[Are American markets likely to outperform INTL]

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garlandwhizzer
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[Are American markets likely to outperform INTL]

Post by garlandwhizzer » Sat May 02, 2020 9:52 pm

Bogle believed in American exceptionalism--that our markets and our economy are exceptional and likely to outperform INTL regardless of INTL's more attractive valuations as measured by PE, PB, etc.. I have always believed that valuations do matter and have agreed with Larry, Arnott, and Bernstein other luminaries that in the long run cheaper INTL stocks were due to make a comeback and outperform. I was a believer and went 50 US/50 INTL 15 years ago. Overall INTL like value itself has been a loser for 15 years. US outperformance only seems to continue in both up and down market cycles.

I suspect some of this is due to the facts that our economy relative to other DMs is more innovative, more entrepreneurial, we have the world's reserve currency, faster economic growth, more risk taking with disruptive and transformative tech than in Japan or Europe, plus we have the deepest equity and bond markets in the world which are very well regulated. That's a lot of pluses on the side of the US versus INTL. I'm beginning to wonder who's right: Bogle who favors US because it's exceptional with up to 20% INTL (not a requirement, merely an option) or the market analysis that many very bright students of the market believe in, experts who would argue differently. A 50/50 split is roughly along market weight lines which the EMH would support and it also might appeal to value factor investors because INTL looks on paper to be significantly better valued. It's been that way for a long time and in spite of the EMH and value factor theories, US especially US LCG just keeps chugging ahead.

I know there's no clear answer for this question, only opinions, but I would like to hear others thoughts.

Garland Whizzer

BH+
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Re: American exceptionalism

Post by BH+ » Sat May 02, 2020 10:00 pm

I think you are correct with regard to the exceptionalism, but some of the other arguments could have been made in the case of Japan in the 1970's and 80's.

On a more granular scale, at times, similar arguments are made in favor of XYZ stock, specific sectors, factors, etc.

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Re: American exceptionalism

Post by Jags4186 » Sat May 02, 2020 10:02 pm

What I know is that if I change my strategy my old strategy will immediately start to outperform my new strategy.

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Re: American exceptionalism

Post by runner540 » Sat May 02, 2020 10:05 pm

Did you see this thread?
viewtopic.php?f=1&t=255757

What about US levels of leverage and buybacks driving stock prices?
What about US educational and health outcomes (human capital) compared to other “developed markets”?
The US is middle of the pack in terms of transparency/corruption among “developed markets”.
https://www.transparency.org/news/press ... ts_new_low

Brb, gotta get popcorn for this thread :beer

typical.investor
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Re: American exceptionalism

Post by typical.investor » Sat May 02, 2020 10:17 pm

garlandwhizzer wrote:
Sat May 02, 2020 9:52 pm
I know there's no clear answer for this question, only opinions, but I would like to hear others thoughts.

Garland Whizzer
Valuations win in the end.

It’s only “when” that is of concern.

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JoMoney
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Re: American exceptionalism

Post by JoMoney » Sat May 02, 2020 10:21 pm

I don't believe Mr. Bogle believed this:
garlandwhizzer wrote:
Sat May 02, 2020 9:52 pm
Bogle believed ... likely to outperform INTL regardless of INTL's more attractive valuations as measured by PE, PB, etc..
If I recall correctly, I believe he did make a call in a specific time period where he believed the U.S. dollar was severely undervalued and would work to the benefit of U.S. equity holders... but largely I believe he thought the long-run returns of U.S. vs ex.US were likely to have similar expectations, but there were risks (like currency risk) involved, and simply was not something a U.S. investor needed to take.
I'll see if I can find a quote/reference for what I'm saying, but I would be interested if you could find a reference for yours stating that he believed it would outperform.


---
FWIW, This is a quote from his book "Common Sense On Mutual Funds"
...The race for superior market returns around the globe is never an easy one to call.
But there was what seemed to me an easy call in 1994. As it turned out, that call has proven correct so far: such weakness in the dollar could
not continue indefinitely...
And this is one from an interview back in 2010 (that hasn't worked out the way he might have guessed)
https://www.morningstar.com/articles/35 ... t-overseas
... I think, I guess, I'd say overall internationally--I don't happen to use international because I think the market is going to be an equalizer. And international and emerging markets will probably do more or less the same as the U.S. in the next 10 years...
Last edited by JoMoney on Sat May 02, 2020 10:46 pm, edited 1 time in total.
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Re: American exceptionalism

Post by anon_investor » Sat May 02, 2020 10:29 pm

Jags4186 wrote:
Sat May 02, 2020 10:02 pm
What I know is that if I change my strategy my old strategy will immediately start to outperform my new strategy.
Exactly!

