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Tuesday, December 22, 2009

Bob Brinker -- and Mark Hulbert's "Honor Roll"

December 22, 2009.... This morning, in his Marketwatch article, Mark Hulbert reported that once again he has added Bob Brinker to the Hulbert Financial Digest "2010 Honor Roll" -- saying that Brinker is bullish. This is the third year in a row that Hulbert has written almost identical comments about Bob Brinker. Please note that only in 2007 (at the market top) did Hulbert mention that Brinker's model portfolios have been fully invested since 2003, even though Brinker also remained fully invested during the 2008-2009 megabear market.

Dec. 14, 2007, 12:01 a.m. EST
Honor Roll inductees are bullish
Commentary: Best newsletters forecast a higher stock market next year
By Mark Hulbert, MarketWatch

ANNANDALE, Va. (MarketWatch) -- I normally don't put too much weight in the year-ahead forecasts that advisers circulate every December.

But I will make an exception when it comes to the forecasts of the seven newsletters that made it onto the Newsletter Honor Roll for 2008.......So it behooves us to pay attention to what they are saying.......

Bob Brinker's Marketimer. Editor Bob Brinker has been bullish since March 2003, and his model portfolios remain fully invested. Brinker regards the stock market's recent correction as good news for the bulls: "The short-term correction that began in October and continued into November has served as a health-restoring pullback," Brinker wrote in the early-December issue of his newsletter, "and has paved the way for new record highs in the S&P 500 index in our view."

Dec. 18, 2008, 11:05 p.m. EST
Bruised but bullish
Commentary: Four of five newsletters on Honor Roll are bullish
By Mark Hulbert, MarketWatch

ANNANDALE, Va. (MarketWatch) -- I normally don't put too much weight in the year-ahead forecasts that advisers circulate every December.

But I will make an exception when it comes to the forecasts of the five newsletters that made it onto the Hulbert Financial Digest's Newsletter Honor Roll for 2009.....

..... Bob Brinker's Marketimer. This newsletter makes it onto this year's honor roll even though editor Brinker last year did not expect the stock market to decline more than 20%. That he nevertheless remains on the Honor Roll is testament both to how good his market calls have been on other occasions over the past 18 years, as well as to the failure of most other newsletters to also anticipate the severity of the market's decline. He was in good company, in other words, and the Honor Roll is graded on the curve.

Brinker currently believes the stock market is in a perhaps extended bottoming process, and he therefore recommends that subscribers invest in the stock market on a dollar-cost-averaging basis. "We are aware that there is widespread fear that financial Armageddon is the likely outcome of the global financial crisis. We take the opposite view, and expect the stock market to record significant gains during the next major market uptrend. We continue to focus our efforts on the ongoing bottoming process that we regard as essential to establishing the level from which a sustainable market uptrend can occur. When we reach the point at which we can upgrade our current stock market view from dollar-cost-average to a renewed buy recommendation, we will do so."

Dec. 22, 2009, 12:01 a.m. EST
Upbeat for 2010
Commentary: Most newsletters on Honor Roll are bullish for new year
By Mark Hulbert, MarketWatch

ANNANDALE, Va. (MarketWatch) -- I normally don't put too much weight in the year-ahead forecasts that investment advisers circulate every December.

But I make an exception when it comes to the newsletters on the Hulbert Financial Digest's Newsletter Honor Roll for 2010. Making it onto that Honor Roll requires jumping over a number of demanding hurdles; merely beating the market won't do. Instead, to make it onto the Honor Roll, a newsletter had to have above-average performance both in up and down markets.

Bob Brinker's Marketimer. Brinker in his most recent issue wrote: "Based on our earnings estimate for next year and our fair value price/earnings ratio of 16 to 17 times operating earnings, we estimate upside potential for the S&P 500 index (INDEX:SPX) into next year in the 1170 to 1240 range." That upside potential represents a gain from current levels of between 6% and 13%; his model portfolios are fully invested."

