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Of course a country’s stock market will perform well as that country ascends to become the world’s dominant superpower. The question is whether the power and i

by danhak 4y ago

Of course a country’s stock market will perform well as that country ascends to become the world’s dominant superpower. The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150. To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior.

radiator 4y ago
Actually it looks like the US is already on the way of demotion from a global superpower to a regional power. There is no single country which comes as a replacement, but a multipolar world order instead. Many countries, mostly asian are emerging.
gumby 4y ago
Who cares about returns over the next 150 years? Even half that is excessive. Someone investing at age 18 might care about the subsequent 50 years. It's going to be a long time before some other country takes over the "reserve currency/investment market of last resort" position the US currently has. No other market is even close to providing the deep liquidity and rule of law the US market has over a wide variety of instruments. Sure, someone will eventually take over that role, but there are no candidates today. And, to your point: it was clear by the late 19th century that the US dollar would displace Sterling, but it took another half a century for that to happen. On the scale of current human lifespan, you can assume it won't happen at all.
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- hammock 4y ago
  100-year bond spot rate: https://alfred.stlouisfed.org/series?seid=HQMCB100YR&utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=alfred https://alfred.stlouisfed.org/series?seid=HQMCB100YR&utm_sou...
- ganonm 4y ago
  Keep in mind that the present value depends somewhat on the discounted future earnings, which by definition extends to the end of time. That being said, the associated time discounting heavily reduces the impact of earnings envisaged say 100 years from now (a 5% discount rate would mean ~13k USD in 100 years is worth about 100 USD now, and that's probably generous given historic market returns). So, the US doing extremely well 100 years from now vs. the US doing very badly 100 years from now could have a non-trivial impact on the perceived value of US assets. I suspect that the large uncertainty about what the world will look like in 100 years means there is just some sort of seldom changing value baked into assets to account for this, but it nonetheless exists, and could change if there was some huge geopolitical shift. And before you mention anyone on earth would be dead in 150 years, yes that's true, however you can always sell it to someone later on who will be alive in 150 years (or sell it to someone who can later sell it to someone etc. etc.).
  - mint2 4y ago
    Is that actually how it works? Money has to go somewhere regardless of future. Whatever looks the least bad at present is in demand, regardless of what the returns are. Inflation was above tbill rates yet people bought because they don’t have better options. It’s like food. Food in 100 years does not help the need for food now.
    - kqr 4y ago
      Food perishes faster han equity indices. If there was a futures market in foodstuffs that basically keep forever and is cheap to store (honey?) you would see that the expected price of that food in 100 years would have some effect on the current price.
  - nonethewiser 4y ago
    In theory maybe, but I'm not sure this is right. The further out you go the more worthless expectations on returns become. Who actually has high confidence in a price model projecting 100 years out? What organization has the conviction to execute on this 100 year plan instead of signals with real correlation for returns over 1, 5, 10, 20 years?
- itsoktocry 4y ago
  >Someone investing at age 18 might care about the subsequent 50 years Those 50 years are part of the next 150, and are no easier to forecast. Most market projections are for numbers ~7% annually, but periods worse than that would drastically alter investing plans, and hence social infrastructure planning.
  - JustSomeNobody 4y ago
    That is why https://www.firecalc.com/ https://www.firecalc.com/ exists. The idea is that you save enough that over all the possible starting years, you would end up with money instead of broke, for the length of time you think you'll be alive.
    - kudokatz 4y ago
      It's my understanding that firecalc uses only US data. Japan has "lost decades" of price-weighted, non-dividend returns that are flat since 1988 (Nikkei 225). Seems worth considering that some version of this has some future probability of happening in the US and hedging that. Another similar and popular US-data-only tool that is fun to play with is cFIREsim: https://www.cfiresim.com/ https://www.cfiresim.com/ (Edit: of course, US companies have non-US revenues - helps out a bit)
      - JustSomeNobody 4y ago
        Yes, that's a risk. If that happens, most of us simply won't ever retire. Yay capitalism?
  - paganel 4y ago
    > Most market projections are for numbers ~7% annually, Too lazy to web search for an answer, but are those real returns? (i.e. inflation-adjusted).
- kingkawn 4y ago
  Your assumptions presume that the pace of historical developments is the same as it was in the late 19th century, which seems clearly untrue. The rate that these things transform today may be breathtaking.
- MuffinFlavored 4y ago
  > Someone investing at age 18 might care about the subsequent 50 years. With a gradual decline in exposure to equities over time. https://www.google.com/search?q=what+asset+allocation+should+i+have+by+age https://www.google.com/search?q=what+asset+allocation+should...
  - ideamotor 4y ago
    This is terrible advice. It’s more complicated than this and depends on your situation (age, social security, pensions, tax deferred account timing) but generally you want less stocks when you enter retirement but gradually going back up in retirement.
    - ambicapter 4y ago
      Why going back up in retirement?
      - ideamotor 4y ago
        I'll respond in more detail later but here is a paper that examines it: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2324930 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2324930: "Accordingly, as the results support, for those looking to maximize their level of sustainable retirement income, and/or to reduce the potential magnitude of any shortfalls in adverse scenarios, portfolios that start off in the vicinity of 20% to 40% in equities and rise to the level of 60% to 80% in equities generally perform better than static rebalanced portfolios or declining equity glidepaths. Though as the results also reveal, in particular scenarios where the equity risk premium is depressed, the optimal glidepath includes less equity, and in scenarios where the goal is to withdraw at a level that stresses the portfolio and its expected growth rate, higher overall levels of equity are necessary; with such high-risk goals, having a relatively high-risk portfolio, with the danger that entails, is still the optimal solution (and for clients who cannot tolerate that level of risk, the ideal solution is to choose not a less risky portfolio, but a less risky and aggressive goal). Nonetheless, for everyone else looking to maximize a sustainable income level, or determine the amount of assets to support a (reasonable) target income level, rising equity glidepaths appear to both maximize the likelihood of success and sustainable income and reduce the magnitude of shortfalls when they occur." There is a a lot of discussion of this here: https://www.bogleheads.org/index.php https://www.bogleheads.org/index.php. Also, this article: https://www.kitces.com/blog/should-equity-exposure-decrease-in-retirement-or-is-a-rising-equity-glidepath-actually-better/ https://www.kitces.com/blog/should-equity-exposure-decrease-....
- zie 4y ago
  > Someone investing at age 18 might care about the subsequent 50 years. I get what you are saying, but your math here is a bit off. 50+18 = 68. People generally can live longer than 68 years old, If we go out on longevity and assume people can live to 100 or 120, then it's more like 100 years. Your next thought is, but people will retire before/around 68, fair enough, but they stay invested generally the entire rest of their lives. So if the US dominance ends in the next 100 years, then today's teenagers might need to care about it. People in their 30's or 40's probably don't though. The next 150 years, you are right todays teenagers might not need to care, unless many/all of our aspirational longer living goals happen.
  - purpleblue 4y ago
    No, this is poor investment advice. The closer you get to retirement, the more your money should be in extremely short term, non-volatile investments like T-bills. You should not be invested in the stock market, because the risk is too high that you could lose a lot of your savings just before you really need it.
    - zie 4y ago
      I never talked about asset allocation, you did, but going 100% equities to 0% equities is not reasonable either. Yes you probably want some bonds, but you still need some equities. The default answer is something around 20% to 60% equities in retirement.
      - FooBarBizBazz 4y ago
        Everybody says this, but stocks and bonds go up and down together now. I guess it's less an issue if you're holding bonds to maturity and laddering, but that might just be psychological, not sure.
        zie 4y ago
