Seriously, what is going on with international?

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3funder
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Re: Seriously, what is going on with international?

Post by 3funder »

Not sure what to say here. The market tends to perform in a cyclical manner, but cycles can be shorter or longer than we would like or even think is possible. Choose your allocation and stick with it.
BogleFan510
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Re: Seriously, what is going on with international?

Post by BogleFan510 »

Imagine if the big tech companies had capitalized in India or Germany, instead of on US exchanges. US stocks are also really a mix of US only and global stocks that happen to trade on US exchanges. US indexes include foreign led companies that wanted to tap the large US market for capital.
So really, what criteria do you want to apply to the people who decide which companies to include when they create an index? Buy the ETF that most closely matches that diverification appoach, but either way I choose the broadest exposure.
junior
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Re: Seriously, what is going on with international?

Post by junior »

This is investments 101 stuff folks:

It does not matter if international stocks underperform.

The only thing that matters is how an annual rebalanced portfolio (or similar rebalancing strategy) would have done over a time period with a combination of international and domestic stock versus an annual rebalanced portfolio that only includes domestic stock. Also if you are still working such a chart should account for continual contributions.

Anybody talking about international stock in a vacuum is just posting noise.
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Stef
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Re: Seriously, what is going on with international?

Post by Stef »

willthrill81 wrote: Wed Oct 14, 2020 11:02 am
UpperNwGuy wrote: Wed Oct 14, 2020 10:57 am
Steadfast wrote: Wed Oct 14, 2020 10:54 am I'm just going to leave this here. Again.

Image
Could you post a "growth of $10,000" chart to go with it?
According to the Simba backtesting spreadsheet, from 1969-2019, real returns for the U.S. were 5.92% and 4.34% for ex-U.S.
And 50/50 US/exUS with quarterly rebalancing?
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willthrill81
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Re: Seriously, what is going on with international?

Post by willthrill81 »

Stef wrote: Wed Oct 14, 2020 12:26 pm
willthrill81 wrote: Wed Oct 14, 2020 11:02 am
UpperNwGuy wrote: Wed Oct 14, 2020 10:57 am
Steadfast wrote: Wed Oct 14, 2020 10:54 am I'm just going to leave this here. Again.

Image
Could you post a "growth of $10,000" chart to go with it?
According to the Simba backtesting spreadsheet, from 1969-2019, real returns for the U.S. were 5.92% and 4.34% for ex-U.S.
And 50/50 US/exUS with quarterly rebalancing?
I'm not sure, but you're welcome to download it and test it for yourself. Logically, we would expect to approximately split the difference noted above.
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Re: Seriously, what is going on with international?

Post by garlandwhizzer »

There is a serious question about whether to use US only or at most 20% INTL as recommended by Bogle and Buffett or a closer to cap weight global allocation, currently about 40% INTL, which the overwhelming majority of experts recommend. Over the past 5,10, 20, and 30 years, US only has clearly outperformed INTL in total return and risk adjusted return. Whether it will continue to do so going forward is unknown. Currently the valuation differences between the two are striking but these valuation differences may persist or even increase as they have in the last decade. There is no doubt that including INTL increases portfolio diversification but in terms of returns going forward we don't really know, just guesses. I continue hold long suffering INTL at about global market weight but I'm not sure that that is going to produce outperformance relative to US only. I believe it reduces specific country risk which hasn't shown up for a long time but may in the future. In spite of my opinion, Bogle may continue to get last laugh as he has for decades.

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columbia
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Re: Seriously, what is going on with international?

Post by columbia »

If it makes the OP feel better, US is down further today than ex-US. :P
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Tamalak
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Re: Seriously, what is going on with international?

Post by Tamalak »

columbia wrote: Wed Oct 14, 2020 12:58 pm If it makes the OP feel better, US is down further today than ex-US. :P
It doesn't make me feel better, it figures today would contradict my OP :oops:
kolder
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Re: Seriously, what is going on with international?

Post by kolder »

Tamalak wrote: Wed Oct 14, 2020 1:04 pm
columbia wrote: Wed Oct 14, 2020 12:58 pm If it makes the OP feel better, US is down further today than ex-US. :P
It doesn't make me feel better, it figures today would contradict my OP :oops:
No it just means the US will outperform for the next 9 days! BUY BUY BUY :greedy
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Stef
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Re: Seriously, what is going on with international?

Post by Stef »

garlandwhizzer wrote: Wed Oct 14, 2020 12:52 pm There is a serious question about whether to use US only or at most 20% INTL as recommended by Bogle and Buffett or a closer to cap weight global allocation, currently about 40% INTL, which the overwhelming majority of experts recommend. Over the past 5,10, 20, and 30 years, US only has clearly outperformed INTL in total return and risk adjusted return. Whether it will continue to do so going forward is unknown. Currently the valuation differences between the two are striking but these valuation differences may persist or even increase as they have in the last decade. There is no doubt that including INTL increases portfolio diversification but in terms of returns going forward we don't really know, just guesses. I continue hold long suffering INTL at about global market weight but I'm not sure that that is going to produce outperformance relative to US only. I believe it reduces specific country risk which hasn't shown up for a long time but may in the future. In spite of my opinion, Bogle may continue to get last laugh as he has for decades.

