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Tuesday, May 19, 2009

David Korn Comments on Brinker's Latest Stock and CA Bond Views

May 19, 2009

Bob Brinker's 2009 stock market projection.

May 13th, Bob Brinker said this on Moneytalk:
"You know, I published a statement in January that I thought that 2009 could be a good year for the stock market – and that was back in January……A lot of people thought basically I had gone insane to make a comment like that. Look, it’s only May and we’re already in positive territory. Certainly we can slip back into negative territory for a period. Nobody can rule that out because we are only in minor positive territory using the S&P 500…..I still think 2009 is going to be a significant positive year for the stock market. I’m on record back in January having said that and I’m not changing anything about that forecast. I think that 2009 will be a significant up year for the stock market. And I certainly think that what we have seen so far, despite the volatility…..bears that out.....

.....I’ll give you the exact quote on that comment, ‘We expect calendar year 2009 to be a significant positive year for the stock market.’.....So I would have to tell you, from everything I’m looking at, and it just represents my opinion of course, that I think that comment is on track – that calendar 2009 should be a significant positive year for the stock market. We’ll see how that works out. I don’t see any reason to make a change in that projection, and that projection was made back in January.”

David Korn's interpretation and commentary about Brinker's projection. [written May 17th]:

[David Korn]
"EC: Bob was referring to a special bulletin he did in mid-January of this year where he recommended that new stock market money be added when the S&P 500 was in the low-to-mid 800s. It is nice to hear that he is bullish, but I don't give him much credit for coming out on the radio 5 months later to crow about it. After all, he missed a bear market already this year when you measure from the beginning of 2009 to where the market bottomed on March 9th at 676.53...

...Moreover, he had dropped his lump sum buy level once the market went into the low 700s and he said he was going to look for a new bottoming process. But he never identified it as the market took off on a tear following the inflection point on March 9th. Look, if he didn't advertise himself as a market-timer, I wouldn't be critical of this. But for someone who had been bashing buy and holders and ribbing the "bears" in 2007-2008, I got to tell it like it is."

[David Korn]
"EC#2: For those trying to "interpret" daBrink's words, a logical question would be what he means by 'significant" positive year. As of last Friday, the market was up a couple of percentage points for the year. (It is now down 2.3% year-to-date, excluding dividends). To me, a significant positive year would be at least 15%. That's just my take on it though. Incidentally, for the S&P 500 to put in a 15% return based on price change, it would need to rise to 1038."

[David Korn]
"EC#3: If you are going to make timing moves based on Bob's timing recommendation, then presumably you would be buying into the market right now with the market in negative territory for the year. After all, if you believe Bob is right and this will be a "significant" up year for the market, than you would do pretty well. I would note that on January 15th when Bob gave that special bulletin, the S&P 500 was at 843.74. The S&P 500 closed Friday at 882.88."

Bob Brinker's latest views on California General Obligation Bonds.

May 16th on Moneytalk, Brinker said:
"Now California, although it is investment grade, it's the lowest investment grade of any municipal bond in the United States. Now why is that the case? Fiscal irresponsibility on steroids in California........That means that they not interested in balancing the budget -- which they must do, and they have shown no propensity to get their financial house in order......So there is always the possibility that they are going to be unable to come up with the money to do whatever they have to do to meet their obligations.....

.....Hypothetically, my personal view is, if you had a default in the State of California, I'd expect you'd get assistance from the federal government. Now whether that assistance would bail out the bondholders is an entirely different story."

David Korn's interpretation and commentary on Brinker's radical reversal on Ca. GO's. [written May 17th]:

[David Korn]
"EC: The foregoing comments marked a subtle, but dramatic 180 degree reversal on Bob's longstanding position. He didn't make a big deal about it to the caller, but he is basically saying that all bets are off for bondholders of California. For many years, Bob strongly recommended California General Obligations. Then last year when they were tanking, he came up with some kind of weird justification saying that the California GO's that he held had extra government protection. After getting some flack for that position, he reverted to his belief that the government would step in and bail out California.....

.....Today, he acknowledged that even if they do that, they might not bail out the bondholders. At this point, Bob has basically taken every possible position such that if the bonds recover, he can claim he was right, and if the bond holders get screwed, he can say he pointed out that risk on Moneytalk. Bob has been flip-flopping on this issue a lot lately, and now I think he is just trying to cover his tracks as best he can."

Honeybee EC: It is worth noting again that Bob Brinker has been a "buy and holder" since March 2003. His timing model did not predict the biggest bear market in over 70 years, and he never recommended raising cash at any time during it.

Additionally, every one of Bob Brinker's market bottom calls in 2008/2009
[mid-1400's, low-1300's, low-to-mid 1200's, low-to-mid 800's] were taken out as the market continued to drop to 677 on March 9th -- the real bottom -- the one that Brinker totally missed. The market has recovered over 30%; now Brinker says "buy on weakness."

Please request complimentary issues of David Korn's outstanding weekly newsletter and the Retirement Advisor. The Retirement Advisor Portfolio 3 gained 3.73% in 2008. According to Mark Hulbert, Bob Brinker (the son, who now uses the same name as the talk-show host) lost 5.2% in his Portfolio 3 of Fixed Income Advisor in 2008. [LINK to David Korn's newsletters]

SJ Al sent this picture taken from his hotel room in Destin, Florida:


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