Japanese stock fundamentals were superior to US stocks this decade

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Nathan Drake
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Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

https://www.marketwatch.com/story/the-b ... 1641776003

Interesting article, especially when we often hear false narratives of “why would anyone want to invest in Japan or any region other than the US, etc”, “US companies do better that’s why they outperform”
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by JBTX »

Paywalled
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

JBTX wrote: Mon Jan 10, 2022 1:41 pmPaywalled
Shows up fine for me without a paywall
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by milktoast »

Not too surprising. But there is no way of knowing if or when the market will reward better fundamentals. “Markets can stay irrational longer than you can stay solvent."
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Booogle »

Yes, S&P 500 is way overpriced.

But SCV is at fair value, so it isn't going to increase either.

There really isn't anything to invest in.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by JBTX »

For whatever reason many marketwatch articles show up as paywalled starting this year for me. I was able to bypass it using other means.

The source article is from GMO

https://www.gmo.com/americas/research-l ... ly-letter/

Basically says while the US has been best performing market vs Japan, that is mainly due to multiple expansion. Revenue, earnings etc actually grew more in Japan last 10 years. Plus much of US growth is FAANG+MSFT
Many investors believe that the U.S.’s greater fundamental performance justifies the market’s much higher valuations. Over the past 10 years, U.S. companies delivered fundamental performance 45% higher than the rest of the world, impressive indeed. Over the same period, the U.S. stock market valuation multiples rose more than 85% faster than the rest of the world – far outpacing their fundamental upside.
Japanese companies delivered better fundamental performance than U.S. companies over the last decade, yet Japan trades at two-thirds of the valuation multiple of the U.S. market.
Last edited by JBTX on Mon Jan 10, 2022 1:52 pm, edited 1 time in total.
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Nathan Drake
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

Booogle wrote: Mon Jan 10, 2022 1:50 pm Yes, S&P 500 is way overpriced.

But SCV is at fair value, so it isn't going to increase either.

There really isn't anything to invest in.
Fair value = normal expected returns….
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Booogle »

JBTX wrote: Mon Jan 10, 2022 1:51 pm For whatever reason many marketwatch articles show up as paywalled starting this year for me. I was able to bypass it using other means.

The source article is from GMO

https://www.gmo.com/americas/research-l ... ly-letter/

Basically says while the US has been best performing market vs Japan, that is mainly due to multiple expansion. Revenue, earnings etc actually grew more in Japan last 10 years. Plus much of US growth is FAANG+MSFT
Many investors believe that the U.S.’s greater fundamental performance justifies the market’s much higher valuations. Over the past 10 years, U.S. companies delivered fundamental performance 45% higher than the rest of the world, impressive indeed. Over the same period, the U.S. stock market valuation multiples rose more than 85% faster than the rest of the world – far outpacing their fundamental upside.
Japanese companies delivered better fundamental performance than U.S. companies over the last decade, yet Japan trades at two-thirds of the valuation multiple of the U.S. market.
So we should all be investing in Japan.

What is the best Japanese equity ETF?
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

Booogle wrote: Mon Jan 10, 2022 1:53 pm
JBTX wrote: Mon Jan 10, 2022 1:51 pm For whatever reason many marketwatch articles show up as paywalled starting this year for me. I was able to bypass it using other means.

The source article is from GMO

https://www.gmo.com/americas/research-l ... ly-letter/

Basically says while the US has been best performing market vs Japan, that is mainly due to multiple expansion. Revenue, earnings etc actually grew more in Japan last 10 years. Plus much of US growth is FAANG+MSFT
Many investors believe that the U.S.’s greater fundamental performance justifies the market’s much higher valuations. Over the past 10 years, U.S. companies delivered fundamental performance 45% higher than the rest of the world, impressive indeed. Over the same period, the U.S. stock market valuation multiples rose more than 85% faster than the rest of the world – far outpacing their fundamental upside.
Japanese companies delivered better fundamental performance than U.S. companies over the last decade, yet Japan trades at two-thirds of the valuation multiple of the U.S. market.
So we should all be investing in Japan.

What is the best Japanese equity ETF?
I think having exposure globally is the more optimal default starting position

AVDV is heavily invested in Japanese equities (Intl Developed SCV)
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by peskypesky »

Booogle wrote: Mon Jan 10, 2022 1:53 pm So we should all be investing in Japan.

