"Successful investing is about recognizing the widest gaps between fair value and present value." --Steven Jon Kaplan

BABY DONE, MAMA NEXT (November 27, 2022): All we really need to know we learned in kindergarten, including the story of Goldilocks and the Three Bears. 2021 was Goldilocks and 2022 was Baby Bear, so 2023 will be Mama Bear and 2024 will be Papa Bear. If you can remember this then you will invest far better than most grownups.

2022 was a classic first year of a bear market with familiar themes from similar past bear markets.

Bear markets are much more similar to each other than bull markets. We experienced a large-cap growth stock bubble one year ago which was very similar to the bubbles of September 1929, January 1973, and March 2020. Just as in those three previous periods from the past century, the large-cap growth shares which caused the bubble in the first place mostly dropped in 2022 about twice as much as the average U.S. stock during the past year just as they had done in 2000. We also had three sharp bounces along the way, including the current one which began around the beginning of the fourth quarter of 2022. It is therefore logical to assume that 2023 will be similar to a year like 2001, with generally steeper losses during each downtrend along with stronger bounces in between downtrends and probably with a moderately larger total loss for 2023 compared with 2022.

Throughout 2022 the U.S. dollar, emerging-market securities, and highly-speculative assets (think cryptocurrencies) also behaved as they generally do during the first year of major bear markets.

VIX and TLT varied from the usual script throughout 2022.

Two interesting differences from analogous past bear markets included 1) the failure of VIX to reach 40 throughout 2022; and 2) the dramatic weakness for U.S. Treasuries and their funds including TLT which dropped about twice as much as they usually would during the first downward phase of a bear market. Since we had more net inflows into the U.S. stock market in 2021 than during 2001 through 2020 combined (not a misprint), presumably these tardy buyers included many less-experienced investors who are not familiar with bear markets.

I expect U.S. Treasuries and VIX to surge sharply higher during the first half of 2023, partly to compensate for their overdone 2022 weaknesses.

In a bear market you can make money selling short on the way down while purchasing U.S. Treasuries and gold/silver mining shares along with other deeply-oversold securities near each intermediate-term bottom.

Selling short the most-overpriced U.S. large-cap equity funds will likely continue to be a winning approach which you can enhance by periodically selling covered puts against these whenever VIX is beginning another retreat. This can be enhanced by adding to the most undervalued long positions whenever there is the least insider selling and the greatest outflows by the least-experienced investors. U.S. Treasuries and gold/silver mining shares in particular tend to enjoy net gains even with sharp corrections during these kinds of bear markets; look at a chart of VUSTX (long-term Treasuries) or $HUI (gold/silver mining shares) from 2000 through 2003. I have therefore been adding to both of these sectors during their most depressed periods of 2022.

Closed-end funds often provide outsized bargains during intermediate- and long-term bear market bottoming patterns.

Some investors aren't as familiar with closed-end funds as they are with open-end or exchange-traded funds. Especially during bear markets, closed-end funds are often sold by those who are disappointed or discouraged or who are otherwise emotionally unhappy about holding anything which has dropped for two years or longer. This causes many closed-end funds to sell at higher discounts to net asset value than they experience during bull markets.

In February 2009, near the end of the severe 2007-2009 bear market, I went to Cefa.com and ranked all closed-end funds from highest discount to lowest. By the middle of the ninth page the discount finally dropped below 20%. When I did the same test in January 2010, less than a year later but when fear of losing more money had been replaced by fear of missing out on additional gains, the discount dropped below 20% halfway down the very first page. This means that the number of closed-end funds with high discounts was 17 times as high in February 2009 as it was in January 2010.

It is especially likely that the next market bottom following a "Mama Bear" retreat, perhaps around the middle of 2023, could be accompanied by very high discounts for some worthwhile closed-end funds. Select those where the fund manager(s) have their own money in the fund, where they have been managing the fund for several years or longer, which have relatively low expense ratios, and which rely on value investing principles rather than using leverage or other financial tricks to enhance their performance.

Value investing is once again taking over from growth as these major groups take turns outperforming through the decades.

