Moneytalk Bob Brinker Summaries - Information ONLY

» Kirk - Don't Chase Rallies

http://www.siliconinvestor.com/stocktalk...

Sunday, Jul 13, 2003 6:56 AM
View Replies (1) | Respond to of 46

Larry,
Where are you getting the recommendations? From the radio shows alone?

I never seem to remember to listen to the radio shows, which I think are on in the late afternoon here. But I know from what I've heard on those shows in the past that they don't fully reflect his entire recommendation. He wants to sell the newsletter and give subscribers first dibs at his recommendations, I believe.

The newsletter shows various portfolios, and the one for individual investments shows everything I listed in my last post. He has three other model portfolios, and the one for individual issues.

At the point he issued his Buy bulletin, telling people to become fully invested, pretend you're a new subscriber to his newsletter. He says you should get fully invested as of March 12th, and you don't hold any of his recommendations at that point. So if you're buying individual issues, you're buying the list I gave you. He says if you miss that buy you should only buy them when the S&P is down again to whatever number it was when he issued that recommendation, or that you carefully slowly average into them.

If you're getting all your info from the radio show, you're not getting a complete picture of his recommendations and probably aren't doing justice to the task of this thread. On the other hand, he could be giving info on the radio show that we subscribers aren't getting. So we need both sources of information. I'll be interested in this thread for reports on what he says on the radio, because I do think that's important input.

For my part, personally, I think his long term calls on the market direction have been superb, so if he's saying the market's in a cyclical bull right now, it makes sense to invest in the indexes -- the four in his individual portfolio: SPY, DIA, VTI and QQQ. That is just consistent with taking his advice on the market direction, IMO, and it is also four of the six individual issues he recommends in is individual issues portfolio. As for his two stocks, they've done fine since his recommendation, but they have lots of news, good and bad. I have traded them a fair number of times since March and currently hold one of those two, but I am honestly doing better in some momentum stocks I've been playing (which I might not have had the courage to play if not for his call on the market).

-- posted by Kirk

» David_Korn - Summary and Commentary of Bob Brinker on Moneytalk

BOB BRINKER SAYS DIVIDENDS ARE MORE VALUABLE THAN EVER

Brinker Comment: The top tax rate on dividends has been reduced to 15%. This is retroactive to January of this year and is scheduled to remain on the books until 2008. Bob pointed out that by Congress reducing the maximum dividend tax rate to 15%, this makes dividends more valuable than wages which are taxed as ordinary incomes, and more valuable than short term capital gains which are also taxed at ordinary income taxes. Be careful though. Not all dividends qualify for the lower rate. For example, real estate investment trust dividends will generally not be taxed at the new low rate. This enhances the appeal of company's issuing dividends. A lot of people believe this is a good thing and encourages corporations to pay out some of their earnings in dividends.

EC: There were certainly many advisors who expected a decline in real estate investment trust (REIT) shares after the President signed into law the dividend tax cut which excludes REITs. However, as of last week, investors were still purchasing REIT shares with inflows of $1.7 billion for the first half of the year according to AMG Data Services. Indeed, the Morgan Stanley REIT index hit a 52-week high on July 7th outpacing even the S&P 500 Index for calendar year 2003. Interested in REITs? More on this story at the following link:

http://tinyurl.com/gud3

Brinker Comment: Interest earned on corporate and treasury bonds now face more competition from dividend income because interest is still taxed as ordinary income. Thus, if you are getting interest on a bond, you could be paying a 35% federal tax on that; whereas, if you are getting a dividend on a stock that is derived by earnings, than you may only have to pay 15% in taxes. These are all factors you should be aware of when looking at investment income versus dividend-bearing stocks.

EC: When the tax law was passed, there were many on Wall Street that were expecting dividend-bearing stocks to be some of the best performers. What I found surprising, is that of the 365 companies in the S&P 500 that pay a dividend, those stocks only gained 10.2% on average during the first half of the year which is far less than the 28.7% gains of non-dividend paying companies in the S&P 500. Why is that happening? I found an article this past week which offers three reasons to explain this phenomenon: (1) sector shuffling; (2) performance chasing; and, (3) return to the bubble mentality. Check out the article entitled, "Dividend tax cut not luring mob of buyers" at the following link:

http://tinyurl.com/guez

PAYOUT RATIO

Brinker Comment: The amount of payout of earnings in dividend form is known as the "payout ratio." For example, if a company makes $1 per share and pays out a .50 dividend, that is a 50% payout ratio. You always want the pay out ratio to be less than the earnings power of the company.

EC: Some investors use the payout ratio to get an idea of how well earnings support the dividend payment. Typically, older companies will have a higher payout ratio, although not always. In the United Kingdom, there is a similar ratio known as the "dividend cover" which is calculated as earnings per share divided by dividend per share. In the Magic Kingdom, there is the "break the budget ratio" which is calculated by dividing how much you thought you were going to have to spend at Disney world, divided by the amount you actually brought.

INTERNATIONAL WEIGHTING AS PART OF AN ASSET ALLOCATION

Caller: This caller wanted to know if Bob thought it would be ok to have a 10% weighting in the international arena as part of an asset allocation consisting entirely of equities? Bob said he had no problem with having a 10% international weighting.

