It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

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flyingaway
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by flyingaway » Sun Sep 09, 2018 12:57 pm

I have about 30% international funds and it performed poorly this year (along with my 30% bond funds).
I am OK with that and am still financially independent.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by alpine_boglehead » Sun Sep 09, 2018 1:05 pm

Post #1001 in this epic thread ... definitely a good read so far.

Some day there might be a thread "US investing has been a disaster!". Waiting for a poster from the future to confirm :twisted:

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Engineer250 » Sun Sep 09, 2018 4:56 pm

cheezit wrote:
Tue Sep 04, 2018 4:20 pm
oldzey wrote:
Mon Sep 03, 2018 5:08 pm
Kevin8696 wrote:
Mon Sep 03, 2018 4:16 pm
sambb wrote:
Tue Aug 14, 2018 4:24 am
this thread has reminded me to buy international this week
buy low sell high is nice
Could you do just as well by shorting the USD ?
“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.” –- Warren Buffett
Ignoring Mr. Buffett's assertion about social security's continued viability in its present form (as that's a political discussion), we should note that the bolded statement is empirically false. We already have a generation with a lower standard of living than their parents; we may have more, depending on whether the 50+ year trend of stagnant real wages, and the other long-term trends of increased health care, housing and social security costs hold.
Thanks for saying something. It invoked such a sad response in me I didn't know how to respond. I do know wages, adjusted for inflation, have stayed basically flat for the last 30 years. Gains in productivity/GDP have not gone to median households. I know Bogleheads tend to be from the fortunate side of Americans but I am frustrated when education and housing are increasing so much faster than inflation, wages aren't, and it doesn't get acknowledged.
Where the tides of fortune take us, no man can know.

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fortyofforty
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by fortyofforty » Sun Sep 09, 2018 5:57 pm

Engineer250 wrote:
Sun Sep 09, 2018 4:56 pm
cheezit wrote:
Tue Sep 04, 2018 4:20 pm
oldzey wrote:
Mon Sep 03, 2018 5:08 pm
Kevin8696 wrote:
Mon Sep 03, 2018 4:16 pm
sambb wrote:
Tue Aug 14, 2018 4:24 am
this thread has reminded me to buy international this week
buy low sell high is nice
Could you do just as well by shorting the USD ?
“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.” –- Warren Buffett
Ignoring Mr. Buffett's assertion about social security's continued viability in its present form (as that's a political discussion), we should note that the bolded statement is empirically false. We already have a generation with a lower standard of living than their parents; we may have more, depending on whether the 50+ year trend of stagnant real wages, and the other long-term trends of increased health care, housing and social security costs hold.
Thanks for saying something. It invoked such a sad response in me I didn't know how to respond. I do know wages, adjusted for inflation, have stayed basically flat for the last 30 years. Gains in productivity/GDP have not gone to median households. I know Bogleheads tend to be from the fortunate side of Americans but I am frustrated when education and housing are increasing so much faster than inflation, wages aren't, and it doesn't get acknowledged.
Don't automatically assume that "Bogleheads tend to be from the fortunate side of Americans". Many Bogleheads worked hard and saved to achieve a measure of success. Not everyone here has had things handed to her. Not everyone here was born into wealth or privilege. Success for many here started with a state of mind, which is one message Bogleheads try to impress on those who will listen.

We see that many things increase far faster than wages, education and healthcare come to mind. However, discussions involving such subjects tend to drift into politics, which is off limits here.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

gmaynardkrebs
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by gmaynardkrebs » Sun Sep 09, 2018 6:10 pm

fortyofforty wrote:
Sun Sep 09, 2018 5:57 pm
Engineer250 wrote:
Sun Sep 09, 2018 4:56 pm
cheezit wrote:
Tue Sep 04, 2018 4:20 pm
oldzey wrote:
Mon Sep 03, 2018 5:08 pm
Kevin8696 wrote:
Mon Sep 03, 2018 4:16 pm


Could you do just as well by shorting the USD ?
“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.” –- Warren Buffett
Ignoring Mr. Buffett's assertion about social security's continued viability in its present form (as that's a political discussion), we should note that the bolded statement is empirically false. We already have a generation with a lower standard of living than their parents; we may have more, depending on whether the 50+ year trend of stagnant real wages, and the other long-term trends of increased health care, housing and social security costs hold.
Thanks for saying something. It invoked such a sad response in me I didn't know how to respond. I do know wages, adjusted for inflation, have stayed basically flat for the last 30 years. Gains in productivity/GDP have not gone to median households. I know Bogleheads tend to be from the fortunate side of Americans but I am frustrated when education and housing are increasing so much faster than inflation, wages aren't, and it doesn't get acknowledged.
Don't automatically assume that "Bogleheads tend to be from the fortunate side of Americans". Many Bogleheads worked hard and saved to achieve a measure of success. Not everyone here has had things handed to her. Not everyone here was born into wealth or privilege. Success for many here started with a state of mind, which is one message Bogleheads try to impress on those who will listen.

We see that many things increase far faster than wages, education and healthcare come to mind. However, discussions involving such subjects tend to drift into politics, which is off limits here.
Given that the average American has close to no savings or investments, I would say that as a whole, the people who post here are relatively "fortunate."

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willthrill81
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Sun Sep 09, 2018 6:47 pm

fortyofforty wrote:
Sun Sep 09, 2018 5:57 pm
Engineer250 wrote:
Sun Sep 09, 2018 4:56 pm
cheezit wrote:
Tue Sep 04, 2018 4:20 pm
oldzey wrote:
Mon Sep 03, 2018 5:08 pm
Kevin8696 wrote:
Mon Sep 03, 2018 4:16 pm


Could you do just as well by shorting the USD ?
“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.” –- Warren Buffett
Ignoring Mr. Buffett's assertion about social security's continued viability in its present form (as that's a political discussion), we should note that the bolded statement is empirically false. We already have a generation with a lower standard of living than their parents; we may have more, depending on whether the 50+ year trend of stagnant real wages, and the other long-term trends of increased health care, housing and social security costs hold.
Thanks for saying something. It invoked such a sad response in me I didn't know how to respond. I do know wages, adjusted for inflation, have stayed basically flat for the last 30 years. Gains in productivity/GDP have not gone to median households. I know Bogleheads tend to be from the fortunate side of Americans but I am frustrated when education and housing are increasing so much faster than inflation, wages aren't, and it doesn't get acknowledged.
Don't automatically assume that "Bogleheads tend to be from the fortunate side of Americans". Many Bogleheads worked hard and saved to achieve a measure of success. Not everyone here has had things handed to her. Not everyone here was born into wealth or privilege. Success for many here started with a state of mind, which is one message Bogleheads try to impress on those who will listen.

We see that many things increase far faster than wages, education and healthcare come to mind. However, discussions involving such subjects tend to drift into politics, which is off limits here.
I don't believe we can readily dismiss Buffett's statement on the basis of inflation-adjusted wages alone. It assumes that buying-power is the only measure of whether someone is "living better." But consider how much better so many things are these days than they were 40 years ago, for instance. Computing power, the Internet, ready access to information, medical technology, etc. How many here would want to go back to the standard of living that existed in 1978 rather than the one that exists today, even if real wages were the same?

