Russell Napier - Global Reshoring Existential Threat to US PP?

[gull1]

I have been consuming Russell Napier's content of late. His thesis is largely that 'economic nationalism' is the global trend: i.e. governments are going to push central banks and large institutions to "reshore" their assets under management. He points to examples where for example the UK is hinting they will push pensions to buy more UK assets; and the obvious loser is the most liquid non-UK assets US stocks & US bonds. He gives other examples too. He expects governments to interfere with the movement of money: capital controls. He is generally positive on gold and Bitcoin; because these help get around those controls.

This kind of scenario might be good for a UK PP where UK will be forced to buy up UK assets. But might it be very negative for US PP holders as the world seeks to sell US assets? Presumably it might mean US stocks, bonds and USD all losing value against rising gold? Thoughts? Maybe split 1/5 each into standard PP buckets and balance with 1/5 Bitcoin? Use a global stock index or focus on value stocks?

Russell himself advocates more fixed assets, active management (not index funds), value stocks, and looking at markets like Japan like he describes here:

His recent article:
- https://americanaffairsjournal.org/2024 ... on-system/

Recent interview:
-

[ochotona]

I thought it was the opposite, I thought everyone was all-in on US assets because of "exceptionalism" (which I take to mean, recency bias), and "Woe is me, Europe is dead especially Germany, Japan is dead, China is dead, UK is dead".

[gull1]

I think the idea is we are past-peak of US exceptionalism and now entering a phase of anti-globalization and multipolarity. As the US weaponizes the dollar, it will be politically desirable for countries to turn inward.

In fact, I subsequently listened to an interview where Napier expects USD to perform well relative to other currencies in the near term, anyway. So presumably if USTs and US stocks sell off that will increase demand for USD cash because that's what is on the side other side of the sale.

[boglerdude]

Ambition is the scarce resource. When techies flee to Germany to start companies ill invest there. Or maybe they'd have another pipeline accident

[gull1]

It's obviously not having to do with reality. Since when does policy reflect it? Instead this is a political shift to mandating that which the government thinks is in its interest and as part of the new geopolitical game. Free markets of capital superseded by political protectionism All driven by the west's desire to counter China.

[gull1]

So after thinking about this if I were to tweak a US modified PP to Napier's thesis; I am thinking to replace ST & LT bonds with a 10 or 20 yr treasuries ladder (like @seajay suggests), looks like you can get ETFs to mimic that. And I would also perhaps swap out the S&P500 index with something like the Vanguard S&P Mid-Cap 400 Value ETF (IVOV). Food for thought.

[seajay]

Midcaps are less prone to some stocks/sector pulling the entire index up (or down) and as such better IMO. Might be considered more like a equal weighted index instead of having the likes of dot com, financials or mag7 stocks pulling the index up to later weigh down the index. In Japan for instance the 1970's saw some stocks rise to being massive (Sony ...etc.) that when that bubble burst they still remained large and dominant of the index.

For a UK investor thirds each US$ (US midcap), gold, Pounds in bonds ... is nice currency diversity, each of those currencies will have their good/bad times.

Non rebalanced also has appeal. Just directed additions (saving)/withdrawals (retirement), drawing from whichever is the most-up (above target weighting) at the time (or adding to the most below target weighting if saving/adding). Broadly thirds initial weightings after 30 years of drawdowns averaged around 45% stock weighting, so broadly close to 50/50 style asset allocation rewards but with 33/33/33 type risk reduction benefits. Not moving capital/assets also nets costs and potential tax savings. The drift to being stock heavier is also a more appropriate portfolio for younger heirs to inherit. The lighter stock weighting in earlier years can also help reduce early years bad sequence of returns risk (that can otherwise have a significant effect across the entire 30 year outcome/progression).

Simpler for heirs as well, especially if you use accumulation funds. After initial thirds equal loading - spend using credit cards and once/month sell some of stocks/gold/cash (bonds), whichever is most above 33.3% weighting at the time. No other movements of capital/assets.

Keep your spending within 4% SWR type limit and historically that had a good chance of ending with a decent residual (inflation adjusted) portfolio value still remaining at the end of 30 years. If within 3% SWR limits and that was more like a PWR (perpetual withdrawal rate).

You might be able to enhance rewards via trading the gold/silver ratio, such as rotating into silver when the GSR passes through 80, rotate back to gold again when the GSR cuts down through 50. Each such cycle ends up with 8/5 = 60% more ounces of gold being held. I have local dealers that are more than happy to do exchanges (swap bunches of 1 ounce gold coins for silver coins or vice-versa), especially if they're short of that type of coin at the time and/or have too many of the other coins that you're swapping for, and/or its not a here-and-now swap, but is left with them for a while - in which case you might haggle them down to a 1% type cost.

[seajay]

I thought it was the opposite, I thought everyone was all-in on US assets because of "exceptionalism" (which I take to mean, recency bias), and "Woe is me, Europe is dead especially Germany, Japan is dead, China is dead, UK is dead".

Circumstances have seen much flight to US dollars (safety). As/when fear subsides or others dump the dollar so the US being a outlier might 'revert' - investors seeing better 'value' (potential) elsewhere. Given the state of the US debt, $1M per taxpayer of Federal debt (included unfunded debt) and possible local state debts on top, along with BRICS PAY and broad dumping of USD - that could lead to a significant reversal/swing. Warren Buffett has been increasing his cash pile massively - maybe just as a means to reduce BRK's exposure to Apple, maybe with a major 'correction' in mind. Trump is doing much to isolate America and drive others towards dropping the dollar - such that the 'correction' could be considerable, similar to the 1930's or 1970's. Key is to not be too dependent/concentrated-in any one single currency (including gold as a commodity/non-fiat currency).