EC: A few weeks back, Bob said he had kept a small percentage of international funds in some of his model portfolios. With so many U.S. companies earning revenue from the operations abroad, the need to diversify in foreign markets may not be as important as it once was. If you are looking for some mutual funds that invest in the foreign arena, check out this article entitled, "Don't let geography limit your returns" which you can access at this link:

http://tinyurl.com/gugb

- David Korn. E-mail: mailto:davidk555@earthlink.net

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

Website: http://www.BeginInvesting.com/

-- posted by David_Korn

» David_Korn - Summary & Commentary - Bob Brinker's Moneytalk

INVESTING PRINCIPALS TO LIVE BY

Bob Brinker Comment: One of the most important aspects of investing, is to watch your expenses. One of the best ways to invest with low expenses, while simultaneously achieving diversification and tax efficiency, is to use broad-based index funds in your portfolio. For example, you can consider no-load mutual funds that track the Wilshire 5000 or the S&P 500. You can now purchase index funds for less than 20 basis points which means after 5 years, you have only spent 1% on the cost of owning that type of fund. That is virtually nothing!

EC: The Vanguard family is the only fund family I am aware of that you can purchase the funds that mimic the S&P 500 or Wilshire 5000 with an expense ratio of 20 basis points or less.

Brinker Continued: When you don't have to pay "load charges" or high expense ratios, you can keep that money and let it work for you, instead of against you. Moreover, choosing an index fund is wise because managed funds tend to under perform index funds over the long haul AND they typically generate more taxes because of the trading they do. Given the federal and state tax structure in our country, taxes are a critical component of investing. Bob said he does not favor a short-term trading approach to the market when our tax structure is now preferential for long-term capital gains.

EC: I think it might be more accurate for Bob to say he "no longer favors short-term trading."

Brinker Continued: Asset-allocation is also something you must consider and can be the most important decision to make. Are your investments in stocks, cash, the bond market, and what is the quality of those investments? These are questions every investor should ask when determining their asset allocation.

Another important aspect to investing is managing risk and is something you must do in connection with understanding your risk-tolerance. As a corollary, diversification is a way to manage your risk. Finally, patience is required. If you work hard and save hard and invest wisely, you can get rich over the very long term. Avoid the "get rich" schemes, and focus on the very long term to reach your critical mass such that you can live off of your investment income and never have to work again if you choose not to.

Editorial Comment: "EC": Wonderful advice by daBrink. Along these lines, I highly recommend reading the following three speeches given by John Bogle, Founder and former Chairman of the Vanguard Group:

1. "Mutual Fund Industry Practices and their Effect on Individual Investors":

http://www.vanguard.com/bogle_site/sp200...

2. "Reinventing Mutual Funds":

http://www.vanguard.com/bogle_site/june1...

3. "Mutual Funds at the Millennium: Fund Directors and Fund Myths":

http://www.vanguard.com/bogle_site/may15...

S&P 500 v. WILSHIRE 5000

Caller: Do you prefer investing in a fund that tracks the S&P 500 or that tracks the Wilshire 5000? Bob noted that over the long term, the performance of both funds will be similar. However, if Bob had to choose, he would go with the Wilshire 5000.

EC: I think Bob used to answer that question differently, but that is water under the bridge. I agree with Bob here. If you go with the S&P 500, you should try to get some small cap exposure since the S&P 500 doesn't have small cap stocks (or as many stocks in general) as the Wilshire 5000. Check out the article at this link which answers the very question posed by the last caller and is subtitled, "Which index fund is better for the long-term, the S&P 500 or the Wilshire 5000?":

http://money.cnn.com/2002/01/25/expert/a...

I-BONDS

Caller/Brinker Comment: This caller is considering purchasing I-Bonds before November when they change the base rate. Will she be able to lock in the current base rate if she buys now? Yes. The current base rate of 1.1% is locked in for 30 years. Bob added that he expects the base rate to stay the same or go down in November. Bob noted that the treasury has set the rates too high. Because they have done this, people are buying I-bonds, and cashing them in after one-year and beating competing investments. Indeed, the 1.1% base rate is higher than any quality money market fund out there. In addition, you get the inflation rate on top of that. People who are buying the I-bonds are much smarter than the people who are issuing the I-Bonds. That is not the intention of the I-Bond people. When they reset it November 1st, Bob thinks it will go down or stay the same.

EC: Recently, Bob recommended a strategy of creating a laddered portfolio of I-Bonds, where you start out and purchase a series of 1, 2, 3 and 4-year CDs and then a 5-year I-Bond. As the CDs mature, you replace them with I-Bonds to avoid purchasing and I-Bond and then have to incur the penalty. Well, many people have e-mailed me pointing out that it made no sense to use CDs when you can use I-Bonds and make more than the CDs EVEN if you sold early and paid the penalty! This point was also posted on various message boards, and I think it is clear from this weekend's comments that Bob agrees. Another point that Bob made about I-Bonds which needs clarifying is his recent recommendation that a couple could invest $90,000 per year in I-Bonds ($30,000 per couple, with another $30,000 in a joint account). That advice appears to be wrong based on my conversations with several CPAs and I think Bob is going to change his position on it next time it is asked. Posts at the following two links provide discussion of these two issues with respect to I-Bonds:

http://tinyurl.com/hiqi

http://tinyurl.com/hirq

Brinker Comment: Bob said he can not think of any investment in the United States that competes with the I-Bond as a tax-free instrument for a child's education fund. You get the base rate, you get the consumer price index and all of the investment return tax free if you use it for a child's education. There is nothing out there that is inflation insured like the I-Bond.

