Thanks for the responses. We had this convo upthread, but I’m now appreciating it a bit differently.
If I’m going to continually claim the reasons don’t matter and things just are, then I should include all the times when companies were prevented from even existing. They did not try and fail, they tried and the situation in their country just evaporated and so did the companies. At the end of they day, while not a free market force, those should be viewed as a type of “downward trends”. Very unlikely, but certainly possible.
I don’t think it changes the advice or how I view it. As long as retirement is still a thing that can be done, then there will be equity investment options. If free markets don’t exist in the world/US evaporates, I don’t think a comfortable retirement is the issue to worry about anymore. It’s just survival at that point.
If you want to remove an appropriate amount of American bias from investing, then just go worldwide with your equity investments (eg, ETF with 10,000 companies across the globe). Everything is captured, nothing changes with average returns, advice, waiting out downturns, etc.
The US is still the place to invest, IMO. Don’t get me wrong- I’ve moved a chunk into a European index fund, but something dramatic will have to happen for RoW to outperform the US markets.
And the reason is that Europe is even more moribund than the US. And that’s not MY opinion, the Economist has some recent articles of how much European taxes and regulations cost, and Brussels has acknowledged it in the wake of the Mario Draghi report. Regardless of what one thinks of the AI boom, if one of those companies had come up in the EU Von Der Leyden would have suffocated it in the crib. Don’t get me wrong- I love Europe, and I appreciate their efforts to look after their people. But they aren’t very competitive.
After that you get Japan, which is shrinking fast, and then it’s emerging and really small markets.
I know the US is f-d up, but I don’t see a better place to invest.
This gets at a real and existing concern. How in the world can the US ever repay its debt, which really means can the US manage its large debt forever?
We normally just manage it with growth and targeted inflation (basically). You can theoretically do that for a very long time. It definitely all hinges on US credibility, stability, and reliability.
Swapping treasuries with 100-year bonds will certainly help manage US debt, but you lose credibility/reliability and you’re actively helping the house of cards to come crashing down. It’s very short cited, and even using it as leverage if you never intend to do it, is still playing with fire. People really just need to believe it’s possible.
Trump thinks being unpredictable helps him with negotiating. It does. But it’s only in the short-term. Once it’s normalized, and the rules are always negotiable, the US loses in the long-term. Continuity matters. Trust matters. You have to care about America. I’d think you need to get to the next President, say President Newsom. He won’t be bombastic, but will he make short cited decisions that favor him/Democrats/certain voters politically, but that hurt overall US credibility, reliability, and financial stability long-term. I don’t think so. I hope not. At some point, if you can’t keep using inflation/growth tricks to manage debt, you have to cut spending or raise taxes (without increasing spending). Is that going to ever happen? It’ll be hard to return that tariff money, but will we use it to pay for new things or not. Nothing Newsom would do will be obviously stupid sounding like Trump, so you just have to trust the metrics of what a gradual collapse looks like to tell.
Even still, why does that mean I wouldn’t want to own Apple.
No matter what Newson (or whoever) does, a lot of relevant actors worldwide will not trust the USA ever again. That is a fact. If the link does not work, google the phrase. You will find hundreds of articles, many from reputable sources.
The USA was a great place to invest because it was reliable. The Rule of Law was a given. Pacta sunt servanda and all that. Predictability was the name of the game. You know where that is now? In the gutter.
One trump? Bad enough, but shit happens. Two? Sorry, that means 45 and 47. More than two in 50, the risk is over 4% now, the new normal. And rising. We. Can. Not. Trust. You. We would be stupid if we ever did again.
What you say? (generic “you”)
Yeah, sure. You are US-ians. I am not. It is true that if you are a big investment fond, like Templeton, Berkshire, Fidetlity and so on you have to invest in the USA. As practically all of the 401(k) money does. Those institutional investors have to invest in you at least in proportion to your share in the world economy. More, in fact.
But I don’t have to. There is more than enough investment universe in Europe, Japan, Asia ex Japan, South America to absorb my assets with sufficient diversification. Anybody’s assets, in fact, if you are not a member of the 0.001%. There will be a lot of correlation with the USA, sure. But my money will not be in the USA, and your government will not be able to stab me directly in the back. They will find other ways to fuck me, sure. And I will find ways to dodge those daggers, if all goes well. Just for your information: right now, since april this year, when trump did his humiliation thing in the Oval Office against Zelensky (yes, that was the final straw for me) under 1% of my assets are invested in the USA. No problem. And my performance has not suffered so far.
OK, just over two quarters is not long term, may be a fluke. Whatever.
Don’t expect me back any time soon.
Another reason not to trust the United States is its repeated inability to achieve a federal budget, with repeated shutdowns. Plus Congress is unable to agree on pretty much anything. And we’re doing nothing to address the national debt.
I think I wasn’t clear. I was talking about in terms of return. Yes, Europe and Japan are viable investment venues, and I would expect them to provide positive CAGR over time. But I would not expect them to provide a CAGR as healthy as the US- which is why I mentioned the burdens on European companies. It was NOT meant to be a “‘Murica! Fuck Yeah!” statement
Second, I get why the rest of the world is mad at us. I’m mad at us. I’m a prisoner in all this and actively looking into expat options for retirement. But, respectfully, I sensed some hostility that felt kind of personal, and I for one would appreciate it if my foreign friends gave me some slack as a non-Trump voter in a deep blue area who isn’t on board with any of this.
