point of maximal pessimism for international investing

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garlandwhizzer
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point of maximal pessimism for international investing

Post by garlandwhizzer » Mon May 06, 2019 7:20 pm

So far Bogle and Buffett have been right for decades--invest only in the US. International exposure has provided diversification to a US equity portfolio but over most time frames that exposure has reduced total portfolio returns. There is an interesting bifurcation at present. Many, perhaps most, US investors are like Warren and Jack investing only in the US or else with very limited international exposure. On the other hand, many other financial experts/advisors--Larry, Bernstein, Grantham, Arnott--plus many highly respected financial firms including Vanguard and Schwab are beating the drums for substantial international exposure now. There is no doubt that valuation measures like PE, PB, etc., are decidedly more attractive for international than for US equities. They have been more attractive for decades, even as US continued to outperform and pull away. Will it be more of the same in the future or will the tide reverse? The following is an article that argues that we are near the point of maximal pessimism for international equity and that those like me who have held on to underperforming INTL for many years should take heart after the beating we've received. The author argues that all the numerous INTL political and economic problems plus the persistent INTL underperformance has paradoxically set the stage for future success. Comments?

www.thecapitalideas.com/articles/outloo ... al-outlook

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Thesaints
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Re: point of maximal pessimism for international investing

Post by Thesaints » Mon May 06, 2019 7:22 pm

garlandwhizzer wrote:
Mon May 06, 2019 7:20 pm
So far Bogle and Buffett have been right for decades--invest only in the US.
Not really.

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Valdeselad
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Re: point of maximal pessimism for international investing

Post by Valdeselad » Mon May 06, 2019 7:28 pm

It’s all about currency strength of the USD since all of your non-US holdings have to be converted back into USD. I’m honestly surprised how much currency impacts seem to stump Bogleheads when they keep asking this question over and over.

I’ve said it before but I’ll say it again - when you invest in non-US stocks (via holding USD-based funds) you are exposed as much or more to currency fluctuations as you are to movements in the underlying security.

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Re: point of maximal pessimism for international investing

Post by HEDGEFUNDIE » Mon May 06, 2019 8:02 pm

Valdeselad wrote:
Mon May 06, 2019 7:28 pm
It’s all about currency strength of the USD since all of your non-US holdings have to be converted back into USD. I’m honestly surprised how much currency impacts seem to stump Bogleheads when they keep asking this question over and over.

I’ve said it before but I’ll say it again - when you invest in non-US stocks (via holding USD-based funds) you are exposed as much or more to currency fluctuations as you are to movements in the underlying security.
Which is why I keep beating the drum for currency hedged international funds.

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Re: point of maximal pessimism for international investing

Post by DonIce » Mon May 06, 2019 8:07 pm

HEDGEFUNDIE wrote:
Mon May 06, 2019 8:02 pm
Valdeselad wrote:
Mon May 06, 2019 7:28 pm
It’s all about currency strength of the USD since all of your non-US holdings have to be converted back into USD. I’m honestly surprised how much currency impacts seem to stump Bogleheads when they keep asking this question over and over.

I’ve said it before but I’ll say it again - when you invest in non-US stocks (via holding USD-based funds) you are exposed as much or more to currency fluctuations as you are to movements in the underlying security.
Which is why I keep beating the drum for currency hedged international funds.
There's a number of reasonable ex-US equity currency hedged ETFs out there. But it seems to me that part of the diversification benefit of investing outside the US is to protect against the possibility of the US dollar declining relative to other currencies.

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Re: point of maximal pessimism for international investing

Post by arcticpineapplecorp. » Mon May 06, 2019 8:22 pm

garlandwhizzer wrote:
Mon May 06, 2019 7:20 pm
International exposure has provided diversification to a US equity portfolio but over most time frames that exposure has reduced total portfolio returns.
1. Holding bonds would have "reduced portfolio returns" too. Are you suggesting we shouldn't hold bonds because that reduces our total portfolio returns?

2. If we are reaching maximum pessimissm (don't really know how you measure that sort of thing, but ok...are they actually measuring such a thing, or is this known as "shooting from the hip"?) then doesn't that say you should be buying international, rather than selling and giving up. So the premise makes sense, but I'm not sure how or if we'd even know we've reached "maximum pessimism".

I like the chart that says "U.S. stocks have outpaced European stocks by a wide margin" and then uses data back to May 1, 2017. Wow, two years is like, a whole lifetime, right? Who cares what's happened over 2 years. I'm investing for decades. These things come and go. (source: https://www.bogleheads.org/wiki/Domestic/International) see graphs on the right side of page at that link.

As for the rest of the discussion on currency effects, what can we say? Same as always, sometimes they help and sometimes they don't. Over time, it tends to be a wash.

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vineviz
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Re: point of maximal pessimism for international investing

Post by vineviz » Mon May 06, 2019 8:28 pm

DonIce wrote:
Mon May 06, 2019 8:07 pm
HEDGEFUNDIE wrote:
Mon May 06, 2019 8:02 pm
Valdeselad wrote:
Mon May 06, 2019 7:28 pm
It’s all about currency strength of the USD since all of your non-US holdings have to be converted back into USD. I’m honestly surprised how much currency impacts seem to stump Bogleheads when they keep asking this question over and over.

