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

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willthrill81
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Thu Aug 16, 2018 11:22 am

vineviz wrote:
Thu Aug 16, 2018 11:18 am
willthrill81 wrote:
Thu Aug 16, 2018 11:14 am
One must ask how the rest of the world's stocks would perform if the U.S. did a repeat of Japan. That's a matter of conjecture, but I doubt that most believe that a 20% allocation to international stocks would 'save the day'.
20% probably wouldn't save the day, but it'd almost certainly be better than 0%.
Perhaps, but it might be akin to being in a lifeboat 400 miles away from shore instead of 500 miles. You're 'better off', but you're still hosed.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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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 Aug 16, 2018 11:28 am

willthrill81 wrote:
Thu Aug 16, 2018 11:14 am

That's very true of most world markets. Australia, for instance, has a market capitalization of about $1.5 trillion. But the U.S. is roughly 50% of the world's market capitalization, over $30 trillion. The U.S. only investor is buying a stake in 50% of the world's stock; no other home-country-only investor can come close to that.

One must ask how the rest of the world's stocks would perform if the U.S. did a repeat of Japan. That's a matter of conjecture, but I doubt that most believe that a 20% allocation to international stocks would 'save the day'.
From memory Japan was something like 40% of the world index in 1989? I am not sure where I'd check, but it was huge.

So you can have overall growth in markets even as a major component underperforms.

On no measure that I am aware of does the US market look so outlandishly valued relative to world markets, as Japan did in 1989. So it's not likely that circumstance will reoccur.

Good news or bad news depends on your view, but if the US goes down, we all likely go down together ;-).

Exception would be another tech crash - the tech sector is such a large portion of the US market (or: the tech sector is such a small proportion of other markets).

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

Post by asif408 » Thu Aug 16, 2018 11:32 am

willthrill81 wrote:
Thu Aug 16, 2018 11:14 am
But the U.S. is roughly 50% of the world's market capitalization, over $30 trillion. The U.S. only investor is buying a stake in 50% of the world's stock; no other home-country-only investor can come close to that.
I'm not sure I follow the logic. So how does that diversify future risks and return potentials? Here is world market cap by year since 1900: http://ritholtz.com/wp-content/uploads/ ... .22-AM.png. Was it less risky for UK, German, and French investors in the early 1900s, when they represented nearly as much or more of the world market cap than the US, to invest only in their home countries? Or, as already mentioned several times, Japan in the late 1980s/early 1990s? Even Canada had a decent chunk of world market cap in the 1950s.

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

Post by Vulcan » Thu Aug 16, 2018 11:37 am

nisiprius wrote:
Thu Aug 16, 2018 10:14 am
No matter how efficient the market is, it cannot change the fact that a European investor buying European stocks with euros experiences less risk than a US investor buying those identical European stocks with dollars, and that a US investor buying US stocks in dollars experiences less risk and the European investor buying those identical US stocks with euros.
I will be the first to admit I do not understand the "currency risk" mantra.
Why is holding foreign currency-denominated assets inherently riskier than holding USD-denominated ones, all other things being equal?
Doesn't that assume there is no risk if USD ends up on the wrong side of the trade?
I personally view currency diversification as another reason to invest internationally - but that may be because I witnessed hyperinflation first-hand in my formative years.

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

Post by willthrill81 » Thu Aug 16, 2018 11:53 am

asif408 wrote:
Thu Aug 16, 2018 11:32 am
willthrill81 wrote:
Thu Aug 16, 2018 11:14 am
But the U.S. is roughly 50% of the world's market capitalization, over $30 trillion. The U.S. only investor is buying a stake in 50% of the world's stock; no other home-country-only investor can come close to that.
I'm not sure I follow the logic. So how does that diversify future risks and return potentials? Here is world market cap by year since 1900: http://ritholtz.com/wp-content/uploads/ ... .22-AM.png. Was it less risky for UK, German, and French investors in the early 1900s, when they represented nearly as much or more of the world market cap than the US, to invest only in their home countries? Or, as already mentioned several times, Japan in the late 1980s/early 1990s? Even Canada had a decent chunk of world market cap in the 1950s.
A person buying only the U.S. is buying 50% of the world's market cap. That offers far greater diversification than someone in another country who is only buying 1% of the world's market cap.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by willthrill81 » Thu Aug 16, 2018 11:56 am

Vulcan wrote:
Thu Aug 16, 2018 11:37 am
nisiprius wrote:
Thu Aug 16, 2018 10:14 am
No matter how efficient the market is, it cannot change the fact that a European investor buying European stocks with euros experiences less risk than a US investor buying those identical European stocks with dollars, and that a US investor buying US stocks in dollars experiences less risk and the European investor buying those identical US stocks with euros.
I will be the first to admit I do not understand the "currency risk" mantra.
Why is holding foreign currency-denominated assets inherently riskier than holding USD-denominated ones, all other things being equal?
Doesn't that assume there is no risk if USD ends up on the wrong side of the trade?
If you are a U.S. investor, you're probably doing most of your spending with U.S. dollars. With buying US stocks, there is no currency risk because it's all done in dollars. But by buying international equities, you are adding currency risk to the equation because you are dealing with multiple currencies (e.g. you need dollars to spend but your holdings are in euros, pesos, etc.). Yes, exchange rates may swing in your favor, but they may also swing against you. Hence the risk.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by willthrill81 » Thu Aug 16, 2018 11:57 am

Valuethinker wrote:
Thu Aug 16, 2018 11:28 am
Good news or bad news depends on your view, but if the US goes down, we all likely go down together ;-).
I strongly suspect that that is indeed the case. To the extent that it is, there is little diversification benefit to be had with international stocks.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by nisiprius » Thu Aug 16, 2018 12:04 pm

vineviz wrote:
Thu Aug 16, 2018 11:18 am
willthrill81 wrote:
Thu Aug 16, 2018 11:14 am
One must ask how the rest of the world's stocks would perform if the U.S. did a repeat of Japan. That's a matter of conjecture, but I doubt that most believe that a 20% allocation to international stocks would 'save the day'.
20% probably wouldn't save the day, but it'd almost certainly be better than 0%.
Blue is 60% VTSMX = Vanguard Total [US] Stock Market index, 40% VBMFX = Vanguard Total [US] Bond Market Index.
Red is 48% VTSMX, 12% VGTSX (Vanguard Total International Stock Market Index, 40% VBMFX; i.e. 20% of stocks international

Was 20% international better than 0% international during the worst financial crisis of my lifetime so far?