What is the best Japanese equity ETF?
here's some I'm going to investigate:
https://www.justetf.com/en/how-to/invest-in-japan.html
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by UpperNwGuy »

Booogle wrote: Mon Jan 10, 2022 1:53 pm So we should all be investing in Japan.

What is the best Japanese equity ETF?
https://etfdb.com/etf/EWJ/#etf-ticker-profile
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by VTI »

Nathan Drake wrote: Mon Jan 10, 2022 3:36 pm […]

I think having exposure globally is the more optimal default starting position

AVDV is heavily invested in Japanese equities (Intl Developed SCV)
This is not strictly related to Japan, but I’ve been curious for a while: Could you please talk about why you chose VOO for broad US exposure and VXUS for broad ex-US exposure?

VXUS contains small-caps, and VOO does not. Vanguard’s VEU (FTSE All-World ex-US), which excludes small-caps, seems to be the closest ex-US equivalent to VOO.
Last edited by VTI on Mon Jan 10, 2022 4:36 pm, edited 2 times in total.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by GP813 »

Warren Buffet bought bought Japanese stocks in the 2020 crash but nobody really followed him into these trades.

Berkshire Hathaway’s Yen Bond Sale Indicates Warren Buffett Is Buying Japanese Stocks

Warren Buffett’s $2 Billion Japan Gain Yet to Lure Followers a Year On
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

VTI wrote: Mon Jan 10, 2022 4:26 pm
Nathan Drake wrote: Mon Jan 10, 2022 3:36 pm […]

I think having exposure globally is the more optimal default starting position

AVDV is heavily invested in Japanese equities (Intl Developed SCV)
This is not strictly related to Japan, but I’ve been curious for a while: Could you please talk about why you chose VOO for broad US exposure and VXUS for broad ex-US exposure?

VXUS contains small-caps, and VOO does not. Vanguard’s VEU (FTSE All-World ex-US), which excludes small-caps, seems to be the closest ex-US equivalent to VOO.
My VOO position is just because S&P 500 is what I invested into when I first started.

If I were to do it over again I’d just go with VTI, but honestly the two funds are indistinguishable and the additional small cap exposure is going to have a negligible impact.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by steve r »

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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by klaus14 »

Fundamentals are an average of sales, gross profits, smoothed earnings, book value, and GMO’s Economic Book Value.
Who cares? Only future earnings matter.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

klaus14 wrote: Tue Jan 11, 2022 1:05 am
Fundamentals are an average of sales, gross profits, smoothed earnings, book value, and GMO’s Economic Book Value.
Who cares? Only future earnings matter.
Ahh yes, please tell me what those future earnings are
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by gougou »

Over the long term, the stock market is a weighing machine, which means the underlying business fundamentals will drive the total return of whatever stocks you buy. Multiple expansion is not reliable return if you are a long term investor. SP500 is probably going to underperform over the long run.

I follow a lot of Chinese/Hong Kong stocks and most are dirt cheap, even some of the highest quality companies are dirt cheap. I'm not surprised Japanese stocks are also cheap but since I don't read the language, it's pretty hard for me to invest in it.

It's unfortunate people even on this forum tend to have a lot of recency bias and going 100% US or heavily in QQQ/big tech because they have recently outperformed due to multiple expansion.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by klaus14 »

Nathan Drake wrote: Tue Jan 11, 2022 1:07 am
klaus14 wrote: Tue Jan 11, 2022 1:05 am
Fundamentals are an average of sales, gross profits, smoothed earnings, book value, and GMO’s Economic Book Value.
Who cares? Only future earnings matter.
Ahh yes, please tell me what those future earnings are
You are just being snarky.

Why would "average of sales, gross profits, smoothed earnings, book value, and GMO’s Economic Book Value." a good company valuation metric?

US tech companies have high profit margins and high growth and valuable intellectual property so comparing their "sales" or "book value" to Japanese companies is not useful.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

klaus14 wrote: Tue Jan 11, 2022 2:43 am
Nathan Drake wrote: Tue Jan 11, 2022 1:07 am
klaus14 wrote: Tue Jan 11, 2022 1:05 am
Fundamentals are an average of sales, gross profits, smoothed earnings, book value, and GMO’s Economic Book Value.
Who cares? Only future earnings matter.
Ahh yes, please tell me what those future earnings are
You are just being snarky.

