DYI Comments:  Notice the chart above since the end of QE3 the S&P 500 has formed a large arch. Stock prices as a whole have not moved up since January 2015!  Prices as measured by price to dividends are now 109% above their average.  Anything beyond 100% DYI's formula "kicks us out" of the market and rightfully so!  Stocks are clearly in bubble land.  For folks who are holding stocks or purchasing at these levels, who go to sleep like Rip Van Winkle, wake up 12 to 15 years from now will experience a nominal return of 0% to 2%!  This return is nominal before inflation a rate that the reporting authorities always fudge to a lesser degree.  If inflation is reported at 2% you can bet in reality is 3% to 3.5%.  Then you have to take into account any fee's, commissions, trading impact costs, taxes that will reduce one's return.  All told, on a purchasing power basis purchases or holding stocks at this level  (and this includes dividend reinvestment) will be at a marginal loss. The bottom line, the price you pay for sales, earnings, or dividends is a determinate for future return.

Below is our proxy the 10 year Treasury yield for our formula.  Today based on a price to interest 10 year Treasury prices are now 130% above their average.  Clearly in bubble land.  If the Fed's push rates negative then I will stop naming this bubble land and rename to "fantasy land."  Anyone buying bonds, especially long dated will be setting themselves up for losses.  As one would suspect our formula has "kick us out" of the long term term bond market as well.    


Below is a chart for the Dow/Gold Ratio currently at 15 to 1.  This chart places the average around 22 to 1 for DYI's purpose I averaged the three secular highs and two secular lows since 1913 when we started a fiat currency.  My average is 16 to 1.  Today gold in relation to stocks is trading at its mean from DYI's point of view.  Gold is neither undervalued nor overvalued simply at its mean. Even with that said gold and especially the mining companies have a long way to run before they end their secular bull market that started since the year 2000. 


DYI's sentiment indicators(below) based on a secular basis shows our four asset categories and their placement.  Cash or short term bonds is our "go to" investment, a "waiting room" until it can be put to use (and earn some interest while waiting) in our three other assets.  As amazing at it seems the most undervalued among the four is cash, only gold plays a secondary role.  Stocks and long bonds are in bubble land.

Market Sentiment

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

Smart Money buys the Dips!
Optimism
Media Attention
Enthusiasm

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

Smart Money Buys Aggressively!
Capitulation

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 6/1/16

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

83% - Cash -Short Term Bond Index - VBIRX

17% -Gold- Precious Metals & Mining - VGPMX

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

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

DYI

We Have Entered The Looting Stage Of Capitalism — Paul Craig Roberts

May 25, 2016 | Categories: Articles & Columns | Tags: |  Print This Article

We Have Entered The Looting Stage Of Capitalism
Germany’s Assault On The IMF

Having successfully used the EU to conquer the Greek people by turning the Greek “leftwing” government into a pawn of Germany’s banks, Germany now finds the IMF in the way of its plan to loot Greece into oblivion.

The IMF’s rules prevent the organization from lending to countries that cannot repay the loan. The IMF has concluded on the basis of facts and analysis that Greece cannot repay. Therefore, the IMF is unwilling to lend Greece the money with which to repay the private banks.

The IMF says that Greece’s creditors, many of whom are not creditors but simply bought up Greek debt at a cheap price in hopes of profiting, must write off some of the Greek debt in order to lower the debt to an amount that the Greek economy can service.

The banks don’t want Greece to be able to service its debt, because the banks intend to use Greece’s inability to service the debt in order to loot Greece of its assets and resources and in order to roll back the social safety net put in place during the 20th century. Neoliberalism intends to reestablish feudalism—a few robber barons and many serfs: the One Percent and the 99 percent.

The way Germany sees it, the IMF is supposed to lend Greece the money with which to repay the private German banks. Then the IMF is to be repaid by forcing Greece to reduce or abolish old age pensions, reduce public services and employment, and use the revenues saved to repay the IMF.

As these amounts will be insufficient, additional austerity measures are imposed that require Greece to sell its national assets, such as public water companies and ports and protected Greek islands to foreign investors, principally the banks themselves or their major clients.

DYI Comments:  During the early days of the EU myself and friends speculated that over a period of years the central European Union would be run from Berlin.  Our speculation that this would happen during their first nasty economic downturn.  Also speculated during a downturn the whole union would fly apart.  My latest thoughts which I expressed at that time as well, was a strong federal union with the other Germanic countries and controlling interest in the remaining countries.  Once again the fear of a united Germany has prevailed.

