International market recovery

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grayfox
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Re: International market recovery

Post by grayfox » Thu May 14, 2020 11:26 am

jeffyscott wrote:
Thu May 14, 2020 9:39 am
binx99 wrote:
Thu May 14, 2020 9:02 am
Any additional thoughts/critiques on the data being used?
From MSCI: The MSCI EAFE Index was launched on Mar 31, 1986. Data prior to the launch date is back-tested data (i.e. calculations of how the index might have performed over that time
period had the index existed). There are frequently material differences between back-tested performance and actual results.


Data, though the year column is messed up: https://www.bogleheads.org/wiki/MSCI_EAFE_index
That Google spreadsheet looks like it is open for anyone to edit so someone must have messed it up. I fixed the Year and some other cells that had bad references. It said: "Every change you make is automatically saved in Drive. Last edit was 5 minutes ago."

Then I looked back at the Bogleheads Wiki page and it was updated! What!? How could I change it?

How do I know that the data was accidentally changed by whoever messed up the year cell. That spreadsheet and page should be checked by whoever maintains it. And should it be open to anyone to edit?

Also there is no entry for 1978 Cell B10 on MSCI EAFE tab.
Sic transit gloria mundi. [STGM]

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grayfox
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Re: International market recovery

Post by grayfox » Thu May 14, 2020 11:32 am

binx99 wrote:
Thu May 14, 2020 9:26 am
Thanks, asif408. That does help clarify the effect of rebalancing.

But when I run the models with the US Market and the Global ex-US Market as assets rather than the comparable Vanguard index funds, I consistently get substantially lower returns on portfolios with ex-US allocations with multiple timelines (even if you exclude the latest decade US bull market.) Not sure what accounts for that.

https://www.portfoliovisualizer.com/bac ... sisResults
To get a good link with portfoliovisualizer, you have to click the Link button next to where it says Portfolio Analysis Results
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dmcmahon
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Re: International market recovery

Post by dmcmahon » Thu May 14, 2020 11:47 am

Rosencrantz1 wrote:
Thu May 14, 2020 10:33 am
junior wrote:
Thu May 14, 2020 7:21 am
Rosencrantz1 wrote:
Wed May 13, 2020 7:30 pm
I'd encourage you to compare US vs exUS CAGR for the last 10 years, the last 20 years, the last 30 years, the last 50 years. I'm not sure how you define 'folk wisdom rather than data' - but, it seems to me there's an awful lot of historical data out there. Speaking for myself, I invest in equities precisely because of the historical returns of stocks. Otherwise, I'd just put the money in a pillow case and stuff in under the mattress :beer
My point exactly. The economists at Vanguard and elsewhere study math and data. The 100% U. S. folks spend a few minutes on a website widget, cherry pick some data, then make up a folk story about U. S. being number one, pillow cases and beer.
Perhaps you missed my first sentence. I wouldn't consider those time sequences "cherry picking". Nothing against economists, but, by their own admission, if you get 10 of them in a room, you'll get 11 opinions about where the economy is headed. It sounds like you believe in the Vanguard economists that study math and data. Given their belief exUS will outperform, are you going "all in"?

In any case, best of luck to you. Perhaps the Vanguard economists are correct and exUS will outperform for the next 10, 20, 30 years. As for me, I'm not betting on it.
Well, I went with the conventional wisdom of the experts 10 years ago, and put an allocation to international. I also perceived more value overseas, by traditional metrics such as P/E. All it did was shrink in relation to my US allocation and deliver losses despite the long holding period. So now I've done a more careful look, and the conclusion is that while international does have periods where it outperforms the US, the degree of outperformance isn't large enough to make up for the periods of underperformance, and moreover that the correlations go towards 1.0 in down markets, providing almost no rebalancing benefit.

I'll keep my allocation for now in the trusts I manage, but it's around 15-20% and I'm not adding to it. I'm out of international in my personal portfolio, realizing the losses for tax purposes. I'm very glad not to have had the global market weight.

I think this pandemic is going to make permanent changes to the world economy; it's accelerating trends that were in place beforehand. Moreover, I think the low/negative interest rate environment overseas is coming to the US. The former trend favors tech/biotech companies, growth companies, and large companies. The latter augers poorly for traditional financial companies. As always JMHO.

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jeffyscott
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Re: International market recovery

Post by jeffyscott » Thu May 14, 2020 11:59 am

jeffyscott wrote:
Thu May 14, 2020 9:39 am
binx99 wrote:
Thu May 14, 2020 9:02 am
Any additional thoughts/critiques on the data being used?
From MSCI: The MSCI EAFE Index was launched on Mar 31, 1986. Data prior to the launch date is back-tested data (i.e. calculations of how the index might have performed over that time
period had the index existed). There are frequently material differences between back-tested performance and actual results.


Data, though the year column is messed up: https://www.bogleheads.org/wiki/MSCI_EAFE_index

I would probably only use the data post the end of fixed exchange rates, so from ~1972. I also think it makes sense to look at results over full market cycles, so low to low or high to high. So with that, and assuming the back-tested data is acceptable, I would probably go with comparisons starting from the 1974 market low. That time frame also maybe gives enough time for the residual effects of having ended the gold standard and Bretton Woods agreement to have wound down? That gives us 45 years and a few market cycles to compare.

If the back-tested data is not accepted, then we have only 34 years of data and it looks like there was a market high in Oct. 1987 so that could be a place to start.
FWIW, I found a list of the oldest international mutual funds and from that list DWS+CROCI+International+Fund (SUIAX) appeared to, perhaps, be the one that was most similar to Vanguard total international based on m* total return charts. It's not a perfect substitute, but at least it was an actual live fund. Here is that fund compared to the S&P 500 index from the date of inception of the index fund until a few months after the inception of Vanguard Total International.

Image
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grayfox
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Re: International market recovery

Post by grayfox » Thu May 14, 2020 12:00 pm

dmcmahon wrote:
Thu May 14, 2020 11:47 am

I think this pandemic is going to make permanent changes to the world economy; it's accelerating trends that were in place beforehand. Moreover, I think the low/negative interest rate environment overseas is coming to the US. The former trend favors tech/biotech companies, growth companies, and large companies. The latter augers poorly for traditional financial companies. As always JMHO.
I agree, there probably will be big changes to the world economy. Globalization will be scaled back. Borders closed. Less or no immigration. I wonder if the EU will even survive. Despite the Schengen agreeement, I believe all the European countries borders are closed at this time.

I can see many countries in the world de-coupling from China. I read that Japan is paying companies to move factories from China to Japan. Maybe U.S. should do the same. At least for strategic things like medicines.
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MotoTrojan
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Re: International market recovery

Post by MotoTrojan » Thu May 14, 2020 12:02 pm

grayfox wrote:
Thu May 14, 2020 12:00 pm

I can see many countries in the world de-coupling from China. I read that Japan is paying companies to move factories from China to Japan. Maybe U.S. should do the same. At least for strategic things like medicines.
Interesting. Just goes to show you the potential catalysts that can come from an event like this. I could see Japan leveraging their automation knowledge to support production that China utilized cheap human labor for. Maybe just wishful thinking as Japan makes up 35% of my core ex-US holding, and >50% of an international side-bet :twisted:.

whereskyle
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Re: International market recovery

Post by whereskyle » Thu May 14, 2020 12:06 pm

junior wrote:
Thu May 14, 2020 7:21 am
Rosencrantz1 wrote:
Wed May 13, 2020 7:30 pm
junior wrote:
Wed May 13, 2020 6:41 pm
If you read Vanguard`s annual economic report you'll see they expect international to outperform U. S. over the next 10 years.

I don't know if they will be right or wrong but they certainly seem more educated than the 100% U. S. crowd who seem to be operating on folk wisdom rather than data.
I'd encourage you to compare US vs exUS CAGR for the last 10 years, the last 20 years, the last 30 years, the last 50 years. I'm not sure how you define 'folk wisdom rather than data' - but, it seems to me there's an awful lot of historical data out there. Speaking for myself, I invest in equities precisely because of the historical returns of stocks. Otherwise, I'd just put the money in a pillow case and stuff in under the mattress :beer
My point exactly. The economists at Vanguard and elsewhere study math and data. The 100% U. S. folks spend a few minutes on a website widget, cherry pick some data, then make up a folk story about U. S. being number one, pillow cases and beer.
1. Or the 100% U.S. folks have spent hundreds of hours reading all of Jack Bogle's books and speeches and Warren Buffett's letters...

