Over the past 15 or so years, Bob Brinker has gotten a lot of mileage out of talking about secular vs cyclical market trends. In the past, he wrote extensively about them in Marketimer and discussed them on Moneytalk.
By his own words, the current secular bear market must have ended -- without a whisper from Brinker, except to say that they never mattered anyway. That seems almost comical, but it sure filled a lot of pages in his newsletter. This is how he defines the end of a secular bear market:
Brinker told a Moneytalk caller in February, 2007:
“……..But what we do know is within secular trends there are no cases where a secular trend has gone beyond the previous peak by more than, by more than 10%. It's never happened, so I think it's fair to say that until that happens, the secular trend is intact.".Now the secular trend that began in year 2000 when the S&P was up in the 1500s, awww, that remains intact. The S&P 500 Index - and this is measured by the Index itself - has not gone above the prior high of 1527 close. In fact, in remains in the mid-1400s at this point. In order for it to move beyond an existing secular trend, such as the one we've had the past seven years, you would have to exceed it, I would think, by at least 10%.......”(That definition was posted on my original Bob Brinker Blog.)
Brinker totally messed up his secular bear calls. He declared that the one that began in 2000 had ended in 2006 -- he did that retroactively in 2007. Then he had to admit in 2009 that it had not ended after all.
June, 2007, Marketimer, Bob Brinker said:
"In our view, the valuation based secular bear market that was established following the March, 2000 closing high for the S&P 500 index (1527.46) and following the January, 2000 closing high for the DJIA (11723), reached its conclusion on June 13, 2006 at the bottom of the mid-term off-presidential election year correction."In May, 2009, just months after the market had dropped 55%+, Brinker changed his mind and said that the secular bear megatrend hadn't ended after all.
May, 2009 Marketimer, Bob Brinker said:
"Although it appeared to us that the secular bear megatrend that began in year-2000 had reached its conclusion, there is no question that the secular bear megatrend remains intact...."The final time that Brinker wrote about the secular bear market was in the December 2012, Marketimer, Brinker wrote:
"We would not be surprised to see the current secular bear megatrend reach its conclusion within the 2014 to 2020 time frame. This would suggest that we will experience at least one more cyclical bear market within the ongoing secular megatrend that began in Year 2000.....In our view, the absolute low for the current secular bear megatrend occurred during the U.S banking crisis on March 9, 2009."It was also in December 2012 that Brinker seemed to subtly give himself an out regarding secular bear calls:
December 2012, Marketimer, Bob Brinker said:
"While we take note of the secular market trend within the context of analyzing market history, all Marketimer asset allocation and model portfolio decisions are based solely on the market signals generated by our stock market timing model. The Marketimer stock market discipline focuses entirely on cyclical price trends."So much for secular bears -- who needs them anyway? :) Now he only mentions the ongoing cyclical bull market:
April, 2013, Marketimer, Bob Brinker said:
"Given the fact that this cyclical bull market is now in its fifth year, we remain vigilant with regard to our stock market indicators."May, 2014, Marketimer, Bob Brinker said:
"While it is true that the mid-term off-presidential year history of the market suggests that a correction is likely this year, it is also true that the Marketimer stock market market timing model continues to suggest that the underlying cyclical bull market fundamentals remain intact. "So what is Brinker's definition of a cyclical BEAR market? I don't know....
36 comments:
Could it be that the market cognoscenti have changed course yet again, deciding that bad news is actually bad?
If so, when will the next sentiment flip-flop occur? Hours? Days?
I'll take Bizarro stock markets for 500 please, Alex.
http://goo.gl/NNLkky
Jerrod Clarkson
OK Honeybee, I'll go where angels fear to tread.
Your key to understanding Bob Brinker's original secular bear thesis seems to be this quotation:
"But what we do know is within secular trends there are no cases where a secular trend has gone beyond the previous peak by more than, by more than 10%."
You cite evidence where Bob flipped on this, calling an end to the secular bear, and then flopped back again, saying the secular bear was still intact. Fair enough, and now his appears to be only a cyclical focus as he waits for Godot.
It all sounds plausible, and not a little comical, as you say!
But I don't think BB's original thesis is wrong . . . yet.
