Success with Wise money transfer

In Finally a use case for cryptocurrency? (currency conversion fees), Tim suggested Wise as the, um, wise way to transfer dollars to euro-denominated accounts overseas. I recently used this to pay a roughly $700 bill over in Portugal (where what we would call ACH transfer is apparently the standard way to pay) and it was done within hours for a fee of $44 (Bank of America’s hidden fees would have been closer to $200).

If you want to transfer some money away from the galloping inflation of the U.S. dollar, Wise seems like a reasonable option. The euro per se, however, is probably not the best currency to choose for inflation protection. They have the same fraudulent way of computing inflation, in which the cost of buying a house is excluded (Reuters) and their money printing during coronapanic has generated roughly 5 percent annual inflation. Right now Japan and Switzerland are looking good in a ranking of countries (the U.S. is down with Mexico, Russia, Brazil, Turkey, and Argentina). One thing that I don’t understand is how Germany and France can use the same currency, be right next to each other, and yet have substantially different inflation rates (5.2 percent and 2.8 percent).

Remember, though, that you might have to file some additional IRS forms if you own foreign financial accounts/assets (looks as though real estate is exempt, but not a real estate investment trust, for example).

(A potential inflation hedge in Gruyères, Switzerland. Cheese not included.)

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What edge does Rivian have in the truck or EV market?

“Rivian Is The Biggest Company With No Revenue In The U.S.” (Jalopnik) provides a little background on what is now the world’s third most valuable vehicle maker (Tesla #1, Toyota #2, Rivian #3, just ahead of VW).

Readers: Please educate me! What does Rivian know how to do that makes it worth huge $$ despite zero revenue? Wikipedia doesn’t describe any innovations other than maybe putting in four motors (but so what? A C8 Corvette has only one motor and it gets down the road and around corners).

It can’t be battery chemistry because the company buys batteries from Samsung (InsideEVs).

It can’t be that nobody else can make an electric pickup truck because the Ford F-150 Lightning will be here soon.

It can’t be that nobody else can make electric commercial vehicles because Mercedes promises the eSprinters to Americans starting in 2023 (Car and Driver).

I don’t see how it can be the case that Rivian will flood the market before the legacy companies, the way that Tesla has remarkably done, because Rivian is only just struggling to get its first vehicles out to consumers. If things go perfect, Rivian will deliver 40,000 units in its first year (source). Ford sells nearly 1 million F-150s per year.

An electric pickup enthusiast will have to wait his/her/zir/their turn for either a Rivian or a Ford. Why wouldn’t the typical buyer prefer to order a Ford? The price for Ford’s electric truck is lower than Rivian’s price and the reviews of the Ford are positive (example).

Ford is an investor in Rivian, so presumably there is a rational answer to why Rivian is worth a lot (since Ford knows the industry!). But what is that answer?

(Investors take note: I thought and wrote pretty much all of the above about Tesla when the company was young. I think it is safe to say that I have been proven wrong! But on the third hand Tesla didn’t arrive on the scene at the precise moment that the legacy car makers were going all-in on electric vehicles while Rivian is arriving after Ford already demoed the electric F-150.)


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Lecture regarding portfolio diversification from a mother of 6

What are folks doing for end-of-year portfolio clean-up in light of the radically changed economic landscape, notably the dramatic inflation as measured by the CPI and the even more dramatic inflation as experienced by actual consumers? A friend who is a connoisseur of hip hop sent me this brief lecture on portfolio diversification (the percentages are accurate for a lot of states, but the dollar figures could have been a lot higher if higher-income targets had been identified). Note that the lecturer’s strategy is inflation-proof since the wages on which her income is based should rise along with any inflation rate.

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Prepare for a worldwide market crash

I had some cash sitting in a checking account due to selling our house in Maskachusetts and becoming a renter here in the Florida Free State (a relocation analysis). If this had happened a few years ago, I might have let the money sit in checking until the day when it is time to get super extra stupid again and buy a house here in Florida (trade “call the landlord and open the door to the maintenance guys one hour later” for “spend a week begging contractors to come over”). But with inflation for the stuff that we might actually buy, e.g., houses, aircraft, etc., running at 20 percent annually, “park it in checking” didn’t seem viable.