Then there's the whole issue surrounding the accuracy of the procedures used to calculate inflation, which is another ball of wax entirely.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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fortyofforty
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by fortyofforty » Sun Sep 09, 2018 7:07 pm

gmaynardkrebs wrote:
Sun Sep 09, 2018 6:10 pm
fortyofforty wrote:
Sun Sep 09, 2018 5:57 pm
Engineer250 wrote:
Sun Sep 09, 2018 4:56 pm
cheezit wrote:
Tue Sep 04, 2018 4:20 pm
oldzey wrote:
Mon Sep 03, 2018 5:08 pm


“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.” –- Warren Buffett
Ignoring Mr. Buffett's assertion about social security's continued viability in its present form (as that's a political discussion), we should note that the bolded statement is empirically false. We already have a generation with a lower standard of living than their parents; we may have more, depending on whether the 50+ year trend of stagnant real wages, and the other long-term trends of increased health care, housing and social security costs hold.
Thanks for saying something. It invoked such a sad response in me I didn't know how to respond. I do know wages, adjusted for inflation, have stayed basically flat for the last 30 years. Gains in productivity/GDP have not gone to median households. I know Bogleheads tend to be from the fortunate side of Americans but I am frustrated when education and housing are increasing so much faster than inflation, wages aren't, and it doesn't get acknowledged.
Don't automatically assume that "Bogleheads tend to be from the fortunate side of Americans". Many Bogleheads worked hard and saved to achieve a measure of success. Not everyone here has had things handed to her. Not everyone here was born into wealth or privilege. Success for many here started with a state of mind, which is one message Bogleheads try to impress on those who will listen.

We see that many things increase far faster than wages, education and healthcare come to mind. However, discussions involving such subjects tend to drift into politics, which is off limits here.
Given that the average American has close to no savings or investments, I would say that as a whole, the people who post here are relatively "fortunate."
Besides sharing a certain state of mind that led to success, as I said, what makes most Bogleheads "fortunate"?
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

Elysium
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Elysium » Sun Sep 09, 2018 8:42 pm

Coming back to the statement from the original OP, has international investing been a real disaster? If we are so short term focused to look only at last 5 or 10 years, it may appear so. However, if we go back to 15 years then it paints a different picture.

US Broad Market has returned around 9.5% for the past 15, and if we look at various Intl components, they each have done about the same.

EM is between 9% and 11% depending on the index you look at (EM, EMSmall, EMValue), Intl Small has done about 9.5%, and active Vanguard Intl Large Growth has done 9%. It's only Europe Index and Pacific Index that has done relatively poor at 6.5% each.

An investor who had diversified across Intl just as you would do across US, would have done well given Intl Small and EM has done at least as good as US TSM.

What about next 15 years? do we know which asset class will do well. Best strategy then is to continue to diversify across US and Intl, and also don't forget to further diversify into Intl Small and EM.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Engineer250 » Sun Sep 09, 2018 9:50 pm

fortyofforty wrote:
Sun Sep 09, 2018 5:57 pm
Don't automatically assume that "Bogleheads tend to be from the fortunate side of Americans". Many Bogleheads worked hard and saved to achieve a measure of success. Not everyone here has had things handed to her. Not everyone here was born into wealth or privilege. Success for many here started with a state of mind, which is one message Bogleheads try to impress on those who will listen.

We see that many things increase far faster than wages, education and healthcare come to mind. However, discussions involving such subjects tend to drift into politics, which is off limits here.
And don't misinterpret my statements. I didn't say everyone posted here had everything handed to them. I just said I think Bogleheads tend to be from the more fortunate side of things, that doesn't mean many (most? quite possibly all of us?) didn't work hard for our success. In my experience, successful people often have two qualities: 1) luck or fortune and 2) hard work / strong work ethic. I understand the tendency to attribute our success purely to our own hard work and intelligence. In my experience though, that's not the only factor.

Median income in 1985 was around $23k (not inflation adjusted) and the median price of a house was $82k. In 2016, median income was $59k and a median home was $234k. That $59k was about $26k in 1985 (13% better, yay workers) but the house of $234k would be about $106k in 1985 (~30% increase in home price). Yearly tuition/room and board of a four year university was $9k in 1985 and $45k in 2016. So in 1985, median tuition was about 40% of median household income. In 2016, it's 78%. Federal minimum wage in 1985 was $3.35/hour. Someone would have to work 51 hours a week at minimum wage in 1985 to pay for a year typical college. Today, that same person working minimum wag would have to work 122 hours a week to pay for typical college.

People were working hard in 1985. People are working hard today. We don't need to delve into politics to discuss that the environment has changed.
Where the tides of fortune take us, no man can know.

gmaynardkrebs
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by gmaynardkrebs » Sun Sep 09, 2018 9:52 pm

fortyofforty wrote:
Sun Sep 09, 2018 7:07 pm
gmaynardkrebs wrote:
Sun Sep 09, 2018 6:10 pm
fortyofforty wrote:
Sun Sep 09, 2018 5:57 pm
Engineer250 wrote:
Sun Sep 09, 2018 4:56 pm
cheezit wrote:
Tue Sep 04, 2018 4:20 pm


Ignoring Mr. Buffett's assertion about social security's continued viability in its present form (as that's a political discussion), we should note that the bolded statement is empirically false. We already have a generation with a lower standard of living than their parents; we may have more, depending on whether the 50+ year trend of stagnant real wages, and the other long-term trends of increased health care, housing and social security costs hold.
Thanks for saying something. It invoked such a sad response in me I didn't know how to respond. I do know wages, adjusted for inflation, have stayed basically flat for the last 30 years. Gains in productivity/GDP have not gone to median households. I know Bogleheads tend to be from the fortunate side of Americans but I am frustrated when education and housing are increasing so much faster than inflation, wages aren't, and it doesn't get acknowledged.
Don't automatically assume that "Bogleheads tend to be from the fortunate side of Americans". Many Bogleheads worked hard and saved to achieve a measure of success. Not everyone here has had things handed to her. Not everyone here was born into wealth or privilege. Success for many here started with a state of mind, which is one message Bogleheads try to impress on those who will listen.

We see that many things increase far faster than wages, education and healthcare come to mind. However, discussions involving such subjects tend to drift into politics, which is off limits here.
Given that the average American has close to no savings or investments, I would say that as a whole, the people who post here are relatively "fortunate."
Besides sharing a certain state of mind that led to success, as I said, what makes most Bogleheads "fortunate"?
What do you think leads to "a certain state of mind" that has led you to success? Did you spring into life the fully formed person you are today? Were you lucky enough to have good parents? Did you choose to be born and grow up where you grew up? Did god ask you whether you wanted to born smart or not-so-smart? Were you lucky enough to marry a good person, or at least not unlucky enough to marry someone who held you back? Did you enter the workforce at a time when jobs were plentiful? Need I go on?