How the Deep State’s Cronies Steal From You

by Bill Bonner • May 20, 2016

The relentless growth of Leviathan: total pages in the Code of Federal Regulations, 1950-2013 (it has continued to grow since then…). No wonder the economy is in the dumps. 

From fewer than 25,000 pages when President Eisenhower left the White House, the CFR now has nearly 200,000 pages – each one a honeypot for Deep State cronies.  And who reads this stuff? 

Do you know what rules and regulations you are breaking right now? Most people are too busy earning their money and raising their families to spend much time tracking the federal bureaucracy and its cronies. But the foxes make it their business to pay attention… and make the rules that work for them. 

An honest person is at a great disadvantage.

DYI

Balanced Budget Amendment

The need for this amendment was probably best laid out by Rep. Tom Perriello (D-VA) on March 16, 2010 when he said, "The only way to get Congress to balance the budget is to give them no choice. The only way to keep them out of the cookie jar is to give them no choice. Which is why, whether its balanced budget acts or pay as you go legislation or any of that -- it's the only thing. IF YOU DON'T TIE OUR HANDS, WE'LL KEEP STEALING." 

We believe that the best way to "tie their hands" is with a balanced budget amendment (BBA). 

We at Americans for a Balanced Budget Amendment are supportive of other groups which are also promoting passage of this amendment. Among these, the Balanced Budget Amendment Taskforcehttp://bba4usa.org is pursuing passage of this amendment via the ArticleV constitutional convention route, allowing bypass of our recalcitrant Congress. Their constitutional scholars have sample legislation which the states can use to virtually eliminate any possibility of a "runaway convention." We at ABBA support the efforts of the BBA Taskforce since winning a war often requires fighting on multiple fronts.

Balanced Budget Amendment Task Force 

Heading into 2016, we have 27 of the 34 state applications required to call an Article V Convention to propose a balanced budget amendment! With your help we can attain the final 7 necessary to reach 34 by July 4th, 2016! 

DYI Comments:  With a last minute push the Balanced Budget Amendment Task Force could have this amendment front and center for the Presidential elections providing an even more engaging election.

If passed this would end our chronic deficits that emits endless credit with a portion being paid by the Fed's digital money printing.  Hence inflation; making it far more difficult for the average person to get ahead financially.  This would put us squarely in the direction of honest money.

I'm going to watch this carefully and will provide updates.  

DYI

America’s New Law and Order Regime: In 2014 Cops Stole $5 Billion, Robbers Stole $4 Billion

by Economic Collapse News • May 25, 2016

The total annual dollar value of assets seized by federal law enforcement agencies has been soaring since 2011. At the same time, however, the total annual dollar value of assets seized through burglary has actually gone down. 

That’s right. Assets taken by the government has surpassed that of burglaries. Today, civil asset forfeiture in the United States has exceeded $5 billion, while burglaries have dipped below $4 billion. That’s just incredible. (SEE: Civil Asset Forfeiture and the Income Tax)

The Civil Asset Forfeiture Racket

It's time to end the practice of policing for profit.

A. Barton Hinkle | September 24, 2014

Hey, here’s a great crime-fighting idea: Let’s give local police and prosecutors the authority to seize cash, cars, homes, and other property from private citizens—without a court convicting those citizens of any crime. Without, in fact, even charging those citizens with any crime. Then let the authorities sell the goods and keep the proceeds for themselves. 

What could possibly go wrong? 

Well, now we know. In fact, we’ve known for a long time. Since the practice described above, called civil asset forfeiture, took off about three decades ago, its flaws have become painfully clear. The system’s incentives have led some localities to turn forfeiture into little more than a shakedown operation. 

Exactly so. Asset forfeiture should be limited to criminal cases. The government should not use a lower standard of proof to take property simply because it thinks somebody might be up to something, maybe. If it can’t prove a case, then it should not get the cash. Police departments that play by the rules should have no problem with that. And police departments that don’t should have a lot less power in the first place

DYI Comments:  This is far more than a few bad apple police departments it now has become a major industry into itself.  A majority of these cases never go to court nor plea bargains many are not even arrested.  As hard as this is to wrap one's head around - the police are arresting whatever items that are forfeit.  I've always wondered sarcastically when the police are seizing a house(or any other property) if they've read the property it's rights. The police as a rule pray upon minorities predominately as they don't have the resources to fight back nor the political power.  Any wonder why the police in these neighborhoods have such a bad reputation.