The following chart highlights the see-saw behavior of value vs. growth investing since 1975:

I expect value shares to lose much less than growth shares on the way down for a couple of years, just as value had lost much less overall in 2022, and to gain substantially more on the way up for five or six years during the next major bull market (2025 through 2030, approximately).

Differentiation is clearly underway.

In my last update I forecast that investors would begin to differentiate among sectors, so that not all shares would go up or down by similar percentages. This has been increasingly prevalent in recent months as gold mining and silver mining shares and some emerging markets have been far outgaining large-cap U.S. growth favorites from 2020-2021. Part of the critical shift from growth to value will be the increasing outperformance of small caps versus large caps, emerging markets versus U.S. securities, mining shares versus technology, and in general the big winners of 2000-2008 trouncing the big winners from 2009-2021.

It is okay to be a Boglehead with assets which may have completed their cycle bottoms including government bonds and gold/silver mining shares. It's not okay to be a Boglehead with SPY, QQQ, or any collection of previous large-cap U.S. growth favorites.

Why did U.S. large-cap growth stocks perform so well in 2021? It wasn't because their profits increased faster than the profits of other sectors. The primary reason by far is that we had the biggest-ever inflow of inexperienced investors in 2021 who in many cases had never invested in anything before. Being unfamiliar with the financial markets, they invested in names they knew from their everyday lives regardless of how overpriced they had become, and therefore created unsustainable bubbles. Just as a hangover must result from having far too much alcohol, 2022-2024 is the inevitable morning-after resolution of 2021. All of those big-name U.S. technology shares have to go back to fair value and probably well below, since bear markets usually end with an average 30% to 50% discount to fair value for these shares.

Dollar-cost averaging is not a worthwhile approach for any overpriced asset class. You might lose less on the way down but it will still represent a huge overall loss.

I am gradually adding to my short positions and reducing my long positions during the upcoming month to restore their balance from the middle of August 2022.

At the end of September and the beginning of October 2022 I sold covered puts and added significantly to all of my long positions in order to create a much heavier weighting of longs versus shorts compared with their mid-August interrelationship. Now that VIX has retreated almost all the way to 20, I plan to use the next few weeks, especially shortly after the opening bell into all upward spikes, to progressively reduce my long positions except for U.S. Treasuries and gold/silver mining shares and to add to my short positions in XLI, XLE, SMH, QQQ, and XLK. You can't make as big a percentage gain by selling short as you can by being long, but in a bear market the most consistent gains will almost always be on the short side.

XLI and XLE are new short positions, with SMH possibly joining them soon.

I began to sell short XLE when it had first reached 93 a couple of weeks ago, and I have been more recently selling short XLI at 101 and above. Both of these sectors are among those which have more than doubled from their respective March 2020 bottoms, have experienced intense selling of their components by top corporate executives, have enjoyed massive net inflows in recent weeks, and frequently climb shortly after the opening bell most days which is when the least-experienced investors do a large percentage of their total trading. SMH has experienced a sharp bounce in recent weeks so I may begin selling it short soon. If QQQ approaches 300 and especially if it surpasses that level, it is also worth adding to my already-existing position.

I'll take the over on the duration of this bear market.

Many investors believe that either the current U.S. equity bear market has ended or that it will terminate within a year or so. In my opinion that's not likely and I'll happily take the "over" on that bet. The earliest the current bear market could end, based upon the experience with all past lengthy bull markets (the bull market ending in January 2022 had begun in March 2009), would be in the summer of 2024 and that is probably too early by some unknown number of months.

I'm sure that by the time the current bear market has ended, I'll be losing plenty of money on the long side from having gotten invested far too soon and too high.

Old-fashioned savers can get their best deals from U.S. government bonds, especially U.S. Treasuries of 26 weeks, 52 weeks, 2 years, and 3 years until maturity.

Most investors are unaware that U.S. Treasuries have been sporting their highest yields since the summer of 2007. You can get over 4.7% on some securities and over 4% even on the shortest 4-week Treasuries. A good place to do this is TreasuryDirect.gov which charges no fees and allows you to participate in the same auctions as multi-billion-dollar institutions.

