I'm Going to Post this Four Times a Year Explaining My Investment Method!

 How to Use this Blog

Four Uncorrelated Assets

1.)  Stocks

2.)  Long Term High Grade Corporate/Government Bonds

3.)  Short Term Notes (Cash)

4.)  Gold – Precious Metals Mining Companies

Four Assets Correlated to Four Economic Conditions

1.)  Prosperity

2.)  Deflation

3.)  Recession

4.)  Inflation

1.)  Prosperity: Stocks become a clear winner during conditions of increasing employment, rising wages tied to increasing productivity along with rising profits.  Junk bonds (they trade like stocks) are also winners in this environment despite their low quality; the economy is so good interest and principal payments are made – defaults are minimum – and a positive climate for refinancing.  High quality corporate/ government bonds are secondary winners as prosperity is noted for stable or slowly declining rates.  Gold is generally a loser in prosperity as inflation is minimized and investors seek higher returns in more traditional investments.

2.)  Deflation:  Deflation is the decease in the general price level of goods and services.  The Great Depression is a standout example of deflation.  The general cause is when excess debt is built up in the private sector that can no longer be increased and/or maintained resulting in massive bankruptcies.  This creates an environment of panic as businesses scramble to become profitable by firing employees and cutting hours of remaining workers.  In this deflationary episode interest rates decline, prices decline, and the almighty buck rises in value against softer currencies.

Long term high quality corporate bonds and long term U.S. government bonds are winners in this type of economy.  Stocks, gold, and junk bonds generally will fall in price along with interest rates on short term notes.

3.)  Recession:  For DYI's purposes recessions are a period of increasing interest rates engineered by the Federal Reserve in order to quell inflation by slowing down an over heating economy.  This condition is temporary as the economy will either adjust to the new economic environment bringing back prosperity or a deflationary period will begin.

High quality corporate/government bonds, stocks, gold, and junk bonds are all losers in this scenario. Short term notes and money market funds are clear winner as their principal value remains steady plus the interest income improves with increasing interest rates.

4.)  Inflation:  Too much money chasing too few goods.  When Federal government liabilities become onerous from financing of war(s) and/or social programs that are too great to be paid by taxation governments will resort to money creation to pay the remaining costs.  After WWII, Korea, Vietnam and the war on Poverty inflation began slowly prices increased relentlessly (despite high taxes) as government liabilities expanded.  When President Richard Nixon closed the gold window (1971) the last vestige of inflationary controls were removed with inflation peaking in the high teens only until Paul Volker was appointed as Fed Chairman (August 79) who crushed inflation with high interest rates.

Stocks, high quality long term corporate/government bonds, junk bonds are all losers as inflation soars along with interest rate increases (despite the Fed's efforts to suppress them).  Cash (money market funds) or short term notes are neutral or slightly lag inflation rolling up to the higher interest rate quickly.

Gold is a winner when inflation breaks above 5%.  When inflation goes double digit gold is marked up in price to reflect the debasement of the currency.  Gold will also rise in price based upon fear of massive defaults as gold has no counter party risk.

 VALUATIONS DO MATTER

This investment approach is an offshoot of Harry Browne's Permanent Portfolio that maintains a fixed 25% invested in the above four asset categories listed above.  Harry's uncorrelated assets at the time was ground breaking.  Today it is taken for granted.  As much as I was impressed with Harry's work it always made me uncomfortable to always own 25% in each asset. When valuations are at extreme lows a greater percentage is called for and conversely at historical nose bleed levels significantly less (or none).

DYI’s approach working through our four assets and determining with a measure of accuracy the percentage invested depending upon long term valuations.  This is done by calculating our averaging formula for each asset.

If all three assets - gold, stocks, long term bonds, cash is our default position - are at fair or average value then each of the categories will be at 25% of the portfolio just like Browne's Permanent Portfolio.  However as prices move up or down from their respective mean our averaging portfolio will make the adjustment enhancing the overall return.  

Will DYI outperform the market??