Garland Whizzer
I guess diversification isn't always a free lunch. Let's assume someone invested 1000$/month from 2000 till today:

Image
Source

Portfolio 1: 50% US 50% exUS (7.4% MWRR with $568,867)
Portfolio 2: 100% US (9.7% MWRR with $751,516)
Portfolio 3: 100% US Large Growth (11.8% MWRR with $971,629)

You could go further on this path and reduce diversification further. Sometimes you'll get rewarded for taking that risk and sometimes not. I think it's about minimizing regret and not maximizing return.
BespokeBiker
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Re: Seriously, what is going on with international?

Post by BespokeBiker »

When I've looked at this in depth I came to the conclusion that this is one area where ACTIVE can seriously outperform PASSIVE-WHOLE INDEX.

That is, YES - of late VTIAX chronically lags VTSAX. But if you look among the broad group of ex-USA stock mutual funds, you'll find some outfits that seem to be very good at picking a select basket of foreign stocks. The minor hitch: fund management fees are 0.7 - 1.5 (ish) .. but benefit might far outweigh this cost depending on your taste for adventure.
Last edited by BespokeBiker on Wed Oct 14, 2020 2:26 pm, edited 1 time in total.
Soon2BXProgrammer
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Re: Seriously, what is going on with international?

Post by Soon2BXProgrammer »

Stef wrote: Wed Oct 14, 2020 1:42 pm
garlandwhizzer wrote: Wed Oct 14, 2020 12:52 pm There is a serious question about whether to use US only or at most 20% INTL as recommended by Bogle and Buffett or a closer to cap weight global allocation, currently about 40% INTL, which the overwhelming majority of experts recommend. Over the past 5,10, 20, and 30 years, US only has clearly outperformed INTL in total return and risk adjusted return. Whether it will continue to do so going forward is unknown. Currently the valuation differences between the two are striking but these valuation differences may persist or even increase as they have in the last decade. There is no doubt that including INTL increases portfolio diversification but in terms of returns going forward we don't really know, just guesses. I continue hold long suffering INTL at about global market weight but I'm not sure that that is going to produce outperformance relative to US only. I believe it reduces specific country risk which hasn't shown up for a long time but may in the future. In spite of my opinion, Bogle may continue to get last laugh as he has for decades.

Garland Whizzer
I guess diversification isn't always a free lunch. Let's assume someone invested 1000$/month from 2000 till today:

Image
Source

Portfolio 1: 50% US 50% exUS (7.4% MWRR with $568,867)
Portfolio 2: 100% US (9.7% MWRR with $751,516)
Portfolio 3: 100% US Large Growth (11.8% MWRR with $971,629)

You could go further on this path and reduce diversification further. Sometimes you'll get rewarded for taking that risk and sometimes not. I think it's about minimizing regret and not maximizing return.
what about if they just start with a million dollars and don't add?
tibbitts
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Re: Seriously, what is going on with international?

Post by tibbitts »

RJC wrote: Wed Oct 14, 2020 9:55 am Is a Japan scenario even possible in the US? and what are the likely chances?

If it's something like 1%, should it have an impact on your AA?
Nobody thought the Japan scenario was possible in Japan either. Well, nobody is an exaggeration, but probably about the same percentage of people felt it was possible in Japan then that think it's possible in the U.S. now.
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Re: Seriously, what is going on with international?

Post by asif408 »

Stef wrote: Wed Oct 14, 2020 1:42 pm
garlandwhizzer wrote: Wed Oct 14, 2020 12:52 pm There is a serious question about whether to use US only or at most 20% INTL as recommended by Bogle and Buffett or a closer to cap weight global allocation, currently about 40% INTL, which the overwhelming majority of experts recommend. Over the past 5,10, 20, and 30 years, US only has clearly outperformed INTL in total return and risk adjusted return. Whether it will continue to do so going forward is unknown. Currently the valuation differences between the two are striking but these valuation differences may persist or even increase as they have in the last decade. There is no doubt that including INTL increases portfolio diversification but in terms of returns going forward we don't really know, just guesses. I continue hold long suffering INTL at about global market weight but I'm not sure that that is going to produce outperformance relative to US only. I believe it reduces specific country risk which hasn't shown up for a long time but may in the future. In spite of my opinion, Bogle may continue to get last laugh as he has for decades.

Garland Whizzer
I guess diversification isn't always a free lunch. Let's assume someone invested 1000$/month from 2000 till today:

Image
Source

Portfolio 1: 50% US 50% exUS (7.4% MWRR with $568,867)
Portfolio 2: 100% US (9.7% MWRR with $751,516)
Portfolio 3: 100% US Large Growth (11.8% MWRR with $971,629)

You could go further on this path and reduce diversification further. Sometimes you'll get rewarded for taking that risk and sometimes not. I think it's about minimizing regret and not maximizing return.
True. Or if you were a retiree in 2000 starting monthly withdrawals, diversified portfolios also worked reasonably well. But concentration in the prior decade's darling would leave US Growth only investors with nothing but their Social Security checks starting in 2017, because there would be no money left in their retirement accounts:

https://www.portfoliovisualizer.com/bac ... ion3_3=100
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willthrill81
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Re: Seriously, what is going on with international?