2. "Math and data"? Vanguard says the same thing every year: Ex-US is very cheap and a globally diversified portfolio may reduce short-term volatility. Let me know if you can explain with any greater rigor the basis for their ex-us recommendations.

3. You overstate the rigor behind ex-us theory and you grossly understate the fact that very smart people with well-reasoned explanations have taken pains to explain why ex-us investment is largely speculative and entirely unproven to reliably increase long-term returns. Jack's point was always the same: if your time horizon is long, you likely will not regret sticking with a U.S. total-stock market index fund because over 30-year periods, returns tend to come out the same. This is a logical explanation based on, yes, you guessed it, "math and data."

4. The real problem is people need to stop taking honest and logical differences of opinion so personally. Yes, ex-us investment might help! Nobody actually knows, though, and it might hurt. I guess not knowing what will happen to their money just makes people emotional or something.

Best of luck to all Bogleheads in making "why international" threads less vitriolic!
"I am better off than he is – for he knows nothing, and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

Rosencrantz1
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Re: International market recovery

Post by Rosencrantz1 » Thu May 14, 2020 12:41 pm

whereskyle wrote:
Thu May 14, 2020 12:06 pm

4. The real problem is people need to stop taking honest and logical differences of opinion so personally. Yes, ex-us investment might help! Nobody actually knows, though, and it might hurt. I guess not knowing what will happen to their money just makes people emotional or something.

Best of luck to all Bogleheads in making "why international" threads less vitriolic!
Agreed. It seems that it's difficult to change someone's mind - and, I suppose, that really shouldn't be the intent. I make investment choices based on what I think is best for me and mine. I'd think that's the direction everyone here has taken.

Rosencrantz1
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Re: International market recovery

Post by Rosencrantz1 » Thu May 14, 2020 12:46 pm

grayfox wrote:
Thu May 14, 2020 12:00 pm
dmcmahon wrote:
Thu May 14, 2020 11:47 am

I think this pandemic is going to make permanent changes to the world economy; it's accelerating trends that were in place beforehand. Moreover, I think the low/negative interest rate environment overseas is coming to the US. The former trend favors tech/biotech companies, growth companies, and large companies. The latter augers poorly for traditional financial companies. As always JMHO.
I agree, there probably will be big changes to the world economy. Globalization will be scaled back. Borders closed. Less or no immigration. I wonder if the EU will even survive. Despite the Schengen agreeement, I believe all the European countries borders are closed at this time.

I can see many countries in the world de-coupling from China. I read that Japan is paying companies to move factories from China to Japan. Maybe U.S. should do the same. At least for strategic things like medicines.
Interesting comments. Thanks for the post. I agree that critical/strategic production of items in China should be carefully evaluated.

bloom2708
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Re: International market recovery

Post by bloom2708 » Thu May 14, 2020 12:47 pm

What does it mean for a stock to be "cheap"? International is "cheap" today. Tons of "value".

Today, all the information available dictates the price. Tomorrow the same thing happens. Every trading day. The price is the price.

A cheap polyester fabric suit is cheap because it gets shiny after a couple wears.

Can your retirement goals be met without International stocks?
Can your retirement goals be met with some percentage of International stocks?

If you answered yes to either, you can meet your goals! :beer
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead

Rosencrantz1
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Re: International market recovery

Post by Rosencrantz1 » Thu May 14, 2020 12:50 pm

dmcmahon wrote:
Thu May 14, 2020 11:47 am

I think this pandemic is going to make permanent changes to the world economy; it's accelerating trends that were in place beforehand. Moreover, I think the low/negative interest rate environment overseas is coming to the US. The former trend favors tech/biotech companies, growth companies, and large companies. The latter augers poorly for traditional financial companies. As always JMHO.
Agreed. It sounds like J. Powell isn't a fan of negative interest rates - I hope that's true and remains that way.

lostdog
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Re: International market recovery

Post by lostdog » Thu May 14, 2020 12:57 pm

Rosencrantz1 wrote:
Thu May 14, 2020 10:33 am
junior wrote:
Thu May 14, 2020 7:21 am
Rosencrantz1 wrote:
Wed May 13, 2020 7:30 pm
junior wrote:
Wed May 13, 2020 6:41 pm
If you read Vanguard`s annual economic report you'll see they expect international to outperform U. S. over the next 10 years.

I don't know if they will be right or wrong but they certainly seem more educated than the 100% U. S. crowd who seem to be operating on folk wisdom rather than data.
I'd encourage you to compare US vs exUS CAGR for the last 10 years, the last 20 years, the last 30 years, the last 50 years. I'm not sure how you define 'folk wisdom rather than data' - but, it seems to me there's an awful lot of historical data out there. Speaking for myself, I invest in equities precisely because of the historical returns of stocks. Otherwise, I'd just put the money in a pillow case and stuff in under the mattress :beer
My point exactly. The economists at Vanguard and elsewhere study math and data. The 100% U. S. folks spend a few minutes on a website widget, cherry pick some data, then make up a folk story about U. S. being number one, pillow cases and beer.
Perhaps you missed my first sentence. I wouldn't consider those time sequences "cherry picking". Nothing against economists, but, by their own admission, if you get 10 of them in a room, you'll get 11 opinions about where the economy is headed. It sounds like you believe in the Vanguard economists that study math and data. Given their belief exUS will outperform, are you going "all in"?

In any case, best of luck to you. Perhaps the Vanguard economists are correct and exUS will outperform for the next 10, 20, 30 years. As for me, I'm not betting on it.
At least you admit to the "bet". Can I borrow your crystal ball? I thought we weren't supposed to invest based on future predictions? Good luck on your casino bet.
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lostdog
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Re: International market recovery

Post by lostdog » Thu May 14, 2020 1:08 pm

junior wrote:
Thu May 14, 2020 7:21 am
Rosencrantz1 wrote:
Wed May 13, 2020 7:30 pm
junior wrote:
Wed May 13, 2020 6:41 pm
If you read Vanguard`s annual economic report you'll see they expect international to outperform U. S. over the next 10 years.

I don't know if they will be right or wrong but they certainly seem more educated than the 100% U. S. crowd who seem to be operating on folk wisdom rather than data.
I'd encourage you to compare US vs exUS CAGR for the last 10 years, the last 20 years, the last 30 years, the last 50 years. I'm not sure how you define 'folk wisdom rather than data' - but, it seems to me there's an awful lot of historical data out there. Speaking for myself, I invest in equities precisely because of the historical returns of stocks. Otherwise, I'd just put the money in a pillow case and stuff in under the mattress :beer
My point exactly. The economists at Vanguard and elsewhere study math and data. The 100% U. S. folks spend a few minutes on a website widget, cherry pick some data, then make up a folk story about U. S. being number one, pillow cases and beer.
The reasons stated on this site for U.S. only investing are very odd and absurd. Throwing common sense and intelligence out the window. Vineviz mentioned there was a study showing lack of formal education in this crowd.

Also the point Junior was trying to get across is to go with Vanguard's recommendation over a group speculators and performance chasers arm chair expertise based on personal ideologies of foreign countries.
Global Market Cap Equity || Taxable: VTSAX+VTIAX || IRA: VTWAX

whereskyle
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Re: International market recovery

Post by whereskyle » Thu May 14, 2020 1:17 pm

lostdog wrote:
Thu May 14, 2020 1:08 pm
junior wrote:
Thu May 14, 2020 7:21 am
Rosencrantz1 wrote:
Wed May 13, 2020 7:30 pm
junior wrote:
Wed May 13, 2020 6:41 pm
If you read Vanguard`s annual economic report you'll see they expect international to outperform U. S. over the next 10 years.

I don't know if they will be right or wrong but they certainly seem more educated than the 100% U. S. crowd who seem to be operating on folk wisdom rather than data.
I'd encourage you to compare US vs exUS CAGR for the last 10 years, the last 20 years, the last 30 years, the last 50 years. I'm not sure how you define 'folk wisdom rather than data' - but, it seems to me there's an awful lot of historical data out there. Speaking for myself, I invest in equities precisely because of the historical returns of stocks. Otherwise, I'd just put the money in a pillow case and stuff in under the mattress :beer
My point exactly. The economists at Vanguard and elsewhere study math and data. The 100% U. S. folks spend a few minutes on a website widget, cherry pick some data, then make up a folk story about U. S. being number one, pillow cases and beer.
The reasons stated on this site for U.S. only investing are very odd and absurd. Throwing common sense and intelligence out the window. Vineviz mentioned there was a study showing lack of formal education in this crowd.