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by LadyGeek » Sun Sep 09, 2018 10:05 pm

Please stay on-topic, which is the investing aspects.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Agent007 » Mon Sep 10, 2018 8:22 am

HEDGEFUNDIE wrote:
Thu Sep 06, 2018 8:25 am
bgf wrote:
Thu Sep 06, 2018 8:00 am
visualguy wrote:
Wed Sep 05, 2018 10:55 pm
FlyingMoose wrote:
Wed Sep 05, 2018 9:41 pm
If international was cheap before, it must be really really cheap now.
Unfortunately, it's not... Abysmal growth in some areas like Europe, inability to capture growth using the stock market in high-growth areas (China, India), etc. Same old.
Index Current P/E Forward P/E Historical P/E (10 Year)
S&P 500 Index 20.71 17.69 17.63
MSCI EAFE Net Index 15.47 14.20 20.31
MSCI EM Net Index 12.91 12.06 14.76

source: https://seekingalpha.com/article/420444 ... tion-point

international markets are substantially cheaper than SP500, both in direct relation as well as in relation to historical PE.

all arguments on this thread about the systematic disadvantages of international markets should be baked into their historical PE. in other words, those arguments fall away when you make value comparisons between current PE and historical PE. even then, international markets are cheap.

right now, $100,000 of VOO is providing your portfolio earnings of less than $5000 per year, or about double what you receive in dividends. we can guess what rate these earnings will grow over the next 5, 10, 25 years, but nobody knows.

the same amount of earnings is generated by only $65,000 of VWO. for whatever reason, the market is valuing that $5000 in emerging market earnings at far less than the same $5000 in SP500 earnings.
+1.

If you tilt value in your portfolio I don’t see how you can ignore international at these valuations.
The US has 2 technology companies that are worth 1 trillion dollars. China has 2 companies that are worth about 500 billion dollars. Europe’s largest technology company (Spotify) is worth about 20 billion dollars.

Why is it that Europe isn’t growing technology companies at the same rate as other parts of the world? Europeans seem to look at technology with a lot of skepticism. Also, Europeans seem to think of entrepreneurs as something like a carpet bagger in the US - adding little value and basically stealing from other people. Contrast this with the US and especially Asia where people think that technology solves problems and entrepreneurs are more celebrated.

I think this is sad. The S&P is about 25% technology and there are a number of high paying jobs in this area. Europe - through negative attitudes and strict regulation drive this opportunity away.

There’s a reason why Europe has underperformed the S&P for the past 10 years - the S&P has technology and Europe doesn’t.

I know that people are bullish on owning international index funds...but why? This trend seems so cultural that it is unlikely to change in 10 or 20 years. Is there more than just tech - sure, but why invest in something that seems to be anti-tech? Are the PE ratios of European companies low? Sure - but there’s usually a reason why PE ratios are low - growth has slowed.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by dh » Mon Sep 10, 2018 8:26 am

alpine_boglehead wrote:
Sun Sep 09, 2018 1:05 pm
Post #1001 in this epic thread ... definitely a good read so far.

Some day there might be a thread "US investing has been a disaster!". Waiting for a poster from the future to confirm :twisted:
:shock: I am fairly confident we will see that thread title one day. For those of us old enough to remember the 1979 Businessweek Cover: "The Death of Equities." For those who ignored that headline experienced quite an amazing 20-year return on equities from '79 to '99.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by gmaynardkrebs » Mon Sep 10, 2018 8:50 am

dh wrote:
Mon Sep 10, 2018 8:26 am
alpine_boglehead wrote:
Sun Sep 09, 2018 1:05 pm
Post #1001 in this epic thread ... definitely a good read so far.

Some day there might be a thread "US investing has been a disaster!". Waiting for a poster from the future to confirm :twisted:
:shock: I am fairly confident we will see that thread title one day. For those of us old enough to remember the 1979 Businessweek Cover: "The Death of Equities." For those who ignored that headline experienced quite an amazing 20-year return on equities from '79 to '99.
I don't remember the cover (except by how often it is cited), but I do remember the era. Things looked very bad, and everything seemed to be falling apart. Pessimism was in the air. I feel we have the opposite "zeitgeist" today with regard to equities. Today, cutting the equity allocation by even 10% is considered highly bearish. In fact, it's bullish. True fear is not expressed in 10% increments.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Valuethinker » Mon Sep 10, 2018 9:28 am

Agent007 wrote:
Mon Sep 10, 2018 8:22 am
HEDGEFUNDIE wrote:
Thu Sep 06, 2018 8:25 am
bgf wrote:
Thu Sep 06, 2018 8:00 am
visualguy wrote:
Wed Sep 05, 2018 10:55 pm
FlyingMoose wrote:
Wed Sep 05, 2018 9:41 pm
If international was cheap before, it must be really really cheap now.
Unfortunately, it's not... Abysmal growth in some areas like Europe, inability to capture growth using the stock market in high-growth areas (China, India), etc. Same old.
Index Current P/E Forward P/E Historical P/E (10 Year)
S&P 500 Index 20.71 17.69 17.63
MSCI EAFE Net Index 15.47 14.20 20.31
MSCI EM Net Index 12.91 12.06 14.76

source: https://seekingalpha.com/article/420444 ... tion-point

international markets are substantially cheaper than SP500, both in direct relation as well as in relation to historical PE.

all arguments on this thread about the systematic disadvantages of international markets should be baked into their historical PE. in other words, those arguments fall away when you make value comparisons between current PE and historical PE. even then, international markets are cheap.

right now, $100,000 of VOO is providing your portfolio earnings of less than $5000 per year, or about double what you receive in dividends. we can guess what rate these earnings will grow over the next 5, 10, 25 years, but nobody knows.

the same amount of earnings is generated by only $65,000 of VWO. for whatever reason, the market is valuing that $5000 in emerging market earnings at far less than the same $5000 in SP500 earnings.
+1.

If you tilt value in your portfolio I don’t see how you can ignore international at these valuations.
The US has 2 technology companies that are worth 1 trillion dollars. China has 2 companies that are worth about 500 billion dollars. Europe’s largest technology company (Spotify) is worth about 20 billion dollars.

Why is it that Europe isn’t growing technology companies at the same rate as other parts of the world? Europeans seem to look at technology with a lot of skepticism. Also, Europeans seem to think of entrepreneurs as something like a carpet bagger in the US - adding little value and basically stealing from other people. Contrast this with the US and especially Asia where people think that technology solves problems and entrepreneurs are more celebrated.
Wonderfully anecdotal. Ignores how much amazing technology there is in Europe - as good or better than that in the US in fact (in some areas). Remember Nokia? Once one of the world's largest tech companies. Yes, it fell, but so did an endless rung of US companies-- Wang Labs or Wordperfect Corporation anyone? If you'd been to Estonia, which now has digital identities for its citizens, you would not call Europe "backwards".

The problem is more about entrepreneurial ecosystem.

Also markets are fragmented. Europe is 28 countries. It would have been a lot harder for an Amazon or a Facebook or a Netflix to hit critical mass with 28 languages to deal with. Even the Single Market is only effective in some ways.

If you look at the tech supercos this cycle, they are consumer facing. With the partial exception of Microsoft. Apple Amazon Google Facebook Netflix. US has the biggest consumer market except for China (which has Tencent and Alibaba, the other 2 tech super stocks).

The real thing is that large parts of the USA are not at all innovative. But in tech there is Silicon Valley, and that truly is innovative - it has the ecosystem of Angel investors, VCs, advisers to direct capital at hungry young entrepreneurs. Their profits at IPO get recycled into the next generation of startups. At each level of a business' development there is a deep pool of managers, software engineers etc. to hire in to take the business to the next stage. There are other areas like Boston's Route 128 (?) and probably the Washington DC Beltway, but Silicon Valley's only real rival in innovation seems to be Israel. Perhaps Shenzen Special Economic Region is coming up? Also Bangalore in India.

