hi ST,
1. what do you think of the Belt Road Initiative?
I think cross-border infrastructure lending in general is a praiseworthy idea. And it's not like China is the only one doing it: Canadian and provincial pension funds are
gargantuan investors in infrastructure, they love the steady stream of inflation-adjusted cashflows (and the fact that you don't have to mark it to market, ahem).
(The CFR has a solid, politically neutral
explainer of what Belt-and-Road actually is, just so we're all starting from the same point. They link to
a series of FT articles, which are also very good, and cover the positive and negative viewpoints.)
But I think the Belt and Road Initiative makes a few policy decisions that have made it a lot more controversial than, say, the Marshall Plan (which was generally agreed to be a success, kick-starting Western Europe's economy after the Second World War) or Canadian pension funds' gargantuan appetite for infra assets.
why is China taking such a huge gamble on being a lender to such projects with countries that isn't creditworthy?
That, I think, is where Belt and Road went a bit sideways. Lending to countries that are poor credit risks isn't necessarily a bad idea—I suspect the original idea was that the revenues from the new infrastructure would pay for the loans taken out to build it, which is eminently sensible, that's how infrastructure investing
should work.
The BRI banks' strategy seems to have been that if the borrowers can't repay the loans, they'll take over the ownership of the assets. While this is pretty normal in a distressed-debt situation—if they can't pay, and they can't restructure, the equity owners get crammed down and the debt-holders take over the equity—the way the BRI has gone about taking over ownership of defaulted assets has been pretty disruptive, and frankly made them a bit unpopular. (The
handover of the Hambantota port in Sri Lanka is the most notable example of this.)
I guess you could say that China's acting like an activist investor... which is fine if you're actually an activist investor who's trying to squeeze every last penny out of a restructuring, but not great if you're a country that has to maintain cordial relationships with other countries.
2. can you explain deflationary depression & inflationary depression?
A "deflationary depression" is a normal depression. Economic growth slows, spending slows, access to credit is impaired, basically the economy seizes up. Think the Great Depression of the early-30s, or, more recently, the Greek economic implosion through the 2010s (Greek inflation has been sub-2% since 2012, and was actually negative from 2013 through 2017).
An "inflationary depression" isn't really a thing? From a quick google, the people who seem to use that phrase the most are cranks like Peter Schiff, which is a good sign that you don't need to worry about it.
shrug emoji
It's a pretty generic HKSE tech ETF. I don't see any particular reason to buy this one.
Many thanks Shiny for your kind patience in answering my questions.
No worries! Happy to help.
Transferring everything to IBKR SG means losing SIPC protection. Do you view this protection as redundant?
Yep, I do.
Also, I will need to settle some GBP denominated debt next year. Would having IBKR LLC be a better vehicle than IBKR SG to facilitate such a payment?
No, there won't be any difference between the two. IBLLC and IBSG accounts will have access to all the same stuff (except that the IBSG account lets you trade Singaporean equities, on top of everything the IBLLC account can do).
However, I am prone to analysis paralysis due to information overload. So, I think I will go along the same line of not picking stocks and not pick SOEs and select a China ETF that is most diversified. Would this be prudent?
Yep. I don't really see the need for a dedicated China ETF at all; I think you'll get more diversification from an EM ETF, or from VWRA. But if you must, a diversified China ETF is the right play.
Shiny, what do you think about the newly launched dimensional etfs:
Dimensional US Core ETF, the Dimensional International Core ETF and the Dimensional Emerging Markets Core ETF.
It seems like now that the costs have been reduced via an ETF structure, it makes sense to have it as a replacement to the same dimensional UTs.
If you're in the Dimensional UTs already, then switching to the ETFs makes sense, but to be honest I don't really buy DFA's marketing that their "improved indexing" (basically indexing with a value tilt) is a good idea.
Hi all,
I'm 29 this year, and have been doing a consistent 90% IWDA and 10% STI etf DCA for a year now, and cant help but wonder whether it makes sense to take a higher level of risk to achieve greater portfolio returns.
This is especially when exciting news on topics such as cryptocurrency (or DeFi) and electric vehicles (US, China) taking the spotlight for the past few weeks. NIO's 1000%+ stock price surge in 2020 alone is just way too eye-catching.
Ahhh. I'm going to be a little bit mean here, apologies in advance... but you're talking about buying these fun things
that have already gone up. It's usually a better idea to buy stuff
before it's gone up.
Let's be blunt here—most retail traders lose money. And nearly all retail traders make less money than they would have if they just put it all in an index fund.
More seriously though: if you don't have a huge portfolio (sub-six-figures, let's say), then the dollar value of the gains you'll actually make from having a "fun money" portfolio won't really be worth the effort you have to put in to pick stocks/pick coins/whatever. It'll be gambling at best, so treat it like an entertainment activity.
If you have a six-figure portfolio or larger, and if you have specialised knowledge about some sector that'll help you make outsized gains, then it can make sense to have a 10% "fun money" account for trading. (I do this! I'm not gonna lie, it's fun to chuck it around in interest-rate futures and FX vol occasionally!)
But it's important to be honest with yourself about how you're performing: if you can't beat the rest of your portfolio (the boring index funds) after trading for a year, then you might not be cut out for active trading or chasing the latest hot stock.