The previous peak in the S&P 500 occurred in the year 2000. There is a March 2000 high of 1527.46, and a retest of that area in late August 2000 and on 1 September 2000 within points of that March 2000 high . . . at 1520.77.
Adjusted for inflation as of today, that 1521 or so level approximates 2018. Add 10% = approximately 2220 on the S&P 500. The high on March 2 was still well south of that at 2117, minus a point or two for some inflation.
So this market still has not shown the original secular thesis to be false, no matter how BB himself may or may not have stopped believing in it.
jm
Jerrod...Here is your link live:
S&P Snapshot: Third Day of Accelerating Declines
Jm....Excellent analysis. The only problem I have with it is "adjusting for inflation," but only because Brinker never included that in his prognostications.
However, no doubt you are technically correct. It will be interesting to see if others have opinions on this.
The question being, did the secular bear end or not?
Maybe we could have a contest about it. :)
Jerrod: An interesting and noteworthy post!
Gabe
cognoscenti
Went scrambling for the dictionary over that one! Thanks, I like learning. :)
I agree with jm that "inflation adjusted" is the most accurate way to measure things, but the reality is very few people measure it that way. Mutual Fund companies never give inflation adjusted performance returns. The return of the stock market as a whole is rarely given using inflation adjusted numbers. Even those who use TA don't use inflation numbers. So when Bob Brinker looks at secular trends he doesn't factor in inflation when looking at levels of the stock market. If he did it would probably become too confusing for the average listener to understand.
I'm with Honeybee and Jm and Jim....
it is more accurate to adjust for inflation when talking about market performance, but it does make things more complex, and most importantly, Brinker never talked about adjusting for inflation in all the many times he wrote and talked about secular bulls and secular bears.
So he doesn't get off the hook on that score.
Brinker has made quite a mess out of the whole subject of secular bears and secular bulls, and has totally confused his readers and listeners.....and probably himself too.
I think Honeybee's question is a good one:
"So what is Brinker's definition of a cyclical BEAR market? I don't know...."
I think the whole thing is just a bunch of [secular] bull.
Market forecasters, including Brinker, try to convince the public that they (the forecasters) know......when in fact they don't know....
So they look at the past and come up with time periods they call secular bear markets and secular bull markets. Somehow this gives them the mystique of "credibility" that they will be able to guide the subscribers in navigating the market.....keeping them in the stock market while it is going up, and out of the stock market during bear markets.....keeping them safe.
As Honeybee alluded to, this helps sell newsletters...
"Bob Brinker's old-standby market-timing selling-tool, the secular/cyclical trends, so let's bring it up-to-date."
"Over the past 15 or so years, Bob Brinker has gotten a lot of mileage out of talking about secular vs cyclical market trends. In the past, he wrote extensively about them in Marketimer and discussed them on Moneytalk"
See the "front page" of Honeybee's blog:
"....all Marketimer asset allocation and model portfolio decisions are based solely on the market signals generated by our stock market timing model. The Marketimer stock market discipline focuses entirely on cyclical price trends."
Hmmm...'the market signals generated by our stock market timing model'.....'the Marketimer stock market discipline'
How far did that timing model and "discipline" get Bob Brinker when he exited the stock market prematurely in 1988, only to be out of the market while it was rising?
It did serve him well in selling 60% of his stock holdings in January 2000......but in that same month he made a disastrous recommendation to purchase a "business to business" internet stock mutual fund that subsequent to his "disciplined" recommendation went down 75% and 90%, as he recommended it more than once in Marketimer.
And another "disciplined" recommendation based on this wonderful stock market timing model made another disastrous recommendation to buy the Nasdaq 100, the QQQ's, later in 2000......for a forecasted "counter trend rally" which never took place.....and lost subscribers tons of money......Brinker recommended buying the QQQs not only to aggressive investors, not only to moderate investors, but even to Conservative investors!! Since when is it recommended for conservative investors to invest that way, based on speculative, high risk forecasts of the future?
The same disciplined investing strategy and stock market timing model totally missed the most important bear market of Bob Brinker's career, the bear market of October 2007 thru March 9, 2009, where the market went down roughly 55%, and Bob Brinker and his followers stayed fully invested throughout.......
Honeybee continued.....
"April, 2013, Marketimer, Bob Brinker said":
"Given the fact that this cyclical bull market is now in its fifth year, we remain vigilant with regard to our stock market indicators."