EC: Go to this link to find out how to use I-Bonds to save for education:

http://www.savingsbond.gov/sav/saveduca....

ATLANTIC CITY RENAISSANCE?

Brinker Comment: Bob discussed New Jersey's first new casino hotel in 13 years to grace Atlantic City. It is the $1.1 billion Borgata Hotel Casino & Spa which is a joint venture between Boyd Gaming Corp. and MGM Mirage. The revenues in Atlantic city are up 3% annual rate since 1996, but they really haven't had the "big show" to excite the patrons like Las Vegas has done with its influx of star-studded hotels. The new hotel might be just what Atlantic City needs to revive its industry. Right now, Atlantic City has plenty of competition including MGM Mirage, Boyd Gaming, Harrah's Entertainment, Park Place Entertainment, Aztar and Trump.

Bob took a moment to reminisce fondly on his youth when he used to go "down the shore." Bob said gaming has totally transformed Atlantic City from the time he was a youngster in the 1950s where he spent afternoons walking the hot sands of the Atlantic City beaches selling the Philadelphia Bulletin.

EC: Did the purchase of a Philadelphia Bulletin include a subscription to Marketimer?

EC#2: Next week is actually a pretty big earnings week for some high profile gaming companies. Starwood Hotels reports earnings on July 24th, and Hilton Hotels reports earnings on July 28th. Casino operator MGM Mirage reports Thursday, followed by Harrah's Entertainment next week. One way to track gaming stocks is to follow the Applied Analysis Gaming Index (AAGI) which is a monthly gauge on equity valuations of eight major gaming related companies, comprised of five operators and three manufacturers of machines and equipment. You can access the June issue of the AAGI at this link:

http://tinyurl.com/hiyj

IS THERE A BUBBLE IN THE HOUSING MARKET?

Caller: This caller is from the greater Los Angeles area. Bob said the real estate market in that area has been fantastic, and the caller agreed. However, the caller noted that if you own a house, you are in a great position to sell. But what about if you want to buy? Is there a housing bubble? Bob noted that there are things to watch to gauge the health of the housing market. One indicator to follow measures how much equity people own in their homes. There has been one trend over the years worth noting; namely, the reduction in the level of equity. Years ago people had 70% equity in their homes, today they only have 55%. That means in absolute terms they are 15% more leveraged today than they were years ago. The caller then asked if Bob thought that real estate could still go up, or whether it was headed in the other direction. Bob didn't answer the question directly, instead saying that in his opinion if your house's value can keep pace with the rate of inflation, you are a winner because there are so many other benefits to home ownership.

EC: In this weekend's Barron's Magazine, Alan Abelson cites statistics showing that equity as a percent of the value of homes is now at a post-World War II low. Stated differently, we Americans are now more leveraged in our home ownership more than anytime in the last 50 years. Indeed, despite the low interest rate environment, and the ability of many to refinance at much lower rates, the household debt-service burden stands very close to where it was at the peak 14.40% which occurred in the fourth quarter of 2001. Bottom line? Even though the cost of borrowing is cheaper, it has only made us hungry to borrow more, rather than made it more likely to reduce our debt.

If you would like to a complimentary copy of my newsletter, or learn how to subscribe, just e-mail me at:

mailto:davidk555@earthlink.net

or, visit my website:

Website: http://www.BeginInvesting.com/

-- posted by David_Korn

» David_Korn - Three Year Anniversary of 1st QQQ Trade

Excerpt from David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials and Special Alert E-mail Service. August 5, 2000

************************************************************************
STCTBMTROOFST
(Short term counter-trend bear market trading rally opportunity only for sophisticated traders)
***********************************************************************

Opening Monologue: Robert Brinker showed up for work at ABC Radio Networks today ready to face fans and critics alike. Right off the top, Bob addressed the conclusion of the short term counter-trend bear market trading rally opportunity only for sophisticated traders that many listeners have been following with interest over the past several weeks. Bob noted that for those who able to purchase the QQQs in the mid-70s, profits were taken on that trade this past week when the QQQs reached $84 a share at which time traders were advised to immediately sell their shares and close out the trade. Profits made were to be returned to the money market cash reserves where they await the next "killer" buying opportunity that Bob foresees occurring at the earliest in calendar year 2001, or perhaps as late as 2002.

Although Bob never suggested that his advice on the QQQs was anything but wonderful, he did note that this type of short term trading advice was difficult to give on a weekly radio broadcast where the trade could only be updated over the weekend. While Bob did not absolutely close the door to the possibility of giving future short term trading advice, the message was pretty clear -- Bob thought the constraints of using a weekly radio show as a pulpit for short term trading was simply not conducive to this type of recommendation. In fact, Bob thought it was almost impossible to produce the desired results without being able to update advice on a daily basis. The callers that made it to the show today were basically congratulatory calls where Bob praised people for being able to take advantage of the trade when the QQQs were in the mid-70s and sold for profits at $84. The one call on this issue that I think would have been the most interesting, was on Sunday, when a caller told Bob he was still in the QQQs and wanted some guidance on what to do. Unfortunately, Bob curtly told the caller that the QQQ trade was over and he was not going to discuss it anymore.

