"How Stupid Was That?"

Will Bob Brinker talk about the stock market this weekend? We shall know in the fullness of time. 8)
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Bob Brinker went into 2008 as bullish as he had been throughout the 1990's. He thought the correction in October, November 2007 had "restored health" to the stock market. He did not expect this deep correction. He had been predicting new highs and the S&P 500 Index into the mid-1600s for several months.

After the market dropped 15%, Brinker did away with the "attractive for purchase in the mid-1400's" buy signal. Here is an excerpt from what Brinker said on January 20, 2008 -- recommending only dollar-cost-averaging until a bottom is established: "Although our sentiment indicators are in favorable territory, we note that selling pressure has increased, which calls into question the area at which a bottom will develop. We recommend a dollar-cost-average approach for new stock market investing until a definitive bottom area is established."

Peter Brimelow published a major portion of the special bulletin that Brinker issued on February 10, 2008 where Brinker called a new bottom and issued a new "attractive for purchase" buy level of "low 1300s or below." Brimelow wrote:
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“All of them (“Bold Bulls”) seem shaken by the economy's deterioration, but still positive long-term. Brinker said recently: "Marketimer views the establishment of a correction bottom as a process which unfolds over a given period of time. This process involves the initial establishment of a closing S&P 500 Index low, followed by a short rally, followed by a test of the area of the previously established low on reduced trading volume. The initial closing low in the current stock market correction process occurred on Jan. 22, when the S&P 500 Index closed at 1310.50. The market subsequently rallied for eight days, at which point it began the process of testing the area of the Jan. 22 closing low."
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"In our view, the correction bottoming process has proceeded with a high degree of historical consistency to date. We have witnessed a decided reduction in selling pressure during the testing process, which is essential to a successful outcome. We now rate the stock market attractive for purchase on any weakness that occurs in the current area of the S&P 500 Index low 1,300s, or any minor weakness that occurs below that level."
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http://www.marketwatch.com/news/story/bold-bulls-bloody-unbowed/story.aspx?guid=%7BEC77C4E7%2D96CB%2D4BDC%2DAD15%2D2DC81C4ECB51%7D.

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The following data from Marketwatch:
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The Dow Jones Industrial Average (.DJI) ended Friday with a drop of 315.79 points, or 2.5%, finishing at 12,266.39. It's loss for February was 3%. The broader Standard & Poor's 500 Index (.SPX) lost 37.05 points, or 2.7%, to close at 1,330.63 on the day and mark a monthly loss of 3.5%. The technology heavy Nasdaq Composite (.COMP) lost 60.09 points, or 2.6%, on Friday to close at 2,271.48, a 5% loss for the month. The Nasdaq has dropped 14.4% so far this year and is the worst performing of the big three indexes.

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Outstanding Bob Brinker commentator, Will L., asks, "How Stupid Was That? Will Wrote:
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"In 2000 Brinker told a caller who wanted to buy oil stocks "That would not be my recommendation. There's plenty of oil and it is no longer important in our economy"--oil trading at about 10.00.
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How stupid was that?
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Throughout his career (until a rather dishonest claim that came up this year) Brinker talked down to people suggesting they might buy gold or gold stocks. Today gold is closing in on 1,000. vastly outperforming anything Brinker has come up with.
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How stupid was that??
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Brinker urged people to ACT IMMEDIATELY with up to 1/3 of an entire portfolio to buy QQQs in the 80s in OCT. 2000. He has never closed out that trade and today they trade in the low 40s--still down by 50% going on EIGHT YEARS LATER. How STUPID WAS THAT Brinker called a "go all in" moment at 1450 on the S&P a few months ago.
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How STUPID WAS THAT?
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Yesssirreee that Bobby is really "sumpthin""
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David Korn: Brinker's Stock Recommendations

