Author Topic: Are you concerned with American decline?  (Read 7472 times)

joenorm

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Are you concerned with American decline?
« on: September 05, 2021, 03:48:27 PM »
With regards to stocks and particularly Index fund investing are you concerned with the decline of American as a place for innovation?

I am no expert in this area but have listened to many smart people make the case that Asia will soon be the center of tech entrepreneurship and innovation just as the US has been until the present.

If so, how are you diversifying to address this. I am sure I am not the first person to ask this, so links to past discussions would be encouraged.

thanks


Rob_bob

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Re: Are you concerned with American decline?
« Reply #1 on: September 05, 2021, 05:39:13 PM »
I'm not concerned about U.S. business overall at this point.  Socially I think the country could soon be on hospice.

EvenSteven

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Re: Are you concerned with American decline?
« Reply #2 on: September 05, 2021, 05:44:26 PM »
Not really. As far as my own portfolio goes, I think listening to many really smart people with the hopes of beating the market will cost me more money than it will make me.

bacchi

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Re: Are you concerned with American decline?
« Reply #3 on: September 05, 2021, 06:15:52 PM »
Where in Asia? China was a possibility until they started jailing the tech CEOs and taking over companies.

South Korea? Japan?

AccidentialMustache

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Re: Are you concerned with American decline?
« Reply #4 on: September 05, 2021, 06:16:59 PM »
No. What would you do, invest in China and hope the gov't doesn't randomly nationalize the corp out from under you? The US markets already include a ton of international companies. If the US really declines that much, those aren't going to cease to exist, they're going to shift their focus away from the US.

See also "made in USA" vs "made in Japan" from the 80s/90s. Doom never came to pass.

Michael in ABQ

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Re: Are you concerned with American decline?
« Reply #5 on: September 05, 2021, 06:17:22 PM »
No, I don't think American innovation is going anywhere. China's market is sitting on a huge debt bubble with various underlying demographic, social, and political factors that could cause it to burst. While there may be more patents coming out of China than in year's past, how many of them are truly groundbreaking advances and how many are minor improvements or quite frankly just copying innovation elsewhere that wasn't already patented in China?


PDXTabs

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Re: Are you concerned with American decline?
« Reply #6 on: September 05, 2021, 07:31:51 PM »
I'm pessimistic about the USA in the medium term as a country/society/political entity. Because of this I'm global market cap weighted (VT and equivalents). However, look at the top 10 holdings of VT:
Code: [Select]
Apple Inc.
Microsoft Corp.
Alphabet Inc.
Amazon.com Inc.
Facebook Inc.
Tesla Inc.
Taiwan Semiconductor Manufacturing Co. Ltd.
Berkshire Hathaway Inc.
NVIDIA Corp.
JPMorgan Chase & Co.
Possibly ignoring Tesla, those companies aren't going anywhere.

With that said if you wanted to be slightly overweight certain developing markets (eg, FRDM, EWW, etc) I wouldn't think that you were crazy.

PDXTabs

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Re: Are you concerned with American decline?
« Reply #7 on: September 05, 2021, 07:34:41 PM »
Where in Asia? China was a possibility until they started jailing the tech CEOs and taking over companies.

South Korea? Japan?

Well, this is how FRDM breaks down:
Code: [Select]
Taiwan 20.03%
South Korea 17.41%
Chile 16.95%
Poland 14.60%
South Africa 7.01%
Indonesia 5.63%
Mexico 4.67%
Philippines 4.59%
Brazil 4.48%
Malaysia 3.35%

Just as an example of some other Asian economies to maybe be overweight in.

Abe

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Re: Are you concerned with American decline?
« Reply #8 on: September 05, 2021, 07:48:03 PM »
Thatís an ironic ticker symbol. Do I trust the stability of the USí government-company relationship and government-research relationship more than Indonesia, Philippines and Malaysia? Yes, all three have rampant corruption and barely functioning infrastructure.

Maybe not more than S Korea or Japan, but they have big albatrosses around their neck with all the old people and their refusal to allow in many immigrants. Taiwan has Chinaís slowly increasing grip on pacific trade and Asian-African trade to contend with.
« Last Edit: September 05, 2021, 07:52:24 PM by Abe »

ixtap

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Re: Are you concerned with American decline?
« Reply #9 on: September 05, 2021, 07:58:37 PM »
I have been told this is the case my entire life and we continue to be innovation leaders. If we could just get our act together regarding invading other countries...

PDXTabs

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Re: Are you concerned with American decline?
« Reply #10 on: September 05, 2021, 08:25:18 PM »
Thatís an ironic ticker symbol. Do I trust the stability of the USí government-company relationship and government-research relationship more than Indonesia, Philippines and Malaysia? Yes, all three have rampant corruption and barely functioning infrastructure.

