By Dr. Jim Dahle, WCI FounderI often get requests to write posts about political issues. I generally decline to do so. It's not because I don't find politics interesting. I do. I decline them for business reasons. I am well aware that The White Coat Investor community is composed of people with all kinds of political views and that any political stance I take or defend is likely to be opposed by half of our community. Why anger half of our potential customers? I want docs and other high-income professionals to stop doing dumb stuff with their money, no matter where they find themselves on the political spectrum.
If you're curious about my politics, know that in the last seven presidential elections, I've voted for three Republicans, one Democrat, and three third-party candidates. That is typically how most of my ballots look, too. I thought I was a conservative when I lived in purplish Virginia. After moving to bright red Utah, I feel more like a liberal. Like most Utahns, I registered as a Republican so I can vote in the only election that matters here—the primary election. I generally find myself voting for the most moderate Republican candidate in the primary.
Now that I've alienated 90%+ of WCIers, let's get into some political topics. One comes from a recent email, and the other comes from a WCI Forum post I responded to recently.
“Blog post ideas:
- “How worried about the national debt should you be?”
- “How to invest with rising national debt in mind”
- “What can you do to protect yourself today for a debt crisis tomorrow?”
- “How you can hedge against rising national debt?”
Just some ideas, take em or leave em!”
And
“Some of you might laugh at this, but I see the writing on the wall. Even if WW3 doesn't happen, I know being a brown, naturalized citizen, I am most likely going to have to leave soon. And I will be heading to Canada. I have ‘substantial to me' funds in Fidelity invested in a three-fund portfolio. About 80% is a 401(k) and 20% in Roth. I also have investments in TSP. I will be selling my house in preparation for departure, but I have also been considering liquidating all my retirement accounts, paying penalties and tax, and moving them to the Canadian investment banks. What are the implications of this? I still have about 20 years left in the job market, but given the poor prospects for employment in Canada, I need to protect whatever nest egg I currently have in case I can't make a reasonable salary there. Am I completely nuts? How would you protect your wealth from a rogue state and the end game of Project 2025.”
Politics and Your Portfolio
Plenty of people have strongly held political views. I'm obviously not one of them. Maybe it is my relatively moderate political beliefs. More likely, it's because, “I've seen this movie before and I know how it ends.” I can find something I like AND something I don't like that every Congress and every president has done. I've watched people (from both ends of the political spectrum) threaten to leave the country (or hole up in a bunker) after a presidential election doesn't go their way. Somehow, we still manage to muddle through.
I think a big part of it is that people didn't pay a lot of attention in their high school civics class. The founders of the United States had their problems, but there is great wisdom in their implementation of a separation of powers. Even with an administration, like the current one, trying to maximize its power over Congress, the courts, and the Fed, those institutions still have substantial power. Plus, only so much damage (or good, depending on your perspective) can be done in four years before the next presidential election (or two before the next congressional election).
More information here:
Confiscation Due to Political Calamity
Reactionary Portfolio Moves Usually Cost Money
As a general rule, making portfolio changes in response to anything in the financial or political news is a mistake. Jack Bogle famously said,
“I've said ‘Stay the course' a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you.”
I am a big advocate of using a periodically rebalanced, static asset allocation composed primarily of low-cost, broadly diversified index funds. Static. That means it doesn't change. It doesn't change because stocks go down. It doesn't change because the House of Representatives flips. It doesn't change because PPACA or TCJA or OBBBA passes. It doesn't change because interest rates went up. It doesn't change because there is war in Ukraine or Israel or Afghanistan or Vietnam. Static. The idea behind setting it up was to have a portfolio that would be likely to help us reach all of our financial goals, even if various reasonably likely political and economic risks show up. Whatever political or economic change you currently feel like reacting to, that risk is not new. It has always been a possibility. Like falling 35 feet on the North Face of the Grand Teton due to loose rock. I'd been running that risk for decades; it just finally showed up on August 21, 2024. That's why I always climbed with a rope, a helmet, and a very competent partner.
