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Monday, April 13, 2009

Mark Hulbert on Bob Brinker's Marketimer Performance Record

About once a year, Mark Hulbert does a full page write-up on each of the newsletters he follows. In April of 2009, Hulbert did a full page on Bob Brinker. This was what he said about Brinker's results that do not include Bob Brinker’s QQQ mistake”.
"Brinker’s fund selections on average have lagged the market. The HFD reports an 8.7% annualized gain for his “Aggressive” portfolio, which is 0.6 percentage points per year less than what this portfolio would have made if each of its funds were invested in the DJ Wilshire 5000 during the times they were owned.

"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."

__ March 2009 by Mark Hulbert on Pg 4 of the April 2009 issue of "The Hulbert Financial Digest"
This is what Mark Hulbert said in March of 2008:
"Brinker’s fund selections on average have lagged the market. The HFD reports an 11.5% annualized gain for his “Aggressive” portfolio, which is 0.9 percentage points per year less than what this portfolio would have made if each of its funds were invested in the DJ Wilshire 5000 during the times they were owned.
Hulbert attributes Brinker's under performance relative to the markets to his mutual fund selection. In an attempt to mitigate this under performance, Brinker added an "active passive" portfolio using two Vanguard funds to his newsletter. Currently, this portfolio consists of Vanguard's Total Stock Market Index Fund (VTSMX) and Vanguard's International Growth MANAGED mutual fund (VGMFX, a fund I have owned for nearly 20 years for its great performance.) Brinker does not track these or give performance data for them in his Marketimer newsletter, but Mark Hulbert has attempted to track the performance. Mark concludes Brinker's timing ads some value using this portfolio.
For investors who therefore are interested only in his timing, as opposed to his fund advice, Brinker provides an “Active/Passive Portfolio.” It “is designed to provide active management in the areas of long-term market timing while maintaining an indexed approach to the U.S. equity market.” From the beginning of 2002, when the HFD began monitoring this portfolio, to 3/31/09, this portfolio gained 1.3% annualized, vs. a 2.1% annualized loss for the DJ Wilshire 5000.
Hulbert neglects to mention that a portion of this "active/passive" portfolio is in a MANAGED, INTERNATIONAL fund so its benchmark should not be the Wilshre 5000, but a mixture of the Wilshire 5000 and the suitable weighting in an international index. Thus, I conclude that Mark Hulber's conclusion is worthless in gauging if Brinker's timing adds value.

On several Brinker portfolios Mark Hulber tracks, Hulbert reports somewhat different returns than Brinker shows for the specific time periods, some better and some worse. I wrote Hulbert to ask why. Mark said they "periodically undertake various rebalancing transactions to bring a given fund’s actual % weight in a portfolio into line with the % that Brinker assigns to it." I wrote that Brinker has specifically recommended against rebalancing so this "rebalance premium" could more than explain the slight performance edge, especially during a highly volatile market. Clearly, Mark Hulbert admits they don't measure Brinker's performance the way Brinker recommends!

Mark Hulbert also does not adjust Brinker's model portfolio returns for all the "lump sum buys" Brinker issued between 2007 in the "mid 1400s" all the way down to the last "lump sum buy with new money" in the "mid to low 800s" just before the market crashed to 676. To be fair, neither does Brinker.

Click chart courtesy of for full size image

Mark Hulbert also leaves out the effect of Brinker's QQQ advice on reported results. Add to that his conclusion that Brinker's market timing has added value since 2002 uses faulty assumptions and you have to ask "why does Mark Hulbert bend over backwards to give Brinker every benefit of the doubt when the record clearly shows Brinker's market timing has added dubious, if any value?"

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