I have been buying "American" (S&P500/Total Stock Market) for my entire investing life, including during the mid 2000s when international out performed. I live in America, I earned US dollars and I buy in US dollars, I do not need currency risk. I see no reason to deviate now.

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Re: American exceptionalism

Post by SimpleGift » Sat May 02, 2020 10:56 pm

One may or may not believe in American exceptionalism, but the financial markets and global investors in general do seem to believe in it, based on recent stock market valuations. And for the last decade or more, this belief has been rewarded, as earnings-per-share of U.S. companies have outpaced those from other world regions (in green, chart below).
  • Image
    Source: JPMorgan ChartBook, as of March 31, 2020.
Whether this outperformance will continue in the future is of course unknown, which is why many investors diversify globally. Personally, we only "half believe" in U.S. exceptionalism, with a 30% international stock allocation.
Last edited by SimpleGift on Sun May 03, 2020 6:43 am, edited 1 time in total.

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Re: American exceptionalism

Post by randomguy » Sat May 02, 2020 11:08 pm

typical.investor wrote:
Sat May 02, 2020 10:17 pm
garlandwhizzer wrote:
Sat May 02, 2020 9:52 pm
I know there's no clear answer for this question, only opinions, but I would like to hear others thoughts.

Garland Whizzer
Valuations win in the end.

It’s only “when” that is of concern.
Amazon PE ratio is 100
GM PE ratio is about 5

Which one is over valued? I am sure there will be a rotation (i.e. it was only a decade ago when international was saving the bacon of. your portfolio by crushing US returns) and we will make up a story to explain it. When and if that story has any validity is much harder to say.

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Re: American exceptionalism

Post by dmcmahon » Sun May 03, 2020 12:26 am

I’ll go with reserve currency, tech companies, and avoiding the forces of stagnation that have overcome Europe and Japan.

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Re: American exceptionalism

Post by pokebowl » Sun May 03, 2020 12:39 am

Total international indexes generally have a greater concentration in “old economy” sectors such as materials, financials and energy. Contrast that with the U.S, where technology services and consumer technology dominate the indexes. That alone accounts for much of the decade-long return disparity between U.S and non-U.S stocks. Its not the only reason, but a large one. I feel many here would be posting much different discussion talking points if our tech sector didn't quickly recover after the dot com crash of the early 2000s. Or if the sector ended up re-establishing itself in countries outside the U.S Which leads to my next point below -

I'd also argue as companies have become more global, the lines between U.S and non-U.S indexes have started to blur, and correlations between the two have risen over the last two decades (Several bogleheads have made various posts on this in the past). One could argue the address of a company’s headquarters has become less important to its growth potential than where it makes its revenue in various regional markets. This also means these same companies are impacted by those markets either directly or indirectly at macro levels which goes both ways...

We may eventually have something similar to Europe in the US, where the top companies that make up the S&P500 earn a majority (greater than 50%) of their revenue and business overseas while at the same time companies headquartered outside the U.S (which would mean omitted from U.S indexes) earn a majority of their revenue from inside the states. You would then have to ask yourself, who is really invested in the U.S with a total market or S&P 500 fund?

Buying the haystack and investing globally I feel is the best approach to address this going forward and its how I tailor my own portfolio.

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Re: American exceptionalism

Post by visualguy » Sun May 03, 2020 12:54 am

pokebowl wrote:
Sun May 03, 2020 12:39 am
I'd also argue as companies have become more global, the lines between U.S and non-U.S indexes have started to blur, and correlations between the two have risen over the last two decades (Several bogleheads have made various posts on this in the past). One could argue the address of a company’s headquarters has become less important to its growth potential than where it makes its revenue in various regional markets. This also means these same companies are impacted by those markets either directly or indirectly at macro levels which goes both ways...

We may eventually have something similar to Europe in the US, where the top companies that make up the S&P500 earn a majority (greater than 50%) of their revenue and business overseas while at the same time companies headquartered outside the U.S (which would mean omitted from U.S indexes) earn a majority of their revenue from inside the states. You would then have to ask yourself, who is really invested in the U.S with a total market or S&P 500 fund?

Buying the haystack and investing globally I feel is the best approach to address this going forward and its how I tailor my own portfolio.
The country where the company is listed and domiciled does make a difference, though, and your argument ignores that. There are many differences: currencies, level of government support (e.g. the US just injected trillions), taxation policies, regulation, management culture (more shareholder-centric or less, buybacks, etc.), level of entrepreneurship in society, levels of skilled immigration, demographics, etc. There's a long list of factors that differ significantly between countries and ultimately have a strong bearing on their stock markets.

