War

Drums

US Deploys Two More Aircraft Carriers Toward Korean Peninsula: Yonhap

According to a report by South Korea's primary news outlet, Yonhap, the Pentagon has directed a total of three US aircraft carriers toward the Korean Peninsula, citing a South Korean government source. 

Yonhap reports that in addition to the CVN-70 Carl Vinson, which is expected to arrive off the South Korean coast on April 25, the CVN-76 Ronald Reagan - currently in home port in Yokosuka, Japan - and the CVN-68 Nimitz carrier group - currently undergoing final pre-deployment assessment, Composite Training Unit Exercise off Oregon - will enter the Sea of Japan next week.  According to the senior government official. the US and South Korea are discussing joint drills, which will include the three aircraft carriers and other ships.

 DYI

Maduro orders Venezuela army into streets

Maduro

The

Worst Type of Socialist

The

True Believer

DYI

Ben Graham's Corner

April 17, 2017

The Value of Dry Powder

John P. Hussman, Ph.D.

Based on current valuation extremes, the outlook for prospective 12-year S&P 500 total returns remains dismal, likely averaging less than 1% annually by our estimates.

DYI:  DYI's return is along the lines of John Hussman as well from my work based upon dividends.

Estimated 10yr return on Stocks

Using 5.4% as the historical growth rate of dividends and 4.0% as the ending yield.

Starting Yield*---------return**
1.0%-----------------------(-5.7%)
1.5%-----------------------(-1.7%) 

2.0%------------------------1.3% You are here!

2.5%------------------------3.8%

3.0%------------------------5.9%
3.5%------------------------7.8%
4.0%------------------------9.4%
4.5%-----------------------10.9%

5.0%-----------------------12.3%
5.5%-----------------------13.6%
6.0%-----------------------14.8%
6.5%-----------------------15.9%

7.0%-----------------------17.0%
7.5%-----------------------18.0%
8.0%-----------------------19.0%

*Starting dividend yield of the S&P500-**10yr estimated average annual rate of return. 

Our estimate of 12-year total returns for a conventional portfolio mix of 60% stocks, 30% bonds, and 10% T-bills remains near a historic low of about 1.5% annually. This profile of expected returns is likely to improve substantially over the completion of the current market cycle. Indeed, no market cycle in history, including the most recent cycles, and even those accompanied by quite low interest rates, has failed to bring estimated 10-12 year equity market prospects into the 8-10% range, or beyond.

In any event, investors should emphatically not rely or wait on evidence of economic risk as a prerequisite for examining their equity market risk. 

Remember that the average bear market erases more than half of the preceding bull market gain, and the complete market cycle is enormously forgiving to investors who reduce their risk exposure at rich valuations. 

At the very least, investors should carefully ensure that their investment positions are consistent with their actual investment horizon and risk-tolerance. That said, investors who cannot tolerate the idea of missing out on a potential market advance, even at offensively high valuations, probably should not read my stuff.

Again, even for passive investors, take care to ensure that your exposure to stocks is consistent with your actual risk tolerance and investment horizon. In particular, 

I continue to believe that passive investors should set their exposure so that they would be capable of weathering a 40-60% loss in the S&P 500 over the completion of the present market cycle, 

and 12-year S&P 500 total returns averaging less than 1% annually, without abandoning their discipline in the interim.

DYI:  Ben Graham’s Corner of my blog (shown below) is screaming an overvalued market.  This matrix does not take into account the massive profit margins of corporate America that will be fleeting when they regress back to the mean. 

Ben Graham's Corner

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

As of 4-1-17
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  .........29.02
Bond Rate...3.93%

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

Be as that is the passive investor better be well prepared to handle money wise and emotionally a 45% to 60% (DYI’s est.) decline.

DYI’s model portfolio remains very defensive – WITH HUGE AMOUNTS OF DRY POWDER (CASH) waiting for improved valuations.

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 4/1/17

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

74% - Cash -Short Term Bond Index - VBIRX

22% -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

Driverless Vehicles

Revolution or Evolution?

By 2030, 25% of Miles Driven in US Could Be in Shared Self-Driving Electric Cars

BCG’s key insight is that the convergence of three trends—ride sharing (services such as Uber and Lyft), autonomous driving, and vehicle electrification—create a far more compelling economic case than any of these forces alone. Due to their ability to cut travel costs by 60%, shared autonomous electric vehicles (SAEVs) could shift about 25% of miles traveled from private automobiles-—creating enormous benefits for consumers as well as causing major disruption to the automotive industry. While total vehicle demand will only be affected slightly, by 2030 more than 5 million conventional cars per year could be replaced by a combination of fully autonomous electric vehicles for urban fleets and partially autonomous cars for personal use. Cities will benefit from less congestion and cleaner air, but could be disadvantaged by falling ridership on public transit, fear of which could result in some cities proactively trying to regulate the number of SAEVs on the road. 