I didn’t have enough confidence in the U.S. dollar or the Democrats’ muscular central management of the economy to buy more U.S. stocks. Buying bonds seems literally crazy given that the interest rate is lower than the official inflation rate. Buying TIPS doesn’t seem wise given that they’re pegged to the official inflation rate, which is way lower than the inflation rate for our family. So… that leaves non-U.S. stocks. The euro seems to have some of the same inflation risks as the USD, with governments using the same logic that Americans used from 1961 through 1975 with respect to the Vietnam War (“if we just throw some more cash at fighting this enemy, we cannot be defeated”; the enemy today, of course, is SARS-CoV-2).

But my beloved Sweden has its own currency! And that currency is up quite a bit against the euro (i.e., of course I am late to the party!):

(The dollar has lost roughly 10 percent of its value against Swedish krona as well.)

From Best way to invest in Sweden? (September):

I do think the Swedes will prosper in the long run due to superior mental health, a focus on something other than COVID-19, their kids having an extra year of in-person school compared to kids in U.S. cities, etc. I want to invest in Sweden with a 10-20-year horizon.

I have now put my money where my mouth is. The house sale proceeds are, as of today, in EWD, a high-fee index fund of Swedish stocks that I never could figure out how to buy directly as an American.

However, since I am the world’s dumbest investor, if I have moved money from cash to stock that can only mean one thing going forward: a worldwide stock market crash (or at least a crash in the Swedish market and/or currency!). You have been warned!

In the best tradition of Wall Street, if this investment outperforms, I will claim credit as a farsighted genius, second only to Mileva Marić, who explained the photoelectric effect, Brownian motion, and formulated the special and general theories of relativity. If this investment underperforms, I will say that it is my version of Environmental, Social and Governance (ESG) Investing, in which I support a society that had the courage to carry on educating children, working, socializing, breathing without masks, etc. despite recognizing that COVID-19 would kill some people (albeit at a much lower rate than in a lot of countries that were celebrated for their mask and shutdown orders). The Swedes even managed to get through 2020 and 2021 without the marijuana that California and Massachusetts governors/covidcrats deemed “essential” (“Cannabis in Sweden is illegal for all purposes.”).

Readers: What are doing right now for protecting savings from Bidenflation?


  • “Annual inflation hits 30-year high” (The Hill, today): The consumer price index (CPI), which tracks inflation for a range of staple goods and services, rose 0.9 percent last month and 6.2 percent in the 12-month period ending in October, the highest rate in the U.S. in 30 years. Analysts broadly expected the CPI to rise by 0.5 percent last month, up from a gain of 0.4 percent in August, and 5.8 percent over the past year.
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Portuguese stock picks

If you want some insurance against future Europe-US travel restrictions, want your children to have the flexibility to study/work/live in the EU, or just want to be like Eric Schmidt (support Biden and the Democrats’ plan to re-make U.S. society and the U.S. economy, but have the Gulfstream fueled and that second passport handy just in case!), the Portuguese Golden Visa program is an inexpensive path to an EU passport (less than $100,000 in fees and travel expenses). One requirement of the program is investing in real estate, which the Portuguese love and which I personally hate, or stocks, which the Portuguese hate and I love. The stock purchase approach requires more capital (1 million euro, versus as little as 280,000 for real estate that needs renovation), but is virtually guaranteed to be liquid.

(see Portuguese stocks or Lisbon real estate for the next five years? for some backgrond)

Friends of friends manage money or work in investment banking over in Europe. The general consensus was that Portuguese stocks aren’t mispriced and therefore there is no reason to expect them to do worse (or better) than German or U.S. stocks. That said, the stock market isn’t very developed in Portugal and it is perhaps easier for a management team to loot from shareholders.

Here are some notes from a guy who grew up in Portugal, but has spent his career as an investment banker in London and Spain….

Don’t buy real estate unless you want to use it. He bought in the center because he is fanatical about capital preservation. It took a long time to unload an apartment in Lisbon after the last crash.

Why has PSI-20 done so badly? Had same problems in 2001 and 2008 as everyone else. Bank blew up in 2014. Should be correctly priced now. They’ve survived hell and high water.

The PSI-20 has more exposure to Poland than Brazil or Angola, e.g., through JMT.

You’re in great shape with the large liquid components of the PSI-20.

