It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
WanderingDoc
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by WanderingDoc » Sat Sep 22, 2018 3:41 am

Leif wrote:
Thu Sep 13, 2018 2:14 pm
columbia wrote:
Thu Sep 13, 2018 1:59 pm
Not that I would ever do it, but this seems like a good buying situation for commodities.
Right, the last 10 years were constant buying opportunities as well.

I remember a post several years ago were someone decided to buy more since it was a buying opportunity. Perhaps one day it will be true. I think if your goal is inflation protection TIPS is a lot less volatile. Plus you are guaranteed to not lose principal even if we have deflation.
Right. Peter Schiff has been telling me this since 2012 - buy gold and commodities. Gold will run "any day now" etc. I have done the opposite of what he said and the result was magnificent. I actually listen to his podcast religiously so I can just do the opposite of his predictions. 8-) :moneybag
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columbia
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by columbia » Sat Sep 22, 2018 6:41 am

WanderingDoc wrote:
Sat Sep 22, 2018 3:41 am
Leif wrote:
Thu Sep 13, 2018 2:14 pm
columbia wrote:
Thu Sep 13, 2018 1:59 pm
Not that I would ever do it, but this seems like a good buying situation for commodities.
Right, the last 10 years were constant buying opportunities as well.

I remember a post several years ago were someone decided to buy more since it was a buying opportunity. Perhaps one day it will be true. I think if your goal is inflation protection TIPS is a lot less volatile. Plus you are guaranteed to not lose principal even if we have deflation.
Right. Peter Schiff has been telling me this since 2012 - buy gold and commodities. Gold will run "any day now" etc. I have done the opposite of what he said and the result was magnificent. I actually listen to his podcast religiously so I can just do the opposite of his predictions. 8-) :moneybag

I know a gold buying person, who likes to point to the “Peter Schiff was right” (about the 2008 crash) video whenever anyone questions him following Schiff’s advice.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Maverick3320 » Mon Sep 24, 2018 3:05 pm

Beensabu wrote:
Fri Sep 21, 2018 9:32 pm
Maverick3320 wrote:
Fri Sep 21, 2018 9:40 am
Engineer250 wrote:
Sun Sep 09, 2018 4:56 pm
cheezit wrote:
Tue Sep 04, 2018 4:20 pm
oldzey wrote:
Mon Sep 03, 2018 5:08 pm


“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.” –- Warren Buffett
Ignoring Mr. Buffett's assertion about social security's continued viability in its present form (as that's a political discussion), we should note that the bolded statement is empirically false. We already have a generation with a lower standard of living than their parents; we may have more, depending on whether the 50+ year trend of stagnant real wages, and the other long-term trends of increased health care, housing and social security costs hold.
Thanks for saying something. It invoked such a sad response in me I didn't know how to respond. I do know wages, adjusted for inflation, have stayed basically flat for the last 30 years. Gains in productivity/GDP have not gone to median households. I know Bogleheads tend to be from the fortunate side of Americans but I am frustrated when education and housing are increasing so much faster than inflation, wages aren't, and it doesn't get acknowledged.
Gains in productivity have gone to median households, just not in wage form. The massive increase in healthcare costs, borne by employers, has cut into potential wage increases.
If you have the good fortune of having access to a low deductible health care plan where the premium is entirely or substantially covered by your employer, please do not assume that such a situation is universally experienced by most workers. I can assure you that it is not.
I didn't say anything was universally experienced by anyone - no need to be short with people.

According to the Kaiser Foundation, approximately half of all Americans have employer-subsidized healthcare. I'm not a mathematician, but I can assure you that half is pretty significant. Note that this doesn't include retired Americans, who generally shift to government healthcare coverage. So the percentage of working-age Americans covered by employer healthcare coverage is actually much higher than 50%.

Even if it was 10%, it would still be significantly significant in terms of affecting productivity gains.

HEDGEFUNDIE
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by HEDGEFUNDIE » Fri Sep 28, 2018 7:55 pm

https://www.wsj.com/articles/the-dumb-m ... lead_pos11
The U.S. was among the worst-performing stock markets worldwide in the 1970s and the 2000s; it also earned lower returns than the average international market in the 1980s.

Over the 10 years ended in December 1986, international stocks outperformed the U.S. by an average of 6.2 percentage points annually; even over the decade through December 2007, U.S. stocks lagged the rest of the world by an annualized average of 3.1 percentage points.

No one can say when that might happen again. Chances are it will.
The biggest surprise is that individual investors have not abandoned global diversification during this recent period of disappointment.

Over the past 10 years, even as U.S. stocks hugely outperformed, mutual-fund and exchange-traded-fund investors took $34 billion out of U.S. funds and added $1.02 trillion to international, according to Fran Kinniry, an investment strategist at Vanguard Group.

Historically, investors have chased good returns and run away from bad performance, so “these numbers are kind of crazy,” says Mr. Kinniry. “This is incredibly contrarian compared to what we have seen in the past.”

Individual investors and their financial advisers, say Mr. Kinniry and other fund executives, seem to be adding money to international stocks as a systematic way of taking some money off the table as U.S. shares keep rising.

Sooner or later, that’s likely to make the so-called dumb money look smart.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by MotoTrojan » Fri Sep 28, 2018 9:50 pm

oldzey wrote:
Wed Aug 15, 2018 3:53 pm
Tycoon wrote:
Tue Aug 14, 2018 3:55 pm
oldzey wrote:
Tue Aug 14, 2018 9:38 am
The inception date of Vanguard Total Stock U.S. Stock Market Index Fund (VTSMX) was 4/27/1992.

The inception date of Vanguard Total International Stock Index Fund (VGTSX) was 4/29/1996.

Per Morningstar, as of 8/13/2018, if you had invested $10,000 in both funds on 4/30/1996, you would currently have $65,648 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $28,165 in your Total International Stock Index Fund.

Of course, past performance does not indicate future performance.

Image
Compelling.
Yep. 22 years of data. Again, 0% International works for me! :beer
Assuming you were accumulating you’d be far ahead in 100% International at the 2008 peak.

Beensabu
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Beensabu » Fri Sep 28, 2018 10:15 pm

Maverick3320 wrote:
Mon Sep 24, 2018 3:05 pm
Beensabu wrote:
Fri Sep 21, 2018 9:32 pm
Maverick3320 wrote:
Fri Sep 21, 2018 9:40 am
Engineer250 wrote:
Sun Sep 09, 2018 4:56 pm
cheezit wrote:
Tue Sep 04, 2018 4:20 pm


Ignoring Mr. Buffett's assertion about social security's continued viability in its present form (as that's a political discussion), we should note that the bolded statement is empirically false. We already have a generation with a lower standard of living than their parents; we may have more, depending on whether the 50+ year trend of stagnant real wages, and the other long-term trends of increased health care, housing and social security costs hold.
Thanks for saying something. It invoked such a sad response in me I didn't know how to respond. I do know wages, adjusted for inflation, have stayed basically flat for the last 30 years. Gains in productivity/GDP have not gone to median households. I know Bogleheads tend to be from the fortunate side of Americans but I am frustrated when education and housing are increasing so much faster than inflation, wages aren't, and it doesn't get acknowledged.
Gains in productivity have gone to median households, just not in wage form. The massive increase in healthcare costs, borne by employers, has cut into potential wage increases.
If you have the good fortune of having access to a low deductible health care plan where the premium is entirely or substantially covered by your employer, please do not assume that such a situation is universally experienced by most workers. I can assure you that it is not.
I didn't say anything was universally experienced by anyone - no need to be short with people.

