Author questions whether VT's implicit assumptions of open trade, stable alliances, capital mobility, low conflict probability, and efficient repricing hold in a world without NATO, asking if market-cap index investing still makes sense.
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If NATO is dissolved, does it affect how we invest? This is a question I had and I came across this:
Implicit assumptions baked into VT
VT assumes:
1. Open global trade
2. Stable security alliances
3. Capital mobility
4. Low probability of prolonged conflict
5. Markets efficiently reprice risk
A world without NATO violates all five assumptions simultaneously.
What do you think? Does index investing based on market cap make sense in this “new” world if assumptions are no longer relevant?