John Bogle Has Been Right About Investing In International Stocks

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ruralavalon
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by ruralavalon »

Taylor Larimore wrote:Bogleheads:

In his first book, Bogle on Mutual Funds, published in 1993, Mr. Bogle wrote:

"Your exposure to mutual funds investing in foreign stocks should not exceed 20% of your equity portfolio."

A recent NewsMax article stated:

"The MSCI USA Index has returned 9.5 percent annually from 1993 through May (2017), including dividends, while the MSCI ACWI ex USA Index -- a collection of global stocks that excludes the U.S. -- has returned just 6.9%."

Mr. Bogle has been right.

Think Global? Invest Local, Bogle Advises

Best wishes.
Taylor
That's an interesting little article. Thank you for posting.

The debate is futile. So many straw men slain, it looks like a war zone :( .
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by azanon »

visualguy wrote:The problem is that decades is too long for an investment to perform poorly. We are talking 25 years here which is longer than the bulk of my money is likely to be in the stock market. Sure, I had some when I was young, and I'll have some when I'm really old, but most of my money won't have time-in-market that reaches 25 years. If an investment performs poorly like this over a generation, it's enough to disqualify it. This period is definitely sufficiently long to qualify as what we like to call "long run".

The valuation reversion to mean argument that you are making is unclear to me because the problem with ex-US isn't a low valuation. The problem is the lack of earnings growth.
If we were going back in time, then yeah it's disqualified - of course. I was talking about an investment today, and expected returns going forward.

To clarify actual logic behind the return to the mean, the US CAPE is approximately 30, and Global ex-US is about 15. CAPE takes both price and earnings into account. A simplistic way to think of it is that you can get twice as much international stock for the same amount of money right now. Reversion to the mean, would be some point where US cape matches Global cape, and that could be done by either US stock dropping, international rising, or some combination of both.

Forward-looking is guessing, so I've never been a fan of that way of valuing. We don't know the future, but past earnings relative to price can be known exactly.

You can know, for example, you're paying about the same price for US stock today, as you would have paid in July 1929 (July 1929 CAPE = 29.93). :sharebeer Wanna buy some stock? :mrgreen:
Last edited by azanon on Mon Jul 24, 2017 3:29 pm, edited 1 time in total.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Thesaints »

But the reason to include foreign stocks is not (more) expected return, but (less) volatility.
Reasoning in terms of expected returns only, there is no reason to include tickers beginning with a letter M-Z. The A-L stock shares will likely provide the same return in the end.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by saltycaper »

nedsaid wrote:
For the record, the Taylor Larimore three fund portfolio includes an International Stock Index. Taylor as far as I know invests Internationally himself. My guess is that he sticks close to Mr. Bogle's 20% recommendation.
Taylor shares his international allocation from time to time. He does not appear to have stayed the course. I'm sure he had his reasons. You don't have to guess though if you're really interested, as he seems very open about his investment choices. Props to him for that.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by sreynard »

saltycaper wrote:
Munir wrote:Numbers don't lie, and they trump speculation, theories, and philosophical discussions. Why is that so hard to accept? I detect an element of defensiveness among many who hold significant percentages of international holdings. Attacking Bogle or Taylor is blaming the messenger. Past performance IS very important and is the leading guide for choosing investments in spite of all the pious arguments against it. Let's be real!
I very much agree that performance is important. But what we have here is someone selectively using extremely limited past performance figures--and nothing else--apparently in attempt to vindicate someone else's argument. I should hope anyone here would get a little defensive about that, not because they are defending investment A or investment B, but rather because they object to the manner in which the argument is being made.
Mr. Bogle has been right.
It seems you are taking this, and probably more importantly, past posts by Taylor to find something to get upset about. His statement is true and correct. Mr. Bogle said a US investor did not need international investments. For the last 23 or so years, this has been right. International investments have not been proven to be necessary to US investors. They may still be desirable, for all the reasons given in all the many posts about the subject here over the years, but they have not been shown to be necessary. Hence, the many opinions between 0% and cap weight. Nobody knows what the future will hold, but so far, Bogle has been right.

It seems like you're reading a whole lot more into Taylor's "argument" than what he actually posted and then getting spun up about your inferences.