Those who make reactionary portfolio moves usually come out behind. They end up buying high and/or selling low. Before you do anything major with your portfolio, consider the alternative of doing nothing. I didn't do anything when President Biden was elected. I didn't do anything when President Trump was elected either time. Doing nothing paid off all three times.
Thoughts on Canada
All that said, I think moving to Canada is a fabulous idea. I love Canada, especially British Columbia. Every trip I've ever had to BC has been spectacular, and I seriously considered trying to get a job in Squamish two decades ago. We even went into the ER to try to talk to someone about it. There are lots of wonderful things about Canada. If you want to go to Canada, I am highly supportive. But don't do it just because of political concerns. You'll likely regret it. Especially if the move involves pulling all of the money out of your retirement accounts and paying taxes and penalties. Just the moving costs should be enough to dissuade most people.
Thanks to tax treaties, tax-deferred US retirement account money remains tax-deferred in both the US and the Canadian system until you pull out the money, even if you renounce your US citizenship and establish Canadian citizenship. It takes serious paranoia to pay all of those costs just to move money to Canadian investment institutions. Roth accounts are treated slightly differently, but earnings after your move to Canada can still be tax-deferred. Tax-deferred accounts can be transferred to Canadian equivalents, too. More details for those serious about moving to Canada can be found in this excellent article.
More information here:
How Moving to Canada Affected My Life as a Physician
Navigating the Minefield of Foreign Investing as a US Expat
Thoughts on World War III
Lots of investors worry about the effect that World War III would have on their investments. They're right to worry. Devastation is one of the four “deep risks” Bill Bernstein describes as true portfolio risk (the others are inflation, deflation, and confiscation). Given that numerous countries now have access to nuclear weapons, World War III is likely to be even more apocalyptic than the effects of World War II in Europe and Japan.
What should one do with their portfolio if they think World War III is likely to occur within the next few years? Probably act as if it isn't likely to occur. If it doesn't occur, you'll be glad you didn't do anything outlandish. And if it does occur, we're all in an equally bad place. Guns, ammo, food storage, and other “prepper” type purchases seem far more useful than just beefing up an allocation to precious metals, cryptoassets, or emerging market bonds. That said, putting a little bit of money into precious metals, cryptoassets, or defense stocks doesn't seem nuts.
Thoughts on the US Debt
We have had a US debt since, well, Alexander Hamilton famously advocated for it in a Broadway play. Many economists worry that it may become too large. Clearly, having a little bit of US debt is probably fine, and it allows us all to invest in those sweet Treasury bonds. The question is, “How much is too much US debt?” Of course, the answer is not an absolute amount. It is related both to the size of the US economy and interest rates. The smaller the economy and the higher the interest rates, the less US debt is OK. There is a statistic out there that suggests a debt-to-GDP ratio of more than 90% slows economic growth (and ours is currently at 123%), but that doesn't necessarily spell doom. We've been to a similar ratio before, after World War II.
There are basically five methods for improving this ratio:
- Spend less
- Raise taxes
- Inflate the debt away
- Grow the economy
- Default
Obviously, one of these is way better than the other four, and the big issue with the four “bad” methods is that they tend to have a deleterious effect on the “good” one. So, is our debt level too high? Nobody really knows, and it really comes down to future economic growth—which is equally unknowable.
More information here:
Staying the Course Despite the Trump Tariffs
Trump Will Allow You to Make Dangerous Moves in Your 401(k), Including Adding Crypto
Optimists Are the Best Investors, Even If the Pessimists Sound Smarter
What to Invest in If You're Worried About the National Debt?
So, what should you invest in if you're really, really worried about the current level of the US debt? There are plenty of options to consider, each with pluses and minuses.