David Korn summarizes and comments on Bob Brinker's individual stock recommendations. Here are some excerpts from David's newsletter of February 23, 24, 2008 -- posted with David's permission:
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David Korn's Stock Market Commentary, Interpretation of Moneytalk (BobBrinker Host), Financial Education, Helpful Links, Guest Editorials, andSpecial Alert E-Mail Service. Copyright David Korn, L.L.C. 2008 http://david-korn.blogspot.com/
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INDIVIDUAL STOCK RECOMMENDATIONS BY BOB BRINKER
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Caller: This retired caller bought $2,060 worth of Jacobs Engineering (ticker: JEC) in 1986 on Bob's recommendation. The stock has grown by leaps and bounds and is now worth over $400,000, accounting for over half of her total portfolio. She wanted to know if she should cash it in at one time,or sell it in increments. Bob said he thought it was important to diversify and he would make a significant reduction. You would only be liable for long term capital gains. Bob said he would move to a balanced portfolio.Bob noted that people can build up a mind boggling amount in individual stocks.
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EC: I don't recall Bob ever specifically recommending Jacobs Engineering. If he did, it might have been one of those casual mentions he did on the radio because if it was something covered in Marketimer, Bob would definitely have said something about it.
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Brinker Comment: Bob noted that he has heard such comments from subscribers who purchased Vodafone or Microsoft back when Bob first recommended them and they have both had huge gains. If you are in a good company over a long period of time, even when there is a lot of volatility you can see incredible gains. Bob said he has a current "hold" recommendation on Vodafone and Microsoft as those original stock recommendations date back to 1989 and 1990.
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EC: I give credit to Bob for his initial recommendations of Microsoft and Vodafone. However, what Bob didn't mention is that in March 2003 he issued a buy on them again, and they have underperformed the market over the last 5 years. So, while his initial recommendation of the stocks was great, the last time he recommended them has been a bust. Other than Microsoft and Vodafone, the last individual stock that Bob recommended was Ultratech (UTEK), but he sold that a long time ago and he got a lot of grief for it. Overall, Bob's individual stock recommendations have been hit or miss and I think it is very possible that Bob may never make a new individual stock recommendation ever again."
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Moneytalk Summary February 23-24, 2008

Brief Summary, Commentary and Moneytalk Excerpts, February 23-24, 2008
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Bob Brinker did not talk about the stock market this weekend.
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Brinker’s opening monologue on Saturday was devoted to politics. He began by singing the praises of Paul Volcker, who has now endorsed Barack Obama. Brinker said this is the first time that a member of the “modern” Federal Reserve fraternity has endorsed a presidential candidate. Brinker quoted Paul Volcker’s reasons for making this endorsement. Brinker doubts that the “maestro” will make an endorsement -- and certainly Ben Bernanke won’t.
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After touting Obama by praising Volcker’s brilliance and then quoting Volcker's reasons for endorsing Obama, Brinker took aim at Hillary Clinton. Brinker said: “....Barack Obama distributing flyers about her support of NAFTA and she is reacting very, very violently in her language -- saying things about Barack Obama that she has not said before. Here’s one of her quotes, ‘Shame on you, Barack Obama.’ War has broken out in Ohio between Evita and the Junior Senator from the Land of Lincoln.”
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(Honeybee EC: IMO, Brinker isn’t even subtle about his political biases and he unashamedly uses his program to promote his own views, and almost never allows opposing opinions.)
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Caller question: What happens if several banks fail and how long does it take to retrieve funds? Brinker Feedback: A time-table has never been published. “It will take some time and you will not earn on your money if you have a CD that has matured.”
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Caller question: Why did the Fed change the limit on purchasing I-bonds from $30,000 to $5,000 a year? Brinker Feedback: Most are purchased in small quantities and the Fed is interested in serving the small buyer. Recommended website: http://www.savingsbond.org/
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Caller comments: This caller said she had been a Moneytalk listener since 1986 and had bought 100 shares of Jacob’s Engineering (JEC) at $8 and 200 at $6, and held them since 1986 – thanks to Bob she has a huge capital gain. She put $2000 into the stock and now owns 5280 shares worth over $400,000. The stock closed at $81 yesterday. She said her total net worth was $700,000.
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Brinker Feedback: “God bless America. What a great country.” He advised her to sell at least half of the stock and put into a balanced portfolio. (Honeybee EC: this caller’s holding in one stock is well over half of her net worth according to what she said. Brinker did not berate her for breaking his 4% in-one-stock rule, and he did not mention that she had ignored his sell 65% of equities recommendation in 2000. IOW: she completely ignored all of Brinker’s major recommendations. Question: If Brinker had JEC as a buy in his newsletter in 1986, did he put a hold on it or a sell on it. Anybody know? It is not in his newsletter now.)
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Follow Up to JEC Call, Brinker said: “This reminds me of some of the stories that I hear from some of our newsletter subscribers who bought Vodafone back in 1989 for very, very little money, a couple of dollars a share or less. Or who bought Microsoft back in 1990 when we first recommended. I recently looked at the split-history on that one, and once again, humongous in those positions. And this story from this caller reminds me of those stories……I should add that our current recommendation on those two stocks – Vodaphone and Microsoft, is a hold rating. We do not have a purchase rating……”
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Caller question: What about CD’s with Countrywide? Brinker Feedback: What you really invest in is the FDIC guarantee. Plus, Bank of America announced last month that they are purchasing Countrywide Financial for $4Billion.
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A Caller made some very unflattering comments about Volcker and Obama. Brinker disagreed with the him and hung up.
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Caller said: “……I subscribe both to Marketimer and the Fixed Income right now,” and then asked Brinker’s opinion about Obama’s stand on globalization. (Honeybee EC: The “Fixed Income” that she referred to is not published by Bob Brinker, the radio talk-show host. He acts as a consultant to his son, Bob Brinker -- however Brinker has yet to clarify that fact on the air. I’d like to recommend the Retirement Advisor as a far superior newsletter about fixed income investing and much more.)
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The Retirement Advisor: Info Performance
Free Issue: http://www.investorhives.com/msgd.php?msg_id=611
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Brinker Feedback: Globalization is here and it’s real. No different than “tomorrow’s sunrise” and the candidates may as well accept it. Brinker then talked about Hillary Clinton again, saying that she had said “terribly nasty things about her opponent.”
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The next caller thought there might have been misinformation put out earlier on the program and wanted to make it clear that FDIC is backed by the full faith and credit of the United States Government.
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Brinker Replied: “It’s not; it’s not full faith and credit. It’s the FDIC guarantee -- that’s not the U.S. Treasury, no. In terms of practically, the Federal Deposit Insurance Corporation has dependably been there when banks have gone under to meet the obligation. And I would fully expect if you have a FDIC insured obligation that you would receive payment in due course if your bank went under.”
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Caller replied to Brinker: “So on the FDIC website it says that banks are supposed to display something saying that it is full faith and credit of the Federal Government.”

