U.S. stocks in free fall

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Bluce
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Re: U.S. stocks in free fall

Post by Bluce » Tue Sep 03, 2019 8:44 am

Are we in this thread today?? :confused :confused

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Re: U.S. stocks in free fall

Post by oldcomputerguy » Tue Sep 03, 2019 1:18 pm

Several posts with political content were removed. As a reminder, political comments are off-topic and against forum policy. See Unacceptable Topics:
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

TropikThunder
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Re: U.S. stocks in free fall

Post by TropikThunder » Tue Sep 03, 2019 11:26 pm

Wait, what happened to Magic Tuesday? Is it because of the holiday? How do you all expect me to efficiently market time during the week with a flawed system?!? :twisted:

viewtopic.php?p=4681269#p4681269

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HomerJ
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Re: U.S. stocks in free fall

Post by HomerJ » Wed Sep 04, 2019 12:44 am

CULater wrote:
Tue Aug 27, 2019 4:46 pm
HomerJ wrote:
Tue Aug 27, 2019 3:42 pm
stocknoob4111 wrote:
Tue Aug 27, 2019 3:26 pm
people do not have the luxury of selecting starting points.. regardless of when you start, given a very long term say 20 years and we stay the course and keep investing we will reap great wealth due to compounding at 7% (most news outlets pedal this), in reality WHEN in the cycle you start could be huge.

Well, I guess 2-3% real is better than zero but for such a paltry return one had to endure 50% drawdowns and several gray hairs.
If you "keep investing" over 20 years, you're not stuck with 2%-3% real on all your money.

The money you invested in 2000 did poorly, the money you invested in 2001 and 2002 and 2003 did much better.

And in the end, yes, so far you reap great wealth, even if a couple of the years over the 20 you invest don't do so well.

Remember, the absolute WORST time to invest in stocks in recent memory was in 2000, and you still got a long-term 2%-3% positive real return out of it. That's pretty good for your WORST year.
It's good to look on the sunny side of things, but you need to have the right temperament. Anything you had in stocks at the start of 2000 didn't even match the real return of T-Bills until 2013. A long time to wait for nothing. All the gains from stocks since 2000 have been accounted for during just the last 6+ years -- if you had the temperament to hang in there through two brutal bear markets and pocket lint after 13 years. That's the way of stocks. Lots of pain for an eventual gain. You don't get something for nothing in this world -- even from Mr. Market.
You didn't have to wait 13 years to make money... Money invested in 2002 and 2003 made you money very quickly.

You completely missed my point. Picking any single year is a poor way to describe investing.

Plus people usually just keep track of their net worth, not each year's gains and losses.

Someone who was continuing to save each year, and who was tracking their net worth on a spreadsheet from 2000 didn't have to wait 13 years to see their net worth go up... 13 years later, they had a TON more money, and were feeling pretty good.
The J stands for Jay

chem6022
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Re: U.S. stocks in free fall

Post by chem6022 » Wed Sep 04, 2019 1:26 am

Well I just finished dollar-cost averaging to my desired asset allocation. So I'm truly sorry for the upcoming crash!

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Stinky
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Re: U.S. stocks in free fall

Post by Stinky » Wed Sep 04, 2019 7:00 am

TropikThunder wrote:
Tue Sep 03, 2019 11:26 pm
Wait, what happened to Magic Tuesday? Is it because of the holiday? How do you all expect me to efficiently market time during the week with a flawed system?!? :twisted:

viewtopic.php?p=4681269#p4681269
"Magic Tuesday" for this week only is officially postponed one day, due to the Labor Day Holiday. (Just like my trash service, which normally comes on Monday but came on Tuesday this week.)

S&P futures are up 25 points as I type this. So maybe it will be a "Wild Wednesday". :moneybag
It's a GREAT day to be alive - Travis Tritt

GoldenFinch
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Re: U.S. stocks in free fall

Post by GoldenFinch » Wed Sep 04, 2019 9:33 am

Stinky wrote:
Wed Sep 04, 2019 7:00 am
TropikThunder wrote:
Tue Sep 03, 2019 11:26 pm
Wait, what happened to Magic Tuesday? Is it because of the holiday? How do you all expect me to efficiently market time during the week with a flawed system?!? :twisted:

viewtopic.php?p=4681269#p4681269
"Magic Tuesday" for this week only is officially postponed one day, due to the Labor Day Holiday. (Just like my trash service, which normally comes on Monday but came on Tuesday this week.)

S&P futures are up 25 points as I type this. So maybe it will be a "Wild Wednesday". :moneybag
I’m glad you figured this out. It’s called magic Tuesday holiday drag. Someone should add a footnote under the graph. :happy

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Bluce
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Re: U.S. stocks in free fall

Post by Bluce » Wed Sep 04, 2019 10:04 am

TropikThunder wrote:
Tue Sep 03, 2019 11:26 pm
Wait, what happened to Magic Tuesday? Is it because of the holiday? How do you all expect me to efficiently market time during the week with a flawed system?!? :twisted:

viewtopic.php?p=4681269#p4681269
The PTB are making some adjustments and are fine-tuning to the timing model. More complexity always equals more accuracy, so in a few more decades it will be perfect.

