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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Here are the traders' commitments for palladium and platinum:

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

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

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

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

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

Disclosure of current holdings:

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

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

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

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

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

TLT long: 11.54%;

I Bonds long: 11.23%;

PMM long: 0.01%;

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

QQQ short: 24.50%;

SMH short: 1.53%;

AAPL short: 0.15%;

GDXJ short: 0.11%;

SARK long: 0.83%;

PSQ long: 0.04%;

PALL long: 1.44%;

Gold/silver/platinum coins: 7.64%;

FXY long: 0.72%.

“Investing should be like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” --Paul Anthony Samuelson

INVESTING WHILE INTOXICATED (January 17, 2021): We have experienced all-time record levels of speculative call buying, penny-stock chasing, massive percentage increases for marginally-profitable companies, IPO eagerness, and numerous other multi-decade and even multi-century records which in many cases have surpassed rare bubble extremes from periods like 1928-1929, 1972-1973, and 1999-2000. Far too many investors have embraced the perceived certainty of ever-rising asset valuations, resurging inflation, a slumping U.S. dollar, endless summer for cryptocurrencies, record-low spreads for high-yield corporate bonds over U.S. Treasuries, the second real-estate bubble of the 21st century, and other myths as though they were certainties. The most remarkable feature today is how few people recognize it as being both phenomenally extreme and completely unsustainable. All similar bubbles in past centuries have ended with nearly identical collapses and this is not going to be the first-ever exception to that rule.

The large-cap Nasdaq collapses of 1973-1974 and 2000-2002 are likely to be repeated along with severe losses for many other fluctuating assets.

From its March 10, 2000 peak of 105.12 to its October 10, 2002 bottom of 17.24, adjusted properly to include all reinvested dividends as StockCharts.com does, QQQ plummeted 83.6%. I expect a similar percentage decline, plus or minus several percent, within three years or less. This will likely be accompanied by notable percentage losses for high-yield corporate bonds, real estate, cryptocurrencies, art, and nearly all fluctuating assets. It won't be a smooth path down and there will be many rebounds along the way. Robinhood investors and Bogleheads will both suffer severe losses for somewhat different reasons.

Bogleheads are overreliant upon the glory of past decades.

John Bogle himself decried the existence of those who took his excellent idea about index investing and badly distorted it. John Bogle sold all of his aggressive-growth shares in 2000 and also unloaded most of his stocks shortly before his passing in 2018 because he astutely recognized that there is sometimes far too much risk in the financial markets. It's too bad that most of today's Boglehead investors haven't considered that if you had been invested in the U.S. stock market near the end of August 1929 then by August 1982--which was 53 years later--your portfolio would have lost an average of about 60% after adjusting for inflation depending upon exactly what you owned. The only true periods of dramatic outperformance for the U.S. stock market, not counting the bubble behavior since March 2020, were the incredible eight-year rally from August 1921 through August 1929 and the more recent huge bull market from August 1982 through March 2000 with a few minor bear markets along the way. Even with its huge gain in recent years, if you are long a basket of Nasdaq stocks which you have owned continuously since the peak on March 10, 2000 then you are only marginally ahead after adjusting for inflation.

People are repeatedly underinvested whenever bull-market gains are about to be greatest and dangerously overinvested near the beginning of all major downtrends.

Nearly all long-term analyses of the financial markets underrate the rarity of the atypical outsized gains of the above two periods of 8 and 17-1/2 years. They usually have an agenda, open or hidden, of creating an illusion that "stocks always go up in the long run." Actual records by brokerages and mutual-fund companies illustrate clearly that most people prior to these two major outperforming periods had historically very low allocations to risk assets; in August 1982, for example, only 13.2% of total household wealth was invested in stocks versus roughly five times that amount by early 2000. So the vast majority of investors got little benefit from the two huge bull markets of the past century while there was massive participation on the downside in 1929-1932 and 1999-2003. With everyone nearly fully invested today we are set perfectly for a massive aggregate loss of wealth over the next few years.

Safe-haven assets have quietly completed important bottoming patterns.

VIX, a measure of implied volatility, has been steadily making dozens of higher lows since the final months of 2019. The U.S. dollar index, a little-followed signal which has accurately forecast nearly all major market turns of the past half century, probably completed its lowest point since the second week of April 2018 at 90.209 at 6:30 a.m. on January 6, 2021, having made numerous higher lows during the past 1-1/2 weeks. The U.S. dollar index topped out on March 4, 2009, exactly two days before the S&P 500 began a historic surge higher, and the U.S. dollar index also completed a key peak on March 20, 2020 just before the March 23, 2020 bottom for many U.S. equity indices. In July 2008 the U.S. dollar index completed a key double bottom just before the S&P 500 suffered one of its worst-ever percentage collapses. It is probably no coincidence that the January 6, 2021 bottom for the U.S. dollar index preceded by a half week the 319.99 after-hours top for QQQ registered at 5 p.m. on January 8, 2021.

The most-experienced investors are among the few who have embraced the U.S. dollar and U.S. Treasuries.

The third of the "Three Musketeers" safe-haven trio, TLT and other long-dated U.S. Treasuries, likely completed important bottoms around noon on January 12, 2021. Top U.S. corporate executives have set new all-time records for the ratio of the total dollar amount of insider selling relative to insider buying in the U.S. stock market. These very-experienced investors have been increasingly accumulating the safest havens while they are still significantly undervalued. In every bull market the most-capable participants buy first, followed gradually down the food chain until the least-knowledgeable novices are piling in near the top. In a bear market the savviest investors get out earliest, followed all the way down the line until the least-experienced traders end up setting all-time records for net outflows near the bottom of the cycle.