Also the point Junior was trying to get across is to go with Vanguard's recommendation over a group speculators and performance chasers arm chair expertise based on personal ideologies of foreign countries.
I think people on both sides of this debate are not careful with their language. Not every reason given is odd and absurd. Read Common Sense on Mutual Funds and tell me if the math and data indicating that a long-term investor will likely see no measurable benefit to his portfolio by owning ex-us stocks is "odd and absurd." I think Jack's explanation is pretty logical: over the long-run, returns tend to even out regardless of which country you are investing in, although there are definitely some countries that have had one or two terrible 30-year periods of performance. Thankfully, all Jack's data show that the U.S. has rarely, if ever, been a severe underperformer over any given 30-year period. So, Jack says, you can go ahead and own ex-us, but I see nothing in the math and data that makes it likely that it will help you. It might, but that's just not clear. This, I humbly submit, is neither an odd or absurd line of reasoning.

I 100% agree that some reasons given for U.S.-only investing are odd and absurd, but I 100% disagree that investing solely in a U.S. total-stock-market index fund is always (or ever) illogical. I think it should be pretty uncontroversial here that, if one could only hold one asset and that asset was VTI, one is in a relatively advantageous position compared to all investors.

And just to sum up my view about why this really should not be such a controversial topic (but of course it's also the reason why it is a controversial topic), I'll say this: it is 100% true that nobody here knows whether investing in ex-us equities will increase long-term returns. There is just no getting around that truth. Investing in ex-us might have some benefits, so I think it logically makes sense to own at least some. But, no, however upset it might make us, we cannot know if buying ex-U.S. equities is the absolute right decision. Ex-U.S. investors take that uncertainty and say, "Well, I'd better own some." U.S.-only investors take that uncertainty and say, "Well, if there's no compelling evidence that I absolutely need to have it, I won't make my life unnecessarily complicated." Neither of these positions is illogical, and only time will tell us if one position was correct.
"I am better off than he is – for he knows nothing, and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

Rosencrantz1
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Re: International market recovery

Post by Rosencrantz1 » Thu May 14, 2020 2:50 pm

lostdog wrote:
Thu May 14, 2020 12:57 pm
Rosencrantz1 wrote:
Thu May 14, 2020 10:33 am
junior wrote:
Thu May 14, 2020 7:21 am
Rosencrantz1 wrote:
Wed May 13, 2020 7:30 pm
junior wrote:
Wed May 13, 2020 6:41 pm
If you read Vanguard`s annual economic report you'll see they expect international to outperform U. S. over the next 10 years.

I don't know if they will be right or wrong but they certainly seem more educated than the 100% U. S. crowd who seem to be operating on folk wisdom rather than data.
I'd encourage you to compare US vs exUS CAGR for the last 10 years, the last 20 years, the last 30 years, the last 50 years. I'm not sure how you define 'folk wisdom rather than data' - but, it seems to me there's an awful lot of historical data out there. Speaking for myself, I invest in equities precisely because of the historical returns of stocks. Otherwise, I'd just put the money in a pillow case and stuff in under the mattress :beer
My point exactly. The economists at Vanguard and elsewhere study math and data. The 100% U. S. folks spend a few minutes on a website widget, cherry pick some data, then make up a folk story about U. S. being number one, pillow cases and beer.
Perhaps you missed my first sentence. I wouldn't consider those time sequences "cherry picking". Nothing against economists, but, by their own admission, if you get 10 of them in a room, you'll get 11 opinions about where the economy is headed. It sounds like you believe in the Vanguard economists that study math and data. Given their belief exUS will outperform, are you going "all in"?

In any case, best of luck to you. Perhaps the Vanguard economists are correct and exUS will outperform for the next 10, 20, 30 years. As for me, I'm not betting on it.
At least you admit to the "bet". Can I borrow your crystal ball? I thought we weren't supposed to invest based on future predictions? Good luck on your casino bet.
One more time. I invest in equities specifically because of their historical performance. And when I look at US vs exUS over the past 10 years, the past 20 years, 30 years, 100 years etc it appears that US has a better CAGR than exUS. Because of that loooooong outperformance (many cumulative decades), I chose to be invested in US. I've actually had some tilt towards big tech and defense/aerospace over the last 20 years too.

Good luck to you too.

It'll be interesting to see how well exUS does over the next decade. I'm thinking there will be a lot of crowing here IF exUS dramatically outperforms US. Time will tell.

DB2
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Re: International market recovery

Post by DB2 » Thu May 14, 2020 3:16 pm

Honestly, having read dozens and dozens of these kind of threads (maybe over 100 by now?) something has stood out to me. Now there are exceptions here, but: I notice a lot of the U.S. vs International preference often comes down to age demographics. Much of the older ages kind of take on the "America First" attitude. The U.S. has been number #1 (for the most part) in their lifetime and this is just going to continue as if it's a metaphysical given. Bogle and Buffet good examples here.

Much of the younger age looks at it differently. They look at the future and think it will be more challenging for the U.S. They look at the future as more unpredictable and less certain. Maybe less optimistic? They are more non-trusting of things as it could be said. So they look at International and global market cap weighting more fundamentally for investing.

I am not trying to start any kind of a "age fight" or discrimination by any means. I am just pointing out observations noting some posters who actually mentioned their age in various posts in other threads and where it became more apparent to me. I'm not even talking about this thread and its posters necessarily, but just in general.

So I just think age plays a big factor in investing preferences. Different views of things. Nothing else is meant to be implied. I find the divergence fascinating actually.

Haeysh
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Re: International market recovery

Post by Haeysh » Thu May 14, 2020 3:58 pm

Short term..maybe US recovers faster then rest of the world from the Rhona virus...long term, who knows?

Rosencrantz1
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Re: International market recovery

Post by Rosencrantz1 » Thu May 14, 2020 4:19 pm

lostdog wrote:
Thu May 14, 2020 1:08 pm


The reasons stated on this site for U.S. only investing are very odd and absurd. Throwing common sense and intelligence out the window. Vineviz mentioned there was a study showing lack of formal education in this crowd.

Also the point Junior was trying to get across is to go with Vanguard's recommendation over a group speculators and performance chasers arm chair expertise based on personal ideologies of foreign countries.
Wow. I'm pretty sure one doesn't need a "formal education" in mathematics to understand compounded annual growth rate. I'd think paying attention in high school would suffice.

Would love to see a link to this alleged "study" Vineviz(?) mentioned. I'd have thought the opposite - that many others, like myself, are formally educated in this crowd.

Rosencrantz1
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Re: International market recovery

Post by Rosencrantz1 » Thu May 14, 2020 4:30 pm

DB2 wrote:
Thu May 14, 2020 3:16 pm
Honestly, having read dozens and dozens of these kind of threads (maybe over 100 by now?) something has stood out to me. Now there are exceptions here, but: I notice a lot of the U.S. vs International preference often comes down to age demographics. Much of the older ages kind of take on the "America First" attitude. The U.S. has been number #1 (for the most part) in their lifetime and this is just going to continue as if it's a metaphysical given. Bogle and Buffet good examples here.

Much of the younger age looks at it differently. They look at the future and think it will be more challenging for the U.S. They look at the future as more unpredictable and less certain. Maybe less optimistic? They are more non-trusting of things as it could be said. So they look at International and global market cap weighting more fundamentally for investing.

I am not trying to start any kind of a "age fight" or discrimination by any means. I am just pointing out observations noting some posters who actually mentioned their age in various posts in other threads and where it became more apparent to me. I'm not even talking about this thread and its posters necessarily, but just in general.

