[Are American markets likely to outperform INTL]

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Dominic
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Re: [Are American markets likely to outperform INTL]

Post by Dominic » Wed May 06, 2020 12:07 am

asif408 wrote:
Tue May 05, 2020 11:04 am
anoop wrote:
Tue May 05, 2020 12:41 am
I saw a video recently but I can't find it or even remember who was presenting it. It explained that because the USD is the world's reserve currency, it causes capital to flow to the US and will also cause the dollar to keep rising in value compared to other currencies. This process will continue until the dollar is replaced with something else (who knows when that happens).
I suggest reading about purchasing power parity. If the dollar keeps appreciating it will make US exports more expensive and US imports cheaper, and the opposite will happen in the rest of the world. This tends to cause a trade imbalance and would eventually cause currency devaluation in the US. Historically, I'm not sure any country's currency has ever permanently risen relative to the rest of the world; it tends to be a cyclical thing.
US interest rates were substantially higher than those of Japan, Germany, etc. for much of the past decade. The Fed tightened while other central banks allowed or even encouraged negative rates. That interest rate spread likely drove the dollar up.

Our rates are still higher than most developed countries' rates, but the spread is a lot lower now than it was a few months ago. Perhaps the dollar is about to weaken and international stocks will finally start appreciating again.

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dmcmahon
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Re: [Are American markets likely to outperform INTL]

Post by dmcmahon » Wed May 06, 2020 12:16 am

Dominic wrote:
Wed May 06, 2020 12:07 am
asif408 wrote:
Tue May 05, 2020 11:04 am
anoop wrote:
Tue May 05, 2020 12:41 am
I saw a video recently but I can't find it or even remember who was presenting it. It explained that because the USD is the world's reserve currency, it causes capital to flow to the US and will also cause the dollar to keep rising in value compared to other currencies. This process will continue until the dollar is replaced with something else (who knows when that happens).
I suggest reading about purchasing power parity. If the dollar keeps appreciating it will make US exports more expensive and US imports cheaper, and the opposite will happen in the rest of the world. This tends to cause a trade imbalance and would eventually cause currency devaluation in the US. Historically, I'm not sure any country's currency has ever permanently risen relative to the rest of the world; it tends to be a cyclical thing.
US interest rates were substantially higher than those of Japan, Germany, etc. for much of the past decade. The Fed tightened while other central banks allowed or even encouraged negative rates. That interest rate spread likely drove the dollar up.

Our rates are still higher than most developed countries' rates, but the spread is a lot lower now than it was a few months ago. Perhaps the dollar is about to weaken and international stocks will finally start appreciating again.
Read the Christine Benz interview. Currency doesn't explain the performance gap. Nor does the sector mix. Nor multiple expansion. EPS growth accounts for most of it, said the interviewee who crunched the data. Make of it what you will:

https://www.morningstar.com/articles/96 ... ave-lagged

typical.investor
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Joined: Mon Jun 11, 2018 3:17 am

Re: [Are American markets likely to outperform INTL]

Post by typical.investor » Wed May 06, 2020 1:10 am

dmcmahon wrote:
Wed May 06, 2020 12:16 am
Dominic wrote:
Wed May 06, 2020 12:07 am
asif408 wrote:
Tue May 05, 2020 11:04 am
anoop wrote:
Tue May 05, 2020 12:41 am
I saw a video recently but I can't find it or even remember who was presenting it. It explained that because the USD is the world's reserve currency, it causes capital to flow to the US and will also cause the dollar to keep rising in value compared to other currencies. This process will continue until the dollar is replaced with something else (who knows when that happens).
I suggest reading about purchasing power parity. If the dollar keeps appreciating it will make US exports more expensive and US imports cheaper, and the opposite will happen in the rest of the world. This tends to cause a trade imbalance and would eventually cause currency devaluation in the US. Historically, I'm not sure any country's currency has ever permanently risen relative to the rest of the world; it tends to be a cyclical thing.
US interest rates were substantially higher than those of Japan, Germany, etc. for much of the past decade. The Fed tightened while other central banks allowed or even encouraged negative rates. That interest rate spread likely drove the dollar up.

Our rates are still higher than most developed countries' rates, but the spread is a lot lower now than it was a few months ago. Perhaps the dollar is about to weaken and international stocks will finally start appreciating again.
Read the Christine Benz interview. Currency doesn't explain the performance gap. Nor does the sector mix. Nor multiple expansion. EPS growth accounts for most of it, said the interviewee who crunched the data. Make of it what you will:

https://www.morningstar.com/articles/96 ... ave-lagged
I am not convinced by that interview. It seems like rubbish.

The Trade Weighted U.S. Dollar Index: Advanced Foreign Economies, Goods and Services is up 15% over the last 10 years. Yet, that M* article says currency accounts for 0.5% of the 7% annualized difference in returns between US and foreign stocks.

The M* article states US and international equities have had similar multiple expansions over the last 10 years so that doesn’t explain the remaining 6.5% difference. Yet clearly US stocks have higher PE 10 ratios than 10 years ago and international lower.

So the conclusion that the US has seen better returns due to EPS increases to me seems quite suspect. Um, borrowing for buybacks will do that.

The effect of currency, multiple expansion, and EPS data all seem wrong.

cj2018
Posts: 183
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Re: [Are American markets likely to outperform INTL]

Post by cj2018 » Wed May 06, 2020 2:16 am

I just binge-watched the WWII in HD Colour on Netflix, and without sounding too political here, it's clear to me that without America's leadership and its citizens' will to fight for fundamental Western values, the world wouldn't have almost 200 sovereign states as of today. Instead, there would be 3 or maybe 4 sovereign states at most and majority of people on the planet would still live in the dark age where they either speak German in Europe, or Japanese in East Asia/Pacific.

I believe we need to learn from history to understand that yes, America is really exceptional and unique in human history:
  • Only country in history to be founded by immigrants and continues to accept new immigrants, in meaniful quantity
  • Only country in history with non-homogeneous population
  • Only country in history that's considered THE TOP place to attract and suck in talents, globally (aka talent drain rest of the world) - even dictators send their children and horde their wealth in this country
  • Only country in history with the moral standing and the means to uphold fundamental Western values that make it possible for the society to proper in the long run, consistently
  • Only country in human history with the privilege of printing WORLD reserve currency used by Global trade
  • Only country in modern history with consistent sovereignty over 300+ years (political stability)
  • Only country in history with over 300M populations and resources-rich land, but with no comparable nation in size as neighbors (unique geo advantage #1)
  • Only country in history with over 300M populations and resources-rich land, but with no land boundary on 2 of 4 sides and is oceans away from other major powers (unique geo advantage #2)
Throughout modern history, America has proven itself as the beacon of freedom in a searching world and that's a big reason why I'm 100% VTSAX. Well, another practical reason is because I also live in America and earns/spends in USD, so I see little value in investing INTL (don't buy diversification as big enough of a factor in this debate). Okay fine, another big reason is because unless we go through another WW3, i don't really see the point of fighting the established economic and financial world order created by US that has the best odds of incubating the next FAANGs and trillion market cap companies (oh wait, they are all American companies!). Therefore, I'm simply all-in according to the current world economic order and ways of investing.

Again, I'm a student of history. If (big if) and when we transition from the current American Century to another Century, my belief is it doesn't matter how much we allocate to US/ex-US, we would all be starting from zero again!

Btw, I fully advocate ex-US investors not to over-weight US market. but I have a feeling lots of non-US investors who have the means and access, they are probably over-weight on US assets (stocks, bonds, real estate etc.) one way or another.

Again, I just don't see the point of US-domicile investors having more than 10% or at most 20% allocated to ex-US, and even that's just for the comfort of "diversification" and i'm not convinced such portfolio would produce superior risk-adjusted returns, over the long haul compared to 100% VSTAX or VFIAX.