Real estate worldwide is completing its second major bubble of the 21st century.

The 2005-2006 real-estate bubble featured subprime mortgages and liar loans. The 2020-2021 real-estate bubble is notable for record-low mortgage rates and the easy availability of credit and zero down payments. The most important similarity between 2005-2006 and 2020-2021 is that the ratio of U.S. housing prices to average household income in both cases surpassed twice their long-term level in many neighborhoods. Much of this data including the detailed Herengracht study which began in 1628 and Case-Shiller backdating to 1890 spans centuries (and even millennia, since real-estate prices have been recorded throughout written history). In 2005-2006 one heard frequently about how "foreign buyers" would enable real-estate prices to be perpetually elevated; by 2010-2012 many of these buyers had become sellers. Today you hear repeatedly about how people "from away" are eagerly buying but no one mentions how those with no long-term connection to a place are much less likely to hold on during periods of falling valuations. No asset which is more than double its fair value can sustain such a high price regardless of whether it's real estate, stocks, commodities, or anything else.

Intraday behavior highlights eager opening-bell buying which characterizes nearly all tops.

If you look at intraday charts of most risk assets in March 2020 then you will quickly discover that the least-experienced investors who were panicking out of the market nearly all did so near the opening bell, especially on Mondays when investors had been worrying all weekend about how much lower the market might retreat and had placed massive market orders to sell. Near bubble peaks in March 2000 and again in recent weeks we have repeatedly experienced the highest prices of the cycle near the opening bell when the least-experienced recent investors are most excited about how much money they're going to make. During the final months of 1999 and the early months of 2000 I heard many people openly predicting--in person and on the internet--how much money they would make in the stock market, with an infamous survey in February 2000 registering the average investors' expectations of 30% annualized gains in the stock market for the following decade. Recently similar absurd extrapolations have become commonplace.

Many of today's investors were in high school or younger during the 2007-2009 and earlier bear markets.

The huge surge of new investors in less than one year, just as in 1972-1973 and 1999-2000, have mostly never experienced a bear market. Many of them were in school when the last bear market occurred so it seems emotionally distant. Now they'll have a front-row seat to the carnage which will affect so many of them directly.

It's not just the newby investors who are convinced of invincibility but many long-time baby boomers who should know better.

If you look at the comments below and on my other essays on Seeking Alpha then you will quickly discover that those who are most optimistic about future risk-asset valuations are not just those who have never personally experienced bear markets. Many investors who lived through the huge collapses of 1999-2003 and 2007-2009, and who may have lost significant percentages of their net worth during those bear markets, have convinced themselves that "because of the Fed" or "since you have to put your money somewhere" or "with all of that cash still out there" or "since assets have to climb in the long run" that they're going to come out ahead even if they enter or hold their positions near their most-overvalued levels in history. All major market tops and bottoms must be accompanied by widespread delusions that a current unsustainable over- or undervalued extreme can persist indefinitely. The biggest percentage losses have always occurred whenever there was the highest level of overconfidence in future gains while the most dramatic percentage gains have happened in an atmosphere of maximum pessimism.

All post-bubble collapses have nearly identical chart patterns as Charles Mackay pointed out in "Extraordinary Popular Delusions and the Madness of Crowds" which he first published in 1841.

QQQ's pullback from its March 10, 2000 zenith of 105.12 to its May 24, 2000 intermediate-term intraday low of 63.03--with both numbers properly adjusted for dividends by StockCharts.com--was just about exactly 40%. QQQ reached 319.99 at 17:00:01 Eastern Time on January 8, 2021 which if we round off to 320 implies an upcoming bottom, perhaps in the second quarter of 2021, near or below 192. This is nowhere near what its ultimate bear-market nadir will be in 2022 or 2023 but is merely a projection for its first significant decline. Usually bear markets have their second-largest percentage losses near the beginning and their largest percentage declines near the end with lots of bounces and other unknowable fluctuations in between. Hardly anyone would likely agree with this price target with the vast majority of forecasters expecting continued QQQ gains in 2021 and beyond.

Participation in recent weeks has been concentrated in the least-reliable and most-dubious sectors of the financial markets.

The most-speculative sectors in the financial markets today have enjoyed by far the greatest increases in both participation and percentage gains, thereby encouraging many others to climb aboard these highly-uncertain assets. Penny stocks, cryptocurrencies, and out-of-the-money call options have become the darlings of recent months to an extent not even approached during past bubble peaks. Here is a chart of participation in penny stocks during the past decade:

The disappearing Trump mystique provides an emotional excuse for "huge" asset losses.

Most of the irrational increases for risk assets occurred since Donald J. Trump was declared the winner of the 2016 U.S. Presidential contest. Whether this is fundamentally meaningful or not, Trump is associated in many people's minds worldwide with wildly-overpriced assets. Now that Trump is out of favor, and soon to be out of office, this mystique has reversed. Many will subconsciously tell themselves that since Trump has gone there is nothing to prevent asset valuations from declining dramatically.

The most noteworthy aspect of the current asset bubble is how--as with every bubble peak in history--so many perceive it as being normal and sustainable when it is neither.

A few people in the media and on chat sites including Seeking Alpha have mentioned the rarities of the current situation and sometimes use the word "bubble" but most investors are convinced that nothing extraordinary is going on. A century from now, and perhaps two or three centuries from now, the current mania will be analyzed as to how it could have been created in the first place and why so many more people piled in near the top rather than prudently reducing risk. The 1929-1932 bear market might still remain as the premier historic collapse but 2021-2023 will provide some serious competition and will likely be much more closely scrutinized partly since data and analyses from the current century are far more numerous and pervasive than a bear market from a previous century of mostly mass print media. Most people have been investing while inebriated with the liquor of potentially unlimited gains, not realizing the severe hangover which is approaching.

