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Wednesday, November 5, 2008

Bob Brinker's Model Portfolio Year-to-Date Returns to 10/31/08

Bob Brinker's year-to-date returns to 10/31/08. (Data provided by Kirk Lindstrom)

I have P1 down 35.6% YTD and down 39.6% from its all time high
I have P2 down 33.8% YTD and down 37.3% from its all time high
I have P3 down 22.8% YTD and down 24.8% from its all time high
(All time highs are end of month... markets were higher on other days.)

Regularly on Moneytalk, Bob Brinker touts Model Portfolio3 as his "balanced portfolio" for conservative retirees or for those nearing retirement. Brinker recently cautioned a caller (who had previously made his own changes) to "wait" before raising his equity allocation from 42% back up to 50%.

October 25, 2008, Brinker said: "You're at 42-58. I'd stay there right now. But if you could identify a position like that -- and I'm certainly working to identify a position like that -- then I think you could think about the possibility to returning to a 50-50 situation......."

At the market top last October (2007), Portfolio3 was a VERY BULLISH 66% in stock funds and 34% in fixed income funds.
Brinker talked about his balanced portfolio on Moneytalk:

February 16, 2008, Bob Brinker said: “The recommended balanced portfolio that I publish in my investment letter calls for a recommended allocation in a balanced portfolio essentially 50-50. Where you would have about half of the money in quality fixed income and half of the money in the equity market. So that’s the way I define a balance portfolio. We’ve also defined a balanced portfolio as having a range on the equity side that can go a little higher. You could have a balanced portfolio that could be 60-65% equities and the rest in fixed income.......In the investment letter, I use a 50-50 starting point. Obviously over time, that can vary, but I would say that on the upside, you would be unlikely to see it much above 60-65% equity and on the downside, you’d be unlikely to see it much below 50% equity........"

Clearly, Model Portfolio3 was NOT at his "starting point" a year ago at the S&P all-time-high.

Port3, October 31, 2007:

Stock Funds: 144,919 / Total: 219,263 x 100% = 66%

Fixed Income Funds: 74,344 / Total: 219,263 x 100% = 34%
Total: 219,263 = 100%

The 66% stock portion of Brinker's balanced portfolio has taken a big hit in the past year during this 47%+ bear market decline.

Port3 as of October 31, 2008:

Stock Funds: $91,378
/ Total: $164,891 x 100% = 55%
Fixed Income Funds: $73,513 / Total: $164,891 x 100% = 45%

Total: $164,891

That's a drop of $53,541 (over 30%) in the stock portion of Brinker's Balanced Porfolio in one year.

NOTE: Brinker was recommending 66% in equities for his balanced portfolio AT THE TOP (1565), but NOW in the 900's he recommends ONLY 55%....which is just a bit more bullish than he was at 811 in March 2003, when he returned all cash reserves to 100% invested and Port3 to 50% equities. What is wrong with that picture?

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