March 29, 2012, Current Status of Bob Brinker's Bear Market Indicators

March 29, 2012....Let's review Bob Brinker's 5-Root Causes for a Bear Market.

On Moneytalk in 2010, Bob Brinker explained his 5-root causes of a bear market. In some ways, they are similar to the 4 components of his Marketimer timing model. We know the main components in Bob's timing model because he explained them at a live appearance in San Jose for a KGO Leukemiathon.

 The Marketimer timing model consists of four main components: Economic Outlook; Monetary Policy; Equity Valuation;  Investor Sentiment.

Bob's 5-root causes of a bear market as of March 2012: 

1. Tight Money: Bob talks about the Federal Reserves' latest report that said: "The committee stated that it expects to maintain a highly accommodative stance for monetary policy."  The FOMC has committed to keeping interest rates low for the next three years.

2. Rising Rates: Brinker thinks it will happen eventually, but doesn't see it in the near future, and it is not happening now.

3. High Inflation: Even though gasoline prices and fuel oil prices have increased, year-over-year,  the CPI now stands at 2.9%, which Bob considers low inflation --the high unemployment rate is a factor. Core inflation (which is minus food and energy) remains tame.  The personal consumption expenditure (PCE) shows year-over-year inflation of just 1.8% and Bob expects that figure to remain close to or below two percent this year.

4. Rapid Growth: Not there....Bob expects real gross domestic product (GDP) growth in 2012 to stay within the range of 1.5% to 2.5% --  slightly more conservative than the Federal Reserve forecast.

5. Over-Valuation: Bob does not see overvaluation now based on company earnings. In the March 2012 Marketimer, Bob wrote:  "Applying our 14 to 14.5 price/earnings multiple range to our $103 operating earnings estimate for the S&P 500 Index, we are projecting a rise in the S&P 500 Index into the mid-to-upper 1400s within the next 12 months."

Conclusion: All the root causes for a bear market are still in hibernation. :)

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March 25, 2012, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary

March 25, 2012...Bob Brinker hosted Moneytalk today...........(comments welcome)

Bob Brinker's comments paraphrased, excerpted or summarized

STOCK MARKET - STAY FULLY INVESTED:   Bob said that there is only one way to be during a market like this one and that is fully invested........We are starting the final week of first quarter and  the  S&P 500 Index is setting at 1397. The first quarter 12-week total return is 11 1/2% -- and from the beginning of the 4th quarter, a total return of 28%.

Honey EC: Bob's current projection is for the S&P to trade in the mid-to-high 1400s this year. 

DOLLAR-COST-AVERAGE AT THIS TIME: Bob said: "We've had an incredible run in the stock market. The only word that works is a melt-up, since the beginning of October.....We have a dollar-cost-average approach recommended at this time." 

INTEREST RATES: Rates remain very low. There had been  a blip up after rates dipped below 2%, but have receded this week.  Ten year Treasury at 2.23%,  an historically low rate. Two-year at 35 basis points.

GOLD IN IRAs....Bob said that gold is speculative and should never be put in an IRA.

Honey EC: Bob still has gold (GLD) on his individual issues list, but he gives no advice on how much to buy or how much to pay for it.  This list is never part of his performance record.  It's just a list that actually only contains three individual stocks -- Microsoft and Vodafone that have been on it for over a decade, and Suncor.

LAKSHMAN ACHUTHAN - ECRI RECESSION PREDICTION...Caller Julio from North Carolina asked Bob about the recession prediction made by the Economic Cycle Research Institute in 2011. He pointed out the fact that very recently, Lakshman was interviewed by CNN and CNBC and said that they are standing by their call for a recession.

Bob replied: "Yeah, I'm familiar with the call. I think the call was an unmitigated disaster. And I think it resulted in the fact that the market got all the way down to the 1100 area in September of 2011. I think that without that call the market would not have gone all the way down to the 1100 area. I think it would have found support higher... But I'll tell what, I think that call was part of the reason that the market went down that low. I'm very happy to say that on September 22nd, through my investment letter, I issued a buy-signal on the market....at the 1129 level."

Honey EC:  Bob basically missed a 20% bear market in September 2011, but he doesn't admit to missing a bear because on a closing basis, the S&P bottomed with a 19.4% decline. Even so, it's clear that, no matter what, Bob always has his perennial "exogenous event" to fall back on. By the way:  Even though Julio said that ECRI  was founded by Geoffrey Moore, its co-founder and CEO is Lakshman Achuthan. Achuthan is also their  public spokesman. * Figuring Out the ECRI Recession Call    

LOCAL FISCAL PROBLEMS: The latest entry is a reported audit on Long Beach, New York. -- a credit rating train-wreck because the credit rating was cut five levels in December -- related to questionable practices in terms of the receipt of funds according to a city councilman. A couple of years ago, Vallejo, California declared bankruptcy.  News about Stockton, California came out this month. Stockton is on track to become the largest American city to go bankrupt.  Stockton pays 30 million dollars in annual pension expense, but they have less than 70-cents on the dollar set aside for this annual expense. We should know by the end of June whether Stockton will file for Chapter 9 bankruptcy.

UNEVEN UNION NEGOTIATIONS.....Bob said: "If Stockton, California decides to file for Chapter 9 bankruptcy, that would allow the city to negotiate reductions in court in its outstanding obligations.....As I've said on the broadcast, if you want to look at an uneven negotiation, look at a negotiation that involves union representatives for public workers sitting across the table from municipal representatives....Invariably, you will see a dramatic imbalance in favor of the union representatives of the public workers and that is why the situation is the way it is today.....You have the union representatives coming in armed with demands for benefits. And you have the municipal representatives not really caring that much because in a lot of ways, they don't have any reason to bring passion to the table -- they're not looking to make enemies. It's easy to just give away the store." 

WILL PUBLIC EMPLOYEE PENSIONS AND BENEFITS FULLY PAY OFF? Bob said: "We've had callers on the program, you've heard many of them over the years, talk about their pension income guaranteed for the rest of their lives. Well I wonder about that because I wonder how many of those pensions are going to fully pay off 100-cents on the dollar. I have to wonder about that when I look at this situation that is unfolding." 

AMERICAN AIRLINES: They are planning to start a bankruptcy court process for voiding union contracts. They are trying to cut labor costs by  1 1/4 billion dollars a year and reduce headcount by 13,000.

STAY CAREFULLY TUNED IN TO THE MUNICIPAL MARKET....Bob said: "If you are in the municipal market, you want to be very carefully tuned to fiscal situations. Firstly, you don't want to own any fiscally troubled municipal debt. And secondly, you do not want to move into a locale that has fiscal problems outstanding because they are going to come to you and raise your local taxes to solve their problems. There is every reason to get out of those locations."

