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Here is an excerpt from my last newsletter which provides summary and commentary of Bob Brinker's Moneytalk.
BOB BRINKER SAYS THE SUMMER DOLDRUMS ARE HERE
Bob Brinker Comment: This was a very quiet week for the stock market. The changes in the major indices were very small. The Dow was only up 6 points for the week. The S&P 500 dropped only 1.5 points, and the Wilshire 5000 fell 11.8 points, which is only about .1%. This is the time when people leave town for their summer vacations and the summer doldrums hit Wall Street.
Editorial Comment "EC": The Stock Trader's Almanac rebuts the widely held belief that summer produces the greatest rally of the year. The so-called "summer rally" was defined by Ralph Rotnem as the lowest close in the Dow in May or June, to the highest close in July, August or September. The Almanac points out that there are rallies in every season of the year, but the summer is actually the weakest statistically speaking. Nevertheless, a rally is a rally and over the last 40 years, the summer rally produced on average gains of 9.2% using Mr. Rotnem's guidelines.
source, 2004 Stock Trader's Almanac (p. 70), Yale Hirsch and Jeffrey A. Hirsch editors, http://www.stocktradersalmanac.com
BOB BRINKER'S VIEW OF THE LONG TERM TREND
Brinker Comment: Bob said that we had an indication that the secular bull market from 1982-2000 came to an end during the speculative peak in the first quarter of 2000 which ushered in a new bear market megatrend. We are now in year 5 of that secular bear megatrend, which Bob thinks will last anywhere from 8 to 20 years. Nothing Bob sees right now, however, suggests to him that this secular bear market will end anytime soon.
BOB BRINKER'S OVERALL VIEW OF THIS CYCLICAL BULL MARKET
Brinker Comment: Bob said he feels that we began in earnest a cyclical bull market in March, 2003 which was the successful and final test of the initial bottom that occurred in October, 2002. Bob said he has referred to this as a market "double bottom" which is where you get a low for the market, followed by a failed rally, and then a crucial retest which determines whether you get a buying opportunity. Bob said we saw the initial low in October, 2002. This was followed by a failed rally into the winter of 2002, and then a successful final retest of the low area in March, 2003. On March 11, 2003, the S&P 500 closed at the 800 level, just 3% from its prior low which is when Bob issued his buy signal when he "saw what he needed to see."
EC#1: As I have discussed in prior newsletters, I believe that Bob decided to return to a fully invested position after seeing the market had a 90% down day which occurred on March 10, 2003. In fact, it was based on the market's close of March 10th (not March 11th), that Bob's timing model issued its "buy signal" and Bob recommended investors return to a fully invested position based on the market's close that day. I am aware of at least two other advisors who turned bullish at the same time, both in large part due to the 90% down day phenomenon in my opinion.
EC#2: I realize that Bob likes to refer to the market as a "double bottom" but I maintain that it is more accurate to refer to this as a "triple bottom." Bob likes to use the S&P 500 area of 800 as evidence that it had tested the lows of October. However, the S&P 500 actually CLOSED at 797.70 on July 23, 2002! That was the first bottom in my opinion, followed by the lowest close which occurred in October, 2002. The third bottom occurred in March, 2003, but the October 2002 saw levels significantly lower in the Nasdaq Composite.
BOB BRINKER SAYS THE EASY MONEY HAS BEEN MADE
Brinker Comment: The stock market is up over 40% since the buy signal in March, 2003. However, Bob thinks that the "easy money" phase of the cyclical bull occurred from March, 2003 until earlier this year. The consolidation period, which we are in now, has been very modest. Even now, the S&P 500 is within 3% of its recovery high, and has never been more than about 6% from its recovery high. Nevertheless, since the easy money was made during the initial 40% thrust from last year, we will now have to fight for our profits and be patient.
EC: I agree, and that is why I am trying to identify inflection points such as the buy signal I identified on May 17th, which so far marks the correction bottom this year.
THE CYCLICAL BULL MARKET HAS NOT ENDED
Brinker Comment: As we move through this consolidation phase, we will have to be patient in a market that can be more than frustrating as it has shown so far this year. AT THIS TIME, however, Bob said he does NOT see the evidence that this cyclical bull market is over.
EC: The cyclical bull market we have seen thus far comports with other cyclical bull markets. If you would like to see my analysis of all cyclical bull market in the last secular bear market, just e-mail me at davidk555@earthlink.net.
HOW LONG DOES BOB BRINKER THINK THE CYCLICAL BULL MARKET WILL LAST?
Brinker Comment: Bob said cyclical bull markets tend to last 1 to 3 years. However, how long it lasts doesn't really matter. What matters is that you are on the right side of the market when it does end, whether its in 1 year, or 3 years or even longer. Bob said his stock market timing indicators have done a very good job of identifying major moves in the stock market and he is going to stick with those indicators and not try to predict when the cyclical bull market will end. As of right now, however, Bob does not think the cyclical bull market is over. Bob will wait until the indicators give the all clear.
EC: No surprise here. The indicators that Bob tracks in his stock market timing model don't suggest to me that Bob will be turning bearish anytime soon. I will update those indicators in a future newsletter.
WHAT HAPPENS NEAR THE END OF A CYCLICAL BULL MARKET?
Caller: This caller wanted to know what will happen with jobs and interest rates toward the end of a cyclical bull market. Bob said that these are economic issues, and the economy, just like the stock market, is subject to cyclical moves. One of the first places that you will see a change in the economy is in the jobs market. You will see the absence of new jobs, you will see layoffs and if you are living in a housing community that is sensitive to new jobs, than you could see that impact the prices of housing as well.
EC: The stock market can turn, however, before the economy turns. Remember, the stock market is a discounting mechanism as investors try to anticipate what the future will hold for corporate earnings and the economy, usually six months in advance.
INVEST IN THE WILSHIRE 50000
Caller: This caller has $100,000 to invest and wanted Bob's recommendation on a security to invest in. Bob said he likes the idea of investing in the Wilshire 5000 because it will basically earn you the rate of return of the U.S. stock market. If you purchase a low expense fund that tracks the Wilshire 5000, you will get a tax efficient investment, diversification and you are assured of not under performing the market as so many managed mutual funds are prone to do.
