Caution!

S&P 500

Dividend Yield

0.98%

Vanguard’s S&P 500 ETF (as of 9-2-2026) current yield is 0.98% a bearish signal that stocks are massively overvalued!

  

 Japan

The Bond Bear Market

Is Now International!

The two decades Sins of Financial Repression has awaken the Worldwide Bond Vigilantes!

Japan’s central bank running the printing presses to suppress interest rates to allow their officials to run massive budget deficits.  It’s all fun and games until someone gets hurt and that hurt is a falling Yen!  Prices for imported raw materials and finished goods have moved up in price significantly slowing Japanese GDP along with inflation all borne by the Japanese people.  In other words the free lunch Japanese officials thought they had for 2 decades the bill has arrived in the form of a free falling Yen.

This has killed off the Yen carry trade.

Investors would borrow in Japan at their sub atomically low interest rates and then use those monies to buy U.S. Treasuries notes and bonds along with corporate bonds plus stocks.  That game is now in the unwinding stage as investors sell seeking buyers for their assets.  This will put upward pressure on U.S. rates as this unwinding runs its course.

So far this has not affected stocks in any material fashion however Treasuries and especially long term investment grade corporate bonds have sold off making their current yield very competitive with stocks.  Vanguard’s ETF Long-Term Corporate Bond symbol VCLT current yield is 6.16% as compared to Vanguard S&P 500 index ETF symbol VOO with its tiny dividend yield at 0.98%! 

(6.16 – 0.98) ÷ 0.98 X 100 = 529% (rounded) greater yield than the S&P 500 index!  Investors – who are now actually speculators – is in the precarious position of not just expecting higher stock prices but are now demanding.  As I’ve stated before IMO bonds over the next 10 to even possibly 15 years will outperform stocks!

This is especially true for those with more than 15 years to go before retirement dollar cost average into a long term investment grade bond fund.  During growth periods rates will move upward in a saw tooth manner and during recessions rates will bottom at higher lows.

Till Next Time          

 Humble Pie

Saving

Social Security

&

Bolstering American’s Saving Rate

This Will Require Congressional Action & Signed into Law by the President

Far too many Americans are falling through the cracks going into their retirement years relying solely on Social Security.  To make matters worse Social Security’s trust fund is scheduled to run out in the 4^th quarter of 2032 if no Congressional action is taken, by law the Commissioner will be forced to lower benefits by 23% (current estimation).

In order to have major improvements and reform the political left and political right will have to be pissed off equally.  Let’s toss a coin to see who goes first.

Public Accounts:

Saving Social Security in its present form is by increasing the earnings level subject to F.I.C.A. taxation (the caps - curr. $184,500).  Social Security will remain as a pay as you go – or (PAYGO) – system, each year the Commissioner’s report will determine the increase (if any) beyond an automatic increase based on the Consumer price index.  If there is any excess dollars they will be invested into existing marketable treasury securities by the Chief Financial Officer for Social Security.   This will allow at current benefit structure (kick the can down the road), estimated to the year 2055 at that time either an increase in the existing tax and/or a tax on dividends.

Private Accounts:

Way too many Americans have fallen through the cracks for retirement savings, so much so, it has become one of the larger problems acerbating our income and wealth inequality between race, gender, and age groups.

Add on mandated private accounts with 6% contributing by the employer and 9% by the employee.  The working poor will receive from income taxes a 3% add on boosting their savings rate to 18%.  

These monies will be invested separately with only one investment option.  That is the Permanent Portfolio concept pioneered by the late Harry Browne. The reason for this method is it’s very low downside risk despite a historical average annual return in the 7% range.

Mandated by law managing costs for these accounts will have an expense ratio no higher than 0.25%.  The maximum going into the accounts is capped at $50,000 per year and then automatically raised each year based on the previous year consumer price index.

25% in worldwide investment grade stocks.

25% in worldwide investment grade long term bonds (Government and corporate).

25% in worldwide investment grade bills and notes. (Government and corporate)

25% in gold

Monies going in will automatically split four ways equally to be invested and will only be rebalanced if one of the asset categories is 35% or greater.

