Has your Investment Policy Changed After the US Election

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Re: Has your Investment Policy Changed After the US Election

Post by Flaccidsteele » 19 Nov 2016 01:32

No need to be dramatic. No big changes forthcoming. Steady as she goes.
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Re: Has your Investment Policy Changed After the US Election

Post by Spidey » 19 Nov 2016 08:56

Flaccidsteele wrote:No need to be dramatic. No big changes forthcoming. Steady as she goes.
I hope you are right. I can see pointing out potential positives but I'm a little surprised by your seemingly total lack of concern. If I remember correctly, you came out quite strongly against two Ottawa police officers who arrested a couple of young black men for drug possession. It was alleged they were stopped based on their skin color (which the officers denied) and the men went free. Trump embraces "stop and frisk" which many believe will target minorities.

Just one of the directions the culture in the US seems to be moving.

http://www.nytimes.com/2016/09/22/us/po ... oters.html

Trump is probably the most fascinating character study in modern history and perhaps one of less than a handful of men in all of history who has the ability to persuade mass populations in a democracy despite a ruthless and narcissistic personality. History shows that when such men take power, tumultuous events tend to take place. Perhaps this time will be different. And perhaps I'm being overly influenced from currently being in the process of rereading Victor Frank's "Man's Search for Meaning" which reveals the frailty of the human character and the extent that a society can be manipulated. I have to admit that most here appear to share your viewpoint of "steady as she goes".
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Re: Has your Investment Policy Changed After the US Election

Post by AltaRed » 19 Nov 2016 11:24

Spidey wrote: I have to admit that most here appear to share your viewpoint of "steady as she goes".
I am not of the same mind of 'steady as she goes'. It is just I have insufficient evidence of high probability trends, at least for now. Everything is simply speculative for the moment and why would I pre-emptively act on something that may not happen.

I do believe there will be winners and losers in the markets as a result of Trump moves, and I believe global GDP will be impacted negatively as a result of trade disruptions and re-configurations, but that should only result in reduced returns on the broad equity markets, and some unknown result in bond yield curves in the bond markets. I smooth out specific sector/company impacts by holding the broad equity indices ex-Canada and have a short term bond/GIC ladder for my fixed income. My take* is there will be more social disruption than there will be financial/economic disruption and I see no reason to make any adjustments at least until direction comes more clear.

* What I am generally saying is things like race riots and a sharp right turn to social conservatism will not have proportional impact to GDP on a global scale. For example, several of the TPP partiicipants are saying they will go ahead with, or without, the USA. Good on them. China will simply become a bigger impact in Pacific trade. I suspect the EU will have enough of its own issues to deal with than to worry too much about Trump's tantrums. Canada and Mexico are in the most precarious positions and Mexico is one of the TPP participants that says they want to continue. Canada would be wise to do the same. Canada would also be wise to approve KinderMorgan to get more oil to Asia because if Trump takes down NAFTA, there is no certainty of a long term oil market to the USA.
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Re: Has your Investment Policy Changed After the US Election

Post by Peculiar_Investor » 19 Nov 2016 11:31

Can we please keep the politics and potentially controversial social impacts in the appropriate Watercooler discussion and keep the focus on economic and financial policy discussion. Thanks.
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Re: Has your Investment Policy Changed After the US Election

Post by AltaRed » 19 Nov 2016 12:12

Additionally, I am of the view that a US 'curve ball' as might be manifested by a Trump presidency will be good for global trade in the long run. There has been too much global reliance on the US market as the trade partner of choice and a short term disruption may be what is required for countries and exporters to develop a better balance with other countries. We all know Canada, for example, is much too reliant on the US for our trade (about 2/3rds I believe) and that provides motivation to work harder to trade with other countries. The PCs were trying hard with a EU deal and the TPP and perhaps now, these same countries will see more merit and motivation to complete these deals. I suspect much of the global economy will be looking to strenthen alternatives. Take advantage of this 4 year opportunity.
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Re: Has your Investment Policy Changed After the US Election

