Gyroscopic Investing

Moved to VP section / Ds

I know ex-US stocks are not part of the HBPP, yet I really do think that ex-US vs US is starting to turn the corner. It's pretty simple. Currently, the US is pursuing an austerity budget. Europe is pursuing a expansion budget (re-arming itself). War spending is stimulative as heck. The ECB cut rates two days ago. The Fed is holding steady for now.

Financial markets are the only places where customers run screaming out of the store when things go on sale. "Oh, woe is China!". Well VWO ETF which has a big China allocation is dead even with VOO over the last 252 trading days. "Woe is Germany!" EWG is up 27% but VOO is 13.4% over the past year. I am holding EWG and IEMG.

Over the last three months, VOO is puking relative to VEA, VEU, VWO. A short time period, yes, but entirely coincident with consequential policy changes, so it's not just stock market randomness.

Truly, by the time it's in the financial news, it's time to do the opposite. The game never ends. I mean look at gold! Now the press says, "maybe it's time to look at gold". Give me a break!

ochotona wrote: ↑Sun Mar 09, 2025 10:09 am I know ex-US stocks are not part of the HBPP, yet I really do think that ex-US vs US is starting to turn the corner. It's pretty simple. Currently, the US is pursuing an austerity budget. Europe is pursuing a expansion budget (re-arming itself). War spending is stimulative as heck. The ECB cut rates two days ago. The Fed is holding steady for now.

Financial markets are the only places where customers run screaming out of the store when things go on sale. "Oh, woe is China!". Well VWO ETF which has a big China allocation is dead even with VOO over the last 252 trading days. "Woe is Germany!" EWG is up 27% but VOO is 13.4% over the past year. I am holding EWG and IEMG.

Over the last three months, VOO is puking relative to VEA, VEU, VWO. A short time period, yes, but entirely coincident with consequential policy changes, so it's not just stock market randomness.

Truly, by the time it's in the financial news, it's time to do the opposite. The game never ends. I mean look at gold! Now the press says, "maybe it's time to look at gold". Give me a break!

ALL the truths written by you!

ochotona wrote: ↑Sun Mar 09, 2025 10:09 am Currently, the US is pursuing an austerity budget.

Oh, how I wish that were true. The fact is the US has been spending lots of money in the public sector in recent years even though the private sector has been doing great. Ideally the government should reduce spending when the private sector is chugging along and be there in reserve for times when the economy sputters. The government spending response to COVID-19 was too high for too long, and now the US has an unsustainable budget deficit. Granted there are some haphazard attempts by DOGE to reduce spending, but I believe DOGE has done nothing of consequence yet to meaningfully reduce the budget. Congress faces a March 14th deadline this week to finalize fiscal year 2025 appropriations. Let's see how that pans out before declaring "US is pursuing an austerity budget".

ochotona wrote: ↑Sun Mar 09, 2025 10:09 am Europe is pursuing a expansion budget (re-arming itself).

I hope so as it seems Europe can no longer depend on the US. Trump today again saying "nuclear weapons are bad" or something. And yet his own idiotic foreign policy encourages the world to pursue them: countries neighboring Russia that don't have them want them (or wish they had never given them up), France offering to extend its nuclear umbrella to other European nations as the US withdraws, autocratic leaders emboldened by an isolationist US. The other NATO countries should just go ahead and kick the US out - get it over with. And move to a wartime economy to counter Putin who is already there. Once the US is out of the way (Hungary too if need be), the EU could start by seizing the ~200 billion euros worth of frozen Russian assets to fund the re-arming before any impact to taxpayers.

ochotona wrote: ↑Sun Mar 09, 2025 10:09 am "Oh, woe is China!". Well VWO ETF which has a big China allocation is dead even with VOO over the last 252 trading days. "Woe is Germany!" EWG is up 27% but VOO is 13.4% over the past year.

I recognize there are many good companies domiciled outside the US. But as a US investor, a key challenge I have with investing in them is the currency conversion impact. For foreign equities you have to get two things right: (1) prosperity in the stock market of foreign nations, (2) weakness in the US dollar relative to other currencies. Morningstar Investing 101 has a nice article on the topic:
How Does Currency Impact Your Portfolio? https://my.morningstar.com/my/news/1596 ... folio.aspx

If I just stick with US stocks, then per Harry Browne PP theory they should cover the case where prosperity is the dominant economic theme. And they should do this regardless of US dollar strength/weakness relative to other currencies.