Post by willthrill81 »

Stef wrote: Wed Oct 14, 2020 1:42 pmI think it's about minimizing regret and not maximizing return.
We discussed that topic in this thread last year. I find the topic intriguing.

It probably depends substantially on the mode of comparison. If the comparison the investor is concerned about is global stocks, then global diversification is a good means of minimizing regret. But if the comparison is the S&P 500, then U.S. would be preferred.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Stef
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Re: Seriously, what is going on with international?

Post by Stef »

asif408 wrote: Wed Oct 14, 2020 2:29 pm True. Or if you were a retiree in 2000 starting monthly withdrawals, diversified portfolios also worked reasonably well. But concentration in the prior decade's darling would leave US Growth only investors with nothing but their Social Security checks starting in 2017, because there would be no money left in their retirement accounts:

https://www.portfoliovisualizer.com/bac ... ion3_3=100
Pretty interesting chart aswell, thanks for sharing! I guess you can take those risks as an accumulator, but should avoid it at all costs once retired.
asif408
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Re: Seriously, what is going on with international?

Post by asif408 »

Stef wrote: Wed Oct 14, 2020 2:38 pm
asif408 wrote: Wed Oct 14, 2020 2:29 pm True. Or if you were a retiree in 2000 starting monthly withdrawals, diversified portfolios also worked reasonably well. But concentration in the prior decade's darling would leave US Growth only investors with nothing but their Social Security checks starting in 2017, because there would be no money left in their retirement accounts:

https://www.portfoliovisualizer.com/bac ... ion3_3=100
Pretty interesting chart aswell, thanks for sharing! I guess you can take those risks as an accumulator, but should avoid it at all costs once retired.
Yes, and I've also found it odd that a not insignificant number of investors here near retirement think stock diversification becomes less important with age or during retirement. It appears to me the riskiest time not to be diversified is when your account balance is the greatest, which is typically near retirement. Maybe US stocks overall won't perform like the US large growth sector the last two decades, but why take the chance and be greedy?
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Re: Seriously, what is going on with international?

Post by Northern Flicker »

Tamalak wrote:
Stocks go up stocks go down. The market prices in expectations so the daily change in the market is by definition unexpected. That's how it's supposed to be.

So how is it, when I look at VTI, VXUS is worse almost every day? 8 or 9 times out of 10.

A random walk doesn't act like this.
Sure it can.

Be careful not to confuse the mathematical concept of random with the concept of uniform distribution, i.e. where each outcome is equally likely.

A lottery ticket is a random outcome, but just always predicting a loss will be a correct prediction almost all the time.

Statistical significance refers to a test and outcome strong enough to reject with high probability that the outcome was an artifact of chance. Your test was most likely too small of a sample to be statistically significant.
Last edited by Northern Flicker on Wed Oct 14, 2020 7:29 pm, edited 1 time in total.
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Re: Seriously, what is going on with international?

Post by Valuethinker »

mrspock wrote: Wed Oct 14, 2020 9:39 am
Valuethinker wrote: Wed Oct 14, 2020 9:20 am
If you strip out the Big 5 all the measures of earnings growth and PEs would look a lot closer - US & non-US.

Since 2009-10 US stocks have been on enormous tear. But I did read something that since 2018 the US index has gone nowhere *ex* the Big 5? And that's a big ex, granted.
Did they strip out the top 5 international as well? For every period of outperformance of the US market? I doubt it. Pretty silly analysis.
It is very unusual to have a market rally that is that narrow in breadth. Usually a rising tide lifts more boats than that.

Why do you think that is stupid?
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Re: Seriously, what is going on with international?

Post by JBTX »

RJC wrote: Wed Oct 14, 2020 9:55 am Is a Japan scenario even possible in the US? and what are the likely chances?

If it's something like 1%, should it have an impact on your AA?
How can you possibly guess that a Japan scenario is only a 1% probability? While I don't see a Japan scenario as likely, a Japan - lite scenario is plausible enough (much higher than 1% such that I'd like at least some hedge against it)

PE ratios are on the high side and interest rates historic lows. There aren't a lot of comparable historical data points in the US. We are in uncharted territory. I don't think US stock history is going to be much use predicting the future.

I think what we have gone through with covid in the US, compared to other countries, shows that US exceptionalism does not always bear out.

It strikes me as a long term investor you are looking and hoping for investing opportunities when prices seem reasonable or are even depressed. With international stocks you may have that. Whatever the case, you have a different scenario than what is in the US and different is good for diversification purposes.
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Re: Seriously, what is going on with international?

Post by rockstar »

Why invest in a market with negative rates?
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Re: Seriously, what is going on with international?

Post by willthrill81 »

RJC wrote: Wed Oct 14, 2020 9:55 am Is a Japan scenario even possible in the US? and what are the likely chances?
It's absolutely critical to keep in mind that at the peak of the Japanese stock market in 1989, the cyclically adjusted price to earnings ratio (CAPE) reached about 90. The highest the U.S. ever got in the dot com bubble was 44. The current 31.90 isn't close at all to its peak, and it's incredibly distant from Japan's peak.

Further, look at what happened demographically to Japan. Their birth rate collapsed, and they basically don't allow immigration. This means that their population has been shrinking for the last 15 years, and it's forecasted to continue doing so for decades to come unless they significantly alter their trajectory.

