"Our advantage, rather, was attitude: we had learned from Ben Graham that the key to successful investing was the purchase of shares in good businesses when market prices were at a large discount from underlying business values." --Warren Buffett

BUY PALLADIUM, SELL GOLD (April 3, 2025): The media have been full of positive stories about why you should buy gold and related assets. Many analysts who had been bearish or indifferent toward gold a year ago have recently jumped aboard the bullish bandwagon. Almost all analysts' recent price targets talk about gold reaching 3,500, 4,000, or some higher number, with the only debate being when. Hardly anyone is talking about gold dropping to 2800 which is a modest pullback and the same distance away from 3150 as 3500 is. A tiny number of people have mentioned gold dropping to 1,820, but they say it will happen in five years which is an eternity with investing. Meanwhile, gold mining shares and their funds including GDX and GDXJ have been struggling relative to gold bullion, while the traders' commitments show commercials in the highest percentiles of short:long ratios for gold, silver, and platinum.

Almost no one has been mentioning palladium which is by far the most depressed precious metal in recent years. The price of PALL, a fund of physical palladium, slumped from a top of 298.21 on March 8, 2022 to a bottom of 76.49 at 8:30:48 a.m. on August 5, 2024 which is a loss of 74.35%. The traders' commitments for palladium approached all-time record bullish extremes, with the most recent reading showing commercials long 9,082 contracts and short 1,662 for an amazing ratio of 5.4645 to 1 long:short.

Click here for a useful Seeking Alpha article by Andrew Hecht about palladium.

Gold mining shares and their funds including GDXJ have been dramatically underperforming gold bullion as they consistently do prior to large percentage declines.

If you only saw a ten- or fifteen-year chart of GDXJ, a fund of mid-cap gold mining and silver mining shares, then you would probably conclude that the price of gold had been very high in past years and had been making lower highs in more recent years, because that is how GDXJ has behaved. Gold has gained more than one thousand dollars from its 2020 peak to its 2025 top so far, while the highest that GDXJ could climb recently was 58.595 on March 28, 2025 which was notably less than its 65.95 multi-year peak from August 5, 2020. Most of the precious metals media have been insisting that the shares of gold producers will catch up with the price of gold, but historically the shares tend to consistently lead bullion in both directions. In 2011, GDXJ topped out in April and made lower highs in September, while gold set higher highs several times from April through September. This was followed by substantial losses for the entire sector. In 2022, GDXJ bottomed in September 2022 and began forming higher lows into November, while gold bullion kept dropping from September to November.

Hedge funds have made all-time record total long:short ratios in gold, silver, and platinum, along with all-time record short:long ratios for palladium.

Hedge funds have increasingly been acting nearly identically to each other in recent decades. When I had worked at Thomson Reuters for 16-1/2 years, I sat next to a fellow whose job it was to track how hedge funds were investing and how they had been evolving through the decades. He showed me how, as recently as the early 1990s, hedge funds tended to be mostly independent of each other. Recently they have been mimicking each other's selections and algorithms with minor variations, so that at any critical reversal they are nearly unanimously piled onto the long side at a zenith, especially near a multi-decade top, and are nearly unanimously piled onto the short side at any nadir, especially when approaching a multi-decade bottom.

Hedge funds will massively close out any long or short position whenever a given asset has moved about 20% or 25% from its most recent extreme. This can lead to dramatic changes, such as in the late summer of 2024 when hedge funds had registered a huge net short position in non-internet Chinese shares. Suddenly they began rallying (see a one-year chart of ASHR) by about 60%, so that hedge funds not only closed out their massive shorts but went very heavily net long Chinese non-internet stocks. Then the Chinese market slid rapidly lower again, causing the hedge funds to once again close out their Chinese positions. Hedge funds thus accomplished the rather amazing feat of losing money on both sides of the same trade within less than one month.

With hedge funds' record longs in gold and their record shorts in palladium, it seems pretty clear what will happen next.

Even non-financial media have been jumping aboard gold's bandwagon.

I expect to read about gold on Seeking Alpha, the Wall Street Journal, or the New York Times. As gold has been frequently featured on National Public Radio and very recently on cooking and travel cable channels for the first time in many years, it is almost certain that it has become too popular. Last year there was a widespread myth that cryptocurrencies were a valuable portfolio hedge and these got touted in the most unlikely places just in time for these to experience historic losses especially for non-Bitcoin crypto. Now we have a nearly identical myth about gold being an ideal hedge against uncertainty. It is definitely true that gold has been in a very-long-term bull market which began on August 25, 1999 and will likely continue for perhaps another decade, but whenever any asset becomes very trendy then it is almost always a good idea to sell and to wait for most investors to be gloomy again before getting back in.

Gold consistently performs poorly in the first year of any large-cap U.S. bubble collapse.

Following the 1929 bubble for the most popular U.S. stocks, sometimes called the blue-chip bubble, gold mining shares experienced huge losses for less than one year, followed by an impressive multi-year bull market. If we jump forward to the 1970s then we see similar behavior for this sector during the plunge following the Nifty Fifty bubble. Going forward some more to 1999-2000, we see another example of large percentage losses for gold mining and silver mining shares which bottomed in mid-November 2000, two years before most U.S. stocks completed their lowest points in October 2002. If you had bought the equivalent of HUI, an index of gold mining and silver mining shares, at its exact bottom on November 15 or November 16, 2000 then by December 2, 2003 you would have had more than seven times as much money in just over three years. However, if you had bought HUI on the day that QQQ had topped out on March 10, 2000, then you would have initially suffered large percentage losses.