Source

Image

How about during 2011, now almost forgotten, but bad enough to throw a scare into a lot of folks at the time?

Image

Why would the result be terribly different the next time? Are we assuming deglobalization (my computer is telling me that isn't a word, but you know what I mean)?

During the time I've held international stocks, roughly since 2002 or so, international stock investing has neither been a disaster nor a savior.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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

Post by qwertyjazz » Thu Aug 16, 2018 12:08 pm

Valuethinker wrote:
Thu Aug 16, 2018 11:28 am
willthrill81 wrote:
Thu Aug 16, 2018 11:14 am

That's very true of most world markets. Australia, for instance, has a market capitalization of about $1.5 trillion. But the U.S. is roughly 50% of the world's market capitalization, over $30 trillion. The U.S. only investor is buying a stake in 50% of the world's stock; no other home-country-only investor can come close to that.

One must ask how the rest of the world's stocks would perform if the U.S. did a repeat of Japan. That's a matter of conjecture, but I doubt that most believe that a 20% allocation to international stocks would 'save the day'.
From memory Japan was something like 40% of the world index in 1989? I am not sure where I'd check, but it was huge.

So you can have overall growth in markets even as a major component underperforms.

On no measure that I am aware of does the US market look so outlandishly valued relative to world markets, as Japan did in 1989. So it's not likely that circumstance will reoccur.

Good news or bad news depends on your view, but if the US goes down, we all likely go down together ;-).

Exception would be another tech crash - the tech sector is such a large portion of the US market (or: the tech sector is such a small proportion of other markets).
I hear the mantra we will all go down together if US does. I understand it over the next decade or so, but I am not sure over a longer time frame. That is why I am interested in international. What am I missing? Where is my logic off?
Thank you
QJ
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by jeffyscott » Thu Aug 16, 2018 12:11 pm

willthrill81 wrote:
Thu Aug 16, 2018 11:56 am
Vulcan wrote:
Thu Aug 16, 2018 11:37 am
nisiprius wrote:
Thu Aug 16, 2018 10:14 am
No matter how efficient the market is, it cannot change the fact that a European investor buying European stocks with euros experiences less risk than a US investor buying those identical European stocks with dollars, and that a US investor buying US stocks in dollars experiences less risk and the European investor buying those identical US stocks with euros.
I will be the first to admit I do not understand the "currency risk" mantra.
Why is holding foreign currency-denominated assets inherently riskier than holding USD-denominated ones, all other things being equal?
Doesn't that assume there is no risk if USD ends up on the wrong side of the trade?
If you are a U.S. investor, you're probably doing most of your spending with U.S. dollars. With buying US stocks, there is no currency risk because it's all done in dollars. But by buying international equities, you are adding currency risk to the equation because you are dealing with multiple currencies (e.g. you need dollars to spend but your holdings are in euros, pesos, etc.). Yes, exchange rates may swing in your favor, but they may also swing against you. Hence the risk.
I think this use of "risk" means volatility. There is more volatility in foreign stocks because of the currency fluctuations, that can go either way.

But what about the risk of owning only dollar based assets?

In effect, what most investors don't seem to understand is you're taking currency risk if you don't invest internationally. The risk is that the dollar will fall in value, deteriorating your cost of living. A falling dollar will not only lead to rising import costs, but also to rising prices from domestic competitors who are no longer faced with competing with cheap imports.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by TropikThunder » Thu Aug 16, 2018 12:26 pm

oldzey wrote:
Wed Aug 15, 2018 10:33 pm
gmaynardkrebs wrote:
Wed Aug 15, 2018 9:53 pm
ThePrince wrote:
Wed Aug 15, 2018 9:46 pm
patrick wrote:
Wed Aug 15, 2018 9:37 pm
Australian stocks have dramatically outperformed US stocks over the period from 1900 to present. That's much longer term than a mere 30 years! Since including US stocks would have dragged down returns compared to an all-Australia portfolio, why are we still considering investing in the US when the long term data proves it is better to buy only Australian stocks?
All the insular people’s heads just exploded.
Technically, Australia is not an island, but I'm still sorry their heads exploded.
I'm guessing just the Tasmanian people's heads.
Funny (“Australia is not an island”) but I prefer the more common meaning of insular:

Insular
ignorant of or uninterested in cultures, ideas, or peoples outside one's own experience.

