Never

Forget

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: 

This blogger has been involved as an investor for 45 years – since the age of 20 – yep that’s right I’m 65 years old.  What we have today is an overblown stock market since 2012 when it achieved the 1966 valuations; around 2016 broke through the 1929 high and possibly will assault the 2000 valuation top!    

To be blunt this is a terrible time to invest in U.S. stocks! 

Take a look at the chart below highlighting previous market tops with their subsequent 10 year returns.     

Purchasing or holding stocks at these valuation levels should expect a negative return over the next 10 years.  What to expect for a 20 year holding period?  Let’s go to money chimp – [they do all the math] – placing in today’s Shiller PE of 32 along with our sub atomic low dividend yield of 1.75% your estimated average annual return before any expenses is…drum roll please…3.22%!  Hope does spring eternal for at least the return starting out is positive.  But alas most 401k’s have a 1% management fee throw in 0.50% for trading impact cost and of course our ever present inflation around 2%.  Add this all up equals 3.50% and lo and behold you are back to a negative return.

The bond rally of lifetime has played itself out.

There may remain speculative sauce furthering the bond rally of a lifetime as another recession is sure to arrive again.  However it does not take a genius to figure out with yields topping out at 15% in 1981 and trading under 2% today the bond rally of a lifetime has essentially played itself out.  After all of those pesky costs including inflation the real return over the next 10 or 20 years will highly likely be negative!

The Dow/Gold Ratio

Precious metals and their mining companies remain reasonably priced.

  

As of 1/17/20

Dow/Gold Ratio

19 to 1

  Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 1/1/20

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

50% - Cash -Short Term Bond Index - VBIRX

50% -Gold- Global Capital Cycles Fund - VGPMX **

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

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

** Vanguard's Global Capital Cycles Fund maintains 25%+ in precious metal equities the remainder are companies they believe will perform well during times of world wide stress or economic declines.  

As J. Paul Getty stated so wisely stated stock and bond certificates are not betting slips; DYI is holding on to our cash and mining companies/ precious metals for the wild ride ahead since gold bottomed out late 2015! 

 DYI