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The Retirement Advisor

Estimate of Effect of Bob Brinker's 
QQQQ advice on his Reported Model Portfolio Returns

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This article examines the effect of  Bob Brinker's QQQQ Advice on his model portfolios. 

In Jan 2000 Brinker moved 60% of his equity portfolios to cash. In August 2000 he moved another 5% to cash for a total of 65% in cash reserves. He told subscribers to wait for instructions on how to use these cash reserves. If he had stayed there, this move would have looked brilliant. But, the story is only beginning.

On October 16, 2000, Brinker’s subscribers got a special bulletin vial USPS mail advising the they could"Act Immediately" and buy QQQ (the exchange traded fund for the NASDAQ100 index) in anticipation of a 2 to 4 months "counter trend rally" for a 20% or more gain. Confused callers to the Marketimer office were told "Bob is comfortable with QQQ at $86" by office staff.   You can read the rest of what happened  at  Bob Brinker's QQQQ Advice but basically the QQQ(Q) fell from a high of $87 to just under $20 and Bob held all the way down.  This was not reflected in his model portfolios where he kept the 65% cash reserves in cash, thus having it both ways. 

In the October 2000 bulletin, Brinker recommended 30 to 50% of cash reserves be put into QQQ(Q) for his aggressive (Model Portfolio #1) subscribers.  The average price for the week after the bulletin was sent was about $82.
Date Open High Low Close Volume Adj Close*
20-Oct-00 84.50 87.87 84.39 86.31 40,692,200 84.78
19-Oct-00 82.39 85.11 81.44 85.06 44,278,900 83.56
18-Oct-00 76.75 81.19 74.56 78.00 64,354,400 76.62
17-Oct-00 83.12 83.17 78.00 78.25 52,101,400 76.87
16-Oct-00 81.12 82.31 79.75 82.00 27,644,900 80.55
* Close price adjusted for dividends and splits.

  • P1 money market allocation on 9/30/2000: $95,359
  • Adjusted P1 money market allocation after QQQ buy: $47,969.50
  • Added P1 QQQ allocation: $47,969.50
In the March 2003 bulletin, Brinker made no mention of the prior advice for QQQQ but he recommended subscribers return to a fully invested position per the model portfolios.

Reported P1 money market allocation on 2/28/2003 : $102,716

Since the money market balance includes the accumulated interest, removing half of the ending balance from the March 2003 total automatically takes into account the loss in interest. This reduces the money market balance by $51,358.

QQQ closed at about $24 on the day the second bulletin was issued, and again on the next day. Since Brinker's new P1 recommendations were all mutual funds, the closing price is the one he had to use in calculating his reported results.

                                                                                PRICES for QQQQ
Date Open High Low Close Volume Adj Close*
14-Mar-03 25.73 25.98 25.36 25.72 89,794,400 25.27
13-Mar-03 24.64 25.65 24.40 25.62 128,537,600 25.17
12-Mar-03 23.76 24.24 23.54 24.23 77,859,800 23.80
11-Mar-03 24.06 24.24 23.78 23.80 54,934,200 23.38
10-Mar-03 24.33 24.45 23.91 24.01 55,948,000 23.59
* Close price adjusted for dividends and splits.

  • The $47,969.50 in QQQ was reduced to $47,969.50 x 24/82 = $14,039.85.
The reported balance for P1 on 2/28/2003 was $126,712. We need to subtract the half of the money market fund that was used to buy QQQ and replace it with what was left of the QQQ holding.
  • $102,716 - $51,358 + $14,039.85 = $89,393.85 "adjusted" P1 balance.
Calculate the reduction in Model Portfolio #1 reported results due to QQQ:
  • [($126,712 - $89,383.85) / $126,712] x100% = 29.5% 
QQQQ Charts

Thus, anyone who followed Brinker's advice with 50% of cash reserves that was also in his "model portfolio for aggressive investors" saw their totals reduced 29.5% from what Brinker reports in his advertising.

  • Brinker's P1 on   01/01/88     $20,000
    Brinker's P1 on   07/27/07     $206,144
  • Brinker's Reported APR           12.7 %
  • QQQQ Effect is 29.0 % or      $59,782
  • Subtract QQQQ Effect          $146,362
  • QQQQ Adjusted APR               10.7 %
  • Wilshire 5000 APR                   12.0 % 
    (Wilshire 5000 APR over the period 1/1/88 to 7/27/07 was calculated by  Padraig Cremin of Wilshire Associates Inc and "Ivan Smile" in post #40.   Join our group and ask Ivan how he did it. )
What do you think? Did I make a mistake on any of these calculations?

Conclusion:  I calculate the QQQQ advice caused Brinker's reported total to drop by 29% and his APR to drop 2.0% a year such that his portfolio under performs the buy and holders of the Wilshire 5000 by 1.3% per year since the inception of P1.

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Since beating the market is hard for most to do, I recommend a "Core and Explore" approach to investing. Core means place 80 to 99% of your money into a CORE, buy-and-hold, no load, mutual fund portfolio and then EXPLORE with the remainder. To build your core portfolio, I suggest a diversified basket of index funds. For the remainder, I  recommend  the  explore portfolio in my newsletter.

DISCLAIMER: Answers & my words are general in nature, are not meant as specific investment advice, and do not necessarily represent the opinion of anyone but Kirk. Individuals should consult with their own advisors for specific investment advice.

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Last Updated 08/31/11  Thanks to Richard P. (aka Math Junky) for suggesting this method of calculation.