I feel confident in saying that the likelihood of the U.S. stock market having negative returns for 30+ years like Japan has is remote.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
kolder
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Re: Seriously, what is going on with international?

Post by kolder »

willthrill81 wrote: Wed Oct 14, 2020 9:15 pm
RJC wrote: Wed Oct 14, 2020 9:55 am Is a Japan scenario even possible in the US? and what are the likely chances?
It's absolutely critical to keep in mind that at the peak of the Japanese stock market in 1989, the cyclically adjusted price to earnings ratio (CAPE) reached about 90. The highest the U.S. ever got in the dot com bubble was 44. The current 31.90 isn't close at all to its peak, and it's incredibly distant from Japan's peak.

Further, look at what happened demographically to Japan. Their birth rate collapsed, and they basically don't allow immigration. This means that their population has been shrinking for the last 15 years, and it's forecasted to continue doing so for decades to come unless they significantly alter their trajectory.

I feel confident in saying that the likelihood of the U.S. stock market having negative returns for 30+ years like Japan has is remote.
Things don't have to be the same as what happened to Japan for a stock market to trade sideways for 30 years. Nobody would have have predicted in the 80s that Japan stocks would return nothing for 30+ years. Even after the crash from the peak of 90 CAPE it wasn't clear if Japan stocks were going provide 0 return going forward. The point is the future is unpredictable, an event that would cause the US to trade sideways for 30 years is not something anyone could imagine right now. How likely is it for something that unpredictable to happen? Also impossible to know.
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willthrill81
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Re: Seriously, what is going on with international?

Post by willthrill81 »

kolder wrote: Thu Oct 15, 2020 5:47 pm
willthrill81 wrote: Wed Oct 14, 2020 9:15 pm
RJC wrote: Wed Oct 14, 2020 9:55 am Is a Japan scenario even possible in the US? and what are the likely chances?
It's absolutely critical to keep in mind that at the peak of the Japanese stock market in 1989, the cyclically adjusted price to earnings ratio (CAPE) reached about 90. The highest the U.S. ever got in the dot com bubble was 44. The current 31.90 isn't close at all to its peak, and it's incredibly distant from Japan's peak.

Further, look at what happened demographically to Japan. Their birth rate collapsed, and they basically don't allow immigration. This means that their population has been shrinking for the last 15 years, and it's forecasted to continue doing so for decades to come unless they significantly alter their trajectory.

I feel confident in saying that the likelihood of the U.S. stock market having negative returns for 30+ years like Japan has is remote.
Things don't have to be the same as what happened to Japan for a stock market to trade sideways for 30 years. Nobody would have have predicted in the 80s that Japan stocks would return nothing for 30+ years. Even after the crash from the peak of 90 CAPE it wasn't clear if Japan stocks were going provide 0 return going forward. The point is the future is unpredictable, an event that would cause the US to trade sideways for 30 years is not something anyone could imagine right now. How likely is it for something that unpredictable to happen? Also impossible to know.
I never said that it couldn't happen. But I said that I personally assess the risk to be remote.

Japan has become the poster child for stock markets that plummet and basically don't recover, at least within an investor's needed time frame. But Japan was and is very unique and definitely an outlier.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
000
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Re: Seriously, what is going on with international?

Post by 000 »

When I started investing I went with 20% international per Bogle. Last year based on listening to the "experts" I went to around 40% with plans to possibly increase further. Clearly Bogle was right again. I think I'll go to around 25% and hopefully stay there.

I recently had a realization that the returns of various stock markets are what they are, but I take on more risk investing in a jurisdiction that is less friendly to my shareholder interest than those of the average person investing in that jurisdiction, so the expected risk-adjusted return for me is less. For this reason I have backed out of emerging markets.

Some international diversification is still valuable IMO.
Last edited by 000 on Thu Oct 15, 2020 6:53 pm, edited 1 time in total.
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Re: Seriously, what is going on with international?

Post by Haeysh »

Someone posted a while back about the possibility that international was not the same “haystack” for various reasons, as the US. It really struck a chord with me. Glad I swerved away from the standard target date fund in my 401k that had too much international for my liking! My account currently would be a lot smaller.
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Re: Seriously, what is going on with international?

Post by case_of_ennui »

000 wrote: Thu Oct 15, 2020 6:32 pm When I started investing I went with 20% international per Bogle. Last year based on listening to the "experts" I went to around 40% with plans to possibly increase further. Clearly Bogle was right again. I think I'll go to around 25% and hopefully stay there.
And what would Bogle have said about the multiple changes of heart in allocation percentages? One should stay the course. This is a principle in the wiki.
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Re: Seriously, what is going on with international?

Post by Ed 2 »

Tamalak wrote: Wed Oct 14, 2020 8:51 am Stocks go up stocks go down. The market prices in expectations so the daily change in the market is by definition unexpected. That's how it's supposed to be.

So how is it, when I look at VTI, VXUS is worse almost every day? 8 or 9 times out of 10.

A random walk doesn't act like this. I shouldn't be able to predict the movement of a market with this much accuracy. And it is prediction, I've been saying aloud "how much worse is VXUS?" and behold, it's worse. I shouldn't be able to do that.