Brinker answered: “Well in any case, it’s an FDIC guarantee. Semantics aside, if a bank goes under, you are going to get your money back up to the insured limit…..Now if we talk about direct guarantees, we generally talk in terms of a number of instruments, and I’ve named them a number of time – U.S. Treasury Bills, Notes and Bonds, Savings Bonds…..GNMAs….all of those are in the direct guarantee category.”

The following is found under “common questions and answers” on the FDIC website:
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“What is the FDIC? The FDIC - short for the Federal Deposit Insurance Corporation - is an independent agency of the United States government. The FDIC was created by Congress in 1933 to make the savings of millions of Americans secure. The FDIC protects depositors against the loss of their insured deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government.”
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http://www.fdic.gov/deposit/deposits/deposit/faqs/index.html.
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Sunday, without mentioning what he said on Saturday, Bob Brinker corrected his error, Brinker said: “You are not going to lose money in and FDIC insured Certificate of Deposit. Just be sure that you have the insurance. Because, once again, an FDIC insured deposit, which carries the full faith and credit of the U.S. Treasury is going to be safe……” (Honeybee EC: perhaps a tad of prevaricating?) Brinker went on to explain that interest on CDs and GNMAS are taxed at the state level, unlike Treasury Notes, Treasury Bonds, Treasury Bills, TIPS or savings bonds which are not taxed at the state level.
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Caller question: How can Volcker endorse someone like Obama who will raise taxes and increase spending in a weak economy?
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Brinker immediately started talking about Hillary again, saying that Obama rallies seem to bother Hillary immensely and that she complained today about his speeches and big turn-outs. Brinker said: “…there is really a lot of anger coming out of Evita today in her press conference attacking Barack Obama on these flyers.” Brinker then opined that he has been wondering where all the money was going to come from in order to fulfill the campaign promises that add up to about $1Trillion.
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HOUR TWO
Brinker opened the second hour of the program by talking about the audacious demand by the President of Iran for an apology from the United States for accusing him of having a nuclear program. Brinker rightfully, found it outrageous and railed against U.S. dependency on importing so much foreign oil.
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Brinker commented: that we import about 12 million barrels a day (of our 20 million daily consumption) -- paid for in dollars – which goes into our trade deficit. We get some oil from our friends, Canada and Mexico. Unfortunately, we buy some 1,250,000 barrels a day from Venezuela – and Hugo Chavez is no friend of the U.S. It is sad that we are not working toward becoming more oil-independent and wonders why the candidates do not talk about this very important subject more than they do.
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Caller question: Does Brinker it’s time to drill in Alaska. Brinker responded that he did think we should drill in the “Alaska National Wildlife Preserve.”
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Caller read that when rates are cut as much as they have been, the economy picks up very strongly and wondered why people are so pessimistic now.
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Brinker said: “It’s not uncommon for people to get overly pessimistic. I mean this is an historical fact……” Brinker praised the stimulus package…said it was the proper role of government to institute Keynesian economics and the “right things are being done." Brinker reminded the caller that Bernanke only began doing the right thing last August, and that before that the Fed was up in an “ivory tower’ and they had “double locks on their ivory tower doors and they did not even come out of their ivory towers… until August of 2007 when they started to act. And they didn’t even descend the stairs of the ivory tower until January when they sharply reduced the Federal Funds rate. I think the reason they made this mistake is they thought that rising oil prices were the problem. Rising oil prices certainly are a problem for the economy but that’s all they are…..the Fed thought that rising oil prices were some kind of a gigantic inflationary threat, and what they failed to realize was that rising oil prices take money out of the pockets of consumers and make it harder for them to make ends meet……and that is what we have seen…..and at the same time, they did all of this at a time when they under estimated the impact of the housing recession……I think that the Fed was lollygagging and asleep at the switch for too long and now I think they are getting in step”
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RECESSION: Brinker did not make any predictions, but said that by historical, traditional, academic definition of a recession, which is two consecutive quarter of negative real GDP growth, you need the data on the first quarter and second quarter to determine if we are in one.
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Woman caller made an effort to defend Hillary and pointed out that Obama was simply giving people what they wanted to hear. She quoted from “Man of La Mancha: “When you fall for a man with moonbeams in his hands, it’s prudent to recall there’s nothing there at all.”

