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Tuesday, July 15, 2008

Did Bob Brinker Give Up On Market-Timing?

Bob Brinker's Marketimer, November 5, 2007, Page one; Paragraph one: "We continue to believe that there is no risk of a cyclical bear market (a decline of 20% or more a measured by the S&P 500 Index) in the months ahead." (S&P: 1549)
Moneytalk, April 19, 2008, Bob Brinker said: "
It’s my opinion that the March 10th low on the S&P 500 was the bottom for the correction. And I think that what happened was that was a very successful test of the initial low recorded January 22nd." (S&P: 1390)
Has Bob Brinker now decided that timing the stock market is impossible, as John Bogle, Burton Malkiel and others have said all along? SHOULD HE?

Bob Brinker's stock market comments on Moneytalk this weekend reflect what he said in the July Marketimer. Brinker said that the price of oil is the "wild card" and has a "direct correlation" to the stock market. He also said that only a "fool" would try to forecast the price of a barrel of oil.
Last Saturday, Brinker said: "Now I wish I could tell you what the price of oil is going to be in a week, a month, a year. I don’t know. I have no way of knowing and I think only a fool would try to forecast the price of a barrel of oil in the world we live in…….”
Even though the S&P was not in bear territory when the July Marketimer was issued, Brinker did not raise any cash from his Model Portfolios, and still recommends 100% of stock market allocations be fully invested. Brinker is still recommending dollar-cost-averaging new money into the stock market. So has Brinker given up on trying to time the market? Or is it simply that he missed the correction, missed the bear, and now can't recommend selling into weakness?

In Marketwatch article last week, Mark Hulbert wrote an article titled: Where Do Stocks Go From Here? Here is an excerpt from Hulbert's article:

"Bob Brinker's Marketimer:
Bullish. In his most recent issue, which was published in early July, Editor Bob Brinker reported that his stock-market timing model remains in favorable territory. However, he cautioned that oil's price constitutes a "wild card." "In the event oil prices continue to rise, consumers and the stock market will be held hostage to the cost of energy. This would provide a strong headwind against the economic recovery process. If oil prices stabilize or decline from current levels, we believe stock prices can make progress into 2009." Brinker is recommending that subscribers' stock portfolios be fully invested."

David Korn, in his most recent newsletter from this past weekend, wrote some very interesting comments. (Posted with David Korn's permission):
"EC:  A few comments here.  First, Bob is now basically
dismissing the predictions of energy expert Charlie Maxwell,
who had been a frequent gueston the program. During the
Moneytalk broadcasts in 2006-2007, Charlie was predicting
that the price of a barrel of oil would trade in the $50-$77
range. For a while, that prediction was spot on, so much
so that Bob would tell callers who asked him that he agreed with
Charlie's prediction. With the price of oil now double that, the
prediction clearly was way too low and Bob has now acknowledged
the inability to predict oil prices.
This is not something new for Bob. He has previously changed
his opinion on whether interest rates can be predicted (now
opting for the view that they can't), and he seems to have
given up on picking any new individual stocks.

The last refuge is the stock market in general. With his
position that you can't predict where oil prices are going,
given Bob's view that it the stock market is going to react
to oil prices, the logical conclusion is that you can't
predict where the stock market is going. But there was
no indication this weekend that Bob has given up on market
timing, or his model for that matter."
David Korn's website

Statistics provided by Kirk Lindstrom:
2007-2008 Bear Market Statistics for 07/15/08
S&P 500 Chart (Using Intraday prices):
Last Market High 10/11/07 at 1,576.09
Last Market low 07/11/08 at 1,200.44
Current S&P500 Price 1,214.91
Decline in Pts 361.18
Decline in % 22.9%
Max Decline 23.8%
=>This means the decline from intraday high to intraday low is 23.8% and we are currently 22.9% off the peak.
=>The decline in the S&P500 from the closing high to the closing low was 22.4%


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