Production Discounting Globally Suggest US Consumers In Deepening Recession

But while Janet Yellen refers to that as distinctly energy, she doesn’t openly address that this price pattern is much more than that; especially past the summer. Non-petroleum producer prices have ceased to expand, and in October fell to just about zero for the first time.

 

In the end, it is little wonder the FOMC wishes to leave out this “part” of their examination of their own failures. To include it would be to completely extinguish their sacred belief in their own abilities as well as the far more important recovery narrative. It is increasingly clear the recovery ended in 2012, and that it was further reversed in 2015 to an as-yet undefined economically descendent purpose; one that looks more and more recessionary by the month, here as well as the rest of the world.

DYI  

Paris attacks kill more than 120 people – as it happened

A Paris city hall official said four gunmen systematically slaughtered at least 87 young people attending a rock concert at the Bataclan music hall. Anti-terrorist commandos eventually launched an assault on the building. The gunmen detonated explosive belts and dozens of shocked survivors were rescued. 

Some 40 more people were killed in five other attacks in the Paris region, the city hall official said, including an apparent double suicide bombing outside the national stadium, where Hollande and the German foreign minister were watching a friendly soccer international. 

Some 200 people were injured. 

Paris public prosecutor François Molins said the death toll was at least 120.

DYI Comments:  Any common sense individual new this was coming as Europe has opened its borders on a wholesale basis to these Islamic nations.  The threat of terrorist is simply too great by the shocking example in Paris.  France which has closed its borders is unfortunate but completely necessary.  They need to patrol the Mediterranean to turn away boat people as close to their shores as possible and work with Turkey, Bulgaria, Greece, to block the flow of refugees from Syria.

Chancellor Merkel of Germany with her open door mentality for all of Syria (and else where) now appears finished.  If she continues on that track, her days as Chancellor will come to an abrupt end during the next election cycle. Her policy statements are completely reckless.

DYI

The S&P 500, Dow and Nasdaq Since Their 2000 Highs

Marc Faber Blog

Market Crash is Yet to Come

I don't think the crash has happened yet. Say you're a young person and you're just starting to work. 

So take me in the 1970's. 

In the US, with 20 hours of work, I could buy the S&P 500. 

Now you need more than 90 hours of work to buy the S&P 500 if you're young, say with a medium income. 

When I was young you could buy a home at a reasonable price, even in Hong Kong. 

What I want to say is that the Fed has basically created with their colleagues in Japan and at the European Central Bank (ECB) and the Bank of England (BOE), they've created a colossal asset bubble. And the returns going forward are going to be disappointing.

Advance/Decline numbers 

The composition of an index is that it's usually capitalization weighted. So one stock that goes up vertically could theoretically drive up an index and 99 percent of the shares don't make new highs. We had a strong day on Wall Street, but on the New York Stock Exchange, out of more than 3,000 shares that are being traded, only less than a hundred made a 12-month new high. The advance is very narrow. 

Some markets are still strong, but the bulk is no longer moving up so in other words the advance of asset price inflation has been narrowing.

DYI Comments:  No doubt we are in a bubble especially for basic stocks and junk bonds.  A 45% to 60% decline is within the realm of the possible and probable.  Since the beginning of the secular bear market 15 years ago stocks unless traded as opposed to buy and hold have had tough time.  Below is DYI's page from the secular top til now.  Amazing despite gold's massive moves up and down it continues to be the winner since the year 2000.

11-6-15
Updated Monthly

Secular Market Top - Since January 2000

+55.8%   Dow       

+176.8% Transports 

+  96.4% Utilities

+42.9%   S&P 500

+26.5%   Nasdaq

+52.3%   30yr Treasury Bond

+275.6% Gold

  +73.0% Oil

From High to Low

+275.6% Gold

+176.8% Transports

+  96.4% Utilities 

+  73.0% Oil

+  55.8% Dow

+  52.3% 30 Year Treasury 
+  42.9% S&P 500

+  26.5% Nasdaq

It is easily seen that in the year 2000 the Nasdaq was horribly overvalued and gold was on the give away table, such lopsided returns 15 years later!

Also of interest the stodgy 30 year Treasury bond has outperformed the Dow(until just recently), S&P 500, and the Nasdaq since the year 2000.  The modern portfolio crowd back in the year 2000 would find this a very low probability outcome.  Value player's, due to extreme valuations, would have recognized this as the most likely outcome (close to a no-brainer!).

