Investment Strategies / Mechanical Investing
No. of Recommendations: 17
No. of Recommendations: 22
I hope you'll still stick around here, at least as far as updating about your bottom detector.
Elan
No. of Recommendations: 12
Jim, I read that thread and seeing you make these moves really leaves me with a bad feeling (even worse than I already had).
You have been a huge influence on me. Your ability to understand these complex things and communicate them is fantastic.
Kudos and good luck, let's hope it works out somehow, and that we are all around to reminisce about these concerning times someday.
Mark
No. of Recommendations: 3
[I don't feel too bad about doing this on a thread with this title...]
Jim/Mungofitch posted this reply on the Berkshire board:
<Don't be a stranger.>
//Historically speaking, it's pretty hard to shut me up.
Jim\\
I personally would greatly miss Jim & a whole bunch of the wise, smart & thoughtful folks here if they left, including the author of the email I'm responding to. [Y'all know who you are—if not, we do!]
I very much appreciate all of you knowledgeable, helpful & generous contributors.
:-)Shawn
No. of Recommendations: 1
WOW!
First of all - you have taught me more about investing , more than many others combined!
So as like a lot of others over here - always wish the very best in all of your endeavors.
Are you in a state where you are forced to reassess the safety and soundness of US Treasuries?
Hope you will contribute your thoughts once in a while
Best
No. of Recommendations: 3
I have followed your advice and posts for years. Thank you so much for everything and I (selfishly) hope you stick around. But more important than that, I hope things go well for you!
No. of Recommendations: 12
Are you in a state where you are forced to reassess the safety and soundness of US Treasuries?Sure.
Bear in mind that my main motivation in selling them is that I no longer desire to be part of the US economic sphere at all, in the same way that I would not want to be part of Russia's. From that it follows that I don't and won't need any US dollars on short notice to make any US investments on future market dips, which is the main reason anyone would hold them: a placeholder for future use. In that sense, the financial risks of holding them are secondary to my reasons.
I don't see many present risks for US residents holding US T-bills, but for those of us outside the country it's more than a little bit different. I conclude the financial risks are now meaningful--meaningful enough to want to take actions to avoid them.
From a post of mind at the (now digressing) thread at the Berkshire board:
"...the [financial] risks are getting pretty plain. You may or may not be aware of moves to curtail inbound investment via taxation of portfolio flows, and (separately) talk of forcible conversion of US debt to non-redeemable perpetuals in some circumstances. Plus many things not already on the policy plate but all too plausible....For non Americans, is there a 1% chance of (say) a huge withholding tax on T-bill redemptions that are not rolled over, or withdrawals from US brokerage accounts, or punishing withholding tax on sales? Would a US brokerage one day be asked/forced to apply some rules that might not be lawful under US law? Note that there is already a rule that if a non-US-person sells shares of a listed LLP, the entire sale proceeds (not the profit) are subject to 10% withholding tax which is (in my case) non recoverable. Buy $100 worth of Sunoco, sell at $105, lose $5.50."It's not just paranoia. Here's someone else's post, which links to and discusses current policy proposal to (among other things) force non-US debt holders to swap for perpetual bonds, which is a forced debt restructuring.
https://www.shrewdm.com/MB?pid=638518736Jim
No. of Recommendations: 7
As a US citizen with just one passport and large extended family here, my bar to making such moves is necessarily quite a bit higher; however, I told my wife (chair of our county's Democratic Party) that we will leave when Trump wins a third term...
Smufty
No. of Recommendations: 9
I told my wife (chair of our county's Democratic Party) that we will leave when Trump wins a third term...
But, but ...... nope, I'm staying out of politics on this board. You can join me on bsky.app if you want to discuss politics.
Elan
No. of Recommendations: 7
The reality is the divest thread is really just political, and political isn't a reasonable investment strategy.
I know a few Canadians abroad, all of them left Canada for Cayman, Monaco, various other places to escape their local tax regime. Skipping your taxes to enrich yourself seems good for YOU ... but not a strong vote of confidence for the country's political system.
Trump: he was elected in 2016, reelected in 2024. Why do people keep insisting he isn't going to leave when his term runs out? He left last time. The same people on the Republican right were convinced Obama wouldn't leave, Biden wouldn't leave etc. It's just political nonsense.
More to the point: the problem with democracy - as we're seeing - is the citizenry and their elected officials have learned that it's easy to promise and give and increase, but it's very very hard to limit and reduce and restrict. People don't usually vote for pain and the officials who bring it generally find themselves either infuriated and quitting or summarily booted from office. Let's count our blessings for a moment that we have some people in and around elected office who are willing to CUT something / anything and REDUCE something / anything in the face of tremendous social / political pressure. Yes, it may be sufficiently overridden, and we can revisit, but it takes some brave souls to give us the hard medicine we may in fact need (just look at how Elon Musk has been painted some evil demon here to destroy the world when the man's done more for humanity and frankly leftwing political causes than any other person in the last 20-30 years).
Here's the math of the problem, public debt to gdp:
https://fred.stlouisfed.org/series/GFDEGDQ188SThe solution to this problem is simple: freeze current spending for a decade and force every government agency to produce a plan to adapt to the new budget reality. Enforce a mathematical REQUIREMENT on the budget process that cannot be overridden for any reason whatsoever. The Swiss have some nice ideas on this.
Most of the spending the current administration is focused on ending / cutting has been funds / funding abroad. Would we prefer to cut funds at home first? Just because you hate the man and the party DOES NOT MEAN everything they do is wrong or evil or incorrect.
