Cash & Gold are kings; Bonds have value; Stocks remain in the dog house!

 

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 5/1/25

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

46% - Cash -Short Term Bond Index - VBIRX

32% -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.  

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  .........34.47
Bond Rate...5.41%

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

2.00+ Stocks on the give-away-table!

1.75+ Safe for large lump sums & DCA

1.30+ Safe for DCA

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

1.00 or less: Sell stocks - Purchase Bonds

0.50 or less:  Stock Market Crash Alert!  

Purchase 30 year Treasury Bonds! 

Current EYC Ratio: 0.59(rounded)

As of  5-1-25
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

%
Stocks & Bonds

Allocation Formula

5-1-2025
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.....34.47

Avg. PE10...........17.22

Core Bond Allocation:  117% 

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

Current Asset: Vanguard Long-Term Investment Grade Bond Fund   

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.

Current Allocation:

Vanguard Long Term Investment Grade Bond Fund

Possible Allocations to Bonds vs Stocks:

Bonds %

100%+  Vanguard Short Term Investment Grade Bond Fund 

99% to 65% Wellesley Income Fund

64% to 35% 1/2 Wellesley Income Fund - 1/2 Wellington Fund

34% to 0%  Equity Income Fund

  

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

 

All Downside

With ZERO Upside!

A 50% decline the market would remain over valued.  A 65% Decline Stocks will only be marginally undervalued!

 

 

There are five stages of the squeeze out.

The U.S. and EU are beginning stage 3.

The U.K has begun stage 4.

Stage one:

The rich starts to accumulate money and drive asset prices up; out-compete the working class for resources, and they drive the working class into debt.        

Stage two:

The working class runs out of resources.

They can no longer borrow anymore.

They can no longer spend anymore.

You get an economic depression and a crisis.

That's when the government has to step in.

Stage three:

Stage three, the government increasingly runs out of resources as well.

The government becomes massively in debt to the rich.

Stage four:

The government has no choice but to slowly eviscerate the middle class.

Eventually, there is no wealth left other than that held by the rich; and the physical structure of your society changes such that it only supports consumption for rich people.  At this point, almost everybody in the country lives in desperate poverty.

Stage five: 

There are no weak hands left to be squeezed out.

The rich own everything, and the only way they can try to grow their wealth is by sending you to fight in their wars against each other.

 Are You Prepared

For Over a 50% Decline!??

John P. Hussman, Ph.D.
President, Hussman Investment Trust

February 2025

If you’re a passive investor, my intent is not to encourage you to abandon your discipline. What I do believe, however, is that this is an extraordinarily good moment to examine your risk exposures and to take them seriously. 

If your notion of passive investing doesn’t allow for a realistic possibility of a market loss well in excess of 50%, or a decade or more in which the S&P 500 lags Treasury bills, you’ve not only decided to be a passive investor, you’ve decided to ignore history. So, whatever your discipline, examine your risk exposures.

J. Paul Getty

"For as long as I can remember, veteran businessmen and investors - I among them - have been warning about the dangers of irrational stock speculation and hammering away at the theme that stock certificates are deeds of ownership and not betting slips.

The professional investor has no choice but to sit by quietly while the mob has its day, until enthusiasm or panic of the speculators and non-professionals has been spent. He is not impatient, nor is he even in a very great hurry, for he is an investor, not a gambler or a speculator. There are no safeguards that can protect the emotional investor from himself."

 Fraudulent Playbook

Medical Industrial Complex!

Article below just substitute your country of choice and you will see the same fraudulent pattern from the medical establishment and the main stream media outlets! 

Exposing the Truth: New Zealand Medical Council, Pharmaceutical Industry, and Government Complicity in the COVID-19 narrative

March 25, 2025 Kelvyn Alp

The New Zealand Medical Council’s (NZMC) relentless pursuit of Dr. Samantha Bailey is a stark reminder of the militant tactics employed by those who seek to maintain the crumbling narrative surrounding COVID-19. The NZMC, in tandem with the pharmaceutical industry and the New Zealand government, have peddled and profited from this fraud, leaving a trail of death, destruction, and devastation in their wake.

The charges brought against Dr. Bailey, including “Covid-19 (Established)” and “Public safety compromised (Established),” are nothing short of farcical. With no evidence of harm caused by her actions, the NZMC has relied on the tainted opinions of government-aligned experts like Helen Petoussis-Harris and Dr. Michelle Balm. Both “experts” simply asserted that public safety could be compromised without providing a single case.

The NZMC’s actions are a clear case of selective enforcement, designed to silence dissenting voices and maintain the illusion of a pandemic. Dr. Bailey’s views on COVID-19 have been portrayed as a risk to public safety, while her books, such as “The Final Pandemic,” which meticulously dismantle the COVID narrative, have been conveniently ignored.

