Gold Allocation Increased Slightly! Stocks Remain Insane and Lt.Bond Remain Near their Mean.

 Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 5/1/26

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

48% - Cash -Short Term Bond Index - VBIRX

28% -Gold- Global Capital Cycles Fund - VGPMX **

 24% -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  .........40.94
Bond Rate....5.44%

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: 0.49(rounded)

As of  5-1-2026
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

5-1-2026
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.....40.94

Avg. PE10...........17.36

Core Bond Allocation:  141% 

% 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 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 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

 

 

DYI:  IMO – as chief cook and bottle washer for this blog – this stock market powered by a debt bubble so huge when it pops returns could very well be in the range of the aftermath of 1929!  Total return from that era lasting from 1929 to 1949 inflation corrected total return (dividends reinvested) was 0.2%! (See chart below).

Boomer’s and early Generational X’ers (early retired) maintaining a 100% stock portfolio – if I’m correct – will experience a massive decline in standard of living as stocks after this bubble bursts will continue their massive underperformance!  

Individuals and families just starting out who have been investing since 2018 in an all stock portfolio is buying into a massive overvalued market.  Returns going forward will be either sub par (returns below inflation) or outright negative over a very possible 2 decade long roller coaster type decline. (See chart above).

If this comes to pass Boomer's, Gen X'es, Millennial's, even a portion of Gen Z's will end up having a total disdain for common stock buying seen as nothing less than a gambler's fate!  Setting up the stock market at that time with massive undervalued bargains galore for the next generations yet to be named who will end up with superior returns going forward!

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.  

 

Bubble

News!

Portions taken from Market Minute: 

The current valuation spike fits into a broader trend of "index concentration" that has been building for over a decade. The fact that the Q Ratio or Shiller PE has only been this high once before—during the 1999-2000 period—is a haunting precedent. During the Dot-com crash, the subsequent "normalization" resulted in a nearly 50% drop in the S&P 500 and a "lost decade" for equity returns. While the companies of 2026 are arguably more profitable and have stronger balance sheets than the "pets.com" era, the mathematical reality of high starting valuations remains: 

High entry prices almost always correlate with lower 10-year forward returns.

This event also highlights a growing rift in regulatory and policy implications. With the market so highly valued, the Federal Reserve finds itself in a difficult position. Any hawkish tilt to combat lingering inflation could trigger a valuation collapse, while a dovish stance might further fuel an unsustainable bubble. 

Historical comparisons to 1929 are frequently cited by bears, noting that while the economic "pipes" are different today, investor psychology and the mechanics of margin and leverage remain remarkably similar.

Furthermore, the ripple effects on global markets are profound. As the U.S. market reaches these "once-in-a-century" levels, capital is beginning to flow toward international markets that offer more reasonable valuations. European and emerging market indices are currently trading at a significant discount to the Shiller PE of the S&P 500, suggesting a potential multi-year shift in global asset allocation if the U.S. enters a period of stagnation or correction.

The ascent of the Shiller PE ratio to 40.58 is a historic milestone that signals extreme caution. For only the second time since the 1870s, the U.S. stock market is priced at a level that has historically preceded periods of poor returns and significant volatility. 

The key takeaway for investors is that the "easy money" of the AI-led rally has likely been made, and the market is now entering a phase where risk management is paramount.

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

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

DYI's Model Portfolio

 Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 4/1/26

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

51% - Cash -Short Term Bond Index - VBIRX

25% -Gold- Global Capital Cycles Fund - VGPMX **

 24% -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.

 

Long Term

Bond Yields

Out Competing Stocks?

The 30-year Treasury yield is now yielding 4.90%. Its been within spitting distance of 5% since mid-March.

Treasury yields are still relatively low in a historical context. It’s just the years of QE and interest-rate repression by the Fed have distorted everything. And now there’s inflation, quite a bit of it, well above the Fed’s target, and once again accelerating. So for the Fed buying long-term Treasury securities to push down long-term yields is off the table.

