Bob Brinker Forum

[Math Junkie]

Here's how I identified changes in status of the model:

The earliest date for which I was able to make this determination was January 1991, when he went 100% invested. If he was fully invested, then his model must have been favorable. Unfortunately, we are not able to make that determination prior to that, as he was only partially invested, and if he made any statements on whether the model was favorable or unfavorable, I don't have that information. On the other hand, in January of 2000, even though he only went 60% to cash, he explicitly stated "the model has turned unfavorable."

In October of 2000 he spoke of a "countertrend rally." By definition a countertrend rally cannot exist unless the trend is down, so it is evident that his model must still have been unfavorable. This is confirmed by the fact that in subsequent issues he made it clear by his explanations that the methodology he was using in attempting to identify a countertrend rally was different from the methodology of his model as he had previously explained it on many occasions.

In March of 2003 he again went fully invested, leaving no doubt about the status of the model.

[Math Junkie]

Here's another way of looking at it: A coin flip would have given a 50% chance of heads in any given month, so the probability was 1/2 for each month. The probability of its coming up heads two months in a row is 1/2 x 1/2 = (1/2)^2, i.e., one-half squared. The probability of its coming up heads 108 months in a row would be (1/2)^108 = 3.08 x 10^-33. The probability of it then coming up tails in the next month was 1/2, so the chance of the model staying favorable for 108 months by random chance and then switching to favorable was the product, or 3.08 x 10^-33 x 1/2 = 1.54 x 10^-33.

The probability of its staying unfavorable for the following 38 months (I already counted the first of the 39 months in the preceding paragraph) is (1/2)^38 = 3.6 x 10^-12. Then there is a 50% chance of it switching to favorable the next month, for a total probability of 3.6 x 10^-12 x 1/2 = 1.8 x 10^-12.

The combined probability for both periods is again the product, or 1.54 x 10^-33 x 1.8 x 10^-12 = 2.77 x 10^-45. Thus, the probability that the model would have stayed favorable for nine years, gone unfavorable for three years, and then gone favorable again, all by random chance, is exceedingly small.

Fascinating.

[Math Junkie]

I've been thinking about the issue of statistical significance. This has been brought up on another site where it was pointed out that one needs to analyze the statistics to determine the likelihood that a given performance record is not due to random chance.

So what I've been thinking is this: Nine years elapsed from when Bob went fully invested until his model turned "unfavorable." Once he had gone fully invested in January of 1991, what is the probability of the next call occurring within two-and-a-half months of the top, as it did?

I figure that with one newsletter a month, he had to consult his model at least once a month to determine whether it was still favorable, or if it had turned unfavorable, so a call based on random chance had as much chance of happening in any month as in any other month. January 1991 through January 2000 was a period of 108 months, so that call had one chance in 108 of occurring in any one month, for a probability of 1/108. The chance of it happening within +/-2.5 months of the top, which is roughly the five month period from January 2000 through May 2000 is five time that, or 5/108 = 4.6%.

The next time his model had a change in position was March of 2003, whereas the bottom was in October of 2002, so he got that one within five months. January 2000 to March 2003 is a period of 39 months, so the call had a 1/39 chance of occurring in any given month. The chance of it occurring within a +/-5 month period of the top, i.e., a ten month period, is ten times that or 10/39 = 26%.

The probability of both those events occurring is the product, or 4.6% x 26% = 1.1% probability of those two calls coming as close to the actual top and bottom as they did by random chance.

Valid analysis or science fiction? You be the judge!

[Math Junkie]

It sure does confirm my lack of interest in buying into the BJ Group! At least with the newsletter you have the option of picking a model portfolio and sticking with it. Even those who interpreted Brinker's first bulletin as applying to the model portfolios would have learned otherwise when the November issue came out, and they could then have gotten out before the losses became too bad, as Hulbert did, although those whose mail delivery was not lightning fast would have had a difficult decision to make.

It's a good thing that Brinker has since adopted a policy of explicitly stating in the bulletin how or whether the model portfolios are to participate, a promise that he has so far kept.

Not that I am not making any prediction on whether his model portfolios will continue to do as well as they have recently.

[TREND1]

Really do not care about BJ Group.
Why?
Because I do not have any money involved in BJ Group.

Now if you say Bob Brinker has incorrectly stated the return
of his Model #1, or #2, Or #3.
That would be of interest to me.

[Kirk]

Will_L posted interesting data showing Brinker's BJ Group managed account matching the S&P500 since the peak of the bull market: http://www.suite101.com/discussion.cfm/investing/101527/1362-1371#message_2

Interesting that the performance is not at all like that advertised in the newsletter for model portfolio #1. Of course, those who participate in the "for a fee managed accounts" are not allowed "Mulligans" on QQQ investments.

What do you think? I find it very interesting that the portfolio actually under performend a PASSIVE benchmark portfolio between March 2000 and March 2004.

[Burk]

Yes. He's usually not that obvious, but he was on Sat.

[rich23241]

Yes, He said it was a buying opportunity.

[Burk]

Bob was sure screaming "bullish" yesterday!

