Honey's Bob Brinker Beehive Buzz: January 30, 2013, Recession Thunderdome Battle Turns to Lakshman's Favor

Wednesday, January 30, 2013

January 30, 2013, Recession Thunderdome Battle Turns to Lakshman's Favor

NEWS ITEM (Jan 31, 2013): Fairholme Fund (FAIRX) Closes To New Investors After Rebound.

Honey EC: Thanks to R.P. for the heads-up about Fairholme Fund.

In April 2011, Bob Brinker sold all Marketimer equity model portfolio holdings in Fairholme Fund. With that money he added to the portfolio holdings in Vanguard Total Stock Market Fund (VTSMX).

Now Fairholme is closing to new investors after it had its best year EVER in 2012 -- beating the total stock market handily.

IN EDIT: Gerry called it to my attention that Fairholme Fund declined precipitously after Brinker sold it in April 2011. I compared the price now to then and see that it is still a bit below that sell price. The ideal crystal ball move would have been to sell in April, 2011 and buy it back in January, 2012. Anyone got one? :)
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January 30, 2013....Oops! It looks like Bob Brinker may not be the one leaving the Thunderdome quite yet. From CNBC TODAY: GDP Shows Surprise Drop for US in Fourth Quarter

A long time Bob Brinker fan, pen-name Marc Ultra, wrote:

"Lakshman and Bob in the Thunderdome. 2 men enter, one man leaves.

While technically there may be wiggle room because they're not defining a recession in exactly the same way, the battle lines are now clearly drawn, one will be correct and one will be wrong. Today Bob flat out said the ECRI ("the private forecaster out of NY") will be wrong and those (like me) who have acted on their call will regret if. It's possible Bob might even be using me as as part of his example since when he was using an alias he would respond to me at various times (including praise at times), so if he glances at this board occasionally he is aware that I have flipped from bull to bear due to the ECRI call but obviously a lot of people have made investment changes based on the CRI so the possible personal point would not be that relevant regardless."

Here is the TV video history of Lakshman's personal appearance recession calls:

* September 30, 2011...Wall Street Online: "Economic Cycle Research Institute's Lakshman Achuthan on The News Hub discusses why his firm is now predicting the U.S. economy is indeed tipping into a new recession and there's nothing that policy makers can do to head it off."

* September 30, 2011....Bloomberg TV: "Economist Says U.S. Recession inescapable"

* February 24, 2012....Bloomberg TV: "GDP Data Signals U.S. Recession"

* May 9, 2012.....Bloomberg TV: "Lakshman Achuthan, chief operations officer of the Economic Cycle Research Institute, talks about his renewed call for the U.S. to enter another recession this year."

* July 10, 2012....Bloomberg TV: "We're in recession already."

* September 13, 2012....Bloomberg TV: "U.S. economy is in a recession."

* November 29, 2012....ECRI Business Cycle: Recession underway. "Indicators used to determine official U.S. recession dates have been falling since mid-year."

* November 29, 2012....CNBC: "Ignore Fiscal Cliff, U.S. is in Recession"

It will be interesting to see if Bob Brinker mentions the fact that there has now been one quarter of negative GDP -- which looks real close to the time frame that Lakshman Achuthan laid out when he predicted a recession over a year ago.

January, 4, 2011, Marketimer, Bob Brinker said: "We are maintaining our real gross domestic product (GDP) estimate of 1.5% to 2.5% for 2013. This is the same estimate we used successfully in 2012. The 2012 annualized real GDP growth rate stands at 2.1% through the first nine months of reported data, and we expect the full 2012 year figure to be close to 2%."

So who will be declared the winner and who will need to apologize? Brinker said he's waiting for an apology, but I honestly don't know if Lakshman knows who Brinker is.

Let's end with some humor by Birdbrain:

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?

READ AND POST COMMENTS

19 comments:

Econ101 said...: Nobody but ECRI claims we are in a recession right NOW...

Other aspects of GDP showed more strength. Consumer spending - the main engine of the U.S. economy - rose 2.2% to eclipse the 1.6% rate in third quarter and 1.5% in the second quarter. That suggests the economy remains on a solid if unspectacular growth path. What's more, investment in residential housing, another source of strength lately, climbed 15.3%. Business spending on equipment and software also snapped back for a 12.4% gain after falling 2.6% in the third quarter.

The GDP report will be refined through two further updates over the next few months. For all of 2012, the U.S. grew at a 2.2% pace, compared to 1.8% in 2011 and 2.4% in 2010.

http://www.marketwatch.com/story/us-grow....tive-2013-01-30; January 31, 2013 at 6:42 AM
Anonymous said...: We probably are on the precipice of another round of technological innovation and investment that will spur productivity growth while also diminishing the number of employed. Under Obama, it has become dangerous to be an employer. The safest route for business is to eliminate via technology low skilled labor through automation. It is starting in fast food now. Robotics is an amazing thing. And Obama care has given companies the impetus to look at technology vs what once was cheap labor.