Honey here:

Hulbert claims that Bob Brinker's Marketimer has "above-average performance in both up and down markets," but offers NO REASON WHATSOEVER to back up his claim. This seems very odd to me since Brinker's Marketimer is nowhere to be found on Hulbert's December 2009 list of top-5 timing newsletters that HFD "follows" over the past 5, 10 or 15 years. And this is in spite of the fact that Hulbert ignores Brinker's October 2000 QQQQ-trade where Brinker recommended using model portfolio cash reserves.

Hulbert knew at the time of the trade that Brinker recommended subscribers use model portfolio cash reserves. According to Peter Brimelow, Hulbert originally added the trade to Brinker's Hulbert Financial Digest record. However, in the November 2000 issue of Marketimer (after it was clear the trade was losing money), Brinker announced that he would not add the trade to his record. Mark Hulbert then removed it from HFD record and thereafter, used a footnote/asterisk to assuage outraged subscribers.

How do I know this? Peter Brimelow spelled it out in this 2002 Marketwatch article, "Bugging Bob Brinker." [LINK] He expertly spun his article in order to make it look like dishonest deception is the acceptable norm, but he did include this bit of TRUTH.

Peter Brimelow wrote:
"This is the problem: Later in 2000, Brinker was trying to catch a rally in what he still regarded as a primary bear market.

In a special bulletin, he suggested Nasdaq 100 Trust , the Nasdaq 100 exchange-trade fund on the American Stock Exchange.

But it did not appear in the detailed model portfolio published, as always, in the next month's letter. So Mark promptly sold out the QQQ position and no longer counted it.

Which was just as well, because QQQ fell from above 80 to a recent 24. Brinker is still sweet on it, in this peculiar, extra-marital sort of way. But if it does rebound, Mark won't count that either -- unless Brinker explicitly puts it in his model portfolio."
Honey here:

Mark Hulbert claims in his HFD Brinker-asterisk/footnote that Brinker said up front that he would not include the trade in his portfolios. Hulbert uses this footnote each time he writes about Marketimer: "Please note: In late 2000, Brinker forecasted a several-month bear market rally and recommended an investment in the NASDAQ 100 Index—a trade that turned out quite unprofitably. However, because Brinker at the time of making this forecast chose not to make this trade part of his model portfolios, his HFD record has not suffered as a result."

Hulbert knows that footnote is false. I wrote a personal email to him with the facts, but he stuck to his story that Brinker had said it up front....

Please enlarge and read the photocopy image below. You will see that Brinker recommends using cash reserves equivalent to what he had raised from model portfolios earlier in the year (2000). Brinker did not say that he would keep the trade off the books. If he had, it's likely that many would have been more cautious and would have been saved from losing over 70% of their money on QQQQ. (BTW: The trade was never closed.)

Like with lying, anytime it is proven that someone like Hulbert (whom you should be able to trust to be objective) will change facts to benefit any newsletter he covers, everything he ever says about that newsletter is suspect. I've given you two examples and offered proof to back them up.

1. I have shown that Hulbert realized that Brinker recommended using model portfolio money for the QQQQ trade, but decided to go along with Brinker's decision not to account for it in his official record. Thus, Brinker was given a mulligan (do over/used twice) on up to 50% of the 65% cash reserves he raised in Jan/Aug 2000.

2. In the images below, I show that Hulbert appears to have deliberately changed Bob Brinker's 2008 performance record for Portfolio III. Hulbert gave Brinker's Model Portfolio III a 5% mulligan on 2008 performance record. Brinker (correctly) reported a 23.9% loss for 2008 in Marketimer.

January 2009 Marketimer, Portfolio III lost 23.9% in 2008:

January 2009 Hulbert Financial Digest, Portfolio III lost 18.1% in 2008:

It's a very "convenient" circular-handshake between Brinker and Hulbert. Brinker hasn't made it into the HFD Top-5 Performers (over the past five years) for years, so he can't use that portion of HFD for advertising. No problem! Brinker's Marketimer always shows up on Hulbert's "Honor Roll," so Brinker uses that in his advertising (see his website). Of course, Brinker never mentions that pesky little "footnote" or where his performance ranks against other newsletters.

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