EC Long The World

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

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?

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 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.