DYI:  Treasury borrowings as far as the eye can see all fueled by Congress and Presidents (no matter the political party) nonstop spending.  That’s the real core driver of inflation forcing the Federal Reserve to monetize an ever growing portion of debt not covered by taxation.  High oil prices (supply and demand imbalance) just simply acerbates the increased cost of living, acting as a tax upon the American public. 

As we go through growth and recessions expect higher highs for all types of debt – public or private – during growing economic times and most importantly higher lows during recessions.  Until Congress and President(s) find the new found religion and put action into reducing budget deficits’ we’ll continue to endure higher interest rates similar to the Great Bond Bear Market of 1946 to 1981.

Higher long term rates have already begun their pushing down of PE multiples as measured by the S&P 500 index.  The Shiller PE maxed out in January of 2026 at 40.58 and now has begun its roller coaster downward journey. 

Simply put long term bonds and especially long term investment grade corporate bonds due to their decline (higher yield) are becoming more attractive than stocks. 

Vanguard’s Long-Term Corporate Bond ETF (symbol VCLT) current yield (as of 4-23-2026) is 5.79% as compared to the S&P 500 index (symbol VOO) yield at 1.16%!  Broader the spread between yields, the more tempting for long term investors (institutional or individuals) to begin shifting a portion of their new dollars into Lt. Term Corporates.

DYI  

 

More

Medical Gas Lighting

From the Fake Main Stream Press!

One of humanity’s oldest and deadliest killers is staging a modern-day comeback.

The so-called “white plague” reclaimed its title as the world’s deadliest infectious disease in 2023 after being briefly overtaken by COVID-19 during the first three years of the pandemic.

And the US isn’t immune. While the country still has one of the lowest rates globally, cases have been climbing steadily since 2020 — reversing three decades of decline.

And on and on and on...Non stop medical gas lighting from the New York Post.  If doctors continue to stay quiet when obvious medical gas lighting is going on the trust between doctors and patients will slide further and further.  

Doctors are being seen (and rightfully so) as advocates for Big Pharma instead of their patients.

DYI        

 Expected Net Worth

Are you on track to be a Balance Sheet Accumulator of Wealth?  To determine if you are, here are three simple levels Gold, Silver, or Bronze based upon your age and income.

Simply use our multiplier based upon your age times your three years average income.

These dollar amounts do NOT include housing values.

Example:  $50,000 average income and 40 years of age the Bronze level is 10% (.10) x 40 x $50,000 = $200,000 

Bronze Level [10%(.10) x Age] x Avg. Income = Expected Net Worth.

Silver Level   [20%(.20) x Age] x  Avg. Income = Expected Net Worth.

Gold Level     [30%(.30) x Age] x Avg. Income = Expected Net Worth.

Using our example of a 40 year old with an average income of $50,000 if he or she equals or exceeds $200,000 you would be comfortable in relationship to your income.  At the Silver Level this would equate to being Affluent $400,000 and the Gold Wealthy $600,000.

At the Bronze Level you will be comfortable plus Social Security in your old age.  You are on track to be way ahead of the average saver (which is almost saving nothing).

At the Silver Level Social Security is simply an add on to your income during your old age.  At this level your wealth is enough to displace the need for Social Security.

At the Gold Level early retirement (if you so desire) possibly in your early to mid 50's, this would depend upon your average level of income. 

The age old adage is so true; live below your means save and most importantly invest the difference. Stay away from personal debt, purchase a house at or less than 2.0 times your income (or the equivalent in monthly rent) purchase modest used car(s) for cash and you are on your way to financial freedom.

DYI

U.S. Stock Market Now in Crash Alert Range! MASSIVE OVERVALUATION!

 

POP

Goes the Market!

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  .........40.44
Bond Rate...5.40%

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: 0.50(rounded)

As of  4-18-2026
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

 

The Late Dick Russell

(1924 to 2015)

Rich Man, Poor Man

In the investment world the wealthy investor has one major advantage over the little guy, the stock market amateur and the neophyte trader.  The advantage that the wealthy investor enjoys is that HE DOESN'T NEED THE MARKETS.  I can't begin to tell you what a difference that makes, both in one's mental attitude and in the way one actually handles one's money.