(healthcare and health technology will have different clusters. Boston is relatively much more important in that, I believe. New media has a cluster around Hollywood (Pixar, etc.).)

You really wouldn't want to neglect the history of Stanford University, Stanford University Science Park (Sand Hill Row) and Hewlett Packard in the history of the creation of that cluster. The Silicon age began here, when Fairchild Semiconductor was established -- the execs who left that, like Andy Grove, created Intel.

Innovation in tech in terms of turning great ideas into companies -- their financing and growth -- is really the province of a very small number of "clusters". Silicon Valley happens to be the world's most important cluster in tech. As the result of what economists call Path Dependence - once an industry gets established somewhere, it has a permanent advantage in external economies of scale - when new companies are established they are established near the existing ones, spun out of the existing ones, have founders who worked for the existing ones, etc.

I think this is sad. The S&P is about 25% technology and there are a number of high paying jobs in this area. Europe - through negative attitudes and strict regulation drive this opportunity away.
Not sure what regulations drive this away? If you mean the EU's latest battles with Google, Facebook etc. then that's the largest companies in the world - that's not some battle with startups.

US visa rules have been a lot easier and so it's been possible to suck in talent from the Rest of the World. A striking percentage of senior people in Silicon Valley are of South Asian background. The Taiwanese semiconductor industry is based upon Taiwanese who trained in America and went home at some point.
There’s a reason why Europe has underperformed the S&P for the past 10 years - the S&P has technology and Europe doesn’t.

I know that people are bullish on owning international index funds...but why? This trend seems so cultural that it is unlikely to change in 10 or 20 years. Is there more than just tech - sure, but why invest in something that seems to be anti-tech? Are the PE ratios of European companies low? Sure - but there’s usually a reason why PE ratios are low - growth has slowed.
And what do we, here, know about this that the market has not priced in?

If you are going to work in an Efficient Market framework, and buy low cost index mutual funds, then you should be wary of anecdotal arguments like the one you have just made. Because you are implying that you can divine something that the market cannot but presumably you are operating on the same publicly available information?

If not, then you can have a role as a Wall Street Analyst. The next Mary Meeker, etc. ;-).
Last edited by Valuethinker on Mon Sep 10, 2018 9:40 am, edited 2 times in total.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Valuethinker » Mon Sep 10, 2018 9:34 am

gmaynardkrebs wrote:
Mon Sep 10, 2018 8:50 am
dh wrote:
Mon Sep 10, 2018 8:26 am
alpine_boglehead wrote:
Sun Sep 09, 2018 1:05 pm
Post #1001 in this epic thread ... definitely a good read so far.

Some day there might be a thread "US investing has been a disaster!". Waiting for a poster from the future to confirm :twisted:
:shock: I am fairly confident we will see that thread title one day. For those of us old enough to remember the 1979 Businessweek Cover: "The Death of Equities." For those who ignored that headline experienced quite an amazing 20-year return on equities from '79 to '99.
I don't remember the cover (except by how often it is cited), but I do remember the era. Things looked very bad, and everything seemed to be falling apart. Pessimism was in the air. I feel we have the opposite "zeitgeist" today with regard to equities. Today, cutting the equity allocation by even 10% is considered highly bearish. In fact, it's bullish. True fear is not expressed in 10% increments.
Precisely. Go back here to say 2012 and read some of the pessimism. That famous thread "US market is crashing" thread (over 2000 posts?) began with the US market... falling.

There was a certainty that Central Bank policies would lead to hyperinflation. That US government deficits were out of control and would inevitably lead to default. That we were doomed!, doomed! I say.

The US market has risen, what, 4x since March 2009? (might be more). Lots of investors have never experienced a real bear market or have limited memories of what the last one was like. Jeremy Grantham of GMO publishes a piece which says that stocks are massively overvalued, but investors might as well hold on for the ride as they are going up.

2000-03 was my first bear market, where I had real money invested in the markets. It was not as violent as 2008-9 but it was of much longer duration.

That's ancient history now to a lot of people.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by corpgator » Mon Sep 10, 2018 2:24 pm

Valuethinker wrote:
Mon Sep 10, 2018 9:28 am
Agent007 wrote:
Mon Sep 10, 2018 8:22 am
HEDGEFUNDIE wrote:
Thu Sep 06, 2018 8:25 am
bgf wrote:
Thu Sep 06, 2018 8:00 am
visualguy wrote:
Wed Sep 05, 2018 10:55 pm


Unfortunately, it's not... Abysmal growth in some areas like Europe, inability to capture growth using the stock market in high-growth areas (China, India), etc. Same old.
Index Current P/E Forward P/E Historical P/E (10 Year)
S&P 500 Index 20.71 17.69 17.63
MSCI EAFE Net Index 15.47 14.20 20.31
MSCI EM Net Index 12.91 12.06 14.76

source: https://seekingalpha.com/article/420444 ... tion-point

international markets are substantially cheaper than SP500, both in direct relation as well as in relation to historical PE.

all arguments on this thread about the systematic disadvantages of international markets should be baked into their historical PE. in other words, those arguments fall away when you make value comparisons between current PE and historical PE. even then, international markets are cheap.

right now, $100,000 of VOO is providing your portfolio earnings of less than $5000 per year, or about double what you receive in dividends. we can guess what rate these earnings will grow over the next 5, 10, 25 years, but nobody knows.

the same amount of earnings is generated by only $65,000 of VWO. for whatever reason, the market is valuing that $5000 in emerging market earnings at far less than the same $5000 in SP500 earnings.
+1.

If you tilt value in your portfolio I don’t see how you can ignore international at these valuations.
The US has 2 technology companies that are worth 1 trillion dollars. China has 2 companies that are worth about 500 billion dollars. Europe’s largest technology company (Spotify) is worth about 20 billion dollars.

Why is it that Europe isn’t growing technology companies at the same rate as other parts of the world? Europeans seem to look at technology with a lot of skepticism. Also, Europeans seem to think of entrepreneurs as something like a carpet bagger in the US - adding little value and basically stealing from other people. Contrast this with the US and especially Asia where people think that technology solves problems and entrepreneurs are more celebrated.
Wonderfully anecdotal. Ignores how much amazing technology there is in Europe - as good or better than that in the US in fact (in some areas). Remember Nokia? Once one of the world's largest tech companies. Yes, it fell, but so did an endless rung of US companies-- Wang Labs or Wordperfect Corporation anyone? If you'd been to Estonia, which now has digital identities for its citizens, you would not call Europe "backwards".

The problem is more about entrepreneurial ecosystem.

Also markets are fragmented. Europe is 28 countries. It would have been a lot harder for an Amazon or a Facebook or a Netflix to hit critical mass with 28 languages to deal with. Even the Single Market is only effective in some ways.

If you look at the tech supercos this cycle, they are consumer facing. With the partial exception of Microsoft. Apple Amazon Google Facebook Netflix. US has the biggest consumer market except for China (which has Tencent and Alibaba, the other 2 tech super stocks).

The real thing is that large parts of the USA are not at all innovative. But in tech there is Silicon Valley, and that truly is innovative - it has the ecosystem of Angel investors, VCs, advisers to direct capital at hungry young entrepreneurs. Their profits at IPO get recycled into the next generation of startups. At each level of a business' development there is a deep pool of managers, software engineers etc. to hire in to take the business to the next stage. There are other areas like Boston's Route 128 (?) and probably the Washington DC Beltway, but Silicon Valley's only real rival in innovation seems to be Israel. Perhaps Shenzen Special Economic Region is coming up? Also Bangalore in India.