So I just think age plays a big factor in investing preferences. Different views of things. Nothing else is meant to be implied. I find the divergence fascinating actually.
I'm recently retired - so, I probably fit your older age demographic. I don't know that I take on the "America First" attitude - at least in the way I interpret you might mean. Honestly, with our university system and our capitalism and our tax structure, I think the US is a magnet for lots of very talented (and, in many cases, foreign) entrepreneurs. I think the country (and our companies) benefit greatly from this.

visualguy
Posts: 1934
Joined: Thu Jan 30, 2014 1:32 am

Re: International market recovery

Post by visualguy » Thu May 14, 2020 4:45 pm

Rosencrantz1 wrote:
Thu May 14, 2020 4:30 pm
DB2 wrote:
Thu May 14, 2020 3:16 pm
Honestly, having read dozens and dozens of these kind of threads (maybe over 100 by now?) something has stood out to me. Now there are exceptions here, but: I notice a lot of the U.S. vs International preference often comes down to age demographics. Much of the older ages kind of take on the "America First" attitude. The U.S. has been number #1 (for the most part) in their lifetime and this is just going to continue as if it's a metaphysical given. Bogle and Buffet good examples here.

Much of the younger age looks at it differently. They look at the future and think it will be more challenging for the U.S. They look at the future as more unpredictable and less certain. Maybe less optimistic? They are more non-trusting of things as it could be said. So they look at International and global market cap weighting more fundamentally for investing.

I am not trying to start any kind of a "age fight" or discrimination by any means. I am just pointing out observations noting some posters who actually mentioned their age in various posts in other threads and where it became more apparent to me. I'm not even talking about this thread and its posters necessarily, but just in general.

So I just think age plays a big factor in investing preferences. Different views of things. Nothing else is meant to be implied. I find the divergence fascinating actually.
I'm recently retired - so, I probably fit your older age demographic. I don't know that I take on the "America First" attitude - at least in the way I interpret you might mean. Honestly, with our university system and our capitalism and our tax structure, I think the US is a magnet for lots of very talented (and, in many cases, foreign) entrepreneurs. I think the country (and our companies) benefit greatly from this.
Exactly - that's the goose that keeps laying the golden eggs.

jibantik
Posts: 361
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Re: International market recovery

Post by jibantik » Thu May 14, 2020 8:19 pm

Rosencrantz1 wrote:
Thu May 14, 2020 4:30 pm
I'm recently retired - so, I probably fit your older age demographic. I don't know that I take on the "America First" attitude - at least in the way I interpret you might mean. Honestly, with our university system and our capitalism and our tax structure, I think the US is a magnet for lots of very talented (and, in many cases, foreign) entrepreneurs. I think the country (and our companies) benefit greatly from this.
And that couldn't possibly be priced into the market appropriately? Do you think that the US university system and tax structure is some secret only you are privy to? If not, do you just think you are better than everyone else at predicting how thousands of companies will perform decades into the future?

Come on, I was born at night but it wasn't LAST night.

You really ought to revisit the dangers of basing investment decisions on PAST performance.

rascott
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Re: International market recovery

Post by rascott » Thu May 14, 2020 8:25 pm

whereskyle wrote:
Thu May 14, 2020 1:17 pm
lostdog wrote:
Thu May 14, 2020 1:08 pm
junior wrote:
Thu May 14, 2020 7:21 am
Rosencrantz1 wrote:
Wed May 13, 2020 7:30 pm
junior wrote:
Wed May 13, 2020 6:41 pm
If you read Vanguard`s annual economic report you'll see they expect international to outperform U. S. over the next 10 years.

I don't know if they will be right or wrong but they certainly seem more educated than the 100% U. S. crowd who seem to be operating on folk wisdom rather than data.
I'd encourage you to compare US vs exUS CAGR for the last 10 years, the last 20 years, the last 30 years, the last 50 years. I'm not sure how you define 'folk wisdom rather than data' - but, it seems to me there's an awful lot of historical data out there. Speaking for myself, I invest in equities precisely because of the historical returns of stocks. Otherwise, I'd just put the money in a pillow case and stuff in under the mattress :beer
My point exactly. The economists at Vanguard and elsewhere study math and data. The 100% U. S. folks spend a few minutes on a website widget, cherry pick some data, then make up a folk story about U. S. being number one, pillow cases and beer.
The reasons stated on this site for U.S. only investing are very odd and absurd. Throwing common sense and intelligence out the window. Vineviz mentioned there was a study showing lack of formal education in this crowd.

Also the point Junior was trying to get across is to go with Vanguard's recommendation over a group speculators and performance chasers arm chair expertise based on personal ideologies of foreign countries.
I think people on both sides of this debate are not careful with their language. Not every reason given is odd and absurd. Read Common Sense on Mutual Funds and tell me if the math and data indicating that a long-term investor will likely see no measurable benefit to his portfolio by owning ex-us stocks is "odd and absurd." I think Jack's explanation is pretty logical: over the long-run, returns tend to even out regardless of which country you are investing in, although there are definitely some countries that have had one or two terrible 30-year periods of performance. Thankfully, all Jack's data show that the U.S. has rarely, if ever, been a severe underperformer over any given 30-year period. So, Jack says, you can go ahead and own ex-us, but I see nothing in the math and data that makes it likely that it will help you. It might, but that's just not clear. This, I humbly submit, is neither an odd or absurd line of reasoning.

I 100% agree that some reasons given for U.S.-only investing are odd and absurd, but I 100% disagree that investing solely in a U.S. total-stock-market index fund is always (or ever) illogical. I think it should be pretty uncontroversial here that, if one could only hold one asset and that asset was VTI, one is in a relatively advantageous position compared to all investors.

And just to sum up my view about why this really should not be such a controversial topic (but of course it's also the reason why it is a controversial topic), I'll say this: it is 100% true that nobody here knows whether investing in ex-us equities will increase long-term returns. There is just no getting around that truth. Investing in ex-us might have some benefits, so I think it logically makes sense to own at least some. But, no, however upset it might make us, we cannot know if buying ex-U.S. equities is the absolute right decision. Ex-U.S. investors take that uncertainty and say, "Well, I'd better own some." U.S.-only investors take that uncertainty and say, "Well, if there's no compelling evidence that I absolutely need to have it, I won't make my life unnecessarily complicated." Neither of these positions is illogical, and only time will tell us if one position was correct.


What I tend to notice is a lot of hostility towards those that aren't "enlightened" enough to understand they should be investing at global cap weight. Xenophobic or lacking formal education is a common comment.

The more years that pass where international investing remains stuck in the mud... the more aggressive it gets. Having half one's equities in an index that has returned less than 0% for over 12 years can be very frustrating, I'm sure.

The final irony remains that we are on a site named for a legendary person in the investing world... who specifically didn't recommend international investing. And he's been proven correct - so far - by an astronomical degree. In the roughly 50 years that international equity investing has been accessible to the US investor.... there has been zero benefit found. None. It's entirely theoretical based.

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hisdudeness
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Re: International market recovery

Post by hisdudeness » Thu May 14, 2020 8:41 pm

rascott wrote:
Thu May 14, 2020 8:25 pm
whereskyle wrote:
Thu May 14, 2020 1:17 pm
lostdog wrote:
Thu May 14, 2020 1:08 pm
junior wrote:
Thu May 14, 2020 7:21 am
Rosencrantz1 wrote:
Wed May 13, 2020 7:30 pm


I'd encourage you to compare US vs exUS CAGR for the last 10 years, the last 20 years, the last 30 years, the last 50 years. I'm not sure how you define 'folk wisdom rather than data' - but, it seems to me there's an awful lot of historical data out there. Speaking for myself, I invest in equities precisely because of the historical returns of stocks. Otherwise, I'd just put the money in a pillow case and stuff in under the mattress :beer
My point exactly. The economists at Vanguard and elsewhere study math and data. The 100% U. S. folks spend a few minutes on a website widget, cherry pick some data, then make up a folk story about U. S. being number one, pillow cases and beer.
The reasons stated on this site for U.S. only investing are very odd and absurd. Throwing common sense and intelligence out the window. Vineviz mentioned there was a study showing lack of formal education in this crowd.

Also the point Junior was trying to get across is to go with Vanguard's recommendation over a group speculators and performance chasers arm chair expertise based on personal ideologies of foreign countries.
I think people on both sides of this debate are not careful with their language. Not every reason given is odd and absurd. Read Common Sense on Mutual Funds and tell me if the math and data indicating that a long-term investor will likely see no measurable benefit to his portfolio by owning ex-us stocks is "odd and absurd." I think Jack's explanation is pretty logical: over the long-run, returns tend to even out regardless of which country you are investing in, although there are definitely some countries that have had one or two terrible 30-year periods of performance. Thankfully, all Jack's data show that the U.S. has rarely, if ever, been a severe underperformer over any given 30-year period. So, Jack says, you can go ahead and own ex-us, but I see nothing in the math and data that makes it likely that it will help you. It might, but that's just not clear. This, I humbly submit, is neither an odd or absurd line of reasoning.

