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Bob Brinker’s stock market discussion began with his opening monologue. He presented the closing level of the S&P 500 Index (1390), Dow (12,849), and Nasdaq (2412). Brinker said that investors were doing the “inevitable -- discounting the future of economic recovery.” Brinker said that in his opinion, the “real returns going forward into the next year” will be in the stock market.
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ECONOMY …..(Brinker comments paraphrased) We are certainly having an economic downturn, but only after we get all of the data from the first two quarters will we know whether or not we had a recession -- technically speaking (defined as two consecutive quarters of negative real GDP). There’s a real good possibility we will get negative numbers for the first quarter, and if the second quarter is also negative, that will mean that we had a “brief and mild” recession. We will be seeing signs of the beginning of an economic recovery in the second half of 2008 and that will continue into 2009.
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BRINKER’S STAND ON STOCK MARKET…....Brinker said: "One thing is for sure if you’re a Moneytalk listener, you know where I stand on the stock market. In fact we had a discussion about this very topic earlier this month right here on Moneytalk.”
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Honeybee EC: Brinker did not discuss the stock market at all last week. He only gave the closing numbers for the S&P and Dow. He didn’t even give the closing number for the Nasdaq, which had lost 81 points that week. However, Brinker discussed his stock market views on April 6th. Here are some excerpts from my April 6th Summary:
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Later, Brinker, in answer to his guest speaker’s direct question, “Are you still bullish," said that he thinks we are going to have “new record highs in the stock market by next year” but that a lot of people think he’s lost his mind. Brinker added: “We’ll see who wins out. I’m pretty confident of my forecast…..”
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Brinker monologue cont: "...........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, (Honeybee EC: How is that possible when all of his portfolios were 100% invested for the whole almost-20% correction?) 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."
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January 4, 2008 Marketimer, Page 3; Paragraph 1; (S&P 1468.36), Bob Brinker said: "In summary....conditions are favorable for the market as we enter 2008. We expect the S&P 500 Index to achieve new record highs this year and to reach the 1600's range in the process. We continue to rate the market attractive for purchase on any weakness into the S&P 500 index mid-1400's range. Above that range we prefer a dollar-cost- average approach for new purchases. All Marketimer Model Portfolios remain fully invested as we enter 2008."
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"And I believe those new all-time-historic-record highs will develop as we move into 2009. And I believe that what we will have in the record book point is what we already have, which is a stock market correction. And unfortunately, there are people in the market who don’t understand that stocks do fluctuate. And they can certainly fluctuate within the correct zone of less than 20% and they’ve done it many times in the past -- Nothing unusual about it at all.”
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Honeybee EC: Bob Brinker is on record saying that a 10% correction can happen any time, but I do not recall him EVER saying it is “nothing unusual” for the market to "fluctuate" more than that. Perhaps David Korn will have this documented one way or the other -- I'll check with him. I also challenge Brinker's premise that the market has “done it many times in the past.” What past? The last 100 years? It certainly hasn’t done it many times since Moneytalk has been on the air.
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STOCK MARKET CORRECTION: Brinker said: “....Stock market sitting in at 1390 on the S&P 500 Index. Now the all-time high recorded last October at 1565 prior to the correction, and we’ve had the correction. In my opinion, it came and it went and it’s in the history books. And right now, we are in a position where investors are looking ahead. I think they are looking ahead to an economic recovery down the line and that’s why we’ve seen the market improving.”
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BEAR MARKET…..Brinker said: “Those who are out there with the bear stories now are making fools of themselves because it just doesn’t compute does it? When you have a market that’s seen this kind of buying it just doesn’t compute……. that America is spiraling downward – doesn’t make any sense.”
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INFLATION AND INTEREST RATES…….(Brinker comments paraphrased) Compare the 5-year Treasury Inflation-Protected base yield is .56 points to the 5-year Treasury Note at 2.94 and you have an implied inflation rate for 5 years of 2 3/8%. This is also supported by comparing the 10-Tips to the 10-year Note. This is global money “voting” and is a highly efficient market.
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Caller John said: “My question is, looking at your Brinker Fixed Income Advisor letter, and in there, under the economic dash-board, you have a comparable to the Federal Funds rate, a Taylor rule….can you just explain what that means?”
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Bob Brinker went right into a lengthy description of Taylor’s Rule, but here is an excerpt of a more concise and brief explanation: “Taylor's rule is a formula developed by Stanford economist John Taylor. It was designed to provide "recommendations" for how a central bank like the Federal Reserve should set short-term interest rates as economic conditions change to achieve both its short-run goal for stabilizing the economy and its long-run goal for inflation.”
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Federal Reserve Bank of Kansas City offers a link to a complete and recent description of "Taylor’s Rule and the Transformation of Monetary Policy": http://www.johnbtaylor.com/
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Honeybee EC: Bob Brinker made no attempt to correct the caller’s incorrect inference. Bob Brinker, the publisher of Marketimer and host of Moneytalk is not the publisher of Fixed Income Advisor– his son and daughter-in-law are the publishers. Is this an attempt to deceive? Why was this call immediately followed by an ad that seems misleading and deceptive in that there is no way to know which Brinker is actually publishing the newsletter? Why does Bob Brinker, the son, now sign articles at his website as “Bob Brinker,” showing no way to differentiate between himself and his father. For years, he called himself Bob Jr. and carefully made the distinction so as not to be confused with his famous father? What changed and why would anyone do such a thing?