- an immigrant from one of the big "emerging market" country in the East.

typical.investor
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Joined: Mon Jun 11, 2018 3:17 am

Re: [Are American markets likely to outperform INTL]

Post by typical.investor » Wed May 06, 2020 2:27 am

cj2018 wrote:
Wed May 06, 2020 2:16 am
I just binge-watched the WWII in HD Colour on Netflix, and without sounding too political here, it's clear to me that without America's leadership and its citizens' will to fight for fundamental Western values, the world wouldn't have almost 200 sovereign states as of today. Instead, there would be 3 or maybe 4 sovereign states at most and majority of people on the planet would still live in the dark age where they either speak German in Europe, or Japanese in East Asia/Pacific.
I just remind people that more Americans died in the Civil War than WWII, and if we in the North hadn't marched South to free enslaved human beings, that slavery might still exist today most likely in the Southern States, Caribbean and anywhere else the Confederacy could influence. Actually, it seems obvious that the Confederacy would have aligned with Axis powers given the whole white supremacy thing and all. I really don't see Germans or Japanese people as being any better or worse than Southerners and their traditions in the US.

The claim that Americans somehow have better values rings hollow to me because it's simply a matter of historical record that "no they don't". And yeah I am likely a much prouder and more patriotic American than you can imagine. But I agree, it's been a long and hard fight for fundamental human rights.

Anyway, maybe so many Americans' historically approving of unrealistic wages for their countrymen is one reason why American companies do so well.
Last edited by typical.investor on Wed May 06, 2020 3:42 am, edited 4 times in total.

dboeger1
Posts: 216
Joined: Fri Jan 13, 2017 7:32 pm

Re: American exceptionalism

Post by dboeger1 » Wed May 06, 2020 2:31 am

ram wrote:
Sun May 03, 2020 12:49 pm
Why stop at American exceptionalism. Why not look at Californian exceptionalism (and Silicon valley exceptionalism). If California based companies do much better than US ex California then should we only invest in California based companies.

I will continue to invest in Intt.
This is a great point, and ties into something I've been thinking a lot about lately. My wife and I just recently started considering buying our first home, and in doing research about real estate, both from shelter and investment perspectives, it struck me how leverage was so normalized compared to buying stocks on margin. Now, I don't really want to get into a discussion on whether margin makes sense for stock investors, because there are so many details that play into that, but I did get to thinking that if it's so normal to take on risk in the form of leverage for outsized returns, there should be a similar way to accomplish the same thing with stocks.

So I started looking into those popular lifecycle investment threads that suggest using leverage early in one's career to maximized time diversification, and in doing so, I kind of realized that leverage mostly magnifies the underlying portfolio's returns without modifying its risk characteristics. Just like a home's neighborhood and schools don't get better or worse because of a mortgage, a company isn't more or less likely to go bankrupt because you buy its stock on margin. That makes margin a fairly investment-agnostic way to amplify returns without introducing additional risk (again, I'm ignoring the mechanical risks of margin calls and suboptimal taxation for the sake of the argument).

Additionally, I started challenging my thoughts on global market investing because as a 100% VTWAX investor, I too have been pretty disappointed with the past decade of ex-US returns. But in reading the research papers and articles, time and time again, I kept seeing statements and evidence suggesting that a global cap-weighted equity index returned better risk-adjusted returns over the long run than even an all-US portfolio.

Now, admittedly, I understand all this market stuff at a very basic layman's level, so I don't really understand what goes into calculating risk-adjusted returns, but conceptually, when I put those 2 concepts together in my mind, an epiphany struck me: leverage is for amplifying returns, and diversification is for reducing risk. They are 2 separate things, and they often get conflated. I think perhaps investors have gotten used to treating the US market as the benchmark for stocks over the past decade, but isn't it more precise to say that the overall market beta factor returns were lower than the recent US market returns would suggest, and an all-US portfolio has instead just been a lucky active bet with outsized performance but additional single-country risk? I mean, after all, it's not that hard to imagine scenarios in which an all-US portfolio would turn out terribly. I haven't compared the relative market performances of Italy and Germany in quite a while, but I'm guessing if I were to look now, Germany would have likely outperformed by a significant margin in recent months for reasons having everything to do with disruption due to the pandemic and very little to do with their relative economic prospects from a year ago. So focusing on the cumulative ex-US returns and how they compare to US markets could be missing the point entirely. The point is not to match US returns at all, just like the point of buying an S&P 500 fund is not to match Microsoft returns. If an active bet outperforms a total market index, more power to the people who made that active bet, but active bets are not without additional risk, so you can't compare them apples to apples.

If that's the case, then I think there are 2 cases to consider: 1) for people who are less than 100% allocated to stocks, they may want to consider switching to a global cap-weight portfolio but also increasing their allocation to stocks, because presumably, a bigger global position has a similar risk profile to a smaller all-US position, and 2) for people who are at 100% stocks, they may want to consider switching to a global portfolio and amplifying returns with margin or some other form of leverage. In other words, I think people with an all-US recency bias may be overestimating both returns and risks of stocks globally, and so they can actually afford to reduce risk by diversifying and then bring that risk back up to their risk tolerance by increasing stock allocation or using leverage beyond 100% stocks. The global position is inherently less risky than any bet on a single individual country, and it will always underperform the top individual countries' markets any given year, so a higher stake in globally diversified equities can yield similar returns with less risk. Again, it's kind of missing the point to say that US beat ex-US for the past decade, because if you're something like 50% stocks / 50% bonds, one could also say 75% global cap-weighted stocks / 25% bonds may have beat your portfolio in that same decade with similar levels of risk. You can't really just look at any top-performing market in isolation and call it an optimal investment going forward based on past performance. That goes back to the whole core philosophy of indexing in the first place, the same as it is within the US markets.

Tellurius
Posts: 119
Joined: Mon Jul 23, 2018 6:42 pm

Re: [Are American markets likely to outperform INTL]

Post by Tellurius » Wed May 06, 2020 3:14 am

cj2018 wrote:
Wed May 06, 2020 2:16 am
I just binge-watched the WWII in HD Colour on Netflix, and without sounding too political here, it's clear to me that without America's leadership and its citizens' will to fight for fundamental Western values, the world wouldn't have almost 200 sovereign states as of today. Instead, there would be 3 or maybe 4 sovereign states at most and majority of people on the planet would still live in the dark age where they either speak German in Europe, or Japanese in East Asia/Pacific.

I believe we need to learn from history to understand that yes, America is really exceptional and unique in human history:
  • Only country in history to be founded by immigrants and continues to accept new immigrants, in meaniful quantity
America was founded by English Americans. All of its institutions were established and designed by them. For the first 40 years of its founding, the years that gave the “national spirit” time to coalesce, there was practically no immigration. It’s historically inaccurate to say it was founded by immigrants, unless you mean English Americans. You might say immigrants played in the house English Americans built.
If that’s not what you mean, then you’d have to count every country in America, which were founded by Spanish, Portuguese and French.