Editorial Comment: I followed Bob Brinker's trade closer than anyone for the benefit of my subscribers. Here was my analysis of that trade in what I call, THE FINAL GRADE

(Modified Slightly Since Original)

I follow Bob Brinker's market timing strategy to some extent and enjoy listening to him analyze the markets. Believe me, I wouldn't be spending my entire weekend analyzing and interpreting his viewpoints if I didn't think he had something important to offer. With that said, I think it is important to objectively analyze Bob's recommendations. Why? Well, many people base their investment decisions based on his recommendation. If we can't be honest with his ability, then we risk hurting our own financial well being. So, here it goes. I have decided to grade different aspects of the STCTBMTROOFST which will cumulate in a final grade on what Bob previously referred to as a short term trading "experiment."

Identifying the Opportunity: Grade A. Bob gets the highest marks for identifying the beginning of the bear market rally in May, 2000. Some will say he did it after the fact, but given that he announced it on the first Saturday after it occurred, he gets an A in my book. The truth is Bob announced that he bought QQQ in the mid-70s on the Saturday following his purchase which was made on the previous Wednesday - just three days earlier. People who wanted to take advantage of his recommendation, however, based solely on the radio discussion, were left out in the cold if they followed Bob's advice to the letter.

Notifying Listeners of the Opportunity: Grade B minus. While Bob did provide listeners with some parameters over when the bear market rally would start, there were some short falls to his advice. First, although he did tell listeners that the bear market rally would begin on lower volume than the previous highs, he made it clear that this would occur in conjunction with positive divergences in the market. There were many calls into the show asking for additional explanations on what Bob meant by positive divergences. In my opinion, Bob was relatively vague on this issue, although he did mention advance decline lines, new highs vs. new lows and the like. Unfortunately, in my opinion, Bob fell short of explaining how he would find these positive divergences, how he would apply them and the weighting he would put on these types of technical indicators. Many of the regular posters on bobbrinker.com were posting questions about this, and Brinker, who believe me used to post there, did not provide any additional specific advice, despite the clear desire to have more information.

When the bear market rally was triggered after the closing low on lower volume on May 27th, I thought the positive divergences were present that Bob was talking about, although frankly I wasn't certain. This led me to buy some speculative call options instead of dumping a ton of money into the QQQs. Although it worked out well later, I remember searching the Internet that night and the following two days to see if anyone else had agreed with me. I went to bobbrinker.com and this site and the consensus was pretty much that the positive divergences weren't there. Bob Brinker or even Bob Brinker Jr. could have posted that Bob believed the counter-trend rally had begun. Even a Brinker alias could have. Instead, there was nothing said. It may have been because Bob himself needed a few more days to see if that low would be breached before he could determine if it was right.

What might be of particular interest to investors now, is the fact that the same market internals that Bob relied on in May, I didn't see present this fall when Bob was suggesting another counter-trend rally in October 2000. In fact, I posted the market internal analysis I did on January 2nd and later on April 4th which suggested a near term bottom was at hand (and so far has held). I do not know if Bob relied on something else this time around when making his predictions in the fall. Here is the link to my market internal analysis I posted on April 4th:

http://www.siliconinvestor.com/stocktalk...

Staying Consistent: Grade C. When the QQQ trade was going great, Bob was emphasizing to the audience that many of his listeners bought QQQs at the market's open on the following Tuesday at $80s recognizing that a 20-25% upside meant they still were going to do well in the trade. However, once the trade went somewhat sour, Bob changed his emphasis to pointing out that he only recommended that you purchase the QQQs in the mid-$70s. One other point relating to this is that I bet most retail traders who decided to buy Tuesday morning did not get QQQ at $80. The QQQs shot up that day and when I purchased them that morning around one hour into the trading day, I was filled at $82 a share. In fact, the rapid rise in the QQQs that day was attributed in part to the "Brinker effect" by James Cramer of the Street.com at the following link:

http://www.thestreet.com/comment/wrongre...

Entertainment Value: Grade. A. Almost every week, we hear a new caller get through who just discovered Moneytalk. However, I imagine that most of his listeners are like my subscribers -- seasoned Moneytalk trekkies. Bob has been doing this for 15 years and realizes that his listeners have become more sophisticated and don't want to hear about Ginnie Maes on every show. In addition, I am sure Bob gets bored talking about the same things. This discussion of STCTBMTROOFST provided an opportunity for a new topic that provoked heated debate in many circles. Of course, it also made for some great radio -- something that is lacking these days.

Predicting the Range of the STCTBMTROOFST Opportunity: Grade A+. Bob was almost uncanny in his identification of the buy point of the QQQ and his prediction that the QQQ would peak in the 4200-4400 range. It did exactly that. It was frankly astounding that he predicted the range and you can't take that away from daBrink.