  • JMT (10, great management, high growth) [the number is a rating from 1 to 10]
  • EDPR (world’s leading wind farm developer, incredibly management)
  • EDP (owns 65% of EDPR, cheapest right way right now to own EDPR)
  • GALP (4, local distribution company for oil, invested some into oil fields in Brazil, Angola, Mozambique, not especially well-managed)
  • BCP (6, only remaining bank, not especially well-managed, dirt cheap, too big to fail for system, largest shareholder is Chinese)
  • RENE (5, just the grid, regulated business, natural monopoly for electricity and gas, yield play)
  • SON (1, conglomerate, screw the minorities every single time, subsidiary is NOS and own that)
  • NVG (integrated paper manufacturer, Europe’s leader, very good management, very well run)
  • COR (10, one of the best companies I’ve ever come across, 50% of good wine[ry?])
  • ALTR (8, indirect way of owning, one of Europe’s most efficient [… something?])
  • CTT (6, post office)
  • SEM (85% of value is navigator, forget about them)
  • EGL (avoid)
  • PHR (avoid)
  • IBS (very nice company, KFC and Pizza Hut, they can grow)
  • Novabase NBA (great company, small IT provider, all software for Vodaphone, half of market cap is cash)
  • RAM (specialized steel and have a forest, properly managed and managed for you).

What if the Portuguese bank holding one’s securities fails? It is just like in the U.S. and the bank is only a custodian.

What did I decide to buy?

CompanySymbolWeight PSI-20Percent portfolio
J. MartinsJMT1325

The above is based on personal prejudice against banks (ruled out BCP), enthusiasm for Poland (overweight JMT), enthusiasm for electricity (overweight EDP; think of all the European douchebags needing to charge their Teslas!), belief that people are too lazy to cook and that table-service restaurants are unsustainable in a world of COVID-19 plus high labor costs (IBS).

Due to prejudice (observing the USPS!), I didn’t buy the post office, which is sad because they have great-looking trucks:

(2017 photo from the Azores)

Readers: Let me know if you need an introduction to attorneys and bankers over there.

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Finally a use case for cryptocurrency? (currency conversion fees)

I did a lot more research after Portuguese stocks or Lisbon real estate for the next five years? (May) and, as part of an EU citizenship project, decided to purchase stocks over in Portugal rather than take on more real estate ownership hassles (one of the big joys of our Florida move has been saying goodbye to homeownership).

Moving money from Bank of America to Bankinter led to some discoveries about international wire transfer costs. If you move a small amount in euros, Bank of America says that they won’t charge you any fees:

But the exchange rate was actually 1.17 on 9/24. So this is a 2.65 percent fee (still only about $31, plus whatever Bankinter will charge to receive the wire (0.05 percent, minimum €5, maximum €30)).

What about for the million euro transfer that is necessary to get the golden visa/passport process kicked off? Compared to the quoted market, the hidden fees within Bank of America were about 0.75 percent (e.g., about $7,500 on $1 million). If sent in USD, however, and converted by Bankinter, the non-hidden cost is 0.5 percent, a little cheaper than BofA, but still about 80X more than the cost of a Bitcoin transaction on the blockchain, right? (right now roughly $60 to the miners?). Given that we supposedly live in a seamless global economy, I’m kind of surprised at how much it costs to change a couple of database records at two banks that are already tightly coupled.

Could this be an argument for cryptocurrency, assuming that just one of the Ponzicoins prevails and becomes a worldwide currency?

(Why is it fair to call these Ponzicoins? Whoever creates a cryptocurrency can mint the first few million or whatever at almost no cost and then they gain value when he/she/ze/they convinces others to buy in.)

Separately, let’s look at the motivational factors from May:

At least to judge by our media, the U.S. is embroiled in white v. Black, white v. Asian, white v. Latinx, and hetero cisgender v. LGBTQIA+ fights. We’re also adding $trillions in debt, welcoming millions of new welfare-dependent citizens, and instituting dramatic changes in government (every day we hear a new and exciting idea for a bigger more powerful central government!). It seems like a good time to ensure that children have the option to study, work, and live in Europe. The Europeans bumped up against the limits of how much government could be responsible for and don’t seem anxious to go back to the 1970s.

There is no way to predict whether Portugal, Italy, Germany, France, or Sweden will be a better place to live than the U.S. in 2030, but keeping only a U.S. passport is essentially a bet that the U.S. will be a better place to live than anywhere in the E.U. Would we want to make that bet?

