Bob Brinker 2014 Performance Results - Income & Stock Portfolios

Bob Brinker 2014 Performance Results for his Income & Marketimer Model Portfolios.

Every month Bob Brinker, editor of the Marketimer newsletter and host of the "Moneytalk with Bob Brinker" radio show, posts the totals for his three model portfolios on his web site. This makes it very easy to track how he is doing compared to the major indexes.  It was a very good year for US stocks but not so good for other markets. 

Unfortunately, Bob Brinker does not post the totals for his "individual issues" which I call my "Explore Portfolio" in my newsletter. He also has an "Income Portfolio" in his newsletter that he does not report results for. Mark Hulbert, editor of the Hulbert Financial Digest, tracks his income portfolio. Below are the results from Brinker's web site and from Hulbert.

Bob Brinker's Reported 2014 Performance Results:

• Model Portfolio #1 (100% in stocks) up 8.1% (calculated)
• Model Portfolio #2 (100% in stocks) up 8.3% (calculated)
• Model Portfolio #3 (~67% in stocks) up 6.2% (calculated)
• Active Passive (100% in stocks) up 8% (given)
• Income Portfolio (0.0% in stocks) not given
• Individual Issue Portfolio not given 

From BobBrinker.com website

What strikes me is Brinker took a ton of risk with 100% in stocks for two of his portfolios and got far less than just sitting in an index fund.   

Bob Brinker's 2014 Performance Results via Mark Hulbert:

• Model Portfolio #1 (100% in stocks) up 7.7% 
• Model Portfolio #2 (100% in stocks) up 8.0% 
• Model Portfolio #3 (~67% in stocks) up 4.7%
• Income Portfolio (0.0% in stocks) up 1.1%
• Active/Passive portfolio (100% in stocks) up 8.7% 

Excerpts from Jan 2015 Hulbert Financial Digest

Why are the returns different?

My guess is Mark Hulbert rebalances Brinker's model portfolios back to the percentage guidelines given in the newsletter while Brinker lets the winners run which makes the percentages listed meaningless. For example, how can you have a "balanced model portfolio 3" when you have about 70% of it in stocks?  I don't believe it is responsible to recommend retired people have such a large percentage of their portfolio in stocks.

Kirk Lindstrom's 2014 Performance Results:

• Kirk's "Core Aggressive" (80% in stocks) up 8.7%
• Kirk's "Explore Portfolio" (67% in stocks) up 7.6%
• Kirk's Core Conservative (50% in stocks) up 5.8%

Unlike Bob Brinker, AT LEAST once a year I rebalance back to my target allocations.  This hurts results when we are near all time highs (since 100% in stocks show better returns when at or near all time highs as we are now) but it makes for much safer portfolios.

Bob Brinker's "Individual Issues" portfolio

If there is interest, I could calculate Brinker's "Individual Issue Portfolio" assuming 4% in each recommendation to get an idea of that adds or subtracts from Bob Brinker's reported returns.

Mark Hulbert on Bob Brinker's Marketimer Performance Record

About once a year, Mark Hulbert does a full page write-up on each of the newsletters he follows. In April of 2009, Hulbert did a full page on Bob Brinker. This was what he said about Brinker's results that do not include Bob Brinker’s QQQ mistake”.

"Brinker’s fund selections on average have lagged the market. The HFD reports an 8.7% annualized gain for his “Aggressive” portfolio, which is 0.6 percentage points per year less than what this portfolio would have made if each of its funds were invested in the DJ Wilshire 5000 during the times they were owned.”

"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."

__ March 2009 by Mark Hulbert on Pg 4 of the April 2009 issue of "The Hulbert Financial Digest"

This is what Mark Hulbert said in March of 2008:

"Brinker’s fund selections on average have lagged the market. The HFD reports an 11.5% annualized gain for his “Aggressive” portfolio, which is 0.9 percentage points per year less than what this portfolio would have made if each of its funds were invested in the DJ Wilshire 5000 during the times they were owned.”

Hulbert attributes Brinker's under performance relative to the markets to his mutual fund selection. In an attempt to mitigate this under performance, Brinker added an "active passive" portfolio using two Vanguard funds to his newsletter. Currently, this portfolio consists of Vanguard's Total Stock Market Index Fund (VTSMX) and Vanguard's International Growth MANAGED mutual fund (VGMFX, a fund I have owned for nearly 20 years for its great performance.) Brinker does not track these or give performance data for them in his Marketimer newsletter, but Mark Hulbert has attempted to track the performance. Mark concludes Brinker's timing ads some value using this portfolio.

