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Saturday, April 19, 2014

Bob Brinker Sees 1900s for S&P500

With the S&P500 just 1.4% below its all-time closing high at 1864.85, Bob Brinker remains fully invested.  This summary is an enhanced version of what I got from reader via email:
Bob Brinker continues to be constructive on the Equity markets and increased his estimate for the S&P 500 to trade into the low-to-mid 1900’s range going forward
Brinker says the fact the stock market has not experienced a significant correction (10% or more) since the autumn of 2011 cannot be ignored. 
Given the fact that 2014 is a mid-term off-presidential year, Brinker believes’ that the probability of a meaningful correction this year is high. A correction of at least 8% has occurred in every mid-term off-presidential year since 1960. 
Brinker views a correction as a health restoring event for the equity markets.  That means he is not predicting a bear market. 
Brinker is unenthusiastic about adding new money to the stock market at this time.  
Brinker recommends dollar-cost-average purchases to be made on market pullbacks when possible. 
In order to reduce interest rate risk, Bob has replaced all the Bond Funds in his recommended portfolios to lower duration Funds.
It seems Brinker has been weary of this market for a long time. This is what we reported (Feb 24, 2013 Summary) Brinker said in February 2013, over a year ago
Brinker Comment: The stock market indexes are all at or close to their 2013 year-to-date highs and for the most part the highest levels in several years. Those indexes have been strong year-to-date. Having said that, there is a lot of bullish sentiment. A lot of the indicators are showing a lot of bullishness. Usually, at some point, that kind of over-zealous participation is very frequently cause for profit taking. So if you see some profit taking coming into the market, you should not be surprised given the high level of sentiment in a number of indicators.
From a summary of the March 2013 Marketimer posted on the "Bob Brinker Asset Allocation History" we have Brinker also cautious:
"The S&P500 Index has the potential to trade in the mid-1500s range.... The absence of a health restoring correction in 2012 remains a concern"
There you have it.  Brinker has all bases covered.  If the market goes down, he can say he warned it might go down and not to put new money in.  If it keeps going up, as it always does eventually, then he's fully invested and can point to that.
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  1. What was Brinker looking for? He said the same nonsense last year before the market gained over 30%. In his January 4, 2013 Marketimer he wrote:

    "The stock market was not able to experience a health-restoring correction in 2012. The S&P 500 Index could only manage a brief 9.9% short-term pullback from April 2 through June 1. This was much different than 2010 and 2011 when health- restoring corrections paved the way for additional significant upside progress.

    In 2010, the S&P 500 Index declined from its April 23 close of 1217.28 to its July 2 close of 1022.58 for a 16% correction. In the July 2010 Marketimer® we stated that "we rate the stock market attractive for purchase." We added that "on a risk/ reward basis, we believe there is substantial upside potential for stock prices into next year." The S&P 500 Index then proceeded to rally 33.3% through April 2011.

    So, he wanted a 10% correction to give a buy signal and missed a 32% gain just in 2013 waiting for one? That doesn't count all the 15.8% gain in 2012 without a "buying opportunity" either.

    He gave a "gift horse buy opportunity" in 2008 just before the market fell by over 50%. He gave buys all the way down to 1000 but missed the bottom at 666 going silent waiting for a test or something that never came.

    Why does anyone listen to this nonsense?


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