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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