"There are no new eras; excesses are never permanent." --Bob Farrell (Rule #3)

TIPPING POINT: BUY LTPZ (July 31, 2026): As I had described in my recent postings, U.S. government debt has become unusually undervalued, with many U.S. Treasuries recently dropping to their lowest levels since 2007 or earlier. I am continuing to buy TLT, EDV, and related funds of U.S. Treasuries; there are also closed-end funds in this sector which I will discuss in a future update. A lesser-known and often misunderstood asset class, which also falls under the category of U.S. government-guaranteed securities, are Treasury Inflation Protected Securities. These are often called Tips which should not be confused with the pink-sheets stock which uses that symbol. In particular, I currently favor those Tips which mature in 20 to 30 years which have average fixed yields of just about exactly 3%. I will discuss and attempt to demystify this asset class which is currently at its most compelling undervaluation in history with the sole exception of a number of weeks in the year 2000. Pimco offers the exchange-traded fund LTPZ which I am recommending as an easy way to purchase long-dated Tips. The timing of the unusually low prices for Tips in both 2000 and 2026 is not a coincidence; near all U.S. stock market bubble tops, investors will ignore the best guaranteed bargains of their lifetimes to chase after the trendiest stocks which are set to plummet 80% or 90%.

TIPS CAN BE AMONG THE BEST INVESTMENT CHOICES WHENEVER U.S. EQUITIES ARE TOPPING OUT AT BUBBLE PEAKS AND ARE SET TO DRAMATICALLY UNDERPERFORM: As is true of the vast majority of assets, if you can purchase something at a 26-year bottom then you are probably going to outperform most other assets over the next several years or so. In June 2000, if you were invested in the S&P 500, then if you reinvested all dividends and paid zero management fees you would have lost 15% of your capital by June 2010 even without adjusting for inflation. If you had instead owned the Vanguard broad-based Tips fund VIPSX then you would have doubled your money by June 2010. Obviously different starting points would result in widely varying results. The conclusion is certainly not that Tips always outperform large-cap U.S. stocks, but that if you purchase Tips anywhere near a bubble peak for U.S. stocks then you will probably come out way ahead. One main reason I am currently recommending LTPZ instead of VIPSX is the VIPSX has an average maturity of only 7.0 years, versus 21.56 years for LTPZ. The yield difference between these maturities is currently high.

2000 and 2026 have a lot in common. In both years, Tips were especially compelling bargains. Both years featured slightly different kinds of bubbles featuring all-time record overvaluations for popular U.S. stocks. Investors put slightly over 51% of their money into U.S. stocks at the March 2000 peak and 55.1% at the early June 2026 top, versus the average of 26.0% of U.S. household assets invested in U.S. equities and their funds since 1950 [source: Mark Hulbert]. Just as in 2000, the popular consensus today is that U.S. stocks will keep climbing regardless of valuations, while U.S. government debt will always be unpopular.

TIPS PAY A COMBINATION OF TWO DIFFERENT YIELDS TO GIVE YOU A TOTAL: Whenever you purchase most U.S. government debt, such as ordinary U.S. Treasuries, you are locking in a particular annualized interest rate which continues until the security matures. With Tips, at the time you purchase them, you are locking in what is called the fixed yield which remains constant through maturity; this is added to the urban CPI each month to give you the total yield. In case the urban CPI is negative, you are still guaranteed the fixed yield as a minimum monthly amount to be credited; a negative CPI is never subtracted from it. Thus, the total yield fluctuates each month and the total of each six-month period is credited to your account.

During the past several trading days, I have been repeatedly purchasing U.S. Tips which mature on February 15, 2053 and which have the cusip 912810TP3. The fixed yield on these has varied with each purchase, but has recently been slightly above 3%. For purposes of simplicity, let's assume that the fixed yield is exactly 3%. Each month, this fixed yield is added to the exact percentage increase in the Consumer Price Index for All Urban Consumers, sometimes abbreviated CPI-U. This index is different from the CPI you will hear reported in the media on the second week of each month at 8:30 a.m., because the urban CPI is not seasonally adjusted. You can find the official data for the urban CPI from the U.S. Federal Reserve since 1913 at the following link:

Consumer Price Index for All Urban Consumers Since 1913

The urban CPI index increased 3.5% for the year ended June 2026. Therefore, if your fixed yield is locked in at exactly 3.0% for 26-1/2 years, your current total yield is 3.0% fixed plus 3.5% urban CPI for a combined total of 6.5% annualized. From the rule of 72, we can see that if you compound your money at 6.5% annualized then it will take 72 / 6.5 or 11 years and 4 weeks to double your money. The actual monthly rate will fluctuate, perhaps considerably, over the 26-1/2-year period, so you can't be certain in advance exactly how much your principal will increase each month. In the worst-case scenario, if U.S. inflation as measured by the urban CPI rapidly drops to zero or negative and remains negative (i.e., deflation) for decades--obviously not likely, but possible--then you will only get the fixed rate of 3.0% annually so it will take 24 years to double your money instead of 11 years. Conversely, if the urban CPI suddenly increases to 6% and stays there, then your total return will be 3% plus 6% or 9% annually and you will double your money in 8 years.

YOU CAN ACHIEVE SUBSTANTIAL CAPITAL GAINS OR LOSSES FROM TIPS, NOT JUST HIGH MONTHLY RETURNS: If you buy Tips with a fixed rate of exactly 3% for 26-1/2 years, as in the above real-life example, then you have the potential for much more than a higher guaranteed yield than almost all other safe investments. When you lock in a rate of 3%, your principal will fluctuate in value depending upon what happens to fixed yields going forward. Let's say that a year from now the fixed rate on the same Tips has climbed from 3.0% to 4.0%. If you then want to sell your Tips prior to maturity (maybe your spouse wants to purchase a sports car or a second home), you will have to accept a significantly lower price than you had originally paid for it. That's because everyone else can get 4%, so there is much less eagerness to buy a piece of paper that only yields 3%. It works the other way also, and here is the key fact that hardly anyone appreciates: the long-term average fixed yield on 30-year U.S. Tips is only 1.14%. If the fixed yield approaches its multi-decade mean, you will be able to sell your Tips for more than double the price you paid for them. That's because investors in the open market will only be able to get half of the yield you have guaranteed, so they will pay you twice your purchase price for it. (The calculations are being slightly rounded off for simplicity; I can give you the exact data to a few decimal places if you want to know it.)

By U.S. federal law, your interest is exempt from income taxation in all U.S. states and localities. In some states including New Jersey, not only is your interest on Tips free of all state and local income taxes, but also all capital gains on those securities and funds of those securities, as long as the securities or funds have nearly all of their capital invested in direct U.S. government debt and not repos or other artificial substitutes. There is a quirk in the Tips rules where you may have to pay tax on some of your principal increase prior to maturity; fortunately, this so-called phantom tax will reduce your ultimate net gain at maturity or whenever you sell your Tips. It is not that different from how you have to pay tax on dividends from most securities even if you don't sell them. Fortunately all necessary tax information by federal law has been automatically reported on your broker's 1099 since the year 2011 so you don't have to do any fancy calculations.

YOU CAN PURCHASE TIPS AT AUCTION, ON THE SECONDARY MARKET, OR USING EXCHANGE-TRADED FUNDS: The easiest way to purchase U.S. Tips are using the auctions established by the U.S. government for this purpose. Just as with 26-week U.S. Treasuries or any other form of U.S. government debt, these auctions are guaranteed to be free of commissions by federal law. You will also receive exactly the same yield as everyone else who participates in non-competitive auctions for the same securities, even if they are the Bank of China or a large hedge fund.

The main problem with U.S. government auctions of Tips is that they don't occur often. There are auctions for 5- and 10-year Tips which are sometimes worthwhile, but don't pay nearly as much at the present time as very unpopular 30-year Tips. Unfortunately the 30-year Tips auction only occurs once every six months. By good fortune, the next auction will be fairly soon on Thursday, August 20, 2026. I definitely plan to participate in this auction, but a lot can happen between now and then, so the yields might or might not still be near 3% or above. Therefore, I would recommend one of the two methods below for purchasing most of your long-dated U.S. Tips.

I OFTEN PURCHASE U.S. TIPS ON THE SECONDARY MARKET, WHICH IS LIKE BUYING U.S. AUTOMOBILES: If you have ever purchased a vehicle of any kind, then perhaps you have gone to an automobile dealership. I assume that after taking a test drive, you don't write a check payable to the dealership, sign it, and leave the amount blank. Hopefully you also don't say to the salesperson: "I'm sure you'll be fair to me, so fill in any amount you choose and I'm fine with it." If you like that method of buying a car then you're probably already placing market orders to buy or sell any security, rather than using a limit order which is far safer especially for anything which is not completely liquid. Since Tips bought in the secondary market are not as liquid as exchange-traded funds like TLT, it takes a little practice learning what price to bid for each purchase, or which price to ask for each sale. Once you have done it several times you will become more adept with it. Start with small purchases to become familiar with how the secondary Tips market works before committing large sums.

