That day, investors panicked as the Dow lost almost a quarter of its value of the day. It was its worst one-day percentage drop ever. If one had nerves of steel and cash on hand, the next day was a perfect time to buy. (Brinker's followers had no cash on hand.) From Marketwatch:
In fact, the day after Black Monday was a terrific time to buy stocks. A $10,000 stake in the 30 Dow stocks on Oct. 20, 1987 would be worth more than $137,000 now, according to investment researcher Morningstar Inc. That’s an 11% annualized return, including dividends, and even factoring in shareholders’ “lost decade” between 2000 and 2010.Mark Hulbert says that another crash like 1987 is "inevitable. That would be disastrous because the Dow would have to drop over 3000 points in one day. Hulbert says "don't kid yourself" into thinking that circuit breakers will prevent it.
Hulbert said: Repeat after me: Another stock market crash as big as 1987’s is going to happen. Period.
On that frightening day in October 1987, I had been a fan of Bob Brinker's Moneytalk for about a year -- wouldn't miss the program. I also subscribed to Marketimer.
I believed that whatever Brinker said about the market could be totally trusted. I believed that his bullish stance both in Marketimer and on Moneytalk meant that my stock market investments were in good hands -- that he would "get me out of the market" before any big drops.
Here is what happened: He was completely blindsided like every one else (except Elaine Garzarelli). He was fully invested throughout the crash.
Not only that, but he made a guest appearance on KGO radio that day -- during one of the business reports that I was anxiously listening to. He very confidently and calmly advised "don't panic" and "don't sell stock." Of course, the market just kept crashing.
Unfortunately, Brinker did sell all stock just three months after the crash -- in January 1988. That was a very bad move because it caused his portfolios to miss huge gains over the next three years before he finally got back to fully invested in 1990. See Brinker's complete market-timing history here.
The only other time in Brinker's timing history that he actually raised cash was in year-2000. He raised 65% during the 2000-2003 bear market.
Since then, he has remained fully invested, including throughout the 2008-2009 megabear market.
Will there be another Black Monday crash, like Hulbert says is going to happen? Will there be another 57% megabear market? Bob Brinker's "timing model" didn't see either coming. Will he see the next one?
Right now, Brinker is bullish and his latest advice is to "dollar-cost-average" on weakness....
11 comments:
Here is some simple truth, reality if you will. If someone had a market timing system that worked, they would not need to sell a market timing service - period, end of story.
For all I know there are market timing systems that may work, but we will never know, because if they go public with the system money will flow in using the system and the market will become immune to their prognostic abilities.
I know several people who claim they can successfully time the market, and they have so much confidence in their ability that they do so by trading a very small portion of their portfolio – why, because they know deep down they are counting fairies on pin heads and most likely the victims of over active imaginations on a winning streak akin to flipping heads 4 times in a row. So in the end you have a lot of people with one or two million dollar portfolios that put 50-100K in a trading account and have fun timing the market. Sometimes they win other times they lose and they tend to remember their wins a heck of a lot more than their loses. But note, they don’t bet the farm, not even close because they ultimately have no faith in what they do. I see it all the time.
Brinker is a huckster pure an simple. He can live in a mansion fat off the profits of those he bilked with his market timing shtick. But ask yourself where are the mansions of his subscribers? Listen closely, when you hear a call from someone singing his praises, almost every time the caller reveals that they explicatedly did not follow Brinker’s advice. It is uncanny.
tfb
"So in the end you have a lot of people with one or two million dollar portfolios that put 50-100K in a trading account and have fun timing the market. Sometimes they win other times they lose and they tend to remember their wins a heck of a lot more than their loses."
Timing the market and actively trading stocks are two completely different things.
With market timing, you attempt to sidestep major downswings in the market, i.e. a bear market.
Stock trading is more short term and is used in up, down or even flat markets.
Dan G., is one of those who says he can time the market and not with a small portion of his portfolio as you suggest. Rather he gets out the market totally and gets back in when the bear has left the room.
But Dan also has a trading account and trades actively during both bull and bear markets.
See his post on the prior thread...or maybe we should repost it here.
I agree with you about the futility of market timing but Dan says he can do it.
Many are interested in DanG's market commentaries. Here is the one he sent yesterday to the Summary article, copied here:
Dan G said...
Worshipers of John Bogle and his "buy and hold forever" strategy will not be interested in this, but those who think market timing might be worth trying might be.
The market is getting creamed today, yet is still not even close to oversold territory. I won't commit until it's at least close to oversold.
Sy Harding's seasonal strategy awaits a positive crossover in the Dow's daily MACD. This is not looking good right now. It will come, but probably not today.
Ok, I'm done. Buy-and-hold-and-yawners can now wake up and watch the market tumble...currently the Dow is down 220 points. But ho-hum, who cares? It's only money!