Sure glad Bob Brinker was "vigilant", scaring the daylights out of countless subscribers and Moneytalk listeners; many subsequently said they stayed out of the market because of their concerns....
How well did that "vigilance" work out? In 2013, the Vanguard Total Stock Market Index fund went up 33.35%, and continued with double digit gains in 2014, up 12.43%.
May, 2014, Marketimer, Bob Brinker said:
"While it is true that the mid-term off-presidential year history of the market suggests that a correction is likely this year......."
Hmmmm.....all throughout 2014, Marketimer subscribers were told that Bob Brinker was working diligently to identify that correction and tell subscribers when to buy into it to get an excellent buying opportunity..........
but it came and went without a word from Brinker......until after the fact, and no buying opportunity was identified.
Buffett had something to say about market forecasters and fortune tellers:
"We've long felt that the only value of stock forecasters is to make fortune tellers look good.
Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children." - Warren Buffett in the 1992 Berkshire Hathaway (BRKa) Shareholder Letter
Can Bob Brinker really successfully time the markets?
How well did he do last year in timing the bond market? His bond market performance last year was atrocious. You would have to have tried very hard to have done worse.
I think Bob Brinker should get out of the crystal ball fortune telling game and stick to what he does well, which is educating the public about investing.
ETF1 Robert said:
"Market forecasters, including Brinker, try to convince the public that they (the forecasters) know......when in fact they don't know.... So they look at the past and come up with time periods they call secular bear markets and secular bull markets."
This reminds me of what Doug Short at AdvisorPerspectives, who has come up more than once recently in the comments here, wrote on March 2 when the S&P 500 made its new all time high:
"Was the March 2009 low the end of a secular bear market and the beginning of a secular bull? At this point, over five-and-a-half years later, the S&P 500 has set an inflation-adjusted record high based on monthly averages of daily closes. ... Based on the real (inflation-adjusted) S&P Composite monthly averages of daily closes, the S&P is 151% above the 2009 low and 5% above its previous secular record close in 2000."
The boundaries are roughly 2017 in the year 2000 and 2117 in the year 2015 (4.96%).
So Doug Short clearly paints the period from March 2009 in blue in his graphs as a secular bull as a consequence of the inflation-adjusted all time high.
The thing is, if you read him carefully, he is skeptical about the March 2009 low. By comparison with the past, it wasn't low enough by a long shot. Which means there is some tentativity in his mind about the true character of the current secular bull.
http://www.advisorperspectives.com/dshort/updates/Secular-Bull-and-Bear-Markets.php
His regression line for the S&P 500 comes in at about 1060 most recently. He notes the March 2009 low was out of step with the past lows which undercut the regression line by in excess of 50% in most cases, whereas March 2009 was only 13% below.
To me that is consistent with the floor put under the market in March 2009 by the SEC by making changes to mark-to-market rules. Without that, the market theoretically could have fallen lower than 500 on the S&P 500.
At the current level of GDP, the S&P 500 would have to fall to about 700 to reproduce the market valuation which gave birth to the bull market which began in 1982. Valuation was 40% higher than 1982 in March 2009.
jm
Bob Brinker tries to tell us this:
200-Point Moves in the Dow Are No Longer Significant
Thursday, March 26, 2015
A quick question: Is a 200-point move in the Dow Jones industrial average a big change or not?
If you are like many people, your intuition is to say “yes, it is” (especially if you ignored the headline of this week’s commentary). Until fairly recently, a 200-point change was a big move. But, then the bull kept running. And running. With each upward move, the absolute value of the Dow rose. As the Dow rose, the importance of a 200-point change decreased.
A little bit of math will put the discussion into perspective. On August 15, 2011, the Dow gained 213.88 points to close at 11,482.9. This was a 1.9% jump. A couple of months ago, on January 7, 2015, the Dow gained 212.88 points to close at 17,584.52. Though it was almost exactly the same size move, point-wise, the blue-chip average’s percentage gain was just 1.2% on January 7, 2015. The difference was the percentage size of both moves, with the 213-point move last January being proportionally smaller. This is due to the fact that the Dow rose by about 6,000 points over the approximate four-year span between the two days.