A SIMPLE COMPROMISE IS TO BUY THE EXCHANGE-TRADED FUND LTPZ TO SUPPLEMENT THE SECONDARY MARKET: I have purchased roughly half of my total long-term Tips via the Pimco fund LTPZ instead of repeatedly entering the secondary market. As is usual with exchange-traded funds versus direct investment in the components of those funds, this makes it far simpler to place a ladder of good-until-canceled orders (ideally including outside of regular trading hours) at different prices, so that the more the price drops, the more you buy. I purchase all exchange-traded and closed-end funds using this gradual approach. It is especially effective if your broker does not charge commissions, as is the case with nearly all U.S. discount brokers, so that you can have numerous orders filled at no extra cost.

The daily trading volume for LTPZ is over seven million shares. The average effective maturity is 21.56 years which will fluctuate slightly through time and currently captures nearly the highest possible Tips yields of all maturities. This fund dates back to April 30, 1998 so it has dealt with the ups and downs of this sector through those decades. The fund is rebalanced monthly and also pays dividends monthly.

One disadvantage of purchasing LTPZ instead of directly at auction or in the secondary market is that you will pay an annualized management fee of 0.20%. The big advantage of Tips trading at their lowest prices in 26 years has the negative feature of hardly any fund companies wanting to create new funds in this sector until after prices have already doubled. If you look at cryptocurrencies, nearly all of the exchange-traded funds in that sector were created within months and often within weeks of their all-time tops in 2025, prior to cryptocurrencies losing half or more of their value. Similarly, a huge percentage increase in the total number of exchange-traded precious metals funds happened during the first quarter of 2026 when these funds were at or near all-time highs prior to their recent losses (such as GDXJ) of roughly 40% from their peak valuations at 4:00 a.m. on March 2, 2026. Whenever there has been a recent surge of new exchange-traded funds of long-dated Tips, it will probably be a useful sell signal.

I don't want to pretend that I am the only analyst who has noticed the unusually compelling bargains for long-dated Tips, although they are not frequently mentioned in the mainstream media. Randall W. Forsyth penned a useful analysis of this idea in the July 27, 2026 issue of Barron's. The following article by Brett Arends was also recently published on this topic:

A Generational Buying Opportunity Guarantees Inflation Plus 3% a Year

Here is an interview with the same analyst:

This May Be the Closest Thing to a Risk-Free Investment

In news which may not seem immediately to be related but which is absolutely relevant, top corporate insiders haven't experienced such a high ratio of total U.S. dollar selling to total U.S. dollar buying in approximately two decades:

The Warning Signal Insiders Are Sending

You thus have a choice of buying long-dated U.S. Tips at their highest fixed yields since 2000, or purchasing popular U.S. stocks which are experiencing some of their heaviest recorded selling by those who know the most about these companies.

Disclosure of current holdings:

Below is my nearly current asset allocation as of 4:00 p.m. on Tuesday, July 28, 2026. Each position is listed as its percentage of my total liquid net worth. The long positions should add up to just about exactly 100%, while the short positions all use U.S. Treasury bills as collateral since those count as 99% cash.

I very recently added to TLT, PSQ, EDV, and LTPZ, in addition to purchasing the TIPS which mature on February 15, 2053 with cusip 912810TP3, whenever each of these was at or near a multi-decade low. TLT is heavily shorted, pays just about exactly 5% in annualized dividends, and has been forming marginally higher lows since it had touched 81.92 on October 23, 2023 at 5:40 and 5:41 a.m. Eastern Time.

The order is as follows: 1) U.S. government bonds; 2) shorts; 3) bear funds; 4) precious metals; 5) individual U.S.-listed stocks.

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: 27.12%;

TLT/VGLT long: 17.25%;

VMFXX/TIAA Traditional, TIAA money market/bank CDs/FZDXX/FZFXX/SPRXX/SPAXX/BPRXX/Savings/Checking long: 15.37%;

EDV long: 5.33%;

LTPZ long: 4.84%;

I Bonds long: 3.86%;

PMM long: 0.01%;

XLK short: 28.88%;

QQQ short: 24.31%;

GDXJ short: 1.40%;

SMH short: 1.38%;

PSQ long: 10.65%;

Gold/silver/platinum coins: 11.21%;

UTZ long: 3.04%;

CAG long: 0.73%;

GPK long: 0.42%;

WEN long: 0.17%.

"Excesses in one direction will lead to an opposite excess in the other direction." --Bob Farrell (Rule #2)

THE FORGOTTEN BUBBLE (July 28, 2026): I have discussed numerous assets which reached bubble status during the past year and which have entered what will become some of the most severe bear markets ever recorded. Cryptocurrencies reached all-time highs less than one year ago, including Bitcoin on October 6, 2025 and Ethereum earlier on August 24, 2025, with nearly all cryptocurrencies since declining by half or more from their peaks. High-yield corporate bonds mostly topped out in the early autumn of 2025 or the early winter of 2026 or both, with many of them sporting all-time low spreads relative to U.S. Treasuries of equivalent maturities. Most commodity producers and emerging-market securities achieved multi-decade zeniths during the first quarter of 2026 and have been forming several or more lower highs, not coincidentally around the same time that the U.S. dollar index touched a four-year bottom of 95.551 on January 27, 2026 and which has since begun a powerful bull market. I expect the U.S. dollar index to reach its highest point since 1985 within a few years.

We can endlessly debate whether or not U.S. stocks have or have not yet begun bear markets, and which sectors are more vulnerable than others. In general, the biggest winners of recent years have been among the most recent percentage losers, partly since those gains had far outpaced earnings and thus left many large-cap and other trendy U.S. stocks at their most elevated levels in the history of any global stock market.

What is discussed far less frequently is that real estate in many parts of the world, including the U.S. and Canada, reached all-time overpricings in real terms. Just as stocks can be compared with earnings to determine whether they are underpriced or overpriced, real estate in any neighborhood can be compared with the average household income in that neighborhood. While many U.S. residents remember the real-estate bubble of 2005-2006 when prices climbed to roughly double their average historic levels, we quietly reached even more elevated overall valuations in the first quarter of 2022. Since then, U.S. prices in real terms have been mostly flat. Thus, residential U.S. housing is vulnerable to a drop of roughly half in real terms. Of course this percentage will end up varying considerably from top to bottom depending upon which part of the country you are looking at, just as it had done from 2005-2006 through 2010-2012.

Any price that is far too low or too high relative to fair value must eventually trade near fair value--with real estate just as with stocks, bonds, and all other assets.

MOST PEOPLE COULD NOT AFFORD TO BUY THEIR OWN HOUSES: I had a friend who was one of the few people to publicly state in 2005 and 2006 that U.S. housing prices would have to fall by about one third overall, which was just about exactly their nationwide average decline from 2005-2006 to 2010-2012 if you don't adjust for inflation. Sadly he passed away in 2006 just before his forecast was set to be proven true. He pointed out to me that he wouldn't have been able to afford to purchase his own home if he had to buy it at the price it was supposedly worth near the end of 2005. That comment stayed in my mind over the next several years. U.S. housing prices today, adjusted for inflation, are more overpriced now than they had been at their 2005-2006 highs with a few exceptions for those cities where housing prices had been especially elevated two decades ago. Here is the proof from the U.S. Federal Reserve which has been maintaining meticulous records:

U.S. Real Housing Prices Since 1970

Canadian Real Housing Prices Since 1970

CANADA HOUSING REACHED TRIPLE FAIR VALUE INSTEAD OF DOUBLE: The media have had all kinds of explanations about why housing prices in Toronto, Vancouver, and some other Canadian cities overall had far surpassed their ratios to household incomes that they have seen during the past several years in the United States. Since February 2022, when both Canadian and U.S. housing prices had mostly peaked in real terms, prices overall for homes in Canada have also declined far more significantly. A simple explanation is that U.S. residents experienced housing prices dropping an average of one third (not adjusting for inflation) from their 2005-2006 peaks to their 2010-2012 bottoms, while in Canada the average pullback was less than 10%. Therefore, people in Canada mostly concluded that Canadian housing prices "couldn't go down." I actually heard a large number of Canadians stating this belief. It is similar to the way that prices for the most popular big U.S. stocks have recently become so overpriced, largely since it has been such a long time since U.S. stock prices had suffered substantial percentage losses. Extreme overconfidence or extreme lack of confidence will almost always lead to unusually overvalued or undervalued price levels respectively.

U.S. HOUSING PRICES FALL TO HISTORIC LOWS EVERY 18 YEARS: I looked back at those times when U.S. housing prices ranged from moderately inexpensive to absurdly cheap. If we go backward from the present, we see that the last bottom for U.S. residential real estate on average had been in 2011. Prior to that, there were even lower lows in inflation-adjusted terms in 1993, while some of the lowest levels since 1950 occurred in the year 1975. It is interesting to observe that these bottoms were separated by 18 years. Continuing the 18-year pattern going backward, 1957 was not as depressed as 1993 or 1975; 1939 and 1903 were both notably undervalued; 1921 was the lowest point in history for U.S. residential real estate when you adjust for inflation. For purposes of this research, I used many of the charts and data compiled by the early and revised editions by Case and Shiller dating back to 1890 that are summarized here:

Case-Shiller U.S. Real Residential Real Estate, 1890-2006

If we now extrapolate forward then we may conclude that 2029 is the next year in the 18-year cycle of bottoms and is only three years away. Since the year 2029 corresponds with similar potential lows for many other assets including popular U.S. stocks and high-yield corporate bonds, and perhaps other assets such as cryptocurrencies, it fits the pattern of previous bottoms. Notice the correspondence between U.S. stock bear-market bottoms and U.S. real estate being depressed; 1921 was one of the lowest points in history for the U.S. stock market, as was 1939, while U.S. stocks had been especially depressed in December 1974 which of course is very close to 1975.