Exit Strategy: Grade D. Although traders made a profit, Bob's selection of $84 as the sell price if it was reached was pretty much the worst exit point traders could have gotten during this entire bear market rally. Indeed, an analysis of the QQQ chart on the day QQQ reached $84 reveals that it only traded below $84 for a short while before shooting up and closing the day incredibly strong above $90 a share. Check out this chart that shows QQQs activity on the day the sell order was activated:

http://www.suite101.com/discussion.cfm/i...

Now of course anyone participating in this trade could have taken profits at any juncture along the way. However, I am grading Bob, not anyone else. And Bob told listeners to stay with him and wait until he gave the green light on a weekend broadcast. For that, he received a D in this category.

Trading Savvy: Grade D Minus: Bob had multiple opportunities to advise listeners to sell the QQQs over 16 points higher than where they got out of at $84 a share. I think even Bob was shocked when the QQQs took out $84. I sent out a Special Alert that day saying I was not going to sell my QQQs. I didn't sell simply because the Nasdaq seemed to be oversold at that point and you would be selling into weakness. I assume that Bob felt the need to protect the trade with profits and so the $84 stop was necessary.

The other component to Bob's trading savvy is the fact that he waited way to long to institute a stop or base level from which traders could take profits. For example, I still don't know why Bob didn't simply set higher and higher stops each weekend as the trade went higher, although Bob did say on this weekend's broadcast that he never uses stops in his own personal trading. Nevertheless, he could have discussed this possibility on his show so that others could take advantage of it if they so desired. Did Bob learn from this mistake? I think we all know the answer to that.

I sent out an e-mail to my subscribers on July 14th saying you could sell the QQQs that day for $100 a share. That weekend, Bob could have set the stop at $99 and when traders sold the following week, he would have looked like a genius. Instead, I looked smart, and believe me I ain't that smart!

Discussion of Exit Strategy on Radio: Grade D. Bob lost big marks in this category in my opinion when he clammed up about the QQQ trade. Bob's excuse was that too many people were misinterpreting what he was saying about the QQQs and, therefore, he decided he would just tell people when to exit. I think this began when several posters on his website who appeared pretty unsophisticated, were insisting that Bob had said the QQQs were going to $120, when Bob had never made that statement. Remember the caller to Monetyalk who had $500,000 in the QQQs and was leaving the country and wanted to know what to do? Bob refused to give her any guidance, or to recommend that she exit the trade immediately (which would have yielded her a much higher price assuming she got out at $84). Instead, Bob told her to go visit bobbrinker.com where she could read an announcement of the sell signal when it occurred. Obviously, at that juncture, Bob still believed that he was going to be able to get people out at the right time. Bob's decision to avoid discussion of any exit strategy to me displayed some arrogance on behalf of Mr. Brinker. Moreover, many listeners were interested in learning more about technical analysis and wanted a better understanding from Bob as to what he was looking for in an exit strategy. Personally, I think Bob was looking for a classic "double top" in the Nasdaq composite where we retest the highs on lower volume. Unfortunately, the extreme volatility and dramatic downturn caught even Bob off guard and to protect profits in the trade, he had to institute the $84 stop. Just imagine if the QQQ had never recovered from that point -- Bob felt that had to take some action.

Educational: Grade D. I imagine this will be my most controversial grade and it was tough giving Bob a "D" in this category, so let me explain my reasons. I was going to give Bob an A for this category simply because he opened up an entire area of investing that many people were not familiar with; namely, trading. For example, the constant monitoring of the market, the pitfalls of dramatic moves, analyzing technical indicators, using stop losses were all issues that relate to trading. Unfortunately, Bob failed to discuss or acknowledge the two most important lessons of all that every trader learns. The first lesson you probably starts with the letter "G" and was made famous by Michael Douglas in the movie WallStreet. Yup, GREED. It is a lesson that I feel I am still learning and I have been a victim to my own greed in my trading experiences. During the weekend of July 14th, QQQ had already broken through and closed at $100 a share! Bob did not even acknowledge that fact and during that weekend's broadcast, Bob avoided callers questions about the QQQ trade, even screening out callers (according to posts on the net) who wanted to discuss the trade. Listen to that weekend's broadcast and you will here Bob snip at callers saying he would tell them when to exit the trade. This brings up the second most important lesson of trading: OVERCONFIDENCE. Trading is a humbling experience. Those who believe that they can accurately predict short term moves quickly learn not to take anything for granted. Bob's identification of the exact bottom of the bear market rally, the unbelievable rise immediately following that call, probably caused Bob to react as many of us do -- he got cocky and overconfident. So confident that he simply told callers the Nasdaq would return to the 4200-4400 level and he would be able to tell them when to exit the trade. To analogize to baseball, I think Bob was looking for the ultimate grand slam with this trade. In reality, if he had simply told callers to put a market stop sell order (or a mental stop) at QQQ 100 that weekend, he would have hit a home run. Greed and Overconfidence. Two of the most important lessons to learn from short term trading and Bob didn't acknowledge either of them. Finally, Bob scored low on another important lesson - RISK. Early on, Bob emphasized that the trade was only for sophisticated traders. Once the trade was going well, Bob implicitly approved of people who sounded like they had no business trading. How did he do this? Well, Bob told callers to simply wait for him to tell them what to do. Sophisticated traders would know better. The lady with about 1/2 million in QQQs going out of the country was wondering what she should do. Bob told her to listen to the radio, and if not, she could check his posted summary of the show to see what he advised. This type of caller seemed the norm after a while and rather than encourage this type of person against participating in the trade, Bob seemed to relish the roll of starship commander in charge of the trade. I imagine similar complaints could be made at present about Bob identifying the risks of current opportunities.

