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Saturday, February 14, 2009

Summary: Bob Brinker's Moneytalk February 14, 2009

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Bob Brinker's Moneytalk: Excerpts, Summary and Commentary, February 14, 2009. For the week: Dow closed at 7850.41 (down 5.2%); S&P 500 Index closed at 826.84 (down 4.8%); Nasdaq closed at 1,534.36 (down 3.6%); Oil closed at 38.01 (down 6.6%).

Bob Brinker's replacement-host this weekend was Bill Flanagan. The subjects of the weekend were the stimulus package and energy. Bill gave his views, which seemed mostly favorable to the stimulus package and pro-nuclear. There was no discussion about the stock market.

This year, the Dow has declined 10.6%; the S&P has declined 8.5%; and the Nasdaq has declined 2.7%.

From the market high, the Dow has declined 44.6%; the S&P has declined 47.2%; and the Nasdaq has declined 46.3%.

Several times during 2008, Brinker said that the market had bottomed, and he issued an “attractive for purchase” buy-in level for “new money.” Unfortunately, he was wrong each time, so he removed them -- but he always continued recommending dollar-cost-averaging.

According to the February 4, 2009 issue of Marketimer, Brinker believes this “major bear market" which “began during the fourth quarter of 2007” is bottoming in the "750 to 850 price range." He said: “We expect calendar year 2009 to be a significant positive year for the stock market.”

Mark Hulbert, in his latest issue of Hulbert Financial Digest, writes that “Believers in buying and holding are hard to find these days.” Mark said that one should not “confuse brains with a bull market” and "don’t confuse a bear market with timing skills.” If those two aphorisms are true, then one might wonder what would be the point in paying someone to try to time the market.

Mark also said that timing the market is difficult in a rising market and that going to cash “is more often than not a losing proposition during bull markets,” and that “when the market is declining, a cash position is likely to make a market timer look like a genius.”

As Mark pointed out, the stock market has produced an average annualized loss of 3.8% over the last five years, while the gold market has produced an 18.1% return. The bond market has done well, but not nearly as well as gold.

Mark seems to conclude that that none of these factors have anything to do with a market-timer's ability. He said that in order to be objective about a market timer, one has to “first look at whether the market he’s been focusing on has itself been strongly rising, as well as whether it has been particularly volatile.”

At first, I wondered why Mark was trying so hard to make (what I consider SILLY) excuses for market-timers that did well during rising markets, but have “held” during this major bear market, then I took a look at Mark Hulbert's very latest performance rankings in Hulbert's Financial Digest:

I looked at the “Mutual Fund Performance Scoreboard Top 5 through 1/31/2009.” Brinker’s Marketimer is not there in any time period – 5 years; 10 years; or 15 years.

I looked at the “Top 5 Performers (all newsletters Hulbert ranks) Through 1/31/1009.” Brinker’s Marketimer is not there in any time period (adjusted for risk or not-adjusted for risk) – 5years; 10 years; 15 years; 20 years; 25 years.

Then I looked at the “Top Timing-Only Performers Over Five Years Through 1/31/2009” category. ( Hulbert includes stock, bonds and gold in these rankings.) Brinker’s Marketimer is not in the Stock timing top-5; Brinker’s Marketimer is not there in the Gold Timing top-5; But voila, there it is! Brinker’s Marketimer is ranked number two in the bond-timing top-5.

I challenge anyone to find any instance where Brinker has EVER TIMED THE BOND MARKET.

Bob Brinker has remained bullish and fully invested throughout this major bear market. Does this make him a member of the “church of buy and hold?” Yep, but he was drafted, and dragged in unwillingly. Brinker does not believe in “buy and hold,” and has often talked how he would be out of the market long before they took out the “piano player.”

Here is a great graph that tells a thousand words story. Thank to Kirk Lindstrom:

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