This program needs to end.  It is nothing less than tyranny.

Below is John Oliver while taking on a serious subject he addresses it in a humorous manner.  He covers very clearly that the police are arresting items such as cash, cars, houses but NOT the individuals.  A 17 minute You Tube video.  Well worth your time.

Here is John Oliver speaking about this dubious process in 2014:

DYI

NATO Invites Montenegro to Join as 29th Member Nation

Nation Set to Become NATO's Smallest Economy

by Jason Ditz, May 19, 2016

Actual membership won’t actually happen until all 29 involved nations’ parliaments sign off on the plan, but NATO today formally invited tiny Montenegro to join the alliance, making it the smallest economy in NATO. 

Montenegro would be the first new NATO member since 2009, when Albania and Croatia joined, and adds yet more former Warsaw Pact territory to the alliance, further antagonizing Russia. Russia complains NATO is trying to encircle it by absorbing former allies.

DYI Comments:  Russia is correct the alliance [U.S., U.K., NATO, EU] is in the process of encircling her from the far north Baltic Sea region to the central plains with Poland and their attempt to bring in Ukraine.  The remaining countries of the ex Yugoslavia plus the push to admit Georgia.  Geopolitics, the alliance drive is for Russia to break up especially her political sub division east of the Ural Mountains creating new counties that would be friendly to western oil and gas companies.
 
DYI 

Castro the Multimillionaire

Fidel Castro’s son enjoying a millionaire vacation, while Cubans are starving

While Cubans in Cuba have an average salary of $20 a month and cannot buy enough food to feed their families, Antonio Castro, one of the sons of Cuban dictator Fidel Castro, spent several weeks in June of 2015 cruising the Aegean Sea on his 160 foot yacht with a group of friends and several bodyguards. 

A few years ago,  Forbes magazine estimated Castro’s fortune in at least 900 million dollars. Many of those who are familiar with the dictator’s business believe that Forbes was too conservative. 

The Cuban dictator runs Cuba as if it was his own farm and the 11 million poor Cubans as his slaves. Castro’s businesses include the Convention Palace (Palacio de Convenciones); CIMEX; MEDICUBA; resort hotels and much more. 

Castro has been accused of murdering thousands of innocent Cubans; of betraying the ideals of the Cuban Revolution; of murdering many of those who helped him reach power; of keeping 11 million Cubans enslaved and many other crimes, but it seems that none of those accusations bother the Cuban dictator as much as Forbes saying that he is almost a billionaire, even though his salary is supposed to be around 700 Cuban pesos per month. 

Manuel de Beunza, a defector who used to to handle the finances for the Ministry of the Interior when he was a top officer in Cuba’s intelligence services, told El Nuevo Herald on Sunday that Castro has a bank in the UK that is completely controlled by him.

The bank is Havin Bank LTD and used to be known as Havana International Bank LTD. De Baunza, who thinks that Castro’s fortune exceeds the $900 million reported by Forbes, told El Nuevo Herald that Cuba created 270 corporations around the world that report directly to Castro.

DYI Comments: In the end all socialists become part of the criminal class as exemplified by the two Castro brothers Fidel & Raul.  Venezuela is the latest example where food is in short supply along with medications plus high unemployment and run away inflation.  Socialism works only up to the point when you run out of other peoples money!  Yet mass populations to this day are tricked into believing they can have unlimited largess from their governments.

DYI 

Despite Rally, Hype, and NIRP, Bear Markets Hound the Globe

by Wolf Richter • May 22, 2016

GLD - The Beginning Of The Long Term Bull Cycle

I am very bullish on gold's long-term prospect. Many fear that as the Fed enters its long term interest rate hike cycle, gold prices will go down further. The following chart will tell you the true story -- gold prices and the Fed fund interest rate have had a positive correlation most of the time, and the only time they are in negative correlation is when gold prices move higher while interest rates keep moving down.

 

Guess What Occupation Is Most Frequently Cited In The Panama Papers?

DYI

If this Referendum Passes in Maine this will Encourage the Remaining States to Pass This Voting Method ENDING the Death Grip from the Republican & Democrat Monopoly.

Maine Ranked Choice Voting Initiative (2016)

The Maine Ranked Choice Voting Initiative is on the November 8, 2016, ballot in Maine as an indirect initiated state statute.

A vote "for" the measure would establish a statewide system of ranked-choice voting.

A vote "against" the measure would maintain the current voting system.