When in doubt use the Martian test.

Suppose that you had just arrived on planet Earth from a trip to Mars where your internet connection had been broken. What looks absurd and what looks normal? If you are living through a period where the value of cryptocurrencies gradually climbs for months then you begin to accept it as being typical regardless of how high it gets. If you were thinking about selling on the way up but you didn't sell and the price climbs higher, you keep getting positive psychological feedback telling you how smart you were for waiting longer. Eventually you won't be able to sell at any price, no matter how high, since you've gotten so many pats on the back attesting to your brilliance in doing nothing. Many of the recently-minted rich from being fortunate enough to hold bubble assets have proudly declared that they're not selling a single share, thereby ensuring that they will end up poorer than when they began. I personally know several people who had suffered this fate in 1999-2003.

The bottom line: today's investors are like small animals blissfully eating by a pond, not recognizing that they are surrounded by hungry alligators.

One of the most important principles of investing is that if you are long anything and a massive concentration of inexperienced investors are joining your trade while insiders and commercials are heavily selling then you must get out regardless of what might happen in the long run. That is why I bailed out of GDXJ with an average price of 62.50 - 63.00 in the morning of July 27, 2020. Similarly, if you are short or in cash and investors are making all-time record net outflows while insiders are buying at their most intense pace in eleven years, as had occurred in March 2020, then you must buy aggressively even if you don't see any light at the end of the tunnel.

Disclosure of current holdings:

I have gradually increased my short positions in XLK, TSLA, and especially in QQQ while increasing my long position in GEO and more than quadrupling my now-substantial long position in TLT. I closed out all of my long positions in value shares; while I like many value sectors long-term I expect substantially lower prices sometime during the next half year.

Here is my asset allocation with average opening prices adjusted for all dividends: 65.7% cash including TIAA Traditional Annuity paying 3% to 5% (only available for legacy retirement accounts) and Discover Bank high-yield savings paying 0.50% (available for all U.S. residents); 18.5% short XLK (112.5968); 11.5% long TLT (154.68); 10.2% short QQQ (292.8835); 9.6% short TSLA (491.9117); 3.0% long GEO (8.76); 2.4% short ZM (293.16); 0.9% short AAPL (125.5481); 0.6% short IWF (223.0119); 0.5% short SMH (170.7813). It doesn't add up to 100% since short positions require less cash; there is no margin involved.

“If it's obvious, it's obviously wrong.” --Joe Granville

EPHEMERAL EXTREME ELECTION EUPHORIA (November 8, 2020): As a result of eager investor anticipation of a new U.S. political configuration the shares of risk assets have generally climbed during the past several trading days. This has made the least-experienced investors especially excited about getting "back into the market" and once again buying unusually intense quantities of speculative out-of-the-money call options. Insiders have been doing the exact opposite, dramatically accelerating their selling to tabulate some of the highest-ever ratios of selling to buying ever recorded for many popular large tech companies. When the most-experienced investors are doing nearly the exact opposite of the least-knowledgeable participants then you can be pretty certain who is going to be correct once again. In March 2020 we had the exact opposite where we had two consecutive weeks of all-time record net withdrawals from equity funds while insider buying relative to selling touched its most elevated ratio since March 2009.

Following both March 2009 and March 2011 we experienced powerful two-month rallies. Following all periods of similarly intense insider selling relative to buying as we have recently experienced, the most popular shares generally declined dramatically over a few months and are likely to do so again.

Several investments are currently especially compelling either to buy or to sell. Here they are with the most compelling one listed first on down the line:

1) QQQ, XLK, and similar funds of the most popular U.S. mega-cap technology companies have only been more overvalued in their entire history at the beginning of September 2020 when most of them achieved all-time zeniths and during the second week of October 2020 when they completed marginally lower highs. We have likely registered or will soon finish making additional lower highs for these shares. Even in historic years for popular growth stocks including 1928-1929, 1972-1973, and 1999-2000 we never had valuations as stretched as they are currently. We are likely on the verge of the next important correction which will rival the February-March pullback earlier this year and will probably exceed its declines in percentage terms for the majority of the most popular tech stocks. I have been adding to my short for QQQ each time it touches 295. If current overnight trends continue then QQQ could reach 296 or more in early trading on Monday, November 9, 2020 which would represent an ideal opportunity to add more of it on the short side. The resolution of U.S. Presidential election uncertainty is providing a wonderful selling opportunity for large-cap tech shares since no political alignment can trump [pun intended] all-time record overvaluations.

Probably the primary difference between the February-March 2020 correction and the current one is that this one is developing much more slowly. I believe it will also be harsher for the most popular big tech stocks.

2) TLT likely completed its next important higher low at 155.10 at 19:20:17 on November 3, 2020 when the earliest U.S. elections results were beginning to be counted. Since then TLT has been choppily rebounding. I have been buying TLT consistently below 159 and it dipped again below that mark on Friday, November 6, 2020. TLT is a fund of U.S. Treasuries averaging 26 years to maturity. Many investors avoid TLT because it seems to be closer to its long-term top than its long-term bottom but this is overlooking a bull market which has existed for this sector since September 1981 as well as a recent huge surge of fresh commercial buying of U.S. 30-year Treasury futures. Below is a chart highlighting the intensity of the commercial buying--notice the maroon bars growing in size on the right:

With the kind of extremes that we have in the above chart it is worthwhile to purchase TLT and other funds of long-dated U.S. Treasuries whenever TLT is below 160 with the idea of selling in early 2021 above 170.

