How Does Your Nest Egg Compare To Most Americans'?

How big is your retirement nest egg compared with most people's? Only 14% of workers have $250,000 or more saved for retirement, according to a new survey by the Employee Benefit Research Institute and Greenwald & Associates.

The other 86% of workers who were queried have smaller amounts of retirement savings. 

Thirty-eight percent have less than $50,000. 

The good news, slim as it is, is that the percent who have at least $250,000 rises to 20% among workers who have a retirement plan. 

Among workers with no plan, just 1% have $250,000 or more in savings.

The magical 2.2 housing ratio between median nationwide home prices and household income – Nationwide home prices still inflated by 30 percent based on 50 years of household data.

Back in 1950 the median home price cost a little above 2 times the annual median household income: 

1950:     $7354 / $3,319 =2.2 

In 1960 the ratio remained roughly the same: 

1960:     $11,900 / $5,620 = 2.1 

In fact, over this ten year period the typical household gained buying power when it came to housing.  Even in 1970 the ratio became more favorable to US households: 

1970:  $17,000 / $9,867 =1.7 

This was the lowest point at the start of any decade in modern history.  After this point, with all the push for deregulation and allowing Wall Street to run rampant prices remained fairly stable only because of the two income household (that is until we hit 2000): 

1980:     $47,200 / $21,023 = 2.2 

1990:     $79,100 / $35,353 = 2.2 

2000:     $119,600 / $50,732 = 2.3 

This was sustained via the two income household:

 After this point, things went haywire.  Incomes went stagnant or dropped yet home prices sky rocketed.  Even today after the severe correction the ratio is still out of sync with 50 years of data:

2010:     $170,500 / $50,221 = 3.3

 

The average American is going to struggle throughout the next decade.  It is hard to see how wages will go up so it is likely that home prices will adjust lower given the magnitude of foreclosures in the pipeline.  People might be jumping up and down about the recent job growth but they are occurring in lower paying sectors.  So this does nothing to justify current prices.  Low mortgage rates are merely a gimmick so banks can use cheap money to speculate on a global scale.  Even with mortgage rates at levels we’ve never seen the housing market remains stalled like an old car.  Why?  Because the actual sticker price is still inflated based on income levels.

DYI 

No Where to Hide! Stocks and Long Term Bonds are Overvalued and Overblown. Gold and Short Term Bonds are Your Sanctuary...Everything Else Buyer Beware!

April 27, 2015

Fair Value on the S&P 500 Has Three Digits

John P. Hussman, Ph.D. 

On the basis of valuation measures best correlated with actual subsequent market returns, we can say with a strong degree of confidence that the S&P 500 would presently have to drop to the 940 level in order for investors to expect a historically normal 10-year total return of 10% annually. 

That 940 figure for the S&P 500 would not represent some extreme, catastrophic outcome. It’s not a level that would even represent undervaluation from a historical perspective. It’s the level that we would associate with average, historically run-of-the-mill long-term equity returns. As we observed at the 2000 peak, “if you understand values and market history, you know we’re not joking.” 

That said, if one believes that depressed interest rates warrant not only a low prospective return on stocks, but also virtually no risk premium whatsoever despite their significant full-cycle volatility, then you might be quite happy with the prospect of a 1.4% annual nominal total return on the S&P 500 over the coming decade, 

which is what we presently estimate from current levels, based on a variety of historically reliable methods (see Ockham’s Razor and the Market Cycle for the arithmetic behind these estimates). In that case, you might consider stocks to be "fairly valued" here. But you should still allow for a 940 level or below on the S&P 500 over the completion of this market cycle.

DYI Comments:  Once again Professor Hussman hits the nail on the head.  However one values this market, in an honest fashion, it is overvalued and overblown devoid of value on a wholesale basis.  I've been saying for two years plus that the market is setting up for a 45% to 60% smash.  The only question is when which has been postponed due to two massive events.

One:  Fed intervention on an unprecedented basis with multiple QE, operation twist, reinvestment of interest into addition bond purchases that has resulted in sub atomic low interest rates.