        Not really, they are somewhat correlated, but they are not completely correlated. Duration has a lot to do with it as well. Look up Long Term Treasuries(TLT/EDV are funds that hold these) and compare that to US stocks like VTI. Bonds are like buying future cash-flow, stocks are about future growth. i.e. if you buy a bond that's paying you $25k/yr, then you will get that $25k/yr regardless of what happens to the NAV until maturity(and/or bankruptcy obviously).
- time_to_smile 4y ago
  Or we see a contraction in globalization in general in which all economies shrink. It's entirely reasonable that we could enter a period of long, slow decline across the board. Especially as we continue to push the limits of natural resources and global supply chains. For example suppose the US continues to move its push to return chip manufacturing to the US. This might mean both that US chip manufactures have a more healthy future than other more fragile tech companies and that they shrink in size. We could see a return of manufacturing to the US which leads to continued employment in US labor for while also meaning that labor force gets paid much less. We're already starting to see evidence of this happening. The concerning thing is that I'm not at all sure that our incredibly debt dependent global economy, which assumes future growth, can really handle a gradual contraction to a more sustainable economic structure. Either way, assuming up is the only way for the market to go is a very naive assumption, but one nobody is happy questioning.
  - vl 4y ago
    >We could see a return of manufacturing to the US which leads to continued employment in US labor for while also meaning that labor force gets paid much less. Interesting! Why is it happening? Shouldn’t labor earn more in this scenario?
    - bluGill 4y ago
      Depends. Manufacturing in the US implies high automation. For those who maintain the machines there is a lot of money, but there are far less jobs and in turn far less in total in labor. Though I suspect there is more need for such labor than people who can do the job. Hard to say, but there are a lot of things we haven't automated yet.
  - verdverm 4y ago
    > a gradual contraction to a more sustainable economic structure Why do you assume that it requires a contraction to reach a sustainable economic structure? What prevents the economy from growing for the foreseeable future while also becoming more sustainable at the same time?
- dalbasal 4y ago
  Why is "reserve currency" the central issue? Also, the US stock market, US Dollar and US economy/gdp aren't hard linked to one another these days. The companies listed can be selling to non US markets, employing internationally, founded internationally. They're just listing on the US stock market because well.. that's where the stock market is. The US could, in theory, become more or less popular a stock market regardless of its currency's popularity. Meanwhile, both the Euro and RMB have similar size markets backing their currency. Neither one is currently trying to displace the USD. I think the importance of owning the international currency is somewhat speculative.
  - bobthepanda 4y ago
    Yeah, China has already indicated that it would prefer the ability to implement sudden, nearly total capital controls rather than be annoyed with the day-to-day of a reserve currency.
  - malandrew 4y ago
    Stock markets are natural monopolies. Liquidity begets liquidity. What would cause companies to choose other exchanges and what stops the dominant exchanges from adapting to changes that threaten its liquidity advantage. Is there anything stopping the NYSE, Nasdaq or CME/CBOT from handling trades in another currency?
    - gumby 4y ago
      > Is there anything stopping the NYSE, Nasdaq or CME/CBOT from handling trades in another currency? It would reduce liquidity. Equity prices would fluctuate not only on buy/sell basis but exchange rates. Sure, computers could figure all that out these days but what's the advantage? Overwhelmingly, equity buyers and sellers (not "traders") buy in their local currency because they use the money to live in a local economy. Companies list in other countries for access to those countries' buyers. What would be the point of Shell listing in Euro on the NYSE? They want to list in dollars. Nobody outside Nigeria lists on its exchange but local companies do because local people understand the companies and everything (both their operations and their stock) is in naira. So if you want to be an exchange in a different currency, just buy a local exchange. NASDAQ did try to buy the London Stock Exchange, though I think it fell through.
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- Spooky23 4y ago
  It should give pause to people who think that the stock market is some sort of science. Macroeconomic conditions and policy influence this stuff.
- acchow 4y ago
  How can anyone assume the next 30-50 years of the US economy will be anything like its rise to superpower over the last 150 years.
  - refurb 4y ago
    Sure, but how can anyone assume it won’t be? If you’ve been alive long enough you’ve realize the “end of US dominance” has been in headlines since the 60’s.
- roenxi 4y ago
  1. After what happened to Russia every planner in China has "the US government seizes our assets" as a plausible in the next 50 years. 2. It is implausible that the US will ever pay back its foreign debts in real terms. Anyone who lends to them will end up with less stuff in total. 3. We live in an age of computers and pervasive digital communication; things can happen a lot more quickly these days than in the 50s. 4. There is a consistent trend of dropping energy security in Western countries. This is no time to be forecasting assuming things will happen at a comfortable pace. People should have contingencies ready in case something unprecedented happens. It is tense out there.
  - the_doctah 4y ago
    What kind of contingencies? Money in mattress?
    - roenxi 4y ago
      I've got no particular clue. But if the plan is to assume things happen slowly over 50 years then that is a risky plan. If things play out like in the 1900s, we could see an entire world war play out over 5 years and that'd likely break the US dollar. Or some similar shock. We still don't really understand the impacts of the COVID pandemic and what that is doing in China. > Money in mattress? The response to every crisis the US has had for the last 3 decades is to print and borrow increasingly large amounts money. And they are probably the most responsible fiscal controller around at the moment. If you see that changing for some reason then sure, maybe money under the mattress could help. I don't expect that strategy to change myself, and the last thing I'd want under my mattress is money.
      - bee_rider 4y ago
        What does investing with possible WW3 taken into account look like? Heavy on canned food, bullets, and remote real estate I guess? Assuming nuclear weapons don’t just magically vanish.
      - nonethewiser 4y ago
- newyankee 4y ago
  My understanding is that development in some modern areas is exponential. This is the reason why China grew so fast. So a case could be made for faster timelines. US may not slow considerably but it will stop leading and being the only one.
getToTheChopin 4y ago
Fair point. To add some context though, this data is based on the returns of the S&P500 index. Companies in the S&P500 index are based in the U.S., but most of them earn revenues internationally as well. "Roughly 40% of S&P 500 revenues are generated outside of the U.S., and about 58% of Information Technology company sales were sourced from abroad." Source: https://www.globalxetfs.com/sector-views-sp-500-sensitivity-to-global-factors/ https://www.globalxetfs.com/sector-views-sp-500-sensitivity-... So, the performance of the U.S. stock market in the next 150 years will not rely solely on U.S. specific economic growth.
- MuffinFlavored 4y ago
  I've always wondered, why do American investors get to benefit from companies like Apple? Why does Apple choose to be a U.S. company? We're obviously in competition with other countries globally in terms of getting companies like Apple to give us their tax dollars. I know Apple does this https://en.wikipedia.org/wiki/Double_Irish_arrangement#:~:text=The%20commission%20ordered%20Apple%20to,corporate%20tax%20fine%20in%20history https://en.wikipedia.org/wiki/Double_Irish_arrangement#:~:te.... I just wonder, can they really not find a more favorable country to route the gross of their revenue through?
  - JackFr 4y ago
    The maturity and stability of the US stock market (by which I mean institutional and structural stability rather than price stability) make it the most frictionless, transparent and predictable place to raise equity capital. Add that dollars are also attached to a broad domestic market and the US corporate form is strongly entrenched in a culture of rule-of-law and there's a compelling case to create and maintain your company in the US.
    - MuffinFlavored 4y ago
      > The maturity and stability of the US stock market (by which I mean institutional and structural stability rather than price stability) make it the most frictionless, transparent and predictable place to raise equity capital. The number one way that Apple benefits from this is giving shares to employees as compensation, right? They aren't commonly "financing" projects with stock as far as I understand it. aka, they aren't diluting existing shareholders by issuing fresh shares to take advantage of the share price. Since they aren't doing that, how do they benefit financially from their share price?
nscalf 4y ago
More interesting that power and influence, which is an open question, is demographics. There is little to be done about shifting world demographics. Even if the us stays the premier world superpower, can that offset massive declines in the amount of people producing and consuming everywhere? While the us may actually be okay with shifting demographics (Zeihan has some interesting stuff on this), most major economies are facing rapidly declining populations over the next couple of decades.