Brinker replied: “So Barbara, which position is it that you have which position is it that you have in Hillary’s campaign. Tell us about that?” The caller nicely said that she has no position, that she is a volunteer. Brinker said to her: “You are a Hillary volunteer. I appreciate your candor….that’s exactly why I was asking so listeners would know where you are coming from.” (Honeybee EC: So what, Mr. Brinker? Now tell us where you are coming from. You are the one with the carefully guarded microphone.)
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Brinker went on to claim that he had “no brief” for any candidate, but that Obama is really talking about making changes to NAFTA, and the one he talks about the most is the idea of giving tax benefits for taking jobs overseas – telling voters that he does not favor doing it. Then he used this call as another opportunity to bash Hillary again. He said that in the debates, Hillary has been doing something that he has difficulty understanding -- she keeps trashing George Bush. Brinker said: “Has anybody told Hillary Clinton that George W. Bush is not running for anything?”

Caller said that he had been listening to Brinker for 12 years, was a Marketimer subscriber and also gets his email alerts and appreciated everything he had done for him and his family.
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Brinker immediately said: “What’s on your mind.” Caller replied: "Well, recently, you had a buying opportunity that would occur in the low-1300s for the S&P 500, and we were thinking about moving some money from the GNMA fund….and moving it into the S&P 500 fund and obviously, I would do that based on the opportunity with the S&P 500….” Brinker interrupted and told him to look at asset allocation first. (Honeybee EC: The caller, who had just gotten through thanking Brinker for his advice, in essence said that he had not been following Brinker’s advice. Brinker recommends 100% of equity allocation invested, while the caller said most of his money is in fixed income, because he had sold equities when the market was in the 1500s. That is almost comical in light of the fact that Brinker raised no cash when the S&P was in the 1500s.)
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Brinker third hour guest speaker was Barton Biggs. I will write more about the interview later.
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Sunday, Most all of the program, including the opening monologue was devoted to Brinker talking politics. In general, Brinker spoke of Barack Obama in a positive manner. Even the fact that Obama has promised to raise taxes seems like it is okay with Brinker. Brinker’s only concern seems to be where the money is going to come from to pay for all the proposed new programs.
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Brinker repeatedly slammed Hillary again on Sunday, repeating much of what he said yesterday and saying that she spoke “viciously and violently” about Obama, had“called him out,” and insulted him by saying “Shame on you.”
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Nothing new in any of the calls on Sunday, but there was one that piqued my interest. Rick called and said: "I wanted to ask something about taxes. I do a lot of work in that area and I’m also an entrepreneur and I think a lot of people misunderstand the tax system and it was reflected in some of your comments today. For example……. " (Honeybee EC: several seconds of absolute silence followed Rick’s last word.) Brinker came on the air and said: “Hello, Rick. Rick, I think that’s two strikes and you’re out….”
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No Stock Market on Moneytalk

• FYI for those who are interested in knowing what Bob Brinker may have said about the stock market today. He said absolutely nothing about it.

Brimelow's "Bold Bulls"

Bob Brinker still a Peter Brimelow "Bold Bull."

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Peter Brimelow labeled the three newsletters that called the end of the post-2000 bear market in early 2003, "Bold Bulls."
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February 21, 2008, Peter Brimelow's Marketwatch article said that Brinker is still a "Bold Bull."