1. It's an emerging market fund. The USA hasn't yet undeveloped to the point of acceptance. Also, Japan isn't EM either.
2. I've been to Malaysia, I didn't notice a distinct lack of infrustrutre.
3. The freedom data is provided by the Fraser Institute, Cato Institute, and Friedrich Naumann Foundation for Freedom. You may or may not agree with the data, but it isn't an ETF's place to make up their own data.

https://alphaarchitect.com/wp-content/uploads/compliance/etf/factsheets/FRDM_Factsheet.pdf
« Last Edit: September 05, 2021, 09:08:28 PM by PDXTabs »

ender

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Re: Are you concerned with American decline?
« Reply #11 on: September 05, 2021, 08:46:09 PM »
I think people simultaneously worry too much about this but discount the ability of a country like China/India to compete in this space longer term.

Many people in the USA see crappy Chinese import products and assume all Chinese innovation is of equal quality, aka worthless. That isn't true.

Abe

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Re: Are you concerned with American decline?
« Reply #12 on: September 05, 2021, 08:48:20 PM »
Thatís an ironic ticker symbol. Do I trust the stability of the USí government-company relationship and government-research relationship more than Indonesia, Philippines and Malaysia? Yes, all three have rampant corruption and barely functioning infrastructure.

1. It's an emerging market fund. The USA hasn't yet undeveloped to the point of acceptance. Also, Japan isn't EM either.
2. I've been to Malaysia, I didn't notice a distinct lack of infrustrutre.
3. The freedom data is provided by the Fraser Institute, Cato Institute, and Friedrich Naumann Foundation for Freedom. You may or may not agree with the data, but it isn't an ETF's place to make up their own data.

https://alphaarchitect.com/wp-content/uploads/compliance/etf/factsheets/FRDM_Factsheet.pdf




1. Ah that makes sense.
2. Have friends from all three, they note that infrastructure is not their home countries' strong suite, especially in regards to climate change. Malaysia is probably the most developed out of the three by a long shot.
3. So it's freedom for companies to make money in countries with weak governments, not necessarily the population's freedom. In that case the ticker does make sense. Still, I'd be worried about some politician's useless kid being inserted into VP of some company and driving it (or at least a division) into the ground. Happens all the time in developing countries.
« Last Edit: September 05, 2021, 08:50:31 PM by Abe »

PDXTabs

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Re: Are you concerned with American decline?
« Reply #13 on: September 05, 2021, 08:59:38 PM »
So it's freedom for companies to make money in countries with weak governments, not necessarily the population's freedom.

I believe that it is both freedoms, which is why Friedrich Naumann Foundation for Freedom data is included and why India didn't make the cut. If you are at all interested I strongly recommend listening to the interview with Perth Tolle on the Animal Spirits podcast. I think that it's this episode: https://theirrelevantinvestor.com/2021/03/12/animal-spirits-investing-in-freedom/

Abe

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Re: Are you concerned with American decline?
« Reply #14 on: September 05, 2021, 09:47:03 PM »
It's interesting you mention that, as the Cato institute's analysis suggests:

1. Phillipines, Brazil, Malaysia, Mexico and Indonesia all do poorly (<5/10) in the "Rule of Law" and "Legal System/Property Rights". Poland, Chile and S Africa do ok at ~6 and S Africa at 5.7/10 (though the Chilean bank was well-known money launderer for Pinochet, and the Polish bank is state-owned). For comparisons, the US and western European countries rank in the high 6s to low 8s for these.

2. For the countries invested in particular, personal freedom rank and economic freedom rank do not correlate. Same for human freedom rank and economic freedom rank. For countries as a whole they vaguely do correlate (human vs economic better than personal vs economic), but not for the ones chosen in this fund. Same applies for direct scores for each category rather than rank (but correlation is worse for human vs economic freedoms and disappears for personal vs economic in this system).

I can show you the data and graphs if you want, data is also here:  (https://www.cato.org/human-freedom-index/2020)

Will for sure listen to the podcast, thanks!
« Last Edit: September 05, 2021, 09:51:58 PM by Abe »

PDXTabs

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Re: Are you concerned with American decline?
« Reply #15 on: September 05, 2021, 10:14:17 PM »
Phillipines, Brazil, Malaysia, Mexico and Indonesia all do poorly (<5/10) in the "Rule of Law" and "Legal System/Property Rights". Poland, Chile and S Africa do ok at ~6 and S Africa at 5.7/10 (though the Chilean bank was well-known money launderer for Pinochet, and the Polish bank is state-owned). For comparisons, the US and western European countries rank in the high 6s to low 8s for these.