We humans tend to focus on the point move of the Dow. This is what is often reported to us, through headlines such as “the Dow rose X points today” or the “Dow was off X points today.” As such, we have learned to frame our expectations of what is or is not a volatile day based on the point move in the blue-chip average.
READ MORE
Good article on volatility, Honeybee.
Interested individuals can track volatility for a number of things at stlouisfed.org which has about 40 charts in the series.
Here's the one for the Dow:
https://research.stlouisfed.org/fred2/series/VXDCLS
jm
Sorry, not 40 in the series, 20.
Here's the one for the Dow:
https://research.stlouisfed.org/fred2/series/VXDCLS
jm
JM,
If you use inflation adjusted numbers for the respective index, then you need to use the compounded annual growth of reinvested dividends.
Additionally, with over 185 companies added and dropped from the S&P 500 since 2003, there is little chance that the index correctly reflects the true level.
The history of stock index changes has been for a company to be dropped when it appeared weakest. Once dropped from the index the stock usually recovers.
Alternatively, the stock that is added to the index is thought to be the strongest. However, once added to the index the stock usually underperforms the stock that it replaced.
These are just a couple of factors that make
Hi Honeybee I enjoy your work.
He no longer brings up the word secular because he is stuck in a corner.
On one hand, his timer says we are in a secular bear, but by his own reasoning we are in a Secular Bull !
He expected the secular bear market that started March 24, 2000 to last 16-20 years. Why? Well because the last 5 secular markets lasted between 16.5 to 20 years; so they all should right?.
This one however, was much shorter. The secular bear market ended March 9, 2009. Total 9 years, 56% decline. (S&P 1527 to 676)
March 9, 2009 was MOABO. Bear market megatrends end with a MOABO. The original prediction was "a secular bear market with a MOABO at the end of that bear market."
We are now 5 years into a new secular mega trend bull market. This was confirmed on 9/18/13 when the S&P 500 closed 10% above the old high("until that happens, the secular bear market is intact") and was reconfirmed over 50 times in 2014-15 as the market reaches ever higher.
So the $185 dollar question is this, Robert, are we in a Secular Bull or Bear?
Secular Bear Mega Trend 2000-2009
Cyclical Bear I
March 2000- Oct.2002
S&P Down 49%
Cyclical Bull I
Oct.2002 - Oct.2007
S&P up 101%
Cyclical Bear II
October 2007- March 9, 2009
S&P down 51%
MOABO
START NEW SECULAR BULL MEGATREND
Cyclical Bull I
March 2009 - 5 years and counting
S&P up over 300%
Had Yellen's further clarification on rates cause a positive market reversal?
Gabe
Hi Ghost of Bob (yes, that Bob)....Thank you for explaining that. I think the conclusion we can draw is that anything over 20% decline should be called a cyclical bear.
So cyclical bears, like cyclical bulls, can run simultaneously alongside a secular bear.
Now the question is, can a cyclical bear run simultaneously alongside a secular bull? Or does a cyclical bear-run automatically change the secular trend to bear. :)
Everyone: My thought is that the examination of both a cyclical and secular Bull/Bear Market makes for a interesting theoretical format and or thesis for investors to digest. For me, it only provides for intellectual stimulation at the very best.
My two cents.
Gabe
I like what Ghost of Bob has to say. I wish it were true (I think). It's just that March 2009 wasn't MOABO. 1982 was a MOABO event. For a brief moment in 2009 the ratio of the S&P 500 to GDP dipped to 40% above the 1982 level. Throughout the period bounded by 1982 the ratio stayed at the much lower level.
A lot of money has been made since 2009 to be sure. There's no question it was a very good buying opportunity, but it disappeared quickly. But what's inevitably coming means much of the money made is going to be lost just as surely as it was lost in 2002 and 2008. Valuation could theoretically climb another 25% to 2000 levels, but I'm betting not in this GDP environment, which is the worst in the post-war.
Keeping my powder dry is what I'm doing. The Fed has dropped the word patient, but I think investors should pick it up.
jm
J.M. Yes, 1982 (August 12, 1982) was a MOABO event indeed. It was the end of the 17.5 year Secular Bear Mega Trend that started Jan. 1966. However, I was in Junior High and my mother would not let me buy stocks that day.
