US stocks still look better than anywhere else

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fennewaldaj
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Re: US stocks still look better than anywhere else

Post by fennewaldaj » Thu Jun 06, 2019 1:14 pm

mrspock wrote:
Thu Jun 06, 2019 10:45 am
Valuethinker wrote:
Thu Jun 06, 2019 10:35 am
mrspock wrote:
Wed Jun 05, 2019 5:25 pm
Not surprised in the least. Still holding 0% international in my AA, just got back from travels in Europe.... sufficed to say after nearly having to beg for my bill each time so I could leave (you “rent” the table for the night), and get yelled at because I sat at a table to drink my latte (after noon you need to have lunch for a table... even if the place is empty).... I’m not changing my stance :D .

Love the laid back life of Europeans, but the American way to run a business (e.g. emphasis on customer service) is unmatched.
I must admit all of Rick Steves' comments about American tourists came flooding back ...

Fortunately many Americans I know (other than business people - and business people often make obnoxious guests) are sophisticated global cosmopolitans and revel in the differences of other countries v. their own. A common refrain is "why don't we have xxx like this at home"?

Another very American attribute is to reflect full and emotional delight at the discovery of, say, Italian ice cream or a good English pub or a glorious stained glass window. That kind of open expressiveness of emotion is just not British and generally not European.
First don’t equate my private thoughts with my actions. I was perfectly polite, and behaved to local customs (I always look them up). Only a fool would be rude to those acting within the boundaries of their customs. My point here, is that one “custom” makes more money... one doesn’t .

It’s not a value judgement, for Europeans in certain this way of doing things is preferred (for example you rent the space because entertaining spaces in homes are smaller).
My point is, the end result is companies will make less money. Same goes for Americans “work ethic”, horrible for work life balance and families, great for shareholders/investors.

I’m also not American... I’m an outsider looking in.
Your examples seem strange though. Japanese restaurants are quite adept at getting people food paid and out the door quickly. This is mostly preference of the customers. Longer lingering meals are more of the preference in Europe.

Tamalak
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Re: US stocks still look better than anywhere else

Post by Tamalak » Thu Jun 06, 2019 2:17 pm

fennewaldaj wrote:
Thu Jun 06, 2019 1:10 pm
Tamalak wrote:
Thu Jun 06, 2019 9:54 am
I don't get it. If the market is even a little bit efficient, how can international have inferior returns week after week after week?

If it was like a sudden correction once due to new information that would be one thing. But I play a game where I look at VTI and ask "ok how much worse is international". 80% of the time it's worse.
EMH would set expected return to a similar level between the two markets. Realized return will always be different than expected return. Basically the new information out of ex-US has been worse for the last decade and thus so have returns.
Yes that's fine, but I would expect the bad news to come in "lumps" not in the steady, reliable trickle it's come in. Because since the trickle has become reliable, wouldn't the market adjust its expectations to it (thereby causing a crash in international in anticipation of continuing bad news, not adjusting to each drop of the trickle as it comes in).

EMH says that only *unanticipated* news should move the market. At this point it should anticipate that international sucks.

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TimeRunner
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Re: US stocks still look better than anywhere else

Post by TimeRunner » Thu Jun 06, 2019 2:34 pm

...and from today's WSJ article: “U.S. stocks are very vulnerable right now,” said Luca Paolini, chief strategist at Pictet Asset Management, who has sold some of their U.S. equities and added cash, gold and shares of companies in emerging markets and the U.K. “We’re toward the end of a cycle. It’s the best time ever to diversify away from U.S. equities.”

So there's that.

...and I'm about 99% VT. Pass the popcorn.
Man assumes more intelligence than dolphins because he achieves so much, while dolphins just have a good time. Dolphins believe they're more intelligent than man - for precisely the same reason. (HGG)

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willthrill81
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Re: US stocks still look better than anywhere else

Post by willthrill81 » Thu Jun 06, 2019 2:54 pm

TimeRunner wrote:
Thu Jun 06, 2019 2:34 pm
...and from today's WSJ article: “U.S. stocks are very vulnerable right now,” said Luca Paolini, chief strategist at Pictet Asset Management, who has sold some of their U.S. equities and added cash, gold and shares of companies in emerging markets and the U.K. “We’re toward the end of a cycle. It’s the best time ever to diversify away from U.S. equities.”

So there's that.

...and I'm about 99% VT. Pass the popcorn.
Especially since these strategists have such a great track record of predicting markets' movements. :D
Last edited by willthrill81 on Mon Jun 10, 2019 10:13 am, edited 1 time in total.
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TomCat96
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Re: US stocks still look better than anywhere else

Post by TomCat96 » Thu Jun 06, 2019 3:54 pm

Tamalak wrote:
Thu Jun 06, 2019 9:54 am
I don't get it. If the market is even a little bit efficient, how can international have inferior returns week after week after week?

If it was like a sudden correction once due to new information that would be one thing. But I play a game where I look at VTI and ask "ok how much worse is international". 80% of the time it's worse.

I'm 100% down with keeping my global portfolio if these prices are truly market driven. Either domestic or international were bound to be disappointing compared to the other. But I get a nagging feeling that something is wrong.
Countries are not companies. They don't operate on the same timescales. A company, especially small ones can right themselves in a short amount of time. Countries relatively speaking are slow moving entities with enormous internal inertias--cultural inertia, educational inertia, geographic inertia, etc.

Why has the US outperformed International specifically? One word: Tech. or FANG

Let's look at one of the major factors in the FANG growth and outperformance story: Silicon Valley.

Silicon Valley: high desirability weatherwise, lots of capital flowing, capable of commanding top tier engineering talent year over year, has access to UC berkeley CS, and Stanford CS in their direct vicinity, appealing to young people who have such top tier talent who are willing to put in long hours.
Have you experienced the Silicon Valley work culture?

What would it take for say Silicon Valley Fiji to crop up? What about Silicon Valley London? Silicon Valley Madrid?
Ask yourself, can that happen by next quarter? What about next year? What about in the next 10 years?

We can't even reproduce Silicon Valley here in the states. We tried in Northern Virginia in Ashburn/Dulles a few years back.
You can't just growth the infrastructure from nothing.

The International argument is based on a kind of hand-wavium, where nobody knows nothing, and where any kind of investment except for the market cap is Audacious and irrational. But if we look for a second at the exact factors which caused the US outperformance, namely FANG and Silicon Valley, the picture gets a little more clear.

You can't just pull Socio-economic forces and infrastructure out of one's rear. It takes time to build such things.

So the International argument where "nobody knows nothing", invest accordingly is not so much wrong, as it is flippant about time-scales.

It may well be the case that International Stocks will outperform the United States in the long run.
But it may also well be the case that when that happens, it won't synchronize with your personal investment horizon.

To paraphrase Larry Swedroe, 10 years is a drop in the bucket. Yes it is. But that cuts both ways doesn't it?

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jeffyscott
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Re: US stocks still look better than anywhere else

Post by jeffyscott » Thu Jun 06, 2019 4:22 pm

TomCat96 wrote:
Thu Jun 06, 2019 3:54 pm
Why has the US outperformed International specifically? One word: Tech. or FANG

Let's look at one of the major factors in the FANG growth and outperformance story: Silicon Valley.

Silicon Valley: high desirability weatherwise, lots of capital flowing, capable of commanding top tier engineering talent year over year, has access to UC berkeley CS, and Stanford CS in their direct vicinity, appealing to young people who have such top tier talent who are willing to put in long hours.
Have you experienced the Silicon Valley work culture?

What would it take for say Silicon Valley Fiji to crop up? What about Silicon Valley London? Silicon Valley Madrid?
Ask yourself, can that happen by next quarter? What about next year? What about in the next 10 years?
What about 10 years ago, was all this not known then? Why didn't the price 10 years or 5 years ago reflect all of this amazingness already?

It all seems like a sort of re-run of the 1990s to me. With International playing the role of small cap value in the remake.

One A is mentioned in the article. Which indicates that Amazon's market value is more than $900 billion, while all the other retailers in the developed world tracked by MSCI have a combined market value of $1.2 trillion. So Amazon's market value represent 43% of all publicly traded retail. Maybe this is a reasonable ratio :?: , if it is then it doesn't mean the other retailers must become as good as Amazon to provide equal returns to shareholders going forward, all they should have to do is what is expected for that to occur.
Time is your friend; impulse is your enemy. - John C. Bogle

fennewaldaj
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Re: US stocks still look better than anywhere else

Post by fennewaldaj » Thu Jun 06, 2019 4:27 pm

jeffyscott wrote:
Thu Jun 06, 2019 4:22 pm
TomCat96 wrote:
Thu Jun 06, 2019 3:54 pm
Why has the US outperformed International specifically? One word: Tech. or FANG

Let's look at one of the major factors in the FANG growth and outperformance story: Silicon Valley.