DYI's portfolio remains the same, very defensive as valuations have long since left planet earth.

   Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  11/1/15

Active Allocation Bands (excluding cash) 0% to 60%

79% - Cash -Short Term Bond Index - VBIRX

17% -Gold- Precious Metals & Mining - VGPMX

 4% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

 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.

DYI

Global Cooling Alert: Korean Exports Down 16%, Sharpest Since August 2009, 10th Straight Drop

South Korean exports last month slumped the most in more than six years, with hefty drops in shipments to China, the US and Europe suggesting a further weakening in global demand. 

The South Korean Ministry of Trade, Industry and Energy attributed the declines mainly to a sharp fall in ship contracts and low oil prices, but the sharper-than-expected deterioration is likely to add to fears that a deeper chill is settling over the international economy. 

Exports last month fell 15.8 percent year-on-year to US$43.5 billion, their 10th straight month of declines and the sharpest fall since August 2009, ministry data showed yesterday.

This Is the Worst U.S. Earnings Season Since 2009

So far, about three-quarters of the S&P 500 have reported results, with profits down 3.1 percent on a share-weighted basis, data compiled by Bloomberg shows. This would be the biggest quarterly drop in earnings since the third quarter 2009, and the second straight quarter of profit declines. Earnings growth turned negative for the first time in six years in the second quarter this year.

DYI 

Being a Contrarian is Never Easy!

Global Trade In Freefall: China Container Freight At Record Low; Rail Traffic Tumbles, Trucking Slows Down

Over the past year we have regularly contended that a far greater threat to the global economy than either corporate earnings, currency devaluations, rate cuts (or hikes), reserve outflow, or even the stock market, is the sudden, global trade crunch which has been deteriorating rapidly since late 2014 and has seen an even more dramatic drop off as 2015 is winding down. Actually, that is incorrect: global trade is merely a manifestation of the true state of the above listed items.

 


DYI Comments:  Continue to watch developments for the world wide economy as the odds of a global recession are increasing.  So far the U.S. has been the lone wolf of growth (what little there is) how long this will last is the big question.  The U.S. has been growing since 2009 making this recovery(prosperity) of sorts long in the tooth.

For those of you who desire to speculate that a recession is just around the corner the 30 year Treasury bond is yielding 3%.  A downturn would manifest itself into a deflationary bust dropping all interest rates as investor's have a flight to quality.  Treasury securities fit that description.  If this were to occur (deflationary bust) the 30 year could very easily trade under 2% with notes and bills 5 year or less in maturity going negative.

DYI's formula for bonds now has a small 4% holding at the long end of the market.  The weighted formula is based upon interest rate rate movement for the 10 year Treasury.  As rates increase dropping the duration (lower the duration faster you get your money back) DYI's formula increases its commitment.  Once rates go higher than the average (4.61%) pushes you to increase proportionally more; hence a weighted formula.  Higher the yield faster your compounding our goal of staying ahead of taxation and inflation.

DYI's four asset categories are highly correlated to the general prevailing economic conditions and over long periods of time highly uncorrelated assets to each other.

Four Assets Correlated to Four Economic Conditions

Uncorrelated assets Stocks, bonds, cash, gold

1.)  Prosperity

Stocks and high grade corporate/U.S. government bonds

2.)  Deflation

Stocks and high grade corporate/U.S. government bonds

3.)  Recession

Short term notes and bills

4.)  Inflation

Gold Precious metals mining companies

The formula plays off the valuation averages for stocks, bonds, and gold.  Cash is our default asset when our commitments are low for stocks, bonds, or gold.  The pull pen, using a baseball analogy, to purchase when valuations improve to purchase or a holding place for profits.  This is a valuation formula based contrarian investment method.

There's a bull market somewhere

The idea is buying assets that are unloved by investors and wall street.  This will occur when valuations are cheap.  It seems that no one ever wants bargains (except historically motivated value players).

CONTRARIAN

Being a contrarian is not easy, you are always going against the grain of the prevailing consensus.  For those reasons is why I'll never have a large following for this blog.  For those who do will be that special breed contrarians.  When the masses are buying you're selling and when they are selling you're buying.  That is what our formula does not just for gold, but for stocks, long bonds, and when needed cash.