Now that we’ve had a full summer of rule by Joe Biden and the Democrats, do the above factors still apply to the U.S. as reconceived from Washington, D.C.? Let’s take them one at a time.

embroiled in white v. Black, white v. Asian, white v. Latinx, and hetero cisgender v. LGBTQIA+ fights

The conflicts described in May don’t seem to have been resolved. To these we’ve added roughly half of Americans who now hate Texas and Texans (see “Boycott Texas,” for example, from The Nation, 9/14: “With SB 8 following a crazy new gun law and mandatory mask ban, the Lone Star State has more than earned the cold shoulder”). We also have the hatred of the vaccinated for the unvaccinated, a new-since-May phenomenon.

adding $trillions in debt

“America’s Need to Pay Its Bills Has Spawned a Political Game” (NYT, 9/26): “The Covid-19 pandemic continues to ravage the United States in waves, frequently disrupting economic activity and the taxes the government collects, complicating Treasury’s ability to gauge its cash flow.”

In other words, the U.S. will continue to bury itself more deeply in debt so long as coronapanic continues. And, absent an enormous advance in treatment, we know that coronapanic will continue so long as the virus has the capability of evolving.

(Of course the U.S. also buried itself more deeply in debt before COVID-19 emerged, but at a somewhat slower pace (St. Louis Fed))

welcoming millions of new welfare-dependent citizens

This one might have changed. In order to hit our goal numbers for Americans dependent on government-provided housing, health care, food, and smartphone, we’re no longer relying on immigrants (the “welcoming” part of the headline). We’ve got the new $3,600 per year per child handout, which started in July. Going forward, the NYT tells us that what we used to call “welfare” is our common destiny: “From Cradle to Grave, Democrats Move to Expand Social Safety Net” (9/6, regarding $3.5 trillion in new spending, “a cradle-to-grave reweaving of a social safety net frayed by decades of expanding income inequality, stagnating wealth and depleted governmental resources, capped by the worst public health crisis in a century.”). Tens of millions of additional residents of the U.S. will be dependent on government support (no longer called “welfare”) going forward, but, due to the massive expansion of the welfare state, most of them will be native-born.

On the third hand, once chain migration (wives, cousins, kids, parents, etc.) is mostly complete, we’ll have at least 1 million new citizens from Afghanistan as a result of our spectacular defeat in August and decision to evacuate mostly men mostly at random rather than simply pay the Taliban not to bother people on a list. If these folks are like previous immigrants from Afghanistan to the U.S., they and their descendants will be among the poorest of the poor here, eligible for every form of government assistance for at least three generations. (See “Challenges to the economic integration of Afghan refugees in the U.S.”: “Afghan refugees’ earned incomes are the lowest of seven refugee/immigrant comparison groups”)

instituting dramatic changes in government (every day we hear a new and exciting idea for a bigger more powerful central government!)

Other than the welfare state expansion that the NYT describes above, I can’t think of anything new since May from the Biden administration or Congress.

If an EU passport was a good idea in May 2021, therefore, it seems like it might be an even better idea today. If you want to buy yourself and your children the option to study, work, or live in Europe (or simply travel back and forth during lockdowns), I would recommend acting ASAP. The Portuguese love hardcopy, notarization, etc. and it will take a two months to jump over the bureaucratic hurdles, even with two-day FedEx delivery of signed hardcopies. Email if you need recommendations for a lawyer and bank over there.


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Should investors react to the change in Germany’s government?

After 16 years of rule by Angela Merkel and the Christian Democrats, the government in Germany is changing. I talked to some European bankers and a former hedge fund manager to find out what, if anything, investors should do about this.

The general consensus was that very little would change in Germany. As in the U.S., grand plans from a party can be derailed by an individual member of parliament who thinks that the grand plan will have a negative impact on his/her/zir/their own little corner of the country. For better or worse, this tends to make the German system stable.

Nobody said that Merkel would be missed. One banker pointed out that Merkel was likely voted out by the low-skill welfare-dependent migrants that she was instrumental in bringing to Germany (welfare in Germany is much less generous than in the U.S., but still leads to a better material lifestyle than trying to work for a living in a lot of countries). “They’re betting that the Social Democrats will increase the handouts,” he said. “The conservatives bring them in saying that they’ll work and they turn around and vote for liberals so that they don’t have to work.” (After five years in Germany, about 51 percent of migrants don’t work, which is considered an improvement and a success story by pro-migration Germans.)

