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Friday, October 31, 2008

Was Bob Brinker Wrong About V-shaped Bottom?

Bob Brinker's market-timing batting-average is zero for 2008. September 27th, Brinker said "don't sell" stocks. That was probably correct advice, but another 17% loss in one month has to be painful to his followers who are 100% invested.


Dow: down 14% -- worst month since 1998

S&P: down 17% -- worst month since 1987

Nasdaq: down 18%

OIL FOR MONTH OF OCTOBER: down 33% -- largest monthly drop ever.
(Brinker no longer even mentions his "oil is the wildcard" edict.)

Last weekend on Moneytalk, Brinker said that he was "working on" getting a "handle on the future." Brinker even told a caller who was 42% in equities to "stay where you are," rather than raise his allocation to 50% equities. Oops, the market just had its best week in 34 years.

Another caller last weekend, asked Brinker if he thinks there will be a V-shaped recovery from this bear market. Here is what Brinker said to him:

Brinker replied to Joseph: "V-shaped theories are wanting.......When you look at the true value of stock prices, and it is very difficult to do right now, but the way they are quantified is by discounting the present value of their future earnings or the present value of their future dividend stream to the present........ So I think that the V-shaped is a hard sell for that reason that we have to have a visible earnings stream growth track that we can point to. And if you're talking V-shaped then you are talking about all the earnings just soaring right back up again right away. That's what's required for a V-shape recovery. That's a hard sell right now.......

....... I think it's a lot easier sell to think in terms of a healing process, which is a process that takes time. I actually do believe that over time the market will come back. But I think first it has to go through a healing process and that in itself is going to take some time. And then the process of recovering the economy and the recovering the earnings streams, I think that will take some additional time."


Dow: up 11.4%

S&P: up 10.7%

Nasdaq: up 10.9% -- first time this has ever happened.

You can read Louis Navellier's weekly marketmail in the comments section of this post. He wrote this about the market bottom:

"In a nutshell, the stock market retested the October 10 lows several times this month, it’s now rebounding in the face of bad news (a classic oversold characteristic), central banks have primed the pump for growth, commercial banks could start lending again after the election, investor confidence could improve after the election, there’s $4tn in cash looking for higher returns, we’re in the seasonally strong time of year, and history suggests the best time to invest is about four months before the end of a recession.

Things are looking up."

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