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

Post by vineviz » Thu Aug 16, 2018 12:30 pm

willthrill81 wrote:
Thu Aug 16, 2018 11:22 am
vineviz wrote:
Thu Aug 16, 2018 11:18 am
willthrill81 wrote:
Thu Aug 16, 2018 11:14 am
One must ask how the rest of the world's stocks would perform if the U.S. did a repeat of Japan. That's a matter of conjecture, but I doubt that most believe that a 20% allocation to international stocks would 'save the day'.
20% probably wouldn't save the day, but it'd almost certainly be better than 0%.
Perhaps, but it might be akin to being in a lifeboat 400 miles away from shore instead of 500 miles. You're 'better off', but you're still hosed.
Sounds like you’ve identified the benefit of holding market weight of 50ish percent in international equity
"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: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bgf » Thu Aug 16, 2018 12:31 pm

willthrill81 wrote:
Thu Aug 16, 2018 11:56 am
Vulcan wrote:
Thu Aug 16, 2018 11:37 am
nisiprius wrote:
Thu Aug 16, 2018 10:14 am
No matter how efficient the market is, it cannot change the fact that a European investor buying European stocks with euros experiences less risk than a US investor buying those identical European stocks with dollars, and that a US investor buying US stocks in dollars experiences less risk and the European investor buying those identical US stocks with euros.
I will be the first to admit I do not understand the "currency risk" mantra.
Why is holding foreign currency-denominated assets inherently riskier than holding USD-denominated ones, all other things being equal?
Doesn't that assume there is no risk if USD ends up on the wrong side of the trade?
If you are a U.S. investor, you're probably doing most of your spending with U.S. dollars. With buying US stocks, there is no currency risk because it's all done in dollars. But by buying international equities, you are adding currency risk to the equation because you are dealing with multiple currencies (e.g. you need dollars to spend but your holdings are in euros, pesos, etc.). Yes, exchange rates may swing in your favor, but they may also swing against you. Hence the risk.
everyone is taking currency risk by definition. to be invested, you must be invested in some currency, to the exclusion of others. the only way to get around this is to hedge with options, which incurs other costs.

investing in dollars because you intend to make future purchases with dollars does not eliminate currency risk. its pretty easy to see why. if you are invested in yen, live in japan, invest in japanese companies, and the yen collapses, you think you aren't going to see the effects? you think you are isolated from all currency risk?
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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

Post by Vulcan » Thu Aug 16, 2018 12:40 pm

willthrill81 wrote:
Thu Aug 16, 2018 11:56 am
Vulcan wrote:
Thu Aug 16, 2018 11:37 am
I will be the first to admit I do not understand the "currency risk" mantra.
Why is holding foreign currency-denominated assets inherently riskier than holding USD-denominated ones, all other things being equal?
Doesn't that assume there is no risk if USD ends up on the wrong side of the trade?
If you are a U.S. investor, you're probably doing most of your spending with U.S. dollars. With buying US stocks, there is no currency risk because it's all done in dollars. But by buying international equities, you are adding currency risk to the equation because you are dealing with multiple currencies (e.g. you need dollars to spend but your holdings are in euros, pesos, etc.). Yes, exchange rates may swing in your favor, but they may also swing against you. Hence the risk.
That assumes that international currency fluctuations do not affect local prices. In an increasingly global economy that is not the case.

Currency risk cuts both ways. If all your assets are dollar-denominated, then you have concentrated your currency risk where you could have easily diversified it instead.
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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

Post by fennewaldaj » Thu Aug 16, 2018 12:41 pm

jeffyscott wrote:
Thu Aug 16, 2018 9:28 am
ignition wrote:
Thu Aug 16, 2018 2:27 am
I blame Japan for much of the underperformance of the last 30 years. Its market cap was higher than the US in 1989, dominating the international portfolio and it has gone nowhere since then.
This sort of thing is one reason that I am not a fan of cap weighted indexing, particularly when lumping all foreign stocks in one fund. Here's a chart showing returns by region using M* category averages that demonstrates your point. Start date is the earliest possible for including the Asia ex-Japan average. I used Wellington to create the chart because I knew it had a long history and would allow me to make longest possible chart, but this does show that diversified portfolio via 100% Wellington would've worked out well :!: :happy

Image
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
Using fundamental indexes would have solved this particular problem (as japan would have been massively underweight at the beginning. They do bring up the separate problem of over allocating to a failing market so might suffer a bigger blow in a total market closure type of situation.

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

Post by nisiprius » Thu Aug 16, 2018 12:45 pm

bgf wrote:
Thu Aug 16, 2018 12:31 pm
everyone is taking currency risk by definition. to be invested, you must be invested in some currency, to the exclusion of others.
That is not the definition of currency risk, so if you are going to use a phrase like "currency risk by definition" I think it's reasonable to nit-pick about it.

One definition, from Wikipedia, is:
Foreign exchange risk (also known as FX risk, exchange rate risk or currency risk) is a financial risk that exists when a financial transaction is denominated in a currency other than that of the base currency of the company.
You can look up others but they all agree.

I can't find any definition of currency risk that doesn't mention "exchange rates" or "foreign exchange."

Currency risk is related to fluctuations in exchange rates. It only exists across borders, i.e. when investing internationally. There is no currency risk involved if you use dollars to invest in dollar-denominated assets. The risk of a local currency collapse is not "currency risk." Venezuelans trying to buy things with bolivars are not experiencing currency risk.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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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 Aug 16, 2018 12:49 pm

nisiprius wrote:
Thu Aug 16, 2018 12:45 pm
bgf wrote:
Thu Aug 16, 2018 12:31 pm
everyone is taking currency risk by definition. to be invested, you must be invested in some currency, to the exclusion of others.
That is not the definition of currency risk, so if you are going to use a phrase like "currency risk by definition" I think it's reasonable to nit-pick about it.

One definition, from Wikipedia, is:
Foreign exchange risk (also known as FX risk, exchange rate risk or currency risk) is a financial risk that exists when a financial transaction is denominated in a currency other than that of the base currency of the company.
You can look up others but they all agree.

I can't find any definition of currency risk that doesn't mention "exchange rates" or "foreign exchange."