Foreign Stocks, Real Estate, and Currencies
This method works particularly well if the debt problem is limited only to your country. But since economies are more and more intertwined as time goes on, this is likely only part of your solution. Nonetheless, it is something we have been doing with our portfolio for decades. One-third of our stocks are foreign, and they always have been, just in case this risk ever showed up.
TIPS and I Bonds
Inflation-indexed bonds work far better than nominal bonds if inflation rears its ugly head. They won't help much in a default scenario, though. And if real interest rates rise due to fear of default or inflation, that will decrease the value of a TIPS portfolio like it did in 2022. Nevertheless, we index half of our bond portfolio to inflation as this is the most common, serious risk for bonds.
Precious Metals
Gold and similar precious metals tend to track inflation long term, although swings can be pretty dramatic in the short term. If you have a serious fear of default or inflation, it would not be bonkers to put a small slice of your money into precious metals.
Cryptoassets
Bitcoin gets favorable tax treatment, and it is also mostly independent of the US government. That doesn't mean it will zig when the US zags (it seems to be pretty correlated with other risky assets at times), but it might be worth a try with a small percentage of your portfolio.
Real Estate
The government can't default on your real estate, and it will probably keep up with inflation. It also tends to have good returns in good times. This is one reason we've placed 20% of our portfolio into real estate.
Debt
One of the best “assets” to own in inflationary times is low fixed interest rate debt. OK, maybe it isn't an asset, but it certainly benefits from high inflation, unlike those who loaned the money. And if the world blows up, at least you probably won't have to pay back your debts.
Commodities
Theoretically, commodities do well in inflationary times. No guarantee, though. The price of oil spiked in 2022, but by the end of the year, it was back where it started.
Guns, Ammo, and Food Storage
These are always helpful if things get really bad.
Basically, anything that isn't the “classic” portfolio of large cap US stocks and US Treasuries will probably do a little better in a “US debt crisis.”
But don't let your political views and your anxiety get the best of you. Invest dispassionately, consistently, and intelligently, and you're highly likely to reach your goals. Unless there is a zombie apocalypse. Then you're going to have to get really creative.
What do you think? How much should your political views and fears affect your portfolio? Do you have any “hedges” in your portfolio due to worries like these?
Also thinking about BC. I am retired from ophthalmology so not worried about the job market. I am worried about the US government seizing my assets, which to me are substantial. I am a naturalized citizen and a navy veteran but I worry that in the extreme those things will not matter. I look different than your average American and grew up in NYC in an ethnic neighborhood where immigration agents asked for my papers even when I was home on leave. This was 50 years ago and things have only gotten worse. I do not own guns nor have I stockpiled supplies. I am thinking about Canadian citizenship for my wife and myself as a possible exit strategy. I am worried that my Schwab accounts will be confiscated. This is not how I envisioned retirement.
I am also worried about this and have applied for licensure in BC. I *am* a citizen—born here and I’m white… but I’m an Ob/Gyn and abortion provider. Right now the government-sanctioned cruelty is focused on immigrants. But Project 2025 has a concentration camp ticket for me too. If they’ll arrest a congressman or a judge, how long until they arrest me?
I’ve already fled from Tx to Ca; so I’m not new to political relocation. But everything feels vastly more complicated internationally. And can make significantly more money here, so I find myself struggling to balance staying as long as I can and building my nest egg as quickly as possible—but worry if I will see the writing on the wall in time to get to safety. (And I don’t want to leave… I’d rather stay and fight and care for my fellow oppressed Americans. But since we’re referencing Hamilton: “dying is easy, living is harder”, does neither myself or anyone else any good if I’m stuffed into a Venezuelan prison camp.)
“dying is easy, living is harder” : A friend who relocated from the Gulf Coast and lost her home in a hurricane spoke of an older woman who had weathered several hurricanes. When the family loaded into the boat- from their second floor window when it was clear the house would be totally flooded- she refused to go. She said she had suffered the aftermath- the cleaning up and rebuilding- of enough storms and would rather die drowning now thank you.