Two:  First world Boomer's are desperate to fund their retirement have bid up stock and bond prices to the moon.  The nasty one, two punch of Fed intervention and Boomer desperation for yield.

Boomer's savings glut is expected to peak around 2019 to 2021.  Does this mean we will have four or more years of overblown and overvalued markets? Honestly, I have no idea (nor does anyone else). Studying, managing money for others(now only for myself) for the past 42 years is this:  This is NOT the time to dive into stocks on a whole sale basis and expect to receive anything close to the long term average rate of return (around 10%).  The rate of return is not baked into the cake but is a function of the price that is paid for sales, earning and dividends.  Higher you pay, the less you will receive and the lower you pay, the higher the return.  It's just that simple.

Bonds beware as money catches fire in the US and Europe

Broad M3 money indicators point to a reflationary mini-boom in America and Europe by the end of the year, but be careful what you wish for!

Be thankful for small mercies. The world economy is no longer in a liquidity trap. The slide into deflation has, for now, run its course. 

The broad M3 money supply in the US has been soaring at an annual rate of 8.2pc over the past six months, harbinger of a reflationary boomlet by year's end. 

Europe is catching up fast. A dynamic measure of eurozone M3 known as Divisia - tracked by the Bruegel Institute in Brussels - is back to growth levels last seen in 2007.

The full force of monetary expansion - not to be confused with liquidity, which can move in the opposite direction - will kick in just as the one-off effects of cheap oil are washed out of the price data. "Forecasters ignore broad money at their peril," says Gabriel Stein, at Oxford Economics. 

Mr Stein said total loans in the US are now growing at a faster rate (six-month annualised) than during the five-year build-up to the Lehman crisis. "The risk is that the Fed will have to raise rates much more quickly than the markets expect. This is what happened in 1994," he said. 

That episode set off a bond rout. Yields on 10-year US Treasuries rose 260 basis points over 15 months, resetting the global price of money. It detonated Mexico's Tequila crisis. 

US bond markets are equally vulnerable. Investors are pricing in rates of 0.9pc by the end of 2016, compared with 1.875pc by the Fed itself. This is extraordinary. The St Louis Fed's James Bullard could hardly have been clearer on a recent trip to London. 

“I think reconciliation between what markets think and what the committee (FOMC) thinks will have to happen at some point. That's a potentially violent reconciliation," he said. 

It is not as if the Fed is hawkish. It is rightly wary of tightening with the labour participation rate still stuck at a 40-year low of 62.7pc. Yet the market is turning. The quit rate - a gauge of willingness to look for a better job - is nearing 2pc, the level when employers must build pay-moats to keep workers. 

The greater threat - muttered sotto voce at the IMF Spring meeting this week - is that the Fed will soon be forced to hit the brakes hard, throwing dollar-debtors through the windscreen across the emerging world. 

The official line is that all is under control. There will be no repeat of the "taper tantrum" in 2013. Behind the scenes, IMF officials acknowledge that it may be worse, a full-fledged margin call on $9 trillion of external dollar borrowing, much of it by companies in China, Hong Kong, Brazil, Mexico, South Africa and Russia. They fear too that it will combine with a nasty unwinding of East Asia's internal credit bubble.

DYI Comments Continue:  Going back to Professor Hussman.

Last month, Stan Druckenmiller recounted his own experience with capitulation and performance chasing when he was the lead portfolio manager for George Soros and the Quantum Fund: 

“I’ll never forget it. January of 2000 I go into Soros’ office and I say I’m selling all the tech stocks, selling everything. This is crazy... Just kind of as I explained earlier, we’re going to step aside, wait for the next fat pitch. I didn’t fire the two gun slingers. They didn’t have enough money to really hurt the fund, but they started making 3 percent a day, and I’m out. It’s driving me nuts. I mean, their little account is like up 50% on the year. I think Quantum was up seven. It’s just sitting there. 

“So like around March I could feel it coming. I just – I had to play. I couldn’t help myself. And three times during the same week I pick up a – don’t do it. Don’t do it. 

Anyway, I pick up the phone finally. I think I missed the top by an hour. I bought $6 billion worth of tech stocks, and in six weeks I had left Soros and I had lost $3 billion in that one play. 

