"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%.

"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%.

"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%.

"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%.