BUCKET SHOPS AND JESSE LIVERMORE....A topic from the 1920s, but of interest to some. Bucket Shops were places you could go to trade stocks and make margin deals.  They are now illegal. Bob recommended Jesse Livermore books if you want to read up on them. Bob suggested you could find investing books from his reading list at the library, and "put your tax dollars to work."

Honey EC: Bob never hesitates to recommend using the library rather than buy the books that he talks about on the show.  However, what's good for other authors is not good enough for Bob Brinker. He pulled all the subscriptions to Marketimer from libraries over ten years ago -- right after his tragic QQQ trade went south. There may be some exceptions where you can find Marketimer in a library because sometimes librarians get subscriptions through some avenue not affiliated with the library and provide them for patrons.

 Data coming out next week:
ECONOMY  - GDP:  Final figure for 4th quarter this coming Thursday.  Expected to be close current 3%.

INFLATION- PRICE LEVELS:  Personal Consumption Expenditure price index is expected to be at 2.3% year-over-year, and the core rate 1.9%.

DURABLE GOODS:  Report on Wednesday, expected to be 3% higher.

HOUSING: Case Shiller Survey of Housing comes out on Tuesday and expected to show a monthly change in housing prices of -3/10 of 1%. If so, that would bring the year-over-year change to -3.8%. There is some modest deterioration in housing prices, but certainly have leveled off.

UNEMPLOYMENT INSURANCE CLAIMS:  Estimate 350,000 -- well under the critical 400,000 for months.

  Link to full economic calendar for next week


A CALL FROM THE FILE OF "YOU CAN'T MAKE THIS STUFF UP": HUSBAND GIVES WIFE DYING INSTRUCTIONS TO DO WHATEVER BOB BRINKER SAYS:  Caller Dee from Pennsylvania said: "My recently passed and left me one million dollars to invest and he told do every (sic)  the Marketimer that receive and to also listen to your program. And my question is, I'm torn towards the portfolio III or the income portfolio. Which one would you suggest that I go to?"

Bob replied: "That's a very interesting question. How old are you, Dee? (63) I think I would be going to the balanced portfolio which is model III.....Now  you certainly down the road may skew yourself toward the income portfolio. But for right now I'd go with the balanced portfolio, that's going to include income securities as well as investments in the stock market. As for the stock market investments, at this point, I would recommend a dollar-cost-average approach in terms of putting new money into the market."

Honey EC: Aside from the absurdity of a dying husband telling his wife to trust a radio talk show host who hawks a newsletter on the air that at times has given risky and costly advice, incredibly, Bob did not ask Dee about her net worth, sources of income, expenses or anything else. I have quoted everything she said to Bob.  Bob just eagerly jumped on another opportunity to talk about his wares. 

BEST BRINKER QUOTE OF THE DAY....Bob said: "Your best chance of getting taken out today is by a texter -- and boy, you are gone. I think that texters are the major menace on the highways. I see them all the time. It drives me nuts."

Honey EC: Right on, Bob. Same goes for talking on cell phones while driving. People think they are in their living room. 

THE MONEYTALK-FINAL QUESTION OF THE DAY: What seven states have no state income tax?

Bob's guest author in the third hour was Carmine Gallo: The Apple Experience: Secrets to Building Insanely Great Customer Loyalty

Here are excerpts from the books introduction:

 Apple's 5 Core Principles'Now in the Palm of Your Hand!
Revealing the methods behind Apple's unparalleled retail success, bestselling author Carmine Gallo explains how business leaders can use them to drive growth and profits

Rounding out his Steve Jobs/Apple trilogy, Carmine Gallo reveals the iconic brand's five steps of service that all customer-facing employees follow to engage customers in a retail setting: Approach, Probe, Present, Listen, End with a fond farewell. 

 Moneytalk on Demand and to go is available for free. You can listen and download this week's Moneytalk broadcast at KSFO 560. They archive the program for seven day.  

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March 23, 2012, Update on Bob Brinker's Newest Model Portfolio Fund: AKREX

March 23, 2012....Bob Brinker made some changes in his three model portfolios as of January 11, 2012.

One of the changes he made was to sell  a percentage of Vanguard Total Stock Market Fund weightings (VTSMX) and buy Akre Focus Fund (AKREX).

Last January, I did a briefing on this fund, and made the statement that it looked like Bob Brinker was trying to "beat the market" with these changes. So how is it going so far?  According to this chart, Bob added a lot of risk to his portfolios with no added reward, yet anyway.

Akre Focus is a very new mid-cap growth fund -- less than 3 years old.  It has less than $450 million in assets and a 25% turnover. AKRE has much less diversity with only 25 stocks, whereas, there are 3344 stocks in the VanguardTotal Stock Market Fund.

Bob has always taught listeners to keep expenses down to a minimum,  but surprisingly,  AKREX has  a very high expense ratio (1.45%) and a 12b1 fee.

Also, Bob has always recommended limiting exposure in any single stock to only 4% of one's total portfolio. Akre Focus Fund's top ten holdings are much more than that -- some as much as 12%.

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March 20, 2012, Bob Brinker's Moneytalk Author: "Becoming China's Bitch: And Nine More Catastrophes We Must Avoid Right Now"

March 20, 2012... Bob Brinker interviewed Peter D. Kiernan in the third hour of Sunday Moneytalk. Bob Brinker never gave the name of the book on the air.  

  

Becoming China's Bitch: And Nine More Catastrophes We Must Avoid Right Now  by Peter D. Kiernan, Chairman of the Darden School of Business at University of Virginia. Our guest-writer, FrankJ, has summarized the high points of the interview. (Editorial comments are FrankJ's):

This country’s largest  supplier of consumer goods is also our banker.   The United States has a “negotiated economy” where it is easy to delay and stymie growth.   Our economic rival, has a top-down economy, dictated by the leaders of the Communist party.   When they decide on a course of action, everyone falls into line.  Our “supplier and banker” knows a great deal more about us than we know about them.

This describes the relationship and important differences between the US, and the People’s Republic of China. 

 

Peter Kiernan, Chair of the Darden Business School at the University of Virginia, has written a book on the dangers in our relationship with China – and other catastrophes this county must avoid.

Kiernan said he thought there were about 30 big issues we should be dealing with, and he distilled this list down to ten to write about.   He expressed frustration that no one in Washington DC seems to be doing anything about the big issues.   We can infer that the issue of our relationship with China is at or near the top of Kiernan’s list – and some of the other subjects discussed in the third hour interview with Bob Brinker are on the list as well, but it would have been useful for Bob to ask the guest to run down the list of the top ten, just for  clarity.

China knows more about us, than we know about them.  They understand our leadership, economy and psychology more so than we understand theirs.  In fact, there is a distinct lack of curiosity in this country about how China “works.”   One thing we do know, they are our largest supplier of cheap goods (Kiernan’s words) and they also own $1.7 trillion (with a T) in  Treasury securities, making them the largest creditor  outside the US.  Kiernan believes this co-dependency, as he called it, cannot turn out well for the US.