According to the Kaiser Foundation, approximately half of all Americans have employer-subsidized healthcare. I'm not a mathematician, but I can assure you that half is pretty significant. Note that this doesn't include retired Americans, who generally shift to government healthcare coverage. So the percentage of working-age Americans covered by employer healthcare coverage is actually much higher than 50%.

Even if it was 10%, it would still be significantly significant in terms of affecting productivity gains.
My apologies. Believe it or not, that was me toning it down. My initial reaction was more along the lines of "What!? Want to see my disastrous health care coverage that I pay a hefty premium for and literally only have in case I get run over by a car or bitten by a rattlesnake?" HDHP and not a HSA. It's barely subsidized by my employer, but I guess I'm counted in that ~50%. Anyway, that was a terrible apology. Let's try again. I'm sorry that I was snarky. I had an emotional reaction to your statement, and I should have sat on it instead of posting.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next."

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AnalogKid22
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by AnalogKid22 » Mon Oct 01, 2018 9:09 am

JL Collins also doesn't hold specific international equities: https://jlcollinsnh.com/2018/09/25/what ... n-it-2018/

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watchnerd
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by watchnerd » Mon Oct 01, 2018 9:47 am

AnalogKid22 wrote:
Mon Oct 01, 2018 9:09 am
JL Collins also doesn't hold specific international equities: https://jlcollinsnh.com/2018/09/25/what ... n-it-2018/
Who is JL Collins?
Tax Sheltered: 35% US Stock | 35% ex-US Stock | 30% TTM || Taxable: 35% US Stock | 35% ex-US Stock | 15% TTM | 15% Munis

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by moneyman11 » Mon Oct 01, 2018 12:31 pm

I'm not sure the US vs International argument is really about "US vs International" at this point.

It has turned into "Big Tech heavy" (US) vs "More balanced sector allocation".

VTI now holds over 20% of assets in the "Technology" sector, and its top 5 holdings are: Apple, Microsoft, Amazon, Alphabet (Google), and Facebook. This is compared to a 7% technology sector holding for VXUS.

A bet on Total US at this point appears to really be a bet on the continued out-performance of the Technology sector and those 5 tech companies in particular.
Last edited by moneyman11 on Mon Oct 01, 2018 12:56 pm, edited 1 time in total.

goblue100
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by goblue100 » Mon Oct 01, 2018 12:34 pm

watchnerd wrote:
Mon Oct 01, 2018 9:47 am
AnalogKid22 wrote:
Mon Oct 01, 2018 9:09 am
JL Collins also doesn't hold specific international equities: https://jlcollinsnh.com/2018/09/25/what ... n-it-2018/
Who is JL Collins?
https://www.amazon.com/Simple-Path-Weal ... 1533667926

“In the dark, bewildering, trap-infested jungle of misinformation and opaque riddles that is the world of investment, JL Collins is the fatherly wizard on the side of the path, offering a simple map, warm words of encouragement and the tools to forge your way through with confidence. You'll never find a wiser advisor with a bigger heart.” -- Malachi Rempen: Filmmaker, cartoonist, author and self-described ruffian
Can't take it with you when you're gone | But I want enough to get there on - Rollin with the flow - Jerry Hayes

hdas
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by hdas » Wed Oct 03, 2018 8:53 am

Guide to Markets is out, it has this descriptive figure:

Image

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Taylor Larimore
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Jack Bogle was right

Post by Taylor Larimore » Wed Oct 03, 2018 9:49 am

Bogleheads:

The chart by Boglehead "hdas" reveals that Mr. Bogle has been right when he recommends "no more than 20% by U.S. investors in foreign stocks".

Thank you, Jack!

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

HEDGEFUNDIE
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Re: Jack Bogle was right

Post by HEDGEFUNDIE » Wed Oct 03, 2018 10:00 am

Taylor Larimore wrote:
Wed Oct 03, 2018 9:49 am
Bogleheads:

The chart by Boglehead "hdas" reveals that Mr. Bogle has been right when he recommends "no more than 20% by U.S. investors in foreign stocks".

Thank you, Jack!

Best wishes.
Taylor
Taylor,

That is not my interpretation of the chart at all.

The chart shows there are three periods of time when US and International performance diverged. During the first period US had double the performance of international. During the second period International had double the performance of US. And in the third, current period US has had triple the performance of international.

Who knows what tomorrow will bring. To me this chart is an argument for holding more international.

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abuss368
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Re: Jack Bogle was right

Post by abuss368 » Wed Oct 03, 2018 10:03 am

HEDGEFUNDIE wrote:
Wed Oct 03, 2018 10:00 am
Taylor Larimore wrote:
Wed Oct 03, 2018 9:49 am
Bogleheads:

The chart by Boglehead "hdas" reveals that Mr. Bogle has been right when he recommends "no more than 20% by U.S. investors in foreign stocks".

Thank you, Jack!

Best wishes.
Taylor
Taylor,

That is not my interpretation of the chart at all.

The chart shows there are three periods of time when US and International performance diverged. During the first period US had double the performance of international. During the second period International had double the performance of US. And in the third, current period US has had triple the performance of international.

Who knows what tomorrow will bring. To me this chart is an argument for holding more international.
Interesting observation.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: Jack Bogle was right

Post by steve321 » Wed Oct 03, 2018 10:06 am

Taylor Larimore wrote:
Wed Oct 03, 2018 9:49 am
Bogleheads:

The chart by Boglehead "hdas" reveals that Mr. Bogle has been right when he recommends "no more than 20% by U.S. investors in foreign stocks".

Thank you, Jack!

Best wishes.
Taylor
Taylor:

would you then say that someone who had recommended to invest 100% in Denmark 20 years ago was an even greater investor than Mr Bogle? I don't know how to post pictures here, but you can see on this site that over roughly the same time span as the chart you refer to, Denmark did much better than the rest of the world.
https://www.msci.com/documents/10199/5d ... 60a97d2b94

Surely there must have been a lot of Danish investors that through home country bias invested 100% in their own country. Would you say these people were even greater geniuses than Mr Bogle because it worked out better for them?

Thanks
Last edited by steve321 on Wed Oct 03, 2018 10:24 am, edited 1 time in total.

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Re: Jack Bogle was right

Post by ReformedSpender » Wed Oct 03, 2018 10:07 am

HEDGEFUNDIE wrote:
Wed Oct 03, 2018 10:00 am

Taylor,

That is not my interpretation of the chart at all.

The chart shows there are three periods of time when US and International performance diverged. During the first period US had double the performance of international. During the second period International had double the performance of US. And in the third, current period US has had triple the performance of international.

Who knows what tomorrow will bring. To me this chart is an argument for holding more international.
My thoughts as well.

Remember, "Past Performance Is Not Indicative Of Future Results", which is preached consistently around here, stands true.

My signature is quite fitting at this time imo...

:beer
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.

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Taylor Larimore
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Our International Allocation?

Post by Taylor Larimore » Wed Oct 03, 2018 2:28 pm

Bogleheads:

In his "Forward" to my latest book, The Bogleheads' Guide to The Three-Fund Portfolio, Mr. Bogle wrote:
"In my first book, Bogle on Mutual Funds, published in 1994, I wrote that a long-term investor need not allocate any of his or her assets to non-U.S. stocks. But if they disagreed, I argued, they should limit their holding to 20% of their stock portion, given the significant extra risks involved (such as currency risk and sovereign risk).