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Re: American exceptionalism

Post by Tellurius » Sun May 03, 2020 3:29 am

garlandwhizzer wrote:
Sat May 02, 2020 9:52 pm
Bogle believed in American exceptionalism--that our markets and our economy are exceptional and likely to outperform INTL regardless of INTL's more attractive valuations as measured by PE, PB, etc.. I have always believed that valuations do matter and have agreed with Larry, Arnott, and Bernstein other luminaries that in the long run cheaper INTL stocks were due to make a comeback and outperform. I was a believer and went 50 US/50 INTL 15 years ago. Overall INTL like value itself has been a loser for 15 years. US outperformance only seems to continue in both up and down market cycles.

I suspect some of this is due to the facts that our economy relative to other DMs is more innovative, more entrepreneurial, we have the world's reserve currency, faster economic growth, more risk taking with disruptive and transformative tech than in Japan or Europe, plus we have the deepest equity and bond markets in the world which are very well regulated. That's a lot of pluses on the side of the US versus INTL. I'm beginning to wonder who's right: Bogle who favors US because it's exceptional with up to 20% INTL (not a requirement, merely an option) or the market analysis that many very bright students of the market believe in, experts who would argue differently. A 50/50 split is roughly along market weight lines which the EMH would support and it also might appeal to value factor investors because INTL looks on paper to be significantly better valued. It's been that way for a long time and in spite of the EMH and value factor theories, US especially US LCG just keeps chugging ahead.

I know there's no clear answer for this question, only opinions, but I would like to hear others thoughts.

Garland Whizzer
I would say that perhaps this is less visible because you are at the centre of it. I think English has a big role to play, the US’ huge internal market which no other Developed Market country has, the fact that the USA has the tech monopolies and the fact that other Developed Markets are insufficiently protectionist while the US is quite protectionist.

Eg BlackRock gets handed contracts from the Dutch Central Bank, which increases USA economic growth. Would a foreign company get USA government contracts? There’s serious economic arguments for preventing this as well, but European economies are too open.
I would also say that European stimulus after the financial crisis has helped stimulate the US and Chinese economies due to Europe’s balance of trade.
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Re: American exceptionalism

Post by mrspock » Sun May 03, 2020 3:51 am

I hesitate to even chime in on this thread as they usually devolve into a mess. But I'd just point out that the US does have certain structural advantages which give businesses based here and the country as a whole some wind at their backs. Things like:

1. Arable land
2. Access to fresh water
3. Highly defendable territory
4. Territory rich in resources
5. Large contiguous territory
6. On average, largely a mild climate
... and on.

There's little question in my mind that the country has large economic advantages, as for exceptionalism -- what's exceptional is any country which is able to match or beat the US in economic terms without such advantages -- that is exceptional.

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Re: American exceptionalism

Post by manatee2005 » Sun May 03, 2020 4:10 am

mrspock wrote:
Sun May 03, 2020 3:51 am
I hesitate to even chime in on this thread as they usually devolve into a mess. But I'd just point out that the US does have certain structural advantages which give businesses based here and the country as a whole some wind at their backs. Things like:

1. Arable land
2. Access to fresh water
3. Highly defendable territory
4. Territory rich in resources
5. Large contiguous territory
6. On average, largely a mild climate
... and on.

There's little question in my mind that the country has large economic advantages, as for exceptionalism -- what's exceptional is any country which is able to match or beat the US in economic terms without such advantages -- that is exceptional.
Yeah, Vulcan has a hot climate and still was able to have a good civilization. Vulcan exceptionalism!!!

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Re: American exceptionalism

Post by Tellurius » Sun May 03, 2020 4:30 am

mrspock wrote:
Sun May 03, 2020 3:51 am
I hesitate to even chime in on this thread as they usually devolve into a mess. But I'd just point out that the US does have certain structural advantages which give businesses based here and the country as a whole some wind at their backs. Things like:

1. Arable land
2. Access to fresh water
3. Highly defendable territory
4. Territory rich in resources
5. Large contiguous territory
6. On average, largely a mild climate
... and on.

There's little question in my mind that the country has large economic advantages, as for exceptionalism -- what's exceptional is any country which is able to match or beat the US in economic terms without such advantages -- that is exceptional.
Indeed, the book Prisoners of Geography makes a good case for the role geography played and plays in American development. People underestimate how small other “developed countries” are, excepting Australia.
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Forester
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Re: American exceptionalism

Post by Forester » Sun May 03, 2020 4:36 am

US had a good basis of Common Law & English language, and has attracted peoples who are compatible. No chance of land invasion from the North, East or West, large land area, plenty of decent farmland. My understanding is, the returns of US vs ex-US aren't vastly different since the 1970s, but we are awaiting mean reversion.