I’ve said it before but I’ll say it again - when you invest in non-US stocks (via holding USD-based funds) you are exposed as much or more to currency fluctuations as you are to movements in the underlying security.
Which is why I keep beating the drum for currency hedged international funds.
There's a number of reasonable ex-US equity currency hedged ETFs out there. But it seems to me that part of the diversification benefit of investing outside the US is to protect against the possibility of the US dollar declining relative to other currencies.
Indeed.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

tmcc
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Re: point of maximal pessimism for international investing

Post by tmcc » Mon May 06, 2019 8:29 pm

HEDGEFUNDIE wrote:
Mon May 06, 2019 8:02 pm
Valdeselad wrote:
Mon May 06, 2019 7:28 pm
It’s all about currency strength of the USD since all of your non-US holdings have to be converted back into USD. I’m honestly surprised how much currency impacts seem to stump Bogleheads when they keep asking this question over and over.

I’ve said it before but I’ll say it again - when you invest in non-US stocks (via holding USD-based funds) you are exposed as much or more to currency fluctuations as you are to movements in the underlying security.
Which is why I keep beating the drum for currency hedged international funds.
what are some tickers that you like?

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vineviz
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Re: point of maximal pessimism for international investing

Post by vineviz » Mon May 06, 2019 8:37 pm

Valdeselad wrote:
Mon May 06, 2019 7:28 pm
It’s all about currency strength of the USD since all of your non-US holdings have to be converted back into USD. I’m honestly surprised how much currency impacts seem to stump Bogleheads when they keep asking this question over and over.

I’ve said it before but I’ll say it again - when you invest in non-US stocks (via holding USD-based funds) you are exposed as much or more to currency fluctuations as you are to movements in the underlying security.
Saying it doesn't make it so.

A 60% US/40% ex-US equity portfolio has had, over the past 20 years, a standard deviation of 16.39% if fully-hedged and 17.50% if completely un-hedged.

And since MSCI started the EAFE index in 1970, any percentage up to 72% of that (unhedged) international exposure in a portfolio actually reduced the volatility of relative to a 100% US portfolio.

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Valdeselad
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Re: point of maximal pessimism for international investing

Post by Valdeselad » Mon May 06, 2019 8:45 pm

vineviz wrote:
Mon May 06, 2019 8:37 pm
Valdeselad wrote:
Mon May 06, 2019 7:28 pm
It’s all about currency strength of the USD since all of your non-US holdings have to be converted back into USD. I’m honestly surprised how much currency impacts seem to stump Bogleheads when they keep asking this question over and over.

I’ve said it before but I’ll say it again - when you invest in non-US stocks (via holding USD-based funds) you are exposed as much or more to currency fluctuations as you are to movements in the underlying security.
Saying it doesn't make it so.

A 60% US/40% ex-US equity portfolio has had, over the past 20 years, a standard deviation of 16.39% if fully-hedged and 17.50% if completely un-hedged.

And since MSCI started the EAFE index in 1970, any percentage up to 72% of that (unhedged) international exposure in a portfolio actually reduced the volatility of relative to a 100% US portfolio.

Image
I didn’t say anything about volatility or positive or negative impacts - Simply saying investors should understand their exposure to the relative strength of the USD to foreign currencies via these investments, for better or worse for USD based investors (and as shown above it tends to go up and down over time).

Thesaints
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Re: point of maximal pessimism for international investing

Post by Thesaints » Mon May 06, 2019 8:45 pm

Not to mention that going forward foreign markets are expected to gain more. Vanguard's 10-year outlook center point is 5% for US and 7.5% for foreign (local currency).

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Re: point of maximal pessimism for international investing

Post by Amadis_of_Gaul » Mon May 06, 2019 9:14 pm

Thanks to my decision to begin my investing career with a TDF, I've always owned a substantial percentage of international equity. It has been a blight on my portfolio ever since, but I refuse to reduce it. Regardless of what anyone else predicts about the markets, I am quite confident that the day after I divest myself of all these stinkers, ex-US equities will go up like a rocket, and domestic stocks will tank. Indeed, I am confident that my decision to sell will actually be the catalyst.

As a result, I remain grimly committed to international diversification, ensuring that the woes of international will continue. Sorry, everybody! Now that you know the real reason for underperformance, it should be clear that we are nowhere near the point of maximal pessimism.

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Re: point of maximal pessimism for international investing

Post by TheTimeLord » Mon May 06, 2019 9:16 pm

Thesaints wrote:
Mon May 06, 2019 8:45 pm
Not to mention that going forward foreign markets are expected to gain more. Vanguard's 10-year outlook center point is 5% for US and 7.5% for foreign (local currency).
So should we go 100% International?
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Re: point of maximal pessimism for international investing

Post by HEDGEFUNDIE » Mon May 06, 2019 9:28 pm

vineviz wrote:
Mon May 06, 2019 8:37 pm

A 60% US/40% ex-US equity portfolio has had, over the past 20 years, a standard deviation of 16.39% if fully-hedged and 17.50% if completely un-hedged.
So you’re saying there is a benefit to hedging...

It’s been established that currency fluctuations add volatility without adding return.

And costs are no longer an issue either, with several diversified hedged ETFs at 0.20% ER (HDAW, HDEF).

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Re: point of maximal pessimism for international investing

Post by Thesaints » Mon May 06, 2019 11:44 pm

TheTimeLord wrote:
Mon May 06, 2019 9:16 pm
Thesaints wrote:
Mon May 06, 2019 8:45 pm
Not to mention that going forward foreign markets are expected to gain more. Vanguard's 10-year outlook center point is 5% for US and 7.5% for foreign (local currency).
So should we go 100% International?
The numbers I reported are median values. Naturally each 10-year projection comes in a range of values.
To go 100% foreign, you would have to sell your domestic holdings and that could generate some taxable gains.
Other than that, sure. All my new contributions and dividends reinvestments have been on foreign markets for the past 2 years already, although I’m still only 30% foreign stocks total. Return on domestic holdings keeps pace with inflow.