THERE WILL BE VARIATIONS FROM CITY TO CITY DURING HOUSING'S BEAR MARKET: From their 2005-2006 peaks to their 2010-2012 bottoms, there were wide regional variations in the percentage losses for U.S. residential real estate. In many cities in Ohio, Arizona, Nevada, and Florida, prices fell by roughly two thirds if you don't adjust for inflation which is roughly double the nationwide average over that time period. I have studied this phenomenon to determine if there was any way to know in advance which neighborhoods would experience the largest percentage losses. It would be useful to know that the most overvalued real estate fell by the most, or that prices had dropped the most where there was the highest level of overbuilding, or that there was some other repeatable pattern, but unfortunately I couldn't find any consistent behavior. It will probably be the case that the current decline will similarly feature greater or lesser regional losses than the nationwide average, just as it has already done in Canada where Toronto real estate has so far retreated substantially more than Montreal real estate.

In places where real estate fell by more than the nationwide average during its 2006-2011 bear market, it was often much more than the average rather than modestly more. Partly this could be due to the fact that if a family has purchased a house with a modest down payment and its price has fallen by 15% or 20%, then that family will probably conclude that prices will rebound eventually and will keep making all necessary mortgage and other payments. However, if prices are down 40% or 45% and the remaining mortgage balance is considerably higher than the current value of the property, then the chance of that family deciding to stop making payments and default, eventually probably being foreclosed and evicted, is many times greater. A higher rate of default also tends to lead to a surge in the inventory of properties for sale in any given area, thus adding to supply relative to demand and often depressing prices further especially in the short run. This problem could be exacerbated with the dramatic rise in the percentage of properties worldwide which are owned by investors rather than being owner-occupied. Investors have no emotional attachment to anything, whereas owners occupying their own homes are much more likely to hold onto their properties into multi-year adversity.

THE NEARLY SIDEWAYS MOVE IN U.S. REAL ESTATE IN REAL TERMS SINCE FEBRUARY 2022 IS PROBABLY MOSTLY DUE TO THE VERY STRONG PERFORMANCE OF U.S. LARGE-CAP INDEX FUNDS: Probably the main reason that U.S. housing prices in inflation-adjusted terms have been nearly exactly flat for the past 4-1/2 years is that a buoyant U.S. stock market has made it very easy to borrow money and to sustain the illusion that assets of all kinds will keep indefinitely rising in price. As a result, fewer people so far have sold their houses out of a need to raise money or out of concern that falling prices for stocks and high-yield corporate bonds could spread to residential real estate.

THE INVENTORY OF NEW U.S. HOUSES HAS SOARED TO ITS HIGHEST POINT SINCE 2009, WITH LIMITED MEDIA COVERAGE: Have you read the headlines about the inventory of new U.S. housing climbing to its most elevated point since 2009, which was 17 years ago? I thought not. While this is an important story and has ample supporting data from reliable sources, it doesn't fit the media's narrative about an alleged "permanent shortage" of U.S. residential housing. In early 2022 we actually had a real inventory shortage which by some measures was the lowest on record since the start of the baby boom around 1950, when hardly any homes had been built since the 1920s due to the Great Depression and very depressed prices for houses and many other assets, thereby making it uneconomic to build throughout the 1930s and 1940s.

I don't usually go to Crypto Briefing to get information about U.S. housing prices, but they ran a valuable article on this topic at the end of June which was passed over by most of the mainstream media:

US [New] Housing Market Sees Inventory Rise to 10.3 Months, Highest Since 2009

THE INVENTORY OF EXISTING U.S. HOUSES HAS RISEN, BUT REMAINS WELL BELOW THE DISTRESSED LEVELS OF 2009-2012: If I walk around where I live, there are a lot more houses for sale now as there had been four years ago, although there are far fewer houses for sale than I remember from 2009-2012. As the above article stated, the inventory of existing [just as for Treasuries, people don't like the word "used"] homes is a much more modest 4.5 months of supply. I expect existing home inventory to first rise sharply before the biggest percentage losses occur for U.S. residential real estate.

Just as a multi-decade low for housing inventory led to record prices in both 2005 and 2022, multi-decade highs for inventory are consistently followed by dramatically lower housing prices. A few years ago the Covid crisis and stay-at-home popularity led to multi-decade inventory highs for office building rental space, which not surprisingly soon led to a nationwide decline of about half for office rents. I have no doubt that after housing prices fall by large percentages and the inventory of existing homes becomes much greater, the media will mention how "obvious" it was that prices would have to drop due to the record inventory that they have so far refused to report. The media are expert at telling you anything after it is too late to benefit from it.

U.S. LONG-DATED TIPS HAVE BECOME UNUSUALLY COMPELLING FOR PURCHASE: In other financial developments, long-dated U.S. Treasuries continued to form higher lows, while long-dated U.S. Tips yielded over 2.99% fixed during part of last week, meaning that when you add a CPI rate of 3% then you get a 6% total return. This return will fluctuate with the CPI for the next three decades, but even if there is deflation you will get 2.99% guaranteed with this yield free of state and local income taxes.

Here is a very recent article explaining the little-appreciated advantages of Tips whenever they are especially undervalued:

A Generational Buying Opportunity Guarantees Inflation Plus 3% a Year, Says This Hedge-Fund Manager

The end of the above article states an important point about the internet bubble in 2000 which applies even more strongly to the AI bubble in 2026:

In the decade from June 2000, the Vanguard Inflation-Protected Securities Fund VIPSX doubled your money, while the S&P 500 SPX lost you 15% - before inflation.

MARGIN DEBT REACHED 1.5 TRILLION U.S. DOLLARS, FAR EXCEEDING PREVIOUS TOPS EVEN IF YOU ADJUST GENEROUSLY FOR INFLATION:

S&P 500 PRICE-TO-SALES ON JUNE 5, 2026 FAR EXCEEDED COMPARABLE DATA FOR ALL GLOBAL STOCK MARKET TOPS EVER RECORDED:

INVESTORS ARE WILLING TO ACCEPT CORPORATE BOND YIELDS THAT ARE FAR TOO LOW RELATIVE TO GUARANTEED U.S. TREASURIES:

Disclosure of current holdings:

Below is my current asset allocation as of 4:00 p.m. on Tuesday, July 28, 2026. Each position is listed as its percentage of my total liquid net worth. The long positions should add up to just about exactly 100%, while the short positions all use U.S. Treasury bills as collateral since those count as 99% cash.

As recently as last week, I added to TLT, PSQ, EDV, and LTPZ, in addition to purchasing the TIPS which mature on February 15, 2053 with cusip 912810TP3, whenever each of these was at or near a multi-decade low. TLT is heavily shorted, pays just about exactly 5% in annualized dividends, and has been forming marginally higher lows since it had touched 81.92 on October 23, 2023 at 5:40 and 5:41 a.m. Eastern Time.

The order is as follows: 1) U.S. government bonds; 2) shorts; 3) bear funds; 4) precious metals; 5) individual U.S.-listed stocks.

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: 27.12%;

TLT/VGLT long: 17.25%;

VMFXX/TIAA Traditional, TIAA money market/bank CDs/FZDXX/FZFXX/SPRXX/SPAXX/BPRXX/Savings/Checking long: 15.37%;

EDV long: 5.33%;

LTPZ long: 4.84%;

I Bonds long: 3.86%;

PMM long: 0.01%;

XLK short: 28.88%;

QQQ short: 24.31%;

GDXJ short: 1.40%;

SMH short: 1.38%;

PSQ long: 10.65%;

Gold/silver/platinum coins: 11.21%;

UTZ long: 3.04%;

CAG long: 0.73%;

GPK long: 0.42%;

WEN long: 0.17%.

"With every new wave of optimism or pessimism, we are ready to abandon history and time-tested principles, but we cling tenaciously and unquestioningly to our prejudices." --Benjamin Graham

BUY TLT AND EDV (May 18, 2026): TLT is a fund which invests in U.S. Treasuries and which consists of U.S. government debt averaging 25.70 years to maturity. Generally long-term U.S. government debt pays interest every six months. EDV is a fund consisting of zero-coupon U.S. Treasuries averaging 24.5 years to maturity. Zero-coupon bonds, unlike other U.S. Treasuries of 2 years or longer, don't pay semiannual interest. This causes these "stripped" Treasuries to be more volatile than their underlying securities. Therefore, EDV is riskier than TLT, going up more when this sector is in favor and dropping more when it is unpopular.

Long-dated U.S. Treasuries and Tips were among the biggest percentage winners of the first two major bear markets of the 21st century (1999-2003 and 2007-2009). TLT, EDV, and other U.S. Treasury exchange-traded funds did not even exist in 1999 or 2000, because investors at that time, just like in 2026, were far more excited about purchasing wildly overvalued popular tech stocks than seeking safe havens. Many funds of U.S. Treasuries weren't created until their gains during the internet bubble collapse had almost been completed. Not surprisingly, long-term U.S. Treasuries and Tips far outperformed collapsing U.S. stocks by late 2002 and early 2003, when finally the powerful outperformance by U.S. Treasuries encouraged the introduction of numerous exchange-traded funds in this sector.

