Rebalancing

[Hal]

Well, here's an interesting thread over on BogleHeads regarding rebalancing.
Mathjack will be happy as Kitces gets a mention. This is the link that referenced his paper => https://cpb-us-w2.wpmucdn.com/sites.ude ... tegies.pdf

and the BH link
https://www.bogleheads.org/forum/viewtopic.php?t=446262

Will have to ponder on the benefits of rebalancing Gold in a "Non-US" permanent portfolio. As per HB's comment about the USD being the number one currency, and when inflation hits the US hard, the cash flows to the number two, which is Gold. Gain in Golds value more than compensates for losses in the other three asset classes. But if your assets are not denominated in USD...Hmm.....Perhaps split Gold allocation to 10%USD, 15% Gold....

Anyway this is what you are missing out on. Autumn down here & visited the area a couple of days ago

[dualstow]

very pretty scenery

[Mountaineer]

very pretty scenery

Beautiful!

[seajay]

Even with gold remaining level, stocks declining, the stock purchase power of gold rises. How far might stocks decline? Well the US is running with a $1.2Tn trade deficit - that many are now taking payment for in gold (buy Gold Futures with Dollars, take physical delivery of the gold). A international trade paradigm shift away from dollars to gold/other assets. Trust in the US/dollar having been lost (promised to peg the dollar to gold ... didn't, instead printed/spent (on military/space etc.) and exported inflation (paid for by others); Promised NATO, called upon it itself (US), now reneging when others are considering invocation; Sanctioned (Russia/SWIFT); Promised Ukraine security if it gave up its nukes, now breaking that promise ...etc.).

With 250 million ounces of gold in Fort Knox/elsewhere the US has around $750Bn worth of gold - enough to cover 7.5 months of trade deficit spending before exhausted. To address that the trade deficit, as required when the US dollar was accepted as the primary trade currency, has to be transitioned to balanced trade (outflow/inflow of gold roughly matched) as soon as possible. One way to achieve that is tariffs. Trump is putting out how punitive/high tariffs can be negotiated down but only if trade is transitioned to being more balanced. His number one priority - even if that entails large stock market declines.

How long will it take before US trade deficit is transitioned to balanced trade? I can't see that occurring overnight and until then stocks are inclined to remain down/decline.

Periodic rebalancing or band based rebalancing takes a neutral stance, which generally works OK as its incredibly difficult to call tops/bottoms. The tide however does appear to be receding which tempts one to delay rebalancing. Under such conflict a alternative is to partial rebalance, half and half in both camps, neither fully right nor wrong. Another choice is to perhaps add/hold some silver, at a gold silver ratio in excess of 100 that potentially has similar upside potential as gold, but attenuated downside risk. Silver purchased with gold at GSR=100, later swapped back for gold at GSR=70 (whatever) would have you holding 42% more ounces of gold than had you just held gold.

[Mountaineer]

This is a great message from a financial advisor. I think you will enjoy the perspective:

“CALMNESS: Much as many companies ascribe to "core values", Stonecrop Wealth Advisors claims five virtues that we try to live by. One of them is "calmness." Over the years, we have heard on many occasions, at the end of a client call or meeting, "I feel so much calmer after talking with you." Now, if I simply tell you to "remain calm," I don't want you to be reminded of Chip Diller's (played by Kevin Bacon) final scene in the movie Animal House. In fact, a client recently got angry with me because I did not appear to be freaking out, and she thought I should be. No matter what, I refuse to freak out. I recommend the following right now. One, focus on the long term. Shocks occur from time to time, and no one (despite what they say) knows how they will play out in the short term. Two, don't let the fear-mongering media rule your emotions. Fear sells, and they are really good at it. Three, focus on the facts, discuss your thoughts with others (preferably a good financial advisor) and calmly and logically make your decisions. This is one of the hardest things to do right now because all reporting seems to have a slant, a narrative that is being pushed, or an ideology that is being supported. But the facts are out there if you look and analyze. Finally, maintain your perspective. Money and wealth are critically important parts of your life as you seek to meet your life objectives. But there are other parts of your life that are significantly more important and fulfilling. Focus on those and keep money and wealth in their proper place in your priorities. We at Stonecrop Wealth Advisors are humans too (even though a consultant we hired a couple of years ago said I was "Spock"), but we are trying to live by these principles as we serve you.
SO TARIFFS HAPPENED: The Trump administration announced global tariffs on Wednesday after the markets closed. There has been speculation as to how the decisions were made for each country, but in principle, President Trump stated that other countries are unfairly competing with us through the use of tariffs, currency manipulation, and industrial policy (e.g., you can't import U.S. poultry into our country because of a chemical found on U.S. chickens). It is the combined effect of these policies that the administration announced it is trying to combat with a new tariff regime. President Trump illustrated this with a big poster board he held up during his announcement. The weighted average tariff rate across the board is 18.3%. These are deeper and more aggressive than anyone anticipated. About one third of total imports are exempt, which reduces the impact to about a 12.6% increase in the effective combined tariff rate. Canada and Mexico were exempted from this executive order as those countries are being dealt with separately and remain largely exempt for now. It will take time for the impact of these tariffs to show up in real U.S. economic data. In the near term, businesses are going to assess how it affects them and make decisions accordingly. During the transition, some prices will likely go up, causing some inflation, or at least keeping inflation an issue for longer than we wanted. But despite the fact that we now know more, meaning less uncertainty, much remains uncertain. The current uncertainty is how other countries will respond, and that is a big uncertainty. If we see a lot of retaliation, and not a lot of deals, it could cause global slowing of trade and a decline in economic growth. If we begin to see a lot of deals being made, it could usher in a positive turn and a market rally. It is too early to tell which way it will play out.”

[seajay]

.
.

The current uncertainty is how other countries will respond, and that is a big uncertainty. If we see a lot of retaliation, and not a lot of deals, it could cause global slowing of trade and a decline in economic growth. If we begin to see a lot of deals being made, it could usher in a positive turn and a market rally. It is too early to tell which way it will play out.

Trump is pushing to balance trade, others wont try to stop their own countries businesses exporting to the US, nor promote buying more from the US. On Thursday the EU IMO is more inclined to reciprocate - likely against digital, yet further downside.

e.g., you can't import U.S. poultry into our country because of a chemical found on U.S. chickens

More endure/die from food poisoning in the US due to chlorinated chicken processing, looks 'clean' after processing but deep down has minuscule dormant bacteria - that later can flourish. Fundamentally doesn't comply with EU health standards. The US could adjust to comply with those standards, but would then becomes uncompetitive.

Surplus trade with the US for others and the 'tariffs' applied by those countries are in part a balance to the US's ability to export inflation, are reasonable. The transition over to balanced trade is also a push away from the dollar being used as a international trade settlement currency, a decline/elimination of the US being able to export inflation - the reduction/loss of a massive benefit for Americans (a push towards higher taxes, lower pay/standard of living, but largely self inflicted (the final trigger having been sanctions/SWIFT)).

Trade 'wars' seem more likely than not, with all of the negatives that entails. But in part desirable, as the directional push requires that US trade deficit needs to be closed down asap or otherwise risk even greater problems. More a case of short term pain (year or so), mid/longer term benefit (growth) rather than more prolonged issues that likely would lead to a mid term outcome that was relatively down by comparison.

[coasting]

This is a great message from a financial advisor. I think you will enjoy the perspective:

“CALMNESS: Much as many companies ascribe to "core values", Stonecrop Wealth Advisors claims five virtues that we try to live by. One of them is "calmness." Over the years, we have heard on many occasions, at the end of a client call or meeting, "I feel so much calmer after talking with you." Now, if I simply tell you to "remain calm," I don't want you to be reminded of Chip Diller's (played by Kevin Bacon) final scene in the movie Animal House. In fact, a client recently got angry with me because I did not appear to be freaking out, and she thought I should be. No matter what, I refuse to freak out. I recommend the following right now. One, focus on the long term. Shocks occur from time to time, and no one (despite what they say) knows how they will play out in the short term. Two, don't let the fear-mongering media rule your emotions. Fear sells, and they are really good at it. Three, focus on the facts, discuss your thoughts with others (preferably a good financial advisor) and calmly and logically make your decisions. This is one of the hardest things to do right now because all reporting seems to have a slant, a narrative that is being pushed, or an ideology that is being supported. But the facts are out there if you look and analyze. Finally, maintain your perspective. Money and wealth are critically important parts of your life as you seek to meet your life objectives. But there are other parts of your life that are significantly more important and fulfilling. Focus on those and keep money and wealth in their proper place in your priorities. We at Stonecrop Wealth Advisors are humans too (even though a consultant we hired a couple of years ago said I was "Spock"), but we are trying to live by these principles as we serve you.
SO TARIFFS HAPPENED: The Trump administration announced global tariffs on Wednesday after the markets closed. There has been speculation as to how the decisions were made for each country, but in principle, President Trump stated that other countries are unfairly competing with us through the use of tariffs, currency manipulation, and industrial policy (e.g., you can't import U.S. poultry into our country because of a chemical found on U.S. chickens). It is the combined effect of these policies that the administration announced it is trying to combat with a new tariff regime. President Trump illustrated this with a big poster board he held up during his announcement. The weighted average tariff rate across the board is 18.3%. These are deeper and more aggressive than anyone anticipated. About one third of total imports are exempt, which reduces the impact to about a 12.6% increase in the effective combined tariff rate. Canada and Mexico were exempted from this executive order as those countries are being dealt with separately and remain largely exempt for now. It will take time for the impact of these tariffs to show up in real U.S. economic data. In the near term, businesses are going to assess how it affects them and make decisions accordingly. During the transition, some prices will likely go up, causing some inflation, or at least keeping inflation an issue for longer than we wanted. But despite the fact that we now know more, meaning less uncertainty, much remains uncertain. The current uncertainty is how other countries will respond, and that is a big uncertainty. If we see a lot of retaliation, and not a lot of deals, it could cause global slowing of trade and a decline in economic growth. If we begin to see a lot of deals being made, it could usher in a positive turn and a market rally. It is too early to tell which way it will play out.”

There are some issues where I strongly disagree with the Trump administration. e.g. foreign policy/Russia/Ukraine. There are other issues where I agree with the what but perhaps not the how, e.g. smaller/efficient government great!, but are DOGE actions the right approach? However, tariffs are the one area where I'm in agreement on the what and the how - to me both the policy and the go big/go fast approach make sense. I encourage everyone to read this article and consider this perspective: https://wolfstreet.com/2025/04/03/103178/
Stocks Plunge as the Market Understood What Tariffs Are: A Tax on Corporate Profit Margins
By Wolf Richter for WOLF STREET.
Stocks tanked today as markets understood what tariffs actually are: A tax on corporate profit margins that companies will have a very hard time passing on, which is why companies hate tariffs so much. If they could pass them on easily, they wouldn’t care about tariffs; their revenues would go up by the amount of the tariffs, and their profit margins in percentage terms could be maintained, and their stocks would keep rising. But that’s not the case.

[yankees60]

This is a great message from a financial advisor. I think you will enjoy the perspective:

“CALMNESS: Much as many companies ascribe to "core values", Stonecrop Wealth Advisors claims five virtues that we try to live by. One of them is "calmness." Over the years, we have heard on many occasions, at the end of a client call or meeting, "I feel so much calmer after talking with you." Now, if I simply tell you to "remain calm," I don't want you to be reminded of Chip Diller's (played by Kevin Bacon) final scene in the movie Animal House. In fact, a client recently got angry with me because I did not appear to be freaking out, and she thought I should be. No matter what, I refuse to freak out. I recommend the following right now. One, focus on the long term. Shocks occur from time to time, and no one (despite what they say) knows how they will play out in the short term. Two, don't let the fear-mongering media rule your emotions. Fear sells, and they are really good at it. Three, focus on the facts, discuss your thoughts with others (preferably a good financial advisor) and calmly and logically make your decisions. This is one of the hardest things to do right now because all reporting seems to have a slant, a narrative that is being pushed, or an ideology that is being supported. But the facts are out there if you look and analyze. Finally, maintain your perspective. Money and wealth are critically important parts of your life as you seek to meet your life objectives. But there are other parts of your life that are significantly more important and fulfilling. Focus on those and keep money and wealth in their proper place in your priorities. We at Stonecrop Wealth Advisors are humans too (even though a consultant we hired a couple of years ago said I was "Spock"), but we are trying to live by these principles as we serve you.
SO TARIFFS HAPPENED: The Trump administration announced global tariffs on Wednesday after the markets closed. There has been speculation as to how the decisions were made for each country, but in principle, President Trump stated that other countries are unfairly competing with us through the use of tariffs, currency manipulation, and industrial policy (e.g., you can't import U.S. poultry into our country because of a chemical found on U.S. chickens). It is the combined effect of these policies that the administration announced it is trying to combat with a new tariff regime. President Trump illustrated this with a big poster board he held up during his announcement. The weighted average tariff rate across the board is 18.3%. These are deeper and more aggressive than anyone anticipated. About one third of total imports are exempt, which reduces the impact to about a 12.6% increase in the effective combined tariff rate. Canada and Mexico were exempted from this executive order as those countries are being dealt with separately and remain largely exempt for now. It will take time for the impact of these tariffs to show up in real U.S. economic data. In the near term, businesses are going to assess how it affects them and make decisions accordingly. During the transition, some prices will likely go up, causing some inflation, or at least keeping inflation an issue for longer than we wanted. But despite the fact that we now know more, meaning less uncertainty, much remains uncertain. The current uncertainty is how other countries will respond, and that is a big uncertainty. If we see a lot of retaliation, and not a lot of deals, it could cause global slowing of trade and a decline in economic growth. If we begin to see a lot of deals being made, it could usher in a positive turn and a market rally. It is too early to tell which way it will play out.”

Yes. Quite good. Thanks!

[boglerdude]

"Tax on Corporate Profit Margins" finally someone says it. Funny cuz reddit loves corporate tax but they're in shambles over tariffs. Trump's not going to betray his megacorp donors....if markets drop more than 20% we'll get the printer. Well we better cuz Ive been bagholding EDV since Obama

[yankees60]

"Tax on Corporate Profit Margins" finally someone says it. Funny cuz reddit loves corporate tax but they're in shambles over tariffs. Trump's not going to betray his megacorp donors....if markets drop more than 20% we'll get the printer. Well we better cuz Ive been bagholding EDV since Obama

Note: There seems to be confusion here regarding corporate taxes. Companies only pay corporate taxes if they have a profit. The same way we only pay taxes if we achieve a certain level of income.

A tariff is the same as a sales tax. A person on welfare pays the same amount of sales tax on a purchase as a billionaire would. All companies would be charged the tariff on what they purchase regardless of their level of income or even if they are running at a loss.

Side note.

Everyone loves to rail on Amazon and their billionaire owner. But everyone forgets that for years on end Amazon never saw a profit, had consistent losses.

That meant in those years they were justifiably paying no corporate taxes. But if tariffs had been in place (or these greatly expanded ones) then they would have been charged these tariffs with no regard to their annual corporate losses.

[coasting]

"Tax on Corporate Profit Margins" finally someone says it. Funny cuz reddit loves corporate tax but they're in shambles over tariffs. Trump's not going to betray his megacorp donors....if markets drop more than 20% we'll get the printer. Well we better cuz Ive been bagholding EDV since Obama

Companies only pay corporate taxes if they have a profit.

That sounds reasonable at first blush. However, many successful companies game the system to show no profit in the US and therefore avoid paying US taxes. From the article:
"The #2 goal of tariffs is to impose taxes on corporate profits if companies decide to import, which forces companies to pay taxes that they might otherwise have dodged, such as Big Pharma and Big Tech that run their profits through Ireland and other financial centers and pay zero income taxes in the US on those profits sheltered overseas."

