May 9, 2015, Bob Brinker's Marketimer Nasdaq Blunder - Another One!?

May 9, 2015...... It may come as a surprise to new listeners or new subscribers, but back on October 9, 2012, Bob Brinker sold all Nasdaq holdings in Marketimer, and announced it on Moneytalk the following month.

For old-time subscribers still holding QQQ from October 2000 -- Brinker's all-time-worst Nasdaq blunder -- Brinker finally ended that disastrous trade too. (Note that the last time that Marketimer mentioned this trade was in March 2003.)   But sadly, after holding for 12 years, he had subscribers sell too early to even recoup all of their losses. 

October 2012 Marketimer, Page 3 Paragraphs 6, Bob Brinker wrote: In addition to our recommendation to eliminate Rydex Nasdaq 100 Fund from our model portfolios, we also recommend the sale of any QQQ shares that are held by subscribers, with reinvestment of the proceeds in either the Vanguard Total Stock Market Index (VTSMX), or the corresponding exchange traded fund (VTI).

On Moneytalk the following month, Brinker talked extensively about making these changes. Here are excerpts from my November 18, 2012 Moneytalk summary:

ALL NASDAQ SOLD FROM MARKETIMER:  Caller John from San Diego said: "I've been a subscriber of yours for almost as long as you've been on the air.....Recently, I noticed that you made some changes in your I and II portfolios.... (Brinker interrupted and asked what's your question).....It has to do with exposure the Nasdaq and I understand you...."

Brinker interrupted and replied:  "We don't have it anymore, John. In early October, we sold all of our Nasdaq direct exposure. So that meant that we sold our mutual fund that was invested in the Nasdaq 100....That came out of model I and model II and we also extended that to QQQ shares, which are also invested in the Nasdaq 100. We also sold any QQQ shares that subscribers held. All of those share in the Nasdaq 100, whether they be in the mutual fund or in the Exchange Traded Fund were sold in early October. So they're out of there. There's no more direct Nasdaq exposure anywhere in model I or in model II or anywhere within newsletter subscriber positions. We sold them out in early October. I felt at that time, based on all that I had seen in the Nasdaq that that was an opportunity to sell that index and that's what we did."

Since Brinker made those changes, the Nasdaq Index has outperformed the Total Stock Market Fund by about 15%.  I don't pretend to be a mathematician, so that is my guestimate based on comparing charts. If anyone wants to do the exact math, that would be great!

RYOCX sold at $17.87....now at $26.10
QQQ  sold at $64.79.....now $108.69.
VTSMX  sold at  $34.21........now $53.25

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December 27, 2011, QQQ: Bob Brinker's Worst Stock Market-Timing Call

December 27, 2011......................................................(comments welcome)

Bob Brinker's Moneytalk was not broadcast this Sunday,  so this is an opportunity to post a complete review of Bob Brinker's most devastating market-timing blunder.

You may find it difficult to believe that someone with Bob Brinker's reputation would do something like what I'm going to tell you.  But the facts are indisputably well-documented in Marketimer, and the actual "special" bulletins from Brinker. I also have a lengthy file of first-person testimonies from people who were seriously damaged because they trusted Brinker.

At best, this was a tragedy, but the cover-up and lies were inexcusable. And to this day, he announces himself on Moneytalk as "America's Most Trusted Financial Advisor" and warns of sharks.  Many people were financially hurt by this,  and current subscribers and Moneytalk listeners are in the dark  because it was buried.

For those who wonder why it is still important, here are the reasons:

*Brinker never took responsibility for the trade in his own model portfolios, even though he advised subscribers to use a percentage model portfolio cash reserves previously raised from theirs.

* Brinker never closed the trade and actually covered it up by repurchasing the same investment after a 70%+ drop and THEN adding it to his model portfolios

* Brinker's Marketimer official performance record is skewed in his favor to this day, because the trade was never accounted for. It has been estimated that if this trade was included in his model portfolios, it would have dropped his performance numbers by 2% a year.

* Mark Hulbert knows this but has never accounted for it in Hulbert Financial Digest, so his Marketimer performance ranking is exaggerated. (Hulbert recently added Marketimer to his Honor Roll, in spite of the fact that he uses a footnote to explain HIS reason for not accounting for the QQQ  trade in HFD).

 Here is what happened:

 In January, 2000,  Brinker moved 60% of his equity portfolios to cash. In  August 2000, he moved another 5% to cash for a total of 65% in cash  reserves. He told subscribers to wait for instructions on how to use these cash reserves. If he had stayed there, this move would have looked brilliant. But the story is only beginning.