EC. In the past, BB has been merciless in his criticism of public figures who expressed alarm at the fact that China owns so much of our debt.  In his view, it is the creditor who is in the weak position, not the borrower, but he made no comment back to Kiernan on this topic.  

Some examples of what China is doing came through in the interview and in Kiernan’s response to questions:

·       The party takes a major role in planning the business strategy of “China Inc.”

·       The psychology of China’s investing is to become a world economic power and they choose to invest in infrastructure as a way to achieve that goal.

·     Leadership in port facilities:  Of the top ten world ports, 6 are in China and none are in the US.  According to the guest, Shanghai alone, is larger than the top 7 US ports, combined.

·       When the party leadership decides to do something, it happens with a minimum of red tape, example: building the Shanghai airport in 18 months.    China “steamrolls through the checks and balances” (of the type) we have in the US.

·      The US led the world in production in rare earth elements in the 1960’s and 1970’s but we lost dominance and China took over as the leading worldwide producer.  “We watched it happen.”   Now, one of the only ways to access these materials, some of which have strategic value, is to build your own factory in China.  Link to Wikipedia entry:  http://en.wikipedia.org/wiki/Rare_earth_element 

·      

*    The party owns and/or controls industries:  China makes 80% of the world’s supply of Vitamin C and 20% of Vitamin A.  

*      400,000 people in America are studying Chinese language (presumably Mandarin).  100 Million Chinese are studying English. 

·        

*   China is a leader in electric car battery production.

 The interview revealed some of the other topics on Kiernan’s top ten list. 

BB mentioned a phrase familiar to most MoneyTalk regulars: “We have the best government money can buy.”   Kiernan discussed what he sees as a “selectorate”  hovering above the voters and the government itself.  Lobbyists (15,000 of them) and think tanks exert too much control over the rules, decisions and regulations put out by government.  

They not only influence legislation, but help write it.  A significant number of people who leave Congress (including Congressional staff)  go to work for lobbying firms.  With this as a post-Congress career option, it is unlikely these people will push back very hard against lobbyists while serving in elected office.    

BB and Kiernan discussed public unions and their impact on local budgets.  In 1950, 7% of the public workforce was unionized.  Today it is 36%.   The taxpayer is not represented in negotiations with public employee unions because, through the election process, the public employee unions help choose who their boss will be, i.e., the person who will sit across the table from them.  Kiernan believes that state treasurers need to get involved and explain in clear terms, using basic math, that the promised benefits are almost impossible to meet in financial and economic terms.  If this happens, and it is made clear that even “brilliant investing” can not save you, then there is a chance for progress.   

BB said that people who plan to relocate need to know in advance if they might be moving into a community where they will be taxed heavily simply to provide public employee benefits.  

E.C.  By coincidence, the March 2012 issue of Imprimis, a monthly newsletter from Hillsdale College is devoted to the question of public employee unions.  “What Public Employee Unions Are Doing to Our Country,” is adapted from an address by William McGurn, columnist for the Wall Street Journal.  

On the topic of Social Security, Kiernan brought up the importance of demographics in relation to public policy.  When it was first established, there were 30 workers per retiree and people were not expected to live more than 10 years past retirement.  In 5 years, there will be only 2 workers per retiree.  “That’s like every family getting an extra Grandma.”  

The “over 80” age group is the fastest growing age group in our population and in 15 years, two-thirds of the population will be over 55.    Social Security, along with Medicare and Medicaid have become “untouchable” issues in  politics.   He mentioned the fact that the recommendations of the Simpson-Bowles committee were shelved and that Congress spent every dime from the money that was set aside in a trust fund (in 1983) to cover Social Security shortfalls. 

Caller David from Whittier, CA asked about cap and trade.  This gave Peter Kiernan the opportunity to discuss another topic that is probably on his top ten list: a lack a national strategy for energy.   We get approximately 20% of our electrical power from 104 nuclear facilities.  Some of these are old and need to be replaced, but we haven’t built a new plant in this country since 1979.  We need to build one new plant each year for the next 15 years to replace our current crop of aging nuclear power plants.

EC:  Good interview, I thought, although it seemed short, starting at about 15 after the hour and ending at 10 minutes to 4.   The topic, issues that should be addressed, but are not being addressed was timely considering we are in an election year.  

Honey here: Thank you so much for that recap. It's a very serious subject and Kiernan covered a lot of  events that will have huge impacts on all of us. Please see my Summaries of  hours one and two below.

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March 19, 2012, Bob Brinker's Moneytalk Show Summary Part II

March 19, 2012,  Hour-two summary of Bob Brinker's Moneytalk.....(comments welcome)

I-BONDS and TIPS....The interest on I-bonds are tax-deferrable until redemption, but you can pay current taxes if you elect to...Bob said: "At this time, if I were a holder of Inflation Protected Securities, I would sell them. The reason is that I think the base rate has reached unattractive levels. I have no desire at this juncture to hold (them)."

BOB SETS ME AND BLOG READERS STRAIGHT....Jim from Ohio asked: "I have heard you on a number of occasions caution investors in the bond fund to set a mental stop as to when to get out. My question is, have you done so or will you do so on your Marketimer income portfolio?" 

Bob replied: "I don't think that it would in the context of the way I have answered those question....Sometimes, people call into the program and their primary concern is net-asset-value fluctuation. The mental stop tool is  used in order to ameliorate  those concerns in reference to that specific holding whether it be a Ginnie Mae or whatever. I have the flexibility in my investment letter in managing the portfolio.

I personally manage all of the model portfolios in my investment letter. Just as I personally write every word that's every been in the investment letter.  So the bottom line of all of this is, I have the ability to manage through the investment letter to manage those portfolios. I can announce change whenever I want to. It's normally done within the context of the monthly letter. But I can announce changes whenever I want to and as a consequence, I have that flexibility. So if I'm going to make a change -- do I have a change in hand right now today as we speak, no. But I can make a change in the portfolio at any time." 

Honey EC: If you want to hear this call and Bob's voice as he announces that he alone writes every word in Marketimer and always has (LOL!), it's 9 minutes into the second hour -- available at KSFO 560 archives. When I wrote the summary of Bob's son's Fixed Income Advisor last Tuesday, there was discussion about which Bob Brinker was actually writing Marketimer.  I stated that I thought anything was possible since the address for both letters is in Colorado.  Another thing, the Jr-Brinker uses almost identical funds in his model portfolios, including DoubleLine Total Return, Wellesley Income Fund and Vanguard High-Yield fund. Our friend, Birdbrain also recognized Bob's answer to Jim  as a message to this blog and said this this morning:

birdbrain said...
When Mr B said that he personally manages every portfolio and writes every word in his investment letter, he was speaking directly to the host and readers of this blog.