Another banker said that Merkel was responsible for the UK leaving the EU. “The British could have just ignored the EU’s demands to accept migrants, as the Eastern European countries did, but they’re too bound up in being law-abiding,” he said. “The Eastern European countries just refuse and dare the EU to throw them out, but there isn’t really a mechanism for kicking a country out of the EU.”

The former hedge fund manager said that Merkel was an unprincipled follower of public opinion. While she initially told Germans that most would be infected with SARS-CoV-2 and therefore most resistance would be futile (e.g., masks and shutdowns would just slightly delay the inevitable), when people demanded lockdowns she locked them down.

How’s Europe doing? “Euro zone inflation hits highest level in 13 years as energy prices soar” (CNBC, October 1, 2021):

Headline inflation came in at 3.4% last month, according to preliminary data from Europe’s statistics office Eurostat. This was the highest level since September 2008 when inflation stood at 3.6%. It comes after German consumer prices rose by 4.1% in September — the highest level in almost 30 years.

The rise has been driven higher by surging energy prices, deepening concern among policymakers. The front-month gas price at the Dutch TTF hub, a European benchmark, has risen almost 400% since the start of the year.

What’s more, this record run in energy prices is not expected to end any time soon, with energy analysts warning market nervousness is likely to persist throughout winter.

France has become the latest country to step up measures to mitigate the costs for consumers. Prime Minister Jean Castex said Thursday the government would be blocking further natural gas price increases as well as rises in electricity tariffs. However, before these measures kick in, gas prices will rise by 12.6% for French consumers as of Friday.

I.e., France is copying Richard Nixon’s wage and price controls and hoping for a different result. (See also “Nixon Taught Us How Not to Fight Inflation” (WSJ): His price controls led to an exponential increase in demand, which caused a shock when they ended.)

I asked the hedge fund manager if the European inflation numbers were cooked like the U.S. numbers (e.g., food and energy costs are excluded from some measures, the cost of buying a house is excluded from all measures (the government comes up with a fictitious world in which people can rent their houses from themselves for a government-determined price)). “Completely fake of course,” he responded. “However, there is one reality of their own making. To ‘save the world’ (read: tax more) they recently yanked up taxes on natural gas and the such. Together with rising oil prices, this has created quite a bit of inflation as you can imagine.”

If the Europeans are inflating away the value of their currency just we are inflating away the value of ours, what is an investor to do? Move money to China, as BlackRock has recently started to do? That’s a bridge too far for a lot of non-Chinese investors. How about “Mining Stocks Offer a Cheap Play on Growth. Dig In.” (Barrons, September 17, 2021), in which we learn that iron and copper miners have P/E ratios of 5-7 (compare to over 30 for the S&P 500):

We have no idea where the euro and dollar will be after the politicians on both sides of the Atlantic are done with their manipulations of the respective economies. I’ve always hated gold as an investment because it isn’t productive. And, in fact, once you factor in dividends paid (“total return”), gold has underperformed U.S. stocks going back to the beginning of our galloping inflation (1971):

(black is the total return; silver is bumping along on the bottom; the S&P (without considering dividends), the Dow Jones, and gold are clustered in the middle)

Could mining iron and copper be considered a hybrid of gold’s inflation hedge and the return to be expected from investing in a productive activity? People will still need steel even if there is a lot of inflation in one or more currencies. On the third hand, aside from the low P/E ratio, why are raw materials miners better investments than upstream manufacturers? And if the P/E is 5 or 7, is that because a company is heavily indebted and can go bust (rather than simply slim down) in the event that demand is reduced?


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Buy Berkshire Hathaway?

With tax law and tax rate changes on the horizon, is it time to buy Berkshire Hathaway? Nobody is better connected to the current rulers than loyal Democrat Warren Buffett (he thinks tax rates are too low, but somehow hasn’t ever found that box on the 1040 return where one can make a voluntary contribution to the U.S. Treasury). The complexities of the current tax code have been awesome for Buffett/Berkshire (see “Warren Buffett’s Nifty Tax Loophole” (Barron’s 2015), allowing for near-infinite deferral of taxes due at the corporate level.

Is it a reasonable bet to assume that Buffett/Berkshire will come through whatever happens in Congress and at the White House with less damage than suffered by the average publicly traded company?

On January 19, 2017, I asked Berkshire Hathaway now that Warren’s friend won’t be in the White House? Under the hated Republican dictator, how did Buffet do? Significant underperformance relative to the S&P 500:

And maybe the situation for Buffet fans is actually worse than the chart suggests because the S&P 500 paid a divided every year during this period while Berkshire Hathaway did not.

