Bob Brinker Update for September 2005

Bob Brinker Update for 9/22/05

In our Bob Brinker Free Discussion Forum we've been talking about Bob Brinker's market timing model. He uses this in his "Marketimer Newsletter" for predicting the stock market in the months ahead. Bob Brinker is currently bullish (as of 9/22/05) and has his model portfolios fully invested in the funds he recommends.

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Below is my contribution to the recent discussion.

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Is Bob Brinker Still Bullish?

In response to Re: Brinker's current outlook posted by allancoleman:

Bob was projecting an increase of the S & P 500 earnings outlook, incorporating a 7% growth in profits, from $76 to $77 a share for 2006. We'll see if that outlook changes in the future.

Brinker usually starts out the year with a lower than consensus estimate for "operating earnings" then slowly raises his estimate so it matches the final results by year end. If he comes up short, he might leave off the words "operating earnings" to leave some wiggle room since "as reported earnings" are usually lower.

For example, in the January 2005 "Marketimer" Bob Brinker wrote:

"Based on our current estimate of $69 for 2005 Standard and Poor's 500 Index operating earnings, the index is currently valued at 17.4 times forward earnings."

As you stated, he has $70-$72 for 2005 and $76 to $77 for 2006 but he didn't write "operating earnings" in his most recent newsletter. His estimates are far more "conservative" than those of S&P yet he still feels the PEs, price to earnings ratio, are quite reasonable, thus there is no problem with valuation.

Here is a recent excerpt from my newsletter that discusses S&P's earnings estimates (I don't pretend to be better at estimating the sum of earnings for 500 individual companies which is what S&P does for a living.)

Operating Earnings Summary

My "Fed Valuation Model" as of 9/17/05:

Estimated S&P500 "Bottoms Up" Operating Earnings Estimates:

2005 $77.41 (last month $77.04) Up M/M 2006 $84.75 (last month $84.16) Up M/M '05-06 growth = 9.5% Up M/M

Estimated PE at $1,238 2005 = 16.0 2006 = 14.6 2005 Earnings Yield: 1/16 = 6.3% 10 Year T Bill Rate = 4.27% 1 / (10 YR Rate) = Effective PE = 23.4

The copyright of the article Bob Brinker Update for September 2005 in Investing/Personal Finance is owned by Kirk Lindstrom. Permission to republish Bob Brinker Update for September 2005 in print or online must be granted by the author in writing.

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