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Bob Brinker's Stock Market Update for 2012
March 18, 2012

March 18, 2012 Newsletter Excerpts  -  Editorial Comment ("EC") by David Korn:

Bob Brinker Fan Club Home Page  -  Bob Brinker's Asset Allocation History

David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service.  Copyright David Korn, L.L.C. 2012

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Dow: 113.232.62 NASDAQ: 3,055.26 , S&P 500: 1,404.17,  10-Yr. Bond: 2.298% 
Click links for current quotes and graphs plus Markets at a Glance
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Brinker Comment:
We are not even three months into the new year and the S&P 500 is already up 147 points and when you add in the cash dividend, you get a 12% absolute rate of return thus far in calendar year 2012.  Pretty Pretty good.

Kirk Here: See "World Markets at a Glance" for Daily and a 1 yr view.

Caller:   This caller said he was selling back when Bob was saying to buy last year and as a result he is looking to re-enter the market and is considering purchasing individual stocks and wanted some guidance on the timing of his purchases.  Bob said first of all, he would not be recommending individual stocks, but rather something like the Total Stock Market Index which you can purchase as an ETF through the Vipers (ticker: VTI) or the S&P 500 Index Fund through the ETF SPDRs (Ticker: SPY).  Bob then said that in terms of timing, he would adopt a dollar cost average approach.  Bob said he is not jumping up and down about the market now as he was back in September 11th when the S&P 500 was around 1100.  Bob said it is going to be difficult given that you are going to be kicking yourself for selling at the bottom.  But given that we have gone up so much in the market so fast, this can only be described as a historic “melt up” since the low 1100s and now we are at the 1400 level in such a short period of time.  Use a dollar cost average approach over a time frame you are comfortable with. 

Kirk Here:  Bob was right to stay invested last year but in 2008 ECRI made their last recession call and Brinker called ECRI and others who were bearish "Cassandras" while he issued buying opportunity after buying opportunity from the mid 1400s to the 800s as the market collapsed.  See the article ECRI asked me to publish for them on my blog back in March 2008 called ECRI Calls it "A Recession of Choice."

Kirk Here: Vanguard has their own S&P500 exchange traded fund with ticker VOO that has an expense ratio LOWER than SPY and it pays a higher yield. (as of Feb. 29, 2012 Yahoo! Finance data) 
Expense Ratio
Net Assets
State Street Global Advisors
$110.55B 1.89%
EC (David Korn):  I am enjoying Bob’s rare candor this weekend, even if it is splashed with some serious bragging on his part.  Bob is now no longer in the lump sum recommendation for new money, but rather dollar cost average – and a pretty lukewarm recommendation for dollar cost averaging at that.  I can’t blame him.  This market is seriously gone bonkers.  (That’s a technical term of art).
Brinker Comment:   Bob said for critics who say he is fully invested, he still does his market timing and issues a buy signal when the market presents such an opportunity.  Bob said he looked at last September and the market internals in particular showed that the market was attractive for purchase to Bob.  Ever since then, it has been a market melt up!

Kirk Here:   Don't be fooled by the Circus Act!  Brinker was "buy and hold" for the greatest bear market since the Great Depression that being the 2008 bear market.  Brinker was so bullish at the top he issued a "Gift Horse Buying Opportunity" in the mid 1400s when the market was at its record high in the mid 1500s!  Even worse, Brinker had is "conservative model portfolio #3" two thirds in equities at the very top and told a worried caller to not rebalance to 50:50 because he was bullish for the future!  No wonder so few trust the big names on Wall Street anymore, including Brinker!  (count me as a Brinker critic) 

The next call about Apple shows what sort of person Brinker is.

APPLE STOCK  (AAPL Quotes and Charts)  (Currently $602.50)

 What do you think of Apple’s stock right now?  Bob said in terms of the present value of Apple shares, you take the $585 share price is being adjusted for $100 in cash per share that Apple has in the bank which is not earning a lot of money.  But as long as Apple doesn’t do anything silly with that cash, it is appropriate to value the company including that amount.  So subtract that $100 from the $585 and you get $485 per share and you have to come up with an earnings estimate.  Bob said using a very conservative 12-month forward number of $40 for earnings, that would produce a P/E multiple of 12.  Bob said how do you value Apple shares going forward?  That depends on the ability of the company to maintain earnings momentum.  Right now, there is a lot of excitement over the new iPad that is starting to be sold and that typically happens when a company is producing a new hot product.