They've got the self-operating napkin perfected, so next in line is the market timing machine. Once they turn their full attention to it, it will be perfect and we'll all be rich.

Image

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Stinky
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Re: U.S. stocks in free fall

Post by Stinky » Wed Sep 04, 2019 10:08 pm

Stinky wrote:
Wed Sep 04, 2019 7:00 am
TropikThunder wrote:
Tue Sep 03, 2019 11:26 pm
Wait, what happened to Magic Tuesday? Is it because of the holiday? How do you all expect me to efficiently market time during the week with a flawed system?!? :twisted:

viewtopic.php?p=4681269#p4681269
"Magic Tuesday" for this week only is officially postponed one day, due to the Labor Day Holiday. (Just like my trash service, which normally comes on Monday but came on Tuesday this week.)

S&P futures are up 25 points as I type this. So maybe it will be a "Wild Wednesday". :moneybag
Yes, it was a Wild Wednesday today.

And based on the futures market tonight, tomorrow could be a Tremendous Thursday. :moneybag
It's a GREAT day to be alive - Travis Tritt

rascott
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Re: U.S. stocks in free fall

Post by rascott » Wed Sep 04, 2019 11:20 pm

Are Euro / International the new low-vol? They correlate well with US equities currently... but seem much less volatile.

I feel when I'm buying VXUS I'm really buying German banks.. just like when buying VTI I'm buying US tech. They feel like the drivers of the index.

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samsoes
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Re: U.S. stocks in free fall

Post by samsoes » Thu Sep 05, 2019 8:59 am

Oh, for crying out loud, euthanize this thread, PLEASE!
We are not supposed to be market timers!! :oops:
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)

MotoTrojan
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Re: U.S. stocks in free fall

Post by MotoTrojan » Thu Sep 05, 2019 9:27 am

samsoes wrote:
Thu Sep 05, 2019 8:59 am
Oh, for crying out loud, euthanize this thread, PLEASE!
We are not supposed to be market timers!! :oops:
Just leave. This thread is meant to prevent market timing by those that get spooked, not encourage it.

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nedsaid
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Re: U.S. stocks in free fall

Post by nedsaid » Thu Sep 05, 2019 10:16 am

Wow, the markets are up pretty smartly today. Reopening of trade talks with China.
A fool and his money are good for business.

retiringwhen
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Re: U.S. stocks in free fall

Post by retiringwhen » Thu Sep 05, 2019 10:24 am

nedsaid wrote:
Thu Sep 05, 2019 10:16 am
Wow, the markets are up pretty smartly today. Reopening of trade talks with China.
Since the JG must be enjoying some beach time and spending his Verizon dividends this week, I'll just say....
The bots live by the tweet and die by the tweet! :sharebeer

MotoTrojan
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Re: U.S. stocks in free fall

Post by MotoTrojan » Thu Sep 05, 2019 11:51 am

nedsaid wrote:
Thu Sep 05, 2019 10:16 am
Wow, the markets are up pretty smartly today. Reopening of trade talks with China.
Must be time for the treasuries are in free fall thread instead!

columbia
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Re: U.S. stocks in free fall

Post by columbia » Thu Sep 05, 2019 12:01 pm

MotoTrojan wrote:
Thu Sep 05, 2019 11:51 am
nedsaid wrote:
Thu Sep 05, 2019 10:16 am
Wow, the markets are up pretty smartly today. Reopening of trade talks with China.
Must be time for the treasuries are in free fall thread instead!
Buying treasuries today. :beer

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nedsaid
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Re: U.S. stocks in free fall

Post by nedsaid » Thu Sep 05, 2019 6:42 pm

retiringwhen wrote:
Thu Sep 05, 2019 10:24 am
nedsaid wrote:
Thu Sep 05, 2019 10:16 am
Wow, the markets are up pretty smartly today. Reopening of trade talks with China.
Since the JG must be enjoying some beach time and spending his Verizon dividends this week, I'll just say....
The bots live by the tweet and die by the tweet! :sharebeer
Here's the deal, if you need the markets to go up so that you can take a distribution, post in the "free fall" thread. If you have money to invest and need a buying opportunity, post in the "soar" thread. You didn't know the power of Bogleheads to move markets. :wink: Rumor has it that hedge fund algorithms kick in depending upon the ratio of "free fall" to "soar" posts.

