Why do people discourage investing only in the US markets?

CreditCardChris

bostonerimus said:

I don't like to predict markets as I believe it's a fool's game. But I am disposed to believe that the World's economies will contract in 2020 as small cash strapped businesses fail, people are unemployed and have less money to spend and governments go into debt. There will be emotional ups and downs in the markets, but basic economic realities will also assert themselves.

People do have money to spend as the federal reserve is printing money and paying everyone a salary until this virus situation is over with and yes there's a lot of unemployed people but they're only temporarily unemployed.

Also the US is already in $20+ trillion worth of national debt and external debt and nobody cares. What's another few trillion of freshly printed bills? Literally nobody cares, US currency near all time highs, US stock market was at all time highs before the virus. 

As the federal reserve chairman said "there's nothing we won't do to prevent a recession" and "there's no limit to the amount of money we can print".

This is the mighty US we're talking about, not some third world !!!!!! hole. The US can print trillions upon trillions and still be perfectly fine both currency wise and economy wise. The country is just too big and powerful to fail.

bostonerimus

I agree that the US economy won't fail, but expect some glitches in growth. I think many people will have to lower expectations and tighten belts for a while.

bowlhead99

CreditCardChris s

As the federal reserve chairman said "there's nothing we won't do to prevent a recession" and "there's no limit to the amount of money we can print".

One way of putting that, is the chair of the fed said that they will stop the market performing its usual and proper function under free and open capitalism by intervening to get a different result.  So as an investor with plenty of choice in where to put your money on a global stage, your query 'why do people discourage investing only in the US?' is at least partially answered by the fact that if you put your money into the US you shouldn't expect a fair result because of the quite evident risk that the politicians will manipulate the markets to let someone have 'a better result than they deserve', at your expense. 

A second reason not to put all your eggs in the US basket comes from the second quote.  If the head of the central bank is saying (paraphrasing) 'hey, I can print unlimited money' you can't seriously be wondering why it's sensible to caution investors against using all their pounds and euros and yen etc to buy a limited number of US dollars, and exclusively invest those dollars in one country, at the same time as a senior person in that country is saying 'hey, by the way, my buddies over at Treasury are just going to make as many of these dollars as we feel we'd like'.

bostonerimus

Right now no one is worrying about inflation or devaluing the dollar, well maybe the Chairman of the Fed is, but certainly not the politicians, business owners or the workers. We'll cross that bridge when we come to it and we will get to it eventually.

Malthusian

Investors in the US are worried over the prospect of their investments being devalued, especially if they pay their bills in non-USD currencies. US politicians, business owners and workers are of course entitled to say "screw them". The only US investor not worried is CreditCardChris, for whom investment works differently to everyone else. Probably because they have commited the common error of confusing a country's stockmarket with a country's economy.

The same error is often made by  investors who bet the farm on emerging markets and lose money because they think "such and such a place must eventually come good". And right now everyone is an emerging markets investor.

BananaRepublic

The reason not to invest solely in the US, or in any one region, is to minimise risk, arising from underperformance of the market, and adverse changes in the exchange rate between your country and that of the market. Diversification is one of the key principles of investing. 

CreditCardChris said:

Thrugelmir said:

CreditCardChris said:

dunstonh said:

That's quite the assumption.

1) it wasnt stated as a fact of what will happen.  It was stated as what happens when Sterling rises and falls.

2) Sterling has been in the ballpark it is now before.    People thought it wouldn't go up again and guess what? It did.   This country has been written off so many times but keeps coming back.   A lot of it is goes through cycles. 

We have pretty much exhausted our innovation

You are kidding aren't you?   The UK is a breeding ground for innovation.   The problem is implementation on a wide scale.  Bigger fish, usually based in Asia or US tend to come in buy UK innovation and implement in a way that the UK is not very good at doing.

ur land and now we're just floating around simply existing.

Yet, UK equities in the smaller/mid cap perform equally or better than the US historically.

The UK completely failed to go into the tech game and we got left behind. 

We lagged in some areas but led in others.  However, as said above, our potential kept on being bought.    In some areas though we are market leaders.  Just nothing on a large consumer scale.

Well you have a lot more optimism than I do but since the age of around 18 I've watched innovation and subsequently the economy of the country reduced to just another country. Investors don't just wake up one day and decide to start buying the pound and investing in UK equities... We need to create companies that dominate, Google or Amazon style.

I see three new industries opening up in the next 20 years. AI, alternative energy and "space mining". Only time will tell if the UK sits on the sidelines again. 

Unless you invest in the new industries from the outset. They will simply be sold to overseas investors. Short termism is unfortunately a very British trait. Look at major German companies in comparison. Almost without exception they had an influence on the WW2 war effort. 

Why do we always sell the companies though? Again it goes back to the culture shift of the UK, we're happy to just sell our companies to other conglomerates that then absorb them into their parent companies, making them bigger and more dominate while the UK stays stagnant. 

It's weird, maybe the UK ruled for so long now it's time we're unconsciously taking a back seat on the world stage in terms of currency, economy, companies, military prowess (ok we still have nukes). It's a bit of a shame, I guess this is what Roman Empire felt like when it slowly whittled away leaving just Italy, a country that nobody really cares about generally speaking.

I recall some while back a German businessman, I can’t recall if this was on TV or in print, stated that he was surprised that UK company directors would go to parties and brag about how much they had made, or were going to make, from the sale of their company. In Germany owning a company is seen as a long term role. I’ve worked for countless companies in the UK tech sector and more often than not the aim was to fatten the company up ready for sale. Often this involved alienating the staff as they became no more than fixed assets in the eyes of the management, and creating a product that looked good on paper. The MD of one such telecoms company made a packet when it was sold, and was last heard of running a mobile poodle parlour. And in Germany, and France and the US, engineers are paid a lot more than here. 

Why is the demise of the British Empire a shame? Whilst we did much good, it was fundamentally immoral. Such is perhaps the nature of great power.