I believe that the index is freedom weighted when taking into account their three data sources. Which is why they weight Taiwan, South Korea, Chile, and Poland above all the rest. Speaking of which Chile has a The Human Freedom Index of 8.18 on the link you posted, because Pinoche has been dead for 15 years. I believe FRDM re-balances yearly on yearly freedom data.

But it was only included here as an example of where to maybe invest in Asia that wasn't China.

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Re: Are you concerned with American decline?
« Reply #16 on: September 05, 2021, 11:13:14 PM »
Yes, no maybe? Not out of the ordinary, I am not. And ordinary means what you see the past 100 years throughout the US and other developed world. I am 50/50 US/International as a long standing policy though. It has only been very recently (~2013) that the US stock market has been on a tear relative to the cap-weighted rest of the world. Before that there were lots of logical reasons why the US stock market should underperform the rest of the world, as it had for most recorded time periods in the prior decades.

Also, don't mistake valuation changes for innovation. US stocks are nearly twice as expensive as they were when this website was founded, relative to how good the companies actually are. If companies were to have the same price relative to actual results as they did 10 years ago, prices would have to fall by a factor of two. Similarly, there were tons of explanations in the 1980's for why Japanese companies were fundamentally more innovative than US or anyone else companies. Were Japanese companies actually that much more innovative, or were they just five times more expensive? My vote is the latter.

There are hundreds of reasons besides declining innovation why US stock returns could trail other countries for years or decades, and some of them are very exciting while some are very mundane. So I generally advise people to keep 20-45% of their total investments in international stock funds regardless.

PDXTabs

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Re: Are you concerned with American decline?
« Reply #17 on: September 06, 2021, 12:04:12 AM »
As a slight aside XCEM is a market cap weighted EM-ex China ETF. Combined VEA and VTI you can build a global market cap weighted ex-China portfolio, if that was your thing.

aceyou

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Re: Are you concerned with American decline?
« Reply #18 on: September 06, 2021, 08:34:17 AM »
I think the US could decline as a political entity, but not as a capitalistic entity.  The money might continually erode, but there will still be strong businesses churning out goods and services, and people will buy those with SOME currency.  It won't hurt amazon if in 20 years 50% of people buy things on their site with bitcoin or ethereum, but it would hurt the power center of the US government. 

If your top priority is to see the land mass that is currently called the "USA" look and operate as it does now, then yes, we may be in decline.  But if your priority is the health and strength of the economic activity of the businesses that operate on that land mass, then I bet things will be just fine. 

It's totally possible that in 40 years we may not be the world hegemon that we are today, and yet we could be far richer as a people than ever before.  Think Italy.  If you compare them to the roman empire, they are in a state of big time decline compared to 2 thousand years ago on the world stage.  But economically, Italians are living a much richer life the roman empire could have ever dreamed of.  The Italian economy of 2021 crushes the roman empire, even if politically they aren't as big of a deal.   

MustacheAndaHalf

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Re: Are you concerned with American decline?
« Reply #19 on: September 06, 2021, 09:06:56 AM »
The U.S. has a big lead with it's tech companies, but admittedly the big tech firms are concentrated in Silicon Valley and Redmond (WA).  I don't think they'll fall away anytime soon - partly because they have worldwide offices and attract immigrants to work for them in the U.S.  So are those really U.S. companies?  Big tech is 20% of the U.S. stock market, and is unlikely to decline significantly.

You can allocate more international if you're concerned that U.S. stocks will underperform.  If all your stocks are U.S. companies, then you need better diversification regardless of a decline or not.  And if there's a greater chance of decline, that can be matched with a greater allocation to international.

Financial.Velociraptor

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Re: Are you concerned with American decline?
« Reply #20 on: September 06, 2021, 12:25:33 PM »
I think the US will still perform well.  There will be long stretches where Asia (and even Africa) outperforms but that isn't American Decline.  The arrow will still go up and to the right for the USA, maybe slower than some people like.

joenorm

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Re: Are you concerned with American decline?
« Reply #21 on: September 06, 2021, 01:37:14 PM »
Thanks everyone for weighing in. I'm still reading through your responses.

ChpBstrd

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Re: Are you concerned with American decline?
« Reply #22 on: September 07, 2021, 10:06:27 AM »
Yes, I'm very concerned about American decline. In particular, because elections are now about ad spending rather than leadership performance, the underlying assumption of democracy may no longer apply. People today vote based on the propaganda effect - repeated slogans and narratives that break down resistance and create tribalism - rather than assessing their own interests or values. It doesn't matter how incompetent a politician proves themselves to be, as long as the money is there to buy the ads to sway the voters who stare at screens 5+ hours a day and consider their internet experience to be a valid part of reality.

