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Bob Brinker's Stock Market Advice and Answers to Model Portfolio Questions
October 10, 2012

October 7, 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


==> CURRENT Survey of Best Savings Account Rates <==
Dow: 13,343.51 Nasdaq: 3,005.62 S&P 500: 1,433.19 10-Yr. Bond: 1.768%

Caller:  This caller read Bob’s latest Marketimer newsletter where Bob recommended that for new money to "dollar cost average during market weakness" and wanted clarification on why he said that. 

Bob said when the market goes up, and it has more than doubled in the last 3-1/2 years, there is a tendency to get more and more bullish and excited about the market. Bob said he runs into this all the time, whether it be from a subscriber, investor or advisor.  Bob said the reason that he would rather see people dollar cost average on periods of weakness is to underscore the importance of the notion of not chasing rallies or getting caught up in the hype.  That is why Bob said he is recommending to use periods of weaknesses if you can. Bob noted that his last few buy signals were at much lower prices.  We are now at 1460 in the S&P 500, and his last buy signal was in the low 1100s. The year before that the S&P 500 was at 1030 when he said he was willing to be a buyer.  Bob said he has always tried to caution people to buy after a tremendous run-up when the risks increase.

Kirk Here: How "convenient" that Brinker neglects to mention he issued a "gift horse buying opportunity" back in December 2007 when the market was near all time highs in the 1500s.  Read "Bob Brinker's Mid 1400's Buying Opportunity."  Bob Brinker has had his model portfolios FULLY INVESTED, 100% in equities, since March 2003 so you have to take these "Buying opportunities" with a grain of salt unless you follow my advice to always have some cash to buy.  Send me an email and ask for examples of my sell alerts earlier this year then recent buy alerts at lower prices.

EC (David Korn):  I totally agree with Bob’s cautionary advice here.  Bob isn't making a bear market call, but he recognizes that this run has been extraordinary. In addition, the year-to-date gains have been tremendous with the S&P 500 up over 17% this year alone when you include dividends.

Kirk Here:  David and I are very proud of our performance for "The Retirement Advisor:" 

The Retirement Advisor
Retirement Advisor Portfolio Performance
CLICK HERE to download a FREE issue of "The Retirement Advisor."


Caller:  Because of the run up in stocks, a lot of her holdings are now skewed toward US equities versus foreign funds and bonds.  When and how should she rebalance so that her holdings match the percentage weightings Bob recommends?

Bob said the how is easy.  All you need to do is sell portions of your holdings so that the dollar value of your portfolio is in line of with the percentage value of the fund that Bob recommends.  When you do it is a tougher question. 

Bob said normally he recommends people rebalance after the first of the year so that the tax liability is shifted to the next calendar year.  HOWEVER, Bob noted that we are facing a tax increase on January 1st which could be very substantial for capital gains. For high earners, the federal capital gains tax it is going from 15% to 23.8% for high earners.  If you take the gain this year, you will be capped at 15%.  For that reason, although Bob said that although he would normally wait for the first of the year to push the tax liability out to the next year, at this point he thinks she should make the sale in 2012 since she is going to make the sale anyway and can take advantage of the current tax rate.

Kirk Here: How "convenient" that Brinker neglects to mention he hasn't rebalanced his model portfolios even once since March 2003.  He went into the worst bear market since the Great Depression with nearly two thirds of his "Balanced" model portfolio #3 in equities!  Rather than rebalance back to 50:50 so he had cash to take advantage of the 2009 bear market low, he issued his "Gift Horse Buys" for mid 1400s near the top, encouraging his subscribers to stay aggressive at the very top!  Read: 

Bob Brinker's Asset Allocation History<<

EC (David Korn):  I think Bob also likes the idea of rebalancing now when we are at the market highs so she will be taking advantage of selling into strength since she is looking to lighten up on her US stocks.

EC#2:  This is actually the FIRST time I have ever heard Bob recommend rebalancing prior to the beginning of the new year, so I am certain he gave this some thought and doesnąt take the advice lightly.


Caller:  This caller has $3 million invested in Bob’s Active/Passive portfolio and it provides enough income for her to live off but she thinks it is time to move to Bob’s Model Portfolio III.  However, some of the funds in that portfolio pay dividends and interest semi-annually instead of monthly.  She thinks she is going to be short a few thousand dollars and asked how she should handle that. 

Bob suggested that once a year she sell some holdings and put the money aside in advance by setting up an income reserve fund.  It wonąt have a big impact on her portfolio given how large her portfolio is.

Kirk Here: This is great advice and matches what I do and suggest to people I help. Look at the portfolio for "total return" and use monthly, quarterly or annual "rebalance periods" to recharge your "2-year living expense account."  I like to have 2 years or more in a living expense account so when the stock market crashes, I don't have to sell stocks to pay property taxes and other bills.   It also makes it easier to use the cash in the investment account to "rebalance" near the bottom and buy more equities using the cash I rasied when the markets were higher.  You will note that in my newsletter my most aggressive model portfolio only has 80% in equities so it always has cash to buy the unexpected bear markets.  My returns show just how well this works with the "core plus explore" portfolios ending the quarter at record highs.

Caller:  This caller saved about $260,000 for his kidąs education but ended up not needing it and asked if Bob thought he should invest the money in Model Portfolio 1.  Bob said Model I is an aggressive growth portfolio and to only invest in that if you were sure that its objective mets your own risk tolerance.  Bob said he views his Model Portfolio I as being above average in both risk and market volatility.

EC:  According to Bob’s web site, Bob’s Model Portfolio I is designed for investors with aggressive growth investment objectives.  Such investors seek maximum returns and are willing and able to accept high levels of risk and volatility.  Current income is not a factor in this portfolio.

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Kirk Here:  My core and explore portfolios recently made all time highs!!!   For more conservative investors who have no interest in individual stocks, I co-edit "The Retirement Advisor"  where our most aggressive model portfolio is slightly less aggressive then the "core conservative portfolio" in Kirk Lindstrom's Investment Letter."   For more explanation, see  "Kirk's Two Investment Letters - Which is Best for You?"

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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.
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Retirement Advisor Historical Performance

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