Similar behavior is likely to happen in 2025. As large-cap U.S. stocks may have completed all-time overvaluations as a group on February 18-19, 2025, the first several months to a year will likely be accompanied by greater percentage losses for gold mining shares and their funds including GDXJ than for the S&P 500 and similar large-cap indices. Following this decline, when gold, GDX, and GDXJ will once again go powerfully out of favor as these had done most recently during the summer of 2022, we will likely experience a doubling, tripling, or more for funds like GDXJ over the subsequent few years and eventually larger gains.

Gold will rise again, and probably by more than most gold bulls are currently anticipating. But don't buy it until it is once again widely detested, rather than now when it is adored.

The current U.S. equity bear market will likely last for roughly three years altogether.

Timing and price estimates, whether from me or anyone else, should be taken with a grain of salt. We have so many Bogleheads today who are convinced of their divine right to come out ahead in the long run that it will take a huge total market drop to convince them otherwise. Therefore, we might have a lengthy bear market, especially since we haven't had a serious bear market since March 9, 2009. There will be many pullbacks and just as many subsequent convincing-looking rebounds along the way. Don't believe frequent reports after each rally, including some probably during the next few weeks, about how "the market has bottomed." When we finally do reach the ultimate lows for most assets, the media and the vast majority of analysts will not be saying anything about recently bottoming. Instead they'll be telling you why you shouldn't buy since the market will supposedly be going much lower and why it will be many years before we can enjoy a true rally. That will be your buy signal.

Bear markets consistently experience the most powerful and frequent upward bounces.

Whenever there has been extended weakness for any asset, resist the temptation to sell, just as you must be equally firm about not chasing after anything which has experienced protracted strength. The market will repeatedly reward those who gradually accumulate any position into adversity rather than using lump sums or attempting momentum plays. Now that we have accelerated the downturn for the U.S. stock market, we will likely have energetic rebounds just as we did in previous severe bear market years including not only long-ago periods like 1931, but more recently 2001, 2002, and 2008.

A good rule of thumb is to track VIX and VVIX. Whenever VVIX has recently dropped to its lowest point in many trading days, while VIX has notably retreated from a recent peak in order to complete yet another higher low, this is often a useful time to add to short positions in very overpriced assets. With VIX recently surpassing 30, if it retests 20 then it could provide such an opportunity instead of jumping aboard when fear has recently become elevated.

Mark Hulbert did some useful research to confirm the thesis of the biggest bear markets featuring the sharpest short-term rebounds:

Sharp Short-Term Upward Spikes Confirm Bear Markets

Several emerging markets and commodity producers have either already become compelling buys or will likely do so at various points over the next few years.

Near the beginning of 2025, Brazilian shares and their funds including EWZ sported average price-earnings ratios below 8. Other funds of Brazilian stocks, including FLBR, BRF, and EWZS, had even more compelling ratios of profit growth to price-earnings ratio and other classic valuation measures championed by Benjamin Graham and Peter Lynch. I therefore began to purchase these and have continued to buy these into higher lows, so far in small percentages with the intention of gradually increasing these into all pullbacks especially when Brazilian insiders are doing likewise.

Recently we have experienced worthwhile bargains and depressed behavior for funds including THD (Thailand), EIDO (Indonesia), EPHE (Philippines), as well as some funds of commodity producers including REMX (rare-earth extractors). These are mentioned even less often than Brazil in the mainstream media. Chinese shares, especially those of non-internet companies like ASHR, remain worthwhile bargains after last year's early autumn spike and collapse mentioned earlier in this update; I plan to gradually accumulate them whenever they approach their 2024 bottoms.

Since June 2024 we have experienced by far the most intense insider selling by top executives in U.S. history.

Top corporate insiders sold about 2-1/2 times as much in U.S. dollar terms during the past summer, autumn, and winter than during any previous nine-month period. There was especially aggressive selling in the roughly 73 out of approximately 7300 listed U.S. companies which had become the most blatantly overpriced. If you look at the other 99% of U.S. companies, such as the Russell 2000 which can be tracked via the symbol IWM, then you will see that even before the most recent slump this index had been trading not only below its 2021 highs but below its 2021 lows. All previous five U.S. large-cap stock-market bubbles in 1837, 1873, 1929, 1972, and 1999 had extended underperformance by all but the top 1% of all shares prior to suffering severe bear markets. In all of these other five bubbles, those large-cap U.S. stocks which had been the big winners ended up losing more than 80% during their subsequent bear markets.

The following charts highlight some of the all-time record extremes that we had experienced during recent months:

The more that U.S. investors have piled into U.S. stocks as a percentage of their total net worth, the worse is the performance of the U.S. stock market during the subsequent decade:

There has rarely been any stock market in world history which had been more overpriced than the U.S. stock market was at its February 18-19, 2025 bubble top:

Whenever high-yield "junk" bonds barely yield more than U.S. Treasuries of identical maturities, it signals that investors are willing to accept far too much additional risk for a tiny additional yield:

One especially dangerous sign of overvaluation was seen at the February 2025 peak when the total amount of money in dangerous leveraged long funds was by far at an all-time record while the ratio of leveraged long assets to leveraged short assets also reached an all-time extreme:

The AI, internet, and Nifty Fifty bubbles have become increasingly extreme in how only about 1% of the most popular stocks have accounted for all of the stock market's gains:

The bottom line: whenever it is most worthwhile and profitable to buy or to sell anything, almost everyone wants to do the exact opposite. In February 2025 almost everyone wanted to be long the most popular large-cap U.S. stocks before they began what will likely become roughly three-year bear markets. Now everyone loves gold which will likely suffer a similar fate. Instead, invest in the most unpopular assets including palladium which can be purchased via the symbol PALL. Gradually accumulate emerging-market shares throughout the next few years whenever they are most disliked and have strong annualized profit growth. Eventually it will become timely to purchase funds of mid-cap gold mining and silver mining shares including GDXJ, but only when they are once again hated which may occur near the end of 2025.