(healthcare and health technology will have different clusters. Boston is relatively much more important in that, I believe. New media has a cluster around Hollywood (Pixar, etc.).)

You really wouldn't want to neglect the history of Stanford University, Stanford University Science Park (Sand Hill Row) and Hewlett Packard in the history of the creation of that cluster. The Silicon age began here, when Fairchild Semiconductor was established -- the execs who left that, like Andy Grove, created Intel.

Innovation in tech in terms of turning great ideas into companies -- their financing and growth -- is really the province of a very small number of "clusters". Silicon Valley happens to be the world's most important cluster in tech. As the result of what economists call Path Dependence - once an industry gets established somewhere, it has a permanent advantage in external economies of scale - when new companies are established they are established near the existing ones, spun out of the existing ones, have founders who worked for the existing ones, etc.

I think this is sad. The S&P is about 25% technology and there are a number of high paying jobs in this area. Europe - through negative attitudes and strict regulation drive this opportunity away.
Not sure what regulations drive this away? If you mean the EU's latest battles with Google, Facebook etc. then that's the largest companies in the world - that's not some battle with startups.

US visa rules have been a lot easier and so it's been possible to suck in talent from the Rest of the World. A striking percentage of senior people in Silicon Valley are of South Asian background. The Taiwanese semiconductor industry is based upon Taiwanese who trained in America and went home at some point.
There’s a reason why Europe has underperformed the S&P for the past 10 years - the S&P has technology and Europe doesn’t.

I know that people are bullish on owning international index funds...but why? This trend seems so cultural that it is unlikely to change in 10 or 20 years. Is there more than just tech - sure, but why invest in something that seems to be anti-tech? Are the PE ratios of European companies low? Sure - but there’s usually a reason why PE ratios are low - growth has slowed.
And what do we, here, know about this that the market has not priced in?

If you are going to work in an Efficient Market framework, and buy low cost index mutual funds, then you should be wary of anecdotal arguments like the one you have just made. Because you are implying that you can divine something that the market cannot but presumably you are operating on the same publicly available information?

If not, then you can have a role as a Wall Street Analyst. The next Mary Meeker, etc. ;-).
Actually, Amazon isn't consumer facing at all if you look at what actually makes money - AWS and advertising. The retail side may one day be profitable, but it's being propped up by business serving entities.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by patrick » Mon Sep 10, 2018 5:49 pm

Agent007 wrote:
Mon Sep 10, 2018 8:22 am
The US has 2 technology companies that are worth 1 trillion dollars. China has 2 companies that are worth about 500 billion dollars. Europe’s largest technology company (Spotify) is worth about 20 billion dollars.

Why is it that Europe isn’t growing technology companies at the same rate as other parts of the world? Europeans seem to look at technology with a lot of skepticism. Also, Europeans seem to think of entrepreneurs as something like a carpet bagger in the US - adding little value and basically stealing from other people. Contrast this with the US and especially Asia where people think that technology solves problems and entrepreneurs are more celebrated.

I think this is sad. The S&P is about 25% technology and there are a number of high paying jobs in this area. Europe - through negative attitudes and strict regulation drive this opportunity away.

There’s a reason why Europe has underperformed the S&P for the past 10 years - the S&P has technology and Europe doesn’t.

I know that people are bullish on owning international index funds...but why? This trend seems so cultural that it is unlikely to change in 10 or 20 years. Is there more than just tech - sure, but why invest in something that seems to be anti-tech? Are the PE ratios of European companies low? Sure - but there’s usually a reason why PE ratios are low - growth has slowed.
Tech stocks don't always win. I seem to recall that they underperformed dramatically from 2000 through 2002. If something similar happens again we could find that the international index does better due to not being so tech-heavy.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Dottie57 » Mon Sep 10, 2018 8:25 pm

Agent007 wrote:
Mon Sep 10, 2018 8:22 am
HEDGEFUNDIE wrote:
Thu Sep 06, 2018 8:25 am
bgf wrote:
Thu Sep 06, 2018 8:00 am
visualguy wrote:
Wed Sep 05, 2018 10:55 pm
FlyingMoose wrote:
Wed Sep 05, 2018 9:41 pm
If international was cheap before, it must be really really cheap now.
Unfortunately, it's not... Abysmal growth in some areas like Europe, inability to capture growth using the stock market in high-growth areas (China, India), etc. Same old.
Index Current P/E Forward P/E Historical P/E (10 Year)
S&P 500 Index 20.71 17.69 17.63
MSCI EAFE Net Index 15.47 14.20 20.31
MSCI EM Net Index 12.91 12.06 14.76

source: https://seekingalpha.com/article/420444 ... tion-point

international markets are substantially cheaper than SP500, both in direct relation as well as in relation to historical PE.

all arguments on this thread about the systematic disadvantages of international markets should be baked into their historical PE. in other words, those arguments fall away when you make value comparisons between current PE and historical PE. even then, international markets are cheap.

right now, $100,000 of VOO is providing your portfolio earnings of less than $5000 per year, or about double what you receive in dividends. we can guess what rate these earnings will grow over the next 5, 10, 25 years, but nobody knows.

the same amount of earnings is generated by only $65,000 of VWO. for whatever reason, the market is valuing that $5000 in emerging market earnings at far less than the same $5000 in SP500 earnings.
+1.

If you tilt value in your portfolio I don’t see how you can ignore international at these valuations.
The US has 2 technology companies that are worth 1 trillion dollars. China has 2 companies that are worth about 500 billion dollars. Europe’s largest technology company (Spotify) is worth about 20 billion dollars.

Why is it that Europe isn’t growing technology companies at the same rate as other parts of the world? Europeans seem to look at technology with a lot of skepticism. Also, Europeans seem to think of entrepreneurs as something like a carpet bagger in the US - adding little value and basically stealing from other people. Contrast this with the US and especially Asia where people think that technology solves problems and entrepreneurs are more celebrated.

I think this is sad. The S&P is about 25% technology and there are a number of high paying jobs in this area. Europe - through negative attitudes and strict regulation drive this opportunity away.

There’s a reason why Europe has underperformed the S&P for the past 10 years - the S&P has technology and Europe doesn’t.

I know that people are bullish on owning international index funds...but why? This trend seems so cultural that it is unlikely to change in 10 or 20 years. Is there more than just tech - sure, but why invest in something that seems to be anti-tech? Are the PE ratios of European companies low? Sure - but there’s usually a reason why PE ratios are low - growth has slowed.
Bill Berstein has other reasons for performance of European markets - lack of population growth which drives economic growth.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by columbia » Mon Sep 10, 2018 8:37 pm

I firmly agree with the above statement: “This trend seems so cultural”


US doesn’t have an exclusive market on tech innovation, but don’t look to Europe for competition in this sector.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by MarkRoulo » Mon Sep 10, 2018 8:56 pm

Agent007 wrote:
Mon Sep 10, 2018 8:22 am
The US has 2 technology companies that are worth 1 trillion dollars. China has 2 companies that are worth about 500 billion dollars. Europe’s largest technology company (Spotify) is worth about 20 billion dollars.
Your basic point is valid, but both Nokia and Ericsson (telecom) have market caps in excess of $20B.