The result is federal and local governments that cannot solve basic problems, such as winning wars, removing lead from drinking water, having an effective law enforcement / judicial system, managing natural disasters, or replacing crumbling bridges. Political ineffectiveness has led many Americans to cynicism. A quarter of millennials in a 2018 survey said electing leaders is unimportant, and only 19% disagreed with the statement that ďmilitary takeover is not legitimate in a democracy.Ē. These pro-coup sentiments suggest the U.S's democracy could collapse within our lifetimes.
https://www.nbcnews.com/think/opinion/democracy-essential-millennials-increasingly-aren-t-sure-should-concern-us-ncna847476

I remain mostly invested in the U.S. though, because it is a culture where money buys not only power, but the right to survive. To be poor here involves heightened risk of death by crime, pollution, law enforcement, diet-related illness, and a lack of healthcare to a much greater extent than people face in most other developed countries. American culture is about working long hours so that you can live in a relatively safer neighborhood, send your kid to a relatively better school, hire a good lawyer if you get into legal trouble, and maintain health insurance coverage. American culture is also about propping up the stock market at all costs, and ensuring that profits make their way to shareholders. Sure, lots of people in Europe and Asia work hard too, but the systems for incentivizing labor in those countries are arguably not as brutal (unless you are a Uyghur in a Chinese forced labor camp). Also, a greater percentage of corporate profits in Asia and Europe are directed toward welfare states or ruling parties, but in the U.S. profits are directed to shareholders, who ensure it stays that way by financing the ads which swing elections.

In a nutshell, the U.S. system is uniquely designed to extract the most work and consumption possible out of its people, and return the vast majority of those profits to shareholders. The FIRE movement is an effort to cheat this system by becoming a large enough shareholder to escape most of the incentive/disincentive structure that compels people to spend their whole lives working. One simply has more FIRE leverage in U.S. stocks vs. stocks in high tax / high regulation social democracies or in dictatorships like Russia/China/Phillipines/Thailand.

If the U.S. changes to being a one-party oligopoly like Russia or China, I'll pivot to investing in democracies elsewhere in the world based on the assumption that the U.S. government / ruling party will take an increasing slice of profits from investors through corruption or nationalization. However, many of these cultures, such as South Korea, Chile, Japan, Australia, Western Europe, South Africa, India, etc. will be subject to the same pressures that fell the U.S, so the universe of investible places could shrink dramatically in the coming decades.

FLBiker

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Re: Are you concerned with American decline?
« Reply #23 on: September 07, 2021, 10:51:28 AM »
Interesting question and thread.

Personally, yes, I am concerned.  We moved from the US to Canada last year in part because of this concern -- having dual citizenship seems like a good hedge.  We're still heavily invested in the US, though.  We basically follow the global market cap.  I do wonder if we shouldn't tilt more towards other countries, but I share the same concerns folks have raised.  My feeling that China would be the next superpower was much stronger before I lived there.  The pollution is unreal, and between the environmental issues and the government control, they have some significant obstacles.  And Taiwan is fantastic as a country (I lived there for 5 years) but their economy could be in a lot of trouble overnight if China decided to get aggressive about their One China policy.  All that is to say, who knows?

I tend to agree that American multinational companies will probably continue to do pretty well.  And, more importantly, I have no idea if or when that will change, so for now I'm continuing to stay the course.

Paul der Krake

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Re: Are you concerned with American decline?
« Reply #24 on: September 07, 2021, 11:27:51 AM »
I'm not really concerned, yet.

We still import containers full of knowledge workers despite idiotic hurdles. If you use your brain for a living, by and large the US labor market remains the most attractive in the world. Mothers in Mumbai don't brag to their friends about how their son or daughter got a job in Beijing, they brag about them getting a job in California.

That doesn't mean I think the country can afford to be complacent, but let's not overstate the doomsday case.

PDXTabs

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Re: Are you concerned with American decline?
« Reply #25 on: September 07, 2021, 11:40:03 AM »
That doesn't mean I think the country can afford to be complacent, but let's not overstate the doomsday case.

But even assuming the doomsday case (let's say that over the next 12 months the USA ceased to exist as a political entity). Baring all out war Seattle and the bay area are still going to be teching away. And even if they were bombed to rubble a lot of those companies have offices overseas. I think that the USA could literally burn to the ground and then sink into the ocean tomorrow and it wouldn't put the big multinational tech companies out of business. Of course, it wouldn't be good for our portfolios. But our US holdings also wouldn't go to zero.

seattlecyclone

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Re: Are you concerned with American decline?
« Reply #26 on: September 07, 2021, 11:48:31 AM »
That doesn't mean I think the country can afford to be complacent, but let's not overstate the doomsday case.