Disclosure of current holdings:

Below is my current asset allocation as of 4:00 p.m. on Thursday, April 3, 2025. Each position is listed as its percentage of my total liquid net worth.

I computed the exact totals for each position and grouped these according to sector.

The order is as follows: 1) U.S. government bonds; 2) shorts; 3) bear funds; 4) precious metals; 5) emerging markets.

VMFXX/TIAA Traditional, TIAA money market/bank CDs/FZDXX/FZFXX/SPRXX/SPAXX/BPRXX/Savings/Checking long: 35.88%;

17-Week/52-Week/26-Week/13-Week/2-Year/8-Week/3-Year/5,10,30-Year TIPS/4-Week/6-Week/20-Year: 23.17%;

TLT long: 11.07%;

I Bonds long: 3.70%;

PMM long: 0.01%;

XLK short: 29.02%;

QQQ short: 22.12%;

SMH short: 1.17%;

GDXJ short: 0.47%;

AAPL short: 0.13%;

GDX short: 0.01%;

SARK long: 0.59%;

PSQ long: 0.29%;

Gold/silver/platinum coins: 8.66%;

PALL long: 2.12%;

FLBR long: 0.31%;

EWZ long: 0.22%.

"While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology." --Seth Klarman

TRUMP BUMP? DUMP! (November 20, 2024): On November 5, 2024, the U.S. held elections in which the Presidential winner was a Republican, while the Senate and House of Representatives ended up with majority Republican results. Before these elections, we already had by far the heaviest insider selling in the history of the U.S. stock market, the highest-ever valuations for most large-cap U.S. stocks, the highest-ever percentage of total U.S. assets invested in U.S. stocks, the highest-ever ratios of U.S. stock-market capitalization to U.S. GDP, and similar rare extremes which were above the 99th percentile.

There was a brief euphoric bounce to even higher levels which mostly peaked in the morning of Monday, November 11, 2024, less than one week following the elections. When a very overpriced asset temporarily becomes even more expensive, due primarily to emotional excitement, then this is historically an ideal selling opportunity. It works the opposite way too: when a very undervalued asset temporarily becomes even cheaper mainly for psychological reasons, this is one of the best times to make a purchase.

Gold mining and silver mining shares consistently complete tops and bottoms prior to most other stocks doing likewise.

During the 1999-2003 global equity bear market, HUI which is a fund of unhedged gold mining shares completed its bottom on November 15-16, 2000. This was almost two years before many other equities and their funds had bottomed on or near October 10, 2002. During the 2007-2009 bear market, gold mining shares were similarly among the earliest stock funds to complete their lowest points at or near the open on October 24, 2008. The S&P 500 didn't fall to its lowest point of 666.79 until March 6, 2009. It works the other way also: gold mining shares topped out in August 2020, well over a year before the Russell 2000 had completed its highest point in November 2021 and several years prior to the recent potential zenith for the S&P 500 Index.

Both GDX and GDXJ recently completed multi-year highs during the pre-market session on October 23, 2024. This pullback is likely to lead to losses for most other stock funds. Just as in past decades, GDX and GDXJ will be among the earliest exchange-traded funds to complete their lowest points for the cycle, perhaps in the first half of 2025. My guess is that both GDX and GDXJ will fall to bottoms which are between their early autumn 2022 lows and their early autumn 2023 lows. If this guess is wrong then it will probably be that one or both of these drop below their September 2022 bottoms to five-year nadirs. Assets including QQQ will probably fall to their lowest levels of 2025 several weeks to a few months afterward, possibly with QQQ dropping below 300, with QQQ thereafter enjoying a multi-month rebound which could carry it near 400 before resuming its bear market which might eventually end after many ups and downs around 2027 with QQQ below 100.

Emerging markets have been creating unheralded opportunities which might bottom around the spring and/or summer of 2025.

Emerging-market valuations relative to earnings are near their lowest-ever points of the past several decades, only briefly approached or surpassed during previous U.S. stock-market bubbles. Investors have become overly enamored with large-cap U.S. stocks and have therefore mostly sold their holdings in most other parts of the world to chase after dangerously overpriced U.S. shares. This has already created compelling opportunities. My main reason for waiting before buying is that the first major downward phase for large-cap U.S. shares will usually spill over into nearly all other stocks and corporate bonds in most of the world and in most sectors.

There are many possible worthwhile buying opportunities for emerging-market stock funds which may bottom roughly a half year from now near multi-year lows. Exchange-traded funds worth considering for purchase at that time may include EWZ, EWZS, and BRF (Brazil), VNM (Vietnam), EWW (Mexico), GXG (Colombia), IDX (Indonesia), and EPHE (Philippines).

Undervalued assets including TLT, FXY, and PALL have fallen to historic bottoms and have been forming several higher lows as is typical of the early stages of all true multi-year bull markets.

Just over one year ago, TLT fell to its lowest intraday point (81.92 at 5:40 a.m. on October 23, 2023) since June 15, 2004. Since then it has made several higher lows under 90. In July 2024 the Japanese yen fell to its lowest point since 1986 versus the U.S. dollar which can be purchased via the exchange-traded fund FXY. PALL, a fund of palladium bullion, dropped to 76.49 at 8:30:48 a.m. on August 5, 2024, thereby touching its lowest level since May 30, 2017, and since then forming several higher lows including 84.31 at 8:54:24 a.m. on November 14, 2024. The traders' commitments for all of the above three assets are demonstrating aggressive commercial accumulation which should lead to significantly higher prices over the next few years.

