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Sunday, December 14, 2008

Brinker's "Bizarre and Never Explained Claim"

Newslettercheat requested: "Please include in your discussion the bizzare and never explained claim by Bob Brinker in June 2007 that the secular bear market ended a year earlier in June 2006--never to be mentioned again."

Thank you, Newslettercheat. Here is a very brief history of Brinker's "cyclical bull market running concurrently with a secular bear megatrend" between 2000-2006, theory.

Astonishingly, just mere months before the January 2008 beginning of the worst bear market in decades, Brinker declared that the secular bear megatrend had ended. Which means that he became bullish--short-term, intermediate-term and long-term in June 2006, but announced it (realized it?) in June 2007.

August 2001
Marketimer, Brinker stated unequivocally that the stock market had entered a secular bear. Brinker said:

"U.S. stock market entered a secular bear market in the first
quarter of year 2000.
Standard and Poor's 500 Index: 1527.46 = March 24, 2000
Dow Jones Industrial Average 11722.98 = January 14, 2000 "
Brinker wrote repeatedly (and at great length!) about his predictions and said that he believed the ongoing secular megatrend would see a succession of cyclical bull and bear markets lasting approximately one-to-three years each. He said he expected the secular bear megatrend to last 8 to 20 years and would only end when the S&P 500 Index exceeded its March 2000 all-time-high by at least 10%.

However as history shows, the market did not cooperate with Brinker's theories and forecasts. (Brinker defines a bear market as a 20%+ decline in the S&P 500 Index.) As the years passed, he made excuse after excuse to explain why the cyclical bull market just kept charging ahead with no cyclical bears.

First he lengthened the cyclical bull market time frame by a year. Then as more time went by and the market charged on, he said it was becoming "long-in-the-tooth." Finally, he tried calling it an "outlier" for awhile. But by mid-2007, both the Dow and the S&P were beginning to break through all-time-highs, and it looked as though they would soon exceed Brinker's own definition of a cyclical bull market. (In October 2008, Brinker began predicting the S&P 500 Index would reach the mid-1600's.)

What did Brinker do to unhitch himself from these failing cyclical/secular forecast? In June 2007, he declared that the secular bear megatrend had ended the previous year (June 2006). He wrote one little paragraph about it in Marketimer, but has NEVER mentioned the subject again.

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&P500 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."

Even though Brinker talked about his secular/cyclical market hypothesis on Moneytalk BEFORE he declared the end of it, he has NEVER mentioned it SINCE then, or informed the audience of this change.

(Please note, the following excerpts from a Moneytalk call was in February 2007, eight months AFTER Brinker later claimed the secular bear megatrend ended.):

Caller Peter: "Just a quick question. It's kind of a philosophy of what you do - the secular bear, cyclical bull thing." (Brinker: "Yeah, sure.") "I'm curious because I've read previous letters and it may be some time ago, but I think you gave some kind of an actual projection what you thought the S&P would actually get up to before it may roll over into the bear cycle."

Bob Brinker: "Well, we haven't put a final number on that, and we'll certainly update that by the way on a continuing basis in the monthly letter, which is just part of what we do. But no, we have not put a final number on that. 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%. There are many cases, Peter, where we have exceeded it in the single digits. There are many cases, for example, go back to 1966-1982-that was a secular bear trend. And there were many cases during that trend, where the Index exceeded the prior cyclical bull market high during that secular trend by let's say, 4%, 5%, 6%, but there were no cases where it was exceeded by 10% or more. So for now, the secular trend remains intact because the S&P has been unable to exceed the prior high of 1527 by anything close to 10%. In fact, it's never even been back to that level and even today remains below that level."____Bob Brinker

David Korn wrote the following editorial comments about Peter's call:

"EC: When the bear market came in 2000-2002, Bob said he would stay
with his forecast of a secular bear market unless the market exceeded its prior high by 5%. Today's statement marks a change in that Bob now says the new highs must be breached by 10%. Perhaps Bob did more study of secular markets to come up with this number. Whatever the case, Bob remains convinced that the secular bear market is still here.

EC: This comment clarifies that Bob does not include dividends in his
secular forecast. Why? I have no idea. He lambasted advisors who don't include dividends when making calculations a few weeks ago. Perhaps he realizes that when you include dividends, the Wilshire 5000 is already above its prior highs. Or, maybe he just analyzes price (excluding dividends) when conducting cyclical/secular market analysis. I don't include dividends when doing my studies of past cyclical bull/bear markets."__David Korn

If you want more complete information about this subject. I have an archived article here

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