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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: sat2000 who wrote (16059)6/12/2002 3:51:09 AM
From: Math Junkie  Read Replies (1) of 42834
 
Steve,

Sorry to take so long to get back to you - I've been very busy lately.

Your original question was whether I thought it wise to follow Brinker's "long term" model with a large portion of a portfolio. Your suggestion of limiting it to 5% of the portfolio seems kind of low to me. Your first three scenarios involve people whose equity allocation is fully invested, so they would be better off if they had followed the January 2000 call. The downside risk of doing so was that the market could have kept on going up, but at least they would have still been 40% invested, and they would not have lost any of the gains they had made up to that time.

For any of them to adopt Brinker's asset allocation now would be a bad idea, because that would put them in the position of selling on weakness. But what if they had followed the January 2000 call? What would the risk be of their following Brinker's model now?

It seems to me that there are principally two risk scenarios:

1) Brinker gets in early.

2) Brinker gets in late.

In both situations, since your hypothetical investors would have been fully invested if it hadn't been for Brinker, they are no worse off than they would have been, and in fact are better off, since they sidestepped at least some of the losses. Consequently, I don't see the justification for the 5% limitation you have proposed.

In your fourth scenario, you don't say what per cent invested he is, but from your description of his results, just about anything would be better than what he is doing.
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