Accounts are not subject to taxation until retirement; monies cannot be borrowed out early nor sold before retirement.  The only option for early retirement withdraw is due to total disability (stated by 2 physicians).  

Retirement withdraws may begin at age 62 and required minimum withdraw at age 71.  Two options will be presented for withdraw.  A percentage withdraw rate (changeable at anytime by the participant) from 1% to 8% calculated on an annual basis and then paid out monthly (minus taxes withheld).

The second option is the purchase (after taxes withheld) into a government sponsored non profit annuity.  With either option any monies remaining upon death of the participant will go to the individual(s) named in the plan documents.

Voluntary retirement option:

Super Roth IRA using after tax dollars to shelter earnings from taxation yearly deposits up to $50,000 per year automatically increased each year calculated by the consumer price index.  All other plans would be frozen (no further deposits) or converted into Super Roth IRA’s.    

Little less gold and a little more Cash; Bonds and Stocks remain the same.

 

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 9/1/26

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

44% - Cash -Short Term Bond Index - VBIRX

32% -Gold- Global Capital Cycles Fund - VGPMX **

 24% -Lt. Bonds- Long Term Bond Index - VBLAX

 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  .........42.04
Bond Rate....5.76%

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: 0.45(rounded)

As of  9-1-2026
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

9-1-2026
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.....42.04

Avg. PE10...........17.40

Core Bond Allocation:  144% 

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

Current Asset: 

Vanguard Short-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:  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 Short 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 20%  Equity Income Fund

19% to 0%  Vanguard Small-Cap Value Index 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

 

Year

2020

Bond Bear Market Begins!

DYI:  Given that Congress will not address the deficit, doesn’t even care about the deficit, and if anything, keeps talking about making the deficit worse through additional spending (the war in Iran) and additional tax cuts, along with the Fed’s digital money printing, well then, higher inflation and higher nominal economic growth may be the only solution in sight for Bessent and Warsh.

Bond vigilantes

The bond market, however, is not enamored with these policies. Bond prices continue to sell off thus pushes rates up higher in a saw tooth manner.  Expect during periods of economic growth eventual higher highs interest rates and during recessions higher lows! 

Be as that may be, these higher rates are giving the stock market competition especially the S&P 500 (1.00%) or Total Market index funds (1.03%) where their respective dividend yields are sub atomically low.  These buyers believe they are investors when in fact are now speculators not just expecting higher prices but outright demanding.  The market measured by the S&P 500 Shiller PE is at nose bleed level of 42.17 very close to the all time high of 44.19 set back in the year 2000 a quick glance at a stock chart back then and you’ll see what you’re in for!  

IMO bonds over the next 10 and very possibly 15 years will outperform stocks.  Simply put most long term investment grade corporate bond funds yield is around 5.75% the compounding effect (especially for those who are dollar cost averaging such as a 401k) will overwhelm the dismal 1.00% (or lower depends on the funds expense ratio) dividend yield for stocks.

Also IMO stocks are being set for one hell of a multi-year decline sweeping away years of returns for the stock purchaser as equities revert back and over shoot their long term mean.  Buying bonds – along with a bit of gold and silver (see model portfolio) – will help keep your money intact waiting for much lower stock market valuation putting the individual back in the driver seat as an investor as opposed to today’s speculator. 

Till Next Time        

 

Social Security

Or

Social Insecurity?

What type of economic system is Social Security?

For those who admire the Social Security system as it is funded today is a socialist policy.  It is mandated participation backed by the rule of law for redistribution of monies from one group (current workers) to current retirees.  It is what it is – what it is not, especially those who put this program on a pedestal, a program brought down from Mount Sinai by Moses himself proclaiming God’s 11 commandments (number 11 is Social Security).

A National Socialist retirement program is mandated participation backed by the rule of law into individual investment accounts.  This would serve the state in attaining significant increase in savings along with a secondary effect of increased investment.

A libertarian - a major freedom issue - would have neither program thus ending mandated taxes allowing the individual to devise and fund their own retirement.           