You ask me what I learned. I didn’t learn anything. I already knew I wasn’t supposed to do that. I was just an emotional basket case and couldn’t help myself. So maybe I learned not to do it again, but I already knew that.”

OR 

J. Paul Getty Quote! 

Stock Market - "For as long as I can remember, veteran businessmen and investors - I among them - have been warning about the dangers of irrational stock speculation and hammering away at the theme that stock certificates are deeds of ownership and not betting slips. 

The professional investor has no choice but to sit by quietly while the mob has its day, until enthusiasm or panic of the speculators and non-professionals has been spent. He is not impatient, nor is he even in a very great hurry, for he is an investor, not a gambler or a speculator. There are no safeguards that can protect the emotional investor from himself."

DYI Continues:  Will this market end in a speculative blow off similar to the high tech wreck dot bomb market of 2000?  No one knows for sure history is more on the side of a market blow off of some kind.  Or will it be that Boomer's begin to retire in significant numbers and valuation slide downward over a long period of time as in Japan?  However this plays out now is not the time for whole sale purchases of stocks or long term bonds especially junk. It is the boring time to build cash (short term bonds) and some gold.

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  4/1/15

Active Allocation Bands (excluding cash) 0% to 60%

85% - Cash -Short Term Bond Index - VBIRX

15% -Gold- Precious Metals & Mining - VGPMX

 0% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX
 0%-REIT's- REIT Index Fund - VGSLX

[See Disclaimer]  

The Great Wait Continues

DYI

DYI Comment:  Right in line with DYI's thinking.  This is an overblown stock and bond market with future returns at 7 years or less will highly likely be negative.

The Great Wait Continues...

DYI

How the Baby Boomer's have Blown Up the Stock Market 

A few years ago a pair of research advisors to the Federal Reserve Bank of San Francisco demonstrated this link. They found that demographics (specifically, the ratio between retirement age workers to peak earning and investing age ones) is responsible for 61% of the changes in the price-to-earnings ratio of the stock market over time. Additionally, they found that when their model’s forecast p/e was off by a significant amount the real p/e consistently reverted to their forecast p/e.

According to this theory, for valuations to remain elevated the stock market needs the generations that follow the baby boomers to maintain the same population growth that the baby boom represented. We already know that this just isn’t going to happen. The generation following the baby boomers, Generation X, represents a significant deceleration in population growth. For this reason, this model forecasts a contraction of the price-to-earnings ratio over the next decade, from about 18 last year to roughly 8 in 2025.

DYI

Profit Margins - Is the Ladder Starting to Snap? 

John P. Hussman, Ph.D.

Since mid-2014, the broad market as measured by the NYSE Composite has been in a broad sideways distribution pattern, with an increasing tendency in recent months for advances to occur on weaker volume and declines to follow on a pickup in volume. While capitalization-weighted indices have done somewhat better since mid-2014, the S&P 500 Index is unchanged since late-December. On the basis of broad market action across individual stocks, industries, sectors and security types, as well as a general widening of credit spreads and other risk-sensitive measures, we continue to infer a shift toward increasing risk-aversion among investors.

NYSE Composite Index

As I frequently emphasize, a resumption of favorable market internals and a retreat in credit spreads would suggest a fresh shift toward risk-seeking investor preferences that could defer the immediacy of our downside concerns. Unfortunately, that would not improve the dismal long-term returns that are already baked in the cake of current valuations. Presently, we observe obscene valuations coupled with evidence of a shift toward increasing risk-aversion among investors. For that reason, I continue to believe that the present moment will likely be remembered among a small handful of the very worst points in history to invest in equities from the standpoint of prospective return and risk. 

One of the central features of popular valuation measures such as price to forward earnings is that they take profit margins at face value. Year-ahead earnings estimates have the additional feature that analysts can (and nearly always do) base their estimates on the assumption that margins will improve in the future. We know from a century of evidence that correcting for the variation in profit margins produces valuation measures that are far better correlated with actual subsequent market returns. But when profit margins are elevated, the temptation to take them at face value (or extrapolate them to even greater extremes) seems too much for Wall Street to resist.