He claims that he has owned Apple stock for a decade or so and it has probably been the number one performer that he has owned. A rise of over 4500% in ten years is PROBABLY one of his top investments? The inclusion of that one word raises doubt. As Honey brought up, why no mention of this great success in print or on air?

 SELLING OUT AND BUYING BACK AT HIGHER PRICES....Caller John from San Mateo claimed that he had been a Marketimer subscriber for a long time and followed Bob's portfolio-one, but he got scared last August and went to cash. John pointed out that his portfolio dropped almost 25% during the market downturn.

Bob replied:  "John, just so we don't mislead anybody, we issued a buy-signal on September 22nd in the low 1100s.....The total S&P market decline was 19%....(John reminded Bob that he had told a caller that if he sold he might have to buy back at higher prices.) Bob continued: "That's exactly right, virtually verbatim what I said....I would not buy individual stocks. I would buy the total stock market -- like VTI shares....The SPY shares would be another way. I would dollar-cost-average. I'm certainly not jumping up and down at this level as I was last September in the low 1100's....You're going to be kicking yourself for selling out near the bottom. It's one of the most painful experiences.

Honey EC:  Bob slipped in some horse-puckey again. Unfortunately, most listeners will never know the truth. Yes, Bob did tell a caller that if he sold out, he might have to buy back at higher prices. What Bob didn't say yesterday was that the call  was in June and  there were several opportunities AFTER it to buy in at lower prices -- as much as 19.4% lower when the S&P bottomed in October before turning up again.  Here is a link where I document this call in my summary.

REASON WHY BOB ISSUES BUY SIGNALS WHILE HIS NEWSLETTER ADVICE IS TO REMAIN FULLY INVESTED...Bob said: "Some people will wonder over time, well Bob, you're fully invested, right? Why are you issuing a buy signal? As I have said many times, I have to exercise market-timing in a situation like that. Okay, the model portfolios are fully invested, but we see a buy signal develop in the market on a correction. And this has happened twice in the last two years. It happened in the beginning of July of 2010. Yes, we were fully invested, but at the same time, we saw a buying opportunity on the correction, so we issued a buy by upgrading our investment letter recommendation to attractive for purchase at that time. That was near the 1000 level on the S&P less than two years ago.  And then it happened again last September. Even though we were fully invested, so many of our subscribers asked us is this an opportunity to buy."

Honey EC: Bob just blows off the fact that his subscribers are only gaining back what they have lost from bears in the past few years.  Bob took  no action to raise cash and preserve profits.  What he was  basically bragging about  is that subscribers following his advice, rode the market down 20% in 2010 and 2011. And as those same followers are STILL UNDERWATER from the mega-bear market of 2008-'09.  

Honey EC2: Bob bragged about issuing a couple of buy-signal before the stock market happened to go up. What he has never done is apologize for  all of the buy-signals he has issued before the stock market continued going down.

January 4, 2008, S&P @ 1411: "Mid-1400's"
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"

LENDING SHARES FOR SHORT SELLING: David Korn wrote this commentary:

Caller: This caller owns 70,000 shares in a drug stock trading at $4.50. His brokerage firm told him they wanted to borrow the shares and will pay him 4% a year for that with no restrictions on when he can buy or sell.  Bob asked if this was a thinly traded stock, to which the caller said it had 71 million shares outstanding.  Bob said that meant it had a $318 million market cap which is pretty small.  Bob said it sounded like there was a short-seller who the brokerage firm wanted to lend the stock out for them to short.  Bob said during the period of time he has the stock on loan he will get 4% and since there is no restriction you will get that added income for lending out the stock.  Bob said it must be a hard stock to short given the brokerage house is willing to pay 4% in this kind of market.   The brokerage firm can't naked short, so they need to secure a borrowing of the shares so they can enable their customer to go into the market and sell 70,000 shares short.  The caller then asked if the brokerage firm could use the shares in a margin account without going to a client?  Bob said he thinks many margin accounts have allowed brokerage firms to do that.

Honey EC: The caller was Ed from Illinois. He called in the second half of hour-one....Thanks to Jeffchristie for finding the name of this stock and even finding a Yahoo message board post by the caller.  It's KERX, and you can read Ed's comments about his call to  Bob Brinker (he uses an alias). Here's the LINK. 

Bob Brinker's Moneytalk on Demand is FREE on KSFO560.  Shows are archived for seven days after broadcast.
 

Please see hour one summary below

 

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March 18, 2012, Bob Brinker's Moneytalk: Part I, Show Summary, Excerpts and Commentary

March 18, 2012...Bob Brinker hosted Moneytalk today...................(comments welcome)

Bob Brinker opened the program with a  recommendation for a book written by Walter Isaacson that he just finished reading: Steve Jobs

STOCK MARKET....Honey's EC: Clearly Bob Brinker is very bullish on the stock market, and will no doubt remain so, at least until the S&P reaches his projected mid-to-high 1400s.  It's very unlikely that Bob will ever again recommend that subscribers sell equities or raise cash.  

Look at his record: Bob made no allocation changes during the 57% megabear market drop in 2008 (and early 2009) -- the worst bear of his lifetime.   And he didn't bat an eye during two corrections last year. Each correction came within a fraction of  a  20% decline. So ask yourself, what would it take for him to issue a sell signal? World War III? 

ECONOMY....Bob made no comments about the economy or interest rates.

GREECE IS NUMBER ONE....Bob said: "I have no fear of contradiction when I say that Greece is number one in the world for sovereign fiscal irresponsibility. I don't think anybody even comes close....The new 10-year Greek sovereign debt, this is the one with the lower coupon after losing 53% of the face value off the original securities -- a 75% real net present value discount to the owners -- the new 10-year Greek debt is yielding 17.4% which is more than double the typical junk bond yield." 


 BOB'S MARKETIMER STOCK MARKET TIMING MODEL....Caller Wayne from Alabama asked Bob how he gathered information about the markets, and what did he follow to "keep up with things." 

Bob replied:    "I follow a tremendous number of things, far too numerous to mention. All the traditional things you would think of in terms of publications that are out there. I also do proprietary work. I run a stock market timing model that I use for my market calls. That is the timing model that gave the buy signal in September of last year near the bottom for 2011. It's the timing model that gave the buy signal at the beginning of July for 2010 which was essentially at the low for 2010. It's also the timing model that gave the sell signal in the first quarter of the year 2000 near the top of the market at that time. It's also the timing model that gave the buy signal on March 11, 2003, which was essentially the bottom of that bear market. Is it perfect? No, it's not perfect. Is it highly valuable. Absolutely, to me because it's enabled me to make some calls that I would not be able to make..... 