My opinion was based on my expectation that the American economy would continue to grow over the long term, and that the market values of U.S. corporations would grow faster than the values of non-U.S. corporations. Since 1994, as it was to happen, the U.S. S&P 500 Index was to rise by 743% , while the EAFE (Europe, Australasia, and Far East) Index of non-U.S. stocks rose by 237%.

That I was right is beside the point. It may have been luck. But now that U.S. stocks have dominated for nearly 25 years, it may well be time for reversion the mean, with non-U.S. stocks leading the way rather than following. Who really knows? No one knows what tomorrow may bring. But I'm inclined to stick by my earlier conclusion that holding of non-U.S. stocks should be limited to no more than 20% of equities.

For U.S. investors, Taylor suggests that 20% of the equity allocation should be placed in a Total International Stock Index Fund. That suggested 20% is essentially a compromise between my suggested maximum of 20% and the minimum 20% recommended by a Vanguard study."
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Our International Allocation?

Post by steve321 » Wed Oct 03, 2018 3:29 pm

Taylor Larimore wrote:
Wed Oct 03, 2018 2:28 pm
Bogleheads:

In his "Forward" to my latest book, The Bogleheads' Guide to The Three-Fund Portfolio, Mr. Bogle wrote:
"In my first book, Bogle on Mutual Funds, published in 1994, I wrote that a long-term investor need not allocate any of his or her assets to non-U.S. stocks. But if they disagreed, I argued, they should limit their holding to 20% of their stock portion, given the significant extra risks involved (such as currency risk and sovereign risk).

My opinion was based on my expectation that the American economy would continue to grow over the long term, and that the market values of U.S. corporations would grow faster than the values of non-U.S. corporations. Since 1994, as it was to happen, the U.S. S&P 500 Index was to rise by 743% , while the EAFE (Europe, Australasia, and Far East) Index of non-U.S. stocks rose by 237%.

That I was right is beside the point. It may have been luck. But now that U.S. stocks have dominated for nearly 25 years, it may well be time for reversion the mean, with non-U.S. stocks leading the way rather than following. Who really knows? No one knows what tomorrow may bring. But I'm inclined to stick by my earlier conclusion that holding of non-U.S. stocks should be limited to no more than 20% of equities.

For U.S. investors, Taylor suggests that 20% of the equity allocation should be placed in a Total International Stock Index Fund. That suggested 20% is essentially a compromise between my suggested maximum of 20% and the minimum 20% recommended by a Vanguard study."
Best wishes.
Taylor
Again, since the market value of Danish corporations has grown faster than that of US corporations, would this mean that investing 100% in Denmark would have been a better decision? Since Denmark has outperformed over the last 20 years, should we 'stick with' the conclusion that holding non-Danish stocks is a mistake? If not, please explain why. Thank you in advance.

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Re: Our International Allocation?

Post by abuss368 » Wed Oct 03, 2018 8:32 pm

Taylor Larimore wrote:
Wed Oct 03, 2018 2:28 pm
Bogleheads:

In his "Forward" to my latest book, The Bogleheads' Guide to The Three-Fund Portfolio, Mr. Bogle wrote:
"In my first book, Bogle on Mutual Funds, published in 1994, I wrote that a long-term investor need not allocate any of his or her assets to non-U.S. stocks. But if they disagreed, I argued, they should limit their holding to 20% of their stock portion, given the significant extra risks involved (such as currency risk and sovereign risk).

My opinion was based on my expectation that the American economy would continue to grow over the long term, and that the market values of U.S. corporations would grow faster than the values of non-U.S. corporations. Since 1994, as it was to happen, the U.S. S&P 500 Index was to rise by 743% , while the EAFE (Europe, Australasia, and Far East) Index of non-U.S. stocks rose by 237%.

That I was right is beside the point. It may have been luck. But now that U.S. stocks have dominated for nearly 25 years, it may well be time for reversion the mean, with non-U.S. stocks leading the way rather than following. Who really knows? No one knows what tomorrow may bring. But I'm inclined to stick by my earlier conclusion that holding of non-U.S. stocks should be limited to no more than 20% of equities.

For U.S. investors, Taylor suggests that 20% of the equity allocation should be placed in a Total International Stock Index Fund. That suggested 20% is essentially a compromise between my suggested maximum of 20% and the minimum 20% recommended by a Vanguard study."
Best wishes.
Taylor
Hi Taylor -

I did enjoy reading this part of your new book. Thank you Mr. Bogle and thank you Taylor!
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: Our International Allocation?

Post by sreynard » Wed Oct 03, 2018 9:52 pm

steve321 wrote:
Wed Oct 03, 2018 3:29 pm
Taylor Larimore wrote:
Wed Oct 03, 2018 2:28 pm
Bogleheads:

In his "Forward" to my latest book, The Bogleheads' Guide to The Three-Fund Portfolio, Mr. Bogle wrote:
"In my first book, Bogle on Mutual Funds, published in 1994, I wrote that a long-term investor need not allocate any of his or her assets to non-U.S. stocks. But if they disagreed, I argued, they should limit their holding to 20% of their stock portion, given the significant extra risks involved (such as currency risk and sovereign risk).

My opinion was based on my expectation that the American economy would continue to grow over the long term, and that the market values of U.S. corporations would grow faster than the values of non-U.S. corporations. Since 1994, as it was to happen, the U.S. S&P 500 Index was to rise by 743% , while the EAFE (Europe, Australasia, and Far East) Index of non-U.S. stocks rose by 237%.

That I was right is beside the point. It may have been luck. But now that U.S. stocks have dominated for nearly 25 years, it may well be time for reversion the mean, with non-U.S. stocks leading the way rather than following. Who really knows? No one knows what tomorrow may bring. But I'm inclined to stick by my earlier conclusion that holding of non-U.S. stocks should be limited to no more than 20% of equities.

For U.S. investors, Taylor suggests that 20% of the equity allocation should be placed in a Total International Stock Index Fund. That suggested 20% is essentially a compromise between my suggested maximum of 20% and the minimum 20% recommended by a Vanguard study."
Best wishes.
Taylor
Again, since the market value of Danish corporations has grown faster than that of US corporations, would this mean that investing 100% in Denmark would have been a better decision? Since Denmark has outperformed over the last 20 years, should we 'stick with' the conclusion that holding non-Danish stocks is a mistake? If not, please explain why. Thank you in advance.
Steve, please re-post your advice to invest 100% in Denmark from 20 years ago. A photograph would be perfectly acceptable.

Anyone can pick one industry, one country, or even one stock today that they could have bought 20 years ago that turned out to have been the best. It's a completely different matter to have your prediction from 20 years ago turn out to have been correct. As Mr. Bogle said, he could have just been lucky. He looked at the data, gave his reasons, and made his prediction. He turned out to be right. He could easily have been wrong, but he wasn't. You can buy his arguments or you can reject them, but there is no doubt that he has turned out to be correct.

Mr. Bogle's point wasn't that people shouldn't invest in international. It wasn't that investing in international is bad. It is that the U.S. investors don't really need to do it. It isn't, wasn't, and hasn't been necessary. He didn't say that Denmark investors should invest 100% in Denmark, or that Japanese investors should invest 100% in Japan. He said it wasn't necessary for U.S. investors. But if they do, he said, you should keep the percentage limited to 20%. So far, he has been proven to be correct. As he said, there is no guarantee what the future will hold for investors in the U.S. or in Denmark or anywhere else.

