Honey's Brinker Beehive--Not a Fan Club

» Kirk - Update on 5 Root Causes of a Bear Market

.
In response to Thank goodness we had an up day. posted by mrs1123:

This might help you.

Date: January 27, 2006
Subject: Update on 5 Root Causes of a Bear Market
URL to see January 21, 2006 Bob Brinker Fan Club Update

.
In Bob Brinker’s January 2000 Marketimer newsletter he published his “Five Root Causes for a Bear Market”

They are:

1. Tight Money:
   
2. Rising Rates:
   
3. High Inflation:
   
4. Rapid Growth:
   
5. Over Valuation:
   

In January 2000, he took 60% out of the market because:

1. Tight Money:He said the Fed was reducing M2 to slow growth - BEARISH

2. Rising Rates:He was predicting higher long and short term rates to continue. This did not happen but it was – BEARISH for his model..

3. High Inflation:He said the CPI was approaching 3% and import prices were up 5% which would further impact inflation. We didn’t get high inflation, but this was BEARISH for his model none the less.

4. Rapid Growth:Real GDP growth was approaching 5%. Bob felt the FED would use rates to try and slow this. This was BEARISH and correct.

5. Over Valuation: “We believe valuation levels in the U.S. market are stretched to the limit.” BEARISH
   

All 5 of his root causes were BEARISH. On the radio program he said he was not bearish but the odds favored a decline over the market going up more than 5%. As such, he recommended reducing equity allocation from 100% to 40% in his model portfolio numbers one and two. He also lowered his P3 equity allocation from 50% to 20%. In the Summer of 2000 when the market was a bit higher, he recommended taking another 5% out. Then in October 2000 he recommended putting 20 to 50% of cash reserves back into the market via the NASDAQ100 (QQQ) for a counter trend rally despite saying his model had not given a buy signal. The QQQQ trade was a disaster, but his long term model was correct to predict further weakness because 2001 and 2002 were both down years for the markets.

The market bottomed in October 2002 and his model correctly gave him a bullish buy signal within 5% of that bottom in early 2003.

Now let’s look at the 5 root causes today:

1. Tight Money: Long term interest rates are still near historic lows This chart shows is up off its lows, but it remains half what it was in the late 1980’s.

   <img width=520 height=301 src=http://stockcharts.com/def/servlet/Sharp...>

   You can also see the large spike in 2000 lines up well with the start of the bear market in the S&P500 as people were selling bonds to buy stocks. Today it is the reverse; people are buying safe US Treasuries rather than stocks. BULLISH

2. Rising Rates:: Bob and I seem in agreement that the Fed is only normalizing rates. This means they are going up but it really doesn’t count because they are going up to where they should be if we had not had a 9/11 attack AND a major recession. NEUTRAL

   I also believe this will turn bullish because the Fed should stop rising rates given the low 1.1% GDP growth announced Friday January 27, 2006 and several months of data suggesting the housing speculation has ended. Others, like Ed Yardeni, think the Fed will raise rates to 5% this year. I would say this would be bearish if short-term rates, now at 4.25%, are raised above 4.5%

3. High Inflation: As long as there is an internet connecting China and India to the US, I do not see wages being in danger of high inflation. Higher energy prices has led to slightly above target core inflation but the deflationary forces are secular in nature and should help to contain core inflation. If energy prices remain high, they could actually lead to lower inflation in future quarters as we become even more efficient at converting energy dollars in to GDP dollars. BULLISH

4. Rapid Growth: With fourth Quarter GDP growth at 1.1%, people now are worried we will fall into a recession if the Federal Reserve continues to raise rates. This 1/27/06 report from the US Department of Commerce shows Q4 2005 was the lowest quarter of GDP growth since the last quarter of 2002. ECRI’s WLI is moving higher which says we should see a bit more GDP growth in future quarters, but no huge growth and no recession. This is all VERY BULLISH.

5. Over Valuation: I wrote in my most recent newsletter : “For 2006, S&P estimates ‘as reported top down earnings’ (that include options expensing) will be $82.87 (12/16/05 was $82.87) for a forward PE of 15.1, very reasonable. I don't think we have anything to worry about unless these pass 18 or 20 as long as long term interest rates give an earnings yield in excess of 20. BULLISH
   

I have 4 at bullish and 1 at neutral which tells me Bob Brinker will not be predicting a bear market in the weeks ahead.