GOLD

Anyone talking about gold?  In 1998 when stocks were all the rage with the latest dot.com company going public the Dow/Gold Ratio applied to our formula would have you 60%(our maximum) in gold mining companies.  Looks so smart today.  You would have side stepped the high tech wreckage along with the general downturn in stock prices.  For those two years most folks would have thought of you as being stupid with everyone making money so easily (until the big smash). Only til 2003 did gold stocks take off; like a rocket ship.  And then as everyone was going gold crazy our formula had you sell down (slowly) your commitment from 60% to 15%.  Yep that 15% got smashed, but your stocks, bonds, and cash were all making more money than the drop of those gold shares.

Currently today gold mining companies have been smashed from peak to trough of around 75% or so.  Our formula has a small commitment at 17% as the Dow/Gold is close to its long term average of 16 to 1 (currently 15 to 1).  There is value on a macro basis; gold shares on a micro basis are bargains compared to the yellow metal itself.

STOCKS

Currently stocks are priced to the moon way above their long term average as measured by price to dividends.  At 50 times dividends the market is now 117% above its average(23).  After 100% the formula "kick us out of the market" and rightfully so; its nuts.  Until the economy changes from prosperity to either inflation, deflation, or recession prices will remain overvalued.  Stocks are very correlated to the general economy, but just as you think nothing will change, BANG, economic forces will change to one of those other three affecting stock prices.

BONDS

Bonds yields have been rising a bit enough for our formula to have a small percentage in bonds at 4% of the portfolio.  Is this a harbinger for additional increases in rates?  Is the economy making a shift from prosperity and the bond market is signaling this?  Maybe.  What ever the reason as rates rise duration falls for bond investors.  That is what we are most concerned about is adding only to bonds as the duration falls (higher yields) increasing the compounding.

CASH

Cash.  With 79% in cash for whenever the economy makes it's shift from prosperity(what little there is) to deflation, inflation, or recession will have plenty of fire power to put to work as asset prices change.       

   Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  11/1/15

Active Allocation Bands (excluding cash) 0% to 60%

79% - Cash -Short Term Bond Index - VBIRX

17% -Gold- Precious Metals & Mining - VGPMX

 4% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

 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.

DYI

Forget China: This Extremely "Developed" Country Just Suffered Its Biggest Money Outflow Ever

While understandably all eyes have been fixed on every monthly capital outflow update from China (even the ones that the Politburo is clearly massaging), few have noticed that one of the biggest total outflows currently in the global developed economy is taking place right in America's own back yard. 

According to BofA's Kamal Sharma, Canada’s basic balance - a combination of the capital and the current account: a measure of national accounts that spans everything from trade to financial-market flows - swung from a surplus of 4.2% of GDP to a deficit of 7.9% in the 12 months ending in June. That’s the fastest one-year deterioration among 10 major developed nations.

DYI Comments:  Canada is now experiencing a massive real estate bubble that is in the beginning process of popping.  Amazing as it is Canadians despite the majority of their population living within 250 miles of the U.S. border believe that it is different there and no bubble existed.  It's in the cards that Canada will experience a nasty recession; however if the world economy goes into recession cutting oil prices in half Canada could very well go into depression.  The housing mania has created a huge debt bubble in the private sector greater than the U.S.
 
If Canada goes into depression would the U.S. experience illegal immigration as they go south looking for employment?  Very possible but with Canada population being so small at 35 million (California 38 million) would anyone notice??

DYI wishes Canada well and lots of luck they are going to need all they can get!

DYI 

Bike shortage stems flow of migrants using Arctic route to Europe

The flow of Middle Eastern migrants trying to reach Europe via the Russian Arctic slowed dramatically on Thursday, partly due to a shortage of bicycles to cross the border, a source who deals with them told Reuters. 

People seeking asylum in Norway have taken to using bicycles to cross the border from Russia because pedestrian traffic is banned and drivers of vehicles are fined if they carry passengers across without the proper documents.

 

They then buy bicycles, bring them in taxis to the frontier and hop on the two-wheelers to travel the short distance between the Russian and Norwegian border posts. Stacks of discarded bicycles have accumulated on the Norwegian side.