I 100% agree that some reasons given for U.S.-only investing are odd and absurd, but I 100% disagree that investing solely in a U.S. total-stock-market index fund is always (or ever) illogical. I think it should be pretty uncontroversial here that, if one could only hold one asset and that asset was VTI, one is in a relatively advantageous position compared to all investors.

And just to sum up my view about why this really should not be such a controversial topic (but of course it's also the reason why it is a controversial topic), I'll say this: it is 100% true that nobody here knows whether investing in ex-us equities will increase long-term returns. There is just no getting around that truth. Investing in ex-us might have some benefits, so I think it logically makes sense to own at least some. But, no, however upset it might make us, we cannot know if buying ex-U.S. equities is the absolute right decision. Ex-U.S. investors take that uncertainty and say, "Well, I'd better own some." U.S.-only investors take that uncertainty and say, "Well, if there's no compelling evidence that I absolutely need to have it, I won't make my life unnecessarily complicated." Neither of these positions is illogical, and only time will tell us if one position was correct.


What I tend to notice is a lot of hostility towards those that aren't "enlightened" enough to understand they should be investing at global cap weight. Xenophobic or lacking formal education is a common comment.

The more years that pass where international investing remains stuck in the mud... the more aggressive it gets. Having half one's equities in an index that has returned less than 0% for over 12 years can be very frustrating, I'm sure.

The final irony remains that we are on a site named for a legendary person in the investing world... who specifically didn't recommend international investing. And he's been proven correct - so far - by an astronomical degree. In the roughly 50 years that international equity investing has been accessible to the US investor.... there has been zero benefit found. None. It's entirely theoretical based.
Very well said, rascott. In three short paragraphs I think you nailed it. :sharebeer

Rosencrantz1
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Re: International market recovery

Post by Rosencrantz1 » Thu May 14, 2020 10:21 pm

jibantik wrote:
Thu May 14, 2020 8:19 pm
Rosencrantz1 wrote:
Thu May 14, 2020 4:30 pm
I'm recently retired - so, I probably fit your older age demographic. I don't know that I take on the "America First" attitude - at least in the way I interpret you might mean. Honestly, with our university system and our capitalism and our tax structure, I think the US is a magnet for lots of very talented (and, in many cases, foreign) entrepreneurs. I think the country (and our companies) benefit greatly from this.
And that couldn't possibly be priced into the market appropriately? Do you think that the US university system and tax structure is some secret only you are privy to? If not, do you just think you are better than everyone else at predicting how thousands of companies will perform decades into the future?

Come on, I was born at night but it wasn't LAST night.

You really ought to revisit the dangers of basing investment decisions on PAST performance.

You sound like one of the folks that's very proud of their international investments - if so, I'm happy if you're happy. Buyers and sellers meeting at the market is what makes the world go 'round.

Of course it's priced into the market. Why on earth might you imagine some economists going on about what a 'bargain' international is? In spite of this market knowledge, there have been (including, I suspect, some folks on this website) individuals that stick with US based investing - and have profited handsomely because of it. International is a 'bargain' for a reason. And, I'd suggest some of those reasons include those I've listed above. I'm sure there are many other reasons - including many I do not know.

You talk about "past performance" like it's recency bias. I'm looking at the past 50 years or the past 100 years of US outperformance. It's precisely those many decades of equity performance that motivates me to put dollars into stocks (and US stocks in particular).

Yeah... I was born at night too - and *surprise* it wasn't last night either. I've been investing US for 30+ years and its served me quite well - - I feel like I should 'stay the course' (as is often said here).

Rosencrantz1
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Re: International market recovery

Post by Rosencrantz1 » Thu May 14, 2020 10:25 pm

rascott wrote:
Thu May 14, 2020 8:25 pm
whereskyle wrote:
Thu May 14, 2020 1:17 pm
lostdog wrote:
Thu May 14, 2020 1:08 pm
junior wrote:
Thu May 14, 2020 7:21 am
Rosencrantz1 wrote:
Wed May 13, 2020 7:30 pm


I'd encourage you to compare US vs exUS CAGR for the last 10 years, the last 20 years, the last 30 years, the last 50 years. I'm not sure how you define 'folk wisdom rather than data' - but, it seems to me there's an awful lot of historical data out there. Speaking for myself, I invest in equities precisely because of the historical returns of stocks. Otherwise, I'd just put the money in a pillow case and stuff in under the mattress :beer
My point exactly. The economists at Vanguard and elsewhere study math and data. The 100% U. S. folks spend a few minutes on a website widget, cherry pick some data, then make up a folk story about U. S. being number one, pillow cases and beer.
The reasons stated on this site for U.S. only investing are very odd and absurd. Throwing common sense and intelligence out the window. Vineviz mentioned there was a study showing lack of formal education in this crowd.

Also the point Junior was trying to get across is to go with Vanguard's recommendation over a group speculators and performance chasers arm chair expertise based on personal ideologies of foreign countries.
I think people on both sides of this debate are not careful with their language. Not every reason given is odd and absurd. Read Common Sense on Mutual Funds and tell me if the math and data indicating that a long-term investor will likely see no measurable benefit to his portfolio by owning ex-us stocks is "odd and absurd." I think Jack's explanation is pretty logical: over the long-run, returns tend to even out regardless of which country you are investing in, although there are definitely some countries that have had one or two terrible 30-year periods of performance. Thankfully, all Jack's data show that the U.S. has rarely, if ever, been a severe underperformer over any given 30-year period. So, Jack says, you can go ahead and own ex-us, but I see nothing in the math and data that makes it likely that it will help you. It might, but that's just not clear. This, I humbly submit, is neither an odd or absurd line of reasoning.

I 100% agree that some reasons given for U.S.-only investing are odd and absurd, but I 100% disagree that investing solely in a U.S. total-stock-market index fund is always (or ever) illogical. I think it should be pretty uncontroversial here that, if one could only hold one asset and that asset was VTI, one is in a relatively advantageous position compared to all investors.

And just to sum up my view about why this really should not be such a controversial topic (but of course it's also the reason why it is a controversial topic), I'll say this: it is 100% true that nobody here knows whether investing in ex-us equities will increase long-term returns. There is just no getting around that truth. Investing in ex-us might have some benefits, so I think it logically makes sense to own at least some. But, no, however upset it might make us, we cannot know if buying ex-U.S. equities is the absolute right decision. Ex-U.S. investors take that uncertainty and say, "Well, I'd better own some." U.S.-only investors take that uncertainty and say, "Well, if there's no compelling evidence that I absolutely need to have it, I won't make my life unnecessarily complicated." Neither of these positions is illogical, and only time will tell us if one position was correct.


What I tend to notice is a lot of hostility towards those that aren't "enlightened" enough to understand they should be investing at global cap weight. Xenophobic or lacking formal education is a common comment.

The more years that pass where international investing remains stuck in the mud... the more aggressive it gets. Having half one's equities in an index that has returned less than 0% for over 12 years can be very frustrating, I'm sure.

The final irony remains that we are on a site named for a legendary person in the investing world... who specifically didn't recommend international investing. And he's been proven correct - so far - by an astronomical degree. In the roughly 50 years that international equity investing has been accessible to the US investor.... there has been zero benefit found. None. It's entirely theoretical based.
Yeah... I see that. I'm especially amused by the 'lack of formal education' comments. :)

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oldzey
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Re: International market recovery

Post by oldzey » Thu May 14, 2020 10:35 pm

"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman


rascott
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Re: International market recovery

Post by rascott » Fri May 15, 2020 12:37 am

Great post! People plowing money into Japanese equity markets is possibly the definition of an blind fool. Their central bank has been propping those prices up for 8 years and running....as no real investor wants them. It's quants gone wild.... look at what you are buying and quit just saying it's the normal market! It's a total joke.