“But everything feels vastly more complicated internationally. ”
That’s because it is. Countries that are nice places to live in are not easy to get into, particularly if you’re older.
I was planning on retiring in 2-3 years, but for now I’m stuck as I have an elderly father who’s likely to become financially dependent on me if he doesn’t die VERY soon. Like you, a part of me also want to stay on and fight, but I know enough history to know how that works out in most cases (not very well). But I have no idea of where I can go, and I am afraid that by the time I figure things out and am free to leave, I won’t be able to get out. This is a nightmare I never imagined living through!
Wow. I remember the early days of WCI when a comment this political would have been deleted within minutes.
I’ve had a little help sorting through comments the last few years, but mostly it’s just me. And I spend my morning at the ACEP Scientific Assembly, not monitoring comments on the blog. I like to think my threshold for deleting comments is pretty high, but that one is nowhere near it. It does illustrate the points in the article well though.
Not going to happen. Stop watching msnbc. People like you are exactly the reason the legal immigration system works here. High income tax paying played by the rules types. No one in the current administration has ever made a suggestion anywhere remotely near kicking out citizens. That’s leftist nonsense and it’s just not a)legal or b) even proposed or desired.
Remember, we let more legal immigrants and naturalize more citizens than literally any country on earth, every year. This deportation stuff—and it is real and serious and in my view necessary—does not have anything to do with naturalized citizens like you.
Turn Maddow off. You’ll be happier.
I think cable news is biased garbage designed to sell pick ups and auto insurance. I primarily get my news from the Wall Street Journal and the Washington Post. And I agree with you that US citizens are not on the docket for deportation or imprisonment. However, I do believe that this administration acts with idiocy on every task it undertakes. Whether it’s tariffs, attacking political enemies, driving countries like China and India together with Canada and Mexico, working with Israel and Russia to start World War III. These are things that are much more serious than immigration and we should probably listen to some moderate voices on, and when I say moderate, I’m talking about the Wall Street Journal or maybe some independent publications out there like the Atlantic.
I’m reading a book now about a man killed in a concentration camp in Poland late in WWII. He was a German WWI decorated veteran. I mean, anything is possible, but investing like it’s likely is probably a mistake.
Very reasonable and even tempered article and then of course the comments are from crazy paranoid radicals. I’m not sure you realize how making more dramatic less realistic points makes normal people ignore the rest of your opinions. Think of your over the top histrionic patients and how people naturally downplay what they say afterwards.
Thanks Jim for a good article as usual. Yes, I read some of these comments and I think either it’s an AI bot writing or some people’s perception of reality is really off…
Everyone should get a grip and perhaps take a lesson from history. My family has deep roots in VA; Virginians have survived the Indian Wars of the 1600’s and 1700’s; Bacon’s Rebellion (1676); the twice burning of the Capitol (Jamestown); the French and Indian War (the burning of settlements in what is now WV), the America Revolution, the War of 1812 and the burning of Hampton, the Civil War, numerous depressions; hunger in the Great Depression, famine in the Civil War, numerous pandemics and epidemics, (the Yellow Fever epidemic of 1855 killed 1/3 of Norfolk’s residents; there is even a street still named Quarantine Road); others like African Americans in VA had it much much worse. As for money, well, Confederate Bonds are at least collectables.
Well, with Russian incursion into Polish airspace today, WWIII as a scenario has become more plausible!
Timing couldn’t be better eh? Doha bombed by Israel. Russian drones in Poland. And Charlie Kirk gunned down 40 miles from my house. There’s a lot of politics out there all the time. But the news cycle is a week long and you’re investing for decades.
O for sure, wouldn’t change my investing strategy at all. 100% agree.
“Until such time as the world ends, we will act as though it intends to spin on.”
—Nick Fury
Its great to see you posting what you consider political. Its unfortunate that political discourse in the US offends people. I think it’s the problem, that people are afraid to discuss it for fear of offending and you end up with people at the poles rather than the center.