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vineviz
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Re: point of maximal pessimism for international investing

Post by vineviz » Mon May 06, 2019 11:49 pm

HEDGEFUNDIE wrote:
Mon May 06, 2019 9:28 pm
vineviz wrote:
Mon May 06, 2019 8:37 pm

A 60% US/40% ex-US equity portfolio has had, over the past 20 years, a standard deviation of 16.39% if fully-hedged and 17.50% if completely un-hedged.
So you’re saying there is a benefit to hedging...

It’s been established that currency fluctuations add volatility without adding return.

And costs are no longer an issue either, with several diversified hedged ETFs at 0.20% ER (HDAW, HDEF).
Hedging is a bad idea, at least with regard to equity investments, unless you count assuaging paranoia as a benefit.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Thesaints
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Re: point of maximal pessimism for international investing

Post by Thesaints » Tue May 07, 2019 12:15 am

vineviz wrote:
Mon May 06, 2019 11:49 pm
HEDGEFUNDIE wrote:
Mon May 06, 2019 9:28 pm
vineviz wrote:
Mon May 06, 2019 8:37 pm

A 60% US/40% ex-US equity portfolio has had, over the past 20 years, a standard deviation of 16.39% if fully-hedged and 17.50% if completely un-hedged.
So you’re saying there is a benefit to hedging...

It’s been established that currency fluctuations add volatility without adding return.

And costs are no longer an issue either, with several diversified hedged ETFs at 0.20% ER (HDAW, HDEF).
Hedging is a bad idea, at least with regard to equity investments, unless you count assuaging paranoia as a benefit.
I would not go as far as calling it a "bad idea"; let's say it is not absolutely necessary, or at least not as necessary as it is for foreign bonds.

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Re: point of maximal pessimism for international investing

Post by Prahasaurus » Tue May 07, 2019 12:20 am

I'm for 100% USA. In fact, I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries, depressing returns. This shocking fact has led me to craft a pure "America First" portfolio. I only purchase USA based companies that refuse to do business outside of the USA. This ensures I can maximize my returns - at least based on what I've seen over the past year - but more importantly, avoid foreign infiltration and dilution.

I currently hold US Treasuries. And Norfolk Southern (NSC) railroads. I'm thinking we've only just tapped the amazing potential of American railroads, so there's huge upside, all colored red, white, and blue. Thinking of adding Taco Bell to my America First portfolio, but need to research more. Not sure if it's a stock, however. But I love their food. Just need to make sure there are no Taco Bells in Mexico or Canada before I pull the trigger.

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Re: point of maximal pessimism for international investing

Post by Thesaints » Tue May 07, 2019 12:21 am

:D :D :D
Well played!

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Re: point of maximal pessimism for international investing

Post by visualguy » Tue May 07, 2019 12:53 am

garlandwhizzer wrote:
Mon May 06, 2019 7:20 pm
Will it be more of the same in the future or will the tide reverse? The following is an article that argues that we are near the point of maximal pessimism for international equity and that those like me who have held on to underperforming INTL for many years should take heart after the beating we've received. The author argues that all the numerous INTL political and economic problems plus the persistent INTL underperformance has paradoxically set the stage for future success. Comments?
"The future" is a very long time... If you're talking about the next 2-3 decades, then it's likely to be more of the same. 50 or 100 years from now, who knows.

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Re: point of maximal pessimism for international investing

Post by RadAudit » Tue May 07, 2019 7:10 am

Amadis_of_Gaul wrote:
Mon May 06, 2019 9:14 pm
Regardless of what anyone else predicts about the markets, I am quite confident that the day after I divest myself of all these stinkers, ex-US equities will go up like a rocket, and domestic stocks will tank. Indeed, I am confident that my decision to sell will actually be the catalyst.
If you change your mind and sell, at least we'll know whom to blame or thank - depending on our international allocations. :happy
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

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Re: point of maximal pessimism for international investing

Post by TheTimeLord » Tue May 07, 2019 7:17 am

Thesaints wrote:
Mon May 06, 2019 11:44 pm
TheTimeLord wrote:
Mon May 06, 2019 9:16 pm
Thesaints wrote:
Mon May 06, 2019 8:45 pm
Not to mention that going forward foreign markets are expected to gain more. Vanguard's 10-year outlook center point is 5% for US and 7.5% for foreign (local currency).
So should we go 100% International?
The numbers I reported are median values. Naturally each 10-year projection comes in a range of values.
To go 100% foreign, you would have to sell your domestic holdings and that could generate some taxable gains.
Other than that, sure. All my new contributions and dividends reinvestments have been on foreign markets for the past 2 years already, although I’m still only 30% foreign stocks total. Return on domestic holdings keeps pace with inflow.
My point was more that putting weight on 10 year market projections from Vanguard is dubious. I have been hearing that song for about 5 years now and it has yet to come to pass. Buying International because you think it is a good diversifier makes sense, buying International because Vanguard predicts its over performance is questionable.
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Topic Author
garlandwhizzer
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Re: point of maximal pessimism for international investing

Post by garlandwhizzer » Tue May 07, 2019 1:48 pm

garlandwhizzer wrote: ↑Mon May 06, 2019 8:20 pm. So far Bogle and Buffett have been right for decades--invest only in the US.