Silicon Valley: high desirability weatherwise, lots of capital flowing, capable of commanding top tier engineering talent year over year, has access to UC berkeley CS, and Stanford CS in their direct vicinity, appealing to young people who have such top tier talent who are willing to put in long hours.
Have you experienced the Silicon Valley work culture?

What would it take for say Silicon Valley Fiji to crop up? What about Silicon Valley London? Silicon Valley Madrid?
Ask yourself, can that happen by next quarter? What about next year? What about in the next 10 years?
What about 10 years ago, was all this not known then? Why didn't the price 10 years or 5 years ago reflect all of this amazingness already?

It all seems like a sort of re-run of the 1990s to me. With International playing the role of small cap value in the remake.

One A is mentioned in the article. Which indicates that Amazon's market value is more than $900 billion, while all the other retailers in the developed world tracked by MSCI have a combined market value of $1.2 trillion. So Amazon's market value represent 43% of all publicly traded retail. Maybe this is a reasonable ratio :?: , if it is then it doesn't mean the other retailers must become as good as Amazon to provide equal returns to shareholders going forward, all they should have to do is what is expected for that to occur.
It seems like a lot of the high flying companies are priced as if they have already done what they have a decent but not 100% chance of doing.

columbia
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Re: US stocks still look better than anywhere else

Post by columbia » Thu Jun 06, 2019 5:14 pm

jeffyscott wrote:
Thu Jun 06, 2019 4:22 pm
TomCat96 wrote:
Thu Jun 06, 2019 3:54 pm
Why has the US outperformed International specifically? One word: Tech. or FANG

Let's look at one of the major factors in the FANG growth and outperformance story: Silicon Valley.

Silicon Valley: high desirability weatherwise, lots of capital flowing, capable of commanding top tier engineering talent year over year, has access to UC berkeley CS, and Stanford CS in their direct vicinity, appealing to young people who have such top tier talent who are willing to put in long hours.
Have you experienced the Silicon Valley work culture?

What would it take for say Silicon Valley Fiji to crop up? What about Silicon Valley London? Silicon Valley Madrid?
Ask yourself, can that happen by next quarter? What about next year? What about in the next 10 years?
What about 10 years ago, was all this not known then? Why didn't the price 10 years or 5 years ago reflect all of this amazingness already?

It all seems like a sort of re-run of the 1990s to me. With International playing the role of small cap value in the remake.

One A is mentioned in the article. Which indicates that Amazon's market value is more than $900 billion, while all the other retailers in the developed world tracked by MSCI have a combined market value of $1.2 trillion. So Amazon's market value represent 43% of all publicly traded retail. Maybe this is a reasonable ratio :?: , if it is then it doesn't mean the other retailers must become as good as Amazon to provide equal returns to shareholders going forward, all they should have to do is what is expected for that to occur.


How Amazon makes money

Instead, its cloud computing division, Amazon Web Services, has actually generated the majority of Amazon's operating income since 2016.
https://www.google.com/amp/s/www.cnbc.c ... money.html

Not so retail.

visualguy
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Re: US stocks still look better than anywhere else

Post by visualguy » Thu Jun 06, 2019 5:51 pm

TomCat96 wrote:
Thu Jun 06, 2019 3:54 pm
Why has the US outperformed International specifically? One word: Tech. or FANG

Let's look at one of the major factors in the FANG growth and outperformance story: Silicon Valley.

Silicon Valley: high desirability weatherwise, lots of capital flowing, capable of commanding top tier engineering talent year over year, has access to UC berkeley CS, and Stanford CS in their direct vicinity, appealing to young people who have such top tier talent who are willing to put in long hours.
Have you experienced the Silicon Valley work culture?

What would it take for say Silicon Valley Fiji to crop up? What about Silicon Valley London? Silicon Valley Madrid?
Ask yourself, can that happen by next quarter? What about next year? What about in the next 10 years?

We can't even reproduce Silicon Valley here in the states. We tried in Northern Virginia in Ashburn/Dulles a few years back.
You can't just growth the infrastructure from nothing.
True, and the talent flows to Silicon Valley from all over the world, which is a particularly amazing self-perpetuating success story of immigration. No other country has such a powerful talent magnet. The US in general has been the beneficiary of a global brain drain to a degree that no other country has been able to approach even remotely. It's particularly evident in Silicon Valley, but also in most other advanced industries as well as academia in the US. Hard to see this suddenly shifting to Europe or Japan, etc. in any kind of timescale that would be relevant.

Jeff Albertson
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Re: US stocks still look better than anywhere else

Post by Jeff Albertson » Thu Jun 06, 2019 6:18 pm

visualguy wrote:
Thu Jun 06, 2019 5:51 pm
True, and the talent flows to Silicon Valley from all over the world, which is a particularly amazing self-perpetuating success story of immigration. No other country has such a powerful talent magnet. The US in general has been the beneficiary of a global brain drain to a degree that no other country has been able to approach even remotely. It's particularly evident in Silicon Valley, but also in most other advanced industries as well as academia in the US. Hard to see this suddenly shifting to Europe or Japan, etc. in any kind of timescale that would be relevant.
Goodbye Silicon Valley, hello Maple Valley!
"Indian technology talent is flocking to Canada
As immigrant techies shun the US, its neighbour has rolled out the red carpet"

People like Mr Rangnekar are part of an exodus of tech workers from Silicon Valley. Pushed out by the cost of living as well as by a less welcoming American government, they are being pulled in by countries such as Canada, where tech vacancies are forecast to reach 200,000 by 2020. Canada is gambling that by the time America wakes up to the cost of discouraging immigrants its tech sector will have secured some of the best talent.The starting-point is pretty promising. ... The city (Toronto) added more tech jobs in 2017 than the San Francisco Bay area, Seattle and Washington, DC, combined.
https://www.economist.com/business/2018 ... -to-canada

visualguy
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Re: US stocks still look better than anywhere else

Post by visualguy » Thu Jun 06, 2019 6:32 pm

Jeff Albertson wrote:
Thu Jun 06, 2019 6:18 pm
visualguy wrote:
Thu Jun 06, 2019 5:51 pm
True, and the talent flows to Silicon Valley from all over the world, which is a particularly amazing self-perpetuating success story of immigration. No other country has such a powerful talent magnet. The US in general has been the beneficiary of a global brain drain to a degree that no other country has been able to approach even remotely. It's particularly evident in Silicon Valley, but also in most other advanced industries as well as academia in the US. Hard to see this suddenly shifting to Europe or Japan, etc. in any kind of timescale that would be relevant.
Goodbye Silicon Valley, hello Maple Valley!
"Indian technology talent is flocking to Canada
As immigrant techies shun the US, its neighbour has rolled out the red carpet"

People like Mr Rangnekar are part of an exodus of tech workers from Silicon Valley. Pushed out by the cost of living as well as by a less welcoming American government, they are being pulled in by countries such as Canada, where tech vacancies are forecast to reach 200,000 by 2020. Canada is gambling that by the time America wakes up to the cost of discouraging immigrants its tech sector will have secured some of the best talent.The starting-point is pretty promising. ... The city (Toronto) added more tech jobs in 2017 than the San Francisco Bay area, Seattle and Washington, DC, combined.
https://www.economist.com/business/2018 ... -to-canada
Yeah, but the major tech employers there are mostly US companies.

columbia
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Re: US stocks still look better than anywhere else

Post by columbia » Thu Jun 06, 2019 6:34 pm

Jeff Albertson wrote:
Thu Jun 06, 2019 6:18 pm
visualguy wrote:
Thu Jun 06, 2019 5:51 pm
True, and the talent flows to Silicon Valley from all over the world, which is a particularly amazing self-perpetuating success story of immigration. No other country has such a powerful talent magnet. The US in general has been the beneficiary of a global brain drain to a degree that no other country has been able to approach even remotely. It's particularly evident in Silicon Valley, but also in most other advanced industries as well as academia in the US. Hard to see this suddenly shifting to Europe or Japan, etc. in any kind of timescale that would be relevant.
Goodbye Silicon Valley, hello Maple Valley!
"Indian technology talent is flocking to Canada
As immigrant techies shun the US, its neighbour has rolled out the red carpet"

People like Mr Rangnekar are part of an exodus of tech workers from Silicon Valley. Pushed out by the cost of living as well as by a less welcoming American government, they are being pulled in by countries such as Canada, where tech vacancies are forecast to reach 200,000 by 2020. Canada is gambling that by the time America wakes up to the cost of discouraging immigrants its tech sector will have secured some of the best talent.The starting-point is pretty promising. ... The city (Toronto) added more tech jobs in 2017 than the San Francisco Bay area, Seattle and Washington, DC, combined.
https://www.economist.com/business/2018 ... -to-canada

The singular problem causing that will eventually go away.

jbranx
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Re: US stocks still look better than anywhere else

Post by jbranx » Thu Jun 06, 2019 10:56 pm

{I removed an Off-Topic post}

iamlucky13
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Re: US stocks still look better than anywhere else

Post by iamlucky13 » Fri Jun 07, 2019 12:01 am

Short summary of the article:

Past performance indicates future results, therefore buy high and sell low.

