December 12, 2012, Bob Brinker's Bond Fund Recommendations

December 12, 2012....For over a decade, Bob Brinker has recommended Vanguard Ginnie Mae Fund (VFIIX) in his Marketimer newsletter and on Moneytalk.  Earlier this year, he seemed to become more cautious about the fund. He would often took calls from listeners (who expected interest rates to rise soon) asking for alternatives. He would advise those who were worried about losing net-asset-value to use FDIC insured laddered certificates of deposit instead.

As David Korn pointed out in his newsletter summary of last Sunday's show, Brinker had lowered Marketimer Ginnie Mae holdings significantly in his income portfolio, but has now increased the weighting to 25% once again. David Korn wrote:

Caller: This caller has held GNMAs for a long time. A while back, the caller pointed out that Bob advised reducing the holdings in the Vanguard GNMA fund. If he is ok with a fluctuation in the GNMA of 10%, what¹s wrong with continuing to hold a significant position in GNMAs? Bob said he didn't see anything wrong with holding a significant position in GNMA as long as you are ok with the fluctuations in the net asset value that the caller described. Bob said he still recommends a holding in GNMA and has a significant investment in the fund in his recommended Balanced Portfolio and Income Portfolio, so he is invested in them and has nothing bad to say about them. 

(Korn) EC: Bob's enthusiasm toward the Vanguard GNMA had eased a bit earlier this year when he sold some of his holdings in the income portfolio and replaced it with the DoubleLine Total Return Fund back in May of this year. But these days, the GNMA fund seems to be back in Bob's good graces. The Vanguard GMA Fund (VFIIX) closed Friday at $11.02.

Honey here: David is right that Brinker replaced part of  the weighting in the Ginnie Mae with DoubleLine Total Return Fund (DLTNX) last May -- and that was a good move.  DoubleLine has outperformed Ginnie Mae this year.  However, Brinker sold all holdings in Vanguard Wellesley Income Fund (VWINX) when he increased the weighting in Ginnie Mae fund again.

In October, Brinker also sold all of the Vanguard High-Yield Fund (VWEHX) holdings in his income portfolio and replaced it with Metro West Total Return Bond Fund (MWTRX). Perhaps because VWEHX was closed to new investors a few months ago. 

When you compare these bond funds,  you see that VWEHX has outperformed all of them. I still hold mine, and as long as the economy is growing slowly, I won't sell it. 

One word about Brinker's stock market outlook. David Korn made these comments from Sunday's show:

(David Korn)  EC: Bob is making it very clear to the listening Moneytalk audience that although on any given broadcast he might be bullish, that doesn¹t mean that during the week he might not change his position on the market. As a practical matter, Bob has said that he updates his long-term stock market timing model on each Monday. I don¹t see him changing his views tomorrow, but I think he is on high alert these days in an effort to identify the end of the cyclical bull market (as am I!).....Bob then made a big deal out of saying that all of the advice he gives with regard to the stock market is in the context of today's date....and that his advice can change.

Honey here: Brinker is now using the ploy of only making forecasts in "real time." This is new for daBrink. He has been making projections out as far as a year for a very long time. For example: In the January 2012 issue of Marketimer, Brinker said: ".....we expect the S&P 500 Index to rally into the low-to-mid 1400s range this year."  By June, Brinker had raised his target range to "upper-1400s to low-1500s" -- where it is now. 

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