More Gloom and Doom? Long-term real returns of 2.1%

[lovinglife1]

The issuer was ICICI Bank, the largest private bank in India.
The tax rates were comparable. I dont recall the rate.
The prevailing inflation rate was about 5+ percent.
The terms were 12 months for $10K USD...in rupees.

The only real risk was exchange rate risk since I converted USD to purchase the deposits. Fortunately, the rate moved 8 percent stronger. It was really amazing as I discussed the comparable rates in the US with my Indian colleagues.

You have to have an ICICI account to purchase the deposits.

The point to my comments was that there is real money to be made in EM, far and away more than in the EU and USA but most are not aware of how to make it work living abroad.

I also lived in Vietnam from 2004 and 2007 and made moeny purely on currency. I had many expat friends who have/ had lived in VN for years and had Western investors living and working there as well....and making money hand over foot. No exaggeration.

My advice is simple. Spend just 20% of the time that you are now devoting on how to improve from 2-4% returns in the US to how to generate multiples of that amount in very safe environments.

I am currently living in Japan and I can tell you...Asia is the future, and it's now.

I have been reading these posts for many months now. I am 54 and ER next year with megacorp. It's a bit amusing (and sad) to see the anxiety on how to survive in the US when it's all about being global. Forget mutual funds. Find people who live and work abroad. They know.

Good luck.

 

[traineeinvestor]

The issuer was ICICI Bank, the largest private bank in India.
The tax rates were comparable. I dont recall the rate.
The prevailing inflation rate was about 5+ percent.
The terms were 12 months for $10K USD...in rupees.

The only real risk was exchange rate risk since I converted USD to purchase the deposits. Fortunately, the rate moved 8 percent stronger. It was really amazing as I discussed the comparable rates in the US with my Indian colleagues.

You have to have an ICICI account to purchase the deposits.

The point to my comments was that there is real money to be made in EM, far and away more than in the EU and USA but most are not aware of how to make it work living abroad.

I also lived in Vietnam from 2004 and 2007 and made moeny purely on currency. I had many expat friends who have/ had lived in VN for years and had Western investors living and working there as well....and making money hand over foot. No exaggeration.

My advice is simple. Spend just 20% of the time that you are now devoting on how to improve from 2-4% returns in the US to how to generate multiples of that amount in very safe environments.

I am currently living in Japan and I can tell you...Asia is the future, and it's now.

I have been reading these posts for many months now. I am 54 and ER next year with megacorp. It's a bit amusing (and sad) to see the anxiety on how to survive in the US when it's all about being global. Forget mutual funds. Find people who live and work abroad. They know.

Good luck.

Thanks for the detail. Having lived in Hong Kong for 18 years, I agree with you that Asia offers some great opportunities to get ahead financially. Of course, it also offers some great opportunities to damage your finances, and I've been here long enough to accept that the (financial) ride can be pretty bumpy at times. That said, so far Asia has been good to me.

 

[HFWR]

The issuer was ICICI Bank, the largest private bank in India.
The tax rates were comparable. I dont recall the rate.
The prevailing inflation rate was about 5+ percent.
The terms were 12 months for $10K USD...in rupees.

The only real risk was exchange rate risk since I converted USD to purchase the deposits. Fortunately, the rate moved 8 percent stronger. It was really amazing as I discussed the comparable rates in the US with my Indian colleagues.

You have to have an ICICI account to purchase the deposits.

The point to my comments was that there is real money to be made in EM, far and away more than in the EU and USA but most are not aware of how to make it work living abroad.

I also lived in Vietnam from 2004 and 2007 and made moeny purely on currency. I had many expat friends who have/ had lived in VN for years and had Western investors living and working there as well....and making money hand over foot. No exaggeration.

My advice is simple. Spend just 20% of the time that you are now devoting on how to improve from 2-4% returns in the US to how to generate multiples of that amount in very safe environments.

I am currently living in Japan and I can tell you...Asia is the future, and it's now.

