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Sunday, April 26, 2009

Bob Brinker Market Advice: Buy on Weakness

Bob Brinker told a caller yesterday that this is a good time to be in the stock market.

At about 52 minutes into first hour of yesterday's (Saturday) Moneytalk, a caller named Steve told Brinker that he was 55 years old, 100% in cash and about five years from retirement.

Steve asked:
"I've been in all cash until now and I'm considering taking that cash and going about 60% into the stock market and 40% into fixed income. Would you buy the market outright at its current levels or would you dollar-cost-average in?"
This call struck me as odd, perhaps a plant. Brinker has recommended a fully invested position since March 2003. Brinker has not changed this advice to be fully invested since he became fully invested in March 2003 in the low 800s, about the point the market corrected to last Monday.

Why would someone 100% in cash who follows Brinker ask Brinker his market advice after Brinker has been saying BUY, BUY BUY all the way down?

Last year in late May, Bob Brinker went so far as to bash the "Cassandras" for being bearish when the the stock market fell to 1400.
Brinker replied to Steve:
"Well our recommendation to our subscribers has been to be a buyer on weakness. We have regarded the market as a buy on weakness. That is our view and that's certainly a view that has not changed in recent weeks."
That is right. Brinker had "lump sum" and "gift horse" buy levels for the market with the first in the "mid 1400s" early last year before the bear began. Brinker had "all in" or "buying opportunities" (not dollar cost average buys) for the market at:
  • March 7, 2007 @ S&P500=1380: @1380
  • August 16, 2007 @ S&P500=1411: Mid 1400s
  • February 10, 2008 @ S&P500=1331: Low 1300s
  • August 5, 2008 @ S&P500 1285: Low 1240 or less
  • September 2, 2008 @ S&P500=1282: Low to mid 1200s
  • January 15, 2009 @ S&P500=850: Low to mid 800s
  • March 5, 2009 @ S&P500=696: Looking to identify a bottom (no buy at all in the newsletter and he admits the market trying to "registering the final bottom" had "rendered our efforts to date unsuccessful." )
  • April 3, 2009 @ S&P500=797: "any short0term weakness" is a "buying opportunity."
    (101 points higher! Says he thinks the bottom is in but did not give a specific number for "weakness.")
Now that the market has fallen from the 1500s to 676 and recovered to the mid 800s, his current advice is to "buy on weakness." I guess he put his neck out so many times and got it slashed that he's no longer going to be specific, on the radio or his newsletter.

I have his past "lump sum by levels" listed on the graph below.

Brinker continued:
"We are a buyer on weakness. You had tremendous weakness on Monday. I mean it knocked the thing all the way down to the low-800's on a false news story. So that's the kind of opportunity that is presented. And yeah, I'd be a buyer on weakness. I don't have any problem with your asset allocation. I think that as you move into retirement down the road, you might go to a balanced approach."
At the market top in 2007, Bob Brinker has his "balanced" model portfolio #3 two thirds (66%) in equities, not 50%. Brinker specifically told a caller to the show his advice was to not rebalance to 50% equities because he was so bullish for the market. That advice has not worked out too good for him.

Brinker continued:
"But if you are going to start out with objectives in the 60 to 40% range, equities over fixed income, I'm okay with that. I think there opportunities to make money in the stock market. This is a good time, I think, to be in the stock market. And I think that people that are in the stock market right now are going to be happy they are as we move forward. There's no question about it, the credibility of the stock market has been severely damaged in the marketplace by the high jinks resulting from the repeal of the uptick rule, the high jinks we've seen in terms of false news stories. But in that case, it presents an opportunity."
In his December 2007, Marketimer, Bob Brinker said:
We continue to rate the market attractive for purchase on any weakness in the area of the mid-1400’s range of the S&P 500 Index. Any additional weakness below this range is regarded as a gift horse buying opportunity. We prefer a dollar-cost-average approach for new purchases when the S&P 500 Index is above the mid-1400’s range.
Summary:

When the S&P500 in the 1500s about eighteen months ago, Brinker said the mid 1400s level as a "gift horse" buying opportunity to lump sum in new money. Now that the market has crashed over 50% to 676 and recovered to the mid 800s, he is a "buyer on weakness."

Market Statistics 4/24/09 (not counting dividends):

Index
Ended Week
YTD
DJIA8076.29-8.0%
S&P 500866.23-4.1%
Kirk's Explore Portfolio
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+3.1%

Graph of Bob Brinker's "ALL IN" Buy Levels
Click graph courtesy of stockcharts.com to see full size image

1 comment:

  1. Buy on weakness?

    No buy bulletin at the bottom just before the best 2-month S&P500 gains in 34 years?


    From "Barrons"

    "Here’s an equities market coming off a couple superlative months. The S&P 500 (GSPC) just recorded its best month in nine years. Combine its performance last month with the rally that got underway in March, and the index just posted its best two months in 34 years, dating to the Ford Administration back in 1975. The Dow industrial average (DJI) just notched its best two-month advance since the last bull market got underway back in fall 2002."

    Incredible!

    ReplyDelete

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