Can you offer a counter argument? Can you prove that international investments have been needed for the last 23 years? That something terrible would or even could have happened if an investor did not invest in international stocks?

What gets me defensive is when someone declares what arguments or statements should be permitted or are acceptable. Are some opinions forbidden? I didn't see any forum rules being broken?!?
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by sreynard »

ruralavalon wrote:
Taylor Larimore wrote:Bogleheads:

In his first book, Bogle on Mutual Funds, published in 1993, Mr. Bogle wrote:

"Your exposure to mutual funds investing in foreign stocks should not exceed 20% of your equity portfolio."

A recent NewsMax article stated:

"The MSCI USA Index has returned 9.5 percent annually from 1993 through May (2017), including dividends, while the MSCI ACWI ex USA Index -- a collection of global stocks that excludes the U.S. -- has returned just 6.9%."

Mr. Bogle has been right.

Think Global? Invest Local, Bogle Advises

Best wishes.
Taylor
That's an interesting little article. Thank you for posting.

The debate is futile. So many straw men slain, it looks like a war zone :( .
+1 :D
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Thesaints »

What does "necessary" mean ?

In the past 23 years, has the volatility of a world cap weighted stocks portfolio been identical to that of a US cap weighted one ?
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by saveinvestbecomefree »

No one knows what will happen in the future. But I personally made a significant shift from US stocks to emerging markets last year. It's certainly a bet but in economics, mean-reversion is a pretty strong thing. US company profits are 50% above their long-term average. Emerging market company profits are 10% below their long-term average. Valuations are very, very different. Markets generally work, with profit margin differentials driving actions that bring them back to the mean (the timing of which is unpredictable).

At the current valuations, and on top of above average profits, I see US stocks as risky next-ten-year investments compared to emerging market stocks. What is disconcerting is that I know of no specific reasons things will mean-revert. Usually no one does. But it seems to happen anyway.

Maybe ironically, I think the US has the best very long-term investment climate so when the valuation gap closes to within 30%, I will shift money back towards the US. But the price matters in investing and the US is pricey compared to alternatives right now. I can't imagine anyone, even Bogle, saying that the US is the best place to invest no matter what the relative prices are. Investment returns depend on the price you pay for the future cash flows.

But no one really knows what will happen in the future. No me, not Bogle, and not anyone else. All we can do is try to understand the probabilities, make our own decisions, and try to become more comfortable with the fact that investing entails uncertainty.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by saltycaper »

sreynard wrote:
It seems you are taking this, and probably more importantly, past posts by Taylor to find something to get upset about. His statement is true and correct. Mr. Bogle said a US investor did not need international investments. For the last 23 or so years, this has been right. International investments have not been proven to be necessary to US investors. They may still be desirable, for all the reasons given in all the many posts about the subject here over the years, but they have not been shown to be necessary. Hence, the many opinions between 0% and cap weight. Nobody knows what the future will hold, but so far, Bogle has been right.

It seems like you're reading a whole lot more into Taylor's "argument" than what he actually posted and then getting spun up about your inferences.

Can you offer a counter argument? Can you prove that international investments have been needed for the last 23 years? That something terrible would or even could have happened if an investor did not invest in international stocks?

What gets me defensive is when someone declares what arguments or statements should be permitted or are acceptable. Are some opinions forbidden? I didn't see any forum rules being broken?!?
If you don't see the flaw in his logic despite the numerous times I have answered the same question in this thread, and despite my repeated attempts to explain that it has nothing to do specifically with international investments, there's really nothing more I can add to help you understand. I'm not upset--just trying to be direct and clear. Guess it didn't work. I'll admit I am a bit shocked so many people are giving Taylor a pass. I will not comment on your hyperbole.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by nisiprius »

Simplegift wrote:...
Image
...
Without taking a position here, let me just say that that's a very nice chart.

(Is anybody kidding themselves yet that they see a predictable cycle in it? :twisted: )
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by staythecourse »

nisiprius wrote:
Simplegift wrote:...
Image
...
Without taking a position here, let me just say that that's a very nice chart.

(Is anybody kidding themselves yet that they see a predictable cycle in it? :twisted: )
No doubt, but did you expect anything less then simplegift?