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Re: American exceptionalism

Post by typical.investor » Sun May 03, 2020 4:40 am

Tellurius wrote:
Sun May 03, 2020 4:30 am
mrspock wrote:
Sun May 03, 2020 3:51 am
I hesitate to even chime in on this thread as they usually devolve into a mess. But I'd just point out that the US does have certain structural advantages which give businesses based here and the country as a whole some wind at their backs. Things like:

1. Arable land
2. Access to fresh water
3. Highly defendable territory
4. Territory rich in resources
5. Large contiguous territory
6. On average, largely a mild climate
... and on.

There's little question in my mind that the country has large economic advantages, as for exceptionalism -- what's exceptional is any country which is able to match or beat the US in economic terms without such advantages -- that is exceptional.
Indeed, the book Prisoners of Geography makes a good case for the role geography played and plays in American development. People underestimate how small other “developed countries” are, excepting Australia.
Canada isn’t developed. That’s hilarious!!!

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Re: American exceptionalism

Post by btq96r » Sun May 03, 2020 4:46 am

Betting against America by putting money into international funds is one of those things I just never see as a wise play... certainly not for the investing timeline of my road to retirement for the next 20-25 years. That's my emotional answer. A more practical one is I don't feel secure in my knowledge of how foreign markets operate to understand where that money is going. I know the fundamentals of the US markets to a point where I know enough to understand why it's a good bet.
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Re: American exceptionalism

Post by mrspock » Sun May 03, 2020 5:42 am

typical.investor wrote:
Sun May 03, 2020 4:40 am
Tellurius wrote:
Sun May 03, 2020 4:30 am
mrspock wrote:
Sun May 03, 2020 3:51 am
I hesitate to even chime in on this thread as they usually devolve into a mess. But I'd just point out that the US does have certain structural advantages which give businesses based here and the country as a whole some wind at their backs. Things like:

1. Arable land
2. Access to fresh water
3. Highly defendable territory
4. Territory rich in resources
5. Large contiguous territory
6. On average, largely a mild climate
... and on.

There's little question in my mind that the country has large economic advantages, as for exceptionalism -- what's exceptional is any country which is able to match or beat the US in economic terms without such advantages -- that is exceptional.
Indeed, the book Prisoners of Geography makes a good case for the role geography played and plays in American development. People underestimate how small other “developed countries” are, excepting Australia.
Canada isn’t developed. That’s hilarious!!!
Canada ranks up there, but the US still scores higher in many of these categories. Arable land in Canada is massively less, and the climate is quite a bit harsher. I'm also not sure if the frigid north makes it easer or harder to defend...maybe that's a wash. That said, Canada probably scores higher in natural resources, and fresh water access (probably the largest reserves in the world).

My larger point is that I think people shouldn't frame this in some blind faith in the US way of life or government, instead I think of it as a country which is playing the economic game with a considerable edge over other "players".

This all said, there's obviously more risk due to the reduced diversification, but so far investors have been compensated with better equity returns.

Tellurius
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Re: American exceptionalism

Post by Tellurius » Sun May 03, 2020 6:14 am

typical.investor wrote:
Sun May 03, 2020 4:40 am
Tellurius wrote:
Sun May 03, 2020 4:30 am
mrspock wrote:
Sun May 03, 2020 3:51 am
I hesitate to even chime in on this thread as they usually devolve into a mess. But I'd just point out that the US does have certain structural advantages which give businesses based here and the country as a whole some wind at their backs. Things like:

1. Arable land
2. Access to fresh water
3. Highly defendable territory
4. Territory rich in resources
5. Large contiguous territory
6. On average, largely a mild climate
... and on.

There's little question in my mind that the country has large economic advantages, as for exceptionalism -- what's exceptional is any country which is able to match or beat the US in economic terms without such advantages -- that is exceptional.
Indeed, the book Prisoners of Geography makes a good case for the role geography played and plays in American development. People underestimate how small other “developed countries” are, excepting Australia.
Canada isn’t developed. That’s hilarious!!!
I’m sorry for forgetting Canada, my bad. I don’t see how this detracts from my point.
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Re: American exceptionalism

Post by Jack FFR1846 » Sun May 03, 2020 6:19 am

Name a US based company who does no international business.

I'm waiting.

That's why Bogle was right.
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Re: American exceptionalism

Post by Tellurius » Sun May 03, 2020 6:28 am

Jack FFR1846 wrote:
Sun May 03, 2020 6:19 am
Name a US based company who does no international business.

I'm waiting.