DYI Comments:  No doubt this is an overblown stock market that has now seen sideways action for more than a year.  Elevated profit margins that will soon begin their downward journey by reverting to their mean (most likely overshooting to the downside).  This will put severe pressure (valuations & profit margins) on equities and junk bond prices.  One to two year bear market in the magnitude of 45% to 60% is very possible.  Add on that the economy is dancing on a pin to stay in growth.  The chart from dshort show very clearly the economy is headed in the wrong direction.  To soon for a recession call but does raise one's eyebrows.
  

Also the Empire State Manufacturing and Philadelphia Fed Survey (see below) have both gone soft.  To soon to make a recession call but clearly unless less this data improves and pronto (next 3 months) then a recession will be headed our way.
  
ECONODAY
The international economic picture is under strain as the Economist Magazine lumped China and Greece together as their real estate markets get smashed.

Global housing markets

Property puzzles

EXHIBIT A is a powerhouse of the world economy whose GDP has grown by 158% over the past ten years. Exhibit B is a basket-case whose economy has contracted by 18% over the same period and where a quarter of the workforce is unemployed. China may think Greece an unlikely bedfellow, but the weakness of their housing markets ties the two together in our latest roundup of global house prices.

If this is the beginning of the long awaited China debt melt down and it co insides with a U.S. recession this will bring down Europe as well.  It is possible to have yet another world wide recession.  Too soon to tell at this point in time, but the data is definitely moving in the wrong direction.

My model portfolio remains very defensive.

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  4/1/15

Active Allocation Bands (excluding cash) 0% to 60%

85% - Cash -Short Term Bond Index - VBIRX

15% -Gold- Precious Metals & Mining - VGPMX

 0% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX
 0%-REIT's- REIT Index Fund - VGSLX

[See Disclaimer]

DYI

Isa fund bargains: Countries with cheap stock markets (and how to buy them)

This chart identifies cheap stock markets - we explain why they offer big discounts and how to back them

As the chart shows, there are seven countries in addition to Britain whose markets are at all-time highs, most notably Germany, the United States and India.

According to Russ Mould, of AJ Bell Youinvest, the fund shop, there is an old stock market saying that you can have cheap share prices or good news but NOT both at the same time.

The countries whose stock markets are furthest from their previous record highs are Greece and Portugal, two nations that have been at the centre of the eurozone debt crisis. Greece, for example, has seen its economic output fall by a quarter since the financial crisis struck, while deflation is affecting companies' profits.

The Brazilian and Russian markets are also well below their peaks. This is partly because their economies depend heavily on sales of commodities such as iron ore, oil, gas and copper, whose prices have all fallen heavily over the past couple of years.

Another large economy whose stock market has a long way to go is Japan. Its main share index, the Nikkei 225, has soared over the past two years, largely thanks to a major injection of QE. A 62pc rise recently took the market to a 15-year high but it remains well below its peak of December 1989.

To shed light on this, Telegraph Money looked at the "Cape" ratios for all 25 countries on the chart, then compared their score today with their long-term average, which for the majority dates back to 1983.

Japan, Russia and China look to be three of the cheapest. Both Japanese and Russian shares are at a 40pc discount to their historical average. Japan scores 26 against 45 for its long-term average, although this includes the bubble years, while Russia has a rating of eight today, compared with an average of 13. China has a rating of 21, a 35pc discount to its average figure of 32.

But the biggest apparent bargains are Greece, 80pc below its long-term average, and Turkey, which is 50pc below.

But some markets that are at or close to record levels also look cheap on the Cape measure. Both Hong Kong and Britain are below their long-term averages, both scoring 15 against 21.

DYI Comments:  Vanguard's European Stock Index Fund (VEURX) is DYI's favorite spotting a 3.28% dividend yield far superior to the S&P 500 current rate at 1.96%.  However, one note of caution with the U.S. market so over valued any decline will pull down all markets including the European exchanges.  Dollar cost averaging only to average in for a lower cost basis when the U.S. market pulls down all markets.

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 you are 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 and the Gold Wealthy.

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 1.5 times your income (or the equivalent in rent) purchase a modest used car(s) for cash and you are on your way to financial freedom.