Since beating the market is hard for most to do, I recommend a "Core and Explore" approach to investing. Core means place 80 to 99% of your money into a CORE, buy-and-hold, no load, mutual fund portfolio and then EXPLORE with the remainder. To build your core portfolio, I suggest a diversified basket of index funds such as one of the two Vanguard index fund core portfolios I recommend in my newsletter. For the remainder, I recommend Kirk's Newsletter Explore Portfolio.

Through Jan 1, 2006, these two core portfolios, aggressive and conservative, composed of seven different Vanguard Index funds, have beaten the S&P500 over the past five and seven years by over 20% using no market timing and only rebalancing once a year. These index fund portfolios include US equities, international equities and an REIT index fund.

As of 12/31/05 the Total Return for "Kirk's Newsletter Explore Portfolio" since 12/31/98 is Up 197% while the S&P500 only up 12%!!! & NASDAQ only up 1%!!! (My explore portfolio beta is about 1.5)

For followers of Bob Brinker, I recommend my newsletter core portfolio as an ALTERNATIVE to the QQQQs that Bob Brinker recommends for his three model portfolios. The data here shows followers of Bob Brinker would TURBO CHARGE their returns had they replaced his recommended QQQQ exchange traded fund with the securities in my newsletter portfolio.

So, what do you think? DO you agree with my interpretation of Bob's 5 Root Causes of a Bear Market?

-- posted by Kirk

Permalink Print Discussion Join the latest discussions

» honeyoneohone - Brinker: This Has Not Become a "Secular Bull Megatrend "

.
Yes, Bob Brinker is almost as bullish as he was throughout the 1990's.

However, there is one major difference. He believes that this is a "cyclical bull" within a "secular bear" market--although, he is on record as saying that it is likely that we have seen the low of this "secular bear" market in October 2002.

His major move to 100% equity-allocation in March 2003 will soon have outlived the 1-3 year time-frame that he set as parameters for a "cyclical bull" market.

Brinker is now in the process of trying to create a scenario to explain why this "cyclical bull" continues, and why he believes it will continue on further, but still not be the "beginning of a new secular bull megatrend."

Brinker thinks it is important that the "cyclical bull" market included a 15-month stretch during which the S&P 500 Index went nowhere and was "virtually unchanged." This was between Febuary 11, 2004 at 1157.76 and May 13, 2005 at 1154.02.

Brinker believes that this "sideways action" discouraged many investors and "served to restore the market's health, thereby establishing the foundation for the next leg of the ongoing cyclical bull market."

He is calling this new script for his theory an "outlier."

-- posted by honeyoneohone

Permalink Print Discussion Join the latest discussions

» honeyoneohone - Brinker's News "Pamphlet" :)

.
Will referred to Brinker's Marketimer as a "pamphlet" and raised the ire of some of Brinker's loyalists. Of course, it doesn't take much to "raise the ire" of people who refuse to see that the "emperor has no clothes."

Will L. discusses this subject and some others with pen-name, "math junkie."

"Yesterday when I accurately characterized your comments about Brinker claiming the lows were already in as of Oct 2002 and yet he was calling this a secular bear megatrend and predicts many such cyclical bulls prior to the mega trend ending--as being "inconsistant", you played coy and represented my comments as dishonest. They were not.

Today you throw arround lies while responding to me in your latest post here. You have absolutely no reason to do so and simply lash out because of your dislike for the truth I post about your two bit radio host.

I note that you never mentioned the word lie in describing the BS that the Poobah shill was promoting--ie., that Brinker's 4% individual stock rule was operational in the QQQQ fiasco. Now that was a WHOPPER--yet you didn't use the word lie.

You Math, the holier than thou apologist who likes to insinuate others are LYING and seem only to toss that characterization toward people who don't like Brinker.

(math junkie said) "P.S. I see that you've bought into the lie that Brinker's newsletter is a "pamphlet." It's not a big lie, to be sure, but big lies are often built from small ones"

Here is the definition of pamphlet, ARROGANT POMPOUS BUBBLEHEAD for Brinker.

"pamphlet
(noun) : an unbound printed publication with no cover or with a paper cover

When did Brinker begin binding his newsletter in anything other than a paper cover? Leather you think? Gold inlaid? Do tell, what was the LIE. Apologist! Look that one up!!

