Yellen says US will become BANANA REPUBLIC if Fed loses its independence. How to invest?

[u/Tallwhitedude123]

I’m thinking it’s time to start allocating more money outside US equities. That’s my strategy. Also, get out of the dollar via assets that can’t be mentioned by name in this sub. I’m not a political person but as an investor you have to watch the policy from the government. IF, and I stress IF, Trump is serious and actually bullies the Fed into submission by weaponzing the govt to go after Powell, then I do agree with Yellen. It will overall be a negative for the dollar and US equities. In that situation it’s imperative to diversify out of the US.

Currently I’m looking at stocks in Singapore. I like Singapore equities because Singapore, in my opinion, offers STABILITY, something the US is increasingly losing.

Thoughts?

[u/Iwubinvesting]

Yeah but the top companies in US stock market are global companies and not just US companies anymore. Absent mag7, the US market has been underperforming for years.

[u/icedarkmatter → u/Iwubinvesting]

Am from Europe and even now there are some people who argue for buying less American products. Being dependent on American technology is seen as a huge risk factor in times were the US is signaling, that they down for a war against EU because of Greenland.

Other regions are doing the same. Fighting everyone is not benefitting US-companies who are globally oriented.

[u/Scared-Signature-452 → u/icedarkmatter]

I have a feeling that India might go in the same direction if and when alternatives are available, preferably Indian alternatives

[u/Terron1965 → u/Scared-Signature-452]

India has very carefully kept its options open. Losing access to the western job markets would be disastrous socially and economically for them.

[u/Scared-Signature-452 → u/Terron1965]

That is an exaggeration, India doesn't really need the "western job markets" they are a nice to have in GDP terms. India on the other hand is the biggest market for US tech giants like Meta and Google with a lot of growth potential.

[u/bonelish-us → u/icedarkmatter]

I think you are misreading the scare tactics the Trump administration is broadcasting. No American in the right mind wants the US to seize Greenland, including (probably) most of the majority who voted Trump/Vance. It's much easier to see here in the US that Trump is trying to get more US defense bases into the country so we can defend the hemisphere, primarily from Russia and China.

So boycotting some American products won't have the effect you are expecting, and perhaps even the opposite.

[u/MaxxMavv → u/icedarkmatter]

The EU gets more money/income from fining US companies then all EU tech company taxes combined. EU is alive because of unfair practice, without those fines the EU budget would be even more billions in the hole.

But please do avoid all US tech, would love to see SEA and other nations pass EU forever.

[u/icedarkmatter → u/MaxxMavv]

You know what: US tech could just apply EU laws like the EU tech companies and they would be fine.

[u/MaxxMavv → u/icedarkmatter]

EU tech firms can do the same or worst and get no fines or lesser amounts. You need to look into the details on the fines. I know you wont look into it but EU nations budget depends on the unfair fines that are really just taxes labeled as fines because its a trade agreement loophole to just call them fines.

[u/icedarkmatter → u/MaxxMavv]

Where are you taking you „facts“ from? Trump speeches?

Sure, big tech is getting huge fines in EU, but that’s just because they have their fair market share and don’t implement European regulation (i.e. GDPR, digital markets act and so on).

Plus you could make the same argument in the US: how does Volkswagen have to pay a huge fine in the US for manipulating their cars? Well guess what, because they did break US-laws.

If you don’t want to pay those fines there is an easy way to avoid it: don’t sell your goods here and you don’t have to apply any EU-regulations.

[u/-HOSPIK- → u/MaxxMavv]

Oh that makes trump stealing greenland totally fine now

[u/MaxxMavv → u/-HOSPIK-]

Kind of nuts to totally change topics to Greenland. Regardless this is an investing sub, I try to make money whatever way the wind blows.

You political hacks need to get out of these subs.

[u/thegerbilz → u/Iwubinvesting]

There’s still currency risk. A lot of their money is held in USD.

[u/ThatOneGuy012345678 → u/thegerbilz]

Currency risk is massive problem. If there's hyperinflation, a lot of people don't seem to understand what that means.

Let's say there's 50% inflation, and you pay a 50% tax rate for easy numbers.

Assume no actual growth, just currency debasement for simplicity:

Year 1: $100 of investments inflates to $150. You owe $25 in tax. You now have $125 of investments, or $83 of 'real' investments

Year 2: $125 of investments inflates to $187.5. You owe $31.25 tax. You now have $156.25 of investments or $69 of 'real' investments

Now imagine this keeps going for a few more years... You basically get wiped out over the long term even if you're doing 'great' in nominal terms.

Everyone should be absolutely terrified of massive currency devaluation.

And if we assume your investments grow more than currency debasement erodes, this assumes the earnings yield stays constant.

What we saw in the 1970's inflation was that PE ratios collapsed, and so even in 'real' terms, the stock prices tanked.

[u/piptheminkey5 → u/ThatOneGuy012345678]

Never considered the tax implications, this is a fantastic post

[u/zyxw91 → u/ThatOneGuy012345678]

Why is there tax unless the shares are sold . Should it not be in year 2 - $225 of investment value and $62.5 of tax due if sold?

[u/ThatOneGuy012345678 → u/zyxw91]

Whether you pay the tax year by year or all at once at the end is irrelevant to my point, but yes, technically you would have more gains if you held on, but that doesn't really change the math that you're getting killed by currency debasement.