Regarding the three "Bold Bulls," Peter Brimelow said: “They've chopped and changed a bit, but when I last checked in, after another harrowing day, they were bullish. And, basically, wrong."
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Here are some excerpts from Brimelow’s February 21, 2008 article:

“All of them (“Bold Bulls”) seem shaken by the economy's deterioration, but still positive long-term. Brinker said recently: (Honeybee EC: Brimelow excerpted the following from Brinker's February 10, 2008 special bulletin.) "Marketimer views the establishment of a correction bottom as a process which unfolds over a given period of time. This process involves the initial establishment of a closing S&P 500 Index low, followed by a short rally, followed by a test of the area of the previously established low on reduced trading volume. The initial closing low in the current stock market correction process occurred on Jan. 22, when the S&P 500 Index closed at 1310.50. The market subsequently rallied for eight days, at which point it began the process of testing the area of the Jan. 22 closing low."
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"In our view, the correction bottoming process has proceeded with a high degree of historical consistency to date. We have witnessed a decided reduction in selling pressure during the testing process, which is essential to a successful outcome. We now rate the stock market attractive for purchase on any weakness that occurs in the current area of the S&P 500 Index low 1,300s, or any minor weakness that occurs below that level."
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Market timer's summary: (Honeybee EC: Brimelow excerpted this from the February 2008 issue) "As has been the case with every correction since August of 2007, several stock market pundits are claiming that a bear market is underway. We do not believe this is the case. We expect the S$P 500 Index to work its way into record new high ground by late this year or in 2009.""
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http://www.marketwatch.com/news/story/bold-bulls-bloody-unbowed/story.aspx?guid=%7BEC77C4E7%2D96CB%2D4BDC%2DAD15%2D2DC81C4ECB51%7D
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Brimelow refers to what he wrote about Bob Brinker in his November article. Here is an excerpt from Brimelow’s November Marketwatch article.
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Peter Brimelow wrote:
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“Marketimer's Bob Brinker has not been quite so successful recently, although he's ahead over the last 12 months -- 17.3% vs. the DJ Wilshire's 15.1% Marketimer doesn't seem to have bothered with a hot line at all recently. In its issue dated Nov. 5, Marketimer summarized: "We remain bullish as we move toward the winter season. We continue to rank the stock market as attractive for purchase on any weakness into the area of the S&P 500 Index mid-1400s, in the event such weakness occurs. In the absence of such weakness, we prefer a dollar-cost-average approach for investing new stock-market money. All Marketimer model portfolios remain fully invested."”
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http://www.marketwatch.com/News/Story/wild-ride----bold-bulls/story.aspx?guid=%7B07CF0C2B%2D5BA6%2D4E34%2DBBAF%2D442BFDEFF0E0%7D
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Honeybee here: Well friends, I checked in with Brinker in December and the first week of January, and Brinker was VERY bullish and VERY “wrong.”
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December 2007 Bob Brinker thought that the market had been "restored" to health: "The short-term correction that began in October and continued into November has served as a health-restoring pullback and has paved the way for new record highs in the S&P 500 Index in our view."

January 4, 2007, Bob Brinker wrote: “In summary, the Marketimer stock market timing model indicates that conditions are favorable for the market as we enter 2008”
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However, to Brinker's credit, he did admit to his Moneytalk audience that this intermediate-term correction was more than he "expected." That is admirable admission, but the fact is, he was completely blindsided by it and did not expect it at all.

Brinker's Market Bottom Is In

Bob Brinker Sez Market-Bottom Is In

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January 4, 2008, Bob Brinker said: "In summary, the Marketimer stock market timing model indicates that conditions are favorable for the market as we enter 2008. (January 3, 2008, S&P 1447)

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January 19, 2008, Moneytalk, Bob Brinker said that the stock market is going through a “rocky period in here,” and has declined about 15% on the S&P Index, which is “more than I expected.” He also said it was “trading on fear here,” but in his opinion there was “…no Armageddon scenario……. I think there’s lots of fog out there right now. I think there’s very low visibility out there right now, and I think that low visibility has been caused by all of the things we’ve been seeing over the past several weeks—especially the last week……but it has not been my view that we would be looking to run for the hills and expecting the stock market to go down 50%.”
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Bob Brinker has been 100% invested since March 2003. He has been 100% bullish -- short-term, intermediate-term and long-term --since he announced the (June 2006) ending of a so-called "secular bear megatrend" in June 2007.

