Treasury Bonds

Slated to Outperform

U.S. Stocks?

YES!

John P. Hussman, Ph.D.

President, Hussman Investment Trust

January 2025

Realize that a shortfall of -11.0% versus bonds seems preposterous and implausible, though I haven’t been a stranger to seemingly preposterous and implausible estimates at the extremes of previous market cycles over the past 40 years. 

If one wishes to make the implications more tolerable, one can narrow the gap by several percent with heroic but not altogether impossible assumptions about profit margins and growth rates. Unfortunately, my impression is that one has to dispense with history altogether to garner more comfort than that.

On December 6, the S&P 500 set the most extreme level of valuations on record, exceeding both the 1929 and 2000 market peaks on measures that we find best-correlated with actual, subsequent 10-12 year S&P 500 total returns across a century of market cycles.

An Economic and Financial Truth Elegantly Stated in One Simple Paragraph!

High Interest Rates Are Healthy, Low Rates Are Poison The status quo has it backwards: low rates are now essential to prop up the wreckage left from previous doses of default and cascading losses. Charles Hugh Smith Jan 6

The economy prospers when marginal borrowers doomed to default are excluded and risky ventures doomed to fail are tabled.

Low interest rates and loose credit inject default and catastrophic losses into the system, and as these defaults and losses ripple through the tightly bound financial system, they trigger other defaults and losses, forcing financial authorities to reward the losers with bailouts: the profits skimmed from risky lending and investments are private, but the losses fall on the taxpayers and the public.

 

Official CDC confession: we have ZERO scientific evidence of rhinovirus or parainfluenza virus.. or contagion.. or "viral genomes"

Christine Massey FOIs Jan 7, 2025

Greetings and Best Wishes,

On April 13, 2024 I filed a FOIA order (#24-00977-FOIA, pg 1/2) with the U.S. Centers for Disease Control and Prevention (CDC) and the Agency for Toxic Substances and Disease Registry (ATSDR) for:

all studies/reports in the possession, custody or control of either institution, authored by anyone, anywhere, ever:

1.) that scientifically prove or provide evidence of the existence of any alleged rhinovirus or parainfluenza virus

(showing that the alleged particles exist and cause the illness/symptoms that they are alleged to cause; note that I made it easy for them by not even requiring evidence that the purported particles hijack cells and replicate as claimed).

2.) (if they have no records for #1), records that at least describe the purification of particles that are alleged to be said viruses, directly from bodily fluid/tissue/excrement of “hosts”, with purification confirmed via EM imaging.

3.) that describe the purported genome of any of these alleged viruses being found intact (as opposed to fabricated in silico aka made-up/modelled on a computer).

4.) that scientifically demonstrate contagion of any illness / symptoms allegedly caused by either alleged virus.

As usual, I asked that if any records match the above descriptions and are currently available to the public elsewhere, I be provided enough information about each record so that I may identify and access it (titles, authors, etc.).

October 30, 2024:
Roger Andoh acting as FOIA Officer in the Office of the Chief Operating Officer confessed (pg 8/9) that:

Personnel from the National Center for Immunization and Respiratory Diseases conducted searches of correspondence and shared drives for materials responsive to your request. A search of our records failed to reveal any documents pertaining to your request.

(Note: this information has been sent to ~200 people who work for “the state”, lamestream media, etc. at Canada, Isle of Man, England and the U.S., so that they cannot claim later that they did not know. It will also be sent to people who act in the Canadian “justice” system… that has falsely prosecuted people in relation to “germs”.)

Thank You Christine

DYI

 

Benjamin Graham

Timeless Sage Advice

 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

Stock Market Rockets Ahead!

When will the Bear Roar?

DYI: The S&P 500 is danger close to crash alert territory the NASDAQ is and has been for many months on top of the mountain, both markets will underperform stogy old high quality long term corporate bonds.  Not just an opinion.  Not reading tarot cards or tea leaves; it is SIMPLE ARITHMETIC!  Bonds yields are significantly higher than earnings yield for stocks. 