Currency risk is related to fluctuations in exchange rates. It only exists across borders, i.e. when investing internationally. There is no currency risk involved if you use dollars to invest in dollar-denominated assets. The risk of a local currency collapse is not "currency risk." Venezuelans trying to buy things with bolivars are not experiencing currency risk.
then what do you call that risk? it IS a risk. it exists. it is clear to see. it may or may not fall within the definition of "currency risk," but that doesn't make it any less real.

so, what is it then?
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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

Post by Vulcan » Thu Aug 16, 2018 12:50 pm

nisiprius wrote:
Thu Aug 16, 2018 12:45 pm
Currency risk is related to fluctuations in exchange rates. It only exists across borders, i.e. when investing internationally. There is no currency risk involved if you use dollars to invest in dollar-denominated assets. The risk of a local currency collapse is not "currency risk." Venezuelans trying to buy things with bolivars are not experiencing currency risk.
Ok, great. I will take currency risk 24/7 to hedge against local currency collapse risk once in a lifetime. But I may have been permanently scarred, so never mind me:-)

...But then again, I also have a second passport.
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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

Post by JBTX » Thu Aug 16, 2018 1:08 pm

Vulcan wrote:
Thu Aug 16, 2018 12:50 pm
nisiprius wrote:
Thu Aug 16, 2018 12:45 pm
Currency risk is related to fluctuations in exchange rates. It only exists across borders, i.e. when investing internationally. There is no currency risk involved if you use dollars to invest in dollar-denominated assets. The risk of a local currency collapse is not "currency risk." Venezuelans trying to buy things with bolivars are not experiencing currency risk.
Ok, great. I will take currency risk 24/7 to hedge against local currency collapse risk once in a lifetime. But I may have been permanently scarred, so never mind me:-)

...But then again, I also have a second passport.
I kind of agree with you. It is true that in the normal course of events, currency risk adds an additional level of risk and volatility that you don't immediately get compensated for however, it could serve as a hedge against a scenario where the US tanks vs the rest of the world, resulting in a relative currency collapse. That is Theoretically a very valuable hedge, but that is not reflected in historical data, because that is a rare event and has really never happened before.

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

Post by columbia » Thu Aug 16, 2018 1:15 pm

So now one of the arguments for international is that the US dollar might collapse, while the rest of the world hums along....surely no one actually believes that.

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

Post by bligh » Thu Aug 16, 2018 1:24 pm

columbia wrote:
Thu Aug 16, 2018 1:15 pm
So now one of the arguments for international is that the US dollar might collapse, while the rest of the world hums along....surely no one actually believes that.
The Dollar doesn't have to collapse, just weaken. Even Weaken is a misleading term. More like a "less favorable exchange rate". Which funnily enough might even have benefits for the US.

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

Post by visualguy » Thu Aug 16, 2018 1:42 pm

columbia wrote:
Thu Aug 16, 2018 1:15 pm
So now one of the arguments for international is that the US dollar might collapse, while the rest of the world hums along....surely no one actually believes that.
Folks are working hard to find some reason to hold ex-US... The normal Boglehead argument that it does well if you keep it for the long run can't be used after the poor performance over the last 30 years.

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

Post by willthrill81 » Thu Aug 16, 2018 1:42 pm

vineviz wrote:
Thu Aug 16, 2018 12:30 pm
willthrill81 wrote:
Thu Aug 16, 2018 11:22 am
vineviz wrote:
Thu Aug 16, 2018 11:18 am
willthrill81 wrote:
Thu Aug 16, 2018 11:14 am
One must ask how the rest of the world's stocks would perform if the U.S. did a repeat of Japan. That's a matter of conjecture, but I doubt that most believe that a 20% allocation to international stocks would 'save the day'.
20% probably wouldn't save the day, but it'd almost certainly be better than 0%.
Perhaps, but it might be akin to being in a lifeboat 400 miles away from shore instead of 500 miles. You're 'better off', but you're still hosed.
Sounds like you’ve identified the benefit of holding market weight of 50ish percent in international equity
Perhaps. But again, that assumes that international equity and U.S. equity are not strongly correlated. After the 2008 debacle, I'm not so sure that that's a reasonable assumption.

As noted above, if the U.S. markets tank, the other international markets may tank as well. But we won't know unless it happens.

For better or worse, investing in international comes down to conjecture and person opinion. There is no single objective 'truth' on either side of the fence.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by Vulcan » Thu Aug 16, 2018 1:44 pm

columbia wrote:
Thu Aug 16, 2018 1:15 pm
So now one of the arguments for international is that the US dollar might collapse, while the rest of the world hums along....surely no one actually believes that.
Not very many people believed Soviet Union could collapse. And then, one night, it did.
Yet things do not have to be that dramatic for foreign currency denominated part of the portfolio to experience an exchange-rate related tailwind.
bligh wrote:
Thu Aug 16, 2018 1:24 pm
The Dollar doesn't have to collapse, just weaken. Even Weaken is a misleading term. More like a "less favorable exchange rate". Which funnily enough might even have benefits for the US.
Ditto
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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

Post by willthrill81 » Thu Aug 16, 2018 1:44 pm

visualguy wrote:
Thu Aug 16, 2018 1:42 pm
columbia wrote:
Thu Aug 16, 2018 1:15 pm
So now one of the arguments for international is that the US dollar might collapse, while the rest of the world hums along....surely no one actually believes that.
Folks are working hard to find some reason to hold ex-US... The normal Boglehead argument that it does well if you keep it for the long run can't be used after the poor performance over the last 30 years.
If folks are truly worried about U.S. currency or markets tanking, precious metals may well be a better diversifier than international equities, which history has shown are at least moderately correlated with U.S. equities. They certainly have been over the last 30+ years.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by gmaynardkrebs » Thu Aug 16, 2018 1:45 pm

jrbdmb wrote:
Thu Aug 16, 2018 10:05 am
gmaynardkrebs wrote:
Thu Aug 16, 2018 7:20 am
If you prefer the safety of US, that's fine, but your returns will likely be greater if you up your international allocation. The market has already priced in everything you have observed. That's why international has lower valuations than US, and why, therefore, the expected returns of international are better than US going forward.
If the markets are efficient and have priced in all available information, then they would also see a situation where "the expected returns of international are better than US going forward" and adjust accordingly. ...
But that's the point. Valuations have adjusted. The int. PEs are significantly lower, as is CAPE10. That's why the expected returns are higher. You are being paid to take risk. Of course, taking risk means that you may not come out ahead, and that your potential losses are greater than with safer assets such as US equities. So, potentially, is the upside.