The bottom line: 2023 will resemble 2022 but with larger percentage pullbacks, bigger rebounds, and outperformance by U.S. Treasuries and gold/silver mining shares.

As we transition from the first to the second year of a three-year U.S. equity bear market we are likely to have a similar transition as we had experienced in 2000 to 2001. Mama Bear will rip apart large-cap U.S. growth shares, but will be considerably gentler to safe-haven assets including U.S. Treasuries along with gold mining and silver mining shares; Baby Bear in his inexperience treated almost all assets the same (i.e., not with care). In addition to selling short, put lots of money into 26-week, 52-week, 2-year, and 3-year U.S. Treasuries which have enjoyed their highest yields since the summer of 2007.

Disclosure of current holdings:

Here is my current asset allocation as of the close on Wednesday, November 23, 2022:

TIAA(Traditional)/VMFXX/FZDXX/Savings/Checking long: 30.97%;

XLK short (all shorts currently unhedged): 18.84%;

QQQ short: 6.71%;

XLE short: 4.90%;

XLI short: 0.64% (November 25 close);

TSLA short: 0.35%;

GDXJ long: 10.40%;

ASA long: 5.93%;

GDX long: 2.74%;

BGEIX long: 1.34%;

I Bonds long: 8.95%;

TLT long: 8.78%;

2-Year/3-Year/52-Week/26-Week/13-Week/5-Year TIPS long: 7.76%;

Gold/silver/platinum coins: 5.54%;

INTC long: 2.34%;

TKC long: 2.33%;

GEO long: 1.87%;

TEI long: 1.42%;

KWEB long: 1.32%;

FXY long: 0.85%;

FXB long: 0.18%;

FXF long: 0.17%;

VZ long: 0.65%;

EPOL long: 0.34%;

T long: 0.22%;

WBD long: 0.20%;

HBI long: 0.11%;

LEMB long: 0.06%;

PCY long: 0.05%;

NGL.PR.B long: 0.02%;

CEE long: 0.02%.

The numbers add up to more than 100% because short positions only require about 30% to hold them with no margin required.

“The success of contrarian strategies requires you at times to go against gut reactions, the prevailing beliefs in the marketplace, and the experts you respect.” --David Dreman

DÉJÀ VU ALL OVER AGAIN (January 17, 2022): Most investors are either treating 2022 as though it will be an approximate repeat of 2021 or else they believe that the investing world is totally different than it has ever been in the past. Both of these expectations are seriously flawed. The financial markets will consistently behave similarly to whatever they have done in the past under nearly-matching conditions. Early 2022 has numerous parallels to early 2000, early 1973, and the late summer of 1929. In addition, the past year which was 2021 was surprisingly analogous to 1999-2000, 1972, and 1928-1929. Therefore, what will occur over the next few years can best be determined by examining the market's behavior during 2000-2003, 1972-1975, and 1929-1932. This is especially true since so few investors are doing likewise, thereby making it probable that you will come out far ahead by studying and applying these valuable parallels.

We have experienced an exaggerated large-cap U.S. growth bubble which will behave like all previous large-cap U.S. growth bubbles, only more so since we had achieved all-time record extremes and divergences.

Imagine that you go to see the classic movie Casablanca with a friend. You observe how your buddy responds emotionally to the scenes which you have seen over and over again and which you conclude he must be watching for the first time. After the movie is over you plan to discuss this with him, and then one of the ushers you have seen there for years says to your pal, "You must be a huge fan of this film. You've already viewed it several times during the past couple of weeks." Surprised, you turn to your friend and ask him, "Is that true? The way you reacted to the most powerful parts of the film convinced me that you had never watched it before." "Oh, sure, I've seen it over and over," he responds, "but I keep hoping that it will turn out differently."