My primary goal is to outperform the Permanent Portfolio first.  Outperform the market?  Maybe? DYI's intentions is a 6% real return - as opposed to Browne's 4% - into your pocket with low volatility as opposed to our fully invested stock market investor.  In closing each of these assets stocks, long term bonds, gold and cash, all have their their moment of fame or shame.  Value players reduce or eliminate the overvalued assets and increase the undervalued; simple as that!     

DYI

My impression is that investors are presently enjoying the double-top of the most extreme speculative bubble in U.S. financial history. John Hussman; The Hussman Funds

 Future

America

A Deflationary Bust?

I don’t believe we shall ever have a good money again before we take money out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.” – F.A. Hayek 1984

Universal Capitulation and No Margin of Safety

By John Hussman of the Hussman Funds

Based on the valuation measures we find best-correlated with actual subsequent S&P 500 total returns across a century of market cycles, the stock market presently stands at valuation extremes matched only twice in U.S. financial history: the week ended December 31, 2021 (the 2022 peak occurred the next trading day) and the bubble peak in the week ended August 26, 1929. While our investment discipline is to align our outlook with prevailing, observable market conditions, my impression is that investors are presently enjoying the double-top of the most extreme speculative bubble in U.S. financial history.  John Hussman March 2024

As I’ve noted regularly, there’s one element of our discipline that gave us enormous difficulty during the speculative bubble of recent years. It was not internals. It was not even valuations. Rather, in prior market cycles, there were generally reliable “limits” to speculation – once certain combinations of overvaluation, overextended price action, and over bullish sentiment emerged, the market would quickly encounter an air-pocket, panic or even crash in fairly short-order. Amid the yield-seeking speculation encouraged by zero-interest rate policies (and the need for investors, in aggregate, to hold 18-36% of GDP in zero-interest liquidity created by the Fed), those “limits” proved unreliable, and bearish positions were detrimental.

Jeremy Grantham reminded investors last week, “if margins and multiples are both at record levels at the same time, it really is double counting and double jeopardy – for waiting somewhere in the future is another July 1982 or March 2009 with simultaneous record low multiples and badly depressed margins.”

Fire, Then Ice: Our Deflationary Future

By Charles Hugh Smith

Empires, however, might choose differently. The difference between a nation-state and an empire is generally under-appreciated. A nation-state can destroy its currency and bankrupt everyone holding its bonds / debt and start over, but an empire cannot be quite so cavalier, for the "reserve currency" of the empire is its foundation of power.

Yes, the hard power of military power projection is a core strength, along with trade, alliances, cultural and diplomatic soft power, but if the currency evaporates, so does the Imperial Project, and those tasked with maintaining the Imperial Project are forced to calibrate pain by a different standard than politicians and central bankers.

Inflation and the evaporation of the currency is not a solution for the Imperial Project, it is the surrender of all that is great and good. The only viable solution for the Imperial Project is deflation, the forced liquidation of unpayable debts and thus the forced liquidation of all the phantom wealth generated by ever-expanding debt.

Just as inflation has many sources, so too does deflation. Technology can be a source of deflation, as a new technology can dramatically increase supply and durability while dramatically lowering costs. Substitution can be deflationary, as enterprises and consumers swap a cheaper, more abundant substitute for whatever was becoming scarce and costly.

If the sum of "money" circulating in the economy contracts as credit tightens, it becomes harder to borrow more money into existence. Every dollar of debt that's written down to zero reduces the quantity of money floating around, i.e. the money supply.

If the money that is being created is immediately hoarded by the wealthy, it doesn't circulate in the economy and therefore it's the equivalent of debt being extinguished: the supply of money doesn't expand because the new money has been hoarded, in effect buried in the backyard.

To preserve the Empire, it becomes necessary to wipe out the debt and the phantom wealth it created, 90% of which is held by the hyper-wealthy, super-wealthy and merely wealthy. This is the class that has concentrated wealth and power to the point of destabilizing the social, financial and political orders, and so those tasked with preserving the Empire (the State within the State) will have to strip this powerful class of its phantom wealth indirectly, as the class is too politically powerful to be taken down head-on.