If you were invested in QQQ near its March 10, 2000 peak then you ended up losing more than 5 out of 6 dollars including all reinvested dividends by the time it had bottomed on October 10, 2002. In contrast, if you were invested in VUSTX or a similar fund of long-dated U.S. Treasuries or Tips in the same year when their yields had exceeded 6%, then you would have roughly doubled your money over the same period of time.

INVESTORS DON'T WANT SAFE HAVENS WHEN STOCKS ARE SO POPULAR DUE TO THEIR OUTPERFORMANCE IN RECENT YEARS

The investing world has made as complete a transition as has ever occurred from value to momentum. Almost everyone wants to own what has gone up the most in recent years, rather than whatever presents the most worthwhile current valuations. This has resulted in the highest-ever allocation and overpricing for most popular U.S. stocks, while U.S. government debt had been trading near multi-decade lows with proportional multi-decade highs in yields. No one can say when or how much more extreme this disparity will become, but its unavoidable resolution will lead to unexpectedly large losses from their latest levels for the most widely-own U.S. stocks and a total return of more than 100% for allegedly boring long-term U.S. government debt compared with their current prices. As you will see from the second chart later in this update, most valuations measures for popular U.S. stocks during the AI bubble are moderately to considerably more extreme than their most lopsided levels of the internet bubble about 26 years ago, so their subsequent percentage losses over the next few years could generally be greater.

When stocks are highly trendy, as they have been recently, investors are not interested in alternatives where safety and guarantee of principal are major considerations. This is the main reason that many U.S. Treasuries and Tips have been trading near their highest yields since 2001. Once investors realize that U.S. stocks are not as safe as most people believe they are, investors will become far more concerned with maintaining their net worth rather than making windfall profits. When this happens, there will be such a sharp surge into U.S. government debt that current yields exceeding 5% for long-term Treasuries and Tips will drop to 2.5% and possibly lower. Investors will discover that, just like an American football team, sometimes you have to play defense instead of putting the offensive team on the field.

DOUBLE YOUR MONEY IN A FEW YEARS VIA U.S. GOVERNMENT DEBT

Most investors might think of U.S. Treasuries as "boring" but their historic record shows otherwise. Their prices can fluctuate dramatically in both directions. Because they are paying yields of almost exactly 5%, by the rule of 72 their interest alone would cause them to double in value in fourteen to fifteen years assuming zero price change. However, funds like TLT and EDV can actually result in one dollar invested to be worth two dollars or more within a few years, rather than having to wait 14 or 15 years for the 5% annualized yield to compound sufficiently for a doubling. That is because, if you lock in a yield of 5% for 25 years, and yields drop to 2.5%, then everyone is going to want your 5% yield that is guaranteed by the U.S. government for a quarter century. You will therefore end up with the ability to sell your long-term Treasuries at a much higher price than you had paid for them, where the total return including all reinvested dividends could surpass 100%.

Of course this mathematical reality works both ways: if long-term U.S. Treasury yields rise to 7% or higher instead of dropping to 3% or lower, then if you sell your U.S. 5% 25-year government debt it will be worth much less than what you had paid for it. There's no free lunch.

U.S. GOVERNMENT DEBT PERFORMS MOST STRONGLY WHENEVER U.S. STOCKS ARE MOST VOLATILE IN BOTH DIRECTIONS

Whenever the U.S. stock market disappoints most investors by being both increasingly volatile and more likely to produce losses instead of gains, U.S. investors will turn to U.S. government debt as a safe haven. This shift doesn't always happen simultaneously. In 2008, when U.S. stocks were especially jumpy and unpredictable, U.S. government debt generally moved only slightly higher overall until the final quarter of 2008 when government debt surged in price and yields plummeted. This pattern of U.S. government debt responding to increased U.S. stock-market volatility after a delay of several months is common.

Some investors become disappointed when their holdings don't quickly go up in price. Often this is a blessing in disguise. If funds including TLT and EDV don't immediately surge higher when the most popular U.S. stocks are slumping, then this gives you additional opportunities to purchase more TLT and EDV at bargain prices before everyone else thinks of the idea.

THERE ARE TAX ADVANTAGES TO U.S. GOVERNMENT DEBT

All interest on direct U.S. debt obligations, as well as on funds of direct U.S. debt obligations including TLT and EDV, are free of state and local income taxes by U.S. law. In addition, in some states including New Jersey, you pay no income tax on capital gains for funds including TLT and EDV which consist primarily of U.S. government debt.

U.S. GOVERNMENT DEBT IS BEING HEAVILY SOLD SHORT BY MANAGED MONEY

Hedge funds and other pools of managed money have been aggressively selling short TLT and other popular funds of U.S. Treasuries, Tips, and other U.S. government debt. Ironically, these funds weren't aggressively shorting TLT when it was dropping in price and shorting it would have been profitable. Almost all of the short positions were accumulated since October 2023 when the price of TLT has been moving mostly sideways while paying 5% dividends. If you short anything which yields 5% then you have to pay this amount in dividends, making the vast majority of hedge fund shorts in this sector losing positions even with TLT trading not far above multi-decade lows.

Hedge funds who are long or short will often close out their positions whenever those positions move against them by about 25% or 30%. Thus, whenever TLT eventually climbs by 25% or 30% for any reason, it will likely rise another 25% or 30% as hedge funds nearly simultaneously close out their short positions. We saw what happened when hedge funds closed out their shorts in precious metals and emerging markets during the past year: these mostly ended up surging higher in price.

EXCHANGE-TRADED FUNDS OF U.S. GOVERNMENT DEBT MOSTLY FEATURE ONE-CENT BID/ASK SPREADS, MAKING THEM FAVORABLE TO TRADE WITH MINIMAL FRICTION

In 2008, when zero-coupon long-dated U.S. Treasury funds including EDV and ZROZ were among the biggest percentage winners of all exchange-traded funds, there was a spread of several cents between their bid and ask prices and relatively low average daily volumes, making it difficult to accumulate a substantial position without friction. Fortunately this has changed primarily due to a more serious commitment by market makers in these funds. The bid-ask spread nowadays is usually one cent during regular trading hours. TLT remains by far the most liquid fund in the U.S. government debt sector, often sporting narrow bid-ask spreads both during and outside of regular trading hours.

THERE ARE SIMILAR FUNDS TO TLT AND EDV

If you don't prefer TLT, or you don't want to pay its 0.15% management fee, then alternatives with lower annualized management fees are available including SPTL (0.03%), VGLT (0.03%), and SCHQ (0.03%). Funds which are similar to EDV include ZROZ, although EDV has the lowest annualized management fee of all zero-coupon bond funds at just 0.05%. If you live in Europe then your best choice in this sector is probably IS04. It is headquartered in Germany and has an expense ratio of 0.07%. IS04 is very similar to TLT and related funds of U.S. government bonds averaging roughly 25 years to maturity.

WE HAVE ALL-TIME RECORD EQUITY NET INFLOWS WITH INVESTORS PUTTING OVER 55% OF THEIR TOTAL HOUSEHOLD NET WORTH INTO POPULAR U.S. STOCKS AND STOCK ETFS

Both the above and below charts use data as of 4 p.m. on April 20, 2026:

INVESTORS NO LONGER SEEM TO CARE ABOUT DIVIDENDS OR YIELDS

With U.S. Treasuries and Tips approaching or surpassing their highest yields in both nominal and real terms since either 2001, 1990, or the early 1980s, the yield on VOO, a fund based upon the S&P 500 Index with a very low expense ratio, recently yielded less than 1.1% for the first time in history. Most investors have either forgotten or pretended to forget that more than half of the total return in the U.S. stock market since its inception has been from dividends, not from capital gains. This is also the highest ever ratio of the return on risk-free U.S. government debt to the dividends on the most popular U.S. stocks.

The above chart by Mark Hulbert highlights the overvaluations for U.S. stocks measured by price-to-earnings, price-to-sales, price-to-book, price-to-GDP, and other reliable fundamental valuations. Assets at extremes can become even more extreme, but they must inevitably regress toward the mean to a nearly opposite extreme. The following chart from Bloomberg is on a similar theme, comparing today's valuations with the entire period since 1995:

THE MOST EXPERIENCED INVESTORS HAVE GENERALLY BEEN SIGNIFICANTLY LESS FAVORABLE TOWARD STOCKS AND EAGER TO OWN U.S. GOVERNMENT DEBT; THE LEAST-EXPERIENCED INVESTORS HAVE BEEN TAKING MONEY OUT OF SAFE INVESTMENTS TO BUY THE MOST POPULAR U.S. STOCKS

As a general principle, those investors with the longest and more relevant experience including top corporate insiders and Warren Buffett have been the most conservative in recent months, selling stocks while purchasing U.S. government debt. Those investors who have the least familiarity with the financial markets have been among the biggest net buyers of stocks over the same time period. Whenever the most experienced participants in any field have been doing the opposite of the newest players, it should be pretty obvious what must occur afterward.