Thanks for posting this and doing so in a moderate, tasteful manner. It’s hard not to worry about the “deep risks”. One thing to add: the possibility of the collapse of the USD.
I think doctors, nurses, PA, etc. will be in high demand post WWIII. I think medical skills will be more valuable than guns, ammo and food storage and those skills can be used to barter for essentials when it comes to survival.
It is a scary time for those of us of color/minorities. It feels like 1937 Germany. I’m a 3rd generation citizen, and I never thought like this before, but given everything that is happening, and the Supreme Court’s support of it, I think we need to think of how to keep our families and assets safe.
Can we please have a post on best ways to divest from the US and move assets to another country like Canada or Europe? Also, easiest places to gain citizenship.
Thanks.
The best person to write a post like that is someone who has actually done it. Lots of people talk about it, but few ever actually do it.
I can’t help much, except to say that investigating New Zealand might be worthwhile. They use a points-based immigration system, and some medical fields are shortage areas, so an applicant gets extra points just for being in that field. And back when I was considering that move, there was no requirement to redo residency/fellowship; a physician trained outside of Australia or New Zealand merely had to practice under supervision for a year.
I guess it’s hard to be over prepared, but goodness gracious, I’m with you Jim–I feel like the “leave the country” idea is a bit over the top.
I immigrated here legally as the child of a father who after patiently waiting was granted a work visa, and we eventually became naturalized citizens. There are estimated to be over 10 million immigrants who illegally entered the US who are very far from citizenship. I would imagine the work that would have to be put towards invalidating my decades long citizenship would be better spent upholding the law in terms of more recent illegal crossings. Thus, I haven’t worried about losing citizenship. Even if there’s a small chance of losing my citizenship, that chance pales in comparison to the guaranteed huge financial and life upheaval that goes with leaving the country voluntarily. No country is perfect, but in my opinion any other place tends to be a downgrade from here. Maybe have a good immigration lawyer at the ready as a form of insurance?
NIce article Jim as always. While reading it just occured to me that Ray Dalio’s supposedly All-Weather portfolio would likely not weather the storm of US government debt rising substantially and possibly even default. Do you know if this is because Ray really puts the the doomsday scenario of US defaulting on it’s debt as close to impossible?
I don’t have access to Ray’s mind, I’m sorry. I agree that portfolios with large percentage of treasuries, particularly the long term treasuries I see in many of these sorts of “all weather” portfolios would not fare very well in certain economic scenarios such as hyperinflation or rapid rises in interest rates or US government defaults etc.
Another definitely not bonkers thing to consider owning is value tilted stock ETFs. They tend to do relatively well when inflation strikes. Plus people will want toilet paper until the bitter end.
I’m not sure I’ve seen any data that suggests value outperforms growth in inflationary times. Can you share yours?
Here’s one. There are many more.
https://sponsored.bloomberg.com/article/ishares/positioning-for-inflation-the-historical-outperformance-of-value-stocks
I, for one, agree with my progressive colleagues that the tyrannical right will drive our country into the ground. I have found it prudent to divest all money from domestic shares and bonds and instead liquidate my holdings and purchase pride flags, used Subaru Outbacks, and organic, vegan, sustainably sourced pea protein bars to sustain myself for the coming apocalypse. Be an ally, sell your shares, and resist!
To my friends on the right, ignore the above paragraph. It’s fake news designed to fool the looney leftists. Straight from the Don himself on Truth Social, there’s a battle coming for the soul of the country. We have to sell our paper assets now and purchase bulk red hats, AR-16s (stupendously better than the 15, seriously, winningest of all time. The best! Best ever AR, everyone’s gonna want one), and VHS tapes of old Super Bowl commercials when men were men. Don’t let Bernie and Kamala win, sell stocks and help make the country great again.
Eat the babies! Solve overpopulation!