How about our friend Toucan Sam?

I sold my share because it is my belief that brk.a has a huge cult of personality with Buffet and he will be dead soon. It is hard to say what premium we are paying for Buffet but my guess is around 30%. It is a certainty he will be dead soon and it is a certainty that it will affect the share price so why risk it? I put the earnings from my brk.a sale into a vanguard fund called VTSMX

How did our favorite bird brain do? (He didn’t say exactly when in 2016 he sold, so I picked June 30)

Again, Toucan Sam did better than the chart suggests because the Vanguard fund pays a dividend.

This underperformance by Buffett calls into question Thomas Piketty’s work on inequality, which rests on the assumption that rich people can get better returns on their money than average people. Hardly anyone is richer than Warren Buffett (though sex-with-the-boss-then-divorce-lawsuit family court entrepreneurs MacKenzie Scott and Melinda Gates are pretty close). He didn’t get a better return than someone who put $10,000 into a 401k S&P 500 index fund.

Toucan Sam might have been wrong about Warren Buffett (now 91) being “dead soon”! Even the mighty coronavirus could not fell this tall oak of finance.

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Best way to invest in Sweden?

As readers may have noticed, I’m a contrarian when it comes to COVID-19 (along with the 60,000 physicians and PhDs who’ve signed the Great Barrington Declaration). To me, the untested “experiment” is locking a country down and closing schools in hopes of winning a war against a respiratory virus. It is not an “experiment” to stay open, as Sweden did (and as the W.H.O. recommended through 2019), and continue to educate children, continue to go to work, continue to hit the gym, continue to socialize with friends and family, etc. I don’t think the U.S., for example, will be better off as a result of shutting down, closing schools, buying and wearing cloth masks that have been shown to be worthless, etc. I do think the Swedes will prosper in the long run due to superior mental health, a focus on something other than COVID-19, their kids having an extra year of in-person school compared to kids in U.S. cities, etc. I want to invest in Sweden with a 10-20-year horizon.

(Based on our devotion to the Vietnam and Afghanistan wars, we could still be fighting the COVID-19 war 10-20 years from now! Even if we aren’t, the misallocation of $trillions from the past 1.5 years, e.g., paying people to stay home for 1.5 years ($800 billion just from federal tax dollars), giving $3,600/year extra per child to successful child support plaintiffs, funding highway repairs in the least efficient states (the new “infrastructure” bill, which builds infrastructure everywhere other than in the states that actually need it due to growing population?), etc., will be a comparative drag on the U.S. economy.)

What’s the best way to invest in Sweden? My usual preference is for common stocks, but apparently a lot of these can’t be purchased in the U.S. There is an ETF that tracks the Swedish market: EWD from iShares. The dividend yield is medium (just under 3%), which I hope means that capital appreciation is expected. Somehow, 77 percent of the yield is classified as “qualified” (I’d thought that this was for U.S. stocks) and therefore subject to a lower federal tax rate (if the Democrats are successful with their latest federal tax increase, the result will be a dividend tax rate of about 50 percent for Californians (fed+state) and this will be on top of higher corporate taxes (i.e., something like 75% of a company’s profits that would have belonged to shareholders will instead go to pay taxes); things are a little less grim for residents of Florida).

The big negative of this iShares fund is a 0.51 percent management fee. They’re just trying to track the index, so it is unclear what you’re paying them for (how hard is it to buy and hold 53 stocks?). The fee for the Vanguard S&P 500 ETF is 0.03 percent, which is also the fee for the corresponding iShares S&P 500 ETF.

The big negative of Sweden as an investment, if you’ve been reading this blog, is that I don’t believe the prevailing American dogma that low-skill migrants make a country richer (if they did, Canada and European nations would be vying for and paying for the opportunity to fly low-skill migrants from our southern border to their respective countries). At 25 percent, Sweden has, I think, the highest percentage of immigrants or children of two immigrant parents, of any country in Europe. If these folks prefer not to work, that could be a drag on the Swedish economy (via welfare costs) for the next 100 years. See “‘New Swedes’ left out as economy powers through pandemic” (Reuters, March 17, 2021):

Sweden has powered through the COVID-19 crisis with an economy set to regain its pre-pandemic size by late-2021, but a surge in unemployment among its foreign-born citizens risks exacerbating social divisions for years to come.