For cases where US dollar weakness is the dominant economic theme (i.e. inflation), the PP has an allocation to gold which is agnostic to fiat currencies.

I just don't find the need for international "diversification" in the stock portion of the PP. Or any need for currency diversification beyond T-Bills and gold.

I think the stock/bond/cash portions of the PP should be in the market of whatever economy the investor's expenses are in. This is easy for the US investor. Could be less easy for investors in countries that don't have a large stock market.

coasting wrote: ↑Sun Mar 09, 2025 3:20 pmI think the stock/bond/cash portions of the PP should be in the market of whatever economy the investor's expenses are in. This is easy for the US investor. Could be less easy for investors in countries that don't have a large stock market.

For larger stocks with international business/exposure it makes little difference whether for instance you held CISCO shares listed in Mexico or the US (all else being equal). There are however political risk and as such its better to hold stocks listed in the safer choice - better regulated/least likely to having partial (or total) confiscations applied.

Rather than from a economic cycle perspective I like to look at things from a FX perspective. Have some of each of GB Pounds (domestic), US Dollars, Gold currencies, invested in bonds/cash, stocks and commodity (gold). Borrow at a 0% rate to spend (pay for things using credit cards), pay that off each month by selecting whichever currency/asset was the most-up (least-down) at the time. On the flip side if I were still working for a month at a time and then being paid at the end of the month I'd prefer to be paid in whichever currency/asset was the most-down (least-up) at the time. Averaging in and out relatively small amount over many years in that manner tends to broadly do OK/well.

Many/most countries levy withholding taxes, the US for instance applies a 30% withholding rate, the broad average across all countries is around 20%. If the average payout of interest/dividends is 4% x 20% taxation = 0.8% lag factor. As might costs be relatively high in some cases/countries, market makers spreads/brokers fees etc. Such factors should be considered when making decisions of what/where stock index to hold.

ochotona wrote: ↑Sun Mar 09, 2025 10:09 am …
"Oh, woe is China!". Well VWO ETF which has a big China allocation is dead even with VOO over the last 252 trading days. "Woe is Germany!" EWG is up 27% but VOO is 13.4% over the past year. I am holding EWG and IEMG.

I cannot imagine holding Germany this decade. They make cars and nobody wants them.
China: I used to own some stocks here and there but they’re just too volatile for me.

I hold Japan, Israel and a little Norway.

dualstow wrote: ↑Tue Mar 11, 2025 7:24 am

ochotona wrote: ↑Sun Mar 09, 2025 10:09 am …
"Oh, woe is China!". Well VWO ETF which has a big China allocation is dead even with VOO over the last 252 trading days. "Woe is Germany!" EWG is up 27% but VOO is 13.4% over the past year. I am holding EWG and IEMG.

I cannot imagine holding Germany this decade. They make cars and nobody wants them.
China: I used to own some stocks here and there but they’re just too volatile for me.

I hold Japan, Israel and a little Norway.

Why the change in preference for German cars?

Is Germany no longer known for making premier machines?

Combustion engine ⇢ electric

I saved an old exchange between Desert and Tyler of Portfolio Charts about this very topic:

"Desert wrote:
One additional question: Have you considered a slice of international, for diversification? I realize that past returns show it's always been a return-reducer (with the exception of very high risk EM).

A: Ive looked into it several times, and have yet to find a convincing evidence-based reason to add international stocks to a US-based PP. The biggest proponents of international diversification generally cite the very reasonable assumption that US stocks won't always perform so well and you'll need something else to pick up the slack. I completely agree, but the data indicates that gold already fills that role particularly well which is why adding international never seems to improve the numbers. And in the GB, the small caps also pitch in by greatly diversifying away from the relatively small number of large caps that drive returns of a total market fund due to how the index is weighted. There's more to stock performance than the country it's domiciled in.