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by pascalwager »

saltycaper wrote:
nedsaid wrote:
For the record, the Taylor Larimore three fund portfolio includes an International Stock Index. Taylor as far as I know invests Internationally himself. My guess is that he sticks close to Mr. Bogle's 20% recommendation.
Taylor shares his international allocation from time to time. He does not appear to have stayed the course. I'm sure he had his reasons. You don't have to guess though if you're really interested, as he seems very open about his investment choices. Props to him for that.
Taylor has always said he was about 1/3 int'l. But more recently, he's expressed some regret after looking at past returns. Regret is a typical investor emotion, discussed by W. Bernstein, and the price you often pay for diversification.

I've been around 50% int'l for 22 years and see no investment-founded reason to not stay the course. And it's not like the returns were negative if we're chasing performance here. So, I'd take that 6.9% over 24 years with no strong regrets, just some fleeting disappointment.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by friar1610 »

deltaneutral83 wrote:I never know who to go with so when it comes to international; the market weight purists or the John Bogles/Buffets. I simply meet in the middle at 25% and I will be sticking to that and re balancing over the decades. You can research, talk, and analyze for literally hours upon hours, days upon days, the key is to stick to your plan. I wonder what a 100/0, 75/25, and 50/50 Dom./Int. equities portfolio looks like CAGR the last 60 years.

I do know that anything above 30% makes me queasy, so I feel like I've found what makes me comfortable at 25%. This is why I hesitate to use target retirement funds because of the Intl weight is usually 35-40% of the equities which is a strange % because it's still not market weight.
As the old saying goes' "Nobody knows nuthin'". That certainly describes me to a T. That said, the post above precisely describes how I allocate as a result.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by lazyday »

sreynard wrote:But if "past performance is a minor factor in making decisions" then how do you determine two asset classes should have similar returns? How long do you wait until you determine "the long run" return? From your post, it must be greater than 10 years, but is it 20, 50, 100, 1000? If they don't have "similar returns over the long run" how does that change the calculation?
They should generally have similar returns over the long run not because they have in the past, but because in general US equity and Foreign Developed equity are similar assets with similar risks.

At this moment in time, US companies seem to have a bit less risk and lower expected stock returns. My earlier comment was a generalization.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Johnnie »

Heh-heh - my thoughts keep returning to this post every time the issue comes up, and I hope the reminder doesn't make its author grimace.

It sticks with me because in the face of high US valuations, Japan horror stories and all the rest, this remains the most plausible case I have seen to ignore all that and follow St. Jack (and his disciple Taylor) wherever they lead:
nisiprius wrote:...Applying the same principles and methods used to extract other factors, the Nisiprius Investments crack research team has discovered a new factor, the Manifest Destiny Factor (MDF). According to research director Warwick Buffalo, "Who has ever benefited during the past 116 years by betting against America? We would never do a thing like that. But the other way, sure."

Buffalo went on to note that "Over the past 116 years, the total real return of the U.S. market has been 6.4%, while that of the rest of the world has been 4.3%. Clearly, then, a strategy of going long on the U.S. and shorting the rest of the world would have yielded a lucrative premium of over 2%. We call this previously unreported factor the 'manifest destiny factor' (MDF), and starting in 4Q 2016 we will be giving investors access to it in the form of a new mutual fund."

Asked how the MDF had done recently, Buffalo noted, "over the last fifty years the U.S. has earned 5.3% while the rest of the world earned 5.4%. But, as we all know, any factor can undergo long periods of underperformance, and the investor must be prepared to wait them out. To suggest that transient events like World War I and II could invalidate long-term statistics in any important way would be to undermine the very foundations of factor research..."
It's a joke. Nisiprius Investments does not exist. There is no such fund.
That said, my equities are still 40 percent international (Two parts Total Intl, one part DSL (scv), one part EM and one part VFSVX (sc).)
Last edited by Johnnie on Mon Jul 24, 2017 7:04 pm, edited 1 time in total.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by sreynard »

saltycaper wrote:
sreynard wrote:
It seems you are taking this, and probably more importantly, past posts by Taylor to find something to get upset about. His statement is true and correct. Mr. Bogle said a US investor did not need international investments. For the last 23 or so years, this has been right. International investments have not been proven to be necessary to US investors. They may still be desirable, for all the reasons given in all the many posts about the subject here over the years, but they have not been shown to be necessary. Hence, the many opinions between 0% and cap weight. Nobody knows what the future will hold, but so far, Bogle has been right.