  • Only country in history with non-homogeneous population
Have you been to Europe lately? It’s a very inaccurate statement. Also, as far as I understand, American culture assimilates children of immigrants much more easily than some Europeans ones.
  • Only country in history that's considered THE TOP place to attract and suck in talents, globally (aka talent drain rest of the world) - even dictators send their children and horde their wealth in this country
The UK?
  • Only country in history with the moral standing and the means to uphold fundamental Western values that make it possible for the society to proper in the long run, consistently
  • Only country in human history with the privilege of printing WORLD reserve currency used by Global trade
Ahistorical. Ignores the role of the United Kingdom in global finance up to WW1. Also ignores the Dutch and the French earlier than that.
  • Only country in modern history with consistent sovereignty over 300+ years (political stability)
Again, ignores the UK. Ignores Canada. It even ignores Switzerland.
  • Only country in history with over 300M populations and resources-rich land, but with no comparable nation in size as neighbors (unique geo advantage #1)
  • Only country in history with over 300M populations and resources-rich land, but with no land boundary on 2 of 4 sides and is oceans away from other major powers (unique geo advantage #2)
Throughout modern history, America has proven itself as the beacon of freedom in a searching world and that's a big reason why I'm 100% VTSAX. Well, another practical reason is because I also live in America and earns/spends in USD, so I see little value in investing INTL (don't buy diversification as big enough of a factor in this debate). Okay fine, another big reason is because unless we go through another WW3, i don't really see the point of fighting the established economic and financial world order created by US that has the best odds of incubating the next FAANGs and trillion market cap companies (oh wait, they are all American companies!). Therefore, I'm simply all-in according to the current world economic order and ways of investing.

Again, I'm a student of history. If (big if) and when we transition from the current American Century to another Century, my belief is it doesn't matter how much we allocate to US/ex-US, we would all be starting from zero again!
- European from a tiny island

Just to correct some inaccuracies.
Last edited by Tellurius on Wed May 06, 2020 8:59 am, edited 1 time in total.
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bitmouse
Posts: 76
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Re: [Are American markets likely to outperform INTL]

Post by bitmouse » Wed May 06, 2020 5:59 am

This is a great example of the non-bogleheady arguments I referenced earlier.

"Students of history" touting their exceptional geopolitical ideas in argument of stock picking is no different than "chartists" touting their technical method for reading the leaves in the graphs. People should feel free to do those if they want, but I object to advocating it under the Boglehead banner.

rascott
Posts: 2112
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Re: American exceptionalism

Post by rascott » Wed May 06, 2020 9:44 am

dmcmahon wrote:
Tue May 05, 2020 11:08 pm
rascott wrote:
Tue May 05, 2020 9:30 pm
whereskyle wrote:
Mon May 04, 2020 8:52 am
Dottie57 wrote:
Sun May 03, 2020 10:32 am
With all of the exceptionalism here, remember the exceptional greed that caused the Great Recession.
Great point. It's that exceptional greed that has driven p/e multiples through the roof as well, making u.s.-equity investors happy due to loads of "speculative return," as Jack would call it. It costs $1300+ for $10 of Google earnings. This is ridiculous and unsustainable. But it also shows that low valuations are not the only piece of the puzzle, as the value premium has been drubbed now for 30 years running. Trust me, I'm expecting Reversion to the Mean as much as anyone, but "Nobody knows nothing."

Where are you coming up with that valuation on Google?

TTM earnings were $34b. Market cap is $920b. That's a 27 trailing PE.

Nowhere near the 130 you mentioned.
Could he have meant Amazon? :twisted:


Must have..... that's closer on Amazon.

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dmcmahon
Posts: 2323
Joined: Fri Mar 21, 2008 10:29 pm

Re: [Are American markets likely to outperform INTL]

Post by dmcmahon » Wed May 06, 2020 10:46 am

typical.investor wrote:
Wed May 06, 2020 1:10 am
dmcmahon wrote:
Wed May 06, 2020 12:16 am
Dominic wrote:
Wed May 06, 2020 12:07 am
US interest rates were substantially higher than those of Japan, Germany, etc. for much of the past decade. The Fed tightened while other central banks allowed or even encouraged negative rates. That interest rate spread likely drove the dollar up.

Our rates are still higher than most developed countries' rates, but the spread is a lot lower now than it was a few months ago. Perhaps the dollar is about to weaken and international stocks will finally start appreciating again.
Read the Christine Benz interview. Currency doesn't explain the performance gap. Nor does the sector mix. Nor multiple expansion. EPS growth accounts for most of it, said the interviewee who crunched the data. Make of it what you will:

https://www.morningstar.com/articles/96 ... ave-lagged
I am not convinced by that interview. It seems like rubbish.

The Trade Weighted U.S. Dollar Index: Advanced Foreign Economies, Goods and Services is up 15% over the last 10 years. Yet, that M* article says currency accounts for 0.5% of the 7% annualized difference in returns between US and foreign stocks.

The M* article states US and international equities have had similar multiple expansions over the last 10 years so that doesn’t explain the remaining 6.5% difference. Yet clearly US stocks have higher PE 10 ratios than 10 years ago and international lower.

So the conclusion that the US has seen better returns due to EPS increases to me seems quite suspect. Um, borrowing for buybacks will do that.

The effect of currency, multiple expansion, and EPS data all seem wrong.
I agree there is reason to be suspicious. Yet I lack the ability to do a deep dive into the stats the way the interviewee did, so I don’t discount it either.

I think it’s easy to look at the currency and conclude that it by itself cannot possibly explain the performance gap. SPY is up 150% over 10 years, VEA is flat. Over the same period the Euro has gone from 1.30 to 1.10. Over 20 years, it’s roughly flat. One of many examples.

Regarding multiple expansion, that’s the one part of the interview where I’m puzzled. It seems obvious the US markets are overvalued compared with overseas markets, but that’s in the aggregate and doesn’t adjust for sectors or growth. And yes, the interviewee glossed over or did not look at the effect of borrowing to do buybacks. Is there a reason to think overseas companies are not doing this, or are less leveraged? Especially in EM?

Tellurius
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Re: [Are American markets likely to outperform INTL]

Post by Tellurius » Wed May 06, 2020 11:14 am

Aren’t buybacks illegal in most countries?
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typical.investor
Posts: 2038
Joined: Mon Jun 11, 2018 3:17 am

Re: [Are American markets likely to outperform INTL]

Post by typical.investor » Wed May 06, 2020 11:22 am

Tellurius wrote:
Wed May 06, 2020 11:14 am
Aren’t buybacks illegal in most countries?
I don’t believe so. Less popular perhaps. Anyway, here is JPMorgan‘s look at it

https://www.jpmorgan.com/global/research/stock-buybacks

cj2018
Posts: 183
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Re: [Are American markets likely to outperform INTL]

Post by cj2018 » Wed May 06, 2020 11:22 am

Tellurius wrote:
Wed May 06, 2020 3:14 am
cj2018 wrote:
Wed May 06, 2020 2:16 am
I just binge-watched the WWII in HD Colour on Netflix, and without sounding too political here, it's clear to me that without America's leadership and its citizens' will to fight for fundamental Western values, the world wouldn't have almost 200 sovereign states as of today. Instead, there would be 3 or maybe 4 sovereign states at most and majority of people on the planet would still live in the dark age where they either speak German in Europe, or Japanese in East Asia/Pacific.

I believe we need to learn from history to understand that yes, America is really exceptional and unique in human history:
  • Only country in history to be founded by immigrants and continues to accept new immigrants, in meaniful quantity
America was founded by English Americans. All of its institutions were established and designed by them. For the first 40 years of its founding, the years that gave the “national spirit” time to coalesce, there was practically no immigration. It’s historically inaccurate to say it was founded by immigrants, unless you mean English Americans. You might say immigrants played in the house English Americans built.
If that’s not what you mean, then you’d have to count every country in America, which were founded by Spanish, Portuguese and French.