FINAL GRADE C. I am sure some would argue the grade should be higher, some would argue it should be lower. The fact is Bob helped listeners turn a profit (albeit a small one) on a short term trading opportunity which is an extraordinarily hard thing to do even for a Market Savant like daBrink. Fortunately, or unfortunately, Bob may not have learned from his own trading lessons. Perhaps his Achilles heal -- his ego -- got in the way as he could have hit a grand slam if he had simply not become overconfident and greedy with his own prescient abilities.

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-- posted by David_Korn

» Kirk - Re: Three Year Anniversary of 1st QQQ Trade

For the summer of 2000 radio trade of QQQ, I think he deserved an "incomplete" since he said to "wait for a return to the Mid $70's to buy".

ANYONE WHO TOOK HIS ADVICE NEVER GOT IN! You must give an incomplete for a course if you never show up for the lectures or take the final. Those that participated were just looking through the window.

I am CONVINCED that this is the reason Brinker, a student of recent history, said to "act immediately" when he sent this bulletin that folks first started to get when the QQQs were about $83

Brinker MT Act Immediately Bulletin

He was so excited about this that his money management firm decided to get in on the act on Thursday of that week and sent a letter dated the day QQQ peaked out at $87!

BJ Group Nasdaq100 Memo

Brinker Investing News from GE Capitol.

Brinker and Jacobs had just sold the BJ Group to Centurian (who later sold to GE) and part of the price was contingent on how much money they had under management. Wouldn't a vague, complicated TRADE that many would have difficulty with be a perfect way to get new accounts? If he could show the BJ Group made money on this "trade" then he could really push his subscribers to this wrap fund and he'd get a higher selling price!

The sad thing is there are so many now who have no idea of his past "attempts" who will overdo their "exuberance" when they get the next act immediately type bulletin from Bob.

Will, Rande and I tried to warn folks here that jumping out of the market in January 2000 might be OK but getting back in could be a bitch. Also, we again warned that if you were bearish that buying something you didn’t like for the long term made no sense as it was akin to gambling and a good investment advisor never tells their clients to gamble with more than a few percent of their investment assets (tip of the risk/reward investment pyramid.)

  Date       Kirk    S&P500   Delta
2003 YTD    +37.6%   13.6%    24.0%  as of 7/31/2003
 

                                Kirk   S&P500+  NASDAQ 
4.5+ Yrs 12/31/98 to 07/28/03  111.0%  (14.2%) (20.9%)
Annualized Annual Return        17.7%  ( 3.3%) ( 5.0%) 
+with dividends reinvested. All Numbers unaudited. 
Click for a free issue of my newsletter .

-- posted by Kirk

» Kirk - BJ Group Acquired

Kirk

Investment News ~ August 07, 2000

Small advisers proving hard to consume

Michael Fritz

Though several ambitious efforts to consolidate small-fry financial advisers have stalled, Centurion Capital Group Inc. appears to be off to a solid start.

The La Jolla , Calif. , financial services holding company last week acquired the BJ Group Inc., an obscure but successful mutual fund allocation business run by two high-profile investment newsletter publishers, Sheldon Jacobs and Robert Brinker.

``Everyone is trying to fit acquisitions into one neat hole, and you can't do it that way. We are trying to be different,'' says Joseph Duran, president of Centurion Capital Management, a subsidiary that targets advisers managing more than $250 million who usually are willing to relinquish day-to-day business operations.

Centurion executives say the ultimate purchase price of BJ Group depends on its achievement of certain profit goals, but an investment banking source estimates that the business may have fetched $15 million to $20 million.

BJ Group's assets under management - $613 million through last December, according to regulatory filings - have been growing at 30% to 50% annually over the last six years, according to Centurion.

Mr. Brinker, publisher of the newsletter Marketimer, host of the weekly network radio show ``Moneytalk'' and chairman of BJ Group, declined to comment. Mr. Jacobs, president of the advisory business, did not return telephone calls.

Tough sledding

Outside of Centurion and National Financial Partners in New York , which is continuing plans to acquire 200 to 300 high-end, insurance-oriented advisory firms over the next four years, few financial adviser consolidation efforts appear to be on track.

Canadian financial services marketer Assante Corp. of Winnipeg , Manitoba , has yet to act on an acquisition plan unveiled last fall. It wants to add $6 billion in assets under management by acquiring 20 fee-based advisers over 18 months.

Centurion, which markets wrap accounts, money management and trust services to 700 advisers and stockbrokers, announced plans last November to accumulate up to $10 billion in assets by acquiring 10 to 12 advisory firms annually over the next three years. It manages $1.4 billion, not including BJ's assets.

The BJ Group's acquisition by Centurion's capital management unit is the third such deal this year. In the first quarter, Centurion's Financial Advisors Inc. unit bought Hinds Financial Group Inc., a Lakewood , Colo. , planner managing $105 million, and Hesse Financial Advisors, a Roswell , Ga., firm managing $125 million.