Post by Spidey » 19 Nov 2016 12:46

I do think there are potential advantages. It appears that the Keystone pipeline will be approved and I think small interest groups will have less potential to impede economic projects. And if the US becomes more insular it could open up foreign market for Canadian enterprise if we manage it correctly. But the level of uncertainty appears much higher with a Trump administration and that may merit a review in investment policy.
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Re: Has your Investment Policy Changed After the US Election

Post by ghariton » 19 Nov 2016 12:57

To date, the reaction of U.S. markets seems predicated on the assumption that protection is coming, initiated by the U.S. but reciprocated by other countries. If so, companies with foreign markets will suffer the most. For example, Apple sells much of its production overseas, and is trying to do more. They will be hit relatively hard.

Of course, the thought is not original with me. Others have recognized this, and Apple shares have done poorly in the last ten days. So the question now becomes: Does Apple's price already build in the little that we know about Trump's policies, or is there more to come. To my mind that next step is pure speculation. I wouldn't trade, based on such a weak insight.

The problem is that, not only don't I know what Trump plans to do, indicators are that he doesn't know either. My solution is a broadly diversified portfolio, so that I will share in any gain, as well as in any pain, but only a little at a time. Of course, if correlations rise and everything goes to hell simultaneously, my strategy will not work. But then, hardly any other strategy would do better, except by luck.

Bottom line: I am building up my cash reserve by not investing dividends and interest payments right away. Rather, I plan to hold some 3% of my portfolio in cash until volatility dies down. (I also have to pay for a new roof next spring, and I might as well get the cash ready.) But I'm definitely not selling any of my present holdings.

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Re: Has your Investment Policy Changed After the US Election

Post by Lazy Ninja » 19 Nov 2016 14:01

<Somewhat O/T>
Spidey wrote:And perhaps I'm being overly influenced from currently being in the process of rereading Victor Frank's "Man's Search for Meaning" which reveals the frailty of the human character and the extent that a society can be manipulated.
Would you recommend the book? I've glanced at it at Chapters on a couple of occasions, but haven't gotten around to reading it.

<Somewhat O/T>

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Re: Has your Investment Policy Changed After the US Election

Post by SkaSka » 19 Nov 2016 14:26

Lazy Ninja wrote:<Somewhat O/T>
Spidey wrote:And perhaps I'm being overly influenced from currently being in the process of rereading Victor Frank's "Man's Search for Meaning" which reveals the frailty of the human character and the extent that a society can be manipulated.
Would you recommend the book? I've glanced at it at Chapters on a couple of occasions, but haven't gotten around to reading it.

<Somewhat O/T>
I thought it was a great read on how some possess the mentality to survive in the most wretched of conditions while others simply give up and lie down to die.

On topic, no nothing has changed about investment policy: buy good businesses at fair/reasonable prices.

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Re: Has your Investment Policy Changed After the US Election

Post by long » 19 Nov 2016 15:10

Spidey wrote:Staying the course is almost always the smart thing to do but I'm starting to contemplate ways to protect my portfolio. I suspect optimism and flight to the US dollar will boost US markets for the next 6 to 12 months. However, in my estimation, the risk of serious sh*t hitting the fan has increased dramatically under the current U.S. regime and I'm a little surprised by the fairly lackadaisical attitude of the investment community. The list of risks of negative events that I feel may be increased are quite long:

- Russian aggression towards neighboring states with a possible takeover of the Ukraine.
- Internal strife in the US: mass protests, violence against protesters and law authorities, interracial violence, government corruption at the top levels, Trump or Republican vengeance against adversaries, appointment of judges likely to impose religious and social restrictions, lower and middle income people without sufficient health care, rights violations of certain minorities, increased gap between the rich and the poor, etc.
- International violence against American targets and citizens
- Efficient but high causality rate (of innocent civilians) military action by the US in the middle east.
- Destabilization of 2nd and 3rd world countries due to US policies causing increased poverty, violence and tendency for aggression against neighboring countries.
- A certain destabilization of Europe due to a weaker NATO and fears of an emboldened Russia.
- Rising inflation imported from the US caused by trade restrictions and debt levels.
- Possible trade wars.
- Possible defaults or attempts to renegotiate US debt.