October 16, 2000, Brinker issued a special bulletin advising subscribers to  "Act Immediately" and buy QQQ in anticipation of a 2 to 4 months "counter-trend rally"  -- for a 20% or more gain. Callers to the office were told "Bob is comfortable with QQQ at $86." The advice in the  bulletin was:  Aggressive investors told to put 30 to 50% of cash reserves into QQQ.  Conservative investors recommended to put 20 to 30% of cash reserves  into QQQ.

Here is the bulletin:

November 6, 2000, Marketimer (QQQ=$81.00) Page one: Brinker said: "Marketimer subscribers with aggressive objectives can invest up to 30% to 50% of cash reserves in either the QQQ shares or Rydex OTC Fund in order to participate in this recommendations. That translates into potential exposure of 19.5% to 32.5% of a TOTAL AGGRESSIVE PORTFOLIO. (30% of 65% CASH RESERVES equals 19.5%. 50% of 65% cash reserves equals 32.4%). The balance of reserves remain in money market funds.

Conservative subscribers can invest up to 20% to 30% of cash reserves in this recommendation, using either QQQ shares or Rydex OTC Fund shares. That translates into potential exposure of 6.5% to 9.75% of a total BALANCE PORTFOLIO. (20% of 32.5% cash reserves equals 6.5%, 30% of 32.5% CASH RESERVES equals 9.75% of a BALANCED PORTFOLIO. The balance of reserves remain in money market funds."

November 6, 2000, Marketimer, Page two, Brinker said: "In sum, Subscribers can us a portion of their 65% stock market cash reserve position in order to purchase QQQ shares or Rydex OTC Fund....within our page one percentage guidelines."

 Brinker said he would give follow-up guidance. Marketimer November, 2000, he said: "During the life of this recommendation, we will provide regular followup guidance in each monthly edition of Marketimer."  

He kept his word for 30 months while QQQ crashed over 70%. Then he buried the trade by putting it on hold for the last time and buying news shares of RYOCX and adding it to  his model portfolios. Of course, subscribers didn't have the option of buying "new" shares for their portfolios with the cash reserves they had already spent.  ONLY BOB BRINKER GOT A QQQ MULLIGAN  (and Mark Hulbert helped enable him).

Here's the total sum of the guidance Brinker gave each month until he cleverly covered it up and never mentioned it again in Marketimer or on Moneytalk. 

* #3) December 2000, Marketimer: Bob Brinker said that a "countertrend rally"...."has the potential to carry the Nasdaq indexes as much as 40% to 50% above their late-November closing levels over the next three to six months." (Brinker's target price was $90--December 1, 2000, QQQQ closed at $58.38)

