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. :)
6 comments:
that was great honeybee.. great buzzing around... bob should be in hibernation... brain freeze..love your comments ...
does anyone know the actual birthdate of bob brinker?? it isn't anywhere.. maybe the age but not the actual birthdate,,, hummmm
This was brought to my attention via email. The suggestion posed was, "maybe the stock market is fairly valued now."
Greg Morcroft
NEW YORK (MarketWatch) -- Analysts at Barclays said on Thursday that the year-to-date gains in Apple Inc. AAPL -1.69% stock are responsible for 15% of the S&P 500's first-quarter gains, and virtually all of the bellwether index's earnings growth versus a year ago. "Is it rational to expect a single stock to provide outsized contributions to the index price return?" the analysts asked rhetorically in the note. The note said that Apple's contribution to the S&P 500's gain was four times its weighting in the index. "In addition, AAPL has offset 40% of the year-to-date decline in estimated 2012 index EPS," they said. First-quarter earnings growth is estimated at just 1.4% year over year for the S&P 500, and about zero excluding Apple, the report concluded. "On balance, the outlook for first-quarter earnings reports is mixed at best; any slip-ups from Apple could be costly to equity investors," the analysts wrote.
In an earlier post these words ended a Barclays assessment on AAPL: "any slip-ups from Apple could be costly to equity investors".
My own assessment is that Apple is in a sweet spot, and has a couple more years to run. There is little competition for the quality and functionality of their stuff today. But the competition is working feverishly to catch up. They will catch up in a few years and offer stuff just as good and do it cheaper. That's when the shine will come off of the apple.
I own AAPL in the Q' s, I think QQQ has over 15% AAPL in it, and it seems like a big bite to have in an ETF or mutual fund. The Q' s have performed well recently. Is that largely on the back of AAPL? Is QQQ the vehicle by which Brinker claims to invest in AAPL?
Investor mania will eventually lead to an Apple bubble, but we are a couple of years away from that. Or maybe not.
Mr. Teeter Totter.
Isn't it silly to waste time and effort on Brinkers bear market indicators when you say they don't work? That's why you get usless comments about his birthday.
Seems to me like 2008 all over again.
High fuel prices early in the year and
Recession and market crash later in the year.
Fed is buying 60% of bonds that the treasury issues
Foreigners buying less and less
Higher interest rates could come a lot sooner then some people think
I would like to see others comment on my thoughts
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