I said fear of significant loss. I have enough to early retire now, as long as the market doesn’t turn into a dumpster fire. I have shifted my investment to a more diversified and conservative portfolio, but you can’t get out of the market entirely if you want your money to last a 40 year retirement. A 50% drop in the stock market right as I am about to retire would not be pleasant.
Time zones. It’s a group of countries a multinational can administer from a single HQ located in one of the nicer cities there. That is all.
Perfectly understandable. No need of apology.
I agree your much more right than wrong.
Although at that scope, trump is just one more in the ever-growing roster of evil that is Xi, Putin, Kim, Erdoğan, Orbán, etc.
We are all used to paying the “tax” that these bastards impose on the world. Criminal trump is / will be a large incremental tax, but at worst probably won’t be the single largest contributor. He will almost certainly be the largest source of the largest changes, absent the onset of a China-Taiwan war or a Russia-NATO/EU war.
Another way of getting at it I guess is to consider what would upset you more? Having moved to a very conservative position just before a huge rally, or deciding to stay in before a huge drop.
Of course it matters if the drop is close to when you need the money, or if it threatens your plans.
In my position, 66 still working but enough in the funds to comfortably retire if we wanted to, neither should bother me more. I have little need to dip into it right now. But psychologically I am girded against drops very confident of longer term gains on the other side, but I’d beat myself up for missing the big run.
I’m quite happy to dump on preppers and other doomsayers, as a general course, but I do currently see more chance for growth in Europe (e.g. due to more regulatory stability, increasing military investment, and being able to pick up Chinese manufacturing capacity that the US is being pushed to abandon) and more likelihood of US recession and a financial reset of some sort (e.g. due to overspeculation as measured by e.g. the Buffett indicator, loss of Chinese manufacturing, loss of worker access, stagflation risks, etc.)
Not being a prepper, I don’t see any value in moving money to foreign currencies nor exchanges, if none of the above indicates a need for it.
So I’m not sure if you’re discussing a complete doom scenario where, for example, the US exchanges are turned off and banks burn the account holding records for everyone, or something but under any large financial misadventure by the US, I’d expect that we’re still dealing with a world of private businesses, functioning exchanges, currency exchange rates, etc. The US government is in debt and there’s people out on the street with no home, but money is still money and banks are still banks.
So far as I can tell, under a general misadventure scenario, if I buy a foreign stock or fund of foreign assets, I’m swapping today’s US dollars for a percentage of ownership in a business headquartered in a different nation, who mostly does business in a foreign currency, and often makes all or most of its profit from non-US customers.
The percentage that I own represents the US dollar value for said ownership but the “value” of the ownership is the intrinsic value of the company - how much revenue they’re making, operating costs, liabilities, growth curves, etc. most of which is tied to all of those foreign things. If the US dollar plummets, for example, I’d simply expect the price to rise since you can’t convince people to sell you ownership in a valuable asset in a reliable and growing region, with hyperinflated dollars, unless you really stack a ton of them on top of each other.
Basically, the foreign asset retains value despite what happens in the US. (Not to say that a collapse of the US market wouldn’t have a knock-on effect but it be smaller and, as an American who is competing against other Americans for local real estate and services, if they’re falling faster than me, then I’m “rising” even as we all fall.)
But that’s my understanding of how things would play out, unless I’ve missed something?
I’ve always taken the view that we’re always working with imperfect information and, under that lense, so long as you can feel comfortable that you utilized the information that you did have and made completely reasonable inferences from it, there’s nothing to be gained by thinking back on yourself poorly when it’s purely a matter that you were in the dark on some subject.
The Age of Exploration - for example - would have been a wildly different animal in a time period where we possessed the germ theory of disease and had the ability to craft vaccines. Because it didn’t, billions of people died - often in horrifying and excruciating ways. And yet, there’s no value in shaming those dead explorers for not acting as they should have, if only they’d known a thing that wouldn’t be discovered for centuries to come. It’s deeply deeply unfortunate that they didn’t, but you can’t fault Columbus for not carrying a bottle of Smallpox vaccine - a thing that literally didn’t exist.
But most of them were worshipping a religion that encouraged care and compassion for the foreign and weak, and eschewed greed and violence. Despite that, they were going around pillaging, enslaving, and murdering with abandon. For that, they don’t have an excuse. Shaming them is warranted. When we look back and think of them negatively, that’s where our eye lands, because that’s where it makes sense to complain.
Did you take action at your best, with what you had to work with? If yes, and it’s always yes when you ask that question, then you’re probably going to pull ahead relative to the person who doesn’t. We’re all going to make some bad calls due to the information gap. The person who does that the least frequently will be the most certain to pull ahead.
Thinking about it more than that just means that you’ve got extra brain energy that could probably be better spent on some other task.
Understand and agree w your whole post. And the punchline I quoted.
A USA that does something to itself akin to Argentina or Venezuela would still be a functioning economy sort of. But so much air would be let out of our inflated balloon that folks with significant net worth in US financial markets (IOW, the participants in this thread) would be gutted and find themselves among the working poor or the hungry once again.
