Agreed. Personally I think EU will do nothing if Trump invade Greenland. EU will find a rationale to rationalise all this. Unfortunately EU is not China or India or Brazil. It might take 5-10 years to develop capabilities to fight back (if there is really a will to do so)
Reason -: energy dependence on US, IT dependence on US, trade dependence on US and of course defence dependence on US
Interesting, some of my friends went partly or completely into cash “due to the added risk at the moment”. What risk? The only investing good that permanently loses value is money, which is a position too.
My momentum portfolio (buy high - sell higher) made 6.06% in the first week of this year. Last year it made me 20.12% for the whole year. Both in USD, please do not start the currency bashing again.
Maybe the markets will get exhausted soon, but I will never exchange my stocks for basically worthless pieces of paper, money, trash-cash.
And for the timing: I am (or better my mechanic methods are) quite good in timing lows, but timing highs? Whenever I thought we are at the top of a bubble prices went up, multiplied again and again.
And the sad thing is, even after all, this should be painfully apparent, we are hardly making any strides to develop independence on all these key areas.
I made the same remark in another thread. The first week gave already 30% of the gains of 2025.
I remember reading that although trade/stock trading was naturally suspended between DE and other countries during WW2, at least US companies honoured backdated dividend payments to DE investors after WW2.
I am going to be honest, this is the first time I am genuinely concerned about my portfolio. I can assume a high risk of loss because market conditions, but the perspective of war and freezing of assets, sanctions, etc is another ballpark. Specially with Trump making such a clear statements about his intentions.
I like a lot history and it reminds me a lot of wishful thinking of other countries vs the clear Hitler statements before the break of WWII and expansionist madness.
Do you all think really thats so unlikely?
Do you own Venezuelan assets or assets in Greenland? Then what’s to worry about?
Economic sanctions from the US vs Europe in the context of them wanting to annex Greenland and the freezing of US assets by the US (equities/bonds) + assets held by US banks and brokers. With Switzerland being potentially seen as a way for EU countries to bypass the sanctions and being caught in the fire.
I’ve considered the US as a bully state for some time. I think @Helix presents a good enough generic solution that works for most situations here (it can be applied whether we feel there is a threat or not, no matter from where the perceived threat may come): How to protect assets from international disruption
US Nightwatch plane is flying for example. Maybe it is a crazy Ivan move. But I find it difficult to distinguish strategically 5d chess “crazy” from just crazy. First time I decided to ride this one out. I decided that my peace of mind is worth the opportunity price.
My worries are not about the Venezuelan or Greenland assets. Not even aboit the value over underlying stocks.
My worry is sanctions from Europe to US or otherwise. All my investments are in US stocks/ETFs, I think worry to lose them (like happen to people investing in Russia) is a real concern, imho.
Then split your holdings.
US etfs for US assets.
european ucits etfs for ex-US assets
A bit of a home bias helps here as well, swiss etf on swiss stocks/assets.
Reduce the US weighting a bit as well.
Nothing of this will seriously alter returns going forward, but already helps a ton against expropriation risks.
Yes, because it made the news. Do you know how many times those planes do training flights in a year that never make the news?
YTD 7.03% in my momentum strategy after 6 trading days, >85% U.S.
Do you really believe that any event will make stocks worth less and will not make money worth less? Why people after that many years of central banks still do not believe that cash is just another position, and a very risky one, manipulated by politicians and with a state guarantee to lose value.
I know this situation, had that many times in my life. But anything can happen anyway anytime. That is the beauty of it, nobody knows in advance. But logic tells me that real value like stocks are worth more than a promise and money is nothing but a promise.
And then again: I am very bad in timing tops. However, I am quite good in calling bottoms, that is where I made most of my money. It is when your whole body and soul tells you not to buy, pressing the “buy” button physically hurts. That is when I buy. On credit, so it hurts even more.
Now, when to sell? As late as possible… but not later. For me that means I never ever sell anything without a plan to reinvest the money, usually in stocks.
A few words to asset allocation: if you do it do it right!
In literature you are required to hold many different assets like real estate, gold, stocks, bonds, currencies, art and so on. That really reduces the risk, one thing goes up, the other goes down. But then, probably you won’t make much more than inflation…
In practice, which of those assets did gain the most long term? Stocks of course.
A friend of mine had a really really good hit by timing the Nasdaq. He invests only in ETF. I could prove to him that a simple allocation of all his ETF would have given almost the same performance, even he was very lucky the last few times he bought and sold the Nasdaq (which was pure luck anyhow, the timing came from external influences).
I could show him that a predefined allocation of his ETF with reallocation every 6 months did almost as good as he did. Without having to guess tops or bottoms. And being invested a 100% in stocks all the time.
Anyhow, if you feel you are better off with cash, you still should have a plan. When do you sell how much of what, when do you re-enter the market and so on. Otherwise you are almost sure to lose money.
Do you have a literature citation for that? Sure 60/40 is controversial in today’s regime but not making more than inflation?
OK, that was probably just a mathematical assumption: if you invest in everything except cash you will make exactly the inflation of everything.
But then if you use clever reallocation strategies you will hopefully make more. Shannons demon, you can gain even if all assets you reallocate lose.
Those reallocation systems are mechanical and I love mechanical strategies. I could even live with cash in such a strategy. Because you automatically buy low and sell high. The key point being “automatically”. If you have to decide on a case-to-case base you put yourself out for pure luck.
You cannot invest in everything else, not close.
One can reasonably expect 4-5% real return for global stocks and about 0-1% real return for global bonds, over the longterm.
In a 60/40 and going with the lower threshhold and no rebalancing would mean 2.4% real return. Upper bound 3.4%.
And with Shannons demon and rebalancing as you say, this will get bumped up some more.
I thnk you can reasonably expect a 3-4% real return still with a global 60/40.
Bond rates are a bit higher again, which help expected return, while stock valuations are on the high end of course currently. Should balance out relatively.
I wonder if by “inflation of everything” what was meant was “you’re not generating alpha”?
(at least for me the goal is not to generate alpha, market returns are fine)
In a way we are always generating alpha. Someone knowing nothing won’t manage to reach the market before being picked off by banks or, worse, scamers.
Then you can trivially beat the stock market with low amounts of leverage by also accepting more problems (e.g. volatility, complexity).
Of course, from the outside this can be explained by simple betas. But why is one allocation chosen over the other? Why do some people hold all in cash over decades? That is because they don’t know or can’t.
Of course, this was just a mathematic/statistic thing, an average if you want.
Interesting point. The problem is how to measure market returns and risk adjusted market returns. The “average” is a very strange concept that is often used to make shine the own performance. I fall for the same, compare my returns with the U.S. indices, what makes no sense because I have a completely different risk profile.
No, leverage alone does not beat anything. It rises volatility, that is all.
Because most people lose money in the stock market. So the loss of cash value is the lesser evil.
That is provably wrong. A diversified leveraged portfolio can beat pure stocks in every metric.
But that is not the main critique. Your claim is like saying that stocks can’t beat cash, just raising volatility. This too is provably wrong, as over longer intervals stocks have always beaten cash.
Of course, theoretically something else could happen, but now we are in the domain of risks where many unexpected things could happen instead (e.g. hyperinflation).
The same is true for low leverage. For large enough intervals it will beat unleveraged.