Expecting the financial markets to turn out differently than they had done in 2000, 1972, and 1929 is a serious mistake, because we have such a close repeat of those years. Several weeks ago we had 1099 new 52-week lows for the Nasdaq in a familiar pattern where investors crowd into fewer and fewer of the biggest names near the end of a large-cap growth bubble. Boglehead investing is incredibly popular just as it had been in each of those years. Huge numbers of people who had never invested before are participating for the first time: bucket shops appearing worldwide on ordinary city and town blocks in 1928-1929; discount brokers emerging for the first time in the early 1970s; online brokerages having their debut around 1999-2000; and Robinhood/Reddit and other trendy zero-commission mobile-phone apps appealing to middle- and working-class investors in 2020-2022. There are numerous other parallels including the kinds of options trading, the times of the day/week/month/year when investors are most eagerly participating, huge net inflows into passive index funds, and all-time record overvaluations for the most popular shares. Here is one chart highlighting one of these exaggerated extremes:

The next few years will likely be similar to 1929-1932, 1972-1975, and 2000-2003.

People frequently ask me why I consistently accumulate the most-underpriced shares into extended weakness when I expect the biggest large-cap U.S. growth shares to drop over 80%. The reason is because, following growth-stock tops, value shares often end up with absolute gains especially when they are notably undervalued. Below is a chart highlighting how value shares had performed while QQQ was busy collapsing 83.6% from its March 10, 2000 intraday zenith to its October 10, 2002 intraday nadir:

The above chart highlights the useful point that a bubble for large-cap growth shares, especially the internet bubble of 1999-2000 and the Nifty Fifty bubble of 1972-1973, were followed by extended periods of outperformance by low-price-earnings assets especially in certain sectors such as gold mining. As great as the Great Depression had been, many gold mining shares gained hundreds of percent starting near the end of 1929.

There are numerous sectors today which will likely gain while large-cap growth shares keep making lower highs for two or three years.

Chinese internet shares have never been more undervalued relative to U.S. internet shares than they have in recent weeks by a large factor. Gold mining shares tend to perform especially well whenever large-cap growth shares begin powerful downtrends. Other currently-undervalued sectors include biotech, South American emerging markets, telecommunications, and recently Russian shares. Gradually purchasing these and other unpopular shares into extended weakness over the next few years is likely to be especially rewarding.

TLT and long-dated U.S. Treasuries have gone wildly out of favor in recent weeks.

Two essays were very recently posted by other analysts on Seeking Alpha which recommended selling TLT--after it has already been trading near a multi-month low. Commercials have been accumulating long positions in the 30- and especially the 10-year U.S. Treasury as you can see from maroon bars on the following charts:

10-Year U.S. Treasury

30-Year U.S. Treasury

We also had the greatest-ever two-week net outflow from TLT in its entire history. In a nearly exact inverse position from the spring of 2020, investors are minimally concerned about a recession and maximally worried about inflation. TLT will likely perform well until almost everyone is again far more concerned about a U.S. recession and continued losses for the Nasdaq 100, at which point it could become timely to sell TLT at a two-year high.

Think of your role as a jumbo-jet pilot, not an air-show sensationalist.

A jumbo-jet pilot's top responsibility is to ensure that the passengers remain calm throughout the flight, even if it means taking longer to reach the destination or even putting up with more turbulence than another approach. On a recent flight to San Francisco the pilot decided to break this rule and to make a sudden sharp dive to get us into calm air much more quickly. While he succeeded admirably in his objective and the remainder of the trip was surprisingly calm, quite a few people cried out or were otherwise upset by suddenly dropping thousands of feet. No doubt this would have been the correct maneuver as a military pilot with a squadron on board instead of ordinary passengers, but acting gradually has to take higher priority.

Even if I were to become absolutely convinced near a major bottoming pattern over the next few years that a particular drastic increase in portfolio risk is justified because VIX is at a multi-year peak, we have all-time record insider buying relative to selling, and we had the biggest weekly net outflow in decades, the next week could be even more extreme as we had experienced in March 2020. I have to discipline myself not to "pick up all those great bargains" too quickly.

Unfortunately I can't write a hundred-page essay for each posting, but you can subscribe to my twice-weekly email updates.

Several readers on Seeking Alpha usually say that I'm not giving enough detail to support my arguments. I would love to write a 100-page essay for each posting but unfortunately that's not practical. However, if you want to get additional precise details about what I am planning to buy and sell, at what prices, and in which quantities, you can subscribe to my newsletter at TrueContrarian.com. The subscription also includes two weekly Zoom meetings of 75 minutes apiece.

The bottom line: we have stealthily entered a meaningful rotation out of large-cap deflation-loving U.S. growth shares into small- and mid-cap inflation-loving global value shares. The ideal approach is to gradually purchase assets where their rate of profit growth exceed their price-earnings ratios by the widest ratios and where there is a history of outperformance by those shares under similar past circumstances. Too few investors are intelligently using 1929-1930, 1973, and 2000-2001 as a guide to 2022.

Disclosure of current holdings (most recent purchases in red):

Here is my asset allocation with average opening prices adjusted for dividends/splits and newly-opened positions in boldface: 44.1% cash including I Bonds paying 7.12% guaranteed, TIAA Traditional Annuity paying 3% to 5% (only available for legacy retirement accounts), and Discover Bank high-yield savings paying 0.40% (available for all U.S. residents with retirement and ordinary savings accounts); 18.7% short XLK (112.7737); 16.75% long TLT (148.259); 16.7% short QQQ (309.7504); 7.0% short TSLA (494.9721); 5.9% long GDXJ (39.96); 5.6% long GEO (7.65); 2.53% long GDX (28.97); 1.33% long TUR (17.17); 1.27% long KWEB (35.51); 1.22% long EWZ (27.33); 1.1% long ASA (19.43); 0.9% short AAPL (125.5481); 0.625% long ECH (22.98); 0.55% short IWF (223.0119); 0.45% short SMH (170.7813); 0.175% long T (23.17); 0.1% long UGP (2.565); 0.09% long ITUB (3.83); 0.044% long BBD (3.39); 0.013% long TIMB (9.99). It doesn't add up to 100% since short positions require less cash; there is no margin involved.

“An intelligent investor gets satisfaction from the thought that his operations are exactly opposite to those of the crowd.” --Benjamin Graham

RING IN VALUE, WRING OUT GROWTH (January 2, 2022): It is human nature to assume that the recent past will continue into the indefinite future. However, successful investing in 2022 requires identifying similar past historic parallels rather than assuming that 2022 will be like 2021.

Many investors not only don't realize how much large-cap growth shares decline following bubble peaks, but also how poorly they behave for several years after they collapse.

If you had been invested in QQQ at its intraday top on March 10, 2000 then by its intraday bottom on October 10, 2002 you would have lost 83.6% of your money assuming that all dividends were reinvested. What is perhaps just as bad, if not worse, was that the subsequent rebound for QQQ only returned it to 48.63% of its original peak by October 31, 2007, and then QQQ slid another 54.4% in just over one year to its November 21, 2008 nadir. Similar behavior had occurred in 1929-1932 and 1972-1974 and twice during the 19th century beginning in 1837 and 1873.

Perhaps you want to believe that for some reason it's different this time. Albert Einstein defined insanity as repeating a similar set of circumstances and expecting completely different results.

Here is a chart of QQQ, adjusted for dividends all being fully reinvested, highlighting its previous two 21st-century bear markets as we begin the third:

Insiders and billionaires have never sold more of their assets than they had done in 2021.

Both top corporate insiders and billionaires made all-time record sales and exhibited the highest-ever ratios of insider selling to insider buying in their entire history. It isn't likely that this is a coincidence. Some top insiders also sold real estate aggressively as they hadn't done since 2005-2006, with Elon Musk doing both on a grand scale with the heaviest-ever selling of any single company's stock in world history along with unloading all of his houses including his primary residence. You can believe that Musk only sold shares because Twitter fans made him do it, and that he only sold his houses because he's a simple guy who prefers fewer possessions. You might also want to believe in the tooth fairy.

Value shares overall have never been more underpriced relative to large-cap growth shares, nor have they ever experienced greater net outflows relative to the all-time record inflows for large-cap growth shares.

How popular were U.S. exchange-traded funds in 2021? They had more inflows for the entire calendar year than twenty combined years of inflows from 2001 through 2020. Meanwhile, value shares have never been more underpriced in both absolute and relative terms. By my definition this includes not only classic value sectors but also Chinese internet companies, telecommunications shares, and almost anything where prices have been far below fair value. At the same time, U.S. large-cap growth shares by most benchmarks have never been more overpriced than they were in recent months.

The following chart highlights how U.S. equity indices have behaved in recent decades following powerful outperformance by the ten largest companies by market capitalization:

Whenever large-cap deflation-loving U.S. growth favorites have such a wide disparity with small- and mid-cap inflation-loving emerging-market value shares, the same subsequent behavior has always occurred as in 1837, 1873, 1929, 1972, and 2000.

Since the second week of February 2021 we have experienced major downtrends for exchange-traded funds ranging from MJ (marijuana) to KWEB (Chinese internet shares) to EWZ, ECH, TUR, PAK, NGE (all emerging markets) to GDXJ, GDX (gold/silver mining shares). In the United States we have seen moderate downward behavior for IWC (small-cap U.S.) and mostly sideways movement for IWM (the Russell 2000). Investors have crowded into fewer and fewer large-cap growth shares in almost the exact same way they had previously done in years including 1929, 1972, and 1999-2000. The subsequent behavior is likely to be nearly identical to the above three examples from the past century, with losses of 80% or more for large-cap growth shares over the next few years.

The market's behavior over the past decade is a remarkable repeat of its action at the end of the 20th century:

Options activity has never been more extreme than it was in 2021.

We had all-time record speculative call buying relative to put buying, and for several months more people sold puts to "generate income" than bought puts as a hedge against a market decline. We also had record-low ratios of emerging-market valuations relative to U.S. valuations and VIX generating numerous higher lows throughout 2021 including the wildly-depressed reading of VIX at 16.62 which it had registered at 2:46 p.m. on December 30, 2021. Investors are excited about certain future gains for their favorite stocks, indifferent toward protecting the gains they already have, and complacent about the possibility of a serious downtrend. This is an especially dangerous combination.

Numerous sectors have never been cheaper than they were at their lowest points over the past two years, with some of those bargains still existing in a compelling fashion.

Gold mining, energy, and travel shares are three sectors which had never been more undervalued than they had been at their March 2020 lows. Chinese internet shares reached all-time record low valuations relative to their profit growth during the final week of December 2021. Except for parts of 1932, AT&T had never been as undervalued relative to its profitability in its entire existence dating back to 1877.

Investors have been exhibiting classic herd mentality in desiring to own shares in the biggest U.S. corporations with massive insider selling by its top executives than to purchase the best global bargains which have suffered massive price declines. People want to own what the least-knowledgeable investors widely own rather than following experienced insiders and billionaires. Guess whether the "little guy" or the wealthiest investors will get richer over the next few years.

Generally-rising inflation will be the most harmful to the most-overvalued assets.

The market's first response to the recent rise in inflation, especially in the U.S., has been for investors to crowd even more frenetically into the fewer and fewer assets which remain in uptrends. These are primarily the most-overpriced shares and other dangerously-overvalued assets of all kinds including real estate. This is almost surely the opposite of what will happen sooner or later, which will be that just as in all past episodes where inflation emerged from a lengthy period of dormancy, these assets were almost always the biggest percentage losers. Without exception, value shares have always trounced growth in an environment where inflation is a notable economic factor, although often growth wins out over an initial short time period.

One possible explanation for this behavior is that any significant unexpected change in the real economy, such as inflation suddenly moving higher, is greeted by confusion. People have no idea what to do so they look to see what others are doing and they blindly follow. Only later on do the well-established interrelationships and mathematical necessities become evident.

It's not just large-cap U.S. growth shares which have become dangerously overpriced.