Why would "average of sales, gross profits, smoothed earnings, book value, and GMO’s Economic Book Value." a good company valuation metric?

US tech companies have high profit margins and high growth and valuable intellectual property so comparing their "sales" or "book value" to Japanese companies is not useful.
So you only invest in QQQ tech companies?

If tech earnings start disappointing, goodbye valuations
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by sphinx2020 »

Japanese corporations have a bad reputation when it comes to corporate governance and maximizing shareholder value. They’re under leveraged, tend to avoid restructuring and reducing headcount, and are apt to reinvest profits in low return activities rather than buying back shares at a discount. This explains the low equity valuations.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

sphinx2020 wrote: Tue Jan 11, 2022 2:23 pm Japanese corporations have a bad reputation when it comes to corporate governance and maximizing shareholder value. They’re under leveraged, tend to avoid restructuring and reducing headcount, and are apt to reinvest profits in low return activities rather than buying back shares at a discount. This explains the low equity valuations.
And yet still performed better than US companies this decade
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Marseille07 »

Nathan Drake wrote: Tue Jan 11, 2022 2:57 pm
sphinx2020 wrote: Tue Jan 11, 2022 2:23 pm Japanese corporations have a bad reputation when it comes to corporate governance and maximizing shareholder value. They’re under leveraged, tend to avoid restructuring and reducing headcount, and are apt to reinvest profits in low return activities rather than buying back shares at a discount. This explains the low equity valuations.
And yet still performed better than US companies this decade
That didn't matter is the point being made.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by minimalistmarc »

Yawn, just invest in the all world.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by HomerJ »

From the article:
So the price of the S&P 500 has risen more than twice as much over 10 years as the price of the Nikkei 225 (when quoted in dollars) — even though the Japanese companies have done better.
I think you are proving the opposite point from what you intended.

There are a lot more variables that make up returns than just the fundamentals.

Which is why it's hard to predict the future and hard to profit on predictions.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by HomerJ »

minimalistmarc wrote: Tue Jan 11, 2022 3:01 pm Yawn, just invest in the all world.
Diversification, good.

Tilting based on predictions? So far, bad.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by 6NDone »

Nathan Drake wrote: Tue Jan 11, 2022 2:57 pm
sphinx2020 wrote: Tue Jan 11, 2022 2:23 pm Japanese corporations have a bad reputation when it comes to corporate governance and maximizing shareholder value. They’re under leveraged, tend to avoid restructuring and reducing headcount, and are apt to reinvest profits in low return activities rather than buying back shares at a discount. This explains the low equity valuations.
And yet still performed better than US companies this decade
Are you referring to a different Japan or a different decade? Source https://www.portfoliovisualizer.com/ba ... ion2_2=100
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by peskypesky »

gougou wrote: Tue Jan 11, 2022 1:29 am It's unfortunate people even on this forum tend to have a lot of recency bias and going 100% US or heavily in QQQ/big tech because they have recently outperformed due to multiple expansion.
Well, it is a Boglehead forum, and Jack Bogle was very partial to the US stock market.

And you can call it recency bias, but I would say it's an awareness that the United States is not only the world's biggest economy, but the global leader in innovation.
According to this list by Forbes, the US boasts 51 of the world's 100 most innovative companies:
https://www.forbes.com/innovative-compa ... /#tab:rank

Second place is shared by Japan and China with 7 each.
Last edited by peskypesky on Tue Jan 11, 2022 3:57 pm, edited 2 times in total.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

HomerJ wrote: Tue Jan 11, 2022 3:36 pm From the article:
So the price of the S&P 500 has risen more than twice as much over 10 years as the price of the Nikkei 225 (when quoted in dollars) — even though the Japanese companies have done better.
I think you are proving the opposite point from what you intended.

There are a lot more variables that make up returns than just the fundamentals.

Which is why it's hard to predict the future and hard to profit on predictions.
Right, those variables being speculation

My main point was that the arguments of why “US always outperforms because Japan isn’t as good as American business” is largely a false narrative
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Marseille07 »

Nathan Drake wrote: Tue Jan 11, 2022 3:48 pm Right, those variables being speculation

My main point was that the arguments of why “US always outperforms because Japan isn’t as good as American business” is largely a false narrative
Sure, but it is kind of a moot point because your holding is ex-US, not just Japan.

