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US Implosion


SharperDingaan
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To outsiders, the recent videos and reactions to the race related violence in the US, are very concerning.

Covid-19 continues to hobble the economy, it is 5-months until the US election, the US is experiencing its worst race relations since 1968, Trump is trailing badly in the polls, there are now 8 pm curfews in major US cities, and musings of invoking the Insurrection Act.

 

The Insurrection Act is martial law, it seldom ends well for anyone, and it is right out of the Dictators Handbook.

Yet there has been silence on the potential investment effect of all this on the COBF board?

 

https://www.cbc.ca/news/world/trump-protests-governors-call-1.5593413

https://abcnews.go.com/Politics/advantage-biden-risks-trump-disapproval-grows-poll/story?id=70962322

https://www.amazon.ca/Dictators-Handbook-Behavior-Almost-Politics-ebook/dp/B005GPSLHI 

 

To those who live in these cities under curfew, or in the US - does the local/national economy get a lot worse before the elections?

The civil liberty expectations (if any), should Trump not exit 'peacefully' if the Republicans lose?

 

'Cause at the moment the smart bet is to assume implosion - and even the EU looks like the better investment option.

Asymmetric short bets on worsening US systemic failures, negative interest rates, and collapsing civil order.

 

SD

 

 

 

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The USD has been the world's reserve currency because of a stable political system (or correct me if that is wrong).  So it would stand to reason that it should fall in value, no?

 

Actually, the USD has been falling for most currency pairs I am watching like EUR.USD, GBP.USD, MXN.USD and USD.CAD after peaking around the nadir of the crisis on 3/23. This seems to have accelerated about 2 weeks ago. Maybe it is normalization and we just get back to pre- COVD Levels or it is concern about the US becoming unhinged is hard to tell.

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"PLEASE MOVE THIS THREAD TO THE POLITICS SECTION."

 

Here we go again. I started a similar thread a month or so and it was moved to the Political section.

 

I would maintain that investors who think that the current problems in the US are simply a political issue and may not have a major impact on business and investments have their heads stuck securely in the sand.

 

If the US is descending into anarchy or a dictatorship, does any investor in their right mind not think this will have a major impact on their investments?

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This is not a political question, it is an economic one.

Simply because  what might happen within the US over the next few months, will very likely have a material impact on your full-year investment performance. Could care less about the drivers, other than we have to deal with them. The aim is to flush out the likely economic impacts, their direction, and the potential inflection points that would impact timing.

 

Reluctance to speak to it, suggests unfettered downside should things not work out.

It also implies that internal dynamics are a lot more adversely volatile than reported, strengthening the bear case.

 

Look around you.

Do you really think that ALL those laid off will be back at work by Oct-31? AFTER their benefits have run out? Or is it a lot more likely that there will be additional rioting, as there has been everywhere else in the world when poverty and oppression boil over. The New York unemployment rate was 13% as at Apr-15 (higher than the Great Recession) and this is before the May net addition. 

https://www.forbes.com/sites/mayrarodriguezvalladares/2020/04/26/new-york-state-unemployment-rate-is-at-highest-level-since-the-great-depression/#38164b2276f2

 

Sure, it's a hard conversation.

But your portfolio will thank you for it.

 

SD

 

 

 

 

 

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This is not a political question, it is an economic one.

 

Bingo, but some still stick their head in the sand and think the unrest in the US doesn't effect them. That is some one else's problem.

 

In the thread THE ELEPHANT IN THE ROOM I tried to make the point that what is occurring in the US may have a major economic impact and that is NOT necessarily political. 

 

And for wabuaffo's info I would suggest that the impact of the following just might effect him at some point as the US looks more and more like a third world country.

 

1. A disease is allowed to ravage the country killing 110,000 citizens and accounting for 30% of all worldwide deaths.

 

2, There is an out of control, military style police force that has a serious racial bias.

 

3. Citizens are rioting in the streets in most of the major cities and in every state.

 

4. Looting and fires is a nightly problem in many cities and throughout the country.

 

5. Rather than try to quell the unrest the President of the country criticizes individual states for not being tough enough on their citizens.

 

6. The president of the country is forced to take refuge in his basement for safety from rioters.

 

7. We have a populist leader telling the citizenry that the free press is fake news and that they should get the truth from him directly.

 

8.  The president has gone out of his way to replace nearly all the heads of government departments with people who swear allegiance to HIM personally - rather than to the country.

 

9. The justice minister directs the courts not to prosecute the President's friends

 

10. The President encourages state governors to deploy the military against its citizens

 

11. Military called in to protect the President’s residence and headquarters from citizens

 

12. Peaceful protestors dispersed by military using rubber bullets and tear gass so President can hold a photo op in front of church to the disgust of the bishop and church parishioners.

 

And this is the leader of the free world?

 

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Question is how/why is the market essentially unchanged?

 

Anticipation that these riots will go away in a week?

Or is Comrade Market missing something?

 

Where else would you put money right now besides US equities? Sometimes the simplest explanation is the best.

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From my perspective, one ‘investing question’ is ‘are we at an inflection point with race relations in the US?’ My guess is no. The most likely outcome is, like past demonstrations, a slow return back to usual.