- warinukraine 4y ago
  > There is little to be done about shifting world demographics Hmmmm immigration. That's how fast growing powers have always done it.
  - badpun 4y ago
    You can't add 20+ million imigrants to Germany (and that's what's they'd need over the course of the next decade or two in order to avoid demographic collapse) without massive social problems and/or Germany no longer being Germany.
    - ceejayoz 4y ago
      Demographic collapse won't cause "massive social problems and/or Germany no longer being Germany"?
      - badpun 4y ago
        Yes, of course. My point is that they're screwed either way. The time to fix this was 30 years ago.
    - JumpCrisscross 4y ago
      > without massive social problems and/or Germany no longer being Germany This is where America wins. There is no American ethnicity. There may be, historically. But mythologically: no.
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rr888 4y ago
Along with a 50 year bull market in bonds where yields have dropped nearly every year (along with inflation).
- FooBarBizBazz 4y ago
  It's weird how most of the return from bonds comes not from yield but from capital appreciation [1], which happens because yields are dropping. There's something perverse and circular about it: "Make sure you buy your collectible widget today! It'll go up in value, because next year's widgets won't be as good! Prices only go up, because everything's downhill from here!" [1] Actually, is this literally true?
  - rr888 4y ago
    yes it has been true the last 50 years, as market rates go down the existing bonds become more valuable. But it can't continue forever. https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart https://www.macrotrends.net/2016/10-year-treasury-bond-rate-...
  - FooBarBizBazz 4y ago
    About [1]: I'm wrong. If you look at TLT in TradingView, adjusted for "dividends" vs. not, from 2003 to 2019 you see nominal gains of about 150% (with) vs. 40% (without). So most gain is from income. That's ignoring tax. Would also be good to compare to CPI to understand real returns. Or whatever other number seems to be a truer measure of inflation (house prices, for example).
TheFreim 4y ago
> To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior. If things go badly then the money I would have from not investing "mechanically" would probably be as useless as the investments. If everything is going to decline continually it seems the greater reward will almost always be in the investment. This also assumes you only invest in the current world superpower, seeking global diversification would probably be wise if you see a major change in polarity.
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paulpauper 4y ago
The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150. It does not need to . What matters is how much profits large companies are earning. There is no indication that profits are slowing. Even if GDP only grows at 2%/year, if multinationals generate 10% annual profit margins, that is $ that must still go to investors even if GDP growth is much lower. When you compare foreign markets to the US, the US still comes out ahead by almost every metric. There is little indication to suggest this will change. Every problem that the US has, other countries have worse. So relatively speaking ,the US still will be ahead.
nemo44x 4y ago
> The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150. Over the next 150 years I have no idea. But over the next 30-50 then almost certainly. No other country is even close and most seem quite comfortable with the global state of affairs all things considered. USA hegemony has created a stable world where the vast majority of people are far better off than their ancestors. It isn't perfect of course but there's no reason to think anyone else would do better. Especially when compared to the previous tenant, Europe.
hammock 4y ago
I think about this a lot when you consider the world's largest companies today aren't stocks but sovereign wealth funds and oil reserves. Similarly in days past they were other state-owned entities like the East India Company. The S&P 500 is not everything there is to be had...
- FatActor 4y ago
  A long time ago, naive me learned that tech companies also invest their money and that those returns count toward their valuation, and that seems wildly backwards to me, but I'm an engineer, not a financial expert.
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layer8 4y ago
Just invest in a world index. See for example https://curvo.eu/backtest/portfolio/msci-world--NoIgsgygwgkgBAdQPYCcA2ATEAaYoAyAqgIwDsAHMQKwAsxZAnDsQLptA https://curvo.eu/backtest/portfolio/msci-world--NoIgsgygwgkg... —> minimum investment horizon. Of course the whole world could go into a multi-decades-long recession, but then we’ll have much more serious problems anyway.
- Negitivefrags 4y ago
  I always hate this “If it doesn’t work we have much more serious problems” attitude. If the world did go into a multi-decade recession, what “more serious” problems would you have then your investments doing poorly? You might answer things like “ buying food due to shortages” or something, but surely whatever problem you name, being more rich is going to solve it? Now you can invest on the thesis that this isn’t going to happen, but to argue that the whole concept of investment is useless if it does seems very suspect to me.
  - 7steps2much 4y ago
    Different scale of seriousness. If the whole world goes into a recession there is a big difference between food shortages that you can buy your way out of with cash and food shortages that come as a result of societal collapse and money being worthless. Being rich only matters as long as your investments/assets hold any value. If truly serious problems around your investments go to 0, your assets are only worth something as long as you can maintain control of them (police won't be around, nor will judges be) and even then your car will be worthless without gas. It all depends on what meaning a person assigns to "serious" in this context. Personally as long as being rich solves my Problems I wouldn't describe any situation as serious.
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    - paganel 4y ago
      > Being rich only matters as long as your investments/assets hold any value. Also, as long as poorer people are not after you and your properties (and your life, even) through a revolution, which revolution could be caused by world-wide economical and societal crisis (if not a revolution then maybe a civil-war where the rich are of the wrong ethnicity etc)
mypastself 4y ago
Therefore investing mechanically in the whole world might be a safer bet. Other than currency risk, home bias investment never felt like the optimal approach to me, even if your home is the world’s most powerful economy.
nimz 4y ago
Your point is valid - we shouldn't take single-country risk in investing. Assuming you believe the world as a whole will get more productive and value creating, globally diversifying your stocks is the answer. As an example that supports your point, the Japan stock market (Nikkei) peaked in 1989 and STILL has not returned to that high. However, even if you were incredible unlucky and had bought in at the 1989 peak in Japan, if you had an internationally diversified portfolio, you would be OK. E.g. a 30/30/20/20 Jp Stocks/Intl Stocks/Jp Bonds/Intl Bonds portfolio purchased in 1989 at the Nikkei peak would have more than doubled by 2014 (see here: https://www.bogleheads.org/forum/viewtopic.php?t=265807 https://www.bogleheads.org/forum/viewtopic.php?t=265807 and also https://www.afrugaldoctor.com/home/japans-lost-decades-30-years-of-negative-returns-from-the-nikkei-225 https://www.afrugaldoctor.com/home/japans-lost-decades-30-ye...).
- ar_lan 4y ago
  If you continued to invest in Japan throughout that period after, you'd be up today. The only case you were forever screwed is if you really aren't pouring more money into that (e.g. retirement).
- paganel 4y ago
  > Nikkei) peaked in 1989 and STILL has not returned to that high. Also, the FTSE 100 has been almost flat since the financial crisis, so basically just a little over 10 years. It was at about 6300 in the first half of 2013, it's at ~7700 now, a ~22% return over 10 years is nothing to write home about. For comparison the SP500 was at ~2300 in the first half of 2013 vs ~3800 now, a 66% return. And that's after last year's 23% decline.
wintogreen74 4y ago
>> To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior. Maybe, but this describes the investment strategy of pretty much every index-based fund and they've been the big winners over a long time frame. Why do you care what happens to a market 100+ or even 50 years from now?
rsync 4y ago