That's why Bogle was right.
If you take one step back: why do so many American businesses have the capital for overseas expansion? Why do so many foreigners buy American products?
Furthermore, why do so many American businesses have the capital for overseas expansion in a particular niche FIRST?
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Re: American exceptionalism

Post by nisiprius » Sun May 03, 2020 6:38 am

Henry Luce said that 1941 was going to be the beginning of "the American century." If so, taking it literally: 79 years down, 21 to go.
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Re: American exceptionalism

Post by Forester » Sun May 03, 2020 6:40 am

Japanese & European products are popular too. Japan was conquering the world in the 1980s. Americans get a bit giddy and mawkish on this stuff.

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Re: American exceptionalism

Post by typical.investor » Sun May 03, 2020 7:01 am

Jack FFR1846 wrote:
Sun May 03, 2020 6:19 am
Name a US based company who does no international business.

I'm waiting.

That's why Bogle was right.
Yet, when the USD is strong, profits from overseas is less. And foreign companies have easier in-roads to the US market.

Of course, big companies like Apple will try to hedge but it’s not a panacea.

But as long as the worlds safest asset also returns more than riskier alternatives, it’s a no-brainer for everyone to hold treasuries which will help keep the dollar strong.

And remember, foreigners can take advantage of US corporate tax cuts too. And they know that and did that too.

So to me, the US is not really the total market. If the USD looks to falter, and money is withdrawn, foreign stocks will benefit. A high USD is an economic drag, and US equities are priced at high valuations.

But I think Bogle was wrong due to the unknown such as pandemics. Wow has the US and Europe had tough times. I guess we’ll see the economic effects down the road.

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Re: American exceptionalism

Post by Stormbringer » Sun May 03, 2020 7:15 am

mrspock wrote:
Sun May 03, 2020 3:51 am
I hesitate to even chime in on this thread as they usually devolve into a mess. But I'd just point out that the US does have certain structural advantages which give businesses based here and the country as a whole some wind at their backs. Things like:

1. Arable land
2. Access to fresh water
3. Highly defendable territory
4. Territory rich in resources
5. Large contiguous territory
6. On average, largely a mild climate
... and on.

There's little question in my mind that the country has large economic advantages, as for exceptionalism -- what's exceptional is any country which is able to match or beat the US in economic terms without such advantages -- that is exceptional.
This. Most people don't understand the profound effect that geography has on the fortunes of nations. The United States arguably has the best geography of any country in the world by a significant margin.

In addition to geography, I would add two factors:
  • A culture and system of government that encourages entrepreneurship.
  • Our unique ability to absorb immigrants.
"Compound interest is the most powerful force in the universe." - Albert Einstein

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Re: American exceptionalism

Post by SimpleGift » Sun May 03, 2020 7:16 am

nisiprius wrote:
Sun May 03, 2020 6:38 am
Henry Luce said that 1941 was going to be the beginning of "the American century." If so, taking it literally: 79 years down, 21 to go.
Looking ahead to rest of the 21st century, it's most likely the large majority of the world's economic growth will be coming from the middle-income, emerging countries of China, India, Indonesia, Brazil, etc — and not the aging, slow-growing advanced economies. Based on current demographic and consumption trends, this transition appears well underway (chart below).
The question is: Over the next 50 to 75 years, which companies will best be able to take advantage of this growth in middle-class, emerging market consumers? No one honestly has a clue, which is why at least some international diversification would seem to make sense for U.S. investors — especially young U.S. investors.
Last edited by SimpleGift on Sun May 03, 2020 7:31 am, edited 1 time in total.

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Re: American exceptionalism

Post by firebirdparts » Sun May 03, 2020 7:18 am

Part of non USA performance is exchange rates, as we view that in dollars, and it makes me wonder what mechanism might send that the other direction.
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Re: American exceptionalism

Post by galeno » Sun May 03, 2020 7:30 am

10 yr CAGRs: VTI = 11.29%. VT = 7.07%.

I believe (hope) VT beats VTI over the next 10 years.

I maintain that USA domiciled investors and MAYBE some USA-NRAs with USA tax treaties should hold 100% USA domiciled equities. 100% VTI.

USA-NRAs w/o USA tax treaties should hold a global equity allocation. 100% VT.