3) The U.S. dollar is widely hated but is completing additional higher lows not far above its lowest levels since April 2018.

On September 1, 2020 the U.S. dollar index slid to 91.746 which marked its most depressed point since April 2018. The U.S. dollar index seems to be forming higher lows while most speculators are betting on a weaker greenback. What is likely to occur is that the U.S. dollar will rally to its highest point since the stock-market plunge of March 2020. There is no ideal way to directly invest in a rising U.S. dollar but owning U.S. Treasuries, U.S. time deposits including bank accounts, and U.S. money-market funds is a worthwhile conservative approach. Preservation of capital is far more important over the next few months than trying to achieve unsustainable gains.

The Russell 2000 is nowhere near its August 31, 2018 top and has been forming lower highs throughout 2020.

Since the first U.S. stocks were traded in 1790 (in Philadelphia two years before the New York Stock Exchange) it has consistently been the case that small- and mid-cap shares complete their respective cycle tops in advance of their large-cap counterparts, and whenever this occurs the subsequent losses for both are huge. The Russell 2000 has not only failed to surpass its August 31, 2018 top of 1742.0889 but it has also made several lower highs throughout 2020. We have also experienced a massive surge of new investors who were mostly still in school when the last bear market occurred and have little or no understanding of market history. Regardless of the fundamentals of any trade, whenever any position becomes dangerously overcrowded the market almost always moves in the opposite direction of that crowd.

Investors are confusing the near-term market behavior with how it will behave between now and early 2022.

Some investors believe that we will experience rising inflation, significantly higher interest rates especially on the long end, a resurgence for small- and mid-cap value shares, and generally rising commodities over the next 1 to 1-1/2 years. While this may be correct in the longer run it is almost certainly wrong in the short run since far too many investors have piled into these and related trades. The market will repeatedly punish stale long positions in the most popular shares. We will almost surely get significantly higher lows for VIX, TLT, and the U.S. dollar over the next few months combined with memorable losses of 30% or more for the most popular technology shares by the end of the 1st quarter of 2021 or sooner. Once most investors have given up on their positions we will then experience rising inflationary expectations and generally higher prices for commodity-related and other assets which prefer rising interest rates. The actual end of coronavirus, rather than its anticipation, will tend to accelerate this process.

The market's intraday behavior demonstrates repeated extremes outside of regular trading hours.

I have been trading much more frequently outside of regular hours in order to obtain the lowest prices for unpopular assets I am buying and to obtain the highest prices for the most overloved shares I am selling. I am much more frequently having orders filled with a combination of tiny partials instead of all at once. These two observations are related: the least-experienced traders who tend to buy near the top and to sell near the bottom only have enough money to trade a few shares at a time and are too busy at their 9-to-5 jobs to trade during regular hours.

Several undervalued sectors remain worthwhile for purchase but keep your total long positions smaller than your total short positions.

I am a big fan of those energy companies which have enjoyed the heaviest insider buying in recent months, along with other traditional value names sporting low price-earnings ratios, improving profit growth, increasing dividends, and repeated lows near the opening bell. MTDR, PSX, XOM, and GEO are examples of companies which fit into this category. Don't go overboard in accumulating these until VIX starts to form lower highs from a multi-month peak which will be a sign that the most-experienced options sellers are becoming less fearful of additional market losses. This will not likely occur until sometime this winter.

Boglehead investors in particular will keep underperforming due to not having sufficient cash to be a heavy buyer near each important intermediate-term bottom.

The growth of your entire portfolio in 2020 is primarily a function of how much money you had put into the market in March 2020--which is a function of how much cash you had raised in the weeks leading up to the February-March plunge. Those who were far too heavily invested in February 2020 didn't have nearly enough cash to do substantial buying the following month near multi-year lows and thus missed out on a prime opportunity to grow their total net worth. Similarly, those who haven't been opportunistically and aggressively selling near all important highs in recent months will not have nearly enough cash to be a major buyer whenever the next bottom is being formed perhaps in early 2021. This is one glaring deficiency of a Boglehead approach: it works okay in a smooth upward trend but fails miserably when it is essential to keep buying low and selling high on a frequent basis. Active asset reallocation in this kind of volatile market is far more important than exactly what you are buying, although you should favor securities which have rallied under similar past scenarios where small- and mid-cap value have begun to trounce previously-dominant large-cap growth including 1973-1976 and 2000-2003.

The bottom line: I am 5/8 in cash, 20% in long positions, and 31% in short positions [this actually adds up to 100% due to shorts being treated differently by the SEC].

I have increased my short positions in QQQ while gradually purchasing MTDR, PSX, XOM, and GEO each time those approach multi-month lows especially near the opening bell when the least-experienced investors tend to sell them in small quantities. I bought TLT especially as it fell as low as 155.10 in the after-hours session on November 3, 2020. I have been selling short QQQ at 295 and above as I have been doing since August 2020 and will continue to do.

Disclosure of current holdings:

From my largest to my smallest position I currently am long the TIAA-CREF Traditional Annuity Fund, bank CDs, money-market funds, Discover Bank Savings paying 0.55%, I-Bonds from 2001-2003, MTDR (some new), TLT (all new), PSX (some new), GEO (some new), XOM (some new), XES, BCBP, BOH, KRNY, OPBK, CDEV, WTI, SONA. I have 9.4% of my total liquid net worth in the previously-mentioned energy securities, 5.9% in the regional banks I listed, 2.7% in TLT, 2.3% in GEO, 0.1% in EWZ purchased below 27, and am otherwise completely sold out of everything else on the long side.

