Saturday, June 22, 2024

 

Sentiment Location


Smart Money - Buys Aggressively!
Capitulation
Despondency
Max-Pessimism 
Depression 
Hope - Silver F
Relief *Market returns to Mean  - Short Term Bonds & MMF

Smart Money - Buys the Dips!
Optimism - Gold
Media Attention
Enthusiasm

Smart Money - Sells the Rallies!
Thrill
Greed
Delusional
Max-Optimism  Residential Real Estate
Denial of Problem - Stocks 
Anxiety 
Fear
Desperation - Long Term Bonds

Current Economic Conditions

Prosperity - Moderate
Recession - Shallow
Deflation - None
Inflation - Moderate

Economic Choices
None
Shallow
Moderate
Prominent
Extreme 

DYI:  Long term investors those who are investing for a lifetime and especially for multigenerational organizations knowing the location for the booms and busts is the difference between excellent returns or those that are subpar (or possibly losses).

Let’s start for those asset I track that are on top of the mountain – max optimism – and work our way down the scale to max pessimism. 

Currently residential real estate despite mortgage interest rates moving up from around 3% to 7% home prices have refused to fall – or only sag minutely – where on the coastal regions homes have actually increased in price!  Until I see across the board inflation corrected declines in price this asset – residential real estate will remain at max-optimism.

Stocks are placed at Denial of a Problem.  No longer at max-optimism but one notch down as all listed stocks on the NYSE advance-decline line has remained flat since January 2022 only recently as of March 2024 there has been slight rise.  Bottom line stocks are not moving up in bull market fashion.  Less and less stocks are making their all-time high list that is a major sign of an ageing bull market.

Long term bonds as opposed to residential real estate have reacted violently to the downside as rates exampled by the 10 year T-Bond that bottomed at 0.52% (August 4, 2020) then whipsawed at a breath taking speed racing to 4.80% on September of 2023.  Only recently has rates slightly backed off with the 10 year T-Bond now at 4.22%!  The 10 year T-Bond yield has increased by 711% (current yield)!  Wow!

Silver bullion is at hope.  I haven’t changed silver’s sentiment location a bit more time needs to pass to see if its new higher price remains.  Silver is one of the standouts due to the Gold to Silver Ratio is massively in favor for silver – 79 to 1.  Precious metals are a stand out for value plus you will have the possibility of an extra kicker when the huge gap between gold and silver ratio closes back to its average since 1900 at 50 to 1.

Short term bills and notes of 5 years or less were in the dog house as the Fed’s pursued sub atomic low interest rate policy for years.  Now that that has changed these short rates are now at their respective mean.  For the first time in years savers/investors are able to make something from their hard earned savings.  Unfortunately inflation hasn’t cooled off enough to make a positive return (negative interest rates).  Nevertheless those holding cash equivalents at least now have a fighting chance.

Gold is at Optimism.  The Dow to Gold Ratio is currently at 17 to 1 (rounded) measured against its long term average of 10 to 1 since 1900.  There is a lot of up side potential left in gold as we all know markets whether bull or bear will go way beyond their respective average.

What would a lifetime investor or multigenerational institution portfolio look like?  My model portfolio that only changes as valuations change looks like this:

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 6/1/24

Active Allocation Bands (excluding cash) 0% to 50%
30% - Cash -Short Term Bond Index - VBIRX
45% -Gold- Global Capital Cycles Fund - VGPMX **
 25% -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.  

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