Role

Reversal

Once upon a time – in the 1960’s – Liberals, also known as Hippies, were accurately portrayed as anti-war and extremely distrustful of government.  The Conservatives were correctly depicted as maintaining the status quo – government seen as basically benign, corporate ties to government as helpful and necessary, and a nation waging wars for the betterment of mankind. This is what we have today with both political parties maintaining the status quo.  The only true Liberals today are primarily who express themselves as Libertarian and a minuscule sliver of ageing Hippies – in their 70’s plus – from the Democratic Party.

The Civil War – (The War of Northern Aggression) – was the Republican and Democrat apex of difference.  From that point on decade after decade differences narrowed until the early 1990’s their policy driven legislation differences are insignificant.  Only the tone of rhetoric marks the difference with Republicans as the stern task masters and the Democrats with a conciliatory quality. 

Yet in the end not a bit of difference; exampled and highlighted by an overwhelming vote of both houses – signed by the President [Obama] the repeal of the Smith–Mundt Act (July 2, 2012) allowing U.S. government’s broadcasting facilities to deliver programming to American audiences.  Pure PROPAGANDA produced by government facilities then delivered through our mass media in all forms.  The political duopoly has your vote – now there after your heart, mind, and soul.

Now that the lid has been popped off real news no longer has to be repressed by the government.  All that is required in order to bury the truth [the government no longer needs to censor, outlaw, or outright murder], simply produce a continuous kaleidoscope of fake celebrity news, fake mass murders, and fake “talking heads” commentary.

The generations coming up who are Libertarian – socially liberal and economically conservative – understand our stranglehold of freedom is big government AND big business.  Libertarians require these super mega corporations the likes of J.P. Morgan or ExxonMobil etc. have to be broken up.  Just as Theodore Roosevelt did in his time – it is our time as well.  The Federal government with its alphabet agencies needs to be closed as exampled by the F.B.I. that has simply morphed into the secret police.  Or the Education Department, who educates no one, yet dispenses out money for those communities that favor the Fed’s current position such as Common Core. 

Restoring the balance of power back to the States and to local government as well with favoritism towards small business is the path to power decentralization creating the environment for a flourishing Constitutional Republic.

 DYI

How Much Death and Destruction Awaits Us in 2018?

Among the economic threats are stock, bond, and real estate markets artificially pumped up by years of central bank money creation and by false reports of full employment. It is an open question whether participants in these markets are aware that underlying reality does not support the asset values. Central banks support stock markets not only with abundant liquidity but also with direct stock purchases. The Japanese central bank is now one of the largest owners of Japanese equities. Central banks, which are supposed to provide economic stability, have created a massive fraud. 

The Saker explains that Americans with intelligence, honor, courage, and integrity have disappeared from the US national security establishment. In their place are arrogant morons high on hubris who believe: 

(1) We can buy anybody, (2) Those we cannot buy, we bully, (3) Those we cannot bully, we kill, (4) Nothing can happen to us, we live in total impunity no matter what we do.

 DYI

Huge News Stories You Probably Didn’t Hear About in 2017

1. The government continued its push to spy on you indiscriminately — When Edward Snowden revealed to the American public the extent of the federal government’s surveillance programs, the country was outraged for a few fleeting moments. But the issue of privacy violations has largely faded into obscurity since then, even as the government’s push for these policies continues. Before leaving office, Barack Obama granted more surveillance authority to federal agencies, and once Trump took office, his administration began pushing to reauthorize the Foreign Intelligence Surveillance Act, which has not only swept up the records of foreigners, but also American citizens. 

2. Just as in the Obama years, the civilian death toll from American military operations was swept under the rug — Despite some mainstream reports on the mass casualties the Trump administration has incurred durings its ramped up operations in the Middle East, over all, concerns over the loss of innocent life remain lost on the American public. Though Obama dropped over 26,000 bombs during his last year in office — a massive number — the Trump administration dropped over 20,000 in its first six months. Roughly halfway through the year, over 2,000 civilians had died, and in the battle of Mosul, alone, over 3,200 died as a result of the U.S. coalition, contributing to a total of between 9,000 and 11,000 civilian deaths. 