I have 17.5% of my total liquid net worth short XLK, 5.2% short TSLA, 4.1% short QQQ (some new), 2.3% short ZM, 0.8% short AAPL, and 0.4% short SMH. I plan to keep adding especially to my QQQ short into strength whenever QQQ is near 295 or above. My cash and cash equivalents including bank CDs, savings/money-market accounts, I-Bonds, stable-value funds (fixed principal, variable interest) comprise 63.0% of my total liquid net worth. (It seems to exceed 100% but for short positions only part of the total cash value is required to hold them.)

I am currently sporting my heaviest net short percentage since August 2008, even more than at the beginning of September 2020.

“The trick of successful investors is to sell when they want to, not when they have to.” --Seth Klarman

2020 RETREAT, 2021 REBOUND (August 23, 2020): The most difficult aspect of investing is appreciating the urgency to act when almost no one else wants to do so and to refrain from trading when almost everyone else is either excitedly chasing after recent extended strength or selling in a panic following recent dramatic losses. Now is one of those times when Robinhood investors are tripping over themselves to purchase the most overpriced mega-cap technology shares while most investors are congratulating themselves for not selling in March 2020. Far too many are oblivious to the huge dangers of remaining heavily invested at the most overvalued stock-market top in history surpassing the previous record extremes of 1928-1929, 1972-1973, and 1999-2000. Just during the past week the market has sent multiple simultaneous signals of imminent danger and yet investors are mostly partying like it's 1999. They'll end up suffering the same fate of those who didn't sell two decades ago when the Nasdaq plummeted 78.4% from 5132.52 on March 10, 2000 through 1108.49 on October 10, 2002.

Three key leading indicators completed major reversals during the past week.

Let's consider each of these three indicators in order of importance:

1) The U.S. dollar index likely completed a 27-month bottom of 92.127 at 10 a.m. Eastern Time on August 18, 2020 followed by a higher low of 92.154 at 9 p.m. the same day. Whenever the U.S. dollar begins to rebound from an important bottom it generally indicates that risk-off is likely to prevail for some unknown period of weeks. Given typical calendar behavior it is likely that risk assets worldwide, including most U.S. equity indices, will drop to complete important bottoming patterns during the final weeks of 2020 and perhaps at the beginning of 2021.

2) VIX may have completed a six-month bottom of 20.28 on August 11, 2020 followed by a higher low of 20.99 on August 19, 2020. When VIX completes an intermediate-term bottom during a bear market for U.S. equities, it often surges higher afterward as investors are mostly stunned by the stock market's sudden pullback. While VIX may not return to the mid-80s where it had been in March 2020 it is likely to regain 60 or 70 before the end of 2020.

3) SMH is a fund of semiconductor shares which may have peaked at 9:39 a.m. on Tuesday, August 18, 2020 with an all-time high price of 174.33. For more than a half century semiconductor shares have completed important tops and bottoms in advance of most other U.S. equity indices as a useful leading indicator. It could be different this time but probably it isn't. SMH will probably similarly let us know when the downtrend is coming to an end several months from now.

Breadth is deteriorating with fewer and fewer shares achieving new all-time zeniths.

The Russell 2000 Index, consisting of two thousand medium-sized U.S. corporations, topped out on August 31, 2018 and hasn't reached that level since then, with lower highs in January 2020, February 2020, and August 2020. Over the past two years we experienced two meaningful corrections for U.S. equity indices: during the autumn of 2018 when the S&P 500 dropped over 20% and in February-March 2000 when the S&P 500 slid just over 35%. Most likely we have already begun or will soon initiate a pullback roughly halfway between these declines or perhaps around 27.5%. The S&P 500 almost reached 3400 which it had barely failed to surpass in January-February 2020, this time falling short by just 46 cents. During the past week there were far fewer new 52-week highs than we had experienced during previous peaks for the S&P 500 in recent years. According to this week's Barron's there were only 220 new highs on the New York Stock Exchange, 284 on the Nasdaq, and 8 for NYSE American.

Insider selling relative to insider buying is near all-time highs going back several decades.

Top corporate U.S. executives have been aggressively selling, with among the highest ratios ever recorded for insider selling to insider buying in August 2020. In March 2020 we had the biggest ratio of insider buying to insider selling since March 2009 and the market rallied accordingly. Watch out below.

The market's intraday behavior demonstrates the greatest strength whenever Robinhood investors are busiest trading.

In recent weeks the greatest gains for U.S. stocks tend to occur near the opening bell on the first trading day of the week, usually a Monday, as market orders placed during the weekend all crowd in simultaneously. With most inexperienced traders being busy at their jobs during regular trading hours, many of them don't have time to trade until after the closing bell, thereby leading to funds like QQQ and XLK reaching their highest-ever levels between 6 and 7 p.m. Friday, August 21, 2020 rather than earlier in the day. Expect Robinhood traders to continue to dominate at the beginning of each trading week and sometimes in the after-hours sessions, thereby giving you additional ideal opportunities to sell and to sell short.

The worst losers of recent years are likely to rally strongly in 2021.

One reason for raising lots of cash now is that we are likely to experience compelling bargains for certain sectors near the end of 2020. Which sectors will those be? In recent years small- and mid-cap shares have hugely underperformed the most popular large-cap names. Value shares since June 1, 2007 have set a new all-time record level of sustained underperformance relative to growth shares. Deflation-loving companies have far outpaced assets which benefit from rising inflationary expectations.