DYI 

Too Soon for a Recession Call But it is Getting Closer!

 National Association of Credit Management 

Report for March 2015

The combined score is getting dangerously closer to the contraction zone and has not been this weak in many years (going back to 2010). It is sitting at 51.2 and that is down from the 53.2 noted last month. For most of the last two years, these readings have been in the mid-50s and above—comfortable territory and generally trending up from one month to the next and now there is a very disturbing trend downward. The index of favorable factors slipped substantially, but remains in the mid-range at 55.4. That would be seen as better news if it were not for the fact that these readings had consistently been in the 60s during the last couple of years. It was only August of last year when the reading was a robust 63.8. The most drastic fall took place with the unfavorable factors that indicate the real distress in the credit market. It has tumbled from 50.5 to 48.5 and that is firmly in the contraction zone—a place this index has not been since the days right after the recession formally ended. The signal this sends is that many companies are not nearly as healthy as it has been assumed and that there is considerably less resilience in the business sector than assumed.

Komatsu Construction Equipment Orders In China

Bottom Dropping Out

Greece denies reports that it's preparing for a default

Greece denied on Monday a report by the Financial Times that it was preparing for a debt default if it did not reach a deal with its creditors by the end of the month and said the negotiations were proceeding "swiftly" towards a solution. 

A senior EU official said that the conflicting messages from Athens "reflect the divergence of views within the current Greek government rather than an agreed negotiation position and tactics."

The Big Lie: 5.6% Unemployment

Right now, we’re hearing much celebrating from the media, the White House and Wall Street about how unemployment is “down” to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market. 

None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job -- if you are so hopelessly out of work that you’ve stopped looking over the past four weeks -- the Department of Labor doesn’t count you as unemployed. That’s right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news -- currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren’t throwing parties to toast “falling” unemployment.

Gallup defines a good job as 30+ hours per week for an organization that provides a regular paycheck. Right now, the U.S. is delivering at a staggeringly low rate of 44%, which is the number of full-time jobs as a percent of the adult population, 18 years and older. We need that to be 50% and a bare minimum of 10 million new, good jobs to replenish America’s middle class. 

I hear all the time that “unemployment is greatly reduced, but the people aren’t feeling it.” When the media, talking heads, the White House and Wall Street start reporting the truth -- the percent of Americans in good jobs; jobs that are full time and real -- then we will quit wondering why Americans aren’t “feeling” something that doesn’t remotely reflect the reality in their lives. And we will also quit wondering what hollowed out the middle class.***Jim Clifton is Chairman and CEO of Gallup. He is author of The Coming Jobs War(Gallup Press, 2011).

DYI Comments:  Sky high stock market and an economy possibly drifting into recession a mix for a 12 to 24 month long bear market in the order of 45% to 60%!  However this turns out holding or purchasing stocks at this level future returns will be poor over the next 10 years.  Those with a holding period less than 7 years will highly likely experience losses.

DYI 

Valuation and Speculation: The Iron Laws 

John P. Hussman, Ph.D.

The first is what I’ve often called the Iron Law of Valuation: every security is a claim on an expected stream of future cash flows, and given that expected stream of future cash flows, the current price of the security moves opposite to the expected future return on that security. The higher the price an investor pays for that expected stream of cash flows today, the lower the return that an investor should expect over the long-term. Particularly at market peaks, investors seem to believe that regardless of the extent of the preceding advance, future returns remain entirely unaffected. The repeated eagerness of investors to extrapolate returns and ignore the Iron Law of Valuation has been the source of the deepest losses in history (see Margins, Multiples, and the Iron Law of Valuation).

DYI Comments:  The U.S. market has been in bubble territory for over two years due to engineered sub atomic low interest rate by the Fed's plus 1st world ageing Baby Boomers investing money into anything with a yield.  Boomer's and the Fed's have driven stock values to the moon. Valuations are so high my weighted averaging formula which provides a great deal of latitude for high valuation markets is now at 0% percent invested.