The U.S. dollar index has been rallying since September 27, 2024, which is generally negative for most stocks.

On September 27, 2024, the U.S. dollar index dropped to 100.514, its lowest point since July 20, 2023, and completing a two-year pullback which had begun from a two-decade top on September 28, 2022. Since then the U.S. dollar has been very strong with almost no media coverage. A powerful greenback is almost always followed by declines for most stocks and corporate bonds. Whenever the U.S. dollar index reaches an important peak and begins to form lower highs, which will likely occur sometime during 2025, this will signal that it is time to move progressively onto the long side with most equities and their funds.

We have achieved new all-time extremes between the 99th and 100th percentile for a wide range of valuation categories which have mostly been tracked for decades or longer.

The following charts highlight how large-cap U.S. stocks have been trading near all-time overvaluations even if you go all the way back to the founding of the Philadelphia Stock Exchange in 1790:

The CNN Fear & Greed Index reached 76 for one of the few times in its history:

Compared with the rest of the world, U.S. stocks haven't been more overpriced at least since 1950:

Investors have the most optimistic expectations for their U.S. stock investments since this survey began in 1987:

Using S&P 500 price to sales or price to book, we approached new all-time extremes for both in November 2024:

A measure of sentiment based upon quantitative indicators rather than a survey has shown the greatest-ever anticipation of future percentage gains for large-cap U.S. stocks:

2007 was the last year when the spreads between high-yield corporate bonds and U.S. Treasuries of identical maturities were as low as they have been recently:

Mark Hulbert has quantitatively compiled a list of indicators which have been used for decades to gauge the U.S. stock market's level of over- or undervaluation using percentile readings:

Investors currently have far too much of their money in U.S. stocks and not nearly enough in U.S. Treasuries:

Investors are shunning U.S. Treasuries and bank CDs paying 4.5% while putting money into QQQ paying 0.57%, because, just as with any historic bubble peak, they're certain they can "easily" make several times the difference with capital gains:

The bottom line: Investors years from now will look back at the current time and wonder why they weren't selling U.S. stocks much more aggressively, just as Warren Buffett and the top executives of many of the world's biggest companies have been doing during the past several months near all high points. Instead, investors have made all-time record deposits into large-cap U.S. stocks and have never been more overconfident about achieving future gains. The internet bubble ended with QQQ dropping 83.6% from its intraday peak of March 10, 2000 to its intraday bottom of October 10, 2002, 31 months later. However long the current bear market lasts won't be known except in hindsight, but now is an even more critical time to go against the crowd.

Disclosure of current holdings:

Below is my current asset allocation as of 4:00 p.m. on Wednesday, November 20, 2024. Each position is listed as its percentage of my total liquid net worth.

I computed the exact totals for each position and grouped these according to sector.

The order is as follows: 1) U.S. government bonds; 2) shorts; 3) bear funds; 4) precious metals; 5) coins; 6) miscellaneous securities.

VMFXX/TIAA(Traditional)/bank CDs/FZDXX/FZFXX/SPRXX/SPAXX/BPRXX/Savings/Checking long: 37.36%;

17-Week/52-Week/26-Week/13-Week/2-Year/8-Week/3-Year/5,10-Year TIPS/4-Week/42-Day long/20-Year: 23.44%;

I Bonds long: 11.38%;

TLT long: 10.83%;

PMM long: 0.01%;

XLK short (all shorts are once again unhedged): 35.59%;

QQQ short: 25.58%;

SMH short: 1.50%;

AAPL short: 0.15%;

GDXJ short: 0.13%;

GDX short: 0.01%;

SARK long: 0.58%;

PSQ long: 0.04%;

PALL long: 1.49%;

Gold/silver/platinum coins: 7.71%;

FXY long: 0.80%.

"Risk comes from not knowing what you're doing." --Warren Buffett

RISKS WITHOUT REWARDS (September 29, 2024): In this U.S. Presidential year, far too many investors have been acting like seals and not the Presidential kind. They have become so accustomed to repeating the same tricks, piling over and over again into funds of U.S. large-cap stocks, that they aren't considering the risks they are taking relative to the rewards. You can get away with this kind of mindless approach with assets which are undervalued, since undervalued assets regardless of their so-called "reasons" will eventually rebound to fair value and you will do reasonably well. However, whenever assets are at or near the highest ends of their historical ranges, especially when they are wildly popular and overowned, you are going to come out behind even after decades of faithful Boglehead behavior.

It is time for investors to stop pretending that they have a divine right to come out ahead by brainlessly buying dangerously overvalued assets. By the time they realize their mistakes, they will lose half of their money or more. They should instead be primarily invested in U.S. government debt including U.S. Treasuries, I Bonds, and TIPS. Those who own "boring" U.S. government debt will have just about exactly 117 dollars near the end of 2027 for every 100 dollars that they have now. Those who are too lopsidedly invested in the shares of large U.S. companies, many of which are trading at four, five, or six times their historical average levels relative to profits, sales, and book value, will be far behind "boring" U.S. Treasury investors. This will be true not only three or four years from now, during which time the biggest losses will likely occur, but even thirty or forty years from now. This is proven by the historical record following previous bubble peaks which I will now describe in detail.

The Boglehead myth has recently been more thoroughly researched and decisively debunked.