Personally, I hold 30% in international and hope someday Mr. Bogle will be wrong, but that's as far as I'm going to bet against him. I would love for my 30% to explode to 50% sometime in the near future, but see no reason to think it will. Jack's a pretty wise old bird and sees a lot more than I do, so while I may have some doubts about his arguments, I'm not going to start calling him an idiot when, so far, his analysis has been correct.

Steve

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Re: Our International Allocation?

Post by steve321 » Thu Oct 04, 2018 3:43 am

sreynard wrote:
Wed Oct 03, 2018 9:52 pm
steve321 wrote:
Wed Oct 03, 2018 3:29 pm
Taylor Larimore wrote:
Wed Oct 03, 2018 2:28 pm
Bogleheads:

In his "Forward" to my latest book, The Bogleheads' Guide to The Three-Fund Portfolio, Mr. Bogle wrote:
"In my first book, Bogle on Mutual Funds, published in 1994, I wrote that a long-term investor need not allocate any of his or her assets to non-U.S. stocks. But if they disagreed, I argued, they should limit their holding to 20% of their stock portion, given the significant extra risks involved (such as currency risk and sovereign risk).

My opinion was based on my expectation that the American economy would continue to grow over the long term, and that the market values of U.S. corporations would grow faster than the values of non-U.S. corporations. Since 1994, as it was to happen, the U.S. S&P 500 Index was to rise by 743% , while the EAFE (Europe, Australasia, and Far East) Index of non-U.S. stocks rose by 237%.

That I was right is beside the point. It may have been luck. But now that U.S. stocks have dominated for nearly 25 years, it may well be time for reversion the mean, with non-U.S. stocks leading the way rather than following. Who really knows? No one knows what tomorrow may bring. But I'm inclined to stick by my earlier conclusion that holding of non-U.S. stocks should be limited to no more than 20% of equities.

For U.S. investors, Taylor suggests that 20% of the equity allocation should be placed in a Total International Stock Index Fund. That suggested 20% is essentially a compromise between my suggested maximum of 20% and the minimum 20% recommended by a Vanguard study."
Best wishes.
Taylor
Again, since the market value of Danish corporations has grown faster than that of US corporations, would this mean that investing 100% in Denmark would have been a better decision? Since Denmark has outperformed over the last 20 years, should we 'stick with' the conclusion that holding non-Danish stocks is a mistake? If not, please explain why. Thank you in advance.
Steve, please re-post your advice to invest 100% in Denmark from 20 years ago. A photograph would be perfectly acceptable.

Anyone can pick one industry, one country, or even one stock today that they could have bought 20 years ago that turned out to have been the best. It's a completely different matter to have your prediction from 20 years ago turn out to have been correct. As Mr. Bogle said, he could have just been lucky. He looked at the data, gave his reasons, and made his prediction. He turned out to be right. He could easily have been wrong, but he wasn't. You can buy his arguments or you can reject them, but there is no doubt that he has turned out to be correct.

Mr. Bogle's point wasn't that people shouldn't invest in international. It wasn't that investing in international is bad. It is that the U.S. investors don't really need to do it. It isn't, wasn't, and hasn't been necessary. He didn't say that Denmark investors should invest 100% in Denmark, or that Japanese investors should invest 100% in Japan. He said it wasn't necessary for U.S. investors. But if they do, he said, you should keep the percentage limited to 20%. So far, he has been proven to be correct. As he said, there is no guarantee what the future will hold for investors in the U.S. or in Denmark or anywhere else.

Personally, I hold 30% in international and hope someday Mr. Bogle will be wrong, but that's as far as I'm going to bet against him. I would love for my 30% to explode to 50% sometime in the near future, but see no reason to think it will. Jack's a pretty wise old bird and sees a lot more than I do, so while I may have some doubts about his arguments, I'm not going to start calling him an idiot when, so far, his analysis has been correct.

Steve
Why is it unnecessary for Americans, but not Japanese or Danish investors, to hold stocks from foreign markets? It can't be a question of size of the market, since Japan got to be nearly half of the world by market cap at one point. So what is the reason for the exception in the case of the US? Thanks

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Re: Our International Allocation?

Post by InvestInPasta » Thu Oct 04, 2018 4:26 am

steve321 wrote:
Thu Oct 04, 2018 3:43 am
Why is it unnecessary for Americans, but not Japanese or Danish investors, to hold stocks from foreign markets? It can't be a question of size of the market, since Japan got to be nearly half of the world by market cap at one point. So what is the reason for the exception in the case of the US? Thanks
AFAIK J. Bogle thinks it is not necessary to hold ex-US because he thinks US market will have better returns in the future than ex-US.

In a video J. Bogle clearly explained why he thinks this: ex-US is mainly UK, Japan and France:
  • UK won't do better than US
  • France is a country where they work 35 hours per week
  • Japan has a demographic problem
This is what he thinks, that's it!
He said he might be wrong, it's an educated bet. :wink:

Anyway if you buy MSCI World, US is now 60%, and if you buy MSCI ACWI, US is 50%.
When studying English I am lazier than my portfolio. Feel free to correct my english and investing mistakes.

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Re: Our International Allocation?

Post by Lauretta » Thu Oct 04, 2018 4:34 am

InvestInPasta wrote:
Thu Oct 04, 2018 4:26 am
steve321 wrote:
Thu Oct 04, 2018 3:43 am
Why is it unnecessary for Americans, but not Japanese or Danish investors, to hold stocks from foreign markets? It can't be a question of size of the market, since Japan got to be nearly half of the world by market cap at one point. So what is the reason for the exception in the case of the US? Thanks
AFAIK J. Bogle thinks it is not necessary to hold ex-US because he thinks US market will have better returns in the future than ex-US.

In a video J. Bogle clearly explained why he thinks this: ex-US is mainly UK, Japan and France:
  • UK won't do better than US
  • France is a country where they work 35 hours per week
  • Japan has a demographic problem
This is what he thinks, that's it!
He said he might be wrong, it's an educated bet.
I saw that video too. He also said that he is managing money for some foundation in Philadelphia I think - and that he put 5% of that in gold, in spite of what he is known to have said about gold.
So perhaps his advice should be taken with a pince of salt?
When everyone is thinking the same, no one is thinking at all

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Re: Our International Allocation?

Post by steve321 » Thu Oct 04, 2018 5:17 am

Taylor Larimore wrote:
Wed Oct 03, 2018 2:28 pm

For U.S. investors, Taylor suggests that 20% of the equity allocation should be placed in a Total International Stock Index Fund. That suggested 20% is essentially a compromise between my suggested maximum of 20% and the minimum 20% recommended by a Vanguard study."
[/quote]

That seems just an argument relying on authority. But if I ask two experts to make a house survey and they give me opposite opinions, I don't conclude that the truth is in the middle. I would probably hire another engineer because one of the first two is likely to have got it wrong.

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Re: Our International Allocation?

Post by Valuethinker » Thu Oct 04, 2018 5:27 am

steve321 wrote:
Thu Oct 04, 2018 5:17 am
Taylor Larimore wrote:
Wed Oct 03, 2018 2:28 pm

For U.S. investors, Taylor suggests that 20% of the equity allocation should be placed in a Total International Stock Index Fund. That suggested 20% is essentially a compromise between my suggested maximum of 20% and the minimum 20% recommended by a Vanguard study."


