It’s Different this Time?

NEVER

Analysts: 2019 Oil Demand Growth Could Be Lowest In Years

While OPEC and Russia are busy calibrating a possible extension to their production cuts, analysts and traders have turned their attention away from oil supply concerns and are focused again on faltering economic growth and a downbeat outlook on oil demand growth.

DYI:  Anyone who believes that the business cycle has been repealed by some government edict or has been subjugated to nonexistence through masterful strokes of genius at the Federal Reserve all have been proven wrong. 

What we have today is another debt laden economy ready to pop once again.  The FIRE economy [Finance, Insurance, and Real Estate] has been driven to insane levels making it impossible for old school pensions or 401k type of plans to fashion any possible reasonable returns to fashion a retirement with any possible degree of certainty.  Insurance is suffering the same fate with interest rates so low [and zero projected stock returns] premiums have leaped locking out working class or lower middle class from insurance protection.  Real estate whether rental or purchasing is so high many Millennials [along with the newly minted Cyber generation] are locked out of household formation remaining living with their parents.  Add on criminal behavior of the medical industrial complex AND the student loan debacle you end up with a consumption and investment capital starved economy. 

Once again we’re coming to another reset moment when the debt is too great and the house of cards come tumbling down.  This is not just happening here in the States but world wide and has lowered the price of oil to reflect reduced world wide economic growth.  When the increase in debt stalls and then rolls over in decline we will once again be in recession.  Be prepared.

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 06/1/19

Active Allocation Bands (excluding cash) 0% to 50%

68% - Cash -Short Term Bond Index - VBIRX

32% -Gold- Global Capital Cycles Fund - 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

The

Big Short

Uber’s

Path of Destruction

Uber’s investors, however, never expected that their returns would come from superior efficiency in competitive markets. Uber pursued a “growth at all costs” strategy financed by a staggering $20 billion in investor funding. This funding subsidized fares and service levels that could not be matched by incumbents who had to cover costs out of actual passenger fares. Uber’s massive subsidies were explicitly anticompetitive—and are ultimately unsustainable—but they made the company enormously popular with passengers who enjoyed not having to pay the full cost of their service.

Uber’s longer-term goal was to eliminate all 

meaningful competition and then profit from 

this quasi-monopoly power. 

These beliefs about Uber’s corporate value were created entirely out of thin air. This is not a case of a company with a reasonably sound operating business that has managed to inflate stock market expectations a bit. This is a case of a massive valuation that has no relationship to any economic fundamentals. 

Uber has no competitive efficiency

 advantages, operates in an industry with few 

barriers to entry, and has lost more than $14 

billion in the previous four years. 

But its narratives convinced most people in the media, invest­ment, and tech worlds that it is the most valuable transportation company on the planet and the second most valuable start-up IPO in U.S. history (after Facebook).

DYI:  Here we go again as it seems we are going to have a redo of the 2000 market top.  Another BS company bleeding money at a feverish pace, soon to make it into the dustbin of failed companies, once investors realize this is nothing less than a Ponzi scheme the abandonment by investors will drive the stock price to zero. The next big short?  Not the purview of the Dividend Yield Investor, just something I’d like to pass along.

DYI 

Medical

Industrial Complex

Collusion & Monopolies

Californians could be required to have health insurance starting in 2020

Identical bills have been introduced in the California Senate and Assembly that would reinstate the individual mandate, requiring all Californians to have health insurance starting in 2020 or pay a tax penalty. 

“I don’t see a very rosy picture of what is happening now that the (federal) mandate is gone,” said Bill Youngblood of William Youngblood Insurance Agency in Rancho Mirage. “The pricing of insurance will increase without a mandate. You need everyone paying into the system to keep insurance premiums down. Insurance premiums paid without the mandate will not be enough to make a healthy insurance system for California or even the country.” 

“We need young people to pay into the health insurance system, even though they think they will live forever and nothing will ever be wrong with their health,” Youngblood said. “By everyone paying into the system, it helps keep insurance prices stable and more affordable for everyone.” 

Assemblyman Chad Mayes, whose district covers the Inland Empire, said he agrees that the health care system begins to fall apart when the mandate is removed. 

“I do believe in freedom and free markets and that individuals have choices,” Mayes said. “But we also have to be realistic to where we are today. 

The health care system is not a free market. 

By taking away the mandate, health care costs will be pushed up for those who are insured with higher premiums.”

