I don't know, I'd put zombie apocalypse and a 90% stock market drop at about the same likelihood.

Clearly you have a good qualitative point. We should all plan for weathering realistic threats. But if the market falls 90% so many people will be in such bad shape that collecting on loans will not be a priority. I dare to say that in such a dire situation you'll see angry mobs beating up the bankers that come to evict you from your house. On the other hand, there will be no food stamps, social security, and so forth. Such a calamity would eliminate most banks and large corporations over night and that is not an exaggeration. There would be no one to distribute food, cash, and so forth.

But I don't see any of that happening. There is a reason why, after all the name calling and bickering, that Congress approved the bailouts in 2008 and those with half a brain in both parties supported it at the time. It was necessary to keep the country running. We can look back now and criticize and try to revise history but the reality is, even the relatively modest "crash" of 20-30% started an avalanche that had to be stopped and our leaders recognized it and actually came together to take action.

But if we make your scenario more realistic, say an 40% fall in asset prices, 25% unemployment, and so forth then, sure, I think everyone should have a plan for surviving that. But personally I find that so unlikely that I think eating eating dried beans and rice with homegrown vegetables, turning off the utilities, walking everywhere, and other extreme measures could be a part of the long term plan in such a major disaster. I can make my mortgage payments from my mortgage offset fund for a few years and largely eliminate most other costs.

The trouble is that planning for a worst case scenario is not what you want to do. People need to plan for realistic scenarios. Worst case is that a UFO crashes into your house but planning for that makes no sense.

The Dogs strategy has done well in the sense that it has matched the DJIA (statistically) and slightly outperformed the S&P 500 indexes over long periods. But that strategy is undiversified and has had periods of very bad performance. After adjusting for risk it has underperformed the indexes.

Well, I'm in the middle of that. Realistic everyday scenarios, check. Absolute worst-case scenarios, nope (because like you said, if things are THAT bad, then society at large will be crumbling, and how much money is in the bank or what your mortgage balance is will not matter one bit).

I guess a good analogy would be Y2K. I wouldn't be one of the people just shrugging it off and not having a single worry. I also wouldn't be building an underground bunker (well, probably not...maybe if there were a sale I would, since we are in a tornado prone area). What I'd probably do is make sure we have a good bit of semi-drinkable water stored up (I mean...tap water that may have been sitting in old milk jugs for weeks/months), enough food to last for several weeks, make sure propane tank is full (if we have one), make sure the car(s)'s gas tanks are full, and maybe fill up any gas cans I have too. Any major disruption in our daily lives would likely last for a few days, maybe weeks...I doubt the whole world would end (and if it does...would a full year's supply of food make that much of a difference?).

The US has an uncertain future. The debt per taxpayer is really staggering. Yes, I know that's spread amongst everyone, the poor and the uber-rich, but still.... Things may get better, or they may get much much worse. I planned ahead. House is paid for, so no matter what we'll have a place to live. Things probably won't be too bad, so we have retirement accounts there. But things may get really bad, so here we are in Australia, building another life here, and working toward making it our Plan B (or perhaps Plan A). The odds of both countries having a complete social and economic collapse at the exact same time are low (and outside the scope of "realistic" worse case scenario). And we're having fun while we wait out our 3-4 years (must live here four years, with an absence of less than one year, to qualify for citizenship; assuming you're already a permanent resident of course).

I don't have the statistics in front of me to compare it to the indexes, but I do know that the Dogs of the Dow returned 12.7% compounded from 1929-1996 in comparison to 9.89% for the S&P 500. So yes. It's not what I would call a "great strategy", but it is a simple strategy that anyone can execute that returns better than the S&P 500.

Perhaps if you adjust for a month-to-month view you might get different results, but I have the 1952-1996 results in front of me (from the perspective of buying at the start of the year) and I cannot find any 4-year periods or longer that have a negative result (excluding expenses). The worst 5-year return was ended in 1970 at 1.43%(compounding per year), and the second worst was 4.19% (compounding per year) ending in 1973. The best 5-year return was 26.87% (compounding per year) ending in 1958.

So yes, there are definitely bad times for this strategy. but you won't end up losing all your money using it. It's certainly not the strategy that I myself prefer, but it is a simple strategy that anyone can pick up if they want to do things themselves and are satisfied with merely being able to beat the S&P 500.

But the S&P 500 is diversified. The Dogs is not. Also, going forward one could buy SPY to invest in the S&P index and never have to trade. With the Dogs strategy you would need to trade every year and that would trigger taxes on gains. Similarly, the Dogs are by definition high yielding so more of their annual return will be subject to income taxes.

I know it is a popular strategy and has done reasonably well. And I expect it will continue to do well going forward. But I'm not convinced that a truly complete analysis supports that strategy having a better return after adjusting for risk, taxes, trading costs, and so forth.

Hello,

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