Happy Halloween!

Happy Halloween to all readers of the Bob Brinker Fan Club blog.

See if you can guess or make funnier captions for these pumpkins:

Pumpkin #1

#1: Bob Brinker after he sees the S&P500 returns to four digits (1000s) without him issuing a buy signal in the 800s and 900s despite buy signals given in the 1400s, 1300s and 1200s!

Pumpkin #2

#2: A message to Bob from Marketimer subscribers still holding QQQQs (Charts) they purchased on Bob's advice eight years ago in the $80s (now only $32.89) who are still holding for "future recovery" on Brinker's advice. (See Bob Brinker's QQQ Advice if you don't get the joke.)

Pumpkin #3

#3: Happy Cassandra feasting on bullish pumpkin portfolios now much smaller after the huge bear market. (See "Bob Brinker's May 31, 2008 Cassandra Rant")

Pumpkin #4

#4: A tentative, green investor looking to see if the bear has any more teeth before he considers getting back into stocks. Odds favor he will miss the bottom by a long shot.

Pumpkin #5

#5: A Bear Meat Burger: What I hope to be eating soon after buying stocks and Spiders (SPY) at lower than current levels when the market was near the lows.

Kirk's October 31, 2008 Update: This market sucked big time as it seemed there was significant forced liquidation with few buyers stepping forward with cash as hedge and mutual funds liquidated to meet redemptions. This is the sort of action major bottoms come out of, but it can get darker before the dawn. October is a good month for major bottoms and I did major buying for my explore portfolio with the hope this October is no exception.

The good news is we are now in the "Favorable Season" for stock market returns based on historical data.

• See Sy Harding's MACD Seasonal Buy Signal

The temptation to sell when all others are selling is very strong. Just remember "It's a Wonderful Life" where Potter was buying when all were selling at pennies on the dollar. It is now 2008 and Potter has been replaced by Warren Buffett and the US government. BOTH Buffett and the US Government are buying.

We've got a long history of muddling through so as long as you maintain liquidity by ALWAYS keeping cash reserves, markets going down are usually great opportunities.

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 157% vs. S&P500 only up 9.9% vs. NASDAQ down 5% vs. Warren Buffett's Berkshire Hathaway up 85% (All through 9/30/08) (More Info)

Subscribe NOW and get the November 2008 Issue for FREE! !

.

We Are In A Recession Now; Revenge of the Cassandras!

Congratulations to ECRI for correctly predicting a recession while many others like Bob Brinker early this year were saying the American economy was healthy, they were very bullish and they expected the market to make new all time highs.

When the S&P500 was last at 1400: From "Bob Brinker's May 31, 2008 Cassandra Rant"

“What we have right in here now is evidence that the Cassandras, who earlier this year, were telling us we were in recession – right now they’ve basically – well I’ll be kind, basically, they look like fools right now.

….So what we have here basically, is an example of false prophets and it’s sad. And the reason it’s sad is the damage done. Think of the people that are looking today at the market, S&P at 1400 and they’ve been scared out of the market in the first quarter by these bears………

It’s just amazing and yet these people are out there, and these people are not happy, I’m sure, to find themselves out of a rising market since March. To find themselves looking for ever lower prices when in fact we’ve had the opposite."..

Who looks like a fool now Bob Brinker?

Nobody doubts the economy is shrinking in the fourth quarter. The US Department of Commerce says the US economy (Q3 GDP) contracted at a 0.3% annual rate in the third quarter. Rex Nutting of MarketWatch summarizes:

• The U.S. economy contracted at a 0.3% annualized rate in the third quarter, as consumer spending declined at the fastest pace in 28 years, the Commerce Department estimated Thursday.
  
• Final sales to domestic purchasers fell 1.8%, the largest decline in 17 years.
  
• Consumer spending dropped 3.1%, the first decline in 17 years and the biggest drop in 28 years
• business investment fell 1%.
  
• Investments in homes fell for the 11th straight quarter.
• Inflation-adjusted after-tax incomes fell 8.7%, the largest quarterly decline since the record-keeping began in 1947!!!!

Readers of my blog, Kirk's Market Thoughts, should not be surprised by this data as The Economic Cycle Research Institute, a New York-based independent forecasting group also known as ECRI, warned us on my blog earlier this year with the following articles as well as their regular "Weekly Leading Index" (WLI) updates that I cover in my newsletter and often report in my mailings between monthly newsletters to my subscribers.