3. Police violence continues — Aside from several high-profile instances of police brutality, including the brutal shooting of Philando Castile, a legal gun owner (the officer was acquitted of all charges and received a settlement from the police department),  and the recent instance of a cop forcing a pet owner to behead his own dog, mainstream attention on the system problem of police misconduct has been quiet this year (especially compared to 2014, for example, when protests in Ferguson, MO, drew ongoing national attention). At the same time, President Trump encouraged officers to be rough with suspects and continued to assert his unwavering support for law enforcement, claiming anti-police sentiment is “wrong” and “dangerous.” He also reinstated the federal government’s program of granting military gear to local police. Meanwhile, American police continue to kill civilians at staggering rates, with estimates ranging between 976 and almost 1,182 for 2017. The number of cops killed in 2017 was the second-lowest in 50 years, according to data from the National Law Enforcement Officers Memorial Fund.

 DYI

In the short run the market is a voting machine, but in the long run it is a weighing machine. Benjamin Graham

Quotes

Benjamin Graham

To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.

The intelligent investor is a realist who sells to optimists and buys from pessimists.

The defensive (or passive) investor will place chief emphasis on the avoidance of serious mistakes or losses. His second aim will be freedom from effort, annoyance, and the need for making frequent decisions.

People who invest make money for themselves; people who speculate make money for their brokers. And that, in turn, is why Wall Street perennially downplays the durable virtues of investing and hypes the gaudy appeal of speculation.

Thousands of people have tried, and the evidence is clear: The more you trade, the less you keep.

It should be remembered that a decline of 50% fully offsets a preceding advance of 100%.

The intelligent investor shouldn’t ignore Mr. Market entirely. Instead, you should do business with him- but only to the extent that it serves your interests.

Mr. Market’s job is to provide you with prices; your job is to decide whether it is to your advantage to act on them. You no not have to trade with him just because he constantly begs you to.

Even defensive portfolios should be changed from time to time, especially if the securities purchased have an apparently excessive advance and can be replaced by issues much more reasonable priced.

Diversification is an established tenet of conservative investment.

DYI

Critical thinking

Disciplined thinking that is clear, rational, open-minded, and informed by evidence:

EFFORTS GROW TO HELP STUDENTS EVALUATE WHAT THEY SEE ONLINE

IOWA CITY, Iowa (AP) -- Alarmed by the proliferation of false content online, state lawmakers around the country are pushing schools to put more emphasis on teaching students how to tell fact from fiction. Lawmakers in several states have introduced or passed bills calling on public school systems to do more to teach media literacy skills that they say are critical to democracy. The effort has been bipartisan but has received little attention despite successful legislation in Washington State, Connecticut, Rhode Island and New Mexico.

 DYI:

Associated Press is short on specifics and long on glittering generalities, so much so, I can only assume their meaning of “media literacy” is acceptance of mainstream media as truth and all others as fake news.

What is required in our schools is critical thinking skills once fully develop media propaganda would stop dead in its tracks as educated citizens check verifiable evidence for what is being presented.  Critical thinking citizens would reject the emotional laden propaganda and seek out tangible evidence proofing or dis-proofing events such as the Las Vegas shooting and other historical episodes for their authenticity as illustrated by the moon landings.  Both of these were clearly faked yet many of our citizens today believe both occurred.

DYI  

U.S.

Junk Bombs!

U.S. junk bonds are time bomb with a long fuse

NEW YORK, Dec 29 (Reuters Breaking Views) - U.S. junk bonds are a time bomb with a long fuse. Low default rates, a lack of alternatives and foreign demand will support high-yield bonds in 2018. Yet with spreads near record lows, covenants weak and leverage rising, the seeds of a bear market are plentiful. 

Demand for yield from pension funds, endowments and other investors has driven the spread - or premium over U.S. government bonds - near levels not seen since the pre-crisis boom. It's unlikely to rise anytime soon. Despite a sharp spike from the energy sector's woes two years ago, the default rate on high-yield bonds should decline to 2 percent by the end of 2018, the lowest since 2013, Fitch forecasts. 