BCG’s conservative estimate is that 23% to 26% of miles driven in the United States, or about 800 billion to 925 billion miles, could be traveled in SAEVs by 2030. The shift to SAEVs, which would be gradual and would begin by the early 2020s, would likely occur in cities with more than 1 million people, where there is sufficient demand to keep fleet utilization high and there are significant pain points associated with private vehicle ownership (expensive insurance, difficulty finding parking, and congestion). 

DYI:  Driverless vehicles will first arrive on closed loop circuits such as hospital complexes, universities, military bases, large amusement parks etc.  Once the bugs have been worked out on closed loop circuits the technology will spread to city bus services, then to long haul truckers and lastly individual car and truck owners. Once the public becomes convinced that the safety issues are SIGNIFICANTLY better than drivers this industry will move from early adopters to a massive growth industry.  Why?  Cost of use will drop – whether owning or renting – considerably.  The reason is simple – flexibility! Vehicles will go where they are needed without the need of its owner/driver…the possibilities are almost endless.  Routine maintenance; send the car all by itself and when the mechanics are finished they will send it back any where you need it.  Wife needs the car to do an errand send the car all by itself…She works the other sides of town, too far to send the car, call a driverless cab company as the cost will now be marginally higher than car ownership (no cabby to pay)     

Individuals and families in large cities will go from 1 to 2 cars down to 0 to 1 with many opting out of car ownership entirely especially if the metropolitan area has extensive mass transit such as New York City or Boston.  Suburbanites could be another matter all will be dependent upon direction and distance for a two income household holding many to the two car family.  I’m not as sanguine for a reduction in car/truck ownership for this group but who knows if the market place is allowed to work as opposed to cronyism there could easily reduce the need for two vehicles.  Needless to say driverless vehicles are on its way faster than one would expect yet longer than the cheerleaders for this technology believe, more to do with the public’s perception of safety and reliability.  Once that is conquered will you be ready to get on an airliner WITHOUT PILOTS!?

DYI

Bubble

News

Commodity Carnage Crushes Trumpflation Hopes: "Everyone's Nervous The Bottom Is Falling Out"

Another night of ugliness in Asia as the 'froth' is blasted out of the exuberant hot-money-chased commodity markets. Chinese steel and iron ore futures tumbled on Wednesday to the lowest prices in months as market sentiment turned bearish on the demand outlook. 

The most active rebar contract on the Shanghai Futures Exchange settled 3.5 percent down at 2,893 yuan ($420), the lowest since Feb. 2. The sharp decline in steel futures has tamed buying interest in the physical market as well. Iron ore for delivery to China's Qingdao port has swung into a bear market, with the price sinking more than 20 percent from its 2017 high in February to $74.38 a tonne, according to Metal Bulletin.

What Tesla's "Inexplicable " Ponzi scheme" Valuations say about the Stock Market. 

Tesla shares rose to $313.38 this morning, giving the company a market capitalization of about $51 billion, surpassing GM for a moment as the most valuable American automaker. This left some industry insiders wondering about tulip bulbs. 

Tesla makes some nice cars, as you’d expect from a company that charges an arm and a leg for them. But Jackson’s statement wasn’t about its cars, their quality, or electric versus internal combustion engines. It was about Tesla’s market capitalization of $51 billion. 

Then there is Tesla’s financial performance. It lost money in every one of its 10 years of existence. Here are the “profits” – um, net losses – Tesla racked up, in total $2.9 billion: 

As long as shares continue to rise, the whole equation is perfectly validated: Let the doubters and short sellers stew in their own juices. Shares will rise because stock jockeys expect them to rise, and with that expectation, they buy them and drive up their price. Buy-buy-buy turns into a self-fulfilling prophecy. It won’t last forever. 

But until then, market share, profits, or anything else vaguely linked to reality simply don’t matter.

 DYI

Making America Great

Requires

Core Institutional Change

            End the Federal Reserve…

The true mission of the Federal Reserve is not to manage the economy with its subsequent business cycles but to promote a cartel with the sole purpose to reduce competition and thereby increasing the profitability of their members through a shared monopoly.  A legal private monopoly all based upon the false narrative of protecting and promoting the public interest.