 

Is there a chance that the current situation could morph in an unpredictable direction? Yes. But i would assign it a low probability (although a little higher than 2 weeks ago).

 

Could the current situation cause electoral damage to Trump and Republicans In Nov? Not likely. Most voters have picked their teams and are not likely to change their mind regardless of what happens.

 

 

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The graph on "vote preference by county-level COVID-19 cases" is very interesting. So far the overwhelming preference is for Biden in areas affected by COVID-19. To some extent that is just an artifact of time. COVID-19 hit the coasts and large metropolitan areas first. As the virus almost certainly starts to decimate the hinterlands, the preference for Trump may change in those locations.

 

States like Alabama are now topping the list of places to be concerned about.

 

https://www.covidexitstrategy.org/

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This is not a political question, it is an economic one.

 

 

To be fair, it is a political question and an economic one.  Many political questions are economic ones as well.

 

Trump threw away a huge opportunity to bring the nation together and get behind a reform of our obviously broken justice system to instead act like a tyrant and call for more government violence. Sad.  I'm not excusing the violence of the mob, but government violence is what angered the mob to begin with.

 

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It's pretty amazing how unpopular Trump is in the rest of the world. Pretty much tied with Xi, and less popular than Putin according to the polls linked below. Obama by contrast was wildly popular, so it is not solely tied to opinions of the USA.

 

https://www.pewresearch.org/fact-tank/2020/01/08/how-people-around-the-world-see-the-u-s-and-donald-trump-in-10-charts/

 

https://www.pewresearch.org/global/2020/01/08/trump-ratings-remain-low-around-globe-while-views-of-u-s-stay-mostly-favorable/

 

Those who support Trump in the USA seem to either be ignorant of this, not care about it, or actually think it's a good sign. My impression is that if you punch somebody in the nose enough, eventually they punch you back. A lot of very intelligent Trump supporters seem to have never learned a lot of the lessons you'd hope someone would learn in Kindergarten.

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It's pretty amazing how unpopular Trump is in the rest of the world. Pretty much tied with Xi, and less popular than Putin according to the polls linked below. Obama by contrast was wildly popular, so it is not solely tied to opinions of the USA.

 

https://www.pewresearch.org/fact-tank/2020/01/08/how-people-around-the-world-see-the-u-s-and-donald-trump-in-10-charts/

 

https://www.pewresearch.org/global/2020/01/08/trump-ratings-remain-low-around-globe-while-views-of-u-s-stay-mostly-favorable/

 

Those who support Trump in the USA seem to either be ignorant of this, not care about it, or actually think it's a good sign. My impression is that if you punch somebody in the nose enough, eventually they punch you back. A lot of very intelligent Trump supporters seem to have never learned a lot of the lessons you'd hope someone would learn in Kindergarten.

 

I don't like Trump, but I also don't care what anyone else thinks.

 

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Question is how/why is the market essentially unchanged?

 

Anticipation that these riots will go away in a week?

Or is Comrade Market missing something?

 

Where else would you put money right now besides US equities? Sometimes the simplest explanation is the best.

There's cash...

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quickly turning into politics again...

 

I agree. The topic has merit, but the title post should be redacted to make it factual and less loaded.

 

While I don’t mind bashing Trump, we have enough threads to do so already and it Isn’t really productive in terms of investing.

 

My take is that there will be relative winners from this, and there will be losers.

Winners might be: Taiwan, South Korea, Skandinavien countries ( I would include Sweden here ), Germany, Austria Netherlands, Switzerland, Poland, Czech Republic , Portugal etc., Vietnam

 

Losers:

UK, Spain, Italy , Brazil and the rest of South America ,Russia , India, Arabia, most likely USA, Belgium

 

Wildcard: China

 

Of course it’s anyone’s guess and it is really not clear that the US is really a relative looser here ( never underestimate second order effects) but it seems risky here to expect continued outperformance when matrix seem to indicate otherwise.

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Question is how/why is the market essentially unchanged?

 

Anticipation that these riots will go away in a week?

Or is Comrade Market missing something?

 

Where else would you put money right now besides US equities? Sometimes the simplest explanation is the best.

 

If one was expecting a real breakdown then perhaps Yen, Swiss Franc, TLT, IAU, SLV, Bitcoin, maybe some levered, crappy miners - Hecla mining, etc.  Emerging Market value stocks and some English dividend payers (I bought British Land yesterday).

 

Thanks

Lance

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Think we've learned all that we're going to - no objection if the thread now moves to the politics section.

 

It is hard to see how continuing rioting does not negatively effect the economy, as this is not a 'once and done'.

Maybe enough to tip the balance into negative interest rates in the US, and/or a US military action somewhere in the world.

 

It is hard to see how reserve capital does NOT now flow OUT of the US. Reserve status relies in part on maintaining the confidence of the global market, and there are a lot of other currency and commodity choices. Prudence. 

 

It is hard to see anything but rising economic volatility, as we close in on the election. Spiking materially up/down on the the election result, dependent upon who wins. All actionable investment directions.

 

The topic clearly hits a nerve, and folks would prefer not to talk about it.

We respect that, but would caution that ignoring symptoms - doesn't mean that the cause suddenly went away.

 

SD

 

 

 

 

 

 

 

 

 

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