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However, for those who happen to have new money to invest in the market, Brinker usually issues a level at which he considers the market “attractive for purchase.” That level was raised from “1380 or lower” to the “mid-1400’s range" in August 2007.
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About the middle of January 2008, Brinker announced that he no longer considered “mid-1400’s” an attractive level to sink new money into the market. At the same time, he indicated that he was looking for a bottom to this 15% correction that he had not expected to happen. (January 22, 2008, S&P 1310)
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As of February 10, 2008, Brinker claimed that the bottom is in, and he considered the “low-1300’s” in the S&P 500 Index “attractive for purchase.” (February 8, 2008, S&P 1331)
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Last week (February 16-17) on Moneytalk, Brinker said that it had been "......a good week for the stock market.” (S&P 500 was at the 1350 level – a gain of 1.4%; Dow gained 1.36%)
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So even though Brinker has recommended being 100% invested throughout this intermediate-term correction which he admits he didn't expect, he has now re-grouped, moved his market-timing goal-posts and is "probably" hoping the market goes up from here. That 20% bear that he said "was not on the radar" is growling just around the corner. I think we all hope he doesn't appear and that Brinker is correct on that point. 8^)
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If anyone happens to make it past the Moneytalk call-screeners to ask Brinker about this correction, he will most likely ignore the question and simply hearken back to his March 2003 buy signal. It’s déjà vu all over again. Wash, rinse, wash, rinse.

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Moneytalk Summary February 16-17, 2008

Brief Summary, Commentary and Moneytalk Excerpts, February 16, 17, 2008

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TOTAL RETURN INVESTING Saturday, Bob Brinker’s opening monologue was devoted to what he labeled total return investing. He talked about the balanced approach to investing, which he explained as how much money you have in the stock market and how much you have in fixed income investing.
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Brinker said: “You have these three components of return that you are looking at in a balanced portfolio. You are looking at cash dividends on stocks or mutual funds of stocks. You are looking at the interest in the form of cash flow that creates……. and you are looking at capital appreciation over time that can also be converted into cash flow.” Brinker recommends a 4% retirement withdrawal rate.
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STOCK MARKET Brinker said that it was a good week for the stock market.

S&P 500 is at the 1350 level – up 18.7 for the week, a gain of 1.4%.

Dow gained 166 for the week at 12,348 – a gain of 1.36%.

