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Thursday, July 10, 2008

Bob Brinker Timing Model Mauled By Bear Market

Bob Brinker's premature bashing of his "Bad News Bears" in May when the S&P500 was over 1400 was early at best and wrong if the market continues to go down. Brinker was also wrong last December when he wrote "We expect the bull market to continue at least well into 2008, and we look for significant stock market gains, including new S&P 500 record highs." The market was already in the early stages of the bear market when he wrote that as the graph and table of data below show.

A picture is worth a thousand words.

But for those who don't read graphs, here are some words. By Brinker's own definition, we are in a bear market as the S&P500 closed down over 20% from its all time
Date of last high is 10/09/07
Last Market High is 1,565.15
Date of last low is 07/09/08
Correction Low = 1,244.69
Decline in Pts = 320.46
Decline in % = 20.5%
Besides being fully invested at the top and looking for new highs in 2008 he had an "All in" buy for new money in the mid 1400s. Marketimer newsletter quotes follow:

October 2007 with 100% invested & S&P500 @ 1526.75
  • Dollar Cost Average. Lump sum mid 1400's
  • "Although we do not believe further weakness into the mid-1400's range must occur, we remain comfortable with rating the market attractive for purchase should any such additionalweakness occur. Above that price range, we prefer a dollar-cost-average approach for new stock market investing. All Marketimer® model portfolios remain fully invested."
Dec. 2008 with 100% invested & S&P500 @ 1481
  • Dollar Cost Average. Lump sum mid 1400's
  • "We continue to believe that a bear market (S&P Index decline in excess of 20%) is not on the radar screen at this time. We expect the bull market to continue at least well into 2008, and we look for significant stock market gains, including new S&P 500 record highs."
Months into the bear market, Brinker thought we were still in a bull market. The bear market started at the high, in October 2007!

January 2008 with 100% invested & S&P500 @ 1468.36
  • Dollar Cost Average. Lump sum mid 1400's
  • Pg 3: “In summary, the Marketimer stock market timing model indicates that conditions are favorable for the market as we enter 2008. We expect the S&P Index to achieve new record highs this year and to reach the 1600’s range in the process."
March 2008 with 100% invested & S&P500 @ 1330.63
  • Dollar Cost Average. Lump sum low 1300's
  • Marketimer Pg 1: "Based on the model’s current readings, we expect the area of the correction bottom established during recent weeks in the S&P500 Index low 1300’s to contain any further testing and probing that may occur."
May 2008 with the S&P500 back over 1400 he gave a bad news bashing on the radio that had their heads spinning. Brinker said:
“So what we have here basically, is an example of false prophets and it’s sad. And the reason it’s sad is the damage done. Think of the people that are looking today at the market, S&P at 1400 and they’ve been scared out of the market in the first quarter by these bears………It’s just amazing and yet these people are out there, and these people are not happy, I’m sure, to find themselves out of a rising market since March. To find themselves looking for ever lower prices when in fact we’ve had the opposite.

We’ve had the market rising since mid-March. It’s rather significant when you stop to think about it. If you go back to mid-March and you take a look at the S&P 500 Index since mid-March, right now you have a total return, including cash dividends of about 10 1/2%.....................So it’s fair for you to say to the Cassandras, where is that recession, where are those millions of lost jobs, where are the two quarters of negative real GDP growth? Where’s the bear market? …………The answer is, they blew it! That is the answer, they blew it. They got caught up in their own negativity and they pronounced that it was all over, it was going to spiral downward and there was no end in sight – and they got it completely backwards. Truly amazing to see, and sad to see the people that are harmed by such unjustified negativity.”
June 3, 2008 Article "Bob Brinker's June Market Outook"
  • Bob Brinker's Marketimer: Bullish. In his most recent issue, which was published in early June, editor Bob Brinker wrote that his market timing model "remains in favorable territory as we approach the start of the summer season. We continue to expect stock prices to work higher and to achieve new historic highs in the market indexes." Brinker's model portfolios are fully invested.
July 10, 2008 Barrons article:
  • Bob Brinker's Marketimer: Bullish. In his most recent issue, which was published in early July, Editor Bob Brinker reported that his stock-market timing model remains in favorable territory. ..... Brinker is recommending that subscribers' stock portfolios be fully invested.
All quotes are detailed at:
>>Bob Brinker's Asset Allocation History<<
Brinker's belief that he can time the stock markets is flawed at best. The good news is his other advice to become your own financial advisor, use low cost index funds and avoid excessive concentration in any one stock is sound. Sadly, I think the good advice is to lull you into the belief that he can time the stock markets.
"Market Timing is a wicked idea. Don't try it --- ever."
[Charles D. Ellis, Winning the Loser's Game]

"I have been following markets for about 50 years, and I’ve never met anybody who could time the market correctly."
(Burton G. Malkiel on 4/28/07 as a guest on “Moneytalk with Bob Brinker.” Malkiel won the 1973 Nobel Prize in Economics for his work on efficient markets presented in his book “A Random Walk Down Wall Street

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