Bubble

News

The iconoclast Jim Rogers is interviewed by the freethinker Michael Pento.

Some of the highlights of the discussion are:

• Government debt has doubled since 2009
• Japanese central banks control Japanese ETF market. They are constantly buying Japanese ETF's. By the way I own Japanese ETF's.
• Swiss Central Bank now everyday prints money and buys Amazon and Google, they buy the Banks in America. The Swiss Franc is now backed by Google.
• The next bear market in Bonds. Junk bonds will get killed.
• Half of cities in Germany are bankrupt.
• Additional U.S. cities will file for bankruptcy
• U.S. pensions public and private will be decimated.
• U.S. real estate commercial and residential will have massive sell offs. 
• U.S. bear market in bonds from 1946 (2%) to 1981 (15%) 10 year Treasury.  Bull market in bonds from 1981 (15%) to 2012 (1.4%) - so far.  We are due for a secular bear in bonds.
• U.S. will experience the worst bear market in U.S. history!

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DYI:  When stocks on a valuation basis are at their mean – Shiller PE¹⁰ 16.84% - an investor will have 50% in stocks and 50% in bonds.  Historical valuation based on Benjamin Graham’s balanced approach [50%-50%] only diverting from that norm progressively as stocks valuation diverge from its historical average (since 1871).  U.S. stocks are now so absurdly priced DYI’s averaging formula has “kicked you out of the market” and rightfully so.  

%

Allocation Formula

3-13-18
Updated Monthly

% Allocation = 100 – [100 x (Current PE10 – Avg. PE10 / 4)  /  (Avg.PE10 x 2 – Avg. PE10 / 2)]

Current PE10.....33.49

Avg. PE10......... 16.84

% Stock Allocation 0% (rounded)

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.  

 DYI

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