Recall that deflation--the decline in the price of assets, goods and services--is beneficial to wage-earners, as their earnings go farther as prices fall. Profits become harder to come by, and those lending and speculating on ever-higher asset valuations are wiped out.

From the Imperial point of view, this is all good: given that the only goal is to preserve the currency from evaporation, then the takedown of the hyper-wealthy class that threatens to destabilize the Imperial order is equally essential.

Just as inflation is a hidden tax on labor, deflation is a hidden tax on capital. If commercial real estate, stocks and corporate bonds all lose value for a decade, the bottom 90% will only be affected indirectly. If whatever money is being created is funneled into spending at the bottom of the economy--those buying essentials--then the deflation of private debt and assets won't strip the real economy of money in circulation, it will only strip the wealthy of the capital they were hoarding and speculating with under the guise of "investing."

Fire, then ice: as inflation (fire) threatens the Imperial currency, the Empire must choose deflation (ice) to preserve its foundation. Currency in active circulation is lumped in with the phantom wealth of debt-based assets, but they are two different things, as Aristotle observed (oikonoma and chrematistics). Just as inflation works slowly to erode the value of labor, deflation works best if it too is gradual, slowly extinguishing phantom wealth over time.

I have endeavored over the years to explain that the concentrated wealth and power of the hyper-wealthy pose an existential threat to the Imperial Project, and the showdown between debt-created phantom wealth and the bedrock of the Imperial Project, its currency, will play out in the next 6 to 8 years.

The "everything's always fine" echo-chamber holds that inflation to preserve all the debt-created phantom wealth is necessary, but they are focused on serving private wealth, not the Imperial Project. What's truly essential is to preserve the Imperial currency, and to accomplish that, both the phantom wealth and the power of the hyper-wealthy who own the vast majority of it must be extinguished. Slowly, slowly, but extinguished nonetheless.

Lest you weep for those whose phantom wealth will be drained away, recall that few win when a reserve currency dies. Labor can start earning the day after the reset, but the capital lost is gone for good.

DYI:  The sun never sets on the American Empire! 

No doubt if the Empire is to be maintained the gas must be let out of our financial debt bubble.  If you think that our Federal Government is in debt they don’t hold a candle to the private sector that is massively debt leveraged.  This includes our average John and Jane Doe who are doing what ever they can to maintain some semblances of the middle class through debt.

So far I don’t see a debt blow off to the likes of 1929 to 1932 then carried on through governmental missteps only ending by America’s orchestrated Pearl Harbor event putting the U.S. on a war time economy.  What I do envision is the likes of China who is currently letting the gas out of their real estate bubble that will be a multiyear event taking one decade to complete.

So…The most likely scenario is a multicycle stock market decline as corporate America deleverages all pushed through by the Department of Defense (DoD) over riding the Jewish banking cartel – [they are powerful bankers but the DoD has the guns] in any macro economic showdown.

My suspicion about ten years from now the U.S. stock market will completely mean invert from its current Shiller PE at 34 will bottom out around 10 and possibly lower.

Till Next Time

DYI           

 Multi-Agenda

 Kate Middleton

Psychological Operation  

Kate Middleton Mass Trauma Event: 

Cancer Is The New COVID

The fakery in the video is next level. This pys-op is about keeping the masses in a state of perpetual fear and ill health. Anyone for 'preventative chemotherapy'? Works just as well as the clot shot!

GEMMA O’DOHERTY March 24, 2024 Gemma's BitChute Channel What’s the true purpose of the Kate Middleton psyop? In the same way news of the ‘deadly’ non-existent virus went global in 2020 in a matter of hours, there isn’t a person on the planet who hasn’t heard about her bizarre ‘diagnosis’ by now, which followed a pantomime of media lies, fake images and trickery since her last actual appearance on Christmas Day 2023. I don’t want to lower the tone of my Substack by even mentioning the British ‘Royals’ here but I do think it’s worth analyzing why they have launched this particular mass fear op at this particular time. Like COVID, it’s quite obviously a global scare event designed to keep the dumbed-down masses traumatized, in a state of fear, easily manipulated and lining up for scans and experimental ‘preventative’ chemotherapy, which will in due course kill them. Depopulation? Tick. But it has other purposes: the media are busy lacerating ‘conspiracy theorists’ for daring to ask questions about the obvious fakery in the video released by ‘Kensington Palace’ last week, and, in typical fawning fashion, are pushing for stricter legislation around hate speech and the introduction of digital IDs. Problem, Reaction, Solution. It’s also a Jewish-style victim op, running parallel with the King Charles ‘diagnosis’, to engender some badly-needed sympathy for the Windsor’s whose popularity is on the floor not only in England but around the world. Chop, chop? Tick tock.

