Stocks go down and down and down some more

[The_Polymath]

This is a big deal. I am also seeing the same views in the UK. The US is becoming an emerging market in terms of political and economic stability.

Some of the world’s biggest pension funds are halting or reassessing their private market investments into the US, saying they will not resume until the country stabilises after Donald Trump’s erratic policy blitz. The moves underscore how big institutional investors are rethinking their exposure to the world’s largest economy as the US president’s trade policy upends markets, adding pressure to America’s private capital industry which is under increasing liquidity strain. Some top Canadian funds are backing away from taking on more US private assets because of geopolitical concerns and fears they will lose tax breaks on their American investments. Canada Pension Plan Investment Board, which has C$699bn ($504bn) in assets, is among those considering its approach.

Trump chaos prompts top Canadian and Danish pension funds to cool on US

[Cooke]

@The_Polymath

Some top Canadian funds are backing away from taking on more US private assets

Yes, the traditional view of the US being the best long term market may be changing.

I have a call on Tuesday with our pension fund managers (one of the Maple 8 investment managers) and have asked in advance how their long term view on US investments has changed.

[Macroman]

It’s been pretty well established that having a trade surplus and being seen as an attractive investment venue are goals that are in conflict. Being an attractive investment venue drives up the value of your currency which in turn makes exported goods more expensive and imports cheaper.

It’s apparent that the balance of trade is more important to Trump than being seen as an attractive investment. Seen in this light it’s easy to see why Trump might view destabilizing the US economy as an acceptable move.

In practice, though, there are many difficulties with Trump’s approach.

1. It will require huge investments to build the factories that would produce good to replace those that we import. Who will commit those investments if the US is not an attractive investment venue.
2. The US has a labor shortage and US policies limiting immigration make this situation even worse.
3. The US national debt needs to be financed, if investors no longer see the US as an attractive place to invest the US debt financing cost will rise.
4. With tariffs changing every other day, investors and businesses will not have the confidence to plan and invest for the future.

[EimonGnome]

I’d add one little thing.
Political risk when considering a foreign investment is basically about how much you can rely on the rule of law to protect your property rights. Trumps behavior casts doubt there. Due process appears to be optional now. Just spitballing here, but I’d expect a 25 to 50 bp bump on yields. And that’s all U$D assets, not just govt debt.

[Cooke]

Only a 4% bump in Apple stock when I last checked so will not sell my son’s holdings yet.

[An_actuary]

And yet the rate of people buying houses they couldn’t afford went up when rates were low

[An_actuary]

I’m not sure low net worth people never spend their money on things they shouldn’t be buying

The frequency of tattoos and multiple pets is sometimes >0

Not to mention betting and alcohol

[knoath]

Are you using the avocado toast argument?

Millionaire tells millennials: if you want a house, stop buying avocado toast

[An_actuary]

I suspect having money troubles because of buying a house you can’t afford was a more common occurrence than having money troubles because you were buying avocado toast.

I also suspect yearly spending per capita on tattoos is more than yearly spending per capita on avocado toast.

[The_President]

Well, it wasn’t so much that people bought a house they couldn’t afford, it was they bought a house in a way that they could afford to walk away from.

[SredniVashtar]

@An_actuary

And yet the rate of people buying houses they couldn’t afford went up when rates were low

Housing is different because people rely on experts to tell them what they can “afford”, and the experts reference interest rates. Nobody asks an expert if they can afford a payday loan.