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  4/1/15

Active Allocation Bands (excluding cash) 0% to 60%

85% - Cash -Short Term Bond Index - VBIRX

15% -Gold- Precious Metals & Mining - VGPMX

 0% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX
 0%-REIT's- REIT Index Fund - VGSLX

[See Disclaimer]

How high is high?  Based on price to dividends the S&P 500 is now 122% above it's average since 1871!  Below is dshort.com based on the average of four methods of valuation to determine how far above or below the market is.  Currently this market is sky high only being out done the year 2000 high tech wreck market.

The Market Remains High in Overvaluation Territory

DYI Continues:  Future returns going forward?  Investing today or holding your current stock holdings going to sleep like Rip Van Winkle waking up 10 years from now what can you expect as an average annual estimated return.  Based on dividends (DYI's favorite) is 1.3%!

Estimated 10yr return on Stocks

Using 5.4% as the historical growth rate of dividends and 4.0% as the ending yield.

Starting Yield*---------return**
1.0%-----------------------(-5.7%)
1.5%-----------------------(-1.7%) 

2.0%------------------------1.3% You are Here!

2.5%------------------------3.8%

3.0%------------------------5.9%
3.5%------------------------7.8%
4.0%------------------------9.4%
4.5%-----------------------10.9%

5.0%-----------------------12.3%
5.5%-----------------------13.6%
6.0%-----------------------14.8%
6.5%-----------------------15.9%

7.0%-----------------------17.0%
7.5%-----------------------18.0%
8.0%-----------------------19.0%

*Starting dividend yield of the S&P500-**10yr estimated average annual rate of return.

Will this 1.3% return be a smooth ride?  Not a chance!  Over the next 10 years there will be one bear market for sure and very likely a second as well.  Please note this return is before management fees, inflation, trading costs and possible taxation.  No doubt the future returns are negative!

Here's our last chart showing more of the same.

DYI

Dow to Gold Ratio "Returns to the Mean" now above the midpoint (green line) Future Returns have Increased. An Excellent Opportunity to Dollar Cost Average into your Favorite Precious Metals Fund!

Fred's Intelligent Bear Site brought to you by Fred Filskov. Public, private, and commercial distribution of this material is permitted as long as a link to this site is attached.

DYI Comments:  I have moved my sentiment indicator down one notch from optimism to relief "market returns to mean."

Market Sentiment

Smart Money buys aggressively!
Capitulation
Despondency--Short Term Bonds
Max-Pessimism *Market Bottoms*MMF
Depression
Hope
Relief *Market returns to Mean* Gold

Smart Money buys the Dips!
Optimism
Media Attention
Enthusiasm

Smart Money - Sells the Rallies!
Thrill
Greed
Delusional---Long Term Bonds
Max-Optimism *Market Tops*--REIT's
Denial of Problem--U.S. Stocks
Anxiety
Fear
Desperation

Smart Money Buys Aggressively!
Capitulation

Gold mining companies have been wonderfully beaten up far greater than the actual metal.  I would not recommend lump sums; dollar cost averaging unless gold drops, mining company shares drop and/or stocks fly pushing the indicator above the 1929 line of 18.4 then lump sum investing will be far safer.

DYI's sentiment indicator has moved however my model portfolio remains the same.

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  4/1/15

Active Allocation Bands (excluding cash) 0% to 60%

85% - Cash -Short Term Bond Index - VBIRX

15% -Gold- Precious Metals & Mining - VGPMX

 0% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX
 0%-REIT's- REIT Index Fund - VGSLX

[See Disclaimer] 

Interesting Reading Assignments:

By the Time You Read This, They've Slapped a Solar Panel on Your Roof

Solar power has definitely improved over the years; base loading from your utility company will continue to be required however peak demand will be solved by solar (and other alternatives). Improved battery storage and/or fly wheel technologies is the one, two punch creating a continuous supply of electricity.
***************************************************************

Driverless cars to create 320,000 UK jobs and save 2,500 lives

No doubt about it driverless cars are on its way.  At first only on closed circuits such as hotels, universities, hospitals etc.  After that is long haul trucking and last your own personal vehicle.  Thirty years from now driverless cars, trucks and airlines will be common place.