EWJ slightly outperforming ex-US since 2014: https://www.portfoliovisualizer.com/bac ... ion2_2=100
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Triple digit golfer »

peskypesky wrote: Tue Jan 11, 2022 3:46 pm
gougou wrote: Tue Jan 11, 2022 1:29 am It's unfortunate people even on this forum tend to have a lot of recency bias and going 100% US or heavily in QQQ/big tech because they have recently outperformed due to multiple expansion.
Well, it is a Boglehead forum, and Jack Bogle was very partial to the US stock market.

And you can call it recency bias, but I would say it's an awareness that the United States is not only the world's biggest economy, but the global leader in innovation.
According to this list by Forbes, the US boasts 51 of the world's 100 most innovative companies:
https://www.forbes.com/innovative-compa ... /#tab:rank

Second place is shared by Japan and China with 7 each.
Your post is basically an argument for global market cap weighing.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Elysium »

U.S Stock market is an anomaly. Not just this decade or past ones, over last 100+ years of history the U.S stock market created much more wealth than rest of the other stocks markets worldwide. You cannot pinpoint this on any one sector such as Tech which is a recent thing, or valuation expansions. Investors simply have poured more money into U.S stock market and driven prices up, every time there was a major drawdown, more money was made afterwards. Federal reserve also keeps creating stimulus and flexible money supply to keep this going, and U.S companies keep driving towards more and more profits and pushing for new products. This is what some people called American innovation. Some would say this is not exceptional as rest of the world does similar things. May be, but not really when you inspect country by country returns over many decades, the U.S stands apart.

The point is that average returns in excess of 8% to 9% over many decades is not something that can be taken for granted. Stock markets across the world when taken country by country have returned 5% to 6% on average, that's about what you can expect reasonably. Then there are markets that have returned 2% to 3% range and this isn't totally unexpected either. Said differently, do not be fooled by the 8% to 9% average returns of U.S stock market to think that's the expected returns from stocks in general when you invest in a random stock index. The expected returns from stock market historically worldwide is about 5% to 6% over a 100 year period, with lot of volatility and many large drawdowns. Take the U.S returns for what it is, a gift, and not think you are to get this always or from any other markets.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by klaus14 »

Nathan Drake wrote: Tue Jan 11, 2022 1:51 pm
klaus14 wrote: Tue Jan 11, 2022 2:43 am
Nathan Drake wrote: Tue Jan 11, 2022 1:07 am
klaus14 wrote: Tue Jan 11, 2022 1:05 am
Fundamentals are an average of sales, gross profits, smoothed earnings, book value, and GMO’s Economic Book Value.
Who cares? Only future earnings matter.
Ahh yes, please tell me what those future earnings are
You are just being snarky.

Why would "average of sales, gross profits, smoothed earnings, book value, and GMO’s Economic Book Value." a good company valuation metric?

US tech companies have high profit margins and high growth and valuable intellectual property so comparing their "sales" or "book value" to Japanese companies is not useful.
So you only invest in QQQ tech companies?

If tech earnings start disappointing, goodbye valuations
You are still being just snarky. Maybe try contributing some information?

no i do the opposite. i heavily tilt to international and value. but not because "GMO’s Economic Book Value" nonsense. one shouldn't believe in everything that aligns with their position. don't forget that GMO's primary motivation is to sell funds. that is why they are using these propriety metrics.

Campare japanese earnings to US ones here. Figure 5 vs 8.
(These are forward earnings but forward earnings extrapolate from trailing earnings so both should tell the same story. if you can find trailing earnings history please share.)

2008 peak -> Today
Japan 70 -> 85
US 100 -> 210

How is Japanese fundamentals better than US?
I guess market didn't care about "GMO’s Economic Book Value" as much as earnings and earnings expectations.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by nisiprius »

I note that GMO, source of the information in the article, launched a Japanese stock fund in September of 2020: the GMO-Usonian Japan Value Creation Fund, GMAHX.

In the short time since launch, it has underperformed both the Vanguard Total [US] Stock Market index fund and, more significantly, the Total World index fund. Source

Arend says "Sooner or later, goes the theory, stock prices will end up following the underlying values of businesses."

