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Morningstar article opines that “Autocracy Is a Bad Investment”
Russia, China highlight the need to consider “regime risk.” Author Tom Lauricella contributed this article on March 8, 2022. It seems particularly relevant today. Something to think about.
Using Russia and China as prime examples a few years back, perhaps it strikes a cord with autocratic supporters here in the US. Anyway, returns in those countries' markets had suffered as a result of heavy handed leadership, higher risk of war, corruption, human rights abuses, etc.
Much of it seems like common sense.
"There's also the lack of transparency in autocratic or authoritarian regimes."
"Morningstar's Hale thinks that with investors being burned in Russia and China, perhaps awareness of regime risk will grow among investors. That could extend to countries such as Turkey and Hungary. "I think it will be considered more prominently than it has been in the past couple of decades," he says."
Well, the (referenced / later linked) 2022 article talks about Russia and China. The underlying message is to avoid investments in such autocratic regimes. If it makes any comparisons to the U.S. I missed it. I agree that investing in Russia and China is very risky. I won’t. So, is the real purpose of posting this to draw comparisons to the U.S.? I think that was the intended purpose.
If so, I’m not sure you (or Morningstar) should be advising readers not to invest in the U.S. It encompasses about 60% of all the stocks (market cap) in the world. Japan is a distant second. The U.S. dollar is considered the global reserve currency, so strong that all others are measured against it. The U.S. economy by most measures is the strongest in the world. Do you really want to tell people not to invest in the U.S.?
This reminds me of 90% of the content in the OT section. While I respect everyone’s right to hold and voice political opinions, it isn’t what I visit the board for. Let’s focus on making money here. If you don’t think the U.S. is investable now, where are you investing? In some foreign stocks? A foreign currency? A cookie jar? I’d really like to know where you think people should invest - if not in the U.S. Some actually read and take seriously the advice proffered here. It would be a shame if they sold all their U.S. holdings out of irrational fear or worse yet, stopped investing completely.
I doubt anybody is selling their US holdings based on a thread at MFO - hope not.
Maybe the question is whether diversifying internationally makes more sense now as US policies are embracing (stoking?) higher inflation and promoting isolationism.
The US has been perceived as the safest market exchange for years. Some folks on MFO have been hedging a bit recently. Maybe that means buying hedged ETFs or global equity funds or adding single country funds (India, Australia, etc) or short-term bonds.
Picking trade wars that could escalate, claiming other lands (Canada, Greenland, Panama canal), redirecting Palestinians, removing safeguards, hyping crypto, etc. - some of these actions could come back to bite us.....in our wallets.
Can the market ignore these potential headwinds? Is it all just posturing?
We here invest in funds and ETF’s based on a mix of data, intuition and hope. The fund managers invest in securities that make up those funds based on mountains of data that historically they counted on to be accurate. And they counted on more than one federal agency to make sure that data was honest. And an effective SEC to watch over the players. But make no mistake about it,,, the whole thing runs on data. My daughter is medical professional whose work relies on very timely access to FDA data to make sure hospital patients get the EXACT correct medication. Last week that data was shut off. Boy was she stressed. And that was before they let Bobby go wild. What might happen to investing data when Eric becomes the head of the SEC and president musk hollows out the enforcement arm of the investment data police. Not a pretty picture. Sure Fd has his magic secret sauce that always wins and never loses but the rest of us rely on a level playing field and clean data. It won’t be the same going forward. You can bet on it.
LarryB, without going into details, with what i'm hearing from trusted sources about federal data, systems, and security these days, it's a wonder I'm getting any sleep. It's truly disturbing both as a citizen and investor....
Think we are getting the real deal about bird flu,,, about inflation,,, think the quality of prescription drugs will remain the same,,, sorry off topic,,,,Read krugman today.
Definitely investment. According to Morningstar, their main (or only) mission is: "...our mission—to empower investor success...." so must be. Case closed!
Just addressing Trigger. All things that cause one to lose their mind can make them to act similarly. For example, fans of a team that wins a championship riot (burning cars, breaking windows, etc.). A group that feels aggrieved by society also riot. Very different reasons (triggers) but to our eye the result is the same.
Something that Trump did or said recently may have made them giddy. It is like a steroid (or fentanyl, depending on one’s disposition) shot to them. So, his fans can behave the same way they behaved the day after election intermittently throughout the next four years. Reasons can be varied when you have a “Coalition of Single Issue” voters.
One can ignore entirely or go through the trash can trying to figure out what is what.
for those interested in whether evidence can help make money on this theme, there are multiple good interviews from perth tolle, founder of the freedom index etf. of course this is a long-term strategy as regimes tend to move away\towards autocracy over (usually) long periods, despite the positive feedback loop beyond certain thresholds. (FYI, america swings within #10 and #20, which indicates home bias and liquidity overwhelms all other investment decisions)
autocracy themes appeal to market timers, as they seem rather overconfident in regards to inter-nation geopolitics such as china invading taiwan, trump acquiring greenland\gaza, etc.... something like regionalization of global trade, which affects dozens of nations jointly, seems a much more reasoned higher level abstraction.