DYI:  Amazing a small amount of truth from Nicole Hayden the author of this article.  Damn right the health care industry or what I call the medical industrial complex is NOT in the free market.  These mega corporations routinely collude in order to price fix and have moved from local to regional monopolies.  All are in civil and CRIMINAL violation of the Robinson-Patman, Clayton, and the granddaddy Sherman Anti-Trust Acts.  All of these acts have massive fines plus up to 10 years in prison. They were put into place 75 to 100 years ago to deal with the Robber Barons of the gilded age.  No new legislation is required.  At the State level there are numerous consumer protections laws with civil and criminal statues as well.  But alas this industry pumps out more campaign money [better known as bribes] than the military industrial complex so nothing is ever done.  Eventually this house of cards will collapse and God only knows what type of health care system will come out of the ashes.

If these acts were all actively enforced prices will drop on average 75% plus.  That is correct and that’s NOT a typo.  75% on average or to be more specific depending on the severity of the illness from 60% to 90% drop in costs.  Health insurance would only be needed for horrific conditions all other cost would simply be paid out of pocket and easily done even for the working poor.  That is the answer to our health care in this country is by having REAL free enterprise in health care.

  DYI

American

Propaganda?

US and Russian Warships Almost Collide in Philippine Sea

The U.S. Navy says one of its warships was forced to maneuver to avoid a collision with a Russian destroyer in the Philippine Sea. 

The USS Chancellorsville, a guided-missile cruiser, nearly collided with the Udaloy I DD 572 when it made an "unsafe maneuver", coming within 50 to 100 feet, according to the Navy's 7th Fleet in a statement. 

"This unsafe action forced Chancellorsville to execute all engines back full and to maneuver to avoid collision," said the Navy's 7th Fleet in a statement. 

Russian state media had claimed that the U.S. cruiser had "hindered the passage" of the Admiral Vinogradov anti-submarine destroyer about 160 feet in front of it, forcing them to perform a dangerous maneuver in the southeastern part of the East China Sea. But the U.S. dismissed their version of events as "propaganda"

DYI:  I find this entire story beyond the scope of reality.  To be blunt it is not the Russians committed to propaganda but the U.S.  I’ll go so far as to state I don’t think this even actually occurred simply a story that has been made up to further America’s Russia, Russia, Russia, propaganda fixation that has been going on for the past three years or so.

Sailors whether Russian or American would never risk a collision on the high seas, hell no one would desire coming into port.  Both Navies are very professional despite the so called footage showing Russian sailors sunbathing on deck.  This just smacks of nothing less than crude propaganda once again in a vain attempt to beat the war drums – along with higher military spending for the military industrial complex.

Also of note since the year 2012 the Smith-Mundt Act was modernized [repealed] allowing the Federal government to produce sponsored news to be delivered to the American public.  This is more commonly known as PROPAGANDA!  And wow have they delivered a nonstop dog and pony show of fake news to the American public. 

For those of you who are new to my blog you may find this shocking for the old timer’s ancient news.  All of the shootings highlighted in the mass media are DHS FEMA drills; no one was shot; no one was killed or wounded all promoted as real by the main stream press who is being paid by our government to deliver this to your TV, radio, or print of digital.  These fake shootings at the schools is for security companies to sell to 94,500 school districts and 14,500 plus colleges/universities metal detectors, CCTV Networks, bullet resistant glass windows, scanners and assorted security services.  Big business along with big profits as they get the THRILL; and the taxpayers get the BILL. 

DYI

Recession

Sooner or Later?

Why You Should Not Underestimate The Severity Of The Coming Recession

Make no mistake: numerous bubbles have formed during the low interest rate period of the past decade and there is no way of escaping their ultimate popping. These bubbles are forming in global debt, China, Hong Kong, Singapore, emerging markets, Canada, Australia, New Zealand, European real estate, the art market, U.S. stocks, U.S. household wealth, corporate debt, leveraged loans, U.S. student loans, U.S. auto loans, tech startups, shale energy, global skyscraper construction, U.S. commercial real estate, the U.S. restaurant industry, U.S. healthcare, and U.S. housing once again. 

There are likely even more bubbles than I listed – we just won’t know until they all burst. As Warren Buffett once said “only when the tide goes out do you discover who’s been swimming naked.” I believe that the current bubble situation, when looked at globally, is even worse than it was before the 2008 Global Financial Crisis – that’s why the coming crisis is actually likely to be far worse than 2008. How’s that for an unpopular opinion?!

