Posted May 16, 2008, Bob Brinker's May 10-11, 2008 Moneytalk Summary, Commentary and Excerpts: (Conclusion)
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- Bob Brinker Tidbits of Advice:
- Buying FDIC Certificates of Deposit is not the same as buying Annuities. When bankers tell customers that they are both guaranteed, that is “bull-bleep.” Annuity guarantees are not the same as FDIC guarantees.
- VTI is a good substitute for Model Portfolio1 holdings for those just getting started.
- By 2009, in terms of housing market……we should have made real progress and enter a period of stabilization, but “the glory days are over for housing.”
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A Moneytalk Caller asked Bob Brinker about demographics of the retiring baby boomers and how that might affect the stock market. After mentioning a local commentator, the caller said this: “He’s saying that as the baby boomers retire now, the spending would trail off and that would cause the stock market to go down in 2010, and actually create a Secular Bear Market. I was just wondering what your opinion was on that type of scenario."
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Honeybee EC: Brinker did an outstanding job of evading the caller's question about the possibility of a “Secular Bear Market.” There is a very good reason why Brinker would not want the subject discussed openly on Moneytalk. It goes to the very heart of Bob Brinker's ability to analyze and reach conclusions about stock market-timing and IMO, clearly shows how it's more luck than skill. Here are the facts:
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When Bob Brinker issued a buy signal in March, 2003, he predicted that it was the beginning of a cyclical bull market. However, he opined (and cautioned) that the cyclical bull market was part of an ongoing secular bear market megatrend and he expected the cyclical bull market to last only 1-2 years.
- As the cyclical bull market stretched longer, he extended the time-frame to 1-3 years.
- Later, as it stretched even longer, he called it "long-in-the-tooth."
- In November, 2006 (five months after he later claimed the secular bear had ended) he said this: "We regard this cyclical bull market as an outlier in terms of its unusually long durations."
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Here are two examples of what he said about the secular bear megatrend: In the August 2002, Marketimer, Page One; Paragraph One; Bob Brinker said: "In our view, the U.S. stock market entered a secular bear market in the first quarter of year 2000. The benchmark starting points for this secular bear are: Standard and Poor's 500 Index: 1527.46...March 24, 2000. Dow Jones Industrial Average: 11,722.98....January 14, 2000"
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September 2002 Marketimer, Page One; Paragraph Two; Bob Brinker said: "We believe the ongoing secular megatrend we are now experiencing will see a succession of cyclical bull and bear markets lasting approximately one-to-three years each."
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Finally, in June, 2007, Brinker retroactively declared that the secular bear megatrend had ended a year earlier, in June, 2006. Of course, he did not say that in June, 2006 or at any time between June, 2006 and June, 2007.
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Matter of fact, even Brinker was not aware that the secular bear market had ended in June, 2006 when he had this conversation on Moneytalk in 2007:
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February 3, 2007, Moneytalk caller: "Just a quick question. It's kind of a philosophy of what you do - the secular bear, cyclical bull thing." (Brinker: "Yeah, sure.") "I'm curious because I've read previous letters and it may be some time ago, but I think you gave some kind of an actual projection what you thought the S&P would actually get up to before it may roll over into the bear cycle."
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Bob Brinker: "Well, we haven't put a final number on that, and we'll certainly update that by the way on a continuing basis in the monthly letter, which is just part of what we do. But no, we have not put a final number on that. But what we do know is within secular trends there are no cases where a secular trend has gone beyond the previous peak by more than, by more than 10%. It's never happened, so I think it's fair to say that until that happens, the secular trend is intact."
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Now the secular trend that began in year 2000 when the S&P was up in the 1500s, awww, that remains intact. The S&P 500 Index - and this is measured by the Index itself - has not gone above the prior high of 1527 close. In fact, in remains in the mid-1400s at this point. In order for it to move beyond an existing secular trend, such as the one we've had the past seven years, you would have to exceed it, I would think, by at least 10%..
There are many cases, Peter, where we have exceeded it in the single digits. There are many cases, for example, go back to 1966-1982-that was a secular bear trend. And there were many cases during that trend, where the Index exceeded the prior cyclical bull market high during that secular trend by let's say, 4%, 5%, 6%, but there were no cases where it was exceeded by 10% or more. So for now, the secular trend remains intact because the S&P has been unable to exceed the prior high of 1527 by anything close to 10%. In fact, it's never even been back to that level and even today remains below that level."____Bob Brinker
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Perhaps that is why he evaded the callers question when he heard the words, "secular bear market," because history has proven that he was 100% mistaken -- there has not been a secular bear since 1982 when the secular bull market began. The record shows a cyclical bear market between March, 2000 and October 2002. And we came real close to another cyclical bear (by Brinker's definition) beginning in January, 2008 -- one that he says he did not expect, and certainly rode down with all Model Portfolios fully invested.
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This chart shows that (so far) the high was October 2007 and the low was March 2008.
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Now back to how Brinker answered the “secular bear” question from this past weekend: “Charles, there are “as many opinions about the stock market as there are people forecasting the stock market.” Brinker went on to explain the obvious – that you could look at hundreds of forecasters and they would all be different. Some forecasters predict the market is going to the moon, others say it is going to zero. Brinker said that his policy has always been to do his own work, and that he pays no attention to what anybody else is saying about the market, because he doesn’t want his thinking to be “colored.”
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Brinker continued: “When I put out my sell signal on the stock market in January of 2000, and we took most of our Model Portfolio money out of the market at that time, I did it based on my own work. And when I put out the buy-signal, the major buy-signal, on March 11, 2003, when the S&P was around 800, I did it based on my own work. Now in January of 2000, there were many people that were bullish and I put out a sell-signal. And in of March, 2003, there was very wide-spread bearish viewpoint out there and I put out a major buy signal.”
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The caller followed-up by again asking if Brinker had any opinion on the “generational shifts.” Brinker commented that he thinks there are always generational shifts -- it is an ongoing thing, but that stocks are valued based on the discounted present value of future earnings, or alternatively, the discounted present value of the future dividend stream.
Bob Brinker amusing quotes of the May 10-11, 2008 weekend:
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“I think you have to do more work than just be a shill.”
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"That is “bull-bleep.”
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