Different sectors outperform others over years or even decades, or in spikes over days, but this daily underperformance makes me suspicious.

My worry is not underperformance itself. Diversification means you'll always have a section of your portfolio underperforming. My worry is that international stock prices are being driven by something other than profit-seeking traders. Is there some law that requires european companies to invest in stocks for example? The same way a law that requires investment in bonds lead to negative-yielding bonds that peons like us should never buy? Government regulation can lead to worthless investments, could that be the case here?

Of course, the idea occurs that the reverse could be happening - that international stocks are being driven naturally but domestic stocks are being shoved off the rails by government. Either way would lead to bad mojo when it comes to long term returns. Either way, the consistency of behavior really freaks me out.

International stocks have gone nowhere in 20 years. This is not just one sector or region. This is representing 90% of the entire world's GDP. Has done nothing in 20 years. How is that possible?

Either:

1. Their profits are remaining at least steady, but P/E has gone way down over the time period, or
2. Their profits have managed to go down?? Over 20 years??

I can't find good historical data on international P/E so I don't know which is which
World far not perfect. During time’s of uncertainty handful countries rule the world, one or two. I personally glad that listened Jack Boggle when he recommended to keep only Total stock market Index fund and keep at minimum International. Buffett was saying that for decades. US economy can withstand many problems same time . We are in the middle of the sh.t storm or maybe just not even close than in the middle. It may take years until we will recover what is going on now. Europe and Asia not so well . Here is the simple explanation.
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
000
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Re: Seriously, what is going on with international?

Post by 000 »

case_of_ennui wrote: Thu Oct 15, 2020 6:56 pm
000 wrote: Thu Oct 15, 2020 6:32 pm When I started investing I went with 20% international per Bogle. Last year based on listening to the "experts" I went to around 40% with plans to possibly increase further. Clearly Bogle was right again. I think I'll go to around 25% and hopefully stay there.
And what would Bogle have said about the multiple changes of heart in allocation percentages? One should stay the course. This is a principle in the wiki.
Yes, I should have stayed on my original course instead of listening to the finance theorists who post here.

Anyway, I don't think one should stay the course when one realizes one is on a bad course.

In life and investing, in my opinion it's best not to throw good money after bad. I'd rather accept a loss or failure than persist on a bad course.

YMMV.
muffins14
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Re: Seriously, what is going on with international?

Post by muffins14 »

000 wrote: Thu Oct 15, 2020 7:08 pm
case_of_ennui wrote: Thu Oct 15, 2020 6:56 pm
000 wrote: Thu Oct 15, 2020 6:32 pm When I started investing I went with 20% international per Bogle. Last year based on listening to the "experts" I went to around 40% with plans to possibly increase further. Clearly Bogle was right again. I think I'll go to around 25% and hopefully stay there.
And what would Bogle have said about the multiple changes of heart in allocation percentages? One should stay the course. This is a principle in the wiki.
Yes, I should have stayed on my original course instead of listening to the finance theorists who post here.

Anyway, I don't think one should stay the course when one realizes one is on a bad course.

In life and investing, in my opinion it's best not to throw good money after bad. I'd rather accept a loss or failure than persist on a bad course.

YMMV.
There's no way of knowing you are on a bad course
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Re: Seriously, what is going on with international?

Post by Ed 2 »

000 wrote: Thu Oct 15, 2020 7:08 pm
case_of_ennui wrote: Thu Oct 15, 2020 6:56 pm
000 wrote: Thu Oct 15, 2020 6:32 pm When I started investing I went with 20% international per Bogle. Last year based on listening to the "experts" I went to around 40% with plans to possibly increase further. Clearly Bogle was right again. I think I'll go to around 25% and hopefully stay there.
And what would Bogle have said about the multiple changes of heart in allocation percentages? One should stay the course. This is a principle in the wiki.
Yes, I should have stayed on my original course instead of listening to the finance theorists who post here.

Anyway, I don't think one should stay the course when one realizes one is on a bad course.

In life and investing, in my opinion it's best not to throw good money after bad. I'd rather accept a loss or failure than persist on a bad course.

YMMV.
With my dumb luck I did listen to Jack. I even remember I read on Money Magazine the article where Jack was telling invest in Total Stock Market Index fund and 529 invest in Balanced fund as he does. So I did and still do , around 18% in Total International only both in my Vanguard and Fidelity . Just trying not to outsmart myself)).
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
Chicken Little
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Re: Seriously, what is going on with international?

Post by Chicken Little »

willthrill81 wrote: Wed Oct 14, 2020 9:15 pmFurther, look at what happened demographically to Japan. Their birth rate collapsed, and they basically don't allow immigration. This means that their population has been shrinking for the last 15 years, and it's forecasted to continue doing so for decades to come unless they significantly alter their trajectory.
This is cited all the time, but I'd love to know how this is relevant today.

The most common elements are the notions that more people equals more growth period, and then more active workers can support more retired workers in terms of something like social security.

Setting aside the requirement for never ending population growth to satisfy our beloved economies, how won't Japan be better off once they swallow this demographic bubble? Aren't they ultimately going to rely on increased productivity to fuel growth instead of an increasing population?