EC: The Vanguard Total Stock Market Fund (Ticker: VTSMX) is the way to go if you want to own the Wilshire 5000 through a no load mutual fund. It only has an expense ratio of 20 basis points or 0.20%. I prefer to own the Wilshire 5000 through the exchange traded fund VIPERS (ticker: VTI) because you can trade it in real time. The only downside is you have to pay a commission when you buy and sell it, but a discount broker minimizes those transaction costs.
TREASURY INFLATION PROTECTED SECURITIES
Caller: This caller subscribes to Bob's Marketimer newsletter and observed that he made a recommendation to reduce holdings in some TIPS mutual funds. Bob said he made that recommendation some time ago, although he still keeps a small portion of his portfolio in TIPS. The caller then asked what Bob thought the optimum conditions were for TIPS? Bob said the optimum situation is what we saw a couple of years ago when the base rate was up near 3%. Recently, the base rate got down into the ones and Bob's concern was that people would demand a higher base rate and they have and that is why you have seen depreciation in the share price.
EC: Looking for inflation protection? Check out this article entitled, "Inflation-Proofing Your Portfolio" which you can access at this link:
http://tinyurl.com/2n6zm
STARTING OFF SMALL
Caller: This caller's 16-year old wants to learn about investing and purchase some stocks. Bob said he would like a young person to learn about investing, rather than actually start investing in stocks. The caller asked if Bob knew of a way to invest small amounts of money into stocks. Bob encouraged the caller not to adopt this route. Instead, he said he would rather the child wait until their early 20s, keep the money liquid in a money market account and start investing after college.
EC#1: I take a different stance on this issue than Bob. I think it can be very beneficial for children to start investing in stocks at a young age. It gets them interested in the concept of investing, and can be financially rewarding to boot. Moreover, there are now companies that allow you to buy stocks for a very small amount per transaction. One such company is Sharebuilder which allows you to start buying stocks at just $4 per investment. Learn more about Sharebuilder at this link:
http://www.sharebuilder.com/
EC#2: Another way to invest in stocks without paying commissions is through what are called "Drips." Drips is actually a nickname for the acronym DRP which stands for Dividend Reinvestment Plan. A related concept are the Direct Stock Purchase Plans (DSPs). These plans are offered typically by blue-chip companies where you can invest small amounts of money by purchasing stock directly from the companies. Want to learn more about this type of investing? Start here and follow the links:
http://www.fool.com/school/Drips.htm
David Korn, editor of http://www.BeginInvesting.com
E-mail me at: mailto:davidk555@earthlink.net
DISCLAIMER: I am not associated with ABC Radio Networks, Moneytalk or Bob Brinker and this service is neither sanctioned by, nor written under the auspices of ABC Radio Networks, Moneytalk or Bob Brinker.
Here is an excerpt from my last newsletter which provides summary and commentary of Bob Brinker's Moneytalk. If you like it, you can find out more by visiting my website, http://www.BeginInvesting.com
BOB BRINKER SAYS THE SUMMER DOLDRUMS ARE HERE
Bob Brinker Comment: This was a very quiet week for the stock market. The changes in the major indices were very small. The Dow was only up 6 points for the week. The S&P 500 dropped only 1.5 points, and the Wilshire 5000 fell 11.8 points, which is only about .1%. This is the time when people leave town for their summer vacations and the summer doldrums hit Wall Street.
Editorial Comment "EC": The Stock Trader's Almanac rebuts the widely held belief that summer produces the greatest rally of the year. The so-called "summer rally" was defined by Ralph Rotnem as the lowest close in the Dow in May or June, to the highest close in July, August or September. The Almanac points out that there are rallies in every season of the year, but the summer is actually the weakest statistically speaking. Nevertheless, a rally is a rally and over the last 40 years, the summer rally produced on average gains of 9.2% using Mr. Rotnem's guidelines.
source, 2004 Stock Trader's Almanac (p. 70), Yale Hirsch and Jeffrey A. Hirsch editors, http://www.stocktradersalmanac.com
BOB BRINKER'S VIEW OF THE LONG TERM TREND
Brinker Comment: Bob said that we had an indication that the secular bull market from 1982-2000 came to an end during the speculative peak in the first quarter of 2000 which ushered in a new bear market megatrend. We are now in year 5 of that secular bear megatrend, which Bob thinks will last anywhere from 8 to 20 years. Nothing Bob sees right now, however, suggests to him that this secular bear market will end anytime soon.
BOB BRINKER'S OVERALL VIEW OF THIS CYCLICAL BULL MARKET
Brinker Comment: Bob said he feels that we began in earnest a cyclical bull market in March, 2003 which was the successful and final test of the initial bottom that occurred in October, 2002. Bob said he has referred to this as a market "double bottom" which is where you get a low for the market, followed by a failed rally, and then a crucial retest which determines whether you get a buying opportunity. Bob said we saw the initial low in October, 2002. This was followed by a failed rally into the winter of 2002, and then a successful final retest of the low area in March, 2003. On March 11, 2003, the S&P 500 closed at the 800 level, just 3% from its prior low which is when Bob issued his buy signal when he "saw what he needed to see."
EC#1: As I have discussed in prior newsletters, I believe that Bob decided to return to a fully invested position after seeing the market had a 90% down day which occurred on March 10, 2003. In fact, it was based on the market's close of March 10th (not March 11th), that Bob's timing model issued its "buy signal" and Bob recommended investors return to a fully invested position based on the market's close that day. I am aware of at least two other advisors who turned bullish at the same time, both in large part due to the 90% down day phenomenon in my opinion.
EC#2: I realize that Bob likes to refer to the market as a "double bottom" but I maintain that it is more accurate to refer to this as a "triple bottom." Bob likes to use the S&P 500 area of 800 as evidence that it had tested the lows of October. However, the S&P 500 actually CLOSED at 797.70 on July 23, 2002! That was the first bottom in my opinion, followed by the lowest close which occurred in October, 2002. The third bottom occurred in March, 2003, but the October 2002 saw levels significantly lower in the Nasdaq Composite.