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

Chinese Company builds 57-Storey Skyscraper in 19 Days, in Pictures

Fascinating modular technology hopefully is being looked into here in the States.

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

Obesity Becoming A Child Protection Issue

Ethical Family Interventions for Childhood Obesity

This will become a hot issue as child services agencies intervene into family affairs as the national obesity crises balloons.

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

Europe once more sleep walks towards the abyss

Business cycles have not been repealed no matter what politicians say and when the U.S. goes back into recession so will Europe placing huge pressure on the Economic Union.  I anticipate the trade agreements holding together the Euro currency is most likely not long for this world.  European equities however are undervalued only recommend dollar cost averaging as the U.S. market is over blown and when it declines it will bring down Europe's markets as well.  Vanguard's European Stock Index Fund (VEUSX) dividend yield is 3.43% our markets declining pulling down Europe's would only encourage to purchase more.  Also the Euro (or Franc, Mark, or Pound) are undervalued as compared to the U.S. dollar.

US risks epic blunder by treating China as an economic enemy

The US Treasury's attempt to cripple the Asian Infrastructure Investment Bank (AIIB) before it gets off the ground is clearly intended to head off China's ascendancy as a rival financial superpower, whatever the faux-pieties from Washington about standards of "governance". 

Such a policy is misguided at every level, evidence of what can go wrong when a lame-duck president defers to posturing amateurs in Congress on delicate matters of global geostrategy. 

Washington has enraged Britain by trying to browbeat Downing Street into boycotting the project. It has forced allies and friendly countries across the Far East to make a fatal choice between the US and China that none wished to make, and has ended up losing almost everybody. Germany, France, and Italy are joining. Australia and South Korea may follow soon.

Unfortunately despite all the good things the U.S. does many times we are a bull in a china shop (sorry for the pun).  Two paragraphs in the article eludes that China's debt bubble may have burst (I've been waiting over 5 years).

It is possible that the AIIB will fizzle. China's economy has come off the boil, struggling by an incipient debt crisis. The work force is contracting by three million a year. Productivity growth has failed to keep pace with rising wages. Capital outflows are eating into foreign reserves. The central bank has become a net seller of bonds. The Asian Development Bank said this week that the yuan is now "overvalued". 

David Shambaugh, a veteran sinologist at George Washington University, says the Communist Party is in danger of disintegrating. Riddled with corruption, it is relying on naked repression and systemic purges to make up for lost legitimacy. He has even begun to talk of a coup against President Xi.

I've stated for longer than I care to admit that China is a paper tiger and when their massive debt bubble collapse, holding their empire together will be a monumental task.  Their autonomous regions are very susceptible to total independence especially the north western regions that are Muslim.

 If this is the long awaited economic Chinese implosion their country will experience a 1930's style depression lasting 10 to 15 years.  China's international adventures will certainly be put on hold as the country looks inward to stabilize itself politically and economically.

DYI

Treasury Prices can Go Higher!

 The U.S. Federal Reserve sounded an “all clear” for Treasury securities at its March 18 meeting. With continued problems in the U.S. labor market, stagnant real wage growth, flagging retail sales and deflation worries, the Fed won't be raising rates anytime soon. Treasury prices, then, are sure to rise. 

The coming rally will draw strength from steps that central banks in Europe and Japan are taking to boost exports by devaluing their currencies, which drives investors to the U.S. What's more, government-bond prices, even for Spanish and Italian debt, are higher than in the U.S. It won't be long before investors narrow those gaps by purchasing Treasuries. 

The Fed started the springtime rally last week when it effectively signaled it wouldn't soon increase interest rates by cranking down forecasts for the federal funds rate and inflation. The economy, the Fed said, is now “moderating” instead of “expanding at a solid pace.” 

The central bank also cut its 2015 economic growth outlook to 2.5 percent from 3.4 percent, much like the repeated downgrades of its gross domestic product forecasts for 2012, 2013, and 2014.removed the word ‘patient’ from the statement mean we’re going to be impatient.” 

Fed Chairwomen Janet Yellen 

The Fed’s dual mandate is to promote full employment and price stability. It hasn't accomplished either. Payroll employment has accelerated, with almost 282,000 new jobs a month in the last 11 months, significantly higher than the average of about 185,000 between October 2010 and March 2014.  