Ajlan came to Sweden as a 17-year-old from Baghdad in 1993. Despite graduating with a degree in Middle Eastern Studies from Lund University – one of the country’s best schools – he only found work as a taxi driver.

A rigid labour market and a lack of low-skilled jobs means Sweden has been poor at integrating waves of immigrants, or “new Swedes”, since the 1970s – a social and economic divide that has been widened further.

Unemployment among foreign-born workers stood at 18% in the fourth quarter of last year, up 3.5 percentage points from a year earlier, according to Statistics Office data. For people born in Sweden, it was 4.1%, up just 1 percentage point.

Immigration has been running at high levels for the past two decades in Sweden, with a record 163,000 asylum seekers arriving in the country of 10 million in 2015.

The government has launched a raft of measures – some of which predate the pandemic – aimed at getting people into work, including subsidized employment, tax breaks for employers, on-the-job training schemes and its “knowledge-lift” programme that offers study opportunities for the unemployed.

In other words, the Swedes don’t have any better idea of what to do with low-skill migrants than we do. They’re on the same “provide free housing, free health care, free food, and then ask people nicely if they would like to work” plan (maybe the Swedes don’t offer an Obamaphone, but mobile phone service in Europe is much cheaper than in what we call our competitive market).

On the third hand, the U.S. and all of Europe are going to be packed with low-skill migrants for the foreseeable future. The only way to short the idea of a migrant-packed welfare state is to invest in Asian countries that are closed to low-skill immigration and that, in any case, don’t offer the multiple generations of free housing, health care, and food that the U.S. offers and that some European countries offer (albeit at a less generous level; see Hartz IV in Germany, of which 55 percent of the recipients are migrants or children of migrants: “According to the Federal Employment Agency … this was due to the migrants lacking either employable skills or knowledge of the language”).

Vaguely related… the Volvo-driving migrants arrive in Stockholm on the ferry from Finland (2016):

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How rich would we be if God had told us about coronapanic in November 2019?

Suppose that you got a letter from God in November 2019 saying that coronapanic would start in March 2020, with unprecedented shutdowns of schools, factories, retail, restaurants, etc. God would have told you that China, Japan, and Taiwan would experience relatively minor shutdowns, that Sweden would have no shutdown, that everyone would try to meet by videoconference, and that most countries and U.S. states would have lengthy shutdowns.

The most obvious response to this as an investor would have been (1) buy China, Japan, and Taiwan, (2) short the U.S., (3) short Europe, (4) buy some individual stocks such as Zoom, and (5) maintain the strategy until a vaccine authorization (not “approval”!) was announced (not because of a belief that COVID-19 vaccines will eliminate COVID-19, but because of a belief that other investors would believe that COVID-19 vaccines will eliminate COVID-19 and therefore coronapanic-related shutdowns).

Let’s see how that would have done. We’ll say that we started the strategy on November 15, 2019 and closed it out on November 10, 2020 a day after Pfizer celebrated the defeat of Big Pharma’s nemesis (Donald J. Trump) by finally disclosing Phase 3 vaccine trial results. We would use 40 percent weight on Asia, 40 percent on the US/Europe short, and a remaining 20 percent on individual stocks.

Let’s first benchmark this against a not-favored-by-God person buying and holding the S&P 500. SPX went from 3120 to 3360 (up 7%).

Element 1 (buy Asia): SSE (Shanghai Index) went from 2911 to 3330 (up 14%). The Nikkei (Japan) went from 23160 to 25087 (up 8%, but this would be called the largest move by far by the journalists writing about COVID in India!). TWSE (Taiwan) went from 52.20 to 61.60 (up 18%).

Element 2 (short the U.S.): as noted above, this would have lost roughly 7% (we’ll ignore dividends since the stuff we bought long would have paid dividends as well).

Element 3 (short Europe): Let’s use the MSCI Europe index. It went from 136 to 127 (down 7%).

Element 4 (buy Zoom, et al): ZM from 68 to 433 (up 536%!), AMZN from 1760 to 3231 (up 83%)

So we’d be up roughly 12% on Asia, flat on the U.S. and Europe (assume equal weight between these two and they moved in opposite directions), and up about 250% on the individual stocks. After transaction costs, given the assumed weights, we’d be up 50-55% for the year.

That’s a lot less than I would have expected!

Above: God creates a Robinhood user.

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