* #4) January 2001 Marketimer: Bob Brinker said, "We continue to emphasize the guidelines we have recommended with regard to the exposure in the Nasdaq 100 Index for the countertrend rally phase we expect.......we are expecting potential gains for the Nasdaq 100 Index of up to 50% or more as measured from the January 2 closing low....." (January 1, 2001, QQQQ closed at $64.30)
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* #5) February 2001, Marketimer: Bob Brinker stated that the "bear market rally" had commenced and he expected the timeline to be "three to six months as measured from the starting point Jan 3." Brinker added: "In terms of Nasdaq 100 shares, our expectation of a target range in the 80 to 90 range remains intact. We believe this remains an achievable objective into the second quarter." (February 1, 2001, QQQQ closed at $47.45)
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* #6) March 7, 2001, Marketimer: begins with Bob Brinker admitting that "we were wrong in our earlier expectations that a countertrend rally would develop late last year...." He then admits that even his call for a new bear market rally beginning on January 3 "was unable to sustain upward progress in February. In spite of these admissions of being "wrong," in the same issue of Marketimer, Bob Brinker again made the following recommendation to subscribers: "In our view, the probabilities favor a three to six month bear market rally phase beginning shortly. Such a rally has the potential to carry the Nasdaq composite Index above the 3000 level by spring or summer as measured from the closing lows." (March 1, 2001, QQQQ closed at $39.15)"
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* #7) April 6, 2001 Marketimer, Page 2; Paragraph 5: Bob Brinker said, "Recent weakness in the Nasdaq 100 Index (QQQ) shares has far exceeded our expectations. However, we believe subscribers holding a position in these shares will eventually be rewarded, although this holding will require both time and patience. With or without a buy signal from our long-term model, we expect the Nasdaq Composite and Nasdaq 100 Index to stage a significant recovery over the next several months." (April 1, 2001, QQQQ closed at $46.15)
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* #8) May 7, 2001 Marketimer: Bob Brinker said, "As we stated last month, 'with or without a buy signal from our long-term model, we expect the Nasdaq Composite and Nasdaq 100 Index to stage a significant recovery over the next several months.'" (May 1, 2001, QQQQ closed at $44.73)
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* #9) June 2001, Marketimer: About the Nasdaq 100 Index (QQQ) shares, Bob Brinker said: "....we recommend holding these shares for future recovery within our earlier percentage guidelines." (June 1, 2001, QQQQ closed at $45.70)
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* #10) July 2001, Marketimer: Bob Brinker said, "We also recommend subscribers with a position in Nasdaq 100 (QQQ) shares hold for price recovery within our earlier percentage guidelines." (July 1, 2001, QQQQ closed at $41.76)
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* #11) August 2001, Marketimer: Bob Brinker now recommended that subscribers with a "position in Nasdaq 100 (QQQ) shares hold for recovery, although patience will continue to be required in the difficult market environment we are experiencing...." (August 1, 2001, QQQQ closed at $36.63)
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* #12) September 2001, Marketimer: Bob Brinker said the following on Page Two: "Subscribers who own Nasdaq 100 Index (QQQ) shares purchased at higher prices in the taxable accounts since the fourth quarter of last year can realize short-term losses for current and future use by switching to......XLK.......the differences are sufficient to avoid the wash-sale rule as long as you wait at least 31-days before switching back into the QQQ shares."....."Making this transaction in taxable accounts for tax purposes is consistent with our recommendation to hold QQQ shares for price recovery over time." (September 1, 2001, QQQQ closed at $28.98)
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* #13) October 2001, Marketimer: Bob Brinker said, "....we recommend holding existing cash reserves. We also recommend subscribers with a position in Nasdaq 100 (QQQ) shares hold for recovery within our earlier percentage guidelines." (October 1, 2001, QQQQ closed at $33.90)
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* #14) November 2001, Marketimer: Bob Brinker said, ".....we recommend subscribers with a position in Nasdaq 100 (QQQ) shares hold these shares as we expect them to trade at much higher levels during the next cyclical bull market." (November 1, 2001 QQQQ closed at $39.65)
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* #15) December 2001, Marketimer: Bob Brinker said: "....For subscribers with a position in the Nasdaq 100 (QQQ) shares, we recommend holding in anticipation of higher price levels during the next cyclical bull market." December 1, 2001 QQQQ closed at $38.91--QQQQ closed at $38.73 today, August 17, 2006)
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* #16) January 2002, Marketimer, Bob Brinker said: "In the case of Nasdaq 100 (QQQ) shares, we prefer to hold existing positions in the expectation that the next cyclical bull market will provide a much better price level for the Nasdaq 100 Index." (January 2, 2002, QQQQ closed at $40.11)
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* #17) February 8, 2002, Marketimer: Page 1; Paragraph 4; "We remain concerned that a secular bear market, based on declining valuations, began in March of 2000......The most difficult money making strategy in such a market environment is the buy and hold approach. This strategy has led to large losses since early in 2000, and in our view buy and hold investing is likely to prove disappointing in the stock market environment we anticipate within a secular bear trend. ......We recommend subscribers with a holding in the Nasdaq 100 Index (QQQ) shares hold these shares for recovery during the next cyclical bull market."(QQQ closed February, 8, 2002 at 36.17 and closed today at 38.48.)