Cryptocurrencies will likely plummet more than large-cap U.S. growth shares during the next few years, partly because the earliest one, Bitcoin, didn't even exist during the previous two bear markets. Owning cryptocurrencies is like owning an outdoor plant transported from a much warmer climate which has never experienced its first winter. Real-estate prices in most countries have reached all-time highs relative to average total household incomes in most neighborhoods. Many works of art, automobiles, and other collectibles have also reached unprecedented levels even if you adjust generously for inflation. Much of these occurred due to the unusual, temporary ease in obtaining borrowed money for just about any purpose.

The following chart highlights the most-popular trades among investors in both November and December 2021:

Anyone in the U.S. with a solid credit rating can purchase any property with zero net worth.

Here is a true story: I was scanning Zillow.com in one part of the United States where desirable houses tend to average about 600 to 700 thousand dollars. After ten to twelve minutes I started getting a sidebar questionnaire asking me about my job, my net worth, my credit score, and similar personal data. I responded (untruthfully) that my wife and I both worked for Amazon full time as package deliverers, that we had both been recently promoted to make twenty dollars per hour, that we had excellent credit ratings in the low 800s (the only honest piece of data and which could be easily verified), that we never owned property before, and that our net worth was literally zero. Within a half hour I received multiple email offers from lenders guaranteeing a mortgage of up to 750 thousand dollars for nearly any house we wanted to buy, and promised that all closing costs would be included in the mortgage financing. The next day I got several telephone calls about mortgage approval and none of them were the least bit discouraged about our complete lack of savings, nor our absence of history in paying a mortgage. Perhaps subprime mortgages or loans where the potential buyer lies about his or her income are no longer commonplace as they had been in the U.S. during 2005-2006, but the current situation seems even more perilously lenient.

Not surprisingly, mortgage debt has reached all-time record highs by huge ratios to their previous records in dozens of countries.

The bottom line: far too many investors have become converts to the Boglehead myth that if you keep buying U.S. large-cap growth equity funds then you have to come out ahead in the long run. While this might be true over thousands of years, humans alas don't live that long. Those who believed in the Boglehead method in August 1929, when John Bogle himself was a baby, were behind by 38% on average in real terms by August 1982 which was 53 years later (see chart from my November 24, 2021 update highlighting the exact data points). U.S. large-cap growth shares are significantly more overpriced now than they had been in August 1929 so expect similar losses for the masses of current investors who refuse to sell even a modest percentage of their holdings. History demonstrates that most of them will give up in disappointment following massive declines of 70%, 80%, or 90%, and will end up selling during the next major bottoming pattern just as Bogleheads (if by another name) had done in 1932, 1974, and 2002-2003 following similar growth-stock post-bubble collapses.

After each of these previous growth-stock bubbles we experienced huge declines for large-cap growth shares followed by subsequent extended underperformance. Large-cap U.S. growth shares may not regain anything close to their recent dominance until the 2030s when nearly everyone today will have give up on Boglehead methods.

Disclosure of current holdings (most recent purchases in red):

Here is my asset allocation with average opening prices adjusted for all dividends: 43.3% cash including I Bonds paying 7.12% guaranteed, TIAA Traditional Annuity paying 3% to 5% (only available for legacy retirement accounts), and Discover Bank high-yield savings paying 0.40% (available for all U.S. residents with retirement and ordinary savings accounts); 19.7% short XLK (112.7737); 18.0% short QQQ (309.7504); 17.4% long TLT (148.259); 7.0% short TSLA (494.9721); 5.8% long GDXJ (40.86); 5.55% long GEO (7.65); 2.4% long GDX (29.55); 1.25% long TUR (17.17); 1.05% long ASA (19.43); 0.95% long KWEB (35.94); 0.9% short AAPL (125.5481); 0.6% long ECH (22.98); 0.55% short IWF (223.0119); 0.45% short SMH (170.7813); 0.125% long T (23.17); 0.1% long UGP (2.565); 0.075% long ITUB (3.83); 0.0375% long BBD (3.39); 0.0125% long TIMB (9.99). It doesn't add up to 100% since short positions require less cash; there is no margin involved.

You may wish to check out the following article on BusinessInsider.com:

Prospect Theory Holds that People Are Generally More Biased Toward Avoiding Losses than Seeking Gains