Social Securities Birthrate Problem:

The social economic change that advocates refuse to address for maintaining Social Security in its present form as a generational monetary transfer program is the declining birthrate below replacement.  As long as the U.S. birthrate (currently 1.6 to 1.7) remains below replacement overtime there will be less future tax-payers for Social Security requiring higher taxes in one form or another to maintain current level of transfer payments. 

The cap on income (currently $184,500) can be raised significantly (or outright repealed) along with surtaxes on dividends and capital gains extending Social Security for another 30 to 40 years.  The Boomer generation will have aged out along with a portion of Gen X’ers,  However, the Millennials’ and early Gen Z’s will be right back in the same boat as todays Boomer’s with Social Security needing ever higher level of taxation to maintain the system.

The Solution:

Add on private investment based accounts similar to 401k’s with strict cost controls (expense ratio less than 0.15%) maintained by the rule of law disallowing Wall Street using these accounts as a cash generating machine.  There will be no early withdraw (unless totally disabled) and no borrowing against the account, only used for retirement with a 4% withdraw rate or purchasing an annuity.  Any remaining value upon the death of the owner will go to the beneficiary as stated in the plan documents.  All accounts will be set up along the lines of Harry Browne’s Permanent Portfolio.  25% worldwide stocks – 25% worldwide long term bonds – 25% in worldwide bills and notes – 20% gold and 5% in silver.  Account is rebalanced on the anniversary date of inception.  An 18% levy (deposit) creating enough savings to effectively out compete Social Security in any poor return environment.

The reason for the Permanent Portfolio method is its very low downside risk while historically having near the same return as a 50% bond – 50% stock portfolio.  This significantly reduces the risk of major drawdowns when an individual nears retirement.     

 

CBO: Without immigration, U.S. population will shrink starting in 2031

National Restaurant Association 

In that analysis, we cited projections from the Congressional Budget Office (CBO) released in January, which forecasted that deaths would begin to outpace births by 2031, meaning immigration would become the sole driver of population growth from that point forward. 

From a policy standpoint, these demographic trends will place increasing pressure on public finances. Rising costs for healthcare and entitlement programs will coincide with a shrinking base of working-age taxpayers, creating long-term fiscal challenges that could complicate budgetary planning and sustainability.

DYI:  My stance for legal immigration (for the record I’m against illegal immigration) is akin to a college coach recruiting the top players for his/her team.  As a nation – Team America – recruit young men and women from 25 to 35 years of age to immigrate to the good old U.S. of A. 

Skilled workers where there is a shortage exampled by doctors, nurses, engineers of all types, plumbers, HVAC, electricians, elevator repair etc. 

People who can and will hit the ground running immediately working, saving and investing plus that all important tax paying.  Since this is being accomplished by government sponsored recruiters the numbers immigrating per year and by skill will be set by national goals.  Along with background checks to keep out anyone who has a criminal past.

Till Next Time        

 

The

Frugal Lifestyle

Financial Mitigation of Risk  

A Future of Sanity & Wealth

ZERO DEBT:

**Owe no man or institution anything. 

Easy credit equals over consumption along with paying interest.  Don’t believe this is true then why are there multiple self storage facilities near you?

**If you cannot afford to pay cash, you cannot afford to buy. 

This keeps spur of the moment purchases at bay whether large or small.

BUY INTELLIGENTLY:

**Give every dollar a job before it leaves your hand. 

In other words – budgeting – with today’s technology (example: Ramsey’s Every Dollar App.) making this effort so much easier.

**Buy real estate during economic downturns.

Buy only when the Price to Yearly comparable Rent is less than 10 to 1.  When the economy recovers you’ll have a gain in house value not leaving you under water if you have to sell. 

Pay cash.  If not; significant down payment 30% to 50% using a fixed 15 year mortgage and possible 10 year fixed mortgage if the down payment is large enough.    

**Buy it used when ever possible. 

This is especially true for cars or trucks; it is well known for fast depreciation buying in the 5 to 7 year old category is the sweet spot.  Drive the vehicle until the wheels fall off then have it fixed (if possible) before you replace it. 