So if I turn around and look at the US, we have a growing population, but how many of our people have good jobs? How many of our people in the prime of their working years are unemployed, underemployed, disabled, or unemployable? How many have stopped looking for work and are not even counted as unemployed? How many don't even have a HS degree? How many don't have health insurance? How many don't have any retirement assets at all? How many don't have any real marketable job skills whatsoever? How many don't pay income tax?

For population-driven growth, ideally you need more of the people who will do good jobs, and no more than the minimum amount required to do the bad jobs (with some leeway for the invariable leave-of-absence). The only exception to that is the idea of the "person as the commodity". For example, if health insurance is provided to a person without resources, and they use that to get medical services, there is economic activity. Obviously the question becomes where did the money come from, and what are the ramifications of distributing it.

I'd bet a dollar that Japan will be just fine.

Edit: The crux of it is, how many of the people in the US are underutilized right now? If the answer is "a lot", then how would more people without exceptional skills increase real growth? On the other hand, what if Japan's individual-utilization-efficiency is increasing? Isn't that an offset?
Last edited by Chicken Little on Thu Oct 15, 2020 8:32 pm, edited 14 times in total.
000
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Re: Seriously, what is going on with international?

Post by 000 »

muffins14 wrote: Thu Oct 15, 2020 7:15 pm There's no way of knowing you are on a bad course
Really? We can't distinguish whether day trading options is a bad course, for example? Or are you merely claiming that it's impossible to tell whether one international allocation is a worse course than another?
Trader Joe
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Re: Seriously, what is going on with international?

Post by Trader Joe »

Well, what is going on with international stocks is what was fully expected.

No surprises here - at all.
case_of_ennui
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Re: Seriously, what is going on with international?

Post by case_of_ennui »

000 wrote: Thu Oct 15, 2020 7:08 pm Yes, I should have stayed on my original course instead of listening to the finance theorists who post here.

Anyway, I don't think one should stay the course when one realizes one is on a bad course.

In life and investing, in my opinion it's best not to throw good money after bad. I'd rather accept a loss or failure than persist on a bad course.

You said " I'd rather accept a loss or failure than persist on a bad course." That makes sense, yet does one necessarily know in investing if one is on a bad course? You can know that you have been on a bad course based on the returns of the last however many years, but you don't know what the course looks like going forward. Between the environment, political and geopolitical issues, COVID, effects of things like birth rates on productivity, etc. I don't see how we can attempt to speculate on international vs US with any semblance of accuracy. It seems like in history investments in a company, a sector, or even a country are good investments right up until the point where they aren't anymore.

I also wonder if the behavioral mistakes one can make in an attempt to compensate for what may be a less than ideal initial asset allocation can sometimes actually be more harmful to returns than if the initial suboptimal allocation was just left alone. Consider this quote pulled from the Bogleheads wiki.
Bogleheads adopt a reasonable investment plan and then stay the course.
This says to adopt a reasonable investment plan, it doesn't have to be the optimal one. I think all I can do is shovel money towards retirement and hope for the best. The "nobody knows nothing" mantra around here really resonates with me. FWIW I also have a 25% international allocation
muffins14
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Re: Seriously, what is going on with international?

Post by muffins14 »

000 wrote: Thu Oct 15, 2020 7:26 pm
muffins14 wrote: Thu Oct 15, 2020 7:15 pm There's no way of knowing you are on a bad course
Really? We can't distinguish whether day trading options is a bad course, for example? Or are you merely claiming that it's impossible to tell whether one international allocation is a worse course than another?
That at any snapshot in time, it's not possible to forecast future returns of a portfolio well enough to tell whether one international allocation is worse than another, assuming they are both in the range of 0%-40%
000
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Re: Seriously, what is going on with international?

Post by 000 »

case_of_ennui wrote: Thu Oct 15, 2020 7:46 pm
000 wrote: Thu Oct 15, 2020 7:08 pm Yes, I should have stayed on my original course instead of listening to the finance theorists who post here.

Anyway, I don't think one should stay the course when one realizes one is on a bad course.

In life and investing, in my opinion it's best not to throw good money after bad. I'd rather accept a loss or failure than persist on a bad course.

You said " I'd rather accept a loss or failure than persist on a bad course." That makes sense, yet does one necessarily know in investing if one is on a bad course? You can know that you have been on a bad course based on the returns of the last however many years, but you don't know what the course looks like going forward. Between the environment, political and geopolitical issues, COVID, effects of things like birth rates on productivity, etc. I don't see how we can attempt to speculate on international vs US with any semblance of accuracy. It seems like in history investments in a company, a sector, or even a country are good investments right up until the point where they aren't anymore.

I also wonder if the behavioral mistakes one can make in an attempt to compensate for what may be a less than ideal initial asset allocation can sometimes actually be more harmful to returns than if the initial suboptimal allocation was just left alone. Consider this quote pulled from the Bogleheads wiki.
Bogleheads adopt a reasonable investment plan and then stay the course.
This says to adopt a reasonable investment plan, it doesn't have to be the optimal one. I think all I can do is shovel money towards retirement and hope for the best. The "nobody knows nothing" mantra around here really resonates with me. FWIW I also have a 25% international allocation
I already gave my specific reason and it was not recent returns. I'm not speculating on US vs international, I have come to accept that a modest home bias is rational due to same market pricing versus differing risk based on domicile.
000
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Re: Seriously, what is going on with international?