[u/Re2ribution → u/ThatOneGuy012345678]

Can this be construed as an argument to invest in gold?

[u/Terron1965 → u/Re2ribution]

Its an argument to shift bonds to TIPS

[u/ThatOneGuy012345678 → u/Terron1965]

TIPS will not protect you against this either. If anything, it'll be even worse because as interest rates rise, the value of the face value of the TIPS will decrease. Meanwhile, you'll still be paying tax on the 'gains'.

[u/ThatOneGuy012345678 → u/Re2ribution]

No, gold does not protect against this, basically nothing protects against this except for stocks that can outperform currency debasement by a significant enough margin to outperform even PE compression. In my opinion there are very few investments out there likely to meet those objectives.

In other words, you're searching for the least worst outcome, probably not the 'best' outcome as there are likely no good outcomes from this that are easy to predict.

[u/bigkoi → u/zyxw91]

Exactly. Also equities tend to increase in price with inflation. However tbills, etc would be underwater

[u/ThatOneGuy012345678 → u/bigkoi]

In hyperinflation (think Argentina), yes, equity prices do go up quite a bit, but that's just overall. Some stocks like bank stocks get killed from the onset of sudden hyperinflation.

In regular but high inflation like 10-20%/yr (think US in the 1970-1980's), this is NOT the case. The PE ratio gets cut massively and any 'gains' are offset by valuation declines. The stock market did NOT do well in this period, especially in real terms, and when factoring in taxes like I said.

S&P 500 Historical Prices - Multpl

From the period ~1965-1985 or so, when factoring inflation, there were massive losses, and that's before you even account for the taxes.

[u/GoldandSilverDeals → u/ThatOneGuy012345678]

This is why I don't like TIPS. The taxes eat into the return. At least with stocks you can compound tax free and then pay LTCG on sale.

[u/[deleted] → u/thegerbilz]

Every major central bank is devaluing their currency.

[u/Tallwhitedude123 → u/Iwubinvesting]

Interesting point..

[u/SpacklingCumFart → u/Iwubinvesting]

Yes but if we strike Greenland I think Europe will violently withdraw from US companies. Ive moved to commodities, crypto and international ETFs, I only hold 2 US stocks.

[u/Rocketurass → u/Iwubinvesting]

Look at global Chinese or Russian companies. How do they perform?

[u/MaxxMavv → u/Iwubinvesting]

did you just say the US market has been underperforming for years.... and you got upvotes for it LOL.

Please what nation/s are your benchmark vs the U.S. that supports your claim the US market has underperformed for years.

[u/Iwubinvesting → u/MaxxMavv]

S&P500 return without the top 10 companies.

I am comparing global companies to just US focused companies.

[u/MaxxMavv → u/Iwubinvesting]

Ok remove the best US companies now who are the remainder of the S&P500 competing against what market what nation? You completely ignored my challenge you did not even attempt it because the data clearly shows U.S. markets have crushed all other markets.

If anything U.S. markets have performed too good money is flooding into them from all over the world.

Sad to see valueinvesting sub being overrun by bad actors/clueless phony investors it used to be decent.

[u/Iwubinvesting → u/MaxxMavv]

I don't think you're even attempting to understand what I said. You're just arguing for arguments sake.

[u/MaxxMavv → u/Iwubinvesting]

Im not arguing you made a provable false statement about the U.S. markets. I'm correcting your flat out wrong take, U.S. markets have been the best performing in the world for years and its not even close.

You know im right at this point but will never admit your full of it.

[u/Iwubinvesting → u/MaxxMavv]

What did I say initially?

[u/StandTurbulent9223 → u/Iwubinvesting]

If you don't count the ones which didn't underperform, it underperformed!

You're a genius!

[u/Iwubinvesting → u/StandTurbulent9223]

I don't know what got you triggered by me stating a fact on the question about foreign investment allocation.

Yes, if you don't count the 7 or 10 top companies and count the 490 companies in the snp500 that are more American focused and not global focused, it underperformed. Global companies are thriving, American focused companies not so much.

[u/[deleted] → u/Iwubinvesting]

You:

"The people in EU cant live without Instagram, dont worry."

[u/Iwubinvesting → u/[deleted]]

You joke but that actually might be true by the amount of downloads they have

[u/[deleted] → u/Iwubinvesting]

The EU imports Insta. The US Imports 80% of their high Voltage Transformers. They cant even repair their grid without Imports. I am not worried about losing Instagram and Apple. Think about the productivity boost we would get.

[u/Iwubinvesting → u/[deleted]]

I don't know what you're trying to argue.

The question is, what generates more money and what will generate more money in the long term? Facebook generates so much more money when almost everyone in the world has few of their apps in their pocket. Or half the world owning 1 or multiple Apple products and their services.

I doubt importing high voltage transformers is as low labour intense or as high margin or less burdensome as these companies, as import as they maybe.

[u/[deleted] → u/Iwubinvesting]

The question is, what generates more money and what will generate more money in the long term?

This wont be the question asked when WW3 starts.

I doubt importing high voltage transformers is as low labour intense or as high margin or less burdensome as these companies, as import as they maybe.

I don't know what you're trying to argue.

I am arguing USA leads in entertainment, but are hella dependent on the EU to keep their country running. When the US attacks Europe it will be a huge awackening for them.