The readers of my financial independence blog have probably noticed that I am quite concerned with my EUR investments, and specifically into EU zone. This investment for the past 40 months has been down by 6% in EUR and 0% in USD (this is due to the currency differences). While it is reflecting state of the economy in European Union, it drags down my financial independence day. If 40 months ago I went all into S&P500 I would have $593K today, vs. $502K in my funds. I read recently that asset diversification should make one uncomfortable, otherwise it is not really a diversification.
This is first time in the long time, when without borrowing surplus saving from abroad, growth becomes impossible. Hence the only reasonable way forward is the exchange rate adjustment.
The dollar index fell 33 per cent in real terms both in the 1970s and the mid-1980s, and another 28 per cent from 2002 to 2011. During those three periods, the net domestic saving rate averaged 4.9 per cent (versus -1.2 per cent today) and the current account deficit was -2.5 per cent of gross domestic product (versus -3.5 percent today). A crash is looming.
Fun fact: Schlumberger, an oil and gas service company whose share price is down 60 per cent since the beginning of the year, said it replaced an earnings-per-share metric with an adjusted Ebitda metric for the second half of 2020 as a factor in determining executives bonuses. In July Schlumberger, which is the world’s biggest oilfield services company, said it would cut 21,000 jobs, or about a fifth of its workforce. My humble view is that If the chief administrators don’t perform well, then they shouldn’t be getting bonus payouts.