• January 2008 Marketimer with S&P500 @ 1468.36 : Pg 3:
  

  “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."

• Saturday, January 05, 2008: "ECRI Says Fed Has Room To Cut Rates Despite Fears of Inflation"
  

  "WLI growth is now at its worst reading since the 2001 recession. However, the WLI's recent decline is not based on pervasive weakness among its components, suggesting that a recession could still be averted"

• Friday, January 25, 2008: "ECRI Says There Is A Window of Opportunity for the US Economy"
  

  The U.S. economy is now in a clear window of vulnerability, given the plunge in ECRI’s Weekly Leading Index (WLI) since last spring. Yet there is a brief window of opportunity within that window of vulnerability to avert a recession. That is why ECRI has not yet forecast a recession.
  

• Friday, March 28, 2008: ECRI Calls it "A Recession of Choice"
  

  The U.S. economy is now on a recession track. Yet this is a recession that could have been averted. In January, given the plunge in the Weekly Leading Index, we declared that the economy had entered a clear window of vulnerability. Yet we emphasized the brief window of opportunity within that window of vulnerability for timely policy stimulus to head off a recession.

• Moneytalk, April 19, 2008, Bob Brinker said:
  

  "It’s my opinion that the March 10th low on the S&P 500 was the bottom for the correction. And I think that what happened was that was a very successful test of the initial low recorded January 22nd."

The Q3 GDP number is subject to revision in the future but few think it will be revised to a positive number. Most economists now think we could have a much deeper and longer recession than recent short, shallow ones we are more used to. Some bears (Cassandras if you prefer) are now calling for a depression while others like Warren Buffett and Larry Lindsy have started to buy stocks again. See:

• Sy Harding's MACD Seasonal Buy Signal
  
  
• Warren Buffett Buy Signal
  
  
• John Bogle on CNBC

Congratulations to ECRI for correctly predicting a recession. I wonder if Brinker will say this weekend he feels like a fool or will he pretend he was right all along. For sure, not knowing how he will spin the data is what makes him so entertaining!


Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 157% vs. S&P500 only up 9.9% vs. NASDAQ down 5% vs. Warren Buffett's Berkshire Hathaway up 85% (All through 9/30/08) (More Info)

Subscribe NOW and get the October 2008 Issue for FREE! !

Other key sentiment indicators for stock market technical analysis include:

• AAII: American Association of Individual Investors Bull/Bear Index: AAII Charts and Info
• II-BBS: Investors’ Intelligence Bull Bear survey: II Charts and Info
• ISE (International Securities Exchange) Sentiment Index: ISE Charts and Info
• State Street Investor Confidence Index State Street Charts and Info

==> Very Best CD Rates with FDIC <==

Jim Rogers and Bob Brinker

Bob Brinker and Jim Rogers do not see eye-to-eye.

Jim Rogers has been correctly short the banks and invested in commodities.

Bob Brinker has been fully invested in equities since March 2003. He has ridden this massive bear market down while fully invested AND while issuing several "ALL IN buy signals for new money" in the 1400s, 1300s and 1200s right before the market fell into the 800s.


Bob Brinker says inflation is not and will not be a problem while Jim Rogers says otherwise.

This is a good video interview:

Jim Rogers Says Massive inflation is Coming

From the summary of Roger's key points

• We are going to have an inflation nightmare.
  
  
• Whenever people have printed a lot of money, six months to two years later, you have terrible inflation.
  
  
• People all over the world are printing money like mad.
  
  
• Massive inflation is coming and the only way to protect yourself is to be out of paper assets and in (US Treasury Rates)

During the 1990s when Jim Rogers was warning that there was a bubble in US equities and they were not the place to invest, Brinker called him "Mr. Bow Tie." It is interesting that the S&P500 is now back to where it was when Rogers was saying commodities were the better investment.

The chart above shows the S&P500, before dividends, has lost money since January 1, 1998 while gold has more than doubled from about $350 per ounce to $730 per ounce today.

It would be interesting to see who has made and held on to more money the past ten years, Brinker or Rogers.


One thing for sure, neither has to be very happy about being down nearly 50% from the peaks when both were quite bullish for what they recommended.

*==> LIBOR Rates at a Glance <== *
New!