  • Only country in history with non-homogeneous population
Have you been to Europe lately? It’s a very inaccurate statement. Also, as far as I understand, American culture assimilates children of immigrants much more easily than some Europeans ones.
  • Only country in history that's considered THE TOP place to attract and suck in talents, globally (aka talent drain rest of the world) - even dictators send their children and horde their wealth in this country
The UK?
  • Only country in history with the moral standing and the means to uphold fundamental Western values that make it possible for the society to proper in the long run, consistently
  • Only country in human history with the privilege of printing WORLD reserve currency used by Global trade
Ahistorical. Ignores the role of the United Kingdom in global finance up to WW1. Also ignores the Dutch and the French earlier than that.
  • Only country in modern history with consistent sovereignty over 300+ years (political stability)
Again, ignores the UK. Ignores Canada. It even ignores Switzerland.
  • Only country in history with over 300M populations and resources-rich land, but with no comparable nation in size as neighbors (unique geo advantage #1)
  • Only country in history with over 300M populations and resources-rich land, but with no land boundary on 2 of 4 sides and is oceans away from other major powers (unique geo advantage #2)
Throughout modern history, America has proven itself as the beacon of freedom in a searching world and that's a big reason why I'm 100% VTSAX. Well, another practical reason is because I also live in America and earns/spends in USD, so I see little value in investing INTL (don't buy diversification as big enough of a factor in this debate). Okay fine, another big reason is because unless we go through another WW3, i don't really see the point of fighting the established economic and financial world order created by US that has the best odds of incubating the next FAANGs and trillion market cap companies (oh wait, they are all American companies!). Therefore, I'm simply all-in according to the current world economic order and ways of investing.

Again, I'm a student of history. If (big if) and when we transition from the current American Century to another Century, my belief is it doesn't matter how much we allocate to US/ex-US, we would all be starting from zero again!
- European from a tiny island

Just to correct some inaccuracies.
Thanks for providing the additional context and facts. Not arguing with you as your points are all valid. All I’ll try to amend to what I stated earlier regarding uniqueness of America would be its size/scale compared to the nations you outlined.

My entire point is that bogleheads style investing, as data-driven and as quantitative as it should be, the ability to stay the course is still largely faith and trust-based at the end of day. When push comes to shove, as we observed in this forum back in 08/09 and the doc.com bubble (heck, as recent as the pandemic selloff in March and 2018 Dec. Xmas drop), so many smart folks capitulated or at least spent way too much time thinking about changing one’s allocation as they should during volatile time despite being
super metrics-driven during peace time!

Therefore, when it comes to portfolio allocation at a national level (picking countries), I pick 100% US for the qualitative reasons I stated previously because it allows me to Stay, The, Course and I won’t even have the slightest doubt to that decision in my mind even during the darkest hours (think 08/09 kind of dark), and that my portfolio would come out strong than ever.

atdharris
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Re: [Are American markets likely to outperform INTL]

Post by atdharris » Wed May 06, 2020 11:51 am

I have trouble seeing a scenario where the rest of the world significantly outperforms US markets. There may be years they do, sure, but in the next 25-30 years, which is my time horizon, I just can't see VXUS outperforming. While convential wisdom would say that emerging markets like China, India and Brazil, it has not translated into their stock markets fastly outperforming US markets. If you compare FXI, INDA, and SPY going back to 2005, the SPY still would have given you a better return, but you would have trailed up until 2020

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packer16
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Re: American exceptionalism

Post by packer16 » Wed May 06, 2020 1:00 pm

SimpleGift wrote:
Sun May 03, 2020 1:50 pm
Dominant countries, economies and stock markets do not last forever. And they're also not usually aware of when their star is fading. From Violet Bonham Carter (in Winston Churchill: An Intimate Portrait), describing the invulnerability of the British Empire at the start of the 20th century:
Violet Bonham Carter wrote:“The world of 1906...was a stable and a civilized world in which the greatness and authority of Britain and her Empire seemed unassailable and invulnerably secure. It was assumed unquestioningly that we should always emerge "victorious, happy and glorious" from any conflict.

There were no doubts about the permanence of our "dominion over palm and pine", or of our title to it. Powerful, prosperous, peace-loving, with the seas all round us and the Royal Navy on the seas, the social, economic, international order seemed to our unseeing eyes as firmly fixed on earth as the signs of the Zodiac in the sky.”
As we know, the United States went on to dominate the 20th century — economically, militarily and in investment returns.
You need to take a look at where the lineage of the US came from. It was a place where at first UK outcasts went who were not part of the UK elite. Canada & Australia have a similar lineages & similar economic results, see "Triumph of the Optimists". The UK lineage lives on in the leadership. This is not a lineage of race but more one of the idea of freedom. The idea of freedom as a common bond was unique in the US constitution & was granted to more & more folks over time. This type of system creates economic growth & has an anti-war bias.

If China is the new superpower, it will be the first time the world leader is an autocrat to its own people since Spain. So IMO the only way China can become the leader is if it is democratic, as the other democracies will not go back to autocracy & typically do not admire/respect autocracies.

Packer
Last edited by packer16 on Wed May 06, 2020 1:28 pm, edited 1 time in total.
Buy cheap and something good might happen

huskerfan1414
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Re: [Are American markets likely to outperform INTL]

Post by huskerfan1414 » Wed May 06, 2020 1:04 pm

It is amusing to me that so many people try to bend and twist their way into downgrading American exceptionalism and propping up international markets. I'm not saying you shouldn't invest international-that's up to you. But America IS exceptional It is THE powerhouse of economics in the world and has been for some time. It will be for some time forward.

America has the ingenuity, talent, wealth, and MOST importantly legal structure conductive to business performance and growth.
The world should credit America BIG time over the past 200 years. America has done more for the economic development and increase in standard of living for the world than any nation on the planet in world history, and there is no reason to ignore that.

After reading this thread and others I think I'm out of international. The people who are for international are trying too hard to pretend America isn't superior. Even though, it is. So sell your American funds to buy more international, please. We can trade :sharebeer
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garlandwhizzer
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Re: [Are American markets likely to outperform INTL]

Post by garlandwhizzer » Wed May 06, 2020 1:11 pm

dmcmahon wrote[;

Read the Christine Benz interview. Currency doesn't explain the performance gap. Nor does the sector mix. Nor multiple expansion. EPS growth accounts for most of it, said the interviewee who crunched the data. Make of it what you will:

https://www.morningstar.com/articles/96 ... ave-lagged/quote]

I think this is an interesting interview well worth listening to. Thanks for posting, dmcmahon. It suggests that US EPS growth relative in INTL is the dominant driving force for the massive outperformance of US relative to INTL over the last decade. Having made that point, the interview ends with a piece of advice for investors going forward. Don't expect this trend to continue forever. Instead consider rebalancing now from US winners into INTL losers. It's basically the same advice we've been hearing from multiple experts for most of the past decade that INTL and especially EM were likely to outperform US going forward. Thus far they have consistently been wrong.

I am still holding on to my considerable INTL exposure but I don't have rock-hard certainty that this is the optimal approach. I have stopped rebalancing into INTL losers from US equity winners. I'd like to start to see light at the end of the INTL dark tunnel before I send more good money that way. I also believe that INTL bonds are not necessary for US residents, that quality US bonds satisfy all the functions of bonds in a portfolio and likely do it better than INTL. Again, many experts suggest diversifying with INTL bonds but I believe that like much expert advice is a solution in search of a problem.

Garland Whizzer

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Re: [Are American markets likely to outperform INTL]

Post by asif408 » Wed May 06, 2020 1:19 pm

atdharris wrote:
Wed May 06, 2020 11:51 am
While convential wisdom would say that emerging markets like China, India and Brazil, it has not translated into their stock markets fastly outperforming US markets. If you compare FXI, INDA, and SPY going back to 2005, the SPY still would have given you a better return, but you would have trailed up until 2020
And if you started investing in a broad emerging markets fund in September 1998, you would never have trailed the US stock market through today: https://finance.yahoo.com/chart/VEIEX#e ... B9fQ%3D%3D

Of course, everyone knows starting points, ending points, and valuations at the starting and ending points don't matter when making comparisons.