Wilshire 5000 up 1.24%.
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ECONOMY: Brinker expects either no or very slow growth the first two quarters of 2008.
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BRINKER’S BEAR MARKET DEFINITION Brinker explained his definition of a bear market again today. He said: “That’s defined as a decline in the S&P Index on a closing basis in excess of 20%. Last time we had that was early in 2000 to March of 2003, where we saw the market go down almost 50% in the S&P Index……” (Honeybee sez: The market actually bottomed in October, 2002. Bob Brinker recommended returning all available cash reserves to the market in March, 2003. Those who followed his sell signals in January and August, 2000, would have raised 65% cash reserves. And those who then followed his advice to buy QQQQ with available cash reserves in October, 2000, and held them as he advised, would have invested up to 50% of those 65% cash reserves into them and watched as they lost over 70% of value.)
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BRINKER’S BALANCED PORTFOLIO A caller asked if there was much difference between a balanced mutual fund and a balance portfolio. After telling the caller that there should not be a whole lot of difference, 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........"
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BOND MARKET AND INFLATION A caller said that he had heard that mortgage rates are tied more to inflation than to overnight lending rates, and wondered if Bob Brinker would explain. Brinker said: “Interest rates are certainly tied to inflation and as one of the many interest rates out there, mortgage rates would be tied to inflation in this sense, investors demand a return on their money generally above and beyond the inflation rate. Now if you go to the academic community, they will show you evidence over the long term that investors in long-term maturities, such as most mortgages, want to have about a 3% real rate of return.......the long-term Treasury has been trading in the 4 ¼ -4 ½ vicinity.” .......If you subtract out inflation, there really is no real rate of return at all.” Headline inflation is running about 4% now. So the academic benchmark of 3% real rate of return does not always apply. Applied to the 10-year Treasury Bond, there would be no return left at all. “The bond market is saying loudly and clearly that it is not worried about inflation…….Bond market investors are not generally interested in taking long-term bond market risk unless they are going to get paid for it if they expect a lot of inflation – but they don’t.” We know that because we don’t see much of a inflation premium in the bond market. The base rate on TIPS is just over 1% -- exceptionally low.
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HIGH-YIELD PREFERREDS Brinker says that he has never recommended them on Moneytalk or Marketimer.
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NORTHERN ROCK The fifth largest mortgage lender in the United Kingdom is being Nationalized as a result of the sub-prime mortgage collapse. Trading has been suspended. This is the first time since 1984 that the British Government has taken control of a bank. Brinker mentioned several U.S. Federal interventions/ bailouts that he considered successful and the right thing to do. Lockheed in the 1970s, Chrysler in 1979, New York City in 1914 and in 1975.
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PROJECT LIFELINE It's a proposal out of Washington DC to suspend mortgage foreclosure process for 30 days. Brinker says they are just trying to buy some time -- the lenders don’t want to take possession of properties.
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BIZARRE PRESIDENTIAL POLITICS Hillary Clinton wants a 90 day freeze on foreclosures and a 5-year freeze on interest rates. Brinker calls the idea “…..one of the most bizarre proposals in the history of presidential politics…..What is Hilary smoking? I don’t have an answer for you, but it’s definitely not good for your clear thinking – there’s no doubt about that, because a 5-year freeze on interest rates is one of the most bizarre economic theories for all time – credit Hilary Clinton for that one. It was her idea – fortunately no one else is picking up on that one.”
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GNMAS RISK FACTOR GNMAs are very high quality investments with a direct guarantee from the government for repayment of principle and interest. GNMAs generally fluctuate inversely to interest rate trends and the NAV changes. Vanguard GNMA fund is now very close to the top end of that normal fluctuation range. The yield on VFIIX is 5.1% at this time.
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LADDERED CDS Brinker said that those who do not want to accept GNMA NAV fluctuations can just put together a ladder of FDIC insured CDs, hold until maturity and roll them over when they come due.
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COVERDELL SAVING FOR COLLEGE: For information Brinker recommended this website: http://www.savingforcollege.com/
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STIMULUS PACKAGE When will the checks arrive? The earliest published time that Brinker has seen is May.
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GMAC BONDS RISK High risk to very high risk category.
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LONG-TERM CAPITAL GAINS IN 2008 A caller pointed out the fact that if you are in the 15% tax bracket in 2008, you don't pay any capital gains. He asked Brinker if he was aware of this. Brinker said he was aware of it for 2008, but he said that he is not sure it will last beyond that time, “…….because I expect tax increases if we get a democrat in the White House next January, and your guess is as good as mine as to how far they will reach into the pockets of taxpayers. There is no question they are going to increase taxes in 2009…….it doesn’t matter what the name of the democrat is…….Barrack Obama, Hillary Clinton have stated publicly they plan to raise taxes – we don’t know what form that will take.” Brinker explained that he is distrustful of candidate promises about tax changes because Bill Clinton promised a middle-class tax cut (which probably got him elected in 1992) but then he actually raised taxes on the middle-class after he was sworn into office. (Don't forget to check to see if your state goes along with the 2008 capital gains tax break.)
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HOME PRICES Brinker called them “kinda sorry.” The median sales price for a U.S. home was down almost 6% YOY, to $206,200 by the end of 2007 -- that’s nominal, when you add in inflation, it’s about 10% real terms. The largest in almost 30 years. About half of the metropolitan area saw prices decline. There were 16 areas where the nominal decline was more than 10% -- 14% inflation adjusted.

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  Regional declines: West nominal 8.7, inflation-adjusted close to 13%; Midwest decline 3.2, inflation-adjusted about 7%;


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  Biggest declines: Lansing and East Lansing, Michigan, down 19%, inflation-adjusted, 23%; Sacramento, California, down 18½, inflation-adjusted, 22%; Riverside and San Bernadino, California –the so-called “inland empire,” down 17% inflation-adjusted, 21%.


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  Markets Who Bucked the Trend: There were 11 that went up 10% or more. Cumberland, Maryland up 19%, inflation-adjusted, 15%; Yakima, Washington, up 18%; Atlantic City, N.J. up 11%.


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  Median Prices Extremely Variable: Youngstown, Ohio -- $72,600; Silicon Valley, California -- $845,000 (Twelve times higher).


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  Declines in Sales: Nevada, Arizona, Wyoming, Oregon, Utah have had big declines in sales volume, which can feed into prices.

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CASINOS “…….somebody coming in and throwing thousands down the drain……”