It seems like you're reading a whole lot more into Taylor's "argument" than what he actually posted and then getting spun up about your inferences.

Can you offer a counter argument? Can you prove that international investments have been needed for the last 23 years? That something terrible would or even could have happened if an investor did not invest in international stocks?

What gets me defensive is when someone declares what arguments or statements should [not] be permitted or are [not] acceptable. Are some opinions forbidden? I didn't see any forum rules being broken?!?
If you don't see the flaw in his logic despite the numerous times I have answered the same question in this thread, and despite my repeated attempts to explain that it has nothing to do specifically with international investments, there's really nothing more I can add to help you understand. I'm not upset--just trying to be direct and clear. Guess it didn't work. I will not comment on your hyperbole.
Taylor Larimore wrote:Mr. Bogle has been right.
OK, you are correct. I do not see the flaws in Taylor's "argument". It seemed like a pretty clear statement of opinion to me that so far appears to be correct.

Hyperbole - "exaggerated statements or claims not meant to be taken literally"

Sorry, no hyperbole was intended. It seems to me that if you wish to claim that someone's argument is faulty, you should be able to give reasonable proof. In other words, how was Mr. Bogle wrong? Presenting an argument that someone didn't actually make and then disproving it is what is known as a straw man.

Straw man - "an intentionally misrepresented proposition that is set up because it is easier to defeat than an opponent's real argument."

As another poster commented there seem to be whole armies of straw men being set up and mowed down around here.

The statement, "Mr. Bogle has been right," is a fact that can be proven or dis-proven. The fact that Taylor made that argument solely based on performance was an inference that was not given in the original statement. Taylor did not provide any argument about why he believed Bogle to be correct, or about the future, so any conclusions of his opinions would be speculation. If you wish to disagree with Taylor's opinion, feel free, but I fail to see where you have the right to determine what opinions relevant to investing he can or can not state.

Full disclosure, I have 30% international. For the last several years I've invested almost 100% of all new 401K money into total international to get it up to 30%. I don't know what the future holds any better than Bogle, Taylor, or anybody else, but believe that the longer the long term under performance of international equities the higher the probability that Bogle MAY be correct. This year's international performance is a very welcome sign that there's still some life in international yet. Ask me again in another 20 years and I'll let you know if I've been wise betting against Bogle. :)
Last edited by sreynard on Mon Jul 24, 2017 5:38 pm, edited 2 times in total.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Thesaints »

Should internatonal stocks underperform in perpetuity, the day will come when the entire capitalization of the stock market will be made of US stocks.

Reductio ad absurdum, An interesting reading on Wikipedia
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by sreynard »

Thesaints wrote:Should internatonal stocks underperform in perpetuity, the day will come when the entire capitalization of the stock market will be made of US stocks.

Reductio ad absurdum, An interesting reading on Wikipedia
Not necessarily. That assumes a zero sum game. What if EM countries (or planets) create new companies faster than the delta in performance?

Eternity is a really long time and as John Maynard Keynes observed, "In the long run we are all dead." :sharebeer
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Thesaints »

But those new stocks would be included in the international indexes as well.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by tadamsmar »

Taylor Larimore wrote:Bogleheads:

In his first book, Bogle on Mutual Funds, published in 1993, Mr. Bogle wrote:

"Your exposure to mutual funds investing in foreign stocks should not exceed 20% of your equity portfolio."

A recent NewsMax article stated:

"The MSCI USA Index has returned 9.5 percent annually from 1993 through May (2017), including dividends, while the MSCI ACWI ex USA Index -- a collection of global stocks that excludes the U.S. -- has returned just 6.9%."

Mr. Bogle has been right.

Think Global? Invest Local, Bogle Advises

Best wishes.
Taylor
Quoting from the link:
Bogle wrote:It is a simple bet on which economy is going to be the strongest in the long run.
The link says Bogle is now 100% US, not 80%.

I think Bogle is wrong. There is no good reason to make a simple bet on a single national economy. This is a bad investment policy.