Post by 000 »

muffins14 wrote: Thu Oct 15, 2020 7:55 pm
000 wrote: Thu Oct 15, 2020 7:26 pm
muffins14 wrote: Thu Oct 15, 2020 7:15 pm There's no way of knowing you are on a bad course
Really? We can't distinguish whether day trading options is a bad course, for example? Or are you merely claiming that it's impossible to tell whether one international allocation is a worse course than another?
That at any snapshot in time, it's not possible to forecast future returns of a portfolio well enough to tell whether one international allocation is worse than another, assuming they are both in the range of 0%-40%
That's oddly specific. So you know that 50% international allocation is a bad course, but can't tell whether or not 40% is?
case_of_ennui
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Re: Seriously, what is going on with international?

Post by case_of_ennui »

000 wrote: Thu Oct 15, 2020 8:05 pm I already gave my specific reason and it was not recent returns. I'm not speculating on US vs international, I have come to accept that a modest home bias is rational due to same market pricing versus differing risk based on domicile.
Apologies I missed that. I appreciate the responses.
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willthrill81
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Re: Seriously, what is going on with international?

Post by willthrill81 »

Chicken Little wrote: Thu Oct 15, 2020 7:20 pm
willthrill81 wrote: Wed Oct 14, 2020 9:15 pmFurther, look at what happened demographically to Japan. Their birth rate collapsed, and they basically don't allow immigration. This means that their population has been shrinking for the last 15 years, and it's forecasted to continue doing so for decades to come unless they significantly alter their trajectory.
This is cited all the time, but I'd love to know how this is relevant today.

The most common elements are the notions that more people equals more growth period, and then more active workers can support more retired workers in terms of something like social security.

Setting aside the requirement for never ending population growth to satisfy our beloved economies, how won't Japan be better off once they swallow this demographic bubble? Aren't they ultimately going to rely on increased productivity to fuel growth instead of an increasing population?

So if I turn around and look at the US, we have a growing population, but how many of our people have good jobs? How many of our people in the prime of their working years are unemployed, underemployed, disabled, or unemployable? How many have stopped looking for work and are not even counted as unemployed? How many don't even have a HS degree? How many don't have health insurance? How many don't have any retirement assets at all? How many don't have any real marketable job skills whatsoever? How many don't pay income tax?

For population-driven growth, ideally you need more of the people who will do good jobs, and no more than the minimum amount required to do the bad jobs (with some leeway for the invariable leave-of-absence). The only exception to that is the idea of the "person as the commodity". For example, if health insurance is provided to a person without resources, and they use that to get medical services, there is economic activity. Obviously the question becomes where did the money come from, and what are the ramifications of distributing it.

I'd bet a dollar that Japan will be just fine.

Edit: The crux of it is, how many of the people in the US are underutilized right now? If the answer is "a lot", then how would more people without exceptional skills increase real growth? On the other hand, what if Japan's individual-utilization-efficiency is increasing? Isn't that an offset?

Would you counsel China to open the spigots?
I'm not a demographic economist, nor did I stay at Holiday Inn Express last night, so I don't know claim to know the answer to all your questions, nor does anything else really know it. But I do know that what you're suggesting (i.e. a nation can increase its GDP with a shrinking population) seems to be very challenging. It's one thing to increase your GDP with a growing population, which can be achieved simply through having more workers and productivity remain flat; another thing to increase GDP with a stable population, which can only be achieved by increasing worker productivity; and yet another thing to increase GDP with a declining population, which requires that worker productivity increase at a faster rate than the population is shrinking.

Some suggest that AI and robotics may help in this regard, and perhaps they're right. But I don't see robotics doing much for a long time. It takes a long time and capital to make millions upon millions of robots that can replace relatively mundane human labor.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
000
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Re: Seriously, what is going on with international?

Post by 000 »

case_of_ennui wrote: Thu Oct 15, 2020 8:23 pm
000 wrote: Thu Oct 15, 2020 8:05 pm I already gave my specific reason and it was not recent returns. I'm not speculating on US vs international, I have come to accept that a modest home bias is rational due to same market pricing versus differing risk based on domicile.
Apologies I missed that. I appreciate the responses.
No need to apologize. Best wishes
UpperNwGuy
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Re: Seriously, what is going on with international?

Post by UpperNwGuy »

case_of_ennui wrote: Thu Oct 15, 2020 6:56 pm
000 wrote: Thu Oct 15, 2020 6:32 pm When I started investing I went with 20% international per Bogle. Last year based on listening to the "experts" I went to around 40% with plans to possibly increase further. Clearly Bogle was right again. I think I'll go to around 25% and hopefully stay there.
And what would Bogle have said about the multiple changes of heart in allocation percentages? One should stay the course. This is a principle in the wiki.
I think Bogle would have approved. He changed his own allocation percentages occasionally.
Chicken Little
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Re: Seriously, what is going on with international?