Very little change from last month with stocks at nose bleed valuations; bond yields hovering around their mean; gold remaining the stand out value!

 

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 4/1/24

Active Allocation Bands (excluding cash) 0% to 50%

29% - Cash -Short Term Bond Index - VBIRX

49% -Gold- Global Capital Cycles Fund - VGPMX **

 22% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

** Vanguard's Global Capital Cycles Fund maintains 25%+ in precious metal equities the remainder are domestic or international companies they believe will perform well during times of world wide stress or economic declines.  

 This blog site is not a registered financial advisor, broker or securities dealer and The Dividend Yield Investor is not responsible for what you do with your money.

This site strives for the highest standards of accuracy; however ERRORS AND OMISSIONS ARE ACCEPTED!

The Dividend Yield Investor is a blog site for entertainment and educational purposes ONLY.

The Dividend Yield Investor shall not be held liable for any loss and/or damages from the information herein.

Use this site at your own risk.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

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Margin of Safety!

Central Concept of Investment for the purchase of Common Stocks.

"The danger to investors lies in concentrating their purchases in the upper levels of the market..."

Stocks compared to bonds:

Earnings Yield Coverage Ratio - [EYC Ratio]

Lump Sum any amount greater than yearly salary.

PE10  .........35.14
Bond Rate...5.16%

EYC Ratio = 1/PE10 x 100 x 1.1 / Bond Rate

1.75 plus: Safe for large lump sums & DCA

1.30 Plus: Safe for DCA

1.29 or less: Mid-Point - Hold stocks and purchase bonds.

1.00 or less: Sell stocks - Purchase Bonds

Current EYC Ratio: 0.61(rounded)

As of  4-1-24
Updated Monthly

PE10 as report by Multpl.com

Bond Rate is the rate as reported by

Vanguard Long-Term Investment-Grade Fund Investor Shares (VWESX)

DCA is Dollar Cost Averaging.

Lump Sum is any dollar amount greater than one year salary.

Over a ten-year period the typical excess of stock earnings power over bond interest may aggregate 4/3 of the price paid. This figure is sufficient to provide a very real margin of safety--which, under favorable conditions, will prevent or minimize a loss...If the purchases are made at the average level of the market over a span of years, the prices paid should carry with them assurance of an adequate margin of safety.  The danger to investors lies in concentrating their purchases in the upper levels of the market.....

Common Sense Investing:
The Papers of Benjamin Graham
Benjamin Graham

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%
Stocks & Bonds

Allocation Formula

4-1-24
Updated Monthly

% Allocation = 100 x (Current PE10 – Avg. PE10 / 4)  /  (Avg.PE10 x 2 – Avg. PE10 / 2)]

Formula's answer determines bond allocation.

Current PE10.....35.14

Avg. PE10...........17.10

% Stock Allocation     0% (rounded)
% Bond Allocation  100% (rounded) 

Logic behind this approach:

--As the stock market becomes more expensive, a conservative investor's stock allocation should go down. The rationale recognizes the reduced expected future returns for stocks, and the increasing risk. 

--The formula acknowledges the increased likelihood of the market falling from current levels based on historical valuation levels and regression to the mean, rather than from volatility. Many agree this is the key to value investing.  

Please note there is controversy regarding the divisor (Avg. PE10).  The average since 1881 as reported by Multpl.com is 16.70.  However, Larry Swedroe and others believe that using a revised Shiller P/E mean of 19.6 , the number since 1960 ( a 53-year period), reflects more modern accounting procedures.