We saw the attorney today about estate planning and oh boy does everything make more sense now. The trust appears to be less like a single account and more like a legal entity which is the beneficiary of all our accounts. We are putting everything into a living trust for our son, which will mean making the trust the beneficiary of all our existing accounts. It’s going to feel so good to have this taken care of. There will also be what she called a pourover will, which will be a stop gap for anything that might have been missed. But the goal is to avoid probate - which is consistent with the financial advisor’s advice.
Whether we will need a special needs trust can be evaluated at a later date, as we are apparently supposed to do this every five years.
We asked her about Grandma’s irrevocable trust. She says her best guess is that it’s being used to reduce her tax liability while she’s alive, so whenever the account reaches a certain capital gains threshold that would increase her tax liability, it spits out money to the grandkids. That would explain the check this year. Business is good.
The attorney is also related to us somehow, as extended family. We’re all related over here we just don’t always know how. So she has a bit of insider knowledge having done this for other family members. We got the reference from a cousin.
Sorry if it felt personal, I know that the people in this board are not responsible for the clusterfuck, as it is aptly named in a neighboring thread. But I want to make it clear that even a supposed return to normality, like Biden was supposed to be, will not put Humpty Dumpty together again. Because the world knows now what is lurking just below the surface, ready to come back, like in a cheap horror movie sequel. And we all have seen enough horror movies to know how this ends.
Oh, we have fascists too! And commies, real ones, not like yours. And some religious zealots too. Still yes, strangely, the general picture is one of sanity. Broadly speaking. But we have no reason to be complacent, and a deadly enemy just behind the next border to the East. And our former ally is stabbing us in the back.
Acknowledged. So since we’re in the investment thread, what does knowing this mean for me, the average American investor? Can I reach any conclusions that I can stake my future comfort and happiness on, besides perhaps “you’re certain to die in poverty”? (Though even then, it does suggest a potential course of action: flee Trump at literally any cost. Even if I’m not inclined to do it, I definitely understand it.)
I whish I knew. I am trying myself to find something I can jump into in an emergency, a ripcord to pull in an instant. It would have to switch my investments to a safe haven, but what would that be? Physical gold? I am not a fan at all, consider it a fetish. And it has been forbidden before in the USA, making it compulsory to hand it over to the government (see Executive Order 6102) Real estate? It is not movable at all, and not liquid in an emergency. Foreign assets, held abroad? Can be confiscated, or frozen. See what is happening to Russian oligarchs’s assets. And so on.
The Russian oligarch may be a lesson in more ways than this one. What do you think they should do? And what should they have done when they still could? Maybe it is time to try that in the USA. Fight oppression, propaganda, desinformation, corruption. Identify who the real enemy is.
Good things to do. Not quite an investment strategy. Of course neither was “trust” much of one either.
And FWIW the idea of having a
is to me what I would avoid having.
For those who do believe that the American equity market is both going to collapse, and not recover for decades, for whatever reason, the time to do something isn’t jumping out during a tailspin but moving into the alternatives ahead of it.
You got no alternatives to offer? Cash not a great idea. You don’t like gold or real estate or international funds? Maybe giving it all away to various political action organizations is your investment plan?
I’ve concluded that is the sky falls I am doomed no matter what I do. So I might as well not assume that, but instead be as ready as I can be for a patch of bad weather.
I think this is right. I don’t know how society survived the 25% unemployment in the Great Depression, but I don’t think it would survive a repeat. Either there would be a major reworking of the economy and the state, or we’d end up in some kind of significant internal conflict.
Look at how quick we were with intervention during the 2008 collapse (for the corporations), massive stimulus during Covid, QE, and now there’s talk of tariff rebate checks. I do find it interesting that it seems the Republicans are the quickest to throw government money at problems.
Fair enough, so if past is prologue we end up with a massive increase in the welfare state from where we are, which is already massively larger than where it was at the end of the GD.
I don’t mean that to sound snarky or like a judgement of the the increase, but despite all the resistance, and despite the fact that 1/2 the population thinks it isn’t nearly enough, we now have Medicaid, the ACA, and I don’t think the government was in the habit of sending out stimulus checks in 1933. We’ve had three in the past 5 years.
I wonder what that outcome (bigly welfare state) would mean for investments.
You make it sound as if the arch of economy bends towards UBI (Universal Basic Income). If anybody can pull this off, it will be republicans in the name of abolishing socialism, aka Obamacare.
If you look at the EU and Hungary/Victor Orban, or NATO’s issues with Turkey/Erdogan, I think that the world should stop innately trusting democratic processes - in any nation - to push back against authoritarian leaders. On average, the majority like authoritarians and its earlier era republic-focused rhetoric and political organization that prevented it.
France could have easily gone over to the neo-Fascists. The UK certainly has a strong movement.
The instant that you include another country in some deeply important process, because they’re acting sanely and reasonably now, you’re making a giant assumption that now will persist.
Unless you really review the election process in that nation and what the evolutionary processes are that act on candidates, you shouldn’t sign any lasting, binding deals. And the continuation of those processes would need to be a part of the deal.