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Thursday, November 22, 2007

Bob Brinker Timing Model Update

Update on what Bob Brinker's "5 Root Causes of a Bear Market" and "Marketimer Stock Market Timing Model" are saying to the members of our discussion group.

This was posted today in our "Bob Brinker Discussion Forum" at Facebook's discussion group "Investing for the Long Term."

George asked:

Since the chances of a recession keep going up each day, could someone explain to me how a recession fits into the 5 root causes of a bear market as developed by Brinker? I think I understand the 5 root causes fairly well from reading the Brinker web sites and having subscribed to his newsletter in the past. However, none of the 5 root causes seem to deal with a recession. It seems to me that if you have a recession, profits are going to drop significantly. If profits drop significantly I would think you could easily have a bear market at least until the market could see the end of the recession. The 5 root causes could all be favorable or neutral but it seems like you could still have a bear market. The impression I have is the 5 root causes model has a lot of credibility with people associated with this site. What am I missing?
Allan replied to George's post:

In his November 5th newsletter , George , Bob Brinker sees " no evidence in our work that a recession will occur " . " The Conference Board Leading Economic Indicators and Coincident Economic Indicators show no signs that a recession is on the horizon , and we view the cacophony of financial media stories on this subject as highly suspect " .
Ivan replied to George's post:

A recession could follow if all 5 of the data points lined up and pointed to a bear which they do not.

The biggest piece would be tight monetary policy which we did not have IMO, and we never truly inverted the yield curve which is significant.

+ 5 major causes for a bear market (20-50% decline)

1) tight monetary policy - tight money when fed acts to limit the growth of money supply;
2) rising interest rates - currently or prospectively
3) high inflation
4) rapid econmic growth
5) overvaluation - overvaluation will not cause a bear

========
His timing model will give you clues of possible recession

Valuation
Monetary
Sentiment
Economic Cycle

====

it is not however fool proof IMO
Dan replied to Ivan's post:
"Smile, in light of the dismal stock market, it is amazing that not a single one of those 5 causes is negative. I don't think we have to have all five negatives for a bear market, but when not even one is, that makes you think.

The only one I can see that might even remotely be negative is inflation, and that's only if you view oil prices as the sole measure of inflation. And that's certainly not the case."




Join us and give your inputs on what the model is saying to you these days! Request Invitation to facebook discussion group "Investing for the Long Term" to participate in our "Bob Brinker Discussion Forum."




Have a safe and Happy Thanksgiving!

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