BOB BRINKER SAYS THE EASY MONEY HAS BEEN MADE
Brinker Comment: The stock market is up over 40% since the buy signal in March, 2003. However, Bob thinks that the "easy money" phase of the cyclical bull occurred from March, 2003 until earlier this year. The consolidation period, which we are in now, has been very modest. Even now, the S&P 500 is within 3% of its recovery high, and has never been more than about 6% from its recovery high. Nevertheless, since the easy money was made during the initial 40% thrust from last year, we will now have to fight for our profits and be patient.
EC: I agree, and that is why I am trying to identify inflection points such as the buy signal I identified on May 17th, which so far marks the correction bottom this year.
THE CYCLICAL BULL MARKET HAS NOT ENDED
Brinker Comment: As we move through this consolidation phase, we will have to be patient in a market that can be more than frustrating as it has shown so far this year. AT THIS TIME, however, Bob said he does NOT see the evidence that this cyclical bull market is over.
EC: The cyclical bull market we have seen thus far comports with other cyclical bull markets. If you would like to see my analysis of all cyclical bull market in the last secular bear market, just e-mail me at davidk555@earthlink.net
HOW LONG DOES BOB BRINKER THINK THE CYCLICAL BULL MARKET WILL LAST?
Brinker Comment: Bob said cyclical bull markets tend to last 1 to 3 years. However, how long it lasts doesn't really matter. What matters is that you are on the right side of the market when it does end, whether its in 1 year, or 3 years or even longer. Bob said his stock market timing indicators have done a very good job of identifying major moves in the stock market and he is going to stick with those indicators and not try to predict when the cyclical bull market will end. As of right now, however, Bob does not think the cyclical bull market is over. Bob will wait until the indicators give the all clear.
EC: No surprise here. The indicators that Bob tracks in his stock market timing model don't suggest to me that Bob will be turning bearish anytime soon. I will update those indicators in a future newsletter.
WHAT HAPPENS NEAR THE END OF A CYCLICAL BULL MARKET?
Caller: This caller wanted to know what will happen with jobs and interest rates toward the end of a cyclical bull market. Bob said that these are economic issues, and the economy, just like the stock market, is subject to cyclical moves. One of the first places that you will see a change in the economy is in the jobs market. You will see the absence of new jobs, you will see layoffs and if you are living in a housing community that is sensitive to new jobs, than you could see that impact the prices of housing as well.
EC: The stock market can turn, however, before the economy turns. Remember, the stock market is a discounting mechanism as investors try to anticipate what the future will hold for corporate earnings and the economy, usually six months in advance.
INVEST IN THE WILSHIRE 50000
Caller: This caller has $100,000 to invest and wanted Bob's recommendation on a security to invest in. Bob said he likes the idea of investing in the Wilshire 5000 because it will basically earn you the rate of return of the U.S. stock market. If you purchase a low expense fund that tracks the Wilshire 5000, you will get a tax efficient investment, diversification and you are assured of not under performing the market as so many managed mutual funds are prone to do.
EC: The Vanguard Total Stock Market Fund (Ticker: VTSMX) is the way to go if you want to own the Wilshire 5000 through a no load mutual fund. It only has an expense ratio of 20 basis points or 0.20%. I prefer to own the Wilshire 5000 through the exchange traded fund VIPERS (ticker: VTI) because you can trade it in real time. The only downside is you have to pay a commission when you buy and sell it, but a discount broker minimizes those transaction costs.
TREASURY INFLATION PROTECTED SECURITIES
Caller: This caller subscribes to Bob's Marketimer newsletter and observed that he made a recommendation to reduce holdings in some TIPS mutual funds. Bob said he made that recommendation some time ago, although he still keeps a small portion of his portfolio in TIPS. The caller then asked what Bob thought the optimum conditions were for TIPS? Bob said the optimum situation is what we saw a couple of years ago when the base rate was up near 3%. Recently, the base rate got down into the ones and Bob's concern was that people would demand a higher base rate and they have and that is why you have seen depreciation in the share price.
EC: Looking for inflation protection? Check out this article entitled, "Inflation-Proofing Your Portfolio" which you can access at this link:
http://tinyurl.com/2n6zm
STARTING OFF SMALL
Caller: This caller's 16-year old wants to learn about investing and purchase some stocks. Bob said he would like a young person to learn about investing, rather than actually start investing in stocks. The caller asked if Bob knew of a way to invest small amounts of money into stocks. Bob encouraged the caller not to adopt this route. Instead, he said he would rather the child wait until their early 20s, keep the money liquid in a money market account and start investing after college.
EC#1: I take a different stance on this issue than Bob. I think it can be very beneficial for children to start investing in stocks at a young age. It gets them interested in the concept of investing, and can be financially rewarding to boot. Moreover, there are now companies that allow you to buy stocks for a very small amount per transaction. One such company is Sharebuilder which allows you to start buying stocks at just $4 per investment. Learn more about Sharebuilder at this link:
http://www.sharebuilder.com/
EC#2: Another way to invest in stocks without paying commissions is through what are called "Drips." Drips is actually a nickname for the acronym DRP which stands for Dividend Reinvestment Plan. A related concept are the Direct Stock Purchase Plans (DSPs). These plans are offered typically by blue-chip companies where you can invest small amounts of money by purchasing stock directly from the companies. Want to learn more about this type of investing? Start here and follow the links:
http://www.fool.com/school/Drips.htm
David Korn, editor of http://www.BeginInvesting.com
E-mail me at: mailto:davidk555@earthlink.net
DISCLAIMER: I am not associated with ABC Radio Networks, Moneytalk or Bob Brinker and this service is neither sanctioned by, nor written under the auspices of ABC Radio Networks, Moneytalk or Bob Brinker.
For those interested in Bob Brinker's Moneytalk, here is an excerpt from my newsletter.
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.
BOB BRINKER PREDICTS NEW I-BOND RATE WILL BE LOWER
Caller: How much do the I-Bonds pay? Bob noted that current holders of I-bonds during the 6-month period ending October 31st, are earning an annualized rate of 4.66%. If you buy them prior to November 1, 2003, you will get a base rate of 1.1% plus the annualized inflation rate which totals 4.66%. On November 1, 2003, the Treasury will revisit the base rate and Bob projects that the base rate will either stay the same, or decline. Bob said he thinks the chances of the Treasury raising the base rate are zero. With respect to the inflation component, Bob thinks that will be lowered on November 1st. Accordingly, when the new rate gets issued on November 1st, Bob said he expects the new rate to be lower than 4.66%. If you buy it by October 31, you lock in the 1.1% base rate for up to 30 years. The inflation component is subject to change every six months. Bob noted that when the I-Bonds first came out, they were paying a fixed rate of over 3% for 30 years which shows you how off base the Treasury was thinking at that time. Bob said he still likes the I-Bonds if you are looking for inflation protection and have a conservative objective.
Editorial Comment "EC": I agree with Bob's view that the total I-Bond rate will probably be lower effective November 1st. Thus, if you want to purchase I-Bonds before November 1st, you have about 6 weeks left. On a related note, I e-mailed the Treasury to verify that for 2003 individuals can invest $60,000 in I-Bonds. I received a prompt e-mail reply confirming that this was accurate provided you invest up to $30,000 in paper I-Bonds, and the other $30,000 in electronic I-Bonds through Treasury Direct:
http://tinyurl.com/l2rw
Caller: This caller noted that if you use a credit card to purchase I-Bonds online, you can get a 1% rebate depending upon your credit card. That means, if a husband and wife team purchased $30,000 each, you could get a $600 rebate. Bob said he heard this option will not be available next year.
EC: I suppose you could also get airline miles if you used certain credit cards to purchase I-Bonds. Just another benefit to purchasing I-Bonds!
REBALANCING A PORTFOLIO FOR YOUR OPTIMUM ASSET ALLOCATION
Caller: This couple is in their late 30s to early 40s, and just subscribed to Bob's newsletter. They need to know how to go about rebalancing their portfolio which is all in stocks right now. Bob said the first thing they need to decide, is what their asset allocation should be. Bob said in his opinion, based on their age bracket, they could have 70-75% of their assets dedicated to the stock market during "favorable periods" and 25-30% in fixed income securities. Since they were 100% invested, all they needed to do was move about 25% into the fixed income area. Bob said if it were him, he would try to do that in tax-deferred accounts so that all of the income they earned would be deferred all the way out to retirement. In other wards, try to make the asset allocation changes in the tax-deferred accounts, rather than the personal accounts. The caller then asked whether they should get to the 25% fixed income by relegating new money to fixed income. Bob said that was one possibility, or they could do a combination new money, and selling some equities now.
EC: One of my subscribers recently asked me if I had a link to a good synopsis of the concept of asset allocation. Here is a good one-page primer on asset allocation:
http://tinyurl.com/nd7t
Caller: This caller has about 8-10 years until retirement, and isn't sure what her asset allocation should be. Bob said if you are close to retirement or in retirement a balanced approach is a good start for your asset allocation. A "balanced approach" means that you have 50% of your assets in stocks and 50% in fixed income. If you have reached critical mass (i.e. have enough money such that you never have to work again), there is no need to place your entire portfolio at risk. If you are 8-10 years from retirement, Bob said he would be comfortable having 2/3rds of your holdings in stocks, and 1/3rd in fixed income, during a positive market environment.
EC: Since Bob would presumably view today's market as a "positive market environment" you could have as much as 66% of your asset allocation in equities if you are 8-10 years away from retirement and want to follow Bob's guidelines.
Brinker Comment: In determining your asset allocation, you have to keep in mind your risk tolerance. Bob referred to a caller who said she was totally unnerved by the stock market. Bob noted that emotions should not play a part in your investment strategy. If you invest in stocks emotionally, that is a ticket to losses. Why? Because emotional investors tend to sell on weakness, and buy on strength.
Caller: This caller has all of his 401(k) plan invested in a fixed income security that is generating a 6.86% annual rate of return. Should he switch some of it over to equities? Bob asked the caller if he held equity holding outside the retirement plan, which the caller said he did. In response, Bob noted that you calculate your asset allocation by taking into consideration ALL of your holdings, not just one particular account. In addition, Bob noted that if you can make 6.8% guaranteed in a fixed income account, keeping it in a tax-deferred account would be the perfect situation.
EC: Here are links to three sites that have asset allocation calculators which can help you decide how to allocate your investment assets among stocks, bonds and cash:
http://www.smartmoney.com/oneasset/
http://www.forbes.com/tools/calculator/asset_alloc.jhtml
http://tinyurl.com/nd83
Caller: This caller cashed in a life insurance policy, and put the bulk of her money into a money market account, but wants to get to her proper asset allocation. Bob, of course, recommends a diversified portfolio and to the extent you are going to invest in the equity market, Bob recommends using a dollar cost averaging approach. HOWEVER, there is still risk in that approach, which Bob pointed out he has said on numerous occasions. Bob cautioned people who think that dollar cost averaging carries no risk, when in fact it does, depending upon what kind of market environment you get into. Bob concluded this call by saying that the dollar cost averaging approach is well-grounded, but does entail risk.
EC: I was waiting for this comment from Bob which confirms that his stance toward new money has not changed. Bob continues to recommend dollar cost averaging new money into the stock market, although today, he didn't use the phrase "on market weakness" which may have just been an oversight on his part. Trust me, if the market declines precipitously, Bob will say that he had recommended dollar cost averaging on weakness! More importantly, the fact that he continues to stress the risks of this approach implies that he believes there is a chance (even a small one) that the market could correct significantly at any given time.
GOLD AND OTHER PRECIOUS METALS
Caller: What is your opinion on gold as an investment right now? Bob thinks that what you are seeing with respect to the gold is speculation by traders who think that inflation will get out of control which so far hasn't happened. In addition, the gold bugs are betting on geopolitical events that would threaten the currency. This could come in the form of a major terrorist attack, or a nuclear holocaust involving India/Pakistan or North Korea. Any type of chaotic event would be good for gold. By in large, Bob thinks gold remains a speculative vehicle.
EC: Another caller this weekend told Bob that she was afraid of investing in stocks out of fear that there would be another major terrorist attack on U.S. soil. I can certainly empathize with this fear. In the wake of the September 11, 2001 terrorist attacks, the Dow declined from 9.605.50 to 8,235.80 in the five trading days the market was opened after the attack. Bob has previously stated that his stock market timing model does not factor in the threat of a terrorist attack; however, he has acknowledged that the risk of terrorism is now a component of equity investing that we all have to live with.
Caller: This caller wants to invest in a gold mutual fund. Bob said there are dozens of such funds, some of which are even no load funds. The caller asked Bob for a recommendation, but Bob didn't know any and recommended that the caller refer to Morningstar to find a fund.
EC: The Fidelity Select Gold Fund (FSAGX) is perhaps the largest gold mutual fund. Other gold mutual funds include The Midas Fund (MIDSX), Tocqueville Gold (TGLDX), and Gabellie Gold (GOLDX). Compare these funds to each other at the following link:
http://cbs.marketwatch.com/tools/mutualfunds/fundcomparison.asp
Caller: This caller believes that gold is a worthwhile investment at this juncture due the fact that he thinks we will have more problems with Iraq. In addition, he thinks the situation in Israel is going to escalate, and that the chances of a terrorist attack on U.S. soil are high. Bob gave the caller credit for at least justifying his position in gold. However, Bob noted that there is a counter-argument to the caller's position. For example, if we do have more terrorism and the like, that could be counter-productive to economic growth which would be directly contrary to the notion of inflation coming back which typically is the basis for a fundamental rise in gold prices. Bottom line? Bob isn't sure that gold would do well even if the caller was right.
EC: John Hathaway, manager of the Tocqueville Gold fund (TGLDX), thinks that the case for gold transcends Iraq and the that "the overriding driver of money into gold is the loss of confidence in financial assets." Check out the article in which he made those comments entitled, "Gold Ringer - Fund manager says the case for gold transcends Iraq":
http://tinyurl.com/cpc6
Caller: Do you have any thoughts on silver as an investment? Bob said he doesn't really follow silver, and asked the caller what price it is trading at. The caller noted that it is trading around $5.33 an ounce. Bob remarked that it seems as if silver has been trading in the $5 range forever, and he has no recommendation on it.
EC: Gold, silver and other so-called "hard" assets have done exceptionally well since the terrorist attacks on September 11, 2001, being up around 25% since that time, compared to the Dow Jones Industrial Average which is about even since then. If you have never considered owning a precious metal or "hard asset" holding, you should at least know about their availability. I recommend an article written by Thom Calandra this weekend entitled, "Hard asset bugs keep the faith" which you can access at the following link:
http://tinyurl.com/nbik
S&P EQUAL WEIGHT INDEX
Caller: This caller heard about an equal weighted S&P 500 fund and wanted to know if Bob heard about it? Bob said he was aware of the fund which instead of being market cap weighted, is equal weighted. Bob noted that there really wasn't a track record yet to judge it. What we do know, is that if large amounts of money flowed into the smaller companies in the S&P 500 that should drive up the price. Bob didn't make a recommendation either way, and just said he was going to have to see how it played out.
EC: The S&P Equal Weight Index (EWI) will conduct its quarterly rebalancing at the close of business Friday, September 19, 2003. All stocks will be rebalanced to have an equal weight in the index. You can trade the S&P Equal Weight Index through the Rydex S&P Equal Weight Exchange Traded Fund which seeks investment results that correspond to the S&P Equal Weight Index. It trades under the ticker symbol, RSP and has an expense ratio of 0.4%.
NOTE: If you want a full copy of my newsletter, or learn how to subscribe to my service, e-mail me at: davidk555@earthlink.net
- David Korn,
Editor, http://www.BeginInvesting.com/
Richard, I think he first went from recommending Microsoft as 4% of cost to 4% of market value in the March, 1998 Marketimer.
Do you know when he first moved Microsoft from a buy to a hold?
Hi Larry. Bob Brinker has said the cyclical bull could last 1-3 years; however, I think he likes measuring it from his buy signal for "advertising" purposes, rather than the bear market bottom from which most market historians measure bear/bull markets. Here is an excerpt from my newsletter where Bob Brinker discussed this:
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. Excerpt from June 1st Newsletter
HOW HIGH WILL THIS CYCLICAL BULL MARKET TAKE US?
Caller: This caller missed Bob Brinker's initial buy signal at around 800 in the S&P 500, but he did buy into the market when the S&P 500 was trading around 840. He heard someone say that the market might rise 25% from that the 800 level, and based on that, he is considering selling when the S&P 500 reaches 1000 because he thinks that is as high as this cyclical bull market might go. What do you think of that strategy? Bob said he will exit the market when his long term stock market timing model issues a sell signal. Bob said he estimates that a cyclical bull market has the potential to last 12 to 36 months. We are only 2-1/2 months into that time frame, so we have a ways to go. Sure, there will be pullbacks along the way, but Bob expects this cyclical bull market to last at least anywhere from 1 year up to 3 years. As the Moneytalk bumper music came on, Bob added a nugget that had Trekkies salivating across the country. Specifically, Bob said that he expects to see gains for this cyclical bull market "in excess" of 25%, with the possibility that those gains in excess of 25% could be "substantial."
EC: Ok, a few things here. First, Bob's comments indicate that Bob is not about to sell anytime soon, despite these dramatic gains. It looks like he is going to let the historical time frame for a cyclical bull market play out, before he decides to sell. That means, we have at least 7-1/2 months to go if it is a short cyclical bull market and up to 2 years and 7-1/2 months if it is a long cyclical bull market.
EC#2: Bob specifically mentioned to his audience to expect "pull backs." I try to stress that the market does not move in a straight line at least once a month in my newsletters, because when you follow the market day-to-day, or even week-by-week as you all do, you can easily get caught up in the momentum of the market and think the market will only keep going down, or as of late, that it will only keep going up. That has never been the case.
EC#3: One thing that I find very interesting about Bob's estimation of the time frame for the cyclical bull, is that he choose the closing level of 800 for the S&P 500 which occurred on May 11th as the beginning point for his 1-3 year estimation of how long it would last. Why did he choose this date, other than it was the day that he recommended becoming fully invested? It would seem that a market historian like daBrink would choose the ultimate bear market low which occurred on October 9, 2002 when the S&P 500 at 776.76 to measure the cyclical bull market.
EC#4: Consider this. Bob Brinker (and many others) have often referred to a bull market as lasting a minimum of 6 months which produced gains in excess of 20%. If you start from the all-time bear market closing lows, then we are already in the midst of a cyclical bear market that began almost 8 months ago. I am not making this up. All three indices have produced gains in excess of 20% during a period of time in excess of 6 months. I hand crunched the numbers myself tonight. Check it out:
Dow Jones Industrial Average:
October 9, 2002: 7,286.27
May 30, 2003: 8,850.26
Percentage Gain: Up 21.46%
S&P 500 Index:
October 9, 2002: 776.76
May 30, 2003: 963.59
Percentage Gain: Up 24.05%
Nasdaq Comp:
October 9, 2002: 1,114.11
May 30, 2003: 1,595.91
Percentage Gain: Up 43.24%
What's the importance of my data? Frankly, I am not sure yet. As you know, I don't always see eye-to-eye with daBrink, and I am pondering whether he is letting his ego get in the way of using the ultimate bear market bottom as the measuring point for the cyclical bull market, rather than the point in time that he chose to become fully invested. I will have to study this issue a little more. In the meantime, I at least wanted to provide you with the data.
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Larry, I did some more research to find an accurate date to track Bob's recommendation of AT&T.
I would use October 23, 1999 as the date of the recommendation. I would use a price of $131.83 which is where the stock closed at on October 22nd. There is no record of Bob ever saying he sold those shares.
My reasoning is based on my research into my newsletters from the fall of 1999! The synopsis of that research is that on October 23, 1999, Brinker said he liked AT&T at these levels for a long term investment. The stock closed at $131.83 on October 22, 1999 ($42.75 without accounting for the splits). A few months later on December 12, 1999 when AT&T was trading at $174.75 ($57 without adjustments), Bob reiterated that he would purchase AT&T at the levels he previously mentioned which would equate to the low $40s (or around $131 as referenced in his October 22, 1999 show.
- David Korn
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.
E-mail: davidk555@earthlink.net
Website: http://www.BeginInvesting.com/
In September, 1999 it hit the high $120s.
Sep-23-99 44.00 44.25 42.25 42.44 11,630,600 129.46
And it was trading in the 120s for a while in the fall of 1998
Dec-04-98 62.19 63.69 62.06 63.44 4,908,900 127.42
Dec-03-98 62.31 62.75 61.75 62.19 3,437,200 124.90
Dec-02-98 62.13 62.81 61.69 62.31 3,720,500 125.15
Dec-01-98 62.19 62.50 61.69 62.13 3,175,200 124.78
Nov-30-98 63.06 63.94 62.19 62.19 4,273,000 124.90
Really, I am giving Brinker the benefit of the doubt, since he was recommending the stock in the 40s (split-adjusted) which translates to a range of around $120-$150 I think.
Larry, I would add AT&T to your list of Brinker recommendations. Since you like numbers, I would give Bob the benefit of the doubt and use $120 (split-adjusted) as his recommendation price. The stock has obviously been decimated since his recommendation and like many other of his issues that go south, he often simply rides them down, never issuing a sell signal. (i.e. QQQ, TEFQX, etc.) Unfortunately, he usually stops discussing them on the show which I personally view as disheartening since we can all learn from our mistakes. Anyhow, for the people that think Brinker can do no wrong, please don't shoot the messenger. I report on Brinker's great calls as well as his bad ones. My goal (like Larry's) is to objectively report on Bob Brinker's record and the fact that my subscription base has continued to grow over the last 5 years I hope is a testament to that fact. Here is an excerpt from my newsletter which in part tracks Bob Brinker's Moneytalk on point:
Excerpt from David Korn's March 25, 2000 Newsletter
Caller #14: This caller wanted to know at what price Bob Brinker would consider buying AT&T shares? Mr. Brinker said he really liked AT&T when the stock was trading in the 120s (split-adjusted) and he pointed out to the caller that he spoke very favorably about AT&T on the program when it was trading at those levels. Since that time, the stock has had a good run. Bob noted that when the stock is trading in the 120s that is probably the best time to establish a position in AT&T.
UPDATED EC: On the date of that last call, AT&T was trading at $180.90 (split-adjusted). On the Monday after that call, AT&T actually closed at $185, not too far from its peak. From there, the stock basically cratered. As of today's close, shares are trading at $22.20 and it is a very different company now.
- David Korn
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/
Bob Brinker very very recently stated that he does not recommend individual stocks on Moneytalk. I have recorded many instances in the past where Bob did in fact recommend stocks publicly. I like to research fully before posting about them to strive for accuracy.
I think that is fair.
The question was posed to me whether Bob Brinker ever mentioned purchasing shares of AT&T's wireless tracking stock (Ticker: AWE) on Moneytalk. Indeed he did as shown below from in excerpts from my newsletter relative to AWE:
David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials and Special Alert E-mail Service.
From my April 29, 2001 Newsletter:
Caller: What do you think of the initial public offering market in the next few months. Bob thinks the IPO market is in "shambles" right now as a result of the tech stock debacle. Bob though that the one triumph was the AT&T wireless IPO. Elizabeth wanted to know specifically if a biotech IPO would be worthwhile. Bob thought it might be worth looking at, but overall that sector has done very poorly lately.
EC: AT&T's wireless tracking stock (NYSE: AWE) priced at $29.50 at its initial public offering which brought in $10.62 billion in proceeds from the 360 million share deal ranking it as the largest U.S. IPO ever. The stock opened at $30.13 per share, so you could have purchased it on the open market for only .63 cents more than the IPO price. It closed Friday at $31 15/16. After the offering, AT&T retains about 82.5 percent of equity interest in AWE and plans to use about $7 billion in proceeds from the IPO, plus an additional $5 billion credit line, to acquire, upgrade, and expand its network, Until recently, AT&T was the largest wireless carrier, but now that Bell Atlantic, and Vodafone Airtouch have merged, AT&T will no longer be the biggest wireless company in town. See article for more:
http://www.redherring.com/ipo/2000/0428/ipo-attws042800.html?id=yahoo
From my May 6, 2000 Newsletter
Brinker Comment/EC: On Sunday's show, Bob told his listening audience that he purchased shares of the AT&T wireless spin off (Ticker: AWE) at the initial public offering price. For those of you who like to purchase stocks that Bob owns, Bob paid $29.50 at its initial public offering. It closed Friday at $30 1/2 so you can pick it up for only $1 more per share than Bob paid.
July 27, 2003 EC UPDATE: Bob Brinker has not mentioned AWE in a very very long time and I have no record of him ever saying he sold it. One could presume he still owns it, and it went the way of TEFQX in that it was simply "removed" from discussion. Shares closed Friday at $8.59 and have suffered dearly since their IPO which nearly coincided with the end of the bull market in the first quarter of 2000:
http://finance.yahoo.com/q?s=AWE&d=c&k=c1&a=v&p=s&t=5y&l=on&z=m&q=l
- David Korn,
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/
I think the focus on Bob Brinker's recommendation of CA General Obligations stems from this week's downgrade of California's credit rating by Standard & Poor's to a worst-in-the-nation "BBB." This makes a lot of folks who own those GO's very nervous. Recall that Bob Brinker said that as an "A" rated credit, he would not be losing any sleep over them. But what about a BBB rating?
As for whether CA will recover, I think the odds favor it given that no state in modern history has defaulted on its debt, but in the meantime there are just a lot of nervous investors that need reassuring. At least that is what I gather from the numerous e-mails I received in the past few days on the issue.
- David Korn,
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/
Larry, if you want to keep track of Bob's bond recommendations as well, he recommended purchase of the California General Obligations on numerous occasions. I don't know when he first recommended them, but based on the inordinate amount of e-mail I received from my subscribers today, I imagine there are many Trekkies around the world anxious to hear what Bob Brinker has to say about yesterday's downgrade of California's credit rating by Standard & Poor's to a worst-in-the-nation "BBB." I did some research, and pulled out Bob's discussion and recommendations of California State General Obligations, and how he has responded to the ever slowly degradation of the state's debt. Here are excerpts from my newsletter over the last two years where Bob addressed his recommendation of California General Obligations. Check it out:
Excerpt from my newsletter dated May 6, 2001
Brinker Comment: Bob said he was comfortable with purchasing high quality municipal bonds within the state of California that are backed by the full faith and credit of the State of California. Bob added that he doesn't expect to see a default in General Obligations in the State of California, despite the utility crises and the problems with PG&E.
Editorial Comment (EC): I am glad Bob answered my question from last week about his view on the credit worthiness of California General Obligations. Incidentally, if you are a Californian, and you have questions about your taxes, your starting point on the net should be the California Tax Information Center Homepage which you can access at this link:
http://www.taxes.ca.gov/
December 7-8, 2002
CALIFORNIA BONDS
Caller: This caller is in a high tax bracket and is interested in California state bonds, but is concerned about the amount of debt that California has on its books. Bob said if you want tax-free income, you can definitely consider quality California bonds. Bob noted that General Obligations for the State of California are investment grade bonds and generally carry an "A" rating. They could be downgraded to BAA, but they would still be investment grade if they were. Bob doesn't see any reason right now to think that California will default on its general obligations. Bob also suggested that the caller try to purchase new issues where the seller pays the commission.
EC: Bob has maintained his bullish view of California State General Obligation bonds for a very long time. As Bob noted, the ideal way to purchase general obligations is to work with a broker from a brokerage house that is part of the syndicate underwriting the bond offering. If you can't buy them on the initial offering, you would then have to purchase them on the secondary market where you would have to pay a commission and might not get such a good price due to the spread between the bid and the ask price.
March 29-30, 2003
MUNICIPAL BONDS/GENERAL OBLIGATIONS
Brinker Comment: Bob reiterated one of his long-standing recommendations for a bond portfolio -- General Obligations issued by a particular state. Bob said he likes investing in state General Obligations because they have a great track record. The only state general obligation that Bob would not invest in are the bonds issued by the State of Louisiana.
EC: Over the past few years, Bob has steadfastly recommended general obligations issued by the State of California. When those bonds do well, Bob has bragged on that recommendation. In the wake of the energy crises in California, Bob stood by his recommendation noting that California bonds had only suffered a slight downgrade in credit rating. If Bob is going to single out Louisiana as the one state he would not purchase general obligations from, he might want to check the latest ratings from the major credit rating companies. As of February, 2003, Fitch, Moody's and S&P rated both California bonds and Louisiana bonds with the same ratings (A, A2 and A, respectively). These are lower than most of the other states which are rated. This link brings you to a list that compares California's bond ratings to all other State General Obligation Bond Ratings:
http://www.treasurer.ca.gov/ratings/current.htm
April 26-27, 2003
Caller: How safe are General Obligations (GO) of the State of California with 7-10 year maturities? Bob first noted that you aren't going much of a yield on them. 10-year treasuries are yielding less than 4%, and you will only get a little better on yield on the GOs. In terms of their safety, Bob thinks they have shown there resilience through the various crises California has faced. Bob said he follows them closely since he owns them. Bob bragged a bit pointing out that the ones he purchased are yielding 5.25% to 5.75%. In Bob's opinion, they have been outstanding performers. As an "A" rated credit, Bob said he would not be losing any sleep over them.
EC: I guess Bob will have to modify his opinion on the State of Louisiana's General Obligations which Bob previously said he wouldn't own. Louisiana and California now have the dubious distinction of being two states that have an "A" rating by Standard & Poor's versus AA and AAA ratings for most other states.