In 2021 I expect these losers to exact their just revenge as small- and mid-cap value inflation-loving shares are among the top assets to rebound from their late-2020 bottoms. This would likely include some sectors like gold/silver mining which had been undervalued but had skyrocketed after their mid-March 2020 bottoms, only to become far too popular when gold surpassed two thousand U.S. dollars per troy ounce which attracted the eagerly-chasing Robinhood crowd. Once funds like GDXJ which had reached 65.95 eventually retreat below 40, gold mining and silver mining shares will be worth buying again as they will likely more than double within about one year.

Do not buy too soon. Wait for VIX to start forming lower highs following a multi-month peak and for other leading indicators to signal that the severe autumn stock-market correction of 2020 is almost over.

The bottom line: be mostly in cash and partly in short positions for the rest of the summer and for most of the autumn.

I have significantly increased my short positions as listed below while only doing a tiny bit of buying of GEO each time it approaches or goes below 10.50 per share, and I intend to continue to sell short into all rallies--even modest ones. Hardly anyone I know has been interested in betting against the market, either frustrated by repeated new all-time highs or convinced of foolish conspiracy theories such as the market not dropping substantially prior to the U.S. elections on November 3, 2020. Historically the U.S. stock market tends to be significantly weaker than usual in the months leading up to any Presidential election and this is easily verified by examining the past several years which were multiples of four.

Disclosure of current holdings:

From my largest to my smallest position I currently am long the TIAA-CREF Traditional Annuity Fund, bank CDs, money-market funds, Discover Bank Savings paying 0.80%, I-Bonds from 2001-2003, XES, MTDR, PSX, CDEV, WTI (all energy shares purchased in the second week of July 2020), GEO, BCBP, OPBK, SONA, KRNY (continuing to purchase GEO and regional banks into weakness). I have 5.0% of my total liquid net worth in the previously-mentioned energy securities, 4.2% in the regional banks I listed, 1.7% in GEO, and am otherwise completely sold out of everything else on the long side.

I have 16.7% of my total liquid net worth short XLK (half new), 4.4% short TSLA (some new), 1.7% short ZM (some new), 0.5% short QQQ (all new), and 0.4% short SMH (all new). I plan to keep adding especially to my XLK short into strength whenever XLK is near 117 or above. My cash and cash equivalents including bank CDs, savings/money-market accounts, I-Bonds, stable-value funds (fixed principal, variable interest) comprise 73.7% of my total liquid net worth. (It seems to exceed 100% but for short positions only part of the total cash value is required to hold them.)

I am currently sporting my heaviest net short percentage since August 2008.

“When your views are truly contrarian they are inevitably uncomfortable. Courage and the ability to withstand pain are required.” --Michael Steinhardt

STEADILY SELECT SPLATTERED SECURITIES (March 29, 2020): A useful analogy to a bear market is to imagine that several dozen people carry buckets of brightly-colored paint up to various floors of a skyscraper and then simultaneously pour their buckets onto the street. The buckets which were carried to the highest floors will generally splatter more aggressively than buckets from lower floors but it will be a messy correlation rather than a clean linear pattern. In other words, some of the paint from floors which are not at the very top will end up splattering worse than some of the paint from higher floors due to the unpredictability of nature. The same is true of bear markets: the most overpriced assets will generally suffer but some undervalued assets and others which "shouldn't have" dropped so much will do so anyway. Because most investors aren't accustomed to trading in bear markets, especially now when we haven't experienced such a downtrend for eleven years, most people will be acting from confusion rather than with advanced planning. Even an inferior method is better to acting randomly or using emotions.

The weekly timing of the selling signals that the least-experienced investors are doing the most selling--which is when you should be doing your heaviest buying.

When do ordinary inexperienced investors sell? Definitely not at 11 a.m. on a Wednesday since they're busy working at that time. Most inexperienced people place market sell orders on non-trading days when they have time to do so. We saw this clearly in December 2018 when during the weekend prior to December 24 many investors sold in a panic with their orders being filled at the open that day, which triggered sell stops that led to additional losses. Investors had all of Christmas Day to place more market sell orders which were filled near the open on Wednesday, December 26, 2018 which triggered a final round of stop-loss selling followed by one of the biggest one-day rebounds in history the same day.

Do the opposite of the weekend warriors and follow the Nikkei 225 futures especially on Sunday evenings.

Nearly identical behavior has been occurring in recent weeks when ordinary investors have placed market sell orders during most March weekends which are filled at the open on Monday followed by stop-loss orders being triggered by those lower prices. The market then mostly recovers later in the week, only to experience the same behavior the following weekend. If you look back at the first quarter of 2009 then we had another instance of the same phenomenon. This kind of action has been true for decades. Experienced traders will do extra buying near the opening bell each Monday and on other days following non-trading days (like December 26, 2018) whenever fear is elevated.

Sometimes U.S. futures are trading limit down which makes it impossible to track how the global markets are behaving. Ignore the U.S. futures especially on limit down days and watch the Nikkei 225 futures which don't have limit-down restrictions. On Sunday evening, March 22, 2020, Nikkei 225 futures opened down about 11% and were down only 3% a few hours later, indicating that U.S. stocks would probably open lower but that better times probably were ahead. As I am writing this on Sunday evening we have similar albeit less exaggerated moves as Nikkei futures opened moderately lower and are now slightly positive. The exchanges' suspending trading during volatile moves is idiotic since most investors get especially nervous during trading halts. Some of my lowest purchase prices were achieved from fills which occurred within a few minutes of trading being resumed after an artificial halt.

