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Many people follow investment and risk management strategies similar to those advocated by Bob Brinker. I do not. However, to enlighten myself I ordered a complimentary copy of his MARKETTIMER newsletter from his Web site and received the one dated 1/8/00. Here is my analysis of it.


The following statement provides a clue as to what Bob Brinker views as
an INCREDIBLE yield in our current era's record-setting market:

"During the five-year period ending on 12/31/99, a simple $1,000 investment
in the Wilshire 5000 grew to $3,258 for an INCREDIBLE FIVE YEAR ANNUAL

As contrast, over the past four years my investment strategy has produced
annual yields that range between 57.6% and 92.9%. This explains why
I view 26.8% as a mediocre return.


In this eight-page newsletter there is only brief mention of seven
individual issues. Three of them actually are forms of index funds such as
QQQ, DIA and SPY, plus a trust fund GAB. Two of the remaining three that
one might recognize as true individual stocks are Vodafone/Airtouch (VOD)
and Microsoft (MSFT) -- the latter being what I view as my poorest
performing major holding with its133% yield over the past 16 months.

So what is it that Bob Brinker focuses upon other than low-yielding and
super-safe vehicles such as bonds and treasuries for the aged and/or faint
of heart?

The answer of course is NO-LOAD MUTUAL FUNDS. In fact, three of
the eight pages of this newsletter are consumed by a widely spaced list of
20 no-load funds he presently recommends. Removing the best three as well
as the worst three performers as anomalies, the average annual yield was
20.2% in 1998 and 26.2% in 1999. The median was 23.3% in 1998
and 23.8% in 1999.

A fund Mr. Brinker often suggests on his radio program is the Vanguard
Index Total Stock Market Portfolio which was close to the median
performances -- 23.3% in 1998 and 23.8% in 1999.

So again one can see that Bob Brinker and his strategies seem quite
satisfied with annual yields which come in at plus or minus a few points of
a 20% annual yield. If that is a level of return which pleases an investor
and allows him or her to sleep well at night, then go for it. I would
venture the guess that this is better performance than the majority
of investors achieve.


One full page is devoted to detailing these portfolios. Each contains 7 to
8 funds plus the present recommended percent of total market value to have
in each one. As I did in a previous treatise, let's again check out two of
them, beginning with the one with the highest yield.

PORTFOLIO I. Per the newsletter, this one is designed for investors with
aggressive growth investment objectives. Such investors seek maximum
returns and are willing and able to accept high levels of risk and
volatility -- and wherein current income is not a factor.

It goes on to say that $20,000 invested on 1/1/88 would have increased to
$136,620 on 12/31/99 -- a percent increase of 583% over those 12 years.
This sound interesting -- until one pulls out their calculator and discovers
it is the equivalent of achieving an average annual yield of only 17.4%!

PORTFOLIO II. This less aggressive one (which translates to an even lower
yield) is touted as being designed for investors with long-term growth
objectives who seek to enhance the value of capital over time and assume a
reasonable level of diversified market risk -- and wherein current income is
not an important factor.

PORTFOLIO III. This docile one is defined as "balanced" to achieve current
investment income along with capital preservation and modest growth. It is
allocated evenly between equities and fixed-income and is touted as best
suited to investors nearing or already enjoying a retirement lifestyle.
Noting the beginning date of 3/1/90 (rather than 1/1/88 used in portfolio
I), it indicates that $20,000 invested on 3/1/90 would have increased to
$55,348 on 12/31/99 -- a 177% increase over those 9 3/4 years. That is
equivalent to an average annual yield of only 11.0%!

After studying these portfolios, it remains my opinion that they have so
much "CONVENTIONAL SAFETY" built into them that their yields suffer
immensely -- and unnecessarily! They employ all of the "put your portfolio
in a straight jacket" standards and adages such as broad diversification,
using mutual funds to achieve it (which as a whole do just so-so), asset
allocation (which forces selling and then re-selecting and re-buying
whenever advised that the winds may be changing), and on and on.

Are there simpler and more profitable alternatives featuring reasonable
safety? I believe the strategy I employ and have described in other
messages qualifies as one. In just FOUR years it would have grown
a $20,000 investment to $177,326 -- and this translates to an
average annual yield of 72.6%!

A longer term real-life example is the IRA I began in the last months of
1992. If someone shadowed that venture, in just 7 years their initial
$10,000 investment would have grown to $195,020 -- which translates to
achieving an average annual yield of 52.9%.

In Brinkers "aggressive" Portfolio I, it took 12 YEARS to grow $20,000 into
$136,620. In my IRA real-life example above, it would have taken an
investor only 7 YEARS to grow that same $20,000 amount into $390,040!


There are at least three things I do admire about Bob Brinker. First, he is
clearly aware of and constantly warns his callers that there are many sharks
out there including brokers and financial advisors who are far more
interested in lining their pockets than yours.

