Bob Brinker Sure Needed a Crystal Ball in 2008

Bob Brinker has always said he didn't have a crystal ball. Too bad, he sure could have used one this year because his "timing model" completely failed him -- and consequently, failed his followers.

The curtain just came down on the worst year in the stock market since 1931 -- the third worst decline in the history of the stock market. Only 1907 and 1931 endured greater declines.

What happened to Bob Brinker's market-timing? He did a fully invested five-year round-trip from S&P 807 (March, 2003) to an almost double at 1565 (October, 2007), then back down to 752 in November, 2008.

Unfortunately, by the time Brinker was aware that it WAS a bear market, it was too late for him to recommend selling. He never recommends selling into weakness, so he rode it out fully invested as the S&P 500 Index dropped below his famous March 11, 2003 buy-signal of S&P 807. A crystal ball would have told him that he could have waited and issued a lower buy signal on November 20, 2008 when the S&P closed at 752.

As 2008 began, Brinker was a raging bull -- predicting new highs into the 1600's, and calling S&P 500 Index mid-1400's a "gift-horse buying-opportunity" in the January issue of Marketimer.

But the market started to drop precipitously, so on January 20th, Brinker did away with the mid-1400’s buy-level and said to dollar-cost-average new money into the market.

February 10th, Brinker issued a lower buy-signal in the low-1300's. He talked about this call on Moneytalk in May. He claimed that he had made the call based on the March lows (which in his opinion, were THE lows for the market).

Moneytalk, April 19, 2008, (S&P 1390.33) Bob Brinker said: "...........if you are looking for the market into 2009, then obviously, you should be feeling pretty good about your stock market portfolio. Because not only has it shown a very nice advance since the correction lows in March...............but in addition to that, I think it has a lot further to go. And I continue to expect, as I have said, that we will see new all-time-historic-record highs in the S&P 500 Index."

Moneytalk, May 10, 2008, Bob Brinker said: "I mentioned last week we had a recent guest on the program back when the market was at the lows – when the market was down around 1300 in the S&P……..he was bearish as a (unintelligible) bears. And I remember telling the audience, I said look, it’s a free and open exchange of ideas. This is not my view. I happened to be very bullish at that time.......In fact, at that time, I happened to have a buy signal on the market when the market was down around 1300. But he was coming with his bearish views………”

By May 31st, Brinker was bashing the “bears, false prophets and cassandras" who had “scared people out of the market.” He called it “sad” and said people were “not happy.”

Then the market was hit with the worst month of June ever; and by July, all the indexes had dropped firmly into bear market territory. Brinker began blaming the declines on the rise in the price of oil -- calling oil a "wild card" and saying it had an "inverse correlation" to the stock market.

However, by the time October rolled around, that tactic was looking really silly because the price of oil had been dropping faster than the stock market. And indeed, seemed to be moving in tandem with it, so he never mentioned the theory again on Moneytalk or Marketimer.

After the market hit bear territory, Brinker issued the following buy levels and subsequently removed them:

* Aug 5, 2008 @ 1285: 1240 or less
* Sept 2, 2008 @ 1282: Low-to-mid 1200's
* September 16th -- rescinded low-to-mid 1200's (recommends dollar cost-average only)

Currently, Brinker continues to recommend dollar-cost-averaging, and he is waiting for “conditions” to “fall into place” in order for him to issue a new market-bottom and “attractive for purchase” level.

December 3, 2008, Marketimer, Bob Brinker said: “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."

Stock market for the year:

* The Dow ended down 34%.
* The S&P 500 Index ended down 40% for the year.
* The Nasdaq ended down 40% for the year.
* Oil ended at $42.72.

Now the good news for all of us is that the stock market had the biggest final 2-days year-end rally EVER.

More good news is that the stock market has rallied considerably off of its November lows -- from 752 to 906.