If you invest in anything when it is underpriced then you have the wind at your back. The long-term upward trend will eventually work in your favor. However, if you buy something which is at the 99th or 100th percentile of overvaluation then you will be behind in real terms even after several decades. Edward McQuarrie researched the entire history of the U.S. stock market dating all the way back to 1793 to determine whether U.S. Treasuries or U.S. stocks achieve greater returns, and discovered that their total long-term performance has been nearly identical:

In the Long Run, Stocks Outperform Bonds, or Do They?

The best-known modern period of severe underperformance by U.S. equities had occurred from the September 1929 stock-market top to the August 1982 bottom. During this interval of nearly 53 years, the S&P 500 lost 38 percent after adjusting for inflation:

If this is backdated further to the previous century, then the period from June 30, 1851 through June 30, 1932 was accompanied by a 21% net loss for U.S. stocks in real terms during this 81-year span:

Of course you can also select numerous periods of time when the S&P 500 Index has impressively outperformed, especially if you begin from a starting point of notable undervaluation. Where you end is a function primarily of where you begin, not which asset you own. There is no magic which will cause you to "always be ahead in the long run," which is one of the most irrational and misguided conceits of Boglehead investors. Since we only live to be 100 years old or less, rather than 10 thousand years, it very much matters where we are in the cycle.

We are either at or near the 99th to 100th percentile for many U.S. equity valuation measures.

U.S. stocks, especially large-cap shares which have been by far the most popular with investors, have never been more overpriced in their entire history relative to current and future earnings than they have been during 2024 according to most reliable measures of valuation. Here are two charts which highlight their dangerous current levels:

The CNN Fear & Greed Index has rarely reached or exceeded 72 in its entire history:

The most important executive orders are the all-time record insider sales by the highest-ranking officers of U.S. companies.

In 2024 we have experienced all-time record insider selling by the top executives of large U.S. companies. This is not a coincidence; those who know the most about valuations and future profits are well aware that their companies' shares have never been more overpriced and will likely never be as overpriced again in their lifetimes and probably not in their children's lifetimes. That is why the total U.S. dollar volume of such selling is roughly twice the previous all-time record and is far above the average level of selling. Top executives have also done the least U.S. dollar volume of total insider buying in history during 2024:

Corporate Insiders Are Dumping Stock at the Fastest Rate in More Than a Decade

More aggressive investors who are aware of current record overvaluations, and who understand the risks they are taking, may choose to sell short.

It is possible to sell short assets which are at a high multiple of fair value including QQQ, or to purchase bear funds which do this including PSQ if you are less comfortable with short selling. It is essential to understand the potential risks and rewards with any kind of investment before taking such action. In addition, whenever you establish any position, you should always begin with a tiny percentage of your total liquid net worth and only add 125 dollars per trade for every one million dollars of your total liquid net worth. Many investors dangerously overtrade by doing amounts which are far too large, which will almost always give you a mathematically inferior average price.

Unlike long positions where you must surrender your U.S. Treasury bills to purchase those longs, short sellers can hold their Treasuries as collateral which will count almost as much as cash. You will also be paying the lowest dividends in history.

One little-appreciated advantage of selling short is that if you establish any long position then you have to give up the U.S. Treasury interest to make such a purchase. If you buy SPY, for example, then you are giving up 4.75% which you could get on 4- or 8-week U.S. Treasury bills, or similar yields on funds such as the Vanguard Federal Money Market Fund VMFXX, to get 1.18% in dividends which is the current 30-day SEC yield for SPY. It makes no sense to surrender 3.5%, because then you have to make 3.5% in capital gains just to break even, and that's not counting the fact that U.S. government debt is free of state and local income tax. If you are selling short and you use U.S. Treasury bills as your collateral, then those will count as 94% cash positions by SEC regulations. In other words, having 100 thousand dollars in U.S. Treasuries has the same marginable value as 94 thousand dollars in cash. You will thus be able to continue to collect interest so that if nothing happens in one year you will come out ahead compared with those who have long positions in the same securities. Since the SEC dividend yield for QQQ is 0.58% while short-term U.S. Treasury bills are yielding a blended average of 4.58%, the annualized net increase in your account per year will be exactly 4% if you are short QQQ and its components are unchanged in value.

U.S. Treasuries overall in October 2023 sported their highest yields since 2000. It makes much more sense to purchase assets which are at 23-year lows than to buy shares which have never been more overpriced since the beginning of the U.S. stock and Treasury markets in the late 1700s. Current U.S. Treasury yields have declined moderately from their 2023 peaks but remain well above their long-term historic averages. Investors have been shunning a guaranteed 4% to 5% annualized since, just as had been the case at previous bubble peaks including 1929, 1972, and 1999, they are overconfident about gaining 20% or more each year with large-cap U.S. stocks.

The behavior of the U.S. dollar index has been ignored by most investors even though it has been one of the most consistently reliable signals since it began trading at the start of 1972.

Only a small percentage of investors track the behavior of either the U.S. dollar index or the greenback relative to other global currencies. Historically the U.S. dollar tends to complete important peaks and thereafter make lower highs whenever U.S. stocks are set for significant uptrends, as we had most recently experienced when the U.S. dollar index completed a two-decade peak on September 26, 2022 and on earlier occasions before stock-market surges such as March 4, 2009 which was two days before the S&P 500 had ended its bear market on March 6, 2009 at 666.79. Symmetrically, the U.S. dollar index will often bottom and begin to form higher lows whenever U.S. equities are set for meaningful declines, as we had seen on numerous occasions including the important double bottom for the greenback in March and July 2008.