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

Post by Vulcan » Thu Aug 16, 2018 1:46 pm

willthrill81 wrote:
Thu Aug 16, 2018 1:42 pm
For better or worse, investing in international comes down to conjecture and person opinion. There is no single objective 'truth' on either side of the fence.
The truth is, a domestic-only portfolio is a concentrated bet. So far it has paid out. As to why, and, more importantly, whether it will continue to do so, opinions do differ.

The world is a large place. Ignore that reality at your own peril.
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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

Post by Vulcan » Thu Aug 16, 2018 1:48 pm

willthrill81 wrote:
Thu Aug 16, 2018 1:44 pm
If folks are truly worried about U.S. currency or markets tanking, precious metals may well be a better diversifier than international equities, which history has shown are at least moderately correlated with U.S. equities. They certainly have been over the last 30+ years.
Precious metals are not productive assets.
Shell, Nestle, and Samsung are.

Just got a new Galaxy S8 last night. It's very nice.
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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

Post by patrick » Thu Aug 16, 2018 1:50 pm

visualguy wrote:
Thu Aug 16, 2018 1:42 pm
columbia wrote:
Thu Aug 16, 2018 1:15 pm
So now one of the arguments for international is that the US dollar might collapse, while the rest of the world hums along....surely no one actually believes that.
Folks are working hard to find some reason to hold ex-US... The normal Boglehead argument that it does well if you keep it for the long run can't be used after the poor performance over the last 30 years.
Yet the people holding non-Australian stocks don't seem to be working hard to find reasons ... it's almost as if they think that no reason is even needed to invest in worse-performing countries like the US.
Last edited by patrick on Thu Aug 16, 2018 1:53 pm, edited 1 time in total.

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

Post by willthrill81 » Thu Aug 16, 2018 1:51 pm

gmaynardkrebs wrote:
Thu Aug 16, 2018 1:45 pm
jrbdmb wrote:
Thu Aug 16, 2018 10:05 am
gmaynardkrebs wrote:
Thu Aug 16, 2018 7:20 am
If you prefer the safety of US, that's fine, but your returns will likely be greater if you up your international allocation. The market has already priced in everything you have observed. That's why international has lower valuations than US, and why, therefore, the expected returns of international are better than US going forward.
If the markets are efficient and have priced in all available information, then they would also see a situation where "the expected returns of international are better than US going forward" and adjust accordingly. ...
But that's the point. Valuations have adjusted. The int. PEs are significantly lower, as is CAPE10. That's why the expected returns are higher. You are being paid to take risk. Of course, taking risk means that you may not come out ahead, and that your potential losses are greater than with safer assets such as US equities. So, potentially, is the upside.
The problem with using valuations to predict future returns is that valuations are not reliably mean reverting. Valuations can remain relatively high for a long time (since 1992 for U.S.) or low for a long time.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by Vulcan » Thu Aug 16, 2018 1:53 pm

willthrill81 wrote:
Thu Aug 16, 2018 1:51 pm
The problem with using valuations to predict future returns is that valuations are not reliably mean reverting. Valuations can remain relatively high for a long time (since 1992 for U.S.) or low for a long time.
Past performance, however, is a sure bet!
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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

Post by jeffyscott » Thu Aug 16, 2018 1:54 pm

fennewaldaj wrote:
Thu Aug 16, 2018 12:41 pm
Using fundamental indexes would have solved this particular problem (as japan would have been massively underweight at the beginning. They do bring up the separate problem of over allocating to a failing market so might suffer a bigger blow in a total market closure type of situation.
That is actually a recent addition to my strategy :) .

I'll continue to use low cost managed funds as well. Maybe I am just lucky, but most of the managed international funds used have been quite a bit less painful than the index.
press on, regardless - John C. Bogle

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

Post by willthrill81 » Thu Aug 16, 2018 1:55 pm

Vulcan wrote:
Thu Aug 16, 2018 1:48 pm
willthrill81 wrote:
Thu Aug 16, 2018 1:44 pm
If folks are truly worried about U.S. currency or markets tanking, precious metals may well be a better diversifier than international equities, which history has shown are at least moderately correlated with U.S. equities. They certainly have been over the last 30+ years.
Precious metals are not productive assets.
Shell, Nestle, and Samsung are.

Just got a new Galaxy S8 last night. It's very nice.
That's true but beside the point. I said that precious metals were a better diversifier, which is distinct from their returns. That being said, a 50/50 portfolio of U.S. stocks and gold slightly outperformed a 50/50 portfolio of U.S. and international stocks. And the volatility, maximum drawdown, and Sharpe ratio of the former were all much better than the latter.