But even assuming the doomsday case (let's say that over the next 12 months the USA ceased to exist as a political entity). Baring all out war Seattle and the bay area are still going to be teching away. And even if they were bombed to rubble a lot of those companies have offices overseas. I think that the USA could literally burn to the ground and then sink into the ocean tomorrow and it wouldn't put the big multinational tech companies out of business. Of course, it wouldn't be good for our portfolios. But our US holdings also wouldn't go to zero.

I think you're perhaps overstating the likelihood that price declines would be the worst thing to happen to our brokerage accounts in the event of a US political collapse and civil war. Property rights can become rather fluid in such a situation, especially for property owners who are not seen as sufficiently loyal to whatever side happens to be holding a gun to the heads of the bankers that day.

PDXTabs

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Re: Are you concerned with American decline?
« Reply #27 on: September 07, 2021, 12:00:02 PM »
That doesn't mean I think the country can afford to be complacent, but let's not overstate the doomsday case.

But even assuming the doomsday case (let's say that over the next 12 months the USA ceased to exist as a political entity). Baring all out war Seattle and the bay area are still going to be teching away. And even if they were bombed to rubble a lot of those companies have offices overseas. I think that the USA could literally burn to the ground and then sink into the ocean tomorrow and it wouldn't put the big multinational tech companies out of business. Of course, it wouldn't be good for our portfolios. But our US holdings also wouldn't go to zero.

I think you're perhaps overstating the likelihood that price declines would be the worst thing to happen to our brokerage accounts in the event of a US political collapse and civil war. Property rights can become rather fluid in such a situation, especially for property owners who are not seen as sufficiently loyal to whatever side happens to be holding a gun to the heads of the bankers that day.

I do think about that sometimes. What happens to all of my Vanguard and Fidelity holdings if the USA descends into civil war?

Should I start buying taxable shares in an off shore account?

Paul der Krake

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Re: Are you concerned with American decline?
« Reply #28 on: September 07, 2021, 12:08:27 PM »
Nobody knows. Humans in crowds are annoyingly unpredictable sometimes.

Realistically, there are so many things in the world that tie back to the US dollar in one way or another that I don't think the domicile of your ETFs would change anything.

If you want to fully insulate yourself from the US, it needs to be 100% disconnected. Maybe some instruments that are only connected on the economic situation in a country you like. Good luck finding something worth owning with a real firewall. Ownership in a fishing operation in a small town in Japan or something, I don't know.

PDXTabs

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Re: Are you concerned with American decline?
« Reply #29 on: September 07, 2021, 12:18:06 PM »
Realistically, there are so many things in the world that tie back to the US dollar in one way or another that I don't think the domicile of your ETFs would change anything.

If you want to fully insulate yourself from the US, it needs to be 100% disconnected. Maybe some instruments that are only connected on the economic situation in a country you like. Good luck finding something worth owning with a real firewall. Ownership in a fishing operation in a small town in Japan or something, I don't know.

I'm obviously not talking about fully insulating myself from the USA. In today's economy that would be impossible. I'm more interested in the ETF domicile question. Which I've never really gotten a good answer to. Eg, TSMC and Samsung aren't going to stop trading no matter what happens in the USA. But how to hold them?

ChpBstrd

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Re: Are you concerned with American decline?
« Reply #30 on: September 07, 2021, 02:58:58 PM »
Realistically, there are so many things in the world that tie back to the US dollar in one way or another that I don't think the domicile of your ETFs would change anything.

If you want to fully insulate yourself from the US, it needs to be 100% disconnected. Maybe some instruments that are only connected on the economic situation in a country you like. Good luck finding something worth owning with a real firewall. Ownership in a fishing operation in a small town in Japan or something, I don't know.

I'm obviously not talking about fully insulating myself from the USA. In today's economy that would be impossible. I'm more interested in the ETF domicile question. Which I've never really gotten a good answer to. Eg, TSMC and Samsung aren't going to stop trading no matter what happens in the USA. But how to hold them?

