Bob Brinker and Hulbert's Conclusions

According to Mark Hulbert, Bob Brinker's newsletter has "one of the best" market-timing records over the past two decades. Hulbert wrote this in his Marketwatch article March 12, 2008:
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"Technical support for the idea that the correction's bottom has been seen comes from the market's diminished trading volume in recent weeks. Bob Brinker, editor of Bob Brinker's Marketimer, the newsletter with one of the best market-timing records over the last two decades, explained why in the March issue of his newsletter, published earlier this month:
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"The process of establishing a stock market correction bottom has unfolded in text-book fashion over the past two months. This process involves the establishment of an initial closing low, followed by a short-term rally, followed by testing of the area of the prior established closing low on reduced trading volume ... The correction bottoming process (over the past few weeks) has seen a significant reduction in selling pressure in the vicinity of the Jan. 22 closing low. This is a very important aspect of any successful test.""
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Honeybee wonders why Mark Hulbert is so willing to overlook several important facts in order to exaggerate Brinker's performance record. For example:

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1) In the February, 2008 issue of Hulbert’s Financial Digest, Brinker did not make it into the top 5 “Performers on Unadjusted Basis” for the last 20 years (or 5, 10, 15, or 25 years). Even with Hulbert ignoring the QQQQ-trades and averaging Brinker’s three model portfolios – one of which contains about 50% bonds.
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2) Brinker's "off-the-books" QQQQ-trades of 2000, 2001. Here is the copy of the footnote that Hulbert used to justify giving Brinker a mulligan on the trades. Please note that even the footnote is based on false information. Brinker DID NOT choose to make the trade part of his model portfolios AT THE TIME OF MAKING THE FORECAST. Hulbert's footnote:

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"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."

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In order for Hulbert to overlook the fact that Brinker recommended using model portfolio "available cash reserves" for his QQQ-trade (Brinker even gave exact percentages), Hulbert has to basically make a false claim about when Brinker pulled the unbelievable double-cross of "choosing" to keep the trade off of his "official" record.


Here is a copy of the original bulletin. It does not say that the trade is not part of the model portfolios. Indeed, it says just the opposite. It gives the exact percentage of cash reserves that Brinker had his subscribers raise from the model portfolios in August 2000:
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• SUBSCRIBER BULLETIN
  FROM MARKETIMER
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  MARKETIMER is projecting a significant countertrend rally which is expected to be led by the Nasdaq 100 Index. We expect this rally to persist over a period of approximately 2-4 months, and to generate Nasdaq gains in excess of 20% from the vicinity of the recently established Nasdaq closing low point.
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  We view this projected Nasdaq rally as a significant trading opportunity for MARKETIMER subscribers seeking potential short-term capital gains. Our clear vehicle of choice for this opportunity is the Nasdaq 100, which is traded on the American Stock Exchange under the ticker symbol QQQ.
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  We recommend MARKETIMER subscribers with aggressive objectives invest 30% to 50% of existing CASH RESERVES in the QQQ shares in order to exploit this opportunity. Also, we recommend subscribers with conservative investment objectives invest 20% to 30% of CASH RESERVES in the QQQ shares in order to take advantage of this opportunity.
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  MARKETIMER will provide follow up guidance for this short-term opportunity in regular monthly editions, and, if necessary, in follow up bulletins.
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  We recommend subscribers interested in taking advantage of this recommendation act immediately.
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  P.O. Box XXX/ Irvington, NY 10533/ phone: 914-XXX-2655/ Editor: Robert J. Brinker"

Here are Brinker's instructions from November 2000 Marketimer:
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"Marketimer subscribers with aggressive objectives can invest up to 30% to 50% of cash reserves in either the QQQ shares or Rydex OTC Fund in order to participate in this recommendations. That translates into potential exposure of 19.5% to 32.5% of a TOTAL AGGRESSIVE PORTFOLIO. (30% of 65% CASH RESERVES equals 19.5%. 50% of 65% cash reserves equals 32.4%). The balance of reserves remain in money market funds."

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