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Re: American exceptionalism

Post by Tjb » Sun May 03, 2020 8:14 am

I spent 6 years running a manufacturing operation in Europe. I had also run similar operations in the US, so I could make a reasonable comparison. It was a great living experience for me and my family, and It was one of the most challenging and fascinating work experiences I have ever encountered. All said, I came away from that experience convinced that the US has a far superior business climate and is structured to promote business rather than over regulate and hinder it . There were tons of cultural differences that were manageable over time, but the biggest thing that jumped out at me was the speed of doing business. Europe is so stodgy and regulatory and those aspects are very counter productive. In the US, a company in VA. doing business with a company in OK. encounters very few issues and the transactions are seamless. In Europe, two companies the same distance apart are in different countries, and everything about that transaction becomes complicated. Couple that with cultural difference among workers and unions and I came away convinced that there was no huge benefit or need to invest outside of the US. Of course, most American Companies have international presence and having a small percentage invested Internationally is OK, but in my opinion, after that experience, the US is a far better bet.

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Re: American exceptionalism

Post by whereskyle » Sun May 03, 2020 8:18 am

Shareholders exert their will on the levers of political power in the U.S. moreso than in any other country I can think of. I still buy VT in addition to my major holding in VTSAX, but I feel very comfortable tilting toward the US and not by a little. Call me a cynic!
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Re: American exceptionalism

Post by anon_investor » Sun May 03, 2020 8:19 am

galeno wrote:
Sun May 03, 2020 7:30 am
10 yr CAGRs: VTI = 11.29%. VT = 7.07%.

I believe (hope) VT beats VTI over the next 10 years.

I maintain that USA domiciled investors and MAYBE some USA-NRAs with USA tax treaties should hold 100% USA domiciled equities. 100% VTI.

USA-NRAs w/o USA tax treaties should hold a global equity allocation. 100% VT.
+1. This makes a lot of sense.

stan1
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Re: American exceptionalism

Post by stan1 » Sun May 03, 2020 8:37 am

garlandwhizzer wrote:
Sat May 02, 2020 9:52 pm
I know there's no clear answer for this question, only opinions, but I would like to hear others thoughts.
Every international thread on this forum has addressed the issue. Sometimes directly but most of the time indirectly. Most justifications cited for only investing in US companies such as US companies do business internationally are rationalizations based on American exceptionalism.

It also gets wrapped in with political and even religious beliefs for some people (prosperity theology) which are prohibited topics on this forum so people talk around them.

People seem more reluctant to talk about age and sequence of returns though.

History may tell us that Jack Bogle and Warren Buffett were very blessed based on their birth year (along with skill and intuition, too, of course). Their birth year may have given them a very favorable sequence of returns.

If you are over 60 or 70 your sequence of returns based on birth year are pretty well set for the rest of your life (20-30 years) and you may be able to keep riding the coat tails of Post WW II US economy, society, and government (albeit with a large 401K balance not a pension).

If you are under 30 there's much more uncertainty about what might happen over the next 70 years.

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Re: American exceptionalism

Post by 7eight9 » Sun May 03, 2020 8:46 am

The United States has been lucky. No other way to put it. On the right side of two world wars. Not conquered. No wonder it has done so well. And yet the Japanese market far surpassed the US market circa 1989.

Trees don't grow to the sky. To think that the US market will dominate in the next century reeks of hubris (and performance chasing).

I'll bet on the whole haystack - not a small fraction of it.
I guess it all could be much worse. | They could be warming up my hearse.

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Re: American exceptionalism

Post by whereskyle » Sun May 03, 2020 8:48 am

galeno wrote:
Sun May 03, 2020 7:30 am
10 yr CAGRs: VTI = 11.29%. VT = 7.07%.

I believe (hope) VT beats VTI over the next 10 years.

I maintain that USA domiciled investors and MAYBE some USA-NRAs with USA tax treaties should hold 100% USA domiciled equities. 100% VTI.

USA-NRAs w/o USA tax treaties should hold a global equity allocation. 100% VT.
U.S. resident here. Most of my investment dollars are in VTSAX, but I love the simplicity of VT and have been steadily building a position. Can you help me understand (or point me to a source that might explain) the tax (and any other adverse) consequences of my holding VT over an all US portfolio? Thanks in advance!
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

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JoMoney
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Re: American exceptionalism

Post by JoMoney » Sun May 03, 2020 8:52 am

stan1 wrote:
Sun May 03, 2020 8:37 am
...
People seem more reluctant to talk about age and sequence of returns though.
...
If you are under 30 there's much more uncertainty about what might happen over the next 70 years.
I don't think people are 'reluctant' to talk about it, there's just not much that can be said that's of use one way or another when talking about equities. Someone attempts to pick a specific time period where an extreme withdrawal rate would have failed without an ex-us allocation, and someone else shows a different time period where the same withdrawal scheme fails because of the ex-us allocation.
Of course the future is always uncertain, and younger people have a potentially longer time-period ahead of them (always been that way), but the way to take uncertainty out of the portfolio isn't by mixing stock allocations with potentially more risky allocations, it's with bonds, cash, maybe even owning a home provides some level of certainty relative to future rents.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

PowderDay9
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Re: American exceptionalism

Post by PowderDay9 » Sun May 03, 2020 9:07 am

Jack FFR1846 wrote:
Sun May 03, 2020 6:19 am
Name a US based company who does no international business.

