Conservative Retirement Portfolios


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Tuesday, November 25, 2008

Did Bob Brinker's Timing Model Predict The Bear Market?

This is an excerpt from David Korn’s November 22-23, 2008 weekly newsletter (Click for a FREE SAMPLE ) that comments on Bob Brinker’s Money Talk.

TIMING MODEL QUESTION

Caller: This caller slipped in the question of whether Bob's timing model (Marketimer Long Term Stock Market Timing Model) detect any of this chaos in the market?

Bob said it did not. Bob noted that earlier in October when he commented on it he was forthright in saying so on Moneytalk because he thought it was important to do at the time. After saying that, Bob immediately moved to the next caller.

David Korn: I thought that was kind of an odd response. Not the part about Bob saying that he commented on it in October, but that he thought it was important to be forthright about it at the time. Anyhow, if you are a new subscriber or missed it, on the October 11-12, 2008 weekend, Bob said this is the most difficult market environment he has seen and that "his work did not forecast this bear market decline, and he had no way of forecasting a global banking crises and if he had, that would have been a huge forecast and that would have caused a lot of disbelieve, but he would have made it if he had been convinced it would happen." Incidentally, during the show he also said that that he does not believe in selling into a panic atmosphere.

David Korn #2: With the S&P 500 at 800, Bob has basically done a round-trip. What I mean by that, is that his timing model last turned "favorable" in March 2003, when the S&P 500 was at 810. He stayed fully invested from 2003 to the present, thus his timing model completely failed. One would have thought that he might have made some asset allocation change in the last 5 years to protect some of the gains, but he did not.

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Monday, September 15, 2008

Ginnie Maes Over Fannie Mae and Freddie Mac

Bob Brinker's favorite fixed income investment includes Vanguard's GNMA Fund (Charts of VFIIX).

This is an excerpt from David Korn’s September 13/14, 2008 weekly newsletter (Click for a FREE SAMPLE ) that comments on Bob Brinker’s Money Talk.
"Caller: Do you have any predictions on where shares of Fannie Mae/Freddie Mac are going in the next few years? Bob said he did not and has never recommended either Fannie Mae or Freddie Mac on Moneytalk and has instead recommended Ginnie Maes. Bob noted that the GNMA fund that he recommends is trading near 1% of its 52-week high, during which the common shares of Fannie/Freddie have declined over 90%.

David Korn: The common shares of Fannie Mae and Freddie Mac were components of the S&P 500 Index Fund and the Total Stock Market Index Fund, which are funds that Bob Brinker recommends and which most of us own in some part in our portfolios. Standard & Poor's announced last Tuesday that it was removing Fannie Mae and Freddie Mac from the S&P 500 index after the close of trading on Wednesday because the companies no longer meet the $5 billion market capitalization standard needed to be an S&P 500 stock. Big help to us shareholders selling at the bottom. The two companies replacing Fannie and Freddie are Salesforce.com and Fastenal Co."
Bob Brinker is comparing apples to oranges when he compares Vanguard's GNMA fund, a fund that buys GNMA bonds guaranteed by the US government, to the common stock of Fannie Mae and Freddie Mac.

From "The Rise and Fall of Fannie Mae and Freddie Mac."
  • Fannie Mae and Freddie Mac were hedge funds that privatized profits and socialized risk...

  • Fannie Mae and Freddie Mac had the closest thing to a license to print money. They legally borrowed money at below-market interest rates based on the perception that the government guaranteed repayment, and then they used the money to buy mortgages that paid market interest rates.

  • Way back in 1996, the Congressional Budget Office reported that Fannie and Freddie were using government support to increase their profits, rather than reducing mortgage rates to make homes more affordable, the reason for their existence.
At the current time, Bob Brinker has no recommendation for Vanguard's GNMA fund, VFIIX, in his recommended "active/passive" portfolio nor his model portfolio's number one or two, but he does have a position in "balanced model portfolio number three." His Active/Passive and model portfolios #1 and #2 have been fully invested in stocks since March 2003, including the current bear market.

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Long-Term "Retirement Advisor" Model Portfolio Performance
The Retirement Advisor Model Portfolio NameDollar Value
on 8/31/2008

Percent
Increase
Aggressive Growth and Income Model Portfolio 1
Initial Value of $200,000 on 1/1/2007
$208,0654.0%
Moderate Growth and Income Model Portfolio 2
Initial Value of $200,000 on 1/1/2007
$213,2196.6%
Conservative Capital Preservation Model Portfolio 3
Initial Value of $200,000 on 1/1/2007
$222,45411.2%

DJIA $11,544on 1/1/2007


$11,544

(7.7%)


Webbsite for more info and current Performance Data

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