The yield premium on high-yield bonds relative to comparable U.S. Treasuries hit 3.61 percentage points at the end of November, 

down a full point from a year earlier and near the post-crisis low of 3.35 percent set in June 2014, according to Bank of America Merrill Lynch. The spread has not traded consistently below that level since the eve of the financial crisis in 2006 and the first half of 2007.

 

DYI:

There’s a time to hold, fold, or cash in your chips.  If you own high yield paper – A.K.A. junk bonds – the time to sell – cash in your chips – over the past two years.  The spread is significantly below the average 579 basis points – or 5.79%.  Today the spread is only 3.61% very little bang despite the high risk for your dollars.  The best time to buy and in my humble opinion, the only time to purchase junk bonds are during an economic downturn when spreads break the 10 percent threshold.

Benjamin Graham

“It is our argument that a sufficiently low price can turn a security of mediocre quality into a sound investment opportunity — provided that the buyer is informed and experienced and he practices adequate diversification. For, if the price is low enough to create a substantial margin of safety, the security thereby meets our criterion of investment.”

When junk bonds drop in price significantly with spreads greater than 10% they move from speculation to an investment with a high degree of safety.  Of course this goes against human nature of selling when everything looks safe and buying during the depths of despair.  Until despair arrives DYI will ignore – but not forgotten – high yield paper.

 DYI

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]

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 - rebalance portfolio - Re-think stock/bond allocation.

Current EYC Ratio: 0.96 (rounded)

As of 1-1-18
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 any amount greater than yearly salary.

PE10  .........32.46
Bond Rate...3.53%

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

U.S. Stock Market Moon Shot CONTINUES!...MASSIVE OVERVALUATION!

%

Allocation Formula

1-01-18
Updated Monthly

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

Current PE10.....32.46

Avg. PE10.........16.81

% Stock Allocation 5% (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.  

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 20 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.      

  

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

The

Business of Higher Education

Doug Casey on Why College Is a Waste of Money

Justin: Doug, I recently had an interesting conversation with my sister.She told me that her financial advisor suggested she start setting aside $500 to $1,000 a month to pay for her son’s college education. That’s because a four-year college education is apparently going to cost between $400,000 and $500,000 18 years from now. 

Her advisor clearly arrived at this figure based on how fast college tuition costs have been rising, which is about 6% per year based on my research. 

But you have to wonder if the cost can keep rising at this rate. It seems to me that no one will go to college if it’s going to cost a half-million bucks.What do you make of this trend? 

Doug: Well, the first thing—my advice to your sister is to get a new financial advisor. I fear that she’s relying on a complete imbecile. She should fire him immediately, and for a number of reasons. 

Number one is his assumption that the trend of higher college costs is going to continue to a totally unaffordable level. 

In fact, the cost/benefit ratio of going to college is already so out of whack that the whole system has to change radically. 

A college degree, even now, is of only marginal value; most everybody has one. And things that everybody has are devalued. You’re quite correct that colleges and universities today are dead ducks as businesses. Unless you’re going to learn a trade, like doctoring or lawyering, or you’re going for science, engineering, or math, where you need the formal discipline and where you need lab courses, it’s a total misallocation, even a waste of money to go to college today.

 DYI:
I wouldn’t go to the point of a complete waste of time; however there is no doubt that the loudness of the bang for your educational dollar has diminished to a whisper.  If you are going to pursue a degree do it as cheaply as possible.

• Avail yourself to the College Level Examination Program – CLEP – study hard and pass as many as possible the cost is a fraction spent in a college setting.

• Go to a community college that is aligned with the four year state school (far cheaper than private on average) you wish to graduate from dropping your cost further.

• On line accredited courses as well plus paying cash whenever possible to stay away from the debt servitude of student loans.

• Stay at home with Mom and Dad.  Room and board as a hotel guest of University Whatever chews up precious dollars.  Unless your parents are well off and paying the bills it is NOT worth the costs.   

