[zppln]

What are some realistic alternatives to US markets here? Selling is one thing, the question is what to buy instead? I mean, everyone starting to buy european instead would be great for stock prices, but it wouldn't make the underlying assets more valuable, right?

[toast0]

If you divest US bonds, you would probably put them into bonds from other nations (and corporate bonds from non-US companies), easiest thing is to try to find a index to track; Vanguard's BNDX tracks the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Index (Hedged).

In a mark to market world, the value of a bond is its acquisition cost, so buying bonds enough to raise prices increases their value, but not their coupons or their face value. It's hard to make sense of the value of a sequence of payments, it's reasonable to consider the present value and the market price is an easily justified present value for a bond.

Selling bonds and buying stocks is a different thing altogether. Selling US stocks and buying EU stocks wouldn't change the value of the underlying assets, however, having an increased stock price does have benefits for the company when issuing new shares or bonds.

[dripdry45]

Large institutions have been moving in this direction for about a year. I just put together a fairly more stable and diversified portfolio that is effectively only about 15% in the US. It involves some short-term private equity, lots of commodities, European cyclicals and financials, some small Deep value, energy and climate change infrastructure is on solid ground and being well funded around most of the world… they really are plenty of bright spots and lots of good advice out there, even from public letters from places like Van Eck, Piko, GMO funds, and others.

There are a number of very important categories to avoid, like convertibles, but overall it’s quite possible if you have a little bit of acumen with investing.

[dripdry45]

Oh, and a bunch of foreign currency baskets and emerging markets debt denominated in the local currency

[jacquesm]

Eurobonds. It may actually happen if this continues. But given the speed of the usual EU decision process I would not be surprised if it takes them longer than the current US administration to finally agree on the various terms. And that's good for Europe in multiple ways.

https://commission.europa.eu/strategy-and-policy/eu-budget/e...

In the meantime: German, Dutch, UK (technically not EU), Swiss, Nordic paper is also a good substitute and regardless all you really want to do here is not to hold an asset that may well become a liability so in that sense almost anything is better.

[robinsoncrusue]

Eurozone has a looming debt crisis. ECB is actively capping the yields for countries bonds from Spain and Portugal which are showing stress signals. This will not end well for ECB this time around if they end up something like 2012.

https://substack.com/home/post/p-185202466

[jacquesm]

You're going to make a lot of money then by shorting EU stocks, right?

[robinsoncrusue]

Stock market is different from bond market, but bond market everywhere is showing stress signal. Just look at Japan. But yeah, eventually it will spill in stocks.

[scoofy]

Fixed income are just the weirdest markets. Like, the most boring and the most insane... kind of at the same time.

[marcyb5st]

Swiss bonds are super safe, but they have ~0 interest rate and so you lose out on inflation.

[vdupras]

Well, CHF gained 12% on USD YoY, so I guess that it ends up being much better yields than US treasuries.

[marcyb5st]

That is fair. Sorry, colored by the fact that I actually live in Switzerland and so investing them in Swiss treasuries is like keeping the cash for me.

[jacquesm]

That's an easy mistake to make. When you're looking internationally you always have to take the rates into account. For you it doesn't matter, but a lot of parties are investing in Swiss treasuries exactly because it is like keeping CHF. which tends to do well relative to their own. The long term USD vs CHF rate works out strongly in favor of holding CHF.

[ares623]

Just needs to be more valuable than the US bonds that are 100% gonna tank I guess

“I don’t need to outrun the bear. I just need to outrun you. “

[toomuchtodo]

Sovereign debt of a more politically stable nation state or other monetary union, if you are investing at these levels. If you're an individual, you have more options, although there will be fierce debate about the risk profile (as US Treasuries were historically considered to be risk free).

https://www.bogleheads.org/forum/viewtopic.php?t=449401

[arjie]

The disciple went to his master and said "Master, I am considering stopping doing a thing and starting to do a different thing. But I am not certain what the new thing is that I should be doing".

The master turned to the disciple and said: "A better thing"

The disciple was enlightened.

EDIT: Oh damn it. The entirety of the comment was "Sovereign debt of a more politically stable nation state or other monetary union" at the time I replied. Ah well.

[loeg]

Which nation states might you consider more politically stable than the US, even now?

[Braxton1980]

Almost every 1st world country has a more predictable and honest leader right now

[loeg]

You've answered a different question than the one I asked. I think the US will continue to pay its debts, under this president and the one who replaces him in three years.

[well_ackshually]

The point is that it doesn't matter, the US is toxic for the next foreseeable twenty years, and for Europe as a whole, a threat and an enemy. We'd be stupid to keep funding your economy, no matter how much money it makes back. Enemies are to be taken down.

>under this president and the one who replaces him in three years.

The levels of optimism in this sentence are off the charts. The US's political systems are so weak, fragile and compromised that you don't even know if you're going to hold proper midterms or if you're going to get a civil war, the current president is threatening the FED, but sure, debts are going to be paid when it's ran by the dude that managed to bankrupt casinos.