Some industry observers say the independent nature of advisers makes them poor candidates for a large-scale consolidation play.

``By definition, they are difficult to buy,'' says W. Patrick Clarke, president and CEO of Clarke Lanzen Skalla Investment Firm Inc., an Omaha, Neb., marketer of separate accounts sold through independent advisers. ``I would also think they would be hard to manage after you owned them.''

Dividing the spoils

While Mr. Brinker and Mr. Jacobs no longer will run the company, they have signed multiyear contracts to continue providing asset allocation advice to BJ clients, says Mr. Duran.

The deal doesn't include Mr. Jacobs' No-Load Fund Investor newsletter or Mr. Brinker's Marketimer publication.

The private equity unit of Putnam Lovell Securities Inc., which bought a 24.5% stake in Centurion last October, is backing Centurion's consolidation effort (InvestmentNews, Nov. 15, 1999). The holding company also is financing acquisitions through a $25 million revolving line of credit with Unionbancal Corp. in San Francisco .

BJ Group's 2,247 accounts through December 1999 held an average of $273,000. The advisory requires at least $100,000 to open an account and allocates customer funds into no-load mutual funds available through Charles Schwab Corp.'s fund supermarket.

Annual fees range from 1.5% of assets for accounts less than $500,000 to 0.6% for accounts under $4 million, generating an estimated $6 million annually.

Mr. Brinker, 58, and Mr. Jacobs, 69, are the principal shareholders. Mr. Jacobs' two children - Roy, 35, a Phoenix real estate agent, and Julie, 31, a financial adviser in Denver , each held 10% to 25% stakes in the business, according to a recent regulatory filing.

All BJ Group's employees are remaining and have received ``enhanced'' salaries and retirement savings, and health plan coverage as part of the deal.

Centurion's Mr. Duran hopes to increase the 14-year-old firm's asset base by attracting additional business from its existing clients through new product offerings such as separate-account management and trust services, as well as stepped-up marketing assistance.

In addition, Centurion plans to largely end BJ Group's longstanding custody and trading relationship with Schwab. It will transfer the bulk of the accounts to Centurion's Phoenix trust company unit, which has custody of $1.7 billion and operates its own fund supermarket.

Gotta hand it to Bob. He sold a company valued on assets under management darn near the market top. His 50% share was estimated to be worth between $7.5 and $10M in the article!

-- posted by Kirk

» allancoleman - Re: BJ Group Acquired

-- posted by allancoleman

» Kirk - Gains Since 1/5/00

$1,402.13 = S&P500  on 1/5/00 (MT Date for 60% Sell)
$990.67 = S&P500  today
(29.3%) = Change
.
$11,122.70= DJIA on 1/5/00
$9,321.69= DJIA Today
(16.2%)= Change (interesting the DOW is only down 16%)
.
$330,788 = My Newsletter Portfolio on 1/5/00
$336,114 = My Newsletter Portfolio Today
1.6% = Change in my newsletter portfolio since 1/5/00

So far, the only folks I hear from who have more now than on 1/5/00 say they went to 100% cash (Brinker: "I didn't say that") and didn't follow Brinker's advice to buy QQQ and/or TEFQX, at least to the amounts recommended.

  Date       Kirk    S&P500   Delta
2003 YTD    +38.8%   13.0%    25.8%  as of 8/17/2003
 

                                Kirk   S&P500+  NASDAQ 
4.5+ Yrs 12/31/98 to 08/17/03  114.4%  (14.1%) (22.4%)
Annualized Annual Return        17.9%  ( 3.2%) ( 5.3%)
 
+with dividends reinvested. All Numbers unaudited. 
Click for a free issue of my newsletter .

-- posted by Kirk

» Kirk - Buy, DCA or Wait for weakness? Post #1

Author: Kirk
Date: September 2, 2003 6:44 AM
Subject: Re: Re: Re: You can learn so much from history

.
In response to message posted by dija:

Kirk said: "I think the total stock market is up over 20% since then with zero, zip, nada weakness.

Markets since 4/1/03
<img src=http://cbs.marketwatch.com/charts/int-ad... width=452 height=366>

I wonder when the market timer expects more weakness to BEGIN his DCA?"

Kirk, why do you keep doing this?

Because it is the truth. David Korn even gave a full summary of this in reply to my post right here.

Brinker has been telling everyone who missed the Mar. 11 buy signal to DCA. What he is clearly saying in the above paragraph is to DCA, and THEREBY take advantage of any period of market weakness.

This is what David Korn wrote and it matches what I remember folks saying here.

A few days after that recommendation, Bob returned took to the airwaves and told callers who has missed his buy signal, that they should go back into the market when the S&P 500 was at 800 or lower. As we know, that never occurred.

Bob then modified his advice to recommending that investors view the level of 810 or below in the S&P 500 as a buying opportunity. Simultaneous with that advice, came a lukewarm endorsement by Bob to a "gradual dollar cost averaging approach" if you could stomach the volatility.