I have been reading these posts for many months now. I am 54 and ER next year with megacorp. It's a bit amusing (and sad) to see the anxiety on how to survive in the US when it's all about being global. Forget mutual funds. Find people who live and work abroad. They know.

Good luck.

Texas is a whole nuther country...

Not moving to Asia, but I invest there, in, gasp, mutual index funds.

 

[IBWino]

Thanks for the link. Since no one can accurately predict the future, the permanent portfolio approach is very appealing.

FYI, William Bernstein posted this commentary about the permanent portfolio last month on his Efficient Frontier site. In summary, he thinks it's good in theory, but difficult to execute.

 

[old guy]

Arends article is interesting and supports Mohamed El-Erian's (PIMCO) concept of the "New Normal" which was profiled in a 16 August, 2010 article in the "money" section of the USA Today: "The Post-financial-crisis world will yield lower investment returns, slower economic growth and higher odds of an out-ot-the-blue financial shock. In short a world where the range of financial outcomes-and risk-is much wider than normal". El-Erian closes out his thoughts with: "Simply put, investors should own less equities, more bonds, more global investments, more cash and more dry ammunition. There is lots we don"t know".

 

[haha]

Arends article is interesting and supports Mohamed El-Erian's (PIMCO) concept of the "New Normal" which was profiled in a 16 August, 2010 article in the "money" section of the USA Today: "The Post-financial-crisis world will yield lower investment returns, slower economic growth and higher odds of an out-ot-the-blue financial shock. In short a world where the range of financial outcomes-and risk-is much wider than normal". El-Erian closes out his thoughts with: "Simply put, investors should own less equities, more bonds, more global investments, more cash and more dry ammunition. There is lots we don"t know".

This is how I feel. I posted once in early fall in another thread that if I did not have to pay capital gains taxes I would sell most of my equities. I think they (my stocks) are mostly fair value at best to moderately overpriced. But I am glad I felt locked by taxes, because since then these overpriced securities have gotten about $200,000 more overpriced.

Like they say, better to be lucky than smart.

Ha

 

[HFWR]

Arends article is interesting and supports Mohamed El-Erian's (PIMCO) concept of the "New Normal" which was profiled in a 16 August, 2010 article in the "money" section of the USA Today: "The Post-financial-crisis world will yield lower investment returns, slower economic growth and higher odds of an out-ot-the-blue financial shock. In short a world where the range of financial outcomes-and risk-is much wider than normal". El-Erian closes out his thoughts with: "Simply put, investors should own less equities, more bonds, more global investments, more cash and more dry ammunition. There is lots we don"t know".

Said the bond guy...

Of course, isn't Pimco currently expanding into equities?

 

[Gone4Good]

Arends article is interesting and supports Mohamed El-Erian's (PIMCO) concept of the "New Normal" which was profiled in a 16 August, 2010 article in the "money" section of the USA Today: "The Post-financial-crisis world will yield lower investment returns, slower economic growth and higher odds of an out-ot-the-blue financial shock. In short a world where the range of financial outcomes-and risk-is much wider than normal". El-Erian closes out his thoughts with: "Simply put, investors should own less equities, more bonds, more global investments, more cash and more dry ammunition. There is lots we don"t know".

Only El-Erian has been pretty wrong for the past year and a half on the whole lower return aspect of his 'New Normal' forecast. How much have domestic equities and fixed income returned since he popularized the phrase? (I just went back and looked. It seems PIMCO's "New Normal" first came out in May 2009 as part of their secular outlook. At that time, the S&P was at 940 and the 10-year treasury was at 3.5%. Over the next year and a half, the S&P is up an annualized 19% including dividends, 10-yr treasuries ~8%, and credit spread products are up far more).

Now after pounding the table for 18 or so months on his "new normal" forecast, he seems to be walking back the concept:

New Normal Odds Stand at 55%

So slightly better odds than a coin flip? Which is kind of funny, because if anything lower future returns seem more probable now after the high returns we've enjoyed since PIMCO first predicted low returns.