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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: Honey_Bee who wrote (42133)	1/14/2009 10:20:31 AM
From: joefromspringfield	1 Recommendation Read Replies (1) \| Respond to of 42834

Honey said to Math: "As you said, we know for certain that he cannot time the market consistently. He can make some good guesses, but his bad guesses are almost equal in number. As you know as a mathematician, that's simply like a coin flip." I think it is significant to note that Brinker has never successfully gotten 100% out of the market before any of the bear markets since the inception of his newsletter in 1988. He did get out 100% early on but no bear market materialized. He made a good call in 2000 when he went 65% out of the market. This year he missed the bear market completely being bullish most of the year predicting new highs in 2009.

To: Honey_Bee who wrote (42133)	1/14/2009 2:26:47 PM
From: Math Junkie	5 Recommendations Read Replies (2) \| Respond to of 42834

"As you said, we know for certain that he cannot time the market consistently. He can make some good guesses, but his bad guesses are almost equal in number." Maybe, maybe not. He has to decide whether to be bullish or bearish every month, and his good "guesses" may or may not be equal in number, depending on how many months he was on the right side of the market, and how many months he was on the wrong side. It's really a moot point though, because what matters is whether and to what degree a market timer is able to outperform the market. "As you know as a mathematician, that's simply like a coin flip." Even if you use the maximum end of his recommended QQQQ allocation from 2000 (i.e., try to make him look as bad as possible), his Portfolio I, for example, still significantly outperformed the S&P 500 for the twenty year period ending 12/31/2008. A mathematician would tell you that it is very unlikely to achieve that by flipping coins. Here is what I base those statements on: I previously showed that the effect of using the worst-case end of his recommended QQQQ range was to reduce the balance for P1 by 29.5%. Message 23948811 Brinker's P1 shows twenty year performance of 756% as of 12/31/2008, vs. 388% for the S&P 500 Index (VFINX). bobbrinker.com That means that the gain was 7.56 times the starting balance. To get the ending balance, you add that to 1.00 times the starting balance, so the ending balance was 8.56 times the starting balance. 29.5% of that is 2.53, so you subtract that. 8.56 -2.53 6.03 To get the gain, you subtract out 1.00 times the starting balance. 6.03 - 1.00 = 5.03, i.e., 503% gain, which still significantly outperformed the 388% of the S&P 500 Index. Thus it would appear that a market timing strategy does not have to consistently avoid bear markets to outperform the market over a long time period.