-- posted by honeyoneohone

Permalink Print Discussion Join the latest discussions

» honeyoneohone - Brinker's Marketimer: "Secular Bear Megatrend"

.
Will L. discusses the validity of comparing todays economy and stock market to the 1966-1982 time frame, which is what Brinker is doing to arrive at his conclusion that we are still in a "secular bear megatrend."

In the February 2006 Markettimer, Brinker says the following: "We do believe that the current cyclical bull market has the potential to be an outlier within the context of the four cyclical bull markets that occurred during the 1966-1982 secular bear megatrend. During that period, the four cyclical bull markets registered gains ranging from 32% to 76%, and lasted from 12 months to 38 months."

Dija asked Will L. this question: "--Will, do you think the fact the cyclical bull has lasted 39 months and counting proves that we are not in a secular bear?"

Will L. answers:

Show me where I said that.

I just pointed out that until September of 2001, Brinker had always insisted that the duration of cyclical bull markets was "approximately"(don't you love that disclaimer that will cover a few years plus or minus these days???) SIX MONTHS TO TWO YEARS. When I pointed out the overlap that he was creating because Brinker was confusing people on the CTR of the QQQs (LOL what CTR??) obfuscating the difference between DURATION of an event and the time frame before it starts that he had moved the CTR out to over a year and into his cyclical bull crap.

With a stroke of keys in September on the glossary of his website and confirmed in a subsequesnt newsletter, Brinker simply arbitrarily moved the definition of the cyclical bull markets up to One to three years.

They are numbers pulled out of Brinker's assets. Anybody can see that. Brinker has claimed for more than 2 years now that this is a "secular bear market" and has claimed repeatedly that "this secular bear market most closely parallels that of the 1967-1982 bear market..yada yada yada--then he goes on to give the bull market moves in there."

Where is there any proof that this is a secular bear market?

What is the reason that "this secular bear market that is not established closely parallels the last secular bear market?"

Now this month Brinker was caught with a cyclical bull market that has persisted twice as long as the bear leg in his claim of a secular bear. It is longer in duration than any cyclical bull in the last secular bear market. He has Given NO data to suggest that the times are ANYTHING at all like the last bear market.

Our country well...sucked during those years. We suffered from double digit inflation for years. Short-term interest rates reached 17%!!!! Who want's to take a shot on equities when you have 17% money market rates. Long term zeros paid over 10%! The country suffered through Watergate and worst of all Jimmy Carter and his incompetence, impotence (Iran hostages), and oil embargo--when we were a manufacturing nation --sucking at it (remember the cars of the 70s made in the USA???--and whining about the maaalaize (Brinker does that often too--reminds me a lot of Carter's incompetence actually).

Now we have an economy that is really rolling in spite of 9/11 and a war in Iraq. We have interest rates at NEAR ALL TIME LOWS. We have productivity that is increasing at rates not even dreamed about during the "malaaaaze". We have LOW INFLATION. Companies are for the most part lean and mean.

Brinker, your hero claimed two years ago that conditions that were not as good as they are today would justify a 18 to 19 P/e ratio--that was June 2004 newsletter sport. Today they say this years P/E based on expected earnings is 15 with these very positive forces.

What Brinker missed and will not admit is that he didn't realize the big problem was technology. What we had was a tech meltdown. Brinker rode that meltdown. Instead of admitting it, he sees a broad market depression lasting years.

In truth the deficiency between the market today and in Jan 2000 can be easily accounted for the removal of the fluff in the tech/telecom sector. Everything else in aggregate (always winners and losers) is doing very very well.

Brinker instead of admitting it--sticks with his stock makret almanac form of timing and now calls this market he says will go on as far as the eye can currently see and calls for much higher levels--an "OUTLIER" to keep from admitting he was just likely wrong."

-- posted by honeyoneohone

Permalink Print Discussion Join the latest discussions

» honeyoneohone - Brinker's Fans Not so Interested Anymore

.
Will L. tells about a time--long past--when Brinker engendered some excitement amongst his fans:

"Recall the other day Math said that he was totally unaware of Brinker's take that the bottom for this megatrend was likely put in October 2002. (EC: February 2006 Marketimer, Brinker said: "In our view, there is a good possibility that the secular bear market that began in the first quarter of Year 2000 has already recorded its absolute low for the megatrend. If so, that low would be the S&P 500 Index close of 776.77, recorded on October 9, 2002.")

