Bob Brinker - Market Prediction, Diversification and Inflation

Moneytalk with Bob Brinker Commentary for June 16, 2013 Radio Show

The following commentary is from my "Retirement Advisor" writing partner,  David Korn.

DIVERSIFYING 

Caller: This caller inherited some stock that accounts for 25% of his portfolio. How should he handle that? 

Bob said he would own something like the total stock market index through Vanguard or Fidelity in a low cost index fund. That is a sideways move in the stock market. 

Kirk Comment:  I like this advice.  Depending on how much money the caller has, I would recommend further diversification with some (20% for young people, 50% for retired people) in fixed income so you have money to "rebalance" and buy low when the market has the inevitable correction.  I felt so sad for many Brinker followers who were 100% in equities at the top before the last bear market.  The rode it all the way down and some actually sold out according to some sad emails I get. 

• More at: Brinker's Asset Allocation History

I also like to split the total stock market index fund into its components plus add international diversification once you have enough in your portfolio to get over the minimums. Then when you have enough in this diverse portfolio to have the six index funds I currently recommend in my "Core Portfolios" then you are ready to add explore stocks.  Of course some like to add explore stocks (what Brinker calls "individual issues") sooner, which is fine, but that comes at a price of higher portfolio volatility.  That is fine with me as long as it doesn't scare you out of the portfolios when the markets are down.  One reason my method works is we have targets to buy low at so we welcome market declines.

• More at Kirk's Two Investment Letters

The caller asked if he should sell the stock now, raise the cash, and then wait for a stock market correction to go into the index fund? 

Bob said he doesn¹t know what the market will do and that is a sideways move and since he recommends being invested right now you do it on the same day. 

Kirk Comment:  I don't think I ever heard Brinker say this before!  Did someone slip a "truth serum" into his iced tea?

EC( David Korn): Bob continues to recommend a fully invested position insofar as the stock market is concerned, a recommendation he has held since May 2003. 

Kirk Comment:  Actually Brinker has recommended being "fully invested" since March 2003.

INFLATION 

Brinker Comment: The Consumer Price Index comes out Tuesday and we have inflation down near record lows. Why is inflation so low? Because the economy is growing slowly and there is so much excess labor out there. When you combine those two things, it is a recipe for low inflation. 

EC: I read a thought provoking article entitled, ³The Truth About Inflation: Prices Don¹t Deceive, the CPI Does² that I found at this url:  http://tinyurl.com/l3rqsad

MONEYTALK GUEST Anita Raghavan 

Bob had on Anita Raghavan, author of the book, "The Billionaire¹s Apprentice: The Rise of the Indian-American Elite and The Fall of the Galleon Hedge Fund." The interview wasn't worth summarizing at all 

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Some of the above commentary is courtesy of my writing partner, David Korn: 

David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service.  Copyright David Korn, L.L.C. 2013

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Marketimer Income Portfolio Performance

In the June 2013 "Hulbert Financial Digest,"  editor Mark Hulbert wrote an interesting articlecalled "The virtues of doing nothing" that said most of the advisors he follow would do better buying and holding! His incredible conclusion:  

"The bottom line?  The inescapable conclusions is that the average transaction that an advisor does is a mistake, at least in the sense that he would be better off if he hadn't undertaken it in the first place."

We may joke that Brinker's "Marketimer" newsletter model portfolios have been fully invested without an allocation change and very few model portfolio changes since March of 2003, but with Hulbert's data supports this idea.

Marketimer Income Portfolio:  Brinker tracks the performance of his three model portfolios, but I've never seen him show annual returns by year for his "Income Portfolio."  My guess is he doesn't want Mark Hulbert to count this against his overall performance since you give up return for safety.  Lets examine the performance of the Marketimer Income Portfolio so far this year.

Brinker Income Portfolio at start of year

Component Performance YTD for
Brinker Income Portfolio

Brinker may have made changes to what is in this portfolio since January, but using Hulbert's idea that of keeping it the same, the performance of the Marketimer Income Portfolio is currently down 2.4% YTD: 

Later on, I hope to do similar calculations for past years to get an idea of how well Brinker's "Income Portfolio" does against a benchmark like 10-yr Treasuries or Vanguard's Total Bond Fund (which is what John Bogle recommends.)

The good news is Brinker recommended very recently to several callers that if they were to only buy one fund, it would be Vanguard's Total Stock Market Index Fund, VTSMX.  The ETF for that fund is VTI which the chart above shows is doing very well this year.

SU - Suncor Energy - A Brinker Individual Issue

Bob Brinker listed Suncor Energy Inc. (SU Stock Quote and Charts) as one of his individual issues in his January 1, 2013 Marketimer. This article reports on how SU has performed.

About:   Suncor Energy Inc., together with its subsidiaries, operates as an integrated energy company. The company primarily focuses on developing petroleum resource basins in Canada's Athabasca oil sands; explores, acquires, develops, produces, and markets crude oil and natural gas in Canada and internationally; transports and refines crude oil; markets petroleum and petrochemical products primarily in Canada; markets third-party petroleum products; and engages in energy trading activities. It operates in Oil Sands, Exploration and Production, and Refining and Marketing segments.  (More at Yahoo! Finance) 

SU YTD Performance vs S&P500

Brinker's History with Suncor Energy Inc.:  In his May 4, 2009 Marketimer, Brinker wrote, "We rate Suncor attractive for purchase in the mid-20's price range."  

• Suncor's low that day was $27.50.  He missed and should have remained patient...
• Then in the June 2009 issue of MT, he raised the buy level for SU to "low $30's" which allowed him to buy on the decline to $33.34 (my definition of low 30s). 