Another Bob Brinker Buy Signal Possible

Bob Brinker fans take note! Today the market closed a tiny bit lower than its October 10, 2008 low but on lower volume.

Click charts courtesy of stockcharts.com for full size images
More S&P500 Charts

This is the type of "successful test of the low" that BobBrinker has used in the past to give buy signals. I would not be surprised if he issues a bulletin soon.

Click charts courtesy of stockcharts.com for full size images

Of course, Brinker has been fully invested since March 2003 and gave many buy signals at much higher levels already. Thus any announcements of a new "buy level" now would be more entertainment than value to his subscribers.

Chart of Bob Brinker "All-In" Buy Levels

Click charts courtesy of stockcharts.com for full size images
More S&P500 Charts

My Recent Buys

Equities: Using profit taking dollars from selling shares (announcement in pdf) when the market was higher, I recently purchased Google (GOOG Charts) at $310 for my personal and newsletter explore portfolios. I also bought Spiders (SPY charts) at $87.54 for my personal core portfolio to rebalance when the market was at an extreme oversold level.

Fixed Income: I also recently purchased a 4.30%, 1-year CD at Wachovia Bank.

"Kirk's Investment Newsletter" (Click for Free Sample Issue)

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 157% vs. S&P500 only up 9.9% vs. NASDAQ down 5% vs. Warren Buffett's Berkshire Hathaway up 85% (All through 9/30/08) (More Info)

Subscribe TODAY and get the October 2008 issue FOR FREE!

Warren Buffett Is Buying American Stocks

Bob Brinker's guest last week was Charles Ellis, author of the book "Winning the Loser's Game: Timeless Strategies for Successful Investing. Bob Brinker called Ellis a legend. Ellis said he thinks the world of Warren Buffett and has his own money invested in Buffett's Berkshire Hathaway. I too think the world of Buffett and pay attention to what he does even more than what he says.

This article from the New York Times, "Buy American. I Am, by Warren Buffett shows Buffett is moving from US Treasuries to US Stocks now.

Buffett writes he had his personal portfolio that was not in Berkshire Hathaway stock in "nothing but United States government bonds."

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

I guess Buffett missed Bob Brinker's "All in Buy Signal" at S&P500 1450.

Click chart courtesy of stockcharts.com for full size image

Buffett writes a simple rule dictates his buying:

Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Buffett is also clear he can't predict the stock market, but he sure seems better than most given he has been in safe US Treasury bonds with his cash for many years leading up to today's bargain basement prices:

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

I like what Buffett says about cash.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

I agree. On Monday I moved a good chunk of my core portfolio from Vanguard Money Funds to Vanguard's TIPS fund (VIPSX Charts) after I sent a chart to my newsletter subscribers showing TIPS were paying the highest base rate in years.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”I completely agree and have been buying this downturn myself. Some things I bought were the S&P500 exchange traded spiders fund (SPY Charts) at $87.54 on 10/10/08 and my very first shares ever of Google (GOOG Charts) at $310 yesterday.

If you want to know what else I have been buying in this period of weakness with my profit taking dollars from selling when the market was higher, Subscribe to Kirk's Investment Newsletter TODAY and get the October 2008 issue FOR FREE!

Buffett was one of the Cassandras Brinker ranted at in May 2008 when he said:

“What we have right in here now is evidence that the Cassandras, who earlier this year, were telling us we were in recession – right now they’ve basically – well I’ll be kind, basically, they look like fools right now. Because all that they’ve accomplished with their talk about recession…………all that they have to show for their efforts is that they scared the people who listened to them out of the stock market this past winter……….

……..And probably a lot of those people got scared out near the correction lows. The initial correction low in January, which was successfully tested in mid-March, before the market reversed and resumed its uptrend. And basically, if you were to total up all of the accomplishments of the Cassandras, that would be it – that they scared people out of the market during a stock market correction in the first quarter……….”
(See Summary: Bob Brinker's Moneytalk, May 31, 2008 for more.)

Buffett warned that financial derivatives were "weapons of financial destruction" and he warned about the tech bubble that caught Brinker with his pants down with his TEFQX and QQQQ advice in 2000. Warren Buffett has gotten it right more than most others, especially Bob Brinker!

I had to laugh when I heard how quickly Brinker changed the subject when Charlie Ellis started to talk about how smart Buffett was on Brinker's show last week.