When geopolitical chaos has erupted in the past, people have generally maintained access to domestically held assets - that is, assets domiciled in the same country they are located in. The risk is when you have assets in overseas banks, and you need to flee, but your assets have been legally frozen by one or the other entities. For example, many Europeans in the World War 2 era took the precaution of moving money into U.S. banks, only to have their assets frozen when they needed it most. This left them just as doomed as if their assets disappeared due to domestic societal breakdown (which was also an unfortunate reality for Jews).
https://govinfo.library.unt.edu/pcha/PlunderRestitution.html/html/StaffChapter3.html

Meanwhile, the German stock markets only suspended trading in 1944 when Allied air raids destroyed the exchange building in Frankfurt, and even thereafter trading continued from rooms in the basement. The stock market reopened only six months after the Allies conquered Germany.
https://www.deutsche-boerse.com/dbg-en/our-company/frankfurt-stock-exchange/history-of-the-frankfurt-stock-exchange/text-collection-30850?frag=247610

Basically, societies are led by their wealthiest people, and the wealthy generally prioritize the maintenance of property rights, with few extreme exceptions such as Russia's communist revolution, Mao's China, and the Nazi seizure of Jewish assets. If you were to, for example, move your assets to accounts in Panama or the UK, you would run the risk of having your assets in those countries frozen - either by coercion from the U.S. regime or as a sanctions program by those countries.

PDXTabs

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Re: Are you concerned with American decline?
« Reply #31 on: September 07, 2021, 03:02:39 PM »
If you were to, for example, move your assets to accounts in Panama or the UK, you would run the risk of having your assets in those countries frozen - either by coercion from the U.S. regime or as a sanctions program by those countries.

Wildly off topic from the OP, but I have UK citizenship and would do my best to get there ASAP in case of actual US civil war.

Panama is an off shore banking mecca, but it is also easy to get PR there. Do you really think that Panama is going to keep a resident from spending their assets? What if they are in Panama at the time?

Yes, Russia is the case that I worry the most about. But as you mentioned it isn't very common.

Paul der Krake

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Re: Are you concerned with American decline?
« Reply #32 on: September 07, 2021, 04:10:47 PM »
If you were to, for example, move your assets to accounts in Panama or the UK, you would run the risk of having your assets in those countries frozen - either by coercion from the U.S. regime or as a sanctions program by those countries.

Wildly off topic from the OP, but I have UK citizenship and would do my best to get there ASAP in case of actual US civil war.

Panama is an off shore banking mecca, but it is also easy to get PR there. Do you really think that Panama is going to keep a resident from spending their assets? What if they are in Panama at the time?

Yes, Russia is the case that I worry the most about. But as you mentioned it isn't very common.
Panama is an inconsequential nation, akin to a fly buzzing around a bison's head, tolerated but unable to dictate anything. They will cow to whatever the new world order happens to be.

maizefolk

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Re: Are you concerned with American decline?
« Reply #33 on: September 07, 2021, 05:31:28 PM »
Just wanted to express my appreciation for the fascinating turn this discussion has taken. Definitely discussing tail end of the distribution risks but still really interesting to think about how to optimize for them. Thanks.

Edit: An example from Turkey of how even less than the Soviet revolution can lead to economic ruin for a group within a country with lots of money: https://en.wikipedia.org/wiki/Varlık_Vergisi
« Last Edit: September 07, 2021, 05:37:02 PM by maizefolk »

PDXTabs

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Re: Are you concerned with American decline?
« Reply #34 on: September 07, 2021, 05:38:11 PM »
Just wanted to express my appreciation for the fascinating turn this discussion has taken. Definitely discussing tail end of the distribution risks but still really interesting to think about how to optimize for them. Thanks.

I like to think that we won't see a civil war in the USA in our lifetimes, but I'm not at all convinced that we won't see the dissolution of the union. The Senate is getting more unrepresentative every day and I fully expect the west coast to get fed up and put their foot down one day. I'm not sure what that will look like.

Navion33

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Re: Are you concerned with American decline?
« Reply #35 on: September 07, 2021, 10:37:09 PM »
I am mostly in agreement with everyone else here in the sense that the U.S. will most likely continue to be a major economic player well into the future. So there might not be a "flight" of capital/ complete collapse of the U.S. market but probable down-turns in the market are bound to happen. Why? I will draw my opinion based on geopolitics/population forecast and predictions. Its a point of interest that I think should require more research but in a simplistic viewing, seem to put the U.S. in a somewhat stable position well into 2100.

Population will stay constant while a majority of other countries will see theirs decline. Why is it important? Consumerism. It's what drives today's economy. Have a stable population = constant stream of consumers. Although, the market might not be as "green" as it is now mainly due to natural capital loss from the Boomer generation. Millennials are 2nd in the amount of population and will never compare in numbers to what their parents where in that sense. Note that I said a majority of countries, not all. I would suggest looking up future 'stable' population figures. Some negatives that I see are Russia, China, Brazil, Germany. Some positives would be U.S., Mexico, France, Turkey

Now what I said is just a jargon version of what can be found out through research, but I am usually surprised when no one mentions this topic since modern economics can be driven by population consumerism and is a good predictor of future markets when taken into account. Overall this is an outside/international viewpoint! Internal things of the U.S. is a whole separate beast to look at.