That seems just an argument relying on authority. But if I ask two experts to make a house survey and they give me opposite opinions, I don't conclude that the truth is in the middle. I would probably hire another engineer because one of the first two is likely to have got it wrong.
Ex ante (before the fact) though, in finance, there are no truths. Your house survey might have an objective truth. But in financial markets, no one can make a definitive call, and the record of experts calling the markets is extremely poor. It would be like being able to pick from a group of surveyors, knowing that their reports will be random assemblages of paragraphs.

You hire a 3rd expert, they may tell you 0%, they may tell you 30%, they may tell you 45% (about market weight), they may tell you 100% (on the valuation argument that the US is very overvalued and headed for a fall).

Nobody can tell you, before the fact, which will give you the more efficient portfolio in risk-return terms.

All that you can do is say what the balance of historic evidence is and why that leads you to a target percentage.

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Re: Our International Allocation?

Post by steve321 » Thu Oct 04, 2018 5:42 am

Valuethinker wrote:
Thu Oct 04, 2018 5:27 am
steve321 wrote:
Thu Oct 04, 2018 5:17 am
Taylor Larimore wrote:
Wed Oct 03, 2018 2:28 pm

For U.S. investors, Taylor suggests that 20% of the equity allocation should be placed in a Total International Stock Index Fund. That suggested 20% is essentially a compromise between my suggested maximum of 20% and the minimum 20% recommended by a Vanguard study."


That seems just an argument relying on authority. But if I ask two experts to make a house survey and they give me opposite opinions, I don't conclude that the truth is in the middle. I would probably hire another engineer because one of the first two is likely to have got it wrong.
Ex ante (before the fact) though, in finance, there are no truths. Your house survey might have an objective truth. But in financial markets, no one can make a definitive call, and the record of experts calling the markets is extremely poor. It would be like being able to pick from a group of surveyors, knowing that their reports will be random assemblages of paragraphs.

You hire a 3rd expert, they may tell you 0%, they may tell you 30%, they may tell you 45% (about market weight), they may tell you 100% (on the valuation argument that the US is very overvalued and headed for a fall).

Nobody can tell you, before the fact, which will give you the more efficient portfolio in risk-return terms.

All that you can do is say what the balance of historic evidence is and why that leads you to a target percentage.
Fair enough, I think that we agree on the fact that it does not make sense to 'make a compromise' on two opposite experts opinions: since experts cannot tell you what the optimal allocation is, taking the average of two opinions is not better than either opinion.
In other words: if you allocate about 50% to the US because you want to use global market cap weighting, I respect your decision. But if you tell me that you allocate 50% to US because it's halfway between the opinion of expert A who recommends 0% (valuations argument) and expert B (inherent superiority of the US market - B stands for Bogle :wink: ) that doesn't make any sense to me. It reminds me of the joke of the guy who went on Friday to the Buddhist temple, on Saturday to the Mosque and on Sunday to Church to avoid choosing the wrong religion and getting in trouble in the afterlife :wink:

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bgf » Thu Oct 04, 2018 7:44 am

the mods should rename this thread "20+ pages of adults playing with charts"
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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Re: Our International Allocation?

Post by Valuethinker » Thu Oct 04, 2018 8:23 am

steve321 wrote:
Thu Oct 04, 2018 5:42 am
Valuethinker wrote:
Thu Oct 04, 2018 5:27 am
steve321 wrote:
Thu Oct 04, 2018 5:17 am
Taylor Larimore wrote:
Wed Oct 03, 2018 2:28 pm

For U.S. investors, Taylor suggests that 20% of the equity allocation should be placed in a Total International Stock Index Fund. That suggested 20% is essentially a compromise between my suggested maximum of 20% and the minimum 20% recommended by a Vanguard study."


That seems just an argument relying on authority. But if I ask two experts to make a house survey and they give me opposite opinions, I don't conclude that the truth is in the middle. I would probably hire another engineer because one of the first two is likely to have got it wrong.
Ex ante (before the fact) though, in finance, there are no truths. Your house survey might have an objective truth. But in financial markets, no one can make a definitive call, and the record of experts calling the markets is extremely poor. It would be like being able to pick from a group of surveyors, knowing that their reports will be random assemblages of paragraphs.

You hire a 3rd expert, they may tell you 0%, they may tell you 30%, they may tell you 45% (about market weight), they may tell you 100% (on the valuation argument that the US is very overvalued and headed for a fall).

Nobody can tell you, before the fact, which will give you the more efficient portfolio in risk-return terms.

All that you can do is say what the balance of historic evidence is and why that leads you to a target percentage.
Fair enough, I think that we agree on the fact that it does not make sense to 'make a compromise' on two opposite experts opinions: since experts cannot tell you what the optimal allocation is, taking the average of two opinions is not better than either opinion.
There is quite a bit of evidence in predictions that the average of the predictions by various experts outperforms, on average, the guess of any one. So that is not clear.
In other words: if you allocate about 50% to the US because you want to use global market cap weighting, I respect your decision. But if you tell me that you allocate 50% to US because it's halfway between the opinion of expert A who recommends 0% (valuations argument) and expert B (inherent superiority of the US market - B stands for Bogle :wink: ) that doesn't make any sense to me.
It might smack of indecision but actually it could be quite clever. Accepting that the extreme view is less likely to be right than something in the middle. Using the experts, in effect, to set the end point. So although it does not appear to be "logical" in a Cartesian sense, it is logical in the face of the uncertainties.

The problem is there is an absence of an actual truth - before the fact- to divine.
It reminds me of the joke of the guy who went on Friday to the Buddhist temple, on Saturday to the Mosque and on Sunday to Church to avoid choosing the wrong religion and getting in trouble in the afterlife :wink:

But that is such an intelligent bet that various theologies have specifically ruled it out ;-).

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Valuethinker » Thu Oct 04, 2018 8:31 am

moneyman11 wrote:
Mon Oct 01, 2018 12:31 pm
I'm not sure the US vs International argument is really about "US vs International" at this point.

It has turned into "Big Tech heavy" (US) vs "More balanced sector allocation".

VTI now holds over 20% of assets in the "Technology" sector, and its top 5 holdings are: Apple, Microsoft, Amazon, Alphabet (Google), and Facebook. This is compared to a 7% technology sector holding for VXUS.

A bet on Total US at this point appears to really be a bet on the continued out-performance of the Technology sector and those 5 tech companies in particular.
+1 this is the key.

Oddly, it could make me more bullish on the US than otherwise. Because those companies really are world beating and world changing -- they dominate what we might call "the internet version 2.0" (it might be 3.0). And they make a lot of money (Amazon and Facebook not so much). I would perhaps have added Netflix, another business with poor profitability but quite amazing growth. And that would give us the FAANGs + Microsoft.

(my own actual sense is that Google and Facebook are primarily about advertising revenues, and that will slow down. That Amazon is overvalued notwithstanding the success it is having in many areas. Apple is a hard call but it's hard to see what they do for an encore (I said the same thing before iphone 10, btw ;-). Microsoft is Microsoft - no one loves it, but they mint cashflow.

For other world leading internet companies you have Alibaba and Tencent, basically. I cannot think of anything else. You get other tech companies - TSMC and Samsung in particular. SAP in Germany. But not really (unless I have missed one - I don't think Softbank counts?) internet companies.

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Re: Our International Allocation?