"Kirk's Investment Newsletter" (Click for Free Sample Issue)

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 175% vs. S&P500 only up 20% vs. NASDAQ only up 5% vs. Warren Buffett's Berkshire Hathaway up 71% (All through 6/30/08) (More Info)

Subscribe TODAY and get the October 2008 issue FOR FREE!

Bear Market Reaches 47% from the top. Bob Brinker Fully Invested for the full decline.

This graph of the S&P500 back to 2002 says it all. Below the chart are the current statistics for this bear market that is currently 43% off its peak value just a year ago.

Click image courtesy of stockcharts.com to see in full size

2007-2008 Bear Market Statistics 10/11/08

S&P500 Chart

Last Market High 10/11/07 at 1,576.09
Last Market low 10/10/08 at 839.80
Current S&P500 Price 899.22
Decline in Points = 676.87
Decline in percent = 42.9%
Max Decline = 46.7%

=>This means the decline from intraday high to intraday low is 46.7% and we are currently 42.9% off the peak.

=>The decline in the S&P500 from the closing high to the closing low was 42.5%

DJIA Charts

Last Market High 10/11/07 at 14,279.96
Last Market Low 10/11/08 at 7,773.71
Current DJIA Price 8,451.19
Decline in Points = 5,828.77
Decline in percent = 40.8%
Max Decline = 45.6%

=>This means the decline from high to low has been 45.6% and we are currently 40.8% off the peak.

=>The decline in the DOW off the closing high to the closing low was 40.3%

NASDAQ Charts

Last Market High 10/31/07 at 2,861.51
Last Market Low 10/10/08 at 1,542.45
Current NASDAQ Price 1,649.51
Decline in Points = 1,212.00
Decline in percent = 42.4%
Max Decline = 46.1%

=>This means the decline from intraday high to intraday low is 46.1% and we are currently 0.4235526 42.4% off the peak.

=>The decline in the NASDAQ off the closing high to the closing low was 42.5%

If you want to know what I have been buying in this period of weakness with my profit taking dollars from selling when the market was higher, Subscribe to Kirk's Investment Newsletter TODAY!

Moneytalk Saturday October 11, 2008 Comments

Bob Brinker said he did not forecast this bear market.

"My work did not forecast this bear market decline. I have no way of forecasting a global banking crisis."

That was no surprise to readers here. When the S&P500 rallied to 1400s earlier this year, Brinker made fun of those who were predicting a meltdown on his show calling them "Cassandras." [See May 31st Cassandra Rant]

Brinker said: “What we have right in here now is evidence that the Cassandras, who earlier this year, were telling us we were in recession – right now they’ve basically – well I’ll be kind, basically, they look like fools right now. Because all that they’ve accomplished with their talk about recession…………all that they have to show for their efforts is that they scared the people who listened to them out of the stock market this past winter……….”

Don't you wish you were so lucky to have been scared out of the market when the S&P500 was way, way up at 1300?

Not once did he mention the price of oil today which he blamed when the market fell its first 20%. Now that the market was down as much as 47%, Brinker now agrees with those of us who said it was troubles in the banking/Financial sector that was responsible for the market's problems. BTW, long ago I heard Warren Buffett say financial derivatives were "weapons of financial destruction." Buffett had 20 or 30% of his Berkshire Hathaway in cash waiting for a fat pitch. He's been picking through the wreckage lately buy at dimes on the dollar the top quality firms by supplying capital at a high rate in exchange for warrants to buy stock.

Other than that, I enjoyed the show a great deal even though he didn't talk about the stock market, just the problems he will use as an excuse for missing the bear market the "fools" he ridiculed earlier were right about.

Brinker talked about LIBOR and the TED Spread. From Wiki:

The TED spread is the difference between the interest rates on interbank loans and short-term U.S. government debt ("T-bills"). Initially, the TED spread was the difference between the interest rates for three-month U.S. Treasuries contracts and the three-month Eurodollars contract as represented by the London Inter Bank Offered Rate (LIBOR). However, since the Chicago Mercantile Exchange dropped T-bill futures, the TED spread is now calculated as the difference between the three-month T-bill interest rate and three-month LIBOR.

and from ForBestAdvice.com:

LIBOR is the London Interbank Offered Rate. It is a daily reference rate based on the interest rates banks in the London wholesale money market (or interbank market) offer to lend unsecured funds to each other. LIBOR is usually slightly higher than the London Interbank Bid Rate (LIBID). LIBID is the rate the same banks are prepared to accept deposits.

