ChapInTokyo wrote: ↑Wed Apr 09, 2025 6:16 am
My target bond allocation is 1/3 Japan bonds and 2/3 yen-hedged international bonds, but because of the still high rates of yen hedging against the dollar, I have not been able to execute this bit of rebalancing yet.
So currently I have maybe 1/2 Japan bonds (mostly the TMAM JGBi fund that you mentioned with a small amount contributed by the Japan component of BNDX), and 1/2 International bonds (of which around 2/3 is US bonds included in VPLS and a little bit of VGIT and 1/3 is ex-US ex-Japan bonds included in BNDX).
Unlike you, I think that the yen will strengthen against the dollar for the next few years since this seems to be what the Americans seem to want Japan to offer up in exchange for lower tariffs. This will make Japanese exports more expensive everywhere not just in the US, so it will put a drag on Japanese firms' profitability, but I guess the negotiation will be all about how much the US wants the yen to strengthen against how much value the Japanese government puts on lower US tariffs in exchange for a stronger yen. In any case, the BoJ wants to raise interest rates to get into positive territory in real terms so a bit of gaiatsu for a higher Japanese interest rate might actually be just what Japan needs.
If this pans out, I think it will be important to have moved into yen-hedged international bonds before the yen starts to strengthen in earnest.
I don't disagree with you. By long term I was thinking more like where the yen will be in 10 to 15 years or so. As you say, the yen could strengthen over the next few years depending on interest rate differentials and whether Japanese companies/investors return more of their overseas earnings/investments to Japan. I am younger than you and still accumulating, which hopefully gives me more time to ride out that problem without spending indirectly on currency hedging.
I agree that the dollar could be much stronger in the long term than it is likely to be during the next few years. On the other hand, if the US continues decoupling from the international trade ecosystem, the use of the dollar as the world’s key currency might undergo some changes some way down the line. I think that if a mad US president can wreak so much havoc in just a couple of months in office, anything is possible…
As for the question of hedging, I think that with a long time horizon, holding unhedged international funds is probably the better bet. At least, the GPIF’s boffins seem to have reached such a conclusion and their bet is much larger than any of us.
ChapInTokyo wrote: ↑Fri Apr 11, 2025 1:36 am
On the other hand, if the US continues decoupling from the international trade ecosystem, the use of the dollar as the world’s key currency might undergo some changes some way down the line. I think that if a mad US president can wreak so much havoc in just a couple of months in office, anything is possible…
Definitely. The US and the dollar will probably remain better than the alternatives but given its electoral system and wealth inequality, America could easily produce another Trump/Erdogan/Orban-clone in the future. That risk could result in a permanent discount on the US relative to what it would have been otherwise.
There's no way of measuring it, but I am still not sure if the Truss effect on UK Gilts has completely disappeared. Maybe it has, possibly because the parliamentary system gives the PM less power than a president, and the governing party MPs and party members can replace lunatic leaders quickly, without waiting for primaries and elections. On the other hand, the populist Reform Party is on the rise in the UK. We could end up with "moron discounts" everywhere
ChapInTokyo wrote: ↑Fri Apr 11, 2025 1:36 am
On the other hand, if the US continues decoupling from the international trade ecosystem, the use of the dollar as the world’s key currency might undergo some changes some way down the line. I think that if a mad US president can wreak so much havoc in just a couple of months in office, anything is possible…
Definitely. The US and the dollar will probably remain better than the alternatives but given its electoral system and wealth inequality, America could easily produce another Trump/Erdogan/Orban-clone in the future. That risk could result in a permanent discount on the US relative to what it would have been otherwise.
There's no way of measuring it, but I am still not sure if the Truss effect on UK Gilts has completely disappeared. Maybe it has, possibly because the parliamentary system gives the PM less power than a president, and the governing party MPs and party members can replace lunatic leaders quickly, without waiting for primaries and elections. On the other hand, the populist Reform Party is on the rise in the UK. We could end up with "moron discounts" everywhere
The “moron discount” is quite an apt description!
When it comes to wealth inequality though, I believe that it has increased all over the world. Not so pronounced yet in Japan, but the erosion of the middle class and the concentration of wealth among the few is perhaps the larger issue, with the rise of populists like Trump being the result.
I recently listened to the audiobook version of Oliver Bullough’s “Moneyland: Why Thieves And Crooks Now Rule The World And How To Take It Back”. It made me feel a bit less annoyed about my unpleasant experience with Sony Bank’s seemingly over stringent anti-money laundering protocol!
ChapInTokyo wrote: ↑Fri Apr 11, 2025 1:36 am
On the other hand, if the US continues decoupling from the international trade ecosystem, the use of the dollar as the world’s key currency might undergo some changes some way down the line. I think that if a mad US president can wreak so much havoc in just a couple of months in office, anything is possible…
Definitely. The US and the dollar will probably remain better than the alternatives but given its electoral system and wealth inequality, America could easily produce another Trump/Erdogan/Orban-clone in the future. That risk could result in a permanent discount on the US relative to what it would have been otherwise.
