Head of the Snake

The Federal Reserve 

"If the American people ever allow private banks to control the issue of their currency, first by [asset] inflation, then by [asset] deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.

I believe that banking institutions are more dangerous to our liberties than standing armies.  The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

Thomas Jefferson

The Crash Of The “Everything Bubble” Started In 2018 - Here’s What Comes Next In 2019

In almost every instance during which the Fed created a crash environment, banking institutions were able to use the opportunity to snatch up hard assets for pennies on the dollar, as well as steal more political and social power. 

During the Great Depression, major banks absorbed thousands of smaller local banks as well as all the assets those banks held. In 2008, banks and corporations enjoyed a deluge of easy money paid for by American taxpayers for generations to come, while also vacuuming up hard assets like distressed home mortgages. 

An even greater prize for banking elites is global centralization of economic authority, which is what I believe their goal is as the next engineered crash runs its course. 

As crisis leads to catastrophe, it will be institutions driven by globalism like the International Monetary Fund (IMF) and Bank for International Settlements (BIS) that step in to “save the day”.

This is a controlled demolition of the economy and markets. The Fed will jawbone as much as possible to keep the system from imploding too fast, because jawboning is the only tool that is left. In the meantime, 

Powell will keep cutting assets and raising interest rates on schedule. 

This will inevitably translate into lower prices in equities as the system is “steam valved” down. Blind faith by investors will only go so far. They will be left holding the bag, right along with pensions.

 

DYI:  Once again the Federal Reserve along with all other 1^st world central banks have blown another bubble that will pop at the time of their choosing sending asset prices spiraling down from 60% to 75% for stocks and at the very least 50% for high yielding corporate bonds [BBB quality]. Large numbers of junk bonds will simply go to zero with the remaining on life support down 80% to 90%!  The question is how long this total inversion from peak secular high to trough secular low will take.  My guess – admittedly is not much help – 3 to 8 years [see chart below].  Will it be similar to the 1929 to 1932 or the long dragged out market decline from 1968 to 1982 with multiple cyclical market ups and downs before bottoming out?  Who knows?

 

What DYI does know our valuation based averaging formula will only add to our asset allocation model as valuation(s) improve substantially increasing future return systematically.  Until that happens DYI’s model portfolio remains with plenty of dry powder for the hunt when valuations improve.

     Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 01/1/19

Active Allocation Bands (excluding cash) 0% to 50%

68% - Cash -Short Term Bond Index - VBIRX

29% -Gold- Global Capital Cycles Fund - VGPMX

 3% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX  

DYI