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Re: [Are American markets likely to outperform INTL]

Post by visualguy » Wed May 06, 2020 1:21 pm

garlandwhizzer wrote:
Wed May 06, 2020 1:11 pm
Having made that point, the interview ends with a piece of advice for investors going forward. Don't expect this trend to continue forever. Instead consider rebalancing now from US winners into INTL losers. It's basically the same advice we've been hearing from multiple experts for most of the past decade that INTL and especially EM were likely to outperform US going forward. Thus far they have consistently been wrong.
That was the surprising thing about the interview. Most of it was about how US companies simply perform better in terms of earnings, and how that accounts for their superior stock performance rather than other factors. However, the advice at the end is to rebalance into ex-US, and there is no explanation of why that makes sense in seeming contradiction to the case made before. If the argument is that the earnings picture is going to shift in the other direction, then that deserves at least some explanation, but there is none.

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Re: [Are American markets likely to outperform INTL]

Post by Tellurius » Wed May 06, 2020 4:46 pm

typical.investor wrote:
Wed May 06, 2020 11:22 am
Tellurius wrote:
Wed May 06, 2020 11:14 am
Aren’t buybacks illegal in most countries?
I don’t believe so. Less popular perhaps. Anyway, here is JPMorgan‘s look at it

https://www.jpmorgan.com/global/research/stock-buybacks
Thanks!
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Re: American exceptionalism

Post by Tellurius » Wed May 06, 2020 4:55 pm

packer16 wrote:
Wed May 06, 2020 1:00 pm
SimpleGift wrote:
Sun May 03, 2020 1:50 pm
Dominant countries, economies and stock markets do not last forever. And they're also not usually aware of when their star is fading. From Violet Bonham Carter (in Winston Churchill: An Intimate Portrait), describing the invulnerability of the British Empire at the start of the 20th century:
Violet Bonham Carter wrote:“The world of 1906...was a stable and a civilized world in which the greatness and authority of Britain and her Empire seemed unassailable and invulnerably secure. It was assumed unquestioningly that we should always emerge "victorious, happy and glorious" from any conflict.

There were no doubts about the permanence of our "dominion over palm and pine", or of our title to it. Powerful, prosperous, peace-loving, with the seas all round us and the Royal Navy on the seas, the social, economic, international order seemed to our unseeing eyes as firmly fixed on earth as the signs of the Zodiac in the sky.”
As we know, the United States went on to dominate the 20th century — economically, militarily and in investment returns.
You need to take a look at where the lineage of the US came from. It was a place where at first UK outcasts went who were not part of the UK elite. Canada & Australia have a similar lineages & similar economic results, see "Triumph of the Optimists". The UK lineage lives on in the leadership. This is not a lineage of race but more one of the idea of freedom. The idea of freedom as a common bond was unique in the US constitution & was granted to more & more folks over time. This type of system creates economic growth & has an anti-war bias.

If China is the new superpower, it will be the first time the world leader is an autocrat to its own people since Spain. So IMO the only way China can become the leader is if it is democratic, as the other democracies will not go back to autocracy & typically do not admire/respect autocracies.

Packer
One might say, with regard to the Bonham Carter quote, that it was one of the few times in human history where one empire gave way to another without conflict, because they are in some ways the same people.

The economic rise of China however foils the “old lie” that one needs to have democracy - or any kind of political freedom - for economic success. It can be argued that it was misconstrued because in simple terms it went like this in the 20th century: democratic countries are successful economically therefore democracy is needed for economic success.

Has Francis Fukuyama written a book about the restart of history?

In economic and investment terms, does this matter? Probably yes. But could someone have predicted the 1914 London Stock Market crash? Or the 1917 Russian Stock Market catastrophe? Definitely not with any accuracy.

“nobody knows nuthin’”
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Re: [Are American markets likely to outperform INTL]

Post by Noobvestor » Wed May 06, 2020 6:11 pm

As usual, we see two camps forming:

1) People who think markets are relatively efficient, or at least better at pricing global equities than we are as individuals.

2) People who can write novel-length posts about why the US can, should and will offer greater return with less risk.

I'm clearly in the first camp. The second camp is doubly baffling to me - not only is the US safer, but it should offer more rewards? Win-win!

There aren't a lot of free lunches out there, so if the second camp is right, leverage US equities to the hilt and ride 'em to the moon, I suppose. There is some nuance, here, too - a third camp that just thinks US is safer - but then I ask: are you investing in stocks for safety, or return?!
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: American exceptionalism

Post by unclescrooge » Wed May 06, 2020 6:51 pm

palanzo wrote:
Sun May 03, 2020 12:54 pm
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.
You don't have to wait for long.

Toll Brothers Inc.
Also Tootsie Rolls.

Not based on actual data, but I have a hard time believing non-Americans will eat that crap. :mrgreen:

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Re: [Are American markets likely to outperform INTL]

Post by Jozxyqk » Wed May 06, 2020 6:55 pm

Tellurius wrote:
Wed May 06, 2020 3:14 am

America was founded by English Americans. All of its institutions were established and designed by them. For the first 40 years of its founding, the years that gave the “national spirit” time to coalesce, there was practically no immigration. It’s historically inaccurate to say it was founded by immigrants, unless you mean English Americans. You might say immigrants played in the house English Americans built.
If that’s not what you mean, then you’d have to count every country in America, which were founded by Spanish, Portuguese and French.
I'm not sure what to make of this comment. Of course the US was (largely) founded by English immigrants. Why would you think when cj2018 noted that the US was founded by immigrants that did not intend to include the English?

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Re: American exceptionalism

Post by palanzo » Wed May 06, 2020 9:33 pm

unclescrooge wrote:
Wed May 06, 2020 6:51 pm
palanzo wrote:
Sun May 03, 2020 12:54 pm
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.
You don't have to wait for long.

Toll Brothers Inc.
Also Tootsie Rolls.

Not based on actual data, but I have a hard time believing non-Americans will eat that crap. :mrgreen:
Where is Jack FFR1846? :mrgreen: :mrgreen:

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Re: [Are American markets likely to outperform INTL]

Post by abuss368 » Wed May 06, 2020 10:54 pm

Oh no another US vs international thread!
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Re: [Are American markets likely to outperform INTL]

Post by pascalwager » Wed May 06, 2020 11:05 pm

Noobvestor wrote:
Wed May 06, 2020 6:11 pm
As usual, we see two camps forming:

1) People who think markets are relatively efficient, or at least better at pricing global equities than we are as individuals.

2) People who can write novel-length posts about why the US can, should and will offer greater return with less risk.

I'm clearly in the first camp. The second camp is doubly baffling to me - not only is the US safer, but it should offer more rewards? Win-win!

There aren't a lot of free lunches out there, so if the second camp is right, leverage US equities to the hilt and ride 'em to the moon, I suppose. There is some nuance, here, too - a third camp that just thinks US is safer - but then I ask: are you investing in stocks for safety, or return?!
Vanguard tells us that int'l is riskier for a variety of reasons, so I guess that means US is safer.

For me, since 1995 (50/50):
Riskier = low returns (bond-like)
Safer = very good returns

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Re: [Are American markets likely to outperform INTL]

Post by pascalwager » Wed May 06, 2020 11:18 pm

visualguy wrote:
Wed May 06, 2020 1:21 pm
garlandwhizzer wrote:
Wed May 06, 2020 1:11 pm
Having made that point, the interview ends with a piece of advice for investors going forward. Don't expect this trend to continue forever. Instead consider rebalancing now from US winners into INTL losers. It's basically the same advice we've been hearing from multiple experts for most of the past decade that INTL and especially EM were likely to outperform US going forward. Thus far they have consistently been wrong.
That was the surprising thing about the interview. Most of it was about how US companies simply perform better in terms of earnings, and how that accounts for their superior stock performance rather than other factors. However, the advice at the end is to rebalance into ex-US, and there is no explanation of why that makes sense in seeming contradiction to the case made before. If the argument is that the earnings picture is going to shift in the other direction, then that deserves at least some explanation, but there is none.
+1 Agreed, in fact I had the sense that the guy was running late for an appointment and had no time left for an explanation. Or maybe the explanation is reserved for M* Premium members.