EC:  Check this out.  Hot off the presses!  Apple issued a media alert this evening saying it will announce tomorrow (Monday) what it will do with its cash balance.  The decision will be via conference call and if you want to call in and listen, just go to this url: http://tinyurl.com/74ejfnw

Kirk Here:   Apple announced they will pay investors a dividend of $2.65 per quarter and buy back $10 billion in shares over three years.  This works out to $10.60 per year or 1.76% at $602.50.

The caller said he was trying to pick another technology stock that had a similar tremendous run-up, but than cratered, such as a company like Cisco to provide a road map of how Apple might do.  Bob said it was a bad stock to use for those purposes because Cisco had its huge run-up during the high tech bubble in the late 1990s that ran into the first quarter 2000. Cisco’s shares were highly valued in terms of their price-to-earnings multiple when they were trading in their $70s.  That is not at all the case when you are looking at the P/E ratio of Apple. 

EC:  Coincidentally, there is an article out this month on Seeking Alpha entitled, “2000 Cisco vs. 2012 Apple – Are We In a Bubble Now” which you can find at the following url: http://tinyurl.com/6ox2nm5

Brinker Comment:
 Bob said you won’t hear any complaints from him about Apple as he personally owns it and for the last 10 years or so and it has been his number one performing holding.  There will be a time to sell Apple, but Bob said he is not selling now.  People who have held onto Apple have been glad they did.  The products that have come out of this company starting with iPod, to the iPhone, to the iPad are mind-boggling.  

EC (David Korn):  What?!!  This is the first time I have EVER heard Bob say he owns Apple!  And Bob is not a guy who is likely to be shy about bragging when a stock he owns (but never recommended) is doing well.  Note that Bob has never recommended Apple in his Marketimer, so this is the first I am hearing of it.  And Bob has specifically discussed Apple on many occasions, only now is when he decided to let his audience know he owns it.   As for the people who did not hold on to Apple, well...., regretfully, I fall into that category.  Subscribers may remember when I first recommended Apple in my newsletter portfolio was based on my enthusiasm over the iPod.  I bought and sold it several times over the years in my newsletter — always at a profit, but in hindsight it would have been a beauty to have just held.  

This caller got stopped out of Apple during the “flash crash.”  Bob said stop losses can get taken out any time there is a whipsaw and big move downward.  Bob said the flash crash has never really been fully explained. The market lost 700 points in a few minutes and then recovered it a few minutes later.

Kirk Here:   Sounds like Brinker is recommending Apple now at its all time high.  Funny he has NEVER recommended it before in his newsletter or on the radio while he's recommended Microsoft (MSFT) and QQQ in BOTH his newsletter and on the radio. The gal who cut my hair asked me today if she should buy Apple.  I told her I worry when people on the street and Bob Brinker like stocks they never liked before after they have doubled several times to all time highs.  Read my article about Apple and other stocks that reached a $500 billion market cap: 
Apple's Market Cap Breaks $500B Barrier; Can It Keep This Where All Others Have Failed?

Kirk continued: None of the others have managed to stay above $500B long. I remember when GE was there. I had a part time job as a paid analyst (I was one of the very few in the Silicon Valley urging people to take profits.)  I did a presentation in 2000 for an investment firm showing GE was over valued by a factor of two compared to the S&P500. People like Brinker and the CNBC show (owned by GE) couldn't say enough about it and that had a big part in pushing it up.  Brinker said on the radio it was like a mutual fund and you could forget his 4% rule and have up to 20% of it in your portfolio.  I tried to get some family members to sell some and they cited Brinker's advice to keep up to 20%. GE crashed soon after that and Brinker went back to the 4% rule for GE.  Microsoft did the very same thing, crashed right after Brinker said it was OK to keep MSFT due to large capital gains if they sold other stocks and funds to get to his recommended allocation back in March 2000 when he cut his allocation to equities to 40%.  See Bob Brinker's Asset Allocation History

       Come back later as we finish this summary.