Just to be clear, I'm not saying that any of the above will happen and nothing would make me happier than to be proven a fool for even suggesting such notions in 4 years from now. All I'm saying is that in my opinion the risk of such events have significantly increased. I have sold all my EM ETFs and raised a little more cash in my portfolio than is typical. I've raised my US holdings slightly for now but will review that in 6 months time. My hope is that Trump's concern about money overrides some of his aggressive and narcissistic tendencies resulting in a fairly healthy economy. I'm not going to do anything extremely drastic portfolio-wise but I am becoming a little more interested in capital preservation than appreciation.
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Re: Has your Investment Policy Changed After the US Election

Post by Spidey » 19 Nov 2016 16:31

Lazy Ninja wrote:<Somewhat O/T>
Spidey wrote:And perhaps I'm being overly influenced from currently being in the process of rereading Victor Frank's "Man's Search for Meaning" which reveals the frailty of the human character and the extent that a society can be manipulated.
Would you recommend the book? I've glanced at it at Chapters on a couple of occasions, but haven't gotten around to reading it.

<Somewhat O/T>
I highly recommend it. It really brings home a few things:

- Both the fragility and strength of the human character. How average people can debased to commit immense cruelty given the right conditions. On the other hand the amazing strength of character of others to survive, be kind and find meaning given unspeakable circumstances.

- The conditions endured by some of these prisoners and the miracle that they survived at all. Forced to do hard labor in sub-zero temperature with nothing but thin ragged clothing while surviving only on a daily ration of a small piece of bread and a small amount of thin soup and enduring regular psychological and physical brutality.

- How fortunate we are to live in a peaceful country and time period where we never have to worry about any of the necessities of life.

- To learn from history and do all that is possible to ensure such events are never repeated.
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Re: Has your Investment Policy Changed After the US Election

Post by AltaRed » 19 Nov 2016 17:32

^ Not sure how this is relevant to a financial thread on personal investment policy.

I think we, like much of the US and Europe, are lucky to have multi-national corporations that can 'improve' shareholder value (and sometimes domestic GDP) despite some domestic home grown policies to the contrary. I think they will continue to do well despite protectionist policies, and maybe will even thrive by operating outside the 'border fence'.
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Re: Has your Investment Policy Changed After the US Election

Post by JaydoubleU » 19 Nov 2016 18:04

No need to be dramatic. No big changes forthcoming. Steady as she goes.
I disagree. Trump is now appointing people to his team that seem almost as crazy as he is. What the Republicans are going to do is anyone's guess, but trade disputes may be on the horizon; military campaigns....(how else is ISIS going to get crushed?)

Nevertheless my investing philosophy hasn't changed. I only hesitate to invest right now because most stocks I'm interested in appear overvalued.

Edited to add: perhaps I misread you. You meant "no big changes forthcoming" to your investment policy? I initially interpreted it as "no big changes coming" to the global economy.

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Re: Has your Investment Policy Changed After the US Election

Post by longinvest » 19 Nov 2016 18:22

My investment policy dictates that I must ignore all gurus and prognostications. I must invest and rebalance my portfolio according to my target asset allocation (AA).

As it happens, I am most likely to direct my next investments into nominal and real-return bonds, which are now conveniently yielding more than before, thanks to a recent price drop. Oops! I shouldn't have told you, guys; you'll front-run me and drive the prices back up. Luckily, if this happens, my AA will force me to put the money elsewhere. :wink:

I don't know who invented the concept of an AA, but I would like to thank that person.
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Re: Has your Investment Policy Changed After the US Election

Post by Flaccidsteele » 21 Nov 2016 00:26

JaydoubleU wrote:Edited to add: perhaps I misread you. You meant "no big changes forthcoming" to your investment policy? I initially interpreted it as "no big changes coming" to the global economy.
No big changes forthcoming to my investment policy and no big changes forthcoming to the US economy. We will all forget this in another 10 years. As we always do.

