Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Bitcoin Crash Sees Flight To Physical Gold Coins and Bars - 18th Jan 18
The Interest Rates Are What Matter In This Market - 18th Jan 18
Crude Oil Sweat, Blood and Tears - 18th Jan 18
Land Rover Discovery Sport - Week 3 HSE Black Test Review - 18th Jan 18
The North Korea Quagmire: Part 1, A Contest of Colonialism and Communism - 18th Jan 18
Understand Currency Trade and Make Plenty of Money - 18th Jan 18
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18
How to Know If This Stock Market Rally Will Continue for Two More Months? - 14th Jan 18
Everything SMIGGLE from Pencil Cases to Water Bottles, Pens and Springs! - 14th Jan 18
Land Rover Discovery Sport Very Bad MPG Fuel Economy! Real Owner's Review - 14th Jan 18
Gold Miners’ Status Updated - 13th Jan 18
Gold And Silver – Review of Annual, Qrtly, Monthly, Weekly Charts. Reality v Sentiment - 13th Jan 18
Gold GLD ETF Update.. Bear Market Reversal Watch - 13th Jan 18
Stock Market Leadership In 2018 To Come From Oil & Gas - 13th Jan 18
Stock Market Primed for a Reversal - 13th Jan 18
Live Trading Webinar: Discover 3 High-Confidence Trade Set-Ups - 13th Jan 18
Optimum Entry Point for Gold and Silver Stocks - 12th Jan 18
Stock Selloffs Great for Gold - 12th Jan 18
These 3 Facts Show Gold Is Set to Surge in 2018 - 12th Jan 18
How China is Locking Up Critical Resources in the US’s Own Backyard - 12th Jan 18
Stock futures are struggling. May reverse Today - 12th Jan 18
Three Surprising Places You See Cryptocurrency - 12th Jan 18
Semi Seconductor Stocks Canary Still Chirping, But He’s Gonna Croak in 2018 - 12th Jan 18
Land Rover Discovery Sport Panoramic Sunroof Questions Answered - 12th Jan 18
Information About Trading With Alpari And Its Advantages - 12th Jan 18
Stock Market Investing 2018 - “I Hope I’m Making a Bad Buy” - 11th Jan 18
S&P 500 Fluctuates As Stock Market May Be Topping, Or Not? - 11th Jan 18
SPECTRE Microprocessor Security Flaw - Big Brother = You - 11th Jan 18
7 Market Forecasts 2018 from the Brightest Financial Minds I Know - 11th Jan 18
It’s Not Enough to Be Contrarian - 11th Jan 18
Stocks That Take One for A Roller Coaster Ride Through the Thick And Thin Of Every Single Investment Made - 11th Jan 18
Police Arrest Tree Protester on Meersbrook Park Road, Sheffield - 10th Jan 18
Stock Market Aggressive Sell Signals - 10th Jan 18
The 2018 Decline in Precious Metals - 10th Jan 18
Gold Hits All-Time Highs Priced In Emerging Market Currencies - 10th Jan 18
TMV : 3X Leveraged Short on US Treasury Bonds - 10th Jan 18
Here are the Key Levels in Gold & Gold Miners - 10th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

If You Are Long Broad ETFs Like VT, You Have Given Up

Companies / Exchange Traded Funds Nov 01, 2017 - 08:04 PM GMT

By: John_Mauldin

Companies

BY JARED DILLIAN : I am going to melt your brain today. Vanguard has an ETF (ticker: VT) that allows you to get long world stock markets.

This raises all sorts of interesting philosophical questions.

You see, if you are long every stock in the world, you are basically long global economic growth. Which is weird! Who has an opinion on global economic growth?


Efficient Market Hypothesis Doesn’t Apply to Stocks

Well, if you got long the human race circa 1880 or so, you have done pretty well. It is hard work being short human ingenuity. But there have been some big drawdowns along the way!

We had a huge depression in the 30s and a die-off in the 40s. Global stock markets have certainly not gone up in a straight line—although they are today.

I can’t see myself getting long the human race because there are pockets of humanity that I am very pessimistic about. (I wrote about the markets that concern me most in my free special report, Investing in the Age of the Everything Bubble, which you can download here)

I am pessimistic on Canada, Australia, and Sweden, with their giant credit bubbles. I am bullish on Chile, which is making positive political change. I am bullish on Bangladesh, which has incredible demographics.

What I am essentially saying is that I am smart enough to pick and choose countries that are going to outperform. Which shouldn’t be super controversial—most national economic wounds are self-inflicted.

It’s not hard to distinguish between good policy and crappy policy.

So really the only reason you would buy VT and get long the world is if you think that efficient market hypothesis (EMH) applies to global stocks—the idea that you can’t beat the world market by picking and choosing countries.

I have no idea if there has been any research to support that statement. I can tell you from personal experience that I have had no trouble beating VT by making targeted investments in individual countries (usually with ETFs). But if EMH doesn’t apply to countries, why would it apply to stocks?

Short the World

I told you I was going to melt your brain.

I’m going to leave that question unanswered for now (partly because I am not smart enough to answer it)—and instead talk about the audacious idea that one might actually want to short human progress.

Selling short VT is the ultimate act of pessimism—you are saying that things, in the general sense, are going to get worse. Looks like most of you think that is going to be the case.

I kinda feel like doing it just to make a point.

Let’s dig deep into this.

If you bought world stocks in 1880 and stayed long, even throughout the nasty bits, you are pretty happy. But in the grand scheme of all human history, that is a pretty small sample size. We had a stretch of several hundred years that was pretty dark. We called it the Dark Ages.

What was the defining characteristic of the Dark Ages? Unreason. The opposite of The Enlightenment. The use of physical force over mutually beneficial trade.

Could we go back there? Maybe not all the way back. But whenever it looks like ignorance is making new highs and trade and capitalism are making new lows, I get anxious.

None of this is quantifiable. But you might have noticed in the last political cycle that flat-earthers made a comeback(!) It should not come as a surprise that the flat-earthers were not too keen on global trade.

The stock market has gone straight up under Trump, but it won’t forever—especially if he gets his way and starts a trade war with China (and everyone else). If you were wondering what I thought a global sell signal might be, that is it.

Three Steps Forward, Two Steps Back

All of human progress is three steps forward, two steps back. We have had our three steps forward, and then some. I am not rooting for the Dark Ages, but we’re long overdue.

For the optimists out there, by all means go out there and start lifting offers on VT. Never mind the fact that it trades at a 22 P/E. Never mind that it has all the dirtbag countries with the good countries. You just want to get long people. There you go.

In my mind, if you buy an ETF like VT (and correspondingly, SPY), you have just given up. Given up picking stocks, yes, but also you have given up having an opinion on anything.

It is a common misperception that stocks are going to go up forever, no matter where you are in the world. Maybe not—what about Iceland? If you dollar-cost averaged there, you are still underwater.

Sometimes stocks go down, and sometimes stocks go down and stay down. People are pretty optimistic these days. Be careful.

Grab Jared Dillian’s Exclusive Special Report, Investing in the Age of the Everything Bubble

As a Wall Street veteran and former Lehman Brothers head of ETF trading, Jared Dillian has traded through two bear markets.

Now, he’s staking his reputation on a call that a downturn is coming. And soon.

In this special report, you will learn how to properly position your portfolio for the coming bloodbath. Claim your FREE copy now.

John Mauldin Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules