9-1-2014
BONDS
100 - [100 x ( Curr. PI - Avg. PI / 2 ) ]
________________________________
(Avg. PI x 2 - Avg. PI/2)
% Allocation 3%
3% x 60% (max. allocation) = 2%
DYI Comments: DYI uses the 10 year Treasury note as a proxy for all interest rates to determine how far above or below their average. Currently the Fed's are now into full blown interest rate financial repression as future returns for bond holder on an after inflation basis will be negative. It appears that this repression of negative interest rates will continue for the next 3 to possibly 5 years. These sub atomic low rates are destroying the returns for retiree's and basic savers of bank CD's. More and more retiree's are now resorting to spending their principal to makes ends meet. When the money is gone especially for those in their 70's and above it is way to late to dust off the resume and go back to work. This of course has forced many, in their desperation for yield, into long dated bonds and/or junk bonds. When interest rates normalize these neophyte investors (they really are savers) will be in for a rude shock when their principal value drops further drawing down their remaining principal.
Currently the Price to Interest is now 95.45% ABOVE the long term average (4.63% or PI 22) for 10 year Treasuries (since Jan 1, 1871). To qualify as a bargain PI would have to be below the average; this is a long way away from being a bond bull.
To be blunt THIS IS ONE "JACKED UP" market for stocks and bonds. Speculation is here and now the reason it is harder to see for it is in all asset categories. Except for gold and the gold mining companies there is remaining value despite the fact that the Dow to Gold ratio is pricey.
[See Disclaimer]
DYI's Aggressive portfolio is now at a surprising 85% cash. Gold mining companies the best bargain of the lot is at a scant 13%. These four asset categories are broadest uncorrelated assets but due to the sub atomic interest rates forcing investors to seek higher yields they are all pushed up way beyond their average interest or dividend yields. Caveat Emptor (buyer beware) for those holding or purchasing at these prices returns over the next 10 years a 0 to 2 percent nominal (before inflation, taxation, fee's and commissions) is at best to be expected. For those who are patient better values await.
THE GREAT WAIT CONTINUES......
DYI
DYI Comments: DYI uses the 10 year Treasury note as a proxy for all interest rates to determine how far above or below their average. Currently the Fed's are now into full blown interest rate financial repression as future returns for bond holder on an after inflation basis will be negative. It appears that this repression of negative interest rates will continue for the next 3 to possibly 5 years. These sub atomic low rates are destroying the returns for retiree's and basic savers of bank CD's. More and more retiree's are now resorting to spending their principal to makes ends meet. When the money is gone especially for those in their 70's and above it is way to late to dust off the resume and go back to work. This of course has forced many, in their desperation for yield, into long dated bonds and/or junk bonds. When interest rates normalize these neophyte investors (they really are savers) will be in for a rude shock when their principal value drops further drawing down their remaining principal.
Currently the Price to Interest is now 95.45% ABOVE the long term average (4.63% or PI 22) for 10 year Treasuries (since Jan 1, 1871). To qualify as a bargain PI would have to be below the average; this is a long way away from being a bond bull.
To be blunt THIS IS ONE "JACKED UP" market for stocks and bonds. Speculation is here and now the reason it is harder to see for it is in all asset categories. Except for gold and the gold mining companies there is remaining value despite the fact that the Dow to Gold ratio is pricey.
AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION
Active Allocation Bands (excluding cash) 0% to 60%
85% - Cash -Short Term Bond Index - VBIRX
13% -Gold- Precious Metals & Mining - VGPMX
2% -Lt. Bonds- Long Term Bond Index - VBLTX
0% -Stocks- Total Stock Market Index Fund - VTSAX
0%-REIT's- REIT Index Fund - VGSLX
0%-REIT's- REIT Index Fund - VGSLX
[See Disclaimer]
**************
Maximum Aggressive Portfolio
(Super Max)
75% Cash - Hussman Strategic Total Return Fund - HSTRX
13% Gold - Tocqueville Gold Fund - TGDLX
2% Lt. Bonds - Zero Coupon 2025 Fund - BTTRX
10% Stocks - Federated Prudent Bear Fund - BEARX
0% REIT'S - REIT Index Fund - VGSLX
DYI's Aggressive portfolio is now at a surprising 85% cash. Gold mining companies the best bargain of the lot is at a scant 13%. These four asset categories are broadest uncorrelated assets but due to the sub atomic interest rates forcing investors to seek higher yields they are all pushed up way beyond their average interest or dividend yields. Caveat Emptor (buyer beware) for those holding or purchasing at these prices returns over the next 10 years a 0 to 2 percent nominal (before inflation, taxation, fee's and commissions) is at best to be expected. For those who are patient better values await.
THE GREAT WAIT CONTINUES......
DYI
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