Assets need not be 'productive' to be good diversifiers.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by willthrill81 » Thu Aug 16, 2018 1:56 pm

Vulcan wrote:
Thu Aug 16, 2018 1:53 pm
willthrill81 wrote:
Thu Aug 16, 2018 1:51 pm
The problem with using valuations to predict future returns is that valuations are not reliably mean reverting. Valuations can remain relatively high for a long time (since 1992 for U.S.) or low for a long time.
Past performance, however, is a sure bet!
Of course not, and I've never said that it was. But if 30 years of underperformance of an asset class isn't enough to convince people that they should at least question its place in their portfolio, I have no idea what would.

Some here place great emphasis on theory (e.g. international and U.S. equity risk-adjusted returns shouldn't differ over the long-term), while others emphasize history (e.g. U.S. stocks have outperformed the rest of the world collectively by a significant margin). Most of us are somewhere in the middle but lean toward one of the two extremes. I lean toward the latter, and you lean toward the former. And that's fine. :beer
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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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 Aug 16, 2018 1:59 pm

visualguy wrote:
Thu Aug 16, 2018 1:42 pm
columbia wrote:
Thu Aug 16, 2018 1:15 pm
So now one of the arguments for international is that the US dollar might collapse, while the rest of the world hums along....surely no one actually believes that.
Folks are working hard to find some reason to hold ex-US... The normal Boglehead argument that it does well if you keep it for the long run can't be used after the poor performance over the last 30 years.
that's not true. it is easy to explain why i invest in ex-Us.

i want to be invested in foreign companies based in foreign markets.

so... i am.

the point i was making was that domestic investors are not somehow magically shielded from currency risk/fluctuation/exchange simply because they expect their future liabilities to be in the same currency. it doesn't work that way.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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

Post by Vulcan » Thu Aug 16, 2018 1:59 pm

willthrill81 wrote:
Thu Aug 16, 2018 1:55 pm
Vulcan wrote:
Thu Aug 16, 2018 1:48 pm
willthrill81 wrote:
Thu Aug 16, 2018 1:44 pm
If folks are truly worried about U.S. currency or markets tanking, precious metals may well be a better diversifier than international equities, which history has shown are at least moderately correlated with U.S. equities. They certainly have been over the last 30+ years.
Precious metals are not productive assets.
Shell, Nestle, and Samsung are.

Just got a new Galaxy S8 last night. It's very nice.
That's true but beside the point. I said that precious metals were a better diversifier, which is distinct from their returns. That being said, a 50/50 portfolio of U.S. stocks and gold slightly outperformed a 50/50 portfolio of U.S. and international stocks. And the volatility, maximum drawdown, and Sharpe ratio of the former were all much better than the latter.

Assets need not be 'productive' to be good diversifiers.
They do need to be productive to be considered "investments" though.
Past performance is irrelevant.
Future performance is unknowable.
So I just buy the world.

Remember: ***it's all is priced in***
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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

Post by Vulcan » Thu Aug 16, 2018 2:02 pm

willthrill81 wrote:
Thu Aug 16, 2018 1:56 pm
Vulcan wrote:
Thu Aug 16, 2018 1:53 pm
willthrill81 wrote:
Thu Aug 16, 2018 1:51 pm
The problem with using valuations to predict future returns is that valuations are not reliably mean reverting. Valuations can remain relatively high for a long time (since 1992 for U.S.) or low for a long time.
Past performance, however, is a sure bet!
Of course not, and I've never said that it was. But if 30 years of underperformance of an asset class isn't enough to convince people that they should at least question its place in their portfolio, I have no idea what would.
Nothing.
/mumbles/ Stay the course!
;)
willthrill81 wrote:
Thu Aug 16, 2018 1:51 pm
Some here place great emphasis on theory (e.g. international and U.S. equity risk-adjusted returns shouldn't differ over the long-term), while others emphasize history (e.g. U.S. stocks have outperformed the rest of the world collectively by a significant margin). Most of us are somewhere in the middle but lean toward one of the two extremes. I lean toward the latter, and you lean toward the former. And that's fine. :beer
I'm just not a big believer in any kind of exceptionalism.
I've been there when a superpower fell.
I'll keep my eggs globally diversified, thankyouverymuch. :sharebeer
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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

Post by willthrill81 » Thu Aug 16, 2018 2:05 pm

Vulcan wrote:
Thu Aug 16, 2018 1:59 pm
willthrill81 wrote:
Thu Aug 16, 2018 1:55 pm
Vulcan wrote:
Thu Aug 16, 2018 1:48 pm
willthrill81 wrote:
Thu Aug 16, 2018 1:44 pm
If folks are truly worried about U.S. currency or markets tanking, precious metals may well be a better diversifier than international equities, which history has shown are at least moderately correlated with U.S. equities. They certainly have been over the last 30+ years.
Precious metals are not productive assets.
Shell, Nestle, and Samsung are.

Just got a new Galaxy S8 last night. It's very nice.
That's true but beside the point. I said that precious metals were a better diversifier, which is distinct from their returns. That being said, a 50/50 portfolio of U.S. stocks and gold slightly outperformed a 50/50 portfolio of U.S. and international stocks. And the volatility, maximum drawdown, and Sharpe ratio of the former were all much better than the latter.

Assets need not be 'productive' to be good diversifiers.
They do need to be productive to be considered "investments" though.
That's only a matter of semantics. I don't care what label anyone places on an asset. I care about what that asset can do for me. And it doesn't have to be 'productive' in order to do something for me.
Vulcan wrote:
Thu Aug 16, 2018 1:59 pm
Past performance is irrelevant.
That's a big stretch. Few Bogleheads would agree with that.
Vulcan wrote:
Thu Aug 16, 2018 1:59 pm
Future performance is unknowable.
True enough.
Vulcan wrote:
Thu Aug 16, 2018 1:59 pm
Remember: ***it's all is priced in***
Only to the extent that the efficient market hypothesis is true. Not many financial academics believe that it's strictly accurate anymore.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by Tamalak » Thu Aug 16, 2018 2:12 pm

Vulcan wrote:
Thu Aug 16, 2018 1:59 pm
Remember: ***it's all is priced in***
Only to the extent that the efficient market hypothesis is true. Not many financial academics believe that it's strictly accurate anymore.
I don't believe that the market is necessarily efficient, only that it tries its best to equalize expected risk adjusted returns between assets.