.....There are many components to that model -- far too numerous to mention.....I think the best way to answer your question is to use an analogy. The analogy that I would use would be that of somebody that's been a lifetime baseball manager and has all that experience that they have been able to assemble, literally over decades and then put to use when they get into a game time situation.....The Tony LaRussa's, the Joe Torreys, the Mike Sochia's...You would never question their ability that they know their stuff and they know what to do in any situations. They make mistakes too. In other words, I started in the investment business when I was in my 20's....I feel as though the key to being able to do this....

.......I believe very strongly in the value of stock market timing to add value because you don't have to be perfect. You just have to occasionally miss major bear market such as we did from 2000 to 2003. We successfully navigated that horrible bear market....You just have to be able to miss an occasional bear market in order to beat the buy and holders. Because the buy and holders are in all the time for all the drops."

Honey EC: Bob's lengthy and convoluted answer to Wayne may be his all-time-best horse-puckey. Here are the facts:

* The Marketimer timing model consists of four components: Economic Outlook; Monetary Policy; Equity Valuation; Equity Valuation; Investor Sentiment. Bob talked about his timing model at a public Leukemia event in San Jose a few years back, and I double-checked in Marketimer -- it has not changed.

* Bob's timing model missed the worst major bear market since the Great Depression in 2008-'09, and his model portfolios lost 57% -- top to bottom. November 22, 2008, this exchange on Moneytalk: Caller Darryl asked: "Did your market timing model detect any of this chaos in the market?" Bob Brinker answered: "It did not.

* The year-2000 sell-signal raised only 65%  cash, and he advised putting up to 50% of that cash into QQQ which lost 70% from his buy price.

* In reality, Bob has been a buy-and-hold advisor since March 2003 because he has not issued a sell signal since August 2000.

* Being a buy-and-holder didn't stop Bob from issuing the buy-signals he mentioned, and it didn't stop him from issuing buy-signal repeatedly as the stock market declined in 2008. All of the 2008 buy-signals were higher than the ones he mentioned in 2010 and 2011. 

 MARKETIMER BALANCED PORTFOLIO AND PAGE 7 INCOME PORTFOLIO....Caller Lori from California asked if should she sell her Ginnie Maes and what should she replace them with.

Bob replied: "I like to invest for income within the context of an overall portfolio....If they follow my lead, they are either going to go with my income portfolio which I publish on page 7 of my investment letter, or the balanced portfolio which includes an income component there.....We have a Ginnie Mae component in our balanced portfolio and we also have a Ginnie Mae component in our page 7 income portfolio.....We continue to hold Ginnie Mae as part of the portfolio......I would rather that be a given percentage, but not an entire income portfolio....In our income portfolio on page 7, we have five holdings.....In our balanced portfolio, we have a number of income oriented holdings......" 

Honey EC: As Bob stated, his now-famous income portfolio on page 7 (the equity portfolios lost money last year -- not much to brag about there),  has the Vanguard Ginnie Mae Fund is in it, but he  has reduced the weighting to 15% -- down from  50%. The balanced model portfolio III now has only 20% Ginnie Mae Fund.  The other income components in the balanced portfolio III are 10% Vanguard Short Term Investment Grade (VFSTX) and 20% Vanguard Wellesley Income Fund. 


BOB BOUGHT APPLE A DECADE AGO BUT NOT IN MARKETIMER OR MONEYTALK....Caller Anthony from Virginia inquired about the price of Apple's stock.

Bob replied:  "...you would have a price - earnings multiple conservatively calculated at about 12 times forward 4th quarter earnings.....As to how you are going to value Apple, that will dependent on the ability of the company to maintain earnings momentum. Right now, there's a  lot of excitement in the shares because the new IPad has been introduced.....and there's a lot of excitement .....around the new IPad.....You won't hear any complaints about Apple from me because Apple has been extremely good to me over the last decade or so....It's been a magnificent performer. It's a company that I'm invested in, and for the last ten years it's probably been the number one performer over that ten year period that I've owned it.  As to when you make a decision to sell Apple? Well, I think that's a decision at some point will have to be made. But I think those who have stayed with it are very, very glad that they have stayed with it....."

Honey EC: Shark Alert! Shark Alert! Bob Brinker has never recommended Apple stock in Marketimer and has never before said he had invested in Apple on Moneytalk.  Don't be deceived into thinking otherwise in spite of how it might have sounded.  A man of integrity would have made it clear that this was a personal choice that he made for himself  but never shared with listeners OR subscribers. The only two individual stocks that Bob has had on his list of individual issues in Marketimer over the past ten years are Microsoft and Vodafone. 

Bob Brinker's Moneytalk on Demand is FREE on KSFO560.  Shows are archived for seven days after broadcast.

Bob's guest-speaker, Peter Kiernan, wrote a book with a title that Bob said he could not say on air: Becoming China's Bitch: And Nine More Catastrophes We Must Avoid Right Now

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March 17, 2012, ECRI Stands By Recession Call - Bob Brinker Waiting for Apology

March 17, 2012....Last Thursday, Economic Cycle Research Institute (ECRI), posted their public commentary stating that their recession call still stands because their indicators "give them no choice."

Bob Brinker disagrees with Lakshman Acuthan and has been very vocal about saying so on Moneytalk. Bob even blames recession predictions for scaring investors out of the market. 

Shortly after ECRI's CEO, Lakshman Achuthan, made the recession prediction, Bob said this on Moneytalk:   "You know, we have these private forecasters out there going around beating the drums of recession. Warning everybody that the US is going back into recession. Batten down the hatches and get in the bomb shelter because we are in a lot of economic trouble. That is what they say, but that's not what we see. So far, we see an economy that continues to grow slowly.......

....One of things that amazes me about the private firms that are forecasting a  recession in here is their conviction. I mean they talk about it like it's a fait accompli. They talk about it like it's for sure -- take it to the bank. Well I'm not taking it to the bank. What do you think about that? I think these forecasters are wrong, but I'll look forward to their apology....this is Moneytalk." 

In Marketimer Bob almost always reports data about the Conference Board Index of Leading Economic Indicators (LEI) and the Coincident Economic Index (CEI). Bob's conclusions are different from Lakshman Achuthan's. 

 In the March issue of Marketimer, Bob wrote: "Taking these two indexes together, we conclude that the current economic expansion remains intact. We continue to expect real gross domestic product (GDP) growth in 2012 within a range of 1.5% to 2.5%, which is slightly more conservative than the Federal Reserve forecast." 

 On the other hand, here are excepts from ECRI's latest  public report. Businesscycle: Why our Recession Call Stands : 

 "Let’s start with the current state of the economy. A couple of weeks ago, we publicly highlighted ECRI’s U.S. Coincident Index (USCI). It’s important to understand that the USCI isn’t a random concoction of data, but rather the gold standard for measuring current economic growth, as it summarizes the key coincident economic indicators used to determine the official start and end dates of U.S. recessions; namely, the broad measures of output, employment, income and sales. So when USCI growth is in a downturn (bottom line in chart), it’s an authoritative indication that overall U.S. economic growth is actually worsening, not reviving.