Later when it was reported that Brinker had said this in the latest issue of his pamphlet, Math said he almost never listened to Brinker and had not read his latest issue of the pamphlet.

Now imagine the old days? The bots and Math's buddies on SI were always clamoring with the "Have you got the newsletter yet?" "Did Bob say anything important?" "No newsletter in California"--"I got my newsletter today--but I can't tell you."

Then you likely had someone (say) "I got my newsletter and Bob says that the market might go up."

Then you would have (Brinker as) "Donlane/mistertopes" come storming in with,
"Dipy, you worthless library freeloader!! You are the reason Bob Brinker might retire. You are releasing propietary information. Everyone on this site ought to shun you. Your first born child should be horsewhipped. A crazed Yak should build a nest in your naval." ....ad naseum.

Now, instead, even the remaining subscriber that I know of--Math, more than a week after Brinker's latest rag has not read it.

Another sign. Many keep subscribing to magazines they lose interest in for a year or two but most will figure if they are not interested enough to pick it up within days of it's arrival, they might as well save the money."

-- posted by honeyoneohone

Permalink Print Discussion Join the latest discussions

» honeyoneohone - Brinker's Starship Moneytalk Hits Turbulence

.
Will L. continues to point out that Brinker is spinning like a top in order to explain why his "cyclical bull" time-frame is way long in the tooth--and that comparing this economy and market environment with 1966-1982 is patently absurd:

"Why instead of whining about terminology when referring to Brinkers' rag, or being so quick to call people liars, do you suppose the Bots don't argue the merits of Brinker's position and tell me where I am wrong?

Brinker has for years now claimed we are in a secular bear market. He often says it like it is a "fact" and occasionally will say "if". He gives NO credible explanation for that claim. Indeed, he is now fudging his cyclical event durations to make it fit his definition--"outlier"--instead of re-examining his premise.

While you (brinker devotee) were pxxxing and moaning about lying and definitions of pamphlets, I pointed out the total differences in this environment and that of the late 60s-82 bear market. Yet this is the period Brinker claims WITH NO EXPLANATION most closely parallels this stock market. Why do you people take such an illogical statement without question?

My take is that Brinker was so high on tech that he couldn't admit that his concentration in that sector and his willingness to ride it all the way down was stupid. He wants to cast the entire stock market as a monolithic robot that follows his stock market almanac timing jive. He cannot admit that the technology crash is what is keeping us from new highs in the broad indexes today. With the exception of pharma, almost all sectors are higher, many much higher than in 2000. I will give you a list of some stocks and indexes and how they have performed since early 2000.

This list will let you judge if Brinker's claim that this market matches that of the 70s, or you might just agree with me, that Bob's favorite, technology, is the only area that has crashed and remained at terribly depressed levels.

Obviously the valuations were totally absurd in that arena, yet Brinker played nearly exclusively in that arena. I think he cannot bring himself to admit the obvious, and separate the rather extraordinarily good moves in the market, ex-technology from 2000.

It seems that Brinker is seeing the Nasdaq returning to 5,000 with the companies based on eyeballs returning to 100 plus multiples before he thinks the bear is over. If I held a lot of QQQs and TEFQX and VOD, Lucent-- I can see why he would be so warped.

Now please instead of checking my grammer or claiming I lied if a decimal is misplaced make a case for why Brinker would claim that this market is like the last secular bear market of the the 70s? Why not explain this as simply a huge sector meltdown and some other issues 9/11, corporate scandals, exacerbating that meltdown? Why not look at the tremendously positive enviroment that is NOTHING like the 70s and the strong performance outside of that sector? Brinker seems stuck on .......himself...and unwilling to look at the market honestly."

-- posted by honeyoneohone

Permalink Print Discussion Join the latest discussions

» honeyoneohone - Brinker's Marketimer Recommendation

.
Will L. discusses Brinker's "Stock Market Almanac" brand of market timing and asks some really good questions that Brinker will probably not answer on his radio program or in his newspamphlet.

"Wow, I leave you people alone and you go off on some Court TV campaign. Though not having to look at Fish's post sure makes that even more entertaining.

I might have missed it, but I think Dija is the only one who responded to my posts pointing to what I consider a pulled out of the air or a "stock market almanac" brand of timing that Brinker seems fond of.

I had asked anyone to give any logical reasons Brinker claims that what he has said is a secular bear market is most closely like that of 1967-1982.