DYI adheres to the long view where over time the legacy (prior 1959) values will be absorbed into the average.  Also it can be said with just as much vigor the last 25 years corporate America has been noted for accounting irregularities.  So....If you use the higher or lower number, or average them, you'll be within the guide posts of value.

Please note:  I changed the formula when the Shiller PE10 is trading at it's mean - stocks and bonds will be at 50% - 50% representing Ben Graham's Defensive investor starting point; only deviating from that norm as valuations rise or fall.        

  

DYI

This blog site is not a registered financial advisor, broker or securities dealer and The Dividend Yield Investor is not responsible for what you do with your money.

This site strives for the highest standards of accuracy; however ERRORS AND OMISSIONS ARE ACCEPTED!

The Dividend Yield Investor is a blog site for entertainment and educational purposes ONLY.

The Dividend Yield Investor shall not be held liable for any loss and/or damages from the information herein.

Use this site at your own risk.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

The Formula.

A value based allocation strategy

February 19, 2010 by John Kingham

 Demon

Cholesterol

Statins to the Rescue? 

Bempedoic Acid: A Newer Useless Cholesterol-Lowering Drug

Pam Popper, President
Wellness Forum Health

Bempedoic acid is one of a new class of non-statin drugs for lowering LDL cholesterol that targets the cholesterol biosynthesis pathway in the liver. The FDA approved it as a treatment for people who are statin-intolerant or who have reached maximum tolerated statin therapy for treatment of high plasma cholesterol. Made by Esperion, the drug is available in two forms. Nexletol is comprised only of bempedoic acid, and Nexlizet is a combination of bempedoic acid and ezetimibe (Zetia). 

Esperion’s website reports that "once-daily therapy was shown in a clinical trial to deliver" 38% reduction in LDL-C compared to placebo.[1] Keep in mind that this is a change in a surrogate marker – which may not have any relationship to meaningful health improvement.

According to an article published in the New England Journal of Medicine, a randomized controlled clinical trial that included 13,970 patients showed that treatment with bempedoic acid was associated with a lower risk of major cardiovascular events – deaths from cardiovascular causes, nonfatal myocardial infarction, nonfatal stroke, or coronary revascularization. According to the study, the relative risk reduction for heart attacks in patients taking Nexletol was almost 23%.[2] One could conclude from this overview that this drug is a reasonable alternative to statins and might be even more effective, a good thing since, when used for primary prevention statin drugs reduce the risk of events by less than 2%.

But further analysis, looking at risk reduction in myocardial infarction in absolute terms shows a different picture:

          Nexletol group: 261 MI events in 6992 patients         3.7% risk
          Placebo:           334 MI events in 6978 patients         4.8% risk
          Absolute risk reduction:                                             1.1% reduction
          Relative risk reduction:                                            22.9% reduction

In other words, the drug delivers a statistically significant result that is clinically meaningless to the person who takes it.

Some additional information from the Esperion’s website reinforces the uselessness of this drug:

"Limitations of use for both Nexletol and Nexlezet:

The effect of NEXLETOL and NEXLIZET on cardiovascular morbidity and mortality has not been determined."

"Safety information:

Side effects of Nexletol include hyperuricemia, tendon rupture, upper respiratory infections, muscle spasms, back pain, abdominal pain, bronchitis, pain in the extremities, anemia, and elevated liver enzymes. Many of these are the same side effects that are caused by statin drugs."

Almost no one would agree to take this drug if shown the actual risk reduction and the side effects. Most people might at least consider adopting a low-fat, plant-centered diet if given data showing the incredible health improvement that results. This lack of real informed consent is one of the reasons why people remain so sick, and why the erroneous perception of the lazy American who does not care about health and just wants to take a pill persists. The pill is falsely represented to be safe and effective, and the diet and lifestyle choice is almost never offered.

Reporting the benefit of drugs, supplements, and medical interventions in relative terms is very misleading, and relative risk reduction should not be the metric used in making treatment decisions.
 