In contrast to the 3% GDP growth widely reported for the latest quarter, year-over-year growth in GDP, after peaking at 3½% in Q3/2010, has basically flatlined around 1½% for the last three quarters. Broad sales growth has followed a similar pattern, while the growth rates of personal income and industrial production have dropped to their lowest readings since the spring of 2010.

The exception to this weakening pattern is year-over-year payroll job growth, which continued to improve through January, and was essentially flat in February. However, the empirical record shows that job growth typically turns down after downturns in consumer spending growth, not the other way around. Because consumer spending growth remains in a cyclical downturn, we expect job growth to start flagging in the coming months.  But the point remains that the USCI, which summarizes the definitive coincident economic indicators – including jobs – indicates declining growth in the U.S. economy.

 (SNIP)

In the chart, please note the one-to-one correspondence between the cyclical swings in the year-over-year growth rates of the WLI and USCI since the Great Recession. Both surged initially, only to roll over, pop up briefly, and then turn down once again. It is notable that the WLI, which is sensitive to the prices of risk assets that have been supported by massive worldwide liquidity injections, has hardly been swayed from its recessionary trajectory. In spite of the efforts of monetary policy makers, actual U.S. economic growth has slowed, while WLI growth has barely budged from a two-and-a-half-year low.
 
The bigger question is, can unprecedented, concerted global monetary policy action repeal the business cycle? The objective coincident and leading indexes that we have always monitored are still telling us that it cannot."

Some humor: 

 birdbrain said...

"In this corner wearing blue and gold trunks, co-founder of ECRI, predictor of an upcoming recession and who has the courage to appear with Suzanne Pratt on Nightly Business Report, Lakshman Achuthan.

And in this corner wearing in-the-red trunks, publisher of Marketholder, looking for a comeback after being defeated by both Cassandra and Bad News Bear in 2008 and terribly pummeled by Nevada Property, from Lake Las Vegas, Bob Brinker."

Pay per view, anyone?

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March 13, 2012....Bob Brinker's Fixed Income Advisor, Summary and Commentary

 March 13, 2012...Bob Brinker, the host of Moneytalk, has a son who uses the same name when he posts on the internet.  The Jr-Brinker publishes The Brinker Fixed Income Advisor.  Many times, Moneytalk callers have indicated that they mistakenly assume that the editor of this newsletter is the famous talk show host.

Jr-Brinker's  educational background was in the computer and internet-technology field.  At one time, he said he was not interested in following in his famous father's footprints. However, in 2005, that changed and he began to publish the Brinker Fixed Income Advisor.  Jr-Brinker's wife, Lisa Brinker, is also an editor of this newsletter.  Her degrees are in English, German and Linguistics.

There is a new complimentary issue of the Brinker Fixed Income Advisor on the website. It is the November 2011 issue, only four moths ago.  Let's review it:

Page one...Summary titled Federal Reserve that includes the November FOMC meeting, the Beige Book Report, and some "incoming economic data."  Column two contains comments about the TED Spread, LIBOR and the "width" of bond spreads.
Page two...  A photocopy  of the "Public Debt" clock (available online) followed by more discussion of how High-Yield bonds rallied in October and some EU discussion.  Next comes a whole column about U.S. Treasury yields.
Page three.... Several lists:  Treasury auctions, Series I/EE bonds, Exchange Traded Funds (DVY; MBB; HYG; LOD; EMB; IGOV; CWB, and a list of CD, Money Market and Savings rates.
Page four....Six graphs that show Federal Funds Rate; Consumer Price Inflation; PCE Price Index; Real Gross Domestic Product; Unemployment Rate; Nonfarm Payrolls.
Page 5....Muni-Bond calendar.
And finally, Page 6,  Model Portfolios.

I very carefully compared the three Fixed Income Advisor portfolios.

* Firstly, I was struck by the fact that uninformed investors might mistakenly believe that the portfolios only contain fixed income since that is the name of the newsletter.  That is not true. The three portfolios all contain a percentage of stock in the Wellesley Income Fund (VWINX).

* Also,  I was surprised to see that the "Conservative Portfolio" contains Vanguard High Yield Corporate Fund (VWEHX), Loomis Sayles Bond Fund (LSBRX), a very volatile fund,  and DoubleLine Total Return Bond Fund (DLTNX, which is largely high-yield bonds, -- and it has a high expense ratio). 

Here is the Conservative Portfolio. The other portfolios are made up of the same funds in SLIGHTLY  different proportions.  Note that investors are told that the portfolio is "safe." In 2008, it lost 5.2%.  Click to enlarge: 

FrankC said...

Honey, I never knew that there were two Bob Brinkers, father and son. Thank you so much for shedding light on this sham of a newsletter. Back when I was a subscriber (sucker) to his father’s Marketimer, I received several solicitations for this Fixed Income Advisor in the mail. I always thought that they were part of the senior Brinker’s newsletter because they both listed similar Colorado addresses. The formatting of the pages was nearly identical to make it appear to have come from the same organization. Now I’m wondering how the junior Brinker obtained my mailing address to solicit this rag of a newsletter? Perhaps his father gave him the addresses of Marketimer subscribers? Or did he blatantly steal the addresses from his father? Either scenario speaks volumes for the unethical business practices of the Brinker clan!

 The address for both newsletter is exactly the same: 10789 Bradford Rd., Suite 210, Littleton, CO 80127. The radio talks show host, Bob Brinker does not live in Colorado.

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March 12, 2012, Bob Brinker's Moneytalk Guest-Speaker

March 12, 2012...........................................(comments welcome)

Bob Brinker's Moneytalk guest-host, Lynn Jimenez, interviewed Roberton Williams yesterday.  This is our gift from guest-writer, Frank J, who, like our friend, DanG, is an experienced tax man.FrankJ wrote:

The third hour guest on March 11^th was Roberton Williams, a Senior Fellow at the Urban Institute’s Tax Policy Center.   He has worked there for six years and prior to that, he served for 22 years with the Congressional Budget Office. 

(Frank J's) Editorial comments in italics.

Lynn asked if paying taxes is the price of living in a civilized society, or is it pocket-picking?  Dr. Williams said we need revenue to pay for necessities (defense, a judicial system and the post office, along with other things.)  Beyond that, we choose to pay for things a wealthy society should have, and he mentioned Medicare and Medicaid. 

The “is it fair” question (referring to the tax code) came next and the answer was “It depends,” whether it is “fair” is in the eye of the beholder. 