See:

• Current LIBOR Rates
  
  
• US Treasury Rates

Brinker's guest was Charles Ellis whom Bob called a "Wall Street Legend." Ellis was there to plug his new book, "The Partnership: The Making of Goldman Sachs." Bob Brinker strongly recommended the book "Winning the Loser's Game: Timeless Strategies for Successful Investing by Charles Ellis.

The most interesting thing from the interview was Ellis said he thinks the World of Warren Buffett and has his own money invested in Buffett's stock. Berkshire Hathaway (Ticker symbol BRKA Charts) is the company. Brinker was quick to change the subject!

The Partnership: The Making of Goldman Sachs (Hardcover)

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Winning the Loser's Game: Timeless Strategies for Successful Investing

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• "This remarkably insightful and lucidly written investment classic should be required reading for every serious investor."--Burton G. Malkiel, Author, A Random Walk Down Wall Street
  
  
• "Ellis has written a liberating book about investing. This book will enable you to face your money matters squarely, with intelligence and vision, and help you create a plan that will increase the security and freedom of your later years."--Byron R. Wien, Morgan Stanley

Q: "What can I do to beat the markets?"

It's one of today's most often asked questions. And the answer, maddening in both its simplicity and its complexity, is simple: Instead of playing the loser's game of trying to "beat the markets," enjoy winning investing by learning how to get the markets to work for you.

Mark Hubert on Bob Brinker

Bob Brinker remains bullish and fully invested as he has been since March 2003. Brinker has issued several "all in" buy signals for new money as the market has crashed. See the chart of the market below for more on these buy levels.

Note: To follow this blog and get emails automatically when new articles are posted, simply click "Follow this blog" to the right then follow the instructions.

In the Barrons's Online article "What the Best Market Timers Are Saying" Mark Hulbert reports only three of the top nine market timers he follows are bullish or on the bearish side of neutral but their average equity allocation is 59%. This is what Mark says Brinker wrote in the latest Marketimer:

Bob Brinker's Marketimer: Bullish. In his most recent issue, which was published in early October, editor Bob Brinker wrote: "We believe the stock market will return to an uptrend within six months of the start of the next economic recovery. Although the timing of the recovery is uncertain, our view is that it could be underway by next spring. If that scenario unfolds, we could be looking at a stock market turnaround beginning in this year's fourth quarter. This bear market decline has been accompanied by an extraordinary flow of negative financial news, but we are focused on stock market recovery in 2009 as investors go through the process of discounting economic recovery prospects in advance of an improved economic outlook." Brinker is recommending that subscribers' stock portfolios be fully invested.

Kirk Comment: Model Portfolios #1 and #2 are and have been 100% in equities since March 2003. Model portfolio #3 started at 50:50 in March 2003, but went higher as the market went up while Brinker recommended against rebalancing to callers of his show.]

Kirk Comment: Mark should have said “remain fully invested” since Brinker has recommended 100% in equities since March 2003.

What is interesting to me is Hulbert compares the top timers on his list to the bottom timers on his list but he doesn't compare either group to buy and hold the Wilshire 5000 index over the last 20 years. Hulbert wrote:

....I continue to believe that a good approach is to consult the investment newsletters with the best long-term records at calling turns in the stock market.

You might wonder why I would even bother, since the top performers have been consistently more bullish than the bottom performers throughout this bear market. Why turn to them now when they've been wrong over the last year?

My answer: No approach is foolproof. But, over time, the top performers turn out to be more right than the bottom performers.

Kirk Comment: Is that a "well duh moment" or what?

Mark continues:

"And the top performers right now are significantly more bullish than the bottom performers."

Mark is missing a key piece of data in his analysis. His top timers lean towards being bullish since the markets are higher now than they were 15 years ago. If a top timer can't match the market, then why bother with them at all?

Mark used a 15 year time frame over which the stock market is higher so bulls will have a better “long-term record” than the bears. If he used a 3-year period or less, the newsletters with a bearish bias or perhaps gold and commodity letters would clearly be at the top.