Thesaints replied:

Not really.
Since 1994, 25 years ago, both S&P 500 and the US total market indexes have hugely outperformed both the developed market index and the emerging market index. There was a period prior to that due to the inflation of the greatest stock bubble in modern history (Japan in 1990s) international did outperform significantly. Since then there have been periods of underperformance alternating with outperformance between US and INTL, but over 1YR, 3 YR, 5YR, 10YR, and 25 YR the US has outperformed by a wide margin. So in fact Buffett and Bogle have been right for a long time. In spite of that, I hold INTL in cap weight because I believe that it offers diversification and also that going forward due to its much better valuations it is likely to outperform US. Nonetheless, I think we all must admit that Warren's and Jack's outperformance over this period is a fact not an opinion.

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Re: point of maximal pessimism for international investing

Post by patrick » Tue May 07, 2019 2:42 pm

The level of pessimism for international investing is certainly quite high, but as with everything else the maximum can only be known in hindsight.

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Re: point of maximal pessimism for international investing

Post by Thesaints » Tue May 07, 2019 3:00 pm

garlandwhizzer wrote:
Tue May 07, 2019 1:48 pm
garlandwhizzer wrote: ↑Mon May 06, 2019 8:20 pm. So far Bogle and Buffett have been right for decades--invest only in the US.

Thesaints replied:

Not really.
Since 1994, 25 years ago, both S&P 500 and the US total market indexes have hugely outperformed both the developed market index and the emerging market index.
By arbitrarily picking a timeframe it is possible to prove almost anything in finance. Yet another consequence of markets volatility.

There was a period prior to that due to the inflation of the greatest stock bubble in modern history (Japan in 1990s) international did outperform significantly. Since then there have been periods of underperformance alternating with outperformance between US and INTL, but over 1YR, 3 YR, 5YR, 10YR, and 25 YR the US has outperformed by a wide margin. So in fact Buffett and Bogle have been right for a long time. In spite of that, I hold INTL in cap weight because I believe that it offers diversification and also that going forward due to its much better valuations it is likely to outperform US. Nonetheless, I think we all must admit that Warren's and Jack's outperformance over this period is a fact not an opinion.

Garland Whizzer
Not sure I understand. First you say that since 1994 there have been periods of alternating outperformance. Then you say that over almost every timeframe Domestic stocks outperform foreign. So, when did foreign stocks outperform ?
Overall, if you had written that investing for decades in the US market would have yielded larger gains than investing for the same decades in foreign markets, that would have been true. Although how incidental is up for discussion.
What it is not true is that throughout decades investing in domestic stocks has always, or almost always outperformed a foreign investment. That depends on the time interval chosen and, as the plot I attached to my first post shows, there have been numerous time intervals when foreign stocks have outperformed.
Last edited by Thesaints on Tue May 07, 2019 3:59 pm, edited 1 time in total.

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Re: point of maximal pessimism for international investing

Post by vineviz » Tue May 07, 2019 3:47 pm

Thesaints wrote:
Tue May 07, 2019 3:00 pm

What it is not true is that throughout decades investing in domestic stocks has always, or almost always outperformed a foreign investment.
In fact, it's not even true that investing in domestic stocks has usually outperformed an investment in foreign stocks: from January, 1970 (the inception of the MSCI EAFE index) through April, 2019 the EAFE index has outperformed the US index about 54% of the time using all rolling 10-year periods, 53% of calendar years, and 50% of calendar months.
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Re: point of maximal pessimism for international investing

Post by smectym » Tue May 07, 2019 4:25 pm

Prahasaurus wrote:
Tue May 07, 2019 12:20 am
I'm for 100% USA. In fact, I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries, depressing returns. This shocking fact has led me to craft a pure "America First" portfolio. I only purchase USA based companies that refuse to do business outside of the USA. This ensures I can maximize my returns - at least based on what I've seen over the past year - but more importantly, avoid foreign infiltration and dilution.

I currently hold US Treasuries. And Norfolk Southern (NSC) railroads. I'm thinking we've only just tapped the amazing potential of American railroads, so there's huge upside, all colored red, white, and blue. Thinking of adding Taco Bell to my America First portfolio, but need to research more. Not sure if it's a stock, however. But I love their food. Just need to make sure there are no Taco Bells in Mexico or Canada before I pull the trigger.
An intriguing portfolio idea. What are its other holdings, or is there another thread on the topic? Thanks.

I do hold one of those Vanguard Lifestrategy funds, and yes, the highly touted international exposure has muted its returns. Mainly founded on the same grim masochism others have confessed above, I’m holding on.

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Re: point of maximal pessimism for international investing

Post by TomatoTomahto » Tue May 07, 2019 4:37 pm

Prahasaurus wrote:
Tue May 07, 2019 12:20 am
I'm for 100% USA. In fact, I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries, depressing returns. This shocking fact has led me to craft a pure "America First" portfolio. I only purchase USA based companies that refuse to do business outside of the USA. This ensures I can maximize my returns - at least based on what I've seen over the past year - but more importantly, avoid foreign infiltration and dilution.

I currently hold US Treasuries. And Norfolk Southern (NSC) railroads. I'm thinking we've only just tapped the amazing potential of American railroads, so there's huge upside, all colored red, white, and blue. Thinking of adding Taco Bell to my America First portfolio, but need to research more. Not sure if it's a stock, however. But I love their food. Just need to make sure there are no Taco Bells in Mexico or Canada before I pull the trigger.
And yet, a few days earlier, you said
While my bond allocation is a bit more complex in taxable, my equity position is simple: VTWAX. I own the entire market, no need to rebalance US v International or fiddle with specific industries. Just buy regularly and forget.
Are you having a laugh?
Okay, I get it; I won't be political or controversial. The Earth is flat.