I did a cursory search of the GMO website to try to understand what they meant by "Usonian," but failed. To me, "Usonian" is the adjective used by Frank Lloyd Wright in the 1930s, to mean "relating to the US" (in preference to "American.")
Last edited by nisiprius on Tue Jan 11, 2022 11:15 pm, edited 1 time in total.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by CyclingDuo »

Nathan Drake wrote: Mon Jan 10, 2022 3:36 pmI think having exposure globally is the more optimal default starting position.
I do agree that having some global exposure out of the US Market for diversity's sake is warranted for the long term.

However, it seems like we have been hearing the same siren song year after year at the beginning of each year "this is the year where we think EM and International is going to outperform"...

Maybe this will be the year. Who knows?

My international has been rather lackluster over the past 4 years...

January 1, 2018 -----> January 11, 2022

• VWO: $49.84 -----> $50.46

• VXUS: $60.06 -----> $63.95

• VSS: $124.51 -----> $132.23

• VWIGX: $32.77 -----> $42.57

Meanwhile, US Total Stock Market Fund...

• VTI: $144.43 ------> $238.05

At the moment, the wisdom of the markets has not yet favored international as the trend. If and when it changes, we'll tip our hats to you Nathan as you have been consistent about it for what - a solid decade at this point? :shock:

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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

CyclingDuo wrote: Tue Jan 11, 2022 11:12 pm
Nathan Drake wrote: Mon Jan 10, 2022 3:36 pmI think having exposure globally is the more optimal default starting position.
I do agree that having some global exposure out of the US Market for diversity's sake is warranted for the long term.

However, it seems like we have been hearing the same siren song year after year at the beginning of each year "this is the year where we think EM and International is going to outperform"...

Maybe this will be the year. Who knows?

My international has been rather lackluster over the past 4 years...

January 1, 2018 -----> January 11, 2022

• VWO: $49.84 -----> $50.46

• VXUS: $60.06 -----> $63.95

• VSS: $124.51 -----> $132.23

• VWIGX: $32.77 -----> $42.57

Meanwhile, US Total Stock Market Fund...

• VTI: $144.43 ------> $238.05

At the moment, the wisdom of the markets has not yet favored international as the trend. If and when it changes, we'll tip our hats to you Nathan as you have been consistent about it for what - a solid decade at this point? :shock:

CyclingDuo
If you were a US investor in the 70s and early 80s you'd be saying much the same thing. When is this dog gone US going to perform compared to exUS?

I don't trust markets that rely on increasing valuations to drive returns. That's just me. Still be exposed to them, you never know, but having exposure to markets underperforming is perfectly fine if your investment objectives are being met. The cyclicality of these things won't change.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Marseille07 »

Nathan Drake wrote: Tue Jan 11, 2022 11:56 pm I don't trust markets that rely on increasing valuations to drive returns. That's just me. Still be exposed to them, you never know, but having exposure to markets underperforming is perfectly fine if your investment objectives are being met. The cyclicality of these things won't change.
What are you talking about. Valuations increasing is an outcome; much like the Japanese market hitting CAPE of 80 as you are fully aware.

As far as investment objectives, I don't know yours. However, generally speaking the quicker you can hit them the better. Now, if your goal is to hit 500K at the age of 70, then you probably don't have anything to worry about. But if it is hitting 2.5M by 40, then that's a different story. That's why your investment decisions matter.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by 6NDone »

I find it humorous how many threads are made by the same folks to continuously push the virtues of international investing. It’s almost as if they are pulling at straws to justify their many years of sunk opportunity cost…
Last edited by 6NDone on Wed Jan 12, 2022 12:48 am, edited 1 time in total.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

Marseille07 wrote: Wed Jan 12, 2022 12:36 am
Nathan Drake wrote: Tue Jan 11, 2022 11:56 pm I don't trust markets that rely on increasing valuations to drive returns. That's just me. Still be exposed to them, you never know, but having exposure to markets underperforming is perfectly fine if your investment objectives are being met. The cyclicality of these things won't change.
What are you talking about. Valuations increasing is an outcome; much like the Japanese market hitting CAPE of 80 as you are fully aware.