Second, he is a "no-load" mutual funds advocate, and he makes it clear that
warning lights should begin flashing in one's mind whenever anyone tries to
sell you on "load" funds -- or annuities or insurance other than term.
Furthermore, he talks about and provides a list of funds in his newsletter
that have a rather consistent track record. This is helpful, because mutual
funds that do exceptionally well in one particular year usually don't repeat
that performance. Nevertheless, that rare year often is used as a major
selling tool and it also inflates the fund's average annual return -- points
cleverly touted that can lead an unwary investor astray.

Third, I believe he is unusually knowledgeable about market details and does
a commendable job of market analysis -- where it's been, where it's at, and
where it appears to be going.

However, as a BUY&HOLD advocate (and one who uses bail-out points as a
safety net), I do question what he might be inclined to suggest an investor
should do in response to changes in the ever-changing temperament of the
market -- i.e. juggling asset allocation, moving into cash or back into
equities, etc. Let me cite a recent example which helps illustrate my

In this 1/8/00 newsletter (and based upon his market timer model) he recommended that equity holders promptly sell to create a 60% cash reserve position in money market funds, and that they then hold this position pending reinvestment of that cash back into the stock market at a "later time" -- and these changes were effective immediately! As of his 2/20/00 radio program he still was sticking to his above cash position advice.

Was he correct in his forecast? Yes -- in the sense that a rather large drop did occur immediately after Friday 1/21/00. Using my own figures to illustrate this drop, my YTD yield on 1/21/00 was 7.2%. It then dropped sharply on Monday 1/24 and ended that week at -4.1% as of Friday 1/28. So far his advice was on target. However, by one week later on Friday 2/4/00 my YTD yield already had recovered to 7.2%. It then steadily has continued to move higher -- and on 2/23/00 it stood at 13.1% which generates a new all time record high market value for this portfolio.

So was this really a good call or not? It will be ONLY IF he makes the "get your cash back into the market" call correctly and quickly communicates it to his followers, and that they in turn do get back into the market. In other words, it is one thing to accurately make the call to get out, but the call to get back in needs to be of comparable market timing accuracy.

On the other hand, my strategy did not require me to make these kinds of precise market timing calls. In addition to the proven fact that my strategy consistently achieves a far higher annual yield, my automatic bail-out points cover worst case scenarios. So I did exactly what my strategy called for -- stayed invested, did NOTHING! And as of 2/23/00 my portfolio remains fully invested and has a total market value which is a new eight-year high!

Bob Brinker presently believes his indicators show that investors who follow his market timing approach still should be 60% or more in cash -- i.e. that the time to get back in has in fact not yet arrived. He very well may be correct. But again, for my strategy this is a moot issue because my system automatically will handle the occurrence of worst case scenarios.


Now let's return to the question of what are reasonable expectations.

I believe that anyone including Bob Brinker who suggests that a Total Stock
Market fund is a good investment idea is like saying and believing
that the AVERAGE TIME of an entire high school gym class for
running the mile is acceptable performance. Just like any high school gym
class, the "total market" consists of the excellent, the good, the average,
the mediocre and the poor performers. Similar to a track coach choosing his
team from amongst that gym class, I don't see it as a major problem to
separate the wheat from the chaff and thereby come up with a winning and
even record-setting combination -- and without taking appreciable risks!

Many investment advisors seem to view the market and stocks as they believe
things "should be" according to rather complex formulas, projections,
mathematical calculations and comparative analyses -- but it never is! To
compensate for this fact, they and most investors retreat to immensely
unfocused and average-seeking strategies such as broad diversification,
asset allocation, mutual funds, bonds, treasuries, etc. Anybody with half a
wit knows that spreading oneself across the board with a little of this and
a dash of that will reduce risk and thereby provide a "safe mode" in which
to operate. However, doing so inevitably brings with it the downside of
ensuring average yields. It sadly reminds me of our culture's propensity to
devote ever-increasing attention to not messing up rather than to focus
primarily on achievement.

Surely there must be a better way. My own parameters for a viable
counter-solution are that it be (1) relatively simple, (2) reasonably safe
risk-wise, and that it (3) must allow an investor great freedom to focus on
arenas of high yield potential that prevail in the market "as it is" in
order to achieve high yields. I believe that my system offers all
of this.

For less aggressive play-it-very-safe investors, the Bob Brinker strategy is
a good and perhaps the best route for them to follow. Were I in that camp,
I would spend $185/year to receive his MARKETIMER newsletter and related
bulletin service in the event of an important change between these monthly
newsletters. Whatever system one follows, you must believe in it and then
keep yourself well-educated and on top of it -- and this is how to do it in
this case.

However, I am not in that ultra-conservative camp for several reasons, and
which I have attempted to clearly explained in this message as well as
others. So for someone like me, the newsletter has little to no value
because going down that road does not satisfy my aspirations and therefore
subscribing to it would be a waste of my time and money.

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