It just seems that many people are being overly dramatic for no particular reason. Similar to listening to my 5 year old.
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Re: Has your Investment Policy Changed After the US Election

Post by Spidey » 21 Nov 2016 18:18

Perhaps I have to plead guilty to being a little dramatic - it is not exactly a very active forum anymore, with seemingly little interest regardless of the topic, even the coronation of one of the most dramatic leaders in history. Hoping to spark some conversation - I guess I find it hard to believe that no one else has portfolio concerns, but c'est la vie.

Just to be clear, I only said that I believe that there is a greater risk of a significant negative event under the Trump leadership. I'm not saying it will happen - if I believed that I would likely put everything in cash.

While perhaps recently in the minority, there are investment professionals and economists who have concerns.

http://www.businessinsider.com/bill-gro ... ng-2016-11

http://www.reuters.com/article/us-inves ... SKBN13B2JT

Obviously, if one thinks the chances of a significant negative event taking place is higher, it may be wise to try to revisit your investment policy. If one doesn't then they don't need to. To date, I'm still assessing the situation and my only move has been to go from my typical 3% cash in the portfolio to about 10%.
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Re: Has your Investment Policy Changed After the US Election

Post by Mordko » 21 Nov 2016 19:37

I tend to agree with Spidey.

Politics is going to bring in more volatility. Anything is possible but chances of a 30% drop by this time next year have to be higher than of a 30% rise.

That said, the only way I am reacting is by spreading my investments throughout the year rather than lumpsumming it all at once.

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Re: Has your Investment Policy Changed After the US Election

Post by AltaRed » 21 Nov 2016 20:13

Well, as I mentioned above, I expect there will be trade disruptions and shifts in trade as the USA becomes more protectionist. That will slow global GDP in the near term as business develops alternative markets and has to spend some money doing so, but why would that not be a good thing longer term? Too many countries and too many buinesses counted the USA as an insatiable and infallible market. Time to think broader. I think there will obviously be winners and losers amongst corporations but on the whole, not so much if one owns broad market indices on a global scale.
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Re: Has your Investment Policy Changed After the US Election

Post by longinvest » 21 Nov 2016 20:45

OK, there are some worries to be had, even for plain boring index investors. I won't act on it, but here it is.

As an index investor, I invest into asset classes at market weight, with the mathematical assurance that I will reap the returns of the market minus a tiny management fee and hopefully small tracking error. All this relies on the fact that all investors are treated equally; all the common share holders of a stock receive the same dividend on the same date.

But, when it comes to international investing, this doesn't hold true, anymore. As a Canadian, I lose money to foreign withholding taxes which is not lost by the domestic investor. As a Canadian, I enjoy a special tax treatment on Canadian eligible dividends, which U.S. investors don't get.

The rise of protectionism could bring further unfairness in the treatment foreign investors. For example, China could react to U.S. protectionism by partially confiscating, directly or indirectly through special taxes, the holdings of North-American investors (they'll consider Canada as a friend of the U.S. and punish us too). Such adverse actions could happen in closer countries, too.

The problem is that when a market becomes excessively unfair to a subset of investors, it does not meet anymore the conditions for indexing to work well for that subset of investors. That's a big risk.
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Re: Has your Investment Policy Changed After the US Election

Post by adrian2 » 21 Nov 2016 20:58

longinvest wrote:As a Canadian, I enjoy a special tax treatment on Canadian eligible dividends, which U.S. investors don't get.
To a large extent, that's not the case. A large percentage (by market weight) of the Canadian large cap stocks are dual listed. Most, if not all, of the dividends from US listed Canadian stocks benefit from preferential taxation by Uncle Sam, too.
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Re: Has your Investment Policy Changed After the US Election