• Sign up for any and all grants or possible scholarships…Yep beg for as much free money as possible.  Going to school is no longer having those fond warmhearted memories; it is a business; all businessmen and women will tell you the key to success is cost control.

College Prices Hit New Record Highs in 2016

The total published or “sticker” price for attending an in-state public university averaged $24,610 a year in the fall of 2016, the College Board said today in its definitive annual report. That cost, which includes tuition, fees, room, board, books, travel, and miscellaneous costs, is up $527, or more than 2%, from last year.

Half of those costs is room and board…Your average cost is around is around $12,000 per year or $48,000 total; a cost that is NOT worth the effort.  CLEP, community college, stay at home, beg for grants and scholarships and shop for a lesser cost school you want your degree to be under $10,000 all in AND with little or no debt.  Remember colleges or universities are nothing more than businesses so treat them as you would any enterprise.  Sorry to report that is how the F’ing world works.

DYI

The Old – New

Cold War?

Russia's Military Is Leaner, But Meaner

That's a simplistic answer from a politician starting an election campaign (of sorts: Putin is headed for re-election in March without giving anyone else a chance). The more pointed question that should be asked is this: How, with a relatively small and decreasing military budget -- 2.77 trillion rubles ($42.3 billion) for 2018, down from some 3.05 trillion rubles this year -- is Russia is still a formidable military rival to the U.S., with its enormous and increasing budget of almost $692.1 billion in 2018, up from $583 billion this year?

DYI:

Let’s get straight to the point Russia militarily nor economically is not a threat to the U.S.  The Russians have always been the master’s of playing a weak hand – they are bluffing virtuosos as their economy is only a fraction the size of the U.S - $4 trillion U.S. dollars – as compared to the U.S. at $19 trillion.  This economic size differential is the driving force for military procurement staggering both in width – lack of conventional military for political power projection and depth – lack of leading edge military weapons development.  In a head to head naval contest between England and Russia – England would win hands down.  If they can’t win against England Russia would not have a chance with the U.S.  Plus Russia suffers from lack of man power with a population of 146 million versus the U.S. with 323 million.  Bottom line Russia has staggering problems just maintaining her borders power projection is accomplished by the art of the bluff. 

The equalizing value of the two countries' well-balanced nuclear deterrents is enough of a reason to avoid direct confrontation.

DYI:

If Russia didn’t have a tactical and strategic nuclear defense shield the U.S. and her allies would have “cut up” the motherland into multiple new countries.  That by the way has the goal of U.S. State Department since the end of WWII.  First to dissolve the Soviet Union then with the loss of the Caucasus’s, the Lapland’s in the north and the grand prize all land east of the Ural Mountains cutting Russia to a fraction of her size.  Of course these new countries would be nothing more than puppets for the Alliance – U.S., U.K., NATO and the EU along with their representative global natural resource corporations.   

But leaving that aside, Putin may well understand the nature of modern military challenges better than U.S. President Donald Trump and U.S. legislators -- and Russia's authoritarian system may be more efficient when it comes to military allocations. Note that Russia is now almost an equal to the U.S. as a power broker in the Middle East, where the Russian military has just helped Syrian President Bashar Al-Assad effectively win a civil war -- in which the U.S. was helping the other side. At the same time, Russian defense spending numbers are deceptive. The country is far more militarized than its defense spending suggests. That level of security spending is only sustainable at the expense of Russia's future. 

 DYI:

What power projection Russia is capable of is always close to home.  Syria is far closer to Russia thus much shorter supply lines as compared to the U.S. that needs to sea and air lift supplies – a distinct and clear-cut geographical advantage.  Russia will spend a small amount of money with an excellent possibility of positive results that so far has played to their advantage.

All of this talk of Russia, Russia, Russia, is just that – ALL TALK.  Russia is a country in decline lacking a vibrant economy and a small population base despite her vast land mass.  It is the U.S. Military Industrial Complex desires a new cold war to feather weapons development and deployment profits.

DYI