Who knows. Maybe US equities will continue to outpace the rest of the world, but I'm not willing to bet on it. At the same time, I'm hesitant to go market weight US/international based on the points about currency risk, and am willing to stay a bit overweight to the US as I continue to evaluate that factor.
AerialWombat wrote:
Wed Jun 05, 2019 5:59 pm
Soooo, what you’re saying...the correct answer is 0% US and 0% international? I can buy into that. Let’s hear it for the Martian Index!
One thing I am certain of: the Mars index has nowhere to go but up. Now I just have to figure out how to invest in it.

Tamalak
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Re: US stocks still look better than anywhere else

Post by Tamalak » Fri Jun 07, 2019 1:11 am

iamlucky13 wrote:
Fri Jun 07, 2019 12:01 am
Short summary of the article:

Past performance indicates future results, therefore buy high and sell low.
Yes. This is my whole concern.

International has sucked in the recent PAST. Big deal right? Humans love to cultivate patterns in the past.

Yet in the PRESENT I have been closing my eyes and predicting: "International will suck today". 80% success rate. What explains that?

Valuethinker
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Re: US stocks still look better than anywhere else

Post by Valuethinker » Fri Jun 07, 2019 2:56 am

columbia wrote:
Thu Jun 06, 2019 6:34 pm
Jeff Albertson wrote:
Thu Jun 06, 2019 6:18 pm
visualguy wrote:
Thu Jun 06, 2019 5:51 pm
True, and the talent flows to Silicon Valley from all over the world, which is a particularly amazing self-perpetuating success story of immigration. No other country has such a powerful talent magnet. The US in general has been the beneficiary of a global brain drain to a degree that no other country has been able to approach even remotely. It's particularly evident in Silicon Valley, but also in most other advanced industries as well as academia in the US. Hard to see this suddenly shifting to Europe or Japan, etc. in any kind of timescale that would be relevant.
Goodbye Silicon Valley, hello Maple Valley!
"Indian technology talent is flocking to Canada
As immigrant techies shun the US, its neighbour has rolled out the red carpet"

People like Mr Rangnekar are part of an exodus of tech workers from Silicon Valley. Pushed out by the cost of living as well as by a less welcoming American government, they are being pulled in by countries such as Canada, where tech vacancies are forecast to reach 200,000 by 2020. Canada is gambling that by the time America wakes up to the cost of discouraging immigrants its tech sector will have secured some of the best talent.The starting-point is pretty promising. ... The city (Toronto) added more tech jobs in 2017 than the San Francisco Bay area, Seattle and Washington, DC, combined.
https://www.economist.com/business/2018 ... -to-canada

The singular problem causing that will eventually go away.
But the underlying mood that caused it will not and will affect the environment for decades to come.

The impossible from a 2016 view has become the possible. Across the world.

TomCat96
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Re: US stocks still look better than anywhere else

Post by TomCat96 » Fri Jun 07, 2019 2:09 pm

Tamalak wrote:
Fri Jun 07, 2019 1:11 am
iamlucky13 wrote:
Fri Jun 07, 2019 12:01 am
Short summary of the article:

Past performance indicates future results, therefore buy high and sell low.
Yes. This is my whole concern.

International has sucked in the recent PAST. Big deal right? Humans love to cultivate patterns in the past.

Yet in the PRESENT I have been closing my eyes and predicting: "International will suck today". 80% success rate. What explains that?

Short answer. Because Silicon Valley cannot be built in a day.

1. US and International have performed similarly EXCEPT for tech, which is responsible for the recent US outperformance.

2. Assuming that the NOT SUCKING comes from Silicon Valley, IE FANG stocks, then for International to begin to achieve the US outperformance, they would have to build a silicon valley, and crop up a few multinational tech companies.

3. Where are they going to get that? You can't close your eyes, open them again and expect complex socio-economic infrastructure to mushroom overnight. If the US outperformance is due to Silicon Valley, then you can't close your eyes, open them, and expect International to start outperforming any day now.

What the International people have right now is the "overdue" theory of investing. That International Stocks are overdue. US outperformed. Now it's International Stocks' turn. It's overdue. It's time.

That kind of pie in the sky thinking doesn't meet the on the ground reality. Yes International may outperform the US. But as I wrote before countries are not companies. They do not operate by the quarter. Countries are slower entities than companies.

International may well outperform the US. But you don't get to dismiss the time scales and tap your foot and say "well any day now...."
No. It could take decades.

Larry Swedroe says decades are a drop in the bucket for markets. I agree. The problem is decades aren't drops in the bucket for you, or I, or any of us here.

Another problem is that that overdue theory gets completely mucked when it comes to 10 year predictions like Vanguard. 10 years seems like a long time. International is overdue. It's time. It's International's turn. The US had it's turn. Now it's international's turn. No.

If 10 years is a drop in the bucket for markets, then the logical corollary of that is that there is simply no guarantee International will outperform the US in the next decade.

I keep pointing to Silicon Valley because that is current reason why US is outperforming. It is an example of on the ground socio-economic infrastructure that cannot be built overnight. I'd argue it cannot even be built in 10 years. But in 10 years, ought it not to be international's turn? Isn't International Overdue? No.

In this case, the US outperformance is attributed to a specific region, in a specific sector, with infrastructure tailored specifically for that sector.

To be fair, it cuts both ways. If International outperforms, it could be the US which lags behind for 50 some years. (or some arbitrary multi-decade period) I'd argue that Japan hasn't fully recovered from its debacle in the 80s. But why not? Isn't Japan overdue?

No. Countries are slow moving beasts. Slower than companies. Slow enough that your investment lifetime may be not be sufficient to give you time to even things out.

kosomoto
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Re: US stocks still look better than anywhere else

Post by kosomoto » Fri Jun 07, 2019 2:47 pm

asif408 wrote:
Thu Jun 06, 2019 8:45 am
Well, it is true as a market cap whole the rest of the world has performed worse. But not all countries have in the last several years, particularly in the emerging markets. For instance, the Russian and Brazilian stock markets have handily outperformed the US stock market since January 2016. Even the Chinese stock market has had comparable performance to the US market over that time period. And if you invested in one of the EM value funds available out there, such as PXH (which GMO and the likes have been pounding the table on for years now), you are still ahead of US stocks, even after last year's dismal showing by EM: http://quotes.morningstar.com/chart/etf ... 2%3A955%7D

Please don't accuse me of cherry picking the time frame. I did.
The Russia ETF has a negative return since inception last I checked. Scary stuff.

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jeffyscott
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Re: US stocks still look better than anywhere else

Post by jeffyscott » Fri Jun 07, 2019 3:53 pm

TomCat96 wrote:
Fri Jun 07, 2019 2:09 pm
Tamalak wrote:
Fri Jun 07, 2019 1:11 am
iamlucky13 wrote:
Fri Jun 07, 2019 12:01 am
Short summary of the article:

Past performance indicates future results, therefore buy high and sell low.
Yes. This is my whole concern.

International has sucked in the recent PAST. Big deal right? Humans love to cultivate patterns in the past.

Yet in the PRESENT I have been closing my eyes and predicting: "International will suck today". 80% success rate. What explains that?

Short answer. Because Silicon Valley cannot be built in a day.

1. US and International have performed similarly EXCEPT for tech, which is responsible for the recent US outperformance.

2. Assuming that the NOT SUCKING comes from Silicon Valley, IE FANG stocks, then for International to begin to achieve the US outperformance, they would have to build a silicon valley, and crop up a few multinational tech companies.

