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

To: Justa Werkenstiff who wrote (1220)	9/27/1998 10:04:00 PM
From: Joseph G.	Read Replies (2) \| Respond to of 15132

<<LTC was short Treasuries and long junk bonds including emerging market bonds. Brinker said LTC bet that interest rates were going up in an inflationary environment here in the US. Wrong. With dead pan humor, Brinker could not for the life of him understand why the smarties in Greenwich did not listen to MoneyTalk because he had been bullish on bonds and told listeners to steer clear from junkies. >> Just shows extreme naivete of Bob - their bet was that interest rates will go down slowly, or won't change, so that they make like bandits on the CMO/treasury spread. Remember that they had their positions for over a year, building them up as rates decreased. They would have gone broke in five weeks, rather than nine months, if the rates went up instead. No wonder they won't listen to "Money Talk". BTW, what am I doing here? -g-

To: Justa Werkenstiff who wrote (1220)	9/27/1998 11:08:00 PM
From: Alan Norton	Read Replies (1) \| Respond to of 15132

Subject: Model Prediction Change of Brinker position. Previously, he stated that new highs would be made by next summer or within about a one year time frame. He now sees new highs within six to twelve months. (Why Brinker does not announce changes in his thinking by first reviewing previously held market views is beyond me). Justa, Bob has always stated in the past that his model could not predict beyond the near term, which I always took to be one quarter. This makes a lot of sense, because any model that tries to predict the future becomes less accurate the farther out a prediction is made. I heard him say today that his model is predicting new highs in six to twelve months, just as you say. What has Bob done to his model and why should listeners have confidence in a forecast so far in the future? A lot can happen between now and late spring/summer. I have lost a lot of respect for Bob over the past month. His model clearly failed to predict the magnitude of the correction (no problem with that, every model eventually fails), but he has downplayed this and now continues to use the same model to make forecasts that a few months ago he was unwilling to make. If anything will be the downfall to the greatest bull market in history, it will be the greed of the bulls who aren't satisfied with 10% annual returns. The latest revelation of the LTCM fiasco suggests that a least a handful of 'smart' investors took risky positions that very well might fit this description. This has a really bad smell to it and reminds me of the heavily margined positions that investors had during the late 20's. The irony of it is that those we pay to look after our investments apparently have the ability to make the same mistakes that were made years ago. I changed my mind about holding on to my equities. After I heard about the 73 page Clinton rebuttal to the Starr report, I sold the rest of my winners. I don't want to be in the market if impeachment hearings start. I am quite satisfied to sit on the sidelines and watch. Rewards go to those who risk capital - the trick is to know when the risks are too high for any expected returns and that can only be a personal decision. Needless to say, I don't share Bob's enthusiasm for the market. Alan Greenspan has expressed concern which will most likely prompt the Fed to lower rates on Tuesday. Short term, this is good news. It however also implies that the Fed is no longer concerned with inflation, but is concerned with recessionary pressures. We appear to be at an economic inflection point. The question that remains to be answered is will the Fed and Alan Greenspan be as good at walking the fine line between inflation and recession in a contracting economy as they were during inflationary times.