That's quite an upward move for a professed market-timer like Bob Brinker to miss. Will it hold? We shall know in the fullness of time. 8^)

As they say, pictures are worth a thousand words. Please take a look at these charts by Kirk Lindstrom:

HAPPY NEW YEAR TO EVERYONE! (PS to Drafted, Quis and Hairie13, I haven't forgotten my promise to you.) 8-)

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Summary: Bob Brinker's Moneytalk December 27, 2008

Bob Brinker's Moneytalk: Excerpts, Summary and Commentary, December 27, 2008. Dow: 8515.55 (Down from 8579.11 last week); S&P 500 Index: 872.80 (down from 887.60 last week); Nasdaq: 1530.24 (down from 1564.32 last week) Oil: $37.90 (up from $33.17 last week).

As expected, Bob Brinker took the Christmas holiday off and was replaced by Bill Flanagan.

STOCK MARKET...... Bill Flanagan said it is in "rough shape," recited the year-to-date numbers [Dow down 35.8%; S&P 500 down 40.56%; Nasdaq down 42.3%.], then wryly understated, "Not what you would call a banner year for equities." He said that even though we are all bored with the reasons why, the "real nitty-gritty explanations" may take some time to come out. Bill said: "Some geniuses have been able to predict it, but their predictions fell pretty much on deaf ears." He also pointed out that "bonds took a hit -- the credit market."

Bill angrily talked about some of the men running the banks that "made even Madoff's scam look puny" -- they have now taken their "money and run." He talked about the former head of Merrill Lynch -- Stanley O'Neal, who walked away with $161million. Bill said these "scamsters" are "so rich and so gone." Bill spoke, with sarcasm dripping, about Citigroup's, Mr. Rueben, who made $15million a year but said he couldn't possibly determine the risk-profiles of the investments that were going on behind the scenes, such as CMO's, etc. Now Citigroup is number one in line for the bailout money and netted the most from it. Bill thinks we should "at least" call back the money from them and even more. He said that people are really suffering this year and the ones who did it to them are "whistling and laughing at us."

Bill said: "They not only monkeyed with the family jewels, they stole 'em, so now what in the name of God do you do? We know that not every CEO in America is a crook. Most of them are too busy trying to manage their businesses to even think up some of these heinous schemes that are so popular on Wall Street. They are trying to make a buck for themselves and their shareholders. There's still guys and gals like that around, trying to run their companies and they are in the majority and they will eventually return to what they do best......

.....But meantime, I think that long-term investors will indeed see a lot of improvement in the markets, in the equity markets. And in the bond markets, well, things will remain tricky. So where does somebody go with your money to get more than your mattress yields? Believe it or not, that's a tough question to answer. I've listened to hundreds of these shows -- watched hundreds of hours of CNBC -- Fox Business News -- nobody talks about this. They all get some scrambled hedge fund guys or day traders, goes, oh yeah, buy McDonalds, buy Staples, buy Campbells, buy this, buy that. They don't want to talk about bonds. Why? Maybe they know it's a sucker's game, I don't know. Well they don't make any money on day-trading bonds, that's why.....

......Day traders are fun, they're attractive, they're amusing to watch. They've done something except bite their fingernails off. They've actually made money because they're using puts and calls and all kinds of devices, and they have teams of geniuses sitting at consoles all day long trading with the speed of summer lightening. And God bless 'em, and they do make entertaining guests. But to follow a strategy like this on your own is insane......

......Well a couple of publications have at least stuck their necks out long enough to admit that there are those of us who would settle for small, super safe gains in bonds, although even they can't help from getting -- they call up financial advisors, you see, and the financial advisors don't make any money selling CD's or things like this, so they wind up getting into the soup to by saying, oh put together your own portfolio of bonds --baloney! You're nuts! You don't have enough money, and you don't know how to pick them out and neither do they......

.......Yeah, you're only going to get 2 or 3, or with any luck, close to 4%, but if you want your money to yield more than your mattress, that's about the best we can get with the kind of safety you need right now for some folks. Others want to take a chance, be my guest. And if you're in, and have stayed in, I certainly wouldn't get out of equities. But if you're trying to preserve the capital you have left, you can lose it in bonds as well as you lose it in equities....."

