talked about two of his Marketimer portfolios today. Let’s take a look at what he said, and what he didn’t say, since it's a topic that he frequently talks to subscribers about in front of his Moneytalk audience.
Brinker talked about his Fixed Income Portfolio on page 7 of Marketimer, which is simply Vanguard bond funds. It's almost half VFIIX and the rest is a mixture of high yield, TIPS, and short-term investment grade. According to Mark Hulbert, this FIXED INCOME portfolio lost 2.1% in 2008, perhaps because of the big hit that the Vanguard High Yield Fund took.
Moneytalk caller, Chris from Sacramento, said that she had lost about 30% in the stock market, had gotten scared and sold out in March. She said that they had recently put a bit of money back into the market via some exchange-traded-funds and mutual funds. She said she wanted to dollar-cost-average and “transition” to Brinker’s portfolio III.
Bob Brinker avoided talking about her 30% loss and did not mention how much she had lost by selling out at the bottom. Why? Possibly because Brinker could not take a chance that she might explain how she came to have lost 30% in the market. Since she is a Marketimer subscriber, it's possible that she could have said exactly which model portfolio she is "transitioning" from.
Instead, Brinker immediately explained (“for new listeners”) that exchange-traded-funds are mutual funds. Then Brinker said: "Now when you say transition into model portfolio III, let me say first for my listeners so you will not be puzzled by the caller's comment. Model portfolio III is an investment portfolio for balanced , which I'll define. Which is published each month on page 8 of my investment letter.....We publish an aggressive model portfolio, a long-term model portfolio and a balanced model, which is the model III the caller is talking about. And in that model we are essentially half in the stock market and half in . And that balanced portfolio is designed to generate current investment income along with capital preservation and modest growth over a long-term time frame. And this portfolio approach is best suited for those who are either in retirement or approaching retirement.....That would be as simple as you following the allocations that are listed on page 8 in that model portfolio....all of the funds there are no-load funds...."
Honey EC: Brinker regularly "teases" listeners by giving just enough information about his newsletter to possibly inspire them to subscribe. But there is nothing mysterious about portfolio III or Brinker's "investment letter." It is simply, as Brinker said today, no-load funds. Most are Vanguard, the funds that he touts all the time.
And as to Brinker twice stating that the portfolio was on "page 8," don't be misled into thinking the newsletter contains 8 pages of new information. It does not. There are 3 pages that never change but are simply added into the middle of the newsletter each month -- which is only a list of mutual funds that Brinker "recommends." Anyone can research good performing mutual funds and find them. Of course these are all "off the books," and he never reports on their performance. And the last couple of pages are simply updated portfolio numbers with very little change beyond that. I have never heard Brinker refer to page one, two or three. LOL!
We will never know which model portfolio Chris is transitioning out of, but I'd like to warn her that even if she was in portfolio III in 2008 and up until March 2009, she would have still lost almost 30%. Brinker's model portfolio III lost 23.9% in 2008 plus another 4.7% by March of 2009.
Jeffchristie wrote: "The March 2009 month end numbers are in over at Bob Brinker's website. Portfolio III = $154,875 -4.7% YTD"Why did this happen to retirees who follow Brinker's model portfolio III? Because, at the market high in October 2007, Brinker was a raging bull and did not re-balance the portfolio -- so it was 66% stocks!
Here is how the breakdown looked on October 31, 2007 (at market high) for portfolio III: : 144,919 / Total: 219,263 x 100% = 66%
Fixed Income Funds: 74,344 / Total: 219,263 x 100% = 34%
Total: 219,263 = 100%
Here is how the portfolio looked a year later in October 2008
Stock Funds: $91,378 / Total: $164,891 x 100% = 55%
Fixed Income Funds: $73,513 / Total: $164,891 x 100% = 45%
Thanks to Jeffchristie for sending this latest update on Brinker's balanced portfolio breakdown as of July 31, 2009. It looks like it is hasn't changed much -- still a very bullish-on-equities "balance."CONCERN ABOUT GINNIE MAE
Equity funds: 100,163 = 55%
Fixed income funds: 81,127 = 45%
A caller was very concerned about the latest news about GNMAs, which is that they are moving some of the bad loans from Fannie Mae and Freddie Mac to GNMA. Brinker replied that this would not affect the impact of the Treasury guarantee on GNMAs because any loan accepted into the GNMA portfolio is guaranteed. Brinker also said that it has not affected the NAV of his recommended fund (VFIIX) which is near its all-time-high -- and he does not think it will in the future.
From the Wall Street Journal excerpt:
"Much to their dismay, Americans learned last year that they “owned” Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages. Taxpayers own Ginnie too. Only last week, Ginnie announced that it issued a monthly record of $43 billion in mortgage-backed securities in June. Ginnie Mae President Joseph Murin sounded almost giddy as he cheered this “phenomenal growth.” Ginnie Mae’s mortgage exposure is expected to top $1 trillion by the end of next year—or far more than double the dollar amount of 2007. (See the nearby table.)" Read more [LINK]
Brinker's Sunday guest-speaker was Bob Collie, co-author of "Retirement Plan Solution."
Dixiegeezer took this beautiful ocean sunset: