Bob Brinker's Five Root Causes of a Bear Market

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This article examines Bob Brinker's 5 root causes for a bear market. Please post your questions in our "Bob Brinker Free discussion forum" at facebook's "Investing for the Long Term."

In Bob Brinker's January 2000 Marketimer he published his "Five Root Causes for a Bear Market." The date he gave for the markets says he did his analysis on January 5, 2000.

This S&P500 Chart shows the call to go to 60% cash was excellent.

The 5 root causes of a bear market, according to Bob Brinker, are:

Tight Money:
Rising Rates:
High Inflation:
Rapid Growth:
Over Valuation:

In January 2000, Bob Brinker advised taking 60% out of the market because:

Tight Money: Bob Brinker said the Fed was reducing M2 to slow growth - BEARISH and correct as economic growth collapsed. This chart of M2 money supply growth shows the Fed Cut it to below zero in early 2000.
Rising Rates: Brinker predicted higher long and short term rates to continue. This did not happen but it was - BEARISH for his model..
High Inflation: Brinker said the CPI was approaching 3% and import prices were up 5% which would further impact inflation. We didn't get high inflation, but this was BEARISH for his model none the less.
Rapid Growth: Real GDP growth was approaching 5%. Brinker felt the FED would use rates to try and slow this. This was BEARISH and correct.
Over Valuation: Brinker wrote: "We believe valuation levels in the U.S. market are stretched to the limit." BEARISH and correct. Market PEs were at record levels

January 8 2000 Marketimer: "The Marketimer stock market timing model has turned unfavorable....We recommend raising a 60% cash reserve at this time."(S&P500 = 1402.13; DJIA = 11122.65, QQQQ=86.25)

February 2000 Marketimer: "The Marketimer tactical equity asset allocation change in January has placed subscribers in a strong position as the market continues to deal with several unfavorable factors....."

April 2000 Marketimer: "The Marketimer stock market timing model remains cautious as the second quarter gets underway........"

April 2000 Marketimer: "Marketimer recommends the following investments as our best ideas for 1999 I.R.A. contributions, which can be made through April 17, and Year 2QQO contributions. Each investment should be selected based on your personal investment objectives and should be integrated as part of your overall asset allocation strategy managed from the top down.

Equity Funds: Aggressive:
Janus Olympus JAOLX (Did so bad they shut the fund in 2006!)
Strong Growth SGROX
Growth: TIAA/CREF Growth Equity Vanguard Total Stock Market .
Conservative: Fidelity Utilities: FIUIX
International: TlAA/CREF International Equity
Fixed Income: Ginnie Maes: Vanguard Ginnie Mae Fund

These selections represent funds which we believe are excellent investment vehicles for each investment objective category. We recommend I.R.A. accounts as vehicles for tax deferred investment and we suggest maximizing the I.R.A. accounts available to you. "

I show Fidelity's Low Priced Stock Fund, FLPSX, to show how small cap funds with no tech exposure in 2000 did.

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