From Mark Hulbert's 8/31/2008 newsletter showing his list of the top mutual fund newsletters (27 total eligible) for total returns for the last 15 years:

1. No-Load Fund-x = 13.9%
2. Equity Fund Outlook = 13.8%
3. Timer Digest = 11.8%
4. All Star Fund Trader = 11.4%
5. Bob Brinker's Marketimer = 10.3%
   
   Wilshire5000 9.0%
   

March 2008 by Mark Hulbert on Pg 3 of the March 2008 issue of "The Hulbert Financial Digest" that reviews Brinker's newsletter wrote:

"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."

So one has to take Brinker's place on the list with a truckload of salt.

Make sure you read my recent blog articles:

• ISE Sentiment Turning Up
  
  
• October 9 Bear Market Statistics
  
  
• John Bogle on CNBC

To follow this blog and get emails automatically when new articles are posted, simply click "Follow this blog" above then follow their instructions.

Mark Hulbert on Timer Digest and No Load Fund Investor

Timer Digest and No Load Fund Investor have excellent long term records. In the Barrons's Online article What the Best Market Timers Are Saying Mark Hulbert reports only three of the top nine market timers he follows are bullish or on the bearish side of neutral but their average equity allocation is 59%. Mark Reports:

No Load Fund Investor: Neutral to moderately bullish. Editor Mark Salzinger wrote in early October that he has resisted the urge to sell into this downtrend, and is maintaining his asset allocation recommendations. For his so-called "Wealth Builder" portfolio, his letter's most aggressive, that allocation is 70% to U.S. equities and another 15% to international stocks. [85% total in equities]

Kirk Comment: My most aggressive portfolio is 80% equities and 20% in fixed income.

Timer Digest: Bearish: Editor Jim Schmidt bases this newsletter's market timing model on a consensus of the top market timers. His consensus of the top ten based on performance over the last 52 weeks is bearish, with 1 bull, 7 bears, and 2 neutral. His consensus of the top ten for performance over the last two years is bearish, with all ten newsletters bearish. However, in his latest issue, dated October 6, Schmidt wrote: "The deeper the financial markets fall, the greater the inevitable rally will be and the longer the new bull market will last. Meanwhile, it has been said that the average investor is currently behaving like a deer in the head lights during this crisis." The newsletter's model portfolios currently are about 90% invested in stocks, on average.

From Mark Hulbert's 8/31/2008 newsletter showing his list of the top mutual fund newsletters (27 total eligible) for total returns for the last 15 years:

1. No-Load Fund-x = 13.9%
2. Equity Fund Outlook = 13.8%
3. Timer Digest = 11.8%
4. All Star Fund Trader = 11.4%
5. Bob Brinker's Marketimer = 10.3%
   
   Wilshire5000 9.0%

On Pg 3 of the March 2008 issue of "The Hulbert Financial Digest" that reviews Brinker's newsletter, Mark Hulbert wrote:

"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."

So one has to take Brinker's place on the list with a truckload of salt.

Since 12/31/98 "Kirk's Explore Portfolio" is UP 175% vs. S&P500 only up 20% vs. NASDAQ only up 4.6% vs. Warren Buffett's Berkshire Hathaway up 71% (All through 6/30/08) (Sample Issue and more info).

If you want to know what I have been buying in this period of weakness with my profit taking dollars from selling when the market was higher, Subscribe to Kirk's Investment Newsletter TODAY and get the October 2008 Issue for FREE!
.

Bear Market Reaches 37% from the Top

If anyone still thinks Bob Brinker, or anyone else for that matter, can time the market, then they should have their head examined.

From the peak, the S&P500, DJIA and NASDAQ are down 37%, 35% and 39% respectively. Bob Brinker has been fully invested for the whole ride while giving buy signals for those with "new money" in the mid 1400s, 1300s and 1200s. Since the market went through his last buy level like a hot knife through better, he's back at "dollar cost average" new money as he looks to "identify" a new bottom.

I bought some stock yesterday and today so maybe I too should have my head examined for putting some of my cash at risk.

Despite all the evidence that nobody can time the markets, I like to play around with a tiny fraction of my explore portfolio to see if I can add any value with it. When the DOW broke support at about 12,000, the minimum target was 9,500. We are there now which makes me wish I'd used my 20:20 hindsight to sell everything when the markets were high to start buying back now. Of course, so does every other asset allocator on the planet which is why market timing has such appeal despite the evidence nobody can do it over the very long term.