I'll note, however, that due to macroeconomic forces the negative correlation of gold to stocks is more pronounced in the US than in other countries. If I was a PP investor outside of the US, international investing would look more appealing. And if gold ownership is ever outlawed again in the future or if an individual investor simply has a mental block on owning gold, international stocks are a logical backup choice to fill that role in a portfolio."

Of course I've also noted the sudden uptick in international stocks after so many years of them being dead in the water. If I weren't using the Golden Butterfly I'd for sure own a total world stock fund like VT so as to both have international exposure AND to prevent myself from monkeying with the percentages of U.S. to international. You do get some industry diversification away from tech with this approach but nothing like the half SCV, half TSM allocation in the GB which gives you an almost perfect 1/3rd each in Large, Small and Mid caps. YMMV.

Tyler is a giant.
Thank you, Kevin. I feel better about moving this to the vP section now (not that I felt guilty before).
Yes, gold fulfills all the int'l we need for the pp.

As of 12/31/2024 the expected return of Non-US Stock Markets was 10% vs 5.6% US Stock Market:

https://elmwealth.com/capital-market-assumptions/

You can't predict the future, but turns out you can make some educated guesses.

I'm in the US, and I don't invest internationally because foreign investors are treated differently. However, if I lived in a country w/ a smaller stock market, I would probably invest internationally.

Treated differently?

Jack Jones wrote: ↑Tue Mar 11, 2025 3:45 pm I'm in the US, and I don't invest internationally because foreign investors are treated differently. However, if I lived in a country w/ a smaller stock market, I would probably invest internationally.

For any Non-US folk, this site may be useful...
https://passiveinvestingaustralia.com/p ... llocation/

> Treated differently?

For one thing, my income is too low to use the non-refundable foreign tax credit. And freetaxusa cant process it.

And Fed's going to bailout US companies first. Chart is world vs US

dualstow wrote: ↑Tue Mar 11, 2025 5:53 pm Treated differently?

35:00

Thanks, Jack.

VEU is beating the US stocks?? Be still my heart! My diversification from 2008 is finally starting to work!
Where are the dancing banana emoticons?

I Shrugged wrote: ↑Wed Mar 12, 2025 6:21 pm VEU is beating the US stocks?? Be still my heart! My diversification from 2008 is finally starting to work!
Where are the dancing banana emoticons?

lol the dancing banana thing was on point

Also this (end of writing by me).

https://www.etf.com/sections/advisor-ce ... ead%20More

Allan Roth: Why International Stocks Are Suddenly Outperforming
Trade wars are bad for all parties involved, while free trade enhances all our lives.

Allan Roth
|
Mar 11, 2025
Reviewed by: Paul Curcio
,
Edited by: David Tony

yankees60 wrote: ↑Thu Mar 13, 2025 9:09 am Also this (end of writing by me).

Vinny, I was also busting your chops as far as the writer making his meaning clear. The opportunity was just too good.

Xan wrote: ↑Thu Mar 13, 2025 10:05 pm Vinny, I was also busting your chops as far as the writer making his meaning clear. The opportunity was just too good.

I still remain Mr. Literal who fails to see any figurative unless completely obvious!

yankees60 wrote: ↑Fri Mar 14, 2025 11:24 am I still remain Mr. Literal who fails to see any figurative unless completely obvious!

What a hypocrite!*






*That was sarcasm

My Brazil EWZ ETF up 4.2% today

Something else came to mind... as I was reading that Portugal cancelled it's F-35 order and Canada is pondering whether to cancel it's rather large F-35 order. $13.2 BILLION. "Oh just a flesh wound I tell you!"

We've been dragged not of our own will into an era where maybe people don't want to do business with the US any longer? So you can't just weigh VTI and VEA / VEU and say, "Well, US companies get plenty of sales from overseas, so we'll let the gold take care of FX diversification in the Permanent Portfolio" and just buy VTI.

The built-in assumption is "US companies get plenty of sales from overseas". Maybe it's not true any longer.

End of month trades coming up for the Tactical Equity portfolio... it's looking like it's going to light on risk-on assets, and possibly ALL non-US stocks... nothing based on a political view, it's purely based on momentum indicators. We will know more on 3/31