ARM is British, though now owned by Softbank, and was purchased two years ago for more than $30B.

SAP seems to have a market cap of around $140B

Spotify isn't the largest European tech company.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Noobvestor » Mon Sep 10, 2018 10:34 pm

I'm amazed this hasn't yet spawned a "It's not enough to mumble "Stay the Course"... BOND Investing has been a disaster!" spinoff thread.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by gmaynardkrebs » Tue Sep 11, 2018 10:06 am

Noobvestor wrote:
Mon Sep 10, 2018 10:34 pm
I'm amazed this hasn't yet spawned a "It's not enough to mumble "Stay the Course"... BOND Investing has been a disaster!" spinoff thread.
Not sure what you are referring to -- haven't long bonds have done pretty well, at least until fairly recently.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Tue Sep 11, 2018 10:29 am

gmaynardkrebs wrote:
Tue Sep 11, 2018 10:06 am
Noobvestor wrote:
Mon Sep 10, 2018 10:34 pm
I'm amazed this hasn't yet spawned a "It's not enough to mumble "Stay the Course"... BOND Investing has been a disaster!" spinoff thread.
Not sure what you are referring to -- haven't long bonds have done pretty well, at least until fairly recently.
It depends on the time period being investigated. Bonds suffered in the 1940s and 1970s, especially long bonds. Intermediate-term bonds had a 37% drawdown in real terms between 1976 and 1981.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by ReformedSpender » Tue Sep 11, 2018 11:25 am

The U.S. central bank is shifting its monetary policy in two significant ways: raising interest rates and reducing the size of its balance sheet. Other parts of the world are still seeing QE. Investors should understand this unwinding in the U.S represents some risk with potential consequences. The Fed’s bond-buying program which helped push down interest rates and made stocks look further more attractive than fixed income is ending and could result in more pressure on equities.

There are numerous more factors to consider; Asia markets are in bear territory while the U.S market is currently up ~10% YTD, however, this could flip at any time. I agree with others that there is certainly a recency bias to the U.S present among the community. Personally, I will continue to aim for diversity and invest internationally.

:beer
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by gmaynardkrebs » Tue Sep 11, 2018 12:02 pm

ReformedSpender wrote:
Tue Sep 11, 2018 11:25 am
The U.S. central bank is shifting its monetary policy in two significant ways: raising interest rates and reducing the size of its balance sheet. Other parts of the world are still seeing QE. Investors should understand this unwinding in the U.S represents some risk with potential consequences. The Fed’s bond-buying program which helped push down interest rates and made stocks look further more attractive than fixed income is ending and could result in more pressure on equities.

There are numerous more factors to consider; Asia markets are in bear territory while the U.S market is currently up ~10% YTD, however, this could flip at any time. I agree with others that there is certainly a recency bias to the U.S present among the community. Personally, I will continue to aim for diversity and invest internationally.

:beer
However, the speed of the QE unwinding is glacial. Personally, I think the US market is unlikely to flip, even if it's as overvalued as I believe it is. These are difficult times internationally. In such times, the US market is viewed as a safe haven, and benefits from a flight to safety. I think there's some of that going on already.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Valuethinker » Wed Sep 12, 2018 11:44 am

gmaynardkrebs wrote:
Tue Sep 11, 2018 12:02 pm
ReformedSpender wrote:
Tue Sep 11, 2018 11:25 am
The U.S. central bank is shifting its monetary policy in two significant ways: raising interest rates and reducing the size of its balance sheet. Other parts of the world are still seeing QE. Investors should understand this unwinding in the U.S represents some risk with potential consequences. The Fed’s bond-buying program which helped push down interest rates and made stocks look further more attractive than fixed income is ending and could result in more pressure on equities.

There are numerous more factors to consider; Asia markets are in bear territory while the U.S market is currently up ~10% YTD, however, this could flip at any time. I agree with others that there is certainly a recency bias to the U.S present among the community. Personally, I will continue to aim for diversity and invest internationally.

:beer
However, the speed of the QE unwinding is glacial. Personally, I think the US market is unlikely to flip, even if it's as overvalued as I believe it is. These are difficult times internationally. In such times, the US market is viewed as a safe haven, and benefits from a flight to safety. I think there's some of that going on already.
The clincher is undercapitalized European banks. Italy in particular looks like a slow motion trainwreck, which could turn into a fast motion one, and that will come with its own political crisis.

That's the reason to be bearish re European equities, because the problems of the Eurozone banking system have not been dealt with.

ROW it's the Chinese debt-property bubble and how that plays out.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Valuethinker » Wed Sep 12, 2018 12:04 pm

corpgator wrote:
Mon Sep 10, 2018 2:24 pm
Valuethinker wrote:
Mon Sep 10, 2018 9:28 am
Agent007 wrote:
Mon Sep 10, 2018 8:22 am
HEDGEFUNDIE wrote:
Thu Sep 06, 2018 8:25 am
bgf wrote:
Thu Sep 06, 2018 8:00 am


Index Current P/E Forward P/E Historical P/E (10 Year)
S&P 500 Index 20.71 17.69 17.63
MSCI EAFE Net Index 15.47 14.20 20.31
MSCI EM Net Index 12.91 12.06 14.76

source: https://seekingalpha.com/article/420444 ... tion-point

international markets are substantially cheaper than SP500, both in direct relation as well as in relation to historical PE.

all arguments on this thread about the systematic disadvantages of international markets should be baked into their historical PE. in other words, those arguments fall away when you make value comparisons between current PE and historical PE. even then, international markets are cheap.

right now, $100,000 of VOO is providing your portfolio earnings of less than $5000 per year, or about double what you receive in dividends. we can guess what rate these earnings will grow over the next 5, 10, 25 years, but nobody knows.

the same amount of earnings is generated by only $65,000 of VWO. for whatever reason, the market is valuing that $5000 in emerging market earnings at far less than the same $5000 in SP500 earnings.
+1.

If you tilt value in your portfolio I don’t see how you can ignore international at these valuations.
The US has 2 technology companies that are worth 1 trillion dollars. China has 2 companies that are worth about 500 billion dollars. Europe’s largest technology company (Spotify) is worth about 20 billion dollars.

Why is it that Europe isn’t growing technology companies at the same rate as other parts of the world? Europeans seem to look at technology with a lot of skepticism. Also, Europeans seem to think of entrepreneurs as something like a carpet bagger in the US - adding little value and basically stealing from other people. Contrast this with the US and especially Asia where people think that technology solves problems and entrepreneurs are more celebrated.
Wonderfully anecdotal. Ignores how much amazing technology there is in Europe - as good or better than that in the US in fact (in some areas). Remember Nokia? Once one of the world's largest tech companies. Yes, it fell, but so did an endless rung of US companies-- Wang Labs or Wordperfect Corporation anyone? If you'd been to Estonia, which now has digital identities for its citizens, you would not call Europe "backwards".

The problem is more about entrepreneurial ecosystem.

Also markets are fragmented. Europe is 28 countries. It would have been a lot harder for an Amazon or a Facebook or a Netflix to hit critical mass with 28 languages to deal with. Even the Single Market is only effective in some ways.

If you look at the tech supercos this cycle, they are consumer facing. With the partial exception of Microsoft. Apple Amazon Google Facebook Netflix. US has the biggest consumer market except for China (which has Tencent and Alibaba, the other 2 tech super stocks).

