Later in the week, I am going to post my entire newsletter which I do that occasionally to generate interest from new subscribers. In the meantime, I thought I would contribute to the discussion of the QQQ caller that made it to the broadcast this weekend by wetting your appetite with an excerpt from my newsletter which includes that call. Read on if you dare!
Excerpt from David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials and Special Alert E-mail Service.
QQQ - CALLER OF THE DAY!
Caller: This 65-year old retired female caller started off by saying she felt she had her money "sold down a rat hole." She said she received a letter from Bob Brinker advising her to put 50% of her money into the QQQ shares and she is wondering why Bob sent that out and whether she should continue holding the QQQs? Bob seemed a little surprised, but appeared ready to handle the call. First, Bob pointed out that the 50% recommendation did not mean 50% of your total portfolio, but rather 50% of your cash reserves which would have limited exposure to a "very aggressive high risk taker" to 32% of a total portfolio. The caller said she had the letter and it said to invest 30% to 50% in the QQQ. The first inkling of frustration appeared in Bob's velvety smooth voice. Bob reiterated that the letter, which was written in 2000, recommended a percentage of cash reserves and was meant for someone who had raised substantial cash reserves back in the year 2000. The caller said she sold all of her stock back in 2000....but before she got another word out, Bob said that was not his recommendation either. Rather, Bob had recommended raising 65% cash, mostly in January, the rest in August/September 2000. Bob's voice now took on an edge to it, making any long-term Trekkie a little bit uncomfortable. Bob sternly said that the QQQ recommendation of investing "up to 50%" of your cash reserves was only meant for a "very aggressive high risk taker" which would have limited your exposure to 32% of your total portfolio. The caller then blurted out that she had 50% of her total portfolio in the QQQ and asked Bob what she should do with it???
Dramatic Pause
Bob, mixing up his pronouns, said that "we have a hold on that position" because based on his opinion, that security is going to do "very very well" during the next cyclical bull market. The caller seemed relieved, saying "thank God" because "she has been sick about it." Bob said she shouldn't have made the investment if she was going to feel sick about it, to which the caller said she had sold everything in January. Bob then asked how old the caller was, to which she replied 65 (this was the second time she had said that).
Gloves Taken Off
Bob decided it was time to launch into attack mode, and said quite clearly that he questioned the veracity of this caller. Bob pointed out that given the caller's age, she should be in a balanced portfolio age group and in her age category, the most anyone could have invested in the QQQ would have been a very small percentage -- only 20% to 30% of the existing cash reserves which would have equated to only 9.5% of a total a balanced portfolio. (Recall that in the balanced portfolio recommended by Bob, there is only 32.5% of the total in cash reserves) Bob again questioned whether she was even telling him the truth saying that even with the QQQs down where they are, the most she would have lost from her total portfolio is about 5%-6%. The caller then interjected that she had lost 75%. But Bob said that was 75% of what she put in, and she should not have put in as much as she did.
Damage Control
As an aside, Bob interjected that the QQQ recommendation was not included in any of his model portfolios and he even said so at that time in his newsletter. Bob repeated himself, only this time specifically referring to the November, 2000 Marketimer newsletter saying that he told subscribers that the recommendation was not going to be part of his "long term model portfolio approach." Bob told the caller that she totally ignored what he had recommended, and did something else entirely. The caller said she tried to follow what Bob had said...but Bob cut her off telling her that he considered her a conservative balanced investor, who might have put in 20%-30% of the 32% cash reserves, which is only 6% to 9% of a total portfolio.
Rebuttal
The caller seemed flustered and told Bob that she thought she was only supposed to hold the QQQ for a short period of time, and then get out of the position. Bob said that would have been wonderful if it had worked out as planned. Bob pointed out that for a balanced investor, it shouldn't be a big factor in your portfolio.
Recommendation
Bob said he was not going to give a recommendation to sell the QQQs at this level, because he didn't think it would be a smart thing to do. Bob then said that during the next cyclical bull market (which he still thinks there is "a possibility that it will begin this year"), that area of the market "will do very very well and stage a nice recovery." Bob concluded by noting that for this caller, the issue was academic given that for a balanced investor, a person should only have 6% to 9% invested in the position and he never would have recommended more for someone in that category.
EC: I don't have any editorial comment to make. Well, maybe a few points.
Point 1: If anyone was wondering whether Bob might try to sell the QQQs prior to issuing his buy signal, this call puts that issue to rest. He is going to hold it through thick and thin presumably until he issues the sell signal during the next cyclical bull market.
Point 2: Bob has been very careful to avoid putting a price projection on where the QQQs will go during the next cyclical bull market. He uses generic phrases like it will "do very well" and hold for "future recovery." Personally, I think that is because he probably doesn't believe the QQQs will rise to the level they were recommended at during the next cyclical bull market. I think its far-fetched to even hope that they will hit $80 during the next cyclical bear market. That would require a parabolic rise in terms of percentage gains from these levels.
Point 3: I was somewhat dismayed at how Bob treated this caller. She was clearly a mature lady (65), and Bob treated her as if she were making all of this up to make Bob look bad. I can tell you from my own personal experience with subscribers, that there were quite a few that were a little more aggressive than Bob recommended. Just like some people were more aggressive in going beyond 65% cash, the same is true for Bob's advice on the QQQ. I am not excusing the caller, as she clearly did not follow Bob's advice, but I didn't think it was appropriate for Bob to attack this caller and question her truthfulness.
Point 4: The worst thing about the call in my opinion, was that Bob was clearly trying to minimize the impact of his entire QQQ recommendation. Without any prompting by the caller, Bob made a big point over the fact that the recommendation was not included in his model portfolios, and I am sure the non-subscribing listening audience were left with the impression that Bob specifically stated that it wasn't to be included in the model portfolio at the time he made the recommendation. That is not true. There was no mention of the QQQ recommendation being included in the model portfolios when the recommendation was issued via special bulletin in October, 2000. It wasn't until the November regular edition of the Marketimer that he made that statement. My response is so what? Did Bob expect people to sell a significant position in the QQQ one month later simply because Bob said he wasn't including it in his model portfolio? That would have been totally unrealistic, and furthermore Bob was very very upbeat about the prospects for the "counter-trend rally" in the November newsletter, repeating the recommendation in January, 2001.
Last Point: Did you hear Bob refer to his "hope" that the buying opportunity will be this year? This is the first weekend that Bob has really hedged against the possibility that MOABO/VEBO won't occur during 2003. I thought Bob may have mispoke, but sure enough in this next comment he reiterated that possibility.
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