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Re: [Are American markets likely to outperform INTL]

Post by pascalwager » Wed May 06, 2020 11:29 pm

garlandwhizzer wrote:
Wed May 06, 2020 1:11 pm
dmcmahon wrote[;

Read the Christine Benz interview. Currency doesn't explain the performance gap. Nor does the sector mix. Nor multiple expansion. EPS growth accounts for most of it, said the interviewee who crunched the data. Make of it what you will:

https://www.morningstar.com/articles/96 ... ave-lagged/quote]

I think this is an interesting interview well worth listening to. Thanks for posting, dmcmahon. It suggests that US EPS growth relative in INTL is the dominant driving force for the massive outperformance of US relative to INTL over the last decade. Having made that point, the interview ends with a piece of advice for investors going forward. Don't expect this trend to continue forever. Instead consider rebalancing now from US winners into INTL losers. It's basically the same advice we've been hearing from multiple experts for most of the past decade that INTL and especially EM were likely to outperform US going forward. Thus far they have consistently been wrong.

I am still holding on to my considerable INTL exposure but I don't have rock-hard certainty that this is the optimal approach. I have stopped rebalancing into INTL losers from US equity winners. I'd like to start to see light at the end of the INTL dark tunnel before I send more good money that way. I also believe that INTL bonds are not necessary for US residents, that quality US bonds satisfy all the functions of bonds in a portfolio and likely do it better than INTL. Again, many experts suggest diversifying with INTL bonds but I believe that like much expert advice is a solution in search of a problem.

Garland Whizzer
Me too. I have 20% rebalancing bands now so I have a pretext for not rebalancing into int'l for awhile, anyway.

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Re: [Are American markets likely to outperform INTL]

Post by Hector » Wed May 06, 2020 11:55 pm

I hold international stock based on the FTSE Global All Cap Index because I don't know which market will perform better in the future.

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Re: [Are American markets likely to outperform INTL]

Post by Noobvestor » Thu May 07, 2020 3:55 am

pascalwager wrote:
Wed May 06, 2020 11:05 pm
Noobvestor wrote:
Wed May 06, 2020 6:11 pm
As usual, we see two camps forming:

1) People who think markets are relatively efficient, or at least better at pricing global equities than we are as individuals.

2) People who can write novel-length posts about why the US can, should and will offer greater return with less risk.

I'm clearly in the first camp. The second camp is doubly baffling to me - not only is the US safer, but it should offer more rewards? Win-win!

There aren't a lot of free lunches out there, so if the second camp is right, leverage US equities to the hilt and ride 'em to the moon, I suppose. There is some nuance, here, too - a third camp that just thinks US is safer - but then I ask: are you investing in stocks for safety, or return?!
Vanguard tells us that int'l is riskier for a variety of reasons, so I guess that means US is safer.

For me, since 1995 (50/50):
Riskier = low returns (bond-like)
Safer = very good returns

I guess that puts you in the third camp - seeking relative safety on the stock side, and presumably accepting lower expected returns. Or are you expecting a free lunch - lower risks and equal or higher returns? I find both camps two and three endlessly puzzling.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: [Are American markets likely to outperform INTL]

Post by Noobvestor » Thu May 07, 2020 4:11 am

abuss368 wrote:
Wed May 06, 2020 10:54 pm
Oh no another US vs international thread!
There clearly weren't enough of them! :twisted:
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: [Are American markets likely to outperform INTL]

Post by RayKeynes » Thu May 07, 2020 4:43 am

I am looking for an in-depth analysis of the P/E, PEG P/B ratio's of the Total US Stock Market VS International VS Emerging Markets over the past 50 years.

Do you guys know where I can find such an analysis? I completely agree with the thesis that the US Stock Market is overvalued when directly compared to the ratios found in the international stock market. However, I'd like to understand WHY and how this overvaluation has played out over the last 50 years.

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Re: [Are American markets likely to outperform INTL]

Post by Tellurius » Thu May 07, 2020 6:58 am

RayKeynes wrote:
Thu May 07, 2020 4:43 am
I am looking for an in-depth analysis of the P/E, PEG P/B ratio's of the Total US Stock Market VS International VS Emerging Markets over the past 50 years.

Do you guys know where I can find such an analysis? I completely agree with the thesis that the US Stock Market is overvalued when directly compared to the ratios found in the international stock market. However, I'd like to understand WHY and how this overvaluation has played out over the last 50 years.
Don’t see them as one market. I think, seeing it from the US, it’s easy to look at it as US vs International. Maybe it’s best to compare US vs France vs Germany vs Switzerland vs Australia vs China vs Japan vs Brazil etc

I am not sure there is much meaning in a blanket P/E or P/B which lumps the disparate Developed Markets together. Why has Denmark kept up with the US over the last 10 years while Italy’s total return has been near zero? Why has Germany done better than France? Why has the UK?
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Re: [Are American markets likely to outperform INTL]

Post by grayfox » Thu May 07, 2020 7:14 am

RayKeynes wrote:
Thu May 07, 2020 4:43 am
I am looking for an in-depth analysis of the P/E, PEG P/B ratio's of the Total US Stock Market VS International VS Emerging Markets over the past 50 years.

Do you guys know where I can find such an analysis? I completely agree with the thesis that the US Stock Market is overvalued when directly compared to the ratios found in the international stock market. However, I'd like to understand WHY and how this overvaluation has played out over the last 50 years.
I would also like to know. For the S&P 500, I can find all the numbers back to 1871. But for international, I can barely get the current numbers. All I can get is some meager information from Vanguard which is probably updated about once per quarter.

Code: Select all

Asset Class  Fund       ROE    E growth    P/B       P/E      Return 10Y
USTSM        VTSAX      17.1%  13.4%       2.5x      16.9    11.29%
TISM         VTIAX      12.9%  10.6%       1.3x      12.6     3.07% (benchmark)
Looking at the numbers Vanguard reports, U.S. is selling for 2.5x book value while INTL is selling for 1.3x book value. I have to ask why.

If I go to the supermarket, and the American apples are selling for $2.50 per pound while the foreign apples are selling for $1.30 per pound, which should I buy? You have to ask why are the foreign apples cheaper. Is it just a sale this week, and next week the price for foreign apples goes back to the same price as the American apples? Or are the foreign apples always cheaper. If so, why are they always cheaper? Not as tasty? Maybe when you get them home you find half them are rotten to the core.

What we were told is that, over the long term, International stocks asset class will have about the same return as U.S. stocks asset class. U.S. will outperform for a while and then INTL will outperform, but over the longer term, they come out the same. Like there is assumed to be some kind of mean reversion. So are they predicting that in 5 or 10 years, TISM will have a P/B = 2.5 like U.S. Stocks? Why would you expect mean reversion? No reason is ever given.
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Re: [Are American markets likely to outperform INTL]

Post by spectec » Thu May 07, 2020 7:17 am

I continue to stand by the proposition that it doesn't matter whether one "believes in" American Exceptionalism or doesn't. American Exceptionalism is a fact, and facts don't rely upon what one person or another may believe about them.