 My view, however, is that virtually everyone is underestimating the tremendous economic risks that have built up globally during the past decade of extremely stimulative monetary policies.

DYI:  Over the past few months I’ve been saying the possibility/probability of an upcoming recession is growing.  Obviously after ten years of growth – mainly pushed by debt expansion – one would expect a recession to eventually arrive.  Out of the many indicators that economists look at more and more are showing another downturn is coming sooner than later.  Somewhere between the next six months to two years.  Predicting when the next recession will hit is very hard to do as so many economists know but attempt anyway.

 

So far I don’t see a harsh downturn as this author is predicting as we don’t have the insane levels of massive speculation prior to the 2009 downturn.  There are pockets of house flipping but not as a national pastime.

Stocks for sure have been bid up to moon however the majority of this is within the upper middle class and above.  Again it is not a national pastime that we had going on during the 1990’s along with many holding large margin positions.  The only way I see this turning into a huge downturn is if all of the other countries are pushed over like dominoes.

 DYI

Millennials'

It’s Not Your Fault

Millennials' habits are threatening countless industries — but a new report says it's only because they're poorer than their parents

The financial crisis and college debt — not avocado toast — are changing how Millennials spend their money.

DYI:

 

Student Loans

Millennials are besieged on multiple economic fronts none of their making.  Starting with the most obvious and notorious cost; student loans.  I find it impossible to believe these loans began with the best of intentions.  When you introduce a 3^rd party payer without the self regulating cost inhibitor of bankruptcy these loans will not stay with the student but will go to the College or Universities, driving their costs ever higher.  And wow have cost skyrocketed.  Many higher educational establishments have gone on building booms all in the attempt to scoop up as much student loan money as possible.  Whether a student graduates or not these schools are there to drag in as many new students [or should we say sheep to be sheared] as possible; all to keep the gravy train of money going. 

Higher education costs are easily dropped by applying high school economic principals.  Either do away with student loans or allow the ever present danger to the lender of bankruptcy.  This will stop dead cold the ever increasing dollars forcing the schools [basic economics 101] to drop their prices.  If they don’t that school every year will have less and less students until they have to lay off professors and staff or face bankruptcy.

Unfortunately I don’t see anything changing as Federal politician pushing for automatic garnishment of wages for student loans.  Politicians clearly not working for the people; but to feather the nest of private lenders or government and keeping the money train going for the schools.  This debacle has had its side effects as school enrollment has dropped in direct proportion to the increasing cost.  I’ve run into many young people who are definitely bright enough to handle the academic rigors but have stated conclusively and empathic [four letter flowerily language] NO THANKS.

Real Estate

Whether you rent or buy the cost real estate has been “jacked up” all due to the sub atomic low interest rates engineered by the Federal Reserve.  Housing [RE] and long term bonds are affected in price by the level of interest rates.  When interest rates increase bonds and RE will drop in price and conversely with lowering of rates bonds and RE will rise.  Millennials those with entry level management employment find moving out from Mom and Dad impossible due to the combined effect of student loans and RE prices and those at the hourly level just purchasing a decent car/truck is damn near impossible as well.

Medical Industrial Complex

I won’t get into this deeply as the prior post delves into this in detail.  The medical industry today is sucking up 20% plus of the economy thus starving out the remaining portions of the economy for spending and investment.  Unless employed in some fashion in the medical industry the other sectors spending and investment starved making for dismal pay and benefits.  This is the indirect gruel and arduous reality effecting today’s Millennials.

There are other problems affecting our economy but I’ll leave it there for now.

Till Next Time            

DYI

Out of Control

Medical Industrial Complex

'Really astonishing': Average cost of hospital ER visit surges 176% in a decade, report says

DYI:  If you have been reading my blog increases in cost for the medical industrial complex will come as no surprise.  These companies routinely collude in order to price fix escalating costs moving at breakneck speed from local to regional monopolies.  These companies are in civil and criminal violation laws that were passed 75 to 100 years ago dealing with the robber barons of the Gilded Age.  These acts are: the Clayton, Robinson-Patman and the Granddaddy the Sherman Anti Trust Act.  Due to massive bribes or I should say campaign dollars not just at the Federal level but at the State [and when needed local] politicians from either party will look the other way allowing the collusion to continue.  If true free market principals were put into place [that is what these 3 acts do] prices on average would drop by 75%!  That’s right 75% and that is not a typo.  Or to be more specific depending on the severity of illness prices would drop from 60% to as high as 90%.  Health insurance would only be needed for catastrophic illnesses everything else would be paid out of pocket due to 80% to 90% drop in cost.