Obama’s administration has been playing with unemployment figures by making more available, and encouraging return to college and college as a way to make unemployment and moving those unemployed into SS disability. They just has a seminar in my area on how to file for SS disability.

So this should be interesting: Companies who are profitable, cutting workers via technology, reducing the income of the consumers while the companies themselves grow more efficient.

tfb; January 31, 2013 at 7:04 AM
Jeffchristie said...: Econ101 falsely claims

"No body but ECRI claims we are in a recession right NOW.."

That simply is not true. Noted economist Dr. Gary Shilling says we are currently in a recession.

Shilling: New Recession Has Begun

Also former economics professor turned mutual fund manager John Hussman says the US is in recession.

John Hussman: We Are Already in Recession and The Economists Just Don't Know it Yet; January 31, 2013 at 8:57 AM
Anonymous said...: Schilling and Husman are both permabears and have been claming we are in a recession but have no facts to back it up...just like ECRI.

"Shilling, a perennial contrarian, said that when economists sift through all the data, they will say the next U.S. recession began in the second quarter of 2012."

Shilling also predicted Romney would win the election. He was wrong there too...

[Shilling]...expects Republican candidate Mitt Romney to win the presidential election — “I don’t think there’s any example in American history of a sitting president with high or rising unemployment getting re-elected,” he told me —

nobear2; January 31, 2013 at 9:16 AM
Honeybee said...: nobear2,

Bob Brinker is a perma-bull. Does that make him less important?; January 31, 2013 at 9:20 AM
Anonymous said...: Bob Brinker doesn't even count when it comes to calling a recession. He has no more expertise than Shilling, Hussman or ECRI.

Everyone of these self-styled experts say they will be proven right just wait. Well we've been waiting for over a year now and no recession is in sight.

Shilling even said when he predictied a recession back in 2012 that it would most likely be OVER by now. LOL!

nobear2; January 31, 2013 at 9:31 AM
Honeybee said...: In addition to the bad economic news just released, today the Department of Labor reported a larger than expected increase in unemployment claims:

"In the week ending January 26, the advance figure for seasonally adjusted initial claims was 368,000, an increase of 38,000 from the previous week's unrevised figure of 330,000. The 4-week moving average was 352,000, an increase of 250 from the previous week's unrevised average of 351,750.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending January 19, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending January 19 was 3,197,000, an increase of 22,000 from the preceding week's revised level of 3,175,000. The 4-week moving average was 3,192,250, a decrease of 9,750 from the preceding week's revised average of 3,202,000."

U.S. DOL; January 31, 2013 at 7:33 PM
Honeybee said...: Thanks to R.P. for the heads-up about Fairholme Fund (FAIRX).

In April 2011, Bob Brinker sold all Marketimer equity portfolio holdings in Fairholme.

With that money he added to the portfolio holdings in Vanguard Total Stock Market Fund (VTSMX).

Now Fairholme is closing to new investors after it had its best year EVER in 2012 -- beating the total stock market handily.

Read more:

Fairholme Closes Fund to New Investors After Rebound; January 31, 2013 at 8:22 PM
Anonymous said...: What recession? The market loves the news today...

WASHINGTON (MarketWatch) — The U.S. created a modest 157,000 jobs in January and the unemployment rate ticked up to 7.9%, but the economy added one-third of a million more jobs in 2012 than previously estimated, with a large chunk coming in the final months of the year.

The latest employment figures, which include annual revisions based on business tax returns, show that hiring was somewhat stronger in 2012 and 2011 than initially believed. And job growth was sharply higher in the fourth quarter, according to Labor Department data released Friday.

DJI; February 1, 2013 at 6:42 AM
Anonymous said...: http://www.marketwatch.com/story/us-adds-157000-jobs-as-past-data-revised-higher-2013-02-01; February 1, 2013 at 6:44 AM
Pig said...: Good article on TIPS. Yathink I should mail it to a junior newsletter writer that loses fixed income money in stock funds? DOH?

How Much Should Retirees Stake in TIPS?

