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Saturday, April 20, 2013

Market Update - SPY

Bob Brinker remains fully invested.  Bob Brinker has not made a change from 100% equities for Model Portfolios One and Two since March 2003.   His Model Portfolio Three was 50% equities in March 2003 but since he has not rebalance, even in 2007, Portfolio three is roughly two thirds in equities.  For more, see Bob Brinker's Asset Allocation History

SPY - S&P500 SPDR: This “trust” is comprised of the 500 stocks in the S&P 500 Index, an index designed to capture the price performance of a large cross-section of the U.S publicly traded stock market. The S&P 500  has better diversification than the widely followed DJIA and NASDAQ markets. The main objective of SPY is to replicate the total return of the S&P 500  500 Index. 

This chart shows the S&P500 via its ETF (exchange traded fund) SPY has corrected back to its 50 day moving average or  MA(50) on this chart.

After an “Auto Buy” for 40 shares at $127.50 on 6/2/12, on 1/18/13, I sent an email alert saying I took profits at $147.55 to lock in a $20.05 or $15.3% gain including commissions. Now I have ammunition to buy these shares back if the market corrects. My “break-even” price for my 130.723 shares of SPY in my “explore portfolio” is now only $104.25 per share as I reinvest dividends and trade the volatility.

My chart shows SPY tested the breakout from above and moved to a new high, which is very bullish. My chart below shows SPY adjusted for dividends experienced a 20.9% bear market in 2011 and two corrections below the 200-DMA in 2012 of the typical 7 to 16% variety that are painful, but often “health restoring.” I expect either of the two dashed green support lines on my graph will contain any corrections from here.
We hear a lot of nonsense about stocks being a lousy investment for the last decade. The truth is they were ONLY bad investments for those who bought at the tops and sold out near the bottoms on fear. Anyone who followed my advice to own stocks in “core and explore” portfolios, reinvest dividends and rebalance as I have recommended in my newsletter since 1998 should be at or near all-time highs. Those who took profits when up and bought when down with me are even better off.

If stocks go nowhere for the next 10 years, they could still outperform a 10-year treasury held to maturity since SPY can pay a higher and growing dividend. If we have a large recession, then stocks may go significantly lower, but in the next decade, stocks should significantly outperform a 10-year treasury, especially if you reinvest stock dividends.

On a personal note: In October 2008 I bought 115 shares of SPY at $87.54 to help rebalance my personal core portfolio at a time I needed to add some large cap equities in a taxable account. I may never sell this position, especially if the reinvested dividends continue to receive a favorable tax rate.

More SPY Charts and a current Quote



For market commentary and my current outlook for select stocks I like, read "Kirk's Investment Newsletter"  

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4 comments:

  1. Pedantic, that is how I describe Bob Brinker these days.

    Bob Brinker talks so slowly. Like if you are less than 80 years old you use twitter or watch Jim Cramer on TV rather than listen to this old show.

    First he asks a question "what does earnings expectation mean?"
    Then he congratulates himself for asking an excellent question. Best chuckle of the day!

    Then he goes on to slam earnings estimates and the quality of actual earnings yet he recommends 100% in stocks. Why?

    If I could call and get it on the air, I'd ask him what good are earnings estimates when he thought the S&P would do about $90 or $100 in 2008 and it came out earning next to nothing when we went over the financial cliff. All he could do was laugh at those Casandras advising caution and issue gift horse buys as the market collapsed.

    ReplyDelete
  2. I have been a Marketimer subscriber for a short time now, and have money sitting on the sidelines waiting to invest. Every month, Bob says the same thing about being vigilant, never mentions putting new money in the market, and then the S&P keeps soaring past his targets until he catches up in the next newsletter. Meanwhile, I have missed most of this bull market because he has been saying that we are in a cyclical bull in a secular bear. I think he is wrong. I think we must be in a secular bull and that he has really blown it. I would really appreciate any thoughts/input.
    Thank you, Charlotte

    ReplyDelete
    Replies
    1. This is exactly how everyone thinks near the top of a bull market. Don't be the last sucker to buy.

      Delete
  3. To me, I find value in the total stock market like myself. I used to enjoy his opening monologs very much on his radio shows and feel they were the best part of his program, but they no longer carry me. When his individual stock picks fell out of bed after many successful picks previously, instead of admitting his mistake and going over his rationale over what went wrong, he embarked smoke and mirrors. Even when you read the newsletter, you could never tell which price was when he recommended it was. UTEK was a company he worked for and when he left, he pulled out. Then he stopped talking about it on the radio and said it would only be in his news letter. When you get the newsletter he recommends Vodophone and no change. I don't believe Brinker reviews the stocks he picks himself, but relies on others who information he pays for. In my view, if you invest in the TSM, for most people you will over time beat almost everyone and it's simple.

    ReplyDelete

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