tri_yoda wrote:
It's a good synopsis of the US market, but what about international?
I've been mostly out of US markets since last fall (about 30% in cash), but have maintained all my positions in international stocks (Indexes on Europe, Developed Asia and Emerging markets). I can see a scenario where the US continues to be a train wreck because people don't have the discipline or common sense to get control of COVID and at least until January the Federal government is beyond worthless. Meanwhile, it looks like the major EU nations, China, Japan, Australia have a handle on it. We could see the US get left in the dust while these other economies get somewhere back close to normal during the second half of the year. Those markets will still be down in absolute terms, but will perform way better than the US comparatively. It's also entirely possible this could be somewhat permanent, it might take 10 years for the US to catch back up.
I alos think there is some evidence that COVID will not hit developing nations as badly, because their demographics is younger (so less fatalities) and my personal view is even if they do get hit badly, China's emergence over the last 20 years was strongly influenced by one child policies in the 80s and 90s. It sounds bad, but culling the population in emerging markets could be a long term benefit for these economies because the populations have badly outpaced the ability to feed and house people and build infrastructure, so slowly population growth may help them catch up.
Nothing is certain, but I'd be interested to hear what your take is on the world wide picture.
The problem with the rest of the world is that they're all short dollars. It's hard for people to comprehend just how dominant the USD is trade, FX, etc. Here's what I'll say about international markets:
- Europe: zombie market made up of zombie corporations hitched to an export-heavy economic machine in an increasingly protectionist/nationalist world, declining demographics, and a huge north/south wealth split that will be very expensive to rectify.
- South America: uninvestable unless you're willing to roll the dice on Brazil but everyone I know from SA has no interest in investing in SA.
- MENA: eventually will return to the sand, barely hanging on to the oil age
- China: uninvestable. Do a little research into BABA and what you're really buying when you buy that ADR. Hint: it's not stock in Alibaba.
- Japan: stable but with really horrendous demographics so there's no domestic demand story. They've figured out the best way to export to markets with demand like the U.S. is to actually locate their factories there.
- India: uninvestable for now.
Maybe you take flyers on Indonesia, Thailand, The Philippines... but, again, the dollar shortage would scare me. Forward currency hedge would be way too expensive so you'd have to do it naked and hold the FX risk (which could work to your advantage if the dollar reverses but just keep in mind you have to get two things right instead of one). Mexico is my personal sleeper but buying Mexican government bonds isn't easy.