[HWR_14]

The US will pay its debts in USD and the German government will pay its debts in Euros. If you think the euros to dollar exchange rate will be better in the future, it can easily dwarf the difference in interest rate between the bonds.

[reducesuffering]

How does that practically work out in selecting bond investments though? Betting on receiving euro coupon payments would look like buying BNDX over BND. But in the last year, while the Euro appreciated ~12% over the Dollar, $BND is up ~3% while BNDX is down ~1%.

[vkou]

This president has publicly mulled not paying its debts.

It's time to stop magical, wishful thinking about how you want the world to be, and deal with the world as it is.

[loeg]

The president can mull whatever he wants; he doesn't have the authority to not pay.

[xorcist]

The risk for credit default is very close to zero, but the risk for renegotiated contract terms is not zero. That's what the whole Mar-a-Lago Accords was about. It is a strategy that describes in detail how that would be executed. The likeliness for which is up for debate, of course, but it's certainly not a risk free asset.

Add to that the rampant debt increase over many decades and zero political will to rectify the situation, which is why the rate of return is so much higher than in more politically stable countries such as for example Switzerland, Germany or Sweden.

[Braxton1980]

1. Trump has constantly stated how he believes the US has spent money and lives doing things for the rest of the world. He just did it with Canada this week saying "Canada exists because of the US'.

2. The majority of his followers have some level of cult like adoration for him and therefore he isn't worried about losing support for radical actions.

3. Republican voters have been told to not trust the experts, news, or the opposing political party which eliminates all outside sources of information. This allows them to make claims about our debt or why we shouldn't pay it and many of these voters won't get opposing views.

4. Trump wants a massive increase in spending for the military and has cut taxes. While at the same time Republicans ran on the high debt. Not paying it by claiming it's invalid solves that.

[toomuchtodo]

https://www.cfr.org/trackers/cfr-sovereign-risk-tracker

https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...

[loeg]

> The CFR Sovereign Risk Tracker can be used to gauge the vulnerability of emerging markets to default on external debt.

Sort of definitionally, nothing in that list is going to be more politically stable than the US.

In the second link, the author gives slightly lower country risk premiums (0% vs 0.2%) to Australia, Canada, Denmark, Germany, Liechtenstein, Luxembourg, Netherlands, New Zealand, Norway, Singapore, Sweden, and Switzerland. Setting aside the practicality of these recommendations (how much debt does Liechtenstein issue? or Germany, for that matter?): in a world where the US is unstable, it's hard to imagine Canada being risk-free.

[epgui]

Nothing is risk-free. But Canada is certainly more politically stable than the US.

[vkou]

Canada is more internally stable, but is less externally stable, given that invasion and occupation is on the table.

Canada needs to pursue further armament (Carney is pursuing a doubling of its defense budget) and training in asymmetrical warfare.

[loeg]

What makes you say "certainly," especially in the hypothetical scenario where the US is unstable? Canada has a relatively much shorter history as an independent nation. Canada heavily benefits from its southern neighbor, and has a host of domestic economic issues (low wages, high housing prices; whatever the farmers are on about) that could cause instability as well. I think Canada is reasonably stable, I just quibble with "certainly" and "more" politically stable as compared with the US.

[CamperBob2]

All historically-stable Western nations seem to be subject to the same influences that brought us Trump, though.

They (we) are all under attack.

[abdullahkhalids]

On the first page, I see 9 countries which it claims have a default risk of 50% or higher in the next 5 years. Which means a probability of at least 1-0.5^9=0.998 that at least one of them will default.

That's a crazily high confidence prediction. What is their track record? What did they predict 5 years ago and how did those predictions bear out?

[loeg]

To be clear, those countries are: Argentina, Belarus, Ghana, Pakistan, Russia, Sri Lanka, Tunisia, Ukraine, and Venezuela. It would not be shocking if any of those countries defaulted. Also: your math assumes events are independent, but at least the Belarus/Russia/Ukraine events are probably not independent.

Edit: whoops, CFR only gives Russia a 9/10 score, not the full 10/10 score of 50% default probability.

[blitzar]

Iran

[thatguy0900]

I'm not sure a country can survive running out of water no matter how many revolutions they put down

[blitzar]

> more politically stable than the US

[kavalg]

But I am having a hard time identifying this union/nation. Unfortunately, it feels like the EU is set on a downward trajectory.

[coredev_]

I'm a bit baffled by this - are you saying that you can't identify a single market in the whole world that is worth to invest in & stable except US?

Also I don't see that EU as a whole is on a downward trajectory, there are a lot of areas that are super strong, one being the defence industry.

US on the other hand - who wants to invest in or trade with them when they treat the rest of the world (including close friends) as shit.

[kasey_junk]

You can’t invest in EU sovereign debt though, only the constituent countries.

The problem is that US treasuries have a bunch of features that can’t be replicated because of the size of the US economy. The only choice that comes close is China whose bonds are too illiberal to trade the same (and China has no interest in liberalizing them).