(I am joking).
A fool and his money are good for business.

desafinado
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Re: U.S. stocks in free fall

Post by desafinado » Thu Sep 05, 2019 10:28 pm

rascott wrote:
Wed Sep 04, 2019 11:20 pm
Are Euro / International the new low-vol? They correlate well with US equities currently... but seem much less volatile.

I feel when I'm buying VXUS I'm really buying German banks.. just like when buying VTI I'm buying US tech. They feel like the drivers of the index.
Nestle has been a big part of VXUS performance this year

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Bluce
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Re: U.S. stocks in free fall

Post by Bluce » Fri Sep 06, 2019 9:30 am

I never thought I would do this, but I sold the last of my VXUS yesterday. After holding int'l funds for probably 25 years, I now have no devoted int'l funds and have sided with Jack Bogle on this.

Because we cannot see what the future brings, there is no hard-core evidence for either argument. I've thought about doing this for a long time, but only the rear view mirror will tell me if it was the right choice or not.

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305pelusa
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Re: U.S. stocks in free fall

Post by 305pelusa » Fri Sep 06, 2019 9:34 am

Bluce wrote:
Fri Sep 06, 2019 9:30 am

Because we cannot see what the future brings, there is no hard-core evidence for either argument.
If you don't think diversification is a hard core argument, then I agree with you; there is indeed no hard core argument for holding Intl.

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Re: U.S. stocks in free fall

Post by MotoTrojan » Fri Sep 06, 2019 9:48 am

Bluce wrote:
Fri Sep 06, 2019 9:30 am
I never thought I would do this, but I sold the last of my VXUS yesterday. After holding int'l funds for probably 25 years, I now have no devoted int'l funds and have sided with Jack Bogle on this.

Because we cannot see what the future brings, there is no hard-core evidence for either argument. I've thought about doing this for a long time, but only the rear view mirror will tell me if it was the right choice or not.
Why bother with Total US when you could hold 100% Microsoft? There is no hard-core evidence for holding the full US and MSFT has been killing it.

jibantik
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Re: U.S. stocks in free fall

Post by jibantik » Fri Sep 06, 2019 9:58 am

Bluce wrote:
Fri Sep 06, 2019 9:30 am
I never thought I would do this, but I sold the last of my VXUS yesterday. After holding int'l funds for probably 25 years, I now have no devoted int'l funds and have sided with Jack Bogle on this.

Because we cannot see what the future brings, there is no hard-core evidence for either argument. I've thought about doing this for a long time, but only the rear view mirror will tell me if it was the right choice or not.
This makes no sense. If there is no hard-core evidence, why would you CHANGE your position? In the absence of evidence, you should specifically not deviate from the null position...

It's clear you made this move due to performance chasing.

Good news is that it's not too late to repent for your sins :D

GoldenFinch
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Re: U.S. stocks in free fall

Post by GoldenFinch » Fri Sep 06, 2019 10:07 am

jibantik wrote:
Fri Sep 06, 2019 9:58 am
Bluce wrote:
Fri Sep 06, 2019 9:30 am
I never thought I would do this, but I sold the last of my VXUS yesterday. After holding int'l funds for probably 25 years, I now have no devoted int'l funds and have sided with Jack Bogle on this.

Because we cannot see what the future brings, there is no hard-core evidence for either argument. I've thought about doing this for a long time, but only the rear view mirror will tell me if it was the right choice or not.
This makes no sense. If there is no hard-core evidence, why would you CHANGE your position? In the absence of evidence, you should specifically not deviate from the null position...

It's clear you made this move due to performance chasing.

Good news is that it's not too late to repent for your sins :D
If Bluce will sleep better at night, then Bluce did what was right for Bluce. :happy

Jags4186
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Re: U.S. stocks in free fall

Post by Jags4186 » Fri Sep 06, 2019 10:09 am

I don’t think there’s any reason to jump on a Bluce for dumping intl. International has been a dumpster fire. Diversification is only good if it helps you. Intl diversification hasn’t helped. If anything, constant rebalancing into intl is performance chasing—hoping it will “average up” at some point.

As I have pointed out elsewhere, we are in the midsts of the absolute worst 20 year performance period in the SP500’s history. And we still are trouncing international. Not a good look.
Last edited by Jags4186 on Fri Sep 06, 2019 10:12 am, edited 2 times in total.

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Bluce
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Re: U.S. stocks in free fall

Post by Bluce » Fri Sep 06, 2019 10:11 am

jibantik wrote:
Fri Sep 06, 2019 9:58 am
Bluce wrote:
Fri Sep 06, 2019 9:30 am
I never thought I would do this, but I sold the last of my VXUS yesterday. After holding int'l funds for probably 25 years, I now have no devoted int'l funds and have sided with Jack Bogle on this.

Because we cannot see what the future brings, there is no hard-core evidence for either argument. I've thought about doing this for a long time, but only the rear view mirror will tell me if it was the right choice or not.
This makes no sense. If there is no hard-core evidence, why would you CHANGE your position? In the absence of evidence, you should specifically not deviate from the null position...