Also, when you simply follow the ever-changing advice of one particular guru, what are you going to do when the guru is no longer giving advice?
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by patrick »

sreynard wrote:But if "past performance is a minor factor in making decisions" then how do you determine two asset classes should have similar returns? How long do you wait until you determine "the long run" return? From your post, it must be greater than 10 years, but is it 20, 50, 100, 1000? If they don't have "similar returns over the long run" how does that change the calculation?
It's hard to say, but it seems like 117 years (the farthest back I can find readily available data) is sufficient. The long run data from the past 117 years shows that South African stocks are the highest returning asset class -- they have outperformed US (and other country) stocks handily. So you really don't need non-South African stocks at all, but if you must include US stocks, they should not exceed 20% of your equity portfolio.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Thesaints »

...and that pretty much settles the argument.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Whakamole »

https://mg.co.za/article/2017-03-09-00- ... od-returns is pretty good evidence for South African exceptionalism. SA stocks returned 7.2% from 1900 to 2016, versus 6.4% for US.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by jbranx »

After reading all the threads on this topic of domestic vs. international, it appears to me that each investor has to find their own proximate solution to an insoluble problem. I'm with Buffet, Bogle, and JP Morgan that it doesn't pay to be short America, but I think it's worth considering that it may not be nearly as easy in the decades ahead as it has been since WW II for US corporations to have an outsized share of global sales. This may be a case where quantitative data on the past has to take a back seat to balancing probabilities based on market history about the future. After all, China, India, and the UK, to name three, and to throw in the Japanese history to 1989, have demonstrated that world champion traders and investors have to eventually surrender the throne to others.

I've upped my international percentage from virtually none and am considering seriously going to near market weights with VT or equivalent because I am mainly investing now for my millennial heirs. We simply are no longer the only place where a smartie can find a garage and invent something that takes the world by storm.

There is plenty of evidence that many domestic markets where US corporations have had tremendous success are now approaching us in product quality and selling at lower prices. The S&P 500 foreign sales peaked at 47.8% in 2014 and declined last year to 43.2%, S&P reported today. I have no idea where the peak is, but the growth of open markets suggests it will be tough for the percentages to rise, or at least, to grow at the rate of previous decades.

There is no question that the US has been the champion innovator, has the most friendly business environment for entrepreneurship, and has among the world's best procedures for handling corporate failure and recovering from financial disasters. That said, if I were a European or Asian or an EM business or government, I would point out that the last two financial disasters--the 2000 tech bust and the 2007 housing/mortgage finance/Lehman and investment bank leverage at 30 to 1--were heavily US manufactured and globally distributed. It's a bit disingenuous for us to argue that the lower returns for their markets--for the last 17 years at least--are solely due to the superiority of our corporations and market systems.

I find it compelling that Bill Sharpe is now advocating a global market weighting of not only equities but bonds as well. Like this forum, Sharpe challenges my thinking about long-held investment strategies and allocations.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Northern Flicker »

Taylor Larimore wrote:Bogleheads:

In his first book, Bogle on Mutual Funds, published in 1993, Mr. Bogle wrote:

"Your exposure to mutual funds investing in foreign stocks should not exceed 20% of your equity portfolio."

A recent NewsMax article stated:

"The MSCI USA Index has returned 9.5 percent annually from 1993 through May (2017), including dividends, while the MSCI ACWI ex USA Index -- a collection of global stocks that excludes the U.S. -- has returned just 6.9%."

Mr. Bogle has been right.

Think Global? Invest Local, Bogle Advises

Best wishes.
Taylor
In the same time period US small value returned 11.45%. If such a backtest were actually generalizable, we'd also conclude that Mr. Bogle was absolutely wrong about small value, but I'm pretty sure Mr. Bogle would also reject generalizing from a backtest like this.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by inbox788 »