[jstrack]

Bob beats up on Greenspan and appears to be expecting an increase in inflation. Seems also to be indicating that the increase in energy prices will be a significant drag on consumer spending.....Perhaps a downturn later this year? Time to look out here.....cross currents of increases in inflation and prices while incomes are not expected to keep pace.....

A respected fella recently posted a graph on the increae in the M1 which looked strange due to its fluctuations. Is the M1 fluctuations a red flag that there are some systemic problems in the economy or ???

[Math Junkie]

Thanks for sharing your thoughts on the market and economy.

[jstrack]

I am concerned about the same thing, although I did get out of the market. I think that Bob is correct that profits are way up. In this regard, the second half of 2004 and first half of 2005 will have to show profit growth over excellent data. However, the concern that I have is the sustainability of the economy. Clearly the stimulus is over, Fed rate decreases are long past, tax reduction and rebates are about over, and more importantly the mortgage refinancings are over where about 40% of borrowers increased their mortgage and spent the excess money.

The question is now, how sustainable is the economy. In this world there are two main drivers of growth, the US and China. Both look to be in the mode of raising rates. China's economy is inherently unstable and there is no way of knowing weather the slowdown they attempt will be too much, particularly with their potential overcapacity in some areas. On the US side, as we discussed the stimulus is gone. In addition, there are some indications to me that growth at the levels we are seeing are unsustainable. We may be looking at GDP growth rates of closer to 2% or so in 2005 and given an increase in Fed rates, the value of stocks at these levels may look poor. Finally, oil prices have increased significnatly. When prices increase as such, it has to be a big negative on many economies. There is an argument that the US is less effected than before and there is trueth to that, however, that is not the case for most of the world.

Other concerns that should not overly effect one's investment decisions, but I believe are affecting investment decisions are terrorists targeting of economic and political targets and successfuly have an effect in their favor. In addition, the Fed is currently looking like it missed the boat on interest rates and probably should have raised rates earlier in the year...back in March a bit. The Fed has a habit of moving too late and then too hard...which could be upseting to the market if it raises rates at 50-basis point intervals. I kind of consider the long rate increase to be the first punch and a negative to future growth. I consider the increase in Fed rates a second punch at available credit as banks and business will require higher returns at a juncture where consumer spending is slowing or at least dissapointing. Finally, I think we are nearing the time when we will indeed see how sound Freddie, Franie and some other banks (JP and Citibank) are given the increasing rates and also how safe derrivative transactions really are.

Although the markets have had a rather dramatic decline of late, I think the market may post another rally here, although it should be relatively short lived. I think once again we will see another decline in the latter part of July and then all bets are off. Nevertheless, I could be wrong as the current decline has broken sharpley below the 200-day moving average which could signify further current weakness even though we are oversold.

Overall, I've not seen anyone better than Bob regarding market timing on an overall in or out call. So, I cannot say firmly that he made the wrong call. I respect his economic model, wisdom and understandings greatly. I have made the personal decision a while back to get out of the market because I don't think the market offers an acceptable risk return ratio because the stimulus gone and interest rates are set to rise as well as the other factors mentioned.

Best wishes....

[Math Junkie]

It is not yet clear whether this is a correction or a bear market. That is the basis of my question.

[TREND1]

What bear market ?
Look at the number of sectors that have more then 50%
of the stocks above the 200 day SMA.

http://www.investorshub.com/boards/read_msg.asp?message_id=2989229

[Math Junkie]

Does anyone think that Brinker has missed the start of a new bear market here?

[Math Junkie]

For those who follow the Brinker "discussion" on the Yahoo UTEK board, I see that it has become inaccessible through the menu structure (along with the last two thirds of the alphabet). Here is a direct link for those who are interested:

http://messages.yahoo.com/bbs?action=topics&board=4687942&sid=4687942&type=r

[Math Junkie]

I didn't see your question until now because you addressed it to "None." I'm not that interested in polls in general, and in any case, doing a poll here would not do much good, since the thread is dead. As for me, yes I do believe that Bob Brinker, Sr. was posting as don lane, later changed to mister topes, for what it's worth.

[Kirk]

Can you do a poll to see how many think Bob Brinker posted as Don Lane (later changed to Mister Topes) on Silicon Investor?

Della has compiled all the posts:

SI “Market Savant & Radio Host” Forum: http://www.suite101.com/discussion.cfm/investing/103385/1-9

SI “UTEK” Forum: http://www.suite101.com/discussion.cfm/investing/103657/1-9

SI: "mistertopes" From "Justa and Lars Honor Bob Brinker" Forum http://www.suite101.com/discussion.cfm/investing/103866/1-9

We might as well start with you. Do you agree that Bob Brinker posted as Don Lane on Silicon Investor?

[Tim S]

I'm curious as to Bob's current recommendations. Anyone willing to send them to me at [e-mail] would be appreciated. Thanks, TS

[Math Junkie]

I'm willing to take a stab at moderating a board, but I'm not all that sure I want to go around "drumming up business."

[TREND1]

Are you going to let those SI boards know about this board?
I think you should.IMHO.