European PP: Investing in U.S. stocks too?

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jabba
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Re: European PP: Investing in U.S. stocks too?

Post by jabba » Wed Nov 12, 2014 2:00 pm

I cashed out a lot of euros @ 135.50 on the advice of Martin Armstrong. That was a nice trade so far. I have started buying US/CAD mining stocks now with the proceeds as I can smell the bottom in the next few months. Much prefer the US market but will buy anything anywhere if I think it is cheap and also buying here there and everywhere is a nice way to balance stuff out.

I have a lot of interest in the Eurozone being a partner in a business that is in 4 countries and does business in Euros. Unfortunately due to the nature of the ECB and  no collective debt mechanism I think the Euro is doomed to fail, but as I have enough exposure in my day job I think it is OK for me to have some hedge in USD...and it is more fun :)

Honestly I would like to investigate more about EU companies but I find them as boring as bonds which I do not own either. Ha, not a very good PP guy am I :)
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Re: European PP: Investing in U.S. stocks too?

Post by MachineGhost » Wed Nov 12, 2014 8:50 pm

jabba wrote: I cashed out a lot of euros @ 135.50 on the advice of Martin Armstrong. That was a nice trade so far. I have started buying US/CAD mining stocks now with the proceeds as I can smell the bottom in the next few months. Much prefer the US market but will buy anything anywhere if I think it is cheap and also buying here there and everywhere is a nice way to balance stuff out.
How is good ol' Martin Armstrong these days?  I haven't heard a peep from him in a year or two since he seems clueless about RSS feed or e-mail/IM notifications, etc..
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Re: European PP: Investing in U.S. stocks too?

Post by jabba » Thu Nov 13, 2014 5:57 am

http://armstrongeconomics.com/armstrong_economics_blog/ he posts regularly on his blog, like lots. his calls in the last couple of years have been nothing short of amazing.
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Re: European PP: Investing in U.S. stocks too?

Post by MachineGhost » Thu Nov 13, 2014 8:12 am

jabba wrote: http://armstrongeconomics.com/armstrong_economics_blog/ he posts regularly on his blog, like lots. his calls in the last couple of years have been nothing short of amazing.
It's still not public but I figured it out: http://armstrongeconomics.com/armstrong ... s_blog/rss

I've been following him since the late 90's before he was wrongly imprisoned.  The guy is one in a billion.
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Re: European PP: Investing in U.S. stocks too?

Post by LC475 » Fri Dec 19, 2014 9:28 am

MachineGhost wrote: The guy is one in a billion.
So there are seven of him?

Are you one of the seven?
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Re: European PP: Investing in U.S. stocks too?

Post by LC475 » Fri Dec 19, 2014 9:30 am

happyspec wrote:What do you think?
Just build a US PP.  It will give you stability and protection no matter what comes. 
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Re: European PP: Investing in U.S. stocks too?

Post by MachineGhost » Fri Dec 19, 2014 12:42 pm

Unfortunately, his RSS feed still doesn't work so I don't get to keep up.  I think his time in prison made him clueless about the Internetz.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

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Re: European PP: Investing in U.S. stocks too?

Post by tarentola » Thu Jun 11, 2015 5:08 am

I am a Euro investor and am converting some existing holdings to a PP. At present I hold the following Euro stock ETFs, all traded in Paris, in the following percentages of the stock component of the portfolio:

CEU: MSCI Europe 24%
SP5: S&P 500 12%
TPXH: Japan hedged in Euros 26%
UST: Nasdaq 26%
LEM: Emerging Markets 12%

Obviously 24% Europe is not ideal for a Euro investor, and in any case I  would like to simplify the portfolio to reduce the inclination to tinker.

I know there is no universal answer to this question but I would value some opinions or a guideline: what proportions of the different ETFs would be best, or at least better? I am inclined to go for 50% MSCI Europe, 50% S&P 500. The 50% figure is a trade-off between staying in my own currency and exploiting the relative stability of the S&P 500, and is fairly simple.

Or should I leave in a small percentage of Emerging and Japan to make a sort of world index (like Thomas Hoog above)? Or just go 100% Europe? What do you think?
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Re: European PP: Investing in U.S. stocks too?

Post by Introvert » Thu Jun 11, 2015 6:52 am

Out of the 25% of stocks, I am thinking about investing 20% in EU stocks and 5% in the S&P500. I don't trust the eurozone 100% and that is why I am thinking of tilting a bit to US stocks.

Another thing that is harder for us european is to find data for some of the ETFs or even the underlying indexes that they follow. Some times the data is not available, other times the number of years is too low.
I am here to learn. If I say something stupid, please correct me :)
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Re: European PP: Investing in U.S. stocks too?