Bill's advice not to sell equities is the same as Bob Brinker's. Brinker has not recommended selling equities throughout this bear market. Indeed, the last time Brinker recommended raising cash was in January/August 2000.

[Bill's comments paraphrased]: There is a story in Forbes special issue 2009 investment guide titled: "Bond Buyers Dilemma -- the bond market is bracing for deflation, yet inflation looks like the greater threat: our advice buy TIPS" The government is handing out a lot of money and it can only be repaid one way and that is to keep the printing presses going until some or all of the money comes back -- many think that spells inflation down the road. So how can you protect yourself from inflation and deflation at the same time? One of the ways you CAN'T do it is with corporate bonds or bond funds.

Bill said that for this past year, one of the best performers in the bond arena was the Vanguard Total Market Bond Index Fund -- it returned about 5%. Remember, last year's results are no guarantee of future performance. Brinker said just a couple of weeks ago that he preferred Vanguard Ginnie Mae Fund.

Later on, Bill was very clear in his answer to a caller who asked him if he expected inflation. Bill emphatically said yes -- he expected perhaps a small period of deflation and then inflation. Bill's views on this are different from Bob Brinker's. Brinker is predicting deflation, not inflation.

Bankrate.com has an informative article "5 ways to outlast deflation."

Bill announced an article in today's NYTimes by Tara Siegel Bernard, Older Investors Should Examine the Risk in Bonds. It's a great explanation of the fundamentals of bond investing.

The calls today were mostly on the subject of the GM bailout. Bill made it VERY clear that he is totally for it -- even without any concessions or changes in outrageous UAW wages ($72 per hour, compared with Toyota's $44 per hour), cushy health care retirement benefits, and a job program that pays laid off workers to do nothing. Bob Brinker's views are just the opposite of Bill Flanagan's on this subject.

Download the show, listen at your convenience. A downloadable version of the entertaining Bob Brinker program is available FREE at KGO Archives for a full 7 days after broadcast! Now, you will be able to listen at your convenience on your portable media device whether it's in your car, on the trail, in your garden, or just relaxing at home. You won't have to stay online to listen any more! Moneytalk available when you want it FREE at KGO810

Skier Pig sent these: South Lake Tahoe shot from Heavenly and a North Lake Tahoe shot from the top of Diamond Peak at Incline Village.

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Bob Brinker vs Sy Harding

Bob Brinker has not made any NEW stock market forecasts or offered any predictions about where it might be headed in the coming year since he removed his last "new" money buy-in level in September. Perhaps he has decided it's better to say nothing than to repeatedly be so very wrong.

In the December issue of Marketimer, Bob Brinker explained that even though there is widespread fear of "financial Armageddon," he takes the opposite view. He said: "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."

There are other financial advisors who are willing to voice their stock market predictions. For example, Sy Harding, who recommends a "seasonal timing strategy," wrote the following on his free blog:

What's next?

As we've been saying for several weeks, the S&P 500 has experienced its largest bear market decline in 75 years, factoring in a recession at least as severe as that of 1973-74, which was the worst by far since the Great Depression.

But the market and the economy are two different situations.

Since the stock market looks ahead six to nine months, it usually begins to recover while a recession is still underway, in fact while a recession is still worsening. That also means that someone usually has to begin the buying that starts the rally and keeps it going for awhile. And in general that is not public investors. A hundred years of data shows investors are always extremely bullish at market tops, and extremely bearish and not interested in buying at market lows.

So what technicians look for in the charts and the money flows is an indication that institutions and so-called 'smart money' might be buying again, even as public investors are bailing out at their heaviest.

And we have seen the market rally quite impressively off its November 20 low, the major indexes up 15% to 22% since that low, even as the economic news and surrounding conditions have continued to worsen. It is probably temporary, but combined with the market's favorable seasonality, etc., it does tie in with our forecast that the market would see its low for the year in the October/November timeframe, and then a significant bear market rally that would be well worth going after.......