The original purveyors of the Federal Reserve (1913) – Nelson W. Aldrich, Republican Senator Father in law to John D. Rockefeller – Henry P. Davison, Sr. Partner of J.P. Morgan Company – A. Piatt Andrew, Assistant Secretary of the Treasury – Frank A. Vanderlip, President of the National City Bank of New York, representing William Rockefeller – Benjamin Strong, head of J.P. Morgan Bankers Trust – and lastly the architect of the cartel, Paul M. Warburg, partner of Kuhn, Loeb & Company representing the Rothschild’s and Warburg’s in Europe.  Their mission had five objectives.

1.  Slow and reverse the growing competition from newer banks as the country continued its western drive thereby maintaining ownership of financial resources in the hands of those present and creating a dynasty for their children.

2.   A variable money supply to drive down interest rates to encourage borrowing as opposed to private capital formation – savings – to monopolize the industrial loan market.

3.  The elastic (variable money supply) or quantitative easing to protect against currency drains and/or bank runs due to reckless loaning thus thwarting bankruptcy escaping the rigors of the free market.

4.      During a collapse of the members of the Federal Reserve shift the losses from the owners to the tax payers – bail out.  Those banks not part of the cartel (Federal Reserve) are allowed to parish further consolidating the elites hold upon the financial system.

5.    Convince Congress and the American public this new system is a protection for our citizens.

When viewing the Fed by their true objectives this cartel has been a resounding success.  When viewed by their public mandates of full employment and price stability a dismal failure.  Since 1913 the American dollar’s debasement – purchasing power loss of around 98% or a chronic inflationary rate of approximately 3.25%.  Along with many menacing recessions and two depressions – the 1930’s and the one we are in now.  The Fed needs to go and begin the journey to sound money plus ending one portion of the elite’s stranglehold on the American public.

DYI

American Tyranny

Federal Income Tax

104 Years of the Income Tax: Then and Now

As Americans finish yet another tax filing season, let’s take a look at the 104-year history of the income tax:

• In 1913 the top marginal income tax bracket was 7% -- today it is 39.6%.
   
• In 1913 the marginal income tax bracket range was 1% - 7%. Today the range is 10% - 39.6%.
   
• In 1913 there were 400 pages in the tax code. Today there are 74,608 pages in the code.
   
• In 1913 the family standard deduction was $98,425.45 in today’s dollars. The family standard deduction now is just $12,600.
   
• When the income tax started in 1913, only 358,000 Americans had to file a 1040. Today 148,606,578 Americans file 1040s.

DYI:  Repeal (16^th Amendment) and replace income taxes with a European consumption tax the savings in compliance has been estimated in the billions along with the yearly headache for individuals and corporations.  This would also have the effect of creating a free trade zone for the entire United States corporations would flock to our shores soaking up our unemployment.  Add on significantly less rules and regulations America would definitely be back on the liberty track.  More liberty equals more prosperity; they go hand in hand.  

DYI

Congressional

Arrogance

(Conceit – Self-importance – Condescension)

Congressman to Constituents: You Don’t Pay My Salary

An Oklahoma congressman was caught on video telling constituents that the notion that they pay his salary is “bullcrap” — a remark that has not exactly boosted his popularity. 

“You say you pay for me to do this,” Mullin said. “Bullcrap. I pay for myself. I paid enough taxes before I got there [Congress] and continue to through my company to pay my own salary. This is a service. No one here pays me to go.” 

That response did not go over well with the crowd. Some attendees began shouting back at Mullin, who added, “I’m just saying this is a service for me, not a career, and I thank God this is not how I make my living.” 

To be fair, the thrice-elected Mullin has encountered a great deal of (often organized) opposition at recent public events, a problem common to Republican elected officials since the election of President Donald Trump. According to the Tulsa World, he also had an altercation with an attendee at a March 31 town hall in Pryor, Oklahoma, when that person insisted on holding up a red piece of paper to indicate her disagreement with his comments. Although at first it appeared that Mullin was going to have her ejected from the premises, he ultimately backed down, realizing he was “play[ing] right into their [protestors’] hands.” He canceled a Tuesday-evening town hall, citing safety concerns, although “attendees had already entered the building,” noted McClatchy. 

His frustration is therefore understandable. 

Unfortunately for Mullin, words uttered in frustration often reveal the true character lurking beneath the speaker’s carefully crafted public persona 

— and what Mullin’s remark reveals about him isn’t pretty.

 DYI

Bubble

News

The auto boom is over…

• U.S. auto sales have plummeted…

Below, you can see that U.S. auto sales have nosedived this year.