Jan. 18 1966 S&P 93.95 - August 12, 1982 S&P 102.42
This shows that if you bought and held in early 1966 and sold 17.5 years later in 1982 you made about 10%.
During this period there were 4 bull cycles and 5 bear cycles. Every time a bear market ended and a bull took off it returned no more that the vicinity of the previous highs, then collapsed again. "There are no cases where a secular trend has gone beyond the previous peak by more than...10%"
So J.M. the way I see it the last 3 MOABO's or the end of a secular bear market were March 2009, August 1982, and June 1949.
Secular Bear 9/29-06/49 = 20 years
Secular Bull 6/49-02/66 = 17 years
Secular Bear 2/66-08/82 = 16.5 yrs
Secular Bull 8/82-03/00 = 17.5 yrs
Secular Bear 3/00-03/09 = 9 years
Secular Bull 3/09-
Hi Honeybee, you asked can a cyclical bear run simultaneously alongside a secular bull?
Yes. 1982-2000 can be called a secular bull, and during that time there were some notable bears, like the 1987 crash, the 1990 bear market and the 1998 mini crash.
When these bears ended the long term bull market resumed to even higher new highs.
I'm still puzzled how Bob Brinker could prematurely declare that the secular bear ended in 2006. That would have made it only a little over 6 years long. I'm almost certain he said in 2000 that secular bears last a minimum of 8 years and a maximum of 20 years. He also said several cyclical bear markets occur during the trend. As of 2006 only 1 had occurred (2000-2003). So after giving us all a crash course in secular bull/bear trends in 2000 he failed to follow his own teachings.
Jim....That is a bit of a mystery, but maybe my comments in 2011 will shed some light on it. I think all of this fits together to show that Bob Brinker has washed his hands of talking about secular trends.
May 27, 2011, I wrote/posted:
June, 2007, just months before the market reached its all-time-high, Brinker said that the "secular bear megatrend" had retroactively ended in June, 2006.
June, 2007, Marketimer, Bob Brinker said:
"In our view, the valuation based secular bear market that was established following the March, 2000 closing high for the S&P 500 index (1527.46) and following the January, 2000 closing high for the DJIA (11723), reached its conclusion on June 13, 2006 at the bottom of the mid-term off-presidential election year correction."
In May, 2009, just months after the market had dropped 55%+, Brinker changed his mind and said that the secular bear megatrend hadn't ended after all.
May, 2009 Marketimer, Bob Brinker said:
"Although it appeared to us that the secular bear megatrend that began in year-2000 had reached its conclusion, there is no question that the secular bear megatrend remains intact...."
Honeybee:
Is there more from BB about "valuation based secular bear markets", or do we have to guess what he's talking about?
I'm looking at valuations in June 2006 and frankly I'm wondering if BB hadn't had a couple of drinks too many when he wrote that.
jm
JM asked: Is there more from BB about "valuation based secular bear markets", or do we have to guess what he's talking about?
I'm looking at valuations in June 2006 and frankly I'm wondering if BB hadn't had a couple of drinks too many when he wrote that.
JM....It might be an interesting study to look into valuations at the time that Bob Brinker made those changes. He does base his target range calls on "valuation" and earnings estimates.
Right now, he is estimating S&P 500 operation earnings at $135 for 2016.
And his "estimated price/earnings ratio on 2015 estimated S&P 500 operating earnings of 16.5 to 17, which is slightly above the 50-year average."
This puts his S&P target range "into the upper-2100s."
Honeybee:
When BB said . . .
"In our view, the valuation based secular bear market that was established following the March, 2000 closing high for the S&P 500 index (1527.46) and following the January, 2000 closing high for the DJIA (11723), reached its conclusion on June 13, 2006 at the bottom of the mid-term off-presidential election year correction."
. . . now I don't think he's referring to a secular bear market per se at all.
He simply means the long term slide in the p/e ratio of the S&P 500, which fell from about 46 in March 2002 to 16 in June 2006, that's all.
Using the word "secular" there is a pretty loaded term which could easily mislead into thinking about other things, like secular bears and secular bulls.
Intentional, or just sloppy?
jm
JM, I have a problem when people CHOOSE to CHOOSE what Bob Brinker "meant" rather than take him at his word.
