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Tuesday, March 14, 2006

Bob Brinker Update for 3/14/06

Bob Brinker is bullish and remains fully invested in his equity portfolios. For new money, he recommends dollar cost averaging. My favorite Bob Brinker Reporter, David Korn, writes:
  • * NEW MONEY TO INVEST February 18-19 Newsletter:

    Caller: This caller was gifted quite a few shares of a company stock and he wants to sell it and raise cash to invest into the market. How should he go about it? Bob first talked about how much gains have been in the market since his buy signal in March 2003, and then recommended that for new money such as the cash he raises from the sale of the gifted stock, Bob would adopt a dollar cost average approach and use something like a total stock market index fund or an S&P 500 fund to invest. You could also invest the money in an exchange traded fund like the VIPERs (ticker: VTI). Bob said he would dollar cost average "at a pace you are comfortable with" as long as Bob's outlook on the market remained favorable. For now, however, Bob said his market outlook remains favorable as it has since March 11, 2003.

  • OPENING MONOLOGUE - YIELD CURVE March 4-5, 2006 Newsletter:
  • Brinker Comment: Bob opened the weekend broadcast by discussing the so-called "inverted yield curve." Bob said there is a lot of misinformation about the yield curve. The definition of the true yield curve is the difference between the 90-day Treasury Bill and the long-term Treasury Bond which is now the 30-year Treasury, currently maturing in February 2036 which has an annual coupon of 4.66%. It was auctioned for the first time in 5 years, and now it is out there trading. At present, the 91-day Treasury Bill is currently yielding 4.48%. We look at the difference between the 90-day and 30-yr. and can see an 18 basis point (0.18%) positive yield slope. Thus, we do NOT have an inverted yield curve and it isn't even totally flat. Bob said it gets him crazy when he reads all the stupid wrong information about the yield curve!
  • David Korn Comment: You know it pains me to say this, but Bob is wrong. Yes, wrong. Ooh, it gives me chills just writing it. I know its hard to believe; after all, in 20 years, how many times has Bob said he was wrong?" [snip] Bob has chosen the 90-day versus the 30-year probably because of the seminal study that I have linked to in the past. However, there have been other serious published studies that compare the 90-day to the 10-year and other spreads. The question shouldn't be which is "right" but rather, which is the most accurate in terms of forecasting recessions. John Mauldin has written a great series on the yield curve. Read Part 8 if you want to see what I am referring to. You can find it here.
In our Bob Brinker Discussion Forum we've been talking about Bob Brinker's market timing model. He uses this in his "Marketimer Newsletter" for predicting the stock market in the months ahead. On recent shows, Bob has recommended I Bonds for purchase. I Bonds are currently paying 6.73% on new money as I explained in my article called I Bonds.
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