As far as investment objectives, I don't know yours. However, generally speaking the quicker you can hit them the better. Now, if your goal is to hit 500K at the age of 70, then you probably don't have anything to worry about. But if it is hitting 2.5M by 40, then that's a different story. That's why your investment decisions matter.
Yes. My investment objectives are to make significant progress over short to medium horizons and not be left with extremely bad outcomes for very long periods of time.

Diversification across regions and risk factors accomplishes my goal; the future is not known.
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Marseille07
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Marseille07 »

Nathan Drake wrote: Wed Jan 12, 2022 12:47 am Yes. My investment objectives are to make significant progress over short to medium horizons and not be left with extremely bad outcomes for very long periods of time.

Diversification across regions and risk factors accomplishes my goal; the future is not known.
So a couple of questions.

a) How long are short to medium horizons, or "very long periods of time"?
b) Why are you trying to meet those objectives using 100% equities + margin? It appears holding bonds would be a better idea because equities can all crash at the same time whereas bonds would bail you out during such times.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Noobvestor »

nisiprius wrote: Tue Jan 11, 2022 11:10 pm I did a cursory search of the GMO website to try to understand what they meant by "Usonian," but failed. To me, "Usonian" is the adjective used by Frank Lloyd Wright in the 1930s, to mean "relating to the US" (in preference to "American.")
I was familiar with that term and its origins, so I just had to know more (how could a Japanese fund be Usonian?). The unfortunately boring answer appears to be that GMO recently acquired a company called Usonian Investments. Oh well: https://www.bloomberg.com/press-release ... nvestments
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Nathan Drake
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

Marseille07 wrote: Wed Jan 12, 2022 12:52 am
Nathan Drake wrote: Wed Jan 12, 2022 12:47 am Yes. My investment objectives are to make significant progress over short to medium horizons and not be left with extremely bad outcomes for very long periods of time.

Diversification across regions and risk factors accomplishes my goal; the future is not known.
So a couple of questions.

a) How long are short to medium horizons, or "very long periods of time"?
b) Why are you trying to meet those objectives using 100% equities + margin? It appears holding bonds would be a better idea because equities can all crash at the same time whereas bonds would bail you out during such times.
5-10 year periods. Being concentrated in any given asset class can highly expose you to long, drawn out, very poor outcomes. 00-09 it was US TSM, 10-21 it was EM, etc etc.

A blend of diverse assets mitigates these poor outcomes with high start date sensitivity.

I am currently not using margin, but am 100% equity. Severe recessions will have high global correlations, but recovery periods generally occur within a few years. That’s not a major concern of mine to weather, and I’m still working and relatively young, so I do not see a need for bonds yet.
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Marseille07
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Marseille07 »

Nathan Drake wrote: Wed Jan 12, 2022 1:04 am 5-10 year periods. Being concentrated in any given asset class can highly expose you to long, drawn out, very poor outcomes. 00-09 it was US TSM, 10-21 it was EM, etc etc.

A blend of diverse assets mitigates these poor outcomes with high start date sensitivity.

I am currently not using margin, but am 100% equity. Severe recessions will have high global correlations, but recovery periods generally occur within a few years. That’s not a major concern of mine to weather, and I’m still working and relatively young, so I do not see a need for bonds yet.
I think the mix up I see with what you're doing is this - your objectives do not make sense as an accumulator. The start date sensitivity talk is another issue, you're speaking like a retiree when you're not.

If you're a retiree then sure, trying to avoid "long, drawn out, very poor outcomes" makes sense. If you're an accumulator...that's not an issue. You actually want a period like 00-09 when you get to load up equities on the cheap.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by peskypesky »

Triple digit golfer wrote: Tue Jan 11, 2022 5:14 pm
peskypesky wrote: Tue Jan 11, 2022 3:46 pm
gougou wrote: Tue Jan 11, 2022 1:29 am It's unfortunate people even on this forum tend to have a lot of recency bias and going 100% US or heavily in QQQ/big tech because they have recently outperformed due to multiple expansion.
Well, it is a Boglehead forum, and Jack Bogle was very partial to the US stock market.