If the only reason a market isn't collapsing is because the central bank keeps buying stocks every month.... for going on a decade.... and you want to go along with that as some kind of EMH.... all I say is good luck.
Last edited by rascott on Fri May 15, 2020 12:43 am, edited 2 times in total.

jjface
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Re: International market recovery

Post by jjface » Fri May 15, 2020 12:39 am

I think Europe will be slower to recover.

valleyrock
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Re: International market recovery

Post by valleyrock » Fri May 15, 2020 9:19 am

One usual criticism is that international stocks are dicey because many other countries do not have an SEC or equivalent to keep the companies honest (at least to the extent they can). So, information used to purchase international instruments is often done in a vacuum, perhaps arguing at present for some sort of managed approach on the international front, by managers with an in.

Then there's the idea of how quickly many countries can recover from current troubles. Odds are, many countries will be taking far longer than others, but in the aggregate, who knows.

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Spinola
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Re: International market recovery

Post by Spinola » Fri May 15, 2020 4:05 pm

rascott wrote:
Fri May 15, 2020 12:37 am
Great post! People plowing money into Japanese equity markets is possibly the definition of an blind fool. Their central bank has been propping those prices up for 8 years and running....as no real investor wants them. It's quants gone wild.... look at what you are buying and quit just saying it's the normal market! It's a total joke.

If the only reason a market isn't collapsing is because the central bank keeps buying stocks every month.... for going on a decade.... and you want to go along with that as some kind of EMH.... all I say is good luck.
This is what the Fed is doing now... keep expecting a US equities free lunch for another decade, because we all know past performance will dictate future results and NOTHING ever changes... :oops:

The debt and buyback fueled US equities bubble is going to burst eventually. The status quo is not sustainable. Blind faith in American exceptionalism is rather curious, when the rest of the world clearly sees the greed and utter incompetence at the helm of your country as the potential detonators of self-destruction.

rascott
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Re: International market recovery

Post by rascott » Fri May 15, 2020 5:45 pm

Spinola wrote:
Fri May 15, 2020 4:05 pm
rascott wrote:
Fri May 15, 2020 12:37 am
Great post! People plowing money into Japanese equity markets is possibly the definition of an blind fool. Their central bank has been propping those prices up for 8 years and running....as no real investor wants them. It's quants gone wild.... look at what you are buying and quit just saying it's the normal market! It's a total joke.

If the only reason a market isn't collapsing is because the central bank keeps buying stocks every month.... for going on a decade.... and you want to go along with that as some kind of EMH.... all I say is good luck.
This is what the Fed is doing now... keep expecting a US equities free lunch for another decade, because we all know past performance will dictate future results and NOTHING ever changes... :oops:

The debt and buyback fueled US equities bubble is going to burst eventually. The status quo is not sustainable. Blind faith in American exceptionalism is rather curious, when the rest of the world clearly sees the greed and utter incompetence at the helm of your country as the potential detonators of self-destruction.


False. The Fed has never bought equities.... nor do I ever see them doing so.

Hustlinghustling
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Re: International market recovery

Post by Hustlinghustling » Fri May 15, 2020 7:39 pm

rascott wrote:
Fri May 15, 2020 5:45 pm
Spinola wrote:
Fri May 15, 2020 4:05 pm
rascott wrote:
Fri May 15, 2020 12:37 am
Great post! People plowing money into Japanese equity markets is possibly the definition of an blind fool. Their central bank has been propping those prices up for 8 years and running....as no real investor wants them. It's quants gone wild.... look at what you are buying and quit just saying it's the normal market! It's a total joke.

If the only reason a market isn't collapsing is because the central bank keeps buying stocks every month.... for going on a decade.... and you want to go along with that as some kind of EMH.... all I say is good luck.
This is what the Fed is doing now... keep expecting a US equities free lunch for another decade, because we all know past performance will dictate future results and NOTHING ever changes... :oops:

The debt and buyback fueled US equities bubble is going to burst eventually. The status quo is not sustainable. Blind faith in American exceptionalism is rather curious, when the rest of the world clearly sees the greed and utter incompetence at the helm of your country as the potential detonators of self-destruction.


False. The Fed has never bought equities.... nor do I ever see them doing so.
if you’re hardwired to believe government intervention of the market doesn’t occur much in the great and free USA, you won’t see it even when it’s blatantly obvious. as I said, many differences to suggest between US and non-US markets. at this point, state intervention is hardly the main one to take away

Hustlinghustling
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Re: International market recovery

Post by Hustlinghustling » Fri May 15, 2020 7:49 pm

if japan, UK or france took on the same US govt policies on fed stimulus and buying bonds or too big to fail bailouts, you would be using them as arguments not to invest there too

corp_sharecropper
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Re: International market recovery

Post by corp_sharecropper » Fri May 15, 2020 8:46 pm

visualguy wrote:
Tue May 12, 2020 4:55 pm
binx99 wrote:
Tue May 12, 2020 3:47 pm
But what I'm hearing in this discussion is that US and International markets have historically behaved in a similar fashion and most (all?) reasonable assumptions about investing in the US market can be applied to the international one. Please correct me if I've misunderstood.
If that's what you're hearing, then it's wrong. US has historically outperformed ex-US significantly. The difference is 2% annually over the last century, which is a very large difference when compounded. Even if you decide for whatever reason not to include the last decade, the significant out-performance of US still holds. There were some periods during which ex-US out-performed, but that out-performance was much less significant than the under-performance during other times. People keep mentioning some years during the 2000s when ex-US out-performed, but that out-performance was nothing when compared to ex-US under-performance during the previous decade (1990s) or the following decade (2010s).

What you conclude from it, if anything, is up to you, but there's no reason to be mislead about the past.
This, this right here.

From the charts I've looked at it's plainly obvious the US has absolutely trashed international; developed, emerging, and a market cap combo of the two, going back at least to 1986. Maybe a few years the US underperformed but it was nothing compared to the thorough outperformance it has exhibited all the other times. I'm willing to place more weight into the numbers I see from 1986, which seems like quite a decent chunk of time to be fair, than say, what may have happened in the 30 years prior to '86 (don't know off the top of my head). Literally the only reason I have international equities is 1) single market/sovereign risk should there be something specific to geopolitics/government/trade that has a focused impact on the US 2) hedging against my own beliefs and 3) there's a small part of my brain that is a degenerate gambler and is convinced EM will payoff big at some point (but I'm talking a very small part of my brain).

This has led me to a VERY reluctant 30% international. A 30% that drives me just as mad as my reasons FOR having it. Other than a hedge against something uniquely catastrophic to the US, I do not hold international with some foundational belief that it is good for my portfolio, certainly not with an expectation of higher returns (minus the EM bets). I feel it is an annoying drag on my portfolio, but a necessary evil. I can't imagine a scenario where I go above 30% and I'm likely to drop below, but probably not past 20%.

Well that's my $0.02, and it's worth exactly what you paid for it, so caveat emptor and all.

rascott
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Re: International market recovery

Post by rascott » Fri May 15, 2020 8:55 pm

Hustlinghustling wrote:
Fri May 15, 2020 7:39 pm
rascott wrote:
Fri May 15, 2020 5:45 pm
Spinola wrote:
Fri May 15, 2020 4:05 pm
rascott wrote:
Fri May 15, 2020 12:37 am
Great post! People plowing money into Japanese equity markets is possibly the definition of an blind fool. Their central bank has been propping those prices up for 8 years and running....as no real investor wants them. It's quants gone wild.... look at what you are buying and quit just saying it's the normal market! It's a total joke.

If the only reason a market isn't collapsing is because the central bank keeps buying stocks every month.... for going on a decade.... and you want to go along with that as some kind of EMH.... all I say is good luck.
This is what the Fed is doing now... keep expecting a US equities free lunch for another decade, because we all know past performance will dictate future results and NOTHING ever changes... :oops:

The debt and buyback fueled US equities bubble is going to burst eventually. The status quo is not sustainable. Blind faith in American exceptionalism is rather curious, when the rest of the world clearly sees the greed and utter incompetence at the helm of your country as the potential detonators of self-destruction.


False. The Fed has never bought equities.... nor do I ever see them doing so.
if you’re hardwired to believe government intervention of the market doesn’t occur much in the great and free USA, you won’t see it even when it’s blatantly obvious. as I said, many differences to suggest between US and non-US markets. at this point, state intervention is hardly the main one to take away

I never said that... please don't put words in my mouth.

I said they haven't bought equities like Japan's central bank has done for the last 8+ years..... the BOJ owns nearly 80% of the country's equity ETFs.... and is a top ten owner of nearly every publicly traded company.