How one applies that fact in their investing decisions is a reflection of what they believe about the fact.
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: [Are American markets likely to outperform INTL]

Post by grayfox » Thu May 07, 2020 7:22 am

Tellurius wrote:
Thu May 07, 2020 6:58 am

Don’t see them as one market. I think, seeing it from the US, it’s easy to look at it as US vs International. Maybe it’s best to compare US vs France vs Germany vs Switzerland vs Australia vs China vs Japan vs Brazil etc

I am not sure there is much meaning in a blanket P/E or P/B which lumps the disparate Developed Markets together. Why has Denmark kept up with the US over the last 10 years while Italy’s total return has been near zero? Why has Germany done better than France? Why has the UK?
There is a lot if truth in that. Every country is different. Each has a different constitution, a different form of government, its own set of laws, different regulatory environment, its own culture, different societal norms, different rules of conduct, etc. Some are probably better than others when to comes to business.
Sic transit gloria mundi. [STGM]

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Re: [Are American markets likely to outperform INTL]

Post by atdharris » Thu May 07, 2020 9:27 am

asif408 wrote:
Wed May 06, 2020 1:19 pm
atdharris wrote:
Wed May 06, 2020 11:51 am
While convential wisdom would say that emerging markets like China, India and Brazil, it has not translated into their stock markets fastly outperforming US markets. If you compare FXI, INDA, and SPY going back to 2005, the SPY still would have given you a better return, but you would have trailed up until 2020
And if you started investing in a broad emerging markets fund in September 1998, you would never have trailed the US stock market through today: https://finance.yahoo.com/chart/VEIEX#e ... B9fQ%3D%3D

Of course, everyone knows starting points, ending points, and valuations at the starting and ending points don't matter when making comparisons.
Of course, and if you started in 1995, you'd have an over 500% return in the US versus 104% for emerging markets. It's a crapshoot. I own VEA/VWO knowing it's a crapshoot, but that doesn't mean I don't question why I own them.

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Re: [Are American markets likely to outperform INTL]

Post by Robot Monster » Thu May 07, 2020 9:40 am

atdharris wrote:
Thu May 07, 2020 9:27 am
Of course, and if you started in 1995, you'd have an over 500% return in the US versus 104% for emerging markets. It's a crapshoot. I own VEA/VWO knowing it's a crapshoot, but that doesn't mean I don't question why I own them.
I am also a self-doubting Emerging Markets investor, and am happy to see Blackrock thinks EM will outperform developed markets over the next five years...they of course could be wrong...but I feel better about investing in EM knowing the idea of doing so isn't insane as it sometimes feels. I

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Re: [Are American markets likely to outperform INTL]

Post by asif408 » Thu May 07, 2020 10:07 am

atdharris wrote:
Thu May 07, 2020 9:27 am
Of course, and if you started in 1995, you'd have an over 500% return in the US versus 104% for emerging markets. It's a crapshoot. I own VEA/VWO knowing it's a crapshoot, but that doesn't mean I don't question why I own them.
Not really a crapshoot. EM valuations were high in 1994/1995 relative to the US and in the mid-2000s, which preceded periods of underperformance. They were low from 1998-2003, which preceded a period of outperformance, and they have been about the same relative lower for the last several years, with results TBD. So if you think valuations matter all you need is patience. If they don't matter then I guess it is a crapshoot, but you are a lot more confident than me that it's a crapshoot. The more history I've learned the less of a crapshoot these things appear to be. It's more just being patient enough and emotionally prepared for periods of underperformance than can last many years.

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Re: [Are American markets likely to outperform INTL]

Post by atdharris » Thu May 07, 2020 11:18 am

Robot Monster wrote:
Thu May 07, 2020 9:40 am
atdharris wrote:
Thu May 07, 2020 9:27 am
Of course, and if you started in 1995, you'd have an over 500% return in the US versus 104% for emerging markets. It's a crapshoot. I own VEA/VWO knowing it's a crapshoot, but that doesn't mean I don't question why I own them.
I am also a self-doubting Emerging Markets investor, and am happy to see Blackrock thinks EM will outperform developed markets over the next five years...they of course could be wrong...but I feel better about investing in EM knowing the idea of doing so isn't insane as it sometimes feels. I

https://markets.businessinsider.com/new ... 6q7PYGFhg2
We've been hearing that for a long time from analysts and firms and it really has not happened. I understand it very well may, but so far it has been disappointing.

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Re: [Are American markets likely to outperform INTL]

Post by Spinola » Thu May 07, 2020 1:25 pm

cj2018 wrote:
Wed May 06, 2020 2:16 am

  • Only country in history to be founded by immigrants and continues to accept new immigrants, in meangiful quantity
Sure, just ask the native Americans. Just about every country in the world has immigrants.. the whole world is a melting pot. One need only take a DNA test..
  • Only country in history with non-homogeneous population
You must not have traveled much?
  • Only country in history that's considered THE TOP place to attract and suck in talents, globally (aka talent drain rest of the world) - even dictators send their children and horde their wealth in this country
This is something to be proud of? Siphoning off much needed talent from other countries and keeping dictators money safe while you educate their brats ?
  • Only country in history with the moral standing and the means to uphold fundamental Western values that make it possible for the society to proper in the long run, consistently
It must have been the US that immediately declared war on Germany as soon as they invaded Poland..? and without the Soviet Union, WWII might have turned out differently.. but take all the glory.
  • Only country in human history with the privilege of printing WORLD reserve currency used by Global trade
Really? printing money maybe, but other hard currencies have dominated before and others will after..
  • Only country in modern history with consistent sovereignty over 300+ years (political stability)
United Kingdom? and many others in Europe and Asia have had stable borders and governments for longer
  • Only country in history with over 300M populations and resources-rich land, but with no comparable nation in size as neighbors (unique geo advantage #1)
Canada?
Much of this is hard to swallow, simply NOT true, or just a blatant rewrite of History and Geography :oops: .. people (many no longer with us) in Central and South America and Middle Eastern countries don't appreciate or thank you for your "moral standing" in support of murderous dictatorial regimes that suited the US interests at any given time...

As someone from a stable country, with stable borders for many centuries long before the USA even existed.. I find that statement particularly offensive. If anyone needed evidence of American exceptionalism..

pascalwager
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Joined: Mon Oct 31, 2011 8:36 pm

Re: [Are American markets likely to outperform INTL]

Post by pascalwager » Thu May 07, 2020 10:57 pm

Noobvestor wrote:
Thu May 07, 2020 3:55 am
pascalwager wrote:
Wed May 06, 2020 11:05 pm
Noobvestor wrote:
Wed May 06, 2020 6:11 pm
As usual, we see two camps forming:

1) People who think markets are relatively efficient, or at least better at pricing global equities than we are as individuals.

2) People who can write novel-length posts about why the US can, should and will offer greater return with less risk.

I'm clearly in the first camp. The second camp is doubly baffling to me - not only is the US safer, but it should offer more rewards? Win-win!

There aren't a lot of free lunches out there, so if the second camp is right, leverage US equities to the hilt and ride 'em to the moon, I suppose. There is some nuance, here, too - a third camp that just thinks US is safer - but then I ask: are you investing in stocks for safety, or return?!
Vanguard tells us that int'l is riskier for a variety of reasons, so I guess that means US is safer.

For me, since 1995 (50/50):
Riskier = low returns (bond-like)
Safer = very good returns

I guess that puts you in the third camp - seeking relative safety on the stock side, and presumably accepting lower expected returns. Or are you expecting a free lunch - lower risks and equal or higher returns? I find both camps two and three endlessly puzzling.
Some BH members have already received the free lunch. I've read their stories here.

I'm not bailing yet, but my recent change to 20% bands means I wouldn't rebalance back to 50% int'l until it dropped to 40%. (The new bands are based on a study cited in Humble Dollar and has nothing to do with poor int'l performance.)

