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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: MrGreenJeans who wrote (6855)	7/17/1999 8:59:00 PM
From: Investor2	Read Replies (1) \| Respond to of 15132

First, I understand and generally agree with most of your points. Re: "If the market has 5% upside potential here does it make sense to be fully invested if the downside potential is more severe?" How could one possibly know if there is only 5% left on the upside? If one has that knowledge, why not hang on for the last few percent? If one doesn't know how much is left on the upside, but thinks that the market will go higher from here, then, again, why not hold on to equities? Best wishes, I2

To: MrGreenJeans who wrote (6855)	7/17/1999 9:27:00 PM
From: Justa Werkenstiff	Read Replies (1) \| Respond to of 15132

MGJ: Re: "A short tibit here that I once heard a couple of years ago: A real or theoretical investor in Japan sells at 30,000 in the middle eighties and the Japanese index goes to 39,000 before dropping off to the teens. Is this investor wrong for pulling out early and taking profits or "smart" for taking his profits even though he missed the top and then watching the market subsequently tank?(Debatable)" Not at all debatable IMO. The guy avoided a 50% loss from 30,000 down into the teens. More importantly, he had the use of his money for other purposes for ten long years. Nobody ever gets the top. Brinker's goal is to get within 5% of the top if he sees one at all. I do not expect to get the top when I sell my semi equipment stocks. Re: "If the market has a severe valuation problem it would be better to make an early call and take profits than to wait for some unexpected exogenous shock to effect the market and be late retreating from the market." Good point. But we do not know when that event will occur and at what level. We do the best we can here. Asset reallocation is the best defense to the situation you cite. Re: "If the market has 5% upside potential here does it make sense to be fully invested if the downside potential is more severe? Hard call." Very hard call. I don't think Brinker sees us with five percent upside and then down from there into a bear if that is what you mean. He is not predisposed. Re: "My interpretation of the young lad example is that a person in their 20's would be 100% invested in stocks based on Bob's advice-not 80-20, 70-30." It would depend on the person IMO. We are, of course, talking hypotheticals. I think he would say 70/30 in this market is not unreasonable. I have heard him say it to someone in his late thirties recently FWIW. Re: "Bob calls, accurate for the most part, are cutting it close. Stay 100% invested...valuations are historically high be vigilant...stay 100% invested...pe's are at all time highs...stay 100% invested...the market is priced for perfection...with valuations, pe's and a perfect market where they are at maybe it is time to change the call especially since interest rates appear to be headed slightly higher in part due to these high valuations. I am not referring to asset allocation refinements here I am talking about a full or partial sell call." To me asset reallocations are a partial sell call. I agree that Brinker should further refine his "100%" investment lingo more often. It could suggest to some listener that he meant to be 100% invested in stocks. Re: "Bob had a similar philisophy in 1987. (I know new timing model now.) Stay fully invested...up until the crash." Ouch for sure but no harm done in the long term. I guess that is why I am doing some asset reallocation now. The best offense is a good defense here.

To: MrGreenJeans who wrote (6855)	7/17/1999 10:48:00 PM
From: Digger Sacket	Read Replies (2) \| Respond to of 15132

China vs. Taiwan: "The new flare-up has rippled through Asian financial markets, also hurting China's own markets in Hong Kong, Shanghai and Shenzhen. Taiwan authorities marshaled billions of dollars of funds from four state funds Saturday to halt a sharp stock market skid." Interesting to see on Monday what effect this has on the U.S. markets. Anything can spook the markets these days. BTW - "It's what the guru does, not what he says." In this case, if the guru recommends being 100% invested, he gets the credit if the market goes up, and takes the heat if the market tanks. Digger

To: MrGreenJeans who wrote (6855)	7/17/1999 11:28:00 PM
From: Alan Bell	Respond to of 15132

MGJ, It is important to separate the fact that we are richly valued from a trigger that might force a renormalization of that valuation. At 28 times PE, there is no question that we are richly valued. But it needs a trigger to change the momentum. The sentiment indicators might be one possible trigger. Another more important one might be the perception that inflation is returning. After the April CPI, it looked like it might be returning. But with two very good inflation reports, I claim the "perception" is that it is not returning. Of course, this could change. You paint a scenario that we are near a market top. But let me paint another possible scenario - Interest rates move back down somewhat, allowing PE to expand a little more and the market to rise. This continues into next year as actual earnings continue to increase pulling some pressure off the PE. At the same time, productivity continues to increase into 2000 and beyond, keeping wage pressure in check. (After Y2K, I believe, that many companies are going to increase business to business commerce allowing major gains in productivity.) So the bull market just continues. Now I don't know whose scenario is correct. But I propose this as a plausible alternative. It is one where getting out of the market now could be detrimental because there would be no place to get back in. Of course, if Bob calls a sell, I am out. -- Alan