.......Meanwhile, I'm still expecting the market to be able turn this rally into a significant bear market rally in anticipation of the stimulus efforts working to prevent Armageddon, but for the bear market to resume in the market's unfavorable season next year, when it is realized that still further problems lie ahead that will have to be resolved........The next short-term pattern is the 'monthly strength period', which is due to begin on Monday and to run through January 7th or 8th."

Here is a picture of a familiar sight to me -- my little hometown of Orland, California. Most of you will say "where?" but I have some readers who live in Chico -- just east of Orland.

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Merry Christmas and Happy Hanukkah

I sincerely pray that each person who reads this will blessed with the Spirit of Christmas.

The Spirit of love, peace, forgiveness and JOY!

Summary: Bob Brinker's Moneytalk December 20, 2008

Bob Brinker's Moneytalk: Excerpts, Summary and Commentary, December 20, 2008. Dow: 8579.11 (Down 0.6% for the week); S&P 500 Index: 887.60 (up 1.5% for the week); Nasdaq: 1564.32 (up 1.5% for the week) Oil: $33.17 (down another whopping 22.5% for the week).

Bob Brinker's Stock Market Guidance: Brinker did not discuss his market views today. He also did not discuss the 20% gains off the lows that the market has made since November 11th (more than once). Perhaps missing that big of a move is embarrassing, but it's not like it really matters, he's been fully invested since March 2003.

However, he still tries to offer guidance for those who have "new money" by looking for bottoms and issuing "buy signals" for them. Right now, Brinker is still looking for a bottom (he was mistaken about the two prior ones he called earlier this year). In the meantime, he recommends dollar-cost-averaging for new stock market money.

Kirk Lindstrom's "Market Since 11/21/08 Lows" Chart:



Bob Brinker opened Moneytalk today with a discussion about what is happening to money market funds. He said that you don't have to be a "rocket scientist" to run a MMF, and he doesn't know why some companies charge so much, but thinks one answer might be "greed." Brinker said he did not agree with Gordon Gekko (a fictional character), who said, "Greed is good." Brinker said he personally does not agree with Gordon Gekko on that, and thinks Gekko is "off-base on that one" -- that greed is not good.

Michael Douglas Video: Wall Street: Greed is Good

Brinker (comments paraphrased) Brinker explained that the problems money market funds are having are because of the recession and what the recession is doing to short-term interest rates, which is basically taking them down to zero (as is the case with the Federal Funds Rate). The new Fed Funds rate is zero to 25 basis points, so when you have rates like that, it spills over into the short-term marketplace. (Treasury Bills have a yield close to zero.) What happens is, the money market funds who charge high rates, find themselves in a really difficult position because they cannot earn their expense ratios, so they either have to waive them or lower them or come up with something else. The low-to-zero return has caused people to pull out of money market funds. In the past week, $16billion has been yanked out of them. The reason there are no returns from some funds is because after taking elevated expense ratios, they don't have anything left for their customers. (Brinker explained that none of this applies to Vanguard because their money market fund expense ratio is so low.)

WALL STREET Bob Brinker said: "There's so much going on on Wall Street, it's hard to cover it all. The tsunami of financial news just continues as it has for a good part of the year. But I'm sure many of you have seen this Ponzi scheme, The Mad Dog Ponzi Scheme in the Big Apple, in Gotham City. It's mainly centered there although the tentacles of this go all over the world. This is really an international Ponzi scheme. Although the big money has been lost in places like Long Island, New York, and Palm Beach, Florida, and Gotham City, and elsewhere, I might add. But when you look at what The Mad Dog is charged with doing, a 30 or 40 or $50billion Ponzi Scheme, it really is mind boggling." One of the things, the The Mad Dog story reminded me of what happened back in 1974. You might remember 1974, one of the biggest scandals in Wall Street history and it also occurred concurrent with a very big drop in the stock market as we have seen this year. But right now, we'd have to nominate The Mad Dog as one of the great, and the great is meant in a pejorative sense, one of the great Ponzi schemes of all time.....This is Moneytalk." [Honeybee EC: Brinker did not use the man's name, but he was talking about Bernard Madoff, who was arrested and charged with fraud.]