Why isn’t this well known?  Not just the campaign dollars the main stream press is paid off as well with all of the nonstop commercials for drugs or for a vast array of medical procedures.  Ever notice your mail box has a slew of appeals from doctors who work for this or that corporation attempting to sell their procedures or services?  Not once have I ever seen an advertisement based on cost.  Competing on price is forbidden among these companies.  They subscribe to the John D. Rockefeller school of thought:  “Competition is a sin!”  Until the general public fully understands how they are being ripped off will anything be done.  Until then the medical industrial complex will continue to swallow up more and more of the economy until this house of cards collapses.

DYI

America’s

New Poverty

Work until You

Drop

Dead

The number of Americans working in their 70's is skyrocketing

Katharine Abraham, an economics professor at the University of Maryland, was chatting with her hairdresser one night about retirement plans. The economist said she plans to continue working because she wants to and has no plans for retiring. 

The hairdresser agreed but for different reasons: 

She needs the money. 

Both scenarios are contributing to a big increase in the number of people in the US working into their 70s. Over the past 20 years, the share of Americans working in their 70s has risen from less than 10% to nearly 15%, according to US Census bureau data.

 DYI

Gold

Bull or Bear

?

DYI:  The biggest question for any type of investment is its direction?  Gold presently has knock on the ceiling multiple times attempting to make new highs.  Is this a continuation of gold’s bull market that began December 16, 2015 at $1050 an ounce or going back into a bear market?  The unfortunate truth is that no one knows for sure especially when historical valuations are very close to their mean.  So…Whether stocks, bonds, or gold are trading around their mean or long term average valuation future prices can easily move in either direction for longer than we care to admit.

Concentrating on what we do know using DYI’s valuation driven averaging formulas gold or the precious metals mining companies our model portfolio holds 32%.  A slightly higher percentage as our mean is calculated – as opposed to the above chart – since the inception of the Federal Reserve.  DYI’s mean is at 16 compared to the above chart which looks to be around 22.  Hence by DYI’s judgment stocks as compared to gold are pricey giving us a commitment slightly higher than the mean at 32% for gold.     

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION

Active Allocation Bands (Excluding Cash) 0% to 50%

68% - Cash -Short Term Bond Index - VBIRX

32% -Gold- Global Capital Cycles Fund - VGPMX

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

 0% -Stocks-  Total Stock Market Index Fund - VTSAX

[See Disclaimer]

As of 6/4/19

Shiller PE 28.87

Stocks have been bid to very high levels actually higher than the 2000 top due to the excessive distortion for any company in the S&P 500 with any high tech pushing the Shiller PE to an insane level.  Today almost all stocks in the S&P 500 are at excessive levels far outpacing the 2000 top.  Going to MoneyChimp to calculate; placing your money into stocks today reinvesting dividends going to sleep like Rip Van Winkle waking 10 years from now your estimated average annual return is – drum roll please – 0.98%.  If you are betting on stocks over the next ten years to fund your retirement you better think twice.  It simply isn’t going to happen starting at these insane levels.

As of 6/4/19

19 year T-bonds

2.12%

Using U.S. 10 year Treasury bond as our proxy; yields today are very low and appear to once again on their way to subatomic levels.  To state the obvious compounding monies at these levels with the downside risk of long term bonds are futile.  The days of shooting fish in barrel [high compounding rates of return] in the late 1970’s and early 1980’s are long gone.  The risk/return is now upside down with rates so low.  So…DYI model portfolio holds 68% in short term notes waiting for improved valuations.  Admittedly it’s been a long wait as the Fed’s have once again pumped up a bubble for stocks plus bonds and are attempting to keep it that way.  But as we all know or should know Mr. Market in the end will have his way driving prices back to their mean and lower.  When? No one knows.  We can only wait! 

 

 For those of you who are bullion buyers for your precious metals holdings the Gold/Silver Ratio inverted at 90 to 1!  Silver in relationship to gold is clearly the better bargain with a greater potential of going up – or going down less – than gold bullion.

Till Next Time 

  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 - Purchase Bonds

Current EYC Ratio: 1.06 (rounded)

As of  06-01-19
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  ..........28.34
Bond Rate....3.65%

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