And you can call it recency bias, but I would say it's an awareness that the United States is not only the world's biggest economy, but the global leader in innovation.
According to this list by Forbes, the US boasts 51 of the world's 100 most innovative companies:
https://www.forbes.com/innovative-compa ... /#tab:rank

Second place is shared by Japan and China with 7 each.
Your post is basically an argument for global market cap weighing.
It's actually not.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by peskypesky »

6NDone wrote: Wed Jan 12, 2022 12:39 am I find it humorous how many threads are made by the same folks to continuously push the virtues of international investing. It’s almost as if they are pulling at straws to justify their many years of sunk opportunity cost…
Precisely.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

Marseille07 wrote: Wed Jan 12, 2022 1:14 am
Nathan Drake wrote: Wed Jan 12, 2022 1:04 am 5-10 year periods. Being concentrated in any given asset class can highly expose you to long, drawn out, very poor outcomes. 00-09 it was US TSM, 10-21 it was EM, etc etc.

A blend of diverse assets mitigates these poor outcomes with high start date sensitivity.

I am currently not using margin, but am 100% equity. Severe recessions will have high global correlations, but recovery periods generally occur within a few years. That’s not a major concern of mine to weather, and I’m still working and relatively young, so I do not see a need for bonds yet.
I think the mix up I see with what you're doing is this - your objectives do not make sense as an accumulator. The start date sensitivity talk is another issue, you're speaking like a retiree when you're not.

If you're a retiree then sure, trying to avoid "long, drawn out, very poor outcomes" makes sense. If you're an accumulator...that's not an issue. You actually want a period like 00-09 when you get to load up equities on the cheap.
Not at all. I want consistent returns. It’s not a guarantee that an underperforming asset recovers after ten years either. It can be much longer.

And over the twenty year period, a portfolio constructed similar to my own had more consistent returns and higher returns than the best performing asset class at any given 10 year period.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by 6NDone »

Nathan Drake wrote: Wed Jan 12, 2022 1:32 am
Marseille07 wrote: Wed Jan 12, 2022 1:14 am
Nathan Drake wrote: Wed Jan 12, 2022 1:04 am 5-10 year periods. Being concentrated in any given asset class can highly expose you to long, drawn out, very poor outcomes. 00-09 it was US TSM, 10-21 it was EM, etc etc.

A blend of diverse assets mitigates these poor outcomes with high start date sensitivity.

I am currently not using margin, but am 100% equity. Severe recessions will have high global correlations, but recovery periods generally occur within a few years. That’s not a major concern of mine to weather, and I’m still working and relatively young, so I do not see a need for bonds yet.
I think the mix up I see with what you're doing is this - your objectives do not make sense as an accumulator. The start date sensitivity talk is another issue, you're speaking like a retiree when you're not.

If you're a retiree then sure, trying to avoid "long, drawn out, very poor outcomes" makes sense. If you're an accumulator...that's not an issue. You actually want a period like 00-09 when you get to load up equities on the cheap.
Not at all. I want consistent returns. It’s not a guarantee that an underperforming asset recovers after ten years either. It can be much longer.

And over the twenty year period, a portfolio constructed similar to my own had more consistent returns and higher returns than the best performing asset class at any given 10 year period.
20 years…oh, so past performance? Sounds an awful lot like performance chasing…oh the irony :shock:
100% US TSM
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Marseille07 »

Nathan Drake wrote: Wed Jan 12, 2022 1:32 am And over the twenty year period, a portfolio constructed similar to my own had more consistent returns and higher returns than the best performing asset class at any given 10 year period.
That's called curve-fitting, but I don't think we can convince you.

It's not terribly difficult to craft rosy-looking backtests using PV. The problem is, they look rosy in the historical data but don't perform as well going forward.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by visualguy »

6NDone wrote: Wed Jan 12, 2022 12:39 am I find it humorous how many threads are made by the same folks to continuously push the virtues of international investing. It’s almost as if they are pulling at straws to justify their many years of sunk opportunity cost…
Painful to watch, indeed. The impact on those with many years of a large allocation has been brutal in terms of depressed returns. There is no plausible recovery from something like that. However, I guess it's all part of a "strategy" whose merits are somehow enshrined in some fabricated principles where what matters most is adhering to these principles regardless of how badly that strategy has backfired.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by fisher0815 »

Earnings of the japanese stockmarket are more cyclical than the U.S. market. The margins are also lower. This and a lot other variables explains the valuation difference.
You can't compare two different stock markets with just the P/E ratio. There are a lot more variables in the equation.

If one would compute all variables right, there would be no difference between the expected returns of the japanese and U.S. market.
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