October 19, 2012 11:36 AM
Mark, timing the market and trading are not easy things to do. But I've been at it since the early 60's, having cut my eye teeth on Edwards and Magee's "Technical Analysis of Stock Trends".
My method has evolved into some very simple rules. I usually watch only a few indicators:
- Slow Stochastics which indicate overbought/oversold levels
- MACD, both daily and, more importantly for the longer term trends, monthly. This one indicator indicated to me that the bull had come to an end in late 2007. No, it doesn't work all the time, but I will always pay close attentions when it speaks!
-Other indicators are chart support and resistance levels (Edwards and Magee have the best explanation of these).
- And finally 50 and 200 day moving averages. Prices dropping to uptrending MAs are usually indicating a turn. And vice-versa when rising to downtrending MAs.
Those are the main indicators I watch. Some other less important but still noteworthy are Sy Harding's seasonal trends. Nope, they don't always work either (nothing does!), but they do often enough that I always keep in the back of my mind which seasonal we are in.
If this seems foreign and overly complex, there are other ways to invest. Brinker and others advocate diversification, asset allocation with occasional re-balancing. These are good, too, and much simpler for the average investor. But I enjoy "playing" the market and have done so for many years with good success if I do say so myself. Definitely not for everyone, though!
I sure hope that Chicago ID comes back to get slapped around some more. sHE got whacked pretty good after the thread scrolled, not that i want to bring it back up. (((ROAR)))
I wonder if it was Obama? Who else could talk so damn stupid and arrogant, and know so little?
Anyone who is in the market knows basically there is no way you can predict it.Brinkers theories are basically okay in that if you own the business(stocks)it is better than being an employee and you get part of the profits. The real deal is the earnings as they predict the stock price. Depending on your age you put the appropriate amount in the stock market.I am a big fan of targhet date funds and conservative allocation funds at my age 66. I think if you keep these basic ideas in your head you will be okay and just hang in there..
Dear Honey Blog.
Submitted by: A. U. Ric
I like your analysis of Bob's reaction and stance on the '87 crash. Looking back on that event, I remember where I was and what I was doing when I first heard about it, much like I remember the first reports of planes crashing into the twin towers.
I was not even severely affected by the market crash, and was not working in a financial field, but everyone I spoke to that day had to bring
up the subject. Hand wringing, panic and confusion reigned.
I also listened to Bob most weekends, and I trusted him. As much as a year after the Oct. crash he was still trying to justify not exiting the market. You would know better than I, but did he not always say something like, " the S&P finished the year in positive territory in spite of the crash." Thus minimizing the effect and outcome.
In twenty five years I've learned something. I listen to many so called experts, but I listen for clues and ignore the predictions. I make my own decisions.
If I had a Brinker Market Rag I would use it to line the bottom of a bird cage, if I had a bird.
But in fairness, I think Brinker either by luck, or by stealth made the correct "Black Monday" call. ----DON'T SELL INTO A PANIC.
A. U. Ric
Ditto John's 5:07 am post.
A. U. Ric
Yippee....I slept through this one:
5.3 Earthquake hits California Central Coast
"Depending on your age you put the appropriate amount in the stock market.I am a big fan of targhet date funds and conservative allocation funds at my age 66."
Target funds are good. But I was wondering what target date you chose at age 66? They're not all the same and different funds have a much higher allocation to fixed income even though they have the same target date.
I've never met anybody who says they time the bond market. I wonder if Dan times the bond market as well as the stock market?
You would think Bill Gross could time the bond market but he recently tried just that and screwed up big time. His bond funds fell like a rock.
To the first post, by tfb: Haha, I agree with all of it. I have a friend who claims he can time the market on a daily/weekly basis, jumping in and out of stocks like a "fluffy bunny," lol.
He had another friend of his (about 10 or so years ago) make up some kind of PC program to help him predict what would happen. He asked me if I wanted to "get in on it." Ha, I declined, telling him that there are no predictable trends, the market is driven by millions of people making millions of decisions every day -- not by patterns. But I did build a website for him so he could sell his "snake oil," lol.
The point in this is always, "If it really works, why sell the idea? Just use it to make millions and sit back and laugh." The predictable answer was, "Oh I just want to help other people." I laughed in his face. Then I said if it really works, why don't you take a hundred grand or more equity out of your house and put it up? He just laughed because as you said, he knew, deep down, that it doesn't really work. And as you also commented, he would always tell me when he made out well, but rarely when he lost. Sounds a lot like most gamblers I've known over my lifetime.
If it only works sometimes, as all the proponents claim, then it doesn't really work. Didn't Little Bobby attempt to cover his tracks after the '08 bear by claiming his model couldn't (or didn't) predict unusual events as happened then? Then what good is the model? (Dan G, if it's working for you, more power to you. I'm not trying to offend you or anyone else).
My friend did sell a few of his programs on CD disks, but we abandoned the website around '03-04. And I haven't heard him mention anything about actively trading in close to a year now, so he's probably given up on it.
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