"The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150." No, I think the question is more subtle ... Will the relative power and influence of the US grow similarly. ... and I think that may be a very good bet. The three closest "competitors" - the Eurozone, China and Japan - are, in their own unique ways, dysfunctional basket cases: Europe's northern savers and taxpayers have to pay for southern workers to retire at 60 ... and southern workers need to eat benefit losses to avoid further (br)exits. This is a not-insignificant economic and cultural mismatch and the results of even minor adjustments are riots in the streets[1] ... or boring, orderly referenda[2]. It is unknown whether the CCP can survive any meaningful slowdown in growth and whether much of the growth of the last 10-15 years (enormous empty cities) was substantive or useful at all. Japan is undergoing civilizational and cultural collapse. So ... while there is much dysfunction - both economically and politically - in the United States, it is an enormous, resource rich country that can exist wholly independently from the rest of the world. It also enjoys absolute control of the worlds oceans and brutally dictates economic and geo politics[3]. In a world of troubled and fraught investments, the US is probably the least troubled and fraught. [1] https://en.wikipedia.org/wiki/Yellow_vests_protests https://en.wikipedia.org/wiki/Yellow_vests_protests [2] https://en.wikipedia.org/wiki/Dutch_withdrawal_from_the_European_Union https://en.wikipedia.org/wiki/Dutch_withdrawal_from_the_Euro... [3] https://en.wikipedia.org/wiki/2022_Nord_Stream_pipeline_sabotage https://en.wikipedia.org/wiki/2022_Nord_Stream_pipeline_sabo...
- cwkoss 4y ago
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  - Supermancho 4y ago
    America and Americans are not the same thing.
  - GalenErso 4y ago
    I am not American, and I think America is a very, very special country. See this article: https://acoup.blog/2022/07/08/collections-is-the-united-states-exceptional/ https://acoup.blog/2022/07/08/collections-is-the-united-stat... > The result of all of this is the bizarre situation that the world’s foremost land power is also the world’s foremost naval power, which is also the world’s foremost diplomatic power, which is also the world’s foremost economic power, entrenched in the high ground of most of the world’s international institutions. One may of course argue that this situation is changing, albeit slowly, but at the moment the contrast is startling: the sphere of Russian influence does quite reach Kyiv (about 150 miles from the Russian border) and the sphere of Chinese influence does not quite reach Taipei (about the same distance, but over water), but American influence evidently reaches both despite the former being 4,300 miles and the latter 6,500 miles away from American shores. > That has never happened before; it may well never happen again. We have seen regional hegemons similarly dominant in their local neighborhoods (the Roman Empire, the Han Dynasty, Achaemenid Persia, etc.) and to lack peers locally, but the United States is the first and only country to have done this on a global scale and to lack true peer competitors anywhere. Even as the ‘monopolar moment’ seems to be coming to an end, the United States’ position as ‘first among equals’ among the ‘great powers’ is historically unparalleled; no state has ever been so clearly without peers influence and power except for maybe – wait for it – the Mongols.
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WeylandYutani 4y ago
Smart people invest globally. I have no illusions that American billionaires care about borders or governments.
lastofus 4y ago
> The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150. > To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior. This is why it's suggested that unthinking mechanical investors invest globally, not just in the US. For example, VT, a single set and forget index fund has 40% international exposure. That's to speak nothing of the S&P 500 companies that do business internationally. https://www.morningstar.com/etfs/arcx/vt/portfolio https://www.morningstar.com/etfs/arcx/vt/portfolio
huijzer 4y ago
> Of course a country’s stock market will perform well as that country ascends to become the world’s dominant superpower. There is probably more at play too. The number of banks, for example, has been declining steadily over time [1] as has the internet allowed single corporations connect to more buyers (nationally and internationally). Just think of all the local stores that Amazon has displaced. [1]: https://www.stlouisfed.org/on-the-economy/2021/december/steady-decline-number-us-banks https://www.stlouisfed.org/on-the-economy/2021/december/stea...
snowwrestler 4y ago
This has the causality backward. The qualities of the U.S. that helped it become a superpower, also help it have a high-performing domestic economy.
ketralnis 4y ago
> The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150. I don't think that's required. Most of these analyses use US stock data because it's so easy to gather compared to international data. The do trends hold internationally, but the magnitudes are reduced. So if you think the US will regress closer to the international mean (and I'd agree) then you can use things like the shape of the bell curve, just not the height. And indeed, this bears out if you look at the markets of the UK or most of the EU. Pretty much any reputable adviser will tell you that that's the consensus, that future returns will probably be lower for the next few decades than they were for the last few. (Usually you see this in the media amplified to a more ridiculous version but that's modern clickbait reporting for you.) There are other possibilities like we could stagnate for 3 decades like Japan. But yes, that's investing, that's the nature of the bets you're taking. I'm having trouble finding the quotes but around the turn of last century British economists were looking at the US's explosive economic growth compared to the UK and attributed it to the US having the equivalent of a sudden injection of capital in the form of a whole continent full of free real estate. That is, they reasoned that the UK's growth was limited to what they could do on their existing, mostly already owned and developed land but the US had more physical space for the balloon to expand into. They reasoned that soon that would happen though and the US would grow to fill that space and eventually its economic growth would slow down closer to the UK's. That clearly didn't happen then. I don't think the lesson is the US is exceptional and will continue to outpace the world forever, but I do think that a lesson is that predicting this stuff is hard and reasonable-sounding ad hoc hypothesis don't always bear out.
pacetherace 4y ago
I find the inflation as a variable very interesting. Countries that don't have strong economies generally tend to have higher inflation. So we may continue to see the stock market continue to rise indirectly due to inflation but the net return would be much lower.
dpweb 4y ago
You can only evaluate returns compared to the risk-free return (ie treasuries) - and favor treasuries cause less variance. Stock market success depends entirely on when in history you got in and got out. When it comes to US dominance over the next century - who knows. I do trust in Fed interventionism and willingness to print money - so that certainly favors stock market investment. Personally I find stock market is too high a variance and I prefer not speculate with money I can't afford to lose. Buffet himself said their biggest peak to trough was 50%. Fine if you're already rich and investing a fund. Not so great if it's kiddos college money.
zitterbewegung 4y ago
I don’t think we were much of a dominant superpower until after World War 2. Lots of Europe was decimated but our infrastructure wasn’t and we also won the Cold War . We had large factories created also. If some other superpower does come around you could just try to find a foreign index fund and adjust your investments.
catskul2 4y ago
I get what you're saying about "mechanically" but "cargo cult" does not work as an analogy here.
ptr 4y ago
Nominal Swedish stock market return 1879-2012: 10.9% arithmetic mean, 9.0% geometric mean. Real return: 7.9%/6.1%. And Sweden isn’t really the world’s dominant superpower. https://www.riksbank.se/globalassets/media/forskning/monetar-statistik/volym2/chapter6_-volume2_140613.pdf https://www.riksbank.se/globalassets/media/forskning/monetar...
- jltsiren 4y ago
  Sweden, Switzerland, and the US are obvious outliers. Their economies have been abnormally stable, because they have not faced revolutions, civil wars, foreign occupations, and other forms of widespread destruction in a long time.
  - ptr 4y ago
    I’m not sure that’s it. Sure, Norway was invaded but it was a pretty “benign” invasion in comparison to what happened to others. Same with Denmark. Would be interesting to see their stock market returns.
dionidium 4y ago
Rumors of our impending collapse have been, let's say, exaggerated. I wouldn't bet against the United States over the next 30-50 years, at least.
dangus 4y ago
I would argue that borders are irrelevant. Large multinational companies generally list on US stock exchanges. For example, Spotify is a Swedish company listed on the NYSE.
bionsystem 4y ago
It's too hard to swallow for most people but you're right. There are significant headwinds coming ahead for most markets whilst productivity gains have stalled. See Robert J. Gordon's paper "IS U.S. ECONOMIC GROWTH OVER? FALTERING INNOVATION CONFRONTS THE SIX HEADWINDS". I really think millenials should consider hedging their bet, maybe even spend 100% of their income.
- Thorrez 4y ago
  How would spending 100% of their income be hedging their bet?
  - bionsystem 4y ago
    I meant "or", either hedge their bet OR spend 100% of their income (or a larger % of their income) beyond some safety cushion.
refurb 4y ago
I’d argue the average person’s investing window is more like 30-40 years, not 150. And even then, you don’t have to be the dominant superpower to see a rising stock market. Plenty of examples of smaller countries who have seen substantial market gains.
guidedlight 4y ago
Agreed. At the turn of the century, Argentina was a similarly prosperous country to the United States. I’m sure given an investment in Argentina’s stock market in 1900, it would have now been lost many times over.