It's clear you made this move due to performance chasing.

Good news is that it's not too late to repent for your sins :D
I made the move to simplify by having one less fund and there isn't any downside, according to my crystal ball. I will either croak or have severe dementia in 10-15 years, so my time horizon is short.

H-Town
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Re: U.S. stocks in free fall

Post by H-Town » Fri Sep 06, 2019 10:12 am

Bluce wrote:
Fri Sep 06, 2019 9:30 am
I never thought I would do this, but I sold the last of my VXUS yesterday. After holding int'l funds for probably 25 years, I now have no devoted int'l funds and have sided with Jack Bogle on this.

Because we cannot see what the future brings, there is no hard-core evidence for either argument. I've thought about doing this for a long time, but only the rear view mirror will tell me if it was the right choice or not.
https://www.callan.com/wp-content/uploa ... e-2019.pdf

Have fun.

retiringwhen
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Re: U.S. stocks in free fall

Post by retiringwhen » Fri Sep 06, 2019 10:13 am

Jags4186 wrote:
Fri Sep 06, 2019 10:09 am
I don’t think there’s any reason to jump on a Bluce for dumping intl. International has been a dumpster fire. Diversification is only good if it helps you. Intl diversification hasn’t helped. If anything, constant rebalancing into intl is performance chasing—hoping it will “average up” at some point.

As I have pointed out elsewhere, we are in the midsts of one of the absolute worst long term performance periods in US stock market history. And we still are trouncing international. Not a good look.
The worm always turns.....

The Callan Periodic Table of Investment Returns

viewtopic.php?f=10&t=289874

Edit: Great minds think alike :sharebeer

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305pelusa
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Re: U.S. stocks in free fall

Post by 305pelusa » Fri Sep 06, 2019 10:20 am

Jags4186 wrote:
Fri Sep 06, 2019 10:09 am
If anything, constant rebalancing into intl is performance chasing—hoping it will “average up” at some point.
Buying more of the asset that has performed poorly is quite literally the opposite of chasing performance.
Jags4186 wrote:
Fri Sep 06, 2019 10:09 am
Diversification is only good if it helps you. Intl diversification hasn’t helped. .
Diversification means having a bit of everything so you always do ok. No one knows what will outperform (like Bluce says) so I buy them both and I'm indifferent as to which one does best.

Diversification is doing EXACTLY what I'd want it to do right now.
GoldenFinch wrote:
Fri Sep 06, 2019 10:07 am
jibantik wrote:
Fri Sep 06, 2019 9:58 am
Bluce wrote:
Fri Sep 06, 2019 9:30 am
I never thought I would do this, but I sold the last of my VXUS yesterday. After holding int'l funds for probably 25 years, I now have no devoted int'l funds and have sided with Jack Bogle on this.

Because we cannot see what the future brings, there is no hard-core evidence for either argument. I've thought about doing this for a long time, but only the rear view mirror will tell me if it was the right choice or not.
This makes no sense. If there is no hard-core evidence, why would you CHANGE your position? In the absence of evidence, you should specifically not deviate from the null position...

It's clear you made this move due to performance chasing.

Good news is that it's not too late to repent for your sins :D
If Bluce will sleep better at night, then Bluce did what was right for Bluce. :happy
Absolutely. If Bluce said he did it because he sleeps better undiversifying his assets, I would agree entirely and might even suggest he further undivetsifies (like Moto says) if it can help him sleep even better.

Jags4186
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Re: U.S. stocks in free fall

Post by Jags4186 » Fri Sep 06, 2019 10:21 am

retiringwhen wrote:
Fri Sep 06, 2019 10:13 am
Jags4186 wrote:
Fri Sep 06, 2019 10:09 am
I don’t think there’s any reason to jump on a Bluce for dumping intl. International has been a dumpster fire. Diversification is only good if it helps you. Intl diversification hasn’t helped. If anything, constant rebalancing into intl is performance chasing—hoping it will “average up” at some point.

As I have pointed out elsewhere, we are in the midsts of one of the absolute worst long term performance periods in US stock market history. And we still are trouncing international. Not a good look.
The worm always turns.....

The Callan Periodic Table of Investment Returns

viewtopic.php?f=10&t=289874

Edit: Great minds think alike :sharebeer
How long do you sit watching a dead worm hoping it will turn?

Again, I’m not saying it’s the right move. We all know the “right” move in the past has been not to hold international. Going forward we have no idea.

The Callan table is a great tool for teaching, but it doesn’t show you that after 20 years you had 38% less money from being in internationals vs the SP500 even though internationals outperformed US large cap 8/20 years.

Cheers.