Warren Buffet doesn’t think it is fair.  But the nearly 50% of taxpayers who actually pay no federal income tax probably think it is very fair!

Williams pointed out that for the past 40 years, about 18% of total income has gone to all forms of federal taxes.  Currently, it is about 15% because of the recession.    

“Does the tax system do what it should?”    The tax system does two things, it pays for government functions, but it is also used to shape social policy by rewarding and penalizing certain behaviors.  Williams mentioned the mortgage interest deduction, incentives for retirement savings, “ a slew of things are built into the tax system.”  Williams asserted that because of the dual nature of the tax system, it does neither task well.

Here is a partial list of the social policy aspects of the tax system: deductions for mortgage interest, real estate taxes, sales or income taxes,  some personal property taxes. 

Credits: the earned income credit, the Child Tax Credit ($1000 per bambino), dependent care credits, education credits, retirement savings credits, residential energy credits, alternate motor vehicle credits (think Chevy Volt), credit for being over 65 and/or disabled, credit for having paid foreign taxes, credit for “Tax Credit Bonds,” credits for adoption expenses, the home buyer credit (now expired), credit for health coverage for displaced workers, credit for excess social security or railroad retirement tax, credits for undistributed capital gains.    

“Who pays and who doesn’t?”   The 46% who don’t pay federal income taxes can be divided into two groups.  The first group simply does not earn enough to pay.  Their standard deduction and personal exemption(s) reduce their taxable income to zero.   The other half of the 46% pay no taxes because various credits wipe out any tax liability.  He cited an example of a married couple who would might owe $3000 in taxes, but if they have 3 children (under the age of 17), the child tax credit at $1000 per head would zero out the tax liability. 

The guest pointed out that HOW you earn your income governs what percentage of your income you pay in taxes.  Mitt Romney – 13.7%, LeBron James – 35%.  The difference being income from investments vs. salary.

 After the break, Lynn and Roberton talked about dividends and capital gains before swerving into the topic of the alternative minimum tax, (AMT).  Roberton pointed out that dividends are taxed twice, once at the corporate level and again at the shareholder level.  Capital gains are taxed at the rate of 15% out of recognition that part of the gain is due simply to inflation. 

Then Lynn butted in and brought up the AMT.  Roberton said the AMT was a reaction by Congress in the 1960’s when they learned that 155 individuals with incomes greater than $200,000 paid no income taxes.  Williams said the AMT snags 4 million individuals today, but there were 1000 millionaires last year who paid no federal income tax – because of lots of breaks we built into the tax system.   Congress will lose out on between $800 billion and $1 trillion dollars over the next 10 years if they dump the AMT.

This led into a discussion of reforms and the guest mentioned the major overhaul that took place in 1986 under President Reagan.  Lynn tried to bait him by saying, “Oh, that was trickle down, did that work?”   He said it did work for a short while, but over the next 25 years, Congress added various provisions that led us to where we are today.

Williams said that much of what we as taxpayers have done (regarding our financial decisions) is predicated on the existing tax laws.  Sudden reform therefore could have unexpected consequences.  As to whether reforms could be phased in, Williams was not optimistic – too difficult to get Congress to agree. Then he mentioned the “tsunami of tax law changes scheduled to happen on January 1, 2013.”  

After the next break, Lynn went back and beat on the issue of investment income being taxed differently from wages.  Williams explained the capital gains/inflation issue again and with regard to other investment income, he mentioned that this is taxed at “ordinary rates”  but, payroll taxes (Social Security and Medicare taxes) are not assessed on this income. 

Maybe Lynn wanted to get busy with the calls, but I think it would have been interesting for her to ask the guest if he thought that the Social Security and Medicare taxes should be assessed on investment income.  He seemed to be giving her an opening to do so.

Caller Jerry from Corvallis, OR,  (home of Oregon State University) asked for data supporting the Republican contention that raising tax rates on the highest earners kills jobs?  

Williams replied that the data doesn’t show anything.  Lynn seemed surprised, maybe disappointed.  Williams said taxes on high earners will not affect whether they invest, it will affect where they invest.  Lynn then likened the market to “a gambling den.”  

Nice going, Lynn.  Remember, this is supposed to be a show devoted, in some measure to investing, and that does include the stock market.  Williams does not think the changes in the offing will affect the investment behavior of the high earners.

Jeff, calling from South Bend (Indiana?)  asked about the flat tax.  The guest deconstructed the question to explain that a flat tax is not the same as a “single-rate” tax but it interacts with different provisions in the tax system so that it does not result in the same percentage rate applied to all income levels.    

Lynn:  Poor people would be left without enough money to eat. 

Williams:  Agreed and reiterated the merits of the progressive tax system we have, which means the most heavily taxed individuals have the greater ability to pay. 

Lynn asked about the current candidate’s tax proposals.   Williams said that the candidates would cut taxes “a lot” for the wealthy.  More than $1 trillion for 2016 alone.   They have not been specific about spending cuts to offset the tax cuts.  (There is a paper on this at the Tax Policy Center website. http://www.taxpolicycenter.org.

Lynn:  if we keep spending where it is, the deficit will not go away, so how much higher will taxes have to go to defray the deficit?   Revenues are 15% of GDP, federal spending is 23-24% of GDP.   The guest suggested letting the tax cuts of the past ten years expire, but in the next breath he said, this could push us back into a recession. 

Would this be because lower taxes help create jobs?  Oh, wait, there are no data to support this one way or the other.

Next up was the estate tax.  The guest thinks we need the estate tax as a means to tax income that would otherwise “escape taxation forever.”   He explained:  property (and investments) appreciate in value over time.  The owner dies and the property is passed to an heir.  The heir’s basis in the property becomes its stepped up value, i.e., fair market value at time of death.  Therefore the gain that incurred during the life of the deceased is never taxed. 

The second reason he offered for continuance of the estate tax was simply that there are people with a “lots and lots of wealth” and “we need money to help pay for government.” 

This gave Lynn an opportunity to make a short speech on the issue of concentration of wealth.  She said, “I mean we already have people who are worth $60 billion and own every industry in chemicals and mining and you name it,… isn’t there something to be said for breaking up the feudal concentrations of wealth?”

Williams began waxing on about how kids might be lazy if they anticipate large inheritances.   Lynn butted in and posited her “darker view” that looking back at history, kings were like conglomerates (of today) that got a piece of everything and eventually became “corrupt and awful.”  Williams deflected this, saying he would leave that comparison for the historians, he was an economist.    Maybe Lynn realized how utterly stupid she sounded.  

Caller Tino suggested a $60 - $80,000 standard deduction and above that you pay.  Williams said it depends on how high the deduction is, and how much the tax rate is.  Lynn thought it was a novel idea – Williams said it has been proposed before.  

