Bubble  

News

World's Top Tech Giants Amass $1.7 Trillion in Monster Year

That’s more than Canada’s entire economy, and exceeds the worth of Germany’s biggest 30 companies put together. The eight tech giants -- Facebook Inc., Amazon Inc., Apple Inc., Netflix Inc. and Google parent Alphabet Inc., as well as their Asian peers Baidu Inc., Alibaba Group Holding Ltd. and Tencent Holdings Ltd. -- have amassed as much money in 2017 as Pacific Investment Management Co., one of the world’s biggest fund managers, has done in about 46 years.

DYI: 

This moment in time the U.S. market is a gargantuan overvalued, overpriced, insane asylum!  These few stocks are now greater than the entire Canadian economy?  Good lord if this isn’t a bubble then someone better put a new definition of what a bubble is! 

%

Allocation Formula

11-01-17
Updated Monthly

% Allocation = 100 – [100 x (Current PE10 – Avg. PE10 / 2)  /  (Avg.PE10 x 2 – Avg. PE10 / 2)]

Current PE10.....31.47

Avg. PE10.........16.80

% Stock Allocation 8% 

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 median, 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 16.80.  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 20 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. 

 If DYI’s percentage allocation formula goes zero to negative you may want to add a small short position to add a possible bit a zip to augment your massive cash horde such as Federated Prudent Bear Fund symbol BEARX.  This is NOT followed in my model portfolio; however I will make comments regarding other markets such as oil, European, and Asian etc.

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 11/1/17

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

73% - Cash -Short Term Bond Index - VBIRX

25% -Gold- Precious Metals & Mining - VGPMX

 2% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

So…Hold onto your hats and your cash better valuations are ahead! 

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DYI