3. Where are they going to get that? You can't close your eyes, open them again and expect complex socio-economic infrastructure to mushroom overnight. If the US outperformance is due to Silicon Valley, then you can't close your eyes, open them, and expect International to start outperforming any day now.
I don't think that is what would be necessary. If FAANG do worse than expected, while Foreign do better than expected and the market recognizes it, then Foreign stock prices should rise and FAANG fall. The current expectations for FAANG and the US could turn out to be too optimistic and/or those for Foreign too pessimistic.
Time is your friend; impulse is your enemy. - John C. Bogle

Trader Joe
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Re: US stocks still look better than anywhere else

Post by Trader Joe » Fri Jun 07, 2019 4:07 pm

"US stocks still look better than anywhere else"

Yes of course.

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JamalJones
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Re: US stocks still look better than anywhere else

Post by JamalJones » Fri Jun 07, 2019 5:14 pm

sabhen wrote:
Wed Jun 05, 2019 4:24 pm
While American outperformance continues to defy history, the rest of the world remains trapped in a bear market.
https://www.bloomberg.com/news/articles ... nd=premium
The U.S. is about to celebrate 10 years of uninterrupted economic growth, but the rest of the world is suffering through a bear market that’s now lasted 12 years. Stock markets around the globe, excluding the U.S., remain 25% below the peak they set on the ominous date of Halloween 2007, on the eve of the financial crisis. The American S&P 500 benchmark has gained about 80% over that time.

Outside the U.S., stock markets have never come close to regaining their highs from before the crisis, and they currently appear to be locked into yet another downswing. The MSCI ACWI ex USA Index, which, as its name indicates, covers all equity markets minus the U.S., has dropped more than 17% since its most recent peak early last year, when there was much excitement about a synchronized global economic recovery.

Well yeah, but...what about this time frame?
TSP + Vanguard Roth IRA + Vanguard Taxable: 80% equities / 20% bonds | Yap, yap, yap, yap, - the bottom line is ya gotta buckle up the chin strap!

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Re: US stocks still look better than anywhere else

Post by willthrill81 » Fri Jun 07, 2019 5:18 pm

JamalJones wrote:
Fri Jun 07, 2019 5:14 pm
sabhen wrote:
Wed Jun 05, 2019 4:24 pm
While American outperformance continues to defy history, the rest of the world remains trapped in a bear market.
https://www.bloomberg.com/news/articles ... nd=premium
The U.S. is about to celebrate 10 years of uninterrupted economic growth, but the rest of the world is suffering through a bear market that’s now lasted 12 years. Stock markets around the globe, excluding the U.S., remain 25% below the peak they set on the ominous date of Halloween 2007, on the eve of the financial crisis. The American S&P 500 benchmark has gained about 80% over that time.

Outside the U.S., stock markets have never come close to regaining their highs from before the crisis, and they currently appear to be locked into yet another downswing. The MSCI ACWI ex USA Index, which, as its name indicates, covers all equity markets minus the U.S., has dropped more than 17% since its most recent peak early last year, when there was much excitement about a synchronized global economic recovery.

Well yeah, but...what about this time frame?
And you know what outperformed all of those portfolios over that time period (i.e. 2000-2009)? Gold. But we don't see many threads like "You should diversify your U.S. stock holdings with 50% in gold."

I'm not anti-ex-U.S. But the notion that international has done very poorly compared to the U.S. over the last 30 years should not be taken lightly. Most investors would consider that to be long-term. Long-term U.S. Treasuries have outperformed ex-U.S. stock over the last 32+ years (all data in PV), and intermediate-term Treasuries have basically matched the latter's returns but with far less volatility.
“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: US stocks still look better than anywhere else

Post by JamalJones » Fri Jun 07, 2019 5:29 pm

willthrill81 wrote:
Fri Jun 07, 2019 5:18 pm
JamalJones wrote:
Fri Jun 07, 2019 5:14 pm
sabhen wrote:
Wed Jun 05, 2019 4:24 pm
While American outperformance continues to defy history, the rest of the world remains trapped in a bear market.
https://www.bloomberg.com/news/articles ... nd=premium
The U.S. is about to celebrate 10 years of uninterrupted economic growth, but the rest of the world is suffering through a bear market that’s now lasted 12 years. Stock markets around the globe, excluding the U.S., remain 25% below the peak they set on the ominous date of Halloween 2007, on the eve of the financial crisis. The American S&P 500 benchmark has gained about 80% over that time.

Outside the U.S., stock markets have never come close to regaining their highs from before the crisis, and they currently appear to be locked into yet another downswing. The MSCI ACWI ex USA Index, which, as its name indicates, covers all equity markets minus the U.S., has dropped more than 17% since its most recent peak early last year, when there was much excitement about a synchronized global economic recovery.

Well yeah, but...what about this time frame?
And you know what outperformed all of those portfolios over that time period (i.e. 2000-2009)? Gold. But we don't see many threads like "You should diversify your U.S. stock holdings with 50% in gold."

I'm not anti-ex-U.S. But the notion that international has done very poorly compared to the U.S. over the last 30 years should not be taken lightly. Most investors would consider that to be long-term. Long-term U.S. Treasuries have outperformed ex-U.S. stock over the last 32+ years (all data in PV), and intermediate-term Treasuries have basically matched the latter's returns but with far less volatility.
It's frustrating and surprising how well gold has done this century. But, yes, no one is advocating 50% gold/50% Long-term U.S. Treasuries portfolios. We'll have to see how things go over the next few decades.

BUT, if you want to do international, it seems like adding a percentage of small caps and/or emerging markets to your portfolio should be considered over Total International or International Developed...
TSP + Vanguard Roth IRA + Vanguard Taxable: 80% equities / 20% bonds | Yap, yap, yap, yap, - the bottom line is ya gotta buckle up the chin strap!

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Re: US stocks still look better than anywhere else

Post by JamalJones » Fri Jun 07, 2019 5:42 pm

willthrill81 wrote:
Fri Jun 07, 2019 5:18 pm
https://www.bloomberg.com/news/articles ... nd=premium

And you know what outperformed all of those portfolios over that time period (i.e. 2000-2009)? Gold. But we don't see many threads like "You should diversify your U.S. stock holdings with 50% in gold."
Also, of course...Gold's run-up has been relatively recently. Wasn't there like an 18-19 year period where gold was flat - like from the mid 80s to early 2000s? So that will give people pause...
TSP + Vanguard Roth IRA + Vanguard Taxable: 80% equities / 20% bonds | Yap, yap, yap, yap, - the bottom line is ya gotta buckle up the chin strap!

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Re: US stocks still look better than anywhere else

Post by willthrill81 » Fri Jun 07, 2019 8:49 pm

JamalJones wrote:
Fri Jun 07, 2019 5:42 pm
willthrill81 wrote:
Fri Jun 07, 2019 5:18 pm
https://www.bloomberg.com/news/articles ... nd=premium

And you know what outperformed all of those portfolios over that time period (i.e. 2000-2009)? Gold. But we don't see many threads like "You should diversify your U.S. stock holdings with 50% in gold."
Also, of course...Gold's run-up has been relatively recently. Wasn't there like an 18-19 year period where gold was flat - like from the mid 80s to early 2000s? So that will give people pause...
Indeed. From 1980-1999, ex-U.S. stocks returned 8.63% real while gold returned -3.85%. From 2000-current, ex-U.S. stocks returned .90% real compared to gold's 5.41%.

Over the last 40 years, long-term Treasuries have outperformed ex-U.S. stock (5.39% real vs. 4.07%). Looking at that level of performance for that long, it's hard for many to believe that ex-U.S. stock is a worthwhile investment.
“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: US stocks still look better than anywhere else

Post by Willmunny » Fri Jun 07, 2019 10:45 pm

While I think the U.S. economy currently has a better outlook than many other development markets, I don't equate that with it necessarily being a great time to buy U.S. stocks. I am not selling my U.S. stocks, but I am also not decreasing my Ex-U.S. allocation. Ten years ago the U.S. economy was a mess and it was, in hindsight, a GREAT time to buy U.S. stocks. Changing the course to follow the herd based on price strength doesn't appeal to me.

