Guru Grades

Bob Brinker's Market Timing (Last Updated 5/9/08)

As suggested by a reader, we evaluate here the stock market forecasts of Bob Brinker, mostly since August 2002. Evaluated predictions/recommendations come indirectly via MarketWatch columns, augmented separately by a few items from other sources. Mr. Brinker is editor of the Marketimer newsletter, which "covers stock market timing, federal reserve policy, specific mutual fund recommendations, and model portfolios for various objectives." He also hosts the widely syndicated MoneyTalk radio program, during which he "answers investment questions from around the country and discusses current issues..." The table below presents highlights from his commentary and shows the performance of the S&P 500 index over the 21, 63, 126 and 254 trading days after the publication date for each item. Red plus (minus) signs to the right of specific items indicate those that the market has subsequently proven right (wrong). We conclude that:

• Bob Brinker's market timing model is based on: state of the economic cycle, monetary policy, valuations and investor sentiment.
• His web site offers little insight regarding forecasting methodology or record, but does include a self-assessment of model portfolio performance.
• Since he is mostly a long-term investor, we replace our usual 5-trading day test of his forecasts with a 6-month (126-trading day) test. We consider all four performance intervals shown in judging specific forecasts.
• One forecast has both correct and incorrect components. We evaluate it with "0" and grade him both right and wrong.
• Based on subsequent stock market performance and our judgments about his forecasts for overall stock market direction, Bob Brinker's accuracy rate is about 51%, which is just slightly above average. His forecast sample size is modest, as is our confidence in this conclusion.

Here are a few additional notes to augment the tabular summary:

From the Index Fund Advisors web site: "Jeffrey Lauderman wrote a BusinessWeek article dispelling the myth of market timing, which he called a perilous ploy and a guessing game. His 1998 analysis included an interview with Mark Hulbert, who monitors the time pickers recommendations. Hulbert's conclusion provided a knockout blow to all 25 newsletters he tracked. None of the newsletter timers beat the market. For the 10 year period ending 1988 to 1997, the time pickers' average return was 11.06% annually, while the S&P 500 stock index earned 18.06% annually and the Wilshire 5000 earned 17.57% annually. The figure below tells the story." [The chart shows that Mr. Brinker did well compared to other market timers, but that he underperformed the S&P 500 index over this decade.]

From James Glassman in Capitalism Magazine (11/20/01): "[Brinker's] long-term record is nothing spectacular. According to the Hulbert Financial Digest, for the 10 years ending Dec. 31, 2000, Brinker's long-term growth portfolio rose an annual average of 13.7% while the S&P rose at 15.1%. I won't deny that Brinker is good compared with other timers, but why go to the trouble of jumping in and out of the market if you can't beat the averages?" [This comment does not address risk-adjustment of returns.]

From Mark Hulbert in MarketWatch (3/12/03): " Here is how I sum up Brinker's market timing record over the 15 years the Hulbert Financial Digest has tracked it:

• Buy signals: Prior to this week's, and counting the QQQ trade as a half signal rather than a full signal, Brinker has been successful once (1991) and unsuccessful a half time (October 2000).
• Sell signals: He has been successful once (January 2000) and unsuccessful once (January 1988).

By this count, Brinker's timing signals have been slightly more successful than not, though not by a lot."

From Steven Goldberg in Kiplinger's (4/10/03): "Data compiled over the 1980s and 1990s by the Hulbert Financial Digest show most timers badly lagged the market averages. According to Hulbert, however, Brinker's average portfolio is ahead of the broad-based Wilshire 5000 stock index over the last one, three, five, eight and ten years. But Brinker trails the Wilshire over the full 16½ years Hulbert has tracked him because of a money-losing sell signal after the 1987 crash. Hulbert's most recent results are through the end of January of this year."

From Steven Goldberg in Kiplinger's (2/22/05): "[Among] the top newsletter[s] of the past ten years (through the end of 2004), Bob Brinker's Marketimer is in fourth place. Although Brinker's fund picks have slightly lagged the market on average, his timing moves have put him ahead of the market. Over the past ten years, he's gained an annualized 13.2%, with 19% less volatility than the market."

From Mark Hulbert in MarketWatch (3/3/05): "Which newsletters have done the best according to the HFD's tracking over the last 10 years? The table below lists the top five performers on a risk-adjusted basis over the 10 years through Feb. 28. Bob Brinker's Marketimer: [annual return] 13% [with lower than market risk]."

In summary, Bob Brinker is perhaps slightly above average as a market timer. Confidence in this conclusion is modest.

See Guru Grades for a snapshot of the accuracy of various experts in predicting the direction of the U.S. stock market, including links to evaluations of the commentaries of other individual market pundits and gurus.

After our initial review of Bob Brinker's stock market forecasting record, Kirk Lindstrom of Kirk's Market Thoughts wrote (on 7/26/05) to offer the following additional information:

There is a"Detailed Summary of Bob Brinker's QQQQ Advice" at "Bob Brinker Fan Club" providing additional information on Mr. Brinker's call for a significant countertrend rally in late 2000, referenced in the 8/22/02, 12/19/02, 3/12/03 and 4/19/04 entries of the table below. The summary is very specific regarding follow-up advice through early 2003. Note that Mark Hulbert did not include the consequences of this advice in his evaluation of Mr. Brinker's performance (see 12/19/02 entry below). Images of documents show the clarity of Mr. Brinker's: (1) advice to pull back from the stock market in early 2000; and, (2) forecast for a significant countertrend rally in October 2000.

The "Fan Club" also presents a long-term "Brinker Recommendation History" covering major recommendations during 8/82-4/03.