[jacquesm]

You can actually, but the volumes are too low to absorb a massive sell-off of US treasury paper.

[kasey_junk]

It’s not just that the market isn’t deep enough. The current incarnation of EU bonds are not secured the same way typical sovereign bonds are. And they sort of can’t be without the member states ceding more sovereignty.

We’ll see if the EU member countries can approve a framework for bonds that are closer to a treasury in its guarantees, I’m skeptical but it could happen, but they don’t exist right now.

[toomuchtodo]

So the EU should issue more volume and establish a strategy to start rotating from US debt to EU debt. No one is calling for dumping $8T of treasuries on the market overnight; it's entirely reasonable to start issuing Euro debt and communicating the expectation to start selling down US treasuries to European entities that hold them.

"Plan the work and work the plan."

[loeg]

Not "worth to invest in," just the higher criteria GP asked for: "a more politically stable nation state." It has to be strictly more stable than the US, not just investable.

[piva00]

Switzerland is usually the gold standard for politically stable.

[kavalg]

In the context of sovereign debt, yes. I don't even feel that that the US is stable enough. Of course, everyone sees the world through their own eyes, but in my world, the EU has been going down post-covid in terms of e.g. purchasing power, industrial base, business opportunities for the small/medium business. The defense industry is strong, because it is currently needed and funded, but how long can that be sustained?

[tick_tock_tick]

I mean there is a second almost if not more critical requirement which is has a big enough and liquid enough debt market to function like US treasuries.

> Also I don't see that EU as a whole is on a downward trajectory

That's an extremely contrarian take that you can't justify with EU defense did good for once in it's life. Maybe we'll see something from the EU but remember the USA and EU GDP were basically identical 10 years ago now the US is 50% bigger.

Seriously in 2008 the EU had a bigger GDP and now is a fraction of the USA and member nations have done basically nothing to fix the core issues that left them behind.

> US on the other hand - who wants to invest in or trade with them when they treat the rest of the world (including close friends) as shit.

Sadly it doesn't really matter about a "want" it's a need at this point unless people are going to cut off their arm and collapse their own economies they don't really get a choice.

[coredev_]

Fair, but a bit slower growth than US is not a downward trajectory. Also there is currency effects involved.

Isn't US injecting a lot of loaned money into the economy in a rate that might not be sustainable long term? Their debt-to-GDP ratio is way higher than EUs?

[blitzar]

> What are some realistic alternatives to US markets here

There is nothing particularly interesting or sexy about US treasuries. You could replace a holding of $8bn to $80bn with equivalent or better rated bonds in a half hour or so.

Replacing that sort of allocation of stocks or commodities would be way harder as returns on those assets are not as simple as "pays a 4% coupon each year" - finding an equivalent of Apple or Nvidia is not a trivial task.

[SilverElfin]

It depends on the goal. People buy bonds to play a certain role in their overall investment strategy. China and India have been quietly selling American bonds and focusing on gold / silver / etc. BRICS has also talked for a while about forming their own shared virtual currency but that is further away. You can buy other assets as a store of value too.

[downrightmike]

Same thing that happened to Spain after the New World gold and silver came in, Inflation (limited local supply to spend on and so prices raise) and debt payments, ultimately leaving Spain poor.

[tick_tock_tick]

There aren't any it's why the US takes in such crazy flows.

[zrn900]

> What are some realistic alternatives to US markets here?

It seems to be precious metals. And at this point in time, especially silver. Even Indian government seems to be stockpiling silver.

[stevenwoo]

At first I was leaning toward FGLD but didn't consider that current admin would blow up everything US, there are European alternatives to FGLD that OP might want to investigate that have physical metal reserves (there are many alternatives that represent various tiers of involvement in mining versus just holding precious metals, I'm speculating OP does not want to possess precious metals themselves).

[geoka9]

There's KILO if you're cool with your bullion stored at the Royal Canadian Mint.

[defrost]

A lot of mints about the globe offer remote purchase and local storage, eg: Perth Mint in Australia - https://www.perthmint.com/invest/information-about-gold-and-...

Physical is great if you like Kangaroos, Koalas, Emus, Dragons, Snakes, Koi, etc.

They really need a Quokka: https://www.perthmint.com/shop/bullion/bullion-coins/

[munk-a]

Well, if we're talking about the value of the underlying assets - then I imagine you have all your savings in gold because the PE ratios in the US stock market are already absolutely insane.

If you're trying to escape an expected upcoming crash you don't necessarily need to look for growth but instead stability. Precious metals are always popular but simply shifting a portion of your money into an index fund of a different stock exchange should help minimize your exposure to any catastrophic loss.

This is, of course, not financial advice.

[rixrax]

Canada?

[heathrow83829]

i've wondered this myself. I thought that everyone was selling bonds and just buying equities, gold and bitcoin. isn't that only game plan? bonds aren't investible anymore for anything more than 5 year time horizon.

[thatguy0900]

Bitcoin is going down, wherever they're fleeing it's not that