@a2z. I think that many of us see rise of a dangerous autocracy as more of an existential threat to the way of American life and NOT AS AN INVESTABLE THEME TO HELP MAKE MONEY! Autocracy is not a factor to invest in,,, it’s a threat to fear.
i personally agree, but this is ultimately an investing forum. and in such, the 2 most hackneyed phrases are : ' i am here to make money' 'i am for anyone\anything that lowers my taxes'
can you believe there exists anti-ESG funds? some people are actually against good governance in their underlying companies. as with the above example, i simply wanted to point out free and stable societies are a sensible (evidenced) theme for making money via equity, if that happens to be an abstraction one could grasp.
many of these points flop on crypto and mkt timing investors, especially the lucky ones. i dont see the 'trump trade' as anything more than mkt timing based on pro-autocracy, and 2016-2020 was such but to a lesser degree.
Comments
Please use the off topic forum.
https://www.morningstar.com/stocks/autocracy-is-bad-investment
Using Russia and China as prime examples a few years back, perhaps it strikes a cord with autocratic supporters here in the US. Anyway, returns in those countries' markets had suffered as a result of heavy handed leadership, higher risk of war, corruption, human rights abuses, etc.
Much of it seems like common sense.
"There's also the lack of transparency in autocratic or authoritarian regimes."
"Morningstar's Hale thinks that with investors being burned in Russia and China, perhaps awareness of regime risk will grow among investors. That could extend to countries such as Turkey and Hungary. "I think it will be considered more prominently than it has been in the past couple of decades," he says."
If so, I’m not sure you (or Morningstar) should be advising readers not to invest in the U.S. It encompasses about 60% of all the stocks (market cap) in the world. Japan is a distant second. The U.S. dollar is considered the global reserve currency, so strong that all others are measured against it. The U.S. economy by most measures is the strongest in the world. Do you really want to tell people not to invest in the U.S.?
This reminds me of 90% of the content in the OT section. While I respect everyone’s right to hold and voice political opinions, it isn’t what I visit the board for. Let’s focus on making money here. If you don’t think the U.S. is investable now, where are you investing? In some foreign stocks? A foreign currency? A cookie jar? I’d really like to know where you think people should invest - if not in the U.S. Some actually read and take seriously the advice proffered here. It would be a shame if they sold all their U.S. holdings out of irrational fear or worse yet, stopped investing completely.
Maybe the question is whether diversifying internationally makes more sense now as US policies are embracing (stoking?) higher inflation and promoting isolationism.
The US has been perceived as the safest market exchange for years. Some folks on MFO have been hedging a bit recently. Maybe that means buying hedged ETFs or global equity funds or adding single country funds (India, Australia, etc) or short-term bonds.
Picking trade wars that could escalate, claiming other lands (Canada, Greenland, Panama canal), redirecting Palestinians, removing safeguards, hyping crypto, etc. - some of these actions could come back to bite us.....in our wallets.
Can the market ignore these potential headwinds? Is it all just posturing?
Oh dear, did someone trigger FD1000 today?
LarryB, without going into details, with what i'm hearing from trusted sources about federal data, systems, and security these days, it's a wonder I'm getting any sleep. It's truly disturbing both as a citizen and investor....
Something that Trump did or said recently may have made them giddy. It is like a steroid (or fentanyl, depending on one’s disposition) shot to them. So, his fans can behave the same way they behaved the day after election intermittently throughout the next four years. Reasons can be varied when you have a “Coalition of Single Issue” voters.
One can ignore entirely or go through the trash can trying to figure out what is what.
for those interested in whether evidence can help make money on this theme, there are multiple good interviews from perth tolle, founder of the freedom index etf.
of course this is a long-term strategy as regimes tend to move away\towards autocracy over (usually) long periods, despite the positive feedback loop beyond certain thresholds. (FYI, america swings within #10 and #20, which indicates home bias and liquidity overwhelms all other investment decisions)
autocracy themes appeal to market timers, as they seem rather overconfident in regards to inter-nation geopolitics such as china invading taiwan, trump acquiring greenland\gaza, etc....
something like regionalization of global trade, which affects dozens of nations jointly, seems a much more reasoned higher level abstraction.
i personally agree, but this is ultimately an investing forum.
and in such, the 2 most hackneyed phrases are :
' i am here to make money'
'i am for anyone\anything that lowers my taxes'
can you believe there exists anti-ESG funds? some people are actually against good governance in their underlying companies.
as with the above example, i simply wanted to point out free and stable societies are a sensible (evidenced) theme for making money via equity, if that happens to be an abstraction one could grasp.
many of these points flop on crypto and mkt timing investors, especially the lucky ones.
i dont see the 'trump trade' as anything more than mkt timing based on pro-autocracy, and 2016-2020 was such but to a lesser degree.