In a couple of posts, I pointed out the total differences in this environment and that of the late 60s-82 bear market. Yet this is the period Brinker claims WITH NO EXPLANATION most closely parallels this stock market.

Dija responded with: "--Are you certain that he has never given an explanation?"

Yes Dija, I am very sure in my own mind that he never compared these two periods closely and explained why he sees the close parallel. Obviously it was the closest in time-so what? Perhaps he lost a great deal of money during that time and if he hung on to huge positions in tech, he lost a lot of money this time as well. Maybe that's the connection!! LOL

But seriously, I am amazed that "NOONE" questions this theory that is a major theme of Brinker's. Perhaps some of you take this model idea seriously and it doesn't matter that Brinker is wrong because the model will find bottoms/tops yada yada yada.

But since it seems this thread has been hung up on things legal lately, I would say it "goes to the credibility". We know Brinker is given to being "Certain" a lot. His gambling calls on the super bowl "were certain". His QQQ bulletin had that feeling of certainty and confidence about it only well...a fool would have had. Therefore, a concept so important as Brinker's confidence that this is a secular bear market very much like 67-82 is something on which I think people would want to investigate his logic.

When I said the following:

"As we know Brinker has claimed that a bear market takes all sectors down with it. --the piano player analogy. Well there is nothing like that in this "bear" market as one can readily see."

Dija responded with this: "--Your point is a good one, but I do believe that virtually all sectors went down in 2002, with the possible exception of real estate and maybe one or 2 others. I know my value funds went down, although not disastrously since I was mostly in cash thanks to brinker."

That is true, Dija -- I never said we didn't have a bear market. Actually many sectors were in a downturn in the last couple years of the tech boom. After 9/11 and the scandals and the tech debacle, things looked very bleak--which was indeed near the bottom of the bear. Actually many of the "old economy sectors" were on their way back by late 02.

Now almost all sectors are higher than they were at the highs of 2000--except technology. That was really my point. Tech is still somewhere under 50% --considering the companies that disappeared I would say well under 40% of what was there in 2000. "Thars yer Bar," the guy in Jeremiah Johnson would say.

It seems to me that Brinker is unwilling to recognize or speak to that issue. It has profound implications for his claim of this megatrend. It also has profound indications on how one invests going forward.

Right now, the only two lagging sectors are big Pharma and Technology. Instead of treating the market as a whole following his script; it would be interesting to hear Brinker's take on these questions.

Should one take profits in reits, energy, biotech? Retail? Commodities--gold-building materials--and apply them to big pharma and tech?

At least an explanation of why Brinker claims this is like 67-82 is in order."

-- posted by honeyoneohone

Permalink Print Discussion Join the latest discussions

» Kirk - Brinker's Marketimer Recommendation

.
In response to Brinker's Marketimer Recommendation posted by honeyoneohone:

Did you save a link to that series of posts I did here with graphs for the old and new DOW stocks?

I seem to recall I showed that the DJIA would be at new all time highs now if it had not pulled a Brinker and put all sorts of high tech (Intel?) and other high growth large cap stuff (HD?) in near the very top for those stocks.

I could update the charts to show 2006 if needed. I just didn't save the link.

-- posted by Kirk

Permalink Print Discussion Join the latest discussions

» SteveT - Brinker's Marketimer Recommendation

In response to Brinker's Marketimer Recommendation posted by honeyoneohone:

Will makes many excellent points. As I see it brinker enjoys pointing out those overly optimistic that say "It is different this time". He relies on that.

That is where I think he is wrong. I say it is different every time. This could very well be the cyclical bull that lasts much longer than any other. I would think old bob is getting very anxious to bail out. The only problem is his indicators are saying stay in. But still the clock is ticking. A real conundrum.

-- posted by SteveT

Permalink Print Discussion Join the latest discussions

» honeyoneohone - Brinker's Marketimer Recommendation

In response to Brinker's Marketimer Recommendation posted by Kirk:

.
Unfortunately, I did not save a link to those posts. And I have almost zero luck with the Suite 101 Search engine. I can't get it to zero in on your threads.

Perhaps I can find them the hard way.

But in the meantime, I remember it the same way that you do. It's almost certainly true that the Nasdaq 100 is always re-loaded with new stocks AFTER they've had a good run. Look what happened with Google!

-- posted by honeyoneohone

Permalink Print Discussion Join the latest discussions