Kirk's Asset Allocation Advice: I like the rule-of-thumb "120 less your age in equities." The equities should be a globally diversified basket of index funds such as the "core portfolios" I recommend in "Kirk Lindstrom's Investment Newsletter." For example, if you are 40 years old and don't plan to retire for 20 or more years (unless you get lucky with some of my "explore portfolio" stock picks) then you would have 80% in equities and 20% in fixed income. If you are well into critical mass, then put even less into equities and get inflation protection from TIPS since you don't need the extra "expected" return from equities at the much higher volatility (risk.)

Here are the latest bear market statistics.

2007-2008 Bear Market Statistics 10/07/08

S&P500 Chart

Last Market High 10/11/07 at 1,576.09
Last Market low 10/07/08 at 996.23
Current S&P500 Price 996.23
Decline in Points = 579.86
Decline in percent = 36.8%
Max Decline = 36.8%

=>This means the decline from intraday high to intraday low is 36.8% and we are currently 36.8% off the peak.
=>The decline in the S&P500 from the closing high to the closing low was 36.3%

DJIA Charts

Last Market High 10/11/07 at 14,279.96
Last Market Low 10/07/08 at 9,346.67
Current DJIA Price 9,447.11
Decline in Points = 4,832.85
Decline in percent = 33.8%
Max Decline = 34.5%

=>This means the decline from high to low has been 34.5% and we are currently 33.8% off the peak.
=>The decline in the DOW off the closing high to the closing low was 33.3%

NASDAQ Charts

Last Market High 10/31/07 at 2,861.51
Last Market Low 10/07/08 at 1,754.88
Current NASDAQ Price 1,754.88
Decline in Points = 1,106.63
Decline in percent = 38.7%
Max Decline = 38.7%

=>This means the decline from intraday high to intraday low is 38.7% and we are currently 0.386729384 38.7% off the peak.
=>The decline in the NASDAQ off the closing high to the closing low was 38.6%

If you want to know what I have been buying in this period of weakness with my profit taking dollars from selling when the market was higher, Subscribe to Kirk's Investment Newsletter TODAY!

Bear Market Statistics - Bob Brinker Fully Invested for 30% Bear Market

Market Timer Bob Brinker Fully Invested for 30% Bear Market. John C. Bogle, Vanguard founder and patron saint for those of us who use asset allocation rather than market timing, wrote in Common Sense on Mutual Funds, pg 20:

The idea that a bell rings to signal when investors should get into or out of the stock market is simply not credible. After nearly fifty years in this business, I do not know of anybody who has done it successfully and consistently. I don't even know anybody who knows anybody who has done it successfully and consistently. Yet market timing appears to be increasingly embraced by mutual fund investors and the professional managers of fund portfolios alike.

John, Jack to his friends, Bogle has been a guest on Moneytalk several times.

This graph shows the market decline in percent since it peaked nearly a year ago. For those who don't like graphs or want more information, I list the full set of data below.

Click chart courtesy of stockcharts.com for full size image

2007-2008 Bear Market Statistics 10/04/08

S&P500 Chart

Last Market High 10/11/07 at 1,576.09
Last Market low 10/03/08 at 1,097.85
Current S&P500 Price 1,099.23
Decline in Points = 476.86
Decline in percent = 30.3%
Max Decline = 30.3%

=>This means the decline from intraday high to intraday low is 30.3% and we are currently 30.3% off the peak.

=>The decline in the S&P500 from the closing high to the closing low was 29.8%

DJIA Charts

Last Market High 10/11/07 at 14,279.96
Last Market Low 10/03/08 at 10,310.25
Current DJIA Price 10,325.38
Decline in Points = 3,954.58
Decline in percent = 27.7%
Max Decline = 27.8%

=>This means the decline from high to low has been 27.8% and we are currently 27.7% off the peak.

=>The decline in the DOW off the closing high to the closing low was 27.1%

NASDAQ Charts

Last Market High 10/31/07 at 2,861.51
Last Market Low 10/03/08 at 1,947.19
Current NASDAQ Price 1,947.39
Decline in Points = 914.12
Decline in percent = 31.9%
Max Decline = 32.0%

=>This means the decline from intraday high to intraday low is 32.0% and we are currently 31.9% off the peak.

