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by Kirk

Excerpt from David K's Interpretation of Moneytalk (Bob Brinker Host) March 23, 2003 Newsletter


Dow: 8,521.97
NASDAQ: 1,421.84
S&P 500: 895.90
10-Yr. Bond: 4.095%
QQQ: $27.17

Caller: This caller has plenty of cash reserves and wants to become fully invested again. Her financial planner has advised her to be cautious about going back into the market, and suggested that she dollar cost average back into the market. Bob first pointed out that his subscribers had ample opportunity to lump sum back into the market at the time he issued his buy signal on the morning of March 11, 2003. Even the following day, and the rest of that week, the market was very low. Bob said that anyone who went fully invested during the week he issued his buy signal was able to get very good prices. This week, however, the market took off with the biggest up week in the market in 20 years. For people who are looking to get back into the market now, Bob thinks dollar cost averaging back into the market is a good idea. Later on in the broadcast, Bob reiterated that in terms of new money going into the market at this juncture, Bob thinks it makes sense to take a dollar cost average approach, using periods of weakness to do so. Bob doesn't like to chase rallies.

EC: Bob's view makes sense, although in practice it doesn't always work out. For example, one of my subscribers pointed out that during last weekend's broadcast, Bob said the same thing -- don't chase rallies, and buy on weakness. Well, if you heeded that advice, you would have missed the rally this past week. This is an issue that Bob is obviously aware of, because he took several calls from people who did not get back into the market yet and are anxious to do so. Read on.

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Caller: This caller was out of town when Bob issued the buy signal, and only received the bulletin by mail on Friday. Bob got a little defensive and pointed out that he posted the bulletin on his web site at March 11, 2003 at 2:00 a.m.

EC: I can attest to that fact. I checked his site about 1:00 a.m. on March 11th and it hadn't been posted. The following morning around 7:30 a.m., I noticed it had been posted, and was able to notify my subscribers before the market opened on the March 12th that the bulletin had been posted. How's that for service!

Caller: This caller missed the buy signal completely and wants to know what level of the S&P500 Index would be a good entry point? Bob said he is very comfortable with the level it was when he issued his buy signal (807.48). Although the signal was given before the market opened on Tuesday, March 11th, Bob is using the closing number of 800 for the S&P500 Index for purposes of calculating his model portfolio since the portfolio invests in no-load mutual funds. In the absence of the market returning to those levels, Bob would use market weakness to dollar cost average back into the market. The caller wanted to know over what kind of time frame he should dollar cost back in? Bob said it would vary by the investor, since it depends on how much risk you want to take. When you chase a rally, you diminish your potential return and increase your potential risk. Therefore, you have to decide how much you are willing to invest and the risk you are willing to take given the market has already had a great run -- especially this last week.

EC: Since Bob's timing model was triggered at the close of the market on Monday, March 10, 2003, I am using the S&P500 Index's closing number on that date of 807.48 for purposes of keeping track of his recommendation

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Caller: This caller has $300,000 in his IRA with about $150,000 in cash. He is interested in putting the cash back to work in the market, and wanted Bob's advice on what time frame they should dollar cost average back into the market. First, Bob pointed out that if he is right, then the most you can hope for is that this is a cyclical bull market which will have a limited duration (typically 1-3 years). At some point, Bob expects to issue a sell signal, book the gains, and then raise cash reserves in anticipation of the next cyclical bear market. With that said, Bob noted that if you are looking to put cash back into the market on the heels of a 12% gain in just 7 trading sessions, you have to be realistic and recognize that your risk/reward ratio has increased. As a rule, Bob doesn't feel comfortable chasing rallies, and instead recommends reentering the market through dollar cost averaging during periods of market weakness. If, however, you see continued strength in the market, there will not be much of an opportunity to get back in. Right now, the market already has built in the law of diminishing returns and increased risk given the run-up.

EC: The time frame for dollar cost averaging back into the market is a critical one for those who missed Bob's buy signal and still want to get back into the market. The issue is important because if the market takes off from here, and never looks back, the shorter the dollar cost averaging period the better. On the other hand, if the market pulls back in the months ahead, it would be better to dollar cost average over a longer period of time.

Caller: This 66-year old caller in retirement is invested in Bob's Model Portfolio III. Bob interjected noting that for 14 years, he has advised that people who are in or near retirement to utilize a balanced approach to investing, which is the design of Model Portfolio III. The caller then noted that he was out of town, and didn't really have a chance to catch this rally. Bob reiterated what he said in response to the last caller, which is that if you are coming into the market at this level no matter what type of investor you are (i.e. aggressive/moderate/conservative), it makes sense to be "judicious" and "disciplined" in your approach. Specifically, Bob recommended that investors dollar cost average any new money that is not yet invested in the stock market as opposed to putting it all in via a lump sum investment. In addition, Bob said if the opportunity presents itself, he would take advantage of periods of stock market weakness to dollar cost average back into the market. If you are able to do that, dollar cost averaging will spread out your time risk following such a big rally.

EC: That was fairly specific advice coming from daBrink. He certainly didn't want to say jump in with all of your money Monday morning, because if he says that, and the market tanks after that, he is going to be criticized. His last comment suggests that he does believe there will be periods of market weakness to take advantage of getting back into the market, although the question is will they be periods of weakness below the current levels, or above the current levels. That is an answer I do not expect that Bob will give on air. As noted at the beginning of my newsletter, I will be patient in waiting for periods of market weakness before I begin investing my remaining amount.


Caller: Have you increased your recommended weighting in international funds? No. Bob said he put all of his stock market cash reserves into mutual funds that invest in United States companies.

EC: Before the buy signal, Bob had only recommended 5% of a total portfolio in international funds, and 5% in European funds. Together, these would constitute 10% of a total portfolio. As Bob discussed today, he elected not to increase that percentage, and thus his bullish market outlook is primarily directed to the United States stock market.

- David K DISCLAIMER: This e-mail is neither sanctioned by, nor written under the auspices of ABC Radio Networks, Moneytalk or Bob Brinker. This e-mail is not a substitute for listening to Moneytalk, it is only my interpretation and commentary of some of what is discussed on Moneytalk, along with additional educational information that I include, editorial comments about the market and helpful financial links. If you want to know what was said verbatim on Moneytalk, listen to the show live or subscribe to "Moneytalk on Demand" which allows you to listen to the show in case you missed it live. The web site, bobbrinker.com has all the links to the ABC Radio Network stations that broadcast the show live.

VGTSX = Vanguard Total International Stock Fund
PRASX = T. Rowe Price New Asia Fund
VEURX = Vanguard European Fund

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Last Updated 1/14/06