Competition between earnings power (yield) for stocks and current yields for long term bonds continues with stocks and bonds further widening the gap.  Shiller PE for the S&P 500 38.54 and the NDAQ (NASDAQ) Shiller PE Ratio: 47.10 (As of Feb. 04, 2025)!  Long term investment grade bonds current yield 5.41%.

DYI’s Ben Graham Corner let’s do the simple arithmetic and see how far along these two markets for RISK!

S&P 500 here we go…1 ÷ 38.54 x 100 x 1.1 ÷ 5.41 = 0.53 (rounded). 

NASDAQ:  1 ÷ 47.10 x 100 x 1.1 ÷ 5.41 = 0.43 (rounded)

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 S&P 500

0.50 Or less:  Stock Market Crash Alert! NASDAQ

Purchase 30 year Treasury Bonds!

 Medical

Industrial Complex

Ineffective Tests!

New Blood Test for Early Detection of Colorectal Cancer Pam Popper, President Wellness Forum Health In July 2024 the FDA approved a blood test called Shield, which is reported to detect colorectal cancers when they are early-stage and curable. Guardant is the manufacturer, and the target market is people aged 45 and older who are at average risk of developing colorectal cancer. The test "works" by detecting fragments of DNA shed from polyps that can turn cancerous. Among the reasons for excitement about this test is that it is more difficult to convince people to agree to colonoscopy or fecal sample testing, and much easier to get them to consent to a blood test. The first problem is the rationale behind development of the test is false. So-called experts continue to state that regular screening can prevent as much as 73% of colorectal cancer deaths. This is not true. The first randomized trial that examined colonoscopy as a means for preventing colorectal cancer, CRC death and all-cause mortality was published in October 2022, long after colonoscopy had become the so-called "gold standard" for early detection of colorectal cancer.   The study showed that there was no benefit from colonoscopy when used as a population screening tool.[1] Colonoscopy was not effective for preventing colorectal cancer, death from colorectal cancer, or reducing all-cause mortality. The polyp snipping that often takes place during colonoscopy does not reduce risk. The only strategy that works for lowering the risk of colon cancer is to stop growing polyps. This means that the only justification for enthusiasm for this blood test is that it will be easier to convince people to do it than to convince them to use other screening tools.  It might, but the question about this test is the same as for all cancer screening tests: will this reduce the risk of cancer or death from cancer?  The answer is a resounding "no." In a study published in March, Guardant reported that Shield detected 87% of cancers that were early stage and curable.  The false positive rate was 10%.  The false positive rate should not be discounted – the research is clear that it leads to considerable psychological stress, additional expense to confirm results, overtreatment, and being driven further into the medical mill.[2] Much more disturbing is the efficacy rate for detecting large polyps that can become cancerous and kill patients:  Guardant only found 13% of these.[3] An FDA advisory committee recommended approval on May 23, but noted that the test’s inability to prevent cancer is a significant limitation. The committee stated that the primary reason that approval was recommended is that the test might prompt people who avoid screening for CRC to do it.[4] On July 29 the FDA approved it. To be clear, the FDA has been approving almost everything submitted for some time now, so FDA approval is not a signal for safety or efficacy. In view of this, it’s important to review a few facts that consumers should know about population colorectal cancer screening programs.  At this time, there are no early detection screening tests that reduce the risk of colorectal cancer, or death from colorectal cancer. The primary cause of colorectal cancer is well-known – a diet high in animal foods, refined foods, and fat.[5] [6] [7] [8]  Sulfur-containing amino acids are concentrated in animal foods, which irritate the mucosal lining of the colon, leading to polyps.