The real thing is that large parts of the USA are not at all innovative. But in tech there is Silicon Valley, and that truly is innovative - it has the ecosystem of Angel investors, VCs, advisers to direct capital at hungry young entrepreneurs. Their profits at IPO get recycled into the next generation of startups. At each level of a business' development there is a deep pool of managers, software engineers etc. to hire in to take the business to the next stage. There are other areas like Boston's Route 128 (?) and probably the Washington DC Beltway, but Silicon Valley's only real rival in innovation seems to be Israel. Perhaps Shenzen Special Economic Region is coming up? Also Bangalore in India.

(healthcare and health technology will have different clusters. Boston is relatively much more important in that, I believe. New media has a cluster around Hollywood (Pixar, etc.).)

You really wouldn't want to neglect the history of Stanford University, Stanford University Science Park (Sand Hill Row) and Hewlett Packard in the history of the creation of that cluster. The Silicon age began here, when Fairchild Semiconductor was established -- the execs who left that, like Andy Grove, created Intel.

Innovation in tech in terms of turning great ideas into companies -- their financing and growth -- is really the province of a very small number of "clusters". Silicon Valley happens to be the world's most important cluster in tech. As the result of what economists call Path Dependence - once an industry gets established somewhere, it has a permanent advantage in external economies of scale - when new companies are established they are established near the existing ones, spun out of the existing ones, have founders who worked for the existing ones, etc.

I think this is sad. The S&P is about 25% technology and there are a number of high paying jobs in this area. Europe - through negative attitudes and strict regulation drive this opportunity away.
Not sure what regulations drive this away? If you mean the EU's latest battles with Google, Facebook etc. then that's the largest companies in the world - that's not some battle with startups.

US visa rules have been a lot easier and so it's been possible to suck in talent from the Rest of the World. A striking percentage of senior people in Silicon Valley are of South Asian background. The Taiwanese semiconductor industry is based upon Taiwanese who trained in America and went home at some point.
There’s a reason why Europe has underperformed the S&P for the past 10 years - the S&P has technology and Europe doesn’t.

I know that people are bullish on owning international index funds...but why? This trend seems so cultural that it is unlikely to change in 10 or 20 years. Is there more than just tech - sure, but why invest in something that seems to be anti-tech? Are the PE ratios of European companies low? Sure - but there’s usually a reason why PE ratios are low - growth has slowed.
And what do we, here, know about this that the market has not priced in?

If you are going to work in an Efficient Market framework, and buy low cost index mutual funds, then you should be wary of anecdotal arguments like the one you have just made. Because you are implying that you can divine something that the market cannot but presumably you are operating on the same publicly available information?

If not, then you can have a role as a Wall Street Analyst. The next Mary Meeker, etc. ;-).
Actually, Amazon isn't consumer facing at all if you look at what actually makes money - AWS and advertising. The retail side may one day be profitable, but it's being propped up by business serving entities.
The thing I wonder is to what extent we can attribute Amazon's market cap to AWS (which is disproportionately profitable) v. to the rest of Amazon.

I am sure that the effort has been made, but there will be a lot of guesswork given corporate disclosures.

If you take a train in Europe v. USA, or go to an airport, your view of which country is "advanced" is going to shift. And indeed the Europeans are leading manufacturers of high speed trains. The world's largest carmaker (VW) is European, etc.

Which is not to be overly bullish about Europe. The Eurozone yet haunts it, and in particular the Italian banks. European banks are undercapitalized (Deutsche Bank in that list) and feel like an accident waiting to happen.

The question is whether we know more than the stock market does, in its aggregation of wisdom. Are the prices and valuations of the stocks pricing in the market's best guess of future risks and prospects, based on publicly available information?

I for one certainly do not.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by ReformedSpender » Wed Sep 12, 2018 1:12 pm

ReformedSpender wrote:
Tue Sep 11, 2018 11:25 am
There are numerous more factors to consider; Asia markets are in bear territory while the U.S market is currently up ~10% YTD, however, this could flip at any time.
Currently, VTI red and VXUS green for a change :wink:


On a serious note, a good article I found on the considerations for investing globally:

http://awealthofcommonsense.com/2018/07 ... -globally/
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by JamalJones » Wed Sep 12, 2018 2:56 pm

I guess it depends on which asset class of international we're talking about:

Image

Also, I think Commodities have been the real disater! :shock:

(all return data is from https://www.portfoliovisualizer.com/)
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Wed Sep 12, 2018 3:39 pm

JamalJones wrote:
Wed Sep 12, 2018 2:56 pm
I guess it depends on which asset class of international we're talking about:

Image

Also, I think Commodities have been the real disater! :shock:

(all return data is from https://www.portfoliovisualizer.com/)
Depending on how strongly you believe in mean reversion, it might actually be a great time to invest in commodities. Since 2016, they've had a real CAGR of 5.15% and might be trending upward. Remember that bull markets are built on the back of pessimism. Maybe the same will be true of international stocks. Time will tell.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Elysium » Wed Sep 12, 2018 4:21 pm

willthrill81 wrote:
Wed Sep 12, 2018 3:39 pm
JamalJones wrote:
Wed Sep 12, 2018 2:56 pm
I guess it depends on which asset class of international we're talking about:

Image

Also, I think Commodities have been the real disater! :shock:

(all return data is from https://www.portfoliovisualizer.com/)
Depending on how strongly you believe in mean reversion, it might actually be a great time to invest in commodities. Since 2016, they've had a real CAGR of 5.15% and might be trending upward. Remember that bull markets are built on the back of pessimism. Maybe the same will be true of international stocks. Time will tell.
Not exactly true in case of Commodities, the problem as stated in other threads, and I remember this from 2007/08 as well when it all started, is that Commodities entered into Contango around '07/'08 perid, and unless they move into Backwardation there is no actual recovery. I used to own some CCF back in the days and exited it when this whole Contango thing was discussed.

As for Intl, I had pointed this same thing a few posts / page before, it depends on which Intl component we are taking about. Intl Small, Intl Small Value, EM, EM Small, and EM Value have all done relatively well. It's Developed Large Caps that did poorly, although we must remember the lost decade for US Large Cap equities where US TSM underperformed bonds.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Leif » Thu Sep 13, 2018 1:17 pm

JamalJones wrote:
Wed Sep 12, 2018 2:56 pm
Also, I think Commodities have been the real disater! :shock:
Tell me about it! I was a long time holder of commodities at 5% of my portfolio. Larry S. tells me I should have been a holder of LT bonds at the same time. Well, I was not. Fortunately, I was not rebalancing the commodity part. When I sold last year it was down to less than 2% of portfolio. I took that money and put it into TIPS.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by columbia » Thu Sep 13, 2018 1:59 pm

Not that I would ever do it, but this seems like a good buying situation for commodities.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Leif » Thu Sep 13, 2018 2:14 pm

columbia wrote:
Thu Sep 13, 2018 1:59 pm
Not that I would ever do it, but this seems like a good buying situation for commodities.
Right, the last 10 years were constant buying opportunities as well.