TIPS; February 1, 2013 at 1:41 PM
Anonymous said...: You have to be careful with those employment numbers. Many restaurants are scaling back employee hours because of Obama care. I have several clients that are cutting employees hours to duck Obama care. Essentially the franchisee of Burger King is cutting his employees down to 19 hours and the franchisee of Taco Bell is cutting his employees hours. So what do they do, the Burger King employee goes get an additional job at Taco Bell and the Taco Bell employee also gets a job at Burger King. But to the BLS (Bureau of labor statistics) those two people have 4 jobs.

tfb; February 1, 2013 at 8:55 PM
Gerry said...: Hi Honey,

You imply that Bob was wrong to sell the Fairholme Fund when he did. Here's what happened to me. I decided to wait a bit when Bob sold the fund in April 2011 because I would have had some short-term gains if I had sold then. Boy was I sorry! Shortly after Bob sold it, the Fairholme Fund started to drop, going down about 30% by the end of the year. I was kicking myself for not taking Bob's advice when he gave it. I ended up selling about a quarter of my holdings at the end of 2011 and taking a $4000 loss. Then in 2012 Fairholme started to go up, gaining about 35% for the year. Luckily, because I still had a portion of my holdings, I was able to make up most of my losses. I now have a $3000 gain and am about to sell the rest. The fund is still below where Bob sold it. I would have saved myself a lot of misery (and money) if I had just listened to Bob in the first place. He's not always right, but he was right this time.

Gerry; February 1, 2013 at 9:33 PM
Anonymous said...: "TIPS went on to enjoy a tremendous runup for the rest of 2009 and skyrocketed again in 2011, eventually resulting in negative real yields for TIPS."

I think it's too late to buy TIPS. They have a negative yield and aren't any good if you want cash flow from your fixed income investments. They will get hammered just like any other bonds when rates go up.

I like junk bonds better.

JNK; February 2, 2013 at 6:23 AM
Honeybee said...: Gerry,

You made a good point. I checked the chart for 2011 and see that the fund did decline precipitously after Bob Brinker sold it in Marketimer.

That was a very good and timely call. Thanks for bringing that to my attention.

Imagine if one had sold in April 2011 and bought it back in January 2012. I guess that kind of timing is next to impossible....; February 2, 2013 at 8:14 AM
Honeybee said...: As of today, Bob Brinker has not said that he thinks the secular bear market ended.

But Dshort's guest-writer, Chris Puplava, made a good case that the secular bear market that started in year 2000 ended in 2011 -- and he has done some great graph work to make his case. Some excerpts:

"Back in 2011 I penned a two-part series in which I argued it was time to switch from a secular bear to bull market mentality. A key quote from that series is provided below:

Just like the appearance of more and more green leaves on a tree signals the transition from winter to spring, so does the occurrence of individual stocks breaking out of their respective secular bear markets and hitting new all-time highs signal the macro secular bear market that began in 2000 is coming to an end and a new secular bull market is in the process of forming. It is this fact that I argue that investors should begin to switch from a secular BEAR market investing philosophy to a secular BULL market investing philosophy.

I argued the timeline for when we would reach new all-time highs in the U.S. stock markets was 2014-2015, but certain developments have occurred that suggest that new highs may occur this year or next, which are outlined below.

(SNIP)

Summary
With the small cap and midcap indexes reaching all-time highs and the Dow Jones Industrial average less than 200 points away from an all-time high, the case for a new secular bull market in stocks being underway is hard to dismiss. As suggested in articles I penned in 2011, there are likely two large forces at work that will propel stocks higher in the coming decade, one of which is favorable demographics out to 2028, and the other is the slow glacial movement of institutions rotating out of bonds and into stocks. With the benefit of hindsight, looking back at historical cycles suggests that the March 2009 low was not only a bear market low for the 2007-2009 bear market, but THE low for the secular bear market that began in 2000 with the technology bubble. Looking at demographic trends and prior secular cycles, the new secular bull market in stocks could continue well into the 2020s.

Read more:

The Secular Bear Market in Stocks is Over; February 2, 2013 at 8:07 PM
Anonymous said...: The Fairholme fund, FAIRX, is categorized as a Value fund by Bloomberg financial which has a tool you can use to assess mutual funds.

Also, it is VERY concentrated, at least that's how Yahoo financial showed, it. They show the top ten fund holdings, and showed that 85% of the fund assets were invested in 10 stocks.

To each his own. But one of the justifications for investing in a mutual fund is diversification.

To BB's credit, he was smart in sleuting this fund out and recommending it.

-- Frankj; February 2, 2013 at 8:23 PM
Anonymous said...: Don't know how much sleuthing was necessary re:FAIRX. Bruce Berkowitz (Fairholme's fund manager) was profiled in Fortune magazine as a hot fund manager back in Dec. 2010. Any reader of Fortune knew about this guy. You give Stinker too much credit.

Fair and Balanced; February 3, 2013 at 10:38 AM
Anonymous said...: some years ago, I stopped my subscription to Brinker's newsletter when I lost big time on his recommendation to buy. For several years thereafter, he never acknowleged what a costly blunder he made and when confronted by a caller, He sidestepped by calling the caller's question an " ambush ". Very thin skinned egotist.

After being a complacent Vanguard gnma investor, I just realized that all of my 2012 gains were wiped out since Sept. 2012 to present. Soo much for short duration!; February 3, 2013 at 12:20 PM