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I recommend that you ask for a free copy of Fixed Income Advisor and read it. I also recommend that you get a copy of the “Retirement Advisor” and read it. I am convinced that you will find the Retirement Advisor FAR SUPERIOR! Please send a comment to this Blog and let me know if you agree with me or not.
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http://www.theretirementadvisor.net/index.php
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Caller John, in a follow-up question wanted to know why there are so many “perma-bears” out there saying we are headed for a doomsday.
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Brinker reminded him that he recently had a guest on the broadcast that was extremely bearish when the market was lower than it is now -- and that he had stated “on the broadcast” that he did not agree with the guest-speaker.
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Bob Brinker said: “You’ve heard me say on the broadcast, I think we are going to new all-time-historic-record stock market highs by 2009. I think by the time we get into 2009, we are going to be talking about all-time-historic record highs on the S&P 500 Index. But I know what you are talking about, I see it all the time.....in writings….in talking heads. They are talking down the United States of America. They are talking down our economy………(Caller: “Do you think people tend to focus too much on short-term?”) "Oh, absolutely, absolutely, I know this for a fact because when we have gone through this recent bottoming process, and certainly we have worked very, very hard to identify the bottom that I believe that we did accurately identify in the first quarter.
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It’s my opinion that the March 10th low on the S&P 500 was the bottom for the correction. And I think that what happened was that was a very successful test of the initial low recorded January 22nd. You might remember the S&P 500 closed on January 22nd in a very high volume panic-atmosphere at 1310. Well we knew, that despite the fact there’d be some short-term rally.......back then, we knew there was going to have to be a successful test of that low. And we knew what was required of that test before it occurred. Now that is exactly is what happened. And the closing test in March was, actually it was less than 3% below the initial low established on January 22nd. So we are talking about a text-book testing process in that correction low that we looked at.
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Unfortunately, unfortunately, and I’m sure you’ve heard this, there were a lot of people out there, and I mean a lot of people out there, who got it completely backwards off that correction low and that successful test……I’ve been telling people, going to, actually to February because we do this through the investment letter, of course, I’ve been telling people to actually use periods of weakness to buy into the market at specifically down in the low-1300’s or any minor weakness just below that level, which we got a little bit of there on March 10th and in mid-March, to take those opportunities to add to positions if you’re looking to add to positions – no mention, no thought of selling anything into this kind of weakness……”
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Caller John concluded by saying: “I took your recommendation, Bob. When it was below the 1300’s I added…….I’m just glad I got you, your son and the Marketimer on demand.”
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Brinker said: "And just for the record, I’m right with John. I was the exact same thing that John was doing. When we saw that weakness on the correction test into the low-1300’s and that very, very minor weakness that we had just below that level for a very short window of time, I was doing the same thing that John was doing – which was adding to positions."
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Honeybee EC: Brinker’s Model Portfolios have been 100% invested since March, 2003, and he has bragged many times about that fact on Moneytalk. Therefore, it would show integrity if he would explain that the low-1300’s buying opportunity that he is now touting (and claiming he has taken advantage of) could benefit only those who happened to come into NEW money AFTER January 20th. Before that, his all-new-money-in buy level had been at mid-1400’s.
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Brinker recommended mid-1400's as a gift-horse buying opportunity between August 2007 and January, 2008. Anyone who retired, inherited a large sum of money, etc., and had a substantial amount of money to invest in the stock market, had ample opportunity (indeed, ample encouragement from Brinker) to lump sum it in at the mid-1400's level.
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To now brag about his new revised (and much lower than the PREVIOUS one) "low-1300's" buy-level, which came about as the result of a correction that he admits he did not "expect," and for which he had no "available cash reserves" from his model portfolios, without adding ample disclosure, seems disingenuous at best.
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Brinker continued: “And if John is seeing people crying now about the fact that they sold out of the market at the bottom, how do you think those people are going to feel in 2009……if I am correct........and this market recovers to record highs in 2009, how is somebody is going to feel that sold out of the market at 1300?.......this is Moneytalk.”
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RECOMMENDED READING…… Some of Brinker’s favorites:
“Economics in One Lesson” by Henry Haslett
“Against the Odds” by Peter Bernstein
Books by Charlie Ellis
Books by Larry Swedroe
Brinker suggested checking these books out at the library or buying them to build your own library.
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Honeybee EC: It’s been over 7 years since Bob Brinker stopped allowing libraries to subscribe to Marketimer. This happened shortly after his bungled October, 2000 QQQQ-trade -- which has now been very effectively covered up, even though it has never been closed.
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CALLER..... said that he had taken advantage of Brinker’s buying opportunities as far back as June, 2007. Brinker replied: “Excellent.”
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Honeybee EC: Why was an incorrect assumption allowed to stand? The truth is there was no “buying opportunity” issued in June, 2007. In the June, 2007 Marketimer, Brinker claimed that a six-year long “secular bear megatrend” had ended in June, 2006. He was recommending “dollar-cost-averaging” into the market and said this on Page 3; Paragraph 5: “…….and we expect to see the S&P 500 Index make a series of new record highs going forward.” The S&P closed at 1530.62 at that time. In July, 2007, Brinker was predicting the S&P would move into the 1600’s range “as investors begin to discount operating earnings growth potential into 2008.”
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A complete history of Brinker’s totally incorrect secular-trend market-timing analysis:
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http://honeysbobbrinkerbeehivebuzz.blogspot.com/2007/09/what-happened-to-bob-brinkers-secular.html
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