PDXTabs

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Re: Are you concerned with American decline?
« Reply #36 on: September 07, 2021, 11:00:35 PM »
... Some positives would be U.S., Mexico, France, Turkey.

Speaking of Mexico, Mexico has 129M people with an average age of 29 years and a birth rate of 18/1k. The USA has 328M people with an average age of 38 years and a birth rate of 11/1K. But Mexico is only 0.2% of the world market cap while the USA is 58.6% (using VT today). Which sounds like it could grow more in the next 80 years, AMLO notwithstanding?

rmorris50

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Re: Are you concerned with American decline?
« Reply #37 on: September 08, 2021, 03:43:34 AM »
Depends on how friendly our immigration and work visa policy is going forward to attract the smartest people in the world to our country. We would be in major decline if that world talent should no longer be able to come to the States.


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FLBiker

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Re: Are you concerned with American decline?
« Reply #38 on: September 08, 2021, 05:11:13 AM »
Depends on how friendly our immigration and work visa policy is going forward to attract the smartest people in the world to our country. We would be in major decline if that world talent should no longer be able to come to the States.

This has already been changing.  I work in international education, and we've definitely seen a decline in interest in coming to the US to study.  Canada seems to be the primary beneficiary, in part because they've made it easier to transition from international student to permanent resident, while the US has made it harder.

Michael in ABQ

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Re: Are you concerned with American decline?
« Reply #39 on: September 08, 2021, 06:24:46 AM »
I am mostly in agreement with everyone else here in the sense that the U.S. will most likely continue to be a major economic player well into the future. So there might not be a "flight" of capital/ complete collapse of the U.S. market but probable down-turns in the market are bound to happen. Why? I will draw my opinion based on geopolitics/population forecast and predictions. Its a point of interest that I think should require more research but in a simplistic viewing, seem to put the U.S. in a somewhat stable position well into 2100.

Population will stay constant while a majority of other countries will see theirs decline. Why is it important? Consumerism. It's what drives today's economy. Have a stable population = constant stream of consumers. Although, the market might not be as "green" as it is now mainly due to natural capital loss from the Boomer generation. Millennials are 2nd in the amount of population and will never compare in numbers to what their parents where in that sense. Note that I said a majority of countries, not all. I would suggest looking up future 'stable' population figures. Some negatives that I see are Russia, China, Brazil, Germany. Some positives would be U.S., Mexico, France, Turkey

Now what I said is just a jargon version of what can be found out through research, but I am usually surprised when no one mentions this topic since modern economics can be driven by population consumerism and is a good predictor of future markets when taken into account. Overall this is an outside/international viewpoint! Internal things of the U.S. is a whole separate beast to look at.

Another important aspect is that a business in the US has immediate access to tens or hundreds of millions of customers. If you're starting out almost anywhere else in the world you will have much higher barriers to entry to access that many customers without jumping through the hoops of operating in multiple countries. China and India may have populations of a billion plus, but there's still wide swaths of those countries that are not really customers for most products as they lack the means to purchase it. Even the poor in the US still have far more income to spend than much of the world's population. There's also all the infrastructure in place to get products and services to consumers. I can have a package in the hands of virtually anyone in the US in a matter of days for a few dollars. Almost everyone has access to the internet and there's multiple channels to easily advertise goods and services a local or national audience. You can start a business in a few minutes from the comfort of your home - though you will have some hoops to jump through if you want to make it more than just a small side hustle or hobby. Still, those steps are fairly easy compared to what it takes in a lot of other countries.

MustacheAndaHalf

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Re: Are you concerned with American decline?
« Reply #40 on: September 08, 2021, 08:30:03 AM »
Measuring with economies isn't as telling as measuring with median incomes, in my view.  The U.S. ranks #6 in median income (and household income).  Or using wikipedia data, #4 in the world.
https://worldpopulationreview.com/country-rankings/median-income-by-country

Some countries with much smaller economies are doing fine for their people.  Sweden and Norway are top in per-capita income, and #2 and #3 in median household income.  Their stock markets are a tiny fraction of America's, but individuals are making more money there (purchasing power parity).

China is the second largest economy, with a median household income of $6180/year, or 7x less than America's.  It's likely China passes the U.S. at some point, and then Chinese workers can be proud of their country's economy... and earn 3.7x less than workers in the Czech Republic.

Economic size seems less relevant than median income, and the U.S. is doing quite well with median income.

ender

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Re: Are you concerned with American decline?
« Reply #41 on: September 08, 2021, 08:38:09 AM »
Median income is kind of a useless statistic in my opinion unless it's normalized for quality of life.

mistymoney

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Re: Are you concerned with American decline?
« Reply #42 on: September 08, 2021, 09:18:14 AM »
I'd llike some specifics on how we have we declined on innovation. Is it just that other economies are becoming highly innovated as well?