jbranx wrote:I find it compelling that Bill Sharpe is now advocating a global market weighting of not only equities but bonds as well. Like this forum, Sharpe challenges my thinking about long-held investment strategies and allocations.
I'm indifferent about international equities and bonds. With regard to equities, I'm questioning the very definition of US vs international (headquarters, employees, factories, locations, facilities, customers, suppliers, IP, financing, etc.). There are quite a few international based multinational corporations in the SP500 (MYL, JCI, SLB, AGN, ETN, MDT, STX, DLPH, GRMN, CB, etc.), and it seems more each day. My IPS has a wide range for international (0-75%), but a target range of around 50%. I think I'm near 25% now, but only slowly increasing. With regards to bonds, I understand the increasing quality and quantity of international bonds and currency hedging going on, but I also subscribe to the efficient market hypothesis. Assume there was some alpha in international bonds. Smart traders would figure that out and arbitrage out the difference so that the risk/reward of US vs international bonds would equalize. So while there may be brief periods where you'll see international bonds outperform US bonds, I think over the long term, they will be similar enough, and I'm a free rider on the work of these traders in the same way we passive index investors are free riders on the active funds and stock traders that set the market prices. I think bond traders are supposed to be smarter (smart money), and when they have diverged from stock traders in market directions, it's supposedly the stocks that correct. Arguably, the stock markets are a little less efficient than the bond markets, hence we may see more years like this one where international seems to be catching up a bit.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by saltycaper »

sreynard wrote:
OK, you are correct. I do not see the flaws in Taylor's "argument". It seemed like a pretty clear statement of opinion to me that so far appears to be correct.

Hyperbole - "exaggerated statements or claims not meant to be taken literally"

Sorry, no hyperbole was intended. It seems to me that if you wish to claim that someone's argument is faulty, you should be able to give reasonable proof. In other words, how was Mr. Bogle wrong? Presenting an argument that someone didn't actually make and then disproving it is what is known as a straw man.

Straw man - "an intentionally misrepresented proposition that is set up because it is easier to defeat than an opponent's real argument."

As another poster commented there seem to be whole armies of straw men being set up and mowed down around here.

The statement, "Mr. Bogle has been right," is a fact that can be proven or dis-proven. The fact that Taylor made that argument solely based on performance was an inference that was not given in the original statement. Taylor did not provide any argument about why he believed Bogle to be correct, or about the future, so any conclusions of his opinions would be speculation. If you wish to disagree with Taylor's opinion, feel free, but I fail to see where you have the right to determine what opinions relevant to investing he can or can not state.
There is no straw man. One may play coy by claiming my interpretation, and the interpretation expressed by many other readers, is a misguided inference, and not an actual statement, but here are the three main things Taylor stated, and the order in which he stated them:

1) In 1993, Bogle said investors' foreign stock allocation should be no more than 20% of equities.

2) From 1993 to May 2017, US stocks have outperformed foreign stocks.

3) Bogle has been right.

That's it. That's all Taylor said. Taylor's claim that Bogle has been right is predicated entirely on the fact that US stocks have offered greater returns from 1993 to May 2017. No other evidence is offered for why an investor should have allocated no more than 20% of their equities to international stocks. No other reason behind the statement, Bogle has been right, is given. The linked article is generally critical of Bogle's claim that he was "really right," noting biases, internal contradictions, and ways of measuring performance where he would be wrong. So, you may have other evidence for why Bogle has been right. Bogle may have other evidence for why Bogle has been right. Even Taylor might have other evidence for why Bogle has been right, but Taylor did not offer any such evidence.

You are certainly correct that Taylor can state any opinion he wishes. Others have the right to point out the fallacious reasoning behind such opinions, the dangers of following them, and the generally inappropriate nature of determining whether or not an investment decision was correct by examining the isolated returns of a single asset class over a single time period without considering risk, the rest of the portfolio, or really, anything else at all.

Of course, this post, all my posts preceding it, and all my posts that follow, are merely my opinions.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by baw703916 »

nisiprius wrote:
Simplegift wrote:...
Image
...
Without taking a position here, let me just say that that's a very nice chart.

(Is anybody kidding themselves yet that they see a predictable cycle in it? :twisted: )
I see not exactly a predictable cycle, but a few general tendencies:

1) There are periods of a few years at a time when International outperforms U.S. significantly, and vice versa. The long-term average appears to be pretty close to zero, i.e. the long-term returns of the two are pretty similar.

2) After U.S. (or international) has outperformed for a few years, it's likely to underperform the next few years.