THE MEDIA AND ANALYSTS REMAIN FAR TOO BULLISH ON ENERGY AND MOST COMMODITY PRODUCERS, AS WELL AS MOST EMERGING MARKETS

In my last posting I cited the all-time record selling by top executives in the energy sector. This has somewhat subsided, but prices have been making lower highs as they have been doing for several weeks to months for most commodity producers and emerging markets. Hardly anyone wanted to purchase shares of emerging-market securities in April 2025 because they had underperformed, and almost everyone was recommending them in early 2026 after they had outperformed; naturally these assets surged when they were hated and have been slumping now that they are loved.

We are certain to achieve worthwhile purchasing points for both commodities and emerging markets at some point in the not-too-distant future. If you see the U.S. dollar index reaching a multi-year high and then starting to form lower highs, this is often signaling an ideal entry point for both of these asset classes.

ALMOST EVERYONE IS STILL SAYING GOLD 6000, ALMOST NO ONE IS FORECASTING 4000 (OR LOWER)

As I had described in my previous post, when gold was near five thousand U.S. dollars per troy ounce the number of analysts and brokerages anticipating six thousand outnumbered those expecting four thousand by a huge ratio. Even with gold recently dropping to around 4500, those who are expecting 6000 still far outnumber those forecasting 4000 which makes no sense mathematically. Meanwhile, gold and silver commercials have been increasing their short-to-long ratios into price weakness rather than becoming less bearish. Whenever commercials sell into price declines it usually sends a bearish signal about where the market is going.

Gold mining and silver mining shares become compelling bargains usually a few times per decade and will do so again, but don't expect this to happen soon. Whenever silver commercials are net long, it is probably an ideal time to start once again buying funds such as GDX and GDXJ.

Disclosure of current holdings:

Below is my current asset allocation as of 4:00 p.m. on Monday, May 18, 2026. Each position is listed as its percentage of my total liquid net worth. The long positions should add up to just about exactly 100%, while the short positions all use U.S. Treasury bills as collateral since those count as 99% cash.

I recently added to TLT, PSQ, EDV, LTPZ, and WEN, in that order, whenever each of these was near a multi-decade low, while reducing shorts for GDX and GDXJ into recent weakness. TLT is heavily shorted, pays almost exactly 5% in annualized dividends, and has been forming marginally higher lows since it had touched 81.92 on October 23, 2023 at 5:40 and 5:41 a.m. Eastern Time.

The order is as follows: 1) U.S. government bonds; 2) shorts; 3) bear funds; 4) precious metals; 5) individual U.S.-listed stocks.

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: 26.95%;

VMFXX/TIAA Traditional, TIAA money market/bank CDs/FZDXX/FZFXX/SPRXX/SPAXX/BPRXX/Savings/Checking long: 26.22%;

TLT long: 14.08%;

I Bonds long: 3.89%;

EDV long: 3.17%;

LTPZ long: 1.84%;

PMM long: 0.01%;

XLK short: 32.93%;

QQQ short: 27.04%;

SMH short: 1.64%;

GDXJ short: 1.54%;

PSQ long: 8.33%;

Gold/silver/platinum coins: 12.88%;

UTZ long: 1.28%;

CAG long: 0.76%;

GPK long: 0.41%;

WEN long: 0.17%.

"The intelligent investor realizes that stocks become more risky, not less, as their prices rise—and less risky, not more, as their prices fall." --Benjamin Graham

DXY UP, GOLD/SPY DOWN (April 20, 2026): Whenever any asset has made an extended move in one direction, and is about to make a huge move in the opposite direction, the vast majority of analysts, brokerages, and investors become convinced that the trend of recent years will continue indefinitely. One clear example in 2026 is the very popular belief that the U.S. dollar is going to collapse and that it will no longer serve as the world's reserve currency. This perception is so pervasive that one often finds financial articles that begin with a phrase such as "because the U.S. dollar is likely to continue to decline in upcoming years" followed by the conclusion that a weakening U.S. dollar will lead to higher prices for most other assets including precious metals and global equities.

I HOLLER FOR THE U.S. DOLLAR (WHILE ALMOST EVERYONE ELSE IS EXPECTING A GREENBACK COLLAPSE)

The myth of an upcoming accelerated pullback for the U.S. dollar has encouraged at least three well-known financial publications to highlight the alleged upcoming plunge for the greenback. Barron's, The Economist, and Forbes each featured a separate cover story about how the U.S. dollar will collapse. At least the cover artists had original visual presentations as you will see from these three magazine covers beginning with Barron's from February 23, 2026:

Barron's large-font feature headline states, "The reign of the [U.S.] dollar is coming to an end. What investors can do about it." The first line of the article proclaims, "The [U.S.] dollar is in decline, and investors have to learn to live with it."

Earlier that month, on February 5, 2026, the Economist reached the same conclusion, illustrated creatively with a green snake:

The accompanying Economist headline declares, "The age of a treacherous, falling [U.S.] dollar," with the story beginning, "Those holding American assets will have to get used to it."

On February 17, 2026, Forbes featured a burning U.S. dollar bill on their magazine cover:

Forbes' headline warns, "IMF Issues Serious U.S. Dollar Collapse Warning" with this statement: "High debt, combined with persistent inflation and high interest rates, puts massive pressure on the U.S. dollar and risks a long-term erosion of its dominance as a global reserve currency."

As I was writing this essay, Elon Musk--timely as always--issued a warning that the U.S. dollar would plunge while Bitcoin surges in price. I plan to write several paragraphs or more about cryptocurrencies and how they will become nearly worthless over the next few years, but I want to remain focused here on the repeated "urgent" and "must act now" tone of most of the media's coverage of the greenback and its future prospects.

The U.S. dollar has been in a powerful bull market since March 2008 when it had slumped to its all-time bottom, followed by a slightly higher bottom in July 2008. Near the July 2008 low, the greenback was so unpopular that supermodel Gisele Bündchen declared that she wanted to be paid going forward only in euros, which that year had reached an all-time high just above 1.60 U.S. dollars. I expect the U.S. dollar to climb substantially higher during the collapse of the AI bubble, just as it had done during the collapse of the internet bubble. The U.S. dollar index will very likely reach its highest level since 1985 by the end of the decade while I expect the euro to fall below 90 U.S. cents within a few years or less.

There were no recent cover stories, or hardly any other feature articles, in any well-known media publication pointing out that the U.S. dollar index has repeatedly rebounded from all selloffs. By itself, repeated recoveries from sharp short-term pullbacks are how most powerful bull markets begin. Unfortunately they aren't recognized until after the most important part of the gains have already occurred.

As the U.S. dollar at first gradually and later more convincingly moves higher rather than lower over the next few years, this will lead to eventual depressed valuations for most assets including stocks, commodities, corporate bonds, and cryptocurrencies. Residential real estate will lose perhaps half of its current value in many neighborhoods. Only U.S. Treasuries, Tips, and related U.S. government debt is likely to benefit from a strengthening U.S. currency that will encourage investors to put more of their money in U.S. dollar-denominated time deposits.

FAR TOO MANY ANALYSTS ANTICIPATE "PERMANENTLY" HIGH ENERGY PRICES, JUST AS IN THE SUMMER OF 2008 PRIOR TO HISTORIC LOSSES BY THE END OF 2008

Besides the nearly unanimous negativity surrounding the U.S. dollar, the media have featured numerous other myths which are in sharp contrast to the way that the most experienced investors in any given sector have been behaving. One popular recent fairy tale is that because of Iran or some other combination of factors, energy prices will allegedly remain "permanently high." If this sounds familiar, it was also heard frequently during 2008 especially in the summer. Top corporate insiders sold energy shares more aggressively during the past several weeks than they had done at any time in recent decades including 2008, and shortly afterward funds of energy shares including XLE began what will eventually become dramatic percentage declines.

Energy prices soared to all-time zeniths during the first half of 2008, and then when nearly all analysts had turned bullish we had one of the biggest percentage declines for gasoline and related commodities during the second half of 2008. I expect an approximate repeat during the next several months or so.

EVERYONE IS SAYING GOLD 6000, ALMOST NO ONE IS FORECASTING 4000 (OR LOWER)

Gold and silver had their turn at reaching "permanent rally" status not many weeks ago when we had both aggressive selling by top executives of gold and silver mining companies in addition to commercials (the equivalent of insiders for futures trading) featuring substantially above-average short-to-long ratios for gold, silver, and platinum. Those ratios remain lopsidedly in favor of lower rather than higher prices. The same media outlets, analysts, and brokerages which warned investors not to buy precious metals when they were especially depressed at other key buying points, including January 2016, March 2020, and the autumn of 2022, have tooted among the most bullish horns in recent weeks. Top corporate executives of precious metals mining companies had done some of their strongest-ever insider selling when gold and silver had been peaking several weeks ago.

My favorite misleading media excuse for gold to rise in price is central bank buying. Throughout their history, central banks have been repeatedly and aggressively buying assets near peaks and selling them near bottoms. The U.K. central bank sold most of its gold in the late 1990s when prices were at all-time lows in real terms. The central bank of Canada sold most of its gold near the end of 2015 and the start of 2016 when gold prices were similarly very depressed and were set for substantial upcoming gains. China has been selling U.S. Treasuries and buying gold recently, thereby both buying high and selling low. The next few years will demonstrate why they should have been doing the exact opposite.

