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Monday, June 28, 2010

Bob Brinker Market Outlook + 5 Root Causes of a Bear Market

Bob Brinker remains bullish on the stock market and views any short-term weakness as a health-restoring event. Brinker's advice for new stock market money is to dollar cost average into the market and, if possible, to take advantage of the volatility that brings lower prices.
Brinker says none of his "five root causes of a bear Market" are present at this time. He elaborated on his "five root causes for a bear market" in detail during the May 22 Moneytalk show.
What are the root causes of a bear market?
  1. Tight Money:  "That is when the Federal Reserve pulls in their horns, takes away the punch bowl, restricts the growth of the money supply. And money is harder to get, and as a result money price of money goes up....Do we have that now? No. Do we have the prospect of having that now? No."
  2. Rising Interest Rates:  "I'm not talking about the federal funds rate going from 1 to 2. I'm talking about a meaningful rise in interest rates.....When we look at the rates today, they are low, low, low. Rising rates are not a problem as we look at the market place right now....... 
  3. Hyperinflation, rising inflation. Do we have that? No... We don't have an inflation problem right now.
  4. Rapid Economic Growth.   Do we have that? Not on your life. Not even close......Some people are worried about a double dip.
  5. Over-valuation:  "When stock prices are so high relative to valuations they're on the moon like they were in January of 2000. Well, not true. We don't have over-valuation right now. We have good valuation right now."
Brinker concluded:  
"So all five of those are no's. We don't have tight money. We don't have rising rates problems. We don't have rising inflation problems. We don't have rapid growth in the economy and we certainly don't have over-valuation in the stock market......Out of five possible root causes of a bear market, we have zero. That is why I am of the opinion that we are not in a bear market."
Brinker only did three shows in June (6, 20 and 27th) as his show was cut to Sunday's only and he took some days off.  I believe Brinker was told to give more clear guidance on what he believes on his show to try and get ratings up or they will cancel Moneytalk completely   Why?  Because he has been far more generous with his market views ever since it was announced his air time was going to be cut in half.  See:

From Honey's Bob Brinker Beehive Buzz June 27, 2010, Bob Brinker's Moneytalk: Summary, Excerpts and Commentary
"....So from my point of view, I think it's a correction. I don't think we are going into a bear market, defined as a decline of more than 20% of the S&P 500 Index. And I also believe that when the correction is over, we are going to see new recovery highs in the S&P 500 Index. That's what I think. I'm Bob Brinker."

Moneytalk, May 8th, Brinker said:
.....Remember we had a correction in January and February. It lasted three weeks and it was 8.1% in the S&P 500. A lot of people saw that correction and said the world is coming to an end, run for the hills. They were wrong. Now we've seen an 8.7% correction to date that has been in process for the last couple of weeks since late April which has been against the backdrop of what's been happening in Greece and in Europe, and we getting those same screams from these people who are panicking and saying run for the hills, it's all over. Well, that's their opinion, that is not my opinion.....

.....I do not believe that the crisis in Greece is going to derail the United States economic recovery. And as a consequence of that belief, I do not believe that the crisis in Greece is going to produce a bear market in the United States. Bear markets are defined as losses in the major indexes, such as the S&P 500, in excess of 20% on a closing basis."
Moneytalk, May 22, Brinker said:
......You know, just a couple of weeks ago in my investment letter, this is what I wrote, quote: "Any short-term weakness is viewed as a health-restoring event." I also went on to write earlier this month that I would take a more positive view with regard to investing new money into the market during a correction for those who find themselves under-invested. And I do believe that those who are looking for opportunities to make additions to their stock market portfolios and are using this correction and periods of weakness within this correction -- there have been plenty of those. I think that's a reasonable course of action....

....So from my point of view, I think it's a correction. I don't think we are going into a bear market, defined as a decline of more than 20% of the S&P 500 Index. And I also believe that when the correction is over, we are going to see new recovery highs in the S&P 500 Index. That's what I think. I'm Bob Brinker. This is America's money program."  
Before you get too excited, remember Brinker's newsletter model portfolios one and two have been FULLY invested in equities since March 2003.  He did not see the bear market coming and was so bullish at the top that he issued a "gift horse" buying opportunity when the S&P500 was in the mid 1400s then he bashed the bad news bears and people like myself warning of a coming recession as "Cassandras."  For proof, see:

click chart for full size image


  1. Two calls you will not hear on Moneytalk:

    "Hi,Bob. You think that we are currently in a market correction and dollar cost average mode. Could you explain the difference in market sentiment today versus almost three years ago when you recommended a lump-sum buy at S&P 1400 though at the time the index was only ten percent off its all time high?"

    "Hello, Mr Brinker. I've heard you promoted as 'America's Most Trusted Financial Adviser'. Who awarded you this distinction?"

  2. How would Bob Brinker's bear market criteria apply to the Japanese stock market, which has been in a persistent bear for some 20 years, and whose precedents were very similar to the United States today. Tight money? No. Rising interest rates? No Hyperinflation? More like persistent deflation. Rapid economic growth? Definitely not. Over-valuation? Definitely in 1990, but today, no.

    Bob needs to go back to his previously correct view that the U.S. is in a secular bear market. He definitely got the cyclical bull within the secular bear right in 2003. And then he missed the downturn in 2008. We'll see if the cyclical bull that started in March 2009 is over. It has definitely taken a bit of a pause here. But long-term I remain confident at least that the secular bear growls as strongly as ever.

  3. Bob has lost his mind...he's a joke

  4. does Bob live in a bubble? does he consider that the global economy is collapsing?...where are profits going to come from, after everything collapses?


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