[9] Diets high in fat and protein and containing copious amounts of animal food often cause constipation, a risk factor for colon cancer.[10] This was reported in many studies that looked at the Atkins diet, which was high in animal foods and fat.[11] The beneficial bacteria in your gut thrive on fiber (found only in plant foods),[12] and most people do not eat enough of it. Pathogenic bacteria thrive on protein, fat, and refined sugar.[13] [14] Adopting a high-fiber plant-based (but not necessarily vegan) diet cleans out the colon, nourishes the good critters and stops the irritation and growth of polyps.[15] I’m often asked what people who don’t or won’t eat the right diet should do: would these people benefit from colonoscopy? Or other screening tests?  Most of the people who are showing up for colonoscopy today are not eating optimal diets and population screening has not reduced the death rate for any cancer – except for cervical cancer.  There is no shortcut for people who will not maintain their bodies properly – or their houses or cars, for that matter. It’s a sad state of affairs, and a commentary on our priorities that many of the people who have let their bodies fall into disrepair take very good care of their houses and cars and would not think of neglecting either. What should you do if you have a family history of CRC, or have already had polyps snipped out due to a previous colonoscopy? First, you can stop growing polyps by changing your diet. If you feel compelled to have some type of screening, the better option is flexible sigmoidoscopy, which was the gold standard before colonoscopy became the standard with no data to justify it. It’s much less invasive and less risky. But I’ll stand by my recommendation to change your diet as the most important strategy for avoiding ALL types of cancer. [1] Bretthauer M, Loberg M, Wieszcry P et al. "Effect of Colonoscopy Screening on Risks of Colorectal Cancer and Related Death." NEJM2022;387:1547-1556 [2] Broderson J, Siersma D. "Long-Term Psychosocial Consequences of False-Positive Screening Mammography." Ann Fam Med 2013 Mar;11(2):106-115 [3] Chung DC, Gray DM, Singh H et al.  "A Cell-free DNA Blood-Based Test for Colorectal Cancer Screening." NEJM 2024 Mar;390:973-983 [4] Gina Kolata. FDA Panel Endorses Safety of Colon-Cancer Blood Test. New York Times May 23 2024 [5] Burkitt D.  "Epidemiology of cancer of the colon and rectum." Cancer. 1971 Jul;28(1):3-13. [6] O’Keefe S, Kidd M, Espitalier-Noel G, Owira P. "Rarity of colon cancer in Africans is associated with low animal product consumption, not fiber."  Am J Gastroenterol 1999 May;94(5):1373-1380 [7] Giovannucci E. "Modifiable risk factors for colon cancer." Gastroenterol Clin North Am. 2002;31:925–943. [8] Shike M. "Diet and lifestyle in the prevention of colorectal cancer: an overview." Am J Med 1999 Jan 25;106(1A):11S-15S [9] Tuan J, Chen Y. "Dietary and Lifestyle Factors Associated with Colorectal Cancer Risk and Interactions with Microbiota: Fiber, Red or Processed Meat and Alcoholic Drinks." Gastrointest Tumors 2016;3:17-24 [10] Neil Osterwell "Chronic Constipation a Warning Sign for GI Disorders." Medscape Medical News October 26, 2015 http://www.medscape.com/viewarticle/853239?src=wnl_edit_medn_wir&uac=5312MY&spon=34&impID=872609&faf=1 [11] Astrup A, Larsen TM, Harper A. "Atkins and other low-carb diets; hoax or effective tool for weight loss?" Lancet 2004 Sep;364(9437):897-899 [12] De Fillipo C, Cavalieri D, Di Paola M et al. "Impact of diet in shaping gut microbiota revealed by a comparative study in children from Europe and rural Africa." PNAS 2010 Aug;107(33):14691-14696 [13] David LA, Maurice CF, Carmody RN et al. "Diet rapidly and reproducibly alters the human gut microbiome." Nature 2014 Jan 23;505(7484):559-63 [14] Turnbaugh PJ, Ridaura VK, Faith JJ, Rey FE, Knight R, Gordon JI. "The effect of diet on the human gut microbiome: a metagenomic analysis in humanized gnotobiotic mice." Sci Transl Med 2009 Nov:1(6):6ra14 [15] David LA, Maurice CF, Carmody RN et al. "Diet rapidly and reproducibly alters the human gut microbiome." Nature 2014 Jan 23;505(7484):559-63

 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) - see chart below.