Pension Crisis In U.S. and Globally Is Unavoidable

One of the primary problems continues to be the decline in the ratio of workers per retiree as retirees are living longer (increasing the relative number of retirees), and lower birth rates (decreasing the relative number of workers.) However, this “support ratio” is not only declining in the U.S. but also in much of the developed world. This is due to two demographic factors: increased life expectancy coupled with a fixed retirement age, and a decrease in the fertility rate. 

It’s an unsolvable problem. It will happen. And it will devastate many Americans. 

As George Will recently wrote: 

“The problems of state and local pensions are cumulatively huge. The problems of Social Security and Medicare are each huge, but in 2016 neither candidate addressed them, and today’s White House chief of staff vows that the administration will not ‘meddle’ with either program. 

Demography, however, is destiny for entitlements, so arithmetic will do the meddling.”

The

Propaganda

War

Goggle Putting CNN, Washington Post, NYT, in Charge of Fact-Checking News 

DYI:  Good Lord!?….The fox is guarding the hen house!

  DYI

Bubble

News

Massive Stock Correction To Send Metals Surging & Elites Lose Control

With the broader markets continuing to be propped up by HOT AIR and Central Bank intervention, only a fraction of investors have prepared for the massive stock market correction with physical gold and silver.  Some precious metals investors fear that when the broader markets crash, so will the price of gold and silver… just like they did in 2008. 

I don’t see it that way.  When the markets crashed in 2008… everything went down together.  However, since 2013, the Dow Jones Index has continued higher while the precious metals prices were hammered to new lows in 2015.  Even though the gold and silver prices have recovered a bit from their lows, the Dow Jones is definitely overdue for a correction.

The Unavoidable Pension Crises

The Real Reason The Federal Government Have Been Keen to Blame Russia for Everything: Gold!

April 5, 2017

For the better part of the past year it has seemed as if the mainstream media, with talking points from the federal government, had been 100% obsessed with “Russia did it!!” “It” could be anything as the story has morphed so many times it’s hard to keep track. The “it” is not near as important as the cheer leading by the MSM to remind the public Russia is to blame! 

The Federal Reserve, through the world reserve currency status, has been able to push inflation out of the U.S. economy and onto other nations. 

China and Russia, along with the member nations of the SCO, EEU and BRICS are in the final stages of moving completely away from the Federal Reserve Note, which is quickly becoming useless on the global stage. 

While these nations continue acquiring ton upon ton of gold the U.S. continues to acquire billions upon billions in debt. 

Which scenario is more sustainable? As these nations continue to build out their trading systems, to circumvent the world reserve currency, how will the U.S. contend with this new reality? The U.S. government is currently acting like the drunken cousin described above. 

Why would BRICS nations, who are responsible for a significant portion of global GDP, continue to accept how the U.S. has treated them? The belligerence coming out of the White House and Pentagon, by way of NATO, has created a global divide. The U.S. is broke and can not pay back the owed debt. We can only bully other nations, steal their gold and bomb those that do not fall into line. 

Russia and China are large enough, wealthy enough and strong enough, militarily, to stand up to the U.S. 

They have been quietly going about their business – conducting business – while the U.S. has continually conducted war with anyone and everyone. The U.S. has now set it’s sights on these two power house nations. These nations are not Syria, Libya, Iraq or any of the other tiny nations these warmongers have bullied. This time it will be different and the golden rule still applies – he who has the gold makes the rules. China and Russia have the gold, the U.S. has debt.

Soaring Global Debt Sets Stage For “Unprecedented Private Deleveraging”

And there’s no end in sight. Japan just passed a record-high government budget, 35% of which will be borrowed. The US added $1.3 trillion to its federal debt in 2016 and is debating massive increases in defense and infrastructure spending. China’s corporate debt alone exceeds 170% of GDP. 

Which leads to three inescapable conclusions: 

1) Interest rates can never rise because rolling over this much debt at historically-normal rates would blow up the budgets of both the developed and developing worlds. 

2) The only solution – if you can call it that – is massive currency devaluation to make these debts manageable. 

3) Since the debt binge has apparently gone parabolic, the reckoning is fairly close at hand. 2018 might be one for the history books.

 April 5, 2017 11:00 am JST

China has its eyes on water in Russian lake

Plan could devastate ecosystem but earn Russia some cold, hard yuan

The Russian lake holds roughly 20% of the world's total unfrozen freshwater, which would be carried to northwestern China and Mongolia, helping agriculture as well as thirsty people and industries along the way. 

Russia has high expectations for Chinese cash; Alexander Tkachev, Russia's minister of agriculture, last year proposed a plan to deliver water from Siberia's Altai Republic to China's Xinjiang Uighur Autonomous Region.

 DYI