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Tuesday, July 28, 2009

Bob Brinker's 2009 Market Outlook

Bob Brinker was back to his old self this weekend. On "Moneytalk hosted by Bob Brinker, " he patted himself on the back for "going out on a limb" back in January when he predicted the market would be higher in 2009. Brinker said cash was the worst place to be this year and "I guess the only place worse than cash has been to be short the market."

Honeybee covers it very well in more detail here with the following:
"....And obviously, the worst place to be is to have any stock market money in cash in here, with returns close to zero, plus missing out on the gains this year. I guess the only place worse than cash has been to be short the market.....Some people are short the market because it's summer....And there's no question that when that positive stock market forecast was made in January.....it was a forecast that was a voice in the wilderness. There's no doubt about that, with all the negativity that was out there back in January. But I've often said, so frequently, the best place to be is to be a voice in the wilderness because that's the way the stock market works very frequently....it is a forward looking mechanism.....it does not have a rear-view mirror. And so the key to success in 2009 has been to be looking forward, to be discounting future developments. And the key has been to do so with a fully invested stock market portfolio."
Setting the Record Straight

Brinker didn't tell you that he called a bottom in the 800s when he made that prediction in a special bulletin to his subscribers, the limb broke and the market dropped over 25% to 666 before rallying to where it is now, in the high 900s. He also didn't tell you that when the market was in the 600s he removed the buy signal and told his subscribers he was

He also didn't tell you he went out and broke many limbs in 2008 as the market crashed from record highs in the 1500s.

With the S&P500 at 1468.36 in January 2008, Brinker wrote on page 3 of his Marketimer newsletter:
"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. We continue to rate the market attractive for purchase on any weakness into the S&P 500 Index mid-1400's range. Above this range we prefer a dollar-cost-average approach for new purchases. All Marketimer model portfolios remain fully invested as we enter 2008. "
All these "buying opportunities" are moot since Bob Brinker's newsletter portfolios have been 100% invested in the market since March 2003.

Brinker also didn't tell his listening audience that he might have been raging bullish in January 2008 and January 2009, but he had no advice to buy the market when it was a mere 20 points above its cyclical bear market low of 676 (on a closing basis.)

In Bob Brinker's March 5, 2009 Marketimer Newsletter with S&P500 at 696.33 Brinker wrote:
The process of establishing a major bear market bottom can extend over a period of several months, as we saw in 2002-2003. Clearly, the process of registering the final bottom in this bear market has been relentless, which has rendered our efforts to date unsuccessful.

and

Due to the fact that the November 20, 2008 S&P 500 Index closing low failed to hold during the testing process, we believe a new bottoming process will be necessary in order to put an end to the bear market. This means that in order to set the stage for a sustainable market advance, we need to see a sequence of events consisting of:

(a) the establishment of an initial closing low; (b) a short-term rally; (c) a test of the area of the initial closing low on reduced selling pressure.
Brinker did not issue a buy at 696 nor did he mention “dollar cost average” anywhere in that March newsletter.

In the past four and a half months, the market has gone nearly straight up 300 points without a correction to test the initial closing low.

With the market back in the 900s, Brinker's July 3, 2009 Marketimer Newsletter recommends “using periods of short-term weakness as buying opportunities,” but he doesn’t define what weakness is!

Here is a chart showing the above in graphic detail
click chart courtesy of stockcharts.com for full sized image

Moral to the Story: Brinker makes a great deal of money selling a newsletter called "Marketimer" he promotes on his weekly radio show. A few months ago when the markets were near the lows a caller thanked him for "getting me out of the market" and Brinker didn't correct the caller or tell his audience he had been recommending a fully invested position since March 2003.

Sadly for all of us who would like to believe in magic and fairy tales such as a pot of gold with a magic market timing model, Brinker's own actions the past two years prove he is not very good at it.

1 comment:

  1. Perma Bear wrote on July 26, 2009 at 2:24pm on Kirk's Bob Brinker discussion forum on Facebook.

    Brinker was all over the bull move today, crowing about how great the stock market has been for those who are enjoying it and denigrating those who are holding cash for missing it. Brinker is far from alone. I've been hearing the same song from many bullish analysts all over the financial media. But what you'll never hear from Brinker is that he completely missed the worst bear market in modern history and the worst recession since the Great Depression. And that folks who held cash from the beginning are still WAY ahead of those who have been buy and hold investors, not only since the bear market began but also over the course of the past decade. I haven't heard Brinker talk about the secular bear lately, but if he's sticking to his story which he has admitted to not too long ago, he'd better be on the lookout for the resumption of the bear. I don't know when it's coming, but it is coming back. Put me on record for predicting that the March 2009 lows did not mark the ultimate low for this secular bear market.

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