DYI Comment:  Amazing how far people will travel for the possibility of a better life.  Simply amazing!

DYI 

As risks, uncertainty grow, so does reliance on gold

TOKYO -- Whether they are stockpiling it for a rainy day or selling it to raise some quick cash, emerging countries are relying more and more heavily on gold. 

Growing instability in financial markets and greater geopolitical risks provide increased incentives for buying the precious metal, and larger gold holdings help improve a country's creditworthiness. When faced with financial difficulties, countries can also sell the commodity for cash.

 

DYI Comments:  For all of the hatred for gold as an investment central banks purchase and hold tons of the barbarous relic.  The Dow/Gold ratio (currently 15.5 to 1) in conjunction with our averaging formula lets us know what percentage is required for protection and profit.

Gold today is neither costly or a bargain for it is now trading at its mean.  The mining companies are now being offered at prices far lower than the actual metal.  This is an excellent time to acquire shares of your favorite precious metals mining fund up to our 17% of our model portfolio.

 Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  10/1/15

Active Allocation Bands (excluding cash) 0% to 60%

83% - Cash -Short Term Bond Index - VBIRX

17% -Gold- Precious Metals & Mining - VGPMX

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

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

 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.

DYI 

Jim Rogers Blog

Jim Rogers Blog

Buy Russia if you are bullish on Oil prices

I am optimistic about Russia. By the way if you want to buy oil or energy buy Russia, because their currency and their markets were demolished by the collapse of oil. So that would be a good way to invest if you think the price of oil will go up. 

Russia has huge natural resource, big financial resources, and it is not a debtor nation like the US or some of the other nations we know and love. I would be rather buying Russia than selling.

THE CENTRAL EUROPE, RUSSIA AND TURKEY FUND INC.CEE

Largest Holdings    as of 09/30/15

Gazprom	9.4 %
Lukoil	7.7
MMC NORILSK NICKEL PJSC-ADR	5.1
Powszechna Kasa Oszczednosci Bank Polski	4.2
MAGNIT	3.4
SBERBANK-SPONSORED ADR	3.1
MAGNIT OJSC-SPON GDR REGS	2.6
RICHTER GEDEON NYRT /HUF/	2.3
BANK ST PETERSBURG	2.2
Cez	2.0
Total of Net Assets	42.0 %

DYI Comments:  Russia and Turkey are not for the faint of heart; for speculative dollars only.  My play on this speculation is if oil prices go down to the $10 to $20 dollar range then dive in with spec money (money you can afford to take a loss on).  Once oil moves back up (recession ends) there is a possible big capital gain as these shares recover in price.

DYI

New Company added to the Dividend Room.

3 M Company (MMM)  Yield 2.60%  $158.08 
3M Company operates as a diversified technology company worldwide.
(When recommended)
Date        Price      Div.    Yield
10-29-15  $158.08  $4.10   2.60%

        

DYI recommends that you use our stock allocation formula to arrive at your allocation of stocks to bonds.  Currently 36% for stocks.  For your cash holdings Vanguard's Short Term Bond Index symbol VBIRX or for those in a high tax bracket Vanguard's Limited Term Tax Exempt VMLTX.

Just as the name Dividend Yield Investor indicates is my affinity with dividends; for they have never gone out of style as far as I'm concerned.  In the end they are the real reason investors, as opposed to speculators, purchase quality companies with increasing dividends.  In my mind these are the true growth stocks.  As the dividend is increased over time so will the stock price. As the legendary Charles Dow has written:

"To know values is to know the meaning of the market.  And values, when applied to stocks, are determined in the end by the dividend yield."  

The Dividend Room is a new addition to my blog showing a list of high quality dividend paying stocks for your further study.  All picks are basic time tested value approach. All companies have a reasonable low level of debt for their respective industry and a low PE multiple. Of course a competitive dividend yield 50% greater than the S&P 500.  Also screened companies that have increased their dividends on a regular basis (true growth stocks). Included is additional screens based upon the Benjamin Graham approach for the defensive investor.

Our attempt is to find ten or more high quality companies with a yield 50% greater than the S&P 500.  Recommend selling when the current dividend yield is less than the S&P 500 or when the company's financial strength drops below an A rating reported by Value Line.

For diversification purposes recommend building up to 40 to 50 companies.

 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.