Do you (or those mentioned financial academics) have reason to believe that the market isn't trying its best in the case of international equities? Say, by international governments propping up the prices somehow, or by droves of uneducated investors investing internationally and overwhelming the power of real price discoverers to correct it?

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

Post by willthrill81 » Thu Aug 16, 2018 2:15 pm

Tamalak wrote:
Thu Aug 16, 2018 2:12 pm
Vulcan wrote:
Thu Aug 16, 2018 1:59 pm
Remember: ***it's all is priced in***
Only to the extent that the efficient market hypothesis is true. Not many financial academics believe that it's strictly accurate anymore.
I don't believe that the market is necessarily efficient, only that it tries its best to equalize expected risk adjusted returns between assets.

Do you (or those mentioned financial academics) have reason to believe that the market isn't trying its best in the case of international equities? Say, by international governments propping up the prices somehow, or by droves of uneducated investors investing internationally and overwhelming the power of real price discoverers to correct it?
There's a potentially big gulf between attempting to instantly price in all relevant information in the markets and actually doing so.

In the case of international equities, using all available data in Portfolio Visualizer (1986 until last month), the Sharpe ratio (i.e. risk-adjusted return) for U.S. equities was .53 and for international was .30. That's a big difference, and a strict interpretation of the EMH would say that that should not be.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by willthrill81 » Thu Aug 16, 2018 2:16 pm

Vulcan wrote:
Thu Aug 16, 2018 2:02 pm
willthrill81 wrote:
Thu Aug 16, 2018 1:56 pm
Vulcan wrote:
Thu Aug 16, 2018 1:53 pm
willthrill81 wrote:
Thu Aug 16, 2018 1:51 pm
The problem with using valuations to predict future returns is that valuations are not reliably mean reverting. Valuations can remain relatively high for a long time (since 1992 for U.S.) or low for a long time.
Past performance, however, is a sure bet!
Of course not, and I've never said that it was. But if 30 years of underperformance of an asset class isn't enough to convince people that they should at least question its place in their portfolio, I have no idea what would.
Nothing.
/mumbles/ Stay the course!
;)
willthrill81 wrote:
Thu Aug 16, 2018 1:51 pm
Some here place great emphasis on theory (e.g. international and U.S. equity risk-adjusted returns shouldn't differ over the long-term), while others emphasize history (e.g. U.S. stocks have outperformed the rest of the world collectively by a significant margin). Most of us are somewhere in the middle but lean toward one of the two extremes. I lean toward the latter, and you lean toward the former. And that's fine. :beer
I'm just not a big believer in any kind of exceptionalism.
I've been there when a superpower fell.
I'll keep my eggs globally diversified, thankyouverymuch. :sharebeer
Interesting. You base your argument on global investing on your own past experiences, but you will not deviate from that strategy based on historic data.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by Vulcan » Thu Aug 16, 2018 2:17 pm

willthrill81 wrote:
Thu Aug 16, 2018 2:15 pm
There's a potentially big gulf between attempting to instantly price in all relevant information in the markets and actually doing so.
Doesn't have to be instant in our case.
Just over the next 30 years.
willthrill81 wrote:
Thu Aug 16, 2018 2:15 pm
In the case of international equities, using all available data in Portfolio Visualizer (1986 until last month), the Sharpe ratio (i.e. risk-adjusted return) for U.S. equities was .53 and for international was .30. That's a big difference, and a strict interpretation of the EMH would say that that should not be.
I think not knowing what Sharpe ratio is makes me a better investor:-)
Last edited by Vulcan on Thu Aug 16, 2018 2:21 pm, edited 1 time in total.
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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

Post by visualguy » Thu Aug 16, 2018 2:21 pm

patrick wrote:
Thu Aug 16, 2018 1:50 pm
Yet the people holding non-Australian stocks don't seem to be working hard to find reasons ... it's almost as if they think that no reason is even needed to invest in worse-performing countries like the US.
Indexing the US market did not violate the basic principle of the Boglehead strategy which is that holding a low-cost broad whole market index provides good returns in the long run. Indexing the ex-US market violated this principle - returns have been poor over 30 years, and with high volatility. This is absolute, not just relative to the US.
Last edited by visualguy on Thu Aug 16, 2018 2:22 pm, edited 1 time in total.

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

Post by Riley15 » Thu Aug 16, 2018 2:22 pm

International stocks having 20 or 30 year underperformance compared to the US means nothing at all for the future. They are both diversified set of stocks and International more so than US because it's a basket of countries and a greater percentage. The US is only about 35-40% of world cap.

Just because International underperformed in the past does not predict it will underperform in the future nor does US overperforming in the past predict it will continue to so in the future. If you believe in valuations it's more likely International has a chance of higher returns in the future. If you don't believe in valuations, it's 50-50 shot at best.

Have we not learned past performance does not indicate anything about the future when applied to a well diversified portfolio of stocks.

