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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.

INTERNATIONAL EQUITY ALLOCATION

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.