I'm waiting.

That's why Bogle was right.
Not disagreeing with the point you're making but just for fun....

Anthem Blue Cross?

WhyNotUs
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Re: American exceptionalism

Post by WhyNotUs » Sun May 03, 2020 9:16 am

Economy and markets are different things but linked.

Over time, the international investments will probably be more profitable from a market perspective. Much of the gains in equities have come from worker extractions and externalizing costs. That will likely be increasingly harder as Main St. realizes that Wall St. has not had their best interests at heart.

The American consumer has kept the ship afloat by borrowing and the government seems to be trying to outdo them. The pendulum will swing over time and the 99% will have its day. The interest is American manufacturing could turn from a slogan to a consumer demand at some point. The economy could deleverage and come out the other side stronger. Impossible to know at this point.

The point being that the economy could become more resilient and markets have a hard time. We will see. Free market disruption is out there as one possibility.
I own the next hot stock- VTSAX

Tellurius
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Re: American exceptionalism

Post by Tellurius » Sun May 03, 2020 9:17 am

Tjb wrote:
Sun May 03, 2020 8:14 am
I spent 6 years running a manufacturing operation in Europe. I had also run similar operations in the US, so I could make a reasonable comparison. It was a great living experience for me and my family, and It was one of the most challenging and fascinating work experiences I have ever encountered. All said, I came away from that experience convinced that the US has a far superior business climate and is structured to promote business rather than over regulate and hinder it . There were tons of cultural differences that were manageable over time, but the biggest thing that jumped out at me was the speed of doing business. Europe is so stodgy and regulatory and those aspects are very counter productive. In the US, a company in VA. doing business with a company in OK. encounters very few issues and the transactions are seamless. In Europe, two companies the same distance apart are in different countries, and everything about that transaction becomes complicated. Couple that with cultural difference among workers and unions and I came away convinced that there was no huge benefit or need to invest outside of the US. Of course, most American Companies have international presence and having a small percentage invested Internationally is OK, but in my opinion, after that experience, the US is a far better bet.
Which country in Europe if I may ask?

Part of the problem is that Europe is a concept and not a reality:)
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Stinky
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Re: American exceptionalism

Post by Stinky » Sun May 03, 2020 9:19 am

Jags4186 wrote:
Sat May 02, 2020 10:02 pm
What I know is that if I change my strategy my old strategy will immediately start to outperform my new strategy.
This is also my experience.

I've occasionally changed my strategy. Never worked out. It's best to stay with the tried, true, and boring.
It's a GREAT day to be alive - Travis Tritt

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JoMoney
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Re: American exceptionalism

Post by JoMoney » Sun May 03, 2020 9:26 am

PowderDay9 wrote:
Sun May 03, 2020 9:07 am
Jack FFR1846 wrote:
Sun May 03, 2020 6:19 am
Name a US based company who does no international business.

I'm waiting.

That's why Bogle was right.
Not disagreeing with the point you're making but just for fun....

Anthem Blue Cross?
Lots of REITs and utility companies too... There are some sectors that regulation would make it difficult to be ex-US.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

lostdog
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Re: American exceptionalism

Post by lostdog » Sun May 03, 2020 9:43 am

The US only investors here tend to be overly patriotic or get caught up in recency bias which results in performance chasing. You'll see all sorts of rationalizations trying to side step those facts.
Global Market Cap Equity/1 Year Cash/Short Bonds || 25x Expenses

UpperNwGuy
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Re: American exceptionalism

Post by UpperNwGuy » Sun May 03, 2020 9:44 am

Stinky wrote:
Sun May 03, 2020 9:19 am
Jags4186 wrote:
Sat May 02, 2020 10:02 pm
What I know is that if I change my strategy my old strategy will immediately start to outperform my new strategy.
This is also my experience.

I've occasionally changed my strategy. Never worked out. It's best to stay with the tried, true, and boring.
Another way of saying, "If it ain't broke, don't fix it."

Tjb
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Re: American exceptionalism

Post by Tjb » Sun May 03, 2020 9:45 am

Tellurius

I was in Denmark, on the Peninsula, basically the top of the continent, about as far away from every other country as you can get. I will say that I did gain an appreciation for the Danish Lifestyle. When I fist got there I was perplexed at what the incentive was to try harder, a completely different culture compared to the US. A huge safety net. I really don''y like when people call Denmark a socialist country and it shows they do not appreciate the difference between social democrat and pure socialism. I had to complete for Danish business against companies in Turkey where the labor rate was a fraction of the Danish labor rate. Capitalism at it's finest in some ways. Lifestyle was great, Working there and doing business there was another story.