---

[1] https://www.nexlizethcp.com/?gclid=Cj0KCQjw_r6hBhDdARIsAMIDhV9YjqqGzkaRcJPyg4wBWia8k7AVD41vBlcEWamNmBOMTDXqJaWnxRMaAid2EALw_wcB

[2] Nissen SE, Lincoff AM. Brennan D et al. "Bempedoic Acid and Cardiovascular Outcomes in Statin-Intolerant Patients." NEJM 2023 Mar; doi: 10.1056/NEJMoa2215024. Online ahead of print

*****************************************************

DYI:  I'm no medical expert - since COVID so many of these doctors on TV would not be deemed medical experts - be as that may be; an absolute risk from myocardial infarction is only 3.7% that sounds great since the demon cholesterol that - [may not have any relationship to meaningful health improvement] - but when compared to the placebo group only 4.8%!  Simple arithmetic this is only an absolute improvement of 1.1%  

Plus it does make one wonder as these statin drugs do lower bad cholesterol and yet the absolute drop is from 4.8% to 3.7%...Is cholesterol the big bad demon it is made out to be???  Despite both clinical groups having high bad cholesterol only 4.8% of the placebo group had a myocardial infraction event.  

My Lord with all of the talk regarding cholesterol one would think this placebo group would be dropping off like flies!  Then the statin group only drops by 1.1% on an absolute basis further damning the cholesterol narrative.  My opinion - and again I'm no doctor nor some health professional - cholesterol has as much to do with heart disease as EMT's (Emergency Medical Technicians) causing vehicle accidents!

So little - a case can be made that the improvement is nothing more than statistical noise - for those taking any statin drug will subject themselves to side affects and long term use to permanent harms and possible death.  The risk of harm in my judgement significantly out ways what possible improvement  - and that is debatable - this new statin along with the whole statin group as well.  

I do have a problem with Pam Popper as she thinks that COVID is real and that it came out of a bio-lab in Wuhan China.  I do not know if she is controlled Ops or a misdirected medical expert.  However she does put out excellent info - [so far as I can tell] - regarding anything non COVID.

Till Next Time

DYI         

U.S. Stock Market Leaps to a Higher Valuation! Shiller PE at 36.43 and Scant Dividend Yield at 1.36% EYC Ratio Drops to 0.58!

 Special Update

Ben Graham’s Corner 

DYI:  Up to date estimated 10yr average annual return for stocks – [S&P 500 index fund, generalized growth fund etc.] – held or bought today; go to sleep like Rip Van Winkle waking 10 years from now your return (estimated) will be…Drum Roll Please…NEGATIVE 1.31%!  This is with dividends reinvested.  Go to money chimp and plug in the numbers!

Margin of Safety!

Central Concept of Investment for the purchase of Common Stocks.

"The danger to investors lies in concentrating their purchases in the upper levels of the market..."

Stocks compared to bonds:

Earnings Yield Coverage Ratio - [EYC Ratio]

Lump Sum any amount greater than yearly salary.

PE10  .........36.43
Bond Rate...5.20%

EYC Ratio = 1/PE10 x 100 x 1.1 / Bond Rate

1.75 plus: Safe for large lump sums & DCA

1.30 Plus: Safe for DCA

1.29 or less: Mid-Point - Hold stocks and purchase bonds.

1.00 or less: Sell stocks - Purchase Bonds

Current EYC Ratio: 0.58(rounded)

As of  3-19-24
Updated Monthly

PE10 as report by Multpl.com

Bond Rate is the rate as reported by

Vanguard Long-Term Investment-Grade Fund Investor Shares (VWESX)

DCA is Dollar Cost Averaging.

Lump Sum is any dollar amount greater than one year salary.

Over a ten-year period the typical excess of stock earnings power over bond interest may aggregate 4/3 of the price paid. This figure is sufficient to provide a very real margin of safety--which, under favorable conditions, will prevent or minimize a loss...If the purchases are made at the average level of the market over a span of years, the prices paid should carry with them assurance of an adequate margin of safety.  The danger to investors lies in concentrating their purchases in the upper levels of the market.....

Common Sense Investing:
The Papers of Benjamin Graham
Benjamin Graham