Back to investing. If the US does not address the debt problem materially in 20 years, we will suffer massive economic consequences -- as will Canada, Europe, and the entire planet. The American left wrapped in the Democratic party (which isn't left at all, let's be honest) has no ideas and no solutions. They pretend we don't have a problem. The American right wrapped in the Republican party (which also isn't right at all) pays lip service to the issue then spends like drunken sailors. Trump is not really loved by the Rs, but he's also not very good at running sound financial enterprises. The country needs to move to a true middle - a truly fiscally conservative, socially more tolerant and liberal middle -- if we want to survive.
No. of Recommendations: 1
Jim, I'm curious if you have an opinion as to what might happen to the financial system if it's even broached at an official level that foreign debt holders would be forced to swap for perpetual bonds?
And closer to home: in such a situation would holding T-bills be relatively safer for those of us now invested in defensive positions than holding ETFs or mutual funds that invest in short-term U.S. backed government securities?
An interesting tidbit: perplexity.ai says about 23% of total U.S. debt is held by foreign entities (half of those entities are governments)
https://www.perplexity.ai/search/how-much-u-s-sove...
No. of Recommendations: 20
Trump: he was elected in 2016, reelected in 2024. Why do people keep insisting he isn't going to leave when his term runs out? He left last time. The same people on the Republican right were convinced Obama wouldn't leave, Biden wouldn't leave etc. It's just political nonsense.
A truly astonishing statement given all of Trump's myriad attempts to undo his election loss in 2020. Political nonsense in regard to Obama and Biden, but not for Trump. He was dead serious in trying to undo the results of a free and fair election that he LOST.
But why don't you come over to the US Policy board where there are animated (to put it mildly) political discussions.
No. of Recommendations: 10
The reality is the divest thread is really just political, and political isn't a reasonable investment strategy.
Yes and no. Jurisdiction risk is where the two subjects unavoidably overlap. I don't care about who's running US government one way or another, which is sort of the essence of "politics".
For me, it's about whether a company operates primarily where there is sufficiently reliable rule of law for an investor to be comfortable, and whether the country is allied with enemies of my country and therefore a valid choice for consideration. With the right database, primary jurisdiction could be simple quant filter criteria like RS26. In my case it is, literally.
Different reasonable people will of course arrive at different values for that database, but for me the answers are that the US no longer gets a high enough score on either test to pass. So I no longer own any US-based MI stocks: nothing passes.
Jim
No. of Recommendations: 4
But, but ...... nope, I'm staying out of politics on this board. You can join me on bsky.app if you want to discuss politics.
My dry, seriously non-political, humor went right by alarmist wife too...
Sigh
No. of Recommendations: 5
Jim, I'm curious if you have an opinion as to what might happen to the financial system if it's even broached at an official level that foreign debt holders would be forced to swap for perpetual bonds?
And closer to home: in such a situation would holding T-bills be relatively safer for those of us now invested in defensive positions than holding ETFs or mutual funds that invest in short-term U.S. backed government securities?
I don't know what would happen, but it would be chaotic.
Certainly the US can default on its debt if it wants to, just as anybody else can. It's a risk you take when you lend money to anybody. The 1934 US bond default was massive, but the world moved on. The default April through May 1979 ended. Presumably a problem for those expecting their money to be repaid on time, but again, the world moved on.
I presume the main effect would be erosion of trust in the currency, inside the US and out. The US would move a lot further away from being the world's primary reserve and trade currency. This would mean giving up the privileges that come with that, such as the formidable ability to effect huge penalties on individuals and organizations anywhere in the world simply by denying them access to the US payments system. This is such a predictable consequence that methods to prevent this outcome are included in most drafts of the so-called Mar-a-Lago Accords. Specifically, to coerce non-US governments to continue relying on the primacy of the US dollar, for example by denying the explicit or implicit defence umbrella to those that don't (abrogating treaties in the process, but that too is something that happens in the world). Or of course unbearable tariffs.
I don't see any specific risks to US based holders of T-bills, other than the more general ones that it is always possible that the economy might do very badly at some point in the future, to the extent that devaluation becomes a risk and *all* US-dollar-denominated guarantees become slippery in terms of purchasing power. And the risk of the occasional hiccup when the debt ceiling is hit and congress won't let them be redeemed on time, but people are used to that.
Jim
No. of Recommendations: 4
But, but ...... nope, I'm staying out of politics on this board. You can join me on bsky.app if you want to discuss politics.
My dry, seriously non-political, humor went right by alarmist wife too...
Sigh
Humor or not, you see where this thread is going.
Elan
No. of Recommendations: 4
"For non Americans, is there a 1% chance of (say) a ... punishing withholding tax on sales? Would a US brokerage one day be asked/forced to apply some rules that might not be lawful under US law? Note that there is already a rule that if a non-US-person sells shares of a listed LLP, the entire sale proceeds (not the profit) are subject to 10% withholding tax which is (in my case) non recoverable. Buy $100 worth of Sunoco, sell at $105, lose $5.50."
As a non-American this is an interesting thought experiment.
I could see how a US politician might dress this up to a domestic audience, saying that "furriners" would now be paying big taxes and no longer "taking advantage" of the US.
I suspect the first-order outcome would be immense selling pressure on Wall Street, as the non-US investors sold. That would dramatically cut share prices. I'm not sure how corporate America would like that, let alone Main Street America watching the value of their 401k's tumble.
I suspect the second-order outcome would be for the larger US listed companies to dual-list onto an offshore exchange, so that non-US investors could trade their shares without incurring the withholding tax. Make London Great Again. To be fair Trump might get off on cutting Wall Street off at the knees, because he seems to harbour resentments at the NY establishment.
And I suspect the third-order outcome would be for the USA's position as the global default currency to fall even lower.
I also suspect the withholding tax would end up generating very little tax revenue. It's the challenge with taxes and tariffs ... set them too high and you deter the activity you're hoping to tax and so end up collecting no tax income. You can either use them to be punitive or to collect revenue, but it's hard to do both.