You don't believe it because you don't want to believe it. Try to be objective. You will see he could not possibly have meant anything other than what I say he meant. Your explanation makes no sense whatsoever. No one has EVER suggested DCAing "on weakness." The definition of DCA is to do it on a regular basis so that you can take advantage of periods of market weakness.

dija, I just have what he wrote and reports by David Korn and others for what he said.

Brinker told people in no uncertain terms to take 60% out of the market on the radio in January 2000. He has not said to get back in with any similar level of certainty to his radio only listeners who did not have access to his web site bulletin.

I actually think he is cautious for a good reason. He still thinks we are in a secular bear market but we are having a cyclical bull rally. This would mean he expects the market to make a lower low in the future. Since he radio listeners don't have access to his bulletin site, it would make sense to keep them out of the market if they missed the Fall 2002 bottom or its March 2003 test. I also believe he has a modified DCA strategy that has him buying with a time DCA only on weakness as a traditional DCA strategy makes no sense at all when you expect a market top to occur in a year or more which could have a traditional DCA approach buying shares at a cyclical bull top.

What I hope people are learning from reading all this is how difficult it is to get back into the market after you leave it using market timing. Brinker partially reentered the market with his first newsletter QQQ advice in October 2000 with horrible results. He then advised putting the rest of his subscribers money in during the March 2003 test of the October 2002 Bottom with excellent results. At the time, he was far less than candid that it was not the "true bottom" but just a test.

From reading his newsletter at the time and what he said on the radio, it seemed clear he expected more weakness and testing of that 800 "area low." It didn't happen, the market went up 20%. A good market timer should be able to tell you if the market will go up 25% in 6 months and not have to say "DCA" or "disciplined approach to new purchases." A successful market timer should be able to tell you to lump sum into the market right before it rises 20%.

I think "successful market timing" is a mirage and a hoax and relies on tricks like avoiding bad QQQ advice, taxes, inefficient mutual fund choices, etc. but that is another story.

  Date       Kirk    S&P500   Delta
2003 YTD    +48.5%   15.8%    32.7% as of 8/31/2003
 

                                Kirk   S&P500+  NASDAQ 
4.5+ Yrs 12/31/98 to 08/31/03  127.8%  (12.5%) (17.4%)
Annualized Annual Return        19.3%  ( 2.8%) ( 4.0%)
 
+with dividends reinvested. All Numbers unaudited. 
Click for a free issue of my newsletter .

-- posted by Kirk

» Kirk - Buy, DCA or Wait for weakness? Post #2

Author: Will_L
Date: September 2, 2003 9:30 AM
Subject: Brinker having it both ways --what's new?

I see Dija is claiming it was obvious that Brinker has been espousing a DCA approach for those who didn't hear him in mid March when I predicted his return to the market around the time of the Iraq War.

That is simply not true. Brinker has told people it was NOT his recommendation on more than one occasion. He in fact told people on the radio to wait for WEAKNESS before re-entering the market.

On one occasion a lady called and said that she had made the move he suggested on March call. Here question was about 1,000 per month that she had available for her 401k plan. Her direct question was -"should I just put that in the market on a monthly basis now".

Brinker emphatically told her "NO". Then he went on using both hands to pat himself on the back and bragging about his call in March, but said that it was his advice NOT TO CHASE the market when it was up this much--call was probably about May or June.

Then the Lady re-iterated her question. "I know Bob, and I followed your recommendation in March, this is money from my salary that is available and my question is, do I put the money in the market as I get it on a monthly basis or should I put it in the money market fund and wait for weakness "?

Brinker again said he couldn't recommend anyone putting money into the market after the runnup and launched another self congratulatory rant about how the market had run up since his re-entry.

The Lady who after all was a trusting subscriber then took his twice giving an emphatic "NO" to her question as a statement from him NOT to average into the market. So she said.

"So Bob, then I should just put the new money in my 401 k into the money market acct and wait for a signal or weakness to put those funds into equities".

"I didn't say that" Brinker began--although any sane person knew that indeed he had just "said that". He then launched into the same rehashing of how the market had gone up after his call and NEVER DID ANSWER THE QUESTION FORTHRIGHTLY!!

Having observed Brinker as I have, I know that it was not a matter of not understanding the question. It was a simple question to answer and Brinker did NOT want to do so. The only reason was, Brinker was just as unsure if the market was going right back down as the rest of the world at the time. He fully expected a sell off as his continued emphasis on buying all kinds of crap if the S&P fell under 810 indicated.

Thus he would not tell people directly to DCA into the market. The ambiguity in the newsletter concerning DCAing was by design like the omission of price and date on the QQQ bulletin. One can read it that he believes one should DCA and catch weakness if there is any--others can interpret it as though he is saying to only average in on weakness. Brinker could explain it plausibly either way.

The call I point out matches that ambiguity to a tee. He would NOT give a straight answer--he would not sanction any investment in the market at that time--even a DCA approach. Yet he would not be pinned down to telling her that his advice was to put the funds into a mm and wait. That is indeed the only alternatives. The fact Brinker would not pick one--tells you he was simply setting the flock up to be "BRINKERED", depending on the outcome.

If the market continues up, Brinker will claim that he told people to DCA into the market if they didn't catch that initial March call. If it goes back down, he will swear that he told people not to DCA.

-- posted by Kirk