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Stinky
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Re: U.S. stocks in free fall

Post by Stinky » Fri Sep 06, 2019 10:22 am

Bluce wrote:
Fri Sep 06, 2019 10:11 am

I made the move to simplify by having one less fund and there isn't any downside, according to my crystal ball. I will either croak or have severe dementia in 10-15 years, so my time horizon is short.
Could I get your crystal ball when you're finished with using it?

Between your crystal ball and my Ouija board, I should be able to consistently beat the market averages. :moneybag
It's a GREAT day to be alive - Travis Tritt

rascott
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Re: U.S. stocks in free fall

Post by rascott » Fri Sep 06, 2019 10:28 am

Jags4186 wrote:
Fri Sep 06, 2019 10:09 am
I don’t think there’s any reason to jump on a Bluce for dumping intl. International has been a dumpster fire. Diversification is only good if it helps you. Intl diversification hasn’t helped. If anything, constant rebalancing into intl is performance chasing—hoping it will “average up” at some point.

As I have pointed out elsewhere, we are in the midsts of the absolute worst 20 year performance period in the SP500’s history. And we still are trouncing international. Not a good look.

I've seen little evidence that intl investing has helped anyone's portfolio over the past 3 decades or so. Maybe it did beyond that, but 3 decades is close to someone's entire working career... and holding intl did nothing for them other than have them end up with less money. Yet I keep mindlessly buying equities in these nations that have serious economic stagnation for some reason?

Jags4186
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Re: U.S. stocks in free fall

Post by Jags4186 » Fri Sep 06, 2019 10:28 am

305pelusa wrote:
Fri Sep 06, 2019 10:20 am
Jags4186 wrote:
Fri Sep 06, 2019 10:09 am
If anything, constant rebalancing into intl is performance chasing—hoping it will “average up” at some point.
Buying more of the asset that has performed poorly is quite literally the opposite of chasing performance.
I know :happy I’m just pointing out that one only rebalances into international with the hope that it will eventually perform better. We have no evidence that this will happen.
305pelusa wrote:
Fri Sep 06, 2019 10:20 am
Jags4186 wrote:
Fri Sep 06, 2019 10:09 am
Diversification is only good if it helps you. Intl diversification hasn’t helped. .
Diversification means having a bit of everything so you always do ok. No one knows what will outperform (like Bluce says) so I buy them both and I'm indifferent as to which one does best.

Diversification is doing EXACTLY what I'd want it to do right now.
If diversification means having a bit of everything how much gold and silver do you own? How many commodities contracts do you own? What about private debt? Cryptocurrency? Frontier market sovereign bonds? Foreign currency? No, people own international because they think it will help their long term performance.

GoldenFinch
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Re: U.S. stocks in free fall

Post by GoldenFinch » Fri Sep 06, 2019 10:29 am

Stinky wrote:
Fri Sep 06, 2019 10:22 am
Bluce wrote:
Fri Sep 06, 2019 10:11 am

I made the move to simplify by having one less fund and there isn't any downside, according to my crystal ball. I will either croak or have severe dementia in 10-15 years, so my time horizon is short.
Could I get your crystal ball when you're finished with using it?

Between your crystal ball and my Ouija board, I should be able to consistently beat the market averages. :moneybag
Or you could study the HEDGEFUNDIE thread (which sadly is over my head and I feel really dumb when I read any of it). I think I read that he is up 53% percent so far for the year.

H-Town
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Re: U.S. stocks in free fall

Post by H-Town » Fri Sep 06, 2019 10:36 am

Jags4186 wrote:
Fri Sep 06, 2019 10:28 am

I know :happy I’m just pointing out that one only rebalances into international with the hope that it will eventually perform better. We have no evidence that this will happen.
If we have evidence, would you think international stocks would be this cheap?

retiringwhen
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Re: U.S. stocks in free fall

Post by retiringwhen » Fri Sep 06, 2019 10:45 am

Jags4186 wrote:
Fri Sep 06, 2019 10:21 am
How long do you sit watching a dead worm hoping it will turn?
This worm is not dead, he's just restin' (with apologies to Eric Idle).

Seriously, I have patience. I have been doing this for 35 years and it always changes. So easy to forget that International and Bonds saved most people's portfolios in the 2000's.

Value too.

In the past two years, I have slightly increased my ex-US exposure and am not concerned (from 15% to half Global weight or 22%). I based that decision on prodding from vineviz and siamond's excellent analysis blog series on global diversification benefits as well as surprisingly, Jack Bogle's "Common Sense on Mutual Funds" which ironically gets bashed as being anti-International. His book clearly lays out the case for the diversification benefit with numbers charts and graphs. His conclusion was that it does add diversification benefit over long-term regimes largely driven by monetary policy. He just didn't think the benefit was great enough to get serious about it. siamond convinced me that historically that benefit is valuable, especially considering ex-US examples.