Post by steve321 » Thu Oct 04, 2018 8:35 am

Valuethinker wrote:
Thu Oct 04, 2018 8:23 am

There is quite a bit of evidence in predictions that the average of the predictions by various experts outperforms, on average, the guess of any one. So that is not clear.
That's how I understand the ideas that market prices are about right (as in EMH), because they incorporate the views and decisions of all participants. For the same reason a global market capitalization weighted allocation makes sense, since it's the portfolio held by all investors as a whole. To me personally, that makes more sense than just taking the average between the views of two experts.

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Re: Our International Allocation?

Post by Valuethinker » Thu Oct 04, 2018 8:37 am

steve321 wrote:
Thu Oct 04, 2018 3:43 am

Why is it unnecessary for Americans, but not Japanese or Danish investors, to hold stocks from foreign markets? It can't be a question of size of the market, since Japan got to be nearly half of the world by market cap at one point. So what is the reason for the exception in the case of the US? Thanks
The valuations of Japanese companies were so out of the odds in 1990 that it really was a market distortion. You had the effect of all the crossholdings between companies (and in those days the indices were not as well adapted to netting those out).

Also a lot of the market cap was financials. And those companies turned out to be built on thin air - the profits weren't really there but were largely the creation of the bull market. It was mismeasurement -- I have not checked Japanese GDP figures to see if there was a big divergence between national statistics reported profits and stock market reported profits which might have told you that. Non financial companies were making a lot of their profits out of speculating in financial markets, as well - kind of the reverse GE effect (where the latter is exiting financial services).

AFAIK there's no evidence that is the case of the US market now. In fact it's less the case than it was in 2007 when financials was the largest sector. And US GAAP now is certainly a lot tougher than Japanese GAAP was then.

The risk an American is taking is not holding 45% of the world market. Where there is a lot of duplication with the American market (eg Exxon v Shell BP Total ENI) and indeed American companies earn a lot of their profits overseas. If you own 45% of an index then there's a lot less risk of underperformance against that benchmark vs. only owning 1% (or 10%) of the index.

Empirically that cost (of not investing in international) has been quite small. It does very much depend on sample period. Some of the biggest outperformance of international equities for an American investor came during the relatively early years of the sample period (e.g. 1970s). That does remind me of the situation with Emerging Markets, where the benefit is also concentrated at a time when EM were a tiny proportion of world markets - and the indices did not exist, but were created subsequently and "backcasted".

For a Danish investor the risk is of not holding 99%+ of all the companies out there that are quoted. And for a Japanese c. 90%? That's a lot of diversification benefit to just throw away.

Main problem with US market now is valuation. If you adjust for sectors that's probably less frightening than it at first appears *if* you believe the values of the tech stocks are justified. Mostly, I do, although I don't see how it keeps going up from here.
Last edited by Valuethinker on Thu Oct 04, 2018 8:58 am, edited 1 time in total.

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Re: Our International Allocation?

Post by Valuethinker » Thu Oct 04, 2018 8:40 am

steve321 wrote:
Thu Oct 04, 2018 8:35 am
Valuethinker wrote:
Thu Oct 04, 2018 8:23 am

There is quite a bit of evidence in predictions that the average of the predictions by various experts outperforms, on average, the guess of any one. So that is not clear.
That's how I understand the ideas that market prices are about right (as in EMH), because they incorporate the views and decisions of all participants. For the same reason a global market capitalization weighted allocation makes sense, since it's the portfolio held by all investors as a whole. To me personally, that makes more sense than just taking the average between the views of two experts.
Yes but it is also true of the views of experts.

Deviation from the world market cap weightings is hard to justify. That's clear.

What's harder to defend is not also then hedging back to your home currency. That would theoretically give you the greatest diversification where it matters (stocks) but eliminate diversification which is unlikely to be of long run benefit (currency).

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Re: Our International Allocation?

Post by vineviz » Thu Oct 04, 2018 9:04 am

Valuethinker wrote:
Thu Oct 04, 2018 8:40 am
steve321 wrote:
Thu Oct 04, 2018 8:35 am
Valuethinker wrote:
Thu Oct 04, 2018 8:23 am

There is quite a bit of evidence in predictions that the average of the predictions by various experts outperforms, on average, the guess of any one. So that is not clear.
That's how I understand the ideas that market prices are about right (as in EMH), because they incorporate the views and decisions of all participants. For the same reason a global market capitalization weighted allocation makes sense, since it's the portfolio held by all investors as a whole. To me personally, that makes more sense than just taking the average between the views of two experts.
Yes but it is also true of the views of experts.
Then you run into the problem of defining the "experts".

As evidenced on this topic, investors are more likely to view people who agree with them as experts regardless of their actual qualifications.

For instance, what real asset allocation expertise does someone like Jack Bogle or Warren Buffet have? Virtually none, certainly not in comparison to the fleet of Ph.Ds that work in portfolio construction at major investment firms or professors who have spent their careers studying the field. Yet how far to do you have to look to find Bogleheads saying something to the effect of "never mind that virtually every expert says that 30-40% international is the optimal allocation, Jack Bogle says I don't need any so that's good enough for me"?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Our International Allocation?

Post by steve321 » Thu Oct 04, 2018 9:13 am

Valuethinker wrote:
Thu Oct 04, 2018 8:40 am


What's harder to defend is not also then hedging back to your home currency. That would theoretically give you the greatest diversification where it matters (stocks) but eliminate diversification which is unlikely to be of long run benefit (currency).
Hard question, though for Uk investors who had not hedged it worked out well the morning after the Brexit referendum :wink:
More generally, I listened to a Meb Faber podcast (it was the subject of an OP on Bogleheads) in which he interviewed Elroy Dimson (who spoke in a very different accent :wink: ). Dimson said that in the long run exposure to foreign currencies does not matter; in fact he said that it can be a hedge against inflation in your own country. Something in the Uk we might have to worry about...

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Re: Our International Allocation?

Post by sreynard » Thu Oct 04, 2018 1:57 pm

steve321 wrote:
Thu Oct 04, 2018 5:17 am
Taylor Larimore wrote:
Wed Oct 03, 2018 2:28 pm

For U.S. investors, Taylor suggests that 20% of the equity allocation should be placed in a Total International Stock Index Fund. That suggested 20% is essentially a compromise between my suggested maximum of 20% and the minimum 20% recommended by a Vanguard study."
That seems just an argument relying on authority. But if I ask two experts to make a house survey and they give me opposite opinions, I don't conclude that the truth is in the middle. I would probably hire another engineer because one of the first two is likely to have got it wrong.
No, it is based on the analysis of two experts that have studied the question over many years. Vanguard has found reasons to increase their allocation over the years, Jack hasn't. Taylor just picked the point where both respected experts agree. Seems like a logical approach to me.

If you hire 10,000 experts and their answers are all over the place, it's probably because the answer doesn't really matter. Hiring one more expert isn't going to buy you any more clarity. You are stuck just looking at their track record and how believable you find their analysis.

For international we have a very strong consensus that the number should be somewhere between 0% and 50%, or so. We're pretty sure it's in that range, but nobody knows for sure.

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Re: Our International Allocation?

Post by columbia » Thu Oct 04, 2018 2:32 pm

vineviz wrote:
Thu Oct 04, 2018 9:04 am
Valuethinker wrote:
Thu Oct 04, 2018 8:40 am
steve321 wrote:
Thu Oct 04, 2018 8:35 am
Valuethinker wrote:
Thu Oct 04, 2018 8:23 am

There is quite a bit of evidence in predictions that the average of the predictions by various experts outperforms, on average, the guess of any one. So that is not clear.
That's how I understand the ideas that market prices are about right (as in EMH), because they incorporate the views and decisions of all participants. For the same reason a global market capitalization weighted allocation makes sense, since it's the portfolio held by all investors as a whole. To me personally, that makes more sense than just taking the average between the views of two experts.
Yes but it is also true of the views of experts.
Then you run into the problem of defining the "experts".