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Re: US stocks still look better than anywhere else

Post by visualguy » Fri Jun 07, 2019 11:40 pm

Willmunny wrote:
Fri Jun 07, 2019 10:45 pm
While I think the U.S. economy currently has a better outlook than many other development markets, I don't equate that with it necessarily being a great time to buy U.S. stocks.
The problem is that even if it's not "a great time to buy U.S. stocks", it doesn't follow that it makes sense to buy ex-US stocks. Even more so if you think the US economy has a better outlook. I don't think prospects are great for the US market over the next decade for reasons often analyzed, but the only argument I hear for ex-US to do better than the US is valuations. The thing is that ex-US isn't really cheap relative to its history, just cheaper than the US, and there's nothing new there.

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Re: US stocks still look better than anywhere else

Post by spectec » Sat Jun 08, 2019 5:10 am

mrspock wrote:
Thu Jun 06, 2019 10:45 am
Valuethinker wrote:
Thu Jun 06, 2019 10:35 am
mrspock wrote:
Wed Jun 05, 2019 5:25 pm
Not surprised in the least. Still holding 0% international in my AA, just got back from travels in Europe.... sufficed to say after nearly having to beg for my bill each time so I could leave (you “rent” the table for the night), and get yelled at because I sat at a table to drink my latte (after noon you need to have lunch for a table... even if the place is empty).... I’m not changing my stance :D .

Love the laid back life of Europeans, but the American way to run a business (e.g. emphasis on customer service) is unmatched.
I must admit all of Rick Steves' comments about American tourists came flooding back ...

Fortunately many Americans I know (other than business people - and business people often make obnoxious guests) are sophisticated global cosmopolitans and revel in the differences of other countries v. their own. A common refrain is "why don't we have xxx like this at home"?

Another very American attribute is to reflect full and emotional delight at the discovery of, say, Italian ice cream or a good English pub or a glorious stained glass window. That kind of open expressiveness of emotion is just not British and generally not European.
First don’t equate my private thoughts with my actions. I was perfectly polite, and behaved to local customs (I always look them up). Only a fool would be rude to those acting within the boundaries of their customs. My point here, is that one “custom” makes more money... one doesn’t .

It’s not a value judgement, for Europeans in certain this way of doing things is preferred (for example you rent the space because entertaining spaces in homes are smaller).
My point is, the end result is companies will make less money. Same goes for Americans “work ethic”, horrible for work life balance and families, great for shareholders/investors.

I’m also not American... I’m an outsider looking in.
This is purely anecdotal, but my limited personal experiences and business interactions (UK, France, Germany, India, Myanmar, UAE), over the years have convinced me that American exceptionalism is a reality on several levels. It has its social downsides at times, especially when witnessing the boorish behavior of some Americans abroad, but the economic implications are impossible to ignore. That isn't the only reason I'm 0% international (aside from the international already baked into VTI), but it is a significant factor for me.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

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Re: US stocks still look better than anywhere else

Post by SovereignInvestor » Sat Jun 08, 2019 6:14 am

Factually speaking the US should outperform all the developed world economies over the coming decades.

The US Will have working age population grow about 0.5% annually through 2050.

Japan, China, and EU will see theirs plunge anywhere from 1% to 2% annually.


Those economies will have trouble staving off deflation and any meaingful real GDP growth...like Japan struggled with since 2000.

The US Will likely avoid deflation and have higher real GDP growth as its work force will keEP growing demographically.

Yes higher US stock valuations may price some of this in already. I wonder of FOREX markets have because this would make USD stronger long term all else equal and stronger US dollar is the worst for US based international investors.

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Re: US stocks still look better than anywhere else

Post by finvestor » Sat Jun 08, 2019 6:37 am

Lot’s of talk about american exceptionalism in this thread, but as usual, things depend on the time frame:

https://www.msci.com/documents/10199/86 ... 29ed5adbbf

These net returns show that US stocks have indeed outperformed since 2008 or so, but things were different during the run-up to financial crisis.

Future, as we all know, is not known in advance. Therefore I choose to diversify globally.

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Re: US stocks still look better than anywhere else

Post by columbia » Sat Jun 08, 2019 6:39 am

SovereignInvestor wrote:
Sat Jun 08, 2019 6:14 am
Factually speaking the US should outperform all the developed world economies over the coming decades.

The US Will have working age population grow about 0.5% annually through 2050.

Japan, China, and EU will see theirs plunge anywhere from 1% to 2% annually.


Those economies will have trouble staving off deflation and any meaingful real GDP growth...like Japan struggled with since 2000.

The US Will likely avoid deflation and have higher real GDP growth as its work force will keEP growing demographically.

Yes higher US stock valuations may price some of this in already. I wonder of FOREX markets have because this would make USD stronger long term all else equal and stronger US dollar is the worst for US based international investors.
re:Japan

Number of newborns in Japan fell to record low while population dropped faster than ever in 2018
https://www.japantimes.co.jp/news/2019/ ... PudwSUpCEc

That doesn’t bode well, it would seem.

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Re: US stocks still look better than anywhere else

Post by Valuethinker » Sat Jun 08, 2019 7:31 am

spectec wrote:
Sat Jun 08, 2019 5:10 am
mrspock wrote:
Thu Jun 06, 2019 10:45 am
Valuethinker wrote:
Thu Jun 06, 2019 10:35 am
mrspock wrote:
Wed Jun 05, 2019 5:25 pm
Not surprised in the least. Still holding 0% international in my AA, just got back from travels in Europe.... sufficed to say after nearly having to beg for my bill each time so I could leave (you “rent” the table for the night), and get yelled at because I sat at a table to drink my latte (after noon you need to have lunch for a table... even if the place is empty).... I’m not changing my stance :D .

Love the laid back life of Europeans, but the American way to run a business (e.g. emphasis on customer service) is unmatched.
I must admit all of Rick Steves' comments about American tourists came flooding back ...

Fortunately many Americans I know (other than business people - and business people often make obnoxious guests) are sophisticated global cosmopolitans and revel in the differences of other countries v. their own. A common refrain is "why don't we have xxx like this at home"?

Another very American attribute is to reflect full and emotional delight at the discovery of, say, Italian ice cream or a good English pub or a glorious stained glass window. That kind of open expressiveness of emotion is just not British and generally not European.
First don’t equate my private thoughts with my actions. I was perfectly polite, and behaved to local customs (I always look them up). Only a fool would be rude to those acting within the boundaries of their customs. My point here, is that one “custom” makes more money... one doesn’t .

It’s not a value judgement, for Europeans in certain this way of doing things is preferred (for example you rent the space because entertaining spaces in homes are smaller).
My point is, the end result is companies will make less money. Same goes for Americans “work ethic”, horrible for work life balance and families, great for shareholders/investors.

I’m also not American... I’m an outsider looking in.
This is purely anecdotal, but my limited personal experiences and business interactions (UK, France, Germany, India, Myanmar, UAE), over the years have convinced me that American exceptionalism is a reality on several levels
Aye, therein lies the rub.

The Indian stock market, say, incorporates a valuation that reflects all the problems with India - corruption, state owned industries, infrastructure etc.

Things only have to get a *little bit* better for the economy to do a lot better, and businesses there to do a lot better.

So that's the thing of it. That in fact the problems of doing business in India, say, are what makes it interesting from an investment point of view - that things only have to get a little better to trigger a big valuation shift.

Of course many of the companies which operate in India are western, e.g. in consumer goods. And probably the largest single western company in India in consumer goods (because it has a 100+ year old joint venture with an Indian family) is Unilever (Hindustani-Lever) which is listed on ... the London Stock Exchange. And the world's largest consumer goods company, by market cap, and therefore with the biggest exposure to emerging markets is ... Nestle ... listed in Switzerland.

Of course these emerging markets will need fuel. The private oil companies are relatively small producers in this world compared to the National Oil Companies (State owned). Nonetheless the largest is Exxon Mobil -- listed in New York. The second largest? Royal Dutch Shell - listed in London & Amsterdam. The largest (by hydrocarbon reserves) is probably .. Gazprom ... which is listed in Moscow (and has a low single digit PE, reflecting all the state influence issues with that company).
. It has its social downsides at times, especially when witnessing the boorish behavior of some Americans abroad, but the economic implications are impossible to ignore. That isn't the only reason I'm 0% international (aside from the international already baked into VTI), but it is a significant factor for me.
GDP growth per capita is remarkably similar in the long run between US and Europe. US has higher population growth so its economy grows faster. Japan has negative population growth but, again, its GDP per capita grows at a very similar rate.

And the problem of Representativeness Bias looms. One's personal experiences don't determine the stock market performance of different countries.