During the past several years the U.S. dollar completed a historic bottoming pattern in early 2021 before rallying to its highest point in more than two decades on September 26, 2022. This was followed by a two-year correction which either just ended or is approaching its final downward intraday spikes. There is no guarantee that the U.S. dollar can't drop further, but I expect to see it powerfully rally to its highest point since 1985 by 2027 or 2028. The next several months should also be accompanied by a generally rising U.S. dollar which will imply significantly lower prices for almost all other assets except for U.S. government debt.

Investors and most analysts have recently become as aggressively bullish toward gold and silver and the shares of their producers as they had been equally and staunchly bearish two years ago.

Investors consistently want to buy high and sell low, and this tends to be even more true in the precious metals sector where important tops and bottoms occur more frequently than they do for U.S. equity indices. Fortunately, just as with insider buying and selling, the U.S. government requires those who trade actual metals such as gold, silver, and platinum to register either as commercials, non-commercials, or small speculators. Commercials are those who own physical metal including miners, jewelers, and those who produce finished products from these metals. Non-commercials are hedge funds and others who manage money for other people. Small speculators are ordinary investors.

Commercials have rarely been more bearish toward gold, silver, and platinum than they are right now, only favoring palladium.

Historically, commercials gradually go net long whenever a particular asset is most likely to rise in price, and to gradually go net short whenever anything is most likely to decline in price. Not coincidentally, this trading approach is almost identical to my own method, partly since I based it upon long-term insider and commercial behavior. Recently the ratios of commercial short to commercial long positions for gold, silver, and platinum are near the highest-ever extremes of their multi-decade activity, meaning that those who are the most knowledgeable about precious metals are the most concerned about upcoming price declines and have been intensively hedging their inventory. This stands in stark contrast to most analysts and the media who have recently been especially bullish.

You can find the traders' commitments for silver, copper, and gold at the following link where it is updated each Friday at 3:30 p.m. Eastern Time:

U.S. Government Traders' Commitments for Silver, Copper, Gold, and Others

Here are the traders' commitments for palladium and platinum:

U.S. Government Traders' Commitments for Palladium, Platinum, and Energy

With gold, commercials were most recently long 76,713 and short 416,419 contracts. Silver commercials showed 29,339 longs and 111,171 shorts, while platinum commercials had been long 15,715 and short 45,255. Palladium commercials were long 10,572 and short 3,941, the only one of the four precious metals with a high long-to-short ratio rather than the other way around.

To a somewhat lesser extent than we have experienced with insiders for large-cap U.S. stocks which have sold about twice as much as their previous all-time records, the executives of gold mining and silver mining companies have been recently selling gold mining and silver mining shares at their most aggressive pace since August 2020.

Just during the past several weeks we had insider sales for Royal Gold (RGLD) numerous times, in addition to Newmont Mining (NEM), Hecla Mining (HL) earlier in September 2024, and Apex Silver Mines (APXSQ). In spite of gold frequently achieving all-time highs, the shares of mining companies have been repeatedly struggling to surpass their recent highs and are far below their peaks from the summer of 2020 when gold was more than five hundred U.S. dollars per troy ounce lower than it is now. We have also experienced more frequent intraday highs occurring near the opening bell which is consistent with a topping pattern.

The bottom line: Investors are far too heavily laden with low net dividends and high downside risk for popular large-cap U.S. equity favorites when they should be embracing U.S. Treasuries which yield 4% more with zero risk and no state or local income taxes. Cryptocurrencies remain irrationally popular in spite of having been in downtrends for more than a half year and having no proven long-term intrinsic value. Real estate is eagerly desired for the precise reason that it should be avoided since valuations are roughly double fair value in the U.S. and had reached triple fair value in Canada before modest declines in real terms during the past 2-1/2 years. Gold and silver have thousands of years of proven intrinsic value, but these and the shares of their producers have become perilously trendy in recent months primarily because "they're going up so don't miss out." Commercials and top corporate insiders have rarely been more bearish toward precious metals except for palladium since their euphoric peaks in January 1980. If you are able to handle the uncertainty of selling short QQQ or buying PSQ then this can be a worthwhile speculation, while the vast majority of your total liquid net worth should be invested in U.S. government debt until valuations eventually become more compelling elsewhere.

Disclosure of current holdings:

Below is my current asset allocation as of 4:00 p.m. on Friday, September 27, 2024. Each position is listed as its percentage of my total liquid net worth.

I computed the exact totals for each position and grouped these according to sector.

The order is as follows: 1) U.S. government bonds; 2) shorts; 3) bear funds; 4) precious metals; 5) coins; 6) miscellaneous securities.

VMFXX/TIAA(Traditional)/bank CDs/FZDXX/FZFXX/SPRXX/SPAXX/BPRXX/Savings/Checking long: 37.56%;

17-Week/52-Week/26-Week/13-Week/2-Year/8-Week/3-Year/5,10-Year TIPS/4-Week/42-Day long/20-Year: 23.48%;

TLT long: 11.54%;

I Bonds long: 11.23%;

PMM long: 0.01%;

XLK short (all shorts are once again unhedged): 34.66%;

QQQ short: 24.50%;

SMH short: 1.53%;

AAPL short: 0.15%;

GDXJ short: 0.11%;

SARK long: 0.83%;

PSQ long: 0.04%;

PALL long: 1.44%;

Gold/silver/platinum coins: 7.64%;

FXY long: 0.72%.