by danhak 4y ago

radiator 4y ago

Actually it looks like the US is already on the way of demotion from a global superpower to a regional power. There is no single country which comes as a replacement, but a multipolar world order instead. Many countries, mostly asian are emerging.

gumby 4y ago

Who cares about returns over the next 150 years? Even half that is excessive. Someone investing at age 18 might care about the subsequent 50 years. It's going to be a long time before some other country takes over the "reserve currency/investment market of last resort" position the US currently has. No other market is even close to providing the deep liquidity and rule of law the US market has over a wide variety of instruments. Sure, someone will eventually take over that role, but there are no candidates today. And, to your point: it was clear by the late 19th century that the US dollar would displace Sterling, but it took another half a century for that to happen. On the scale of current human lifespan, you can assume it won't happen at all.

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hammock 4y ago
100-year bond spot rate: https://alfred.stlouisfed.org/series?seid=HQMCB100YR&utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=alfred https://alfred.stlouisfed.org/series?seid=HQMCB100YR&utm_sou...
ganonm 4y ago
Keep in mind that the present value depends somewhat on the discounted future earnings, which by definition extends to the end of time. That being said, the associated time discounting heavily reduces the impact of earnings envisaged say 100 years from now (a 5% discount rate would mean ~13k USD in 100 years is worth about 100 USD now, and that's probably generous given historic market returns). So, the US doing extremely well 100 years from now vs. the US doing very badly 100 years from now could have a non-trivial impact on the perceived value of US assets. I suspect that the large uncertainty about what the world will look like in 100 years means there is just some sort of seldom changing value baked into assets to account for this, but it nonetheless exists, and could change if there was some huge geopolitical shift. And before you mention anyone on earth would be dead in 150 years, yes that's true, however you can always sell it to someone later on who will be alive in 150 years (or sell it to someone who can later sell it to someone etc. etc.).
- mint2 4y ago
  Is that actually how it works? Money has to go somewhere regardless of future. Whatever looks the least bad at present is in demand, regardless of what the returns are. Inflation was above tbill rates yet people bought because they don’t have better options. It’s like food. Food in 100 years does not help the need for food now.
  - kqr 4y ago
    Food perishes faster han equity indices. If there was a futures market in foodstuffs that basically keep forever and is cheap to store (honey?) you would see that the expected price of that food in 100 years would have some effect on the current price.
- nonethewiser 4y ago
  In theory maybe, but I'm not sure this is right. The further out you go the more worthless expectations on returns become. Who actually has high confidence in a price model projecting 100 years out? What organization has the conviction to execute on this 100 year plan instead of signals with real correlation for returns over 1, 5, 10, 20 years?
itsoktocry 4y ago
>Someone investing at age 18 might care about the subsequent 50 years Those 50 years are part of the next 150, and are no easier to forecast. Most market projections are for numbers ~7% annually, but periods worse than that would drastically alter investing plans, and hence social infrastructure planning.
- JustSomeNobody 4y ago
  That is why https://www.firecalc.com/ https://www.firecalc.com/ exists. The idea is that you save enough that over all the possible starting years, you would end up with money instead of broke, for the length of time you think you'll be alive.
  - kudokatz 4y ago
    It's my understanding that firecalc uses only US data. Japan has "lost decades" of price-weighted, non-dividend returns that are flat since 1988 (Nikkei 225). Seems worth considering that some version of this has some future probability of happening in the US and hedging that. Another similar and popular US-data-only tool that is fun to play with is cFIREsim: https://www.cfiresim.com/ https://www.cfiresim.com/ (Edit: of course, US companies have non-US revenues - helps out a bit)
    - JustSomeNobody 4y ago
      Yes, that's a risk. If that happens, most of us simply won't ever retire. Yay capitalism?
- paganel 4y ago
  > Most market projections are for numbers ~7% annually, Too lazy to web search for an answer, but are those real returns? (i.e. inflation-adjusted).
kingkawn 4y ago
Your assumptions presume that the pace of historical developments is the same as it was in the late 19th century, which seems clearly untrue. The rate that these things transform today may be breathtaking.
MuffinFlavored 4y ago
> Someone investing at age 18 might care about the subsequent 50 years. With a gradual decline in exposure to equities over time. https://www.google.com/search?q=what+asset+allocation+should+i+have+by+age https://www.google.com/search?q=what+asset+allocation+should...
- ideamotor 4y ago
  This is terrible advice. It’s more complicated than this and depends on your situation (age, social security, pensions, tax deferred account timing) but generally you want less stocks when you enter retirement but gradually going back up in retirement.
  - ambicapter 4y ago
    Why going back up in retirement?
    - ideamotor 4y ago
      I'll respond in more detail later but here is a paper that examines it: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2324930 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2324930: "Accordingly, as the results support, for those looking to maximize their level of sustainable retirement income, and/or to reduce the potential magnitude of any shortfalls in adverse scenarios, portfolios that start off in the vicinity of 20% to 40% in equities and rise to the level of 60% to 80% in equities generally perform better than static rebalanced portfolios or declining equity glidepaths. Though as the results also reveal, in particular scenarios where the equity risk premium is depressed, the optimal glidepath includes less equity, and in scenarios where the goal is to withdraw at a level that stresses the portfolio and its expected growth rate, higher overall levels of equity are necessary; with such high-risk goals, having a relatively high-risk portfolio, with the danger that entails, is still the optimal solution (and for clients who cannot tolerate that level of risk, the ideal solution is to choose not a less risky portfolio, but a less risky and aggressive goal). Nonetheless, for everyone else looking to maximize a sustainable income level, or determine the amount of assets to support a (reasonable) target income level, rising equity glidepaths appear to both maximize the likelihood of success and sustainable income and reduce the magnitude of shortfalls when they occur." There is a a lot of discussion of this here: https://www.bogleheads.org/index.php https://www.bogleheads.org/index.php. Also, this article: https://www.kitces.com/blog/should-equity-exposure-decrease-in-retirement-or-is-a-rising-equity-glidepath-actually-better/ https://www.kitces.com/blog/should-equity-exposure-decrease-....
zie 4y ago
> Someone investing at age 18 might care about the subsequent 50 years. I get what you are saying, but your math here is a bit off. 50+18 = 68. People generally can live longer than 68 years old, If we go out on longevity and assume people can live to 100 or 120, then it's more like 100 years. Your next thought is, but people will retire before/around 68, fair enough, but they stay invested generally the entire rest of their lives. So if the US dominance ends in the next 100 years, then today's teenagers might need to care about it. People in their 30's or 40's probably don't though. The next 150 years, you are right todays teenagers might not need to care, unless many/all of our aspirational longer living goals happen.
- purpleblue 4y ago
  No, this is poor investment advice. The closer you get to retirement, the more your money should be in extremely short term, non-volatile investments like T-bills. You should not be invested in the stock market, because the risk is too high that you could lose a lot of your savings just before you really need it.
  - zie 4y ago
    I never talked about asset allocation, you did, but going 100% equities to 0% equities is not reasonable either. Yes you probably want some bonds, but you still need some equities. The default answer is something around 20% to 60% equities in retirement.
    - FooBarBizBazz 4y ago
      Everybody says this, but stocks and bonds go up and down together now. I guess it's less an issue if you're holding bonds to maturity and laddering, but that might just be psychological, not sure.
      - zie 4y ago
        Not really, they are somewhat correlated, but they are not completely correlated. Duration has a lot to do with it as well. Look up Long Term Treasuries(TLT/EDV are funds that hold these) and compare that to US stocks like VTI. Bonds are like buying future cash-flow, stocks are about future growth. i.e. if you buy a bond that's paying you $25k/yr, then you will get that $25k/yr regardless of what happens to the NAV until maturity(and/or bankruptcy obviously).
time_to_smile 4y ago
Or we see a contraction in globalization in general in which all economies shrink. It's entirely reasonable that we could enter a period of long, slow decline across the board. Especially as we continue to push the limits of natural resources and global supply chains. For example suppose the US continues to move its push to return chip manufacturing to the US. This might mean both that US chip manufactures have a more healthy future than other more fragile tech companies and that they shrink in size. We could see a return of manufacturing to the US which leads to continued employment in US labor for while also meaning that labor force gets paid much less. We're already starting to see evidence of this happening. The concerning thing is that I'm not at all sure that our incredibly debt dependent global economy, which assumes future growth, can really handle a gradual contraction to a more sustainable economic structure. Either way, assuming up is the only way for the market to go is a very naive assumption, but one nobody is happy questioning.
- vl 4y ago
  >We could see a return of manufacturing to the US which leads to continued employment in US labor for while also meaning that labor force gets paid much less. Interesting! Why is it happening? Shouldn’t labor earn more in this scenario?
  - bluGill 4y ago
    Depends. Manufacturing in the US implies high automation. For those who maintain the machines there is a lot of money, but there are far less jobs and in turn far less in total in labor. Though I suspect there is more need for such labor than people who can do the job. Hard to say, but there are a lot of things we haven't automated yet.
- verdverm 4y ago
  > a gradual contraction to a more sustainable economic structure Why do you assume that it requires a contraction to reach a sustainable economic structure? What prevents the economy from growing for the foreseeable future while also becoming more sustainable at the same time?
dalbasal 4y ago
Why is "reserve currency" the central issue? Also, the US stock market, US Dollar and US economy/gdp aren't hard linked to one another these days. The companies listed can be selling to non US markets, employing internationally, founded internationally. They're just listing on the US stock market because well.. that's where the stock market is. The US could, in theory, become more or less popular a stock market regardless of its currency's popularity. Meanwhile, both the Euro and RMB have similar size markets backing their currency. Neither one is currently trying to displace the USD. I think the importance of owning the international currency is somewhat speculative.
- bobthepanda 4y ago
  Yeah, China has already indicated that it would prefer the ability to implement sudden, nearly total capital controls rather than be annoyed with the day-to-day of a reserve currency.
- malandrew 4y ago
  Stock markets are natural monopolies. Liquidity begets liquidity. What would cause companies to choose other exchanges and what stops the dominant exchanges from adapting to changes that threaten its liquidity advantage. Is there anything stopping the NYSE, Nasdaq or CME/CBOT from handling trades in another currency?
  - gumby 4y ago
    > Is there anything stopping the NYSE, Nasdaq or CME/CBOT from handling trades in another currency? It would reduce liquidity. Equity prices would fluctuate not only on buy/sell basis but exchange rates. Sure, computers could figure all that out these days but what's the advantage? Overwhelmingly, equity buyers and sellers (not "traders") buy in their local currency because they use the money to live in a local economy. Companies list in other countries for access to those countries' buyers. What would be the point of Shell listing in Euro on the NYSE? They want to list in dollars. Nobody outside Nigeria lists on its exchange but local companies do because local people understand the companies and everything (both their operations and their stock) is in naira. So if you want to be an exchange in a different currency, just buy a local exchange. NASDAQ did try to buy the London Stock Exchange, though I think it fell through.
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Spooky23 4y ago
It should give pause to people who think that the stock market is some sort of science. Macroeconomic conditions and policy influence this stuff.
acchow 4y ago
How can anyone assume the next 30-50 years of the US economy will be anything like its rise to superpower over the last 150 years.
- refurb 4y ago
  Sure, but how can anyone assume it won’t be? If you’ve been alive long enough you’ve realize the “end of US dominance” has been in headlines since the 60’s.
roenxi 4y ago
1. After what happened to Russia every planner in China has "the US government seizes our assets" as a plausible in the next 50 years. 2. It is implausible that the US will ever pay back its foreign debts in real terms. Anyone who lends to them will end up with less stuff in total. 3. We live in an age of computers and pervasive digital communication; things can happen a lot more quickly these days than in the 50s. 4. There is a consistent trend of dropping energy security in Western countries. This is no time to be forecasting assuming things will happen at a comfortable pace. People should have contingencies ready in case something unprecedented happens. It is tense out there.
- the_doctah 4y ago
  What kind of contingencies? Money in mattress?
  - roenxi 4y ago
    I've got no particular clue. But if the plan is to assume things happen slowly over 50 years then that is a risky plan. If things play out like in the 1900s, we could see an entire world war play out over 5 years and that'd likely break the US dollar. Or some similar shock. We still don't really understand the impacts of the COVID pandemic and what that is doing in China. > Money in mattress? The response to every crisis the US has had for the last 3 decades is to print and borrow increasingly large amounts money. And they are probably the most responsible fiscal controller around at the moment. If you see that changing for some reason then sure, maybe money under the mattress could help. I don't expect that strategy to change myself, and the last thing I'd want under my mattress is money.
    - bee_rider 4y ago
      What does investing with possible WW3 taken into account look like? Heavy on canned food, bullets, and remote real estate I guess? Assuming nuclear weapons don’t just magically vanish.
    - nonethewiser 4y ago
newyankee 4y ago
My understanding is that development in some modern areas is exponential. This is the reason why China grew so fast. So a case could be made for faster timelines. US may not slow considerably but it will stop leading and being the only one.