Clothing especially for children of young age going to thrift shops is a God Send for savings. Use it up, wear it out, make it do, or go without; waste nothing!

Shop thrift stores, estate sales, retirees downsizing for furniture many time you can buy very high quality items at substantial discount as compared to new.  

**Fill the pantry when prices are cheap.

This is especially true for dry goods when you catch the 2 for 1 sale.  Or long lasting can foods and buy a deep freeze purchasing meats and vegetables on sale.  

**Buy quality once and keep it forever.

Buy cheap and you’ll end up buying multiple times over.  Buy when bargains are available for high quality items and then keep it for as long as possible.

**Buy Christmas presents in January.

The sales come out after Christmas.  Have your list ready (and a place to hid those gifts till next Christmas) and buy the bargains.

SAVINGS and INVESTING:

**Emergency Fund:

The old adage of 3 to 6 months no longer applies in today’s world of change.  A one year worth of expenses is required.  It is difficult but nor is it impossible if you’re debt free and maintain a frugal lifestyle.  Cover the estimated costs for the core basics; food, shelter, utilities, and transportation. 

**Keep your emergency fund for actual emergencies. 

Know the difference between an actual emergency compared to an emotional desire of the moment.  Enough said!

**Pay yourself first.

With computerization setting up automatic savings and investing has never been easier than today!

**Live on one income.

This is possible despite all of the social media telling you how impossible it is today.  No doubt you must be motivated (if you came to this blog I assume you are) using the frugal lifestyle, if possible live on the spouse with lower income save and invest the higher.

**The two rules of investing.

Rule of number one: Don’t lose money.

Rule number two: Don’t forget rule number one.

Understand and apply valuations to the investment process thus significantly reducing long term sub par returns or losses.    

Disclaimer

 

INFLATION

When the difference in inflation between countries is large enough markets will reward the low inflation country and punish the high inflation country with changes in currency exchange! 

DYI:  Since 2020 the U.S. has experienced – we all know so well – massive inflation!  The difference between Swiss cumulative inflation since 2019 is a mere 7% as compared to the U.S. 23%!  As the months turned into years institutions and individuals holding dollars shifted a portion of their dollar asset into Swiss Francs thus increasing the Swiss Franc compared to the U.S. dollar.

As long as the U.S. Federal government continues its drunken spending – by both political parties – assume continued inflation far greater than the somber Swiss.  Over time the dollar will sink and the Franc will increase in a saw tooth manner upwards.  Also expect the Swiss to fight the rise of the Franc against the dollar for fear of pissing off U.S. officials.  All the Swiss will be able to do is slow the Franc’s increase not wanting to jeopardize their well earned reputation for ultra low inflation.

Look into the Permanent Portfolio Fund PRPFX.

•   Gold - 20%
•   Silver - 5%
•   Swiss Franc Assets - 10%
•   Real Estate 
•        Natural Resource Stocks - 15%
•   Aggressive Growth Stocks - 15%
•   Dollar Assets - 35%
• 
  

Disclaimer

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.

Starting Early V.S. Starting Late: How much Money is in your Purse!??

 

Successful

Retirement

1 Million Dollar Goal

8% Return Compounded Quarterly

Minus estimated inflation at 4%

Age 20 to 65.

45 years…$665.02 monthly or invest $166,783.36 today. 

Age 25 to 65

40 years…$848.86 monthly or invest $203,507.39 today.

Age 30 to 65

35 years… $1,093.88 monthly or invest $248,317.70 today.

Age 35 to 65

30 years…$1,439.45 monthly or invest $302,994.78 today.

Age 40 to 65

25 years…$1,948.77 monthly or invest $369,711.21 today.

Age 45 to 65

20 years…$2,712.49 monthly or invest $451,117.94 today.

Age 50 to 65

15 years…$4,054.48 monthly or invest $550,449.62 today.

Age 55 to 65

10 years…$6,773.43 monthly or invest $671,653.14 today.

Age 60 to 65

5 years… $15,088.26 monthly or invest $819,544.47 today.