Post by longinvest » 21 Nov 2016 21:07

adrian2 wrote:
longinvest wrote:As a Canadian, I enjoy a special tax treatment on Canadian eligible dividends, which U.S. investors don't get.
To a large extent, that's not the case. A large percentage (by market weight) of the Canadian large cap stocks are dual listed. Most, if not all, of the dividends from US listed Canadian stocks benefit from preferential taxation by Uncle Sam, too.
OK, right. How about a European investor?
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Re: Has your Investment Policy Changed After the US Election

Post by DenisD » 21 Nov 2016 21:09

Spidey wrote:I guess I find it hard to believe that no one else has portfolio concerns, but c'est la vie.
I always have portfolio concerns. I try, usually successfully, not to do anything about my concerns. :wink:

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Re: Has your Investment Policy Changed After the US Election

Post by adrian2 » 21 Nov 2016 21:15

longinvest wrote:OK, right. How about a European investor?
Don't pity them: Europeans have access to index funds that reinvest dividends, presumably with no annual taxes due (I have very little knowledge of EU taxes).
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Re: Has your Investment Policy Changed After the US Election

Post by Peculiar_Investor » 21 Nov 2016 21:36

DenisD wrote:
Spidey wrote:I guess I find it hard to believe that no one else has portfolio concerns, but c'est la vie.
I always have portfolio concerns. I try, usually successfully, not to do anything about my concerns. :wink:
While I said up-topic
Peculiar_Investor wrote:It didn't even cause me to review it, let alone change it. Why should it? Governments change on a regular basis, good companies and good investment strategies should for the most part be timeless.
I didn't say I don't have portfolio concerns. That's a somewhat different question.

In my mind that's the whole purpose of having an investment policy statement (IPS). It is the guiding principles to how you will operate your investment portfolio. If your sleep at night factor is impacted by political events such as Brexit, the US election, et al. then the IPS should either dial down those elements of your portfolio that might be impacted by these political events, i.e. reduce the risk profile of the portfolio, or it should contemplate more specific actions to be taken around these political events.

Our wiki article, investment policy statement, provides some further depth
finiki wrote:Every investor could potentially benefit from having an investment policy statement. It provides the foundation for all future investment decisions to be made by an investor. It serves as a guidepost, identifies goals and creates a systematic review process. The IPS is intended to keep investors focused on their objectives during short-term swings in the market and provides a baseline from which to monitor investment performance of the overall portfolio, as well as the performance of individual fund managers. If you are using some sort of financial advisor, an IPS outlines the ground rules of the relationship between you and that advisor. And you can use the IPS as a reference to see whether or not your portfolio is achieving your stated goals and objectives. Any proposed changes to your investments can also be evaluated and reviewed against your overall objectives using your IPS.
An IPS doesn't have to be very complex, just detailed enough to provide a framework and guidance on what you're trying to accomplish with your investments and how you plan to accomplish it.

The world and the investing world isn't a static situation, it ebbs and flows in many different directions, subject to many different influences such as a new US president or the consequences of Brexit, or <whatever's happening next>, or ...

I'd rather contemplate and focus on my high level plan, i.e. my IPS, than try to figure out the impacts of these various events and how to react to them. They too shall pass. There are many people far smarter than I and their jobs are to figure this all out and they get paid big bucks to do so. HIstory has shown no-one gets is right with a high degree of probability, so I've chosen not to spend much time sweating the details. I stick to the plan and ignore most of the noise.
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Re: Has your Investment Policy Changed After the US Election

Post by Spidey » 21 Nov 2016 23:33

Sticking to your investment policy usually makes sense and is hard to argue with. But what if my investment policy was made based on a set of criteria that may have changed? If I was 30, I don't think anything would sway me as I would have well over 20 years of investment time left. I guess as I'm getting closer to retirement a question that I would put out there - are some things game changers? For example (not to be dramatic but just as a examples) would an impending major war be a game changer? Would the US defaulting on it's debt be a game changer? Would a massive market crash be a game changer? (For example, might one want to slightly overweight equities after a massive market crash?) Should one's investment policy remain inflexible no matter what or are there times when it should it be reassessed based on changing conditions?

So the question I'm asking myself and I haven't fully come to a conclusion yet. Is a Trump presidency a game changer?
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