EXTREME OVERALLOCATION TO ANY ASSET, IN THIS CASE LARGE-CAP U.S. STOCKS, INEVITABLY LEADS TO MAJOR LOSSES

Let's turn to the U.S. stock market, where the average U.S. household allocation to equities in recent decades has averaged very close to 26%. In March 2000 the total allocation to stocks briefly touched 51.1% of total household assets, by far an all-time record until that point. In March 2026 this allocation climbed to 55.1%, as you can see from the following chart from last month courtesy of Mark Hulbert who has persistently done excellent research on this topic:

In addition to the highest ever allocation to the stock market, more than double the typical amount for the first time in history, those who are most knowledgeable about their companies' future prospects have done their highest ever selling relative to buying:

According to Bloomberg, the current AI bubble has become more overpriced relative to earnings not only compared with typical valuations but when measured against the internet bubble of 1999-2000:

John Hussman has a useful benchmark which allows you to compare any year since 1928 with the present, with clear evidence of investors recently substantially overpaying for U.S. stocks:

A combination of 1) ordinary investors having by far their highest allocation to the stock market in history; 2) close to the 99th percentile for valuations including price-to-sales, price-to-book, and price-to-GDP; along with 3) top corporate insiders making their heaviest-ever sales in history both in absolute U.S. dollars and also as a ratio to total insider buying, provide compelling evidence for an impending dramatic percentage decline especially for those shares which have experienced the most intense selling by top corporate executives including the CEO. Of course this doesn't tell us the shape of the bear market, or how high a particular index will climb before it collapses, or when the bear market will end, or how often it will bounce along the way. There is no way to know how high an overpriced asset will climb before it dramatically retreats, or when it will occur. The same is true with anything near a historic bottom: it is unknowable how low it will continue to fall before it bottoms, or when that will happen. However, you can be certain that all assets--especially those which have been priced the farthest away from fair value-- will eventually regress to the mean and usually beyond to an approximately opposite extreme.

From the intraday high on March 10, 2000 to the intraday low on October 10, 2002, QQQ lost 83.6% of its value assuming that you reinvested all dividends. Since most valuation, allocation, and insider activity measures have approached all-time records relative to fair value in 2026 compared with their greatest extremes during the internet bubble of 1999-2000, it is mathematically probable that the total percentage loss for QQQ over the next few years will be greater than the internet bubble's plunge rather than lesser. Investors are not aware how likely it is that they will lose 5 out of 6 dollars by remaining in these shares, and will likely hang in there almost all the way to the bottom when they finally sell out of fear of prices dropping even lower.

Disclosure of current holdings:

Below is my current asset allocation as of 4:00 p.m. on Monday, April 20, 2026. Each position is listed as its percentage of my total liquid net worth. The long positions should add up to about 100%, while the short positions all use U.S. Treasury bills as collateral.

I recently sold most of the stocks I had bought at all depressed points since early 2025 as I had done in late 2021 and whenever the likelihood of a significant pullback was greatest, while adding to PSQ. I also bought more TLT as this massively-shorted fund has continued to steadily form higher lows for 2-1/2 years while paying 4 dollars in annualized dividends.

The order is as follows: 1) U.S. government bonds; 2) shorts; 3) bear funds; 4) precious metals; 5) individual U.S.-listed stocks.

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: 27.95%;

VMFXX/TIAA Traditional, TIAA money market/bank CDs/FZDXX/FZFXX/SPRXX/SPAXX/BPRXX/Savings/Checking long: 27.84%;

TLT long: 13.59%;

I Bonds long: 3.87%;

LTPZ long: 1.54%;

EDV long: 1.51%;

PMM long: 0.01%;

XLK short: 34.02%;

QQQ short: 26.75%;

GDXJ short: 1.93%;

SMH short: 1.67%;

GDX short: 0.37%;

PSQ long: 8.10%;

Gold/silver/platinum coins: 13.22%;

UTZ long: 1.30%;

CAG long: 0.77%;

GPK long: 0.37%.

"But just months later, swept up in the wild enthusiasm of the market, [Sir Isaac] Newton jumped back in at a much higher price and lost £20,000 (or more than $3 million in today’s money)." --Benjamin Graham

REVERBERANT REVERSALS (February 8, 2026): We have become conditioned by society to want to "turn over a new leaf" each time we approach and enter a new calendar year. We join a gym pretending we will exercise frequently for the entire year; we close out losing positions which have been the most disappointing performers and are set to enjoy powerful rebounds, in order to not have to look at big red negative numbers each time we log into our accounts; we assume that the previous calendar year's trends will continue indefinitely. As a result, whenever I possess shares which used to enjoy insider buying but have recently experienced notable insider selling, while the media have become far more optimistic and brokerages have been making frequent upgrades, I may be tempted to sell such holdings near the end of any given calendar year. Instead, I usually wait until part of January has passed before doing so, giving investors enough time to pile into the previous year's biggest winners. I have been selling some shares which I had bought from October through December 2025 that had been wildly oversold due to their becoming tax-loss favorites, if they have rebounded sufficiently so they are no longer meaningfully undervalued and previous top executive buyers in the autumn have become recent sellers. The start of 2026 fits classically into this pattern, combined with unusually priced large-cap U.S. stocks similar to how the year began in 1973 but generally with even more dangerous overpricings of stock prices relative to their earnings.

I have been aggressively increasing my allocations to TLT and PSQ, although using small amounts per trade as I always do whenever I am increasing risk.

TLT is one of the least-appreciated and most-shorted funds in history. Hedge funds in particular have multiplied their net short position by a factor of about twelve, and all of this increase was done after TLT had already completed its bottom at 81.92 at 5:40 a.m. in the pre-market session on October 23, 2023:

TLT has been in a very unappreciated bull market for 27-1/2 months and yields 4.82% annualized.

We'll leave aside the obvious question about why anyone would want to sell short something with an annualized yield of 4.82% which has been in a bull market for 27-1/2 months, choppily forming numerous higher lows along the way. The media have been insisting for months that the U.S. dollar will collapse and will allegedly no longer serve as the world's reserve currency. Meanwhile, the reality is that the U.S. dollar keeps rapidly rebounding from all selloffs since July 1, 2025, with the sharpest selloffs leading to the strongest recoveries. The media also keep insisting that long-term U.S. Treasury yields will surge higher. The truth is that it is the strong gains in large-cap U.S. stocks, in no way justified by their earnings climbing far more slowly than their stock prices, which has encouraged investors to foolishly conclude that they will always be able to get a 20% or 30% gain in large-cap U.S. shares. if you are sure you will achieve such outsized profits from U.S. stocks, then you will have zero interest in investing in something conservative and guaranteed like the TIPS which mature on February 15, 2053 with a fixed yield of 2.64% which is added each month to the urban CPI for a current total yield near 5-1/4 percent.

PSQ is an unleveraged fund which tracks the inverse of QQQ. QQQ remains one of the most overvalued exchange-traded funds in history and is also one of the most popular exchange-traded funds.

Buying PSQ is like shorting QQQ, except that you have to pay the 0.95% management fee and you can't sell covered puts against it as you can with QQQ. You can own PSQ in a retirement account where short selling is not permitted, and if you own it in a non-retirement account then it will qualify for long-term capital gains if you hold it for at least one year and one day from your purchase date for any lot. Investors have been piling into leveraged long funds of most equity groups, while they have fled from bear funds whether they are leveraged or unleveraged. Any extended uptrend creates the psychological perception that it will continue indefinitely, and since we haven't experienced a true U.S. equity bear market since early March 2009 which was almost 17 years ago, many people can't emotionally imagine a similar percentage decline occurring soon.

Top corporate insiders have been selling their shares at an all-time record pace, along with other very experienced investors including Warren Buffett. The same very experienced investors have been making all-time record investments into "boring" U.S. government debt. Meanwhile, the least-experienced investors have been making by far their biggest-ever inflows into stock funds and have been shunning safe guaranteed investments of all kinds. You can ask yourself whether the most experienced investors will be proven right, as has always occurred throughout history, or whether this will be the first time that the least-experienced participants end up with the biggest gains.

I sold many of the shares I had purchased throughout 2025, primarily emerging markets and energy shares in January and April and tax-loss favorites in October through December.

I sold all of the energy shares I had bought in April 2025, especially RIG, WTI, and PTEN. Fortunately most of these shares had more than doubled in value. I also sold all of my Brazilian, South Korean, Turkish, and other emerging-market shares which I had purchased primarily in January for Brazil and in both January and April for several other countries including South Korea. The South Korean shares more than doubled, while the Brazilian shares including both exchange-traded funds and individual company shares had gained an average of between 60% and 75%. While additional gains are possible for emerging markets and energy shares, I believe that the easy money has mostly been made while the downside risks have increased proportionate to their percentage gains.

I sold all of my PALL and MOH and a few smaller positions especially when brokerages switched from downgrades to upgrades while top corporate insiders changed from aggressive buyers to sellers.

MOH had gained 44% from my average purchase price in just over two months and the media had become far more favorable toward its future prospects, so I sold all of it. PALL, a fund of physical palladium, was an exchange-traded fund which I began purchasing near the end of 2023 and kept buying into the spring of 2025 within a few dollars of 80. In the futures markets, commercials--those who actually use palladium for manufacturing or mine palladium themselves--built up a long position which was more than ten times their short position. This is one of the most lopsided ratios for any futures contract in history. Recently, commercials shifted dramatically to being short:long 3:2. Palladium went from being one of the most popular short positions for hedge funds to a recent net long hedge fund favorite. I therefore sold all of my PALL even though it hadn't quite reached my target. The average gain was about 125% (not annualized).