CREDIT MARKETS: Brinker said there is a tremendous amount of volatility right now and all credit markets are "largely disfunctional" except the Treasury issues.

INFLATION/DEFLATION Brinker said: "We are in deflation right now. We've had 1.7 deflation in November. We had 1% deflation in October. So in the last two months, we've had 2.7% deflation. If you were to annualize that, that would be uh, oh 15-16% annual rate of deflation over the past two months. So we're in a period of deflation right now -- there's no question about that."

Caller Pamela asked about California State Muni Bonds (General Obligations):

Bob Brinker said: "Well, I think the State of California is going to have to get its act together and until then, they are going to continue to do what they are doing right now, which is, they are threatening their bond holders with fiscal irresponsibility......Just look at the numbers, the State of California is facing a possible deficit in excess of $40billion in the next fiscal year.....They have to cut their spending.....dramatically."

Pamela asked: "So would you sell your bonds if you were me?"

Bob Brinker said: "That's a personal decision, Pamela. I really can't tell you what to do with your bonds. I have some California bonds, but in almost all cases my bonds might be different than your bonds and I'll tell you why. The bonds that I own have Treasuries behind them. In other words, they've been pre-refunded by earlier transactions by the state and backed by Treasuries. So in almost all cases, the California bonds that I own are actually backed by Treasuries and are not backed by the State of California....." [Honeybee EC: As this October 4th Summary quote clearly indicates, Brinker said he owned California bonds, but said NOTHING about them being backed by the Federal Treasury. I wrote: Brinker is adamant that California General Obligation Bonds are safe. He said he owns some of them."]

Brinker continued: "......If you own bonds that are backed by the State of California, then you need to make a decision on whether you're comfortable with the fiscal situation in California. I would not argue with anybody in here that would say that we have seen gross fiscal irresponsibility in the State of California. Their refusal to slash spending in California is part of the reason that they are in the pickle that they are in."

[Honeybee EC: This is a new and complete flip-flop for Bob Brinker. Never before, has he told a caller that selling California Bonds was their own decision and that he couldn't tell them what to do. He has never recommended selling them. The only cautionary word he has ever given was paraphrased in my October 18, 2008 Summary: "Brinker recommended that investors keep those holdings small enough that it would not be a “life-altering event" in case something goes wrong with them. Brinker has always said that "Arnie" was "good for California" -- even saying that he got "ill" when he heard people bashing "Arnie." ]

There were no general "what's going on or what should we expect" stock market questions today.

One caller asked about dividend paying preferred and common stocks (Brinker said that dividends paid on any stock are based entirely on board of director decisions).

Another person was moving money around and asked if he should dollar-cost-average into the stock market. (Brinker said it depended on whether it was new money or a "sideways" move.)

The remainder of the calls were mostly about TIPS (Brinker recommends them, and estimates the upcoming auction will be at 2%), annuities, IRA rollovers, GNMA's (Brinker recommend them), capital gain losses/wash sale (Brinker says you have until December 31st) and other esoteric and miscellaneous iteration.

*Brinker's Saturday guest-speaker was Barbara Weltman, J.K. Lasser contributing editor.

*Brinker's Sunday guest-speaker was Dennis Damp, co-author of The Book of U.S. Government Jobs: Where They are, What's Available and How to Get One (10th edition) Website: Federal Jobs.net

• Download the show, listen at your convenience. A downloadable version of the entertaining Bob Brinker program is available FREE at KGO Archives for a full 7 days after broadcast! Now, you will be able to listen at your convenience on your portable media device whether it's in your car, on the trail, in your garden, or just relaxing at home. You won't have to stay online to listen any more! Moneytalk available when you want it FREE at KGO810.

SJ Al sent some baby owl pictures that he took in Montana:




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