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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Digger Sacket who wrote (12771)3/26/2000 9:18:00 AM
From: Justa Werkenstiff  Read Replies (2) of 15132
 
Digger: Re: "Fellow groupies may claim that Bob has made a bear call. I don't hear it. What I hear is 60:40 tactical asset allocation because of increased risk - this during a topping process in the current bull."

Brinker made a bearish call. He said there was 5% upside with 20% downside potential given market conditions. So far, his call is within range but it is riding on the edge.

He hedged his thinking by recommending a 60/40 allocation. I have interpreted this personally as assessing 60/40 odds of a bear market. We have heard all the reasons from Brinker for this asset allocation. He was concerned about the tax aspect and he was concerned that it was difficult for people to sell to begin with. First and foremost, I think Brinker wanted to create the potential for some success while limiting the downside given the current environment.

Brinker has also said that he is comfortable with 0% equities. Why? Many callers have asked why would anyone be in equities when they could achieve the same return in the future of single digit returns with less risk in fixed income instruments. Brinker has said he could not think of a reason. Makes sense to me.

I see nothing wrong with hedging one's thinking. Why? Because the future is unknown and all one can do is to assess the probabilities given the conditions. This is what Brinker has done. The bear may fall into place and it may not but nobody can dispute the fact that this environment is historically where bears can begin. As Brinker has said, this could be a long process. And in hedging, Brinker limited the upside of his portfolio and also limited the downside. This is called risk assessment and it is something that few care about in this environment. All they care about is return. They don't care if they are taking on huge risk to achieve this return. Very few if any Brinker critics have addressed the notion of risk. They focus on him personally and don't address his thinking in relation to their circumstances which is the issue.

And so people criticize him for spinning. When the market is down, Brinker seems bearish and when the market is up Brinker sees himself as a tactical asset allocator. Gee, I seem to recall callers thanking him for his advice and him saying that he did the best he could and said we were in the early innings. So be it. People can view this as spinning but I disagree if people think this a means by which Brinker can be viewed as successful no matter what happens. I am sure the mutual fund advertisers do not view his advice as a means to success ofr his show. Despite any faults Brinker may be viewed as having in this regard, I believe the foundation for his thinking was the in best interest of his listeners: limiting risk while leaving room for reward. It is that simple.
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