Bob Brinker's Market Timing Stumble

When Bob Brinker's Market Timing Stumbles
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Right up until the time that the market dropped over 15% in January, Bob Brinker had been repeatedly predicting new all-time-highs. He said that the stock market outlook was favorable as we entered Y-2008..
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December 5, 2007, Marketimer, Page 2; Paragraph 2; Bob Brinker said:
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"We continue to believe that a bear market (S&P 500 Index decline in excess of 20%) is not on the radar screen at this time. We expect the bull market to continue at least well into 2008, and we look for significant stock market gains, including new S&P 500 record highs."
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On Moneytalk, Brinker said that the correction was more than he had "expected." That is quite an understatement, since Brinker had not been expecting ANY correction. Indeed, in December 2007, Brinker wrote: "The short-term correction that began in October and continued into November has served as a health-restoring pullback and has paved the way for new record highs in the S&P 500 index in our view."
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So how has he reacted to this unexpected more-than-10% correction -- besides letting Bill Flanagan do Moneytalk? 8^)
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Firstly, it is important to note that Bob Brinker has not recommended raising any cash reserves since January/August 2000, when he went to 65% cash reserves. Throughout the bear market between 2000-2002, he was 35% (not counting the QQQQ disasters) invested in equities. His Model Portfolios have been 100% invested since March, 2003.
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On January 20, 2008, he removed his mid-1400's "attractive for purchase" buy-signal which had been in place since August, 2007, and advised only dollar-cost-averaging into the market. At the same time, he said he was looking for a new market bottom.
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As of February 10th, Brinker has issued a new buy level in the "low 1300's." This is not only way below the prior buy level of mid-1400's, it's below the one prior to that--which was "1380 or lower." And now says that we may not see any new stock market highs until 2008 or into 2009. That is quite a change because he has been predicting new highs ahead for at least 8 months....
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He has also changed his recession views. He formerly was saying there was no chance of a recession, or that there was none "on the radar." He now says there is a chance of a mild and brief recession during the first half of 2008.
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Pity the people who might have come into a large chunk of money during the last couple of months of 2007 and sunk it into the stock market on Brinker's advice, just to ride it down almost 20% intraday and 16% on a closing basis....
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Kirk Lindstrom posted these market statistics on Facebook the day after Brinker's last bulletin:
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"Correction Statistics for 02/11/08 S&P 500 Chart (Using Intraday prices):
http://home.netcom.com/~kirklindstrom/Charts/SnP500.html
Last Market High 10/10/07 at 1,576.09
Last Market low 01/23/08 at 1,270.05
Current S&P500 Price 1,339.13
Decline in Pts 236.96
Decline in % 15.0%
Max Decline 19.4%
This means the correction from intraday high to intraday low is 19.4% and we are currently 15.0% off the peak. The decline from the high to the low on a closing basis is 16.3%
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DJIA Chart (Using Intraday prices): http://home.netcom.com/~kirklindstrom/Charts/DJIA.html
Last Market High 10/10/07 at 14,198.10
Last Market Low 01/22/08 at 11,634.82
Current DJIA Price 12,240.01
Decline in Pts 1958.09
Decline in % 13.8%
Max Decline 18.1%
This means the correction from high to low has been 18.1% and we are currently 13.8% off the peak. The decline off the high on a closing basis has been 15.5%"
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"The idea that a bell rings to signal when investors should get into or out of the stock market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don't even know anybody who knows anybody who has done it successfully and consistently.___________John C. Bogle
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"Well, let me tell you, I have been following markets for about 50 years, and I've never met anybody who could time the market correctly. And I say, stay the course............. And what I'm absolutely convinced of is: You'll NEVER, NEVER, NEVER be able to time the market.____Professor Burton Malkiel

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Rates for CDs, iBonds, TIPS and US Treasuries

From the Highest CD Rates Survey at forbestadvice.com, the best CD rate is 5.00% at Pentagon Federal Credit Union for a 7-year CD.

Below are some more rates and terms for the highest yield CDs

• 6 Months 4.75% at Countrywide Bank
• 1-year 4.00% at Excel National Bank
• 2 years 3.86% at Corus Bank & 3.85% @ Intervest National Bank
• 3 years 4.00% at Eastern Savings & 3.97% @ Ascencia
• 5 years 4.25% at Eastern Savings & 4.00% @ Capital One Bank
• 7 years 5.00% at Pentagon Federal Credit Union
• 10 years 4.16% at Capital One Bank

Today's US Treasury (T-Bond) Rates are:

• 3-month treasury bill currently pays 2.31%
• 6-month treasury bill currently pays 2.13%
• 2-yr treasury note pays 1.96%
• 5-yr treasury note pays 2.73%
• 10-year treasury bond pays 3.68%
• 30-year treasury bond pays 4.46%.

Compare that to my December 9th Survey that said:

• The 3-month treasury bill currently pays 3.07%, the 5-yr treasury note pays 3.50%, the 10-year treasury bond pays 4.11% and the 30-year T-Bond pays 4.57%.

I-Bonds (iBonds) currently pay 4.28% (I-Bond Details)

TIPS or Treasury Inflation Protected Securities currently pay

• 5-year TIPS 0.52%
• 10-year TIPS 1.37%
• 20-year TIPS 1.80%
• 30-year TIPS 1.75%

(TIPS pay that yield plus the principal is adjusted according to the CPI inflation )

More terms and rates at Best CD Rates.