Please read my complete analysis of Bob Brinker's secular trends that goes back to 2000 which is posted on my old blog which now belongs to Kirk Lindstrom, then if you still believe the same way, I can't help you.
It includes these quotes:
Bob Brinker said that a secular bull market began in 1982 and ended in the first quarter of year 2000.
Marketimer, April 5, 2002, Bob Brinker said: "We continue to believe that the weight of the evidence suggests the secular bull market that began on August 13, 1982 came to an end in the first quarter of the year 2000...However....the secular bull trend in early 2000 appears to have led to a new secular bear market, which is now into its third year."
In the August 8, 2002 Marketimer, Brinker stated unequivocally: "In our view, the U.S. stock market entered a secular bear market in the first quarter of the year 2000. The benchmark starting points for this secular bear are: Standard and Poor's 500 Index: 1527.46 on March 24, 2000. Dow Jones Industrial Average: 11722.98 on January 13, 2000."
September 2002 Marketimer, Brinker said: "We believe the ongoing secular megatrend we are now experiencing will see a succession of cyclical bull and bear markets lasting approximately one-to-three years each."
In the May 2006 Marketimer, Bob Brinker wrote his definition of what would signal the end of a secular bear market: "The current cyclical bull market, which in our view is unusual in terms of its length, has had to battle the headwinds of the secular bear megatrend that began in the first quarter of Year 2000.
...........by definition, the secular bear megatrend will continue as long as the S&P 500 Index is unable to achieve a significant breakthrough of its March, 2000 historic high. We estimate the likely duration of this secular bear megatrend within a broad range of eight to twenty years, and we are now into year seven."
JM...I must not be getting your point. Sorry, perhaps someone else understands what you are saying.
Here is more of what I posted about the hocus-pocus Brinker pulled -- evaluation notwithstanding:
Posted November 10, 2009.... Bob Brinker's views on stock market secular trends that goes back to 1982.
Bob Brinker said that a secular bull market began in 1982 and ended in the first quarter of year 2000. Marketimer, April 5, 2002, Bob Brinker said: "We continue to believe that the weight of the evidence suggests the secular bull market that began on August 13, 1982 came to an end in the first quarter of the year 2000...However....the secular bull trend in early 2000 appears to have led to a new secular bear market, which is now into its third year."
In the August 8, 2002 Marketimer, Brinker stated unequivocally: "In our view, the U.S. stock market entered a secular bear market in the first quarter of the year 2000. The benchmark starting points for this secular bear are: Standard and Poor's 500 Index: 1527.46 on March 24, 2000. Dow Jones Industrial Average: 11722.98 on January 13, 2000."
September 2002 Marketimer, Brinker said: "We believe the ongoing secular megatrend we are now experiencing will see a succession of cyclical bull and bear markets lasting approximately one-to-three years each."
In the May 2006 Marketimer, Bob Brinker wrote his definition of what would signal the end of a secular bear market: "The current cyclical bull market, which in our view is unusual in terms of its length, has had to battle the headwinds of the secular bear megatrend that began in the first quarter of Year 2000. ...........by definition, the secular bear megatrend will continue as long as the S&P 500 Index is unable to achieve a significant breakthrough of its March, 2000 historic high. We estimate the likely duration of this secular bear megatrend within a broad range of eight to twenty years, and we are now into year seven."
Now history shows that Brinker's carefully laid out scenarios never happened. What did happen is that the cyclical bull market continued for five years (and then turned into the worst bear market since the 1930's).
Brinker made excuses to explain this and repeatedly cautioned subscribers and listeners that the cyclical bull was part of an ongoing secular bear market megatrend and would last 1-2 years. He later changed that to 1-3 years, and then he called the cyclical bull market "long-in-the-tooth," and finally he said it was an "outlier" within a secular bear megatrend.
By the time the market reached its high in October of 2007, Brinker was a raging bull and predicting the S&P 500 Index would reach mid-1600's. It must have looked to him like he would soon appear very foolish with his secular-bear stance because he made the choice to declare retroactively that it had ended the previous year.
In the June 2007 Marketimer, Bob Brinker claimed the secular bear megatrend had ended the PRIOR year -- in June, 2006! Brinker said: "In our view, the valuation based secular bear market that was established following the March, 2000 closing high for the S&P 500 index (1527.46) and following the January, 2000 closing high for the DJIA (11723), reached its conclusion on June 13, 2006 at the bottom of the mid-term off-presidential election year correction." [Note what he said in May, 2006 in the quote above -- one month earlier than the date he said the secular bear had ended.]