"The stock market is a device for transferring money from the impatient to the patient." --Warren Buffett

GDXJ: 48 TO 28 TO 58 (August 25, 2024): It is easy to determine whether to buy or sell precious metals because we have the huge advantage of knowing exactly what the insiders are doing both with the shares of the producers as well as with the futures contracts for the metals themselves. Recently we have experienced the heaviest selling by the top executives of gold mining and silver mining companies since the summer of 2020. The traders' commitments for gold, silver, and platinum show unusually bearish readings where the commercials (including jewelers, fabricators, and miners) who own physical metal have massive ratios of short to long positions. Meanwhile, hedge funds are sporting an all-time record ratio of gold longs (355,551) to gold shorts (64,298). We have also experienced GDXJ far underperforming GLD since July 2020, with GDXJ forming numerous lower highs including the past several weeks while gold bullion and GLD have frequently set new all-time highs.

A combination of recent insider selling of the shares of gold mining and silver mining shares, the shares underperforming bullion, commercials being heavily short gold futures, and hedge funds being heavily long gold futures are likely to be followed by much lower prices for both gold and silver. I expect gold to drop below two thousand U.S. dollars per troy ounce sometime during the next several months, and perhaps below 1800 if past patterns repeat themselves. Silver could drop toward or even below 20 U.S. dollars per troy ounce over the same time period. Almost all technical and fundamental analysts are asking how much higher gold can climb when they should be looking the opposite way.

You can find all of the traders' commitments at this site:

U.S. Government Traders' Commitments for Futures (go to Current Legacy Reports)

GDXJ is a fund of mid-cap gold mining shares.

For U.S. stocks overall, a fund like SPY or VOO represents the largest 500 companies while IWM tracks the Russell 2000 which are companies 1001 through 3000 by market capitalization. For precious metals mining, GDX represents the shares of the world's biggest gold mining and silver mining companies, while GDXJ covers the mid-cap holdings. There is some overlap between the smallest companies in GDX and the largest ones in GDXJ. Currently there is no true fund of small gold mining companies, although it would be useful to have such a fund available for trading.

Gold mining and silver mining shares generally lead gold bullion in both directions.

GDXJ reached a 7-1/2-year peak of 65.95 in August 2020. Since then it has formed lower highs of 51.92 in April 2022 and 49.13 on July 16-17, 2024. Gold bullion is much higher today than it had been at any of these previous times, but the shares of gold mining and silver mining shares have not responded positively. Historically, gold mining and silver mining shares usually lead gold bullion in both directions. For example, in September 2022, GDXJ slid to a 2-1/2-year bottom of 25.80. From September through November 2022, as GDXJ formed several higher lows, gold bullion and GLD kept dropping to lower lows, with gold eventually bottoming in November 2022 at 1621.50 U.S. dollars per troy ounce. Before precious metals can once again move meaningfully higher in tandem with the shares of their producers, we will likely once again see gold mining and silver mining shares outperforming gold bullion instead of underperforming it as it has done in recent years. We will also likely see insider buying instead of insider selling. We should also see the traders' commitments with silver commercials being either net long or approximately neutral instead of being heavily net short as they are now.

Especially whenever the U.S. dollar is strongly rallying against currencies such as the euro over the next several months, GDXJ will likely once again drop below 30 as it has done many times since its inception.

There is no way to know whether GDXJ will bottom near 20 or 30 during the upcoming year, but it will likely be somewhere in between those levels and perhaps near its September 2022 bottom of 25.80. As with all investments, it is essential to use a ladder consisting of dozens or even hundreds of very small good-until-canceled purchase orders placed months in advance to gradually accumulate it, since no one can possibly know with any accuracy when the bottom will occur or at approximately what price. I already have numerous orders to begin buying GDXJ near 29 and to buy it more and more aggressively the lower it drops, just as I have done repeatedly in past decades. I first began buying gold mining shares via the fund BGEIX in 1988 when it was possible to purchase 50 dollars per day of this fund with zero commissions.

Bubble collapses for large-cap U.S. stocks almost always feature initial substantial losses for gold mining and silver mining shares, followed by dramatic percentage gains.

During the previous U.S. large-cap bubble collapse at the beginning of the century for the internet bubble, QQQ topped out on March 10, 2000 prior to plummeting 83.6% by October 10, 2002. Gold mining shares and their indices/funds such as HUI bottomed on or near November 15-16, 2000 which was a little more than eight months later. We can never be sure about timing. However, it seems likely that we began or are about to begin a similar collapse for large-cap U.S. shares for the same reasons of dangerous overvaluation and even more intense selling of their shares by top executives than we had in 1999-2000. Gold mining and silver mining shares will likely retreat to their lowest levels since the autumn of 2022 and perhaps even lower than that, toward but probably above their March 2020 bottoms. The next bottoming process for GDXJ and similar shares will likely be completed either near the end of 2024 or during the early months of 2025.

If we look again at HUI, then if you had purchased its equivalent at its November 2000 bottom then it was multiplied by a factor of more than seven in three years. We can't say for sure how much it might gain under a similar bubble collapse, but even if GDXJ "only" doubles then this would be a superior rate of return. GDXJ has already proven its ability to rebound from depressed levels, having more than tripled within less than one year from its bottoms in January 2016 and March 2020. The key, as always, is to buy something whenever everyone else is despondent and is selling it rather than when everyone is excited about the prospect of additional all-time highs.

Whenever the most people are invested in any asset, it consistently performs the worst; when the fewest people want to own anything, it dramatically outperforms:

Besides being overloved, U.S. large-cap stocks are absurdly overpriced relative to profits, sales, or any other benchmarks:

U.S. equity fund managers have become dangerously overconfident about investors not making future redemptions, thereby reducing their cash percentages to all-time record lows. If investors become worried, they will quickly use up this cash and force these fund managers to sell their stocks to meet higher-than-expected redemptions:

Costco's price-earnings ratio once again surpassed 55.