Ranked-choice voting (RCV) is also known as instant-runoff voting. If approved, ranked-choice voting would be used to elect U.S. Senators, U.S. Representatives, the Governor, State Senators and State Representatives.^[1]

The initiative would define ranked-choice voting as "the method of casting and tabulating votes in which voters rank candidates in order of preference, tabulation proceeds in sequential rounds in which last-place candidates are defeated and the candidate with the most votes in the final round is elected."^[1]

http://www.rcvmaine.com/  Excellent short video explaining ranked choice voting.

WHAT IS RANKED CHOICE VOTING

Ranked choice voting allows voters to rank candidates in order of preference (i.e. first, second, third, fourth and so on). Voters have the option to rank as many or as few candidates as they wish. First choices are then tabulated, and if only two candidates received votes, the one with the most votes wins. Otherwise, the last-place candidate is eliminated. Voters who chose the now-eliminated candidate have their ballots added to the totals of their second-ranked candidate. For all other voters, their first choice still counts.

All ballots are then retabulated, with each ballot counting as one vote for each voter's highest ranked candidate who has not been eliminated. This process is repeated until only two candidates remain. The weakest candidates are successively eliminated, and their voters' ballots are added to the totals of their next choices until two candidates remain. At that point, the candidate who receives the most votes wins.

ADVANTAGES OF RANKED CHOICE VOTING

• RCV allows voters to vote for their favorite candidate without fear of helping elect their least favorite candidate. It minimizes strategic voting and eliminates the spoiler effect.
• RCV is most likely to elect a candidate with broad appeal. It ensures that winners enjoy majority support when matched against their top opponents.
• RCV encourages candidates to run with new ideas and dissenting opinions.

DYI Quick Comment:  This simple method if implemented in all fifty states will end the death grip from Republican & Democrat establishment candidates.  Opening up the process for additional political parties and their candidates as this competition will end the monopoly of shared power.      

• It promotes civility in campaigns and encourages winning candidates to reach out to more people, reducing negative attacks.
• Unlike traditional runoff elections, it accomplishes these goals in a single election. Traditional run-offs require candidates to raise much more money and are much prone to negative attacks ads.

DYI Comments:  This has the potential of seismic change if this referendum passes in Maine.  This passage would be the needed encouragement for passage in other states.  Currently the main stream press who are in the hip pocket of the establishment has ignored this ground breaking referendum hoping it will simply end in defeat.  If this passes AND has legs with other states look for politics from the establishment over the coming years to get malicious as this would end their monopoly.  They will not go down without a fight.

DYI    

Casino Alert: 80 Percent Of Stocks Have A Lifetime Return Of Zero

Longboard’s original research proves that over the long term, a small minority of stocks drive returns for the overall market. 

The principle of the competition gap remains true in practice: The minority accumulates a disproportionate amount of the total rewards, creating a “fat tail” distribution of extreme out-performers and under-performers with a large gap between the two.

So, let’s say an investor’s portfolio missed the 20% most profitable stocks between 1989 and 2015. Instead, he invested in only the other 80%. His total gain would have been 0%.

DYI Comments:  Unless you're the next Warren Buffett a master stock picker, this adds more fuel to fire for the use of index funds.  DYI model portfolio emphasis is index funds whenever possible.  Vanguard's Precious Metals & Mining Fund is a fully non-indexed manage fund the remainder as you can see below are indexed.

 Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 5/1/16

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

[See Disclaimer]

The only way to beat an index fund is with a different index fund that is far more undervalued than the former.  Currently stocks and long term bonds are in bubble land only cash Vanguard's Short Term Bond Index Fund over the coming years will out perform both stocks and long term bonds. Even though the precious metals fund is not an index fund it is far more likely to out perform stocks and long term bonds as well.  Markets have been upside down for many years as the Fed's have blown their third bubble in less than twenty years.  Below are my sentiment indicators which is based upon a secular basis.

Market Sentiment

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

Smart Money buys the Dips!
Optimism
Media Attention
Enthusiasm

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

Smart Money Buys Aggressively!
Capitulation

An upside down world indeed!

The Great Wait Continues...

DYI

May 23, 2016

The Coming Fed-Induced Pension Bust

John P. Hussman, Ph.D.