Finally, in the last few minutes of the show, Lynn asked Williams in effect, what changes should be made to the tax system.  Williams said special preferences pull about $ 1 trillion dollars out of the amount of money the federal government gets each year.  Getting rid of all the special preferences (tax expenditures) would lower the tax rates substantially while bringing in more revenue.   

This means that people would pay more in taxes.  Fewer credits means the amount of income that is taxable, would go up.  So yes, you could multiply that number by a smaller percentage tax rate and raise more revenue.   

 You can read a paper Roberton Williams co-wrote on this topic at the Tax Policy Center’s  website, http://www.taxpolicycenter.org “Curbing Tax Expenditures.”

Honey here:  FrankJ, thank you so much for that OUTSTANDING summary!  This subject IS near and dear to all of our hearts. We are either on the receiving end of taxes or the paying end. 

Right now, the nation is  precariously balancing at the tipping point.  Almost half of us are  not paying any income tax at all. That 47% is not likely to vote for anyone who will derail their Socialist gravy train.   

Jeffchristie said...

Hi Lynn. Thanks for taking my call. I found your discussion about the rich being more likely to cheat and act unethically interesting. I am just an average guy who doesn't know many rich people. One that I do listen to is Bob Brinker. Are you implying he might be dishonest? ............................................................................................. Another question if I may. You stated that the reason we don't tax the poor is that they might not have enough left to eat. Many poor people don't pay for their food. The taxpayers do. It is called food stamps. Obama is the food stamp president.

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March 11, 2012 Bob Brinker's Moneytalk Show: Summary and Commentary

March 11, 2012.... Bob Brinker took the day off and his regular replacement, Lynn Jimenez, did the program. Lynn is a business reporter for KGO 810 radio. She wrote a bi-lingual book: ¿Se Habla Dinero? The Everyday Guide to Financial Success (English and Spanish Edition) Lynn opened with a report on the latest stock market, economic and employment numbers and a review of Greece's bailout.

Lynn made a point about the stock market that Bob Brinker has never talked about. She said: "In March 2009, the S&P 500 closed down 57%. It was at a twelve year low. And today, three years later, it's up 103%."

Honey EC: Those stats are correct, but the fact remains that the S&P is still a long ways below its October 2007 all-time-high of 1565.26.  Bob Brinker's two equity model portfolios are still underwater from that high because he was fully invested for the whole wild ride.

Lynn said: "Profits in the S&P 500 are going up faster than the indexes price. Corporate profits have topped analysts targets twelve straight quarters. And projections are that earnings are going to average about $104 a share. That's the highest ever for the S&P. It's a gain of 69% from 2009....Price to earnings ratio of publicly owned companies.....is just over 14%. That makes stocks cheaper now than at all the market peaks since 1989.....The five decade average is 16.4%.....And yet, we're all nervous about getting into the market."

Bob Brinker's projections don't entirely match with some of Lynn's. In the March Marketimer, Bob said that the historical S&P price/earnings average is 15 to 15.5 -- $103 earnings estimate. On that basis, Brinker wrote: "We are projecting a rise in the S&P 500 Index into the mid-to-upper 1400s within the next 12 months. This represents a slight increase from our prior target range in the low-to-mid 1400s range."

The topic for the first hour was about a study done by the University of California at Berkeley  that claims  "the wealthier you are, the more likely you are to lie and cheat." You can read about it here.

Honey EC: Personally, I think one should consider the source of the study, and also the lack of variables and  tiny number of people involved. I did find it comical that Prius drivers feel "entitled" to break the law -- according to the study. :)

Lynn's topic for the second hour covered how to get help if you are in trouble with your mortgage/home, etc. She gave a couple of websites for more info:
Nationalmortgagesettlement and makinghomeaffordable

Lynn's third hour guest was Roberton Williams, who offered his philosophical opinions about how Americans should and should not be taxed. Please see the next post for a complete summary written by FrankJ.

I will also write a complete summary and commentary about the Brinker Fixed Income Advisor Monday or Tuesday.

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March 10, 2012, Bob Brinker's Marketimer Does Not Make Mark Hulbert's New Market-Timing Honor Roll

March 10, 2012.....Yesterday the March issue of Hulbert Financial Digest was published.  Mark Hulbert did a study that  he called "An honor roll of stock market timers."  He based this study on the question: "Which is easier to pull off successfully -- security selection or market timing." 

Hulbert said that he compared the same newsletters that he used last December when he published his self-created  "Honor Roll" which Bob Brinker was on, of course. This time Hulbert focused entirely on market-timing with no regard for security selection. One would think that Bob Brinker's "Marketimer" would be at the head of the class based on that criteria. One would be wrong.

Hulbert wrote: "Just 2% made it onto this new Honor Roll....The two percent that made it onto the Honor Roll both came from the same letter: Timer Digest, edited by Jim Schmidt.....All of the other letters for which the HFD has timing-only performance data back to 1998 did not make the Honor Roll." 

Hulbert concludes: "If you thought picking stocks and funds was difficult, timing the market's gyrations is even more so." 

Hulbert also did his yearly summary of Marketimer performance. It's important to remember that Hulbert bases his numbers on an average of Brinker's three model portfolios -- two are equities and one is balanced.   Hulbert pointed out that he tracks the record of Marketimer income and active-passive index portfolios, but he does not use them in his performance calculations.

Hulbert described Bob Brinker as  a "Long Term Market Timer" and explained: "Though Brinker is a market timer, he typically focuses on longer-term trends rather than on shorter-term gyrations."   (That is a comical understatement. Brinker has made no timing moves in twelve years.)

However,  Hulbert went on to explain: Over the 25+ years that the HFD has tracked his newsletter, for example, only twice has he deviated from being fully invested. The was after the 1987 stock market crash, a move that ended up costing his portfolios. His second deviation lasted from January 2000 until March 2003, which was a profitable one."

I wrote to Mark Hulbert, so I know that he knows that his Marketimer performance numbers are much higher than they would be if Brinker had included the big-time losses from the QQQ trade in his model portfolios -- like he recommended for his subscribers.

Hulbert also knows that it was the following month that Brinker "chose" not to include the trade in his model portfolios.  See the proof here and read the bulletin.  Hulbert's only concession to these facts (after several wrote to him) was to include a  footnote about the trade and state that Brinker's "HFD record did not suffer as a result."  

And even with all of this, Bob Brinker's Marketimer, over the "lifetime" that Hulbert has ranked it (26 years), does not beat the Wilshire 5000. Here are the simple numbers according to Hulbert:

Letter's Average +881.2 (9.5) 
Wilshire 5000 +892.0 (9.5)

Here is Hulbert's  graph comparing Marketimer to the Wilshire 5000 Total Market Index since 1986: 

Bob Brinker's Land of Critical Mass Marketimer: $185 X 26 years = $4710.00
Total Stock Market (VTSMX or VTI) buy and hold = 00.00

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