Nothing approaching that level of market intervention has occurred in the US. And hopefully it never will.

Alchemist
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Re: International market recovery

Post by Alchemist » Fri May 15, 2020 11:36 pm

jeffyscott wrote:
Wed May 13, 2020 7:44 am
Okay, but what is being said in many of these posts, including yours, is both that and that US Equity will have higher returns. So the claims seem to be that US stocks will continue to feature both less risk and higher returns.

BTW, part of Scandinavia (Sweden) has, so far, a worse covid-19 death rate (deaths per 100,000 population) than the US.
U.S. stocks have been providing better returns at lower risk compared to ex-U.S. international as a whole for the last three decades and arguably for more than a century.

I'm aware of Sweden's infection rates but I specifically said I don't think it really matters to equity markets over the next few years. One way or another the virus will be beaten and the economic damage left in its wake will be the determinate of stock performance. The breakdown in international trade is what will take the longest to recover, thus even if an economy has zero virus deaths it would still get hammered economically based on its exposure/dependence on exporting its goods.
whereskyle wrote:
Wed May 13, 2020 2:58 pm
This is odd to me. When I buy VT (which I've been doing quite a lot of), nearly all of my money goes to multinational corporations regardless of domicile. Japan may do poorly, but Nintendo and Sony are going to do better than usual given the need for at-home entertainment globally. Honda and Toyota will sell fewer cars, given a reduced need for transport globally. These same principles apply to Microsoft and GM. You seem to be conflating national economies with national stock markets, but the stock market is not the economy.
When you buy VT, you are not just purchasing the large multinationals. You are also exposed to all the smaller equities that are dependent on the domestic market. Equity markets and economies are not the same thing, but in a modern developed economy the stock market will trend with the economy over the long term. Hence why stock crashes tend to happen in lock step with recessions.

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aj76er
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Re: International market recovery

Post by aj76er » Sat May 16, 2020 12:56 am

typical.investor wrote:
Thu May 14, 2020 2:32 am
CAGR 1970-2019
INTL 8.65%
Data is from here: viewtopic.php?f=10&t=2520&p=5178028#p5178028

CAGR 1970-2009
INTL 9.55%
US 9.87%

CAGR 2010-2019
INTL 5.1%
US 13.42%
What I see from the data is that investing globally has led to a very predictable average return (i.e. CAGR) over all those time periods (of approximately 9% nominal for a 50/50 split). This is diversification at work - the tendency to make investment returns more predictable, consistent, and reliable over reasonably long and/or different holding periods.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

Beensabu
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Re: International market recovery

Post by Beensabu » Sat May 16, 2020 2:08 pm

DB2 wrote:
Thu May 14, 2020 3:16 pm
Honestly, having read dozens and dozens of these kind of threads (maybe over 100 by now?) something has stood out to me. Now there are exceptions here, but: I notice a lot of the U.S. vs International preference often comes down to age demographics. Much of the older ages kind of take on the "America First" attitude. The U.S. has been number #1 (for the most part) in their lifetime and this is just going to continue as if it's a metaphysical given. Bogle and Buffet good examples here.

Much of the younger age looks at it differently. They look at the future and think it will be more challenging for the U.S. They look at the future as more unpredictable and less certain. Maybe less optimistic? They are more non-trusting of things as it could be said. So they look at International and global market cap weighting more fundamentally for investing.

I am not trying to start any kind of a "age fight" or discrimination by any means. I am just pointing out observations noting some posters who actually mentioned their age in various posts in other threads and where it became more apparent to me. I'm not even talking about this thread and its posters necessarily, but just in general.

So I just think age plays a big factor in investing preferences. Different views of things. Nothing else is meant to be implied. I find the divergence fascinating actually.
I hope your observations are true. I think a lot of the posts in favor of having an ex-US allocation are put there to hopefully keep newer investors from falling into a dogma trap and pushing them to consider all angles, dive into data objectively, do their own research, and come to a conclusion for themselves that they find rational and will not deviate from over time. It doesn't matter if an older investor only holds US stocks. It's worked out well for them so far (can't argue with that), and it'll likely work out fine in the future even if ex-US begins to outperform and does so for the duration of their investment horizon (that's an "if" statement, not a prediction). That's not the case for younger investors though, and it's reassuring to think that most of them have figured that out. The worst thing you can do is buy one thing high now only to potentially buy another thing high later. Just buy everything, all the time, and you're getting a fair enough deal overall.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next."

Topic Author
binx99
Posts: 42
Joined: Thu Apr 16, 2020 9:58 pm

Re: International market recovery

Post by binx99 » Sat May 16, 2020 9:59 pm

OP here. Excellent and informative debate. Still struggling with ex-US allocation.

With appreciation for the conceptual value of diversification into ex-US, I gravitate towards this balanced allocation.

However, let me play devil's advocate:

1) There's a disagreement about how well ex-US has actually performed over the long haul. Cited data sources (Credit Suisse, PortfolioVisualizer, Simba spreadsheet, etc) don't seem to agree. I've been running PortfolioVisualizer over different start/stop intervals with VGTSX and VTSMX since inception in 1992. I deliberately included ex-US outperformance intervals and reviewed intervals excluding the profound post-2010 US bull market. I chose intermediate intervals 10-15 yrs, because this is my investment horizon. (I realize that broader history would be more useful, and I'd love to see accurate 15 year rolling returns for ex-US markets resembling modern indexing instruments.) I'd also say, if you're going to start throwing out the recent, anomalous US bull market, then by the same token, you should examine data excluding the equally anomalous Japanese market in the 80's

Generally speaking, ex-US allocation was a drag on the portfolio. Interestingly, annual rebalancing tended to amplify this drag rather than mitigate it. Nisiprius has also provided some data from Credit Suisse yearbooks suggesting even longer term underperformance of ex-US. I understand that ex-US/US outperformance runs in cycles, but area under the curve very much counts as well.

2) I'm not convinced that a market is a market is a market. The more I research international index funds and consider the larger markets composing them, the less I think that fundamental assumptions about market function, corrections, risk vs. returns, and efficiency apply uniformly. FTIHX is 17.50% Japanese (a market profoundly bolstered by the BoJ) and 9.56% Chinese (large majority state-owned corporations, questionable transparency, shareholder stake in holding companies rather than the companies themselves (?!?). Emerging markets are a whole different animal and make up 25.24% of the fund. I'm not sure why one would assume that these markets resemble the US market and should be expected to demonstrate the same market fundamentals in the intermediate to long term.

So, in my mind, do you invest in (1) long-term historical performance, which is why we believe in the value of market investing anyway, or (2) maximal diversification (even beyond a US index) and confidence that ex-US markets and US markets will likely follow the same tenets of long term (M)arkets in toto.

LeslieSmiley
Posts: 82
Joined: Fri May 08, 2015 7:43 pm

Re: International market recovery

Post by LeslieSmiley » Tue May 19, 2020 10:02 am

binx99 wrote:
Sat May 16, 2020 9:59 pm
OP here. Excellent and informative debate. Still struggling with ex-US allocation.

With appreciation for the conceptual value of diversification into ex-US, I gravitate towards this balanced allocation.

However, let me play devil's advocate:

1) There's a disagreement about how well ex-US has actually performed over the long haul. Cited data sources (Credit Suisse, PortfolioVisualizer, Simba spreadsheet, etc) don't seem to agree. I've been running PortfolioVisualizer over different start/stop intervals with VGTSX and VTSMX since inception in 1992. I deliberately included ex-US outperformance intervals and reviewed intervals excluding the profound post-2010 US bull market. I chose intermediate intervals 10-15 yrs, because this is my investment horizon. (I realize that broader history would be more useful, and I'd love to see accurate 15 year rolling returns for ex-US markets resembling modern indexing instruments.) I'd also say, if you're going to start throwing out the recent, anomalous US bull market, then by the same token, you should examine data excluding the equally anomalous Japanese market in the 80's

Generally speaking, ex-US allocation was a drag on the portfolio. Interestingly, annual rebalancing tended to amplify this drag rather than mitigate it. Nisiprius has also provided some data from Credit Suisse yearbooks suggesting even longer term underperformance of ex-US. I understand that ex-US/US outperformance runs in cycles, but area under the curve very much counts as well.