When many investors and chartists are selling while top executives have been doing their heaviest buying since the last bear-market bottom in March 2009 then you know you should be gradually buying into weakness. Never chase after any recent trend.

Many ordinary investors have been confused by the market's recent plunge and have been either not buying into weakness or actually selling. Technical traders have been hit even harder by repeatedly chasing after short-term trends which usually reverse just after they are "confirmed." Do as the insiders do and gradually purchase whatever is most undervalued using ladders of good-until-canceled orders. Some of the best bargains have existed only for minutes or even for seconds on some especially-volatile trading days, so if you are trying to buy using market orders you are unlikely to succeed in getting the most-favorable prices. The ideal approach is one I use even in calmer markets: place ladders of very small orders of equal-dollar amounts which are spaced equally apart and which go very deep so the market never goes below the lowest rung in your ladder. It is better to buy very tiny amounts at truly compelling prices then to try to magically guess where you will profit from lump-sum trading.

When unusually heavy insider buying is combined with all-time record selling by inexperienced investors then that serves as an even stronger buy signal.

The best time to sell is when we have heavy insider selling combined with intense buying by the least-experienced investors; this is why I was steadily selling near the end of 2019 and the beginning of 2020. Now we have an even stronger buy signal due to all-time record selling by the least-experienced participants in the financial markets:

Funds and ETFs Witness Record-Breaking Outflows During the Week

A surprising number of stocks and bonds recently traded at or near multi-decade lows.

Bear markets are notorious for their capriciousness and usually end up erasing a significant percentage of the gains which had been achieved in recent bull markets. When U.S. equity indices had bottomed in early March 2009 they didn't just give up their gains since 2007 or 2006 but fell to 12-1/2-year lows for the S&P 500 which meant their cheapest prices since 1996 without adjusting for inflation. If you adjust for inflation then stocks in early 2009 had returned all the way back to their levels from the mid-1980s. Recently many traded shares fell to prices not seen since the early years of the 21st century or in some cases in a few decades without even adjusting for inflation. This has created compelling buying opportunities for those who have been alert to recent bargains while highlighting that the Boglehead approach of buying no matter how overvalued the stock market is doesn't work in the long run.

Those who bought U.S. stocks in August 1929 lost half of their money in inflation-adjusted terms if they held them for 53 years until August 1982.

There is zero political resistance to endless stimulus and literally printing money as rapidly as possible.

It is almost impossible for those who believe in restraining deficit growth to be seriously considered nowadays since the popular mood is for governments around the world to "do something about" the economic contraction caused partly by the severe restrictions required to fight the spread of coronavirus. The U.S. just passed a two-trillion-dollar stimulus package, the U.S. Fed is taking extraordinary action in other aspects, while governments worldwide are acting similarly even where they have a long history of being more subdued and conservative. This will have profoundly inflationary implications which aren't generally being considered by many investors except for insiders. Top corporate executives have been doing their heaviest buying in many companies which will benefit from rising inflationary expectations and massive global stimulus.

Housing prices have been collapsing but almost no one knows about it unless they are in the industry.

It is pretty clear why homebuilders and those who wish to sell real estate aren't eager to have it widely known that the much-publicized collapse for financial assets around the world has been accompanied by equally dramatic but mostly hidden losses for both residential and commercial real estate. REITs have plummeted but so many sectors have done likewise that this is often overlooked. Due to the coronavirus there aren't the usual selling procedures like open houses (scheduled public viewings) or even the ordinary procession of buyers meeting sellers. Most people naively believe that housing prices are remaining relatively flat. As wealth has evaporated worldwide this must inevitably lead to significantly lower prices for real estate, and since downturns for real estate usually last for a few years or more the pullback will likely continue for at least three years. If you are able to sell then do so as soon as possible, while if you have been considering doing any buying then I would strongly recommend waiting at least until 2023 before taking action.

The timing of lower highs will be of major significance in the U.S. elections scheduled for November 3, 2020.

Nearly all bear markets are notable in the way in which they form lower highs. The Russell 2000, consisting of companies 1001 through 3000 by market capitalization out of all 3600 U.S.-listed companies, topped out on August 31, 2018, formed a key lower high on January 17, 2020, and recently plummeted so deeply that it was recently trading below its levels from the final months of 2013. This wasn't widely reported in the mainstream financial media but it is immediately obvious on a long-term chart. We have likely begun a powerful rebound for risk assets around the world which will have major implications for the U.S. Presidential, Senate, and House of Representatives elections scheduled in just over seven months. If the S&P 500 and similar U.S. equity indices are completing important lower highs with the S&P 500 near three thousand around Election Day then Donald J. Trump has a good chance of being re-elected while the Senate will likely remain with Republicans holding a majority. On the other hand, if the current rebound stalls around some other time like Labor Day (September 7, 2020) and thereafter falls sharply then we could experience a meaningful shift toward the Democrats. During the 2007-2009 bear market there was a major plunge which began near the opening bell on the day after Labor Day which made it far easier for Democrats to sweep that year; during the 2000-2002 bear market there was an important top also around Labor Day of 2000 followed by a moderate pullback which may have made it possible for George W. Bush to squeak by in a disputed contest.

The media often discuss how the results of the U.S. elections will impact the markets but it is probably even more significant to consider how the markets will impact the elections. If Democrats regain both the U.S. Presidency and the Senate, and retain control of the House of Representatives, then significant tax and other legislative changes will become nearly certain for 2021 which could persist for several years or more.