My explore portfolio is off to a great start too up 10.6% YTD as of 3/19/12 with ONLY 2/3rds in equities!!!!

Long Term Results that Speak for Themselves
Since 9/30/98 inception, "Kirk's Newsletter Explore Portfolio" is UP 390%
vs. the S&P500 UP only 51% vs. NASDAQ UP only 57% (All through 12/31/11
Subscribe NOW and get the March 2012 Issue for FREE!  
(Your 1 year, 12 issue subscription will start with next month's issue.)
(More Info, Testimonials & Portfolio Returns)

Kirk Here:  The Fed is trying to create inflation to inflate us out of trouble.  CPI inflation is running at 3.0% per year and Core PCE inflation, the Fed's preferred method of measuring inflation, is running just above the Fed's target of 1.8 to 2.0%.  This year and last year I bought the maximum $10,000 in Series I Bonds to add to my i-Bond portfolio.  Some of my older iBonds have a 3.0% base rate so with the current inflation rate they are paying me a whopping 7.67%!  But, even the new ones that "only" pay the rate of inflation are paying 3.06% for the next six month.  With CPI running at 2.9%, I expect they will pay more for the next six months.  That sure beats US Treasuries even if you sell them and pay the small penalty if you need the cash before the five year penalty period passes.
Kirk Here:   To get more than $10,000 per year, I bought individual TIPS for my personal IRAs and my newsletter "explore portfolio."
  • In "Kirk Lindstrom's Investment Letter" I sold my GNMA fund to go with a lot of my cash to buy individual TIPS for my explore portfolio.  They continue to do very well for me while providing negative correlation  to the equities in the portfolio. (That means they usually go up in value when stocks go down in value, but not always)  As you can see from the list below, these individual TIPS did very well even as stocks soared in price

Explore Portfolio TIPS as of










Due Date


Buy Date


$ Gain

% Gain



















  • I may sell these to lock in gains or roll over into new TIPS to preserve the gains. You ALWAYS get your principal back if you buy new issue TIPS plus you get to keep all the interest paid so rolling over into new TIPS protects gains but means you may get lower returns going forward since the new TIPS come with much lower "inflation premiums" called "base rates."
Kirk Here:  David and I are very proud of our performance for "The Retirement Advisor:"  Note how our "most conservative portfolio, with zero stock market exposure, made money every year.  The Brinkers can's say that about ANY of their "income portfolios" in either of their two newsletters.
The Retirement Advisor Portfolio Performance By Year Through December 31, 2011
Model Portfolio 2011
2010 2009 2008 2007 Combined
#1: Aggressive 0.5% 10.9% 19.7% (18.2%) 9.5% 19.5%
#2: Moderate Risk 2.2% 8.4% 13.2% (8.7%) 8.5% 24.1%
#3: Conservative 4.8% 5.5% 5.5% 3.7% 8.3% 31.1%


March 18, 2012 MONEYTALK GUEST

Bob's guest for the third hour was Peter Kiernan, author of the book,
Becoming China's Bitch: And Nine More Catastrophes We Must Avoid Right Now .”
In Becoming China’s Bitch, Peter Kiernan presents an unflinching manifesto in which he explores five factors that have sustained our national paralysis, then uncovers the ten challenges that pose the greatest threat to the future of America. Presented from a fresh yet informative Centrist perspective, these ten impending catastrophes include our semiconscious dependency on China, our lack of a centrally coordinated intelligence effort, our downward-spiraling health-care system, and the continually expanding problem of illegal immigration. In a logical, personal, and persuasive voice, Kiernan offers radical yet common-sense solutions to these challenges—solutions that every American must acknowledge and act upon before it’s too late.

Please support our site and buy your Amazon.com books and other items here. 

Kirk Here:  When you are getting next to nothing, I prefer to have FDIC insurance for my cash outside of IRAs.  See "Best Savings Account Rates with FDIC."
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ArticleHow to Get the Best CD Rates

Kirk Here: For charts and quotes, see Vanguard Fixed Income Funds:   GNMA (VFIIX),                        
Total Bond (VBMFX),  TIPS (VIPSX) High-Yield/Junk Bond (VWEAX)

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