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November 6, 2011 Radio Show
Key Topics:  Bob Brinker 2011 to 2012 Market Outlook

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November 6, 2011 Moneytalk Summary with Editorial Comment by Kirk Lindstrom
 
Recession Dome - Two men enter, one man leaves

On Sunday November 6, 2011 Bob Brinker once again entered the "Recession Dome" with The Economic Cycle Research Institute's (ECRI) managing director and my friend,  Lakshman Achuthan.   Bob didn't mention ECRI or Lakshman by name, but on September 30, 2011 ECRI went public with their call for a new recession:
==>  Sept 30, 2011 Jobs To Get Worse Under Recession-Bound U.S. Economy
Bob was adamant that he is not predicting a recession, that these forecasters are wrong and they will owe him an aploogy!  Brinker said:
  • "My estimate is that we will see growth again in the fourth quarter, which means, where's the recession? You know, we have these private forecasters out there going around beating the drums of recession. Warning everybody that the US is going back into recession. Batten down the hatches and get in the bomb shelter because we are in a lot of economic trouble. That is what they say, but that's not what we see. So far, we see an economy that continues to grow slowly."

  • "One of things that amazes me about the private firms that are forecasting a  recession in here is their conviction. I mean they talk about it like it's a fait accompli. They talk about it like it's for sure -- take it to the bank. Well I'm not taking it to the bank. What do you think about that? I think these forecasters are wrong, but I'll look forward to their apology.... This is Moneytalk."
I nearly died laughing.  I don't remember Brinker appologizing after he called forecasters like ECRI "Recession Casandras" back in 2008 when he was bullish with the S&P500 at 1400 and thought the market was headed for 1600s rather than 600s!
==> 03/28/08: ECRI Calls it "A Recession of Choice"
==> 05/31/08: Brinker's Cassandra Bashing
Back in 2008 Bob Brinker was bullish on US stocks and the US economy.  Note how similar it was then to now on the graph below and explained in the text that follows.

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Graph of the S&P500 from January 1, 2006 through November 7, 2011
S&P500 Graph
MA(50) = 50 day moving average is blue line on the above graph
MA(200) = 200 day moving average is red line on the graph
Note how
  1. The market made a bearish "death cross" in late 2007, mid 2010 and again in mid 2011.
    From Death Cross pattern "A death cross occurs when the shorter-term 50-day moving average, MA(50), crosses below the longer term 200-day moving average, MA(200), on chart below. Not all death crosses signal a new bear market and some occured after the bottom was made."
  2. ECRI correctly made its recession calls when the market was below both its 50 and 200 day moving averages.  They also were correct the market would not enter a new recessionafter the July 2010 crossion when many "perma bears" cried for a recession call. 
    July 01, 2010 ECRI Weekly Leading Indicators Widely Misunderstood where they correctly stated "a slowdown in U.S. economic growth is imminent, but a new recession is not."
  3. The market rallied from below its 50 day moving average after ECRI's recession call all the way back to its 200 day moving average.

  4. Brinker made fun of the "recession Casandras" and "private forecasters" on his radio show (green arrows on graph) for forecasting a recession IN THE FUTURE that he did not believe would/will happen.
Back in 2008 when the market rallied back to 1400 to test its 200-DMA from below was a last chance to get out before the big drop.  Will history repeat itself?   I just today exchanged emails with Lakshman and they are still predicting a recession.  I posted a video interview on my blog:
Right now it is too early to tell FOR SURE if the US will enter a recession and who will ultimately be right this time. Given how wrong Brinker was in 2007 and 2008 with his prediction the US economy would grow and the stock market would reach the 1600s, it seems a good idea to use periods of strength to take a few chips off the table so you have fund to buy if the market goes down.  If the market goes up, you would still participate.  

Market Update:   Bob Brinker remains fully invested.    That is not the case for my explore portfolio.  Unlike Brinker, I took profits near the highs this year and raised a lot of cash.  Then I put that cash to work near the lows for the year.  Then the market rallied and I sold a good deal of what I bought during the market weakness so I'm ready to do it again yet will profit nicely if the market goes higher.  Here are what some of my subscribers sent me via email recently:
  • Oct 28, 2011:  Steve P: Kirk, just want to say you had a great batch of sell actions last week.  Many of the financial threads I follow were saying a buy is in in their weekend notes.  Yet you were selling.  Good job.
  • 10/27/2011:  Bard P:  YES, I love those newsletters, and will renew by PayPal.  Thanks for all that Mad Money :)
  • 10/24/2011:  Patrick O:  Love your  newsletter...
  • 9/26/11: Barbara H: Yes, another year of your insightful newsletter.  Check is in the mail.
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September 11, 2011 MONEYTALK GUEST

Bob's third hour guest was Rachael Emma Silverman, author of

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