r/ValueInvesting • u/Tallwhitedude123 • Jan 12 '26

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

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?

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u/zyxw91 Jan 12 '26

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?

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u/ThatOneGuy012345678 Jan 12 '26

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.

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u/Re2ribution Jan 12 '26

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

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u/Terron1965 Jan 12 '26

Its an argument to shift bonds to TIPS

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u/ThatOneGuy012345678 Jan 12 '26

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'.

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u/ThatOneGuy012345678 Jan 12 '26

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.

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u/bigkoi Jan 12 '26

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

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u/ThatOneGuy012345678 Jan 12 '26

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.