U.S. Stock Market Remains at Nose Bleed levels...Its all Fun & Games Till Someone Gets Hurt!

J. Paul Getty Quote!

 "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."

 Bubble

News!

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 2/1/22

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 domestic or international companies they believe will perform well during times of world wide stress or economic declines.  

 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.

Margin of Safety!

Central Concept of Investment for the purchase of Common Stocks.

"The danger to investors lies in concentrating their purchases in the upper levels of the market..."

Stocks compared to bonds:

Earnings Yield Coverage Ratio - [EYC Ratio]

Lump Sum any amount greater than yearly salary.

PE10  .........37.31
Bond Rate...2.84%

EYC Ratio = 1/PE10 x 100 x 1.1 / Bond Rate

1.75 plus: Safe for large lump sums & DCA

1.30 Plus: Safe for DCA

1.29 or less: Mid-Point - Hold stocks and purchase bonds.

1.00 or less: Sell stocks - Purchase Bonds

Current EYC Ratio: 1.04(rounded)

As of  2-1-22
Updated Monthly

PE10 as report by Multpl.com

Bond Rate is the rate as reported by

Vanguard Long-Term Investment-Grade Fund Investor Shares (VWESX)

DCA is Dollar Cost Averaging.

Lump Sum is any dollar amount greater than one year salary.

Over a ten-year period the typical excess of stock earnings power over bond interest may aggregate 4/3 of the price paid. This figure is sufficient to provide a very real margin of safety--which, under favorable conditions, will prevent or minimize a loss...If the purchases are made at the average level of the market over a span of years, the prices paid should carry with them assurance of an adequate margin of safety.  The danger to investors lies in concentrating their purchases in the upper levels of the market.....

Common Sense Investing:
The Papers of Benjamin Graham
Benjamin Graham

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%
Stocks & Bonds

Allocation Formula

2-1-22
Updated Monthly

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

Formula's answer determines bond allocation.

Current PE10.....37.31

Avg. PE10...........16.91

% Stock Allocation    0% (rounded)
% Bond Allocation 100% (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 mean, 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 16.70.  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 25 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.

Please note:  I changed the formula when the Shiller PE10 is trading at it's mean - stocks and bonds will be at 50% - 50% representing Ben Graham's Defensive investor starting point; only deviating from that norm as valuations rise or fall.        

  

DYI

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.

The Formula.

A value based allocation strategy

February 19, 2010 by John Kingham

DYI:  Eventually the Federal Reserve will have to come to the cross roads to either defend the dollar or defend the stock market this decision time will soon be placed at their doorstep.  Defending the stock market requires more and more easy money or more bluntly stating INFLATION.  The real inflation rate is not the Fed’s bogus 6.7% it is closer to 13% to 17%.  The higher number if you live in the major cities hugging our Atlantic and Pacific Ocean with the lower at the interior of America. 

The Fed’s are very aware that unbridled ever increasing HIGH inflation if maintained for the long term revolutions are spawned whether peaceful or violent ginned up from the people.  If there is going to be any revolutions – [from the elite’s point of view] – they will be controlled oppositions benefiting the elites, however  in my judgment that time has past as they have already given the American public their staged, faked pandemic alerting and awakening more of the American public to these organized criminals that have a stranglehold on America.  If they do attempt a controlled revolution the elites will lose control of the situation and end up with a grass roots movement.  This is exampled to a far lesser degree the Canadian trucker convoy that started out by the elite’s but grew way beyond their control so much so Prime Minister Justin “Castrol” Trudeau fled the capital of Ottawa.

So…That leaves the Fed’s with defending the dollar that will require increasing interest rates and scale back their money printing.  Bond prices will be smashed in the high yield and junk category.  High quality corporate/government bonds will sag in value with the stock market over a few months will drop at minimum of 50%.  This is the direction I believe they will go since many super rich such as Black Rock’s real estate arm Black Stone has been buying tangible assets at a monstrous pace thus staying away from stock and bond investments.

So hang onto your hats along with your gold and cash better values are ahead.

DYI