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Re: American exceptionalism

Post by Valuethinker » Sun May 03, 2020 9:52 am

Tellurius wrote:
Sun May 03, 2020 4:30 am
mrspock wrote:
Sun May 03, 2020 3:51 am
I hesitate to even chime in on this thread as they usually devolve into a mess. But I'd just point out that the US does have certain structural advantages which give businesses based here and the country as a whole some wind at their backs. Things like:

1. Arable land
2. Access to fresh water
3. Highly defendable territory
4. Territory rich in resources
5. Large contiguous territory
6. On average, largely a mild climate
... and on.

There's little question in my mind that the country has large economic advantages, as for exceptionalism -- what's exceptional is any country which is able to match or beat the US in economic terms without such advantages -- that is exceptional.
Indeed, the book Prisoners of Geography makes a good case for the role geography played and plays in American development. People underestimate how small other “developed countries” are, excepting Australia.
And Canada ;-)

(Which has roughly 5/3 the population of Aystralia and is the world's second biggest country).

I often find people don't realise just how large Japanese gdp is, in world ranking, despite 3 decades of limited growth. GDP per capita performance has been very close to USA.

Natural resources? Practically none except for some coal.

Valuethinker
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Re: American exceptionalism

Post by Valuethinker » Sun May 03, 2020 9:55 am

Tellurius wrote:
Sun May 03, 2020 6:14 am
typical.investor wrote:
Sun May 03, 2020 4:40 am
Tellurius wrote:
Sun May 03, 2020 4:30 am
mrspock wrote:
Sun May 03, 2020 3:51 am
I hesitate to even chime in on this thread as they usually devolve into a mess. But I'd just point out that the US does have certain structural advantages which give businesses based here and the country as a whole some wind at their backs. Things like:

1. Arable land
2. Access to fresh water
3. Highly defendable territory
4. Territory rich in resources
5. Large contiguous territory
6. On average, largely a mild climate
... and on.

There's little question in my mind that the country has large economic advantages, as for exceptionalism -- what's exceptional is any country which is able to match or beat the US in economic terms without such advantages -- that is exceptional.
Indeed, the book Prisoners of Geography makes a good case for the role geography played and plays in American development. People underestimate how small other “developed countries” are, excepting Australia.
Canada isn’t developed. That’s hilarious!!!
I’m sorry for forgetting Canada, my bad. I don’t see how this detracts from my point.
Americans ;-)

We are used to it ;-).

Good news is pot was something like our 4th largest export (oil and gas no 1; auto parts and vehicles both our largest export *and* import so what you are really seeing is total economic integration rather than genuine comparative advantage).

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JoMoney
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Re: American exceptionalism

Post by JoMoney » Sun May 03, 2020 9:59 am

lostdog wrote:
Sun May 03, 2020 9:43 am
The US only investors here tend to be overly patriotic or get caught up in recency bias which results in performance chasing. You'll see all sorts of rationalizations trying to side step those facts.
Perhaps they aren't "trying to side step those facts", it's just not relevant to anybody but you. You frequently like to project your view that it's somehow "xenophobic" to not have a global allocation, but I've never seen someone looking to hold a portfolio that was "US only" with no exposure to outside US sales, manufacturing, taxation, or employees. Most that do own a US index fund, point out there's a great deal of that baked in with the multi-national companies traded on US markets.
Last edited by JoMoney on Sun May 03, 2020 10:00 am, edited 1 time in total.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

bling
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Re: American exceptionalism

Post by bling » Sun May 03, 2020 10:00 am

i don't quite follow the logic that owning 100% US stocks is sufficient because they do business overseas. the exact same thing also applies in ex-US. we are the biggest consumers in the world and it boggles my mind that all of the companies exporting goods to us did not do so well in the past decade.

is there a way to figure out the returns of the US market *excluding* big tech?

https://www.cnbc.com/2020/01/28/sp-500- ... ebook.html

the 5 biggest companies are all tech stocks and account for 17.5% of the S&P 500. i wonder how the S&P495 has done vs the rest of the world for the past 2 decades.

acegolfer
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Re: American exceptionalism

Post by acegolfer » Sun May 03, 2020 10:03 am

garlandwhizzer wrote:
Sat May 02, 2020 9:52 pm
A 50/50 split is roughly along market weight lines which the EMH would support
Why does EMH support 50/50 but not other ratios?

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