Many popular assets experienced intensified upward moves followed by downside reversals.

You probably already know how nearly all cryptocurrencies accelerated their uptrends during the summer of 2025, and afterward reversed so dramatically that they have mostly lost more than half of their previous peak valuations. The same will occur with many other asset classes. Large-cap U.S. stocks, including funds like QQQ, SPY, and VOO, will similarly lose more than half of their value over the next few years. The degree of the decline will be proportional to the percentage of very overpriced shares they own in their portfolios. During the collapse of the internet bubble, QQQ lost 83.6% of its peak valuation in exactly 31 months if you adjust for all reinvested dividends. A similar or greater percentage decline for this and similar funds is likely by 2029 or sooner.

We have experienced sharp upward bounces for the most overvalued stocks, with the sharpest surges higher often occurring near the opening bell. This is highly characteristic of U.S. equity bear markets and almost never happens during bull markets.

Investors during the early years of bear markets repeatedly conclude that "the bottom is in" and excitedly pile in numerous times, ultimately being disappointed at not achieving new all-time highs which had become routine in recent years. This is especially true of the most severe bear market years including 1931, 1974, 2002, and 2008, which featured far more frequent sharp up days than the strongest bull market years including 2013 and 2017. Mark Hulbert has done extensive research into this phenomenon. Friday, February 6, 2026 was a classic short-term upward spike.

Prior to a large percentage drop for the U.S. stock market, VIX will almost always form a sequence of numerous higher lows following a historic bottoming pattern.

While the S&P 500 during the previous severe bear market had peaked on October 11, 2007 and bottomed on March 6, 2009, VIX had actually bottomed several months earlier in December 2006 and peaked in October 2008. VIX is likely forming a similar pattern in recent months, sliding to 13.38 on December 24, 2025 which had marked its lowest point in over a year. Whenever VIX reaches an especially elevated level, perhaps during the final months of 2026, and then begins to form several lower highs, it will likely be followed by a multi-month recovery for large-cap U.S. stocks before they resume their multi-year bear markets.

There will continue to periodically be worthwhile purchases for unloved shares with brokerage downgrades and insider buying.

My favorite stocks for purchase in any environment are those where the top executives including the CEO are buying into all extended pullbacks, where brokerages have been downgrading their prospects, where the media have become persistently gloomy, with single-digit price-earnings ratios, and with above-average long-term annualized earnings growth. If this sounds like something that Benjamin Graham or Peter Lynch would have said decades ago then that is not a coincidence.

Expect far more dramatic intraday fluctuations over the next few years than we have experienced during the past few years.

The financial markets have become much more volatile since October 2025 than they had been for several previous months, with generally larger spreads between intraday highs and lows. This is typical of a transition from the final stages of a lengthy equity bull market to a classically severe equity bear market. Often the early part of any trading day, especially near the opening bell, will experience sharp gains which are followed by pullbacks later in the day. The most popular shares will often be among the most eager to move higher in the morning. Whenever we are approaching the next intermediate-term bottoming pattern, perhaps several months from now, we will see roughly opposite behavior with frequent downward spikes near the opening bell followed by multiple rebound attempts as they day progresses.

February 2026 has been even more volatile than January in both directions for many assets.

Last week was a classic example of intensified intraday swings which characterize all transitions to true U.S. equity bear markets. QQQ rallied to a Tuesday, February 3, 2026 peak of 630.54 at 2:58 a.m., not far below its all-time top of 638.94 at 11:49:13 p.m. on October 29, 2025, before sliding to a Thursday, February 5, 2026 bottom of 587.44 at 7:16 p.m. and rebounding sharply since then. In case you aren't accustomed to readings outside of regular trading hours, such activity has become increasingly common and increasingly extreme and will likely continue to do so for at least the next several years.

The following charts highlight the incredible unsustainable extremes of the first several weeks of 2026 which will be remembered as one of the most unusually lopsided inflection months in world financial history.

The price-to-sales ratio of 3.43 for the S&P 500 one month ago, which was already surpassed several times in recent weeks, was far above its peak of 2.30 from the 1999-2000 internet bubble and thus probably has further to drop in a bear market:

There is a popular myth that high-P/E shares gain more in annualized terms than low-P/E shares, but the opposite has been proven to be true for decades:

Commodities retested all-time lows relative to U.S. equities during the past several years. Commodities have since rebounded moderately, especially during the past year, and are likely to surrender most of their recent gains before resuming their uptrend into the 2030s:

Precious metals have become unusually overpriced relative to energy commodities:

Investors consistently make the most intense net inflows near market tops and the most dramatic outflows near market bottoms:

U.S. corporate bond yields have been trading at spreads relative to U.S. Treasuries of similar maturities that are among their lowest in history:

There is a clear correlation between the extent of overvaluation and subsequent underperformance of U.S. stocks:

The media often assume that Fed rate cuts are bullish for U.S. stocks, whereas history proves that they are far more often bearish:

Rolling 3-month net inflows into U.S. exchange-traded equity funds are consistently their highest just before the biggest percentage pullbacks in those funds:

U.S. stocks overall are among their most overvalued ever recorded by several fundamental measures:

The out- or underperformance of U.S. stocks is inversely proportional to the percentage of total U.S. assets that are invested in the U.S. stock market:

Disclosure of current holdings:

Below is my current asset allocation as of 4:00 p.m. on Friday, February 6, 2026. Each position is listed as its percentage of my total liquid net worth. The long positions should add up to 100%, while the short positions all use U.S. Treasury bills as collateral.

I extracted the 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) individual U.S.-listed stocks; 6) currencies.

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: 25.50%;

VMFXX/TIAA Traditional, TIAA money market/bank CDs/FZDXX/FZFXX/SPRXX/SPAXX/BPRXX/Savings/Checking long: 25.12%;

TLT long: 13.07%;

I Bonds long: 3.97%;

LTPZ long: 1.38%;

EDV long: 1.31%;

PMM long: 0.01%;

XLK short: 32.88%;

QQQ short: 25.35%;

GDXJ short: 2.42%;

SMH short: 1.55%;

GDX short: 0.53%;

PSQ long: 6.22%;

Gold/silver/platinum coins: 13.51%;

WEN long: 1.31%;

UTZ long: 1.20%;

HUN long: 1.04%;

LYB long: 0.86%;

SG long: 0.83%;

OXM long: 0.75%;

CAG long: 0.52%;

VIRC long: 0.50%;

AVTR long: 0.49%;

VAC long: 0.45%;

BLMN long: 0.34%;

FMC long: 0.30%;

ALIT long: 0.29%;

OGN long: 0.28%;

MOS long: 0.27%;

DEI long: 0.26%;

FISV long: 0.17%;

FXY long: 0.05%.

"A technique that works repeatedly is to wait until the prevailing opinion about a certain industry is that things have gone from bad to worse, and then buy shares in the strongest companies in the group." --Peter Lynch

3 FAT YEARS, 3 LEAN YEARS (December 28, 2025): It is appropriate that the Bible parshah for this week is about Joseph interpreting Pharaoh's dream. Seven fat cows are swallowed by seven lean cows, and the lean cows are just as skinny as before. As you probably know, Joseph correctly interpreted this dream to mean that seven prosperous years would be followed by seven years of famine. Therefore, Joseph recommended that Pharaoh stockpile as much as possible during the seven good years, so that there would be plenty available during the difficult years which followed. Those who didn't live in Egypt mostly assumed that the prosperous times would last indefinitely, so when the famine arrived they weren't ready for it and were forced to go to Egypt to buy food. Eventually Pharaoh was able to trade food for real goods, land, and finally for labor. Pharaoh and Joseph succeeded in creating massive wealth because they had planned for the future to be different from the recent past.

Most people become maximally confident just before the biggest losses, and maximally pessimistic shortly before the strongest rallies for any asset.

Many investors have become dangerously overconfident after three bull market years for the most popular large-cap U.S. stocks. The problem with already overvalued stocks becoming even more expensive is that they eventually have to drop even farther to reach their fair value relative to their profits. That is exactly what will occur with very popular large-cap U.S. equities which have never been more overpriced by most fundamental measures. There has never been any country in history with such high ratios of prices to earnings, sales, book value, and most other benchmarks. Instead of intelligently preparing for a bear market for those shares, investors have been making all-time record inflows into them and into funds of those shares, with a record number of those funds having their debut in recent months as always occurs during a major topping process for any asset. The total net inflow into U.S. exchange-traded stock funds for 2025 will be a new calendar-year record by far of approximately 1.5 trillion U.S. dollars.

The most important time to prepare for tough times is when hardly anyone except for top corporate insiders has been doing so.

We have the most insider selling ever recorded in total U.S. dollar terms in 2025, along with the highest-ever ratio of total U.S. dollars of selling divided by the total U.S. dollars of top executives buying their own shares. This is true even with hundreds of shares falling toward multi-year lows during the fourth quarter of 2025 from a combination of tax-loss selling, regressing to the mean sooner than the most popular favorites, and typical underperformance by unfavored shares in the early part of any severe U.S. equity bear market. Some of the most depressed shares have enjoyed notable insider buying from October through December 2025 and I have been recommending those shares for purchase in my recent postings.