Post by MachineGhost » Thu Jun 11, 2015 1:13 pm

tarentola wrote: Or should I leave in a small percentage of Emerging and Japan to make a sort of world index (like Thomas Hoog above)? Or just go 100% Europe? What do you think?
Why don't you adopt the equity exposure from global market portfolio?

[img width=800]http://i60.tinypic.com/30ldis9.png[/img]
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Re: European PP: Investing in U.S. stocks too?

Post by tarentola » Fri Jun 12, 2015 2:23 am

Thanks MG. I considered VT but its composition is not unlike what I have at the moment. From Vanguard's site, VT composition is (my figures in parentheses):
  9.40% Emerging Markets (12%)
  22.10% Europe (24%)
  14.20% Pacific (26%)
  0.20% Middle East (0%)
  54.10% North America (38%)

So again not enough Euro representation in VT for me. But you have given me an idea - I could invest in something like 50% Euro, 25% USA, 25% Asia Pacific. If I sold half my Nasdaq and half my Japan and bought Europe with the proceeds, that would just about do it.
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Re: European PP: Investing in U.S. stocks too?

Post by frugal » Fri Jun 12, 2015 4:29 am

Tarentola,

how are you?

If you are using EUROS everyday you should hold a 100% EU-PP.

That's what theory says, no?
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Re: European PP: Investing in U.S. stocks too?

Post by LC475 » Fri Jun 12, 2015 10:22 am

frugal wrote: If you are using EUROS everyday you should hold a 100% EU-PP.

That's what theory says, no?
Well, let's think about this logically.  If you are using your Permanent Portfolio money every day, if that is the money you're using every day, then it would make sense to take that into big-time consideration.  If not, then.... why should you?

If my Permanent Portfolio is just going to sit there for decades, why would it matter what currency it's in?  It can be in Martian Bowlhawkles, as long as I can easily convert it into usable money whenever I need it, what do I care?  If it is giving a good return, that's the bottom line.

Where I could run into problems is if my currency that I'm going to spend has some wild fluctuations vs. the Bowlhawkle.  And the currency market can be very volatile.  But, long-term, things will all even out and rough purchasing power parity will be maintained between my currency and the Bowlhawkle.  So long-term, no problem.

Shorter-term, there will be increased volatility.  So, I am trading off increased volatility in exchange for... what?  For, in my humble opinion, a portfolio that is more all-weather, more bullet-proof.  If the Euro crashes, people will likely flee into the dollar.  If the dollar crashes, people will likely flee into gold.  So, gold is a super winner if there's inflation in the dollar.  It will go up even more than the dollar falls.  It's almost like it's leveraged.  Gold can still serve as a hedge against inflation in other smaller currencies like the Euro, but will not be as effective in carrying the entire portfolio.

Thus, if you need things to be smooth and steady in smaller time increments, that is, if you're going to need your money soon, say, in less than five years, it would probably make sense to go with a localized PP-ish portfolio, especially if you guesstimate the chances of your currency experiencing high inflation in that time period are very low.

If, on the other hand, your time horizon is longer, fifteen years or more, I think you can count on the currency fluctuations, wild as they can be, all averaging out by then and so your returns will be the good predictable ones we've all come to expect from the PP.  In that case, I personally think creating a US-based PP would be a better option.  Others will differ with me; that's just my personal opinion.
Last edited by LC475 on Fri Jun 12, 2015 10:24 am, edited 1 time in total.
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Re: European PP: Investing in U.S. stocks too?

Post by frugal » Fri Jun 12, 2015 10:34 am

Hello,

and if in 20 years when I need the money:

1USD = 0,5 EUR

???
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Re: European PP: Investing in U.S. stocks too?

Post by barrett » Fri Jun 12, 2015 11:01 am

frugal wrote: Hello,

and if in 20 years when I need the money:

1USD = 0,5 EUR

???
That's the way I look at it too. A Swiss person starting a USD PP in 1970 or a Japanese person starting as USD PP in 1980 would both be WAY down due to long-term currency trends.
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Re: European PP: Investing in U.S. stocks too?

Post by LC475 » Fri Jun 12, 2015 11:03 am

frugal wrote: Hello,

and if in 20 years when I need the money:

1USD = 0,5 EUR

???
Doesn't matter.  Scratch that: it's great for tax purposes!  You've "lost" tons of money!  Other than that: doesn't matter.  All that matters is real.  Purchasing power, that is.  If 1 USD = 0.5 EUR then that means either the dollar has experienced a lot of inflation, or the euro a lot of deflation, or a combination of both (but to a lesser degree).  If there's been high dollar inflation, gold has kicked in and done well for you.  If there's been lots of Euro deflation, well, you've missed out on the boon that you would have had from just holding Euro cash; a quite unexpected boon, by the way, that would be quite unprecedented in modern times -- in other words, fat chance.  But that doesn't actually hurt you, it's just a missed opportunity.  Oh, if only we'd all invested in Berkshire Hathaway 40 years ago!  So maybe you'll feel psychologically bad for having missed out, but your real return from the Permanent Portfolio will be just the same as if the Euro hadn't somehow become twice as valuable.  It will be just the same as if you happened to be living in Japan or Tuva (or move there for retirement) and are now withdrawing in Yen or Tuvaloos.  Purchasing power parity makes it all work out in the end.
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Re: European PP: Investing in U.S. stocks too?