Insiders have been buying at their most aggressive pace since March 2009.

The ratio of insider buying to insider selling reached its highest ratios since February-March 2009 with the following article discussing this topic:

Executives Are Buying Stock in Droves

Top corporate executives aren't permitted to sell the shares they purchase until at least six months after the date of purchase or else they have to surrender their gains. This means that they have not been buying simply in anticipation of a brief sharp recovery but are looking for a more sustained rebound.

Insider buying has not been uniform across sectors. Especially-undervalued securities in energy and travel are among those which have experienced multi-decade peaks of insider accumulation during the past few weeks.

TLT has been forming lower highs since the pre-market session on March 9, 2020, while VIX revisited the mid-80s multiple times two weeks ago and completed a significantly lower high when most major U.S. equity indices slid near the opening bell on March 23, 2020.

TLT, a fund of long-dated U.S. Treasuries, topped out at 181.41 three weeks ago on March 9, 2020. You won't find this number on your charts unless you use data which includes trading outside of regular hours since this top had occurred in the pre-market session at 7:56:29 a.m. Eastern Time. Meanwhile, VIX peaked several trading days prior to the March 23, 2020 bottom for the S&P 500, the Nasdaq, and many large-cap U.S. equity indices. This implies that the most-experienced investors who tend to purchase long-dated U.S. Treasuries and portfolio insurance became less eager to hedge at the same time that most ordinary investors were becoming increasingly nervous about their portfolios. This is analogous to the market's behavior in early 2009 prior to one of its strongest-ever ten-month uptrends from early March 2009 through early January 2010.

Summary: buying now will likely be profitable especially because we remain in a bear market for U.S. equities which began when the Russell 2000 topped out on August 31, 2018. Buying near the end of 2018 was highly profitable and buying in recent weeks will likely prove to be even more rewarding.

If you buy near an intermediate-term bottom during a bull market you will usually come out ahead. If you buy near an intermediate-term bottom during a bear market, especially when insiders are buying at their most intense pace in eleven years and in some sectors at all-time record levels, you will achieve greater annualized gains since bear markets tend to be far more volatile than bull markets in both directions. Those who bought in the final months of 2018 were well rewarded especially if they sold in late 2019 and early 2020. Similarly, those who have been buying the least-popular securities in recent weeks into the coronavirus panic and who keep buying into pullbacks will likely enjoy even greater annualized gains during some unknown period of months.

The bottom line: with all-time record investor outflows you know it must be worthwhile to be doing the opposite.

The most-experienced investors are doing their heaviest buying in eleven years while the least-experienced investors are doing their most panicked selling in eleven years. You don't need an advanced degree to figure out which side will come out ahead, and since we are in a long-term bear market the upcoming gains will likely occur surprisingly quickly. Whenever most people you know become excited about "getting back into the market" and insiders are unloading then it will be time to get out again.

Disclosure of current holdings:

From my largest to my smallest position I currently am long GDXJ (some new), the TIAA-CREF Traditional Annuity Fund, SIL, XES (some new), ELD (some new), FCG (some new), OIH (some new), PSCE (some new), bank CDs, money-market funds, GDX, I-Bonds, SCIF, MTDR (some new), URA (some new), PAK, EPOL, ECH, COPX (some new), REMX (some new), XOM (all new), PEO (all new), EZA (all new), GXG (all new), FXF, GREK (all new), EWW (all new), GNK (all new), EGLE (all new), IPI (all new), SBLK (all new), SALT (all new), FLNG (all new), EGPT (some new), GOEX, BGEIX, NGE, FXB, XOP (all new), CCL (some new), BA (all new), AA (some new), IDX (some new), EWM, RGLD, WPM, SAND, SILJ, KLXE (all new), and CHK. I am completely sold out of U.S. Treasuries, HDGE, SEA, SLX, ASHR, ASHS, TUR, FM, ARGT, RSXJ, LIT, EWU, EWG, EWI, EWD, EWQ, EWK, EWN, WOOD, EPHE, JOF, and AFK.

I have closed out all of my short positions which I will generally do whenever VIX reaches a multi-year peak. The only securities I would sell short now would be long-dated U.S. Treasuries and their funds including TLT. I would sell short actual houses if there were a way to do so. My cash and cash equivalents including bank CDs and stable-value funds (fixed principal, variable interest) comprise 17.7% of my total liquid net worth.

"Those who cannot remember the past are condemned to repeat it" (George Santayana). "Those who can remember the past but insist that it's different this time deserve to repeat it" (Steven Jon Kaplan).

The two previous longest bull markets in U.S. history occurred as follows: 1) from August 1921 through September 1929 which was followed by a bear market of over 34 months from September 1929 through July 1932; and 2) from October 1990 through March 2000 which was followed by a bear market of 30-31 months in duration (exactly 31 for the Nasdaq). The longest-ever bull market which began for the S&P 500 on March 6, 2009 may have ended for that index on February 19, 2020. This historical evidence suggests that the current bear market for the S&P 500 could last for 30-36 months which implies a major bottom for U.S. equity indices somewhere near the end of 2022.

The heaviest insider buying since March 2009 combined with all-time record investor net selling and repeated pullbacks near the opening bell worldwide especially on Mondays is likely signaling a major uptrend for most global risk assets. Keep steadily buying the most undervalued stocks and bonds and don't sell again until VIX is back down to the mid-teens. Some commodity-related and emerging-market securities may have begun major uptrends with triple-digit percentage gains while some individual shares have already doubled from their recent deep nadirs.