Given a gangster government in the USA as this is going on, there’s no reason to assume rational government decisions. Random confiscations, currency and capital controls, etc., are all on the table.
So essentially the problem, for me at least, comes down to how much insurance to buy from where against what risk? If we muddle through and most Americans both rich and middle class, and most of the foreigners, keep most of their money here, SPX will still be a fine store of wealth with a positive return.
But if we really screw this pooch, i.e. worldwide capital flight away from the USA and the USD, etc., what should I/we own and in what percentage to not only survive, but prosper under these conditions? I don’t quite have the 'nads today to move e.g. 80% of my stock allocation to VGK or your suggestion of IPKW. And if we do screw this pooch, IMO that’s about the minimum foreign allocation that keeps me whole-ish as the USA markets collapse.
I don’t recall whether you’re a pro in this industry, or just somebody real close. But I do value your financial insights highly.
Is there a benefit to owning European stocks on a European exchange compared to owning those same stocks on a US exchange in USD? It’s entirely possible the US kills its economy and the value of the USD crashes, but if that happens, the value of owning the European stock in USD will proportionally be higher, right?
Let’s say a European company’s stock is 90 Euros per share or $100 USD per share (let’s say that’s the current exchange rate). And let’s say the US economy craters so hard that the USD value is cut in half, and for simplicity, the stock has the same value. The European stock that I own is now still worth $90 Euros, but it’s worth $200 USD. It’s not that the value of the stock went up, but rather because dollars are weaker, you need more dollars to match the value of the stock.
I know in practice if the USD crashed that hard, the whole world economy would be affected and it’s unlikely the Euro would have the same value, but I’m trying to simplify this to understand the relationship.
So if I hold the stock in Euro, nothing happens. If I hold the stock in USD, the apparent price of the stock I’m holding doubles, but dollars are now worth half as much, so the net result is nothing. At some point, if I want to spend the money in the US, I’d end up selling the stock in Euros and converting it to USD anyway, which seems like it would be the same result.
Or am I missing something? Is there an advantage to trying to convert money to Euros, get an account on a foreign brokerage, etc?
This is something I’ve wondered about and asked about in this very thread, and as far as I can tell you are correct. But you still benefit because presumably while the dollar has slid against foreign currencies so that Land Rover is now twice as expensive, it doesn’t necessarily follow that your American electrician’s labor rate has doubled.
You’re missing something. If the stock stays at 90 Euros, but the USD has crashed by 50%, you’ve still got twice as many dollars. whether or not you actually sell a share and convert the proceeds to USD.
ETA: ninja’ed by @OldOlds.
The larger point of holding the assets on a European exchange in a European currency is that what happens when the current criminal regime decides to tax all US share ownership? Or decides there’s a special company that all US share trades must go through and that company just happens to take 10% along the way? And just happens to belong to the president’s family? When the SEC is shut down but European regulators are still doing their jobs? etc.
A gangster government can do absolutely anything they can imagine. And can choose to do it to you personally, or you as part of a category. Myself, I expect the billionaires will be largely spared, as long as they pay their secret tithe to the Family. Which is probably already going on.
It’s the demi-fatcats like us who can be gored with no recourse. We’re individually too small to fight back, and numerically too few to amount to a movement. And certainly not a group the other 90-95% of Americans feel any solidarity with.
The point of holding assets that are out of reach of the US government is precisely to get them out of reach of the (now criminal) US government. Nobody can escape the global side effects of a USA meltdown. But there’s a big difference between experiencing the side effects, and the main effect.
I think the risk would be with your brokerage or the company that manages any ADRs/mutual funds/ETFs. If it collapses, then there’s a question of whether you still own anything, whether there’s a liquidation event that pays out, when that happens, and how guaranteed that is.
Some risks for this:
- Reduction of regulations added to profligate pardons for fraudsters and con artists encourage financial hawks across the US investment space to go ape wild and start doing all sorts of questionable, fantasy math and financial repackaging, basically creating a financial bubble that takes down most of the investment sector and leaves everything in a dumpster fire. Who knows who owns what, or who’s supposed to pay for it?
- The US government trashes its own budget and ruins its credit rating. It refuses to insure investments, bank accounts, etc.
- The US government bans the ownership of foreign assets. Poof. Goo’bye. Or, as above, starts taxing it, claiming it, etc.
Currently, I’m not betting on any of that (maybe a bit of the first…) but it is regrettably funny how plausible it rings these days.
Have you, as a US-American citizen, ever tried to open a bank account in Europe? It is hard, European banks are terrified of the paperwork, and the consequences for them if they can’t comply with all the requirements the US government imposes on them. Many US citizens living in Europe have a hard time finding a bank that lets them open an account at all, and if they find one, the terms and conditions are onerous, and many services (like buying shares, for instance) will be excluded. You may have trouble obtaining credit, even when you are solvent (@Cervaise had some experience with that, I believe), and you could run into double taxation issues. I have been asked by my own bank, that applies the usual KYC (know your customer) rules and knows me well, to sign a paper declaring solemnly that I am not a US citizen just so they felt to be on the safe side. I thought it was a bit of a joke, but I did it. I have been told it can be a really uncomfortable for US citizens.