As evidenced on this topic, investors are more likely to view people who agree with them as experts regardless of their actual qualifications.

For instance, what real asset allocation expertise does someone like Jack Bogle or Warren Buffet have? Virtually none, certainly not in comparison to the fleet of Ph.Ds that work in portfolio construction at major investment firms or professors who have spent their careers studying the field. Yet how far to do you have to look to find Bogleheads saying something to the effect of "never mind that virtually every expert says that 30-40% international is the optimal allocation, Jack Bogle says I don't need any so that's good enough for me"?
If you aggregated the experts’ opinions on that particular issue, the likely conclusion is that one’s choice doesn’t matter over the course of a lifetime of investing.

I see no contradiction in play.

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Re: Our International Allocation?

Post by Valuethinker » Fri Oct 05, 2018 2:56 am

steve321 wrote:
Thu Oct 04, 2018 9:13 am
Valuethinker wrote:
Thu Oct 04, 2018 8:40 am


What's harder to defend is not also then hedging back to your home currency. That would theoretically give you the greatest diversification where it matters (stocks) but eliminate diversification which is unlikely to be of long run benefit (currency).
Hard question, though for Uk investors who had not hedged it worked out well the morning after the Brexit referendum :wink:
More generally, I listened to a Meb Faber podcast (it was the subject of an OP on Bogleheads) in which he interviewed Elroy Dimson (who spoke in a very different accent :wink: ). Dimson said that in the long run exposure to foreign currencies does not matter; in fact he said that it can be a hedge against inflation in your own country. Something in the Uk we might have to worry about...
I don't know what Faber sounds like? Dimson has your classic north London accent, AFAIK. Very middle class British (ie not posh, but well spoken).

It's an interesting point by Dimson and one I had not considered in enough detail.

Yes, for UK investors that's a major concern - given how poor our inflation performance has been relative to our main trading partners, since 1945.

The standard BH line that you are betting on something which is volatile, but is net a zero sum game, thus gaining volatility without any benefit, may need modification. At least for those of us investing from smaller countries than the USA.

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Re: Our International Allocation?

Post by steve321 » Fri Oct 05, 2018 5:17 am

Valuethinker wrote:
Fri Oct 05, 2018 2:56 am

The standard BH line that you are betting on something which is volatile, but is net a zero sum game, thus gaining volatility without any benefit, may need modification. At least for those of us investing from smaller countries than the USA.
All right then, in this case I see 2 possible modifications from 'owning the world'. Either overweight our home country, or currency hedge at least some of the foreign exposure. Which do you think is smarter?

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Re: Our International Allocation?

Post by Valuethinker » Fri Oct 05, 2018 6:03 am

steve321 wrote:
Fri Oct 05, 2018 5:17 am
Valuethinker wrote:
Fri Oct 05, 2018 2:56 am

The standard BH line that you are betting on something which is volatile, but is net a zero sum game, thus gaining volatility without any benefit, may need modification. At least for those of us investing from smaller countries than the USA.
All right then, in this case I see 2 possible modifications from 'owning the world'. Either overweight our home country, or currency hedge at least some of the foreign exposure. Which do you think is smarter?
"Overweighting" the home index (FTSE All-Share) is not overweighting GBP by much. 70% of the earnings of the All-Share are earned outside the UK (mostly USD but all currencies).

If 40% of your index is commodity producers (Canada & Australia) then overweighting your home index is a de facto bet on the USD exchange rate.

You can't control the level of hedging the companies themselves do, and it will fluctuate. A genuine US manufacturer like Boeing, say, is more exposed to USD fluctuations than a US company with large overseas operations (say Ford, which is huge in Europe, but exports very little from the USA). Boeing is large enough that they have to adjust the statistics on exports in a month when it makes a major overseas delivery (at least that was true in the early 2000s).

So the only thing you can do is currency hedge. To the extent you have UK gilts (sterling govt bonds) or corporate bonds paying in GBP then the portfolio is already doing this - they pay a known future payment in GBP.

However most of us have other assets in GBP:

- my home equity is in GBP
- any final salary pension benefits are in GBP
- future state pension and other benefits will be paid in GBP
- my labour income until I retire is in GBP

So I have quite a bit of total exposure to sterling assets, thank you very much ;-).

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by watchnerd » Fri Oct 05, 2018 8:46 am

goblue100 wrote:
Mon Oct 01, 2018 12:34 pm
watchnerd wrote:
Mon Oct 01, 2018 9:47 am
AnalogKid22 wrote:
Mon Oct 01, 2018 9:09 am
JL Collins also doesn't hold specific international equities: https://jlcollinsnh.com/2018/09/25/what ... n-it-2018/
Who is JL Collins?
https://www.amazon.com/Simple-Path-Weal ... 1533667926

“In the dark, bewildering, trap-infested jungle of misinformation and opaque riddles that is the world of investment, JL Collins is the fatherly wizard on the side of the path, offering a simple map, warm words of encouragement and the tools to forge your way through with confidence. You'll never find a wiser advisor with a bigger heart.” -- Malachi Rempen: Filmmaker, cartoonist, author and self-described ruffian
warm, fatherly wizard....oookaaay....
Tax Sheltered: 35% US Stock | 35% ex-US Stock | 30% TTM || Taxable: 35% US Stock | 35% ex-US Stock | 15% TTM | 15% Munis

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by CraigTester » Fri Oct 05, 2018 9:48 am

Facts:

SP500 P/E = 25 (Last 12 months)

SP500 PE10=33

Long-term average for both P/E and PE10 is around 15.

This means that $1 dollar of SP500 Earnings today costs between $25 and $33 dollars. (versus long-term average cost = $15)

Similarly,

10 yr US treasuries yield around 3.2%.

This means that $1 dollar of yield costs about $31.

By Contrast,

$1 of Earnings for an International Index today costs between $15 and $17 dollars (PE=15, PE10=17)

If you have a long-term perspective (e.g. 10+ years) Unless you have some special knowledge telling you that International will not continue to pace with US returns over the long-term, there is only one conclusion to be reached (even if you don't "like" it).

P.S. Note that Price and Earnings have a long-term correlation of 96%.

CraigTester

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Lauretta
Posts: 797
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Lauretta » Sat Oct 06, 2018 6:27 am

CraigTester wrote:
Fri Oct 05, 2018 9:48 am
Facts:

SP500 P/E = 25 (Last 12 months)

SP500 PE10=33

Long-term average for both P/E and PE10 is around 15.

This means that $1 dollar of SP500 Earnings today costs between $25 and $33 dollars. (versus long-term average cost = $15)

Similarly,

10 yr US treasuries yield around 3.2%.

This means that $1 dollar of yield costs about $31.

By Contrast,

$1 of Earnings for an International Index today costs between $15 and $17 dollars (PE=15, PE10=17)

If you have a long-term perspective (e.g. 10+ years) Unless you have some special knowledge telling you that International will not continue to pace with US returns over the long-term, there is only one conclusion to be reached (even if you don't "like" it).

P.S. Note that Price and Earnings have a long-term correlation of 96%.