Post by LC475 » Fri Jun 12, 2015 11:21 am

barrett wrote: That's the way I look at it too. A Swiss person starting a USD PP in 1970 or a Japanese person starting as USD PP in 1980 would both be WAY down due to long-term currency trends.
I do not think that's actually true.
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Re: European PP: Investing in U.S. stocks too?

Post by barrett » Mon Jun 15, 2015 7:21 am

LC475 wrote: Thus, if you need things to be smooth and steady in smaller time increments, that is, if you're going to need your money soon, say, in less than five years, it would probably make sense to go with a localized PP-ish portfolio, especially if you guesstimate the chances of your currency experiencing high inflation in that time period are very low.

If, on the other hand, your time horizon is longer, fifteen years or more, I think you can count on the currency fluctuations, wild as they can be, all averaging out by then and so your returns will be the good predictable ones we've all come to expect from the PP.  In that case, I personally think creating a US-based PP would be a better option.  Others will differ with me; that's just my personal opinion.
I don't think it always does average out which is why I gave the examples of the Yen and the Swiss Franc.
LC475 wrote:
barrett wrote: That's the way I look at it too. A Swiss person starting a USD PP in 1970 or a Japanese person starting as USD PP in 1980 would both be WAY down due to long-term currency trends.
I do not think that's actually true.
LC475, Would you then be comfortable setting up a Yen, Euro or Renminbi-denominated PP? Or, put another way, isn't a long-term belief in the stability of the USD at least part of your reasoning?
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Re: European PP: Investing in U.S. stocks too?

Post by LC475 » Mon Jun 15, 2015 10:44 am

If you will look at the charts and do the calculations, I think you will see that your belief that the standard US PP is WAY down in terms of purchasing power in Switzerland of Japan (since 1970 or 1980, respectively) is actually not true.

It is not even close to being true.

I think that's an important point to make.

Roughly, I think the actual figures are over 1000% and over 500%, respectively.  I could be wrong.
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Re: European PP: Investing in U.S. stocks too?

Post by barrett » Mon Jun 15, 2015 11:12 am

LC475 wrote: If you will look at the charts and do the calculations, I think you will see that your belief that the standard US PP is WAY down in terms of purchasing power in Switzerland of Japan (since 1970 or 1980, respectively) is actually not true.

It is not even close to being true.

I think that's an important point to make.

Roughly, I think the actual figures are over 1000% and over 500%, respectively.  I could be wrong.
One of us is thinking backwards, and while I'd normally put my money on myself in that scenario, I don't think it is the case here.

Just pulling rough figures from my head, the exchange rate on Swiss Francs was about 4 to every one USD in 1970. Now it is about 1:1 so as a Swiss person invested in USD, you would be down about 75% just due to currency risk, correct? Their money has gotten way stronger relative to ours.
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Re: European PP: Investing in U.S. stocks too?

Post by LC475 » Mon Jun 15, 2015 12:10 pm

barrett wrote: Just pulling rough figures from my head, the exchange rate on Swiss Francs was about 4 to every one USD in 1970. Now it is about 1:1 so as a Swiss person invested in USD, you would be down about 75% just due to currency risk, correct?
Correct.  Over 4000% return, divided by 4, equals over 1000% return.
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Re: European PP: Investing in U.S. stocks too?

Post by LC475 » Mon Jun 15, 2015 1:00 pm

barrett wrote: LC475, Would you then be comfortable setting up a Yen, Euro or Renminbi-denominated PP? Or, put another way, isn't a long-term belief in the stability of the USD at least part of your reasoning?
To answer your question: I am comfortable using currencies other than the dollar.  So, if there were a sound theoretical reason to set up a portfolio denominated in a different currency, I would have no qualms about doing it.  I simply do not think that such a reason exists at this particular time. 

The dollar is the reserve currency of the world.  The Permanent Portfolio takes advantage of this very special and privileged position the dollar holds in the market.  If the dollar stops being the reserve currency, hopefully the PP will give us time to notice and react and then gold will carry us through that transition period and then we can set up a different portfolio, depending on what comes out the other side.

So no, to answer your second question: I do not base anything on a belief in the long-term stability of the US dollar.  I do not even have such a belief.
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