June14-15, 2003
CALIFORNIA BONDS
Caller: California is offering some general obligation bonds next week which are only rated "A" by the credit rating agencies. Are they still safe to buy? Bob noted that an "A" rating means they are investment grade bonds. Bob added hat California General Obligations have done very nicely. The municipal bond fund that invests in California bonds of longer dated maturities has returned 31% over the past three years. The intermediate maturities have returned around 27%. People are always trashing the great state of California, but their municipal bond holders have had tremendous returns in recent years. Bob noted that as an investment, General Obligations of the State of California are a "reasonable investment" as part of a diversified portfolio." As a point of clarification, Bob said he is not referring to the tobacco bonds which he wouldn't touch with a ten foot pole.
EC: One of my subscribers named Bob (not "The" Bob) e-mailed me this week to update me on his research into California municipal bond funds which he has put on his web site. Bob is a long term Trekkie, and I think you will find it worthwhile to bookmark his website. This link brings you to his research on the closed-end California municipal bond fund:
http://www.geocities.com/bob90245/current.html
July 5-6, 2003
California General Obligations
In response to one very nervous caller this weekend, Bob pointed out that California General Obligations are very liquid and the caller could sell them if owning them was keeping her up at night, but that she would probably face some hefty tax consequences. Bob added that he is going to continue to hold his investment in California General Obligations as they have been very good to him, and because he does not believe California will declare bankruptcy and default on those bonds, despite the daily talk in California of fiscal crises. Bob also added that he isn't worried because he owns the California GOs as part of a diversified bond portfolio -- something he had never emphasized before, and he probably brought up to hedge against being wrong.
EC: I suspect that Bob may have received a lot of nervous inquiries in view of the news that Moody's and Standard & Poor's are considering a possible further downgrade of their ratings of California debt. See article at the attached link:
http://tinyurl.com/g3z6
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- David Korn
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
I just updated the performance figures for Bob Brinker's tactical asset allocation call based on Friday's numbers. These will be included in my newsletter which in part tracks Bob Brinker's Moneytalk.
BOB BRINKER'S PERFORMANCE
Editorial Comment ("EC"): Here is how the major market indexes have played out since Bob Brinker's timing model turned "favorable" based on the S&P 500 Index's close on March 10, 2003 and he recommended investors redeploy their cash reserves into a fully invested position by bulletin issued at 2:00 a.m. on March 11, 2003:
S&P 500 Index: Up 23.67%
Dow Jones Industrial Average: Up 22.67%
Nasdaq Composite: Up 35.38%
For those of you who also followed Bob's recommendation to invest anywhere from 20% to 50% of your cash reserves in the Nasdaq 100 (QQQ shares), here is how those shares have performed based on various times Bob recommended that security:
October, 2000 (Original Recommendation): Down 61.75%
January, 2001 (Second Recommendation): Down 49.08%
March 11, 2003 (Third Recommendation as part of model portfolio): Up 32.44%
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- David Korn
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.
Bob Brinker certainly made an excellent call in January, 2000. However, he characterized it as a "tactical asset allocation" move designed to capture the bulk of profits should the market continue up, and minimize the degredation of assets if the market declined. To be precise, he recommended selling 60% of a fully invested stock portfolio and place that in cash reserves based on the S&P 500's close on December 31, 1999. In August, 2000, he raised an additional 5% cash reserves, making his balance 65% stocks, 35% cash reserves. Then, in October, 2000 he recommended investors take anywhere from 20% to 50% of their cash reserves and invest it in the QQQ shares (then trading around $82 per share). Those were his major market timing moves in 2000.
Bob Brinker's timing model turned "favorable" based on the S&P 500 Index's close on March 10, 2003 and he recommended investors redeploy their cash reserves into a fully invested position by bulletin issued at 2:00 a.m. on March 11, 2003. Here is how the market has played out as per my most recent newsletter which has tracked Bob Brinker's Moneytalk for going on 5 years:
Here is how the major market indexes have played out since Bob Brinker's timing model turned "favorable" based on the S&P 500 Index's close on March 10, 2003 and he recommended investors redeploy their cash reserves into a fully invested position by bulletin issued at 2:00 a.m. on March 11, 2003:
S&P 500 Index: Up 21.57%
Dow Jones Industrial Average: Up 21.40%
Nasdaq Composite: Up 33.64%
For those of you who also followed Bob's recommendation to invest anywhere from 20% to 50% of your cash reserves in the Nasdaq 100 (QQQ shares), here is how those shares have performed based on various times Bob recommended that security:
October, 2000 (Original Recommendation): Down 62.37%
January, 2001 (Second Recommendation): Down 49.91%
March 11, 2003 (Third Recommendation as part of model portfolio): Up 30.27%
- David Korn
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/
Hi Larry. Always enjoy your posts. I noticed that you are tracking Bob Brinker's trades. I just updated my tracking of his recommendations in my newsletter. Feel free to use the information below as you wish.
BOB BRINKER FIX
For those of you who followed Bob Brinker's recommendation to become fully invested in March, here is how the major market indexes have played out since Bob Brinker's timing model turned "favorable" based on the S&P 500 Index's close on March 10, 2003 and he recommended investors redeploy their cash reserves into a fully invested position by bulletin issued at 2:00 a.m. on March 11, 2003:
S&P 500 Index: Up 15.57%
Dow Jones Industrial Average: Up 13.65%
Nasdaq Composite: Up 18.12%
That call is looking very good so far. For those of you who also followed Bob's recommendation to invest anywhere from 20% to 50% of your cash reserves in the Nasdaq 100 (QQQ shares), here is how those shares have performed based on various recommendations of that security by Bob:
October, 2000 (Original Recommendation): Down 66.2%
January, 2001 (Second Recommendation): Down 55.0%
March 11, 2003 (Third Recommendation as part of model portfolio): Up 17.03%
-An excerpt from my May 24-25, 2003 Newsletter.
- David Korn
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. (http://www.BeginInvesting.com)