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Thursday, November 18, 2010

Risky B2B Recommendation That Bob Brinker Kept Off the Books

November 18, 2010.... Many of Bob Brinker's followers view his B2B-buy [TEFQX] as his second most costly recommendation. After the fund went south about 90%, Brinker put it on hold and, walla! it disappeared completely.

Our resident wise Mr. Pig
reminded me about this today when he wrote: "If the "hold" goes "south" for a long time, the recommendation disappears from the newsrag, and history. (BUT.....not from this site) TEFQX is a great example."

In many ways, Bob Brinker handled this disastrous trade similarly to his 2000 QQQQ trade. He didn't send out a special bulletin like with the Q's. However, like with the Q's, he touted the Firsthand Fund [TEFQX] in several Marketimers. He advised aggressive subscribers to invest a defined amount from the 60% cash reserves raised in January 2000.

So I'm going to tell the history of this from my files by posting some writings from people who "were there" and some direct quotes from Marketimers. Some of these people may be a pleasant flash-from-the-past for some of you. :)

(2000) Rande, a professional financial analyst, wrote:

in response to message posted by Mark_J:

Seems otherwise reasonable people continue to argue over the meaning of "immediately" and other strange stuff, but can we at least put to rest the absolute nonsensical and unfounded bullcrap about what "5%" means?

Here's an exact quote from the Jan. [2000] newsletter:
"Firsthand e-Commerce Fund is added to page four of the Recommended List this month. We will include a writeup on this fund in the February Marketimer. For now, we would limit investment in this fund to 5%, and this 5% would be part of the revised 25% overall United States Equity weighting."
NOT 5% of 40%, but 5% of the total portfolio, which was 25% US, 15% International, and 60% cash. So, TEFQX was actually 12.5% of total equities (according to the recommendation), just as International was 38% as a percentage of equities, even though it was "only" 15% of the total portfolio. BUT, not enough conviction to include in the Model Portfolio's evidently.

Read on from the Feb. [2000] letter:
"We have always viewed books, toys and on-line auctions a the tip of the iceberg.... We are very positive on the potential for the Internet growth track to carry forward.... ...the fund is appropriate for subscribers with a high risk tolerance who seek exposure to one of the fastest growing areas of the economy going forward in our view. Due to our current risk averse stock market stance, we are not placing this fund in any of our Model Portfolios at this time. ...we would regard a five percent exposure to this fund as the maximum...."
So, to recap, TEFQX could have been as much as 12.5% of equities, but the guru wasn't willing to add it to the Model Portfolios. The guru was gung-ho on the Internet and fully caught up in the B2B mania, even though he trashed the net for the better part of 1999. And it only got worse as the year dragged on with "no chance" of new highs on the trusty old S&P and "buy immediately" on the "impossible to call/don't ask me" Nasdaq. Any wonder most of his followers don't know what the heck to do or believe"__ posted by Rande

Kirk Lindstrom wrote:
“It is simply amazing to me how "confused" Brinker's advice at the time was in January 2000. He told people to take money out of the market, which was a great call, then the told them to put some of it into TEFQX and QQQQ that were disasters. He did the latter "off the books" that seemed odd at the time, but now we see how he pretends it didn't happen so the risky advice was what seems now to have been a "hedge" to give him something to advertise should the market not crashed.

Yup, he was buying into the IPO mania in internet stocks right at the very top. He did mention it was volatile and not for risk averse investors which would leave out P3 types that don't market time.

Everyone is wrong on occasion. Is sure know I have been wrong on many stocks over the years. But we put our risky recommendations into our portfolios so they can be measured."__Kirk L.

David Korn wrote: "Other than the QQQQ recommendation from Bob Brinker, the recommendation he gave that probably comes in second place insofar as complaints that I get from my subscribers is TEFQX - the mutual fund that Bob recommended in early 2000. You may recall the excitement both on Moneytalk, and on Bob Brinker's discussion message boards at the time over this recommendation.

I do give Bob credit on one count relative to this recommendation -- he put some of his money where his mouth was because he said that he owned the fund. Why? Because he felt that Kevin Landis, the fund manager, was a great stock picker. Unfortunately, Bob simply dropped the fund from his Marketimer newsletter and hasn't brought up the topic in years leaving many people who bought it on his recommendation to decide for themselves what to do about it.

It is a familiar story when one of Bob's recommendations goes afoul I am afraid. I suppose its the ego thing. Do any of you still own TEFQX and have an opinion on it? I keep track of it because I get questions about it on a somewhat regular basis from my subscribers." __ David Korn
Will L. wrote: "I recall retired sorts were going crazy on his site [Brinker message boards] with Junior hyping the B2B sector and stocks in the fall of 99 and spring of 2000. Brinker and his adoration of TEFQX and Landis, the fund manager likely caused many people to bet too heavily on that terrible idea that he just hid rather than ever closed out."
Honey here: Brinker's disappearing trade in black and white:

* Jan 8, 2000, Marketimer, TEFQX=$15.40, Brinker said:
"Firsthand e-Commerce Fund, (888-883-3863) is added to page four of the Recommended list this month. We will include a writeup on this fund in the February Marketimer. For now, we would limit investments in this fund to 5%, and this 5% would be part of our revised 25% overall United States equity weighting. This fund is expected to be volatile, therefore it is appropriate only for very high risk tolerance investors."

* Feb 8, 2000, Marketimer, TEFQX=$15.99, Brinker said:
"Firsthand e-Commerce Fund is the newest addition to the Marketimer No-Load Fund Recommended List on Page four...... We have ALWAYS viewed books, toys and on-line auctions as the tip of the iceberg for electronic business. We believe business-to-business transactions will greatly surpass retail e-commerce including software development tools, database providers, hardware manufacturers and service providers.......We are very positive on the potential for the internet growth track to carry forward through international penetration. We are hopeful the fund will be able to add many of the best positioned B2B companies going forward. Many of these companies are not yet publicly owned but will come to market in the future."

* March 7, 2001, Marketimer, TEFQX=$3.93, Brinker said
: "We are removing Firsthand e-Commerce Fund from the Recommended List. We rate the fund a "hold" at these levels... we expect the shares to recover value over time."

The trade was never again mentioned in Marketimer or on Moneytalk! [Record low down 90%, August 5, 2002 @ $1.60/In 2008, it was close to $2.00/Today, it is at $5.84]

Note: Brinker's "Recommended List" is strictly "off the books" and is never included in his performance records. His model portfolios are his only official record and are used by Mark Hulbert to rank his market-timing performance. Hulbert never accounted for this trade or the Q's in his rankings.

As Rande pointed out above, Brinker did not want the trade on his official record (his model portfolios) "just in case" it took a nose-dive -- which it did. Here is a mind-boggling Marketimer quote which gives the whole picture quite clearly: Brinker said: "Due to our current risk averse stock market stance, we are not placing this fund in any of our Model Portfolios at this time."

(2000) Kirk Lindstrom sumed it up:
"Brinker seems to put most his risky advice "off the books" so he can delete it from the newsletter if they go down (UTEK, ONTK, TEFQX) or keep them as multi year "HOLDS" if they go up (MSFT & VOD). In this day and age of exposing those that "cook the books" consumers should DEMAND accounting accuracy from those in the national spotlight. This sort of behavior (off the books accounting) from a national figure on a Disney Network should be held to EVEN HIGHER standards."

Chart courtesy of Kirk Lindstrom (click to enlarge):

Dixiegeezer photographed this pair of beautiful birds. Click to enlarge:


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