Instead of focusing on extremely overpriced shares including Apple, Nvidia, Microsoft, Tesla, Amazon, and other well-known tech names, it is even more interesting to look at Costco. Costco can't possibly create a revolutionary new product: its business model is people driving their cars to a huge parking lot, purchasing reasonably-priced items which Costco had obtained with favorable wholesale deals, and then bringing those items home. Costco has been around since 1983 which is more than forty years. The current price-earnings ratio for Costco is "only" about five times its historic average while its profit growth has been very steady through the decades.

There are two possible scenarios: 1) extraterrestrial beings arrive from other galaxies with their minds focused on purchasing as much from Costco as they can get, thereby quintupling Costco's profit growth; or 2) the price-earnings ratio for Costco collapses 80% or more to restore it to its long-term historic average. Take your pick.

In spite of the heaviest insider selling and the lowest put-call ratios in history for the largest U.S. stocks, investors who are not top corporate executives have been doing much more buying than selling.

In hindsight, investors will look back at this period of dangerous overvaluation for popular large-cap U.S. stocks and wonder why they didn't do some selling. The reason is that the media keep brainwashing you into putting even more of your retirement money into the most dangerously overvalued assets. Other assets like residential real estate, high-yield corporate bonds, and cryptocurrencies are also near all-time record overvaluations, but more people are interested in adding than subtracting.

Investors are far too eager to take risks which are wildly out of proportion with the potential rewards. They are not nearly eager enough to desire guaranteed gains with zero risk. The result will therefore be exactly the same as it has been for every bubble throughout history.

There are bargains out there, although they could become even better bargains.

Unlike gold, silver, and platinum, for which commercials have high ratios of short to long positions, palladium shows commercials with an even bigger ratio of longs to shorts. You can buy palladium using the ticket symbol PALL. Other unpopular shares include stocks in countries like China, Brazil, and Vietnam, with Chinese shares having suffered a bear market which has persisted for more than 3-1/2 years from its February 2021 top. Rare-earth metals producers and their funds including REMX are also notably out of favor. As the popular U.S. stocks slide 40% or 50% from their recent highs within a year, these losses will most likely initially spill over into almost all other assets as many investors sell first and ask questions later. However, just as they had done during 1999-2003, investors will eventually differentiate between sectors and will begin to purchase the most undervalued shares. Gold mining and silver mining shares, after they complete much greater losses, could be among the first to complete their bear-market bottoms several months from now just as they had done in November 2000.

U.S. Treasury bills are especially compelling, as Warren Buffett well knows.

Investors have been shunning U.S. Treasury bills of 3 months or less which yield 5% or more guaranteed with exemption from state and local income tax, even though those yields are generally the highest since 2000. They have also been avoiding longer-term U.S. Treasuries which yield more than 4% including the 20-year U.S. Treasury. The main reason is that they think that getting 4% or 5% guaranteed explicitly by the U.S. government is less than the 10%, 20%, or 30% that they'll surely achieve through large-cap U.S. stocks which in their opinion "only go up in the long run." This is the exact same mistake that investors made in 1999-2000, and previously near other peaks prior to severe U.S. equity bear markets. Instead of ending up with a three-year increase of 17% compounded and partially tax-exempt, they will end up with only 17% of their money if they are invested in QQQ.

The U.S. dollar has fallen sharply out of favor and is likely getting ready to move significantly higher versus nearly all currencies except the Japanese yen.

The U.S. dollar has been trading at its lowest point versus many currencies since around the end of 2023. Most analysts expect the U.S. dollar to continue lower, but it will likely rally powerfully within the next three to four years to reach its highest point since its all-time peaks of 1985. This is partly since investors will be fleeing U.S. stocks, cryptocurrencies, and high-yield corporate bonds. Currently unpopular U.S. Treasuries and the U.S. dollar will benefit just as they had done during past bubble collapses including 2000-2002.

The Japanese yen is an important exception, having fallen several weeks ago to its lowest point versus the U.S. dollar since 1986. The yen will likely continue to rebound until it is much closer to fair value. Just as it didn't make sense for Japan to have the most expensive cost of living and housing prices in the world as it did in the late 1980s, it makes even less sense for Japan to have the lowest cost of living of any industrialized country and among the lowest housing prices worldwide as has been the case in 2024.

Disclosure of current holdings:

Below is my current asset allocation as of 4:00 p.m. on Friday, August 23, 2024. Each position is listed as its percentage of my total liquid net worth.

I computed the exact totals for each position and grouped these according to sector.

The order is as follows: 1) U.S. government bonds; 2) shorts; 3) bear funds; 4) precious metals; 5) coins; 6) miscellaneous securities.

VMFXX/TIAA(Traditional)/bank CDs/FZDXX/FZFXX/SPRXX/SPAXX/BPRXX/Savings/Checking long: 37.44%;

17-Week/52-Week/26-Week/13-Week/2-Year/8-Week/3-Year/5,10-Year TIPS/4-Week/42-Day long/20-Year: 23.31%;

TLT long: 11.52%;

I Bonds long: 11.10%;

PMM long: 0.01%;

XLK short (all shorts are once again unhedged): 34.49%;

QQQ short: 24.16%;

SMH short: 1.53%;

AAPL short: 0.14%;

GDXJ short: 0.08%;

SARK long: 0.91%;

PSQ long: 0.04%;

PALL long: 1.35%;

Gold/silver/platinum coins: 7.33%;

FXY long: 0.71%.