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TheTimeLord
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Re: point of maximal pessimism for international investing

Post by TheTimeLord » Tue May 07, 2019 4:39 pm

TomatoTomahto wrote:
Tue May 07, 2019 4:37 pm
Prahasaurus wrote:
Tue May 07, 2019 12:20 am
I'm for 100% USA. In fact, I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries, depressing returns. This shocking fact has led me to craft a pure "America First" portfolio. I only purchase USA based companies that refuse to do business outside of the USA. This ensures I can maximize my returns - at least based on what I've seen over the past year - but more importantly, avoid foreign infiltration and dilution.

I currently hold US Treasuries. And Norfolk Southern (NSC) railroads. I'm thinking we've only just tapped the amazing potential of American railroads, so there's huge upside, all colored red, white, and blue. Thinking of adding Taco Bell to my America First portfolio, but need to research more. Not sure if it's a stock, however. But I love their food. Just need to make sure there are no Taco Bells in Mexico or Canada before I pull the trigger.
And yet, two days later, you said
While my bond allocation is a bit more complex in taxable, my equity position is simple: VTWAX. I own the entire market, no need to rebalance US v International or fiddle with specific industries. Just buy regularly and forget.
Are you having a laugh?
I took this to be very tongue in cheek.
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TomatoTomahto
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Re: point of maximal pessimism for international investing

Post by TomatoTomahto » Tue May 07, 2019 4:40 pm

TheTimeLord wrote:
Tue May 07, 2019 4:39 pm
TomatoTomahto wrote:
Tue May 07, 2019 4:37 pm
Prahasaurus wrote:
Tue May 07, 2019 12:20 am
I'm for 100% USA. In fact, I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries, depressing returns. This shocking fact has led me to craft a pure "America First" portfolio. I only purchase USA based companies that refuse to do business outside of the USA. This ensures I can maximize my returns - at least based on what I've seen over the past year - but more importantly, avoid foreign infiltration and dilution.

I currently hold US Treasuries. And Norfolk Southern (NSC) railroads. I'm thinking we've only just tapped the amazing potential of American railroads, so there's huge upside, all colored red, white, and blue. Thinking of adding Taco Bell to my America First portfolio, but need to research more. Not sure if it's a stock, however. But I love their food. Just need to make sure there are no Taco Bells in Mexico or Canada before I pull the trigger.
And yet, two days later, you said
While my bond allocation is a bit more complex in taxable, my equity position is simple: VTWAX. I own the entire market, no need to rebalance US v International or fiddle with specific industries. Just buy regularly and forget.
Are you having a laugh?
I took this to be very tongue in cheek.
I was hoping. I’m not subtle. I need smiley faces to help me.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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arcticpineapplecorp.
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Re: point of maximal pessimism for international investing

Post by arcticpineapplecorp. » Tue May 07, 2019 4:44 pm

TheTimeLord wrote:
Mon May 06, 2019 9:16 pm
Thesaints wrote:
Mon May 06, 2019 8:45 pm
Not to mention that going forward foreign markets are expected to gain more. Vanguard's 10-year outlook center point is 5% for US and 7.5% for foreign (local currency).
So should we go 100% International?
no because that would lessen diversification and increase volatility.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

Prahasaurus
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Re: point of maximal pessimism for international investing

Post by Prahasaurus » Tue May 07, 2019 4:48 pm

TomatoTomahto wrote:
Tue May 07, 2019 4:37 pm
Prahasaurus wrote:
Tue May 07, 2019 12:20 am
I'm for 100% USA. In fact, I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries, depressing returns. This shocking fact has led me to craft a pure "America First" portfolio. I only purchase USA based companies that refuse to do business outside of the USA. This ensures I can maximize my returns - at least based on what I've seen over the past year - but more importantly, avoid foreign infiltration and dilution.

I currently hold US Treasuries. And Norfolk Southern (NSC) railroads. I'm thinking we've only just tapped the amazing potential of American railroads, so there's huge upside, all colored red, white, and blue. Thinking of adding Taco Bell to my America First portfolio, but need to research more. Not sure if it's a stock, however. But I love their food. Just need to make sure there are no Taco Bells in Mexico or Canada before I pull the trigger.
And yet, a few days earlier, you said
While my bond allocation is a bit more complex in taxable, my equity position is simple: VTWAX. I own the entire market, no need to rebalance US v International or fiddle with specific industries. Just buy regularly and forget.
Are you having a laugh?
Wow, how could anyone take my post seriously? "Non-USA countries"??? "America First portfolio"????? Wondering if Taco Bell was in Mexico? Just the entire concept of a portfolio of companies that only do business in the USA???? Come on guys, how obvious can it be?

Woodshark
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Re: point of maximal pessimism for international investing

Post by Woodshark » Tue May 07, 2019 4:54 pm

Amadis_of_Gaul wrote:
Mon May 06, 2019 9:14 pm
I've always owned a substantial percentage of international equity. It has been a blight on my portfolio ever since, but I refuse to reduce it. Regardless of what anyone else predicts about the markets, I am quite confident that the day after I divest myself of all these stinkers, ex-US equities will go up like a rocket, and domestic stocks will tank. Indeed, I am confident that my decision to sell will actually be the catalyst.
I own a tad more international than I'm comfortable with but I refuse to sell for the same reasons!