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* #18) March 8, 2002, Marketimer, Bob Brinker said: "Subscribers holding Nasdaq 100 (QQQ) shares can hold these shares in anticipation of much higher prices in the next cyclical bull market in our view." (March 8, 2002, QQQQ closed at $38.67--today it closed at $38.72)
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* #19) April, 5, 2002, Marketimer, Bob Brinker said: " ..... We are also retaining our hold rating on Nasdaq 100 (QQQ) shares, as we expect these shares to rebound during the next cyclical bull market." (April 12, 2002, QQQ closed at $33.52. Right now, QQQQ is at $39.83)
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* #20) May 8, 2002 Marketimer, Bob Brinker said: "We are also retaining our hold rating on Nasdaq 100 (QQQ) shares. Although the shares remain weak, we expect them to trade well above current levels during the next cyclical bull market." (May 9, 2002 QQQQ closed at $30.95. Today it closed at $39.99)
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* #21) June 7, 2002 Marketimer, Bob Brinker said: "We continue to suggest a patient approach, which includes holding on to your stock market cash reserves. We are maintaining a hold rating on Nasdaq 100 (QQQ) shares, which have the potential to trade at much higher levels during the next cyclical bull market, in our view." (June 7, 2002, QQQ closed at $28.30-today it is about $40)
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* #22) July 5, 2002 Marketimer, Bob Brinker said: "We continue our policy of not selling into weakness, and recommend those with a position in Nasdaq 100 (QQQ) shares hold for higher prices during the next cyclical bull market." (October 15, 2000, QQQ closed at $81.70; July 5, 2002, QQQ closed at $26.34; September 29, 2006, QQQQ closed at $40.65)
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* #23) August 8, 2002 Marketimer, Bob Brinker said: "We are maintaining our hold rating on Nasdaq 100 (QQQ) shares, as we believe they can trade at much higher levels during the next cyclical bull market." (October 15, 2000, QQQ closed at $81.70; August 8, 2002, QQQ closed at $23.57; October 12, 2006, QQQQ closed at $42.23)
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* #24) September 7, 2002 Marketimer, Bob Brinker said: "We are maintaining our hold rating on Nasdaq 100 (QQQ) shares in anticipation of much higher prices for the shares in the next cyclical bull market." (October 15, 2000, QQQ closed at $81.70; September 7, 2002, QQQQ closed at $22.85; October 18, 2006, QQQQ mid-day at $41.83)
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October 2002 was the actual bottom of the market decline that began in 2000. Bob Brinker, however did not recommend any changes at that time.
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* #25) October 5, 2002 Marketimer, Bob Brinker said: "We are now in the 31st month of one of the worst cyclical bears since the 1930's. We recommend continuing to hold stock market cash reserves at this time. We also recommend retaining existing stock market holdings, as we do not view the current period as a propitious time to be a seller of equities." (October 15, 2000 QQQ closed at $81.70; October 7, 2002 QQQ closed at $20.16)
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* #26) November 8, 2002, Marketimer, Bob Brinker said: "As we continue the process of monitoring our stock market timing indicators, we recommend retaining stock market cash reserves until our model returns to bullish territory. We also recommend holding existing stock market positions at current levels, along with holdings of Nasdaq 100 (QQQ) shares." (October 15, 2000, QQQ closed at $81.70; November 8, 2002 QQQQ closed at $25.07)
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* #27) December 5, 2002, Marketimer, Bob Brinker said: "Marketimer recommends retaining existing equity market holdings at this time. This includes existing positions in the Nasdaq 100 (QQQ) shares." (October 15, 2000, QQQ closed at $81.70; December 5, 2002 QQQQ closed at $26.20)
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* #28) January 9, 2003, Marketimer, Bob Brinker said: "We also recommend holding existing positions at the current levels, along with holdings of Nasdaq 100 (QQQ) shares." (October 15, 2000, QQQ closed at $81.70; January 9, 2003, QQQ closed at $26.70)
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* #29) February 7, 2003, Marketimer, Bob Brinker said: "We also suggest holding existing positions in the Nasdaq 100 Index (QQQ) shares, which have recently shown a measure of resilience relative to the broad market indexes. We expect the Nasdaq indexes to post gains well in excess of the broad market indexes during the next cyclical bull market." (October 15, 2000, QQQ closed at $81.70; February 7, 2003, QQQ closed at $23.81; November 27, 2006, $43.68)
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* #30) March 7, 2003 (four days before Brinker's "buy" signal) Marketimer, Bob Brinker said: "For subscribers holding Nasdaq 100 (QQQ) shares, we recommend holding for a significant recovery in the shares in the next cyclical bull market." (October 15, 2000, a few days after Brinker's "Act Immediately" Bulletin, QQQ closed at $81.70; March 7, 2003--after 30 months of "guidance" to "hold", QQQ closed at $24.54)
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That was the final time that Marketimer ever mentioned "those holding Nasdaq 100 (QQQ) shares" and the trades were never closed.

Beginning in the April, 2003 issue of Marketimer, Bob Brinker added RYOCX (proxy for QQQQ) to all of his model portfolios at the closing price on March 11, 2003 -- down over 70% since his "Act Immediately Bulletin."  That was a very effective way to forever cover up his most costly-to-subscribers stock market-timing blunder of all time.

Anyone who wants a photocopy of anything I have quoted can write an email and I will send it to you.

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