Sorry for the delayed reply. I didn't have time to give a substantive answer until now.
"Why would you trust numbers Brinker posts without verification?"
I trust his numbers for the same reason I trust your numbers, or any other newsletter writer's numbers. If one wants to evaluate performance based on anything other than opinion or emotion, one has to get numbers from somewhere. I also believe in the time-honored American tradition, "Innocent until proven guilty." If someone provides verifiable, quantitative evidence that a newsletter writer's reported performance numbers are wrong, I take the corrections into account, as I did with the QQQ data.
"What if they are very, very wrong? How would you know? "
Then there would be a discrepancy between what he reports and what is reported by tracking services like Hulbert's and Timer's Digest.
"I believe Hulbert was quite specific that what Brinker recommended for his P1 (most aggressive) portfolio under performed."
Take another look at the Hulbert quote you provided:
"Brinker’s fund selections on average have lagged the market. The HFD reports an 11.5% annualized gain for his 'Aggressive' portfolio, which is 0.9 percentage points per year less than what this portfolio would have made if each of its funds were invested in the DJ Wilshire 5000 during the times they were owned.'" [emphasis added]
That phrase "during the times they were owned" means that Hulbert was not comparing Brinker's reported results to a straight Wilshire 5000 portfolio, which would be fully invested at all times. He was comparing them to a Wilshire 5000 portfolio that included Brinker's timing efforts. That has the effect of excluding his timing from the results of the comparison, because the performance of his timing is in both the numerator and the denominator. The Hulbert statement you quoted reflects Brinker's fund selection only, not his market timing efforts.
"Lets make it easier for you. What is the total return of the S&P500 and Wilshire 5000 for the past 20 years through 12/31/08 and where did you get the numbers?"
I used the S&P 500 because that is an industry standard benchmark for mutual fund performance, and because that is the index that I had a number for. As I said before, I got that number from Brinker's Web site, and he indicated that he got it from Vanguard's S&P 500 Index Fund, VFINX. I used that number because I hadn't found another source for the S&P 500 total return for the twenty years ended 12/31/2008. I have since discovered that Yahoo's historical prices page has data for VFINX going back that far.
The 31 Dec 1988 to 31 Dec 2008 percentage gain I calculate using Yahoo's right hand column, which is adjusted for splits and dividends, is +393%, vs. Brinker's number of +388%. The numbers I calculate for five, ten, and fifteen years are the same as the ones Brinker shows.
Note that in my initial post I said "The surprising thing is that market timing doesn't have to be all that good to beat the market." It's not necessary to reply on Brinker's reported results to make that point. One can come to the same conclusion even if his reported results are completely ignored.
As an example, if the only equity one were invested in were an S&P 500 fund, and one were partially out of the market during one bear market, fully invested through another bear market, and fully invested the rest of the time, one would still outperform that index for any period that included both bear markets. And yet the above example of market timing would still qualify as not "all that good."
In Brinker's case, he was also completely to partially out of the market for part of a bull market from 1988 through 1990, so whether he beat the index or not for the past twenty years would depend on whether the performance penalty from that error was larger or smaller than the performance bonus from being partially out of the market during the one bear market. |