2) I'm not convinced that a market is a market is a market. The more I research international index funds and consider the larger markets composing them, the less I think that fundamental assumptions about market function, corrections, risk vs. returns, and efficiency apply uniformly. FTIHX is 17.50% Japanese (a market profoundly bolstered by the BoJ) and 9.56% Chinese (large majority state-owned corporations, questionable transparency, shareholder stake in holding companies rather than the companies themselves (?!?). Emerging markets are a whole different animal and make up 25.24% of the fund. I'm not sure why one would assume that these markets resemble the US market and should be expected to demonstrate the same market fundamentals in the intermediate to long term.

So, in my mind, do you invest in (1) long-term historical performance, which is why we believe in the value of market investing anyway, or (2) maximal diversification (even beyond a US index) and confidence that ex-US markets and US markets will likely follow the same tenets of long term (M)arkets in toto.

(1) for me and that's why i began getting out of international a decade ago. the historical performance data doesn't seem very odd and absurd to me, and i do not think that i had thrown my common sense and intelligence out the window to make such decision.....and i am formally educated with occasional invitation to speak/teach at post-grad level internationally in design and technology and not "folksy" mythological studies or any kind.

asif408
Posts: 1958
Joined: Sun Mar 02, 2014 8:34 am
Location: Florida

Re: International market recovery

Post by asif408 » Tue May 19, 2020 10:17 am

binx99 wrote:
Sat May 16, 2020 9:59 pm
OP here. Excellent and informative debate. Still struggling with ex-US allocation.

With appreciation for the conceptual value of diversification into ex-US, I gravitate towards this balanced allocation.

However, let me play devil's advocate:

1) There's a disagreement about how well ex-US has actually performed over the long haul. Cited data sources (Credit Suisse, PortfolioVisualizer, Simba spreadsheet, etc) don't seem to agree. I've been running PortfolioVisualizer over different start/stop intervals with VGTSX and VTSMX since inception in 1992. I deliberately included ex-US outperformance intervals and reviewed intervals excluding the profound post-2010 US bull market. I chose intermediate intervals 10-15 yrs, because this is my investment horizon. (I realize that broader history would be more useful, and I'd love to see accurate 15 year rolling returns for ex-US markets resembling modern indexing instruments.) I'd also say, if you're going to start throwing out the recent, anomalous US bull market, then by the same token, you should examine data excluding the equally anomalous Japanese market in the 80's

Generally speaking, ex-US allocation was a drag on the portfolio. Interestingly, annual rebalancing tended to amplify this drag rather than mitigate it. Nisiprius has also provided some data from Credit Suisse yearbooks suggesting even longer term underperformance of ex-US. I understand that ex-US/US outperformance runs in cycles, but area under the curve very much counts as well.

2) I'm not convinced that a market is a market is a market. The more I research international index funds and consider the larger markets composing them, the less I think that fundamental assumptions about market function, corrections, risk vs. returns, and efficiency apply uniformly. FTIHX is 17.50% Japanese (a market profoundly bolstered by the BoJ) and 9.56% Chinese (large majority state-owned corporations, questionable transparency, shareholder stake in holding companies rather than the companies themselves (?!?). Emerging markets are a whole different animal and make up 25.24% of the fund. I'm not sure why one would assume that these markets resemble the US market and should be expected to demonstrate the same market fundamentals in the intermediate to long term.

So, in my mind, do you invest in (1) long-term historical performance, which is why we believe in the value of market investing anyway, or (2) maximal diversification (even beyond a US index) and confidence that ex-US markets and US markets will likely follow the same tenets of long term (M)arkets in toto.
OP,

I would encourage you to read a book titled Global Investing, by Ibbotson and Brinson. It was written in the mid 1990s, at the tail end of a period of multi-decade international outperformance. It shows the returns of multiple countries over that time, including the US (Hint: you'll see that the US was one of the worst performing markets globally from 1970-1990). Ask yourself if you could sit through a multi decade period of international outperformance and not begin to question having all your eggs in one basket (i.e., country) and get a bad case of FOMO.

Topic Author
binx99
Posts: 42
Joined: Thu Apr 16, 2020 9:58 pm

Re: International market recovery

Post by binx99 » Thu May 21, 2020 7:46 pm

Thanks, asif408. I will look into the book.

I'd say that if US was clipping along at 6+% annual average, I could readily accept that I didn't invest ex-US, even if it was really flourishing...in the same way that I don't lose sleep that I didn't buy a pile of AAPL in the early 2000s. However, if ex-US is doing really well for the next 15 yrs and US equities languish, it would certainly be a tough pill to swallow.

More and more I see the applicability of concepts of regret management in making investment decisions.

rockstar
Posts: 338
Joined: Mon Feb 03, 2020 6:51 pm

Re: International market recovery

Post by rockstar » Thu May 21, 2020 8:27 pm

binx99 wrote:
Tue May 12, 2020 1:37 pm
Any strong thoughts about recovery of or long-term effects on international markets vs. US after this event-driven bear market?
International indexes hold a lot of oil and financial companies. With the ECB keeping rates negative, those banks will have reduced profitability. Oil companies like BP are not going to be making a lot of money right now. On top of this problem, the Fed reduced rates in the US, making the USD stronger. You can see this in the dollar spot index. I can't see how you can buy international and hope to be rewarded given these issues. I'm sticking to US companies and US multinational companies that can hedge their foreign currency exposure.
Last edited by rockstar on Thu May 21, 2020 10:51 pm, edited 2 times in total.

columbia
Posts: 2611
Joined: Tue Aug 27, 2013 5:30 am

Re: International market recovery

Post by columbia » Thu May 21, 2020 8:46 pm

rockstar wrote:
Thu May 21, 2020 8:27 pm
binx99 wrote:
Tue May 12, 2020 1:37 pm
Any strong thoughts about recovery of or long-term effects on international markets vs. US after this event-driven bear market?
International indexes hold a lot of oil and financial companies. With the ECB keep rates negative, those banks will have reduced profitability. Oil companies like BP are not going to be making a lot of money righ tnow. On top of this problem, the Fed reduced rates in the US, making the USD stronger. You can see this in the dollar spot index. I can't see how you can buy international and hope to be rewarded given these issues. I'm sticking to US companies and US multinational companies that can hedge their foreign currency exposure.
An international growth index would get you there? Re: the sector exposures in something like EFG vs VXUS.
If you leave your head in the sand for too long, you might get run over by a Jeep.

rockstar
Posts: 338
Joined: Mon Feb 03, 2020 6:51 pm

Re: International market recovery

Post by rockstar » Thu May 21, 2020 10:54 pm

columbia wrote:
Thu May 21, 2020 8:46 pm
rockstar wrote:
Thu May 21, 2020 8:27 pm
binx99 wrote:
Tue May 12, 2020 1:37 pm
Any strong thoughts about recovery of or long-term effects on international markets vs. US after this event-driven bear market?
International indexes hold a lot of oil and financial companies. With the ECB keep rates negative, those banks will have reduced profitability. Oil companies like BP are not going to be making a lot of money righ tnow. On top of this problem, the Fed reduced rates in the US, making the USD stronger. You can see this in the dollar spot index. I can't see how you can buy international and hope to be rewarded given these issues. I'm sticking to US companies and US multinational companies that can hedge their foreign currency exposure.
An international growth index would get you there? Re: the sector exposures in something like EFG vs VXUS.
You still have foreign currency exposure, which is really tough given the Fed action. The USD is incredibly strong.

Beensabu
Posts: 304
Joined: Sun Aug 14, 2016 3:22 pm

Re: International market recovery

Post by Beensabu » Fri May 22, 2020 8:27 pm

rockstar wrote:
Thu May 21, 2020 10:54 pm
You still have foreign currency exposure, which is really tough given the Fed action. The USD is incredibly strong.
Risks of international investing

Currency risk. Investments denominated in foreign currencies decline in value for U.S. investors when the U.S. dollar rises in value against those currencies. Conversely, the investments rise in value when the U.S. dollar weakens. There have been prolonged periods when the dollar has weakened against foreign currencies and others when it has strengthened.
Risks of home country investing

Currency risk. Currency risk can cut both ways. While we earn and spend most of our money in home-country currency, we also have many assets in that currency not accounted for within investing portfolios - future earnings (human capital), homes and other goods - thus, the need to minimize foreign-currency exposure may not be as great as it first appears from a portfolio-only perspective.
https://www.bogleheads.org/wiki/Domestic/International (emphasis added)
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next."

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