I also had a mild 5-10% Value title for most of the last 35 years, but lost it as part of a portfolio simplification I undertook in 2017. I am seriously considering re-tilting again (this time in index funds only) towards more small value. I withstood the decade long droughts before and am willing to do it again (held onto a successful active value fund for 30 years without touching it.)

My core will always be essentially a 3-fund portfolio of 60/40 with 50% of global weight on ex-US equities (right now 22% of equities)

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DarkNyte
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Re: U.S. stocks in free fall

Post by DarkNyte » Fri Sep 06, 2019 10:46 am

Plenty of people making posts about getting out of REITs last year as well because of under performance and fear of rising interest rates. A lot of why hold VNQ posts all over this forum. I bet all of them wish they had just stayed the course and kept their asset allocation constant. Just throwing this out as an example of performance chasing causing decreases returns. If you don't know VNQ is up almost 30% YTD. I think it would be more prudent to stay the course with international if it has been in your allocation for 25 years.

And yes I hold both VNQ and VXUS in my 4 fund portfolio.

rascott
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Re: U.S. stocks in free fall

Post by rascott » Fri Sep 06, 2019 10:49 am

US SCV has the same level of correlation to US LC as Intl large cap. So one could just as easily use that to "diversify" their portfolio as they would by buying VXUS.

I have no VXUS. My intl is only in intl small cap and EMs. VXUS has no appeal to me.

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305pelusa
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Re: U.S. stocks in free fall

Post by 305pelusa » Fri Sep 06, 2019 10:58 am

Jags4186 wrote:
Fri Sep 06, 2019 10:28 am
305pelusa wrote:
Fri Sep 06, 2019 10:20 am
Jags4186 wrote:
Fri Sep 06, 2019 10:09 am
If anything, constant rebalancing into intl is performance chasing—hoping it will “average up” at some point.
Buying more of the asset that has performed poorly is quite literally the opposite of chasing performance.
I know :happy I’m just pointing out that one only rebalances into international with the hope that it will eventually perform better. We have no evidence that this will happen.
Perform better than how it's been performing recently? I have every expectation that Intl will produce a real, positive return over my multi-decade holding period. I have both historical and fundamental evidence to back up that claim.

Perform better than US? No, I don't rebalance because I expect it will perform better than US. I rebalance because I expect they'll perform rather SIMILARLY to the US. So by holding two assets with similar returns (instead of just 1 of them), I should realize a similar return on average with less uncertainty.

This is diversification 101
Jags4186 wrote:
Fri Sep 06, 2019 10:28 am
If diversification means having a bit of everything how much gold and silver do you own? How many commodities contracts do you own? What about private debt? Cryptocurrency? Frontier market sovereign bonds? Foreign currency? No, people own international because they think it will help their long term performance.
Some of your examples do not have a positive expected real return, which means they don't have expected Sharpe ratios as high as equities or bonds. Diversification works when you add assets with similar risk adjusted returns; it breaks down if you purposefully add assets that don't. Ditto for adding inneficient assets (like private debt) since there is not enough arbitrage to ensure they have a similar risk-adjusted returns to the equities and bonds in a portfolio

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305pelusa
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Re: U.S. stocks in free fall

Post by 305pelusa » Fri Sep 06, 2019 11:08 am

rascott wrote:
Fri Sep 06, 2019 10:49 am
US SCV has the same level of correlation to US LC as Intl large cap. So one could just as easily use that to "diversify" their portfolio as they would by buying VXUS.

I have no VXUS.
Your first paragraph is true: If VXUS and US SCV have a similar correlation (and volatility) with the US LC, then either of them will be just as effective to diversify your US LC holdings.

Your conclusion, however, is incorrect. It would only make sense if VXUS and US SCV had a correlation of 1.00 with each other. Otherwise, you should hold all 3 for maximum benefit.

BTW, I don't believe historical correlations will necessarily carry over to the future nor that they represent the true underlying correlation. And I don't have to because buying assets with 1.00 correlation to my portfolio doesn't decrease my diversification; it just doesn't increase it. So I buy the entire haystack and don't worry about it.

Jags4186
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Re: U.S. stocks in free fall

Post by Jags4186 » Fri Sep 06, 2019 11:12 am

retiringwhen wrote:
Fri Sep 06, 2019 10:45 am
Jags4186 wrote:
Fri Sep 06, 2019 10:21 am
How long do you sit watching a dead worm hoping it will turn?
This worm is not dead, he's just restin' (with apologies to Eric Idle).

Seriously, I have patience. I have been doing this for 35 years and it always changes. So easy to forget that International and Bonds saved most people's portfolios in the 2000's.
Again, I'm not saying that in theory holding international is good thing. I'm saying in practice it has not been a good thing. You did not benefit from holding international. Your returns during the 2000s may have been better, but since you have been investing for 35 years, you should be aware that your "saved" portfolio in the 2000s was already significantly below where it would have been had you not been invested in internationals.