Here is a chart of Suncor Energy from 2007 with Bob Brinker's buy range shown with dashed green lines.

EVERYONE has stock picks that don't do well.  What matters is how they do in total if a subscriber were to buy them according to the advice given.  Brinker usually says no more than 4% in any individual stock but he is unclear on how much in ETFs.  For example, would 10% in GLD and VTI, two of his individual issues, be acceptable to him?  Someone should call Brinker and ask him to account for his "individual issue portfolio" in his reported results and give a clear, easy to understand recommendation on how to use his "individual issues" as I do in my newsletter for my "Explore Portfolio."  

Bob Brinker doesn't include the performance of his "individual issues" in his overall performance. He could easily report their annual performance like I do for my Explore Portfolio performance here. 

VFIIX - Vanguard's GNMA Fund

Vanguard's GNMA Fund with ticker VFIIX (Charts and current quote) is Bob Brinker's favorite bond fund to talk about on his show "Money talk with Bob Brinker."  Brinker recommends VFIIX on the radio and in his "Marketimer" newsletter portfolios that are not 100% in equities.

Bob has told callers who are worried about net asset value (NAV) fluctuations leading to potential losses to either use a stop loss at a price they don't want to lose any more money or to put the funds in FDIC insured CDs.

This chart shows how the fund has performed on a NAV basis since January 1, 2012.

Bob Brinker's Favorite Bond fund is down fairly significantly this year. I wonder how many expected VFIIX to fall so suddenly?

According to Vanguard, the "income return" from the fund last year was only 2.7%

This means the fund has lost money for anyone who held it as of December 31, 2011 or later. Here is a chart showing the fund adjusted for dividends.

VFIIX with price adjusted for dividends showing a loss since 1/1/2012

Note how VFIIX was a money maker for anyone who "sold in May" at the very top on a basis adjusted for dividends.  Like fame, that was fleeting...

Does these charts erase any doubts about Brinker's ability to time either the stock or bond markets?

FWIW, I got out of Vanguard's GNMA fund some time ago and have my core and explore fixed income funds mostly in a savings account earning 0.85%.  It was not flashy, but making over 1% since 2011 sure beats losing money for a "safe" investment.  I tell my subscribers that I prefered to take my risks in my explore portfolio with equities plus I have TIPS and I-Bonds bought as new issues from the US Treasury so they, unlike bond funds, never lose money.  For more info, see:

• CurrentSeries I Bond Rates
• BestSavings Account Rate Survey 
• VeryBest CD Rates with FDIC

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Bob Brinker the Informercial Salesman

"The Ayes Have it!"

I listened for maybe 30 minutes total yesterday to "Moneytalk with Bob Brinker."

I had to laugh so hard...

I heard Bob Brinker plug his newsletter on his website.

I also heard him tell a caller asking his opinion on where the market was headed say he writes that in his newsletter as he refused to answer.

Who would pay for that if they knew he's been fully invested since March 2003 AND he was so bullish at the top in 2007 that he had a gift horse buying opportunity in the 1500s just before the market collapsed to 666!

I heard him plug "Moneytalk on Demand" that is quite expensive compared to iTunes or getting the show for free on the internet.

I heard him LIE to a caller by saying he was not a salesman!

I guess he thinks what remains of his audience is too stupid to notice he's turned his show into an informercial for over priced products, especially when compared to the competition. 

Bob Brinker Moneytalk Summary - June 2013

Who takes more vacations, Bob Brinker or President Barack Obama? It is no contest on who works fewer days each month.

This weekend, Bob Brinker is off again.  His substitute is  Guest Hostess Lynn Jimenez

My guess is Bob would have had plenty to say about

• the NSA surveillance scandal
• the IRS targeting scandal
• the IRS extravagant, million-dollar conferences
• and the exploding national debt. 

Fortunately, on Friday night Jay Leno of NBC's "The Tonight Show with Jay Leno" trashed the feds from all sides.  

Notice the difference in audience reaction for a Mitt Romney tax joke.  Californians are a bit sensitive about attacking the president while they love to hear jokes about rich Republicans.



As for Bob Brinker, he remains fully invested as he has since March 2003.

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Guest Hostess Lynn Jimenez

Lynn Jimenez is hosting "Moneytalk with Bob Brinker" today.

Lynn Jimenez was named as the permanent guest host of the nationally syndicated radio show "MoneyTalk with Bob Brinker" back the fall of 2009.   At that time, Lynn celebrated 20 years as the weekday morning business reporter on the number one radio station in San Francisco, KGO.  KGO also carried "Moneytalk with host Bob Brinker." 

Lynn took an extended leave from KGO last year to "tend to her ailing father. In fact, Jimenez donated one of her kidneys to her father and wrote extensively about it and what it felt like."

Jimenez has been off the air at KGO since Nov. 18, 2012 but she still does the occasional Moneytalk fill-in.

KGO is no longer the ratings leader in the Bay Area.  That position currently belongs to KCBS "All News 740AM & 106.9FM." In an attempt to catch up with KNBR or even regain their number one rating slot, KGO dropped several shows including those of Bob Brinker and Dr. Bill Wattenburg.

In December of 2011, KGO dropped Moneytalk for poor ratings KGO Drops Moneytalk with Bob Brinker. On December 7, 2011 the owners of 50 kilowatt KGO decided to add Moneytalk to their 5 kilowatt (less powerful) station, KSFO. It appears they kept Lynn on as the permanent guest host.

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