OK, one more time.
When BB said in 2007 "In our view, the valuation based secular bear market . . ." I'm saying this is a clue he had stopped talking about a simple market level measurement and started introducing a market calculation, specifically of valuation.
I don't understand what valuation he's referring to exactly, but that's what I think.
jm
Jm...I'll look it up and see what he said about valuation back during those months -- probably tomorrow.
JM... Regarding the words "valuation based" in the July 2007 newsletter. I never caught that change before and there was no explanation, so it has to be secular = megatrend = valuation based secular.
JM...The valuation Brinker was referring to was the P/E of the S&P 500. In 2000 I think he said the P/E was as high as 28. The long term average P/E is normally around 16.
Jim said:
"The valuation Brinker was referring to was the P/E of the S&P 500. In 2000 I think he said the P/E was as high as 28. The long term average P/E is normally around 16."
I think I agree, but talking about a secular bear in the p/e and a secular bear in the market are two very different things, which means that statement cannot be used to say that in 2007 he called an end to the bear market in 2006, and later in 2009 to say he reversed himself on that.
As you say, Brinker observed in 2007, when he said the valuation based bear had ended in June 2006, the following:
The p/e of the S&P 500 was rising to at almost 18 in June 2007, had been just under 17 in June 2006, and had descended to there from over 28 in March 2000 to just under 28 in March 2003 when he issued his buy signal. So from his perspective in June 2007, June 2006 had formed the bottom of the valuation cycle.
What I don't understand is the May 2009 statement that the bear was not over. Is he referring to this valuation business, or to the market? If he's referring to valuation, it's odd because the p/e had soared by that time to nearly 124 and wasn't to descend to below 14 until the late summer of 2011 (Now that was a buying opportunity, as we've seen also from other indications).
But if he's referring in 2009 simply to the secular bear market not being over, that is not inconsistent with his previous portrayals of the market having entered a secular bear in 2000, just to say that at that time he thought the secular bear was on-going.
However, the statements Honeybee has assembled show that in the run-up to 2008, BB was surprised at the length of the cyclical bull. It's as if he was expecting a cyclical bear like 2008, and then when it came he was indeed blind-sided by it, "no one could have predicted this" and so on. But HE was predicting it!
There's something to it when Honeybee points to BB's bullishness in the 2006-2007 period. It IS a reversal of sentiment on BB's part.
I'm saying BB's flying more by the seat of his pants in all this than following signals from some so-called timing model, at least until after the fact (as in May 2009) when he's had time to digest THE CHARTS!
jm
Honeybee,
After doing some considerable digging today, I've decided your representation that BB in 2007 called an end to the secular bear in June 2006 retroactively is completely correct after all, despite my misgivings about the phrase "valuation based secular bear market".
Apparently in the June 2007 issue of the Marketimer Newsletter there is this important but overlooked additional color:
"The total loss for the 6.3 year secular bear market in the S&P 500 Index was 20% (excluding dividends), and the total loss for the 6.4 year secular bear market in the DJIA was 9% (exluding dividends)...In our view, the secular bear trend that ended in June 2006 served an important purpose s it provided the market with the opportunity to consolidate the unprecedented gains of close to 1400% that occurred in both the S&P 500 Index and the DJIA during the robust suclar bull market from August 1982 to the first quarterof Year 2000."
I'll leave it to you to vouch for that since I am not a subscriber, but the math checks out on top of the explicit references to the end of the secular bear.
From the March 24 2000 S&P 500 high to the so-called low on June 13 2006 you get a secular bear, don't laugh now, down 19.88%.
Like you, I respect the use of words even though no one is perfect in their use of them all the time. I think Kirk Lindstrom, however, was correct to detect some quite deliberate BS in the use of the term "valuation" at the time in a thread I found when he spoke of BB "morphing" his position. But the language of the added color leaves no doubt: Bob called an end to the secular bear in 2007 retroactively to June 13, 2006.
jm
JM...I'm going to copy your post over to the new thread (Sunday's summary) and answer you there....
JM....I answered your post here.
Post a Comment