getToTheChopin 4y ago

Fair point. To add some context though, this data is based on the returns of the S&P500 index. Companies in the S&P500 index are based in the U.S., but most of them earn revenues internationally as well. "Roughly 40% of S&P 500 revenues are generated outside of the U.S., and about 58% of Information Technology company sales were sourced from abroad." Source: https://www.globalxetfs.com/sector-views-sp-500-sensitivity-to-global-factors/ https://www.globalxetfs.com/sector-views-sp-500-sensitivity-... So, the performance of the U.S. stock market in the next 150 years will not rely solely on U.S. specific economic growth.

MuffinFlavored 4y ago
I've always wondered, why do American investors get to benefit from companies like Apple? Why does Apple choose to be a U.S. company? We're obviously in competition with other countries globally in terms of getting companies like Apple to give us their tax dollars. I know Apple does this https://en.wikipedia.org/wiki/Double_Irish_arrangement#:~:text=The%20commission%20ordered%20Apple%20to,corporate%20tax%20fine%20in%20history https://en.wikipedia.org/wiki/Double_Irish_arrangement#:~:te.... I just wonder, can they really not find a more favorable country to route the gross of their revenue through?
- JackFr 4y ago
  The maturity and stability of the US stock market (by which I mean institutional and structural stability rather than price stability) make it the most frictionless, transparent and predictable place to raise equity capital. Add that dollars are also attached to a broad domestic market and the US corporate form is strongly entrenched in a culture of rule-of-law and there's a compelling case to create and maintain your company in the US.
  - MuffinFlavored 4y ago
    > The maturity and stability of the US stock market (by which I mean institutional and structural stability rather than price stability) make it the most frictionless, transparent and predictable place to raise equity capital. The number one way that Apple benefits from this is giving shares to employees as compensation, right? They aren't commonly "financing" projects with stock as far as I understand it. aka, they aren't diluting existing shareholders by issuing fresh shares to take advantage of the share price. Since they aren't doing that, how do they benefit financially from their share price?

nscalf 4y ago

More interesting that power and influence, which is an open question, is demographics. There is little to be done about shifting world demographics. Even if the us stays the premier world superpower, can that offset massive declines in the amount of people producing and consuming everywhere? While the us may actually be okay with shifting demographics (Zeihan has some interesting stuff on this), most major economies are facing rapidly declining populations over the next couple of decades.

warinukraine 4y ago
> There is little to be done about shifting world demographics Hmmmm immigration. That's how fast growing powers have always done it.
- badpun 4y ago
  You can't add 20+ million imigrants to Germany (and that's what's they'd need over the course of the next decade or two in order to avoid demographic collapse) without massive social problems and/or Germany no longer being Germany.
  - ceejayoz 4y ago
    Demographic collapse won't cause "massive social problems and/or Germany no longer being Germany"?
    - badpun 4y ago
      Yes, of course. My point is that they're screwed either way. The time to fix this was 30 years ago.
  - JumpCrisscross 4y ago
    > without massive social problems and/or Germany no longer being Germany This is where America wins. There is no American ethnicity. There may be, historically. But mythologically: no.
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rr888 4y ago

Along with a 50 year bull market in bonds where yields have dropped nearly every year (along with inflation).