The point about efficient markets is that markets are the sum total of our experiences. The market knows what we know, when it sets the price for these assets.

The higher US PE reflects the higher rate of growth of American corporate earnings AND (this is a big factor) the tendency of US companies to issue debt and buyback shares, thus increasing EPS. It also reflects the genuinely faster growth of a group of US tech/ internet stocks - the so-called FAANGs (+ Microsoft).

Note that American platinum mining stocks or iron ore stocks have not done as well of late (that's meant to be ironic, if it is not obvious) ...

BTW the way the South Koreans or the Taiwanese do business tends to put Americans into the shade ... they are incredibly tough negotiators and hard workers. But, you know, that's just anecdotal - we want to screen out Representativeness Bias.
Last edited by Valuethinker on Sat Jun 08, 2019 7:47 am, edited 1 time in total.

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Re: US stocks still look better than anywhere else

Post by Valuethinker » Sat Jun 08, 2019 7:35 am

columbia wrote:
Sat Jun 08, 2019 6:39 am
SovereignInvestor wrote:
Sat Jun 08, 2019 6:14 am
Factually speaking the US should outperform all the developed world economies over the coming decades.

The US Will have working age population grow about 0.5% annually through 2050.

Japan, China, and EU will see theirs plunge anywhere from 1% to 2% annually.


Those economies will have trouble staving off deflation and any meaingful real GDP growth...like Japan struggled with since 2000.

The US Will likely avoid deflation and have higher real GDP growth as its work force will keEP growing demographically.

Yes higher US stock valuations may price some of this in already. I wonder of FOREX markets have because this would make USD stronger long term all else equal and stronger US dollar is the worst for US based international investors.
re:Japan

Number of newborns in Japan fell to record low while population dropped faster than ever in 2018
https://www.japantimes.co.jp/news/2019/ ... PudwSUpCEc

That doesn’t bode well, it would seem.
I'd argue the Japanese are preparing themselves for the very different world we face.

Eventually most or all developed countries will tip into negative population growth.

Given the environmental challenges, this is a good thing - fewer humans (in developed countries) means less effluent which we don't know how to cope with, and less pressure to extract natural resources. Reforestation is a thing in Japan (as it was in New England post about 1900). There will be a time when the rewilding of large parts of the American Prairie is a genuine prospect - it will be fiercely resisted by the ranchers, but the logic of it is quite compelling - "... a home where the buffalo roam/ and the deer and the antelope play..."

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Re: US stocks still look better than anywhere else

Post by jeffyscott » Sat Jun 08, 2019 7:41 am

SovereignInvestor wrote:
Sat Jun 08, 2019 6:14 am
Factually speaking the US should outperform all the developed world economies over the coming decades.

The US Will have working age population grow about 0.5% annually through 2050.

Japan, China, and EU will see theirs plunge anywhere from 1% to 2% annually.


Those economies will have trouble staving off deflation and any meaingful real GDP growth...like Japan struggled with since 2000.

The US Will likely avoid deflation and have higher real GDP growth as its work force will keEP growing demographically.

Yes higher US stock valuations may price some of this in already. I wonder of FOREX markets have because this would make USD stronger long term all else equal and stronger US dollar is the worst for US based international investors.
Why would only some of it be priced in? Assuming there are rational investors in the world, why would all expectations not already be priced in?
Time is your friend; impulse is your enemy. - John C. Bogle

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Re: US stocks still look better than anywhere else

Post by Valuethinker » Sat Jun 08, 2019 7:44 am

The problem with these lines of argument is that they tend to degenerate into quasi-sociological, highly anecdotal, comments about the superiority of US business practices and culture.

OR

They make an explicit link between US GDP growth and the performance of stock markets - when we know the actual correlation is weak or even negative.

AND

They all ignore the efficient markets paradigm. That publicly available information is fully reflected in the current prices of securities. Somehow, the market which is so good at pricing Amazon v. Tesla v. Exxon-Mobil, loses its mind at the water's edge, and systematically overvalues non US stocks (even Canadian ones?).

So you get some posters (willthrill81 for example) who explicitly say "no, I do not believe markets are efficient". OK, but that's hard to square with what we teach here about utility of index funds v. active, etc.

But a lot of other posters seem to believe 2 contradictory things - that markets are efficient, and that markets do not correctly price overseas stocks and their earnings growth prospects, against US stocks.

(The argument which does make sense is re success of American tech companies. But really it boils down to a small subset of those - Facebook, Apple, Amazon, Netscape, Google + Microsoft. So you could make a call that these companies will continue to be more successful than the market currently expects and reflects in their valuation ... and recent history (last 10 years) would suggest you are right).

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Re: US stocks still look better than anywhere else

Post by SovereignInvestor » Sat Jun 08, 2019 7:50 am

Valuethinker wrote:
Sat Jun 08, 2019 7:35 am
columbia wrote:
Sat Jun 08, 2019 6:39 am
SovereignInvestor wrote:
Sat Jun 08, 2019 6:14 am
Factually speaking the US should outperform all the developed world economies over the coming decades.

The US Will have working age population grow about 0.5% annually through 2050.

Japan, China, and EU will see theirs plunge anywhere from 1% to 2% annually.


Those economies will have trouble staving off deflation and any meaingful real GDP growth...like Japan struggled with since 2000.

The US Will likely avoid deflation and have higher real GDP growth as its work force will keEP growing demographically.

Yes higher US stock valuations may price some of this in already. I wonder of FOREX markets have because this would make USD stronger long term all else equal and stronger US dollar is the worst for US based international investors.
re:Japan

Number of newborns in Japan fell to record low while population dropped faster than ever in 2018
https://www.japantimes.co.jp/news/2019/ ... PudwSUpCEc

That doesn’t bode well, it would seem.
I'd argue the Japanese are preparing themselves for the very different world we face.

Eventually most or all developed countries will tip into negative population growth.

Given the environmental challenges, this is a good thing - fewer humans (in developed countries) means less effluent which we don't know how to cope with, and less pressure to extract natural resources. Reforestation is a thing in Japan (as it was in New England post about 1900). There will be a time when the rewilding of large parts of the American Prairie is a genuine prospect - it will be fiercely resisted by the ranchers, but the logic of it is quite compelling - "... a home where the buffalo roam/ and the deer and the antelope play..."
Organically the US is close to 0, it is positive from immigration.

I think more humans is a good thing. I recall how there was imminent doom from a shortage of food and resources predicted numerous times throughout the 20th century.

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Re: US stocks still look better than anywhere else

Post by spectec » Sat Jun 08, 2019 8:03 am

Valuethinker wrote:
Sat Jun 08, 2019 7:31 am
spectec wrote:
Sat Jun 08, 2019 5:10 am
mrspock wrote:
Thu Jun 06, 2019 10:45 am
Valuethinker wrote:
Thu Jun 06, 2019 10:35 am
mrspock wrote:
Wed Jun 05, 2019 5:25 pm
Not surprised in the least. Still holding 0% international in my AA, just got back from travels in Europe.... sufficed to say after nearly having to beg for my bill each time so I could leave (you “rent” the table for the night), and get yelled at because I sat at a table to drink my latte (after noon you need to have lunch for a table... even if the place is empty).... I’m not changing my stance :D .

Love the laid back life of Europeans, but the American way to run a business (e.g. emphasis on customer service) is unmatched.
I must admit all of Rick Steves' comments about American tourists came flooding back ...

Fortunately many Americans I know (other than business people - and business people often make obnoxious guests) are sophisticated global cosmopolitans and revel in the differences of other countries v. their own. A common refrain is "why don't we have xxx like this at home"?

Another very American attribute is to reflect full and emotional delight at the discovery of, say, Italian ice cream or a good English pub or a glorious stained glass window. That kind of open expressiveness of emotion is just not British and generally not European.
First don’t equate my private thoughts with my actions. I was perfectly polite, and behaved to local customs (I always look them up). Only a fool would be rude to those acting within the boundaries of their customs. My point here, is that one “custom” makes more money... one doesn’t .

It’s not a value judgement, for Europeans in certain this way of doing things is preferred (for example you rent the space because entertaining spaces in homes are smaller).
My point is, the end result is companies will make less money. Same goes for Americans “work ethic”, horrible for work life balance and families, great for shareholders/investors.

I’m also not American... I’m an outsider looking in.
This is purely anecdotal, but my limited personal experiences and business interactions (UK, France, Germany, India, Myanmar, UAE), over the years have convinced me that American exceptionalism is a reality on several levels
Aye, therein lies the rub.

