. I think the question is, does he still use it after it was clueless about the 2008 megabear market. What kind a "timing model" is it that can't forecast or even recognize the biggest bear market in 80 years? 

Peter:  Bob told the audience that even though he thinks the market will go higher this year, he still believes that we may have corrections of 10% or more.

Honey EC: It would appear that Brinker is now willing to accept 20% corrections and not bat an eye. There were two of them in 2011 that came within a fraction of 20%.

Question #2: What are some threats to the stock  market?

Answer to #2: Bob said oil, fiscal policy, and an overheating economy pose threats to the market.  Bob said he doesn't know  where oil prices are going.  Fiscal policy is out of  control. With respect to the economy, Bob said to watch the employment report released in April closely.  If that number "explodes" it will  not be a good thing because of the impact it will have on  inflation.

Question #2a:  Bob was asked to discuss  his views on  market volatility.

Answer to #2a: Bob started off by mentioning the QQQ trade. The audience exploded into laughter and he admitted it was  a BIG mistake  and it would never happen again.  He said he looked for a counter trend rally in a bear market and it didn't work.  He said he wishes he had put a stop-loss on that recommendation and he takes the blame for the mistake.

Honey EC: So Brinker takes the blame for this trade that damaged so many of his followers? That's mighty big of him. Too bad he didn't also take responsibility by accounting for it in his model portfolio performance records. Instead, he put the trade on hold and  covered it up. You can read all about it here.

He also said he took a lot of heat for his January 2000 call to go to cash.  One tech stock holder was very upset when the market continued to  rise, but he didn't hear anything from him again after March 2000.  Bob said on March 10, 2003, he and his son were up all night when everything fell into place for his call to reenter the market.

Honey EC: So Brinker and HIS SON were up all night in March 2003 trying to decide about reentering the market?  That was two years before the son left the computer/IT field and began publishing a fixed income newsletter. One has to wonder,  if Bob Jr had input in 2003, how much is he inputting current issues of Marketimer?  (Of course, he doesn't call himself Bob Jr like used to when he didn't want to be mistaken for his father.)  Now they both use the same name on the internet.

Question #3: Bob was asked to discuss  his views on the real estate market.

Answer to #3:  Bob said 23% of today's  home purchases are by  investors or people buying 2nd or 3rd houses and he is fielding many more radio  calls regarding real estate than ever before.  He mentioned  a couple who bought two condos on speculation in Florida and flipped them before moving in.  Bob advised his audience to avoid speculation.  In addition, Bob said adjustable rate mortgages are a  fool's bet. Lenders want you to take an adjustable rate mortgage.  Fuggetabout it.  Go with a fixed rate, which aren't that much higher.

Question #4:  Bob was asked what he thought about Alan Greenspan.

Answer to #4:  Bob said Alan Greenspan is a "huge"  role model.

Honey EC: In light of the things that Brinker has said about Greenspan in the last few years, that is really funny. 

Peter: After the pre-prepared questions, Bob went on to take questions from the audience.  Those that had questions  were required  to fill them out on a 5" by 8" card with their name, city and question and submitted them before the show began.

Audience Question #1: Where do you see  the S&P 500 in  2005 and in 2006?

Brinker's Response:  Bob said he will follow his indicators. Bob said he believes we are in a secular bear market  megatrend, which can last as long as 20 years.  As of now, there are no caution lights and  things look ok and will grind to the upside.

Honey EC: Brinker has flip-flopped on his "secular bear market megatrend stands at least three times since 2006. Read all about it here.

Audience Question #2:  What will impact interest rates over the next five years?

Brinker's Response:  Bob said he only predicts rates out to 12 months and that economic growth sets the rates.  Rates look okay right now, and the GNMA Fund, for example, has been trading in a narrow range.

Audience Question #4: Who will be your successor?
 
Brinker's Response: Bob said he only  makes 12 month  contracts with ABC Radio and does not know the answer and  that is why he only  takes 12 month subscriptions to his newsletter, but he has  been doing both for 20 years.

 Peter:  Bob then picked up the next card and said, "CRAIG IS ON THE LINE".  He blew it (it wasn't an intended joke), and the audience initially cracked up and then  applauded when Bob said it shows that he doesn't have a life!

Audience Question #5:  How do you get a  family member  interested in investing in the stock market with limited  funds?

Brinker's Response: Bob said he would  start by opening a  Vanguard Prime Money Market Fund and build from there.

Audience Question #7: What could cause bonds to go down?

Brinker's Response:  Bob said to watch  the employment report that comes out in April.  If we get 500,000 new jobs,  interest rates will  go up, and bond prices will go down.

Audience Question #9:  How do you apply  one of the  model portfolios to a 401(k) plan at work?

Brinker's Response:  Bob said to use the Active/Passive  portfolio (90% total stock market and 10% international).

Honey EC: As of February, 2012, the Active/Passive portfolio is:  80% Vanguard Total Stock Market (VTSMX or VTI) and 10% Vanguard International Growth (VWIGX; and 10% Vanguard All-World (VFWIX) -- or 20% in MSCI EAFE Index IShares (EFA). 

Some say that this portfolio is a good way to strictly follow Brinker's market timing if you don't want to mess with his choices of managed mutual funds. Of course, there hasn't been any "timing" changes for eight years, so you are doing just what the market does. But surprisingly, the market outperformed Brinker's two stock model portfolios in 2011.

Audience Question #10: How many people are on your staff?

Brinker's Response:  Bob said he has written every newsletter himself from day one.  He does have an office manager and staff in Colorado and many "suits" in New York.

Honey EC: I have a hunch the answer to that question would be VERY different today. I suspect that Brinker writes very little of his newsletters now and  he probably has more "staff" on the "farm" too. Notice I used the word, "suspect." :)

Audience Question #11:  Do you see the Northern California real estate market continuing to increase?

Bob said he relies on a person from the University of California Berkeley who says there is higher vulnerability at higher prices and that there is a  15-25% risk level in Northern California. Bob added that in Silicon Valley, many of the principal producers in the world reside and that is not going to change  -- it is an intellectual trophy location of the world.

 Peter: That was about all she wrote.

Honey here:  I have edited out a few of the questions that are completely out-dated and would be of no interest to readers. It needs to be noted that Bob Brinker's Moneytalk is no longer carried on KGO 810, the San Francisco bay area power-house station. Here is a list of stations where you can listen live and also download Moneytalk on demand for free.

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