For recent US innovation, Pfizer co-developed the first covid vaccine with a germany company, Moderna also an american company. Blue Origina and SpaceX are both american companies, those are what comes to mind when I think of innovation. Is someone coming to take major market share away from Apple, Alphabet, and microsoft?

Other have mentioned that the future is multinationals. I don't see how that would affect investments. SP500 is full of mulitnationals.

Are we just upset that we don't have the market in tech cornered anymore?

sixwings

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Re: Are you concerned with American decline?
« Reply #43 on: September 08, 2021, 09:42:25 AM »
American decline is mostly overstated IMO. There may be more new companies coming out of developing countries, which is great, but IMO America will continue to be the #1 place for growth, innovation and value. If anything I think the US's influence will grow. The US navy still controls and will continue to control for the foreseeable future all shipping and flow of goods.

seattlecyclone

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Re: Are you concerned with American decline?
« Reply #44 on: September 08, 2021, 12:03:26 PM »
Depends on how friendly our immigration and work visa policy is going forward to attract the smartest people in the world to our country. We would be in major decline if that world talent should no longer be able to come to the States.

This has already been changing.  I work in international education, and we've definitely seen a decline in interest in coming to the US to study.  Canada seems to be the primary beneficiary, in part because they've made it easier to transition from international student to permanent resident, while the US has made it harder.

Yep. It's so shortsighted. If you get a degree in the US your diploma should come with a green card stapled to it so you can work toward improving the US economy if that's what you want to do. Instead we send them back where they came from, whether they want to go or not, and they end up using their expertise there.

PDXTabs

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Re: Are you concerned with American decline?
« Reply #45 on: September 08, 2021, 02:07:44 PM »
Yep. It's so shortsighted. If you get a degree in the US your diploma should come with a green card stapled to it so you can work toward improving the US economy if that's what you want to do. Instead we send them back where they came from, whether they want to go or not, and they end up using their expertise there.

But with that US degree you can probably get an EU blue card. If I wasn't born here, I wouldn't work here. PR track visas are just too hard to get short of having a PhD.

maizefolk

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Re: Are you concerned with American decline?
« Reply #46 on: September 08, 2021, 02:43:06 PM »
Yep. It's so shortsighted. If you get a degree in the US your diploma should come with a green card stapled to it so you can work toward improving the US economy if that's what you want to do. Instead we send them back where they came from, whether they want to go or not, and they end up using their expertise there.

But with that US degree you can probably get an EU blue card. If I wasn't born here, I wouldn't work here. PR track visas are just too hard to get short of having a PhD.

Even with a PhD it's a pain and requires people to jump through all sorts of necessary hoops.

Abe

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Re: Are you concerned with American decline?
« Reply #47 on: September 08, 2021, 08:07:23 PM »
The other good thing going for the US is we have a large pool of docile working-class people (as in they donít expect much from either the government or employers) that seem happy to hand over any hard-earned gains to people rich enough to invest in various companies, hoping to one day get some crumbs from that pie. I donít something like that would fly in most of Western Europe or developed parts of Asia.

Also, I think the home-grown pool of talent is sufficient that even if we scare off some foreign students with our craziness we will be ok. Sometimes going back home is worse than dealing with a years-long paperwork slog and xenophobes. Thatís why Iím here! (My parents thought it was worth it in the 90s, but now they probably wouldíve gone to Canada).

Paul der Krake

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Re: Are you concerned with American decline?
« Reply #48 on: September 08, 2021, 08:24:14 PM »
The other good thing going for the US is we have a large pool of docile working-class people (as in they donít expect much from either the government or employers) that seem happy to hand over any hard-earned gains to people rich enough to invest in various companies, hoping to one day get some crumbs from that pie. I donít something like that would fly in most of Western Europe or developed parts of Asia.
LOL at the idea that Americans get "crumbs". It's one of the countries where workers have the most disposable income in the world, right after Switzerland and Norway.

I indirectly wrote about this last year:
https://forum.mrmoneymustache.com/welcome-to-the-forum/so-you-want-to-move-to-europe-a-reality-check/

former player

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Re: Are you concerned with American decline?
« Reply #49 on: September 09, 2021, 02:38:27 AM »
The whole premise of this thread is nuts.  The climate will go belly-up long before the Chinese economy can overtake the American economy.

https://www.theguardian.com/commentisfree/2021/sep/09/earths-tipping-points-closer-current-climate-plans-wont-work-global-heating