FooBarBizBazz 4y ago
It's weird how most of the return from bonds comes not from yield but from capital appreciation [1], which happens because yields are dropping. There's something perverse and circular about it: "Make sure you buy your collectible widget today! It'll go up in value, because next year's widgets won't be as good! Prices only go up, because everything's downhill from here!" [1] Actually, is this literally true?
- rr888 4y ago
  yes it has been true the last 50 years, as market rates go down the existing bonds become more valuable. But it can't continue forever. https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart https://www.macrotrends.net/2016/10-year-treasury-bond-rate-...
- FooBarBizBazz 4y ago
  About [1]: I'm wrong. If you look at TLT in TradingView, adjusted for "dividends" vs. not, from 2003 to 2019 you see nominal gains of about 150% (with) vs. 40% (without). So most gain is from income. That's ignoring tax. Would also be good to compare to CPI to understand real returns. Or whatever other number seems to be a truer measure of inflation (house prices, for example).

TheFreim 4y ago

> To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior. If things go badly then the money I would have from not investing "mechanically" would probably be as useless as the investments. If everything is going to decline continually it seems the greater reward will almost always be in the investment. This also assumes you only invest in the current world superpower, seeking global diversification would probably be wise if you see a major change in polarity.

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paulpauper 4y ago

The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150. It does not need to . What matters is how much profits large companies are earning. There is no indication that profits are slowing. Even if GDP only grows at 2%/year, if multinationals generate 10% annual profit margins, that is $ that must still go to investors even if GDP growth is much lower. When you compare foreign markets to the US, the US still comes out ahead by almost every metric. There is little indication to suggest this will change. Every problem that the US has, other countries have worse. So relatively speaking ,the US still will be ahead.

nemo44x 4y ago

> The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150. Over the next 150 years I have no idea. But over the next 30-50 then almost certainly. No other country is even close and most seem quite comfortable with the global state of affairs all things considered. USA hegemony has created a stable world where the vast majority of people are far better off than their ancestors. It isn't perfect of course but there's no reason to think anyone else would do better. Especially when compared to the previous tenant, Europe.

hammock 4y ago

I think about this a lot when you consider the world's largest companies today aren't stocks but sovereign wealth funds and oil reserves. Similarly in days past they were other state-owned entities like the East India Company. The S&P 500 is not everything there is to be had...

FatActor 4y ago
A long time ago, naive me learned that tech companies also invest their money and that those returns count toward their valuation, and that seems wildly backwards to me, but I'm an engineer, not a financial expert.
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layer8 4y ago

Just invest in a world index. See for example https://curvo.eu/backtest/portfolio/msci-world--NoIgsgygwgkgBAdQPYCcA2ATEAaYoAyAqgIwDsAHMQKwAsxZAnDsQLptA https://curvo.eu/backtest/portfolio/msci-world--NoIgsgygwgkg... —> minimum investment horizon. Of course the whole world could go into a multi-decades-long recession, but then we’ll have much more serious problems anyway.

Negitivefrags 4y ago
I always hate this “If it doesn’t work we have much more serious problems” attitude. If the world did go into a multi-decade recession, what “more serious” problems would you have then your investments doing poorly? You might answer things like “ buying food due to shortages” or something, but surely whatever problem you name, being more rich is going to solve it? Now you can invest on the thesis that this isn’t going to happen, but to argue that the whole concept of investment is useless if it does seems very suspect to me.
- 7steps2much 4y ago
  Different scale of seriousness. If the whole world goes into a recession there is a big difference between food shortages that you can buy your way out of with cash and food shortages that come as a result of societal collapse and money being worthless. Being rich only matters as long as your investments/assets hold any value. If truly serious problems around your investments go to 0, your assets are only worth something as long as you can maintain control of them (police won't be around, nor will judges be) and even then your car will be worthless without gas. It all depends on what meaning a person assigns to "serious" in this context. Personally as long as being rich solves my Problems I wouldn't describe any situation as serious.
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  - paganel 4y ago
    > Being rich only matters as long as your investments/assets hold any value. Also, as long as poorer people are not after you and your properties (and your life, even) through a revolution, which revolution could be caused by world-wide economical and societal crisis (if not a revolution then maybe a civil-war where the rich are of the wrong ethnicity etc)

mypastself 4y ago

Therefore investing mechanically in the whole world might be a safer bet. Other than currency risk, home bias investment never felt like the optimal approach to me, even if your home is the world’s most powerful economy.

nimz 4y ago

Your point is valid - we shouldn't take single-country risk in investing. Assuming you believe the world as a whole will get more productive and value creating, globally diversifying your stocks is the answer. As an example that supports your point, the Japan stock market (Nikkei) peaked in 1989 and STILL has not returned to that high. However, even if you were incredible unlucky and had bought in at the 1989 peak in Japan, if you had an internationally diversified portfolio, you would be OK. E.g. a 30/30/20/20 Jp Stocks/Intl Stocks/Jp Bonds/Intl Bonds portfolio purchased in 1989 at the Nikkei peak would have more than doubled by 2014 (see here: https://www.bogleheads.org/forum/viewtopic.php?t=265807 https://www.bogleheads.org/forum/viewtopic.php?t=265807 and also https://www.afrugaldoctor.com/home/japans-lost-decades-30-years-of-negative-returns-from-the-nikkei-225 https://www.afrugaldoctor.com/home/japans-lost-decades-30-ye...).

ar_lan 4y ago
If you continued to invest in Japan throughout that period after, you'd be up today. The only case you were forever screwed is if you really aren't pouring more money into that (e.g. retirement).
paganel 4y ago
> Nikkei) peaked in 1989 and STILL has not returned to that high. Also, the FTSE 100 has been almost flat since the financial crisis, so basically just a little over 10 years. It was at about 6300 in the first half of 2013, it's at ~7700 now, a ~22% return over 10 years is nothing to write home about. For comparison the SP500 was at ~2300 in the first half of 2013 vs ~3800 now, a 66% return. And that's after last year's 23% decline.

wintogreen74 4y ago

>> To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior. Maybe, but this describes the investment strategy of pretty much every index-based fund and they've been the big winners over a long time frame. Why do you care what happens to a market 100+ or even 50 years from now?

rsync 4y ago

"The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150." No, I think the question is more subtle ... Will the relative power and influence of the US grow similarly. ... and I think that may be a very good bet. The three closest "competitors" - the Eurozone, China and Japan - are, in their own unique ways, dysfunctional basket cases: Europe's northern savers and taxpayers have to pay for southern workers to retire at 60 ... and southern workers need to eat benefit losses to avoid further (br)exits. This is a not-insignificant economic and cultural mismatch and the results of even minor adjustments are riots in the streets[1] ... or boring, orderly referenda[2]. It is unknown whether the CCP can survive any meaningful slowdown in growth and whether much of the growth of the last 10-15 years (enormous empty cities) was substantive or useful at all. Japan is undergoing civilizational and cultural collapse. So ... while there is much dysfunction - both economically and politically - in the United States, it is an enormous, resource rich country that can exist wholly independently from the rest of the world. It also enjoys absolute control of the worlds oceans and brutally dictates economic and geo politics[3]. In a world of troubled and fraught investments, the US is probably the least troubled and fraught. [1] https://en.wikipedia.org/wiki/Yellow_vests_protests https://en.wikipedia.org/wiki/Yellow_vests_protests [2] https://en.wikipedia.org/wiki/Dutch_withdrawal_from_the_European_Union https://en.wikipedia.org/wiki/Dutch_withdrawal_from_the_Euro... [3] https://en.wikipedia.org/wiki/2022_Nord_Stream_pipeline_sabotage https://en.wikipedia.org/wiki/2022_Nord_Stream_pipeline_sabo...