[yankees60]

"Tax on Corporate Profit Margins" finally someone says it. Funny cuz reddit loves corporate tax but they're in shambles over tariffs. Trump's not going to betray his megacorp donors....if markets drop more than 20% we'll get the printer. Well we better cuz Ive been bagholding EDV since Obama

Companies only pay corporate taxes if they have a profit.

That sounds reasonable at first blush. However, many successful companies game the system to show no profit in the US and therefore avoid paying US taxes. From the article:
"The #2 goal of tariffs is to impose taxes on corporate profits if companies decide to import, which forces companies to pay taxes that they might otherwise have dodged, such as Big Pharma and Big Tech that run their profits through Ireland and other financial centers and pay zero income taxes in the US on those profits sheltered overseas."

Stipulating that this is true .... are they not taxed in Ireland and these other financial centers?

Let me pause here for some research.

*******************************************************************************************************************

https://investoffshore.com/comparing-co ... n-islands/

Ireland: The European Tax Haven

Ireland has become a preferred destination for global companies, particularly in the technology and pharmaceutical sectors, due to its attractive corporate tax rate of 12.5%. This low rate, combined with a business-friendly environment, access to the European Union, and a highly skilled workforce, makes Ireland an appealing jurisdiction for multinational firms.

In addition to the headline rate, Ireland offers various tax incentives, including the Knowledge Development Box, which applies a reduced 6.25% tax rate to profits derived from certain intellectual property assets. Ireland’s tax treaty network further enhances its appeal, offering reduced withholding tax rates on dividends, interest, and royalties.

Conclusion

When comparing corporate tax rates, the U.S. stands out as a high-tax jurisdiction with complex regulations, whereas Ireland offers a low but competitive rate within the EU. In contrast, Bermuda and the Cayman Islands provide tax-free environments that appeal to companies looking for maximum tax efficiency and flexibility.

For investors seeking offshore opportunities, understanding the nuances of each jurisdiction is crucial. Whether prioritizing regulatory stability, market access, or tax efficiency, jurisdictions such as Ireland, Bermuda, and the Cayman Islands present compelling alternatives to the U.S. corporate tax regime.

********************************************************************************************************************

I'm not convinced that tariffs are the solution here, if there is even a problem.

If tariffs are the solution then it seems like they need to be forever? Otherwise, if the go away .. then that underscuts the argument.

Whatever happened to Republicans and free trade?

Isn't free trade a Libertarian thing?

[coasting]

Whatever happened to Republicans and free trade?

Isn't free trade a Libertarian thing?

I think tariffs are more of a Trump thing than a traditional Republican thing. And I think a lot of traditional Republicans (and their wealthy donors) are pretty pissed off about it. As I've said before, the whole tariff policy and approach is the one area where I actually find some agreement with Trump. Yes, it's going to hurt company profits which is going to hurt the stock allocation of my portfolio. I along with 63% of Americans have investments in stocks in some form or another. But stock ownership is not well distributed. The wealthiest 10% hold 93% of all stocks, while the bottom 50% hold less than 1% of all stocks. Some Americans see their communities hollowed out after decades of globalization. Many observe wealth disparity getting worse. The bottom 50% are not much affected by drop in stock prices. It's Wall Street that's hurt and is making such a fuss, predicting end of the world, etc.

Yes, I believe Libertarians advocate for free trade. And there is a lot I like about Libertarian philosophy. If you consider free trade within the US, it works fairly well - Congress regulates interstate commerce. I think it's difficult to apply to the rest of the world when there are so many different countries with their own self interests and values. By opening up to China economically, we may have hoped to show how great our system is and bring them into the fold of Western liberal democracies. That has not happened; rather China has remained authoritarian and in geopolitical opposition to the US. And Wall Street has found no moral conflict in partnering with a regime that is willing to exploit its workers and pollute its environment in ways we would not accept here.