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

Post by Vulcan » Thu Aug 16, 2018 2:22 pm

visualguy wrote:
Thu Aug 16, 2018 2:21 pm
patrick wrote:
Thu Aug 16, 2018 1:50 pm
Yet the people holding non-Australian stocks don't seem to be working hard to find reasons ... it's almost as if they think that no reason is even needed to invest in worse-performing countries like the US.
Indexing the US market did not violate the basic principle of the Boglehead strategy which is that holding a low-cost whole market index provides good returns in the long run. Indexing the ex-US market violated this principle - returns have been poor over 30 years, and with high volatility. This is absolute, not just relative to the US.
Don't confuse strategy and outcome.
The US was a good bet for the past 30 years.
Is it a good bet for the next 30 years?
I hope to be able to tell you in 30 years.
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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

Post by MichCPA » Thu Aug 16, 2018 2:24 pm

nisiprius wrote:
Thu Aug 16, 2018 12:45 pm

Currency risk is related to fluctuations in exchange rates. It only exists across borders, i.e. when investing internationally. There is no currency risk involved if you use dollars to invest in dollar-denominated assets. The risk of a local currency collapse is not "currency risk." Venezuelans trying to buy things with bolivars are not experiencing currency risk.
That lines up with my understanding. The risk of a dollar buying less of a commodity traded in dollars due to the relative strength of other currencies is really more of an inflation risk due to a shift in the demand curve up the P axis (which would be denominated in USD). Inflation risk is fundamentally a currency issue, but it is not currency risk per se.

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

Post by Tamalak » Thu Aug 16, 2018 2:29 pm

willthrill81 wrote:
Thu Aug 16, 2018 2:15 pm
Tamalak wrote:
Thu Aug 16, 2018 2:12 pm
Vulcan wrote:
Thu Aug 16, 2018 1:59 pm
Remember: ***it's all is priced in***
Only to the extent that the efficient market hypothesis is true. Not many financial academics believe that it's strictly accurate anymore.
I don't believe that the market is necessarily efficient, only that it tries its best to equalize expected risk adjusted returns between assets.

Do you (or those mentioned financial academics) have reason to believe that the market isn't trying its best in the case of international equities? Say, by international governments propping up the prices somehow, or by droves of uneducated investors investing internationally and overwhelming the power of real price discoverers to correct it?
There's a potentially big gulf between attempting to instantly price in all relevant information in the markets and actually doing so.

In the case of international equities, using all available data in Portfolio Visualizer (1986 until last month), the Sharpe ratio (i.e. risk-adjusted return) for U.S. equities was .53 and for international was .30. That's a big difference, and a strict interpretation of the EMH would say that that should not be.
It doesn't have to be instant, and it doesn't even have to price in all relevant information, as long as there is not some kind of systemic and discoverable bias that is a common thread in the information it leaves out.

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

Post by visualguy » Thu Aug 16, 2018 2:29 pm

Riley15 wrote:
Thu Aug 16, 2018 2:22 pm
International stocks having 20 or 30 year underperformance compared to the US means nothing at all for the future. They are both diversified set of stocks and International more so than US because it's a basket of countries and a greater percentage. The US is only about 35-40% of world cap.

Just because International underperformed in the past does not predict it will underperform in the future nor does US overperforming in the past predict it will continue to so in the future. If you believe in valuations it's more likely International has a chance of higher returns in the future. If you don't believe in valuations, it's 50-50 shot at best.

Have we not learned past performance does not indicate anything about the future when applied to a well diversified portfolio of stocks.
Ex-US didn't just under-perform the US. It performed poorly. Period. The return was poor, particularly when considering the high volatility. It was a bad investment in the long run, not just the short run.

Regarding past performance... The whole Boglehead strategy extrapolates from past performance of the strategy. Similarly, SWR arguments are based on past performance. Past performance is the foundation of the whole thing.

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

Post by gmaynardkrebs » Thu Aug 16, 2018 2:34 pm

nisiprius wrote:
Thu Aug 16, 2018 10:14 am
No matter how efficient the market is, it cannot change the fact that a European investor buying European stocks with euros experiences less risk than a US investor buying those identical European stocks with dollars, and that a US investor buying US stocks in dollars experiences less risk and the European investor buying those identical US stocks with euros.
Not quite sure of the point. If the valuations are compelling enough, it's worth taking on the fx risk.
Last edited by gmaynardkrebs on Thu Aug 16, 2018 2:36 pm, edited 1 time in total.

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willthrill81
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Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

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

Post by willthrill81 » Thu Aug 16, 2018 2:36 pm

Tamalak wrote:
Thu Aug 16, 2018 2:29 pm
willthrill81 wrote:
Thu Aug 16, 2018 2:15 pm
Tamalak wrote:
Thu Aug 16, 2018 2:12 pm
Vulcan wrote:
Thu Aug 16, 2018 1:59 pm
Remember: ***it's all is priced in***
Only to the extent that the efficient market hypothesis is true. Not many financial academics believe that it's strictly accurate anymore.
I don't believe that the market is necessarily efficient, only that it tries its best to equalize expected risk adjusted returns between assets.

Do you (or those mentioned financial academics) have reason to believe that the market isn't trying its best in the case of international equities? Say, by international governments propping up the prices somehow, or by droves of uneducated investors investing internationally and overwhelming the power of real price discoverers to correct it?
There's a potentially big gulf between attempting to instantly price in all relevant information in the markets and actually doing so.

In the case of international equities, using all available data in Portfolio Visualizer (1986 until last month), the Sharpe ratio (i.e. risk-adjusted return) for U.S. equities was .53 and for international was .30. That's a big difference, and a strict interpretation of the EMH would say that that should not be.
It doesn't have to be instant, and it doesn't even have to price in all relevant information, as long as there is not some kind of systemic and discoverable bias that is a common thread in the information it leaves out.
Yes it does. That's the basic gist of the EMH. It says nothing about systematic bias.
Last edited by willthrill81 on Thu Aug 16, 2018 2:38 pm, edited 1 time in total.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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