=>The decline in the NASDAQ off the closing high to the closing low was 31.9%

With asset allocation, say 50% in equities and 50% in fixed income for someone 70 years old, when the market is making new highs, you sell equities to "take profits" to get back to 50% in equities. Then when the markets eventually have a bear market, you use those profit taking dollars to repurchase equities at bargain basement prices. For a detailed explanation, see my article "Using Asset Allocation to make money in a Flat Market."

Asset Allocation Advice: I like the rule-of-thumb "120 less your age in equities." For example, if you are 40 years old and don't plan to retire for 20 or more years (unless you get lucky with some of my "explore portfolio" stock picks) then you would have 80% in equities and 20% in fixed income. If you are well into critical mass, then put even less into equities and get inflation protection from TIPS since you don't need the extra "expected" return at the much higher risk.

If you want to know what I have been buying in this period of weakness with my profit taking dollars from selling when the market was higher, Subscribe to Kirk's Investment Newsletter TODAY and get the October 2008 Issue for FREE!

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Bob Brinker Missed Another 30% Bear Market

I like how Bob Brinker has taught thousands of listeners over the years to become their own investment advisers by:

• Asking questions when people make great claims
• Learning to know and understand what they own
• and to not take the word of annuity salesman or insurance agents selling whole life policies.
  

With the "polishing Brinker's assets" segment out of the way, my big disagreement with Brinker is his "act" that he can time the stock market to add value over buy and hold of a diversified basket of index funds so he can sell a newsletter called "Marketimer." Even worse is I strongly disapprove of Brinker's total lack of transparency for his past advice that did not work out well.

One would think a "top rated" market timer would have a good record calling bear markets rather than buy, buy, buy as it fell 30% then switch back to "dollar cost average" near the bottom (or the bottom to date.)

By my count we have had five bear markets since Bob Brinker has had a newsletter and he has only partially called one.

On the radio during the late 1990s when Brinker was selling himself as a market timer who would call the top, he said he planned to go to 100% cash if his Marketimer Long-term Stock Market Timing Model went bearish. He went so far in one newsletter as to tell his subscribers to get the prospectus for a fund that would short the market so they could act quickly when he gave his sell signal. When the 2000 to 2002 bear market began, he went to 65% cash then put up to half of that back in to the NASDAQ "off the books" in October 2000 so he had his "assets" covered no matter where the market went.

Here are the last five bear markets, how far they declined from peak to bottom and what Bob Brinker recommended:

• October 1987: 30% decline
  =>Brinker rode it down fully invested then went to 100% cash in January 1988
  
  
• Gulf War Bear; just over 20%
  =>Brinker got back to 100% invested just before this bear market started.
  
  
• 1998 Bear Market; About 22%
  =>Brinker rode it down fully invested. It was a short bear market so while painful for subscribers who were fully invested, holding through it was not bad advice.
  
  
• March 2000 to October 2002 Bear Market; About 50%
  =>Brinker went to 60% cash about 5% below the top in Jan. 2000, raised another 5% cash in the summer then in October 2000 he recommended putting up to half that cash into the NASDAQ100 ETF known as QQQQ which was in the $80s at the time. In March 2003 he advised putting the reset of the cash back into the market when it was about 4% above the 2002 bottom.
  =>See Bob Brinker's QQQ Advice and Effect of QQQ advice on reported results
  
  
• October 2007 to now bear market; 30% decline so far
  =>Brinker was fully invested at the top and gave "all in" buy signals in the mid 1400s, mid 1300s and mid 1200s.
  =>After the market fell to the low 1200s, he changed "lump sup in mid to low 1200s" back to "dollar cost average."
  =>With the market hitting the very low 1100s the other day, he was back to "dollar cost average" new money.
  
  
• See Bob Brinker's Asset Allocation History

Five bear markets with little value added before taxes and yet he still calls his newsletter "Marketimer" and sells the idea on his show that he tries to time the market. It is like a rock selling itself as "trying to float."

What sort of market timer is fully invested at 1576, calls for an "all in buy" in the mid 1400s then has "dollar cost average" while in the 1100s after riding the bear down 30% fully invested and won't reassure his listeners on the radio that he was wrong to be so bullish at the top so they don't panic now and sell? The ONLY time he has talked about his market advice since it fell below 1400 was when a caller ambushed him to ask if he missed the sell signal. Brinker answered a different question to make it look like the caller was mistaken.