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TomatoTomahto
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Re: point of maximal pessimism for international investing

Post by TomatoTomahto » Tue May 07, 2019 4:57 pm

Prahasaurus wrote:
Tue May 07, 2019 4:48 pm
TomatoTomahto wrote:
Tue May 07, 2019 4:37 pm
Prahasaurus wrote:
Tue May 07, 2019 12:20 am
I'm for 100% USA. In fact, I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries, depressing returns. This shocking fact has led me to craft a pure "America First" portfolio. I only purchase USA based companies that refuse to do business outside of the USA. This ensures I can maximize my returns - at least based on what I've seen over the past year - but more importantly, avoid foreign infiltration and dilution.

I currently hold US Treasuries. And Norfolk Southern (NSC) railroads. I'm thinking we've only just tapped the amazing potential of American railroads, so there's huge upside, all colored red, white, and blue. Thinking of adding Taco Bell to my America First portfolio, but need to research more. Not sure if it's a stock, however. But I love their food. Just need to make sure there are no Taco Bells in Mexico or Canada before I pull the trigger.
And yet, a few days earlier, you said
While my bond allocation is a bit more complex in taxable, my equity position is simple: VTWAX. I own the entire market, no need to rebalance US v International or fiddle with specific industries. Just buy regularly and forget.
Are you having a laugh?
Wow, how could anyone take my post seriously? "Non-USA countries"??? "America First portfolio"????? Wondering if Taco Bell was in Mexico? Just the entire concept of a portfolio of companies that only do business in the USA???? Come on guys, how obvious can it be?
As I said, I was hoping. But, have you watched the news lately? It can be difficult to tell what’s comedy and what’s news. I can’t say more, but some supposedly serious people are saying seriously crazy things.
Okay, I get it; I won't be political or controversial. The Earth is flat.

Prahasaurus
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Re: point of maximal pessimism for international investing

Post by Prahasaurus » Tue May 07, 2019 5:07 pm

TomatoTomahto wrote:
Tue May 07, 2019 4:57 pm
As I said, I was hoping. But, have you watched the news lately? It can be difficult to tell what’s comedy and what’s news. I can’t say more, but some supposedly serious people are saying seriously crazy things.
Yes, it's getting harder to do parody about the USA.

palaheel
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Re: point of maximal pessimism for international investing

Post by palaheel » Tue May 07, 2019 6:19 pm

Prahasaurus wrote:
Tue May 07, 2019 12:20 am
I'm for 100% USA. In fact, I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries, depressing returns. This shocking fact has led me to craft a pure "America First" portfolio. I only purchase USA based companies that refuse to do business outside of the USA. This ensures I can maximize my returns - at least based on what I've seen over the past year - but more importantly, avoid foreign infiltration and dilution.

I currently hold US Treasuries. And Norfolk Southern (NSC) railroads. I'm thinking we've only just tapped the amazing potential of American railroads, so there's huge upside, all colored red, white, and blue. Thinking of adding Taco Bell to my America First portfolio, but need to research more. Not sure if it's a stock, however. But I love their food. Just need to make sure there are no Taco Bells in Mexico or Canada before I pull the trigger.
Well, I thought it was funny, but I've been known to frequent certain satire sites.

I get nervous at "we now know" and "the new normal." The late '70s "death of equities," the dot-com era reassurance that stratospheric P/E ratios were of no concern, the '80s realization that global economic power had shifted to Japan, the tulip bulb being as valuable as a house (ok, I didn't live through that last one, but I remember the others).

Things are different now, until they aren't. Nobody knows nothing, but nobody denies that half of the world's investable market is outside the US. Maybe the US will take the rest of the world to the woodshed for the next 40 years, but maybe it won't. I'm not "all in" either way.
Markets crash. Markets recover. Inflation takes your money FOREVER.

qwertyjazz
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Re: point of maximal pessimism for international investing

Post by qwertyjazz » Tue May 07, 2019 8:18 pm

Prahasaurus wrote:
Tue May 07, 2019 12:20 am
I'm for 100% USA. In fact, I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries, depressing returns. This shocking fact has led me to craft a pure "America First" portfolio. I only purchase USA based companies that refuse to do business outside of the USA. This ensures I can maximize my returns - at least based on what I've seen over the past year - but more importantly, avoid foreign infiltration and dilution.

I currently hold US Treasuries. And Norfolk Southern (NSC) railroads. I'm thinking we've only just tapped the amazing potential of American railroads, so there's huge upside, all colored red, white, and blue. Thinking of adding Taco Bell to my America First portfolio, but need to research more. Not sure if it's a stock, however. But I love their food. Just need to make sure there are no Taco Bells in Mexico or Canada before I pull the trigger.
I believe I read a report of prediction of Taco Bell winning the franchise wars. I think that would be an excellent investment
https://tacobell.fandom.com/wiki/Demolition_Man
G.E. Box "All models are wrong, but some are useful."

visualguy
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Re: point of maximal pessimism for international investing

Post by visualguy » Tue May 07, 2019 10:20 pm

garlandwhizzer wrote:
Tue May 07, 2019 1:48 pm
So in fact Buffett and Bogle have been right for a long time. In spite of that, I hold INTL in cap weight because I believe that it offers diversification and also that going forward due to its much better valuations it is likely to outperform US.
Hope springs eternal.