CraigTester
The way I see it, these figures can mean 3 things:
1. The market has grounds to believe that earnings in the US will grow faster than in the rest of the world
2. The market believes that the US is safer, so it's prepared to accept lower returns because of lower risk
3. The market is euphoric about the US
When everyone is thinking the same, no one is thinking at all

CraigTester
Posts: 80
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by CraigTester » Sat Oct 06, 2018 8:24 am

Lauretta wrote:
Sat Oct 06, 2018 6:27 am
CraigTester wrote:
Fri Oct 05, 2018 9:48 am
Facts:

SP500 P/E = 25 (Last 12 months)

SP500 PE10=33

Long-term average for both P/E and PE10 is around 15.

This means that $1 dollar of SP500 Earnings today costs between $25 and $33 dollars. (versus long-term average cost = $15)

Similarly,

10 yr US treasuries yield around 3.2%.

This means that $1 dollar of yield costs about $31.

By Contrast,

$1 of Earnings for an International Index today costs between $15 and $17 dollars (PE=15, PE10=17)

If you have a long-term perspective (e.g. 10+ years) Unless you have some special knowledge telling you that International will not continue to pace with US returns over the long-term, there is only one conclusion to be reached (even if you don't "like" it).

P.S. Note that Price and Earnings have a long-term correlation of 96%.

CraigTester
The way I see it, these figures can mean 3 things:
1. The market has grounds to believe that earnings in the US will grow faster than in the rest of the world
2. The market believes that the US is safer, so it's prepared to accept lower returns because of lower risk
3. The market is euphoric about the US
1. To be rational, the market would actually need to believe US earnings will grow twice as fast as its own 100 year average. (An extremely difficult thing to do)

2. This is a possibility, but if the goal is safety, one might be better served by waiting for a better price. Versus risking a 50% loss if market reverts to its historical mean.

3. I think this is the most likely conclusion. Interesting that unlike previous periods of euphoria that ended very badly , International stocks are not caught up in it this time.

columbia
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by columbia » Sat Oct 06, 2018 6:33 pm

It would be interesting to know what percentage of the global equity cap partisans also apply that approach to their bond holdings.

If not, what do they know that the global bond market doesn’t know?

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watchnerd
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Location: Seattle, WA, USA

Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by watchnerd » Sat Oct 06, 2018 6:55 pm

columbia wrote:
Sat Oct 06, 2018 6:33 pm
It would be interesting to know what percentage of the global equity cap partisans also apply that approach to their bond holdings.

If not, what do they know that the global bond market doesn’t know?
1. I don't want TBM in any geography because I don't want corp bonds in my bond mix
2. US Treasuries have lower correlation (over the data sets I've seen) with both US and international total stock market indexes than foreign high-quality government debt

As a result, my entire tax-sheltered bond is in a total US treasuries market ETF.
Tax Sheltered: 35% US Stock | 35% ex-US Stock | 30% TTM || Taxable: 35% US Stock | 35% ex-US Stock | 15% TTM | 15% Munis

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fortyofforty
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Joined: Wed Mar 31, 2010 12:33 pm

Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by fortyofforty » Sat Oct 06, 2018 7:21 pm

watchnerd wrote:
Fri Oct 05, 2018 8:46 am
goblue100 wrote:
Mon Oct 01, 2018 12:34 pm
watchnerd wrote:
Mon Oct 01, 2018 9:47 am
AnalogKid22 wrote:
Mon Oct 01, 2018 9:09 am
JL Collins also doesn't hold specific international equities: https://jlcollinsnh.com/2018/09/25/what ... n-it-2018/
Who is JL Collins?
https://www.amazon.com/Simple-Path-Weal ... 1533667926

“In the dark, bewildering, trap-infested jungle of misinformation and opaque riddles that is the world of investment, JL Collins is the fatherly wizard on the side of the path, offering a simple map, warm words of encouragement and the tools to forge your way through with confidence. You'll never find a wiser advisor with a bigger heart.” -- Malachi Rempen: Filmmaker, cartoonist, author and self-described ruffian
warm, fatherly wizard....oookaaay....
Well, to be fair, he is recommended by a self-described ruffian, so...
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

drk
Posts: 745
Joined: Mon Jul 24, 2017 10:33 pm
Location: Seattle

Re: Our International Allocation?

Post by drk » Sat Oct 06, 2018 7:33 pm

InvestInPasta wrote:
Thu Oct 04, 2018 4:26 am
steve321 wrote:
Thu Oct 04, 2018 3:43 am
Why is it unnecessary for Americans, but not Japanese or Danish investors, to hold stocks from foreign markets? It can't be a question of size of the market, since Japan got to be nearly half of the world by market cap at one point. So what is the reason for the exception in the case of the US? Thanks
AFAIK J. Bogle thinks it is not necessary to hold ex-US because he thinks US market will have better returns in the future than ex-US.

In a video J. Bogle clearly explained why he thinks this: ex-US is mainly UK, Japan and France:
  • UK won't do better than US
  • France is a country where they work 35 hours per week
  • Japan has a demographic problem
This is what he thinks, that's it!
He said he might be wrong, it's an educated bet. :wink:

Anyway if you buy MSCI World, US is now 60%, and if you buy MSCI ACWI, US is 50%.
It's certainly a bet, but I wouldn't accuse it of being an educated one.

ge1
Posts: 323
Joined: Sat Apr 28, 2012 8:15 pm

Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by ge1 » Sat Oct 06, 2018 8:37 pm

CraigTester wrote:
Fri Oct 05, 2018 9:48 am
Facts:

SP500 P/E = 25 (Last 12 months)

SP500 PE10=33

Long-term average for both P/E and PE10 is around 15.

This means that $1 dollar of SP500 Earnings today costs between $25 and $33 dollars. (versus long-term average cost = $15)

Similarly,

10 yr US treasuries yield around 3.2%.

This means that $1 dollar of yield costs about $31.

By Contrast,

$1 of Earnings for an International Index today costs between $15 and $17 dollars (PE=15, PE10=17)

If you have a long-term perspective (e.g. 10+ years) Unless you have some special knowledge telling you that International will not continue to pace with US returns over the long-term, there is only one conclusion to be reached (even if you don't "like" it).

P.S. Note that Price and Earnings have a long-term correlation of 96%.

CraigTester
I don’t have the numbers in front me, but I’m pretty sure 5 years ago those P/E ratios were very similar. And what happened? Earnings of US companies grew strongly and US stocks are still “expensive” whilst International Stocks didn’t do anything and are still equally “cheap”. Also dividend yields haven’t changed much either, so that tells me the dividends for US stocks grew strongly in line with strong price gains, while dividends for International stocks hardly grew at all.

Don’t get me wrong, I have a substantial portion of my stocks in International but the outperformance of US vs International Companies (Companies, not share prices) has been extremely impressive over the last 5-10 years.

Dottie57
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Joined: Thu May 19, 2016 5:43 pm

Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Dottie57 » Sat Oct 06, 2018 8:46 pm

I think international has done fairly well over the last 20years.

Callan periodic table

https://www.callan.com/wp-content/uploa ... d_2018.pdf

ge1
Posts: 323
Joined: Sat Apr 28, 2012 8:15 pm

Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by ge1 » Sat Oct 06, 2018 9:32 pm

[Post removed by admin LadyGeek]
Dude, no reason to be rude.

Earnings for the S&P grew over 6% per year over the last 5 years and dividends grew even more than that.

Dividends for the Vanguard FTSE All-Wld ex-US ETF (VEU) grew all of 2% per year over the last 5 years.

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