For investors who therefore are interested only in his timing, as opposed to his fund advice, Brinker provides an “Active/Passive Portfolio.” It “is designed to provide active management in the areas of long-term market timing while maintaining an indexed approach to the U.S. equity market.” From the beginning of 2002, when the HFD began monitoring this portfolio, to 3/31/09, this portfolio gained 1.3% annualized, vs. a 2.1% annualized loss for the DJ Wilshire 5000.

Hulbert neglects to mention that a portion of this "active/passive" portfolio is in a MANAGED, INTERNATIONAL fund so its benchmark should not be the Wilshre 5000, but a mixture of the Wilshire 5000 and the suitable weighting in an international index. Thus, I conclude that Mark Hulber's conclusion is worthless in gauging if Brinker's timing adds value.

On several Brinker portfolios Mark Hulber tracks, Hulbert reports somewhat different returns than Brinker shows for the specific time periods, some better and some worse. I wrote Hulbert to ask why. Mark said they "periodically undertake various rebalancing transactions to bring a given fund’s actual % weight in a portfolio into line with the % that Brinker assigns to it." I wrote that Brinker has specifically recommended against rebalancing so this "rebalance premium" could more than explain the slight performance edge, especially during a highly volatile market. Clearly, Mark Hulbert admits they don't measure Brinker's performance the way Brinker recommends!

Mark Hulbert also does not adjust Brinker's model portfolio returns for all the "lump sum buys" Brinker issued between 2007 in the "mid 1400s" all the way down to the last "lump sum buy with new money" in the "mid to low 800s" just before the market crashed to 676. To be fair, neither does Brinker.

Click chart courtesy of Stockcharts.com for full size image

Mark Hulbert also leaves out the effect of Brinker's QQQ advice on reported results. Add to that his conclusion that Brinker's market timing has added value since 2002 uses faulty assumptions and you have to ask "why does Mark Hulbert bend over backwards to give Brinker every benefit of the doubt when the record clearly shows Brinker's market timing has added dubious, if any value?"

Doubled Money in a Down Market!

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 104% (over a double!) vs. the S&P500 DOWN 16% vs. NASDAQ down 22% vs. Warren Buffett's Berkshire Hathaway (BRKA) up 33% (All through 4/30/09)

As of April 30, 2009, "Kirk's Newsletter Explore Portfolio" is up 5.2% YTD vs. DJIA DOWN 6.9% vs. S&P500 DOWN 2.5%.

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Bob Brinker Marketimer 2008 Performance Numbers

Below are the 2008 performance numbers reported by Bob Brinker for his three recommended model portfolios:

Model Portfolio I = Down 39.7%
Model Portfolio II = Down 37.4%
Model III (balanced) = Down 23.9%

Source: Bob Brinker's January 2009 "Marketimer" newsletter.

2008 Benchmarks:

• The Wilshire5000 "total stock market index fund" at Vanguard, VTSMX (click for charts), was down 37.04%
  
  
• The total bond fund at Vanguard, VBMFX (click for charts,) was up 5.05%

Model Portfolio I, down 39.7% in 2008, was 100% invested in equities for all of 2008.

Model Portfolio II, down 37.4% in 2008, was 100% invested in equities for all of 2008.

Bob Brinker's "balanced" Model III, down 23.9% in 2008, started 2008 with 64% in equities. This allocation shows just how bullish Bob Brinker was at the start of 2008. This bullish allocation hurt his performance relative to the "balanced benchmark."

Marketimer P3 Allocation as of 12/31/07

A "balanced" benchmark portfolio half in VTSMX and half in VBMFX finished 2008 down 16%. This is 7.9% better than Bob Brinker's balanced model portfolio #3.

When my writing partner, David Korn, and I began publishing The Retirement Advisor, we considered the universe of what people approaching or in retirement could invest in for their golden years. Many advisers were chasing stock market gains. Other advisers were chasing yield on the fixed income side. We believed that neither was the right approach and decided that our Model Portfolios would be constructed to benefit in up markets, but also be able to weather down markets such that our subscribers could preserve their capital in a reasonable manner, but take the appropriate risk, depending upon an individual investor’s comfort level.

Our Model Portfolio III has the goal of capital preservation in both up and down markets. That portfolio is up over 12% since inception and it gained 3.7% in 2008. Our model portfolios I and II take more risk with equities so they were down in 2008, but they managed to hang on to most of their 2007 gains and perform very well relative to the benchmarks as well as Brinker's portfolios.

My other newsletter, "Kirk Lindstrom's Investment Letter," is for more aggressive investors who what to use my "core and explore" strategy where you add individual stocks for enhanced (at least so far so good) returns.

Long Term Results that Speak for Themselves
Since 9/30/98 inception, "Kirk's Newsletter Explore Portfolio" is UP 390%
vs. the S&P500 UP only 51% vs. NASDAQ UP only 57% (All through 12/31/11) 
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Latest 2012 Update:  Up 10.5% YTD  as of 2/8/12

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