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JoMoney
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Re: point of maximal pessimism for international investing

Post by JoMoney » Tue May 07, 2019 10:39 pm

Prahasaurus wrote:
Tue May 07, 2019 12:20 am
... I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries...
You should have listened to Mr.Bogle , that's among his arguments for why buying an international fund isn't necessary for U.S. investors
JACK BOGLE: If you own the S&P 500, you're already investing outside the US!
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

visualguy
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Re: point of maximal pessimism for international investing

Post by visualguy » Tue May 07, 2019 10:52 pm

JoMoney wrote:
Tue May 07, 2019 10:39 pm
Prahasaurus wrote:
Tue May 07, 2019 12:20 am
... I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries...
You should have listened to Mr.Bogle , that's among his arguments for why buying an international fund isn't necessary for U.S. investors
JACK BOGLE: If you own the S&P 500, you're already investing outside the US!
"Isn't necessary" puts it mildly... For example, investing in US companies doing business in China has been a better way to gain from economic developments in China than investing in the Chinese stock market index...

Thesaints
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Re: point of maximal pessimism for international investing

Post by Thesaints » Tue May 07, 2019 10:56 pm

visualguy wrote:
Tue May 07, 2019 10:52 pm
JoMoney wrote:
Tue May 07, 2019 10:39 pm
Prahasaurus wrote:
Tue May 07, 2019 12:20 am
... I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries...
You should have listened to Mr.Bogle , that's among his arguments for why buying an international fund isn't necessary for U.S. investors
JACK BOGLE: If you own the S&P 500, you're already investing outside the US!
"Isn't necessary" puts it mildly... For example, investing in US companies doing business in China has been a better way to gain from economic developments in China than investing in the Chinese stock market index...
Are there US companies that only do business in China ? Missing that, how do you know that the gains observed come from their China participation and not from something else ?

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JoMoney
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Re: point of maximal pessimism for international investing

Post by JoMoney » Tue May 07, 2019 11:48 pm

Thesaints wrote:
Tue May 07, 2019 10:56 pm
visualguy wrote:
Tue May 07, 2019 10:52 pm
JoMoney wrote:
Tue May 07, 2019 10:39 pm
Prahasaurus wrote:
Tue May 07, 2019 12:20 am
... I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries...
You should have listened to Mr.Bogle , that's among his arguments for why buying an international fund isn't necessary for U.S. investors
JACK BOGLE: If you own the S&P 500, you're already investing outside the US!
"Isn't necessary" puts it mildly... For example, investing in US companies doing business in China has been a better way to gain from economic developments in China than investing in the Chinese stock market index...
Are there US companies that only do business in China ? Missing that, how do you know that the gains observed come from their China participation and not from something else ?
It would be a bit of a contradiction to have a multi-national company that "only" does business in one country.
Many companies do break out their foreign profits by country or region in their quarterly reports, but that's mostly sales related, would be hard to put a figure on the profits a company like Nike makes having shoes made in China and selling them in the U.S. vs what their margins would be if they were made somewhere else.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

Thesaints
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Re: point of maximal pessimism for international investing

Post by Thesaints » Wed May 08, 2019 12:44 am

JoMoney wrote:
Tue May 07, 2019 11:48 pm
It would be a bit of a contradiction to have a multi-national company that "only" does business in one country.
Many companies do break out their foreign profits by country or region in their quarterly reports, but that's mostly sales related, would be hard to put a figure on the profits a company like Nike makes having shoes made in China and selling them in the U.S. vs what their margins would be if they were made somewhere else.
Let's say China stock market gained 5% annualized (I'm using a random number). How can you say "I gained more from the Chinese market by investing in US companies that do business in China" ? How do you measure it ? Nike might have gained 10% annual; how do you know the fraction of that 10% that comes from China ? Don't tell me it is the portion of profits from China, because stock valuations do not necessarily reflect profits, as evidenced by the P/E being all over the place when one looks at individual companies.

Prahasaurus
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Re: point of maximal pessimism for international investing

Post by Prahasaurus » Wed May 08, 2019 2:05 am

JoMoney wrote:
Tue May 07, 2019 10:39 pm
Prahasaurus wrote:
Tue May 07, 2019 12:20 am
... I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries...
You should have listened to Mr.Bogle , that's among his arguments for why buying an international fund isn't necessary for U.S. investors
JACK BOGLE: If you own the S&P 500, you're already investing outside the US!
IT WAS A JOKE. IT WAS SATIRE. I am quite sure Bogle did not advocate finding companies to invest in that ONLY do business in the USA, refusing to accept business outside of the USA. That would be a ridiculous limiting factor.

I thought it was funny to take some arguments here to the extreme: higher returns with US stocks only, which include some international exposure, over US + International portfolios. The joke was: why not just eliminate all possible "foreign" exposure, find companies that ONLY do business in the USA, refuse to accept non American business, and the returns will logically be even higher! Ha, get it? It's a joke, because I was sure nobody would take it seriously.

In hindsight, I will now add lots of smiley faces to all of my satirical posts, since, as my British friends often tell me, "Americans don't get satire."

"Non-USA countries...." Bright future in railroads... I still chuckle when I read that.

Achkelone
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Re: point of maximal pessimism for international investing

Post by Achkelone » Wed May 08, 2019 4:02 am

Prahasaurus wrote:
Tue May 07, 2019 4:48 pm
Wow, how could anyone take my post seriously? "Non-USA countries"??? "America First portfolio"????? Wondering if Taco Bell was in Mexico? Just the entire concept of a portfolio of companies that only do business in the USA???? Come on guys, how obvious can it be?
I got the joke when you wrote about Taco Bell, but until then, I did take your post seriously. Because there are plenty of US citizens who unironically think in these narrow, almost nationalist terms :-?
And since this forum is already quite biased towards US investing only, it'wasn't far fetched to consider that you truly were making the case for "patriotic investments".