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??

Our 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! 

 

Here we go again!

The office-debt meltdown keeps getting worse. The motto in 2024 was “Survive till 2025” via extend-and-pretend. But now what?

By Wolf Richter for WOLF STREET.

The delinquency rate of office mortgages that have been securitized into commercial mortgage-backed securities (CMBS) spiked to 11.0% in December, a new all-time high, surpassing even the debt-meltdown during the Financial Crisis, when office CMBS delinquency rates peaked at 10.7%, according to data by Trepp today, which tracks and analyzes CMBS.

 

Trade Deficit in Goods Worsens to All-Time Worst in 2024, Small Surplus in Services Rises, Overall Trade Deficit Worsens by 17%

by Wolf Richter • Feb 5, 2025

Three decades of connivance by the US government – which bridged with ease any political divide – and Corporate America, under the failed doctrine of globalization, have destroyed much of the manufacturing base so that corporate profit margins could fatten by chasing cheap labor, lax environmental laws, and preferential treatments in US and foreign tax codes.

In return, they sacrificed the most important economic sector – manufacturing – with its huge primary, secondary, and tertiary impact on employment, on household incomes, on federal, state, and local tax receipts, on knowhow in automation and manufacturing technology, on engineering and engineering education, and on infrastructure. In the process, they shifted much of this activity and expertise to other countries.

The US is still the second largest manufacturing country by output in the world, with a share of 15.9% of global manufacturing output, and larger than the next three combined – Japan 6.5%, Germany 4.8%, and India 2.9%. But China’s manufacturing output is nearly twice that of the US, with a share of 31.6% of global output (World Bank data).

Meanwhile, the globalization-mongers hate tariffs because they’re a tax on the gross profit margins of the importers among Corporate America and hit stocks because passing that cost on to consumers in a competitive market isn’t easily possible. I watched it last time, amazed by the lack of inflation.

DYI:  I’m suspicious of both political parties however I do agree with the tariffs.  They simply don’t go far enough, what is needed IMO, is an across the board 25% tariff on any goods or services coming into the country.  This would have to be as the expression goes “no ifs, ands or buts” mentality.  Then pass investment led spending and most importantly tax incentive for a manufacturing renewal.  The rallying cry would be build baby build alongside drill baby drill!   

 Stock

Valuations

Driven to the Moon!

S&P 500

Shiller PE 38.07

Dividend Yield 1.24

Estimated 10 yr. return

NEGATIVE 1.93%! 

American Empire’s

Economic War

Against

Russia

 &

European Union

European Energy Crisis Worsens as Ukraine Severs Key Natural Gas Route to the European Union

The clear winner of sabotage is the U.S. as it becomes the key supplier of natural gas and LNG to Europe and Ukraine

Lena Petrova

Dec 29, 2024

The decision not to extend the contract is clearly against the best interest of Ukraine. At the same time, it serves the United States and its ambitions to sell more of its energy resources to the EU, therefore making Europeans even more dependent and ultimately subservient to its interests. Ukraine stands to lose fees equivalent to about 0.5 percent of its GDP from ending the transit contract and - perhaps even more importantly - the decision of Zelensky’s government undermines Ukraine’s strategic role as an energy partner for Europe.

DYI COMMENT:  There will be no oil and gas partnership between Russia and the countries making up the European Union (EU).  Simply put the U.S. will NOT ALLOW any regional hegemon from developing as Russia provided inexpensive gas and petrol products to Central Europe with Germany supplying technical assistance/investment to revitalize Russia's ageing manufacturing center.  If allowed to be completed a shared regional power between Moscow, Berlin and Paris would have evolved with a combined economy and population base greater than the U.S.