3) This graph appears to support the adage that when valuations are high, expected returns are low, and vice-versa. If U.S. stocks have been outperforming significantly for a few years, their multiples have almost certainly been expanding faster than international stocks. So the resulting higher valuations would be consistent with the tendency for lower returns going forward.

It would be really interesting and informative to plot P/E of U.S. and international on this graph. Right now international has significantly lower valuations.

I think it's more likely than not that international will outperform over the next 5-7 years. The fact that the U.S. has done better recently is, if anything, a reason to increase international holdings. Or just pick an international percentage and don't let anyone, including on this board, shake you out of the tree.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Leif »

What will be the title of your post if International outperforms the US over the next 5-10 years?

Diversify. That is the correct answer IMO.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by tadamsmar »

saltycaper wrote:
There is no straw man. One may play coy by claiming my interpretation, and the interpretation expressed by many other readers, is a misguided inference, and not an actual statement, but here are the three main things Taylor stated, and the order in which he stated them:

1) In 1993, Bogle said investors' foreign stock allocation should be no more than 20% of equities.

2) From 1993 to May 2017, US stocks have outperformed foreign stocks.

3) Bogle has been right.

1) In 1993, Bogle said investors' domestic stock allocation could be no more than 80% of equities.

2) From 1993 to May 2017, US stocks have outperformed foreign stocks.

3) Bogle has been wrong.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Da5id »

Hmm.

Advisor; you are healthy and don't need to waste money on life insurance
Result: you didn't die within 20 years
Conclusion: advisor was right

Advisor: sure, 90% of your net worth in your company's stock is a good plan
Result: lots of money made (you work for Google or Apple say)
Conclusion; advisor was right

Advisor: liquidate all your investments, buy canned goods and guns
Result: zombie apocalyse happens, you survive to rebuild civilization
Conclusion: adviser was right

Maybe different views on the meaning of the word "right" is the problem here. in my examples above, the advisor was always, in terms of actual outcome, right. And the advice was, in my opinion, wrong. Well, maybe not the third case.

Mind you, lots of this argument may go to us being biased in favor of justifying our own decisions. 1/3 of my stocks are international, so those arguing in favor of some international appear to me to be more reasonable, clever, and even more attractive :) That said, the somewhat cyclical graph of international vs US outperformance does speak to me, as does the heavy weight of academic research. As does Vanguard's Lifestrategy/Target Retirement fund composition. As does the history of Japan. In the end, we all get to play with our money as we see fit.

In conclusion: https://xkcd.com/386/
Last edited by Da5id on Tue Jul 25, 2017 10:16 am, edited 1 time in total.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by z3r0c00l »

willthrill81 wrote:
z3r0c00l wrote:The fact that returns have been so different is a stronger case in favor of diversification internationally.
I think that's only true if you expect that the mean returns will for the U.S. and the rest of the world will ultimately be equal over your investing horizon, unless you expect that international returns will be less volatile than those of the U.S.
I do expect, just as International outperformed during previous (cherry-picked) periods of time, they will likely outperform at some point in the future. That the two seem to get places at different times is rewarding to me. However no, the real reason why is I can't promise the US will always keep up with international performance, especially countries like India and China.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Thesaints »

...and the real issue is not even if returns from ex-US stocks will outperform US returns. They could even be consistently a little lower, but if they were also uncorrelated foreign stocks would be a heck of a better way than bonds for lowering a portfolio volatility.
Granted, they are likely not going to be as uncorrelated as bonds usually are, but the difference in expected returns is substantial.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by harvestbook »

International stocks have outperformed massively in 2017. So Bogle "has been" right, and now he's wrong.

I don't have Bogle's time horizon, anyway, so I don't really care how he personally invests. I will adopt what admirable principles of his I believe can work for me and ignore the rest.
I'm not smart enough to know, and I can't afford to guess.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by BogleBoogie »

I keep checking back on this thread. I find the emotionally charged responses entertaining. So much overthinking going on here in regards to the OP's post (well done :D ).
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by tadamsmar »

Should you confuse strategy with outcome?
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by JoMoney »

tadamsmar wrote:Should you confuse strategy with outcome?
What is the objective of the strategy? How long should a failed or ambiguous outcome be ignored and still believe the strategy is somehow better than another at achieving the objective?
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by LarryAllen »