At present, years of relentless quantitative easing by the Federal Reserve have driven equity valuations to the point where prospective 10-12 year S&P 500 total returns are just 0-2% by our estimates, while Treasury yields are also below 2% and Treasury bill yields are only a fraction of a percent. The combination brings the expected return on this portfolio mix to the lowest level in history outside of the valuation extremes of 1929, 1937, and 2000. Yet, because investors and policy-makers seem incapable of distinguishing realized past returns from expected future returns, they fail to see the danger in this situation.

DYI Quick Comment:  It is required by law to post this caveat emptor (buyer beware) statement regarding financial returns: Past performance is no guarantee of future returns. The general public is excused but pension policy makers are marking their profession for negligence and incompetency.  

Recall, as I detailed last week, that real "wealth" is not inherent in the price of a security, but in the stream of cash flows it delivers over time, and the value-added production that generates those cash flows. The only way for you to spend out of the paper "wealth" of an overvalued security is by selling it to someone else and letting them hold the bag. By encouraging a sense of illusory, paper wealth, all the Fed has done is to discourage saving, and by extension, real investment (which in equilibrium must be identical to saving). Because of the Fed's singular focus on punishing saving and encouraging debt-financed consumption, growth in real gross private domestic investment in the U.S. has collapsed in the past 16 years, growing at less than 1.0% annually since 2000, compared with 4.6% annually in the preceding half-century. 

Put another way, the Fed has encouraged the illusion of paper wealth while simultaneously destroying the capacity of the U.S. to produce real wealth.

All of this is tied together: zero interest rate policy, speculative yield-seeking, pension under funding, financial bubbles, malinvestment, crisis, and economic stagnation. The intentional distortions created by wholly experimental monetary policy carry a great deal of responsibility for these outcomes. The global financial economy has been pushed to such reckless speculative extremes that the ability of this house of cards to survive even a quarter point increase in short-term interest rates is a subject of serious and uninterrupted debate.

 To get a full sense of the level of denial here, the following argument appeared in a February brief from the National Association of State Retirement Administrators:

“Some critics of the current public pension investment return assumption levels say that current low interest rates and volatile investment markets require public pension funds to take on excessive investment risk to achieve their assumption... Although public pension funds, like other investors, experienced sub-par returns in the 2008-2009 decline in global equity markets, median public pension fund returns over a longer period exceed the assumed rates used by most plans. Specifically, the median annualized investment return for the 25-year period ended December 31, 2015 exceeds the average assumption of 7.62 percent... Over the last 25 years, a period that has included three economic recessions and four years when median public pension fund investment returns were negative, public pension funds have exceeded their assumed rates of investment return.”

National Association of State Retirement Administrators, NASRA Issue Brief, February 2016

To draw an inference about future returns using investment returns over the past 25 years is to draw a line from the depressed valuations of 1990 to the obscene valuations of today, and then extrapolate it indefinitely. The realized past returns of this period have been strong precisely because they have robbed from future expected returns. The tide will turn, as it always has in complete market cycles across history, and as investors discovered during the market collapses of 2000-2002 and 2007-2009. The erasure of realized past returns will restore reasonable prospects for future investment, as other retreats have done. 

Meanwhile, keep saving, reach for umbrellas, fasten your seat belt, and brace for the consequences and eventual opportunities that the current recklessness will bring.

DYI Comments:  Returns are inverse to valuations.  Valuations have been pumped up for many years pushing future returns below the average 8% assumed rate of return for pensions. Pension management along with self funding pensions (401k, Roth IRA etc.) is a moving target not static.  This is a difficult ordeal for pension professionals for John Q. Public this is just another reason, among many, for the dismal state for those relegated to - do it yourself pensions.

   

Current Shiller PE 25.64

How bad is the future under funded pension obligations including self funding plans.  I don't have a dollar figure but we can get an idea as most pension (including self funding) assume an 8% return.  Below is DYI's chart for 10 year estimate average annualized returns based upon dividend yield.  Dividends are the compounding mechanism for future returns just as it is for bonds.  Higher the yield - higher the future return, lower the yield - lower the future return.  Simple....Here's the chart....

  

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%
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.

A 3.5% dividend provides a 7.8% future return or close enough to most pension assumptions of 8%.  How long has dividend yields been below 3.5%?

Current dividend yield 2.14%

The Fed's through their total recklessness has engineered a pension crises of biblical proportions.  In my mind the Fed's are not capable of being reformed as I've been in the camp of Ron Paul for over two decades that we should end the Fed.  Not only have they created a pension crises, they have embarked upon to destroy basic savings.  The life blood for economic growth begins with savings once they become excessive they are used for business formation creating jobs.  Also most retirees supplement their Social Security with interest from their CD's at the bank.  With sub atomic low rates the elderly have had to spend the principal to make ends meet.  Once the principal is used up many have had to reenter the work force (many never left do to such low rates) to maintain a reasonable living.