Like GW above, I'm waiting for some "light at the end of the tunnel" and ultimately might not rebalance at the band margin.

BH+
Posts: 83
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Re: [Are American markets likely to outperform INTL]

Post by BH+ » Fri May 08, 2020 12:26 am

One should to keep in mind that exceptionalism does not necessarily lead to market out-performance. Top corporations are generally well-run, but not all well-run companies make it to the big league.

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Noobvestor
Posts: 5581
Joined: Mon Aug 23, 2010 1:09 am

Re: [Are American markets likely to outperform INTL]

Post by Noobvestor » Fri May 08, 2020 2:24 pm

pascalwager wrote:
Thu May 07, 2020 10:57 pm
Some BH members have already received the free lunch. I've read their stories here.
Confusing outcome with strategy just muddies the waters. Also, if we were at the end of the 2000s rather than the 2010s, the picture would look reversed - international diversification paid out during a decade in which US stocks has negative nominal and real returns. Obviously, hindsight in hand, we would have all leveraged US large cap growth this past decade, but we don't know, so we diversify. Anyway, US != free lunch.

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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dmcmahon
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Joined: Fri Mar 21, 2008 10:29 pm

Re: [Are American markets likely to outperform INTL]

Post by dmcmahon » Fri May 08, 2020 11:48 pm

pascalwager wrote:
Thu May 07, 2020 10:57 pm
Noobvestor wrote:
Thu May 07, 2020 3:55 am
pascalwager wrote:
Wed May 06, 2020 11:05 pm
Noobvestor wrote:
Wed May 06, 2020 6:11 pm
As usual, we see two camps forming:

1) People who think markets are relatively efficient, or at least better at pricing global equities than we are as individuals.

2) People who can write novel-length posts about why the US can, should and will offer greater return with less risk.

I'm clearly in the first camp. The second camp is doubly baffling to me - not only is the US safer, but it should offer more rewards? Win-win!

There aren't a lot of free lunches out there, so if the second camp is right, leverage US equities to the hilt and ride 'em to the moon, I suppose. There is some nuance, here, too - a third camp that just thinks US is safer - but then I ask: are you investing in stocks for safety, or return?!
Vanguard tells us that int'l is riskier for a variety of reasons, so I guess that means US is safer.

For me, since 1995 (50/50):
Riskier = low returns (bond-like)
Safer = very good returns

I guess that puts you in the third camp - seeking relative safety on the stock side, and presumably accepting lower expected returns. Or are you expecting a free lunch - lower risks and equal or higher returns? I find both camps two and three endlessly puzzling.
Some BH members have already received the free lunch. I've read their stories here.

I'm not bailing yet, but my recent change to 20% bands means I wouldn't rebalance back to 50% int'l until it dropped to 40%. (The new bands are based on a study cited in Humble Dollar and has nothing to do with poor int'l performance.)

Like GW above, I'm waiting for some "light at the end of the tunnel" and ultimately might not rebalance at the band margin.
I reached that point about 3 years ago. I stopped throwing good money after bad and just let international wither as a percent of my allocation. It was just easier to change the % than to actually do anything! Be careful, because next thing you know you’ll be TLH the entire position and buying the VGT! :twisted:

dru808
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Location: mid pac

Re: [Are American markets likely to outperform INTL]

Post by dru808 » Sat May 09, 2020 12:25 am

If international underperforms the way it has, people holding US & international will be just fine, if the US exceptionalism expires and runs into a catastrophic 30 year japan like scenario, people holding all US are in trouble, I’ll play it safe and buy insurance through international.
60% US equity | 25% International equity | 15% US Treasury bonds

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Noobvestor
Posts: 5581
Joined: Mon Aug 23, 2010 1:09 am

Re: [Are American markets likely to outperform INTL]

Post by Noobvestor » Sat May 09, 2020 12:37 am

dmcmahon wrote:
Fri May 08, 2020 11:48 pm
I reached that point about 3 years ago. I stopped throwing good money after bad and just let international wither as a percent of my allocation. It was just easier to change the % than to actually do anything!
If international is 'bad money' then I suggest you sell it all now at a loss and move on. If not, stay diversified and rebalance. Letting your portfolio drift from its target isn't really here or there - it's just a form of passive-looking market timing disguised as [insert zen quote here]. YMMV/GL.

These are truly the moments when rubber meets the road. You saw international beat US in the 2000s. You then saw US beat international in the 2010s. Ten years is a long time. You might decide to cut your losses, sell low, and bank on US. But keep it in perspective, and think long-term.

If you think the long-term prospects for international are weak (I'm not seeing it - the US is highly valued, handling this pandemic worse than most countries, but whatever) then just pull the ripcord and get out now. If you're not sure, welcome to Bogleheads, where we diversify.

Make a plan and commit to it. If your plan is to chase the returns of the best-returning asset class of the past decade, well, we have endless examples of that not working out, but commit to whatever it is, embrace it, love it, live it and don't look back. Jump and hope for the best.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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grayfox
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Joined: Sat Sep 15, 2007 4:30 am

Re: [Are American markets likely to outperform INTL]

Post by grayfox » Sat May 09, 2020 7:26 am

dru808 wrote:
Sat May 09, 2020 12:25 am
If international underperforms the way it has, people holding US & international will be just fine, if the US exceptionalism expires and runs into a catastrophic 30 year japan like scenario, people holding all US are in trouble, I’ll play it safe and buy insurance through international.
That's the best argument for holding INTL I've heard so far. Consider it insurance against the U.S. losing its mojo. With insurance, you have an ongoing cost to insure against an unlikely, but catastrophic, event. So put some percent into INTL and just assume it will lag the U.S.

It seems that most pro INTL advice is the Gambler's Fallacy: it hasn't come up in a while so it is due. I have yet to hear an explanation of why the market puts such low valuation on INTL and why that is due to change.
Sic transit gloria mundi. [STGM]

whereskyle
Posts: 876
Joined: Wed Jan 29, 2020 10:29 am

Re: [Are American markets likely to outperform INTL]

Post by whereskyle » Sat May 09, 2020 8:37 am

Noobvestor wrote:
Thu May 07, 2020 3:55 am
pascalwager wrote:
Wed May 06, 2020 11:05 pm
Noobvestor wrote:
Wed May 06, 2020 6:11 pm
As usual, we see two camps forming:

1) People who think markets are relatively efficient, or at least better at pricing global equities than we are as individuals.

2) People who can write novel-length posts about why the US can, should and will offer greater return with less risk.

I'm clearly in the first camp. The second camp is doubly baffling to me - not only is the US safer, but it should offer more rewards? Win-win!

There aren't a lot of free lunches out there, so if the second camp is right, leverage US equities to the hilt and ride 'em to the moon, I suppose. There is some nuance, here, too - a third camp that just thinks US is safer - but then I ask: are you investing in stocks for safety, or return?!
Vanguard tells us that int'l is riskier for a variety of reasons, so I guess that means US is safer.

For me, since 1995 (50/50):
Riskier = low returns (bond-like)
Safer = very good returns

I guess that puts you in the third camp - seeking relative safety on the stock side, and presumably accepting lower expected returns. Or are you expecting a free lunch - lower risks and equal or higher returns? I find both camps two and three endlessly puzzling.
What confuses me about the risk premium (I enjoy reading Bernstein but it seems a bit oversimplistic) is that we can always just reframe the narrative. Is investing in the US safer, therefore we can expect lower returns but less volatility, so more people will choose that option, driving the price up, rewarding investors who stuck with the safer option? Or is investing all-US riskier and therefore investors can expect higher returns from such an approach? We know large caps are safer so focusing on US (at least as far as market cap) means safety, even though it also leads to single-country risk.

Thoughts?
"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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