Hindsight can be great to determine who was "right." Lol.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by baw703916 »

JoMoney wrote:
tadamsmar wrote:Should you confuse strategy with outcome?
What is the objective of the strategy?
To achieve confirmation bias? 8-)
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by lazyday »

Simplegift wrote:
Just to make clear what we're seeing: the chart shows 3-Year Rolling Returns.
Domestic stocks and International stocks alternate periods of outperformance
Domestic Stocks vs. International Stocks: 12/31/72-12/31/16 (3-Year Rolling Returns)
The chart shows the values of the S&P 500 Index’s returns minus the MSCI World ex USA Index’s returns.
Note that the MSCI World ex USA Index does not include Emerging Markets.
Last edited by lazyday on Tue Jul 25, 2017 11:40 am, edited 1 time in total.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by saltycaper »

baw703916 wrote:
JoMoney wrote:
tadamsmar wrote:Should you confuse strategy with outcome?
What is the objective of the strategy?
To achieve confirmation bias? 8-)
More generally, to fiercely defend Jack Bogle at any cost.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by visualguy »

JoMoney wrote:
tadamsmar wrote:Should you confuse strategy with outcome?
What is the objective of the strategy? How long should a failed or ambiguous outcome be ignored and still believe the strategy is somehow better than another at achieving the objective?
Exactly. Poor performance after 25 years = stay away from this strategy. Life is way too short for such "investments".
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by billthecat »

Coincidentally, Schwab just published this white paper on the correlation between US and international stocks. What do you think?
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by H-Town »

harvestbook wrote:International stocks have outperformed massively in 2017. So Bogle "has been" right, and now he's wrong.

I don't have Bogle's time horizon, anyway, so I don't really care how he personally invests. I will adopt what admirable principles of his I believe can work for me and ignore the rest.
This ^ I still keep my international allocation the same accordingly to my IPS. I just enjoy the quick growth from my international funds in 2017 so far. Soon, the drift will hit the threshold and I will re-balance to get back to my AA.

I'm also a student of the game. I take great pleasure in observing, making mistakes, and learning from them. To me, knowledge is more valuable than the numbers shown on my balance sheet.
Time is the ultimate currency.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Thesaints »

visualguy wrote:
JoMoney wrote:
tadamsmar wrote:Should you confuse strategy with outcome?
What is the objective of the strategy? How long should a failed or ambiguous outcome be ignored and still believe the strategy is somehow better than another at achieving the objective?
Exactly. Poor performance after 25 years = stay away from this strategy. Life is way too short for such "investments".
How do you define "poor performance" ?
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Bigbonds »

Simplegift wrote:Cherry-picking dates and asserting investment conclusions from them is not an honorable Forum practice.
What conclusions can we draw from the pre-1993 period? Was Mr. Bogle wrong about international investing?
The chart is very helpful and informative, thanks for posting.

What two cataclysmic events happened around the early 90's that would cause the U.S. to outperform international so much? 1.) The Internet really started coming into its own and 2.) Globalism really started to take shape(NAFTA, etc). From the chart it looks like those two things have worked out much better for the U.S. than international stocks.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Youngblood »

Thesaints wrote:Should internatonal stocks underperform in perpetuity, the day will come when the entire capitalization of the stock market will be made of US stocks.

Reductio ad absurdum, An interesting reading on Wikipedia
Thank you for this post and many others. I am surprised at least some of those holding opposing opinions haven't capitulated on reading this.

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Re: John Bogle Has Been Right About Investing In International Stocks

Post by acanthurus »

saltycaper wrote: Of course, this post, all my posts preceding it, and all my posts that follow, are merely my opinions.
I've been following this thread but staying clear of participating until now. I think you are making very pointed, clearly delineated, and apropos criticisms of the original post. I think people are either misreading or failing to understand your point, because your criticism seems to be fairly narrow and mostly stating that bad logic should not be used to justify a position on the matter of allocation. I just wanted to express appreciation for your participation in this thread, since I think it makes Bogleheads a better place.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by oldzey »

The experts know that Jack provides sound investment advice and wisdom.

"What Experts Say About Jack Bogle"
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Thesaints »

Ipse dixit. Another good reading on Wikipedia.
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