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jeffyscott
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Re: point of maximal pessimism for international investing

Post by jeffyscott » Wed May 08, 2019 7:07 am

Prahasaurus wrote:
Wed May 08, 2019 2:05 am
In hindsight, I will now add lots of smiley faces to all of my satirical posts, since, as my British friends often tell me, "Americans don't get satire."
Hey now, not all Americans. :)

In this case, I think you were unsubtle enough that almost all "got it" and had a laugh, at least I hope so :shock: . Most people are not going to respond letting you know, though.

But yeah, to be safe maybe you should've ended with: :P :twisted: :D :wink:
Time is your friend; impulse is your enemy. - John C. Bogle

3funder
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Re: point of maximal pessimism for international investing

Post by 3funder » Wed May 08, 2019 7:16 am

garlandwhizzer wrote:
Tue May 07, 2019 1:48 pm
garlandwhizzer wrote: ↑Mon May 06, 2019 8:20 pm. So far Bogle and Buffett have been right for decades--invest only in the US.

Thesaints replied:

Not really.
Since 1994, 25 years ago, both S&P 500 and the US total market indexes have hugely outperformed both the developed market index and the emerging market index. There was a period prior to that due to the inflation of the greatest stock bubble in modern history (Japan in 1990s) international did outperform significantly. Since then there have been periods of underperformance alternating with outperformance between US and INTL, but over 1YR, 3 YR, 5YR, 10YR, and 25 YR the US has outperformed by a wide margin. So in fact Buffett and Bogle have been right for a long time. In spite of that, I hold INTL in cap weight because I believe that it offers diversification and also that going forward due to its much better valuations it is likely to outperform US. Nonetheless, I think we all must admit that Warren's and Jack's outperformance over this period is a fact not an opinion.

Garland Whizzer
Well said. I hold international at cap weight as well.

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dwickenh
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Re: point of maximal pessimism for international investing

Post by dwickenh » Wed May 08, 2019 8:21 am

Prahasaurus wrote:
Wed May 08, 2019 2:05 am
JoMoney wrote:
Tue May 07, 2019 10:39 pm
Prahasaurus wrote:
Tue May 07, 2019 12:20 am
... I refuse to hold index funds because I've recently learned that many US firms actually do business in non-USA countries...
You should have listened to Mr.Bogle , that's among his arguments for why buying an international fund isn't necessary for U.S. investors
JACK BOGLE: If you own the S&P 500, you're already investing outside the US!
IT WAS A JOKE. IT WAS SATIRE. I am quite sure Bogle did not advocate finding companies to invest in that ONLY do business in the USA, refusing to accept business outside of the USA. That would be a ridiculous limiting factor.

I thought it was funny to take some arguments here to the extreme: higher returns with US stocks only, which include some international exposure, over US + International portfolios. The joke was: why not just eliminate all possible "foreign" exposure, find companies that ONLY do business in the USA, refuse to accept non American business, and the returns will logically be even higher! Ha, get it? It's a joke, because I was sure nobody would take it seriously.

In hindsight, I will now add lots of smiley faces to all of my satirical posts, since, as my British friends often tell me, "Americans don't get satire."

"Non-USA countries...." Bright future in railroads... I still chuckle when I read that.

Warren Buffet might agree with part of your post. :P
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

Amadis_of_Gaul
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Re: point of maximal pessimism for international investing

Post by Amadis_of_Gaul » Wed May 08, 2019 8:24 am

Prahasaurus wrote:
Wed May 08, 2019 2:05 am

IT WAS A JOKE. IT WAS SATIRE. I am quite sure Bogle did not advocate finding companies to invest in that ONLY do business in the USA, refusing to accept business outside of the USA. That would be a ridiculous limiting factor.

I thought it was funny to take some arguments here to the extreme: higher returns with US stocks only, which include some international exposure, over US + International portfolios. The joke was: why not just eliminate all possible "foreign" exposure, find companies that ONLY do business in the USA, refuse to accept non American business, and the returns will logically be even higher! Ha, get it? It's a joke, because I was sure nobody would take it seriously.

In hindsight, I will now add lots of smiley faces to all of my satirical posts, since, as my British friends often tell me, "Americans don't get satire."

"Non-USA countries...." Bright future in railroads... I still chuckle when I read that.
I thought it was funny. I even read it out loud to my wife. I too anticipate a bright future in railroad equities. Party like it's 1876, baby!

asif408
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Re: point of maximal pessimism for international investing

Post by asif408 » Wed May 08, 2019 10:57 am

Prahasaurus wrote:
Wed May 08, 2019 2:05 am
IT WAS A JOKE. IT WAS SATIRE. I am quite sure Bogle did not advocate finding companies to invest in that ONLY do business in the USA, refusing to accept business outside of the USA. That would be a ridiculous limiting factor.

I thought it was funny to take some arguments here to the extreme: higher returns with US stocks only, which include some international exposure, over US + International portfolios. The joke was: why not just eliminate all possible "foreign" exposure, find companies that ONLY do business in the USA, refuse to accept non American business, and the returns will logically be even higher! Ha, get it? It's a joke, because I was sure nobody would take it seriously.

In hindsight, I will now add lots of smiley faces to all of my satirical posts, since, as my British friends often tell me, "Americans don't get satire."
Don't stop, its good to do that to get a pulse on thinking around here. If anything, the responses to your post support the OP's position that maybe we are near a high point of pessimism when something that is obviously a joke is taken seriously.

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