The Indian stock market, say, incorporates a valuation that reflects all the problems with India - corruption, state owned industries, infrastructure etc.

Things only have to get a *little bit* better for the economy to do a lot better, and businesses there to do a lot better.

So that's the thing of it. That in fact the problems of doing business in India, say, are what makes it interesting from an investment point of view - that things only have to get a little better to trigger a big valuation shift.

Of course many of the companies which operate in India are western, e.g. in consumer goods. And probably the largest single western company in India in consumer goods (because it has a 100+ year old joint venture with an Indian family) is Unilever (Hindustani-Lever) which is listed on ... the London Stock Exchange. And the world's largest consumer goods company, by market cap, and therefore with the biggest exposure to emerging markets is ... Nestle ... listed in Switzerland.
. It has its social downsides at times, especially when witnessing the boorish behavior of some Americans abroad, but the economic implications are impossible to ignore. That isn't the only reason I'm 0% international (aside from the international already baked into VTI), but it is a significant factor for me.
GDP growth per capita is remarkably similar in the long run between US and Europe. US has higher population growth so its economy grows faster. Japan has negative population growth but, again, its GDP per capita grows at a very similar rate.

And the problem of Representativeness Bias looms. One's personal experiences don't determine the stock market performance of different countries.

The point about efficient markets is that markets are the sum total of our experiences. The market knows what we know, when it sets the price for these assets.

The higher US PE reflects the higher rate of growth of American corporate earnings AND (this is a big factor) the tendency of US companies to issue debt and buyback shares, thus increasing EPS. It also reflects the genuinely faster growth of a group of US tech/ internet stocks - the so-called FAANGs (+ Microsoft).

Note that American platinum mining stocks or iron ore stocks have not done as well of late (that's meant to be ironic, if it is not obvious) ...

BTW the way the South Koreans or the Taiwanese do business tends to put Americans into the shade ... they are incredibly tough negotiators and hard workers. But, you know, that's just anecdotal - we want to screen out Representativeness Bias.
No reason to object to anything you have said. However, your reference to India calls something to mind for me. I love India and visit there often. But trying to make a simple purchase in India is usually an ordeal. With a small vendor, you are expected to bargain. Everyone is expected to do it even though it's a colossal waste of time and the final result is usually negligible, even by their own standards. In a large store or other retail establishment, your merchandise must be handled by 3 to 5 people before you actually leave with the item. It's almost impossible to simply make your choice, hand it to the cashier, pay, and leave. Yes, the process provides employment for more people, is quaint and filled with tradition, but nonetheless it is inefficient. A simple purchase that should take 15 minutes winds up occupying the better part of an hour. (and don't forget to tender the payment with your right hand. Absent-mindedly using the left hand may cause the cashier to delay the transaction a little longer). :)
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

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Re: US stocks still look better than anywhere else

Post by columbia » Sat Jun 08, 2019 8:10 am

Valuethinker wrote:
Sat Jun 08, 2019 7:44 am
The problem with these lines of argument is that they tend to degenerate into quasi-sociological, highly anecdotal, comments about the superiority of US business practices and culture.

OR

They make an explicit link between US GDP growth and the performance of stock markets - when we know the actual correlation is weak or even negative.

AND

They all ignore the efficient markets paradigm. That publicly available information is fully reflected in the current prices of securities. Somehow, the market which is so good at pricing Amazon v. Tesla v. Exxon-Mobil, loses its mind at the water's edge, and systematically overvalues non US stocks (even Canadian ones?).

So you get some posters (willthrill81 for example) who explicitly say "no, I do not believe markets are efficient". OK, but that's hard to square with what we teach here about utility of index funds v. active, etc.

But a lot of other posters seem to believe 2 contradictory things - that markets are efficient, and that markets do not correctly price overseas stocks and their earnings growth prospects, against US stocks.

(The argument which does make sense is re success of American tech companies. But really it boils down to a small subset of those - Facebook, Apple, Amazon, Netscape, Google + Microsoft. So you could make a call that these companies will continue to be more successful than the market currently expects and reflects in their valuation ... and recent history (last 10 years) would suggest you are right).
I believe that markets are reasonably efficient and that all publicly available information is price in.

Ex-US is at only about 45% of global market cap.

Why do you think that’s the case?
Do you think that’s rational or irrational?
Given that the dollar is the global reserve currency, do you believe that there are rational reasons for a US investor to own less than 45% ex-US?
Do you believe that the myriad of shareholder protections - not necessarily present in other countries- should also inform that decision?
Do you believe that US investors should factor in taxes on ex-US, which are not recaptured by foreign tax credits?

To each their own, but I factor in all of the above.

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willthrill81
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Re: US stocks still look better than anywhere else

Post by willthrill81 » Sat Jun 08, 2019 8:52 am

Valuethinker wrote:
Sat Jun 08, 2019 7:44 am
So you get some posters (willthrill81 for example) who explicitly say "no, I do not believe markets are efficient". OK, but that's hard to square with what we teach here about utility of index funds v. active, etc.
Even Dr. Fama admitted last year that the EMH is false and simply a model, the real question being 'how true' it is.

I believe that index funds are superior to active funds primarily due to the 'cost matters hypothesis'. If costs are low enough, many, perhaps most, Bogleheads are fine with active funds (e.g. Wellington, Wellesley).
“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: US stocks still look better than anywhere else

Post by SovereignInvestor » Sat Jun 08, 2019 2:01 pm

Not sure why EMH has to be all or nothing?

The market is generally not offering free lunches but from time to time there are inefficiencies that can be found but they need to be hidden from most or won't exist.

There are hedge funds secretly profiting off of inefficiencies as we speak and we will never know what they are bevause then they'd not exist.

The reason why US demographics may not be priced in fully is because does everyone know this? Do investirs care about 10 years from now?

I don't know so I said they may be partially priced in....the demographics may not be priced in at all or fully priced in...but US has a premium PE so somethING likely is priced in.

Did Japanese investors rationally price in horrible coming demographics in 1990? Nope they bid stocks to 50x earnings.

Have Chinese investors priced in the horrible demographics coming from their one child policy of past leading to coming sharp drop in work force? Likely to some degree with low PE, but maybe not fully?

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Re: US stocks still look better than anywhere else

Post by willthrill81 » Mon Jun 10, 2019 10:22 am

SovereignInvestor wrote:
Sat Jun 08, 2019 2:01 pm
Not sure why EMH has to be all or nothing?
It doesn't. Andrew Lo's adaptive market hypothesis makes far more sense to me.

An easy but solid demonstration that markets are not as efficient as many proponents of the EMH believe is the recurring phenomenon of factor premia declining shortly after publication. If the EMH were strictly accurate, the market should already be aware of factor premia. But logically, it is impossible for any or all market participants to be aware of every possible combination of existing information because the number of combinations is literally infinite.
“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: US stocks still look better than anywhere else

Post by Valuethinker » Mon Jun 10, 2019 10:29 am

willthrill81 wrote:
Mon Jun 10, 2019 10:22 am
SovereignInvestor wrote:
Sat Jun 08, 2019 2:01 pm
Not sure why EMH has to be all or nothing?
It doesn't. Andrew Lo's adaptive market hypothesis makes far more sense to me.


An easy but solid demonstration that markets are not as efficient as many proponents of the EMH believe is the recurring phenomenon of factor premia declining shortly after publication. If the EMH were strictly accurate, the market should already be aware of factor premia. But logically, it is impossible for any or all market participants to be aware of every possible combination of existing information because the number of combinations is literally infinite.
That's not quite correct.

What a strict Type II efficient market argument would say is that:

1. the apparent factor premia in the past data is simply a product of chance. And the evidence for that is that it offers no predictive power of the future. We just saw a "pattern" in random data, which was in fact just a random outcome. We cannot distinguish a Signal from Noise.

2. alternatively there was a factor premium. But once it is published academically, it's no longer Type III information (information available only to insiders, or to a small number of market participants). It's now Type II information (publicly available). Thus the premium attached to that factor rapidly disappears.

The decline of factor premia post discovery seems closer to the second explanation than the first. It also gives lots of work for budding finance Phds - either to get their Phd or then to be snapped up by some hedge fund - finding the next undiscovered anomaly ;-).

3. the Fama argument. Value might work, but it entails higher risk. There's plenty of evidence that that is true, especially for small cap value in periods of monetary tightening or crisis. Similarly the poor performance of Small Cap Growth stocks can be explained by the Lottery Ticket Effect (there's a new Google out there, somewhere) aka right skew of returns. Indeed if you strip out the unprofitable companies, much of the SCG underperformance gets wiped away.