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Re: U.S. stocks in free fall

Post by Jags4186 » Fri Sep 06, 2019 11:17 am

305pelusa wrote:
Fri Sep 06, 2019 10:58 am
Perform better than how it's been performing recently? I have every expectation that Intl will produce a real, positive return over my multi-decade holding period. I have both historical and fundamental evidence to back up that claim.

Perform better than US? No, I don't rebalance because I expect it will perform better than US. I rebalance because I expect they'll perform rather SIMILARLY to the US. So by holding two assets with similar returns (instead of just 1 of them), I should realize a similar return on average with less uncertainty.

This is diversification 101
I would argue that if expectations have not become reality over a multi decade period, perhaps the expectations are wrong. I do not expect international equities to perform similarly to US equities.

If you expect internationals to perform similarly to US stocks, and international has greatly underperformed US Stocks for decades, then you must expect internationals to outperform us equities going forward in order to even the playing field. If you expect international equities to perform similarly to US equities going forward then you must believe that international equities overall underperform US equities and that leads me to ask why you would be invested in them in the first place.

That said, I own international equities, I just do not own a total international fund. I hold emerging markets and int'l small cap.

retiringwhen
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Re: U.S. stocks in free fall

Post by retiringwhen » Fri Sep 06, 2019 11:21 am

Jags4186 wrote:
Fri Sep 06, 2019 11:12 am
Again, I'm not saying that in theory holding international is good thing. I'm saying in practice it has not been a good thing. You did not benefit from holding international. Your returns during the 2000s may have been better, but since you have been investing for 35 years, you should be aware that your "saved" portfolio in the 2000s was already significantly below where it would have been had you not been invested in internationals.
I don't know, this looks a lot like a good diversifier over my investing lifetime (which just coincidentally started in 1986 and that is the how far back PV has data for this test).

https://www.portfoliovisualizer.com/bac ... 0&total3=0

Eyeballing it, 100% US was ahead about 40% of the time and the globally diversified (at 78/22) was ahead about 30% of the time and they were in a dead heat about 20% of the time.

We are well into a long period where US only is winning, but as this discussion started, the worm will surely turn.

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LinusP
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Re: U.S. stocks in free fall

Post by LinusP » Fri Sep 06, 2019 11:22 am

Folks - all of this conversation about international has no place in the "U.S. stocks in free fall" thread. Can we get back to the inane banter about "buying the dip", please?

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JoMoney
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Re: U.S. stocks in free fall

Post by JoMoney » Fri Sep 06, 2019 11:23 am

305pelusa wrote:
Fri Sep 06, 2019 11:08 am
rascott wrote:
Fri Sep 06, 2019 10:49 am
US SCV has the same level of correlation to US LC as Intl large cap. So one could just as easily use that to "diversify" their portfolio as they would by buying VXUS.

I have no VXUS.
Your first paragraph is true: If VXUS and US SCV have a similar correlation (and volatility) with the US LC, then either of them will be just as effective to diversify your US LC holdings.

Your conclusion, however, is incorrect. It would only make sense if VXUS and US SCV had a correlation of 1.00 with each other. Otherwise, you should hold all 3 for maximum benefit.

BTW, I don't believe historical correlations will necessarily carry over to the future nor that they represent the true underlying correlation. And I don't have to because buying assets with 1.00 correlation to my portfolio doesn't decrease my diversification; it just doesn't increase it. So I buy the entire haystack and don't worry about it.
You can hold all kinds of different stuff under the premise that it adds the simple "diversification" of being different.
Of greater importance to most, is whether that "diversification" is a benefit. If "diversifying" means you're increasing the risks in your portfolio that's not a benefit unless those risks also have higher returns, and even then the variance/correlations/comovements have to diverge and converge in a certain mean-reverting way to add a risk-adjusted "diversification benefit" from holding multiple assets relative to just the best one. If the assets relatively diverge, rebalancing between them can cause a diversification penalty as you move more from the higher performing asset into the lower performing one.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

retiringwhen
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Re: U.S. stocks in free fall

Post by retiringwhen » Fri Sep 06, 2019 11:24 am

LinusP wrote:
Fri Sep 06, 2019 11:22 am
Folks - all of this conversation about international has no place in the "U.S. stocks in free fall" thread. Can we get back to the inane banter about "buying the dip", please?
There haven't been any dips this week, so we got distracted :sharebeer

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JoMoney
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Re: U.S. stocks in free fall

Post by JoMoney » Fri Sep 06, 2019 11:25 am

LinusP wrote:
Fri Sep 06, 2019 11:22 am
Folks - all of this conversation about international has no place in the "U.S. stocks in free fall" thread. Can we get back to the inane banter about "buying the dip", please?
Even without "buying the dip", when the free-fall thread is active, at least it means I'm beating the S&P 500.
Despite the S&P being my only equity holding, after costs, and my cash/bond allocation, my portfolio is always slightly under performing on the way up. On the ride down I'm beating the S&P :D
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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305pelusa
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Re: U.S. stocks in free fall

Post by 305pelusa » Fri Sep 06, 2019 11:28 am

Jags4186 wrote:
Fri Sep 06, 2019 11:17 am

If you expect internationals to perform similarly to US stocks, and international has greatly underperformed US Stocks for decades, then you must expect internationals to outperform us equities going forward in order to even the playing field.
If you believe the market is a random walk, the above is incorrect. I don't expect Int to overperform US in the future just because it underperformed in the past.