U.S. government debt has been slowly gaining in popularity since October 2023, but yields remain mostly not far below their highest levels since the beginning of the 21st century.

During the past several months we experienced the first time in history that the government bonds of any country were yielding roughly quadruple the yield of the most widely traded index for the same country. Those yields have somewhat retreated in recent months, but the 30-year U.S. Treasury yield of 4.82% is well above four times the 1.10% yield on VOO which tracks the S&P 500 Index with the lowest management fee, and is almost eleven times the 0.44% yield for QQQ, a popular capitalization-weighted fund of the top 100 Nasdaq stocks. Investors are so certain about achieving capital gains that they are willing to accept record low dividend yields.

Investors have been so eager to own winners that they have been selling those shares which are the most compelling bargains in order to raise the money needed to purchase their favorite megacaps.

In recent postings I have been listing those shares which are trading near or below half fair value, are near their lowest levels in several years or more, and have been enjoying buying by the top executives running the company. Some of those have already been experiencing sharp recoveries. Paradoxically, if a very depressed stock finally moves higher, it is likely to gain a lot in percentage terms to return to its former levels, which then attracts momentum players who wouldn't have touched it when it was most worthwhile. Many investors will eagerly buy something which has already doubled in price instead of buying it when it was out of favor and the profit potential was far greater.

Partly for not understanding the mathematics of the situation, and mostly for emotional reasons, far too many people refuse to buy near the beginning of any bull market and are especially eager to participate near the end.

If an asset moves from 10 to 60 then you might think you will still experience most of its profit gain by purchasing it at 20, since 20 is only 1/5 of the way from 10 to 60. However, if you buy it at 20 then your total profit will be 200% versus 500% by buying it at 10, so you have given up 60% of your profit instead of 20%. It is also far more dangerous to buy anything which has recently surged higher, regardless of whether it is shares of a highly popular stock that has been in the news, or silver, or anything else, because it is likely that this asset will have to drop by a substantial percentage whenever it decides to regress to its fair value and beyond.

Investors psychologically don't want to own anything when they keep hearing negative comments about it from brokers and the media, which is usually when it is completing a bottoming process. They desperately want to participate when they are bombarded with stories about how so-and-so who can barely tie his shoes is supposedly getting rich from owning a particular asset. Of course those so-called rich folks aren't really rich because they buy more near the top instead of selling, and thus lose even more during the next downturn.

Some formerly trendy assets including cryptocurrencies have already begun historic bear markets with far less media coverage than they had enjoyed when they were frequently making new all-time highs.

Have you noticed how little media coverage there has been of cryptocurrencies in recent months? Even the most popular ones like Bitcoin and Ethereum have received far less press than when these were making new all-time highs earlier in 2025. The reason is not because of a lack of volatility, as most cryptocurrencies have been dropping significantly faster than they had previously been climbing. It is mainly since the media know that viewers and listeners don't want to hear about falling assets. Given who most of their advertisers are, they don't want to mention that buying fluctuating assets may end up ultimately with losses instead of gains especially when measured in real terms.

The same treatment is likely to occur for large-cap U.S. stocks, gold, silver, and everything related to AI. From time to time you'll hear about how much these have dropped in percentage terms, especially if there is an especially sudden surge in volatility or a huge down day for a particular asset. However, you are likely to hear much less on the way down than you did on the way up, and financial journalists will try as hard as possible to find something which is making new all-time highs rather than dwelling on the weaknesses of former top favorites.

I recently added AVTR, FMC, DEI, and MOS to my holdings while buying more TLT, EDV, LTPZ, UTZ, SG, and LYB. I sold a little PALL and RIG to take advantage of their prices more than doubling over the past several months. Top insiders of gold mining and silver mining companies have been doing their heaviest net selling since 2011. I have been buying shares where top corporate insiders are buying, the shares became popular for tax-loss selling, and the valuations are near multi-year lows.

Intelligent investing requires frequent gradual adjustments to capitalize on whatever the most knowledgeable participants have been doing. The traders' commitments are almost up to date while insider buying and selling has consistently been useful in determining the best course of action. Precious metals shares, which had been by far the heaviest percentage of my total asset allocation, have become far too popular with the public although I still have most of the gold coins I had purchased in 1998-2001 when this had been the least popular sector and gold was averaging below 280 U.S. dollars per troy ounce for lengthy periods of time. Tax-loss selling has somewhat abated and some of the shares I had previously recommended have been smartly rebounding, partly aided by momentum players who prefer to buy after recent gains instead of before.

I have been allowing some U.S. Treasuries to mature without reinvesting them in similar U.S. Treasuries whenever their current yields are near their lowest levels in a few years.

The bigger the bear market, the longer it will usually last.

The biggest bear market in U.S. history by percentage loss occurred from September 3, 1929 through July 8, 1932 with the average stock losing about 87% of its value assuming reinvestment of all dividends. This decline thus lasted over 34 months. The second-biggest drop by most measures was the plunge from March 2000 through October 2002, which lasted exactly 31 months to the day for some funds including QQQ which had dropped just about exactly 83.6% if you assume reinvestment of all dividends. The Nifty Fifty shares from January 1973 through December 1974, a period of just about exactly 23 months, was a smaller percentage decline of about 81% for the average name in the Nifty Fifty favorites.

Most measures of valuations for large-cap U.S. stocks had surpassed their previous bubble peaks in recent months. Therefore, it seems possible that the current or upcoming bear market for funds including QQQ will take longer than these previous examples. Even if 2026 is a big down year for the U.S. stock market, the final lows for nearly all funds of U.S. stocks will likely not occur until the second half of 2028 and perhaps in 2029. There are likely to be several powerful upward bounces along the way with some of them being approximately 50%, similar to what we have experienced during the five previous bubbles for large-cap U.S. stocks. The total decline for QQQ will likely surpass its 83.6% total decline during the collapse of the internet bubble.

If you're surrounded by sharks then it doesn't matter why you had originally decided to swim in that part of the ocean. You have to leave.

Many people tell me that they're going to hold their large-cap U.S. stocks "for the long run." Some of them are aware of the all-time record number of new U.S. exchange-traded stock funds, or the all-time record inflows, and some know about the massive selling of the biggest U.S. stocks by top corporate executives. However, they think they can somehow "ride through" any pullbacks, or that they're long-term investors who don't care about fluctuations. You can't ride through a loss of 80% since you have to quintuple your money to get back to where you started and if you adjust properly for inflation you probably have to gain much more than that. If you're going to be devoured then it doesn't matter why you were there in the first place. There will be far better opportunities to accumulate most of today's overpriced assets in upcoming years.

In order to buy low and sell high, first you have to buy low. In order to have the money to buy low, you have to first sell high and then wait patiently for the next bottoming process. You will know it is arriving when the top corporate insiders are becoming aggressive buyers.

Investors have been concentrating into fewer and fewer shares even more narrowly than they had done at the height of the 1999-2000 internet bubble:

Mutual funds usually keep about 10% of their total assets in cash near market bottoms and close to 4% near market peaks, and recently set a new all-time record of only 1.5% in cash in December 2025 (thanks to Elliott Wave International for this chart):

By far a record number of companies have been mentioning AI in their earnings calls even if their lines of business have little or nothing to do with artificial intelligence:

Just as had been the case during the internet bubble in 1999-2000 when internet was the magic word, companies which have mentioned AI in their conference calls have enjoyed over twice the percentage gains in their stock prices as companies which have not:

Disclosure of current holdings:

Below is my current asset allocation as of 4:00 p.m. on Friday, December 26, 2025. Each position is listed as its percentage of my total liquid net worth.

I extracted the 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-market funds; 6) individual Brazilian ADRs; 7) energy; 8) other individual shares.

VMFXX/TIAA Traditional, TIAA money market/bank CDs/FZDXX/FZFXX/SPRXX/SPAXX/BPRXX/Savings/Checking long: 26.44%;

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: 22.81%;

TLT long: 12.68%;

I Bonds long: 4.08%;

LTPZ long: 1.08%;

EDV long: 0.88%;

PMM long: 0.01%;

XLK short: 33.97%;

QQQ short: 26.10%;

GDXJ short: 2.20%;

SMH short: 1.49%;

GDX short: 0.46%;

AAPL short: 0.16%;

PSQ long: 4.02%;

SARK long: 0.29%;

Gold/silver/platinum coins: 13.17%;

PALL long: 3.38%;

FLBR long: 0.76%;

EWZ long: 0.69%;

EWY long: 0.23%;

FLKR long: 0.17%;

TUR long: 0.03%;

EWZS long: 0.02%;

UGP long: 0.55%;

VALE long: 0.40%;

GGB long: 0.20%;

BBD long: 0.17%;

RIG long: 0.62%;

WTI long: 0.08%;

PTEN long: 0.02%;

MOH long: 1.21%;

UTZ long: 1.00%;

HUN long: 0.88%;

LYB long: 0.77%;

SG long: 0.62%;

AVTR long: 0.51%;

CAG long: 0.48%;

VAC long: 0.45%;

ALIT long: 0.33%;

FMC long: 0.30%;

DEI long: 0.28%;

OGN long: 0.24%;

MOS long: 0.17%;

FXY long: 0.04%;

CLF long: 0.01%.