But most of the new jobs are in low-paying sectors such as retailing and hospitality, not high-paying fields such as manufacturing, utilities and information technology. Also, with corporate revenue growing slower in this business expansion versus other recoveries, the route to larger profits has been through cost-cutting. Most costs, directly or indirectly, are for labor.  

Real wages and median household incomes, as a result, have been flat, which slows down consumer spending. Households are putting away rather than spending the savings from the recent drop in gasoline prices. Retail sales fell in December, January and February, while the household savings rate jumped.  

The Fed defines its second mandate, price stability, as 2 percent inflation. Many other central banks use the 2 percent inflation target as well. They don’t love inflation, but they fear the deflation that has plagued Japan for two decades. As prices fall, potential buyers anticipate further declines by putting off purchases. Excess capacity and inventories mount and depress prices further. That confirms consumers' suspicions, so they further cut spending, to the detriment of economic growth.  

After the Fed’s March 18 announcement, Treasury bond prices leaped. I continue to believe that the 30-year Treasury yield, now 2.59 percent, will drop to 2 percent in a year, for a total return of about 15 percent. For a 30-year zero-coupon bond, I expect about an 18 percent return. I also look for the 10-year Treasury yield to drop from the current 2 percent to 1 percent, producing a total return of about 10 percent. 

With the odds falling for a Fed rate increase in the near future, investors are beginning to concentrate on the shrinking issuance of Treasury notes and bonds, which fell to $693 billion in February from $1.7 trillion in the 12 months ending May 2010, as the fiscal 2014 federal deficit declined to $483 billion from $1.4 trillion in fiscal 2009. On the demand side, foreigners continue to charge into Treasuries as the ultimate safe haven in a sea of global economic and financial trouble. Their holdings have jumped by almost $232 billion from January 2014. 

 And there’s plenty of money available to buy Treasuries, with quantitative easing taking place in Japan and the euro zone. The Bank of Japan is buying up to $100 billion in securities a month, while the European Central Bank recently began purchasing $65 billion a month. As those central banks deliberately drive down their currencies, they encourage investors to flock to Treasuries. 

There is another compelling argument for substantial rallies in Treasuries: The gaps between their yields and those of most developed countries are astoundingly wide. Those gaps are ridiculous -- unless you believe Spain and Italy issue higher-quality government obligations than the U.S.! Only Australia, among 17 developed foreign countries, has a higher 10-year bond yield than does the U.S., by 0.32 percentage point. 

These yield gaps scream to be closed, and no doubt will be, by a rally in Treasury prices. With the Bank of Japan and the ECB buying up sovereigns, yields in those regions will probably fall further.  

Investors in the euro zone and Japan can get better returns by buying Treasuries as opposed to their own sovereigns. They will get better capital appreciation as Treasuries rally. And they profit further as the dollar continues to rise against the yen, euro and almost every currency. 

What am I missing?

DYI Comments:  The bond rally of a lifetime appears to be continuing.  For DYI this will mark the the last hurrah for bonds.  However long bonds will not immediately become toxic for low inflation/deflation will continue to reign supreme for the next 5 to 7 years.  Currently we are in the turning point from the long end to the short end of the bond market.  It is the time to slowly begin to purchase short dated bonds (example Vanguard Short Term Bond Index Fund VBIRX).

The bond rally of a lifetime is almost over as shown by DYI's sentiment chart below with only one more notch to the top.

Market Sentiment

Smart Money buys aggressively!
Capitulation
Despondency--Short Term Bonds
Max-Pessimism *Market Bottoms*MMF
Depression
Hope
Relief *Market returns to Mean* 

Smart Money buys the Dips!
Optimism--Gold
Media Attention
Enthusiasm

Smart Money - Sells the Rallies!
Thrill
Greed

Delusional---Long Term Bonds You are Here!

Max-Optimism *Market Tops*--REITs
Denial of Problem--U.S. Stocks
Anxiety
Fear
Desperation

Smart Money Buys Aggressively!
Capitulation

DYI