So far we have had eight years of sub atomic low rates with a mentality of doing what ever it takes.  All this has done is to jack up leverage along with security prices but has done nothing for the real economy.  The common man has been impoverished as jobs have vanished, who no longer can afford a house, nor can he invest to out run your intentional debasement of our currency.

The Fed's REAL mandate is to save the banks up to and including STEALING from the public through currency debasement.  The banks in New York and London made bad bets and are bankrupt.  The money center banks had their thrill with massive speculative bets and the American public (along with England) GET'S THE BILL.

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 5/1/16

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

[See 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.

DYI

The Humungous Depression

If one dates the beginning of a depression from the time when the benefits of debt are, in the aggregate, outweighed by its burdens, the depression began in 2000,["spot on DYI"] with the implosion of the fiat-credit fueled, high-tech and Internet stock market bubble. Unsustainable debt and artificially low interest rates lower the rate of return on productive investment and saving, increasing the relative attractiveness of speculation. Central bankers and their minions refer to this as “forcing investors out on the risk curve,” crawling way out on a limb for fruitful returns. They have no term for when markets saw off the branch, as they did in 2000 and again in 2008. 

Most people don’t see 2000 as the beginning of a depression, but Washington and Wall Street cloud their vision. Stock markets were once essential avenues for raising capital and valuing corporations. Since central bankers’ remit was broadened to their care and feeding, stock markets have become engines of obfuscation. The “wealth effect” supposedly justified solicitude for markets: a rising stock market would increase wealth, spending, and economic growth. For seven years a rising market has coexisted with an anemic rebound and one hears little about the wealth effect anymore. The stock market is the preeminent symbol of economic health, so keeping it afloat has become a political exercise. Sure, central bankers and governments know what they’re doing, just look at those stock indices. 

Let’s look at those stock indices. They are measured in fiat debt units, the entirely elastic quantity of which is in the hands of governments and central banks. What if stock indices are valued in a less ephemeral currency, say gold, aka “real money”? By that measure, the DJIA divided by the price of an ounce of gold reached its all-time high of about 41 ounces in May 1999, or just before the depression began. That ratio collapsed to under 7 ounces in September 2011, and currently stands at about 14. If you paid for the Dow in 1999 with gold, you’ve lost 65 percent on your original investment.

 5-1-15

Updated Monthly

Secular Market Top - Since January 2000

+  54.6% Dow       

+164.4% Transports 

+131.0% Utilities

+40.6%  S&P 500

+17.4%  Nasdaq

+58.8%  30yr Treasury Bond

+345.6% Gold

  +79.9% Oil
  +64.6% Swiss Franc's

    

From High to Low

+345.6% Gold

+164.4% Transports

+131.0% Utilities 

+  79.4% Oil
+  64.6% Swiss Franc's

+  58.8% 30 year Treasury bond

+  54.6%  Dow
+  40.6% S&P 500

+  17.4% Nasdaq

They see a bleak future and they’re not wrong. The global economy hit stall speed with the commodities crash in 2014 and another rendezvous with terra firma looms. Never has the world been more in debt. True recovery won’t happen until most of it has been repudiated and written off. The current depression is already longer than the Great Depression. By the time it’s over, economic historians will be calling it the Humongous Depression.

DYI Comments:  Will it be fire or ice?  Fire is devaluation causing inflation thereby shafting the debt holders who will be paid in depreciating dollars or a icy deflationary smash causing massive defaults. My guess, and it is only a guess(hopefully more informed than the average person) we will first experience an icy deflationary smash pushing the political class into a devaluation.  In other words a repeat of the 1930's.  This is why countries are scrambling to build up their gold reserves so they we have a seat at the table when the world has its monetary reset. So far the countries who will be seated is the U.S., Germany, China, Japan, and Russia.  England will be in the room but will be relegated to a participating spectator allowing to speak from time to time but will not be at the table. Canada who just recently sold off all of their gold will remain at home.

With the U.S. England, EU countries, and Japan massively in debt it is very likely most if not all of these countries will inflate to lower their debts relative to their GDP's.  With interest rates at sub atomic levels long term bonds are now a speculation betting on continued low inflation or deflation.

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 5/1/16

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

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DYI