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Saturday, January 12, 2008

Bob Brinker Free Discussion Forum Comments

Some comments this morning on our Bob Brinker Discussion Forum at our facebook group "Investing for the long term."

Honey O (no network) replied to Jack's post 15 hours ago.
Jack said: "I think an entry point will be below dow 12,000".Oops...if that happens, what will Brinker say?He's on record saying that there is ZERO chance of a 20% bear market.MOF: He's been predicting the S&P 500 going to new highs, and into the MID-1600's, for months now.

Jim F (no network) replied to Honey's post 13 hours ago.
Could be a repeat of the year 1998 (correct me on the year if I'm wrong), when Brinker said there was zero chance of a bear market, but the market did have a 19% correction before recovery.
  • Kirk Lindstrom’s Comment: The “correction” in 1998 was 19.9% on a closing basis and over 21% intraday top-to-bottom. Bob Brinker is careful to always say “less than 20% on a closing basis” when he talks about that period in time. Readers should note what matters is the markets were up significantly in the longer term despite Brinker giving a “Buy Signal” at 8,650 before the DJIA fell to a low of 7,400. Like today, many were fearful when the markets continued well below Brinker's "buy level" but those who held on were well rewarded.
  • Shortly after missing that “20% correction in the DJIA in 1998, Brinker switched to using the S&P500 rather than the DJIA in his newsletter.”
Here is a chart of 1998 from stockcharts.com. Click it to view in full size.
S&P500

Dan G replied to Jim's post 12 hours ago.
Well, technically 19% is 1% away from a "bear market" by most definitions, so "da Brink" escaped disaster by a hair, Jim."Honey Bee", if Brinker is wrong on this bear market, he's toast I'm afraid. He's staked his reputation on being able to call a bear market within 5% or so from its top. If he misses it by 20% or more, what good is his model? Frankly, I hope he's right, but I've pulled in my horns just in case.

Bob N (Boston, MA) replied to Dan's post 8 hours ago.

Hello Dan,

Just a few words of comfort for you. I am encouraged by Ben Bernanke's statement that the Federal Reserve is prepared to act aggressively in adjusting short rates to combat the current economic downturn. This can can only be viewed as a strong positive for the intermediate term health of Mr. Market.

I completely understand and agree with your feelings of anxiety over the health of the market and the economy right now (I'm presently 98% equities and 2% cash having recently bought more IWF shares when the market was around the 1410 range).

The key thing to remember is that core inflation is not an issue right now and the Fed is on a campaign to lower rates. I would be VERY concerned if inflation were a factor which the Fed would have to react to with rate hikes. Mr. Market LOVES contained inflation and lower rates.....always has, always will.

But the problem right now is that we have to sit tight and suffer while all the bad news gets out of the picture (certainly yesterday's news about Merrill and AXP doesn't help). This is an election year. I can't imagine that the markets won't recover as a result of Fed policy adjustments and cash infusions into some of the truly distressed financial firms (the politics of Middle Eastern cash buying influence/control over these firms I'll leave for others to stress over).

When I write the monthly Bob Brinker "Shadow", I do it to try and think the way he thinks. Keep in mind that Brinker's methodology is ONLY geared toward qualifying LONG TERM stock market appreciation prospects. When the housing/credit mess was unfolding 6 months or so ago, Bob's indicators sinply weren't giving negative signals. Imagine where the stock market might be if inflation were more of a concern back then? A hamstrung Federal Reserve six months ago would have led us to a much darker picture for the health of the economy and Mr. Market. This all goes back to the notion that if an investor can't stomach a 10% or so correction, then maybe CDs are a better choice.

So.....all I can say is hang in there and don't get too caught up in all of the noise in the financial press right now. We may have a lot to talk about after the market recovers later in the year. I maintain that after we recover, we will then have to watch core inflation and the Fed very carefully. Eventually they may to have to turn around and go the other way with rates. That is when we may really have to consider heading for Mr. Market's exit sign.
And when that happens.....Jack Swanson's nightmare may really come true.

Bob Norton

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