If you are a US citizen and a non resident in Europe it will be even harder. Not impossible, mind you. Billionaires do it all the time, or rather get it done via their family offices. But for normal people, it can be a nightmare.
Of course not all European countries are equal: some are more “flexible” (i.e.: corrupt), but that flexibility may be costly. I would not put my money in a system that offers insufficient legal guarantees.
I suspect that this is one of the reasons many ill informed people are piling into crypto coins. Which I believe is a horrible, wrong decision, but that is just my opinion and a bit of a tangent here.
You mean like this? Gift link, article from yesterday. I seem to read something similar every week. And the joke about former congressman Santos, but that was small fry.
Currently ownership of foreign assets is not banned, but ownership abroad, beyond the reach of US regulators and tax authorities is complicated, onerous, and legally and fiscally uncertain. See above, but that is only a part of it.
Yeah, Trump and his team have sent out mixed messages about whether they want a strong dollar or to devalue it but, if we assume a purposeful devaluation then the whole goal would be to drive down US wages relative to the rest of the world so that US labor prices are competitive with countries like Vietnam, the Philippines, Mexico, etc.
The ability for the average US consumer to purchase all of the various premium consumer items would drop significantly (if we imagine a “successful” outcome). It would be like the 1910s where you’ve got your one set of clothes that you wear pretty much constantly, one nice outfit for church on Sunday, and you’re purchasing second or third hand smart phones that were used new and then turned back in for an upgraded model.
I have not. Precisely because I know about the things you’ve said. No matter how desirable it’d be for me to transition all my assets (and my butt) overseas, it’s monstrously impractical unless started years ago. And the easy half measures like buying a US-based USD-denominated ETF holding e.g. European shares are scant protection against a criminal-dominated US government.
Which is why I’m sitting here stewing with all my eggs in the increasingly precarious USA + USD basket.
What to do, what to do …
Buy physical, high value, transportable fungible assets. Gold, diamonds, narcotics…
Buy crypto assets.
Start a revolution.
Sorry I can only come up with bad ideas. This is not meant as an advice.
For the record, you can purchase foreign stocks on foreign exchanges, denominated in foreign currencies through US brokerages like Fidelity, without needing to open a foreign bank account or anything.
Yes, of course, but you will be regulated by the US autorities, which is where the problem started. If we speculate (ha!) apocallyptically about the US government going all dictatorial (see your post #890, for instance), this cannot be a solution.
It doesn’t help you with a rogue government, but if you really want to trade in Euros on the Dax, Fidelity makes it pretty easy. Inside the trade window you select currency and buy what you want. Then you just select an international trade- I believe you have to put in the foreign exchange code. It’s been a few years, but when I wanted to buy into an Australian company it was something like ASX:TLX
Done. You can hold the foreign currency or trade it on the appropriate exchange.
And while I made a killing on TLX, I did lose about 10% of that killing to FOREX.
ETA: @Sage_Rat beat me to it.
ETA2: I did have to take a quick “training” on the risks of FOREX and the fact that other countries might have different regulations before Fidelity would turn on foreign trading.
Oh, yes, the more that you are able to fully disentangle yourself from the US the more “safe” that you are. (Though, there may be risks to being an “on paper” resident of a foreign land.)
My AI is saying that there are Swiss options that will accept non-residents for $1000-$2000 starter accounts. You don’t need to be a millionaire, these days, and they will comply with US tax reporting (FATCA).
Singapore also has some options at about the same level.
ETA, I also saw a while ago that you can buy Singaporean government bonds (like T-bills) through a setup like this.
Get some Swiss bonds and some Singapore bonds and, maybe you don’t necessarily profit but you’re probably going to be able to protect the valuation of your assets through even a global financial meltdown without having to fall back on commodities.
Moving assets into non-US but still US-denominated instruments does not seem to provide much diversification. If the US dollar collapses, I think we are all screwed. As for
You can’t eat gold. And in a world where economic activity and trade has failed, what use will it be? The next guy with a gun will just take it from you.
We just have to hope that a sufficient combination of self-interest and negative feedback will prevent a total global collapse…
Just a person that googles.
It’s hard to answer your question, without understanding your hesitation. To me, IPKW is just a fund like any other fund, with a particular rule to decide holdings, and a track history to make some predictions from.
The top ten holdings (at this moment) are multinational banks, oil conglomerates, a 110 year old megacorp that owns most of everything in Africa, and Honda motors.
I might, for example, not generally buy oil because I view it as being on the way out. But I recognize that with Russia sidelined and the US government actively working to stop the development of renewable energy sources, the medium-short term outlook is good. It makes sense that these companies would be buying back their own stocks, seeing an upside that the general market isn’t. And, once that momentary event plays out, they’ll stop buying their own stocks, and subsequently get removed from the fund. I gain on that specialized knowledge and understanding, that the company insiders have, without having to personally monitor the situation.
If I could only invest in a single thing, IPKW would be a strong contender. Personally, I’m diversified across DBJP, EWL, FLAU, EUAD, PICK, etc.