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Saturday, October 11, 2008

Mark Hubert on Bob Brinker

Bob Brinker remains bullish and fully invested as he has been since March 2003. Brinker has issued several "all in" buy signals for new money as the market has crashed. See the chart of the market below for more on these buy levels.
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In the Barrons's Online article "What the Best Market Timers Are Saying" Mark Hulbert reports only three of the top nine market timers he follows are bullish or on the bearish side of neutral but their average equity allocation is 59%. This is what Mark says Brinker wrote in the latest Marketimer:
Bob Brinker's Marketimer: Bullish. In his most recent issue, which was published in early October, editor Bob Brinker wrote: "We believe the stock market will return to an uptrend within six months of the start of the next economic recovery. Although the timing of the recovery is uncertain, our view is that it could be underway by next spring. If that scenario unfolds, we could be looking at a stock market turnaround beginning in this year's fourth quarter. This bear market decline has been accompanied by an extraordinary flow of negative financial news, but we are focused on stock market recovery in 2009 as investors go through the process of discounting economic recovery prospects in advance of an improved economic outlook." Brinker is recommending that subscribers' stock portfolios be fully invested.

Kirk Comment: Model Portfolios #1 and #2 are and have been 100% in equities since March 2003. Model portfolio #3 started at 50:50 in March 2003, but went higher as the market went up while Brinker recommended against rebalancing to callers of his show.]

Kirk Comment: Mark should have said “remain fully invested” since Brinker has recommended 100% in equities since March 2003.

What is interesting to me is Hulbert compares the top timers on his list to the bottom timers on his list but he doesn't compare either group to buy and hold the Wilshire 5000 index over the last 20 years. Hulbert wrote:

....I continue to believe that a good approach is to consult the investment newsletters with the best long-term records at calling turns in the stock market.

You might wonder why I would even bother, since the top performers have been consistently more bullish than the bottom performers throughout this bear market. Why turn to them now when they've been wrong over the last year?

My answer: No approach is foolproof. But, over time, the top performers turn out to be more right than the bottom performers.

Kirk Comment: Is that a "well duh moment" or what?

Mark continues:

"And the top performers right now are significantly more bullish than the bottom performers."

Mark is missing a key piece of data in his analysis. His top timers lean towards being bullish since the markets are higher now than they were 15 years ago. If a top timer can't match the market, then why bother with them at all?

Mark used a 15 year time frame over which the stock market is higher so bulls will have a better “long-term record” than the bears. If he used a 3-year period or less, the newsletters with a bearish bias or perhaps gold and commodity letters would clearly be at the top.

From Mark Hulbert's 8/31/2008 newsletter showing his list of the top mutual fund newsletters (27 total eligible) for total returns for the last 15 years:

  1. No-Load Fund-x = 13.9%
  2. Equity Fund Outlook = 13.8%
  3. Timer Digest = 11.8%
  4. All Star Fund Trader = 11.4%
  5. Bob Brinker's Marketimer = 10.3%

    Wilshire5000 9.0%

March 2008 by Mark Hulbert on Pg 3 of the March 2008 issue of "The Hulbert Financial Digest" that reviews Brinker's newsletter wrote:

"Please note: In late 2000, Brinker forecasted a several-month bear market rally and recommended an investment in the NASDAQ 100 Index—a trade that turned out quite unprofitably. However, because Brinker at the time of making this forecast chose not to make this trade part of his model portfolios, his HFD record has not suffered as a result."

So one has to take Brinker's place on the list with a truckload of salt.

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