cwkoss 4y ago
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- Supermancho 4y ago
  America and Americans are not the same thing.
- GalenErso 4y ago
  I am not American, and I think America is a very, very special country. See this article: https://acoup.blog/2022/07/08/collections-is-the-united-states-exceptional/ https://acoup.blog/2022/07/08/collections-is-the-united-stat... > The result of all of this is the bizarre situation that the world’s foremost land power is also the world’s foremost naval power, which is also the world’s foremost diplomatic power, which is also the world’s foremost economic power, entrenched in the high ground of most of the world’s international institutions. One may of course argue that this situation is changing, albeit slowly, but at the moment the contrast is startling: the sphere of Russian influence does quite reach Kyiv (about 150 miles from the Russian border) and the sphere of Chinese influence does not quite reach Taipei (about the same distance, but over water), but American influence evidently reaches both despite the former being 4,300 miles and the latter 6,500 miles away from American shores. > That has never happened before; it may well never happen again. We have seen regional hegemons similarly dominant in their local neighborhoods (the Roman Empire, the Han Dynasty, Achaemenid Persia, etc.) and to lack peers locally, but the United States is the first and only country to have done this on a global scale and to lack true peer competitors anywhere. Even as the ‘monopolar moment’ seems to be coming to an end, the United States’ position as ‘first among equals’ among the ‘great powers’ is historically unparalleled; no state has ever been so clearly without peers influence and power except for maybe – wait for it – the Mongols.

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WeylandYutani 4y ago

Smart people invest globally. I have no illusions that American billionaires care about borders or governments.

lastofus 4y ago

> The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150. > To invest mechanically without thinking about what’s actually happening in the world is cargo cult behavior. This is why it's suggested that unthinking mechanical investors invest globally, not just in the US. For example, VT, a single set and forget index fund has 40% international exposure. That's to speak nothing of the S&P 500 companies that do business internationally. https://www.morningstar.com/etfs/arcx/vt/portfolio https://www.morningstar.com/etfs/arcx/vt/portfolio

huijzer 4y ago

> Of course a country’s stock market will perform well as that country ascends to become the world’s dominant superpower. There is probably more at play too. The number of banks, for example, has been declining steadily over time [1] as has the internet allowed single corporations connect to more buyers (nationally and internationally). Just think of all the local stores that Amazon has displaced. [1]: https://www.stlouisfed.org/on-the-economy/2021/december/steady-decline-number-us-banks https://www.stlouisfed.org/on-the-economy/2021/december/stea...

snowwrestler 4y ago

This has the causality backward. The qualities of the U.S. that helped it become a superpower, also help it have a high-performing domestic economy.

ketralnis 4y ago

> The question is whether the power and influence of the U.S. will grow similarly over the next 150 years as it has over the last 150. I don't think that's required. Most of these analyses use US stock data because it's so easy to gather compared to international data. The do trends hold internationally, but the magnitudes are reduced. So if you think the US will regress closer to the international mean (and I'd agree) then you can use things like the shape of the bell curve, just not the height. And indeed, this bears out if you look at the markets of the UK or most of the EU. Pretty much any reputable adviser will tell you that that's the consensus, that future returns will probably be lower for the next few decades than they were for the last few. (Usually you see this in the media amplified to a more ridiculous version but that's modern clickbait reporting for you.) There are other possibilities like we could stagnate for 3 decades like Japan. But yes, that's investing, that's the nature of the bets you're taking. I'm having trouble finding the quotes but around the turn of last century British economists were looking at the US's explosive economic growth compared to the UK and attributed it to the US having the equivalent of a sudden injection of capital in the form of a whole continent full of free real estate. That is, they reasoned that the UK's growth was limited to what they could do on their existing, mostly already owned and developed land but the US had more physical space for the balloon to expand into. They reasoned that soon that would happen though and the US would grow to fill that space and eventually its economic growth would slow down closer to the UK's. That clearly didn't happen then. I don't think the lesson is the US is exceptional and will continue to outpace the world forever, but I do think that a lesson is that predicting this stuff is hard and reasonable-sounding ad hoc hypothesis don't always bear out.

pacetherace 4y ago

I find the inflation as a variable very interesting. Countries that don't have strong economies generally tend to have higher inflation. So we may continue to see the stock market continue to rise indirectly due to inflation but the net return would be much lower.

dpweb 4y ago

You can only evaluate returns compared to the risk-free return (ie treasuries) - and favor treasuries cause less variance. Stock market success depends entirely on when in history you got in and got out. When it comes to US dominance over the next century - who knows. I do trust in Fed interventionism and willingness to print money - so that certainly favors stock market investment. Personally I find stock market is too high a variance and I prefer not speculate with money I can't afford to lose. Buffet himself said their biggest peak to trough was 50%. Fine if you're already rich and investing a fund. Not so great if it's kiddos college money.

zitterbewegung 4y ago

I don’t think we were much of a dominant superpower until after World War 2. Lots of Europe was decimated but our infrastructure wasn’t and we also won the Cold War . We had large factories created also. If some other superpower does come around you could just try to find a foreign index fund and adjust your investments.

catskul2 4y ago

I get what you're saying about "mechanically" but "cargo cult" does not work as an analogy here.

ptr 4y ago

Nominal Swedish stock market return 1879-2012: 10.9% arithmetic mean, 9.0% geometric mean. Real return: 7.9%/6.1%. And Sweden isn’t really the world’s dominant superpower. https://www.riksbank.se/globalassets/media/forskning/monetar-statistik/volym2/chapter6_-volume2_140613.pdf https://www.riksbank.se/globalassets/media/forskning/monetar...

jltsiren 4y ago
Sweden, Switzerland, and the US are obvious outliers. Their economies have been abnormally stable, because they have not faced revolutions, civil wars, foreign occupations, and other forms of widespread destruction in a long time.
- ptr 4y ago
  I’m not sure that’s it. Sure, Norway was invaded but it was a pretty “benign” invasion in comparison to what happened to others. Same with Denmark. Would be interesting to see their stock market returns.

dionidium 4y ago

Rumors of our impending collapse have been, let's say, exaggerated. I wouldn't bet against the United States over the next 30-50 years, at least.

dangus 4y ago

I would argue that borders are irrelevant. Large multinational companies generally list on US stock exchanges. For example, Spotify is a Swedish company listed on the NYSE.

bionsystem 4y ago

It's too hard to swallow for most people but you're right. There are significant headwinds coming ahead for most markets whilst productivity gains have stalled. See Robert J. Gordon's paper "IS U.S. ECONOMIC GROWTH OVER? FALTERING INNOVATION CONFRONTS THE SIX HEADWINDS". I really think millenials should consider hedging their bet, maybe even spend 100% of their income.

Thorrez 4y ago
How would spending 100% of their income be hedging their bet?
- bionsystem 4y ago
  I meant "or", either hedge their bet OR spend 100% of their income (or a larger % of their income) beyond some safety cushion.

refurb 4y ago

I’d argue the average person’s investing window is more like 30-40 years, not 150. And even then, you don’t have to be the dominant superpower to see a rising stock market. Plenty of examples of smaller countries who have seen substantial market gains.

guidedlight 4y ago

Agreed. At the turn of the century, Argentina was a similarly prosperous country to the United States. I’m sure given an investment in Argentina’s stock market in 1900, it would have now been lost many times over.