The wealthy investor doesn't need the markets, because he already has all the income he needs.  He has money coming in via bonds, T-bills, money market funds, stocks and real estate.  In other words, the wealthy investor never feels pressured to "make money" in the market.

The wealthy investor is an expert on values.  When bonds are cheap and bond yields are irresistibly high, he buys bonds.  When stocks are on the bargain table and stock yields are attractive, he buys stocks. When real estate is a great value, he buys real estate. When great art or fine jewelry or gold is on the "give away" table, he buys art or diamonds or gold.

In other words, the wealthy investor puts his money where the great values are. And if no outstanding values are available; the wealthy investor waits.  He can afford to wait. He has money coming in daily, weekly, monthly.  The wealthy investor knows what he is looking for, and he doesn't mind waiting months or even years for his next investment (they call that patience).

What about the little guy?  This fellow always feels pressured to "make money." And in return he's always pressuring the market to "do something" for him.  But sadly, the market isn't interested.

When the little guy isn't buying stocks offering 1% or 2% yields, he's off to Las Vegas or Atlantic City trying to beat the house at roulette.  Or he's spending 20 bucks a week on lottery tickets, or he's "investing" in some crackpot scheme that his neighbor told him about (in strictest confidence, of course).

And because the little guy is trying to force the market to do something for him, he's a guaranteed loser.  The little guy doesn't understand values so he constantly overpays.  He doesn't comprehend the power of compounding; he doesn't understand money.  He's never heard the adage, "He who understands interest -- earns it.  He who doesn't understand interest – pays it." The little guy is the typical American, and he's deeply in debt.

The little guy is in hock up to his ears. As a result, he's always sweating.  Sweating to make payments on his house, refrigerator, car or lawn mower he's impatient, and he feels perpetually put upon.  He tells himself that he has to make money -- fast. And he dreams of those "big, juicy mega-bucks." In the end, the little guy wastes his money in the market, or he loses his money gambling, or he dribbles it away on senseless schemes.  In short, this "money-nerd" spends his life dashing up the financial down-escalator.

But here's the ironic part of it.  If, from the beginning, the little guy had adopted a strict policy of never spending more than he made, if he had taken his extra savings and compounded it in intelligent, income-producing securities, then in due time he'd have money coming in daily, weekly, monthly, just like the rich man. The little guy would have become a financial winner, instead of a pathetic loser. Because the little guy is trying to force the market to do something for him, he's a guaranteed loser."

Rule 1: COMPOUNDING...

Rule 2: DON'T LOSE MONEY:

This may sound naïve, but believe me it isn't.  If you want to be wealthy, you must not lose money, or I should say must not lose BIG money.  Absurd rule, silly rule?  Maybe, but MOST PEOPLE LOSE MONEY in disastrous investments, gambling, rotten business deals, greed, poor timing. Yes, after almost five decades of investing and talking to investors, I can tell you that most people definitely DO lose money, lose big time -- in the stock market, in options and futures, in real estate, in bad loans, in mindless gambling, and in their own business.

RULE 3: VALUES: The only time the average investor should stray outside the basic compounding system is when a given market offers outstanding value.  I judge an investment to be a great value when it offers (a) safety; (b) an attractive return; and (c) a good chance of appreciating in price.  At all other times, the compounding route is safer and probably a lot more profitable, at least in the long run."

-Richard Russell

DYI:  I attempted without luck to find when Richard Russell wrote these two observational letters, however I remember reading them on the internet during the mid 1990's.  My best guess they were written back in the 1980's and despite being at least 40 plus years old they are just as relevant today as they were back then.

What does Dick Russell mean by compounding?  

Short term bond funds, money market funds, CD's at the bank, Series E or I Savings Bonds, buying 2 or 5 year U.S. Treasury notes etc.  In other words buying safe and very boring interest bearing investment assets building a nest egg waiting patiently for the next on-the-give-away table investment.