I also don't expect coins to flip more tails if they've flipped more heads in the past. I continue to expect 50% going forward.

Jags4186
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Re: U.S. stocks in free fall

Post by Jags4186 » Fri Sep 06, 2019 12:26 pm

305pelusa wrote:
Fri Sep 06, 2019 11:28 am
Jags4186 wrote:
Fri Sep 06, 2019 11:17 am

If you expect internationals to perform similarly to US stocks, and international has greatly underperformed US Stocks for decades, then you must expect internationals to outperform us equities going forward in order to even the playing field.
If you believe the market is a random walk, the above is incorrect. I don't expect Int to overperform US in the future just because it underperformed in the past.

I also don't expect coins to flip more tails if they've flipped more heads in the past. I continue to expect 50% going forward.
Except that returns aren’t binary. Over a given 20 year period int’l stocks could outperform domestic stocks 19 out of 20 years and have a lower 20 year return. Same in the reverse, of course. And this is the problem with showing the Callan table and saying “See! Diversification!”

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Re: U.S. stocks in free fall

Post by Jags4186 » Fri Sep 06, 2019 12:31 pm

retiringwhen wrote:
Fri Sep 06, 2019 11:21 am
Jags4186 wrote:
Fri Sep 06, 2019 11:12 am
Again, I'm not saying that in theory holding international is good thing. I'm saying in practice it has not been a good thing. You did not benefit from holding international. Your returns during the 2000s may have been better, but since you have been investing for 35 years, you should be aware that your "saved" portfolio in the 2000s was already significantly below where it would have been had you not been invested in internationals.
I don't know, this looks a lot like a good diversifier over my investing lifetime (which just coincidentally started in 1986 and that is the how far back PV has data for this test).

https://www.portfoliovisualizer.com/bac ... 0&total3=0

Eyeballing it, 100% US was ahead about 40% of the time and the globally diversified (at 78/22) was ahead about 30% of the time and they were in a dead heat about 20% of the time.

We are well into a long period where US only is winning, but as this discussion started, the worm will surely turn.
Did you invest $10,000 in 1986 and never invest again? You likely invested periodically. If you instead do $1000/yr invested and adjusted for inflation, your 78/22 split resulted in 18% less money.

Also, there seems to be no rhyme or reason to why you would select 22% vs 30% vs 50%.

I’ll quit posting on this subject now because

1) I’m sure all these posts will get removed anyway
2) it’s off topic for the thread

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305pelusa
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Re: U.S. stocks in free fall

Post by 305pelusa » Fri Sep 06, 2019 12:37 pm

Jags4186 wrote:
Fri Sep 06, 2019 12:26 pm
305pelusa wrote:
Fri Sep 06, 2019 11:28 am
Jags4186 wrote:
Fri Sep 06, 2019 11:17 am

If you expect internationals to perform similarly to US stocks, and international has greatly underperformed US Stocks for decades, then you must expect internationals to outperform us equities going forward in order to even the playing field.
If you believe the market is a random walk, the above is incorrect. I don't expect Int to overperform US in the future just because it underperformed in the past.

I also don't expect coins to flip more tails if they've flipped more heads in the past. I continue to expect 50% going forward.
Except that returns aren’t binary. Over a given 20 year period int’l stocks could outperform domestic stocks 19 out of 20 years and have a lower 20 year return. Same in the reverse, of course. And this is the problem with showing the Callan table and saying “See! Diversification!”
I have no idea what that has anything to do with what you and I are talking about. I didn't even bring up the Callab table.

I'm telling you I am NOT buying Intl stocks because I expect them to overperform US (which would be some sort of performance chasing). I am NOT buying them because past bad returns should mean future excellent returns, as though things need to even out. I think of the market as a random walk where future events are independent of past ones.

I am telling you I buy them because I expect a SIMILAR return in the future, on average, going forward, to US stocks. So instead of having 1 asset with X return, I have 2 assets each with about X return. That IS a free lunch due to diversification.

The only logical reason why you wouldn't buy more Inlt is if you expected they would UNDERperform US. I have absolutely no reason to believe Intl will continue to underperform any more than the global market has already priced in. So I stay at the market cap.

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