There's no way of measuring it, but I am still not sure if the Truss effect on UK Gilts has completely disappeared. Maybe it has, possibly because the parliamentary system gives the PM less power than a president, and the governing party MPs and party members can replace lunatic leaders quickly, without waiting for primaries and elections. On the other hand, the populist Reform Party is on the rise in the UK. We could end up with "moron discounts" everywhere
The “moron discount” is quite an apt description!
When it comes to wealth inequality though, I believe that it has increased all over the world. Not so pronounced yet in Japan, but the erosion of the middle class and the concentration of wealth among the few is perhaps the larger issue, with the rise of populists like Trump being the result.
I recently listened to the audiobook version of Oliver Bullough’s “Moneyland: Why Thieves And Crooks Now Rule The World And How To Take It Back”. It made me feel a bit less annoyed about my unpleasant experience with Sony Bank’s seemingly over stringent anti-money laundering protocol!
Thanks, I'll check it out. I think the wealth gap, populism, anti-globalization, government debt, and climate change will all mean slower growth, higher taxes on asset holders, and higher inflation. I hope I am completely wrong. We'll see how much AI and robots offset all this.
Definitely. The US and the dollar will probably remain better than the alternatives but given its electoral system and wealth inequality, America could easily produce another Trump/Erdogan/Orban-clone in the future. That risk could result in a permanent discount on the US relative to what it would have been otherwise.
There's no way of measuring it, but I am still not sure if the Truss effect on UK Gilts has completely disappeared. Maybe it has, possibly because the parliamentary system gives the PM less power than a president, and the governing party MPs and party members can replace lunatic leaders quickly, without waiting for primaries and elections. On the other hand, the populist Reform Party is on the rise in the UK. We could end up with "moron discounts" everywhere
The “moron discount” is quite an apt description!
When it comes to wealth inequality though, I believe that it has increased all over the world. Not so pronounced yet in Japan, but the erosion of the middle class and the concentration of wealth among the few is perhaps the larger issue, with the rise of populists like Trump being the result.
I recently listened to the audiobook version of Oliver Bullough’s “Moneyland: Why Thieves And Crooks Now Rule The World And How To Take It Back”. It made me feel a bit less annoyed about my unpleasant experience with Sony Bank’s seemingly over stringent anti-money laundering protocol!
Thanks, I'll check it out. I think the wealth gap, populism, anti-globalization, government debt, and climate change will all mean slower growth, higher taxes on asset holders, and higher inflation. I hope I am completely wrong. We'll see how much AI and robots offset all this.
The history of tax avoidance chronicled by “Moneyland” and how the wealth management industry acts as enablers, effectively robbing the rest of society of funding for necessary social services makes me quite pessimistic about the future. There is unlikely to be enough tax revenue to maintain social services unless the tax avoidance can be stopped.
NISA is absolutely a way of avoiding tax (and it's legal).
That's the only reason I, and I believe, anyone, uses NISA accounts.
Personally, I'd much prefer there were no such loopholes and everyone would thus pay their fair share, rather than expecting to pass the tab on to others.
But it is what it is.
I popped into the Setagaya library today and borrowed their copy of "The Triumph of injustice : how the rich dodge taxes and how to make them pay", by Saez and Zucman, so perhaps by skimming through it I might find myself re-educated and led to think otherwise
Tax avoidance is legal.
Tax evasion is illegal.
Nearly everyone engages in some degree of tax minimization. It’s just a matter of degree and how many loopholes governments try to close. Ask Jimmy Carr
However, this think tank agrees with ChapInTokyo
“So here are some things that are not tax avoidance, even though (in the usual meaning of the term) you are “avoiding” tax:
Investing through a pension or ISA. Yes, it avoids tax, but that was absolutely intended by Parliament. Not tax avoidance. Anyone who says otherwise is very silly.2“
captainspoke wrote: ↑Tue Apr 08, 2025 4:36 am
Rather than "I lost this much," or "I'm down this much", another way to look at it is when was your portfolio last at the present level? Was it six, nine, 12 months ago, or what?
For me, that was may 7-8 last year (the august dip is now a little above where I am now).
So another way to see it is that the market has been flat (or choppy, or moving sideways) for 11 months. Like, so what.
...
An update only a week later: now it's Sept 10th when I was last at this level.
The 1-year change is still more than acceptable--so that if the next few years matched or even just came close to this past year's performance (as of today), that would be a very nice sequence of returns.
Of course who knows what the king of chaos will do tomorrow, and then a day or two later, and so on, for the next few years...