Post by Chicken Little »

willthrill81 wrote: Thu Oct 15, 2020 8:36 pmI'm not a demographic economist, nor did I stay at Holiday Inn Express last night, so I don't know claim to know the answer to all your questions, nor does anything else really know it. But I do know that what you're suggesting (i.e. a nation can increase its GDP with a shrinking population) seems to be very challenging. It's one thing to increase your GDP with a growing population, which can be achieved simply through having more workers and productivity remain flat; another thing to increase GDP with a stable population, which can only be achieved by increasing worker productivity; and yet another thing to increase GDP with a declining population, which requires that worker productivity increase at a faster rate than the population is shrinking.

Some suggest that AI and robotics may help in this regard, and perhaps they're right. But I don't see robotics doing much for a long time. It takes a long time and capital to make millions upon millions of robots that can replace relatively mundane human labor.
I like all your posts, but this is just regurgitation.

I just explained how the US has a surplus of workers already. How are more workers with nothing to do going to increase GDP? I've already answered that for you, just not in a way you like. In the modern economy, the person is a commodity. That's intentionally cynical, but true. All a person really needs is a temperature to increase GDP in a debt-driven-expansion. If they can't pay for it, there are programs to provide them with varying amounts of food/shelter/clothing/healthcare/education, which is all economic activity. How much of an increase in GDP is there to arrest, convict, sentence, and jail a person who committed a felony?

As far as AI/automation, at least in the US, the projection is to put more people out of work. The first major transformation (the one that we will all see and feel) is drivers. That's all the CDLs, all the rideshares, and all the delivery. What are they all going to do? The idea that en masse they will be retrained to design/manufacture/maintain robots is a fantasy.

The next conversation is UBI, and that's underway worldwide.
Last edited by Chicken Little on Thu Oct 15, 2020 9:26 pm, edited 7 times in total.
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Re: Seriously, what is going on with international?

Post by Impatience »

Prices aren’t a random walk. They are just assumed to be a random walk to make financial math work. It’s close enough. But in the real world it’s not random at all it’s caused by real transactions, buyers and sellers.
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Re: Seriously, what is going on with international?

Post by abuss368 »

Now this is a good thread and I am learning much!

I have been asking this for years!
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Re: Seriously, what is going on with international?

Post by abuss368 »

jebmke wrote: Wed Oct 14, 2020 9:04 am How much of the US performance is dominated by the big tech companies? If you factored that out, how would it compare?
For 35 years of cumulative return?
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Re: Seriously, what is going on with international?

Post by abuss368 »

mrspock wrote: Wed Oct 14, 2020 9:39 am
Valuethinker wrote: Wed Oct 14, 2020 9:20 am
If you strip out the Big 5 all the measures of earnings growth and PEs would look a lot closer - US & non-US.

Since 2009-10 US stocks have been on enormous tear. But I did read something that since 2018 the US index has gone nowhere *ex* the Big 5? And that's a big ex, granted.
Did they strip out the top 5 international as well? For every period of outperformance of the US market? I doubt it. Pretty silly analysis.
I would agree here. Strip out top 5 US but not top 5 international to make a case for international? That really does not tell us anything.
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Re: Seriously, what is going on with international?

Post by abuss368 »

jay22 wrote: Wed Oct 14, 2020 10:15 am I am done with internationals. I have started selling my ex-US equities and aim to reach 0% by year end. 10 years is a long time for the underperformance and I don't want to continue and see my portfolio drag with it. Sure, next year international might start to outperform US, but I'm willing to take my chances.

Looks like this is another W for Bogle!
Excellent strategy and I did the same last year. Jack Bogle and Warren Buffett recommend the two fund portfolio. That portfolio will never be below average.
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Re: Seriously, what is going on with international?

Post by abuss368 »

UpperNwGuy wrote: Wed Oct 14, 2020 10:57 am
Steadfast wrote: Wed Oct 14, 2020 10:54 am I'm just going to leave this here. Again.

Image
Could you post a "growth of $10,000" chart to go with it?
:sharebeer Exactly.

The international debate:
* Japan
* rolling periods charts
* no cumulative charts

There is never anything else to support taking a position.
John C. Bogle: “Simplicity is the master key to financial success."
muffins14
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Re: Seriously, what is going on with international?

Post by muffins14 »

000 wrote: Thu Oct 15, 2020 8:20 pm
muffins14 wrote: Thu Oct 15, 2020 7:55 pm
000 wrote: Thu Oct 15, 2020 7:26 pm
muffins14 wrote: Thu Oct 15, 2020 7:15 pm There's no way of knowing you are on a bad course
Really? We can't distinguish whether day trading options is a bad course, for example? Or are you merely claiming that it's impossible to tell whether one international allocation is a worse course than another?
That at any snapshot in time, it's not possible to forecast future returns of a portfolio well enough to tell whether one international allocation is worse than another, assuming they are both in the range of 0%-40%
That's oddly specific. So you know that 50% international allocation is a bad course, but can't tell whether or not 40% is?
No reason to be so antagonistic. I was just suggesting what might be a reasonable range for one's international allocation. The main point was that no one can predict future portfolio returns well enough in advance to predetermine what a "bad course" might be, given a couple of options that are both in the boglehead mainstream (for example one cannot state that a 60 US / 40 INTL split is, with certainty, a bad course that one should get off of and that 80/20 or 100/0 is clearly going to be better in the future)
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