The mainstream media’s (MSM) complicity in this charade is equally appalling. Their silence on Dr. Bailey’s wider publications and the NZMC’s actions raise serious questions about their independence and commitment to truth. Why haven’t government experts refuted the Bailey’s work, particularly Dr. Mark Bailey’s treatise “A Farewell to Virology”? The MSM’s failure to report on this matter is a stark reminder of their role in perpetuating the SARS-CoV-2 myth.

The imposition of unprecedented costs, exceeding $148,000, on Dr. Bailey, for a show trial she did not participate in, is a blatant example of the NZMC’s corruption and collusion with the pharmaceutical industry. This money has lined the pockets of beneficiaries in the legal system, further highlighting the entrenched interests at play.

The New Zealand government’s role in this debacle can not be overstated. Their militant application of the SARS-CoV-2 narrative has led to untold suffering, financial ruin, and loss of life. It is imperative that the government, NZMC, and pharmaceutical industry be held accountable for their actions.

The people of New Zealand deserve answers. They deserve to know the truth about the SARS-CoV-2 myth and the motivations behind NZMC’s actions. It is time for transparency, accountability, and justice.

Furthermore, it is essential to acknowledge that the Wuhan Lab Leak narrative, [the back up story] is merely another means to perpetuate the already discredited virus myth. This narrative shift aims to maintain the illusion of a deadly virus while deflecting attention from the actual culprits behind the pandemic: those who pushed unnecessary lockdowns, mask mandates, and experimental injections. With the MSM peddling this new narrative, 

the powers that be seek to salvage their credibility and maintain control over the narrative while continuing to line their pockets with profits from this and future ‘pandemics.’

 Recession Led

Housing Oversupply

Here We Go Again!

Recession yes; however I don’t see another Great Financial Crises in the cards.  Obviously those who do become unemployed no talk as to how mild this recession is will never take away their pain.  This is why DYI always advocates in the most strenuous terms an emergency fund of at least one year.  Six months is simply too small and three months when you find yourself unemployed could easily run out before finding a replacement job.

3 months checking

3 months High Yielding Saving

6 months Short Term Bond Fund (DYI’s favorite Vanguard)

 

What Happened?

Flu just Disappeared?

Or Was it Simply Replaced!??  

Another Housing Bubble so Easily Seen!

 

Median Residential Property Prices

To

Median Household Income

RATIO

 Long Term Average 5 to 1

 Nationwide

Residential Housing

Is less Affordable than the Sub Prime Housing Catastrophe!  

 Fame or Shame

Dollar Cost Averaging

As with all investment methods they have their benefits and their drawbacks as well.  Dollar Cost Averaging (DCA) is no different despite what you’ve heard believers extolling its virtues.  Nonperformance is under achieving a nominal average annual return of 9.24% (or real 6.96%) since 1871.

Three elements come into play.  They are time, dividend yield and price to earnings multiple.  Longer the time you have will lift your rate of return (or lower) closer to the mean return.  Dividend yield is your investment return so important in compounding returns.  Higher the yield closer you’ll be to the mean.  Price to earning multiple (PE) is the speculative element that all depends on the animal spirits either driving returns higher or lower.

Today despite this minor dip the current (4-11-2025) dividend of the S&P 500 is 1.40% significantly below its average (since 1871) of 4.23% along with the Shiller PE at a lofty PE at 33.15!

So…That PE ratio of today is greater than the 1929 top of 27.08. Aggressive animal spirits has the appearance of normalization since this valuation metric has been above the 1929 level since 2017! Thus luring in more and more market participants into believing we have entered a new permanent high plateau.  Nothing is further from the truth as markets will regressive either back down or back up to their respective mean as the economy can only grow so fast supporting dividend growth.

Using 1929 as our comparison even though their dividend (3.67%) and Shiller PE (27.08) is far better than TODAY!  So despite this unfairness we’ll use this time period as our proxy for very possible outcomes for your money 20 years out.

Here we go!

$1,000 invested 1929 and then $2,000 per month for the next 20 years.  Here is our return for our DCA investor a nominal return of 7.68% and after inflation 3.60%.  However our ardent saver doesn’t start with 1k but instead its 10k along with the same $2,000 per month.  Results??  Nominal 7.52% and real at 3.53%.  Let’s continue starting with 100k here is the ending numbers.  Nominal 6.42% and real return 3.03%

Here is a real possibility our hard charger has his 100k at 1929 levels but says to himself. “I can back off my savings to $1,000 per month as I saved so much prior.”  Drum roll please.  Nominal 5.75% and real at 2.73%.  Please note if your 401k funds charge a 2% expense ratio then all returns is lowered by that amount.  In this case a 0.73% a real return that’s retirement on rice and beans along with helpings of ALPO dog food!

The moral of the story is to avoid investing in stocks when price to earnings are elevated way beyond their historical average.  At levels greater than 30 Shiller PE alternative investments such as bonds or even gold/silver is recommended.

Where to find Shiller PE and dividend yield click HERE.  

For past historical data click HERE