None of this convinces me that the market is making systematic valuation mistakes US v. non US stocks given publicly available information.

I was just looking at Gazprom today - 3-4x PE, 8% yield. This company probably has the world's largest hydrocarbon reserves (that you can own as a private investor; although Saudi Aramco has issued a bond). Natural gas is the cleanest of the 3 main forms of burnable carbon (coal, oil, natural gas). Its largest customers are umbilically tied to it - without Russian gas, Europe freezes. The price discounts a lot of the known issues with Russian corporate governance, the fact that Gazprom is essentially an arm of the Russian state.

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Re: US stocks still look better than anywhere else

Post by Valuethinker » Mon Jun 10, 2019 10:36 am

columbia wrote:
Sat Jun 08, 2019 8:10 am
Valuethinker wrote:
Sat Jun 08, 2019 7:44 am
The problem with these lines of argument is that they tend to degenerate into quasi-sociological, highly anecdotal, comments about the superiority of US business practices and culture.

OR

They make an explicit link between US GDP growth and the performance of stock markets - when we know the actual correlation is weak or even negative.

AND

They all ignore the efficient markets paradigm. That publicly available information is fully reflected in the current prices of securities. Somehow, the market which is so good at pricing Amazon v. Tesla v. Exxon-Mobil, loses its mind at the water's edge, and systematically overvalues non US stocks (even Canadian ones?).

So you get some posters (willthrill81 for example) who explicitly say "no, I do not believe markets are efficient". OK, but that's hard to square with what we teach here about utility of index funds v. active, etc.

But a lot of other posters seem to believe 2 contradictory things - that markets are efficient, and that markets do not correctly price overseas stocks and their earnings growth prospects, against US stocks.

(The argument which does make sense is re success of American tech companies. But really it boils down to a small subset of those - Facebook, Apple, Amazon, Netscape, Google + Microsoft. So you could make a call that these companies will continue to be more successful than the market currently expects and reflects in their valuation ... and recent history (last 10 years) would suggest you are right).
I believe that markets are reasonably efficient and that all publicly available information is price in.

Ex-US is at only about 45% of global market cap.

Why do you think that’s the case?
Do you think that’s rational or irrational?
Given that the dollar is the global reserve currency, do you believe that there are rational reasons for a US investor to own less than 45% ex-US?
Do you believe that the myriad of shareholder protections - not necessarily present in other countries- should also inform that decision?
Do you believe that US investors should factor in taxes on ex-US, which are not recaptured by foreign tax credits?

To each their own, but I factor in all of the above.
You won't have seen the endless debates on this, but I have covered these off in other threads.

Home Country Bias (at least in currency, not in stock market) has a reasonable argument for it. And for a US investor, Home Country Bias generally is less problematic. For a non-USian, it really is not a good idea, even for a UK investor with a large and very global stock index.

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willthrill81
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Re: US stocks still look better than anywhere else

Post by willthrill81 » Mon Jun 10, 2019 11:46 am

Valuethinker wrote:
Mon Jun 10, 2019 10:29 am
willthrill81 wrote:
Mon Jun 10, 2019 10:22 am
SovereignInvestor wrote:
Sat Jun 08, 2019 2:01 pm
Not sure why EMH has to be all or nothing?
It doesn't. Andrew Lo's adaptive market hypothesis makes far more sense to me.


An easy but solid demonstration that markets are not as efficient as many proponents of the EMH believe is the recurring phenomenon of factor premia declining shortly after publication. If the EMH were strictly accurate, the market should already be aware of factor premia. But logically, it is impossible for any or all market participants to be aware of every possible combination of existing information because the number of combinations is literally infinite.
That's not quite correct.

What a strict Type II efficient market argument would say is that:

1. the apparent factor premia in the past data is simply a product of chance. And the evidence for that is that it offers no predictive power of the future. We just saw a "pattern" in random data, which was in fact just a random outcome. We cannot distinguish a Signal from Noise.

2. alternatively there was a factor premium. But once it is published academically, it's no longer Type III information (information available only to insiders, or to a small number of market participants). It's now Type II information (publicly available). Thus the premium attached to that factor rapidly disappears.

The decline of factor premia post discovery seems closer to the second explanation than the first. It also gives lots of work for budding finance Phds - either to get their Phd or then to be snapped up by some hedge fund - finding the next undiscovered anomaly ;-).

3. the Fama argument. Value might work, but it entails higher risk. There's plenty of evidence that that is true, especially for small cap value in periods of monetary tightening or crisis. Similarly the poor performance of Small Cap Growth stocks can be explained by the Lottery Ticket Effect (there's a new Google out there, somewhere) aka right skew of returns. Indeed if you strip out the unprofitable companies, much of the SCG underperformance gets wiped away.

None of this convinces me that the market is making systematic valuation mistakes US v. non US stocks given publicly available information.

I was just looking at Gazprom today - 3-4x PE, 8% yield. This company probably has the world's largest hydrocarbon reserves (that you can own as a private investor; although Saudi Aramco has issued a bond). Natural gas is the cleanest of the 3 main forms of burnable carbon (coal, oil, natural gas). Its largest customers are umbilically tied to it - without Russian gas, Europe freezes. The price discounts a lot of the known issues with Russian corporate governance, the fact that Gazprom is essentially an arm of the Russian state.
Those are all possibilities, but I don't personally find them as convincing as the possibility that markets are not as efficient as many believe.
“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

FireProof
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Re: US stocks still look better than anywhere else

Post by FireProof » Mon Jun 10, 2019 12:13 pm

heyyou wrote:
Wed Jun 05, 2019 7:09 pm
What is the "use by" date on the thread title?
A few years ago...

fennewaldaj
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Re: US stocks still look better than anywhere else

Post by fennewaldaj » Mon Jun 10, 2019 2:42 pm

Valuethinker wrote:
Mon Jun 10, 2019 10:29 am

I was just looking at Gazprom today - 3-4x PE, 8% yield. This company probably has the world's largest hydrocarbon reserves (that you can own as a private investor; although Saudi Aramco has issued a bond). Natural gas is the cleanest of the 3 main forms of burnable carbon (coal, oil, natural gas). Its largest customers are umbilically tied to it - without Russian gas, Europe freezes. The price discounts a lot of the known issues with Russian corporate governance, the fact that Gazprom is essentially an arm of the Russian state.
I thought this was interesting.
https://www.themoscowtimes.com/2019/05/ ... eap-a65702

jrbdmb
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Re: US stocks still look better than anywhere else

Post by jrbdmb » Mon Jun 10, 2019 3:15 pm

mrspock wrote:
Wed Jun 05, 2019 5:25 pm

Love the laid back life of Europeans, but the American way to run a business (e.g. emphasis on customer service) is unmatched.
I'm sure we could have quite a thread on instances where American businesses showed a distinct lack of "emphasis on customer service." :sharebeer

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Re: US stocks still look better than anywhere else

Post by Northern Flicker » Mon Jun 10, 2019 3:30 pm

Bloomberg author wrote: While American outperformance continues to defy history, the rest of the world remains trapped in a bear market.
This is classic (and bad) financial journalism— use present tense to describe past performance and present it in a way that suggests it is the driver for future performance.

US equities will outperform non-US equities unless and until they don’t anymore. If and when US equities underperform, pundits will be analyzing why and presenting it as insightful analysis of why international diversification is important.

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Re: US stocks still look better than anywhere else

Post by TropikThunder » Mon Jun 10, 2019 5:31 pm

mrspock wrote:
Wed Jun 05, 2019 5:25 pm

Love the laid back life of Europeans, but the American way to run a business (e.g. emphasis on customer service) is unmatched.
Priority #1 of American business is profit. Customer service is only tangentially relevant up to the point that it hurts revenue.

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Re: US stocks still look better than anywhere else

Post by ImUrHuckleberry » Mon Jun 10, 2019 7:30 pm

willthrill81 wrote:
Wed Jun 05, 2019 5:50 pm
mrspock wrote:
Wed Jun 05, 2019 5:47 pm
To be fair OP is bringing some new data points to table.
What new points are those? It seems to me that it's just the same story that it's been for a long while now: the U.S. is continuing to outperform ex-U.S. at a significant pace.
Probably a full 98 to 99 percent of the topics on the forum are repeat topics. There just isn't that much to talk about when it comes to buy and hold low cost diversified index funds.

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