I read about it recently. While an outright default of US on its bonds has been so far avoided (there was a mentioning of defaulting on “gold notes” or something similar, never heard about it), US government managed to achieve similar results by inflating away its debt.
US expropriated/froze a lot of Russian assets and also assets of a lot of people who owned Russian stocks.
As @Dr.PI already mentioned, the government can always inflate away the debt and I personally think that a US default will never happen.
I speculate that Musks team will deliver on the cost cutting and Trump will lower taxes for companies, which in turn makes the US market more attractive.
Expropriating and freezing assets are two completely different things and afaik no assets have been expropriated.
1 Like
How likely do you rate that scenario?
What happens if they default? What would be the best performing asset in such a case.
Now just hold the best performing asset in this case with the weight of this happening…
Yep, that’s 100% how I feel about it too. I think the word “never” should never be uttered 
Answers in sequence of the post.
I don’t know, but if the chance is at or above 25% it’s a big worry.
I reckon if they default for real (ie miss bond payments) it’ll be an earthquake in global markets which could take years to fix.
I reckon gold and/or CHF would be the best thing to have, and working to bring it to 25% of the total. I don’t consider VT/VWRL any more safe, actually, given the interconnectivity of the equity markets.
1 Like
From the few above posts it looks like the consensus is that VT or VWRL are equally risky (the risk being the US assets, not necessarily the US domicile).
If this is the case then we should altogether stop investing in US stocks, and many people should be already selling, crashing the market. But it doesn’t seem it is happening.
I find myself a bit undecided on how I should act:
- I’m a true believer of the Just Keep Buying™ method, so one part of me don’t want to act based on emotions
- On the other side the situation doesn’t look good
But was the situation looking good during the small Covid crash? Was it looking good in 2008?
I think also part of the confusion is coming from my ignorance of what actually can happen / can they do with my shares/ETFs:
- Big crash
- Frozen
- Expropriated
- ?
For the crashing part I’m not too worried as I have a long investing horizon.
For the freezing/expropriation of assets I have no clue about its mechanism. Can the orange man / technoking just wake up in a bad mood and poof, everything is gone?!
In my opinion a crash and a weird bond semi-default is a possibility, the other two are not.
As long as they have biggest military, there is no chance of going bankrupt. You can always take stuff from others when you have power
Part 1 -: take 50% of Ukrainian natural resource revenue for the “protection” promises or maybe even without any promise
2 Likes
Talking about pure financial part for expected returns from US markets
Is there any research if stock markets in democratic countries do better than authoritarians or there is no evidence either ways?
US is underperforming the ex/US this year though. Maybe there is a bit of selling going on
VTI YTD returns 3.6%
VXYS YTD returns 7.4%
I don’t know but you’d expect that having strong rule of law and protection from arbitrary expropriation would be advantageous.
1 Like
For foreign investors: yes. Domestic investors, he can’t.
US people also need to worry about civil forfeiture and eminent domain issues.
I did not see such a consensus. VT has a much higher exposure to US political risk.
Not only does one own a 100% direct legal exposure to the USA, but also will sanctions impact the 35% international exposure held by the fund.
VWRL, on the other hand, only indirectly exposes 65% US stocks to sanctions.
And splitting VWRL into VTI+EXUS+EIMI gives you the option to switch indirect to direct exposure in the USA.
5 Likes
Completely agree here.
I think if you can manage it easily and can handle it behaviorally (different funds performing differently causing stress etc), then splitting it up, like you mention, is the prudent thing to do.
I‘d also encourage most to add some amount of home bias (i.e. 10-20% SLICHA), and you are set.
The only truly expropriation-safe funds/securities are local funds with lical securities, and also comes with a variety of other benefits (tax treatment, currency effects, etc.)
This would be generally advisable anyway imo, regardless of current situation.
1 Like
Anybody started to think in the last few weeks to move their UCITS funds from IBKR to a Swiss or European broker?
I am thinking about switching from VT to UCITS continuosly. Not only in the context of Trump turmoil, but also as a shield for estate release in case of sudden death. The current turmoil is yet another argument.
If one thinks rationally, cutting off foreign investors in the US market would be a very bad thing to do for valuations and is likely to follow by a panic. There is no rational benefit for the rich in the U.S., neither for the common folks. Not very likely to happen.
But still, international investing carries these risks. I am sure we will be presented with scary things related to this in our investment carriers.
Turn out the noise? Might be best thing to do. On the other hand, it’s difficult and monitoring this type of risks might be rational.
I’ll se how it develops in the coming months. No action for now.
1 Like
My DCA on VT has basically stopped and now I transformed it in 70% VWRL and 30% others. I’m thinking to switch from VWRL to WEBG just to move away also from Vanguard, but with WEBG apparently I’m risking more so ¯\(ツ)/¯
FWRA is a good option too
1 Like
I am thinking of slightly different approach.
Move my US domiciled ETFs to Swiss Broker ( post Finance / Swiss quote), and start / keep buying UCITS at IBKR.
The thinking is more in context of estate tax issue (IRS documentation and potentially blocked funds) and not in context of anything that Trump may do.
2 Likes