Alright, the US dollar doesn’t seem as dominant as it once was, and with China’s economy potentially overtaking ours, I’m worried about investing so heavily in U.S stocks. Is the Dollar on its way out, and should we go heavier in international stocks? What do you think?
Yeah, Joey, this is an interesting one and seems to be commanding a lot of headlines right now. Look, there are conversations around world currency and people pulling out of contracts, and what’s going to be the base currency, and all that sort of thing. Here’s what makes me nervous about these big seismic shifts that people think could happen. While something could take place and it could have long-term impacts, the amount of time that it takes for that to actually manifest is significant. It takes a long time for that to take place. And you have to ask yourself, “When I’m investing, when I’m going out and buying, what am I making a choice on?” Like, I’m saying, “Okay, I want to go out and work, and I’m going to go trade my time doing my vocation for a few dollars, and then I’m going to take those dollars, and I’m going to go buy a product, use Coca-Cola because that’s what Warren Buffett says, and I’m going to exchange some of my dollars for Coca-Cola.” Well, that Coca-Cola came to me because someone else is willing to sacrifice their time to be able to put together the recipe and mix the ingredients and make the can and put it all together. And so, really, when I’m investing, I’m saying, “Hey, I think Coca-Cola is going to continue doing that.” Now, inside of that equation, at the very highest level, currencies, and that sort of thing, don’t come into the equation. We’re talking about a really interesting globalized economy in which we live. So, I’d be curious to know your thought on this, Brian, but I worry that too many people right now are putting too much emphasis on it, not recognizing that when you’re trying to make these shifts on your portfolio allocation, what are you really shifting away from, and what are you really shifting towards, and is it actually having the impact that you think it’s going to have in your portfolio?
Well, I can tell you the current events that Joey’s referencing are somewhat alarming when you find out that because of the conflicts that are occurring, you see China and Russia kind of starting to unite on some things. And then you find out that Saudi Arabia was having discussions, which, on anything, you find out that Brazil just signed something with Argentina with China. And then you find out that there was a headline, I didn’t read into it to see what was going on, but it was saying that Japan was actually going to break some of the trading stuff to buy fuel from Russia. And you’re like, “Whoa, what the heck is going on?” And that stuff is alarming when you see it. But let me bring it back because I always have to say, “Be careful what you think with your emotions because you can get yourself in a lot of trouble.” Because Bo knows, I do a fine balance of trying to say, “Is this a concern, and could this concern also be leading to and creating a blind spot in my investment life where I’m letting the news media scare the heck out of me?” The news media does not care about your wallet or your purse or your retirement savings. They’re just trying to get your eyes and ears, and they scare the heck out of you.
So, let me take this in two parts. Joey, first of all, you should know that pulling everything out of the U.S. because you’re worried about it is not an ideal strategy. The U.S. is already an automatically diversified investment, which is why it’s a good anchor investment. The last time I looked into this, 40% of the S&P 500’s money flowing in, earnings coming in, and revenue coming in from operations were from global operations. If you think about a lot of the brands that are part of the S&P 500, these are brands that not only operate in the United States, but they actually operate all over the world. So, when you buy the S&P 500, you’re picking up a big portion of international business operations as well.
The second thing – and I actually went because I always say, ‘Hey, ground yourself, Brian. Let’s look at the data.’ There was a great visual that helped ground me. I don’t have it for today’s show, but it was something I told Daniel we probably ought to cover at some point. Still, the United States dollar was right under 60% of the global reserve currency. The Euro was in second place with just under 20%, and then everything else was kind of spread out at 3%, 5%, and so forth. But still, America is the global currency that a lot of people use. Still, if you go to a lot of countries and you tip them in a dollar or give them a five-dollar bill, they’re going to love it. But there are some trends that you need to be aware of because I think that with the way our Federal Reserve and our government run, with no gold anymore guaranteeing the value, there does need to be some caution from our leadership, and they need to keep that in check.
So, I will keep watching it, Joey, but I’m also counting on that great big beautiful tomorrow where innovation, the ever-expanding and accelerating desire of mankind to innovate and grow, is still going to get us through this. Don’t let the media pull you off the track of saving and investing and being a part of that future success. You have to make the decision on what variables you’re trying to control for. I’ll use a really simple example. You think about Apple. Apple and the products that they make are bought all over the world. You, as an investor, when you’re thinking about, ‘Okay, I want to be an investor. I want to hold Apple stock as an investment,’ that’s a decision you’re making. You’re kind of counting on Apple to figure out, ‘Okay, if we’re going to trade in global markets, I’m going to handle all the currency stuff. I’m going to handle all the fluctuations. I’m going to handle all that risk.’ And you’re trusting the management of Apple to do that.
When you’re an investor, you have to decide what factors you’re going to control and what factors you’re going to let the things you’re investing in control. Just like you wouldn’t go in and tell them how to run the assembly line to make the iPhones, you have to figure out, ‘Okay, where do I want to weigh in on my allocation decisions, and where am I comfortable not weighing in on my allocation decision?’
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