Valuation:

U.S. Stock Market and U.S. Investment Grade Corporate Bonds.

3-28-2026

S&P 500 dividend yield (VOO) is a tiny 1.09% as compared to U.S. Investment Grade Corporate Bonds (VCLT) at 5.83% or simply put (5.83 - 1.09) ÷ 1.09 x 100 = 435% (rounded) greater than S&P 500 stock index.

What has happened the S&P 500 due to share prices racing ahead faster than dividend increases for purchases today the yield has declined as compared to the last bottom March of 2009 at 3.60%.

Intrinsic Value:  Will my investment make me money if I could no longer sell to another investor?  Intrinsic is interest, dividends, rents and royalties.

Margin of Safety:  In order to not endure a loss or sub par return within a normalized time frame for us mortals we need at a minimum for the S&P 500 dividend yield to be 50% of what can be achieved with bonds.  That yield needs to be at least 2.9% that cannot be found in any index fund.  Not even for my favorite NOBL (dividend aristocrats) comes up short at 2.05%.

At 50% or greater dividend growth (5.4% average annual increase since 1871) dividend compounding without any change in price (pretending the market is closed) will over come bonds within a few years.

Today market participants believe they are investors when actually they've become SPECULATORS. 

IMO long term investment grade bonds over the next 10 years will outperform stocks. 

Please note:  This investment race could very well be won by bonds loosing less money after inflation as compared to stocks.  In the end its purchasing power for all of the things we need to buy for life's needs and along the way a few wants for the spice of life.

The Question is…Is it Time in the Market or is it Timing the Market?

 

196%

Above Trend Line!

DYI:  No matter how stock market participants slice or dice valuation metrics the U.S. market is massively overvalued!  One third of market returns comes from compounding of dividends and the remaining two thirds is from changes in the price to earnings multiple.

The Question is…Is it Time in the Market or is it Timing the Market?  If you’re a college endowment such as Harvard or Yale whose time horizon is forever, then time in the market is far more important than timing the market. 

However, for us mere mortals with only a few decades “To put it all together” then timing or to be more accurate pricing (valuations) possible future returns becomes not just important but absolutely paramount.

Dollars invested today and over the past few years will experience sub par returns or even possible losses over their respective 10 year holding time horizons.  Simply put as PE ratios regress back to the mean and very possibly go below that two thirds portion will drag down returns since the dividend yield beginnings were so low (1%).

DYI’s model portfolio has been out of U.S. stocks for many years however Vanguard’s Global Capital Cycles Fund – VGPMX (holds 25% in precious metals mining companies) over the past 5 years return has been 22.24%!  My model portfolio designed to out perform Harry Browne’s Permanent Portfolio is doing just fine despite holding a large short term bond position.

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 3/1/26

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

57% - Cash -Short Term Bond Index - VBIRX

22% -Gold- Global Capital Cycles Fund - VGPMX **

 21% -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.  

Is DYI’s model portfolio designed to out perform the S&P 500?  In one word: NO!  It is designed to capture ¾’s of its return with ½ to ¾ less downside thus able ling us mere mortals with that limited time horizon “To put it all together”  without experiencing any massive bear markets!

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.

 

Is the U.S. Stock Market

Massively

Overvalued?

DYI:  No matter what type of valuation method used the U.S. stock market is massively overvalued.  This chart from Advisor Perspectives using the average of four measuring methods (see chart above) stocks are now 176% above the mean or around 3.75 standard deviation above as well.  Clearly the upside potential is now significantly less than the downside. 

To provide an insight, if stocks dropped from here by 50% they would remain marginally overvalued!  A 65% decline would be required to solidly place stocks in the undervalued category! 

IMO stocks will once again revert from this massive overvaluation all the way to massive undervaluation.  Please note the possibility of doing this all at once is very remote.  What is more plausible is a combination of declining prices plus the erosion of return by inflation such as experienced from 1965 to 1985 with multiple rollercoaster rises and falls.      

Locked in a small room with flu sufferers — but no one caught it. Why?

Dr Sam Bailey Feb 10, 2026 The commencement of the COVID-19 story in early 2020 coincided with an international wave of mass censorship. For those of us publishing from that time we quickly found that ‘no virus‘ material resulted in demonetisation and channel strikes, if not outright platform bans. And although one of the world’s biggest media agencies tried to smear my work, for most of the COVID era our material was simply ghosted. Hence it was a surprise when mainstream and state media recently admitted to the latest human experiment in which scientists failed to transmit a single case of influenza.  Those of you who have read Virus Mania or Can You Catch A Cold? know that this is not something new as there have been dozens of failed attempts to transmit colds and flus for the past century. However, when mainstream sources cover this material we may have progress as failed transmission was never disclosed to us during our medical training. There is of course still a long way to go before the mainstream addresses the lack of evidence for viruses, pathogens and contagious “germs”. On a wider scale, how much longer the establishment can hide this daylight robbery and maintain The Healthcare System Hoax is yet to be seen. In the meantime, this video analyses the latest “scientific” excuses for the failure of the germ theory to meet even its most basic requirements.

 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??

Our primary goal is to outperform the Permanent Portfolio first.  

Outperform the stock 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

DYI Comment:  

This pop in oil prices is obviously NOT due to economic forces but from a supply constrained war.  Be as that may be, prices have now moved up so swiftly DYI's investment formula throws us out the oil business and rightfully so as downside is much greater than any potential gains.  

Oil prices are now 75% above their inflation corrected average.  DYI will NOT speculate as to how long this stranglehold will last for oil tankers within Persia and Arabia.   

Updated

Monthly

March 16, 2026

100 x (CP - AVG. AP ÷ 4) ÷ (AVG. AP x 2 - AVG. AP ÷ 2)]

 CP = Current Oil Price

AVG. OP = Average Oil Price

Answer is for bond percentage level

West Texas Intermediate Oil:  

Current Price (CP) - December 1, 2025  $96.00

Illinois Basin Crude Oil:  

Average Price (AP) - $55 (rounded) since 1946

Asset Allocation: 

0% Vanguard Energy Fund 

Symbol VGENX

100%  Vanguard Short-Term Bond Index Fund 

Symbol VBIRX

 

When the Top 20%

Reduce their Spending

Expect a Stock Market Selloff!

 Shocking!

The U.S. Dollar has NOT Collapsed!

Trading at its 50 Year Mean!

The crisis media latched on to early January 2025, when the DXY had spiked to 110, and breathlessly hyped the drop since then. All of it was used by folks to hype the “debasement trade” and the collapse of the dollar, which helped drive gold and silver higher, when in fact the dollar is in the middle of its 50-year range.  So much for the collaspe of the U.S. Dollar!

 

DYI:  As chief cook and bottle washer for this blog anticipates over the coming years ahead for the Dow to Gold Ratio to bottom out at a 1 to 1 ratio.  At this moment with the Dow around 50,000 equates gold at $50,000. 

However stocks could very well go into a bear market (which I anticipate) dropping stock prices at a minimum of 50%. This would put the price of gold at $25,000.  Buckle up we’re all in for a bumpy ride with wild swing for gold and stocks! 

 

U.S. Stocks

Remain Massively Overvalued!