I remember a post several years ago were someone decided to buy more since it was a buying opportunity. Perhaps one day it will be true. I think if your goal is inflation protection TIPS is a lot less volatile. Plus you are guaranteed to not lose principal even if we have deflation.
Last edited by Leif on Thu Sep 13, 2018 2:26 pm, edited 3 times in total.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Thesaints » Thu Sep 13, 2018 2:17 pm

What's the expected return for commodities and their expected volatility ?

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Thu Sep 13, 2018 2:32 pm

Thesaints wrote:
Thu Sep 13, 2018 2:17 pm
What's the expected return for commodities and their expected volatility ?
If you can reliably answer both of those questions with any asset class, you should become a very successful investor indeed.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Thesaints » Thu Sep 13, 2018 2:50 pm

willthrill81 wrote:
Thu Sep 13, 2018 2:32 pm
If you can reliably answer both of those questions with any asset class, you should become a very successful investor indeed.
My opinion is that return from commodities shouldn't exceed inflation by a lot and their risk is substantially higher than TIPS.
In other words they are to be avoided.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Thu Sep 13, 2018 2:56 pm

Thesaints wrote:
Thu Sep 13, 2018 2:50 pm
willthrill81 wrote:
Thu Sep 13, 2018 2:32 pm
If you can reliably answer both of those questions with any asset class, you should become a very successful investor indeed.
My opinion is that return from commodities shouldn't exceed inflation by a lot and their risk is substantially higher than TIPS.
In other words they are to be avoided.
Possibly, even probably, so. But if one buys into modern portfolio theory, there may be a diversification benefit to owning a slice of commodities given that they are not strongly correlated to other major asset classes.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Elysium » Thu Sep 13, 2018 6:37 pm

willthrill81 wrote:
Thu Sep 13, 2018 2:56 pm
Thesaints wrote:
Thu Sep 13, 2018 2:50 pm
willthrill81 wrote:
Thu Sep 13, 2018 2:32 pm
If you can reliably answer both of those questions with any asset class, you should become a very successful investor indeed.
My opinion is that return from commodities shouldn't exceed inflation by a lot and their risk is substantially higher than TIPS.
In other words they are to be avoided.
Possibly, even probably, so. But if one buys into modern portfolio theory, there may be a diversification benefit to owning a slice of commodities given that they are not strongly correlated to other major asset classes.
Being not correlated to other assets aren't enough to merit an inclusion, even for diversification purposes. A positive expected return above inflation is required. Commodities do not have a positive expected return above inflation. CCFs are different story since they promise to have double return including that from the collateral (TIPS or T-Bills). However, that also requires them to be in Backwardation, and when they are in Contango like the last 10+ years then expected return is negative. There is no reason to own something with negative expected returns.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by gmaynardkrebs » Thu Sep 13, 2018 9:20 pm

Elysium wrote:
Thu Sep 13, 2018 6:37 pm
Being not correlated to other assets aren't enough to merit an inclusion, even for diversification purposes. A positive expected return above inflation is required. Commodities do not have a positive expected return above inflation. CCFs are different story since they promise to have double return including that from the collateral (TIPS or T-Bills). However, that also requires them to be in Backwardation, and when they are in Contango like the last 10+ years then expected return is negative. There is no reason to own something with negative expected returns.
If what you say is correct, it's hard for me understand how there could even be a market in commodities -- Why anyone would invest in commodities if the expected real return is negative? Obviously some presumably rational investors do. I can understand negative real returns on totally safe assets (eg., TIPS), but commodities are not safe at all. Please explain.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Elysium » Thu Sep 13, 2018 9:56 pm

gmaynardkrebs wrote:
Thu Sep 13, 2018 9:20 pm
Elysium wrote:
Thu Sep 13, 2018 6:37 pm
Being not correlated to other assets aren't enough to merit an inclusion, even for diversification purposes. A positive expected return above inflation is required. Commodities do not have a positive expected return above inflation. CCFs are different story since they promise to have double return including that from the collateral (TIPS or T-Bills). However, that also requires them to be in Backwardation, and when they are in Contango like the last 10+ years then expected return is negative. There is no reason to own something with negative expected returns.
If what you say is correct, it's hard for me understand how there could even be a market in commodities -- Why anyone would invest in commodities if the expected real return is negative? Obviously some presumably rational investors do. I can understand negative real returns on totally safe assets (eg., TIPS), but commodities are not safe at all. Please explain.
First, there is a difference between pure Commodities and CCF (collateralized commodity futures), people use these interchageably often, although it is important to use the correct term as these are two different things. Pure commodities such as wheat, cotton, soy beans, gold, etc have no expected return over inflation, as their prices (spot price) mostly keep up with inflation. As for CCF, their returns are from 3 sources, Collateral, Roll Return, and Spot Price. The Pimco CCF used TIPS in early days as collateral but were forced to switch to T-Bills later (I don't recall all the background reasons, have to search the forum), and these days collateral for CCF market uses T-bills. One can't expect more then inflation returns for T-Bills. Spot price based on long evidence has shown the return is same as inflation. Which just leave the Roll Return for a positive expected return from CCFs.

This was the whole promise. Low correlation, and positive return from Roll Yield (initially the double return from TIPS was considered as added bonus but that vanished quickly as they were forced out of TIPS). But the problem is in order to have positive returns from Roll Yield, futures need to be in backwardation (this is where future prices are below spot price), however since 2007 or so they are in Contango (this is when future prices are above spot price). No one actually knows why the contango situation happened (or do they?), and how / when it will go into backwardation (we may not, because CCF is a new innovation and may be this glut of CCF products are causing this Contango situation?).

To put this in very simple terms, the only positive source of return for CCF are Roll Return which require backwardation and since they are in contango there is no positive return. Hence no need to own them.

That is the answer as best as I can explain based on everything I have read and learned over the years on this topic. You can search up the forum for more, especially the classic threads between Larry vs. Rick on CCF.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by ReformedSpender » Fri Sep 14, 2018 9:15 am

Candidate for "reversion to the mean" imo

VTI vs VXUS

https://pbs.twimg.com/media/Dm-RIIcWsAEolL3.jpg
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Valuethinker » Fri Sep 14, 2018 9:26 am

gmaynardkrebs wrote:
Thu Sep 13, 2018 9:20 pm
Elysium wrote:
Thu Sep 13, 2018 6:37 pm
Being not correlated to other assets aren't enough to merit an inclusion, even for diversification purposes. A positive expected return above inflation is required. Commodities do not have a positive expected return above inflation. CCFs are different story since they promise to have double return including that from the collateral (TIPS or T-Bills). However, that also requires them to be in Backwardation, and when they are in Contango like the last 10+ years then expected return is negative. There is no reason to own something with negative expected returns.
If what you say is correct, it's hard for me understand how there could even be a market in commodities -- Why anyone would invest in commodities if the expected real return is negative? Obviously some presumably rational investors do. I can understand negative real returns on totally safe assets (eg., TIPS), but commodities are not safe at all. Please explain.
Commodity investment markets are tiny compared to commodity markets for storage + future consumption?

The estimate I saw was something like $350bn? So 1/3rd the market cap of any of the top US tech stocks?

That's easily explainable by hedge demand? By future needs to consume those commodities by some market participants.

If you are a pension fund in a major oil importing country (say Western Europe ex Norway, as opposed to USA which is also a major producer) then the final consumption of oil by your plan members and corporate sponsor could be large enough to justify a long position in crude oil. In truth I don't think most institutional investors are that sophisticated but it could be used to justify a commodity holding.

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