International (Non-US) versus US Equities (The "Arguments")

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Tamalak
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Tamalak »

CraigTester wrote: Mon May 13, 2024 11:03 am “International stocks are poised to beat the S&P 500 - here's why - Is the long-anticipated resurgence of international stocks finally underway?“ Morningstar

https://www.morningstar.com/news/market ... -heres-why
It's worth asking because, after years in which non-U.S. stocks lagged behind US. equities SPX, they have jumped ahead over the last three months. Since early February, international stocks (as represented by the Vanguard International Total Stock Market ETF VXUS[) have produced a 6.3% annualized return, versus 3.9% for U.S. stocks the Vanguard Total Stock Market ETF VTI. (See accompanying chart.)
No idea what this guy is on about. The price of VTI and VXUS have BOTH gone up about 6.3% since Feb 1. There might be a dividend here or there that add half a percent at best - but no idea where he got the 3.9% figure for VTI (there is no "accompanying chart" on my screen). On top of this, going up 6.3% in 3 months is not an annualized return of 6.3%, it's an annualized return of > 25.2%. This dude made two basic errors in one breath.
Last edited by Tamalak on Mon May 13, 2024 11:55 am, edited 1 time in total.
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TomatoTomahto
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by TomatoTomahto »

watchnerd wrote: Thu May 09, 2024 3:46 pm
We're gonna need to hire a quant.
Thanks for the chuckle. :beer
I get the FI part but not the RE part of FIRE.
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CraigTester
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CraigTester »

Tamalak wrote: Mon May 13, 2024 11:46 am
CraigTester wrote: Mon May 13, 2024 11:03 am “International stocks are poised to beat the S&P 500 - here's why - Is the long-anticipated resurgence of international stocks finally underway?“ Morningstar

https://www.morningstar.com/news/market ... -heres-why
It's worth asking because, after years in which non-U.S. stocks lagged behind US. equities SPX, they have jumped ahead over the last three months. Since early February, international stocks (as represented by the Vanguard International Total Stock Market ETF VXUS[) have produced a 6.3% annualized return, versus 3.9% for U.S. stocks the Vanguard Total Stock Market ETF VTI. (See accompanying chart.)
No idea what this guy is on about. The price of VTI and VXUS have BOTH gone up about 6.3% since Feb 1. There might be a dividend here or there that add half a percent at best - but no idea where he got the 3.9% figure for VTI (there is no "accompanying chart" on my screen). On top of this, going up 6.3% in 3 months is not an annualized return of 6.3%, it's an annualized return of > 25.2%. This dude made two basic errors in one breath.
Yes, we've had several instances on this thread where Morningstar's math skills, were a bit, ehem lacking...

Seems to be a simple case of data-mining to support whatever story they are selling at the time (e.g. last time they were on the other side)

But that aside, their case can be defended that Int'l has pulled a bit ahead over the last few months.... (dependent on exact start/end points)

So with all the caveats aside about just being noise, etc, etc.... it's perhaps still interesting in this thread for two reasons:

1) On a recent Meb Faber post we just discussed, his guest Whitney pointed out that we recently had another $500B of "money printing" after the official end of QE4 in Mar 2022.... So it's interesting to ponder if we're now past this last "sugar high"....

2) Multiple posters on this thread have stated they won't buy Int'l until it starts to Out-perform.... Whereas other posters countered with questions of " by how much and by how long...?"

So will those posters now buy Int'l....?
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HomerJ
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by HomerJ »

CraigTester wrote: Mon May 13, 2024 11:03 am “International stocks are poised to beat the S&P 500 - here's why - Is the long-anticipated resurgence of international stocks finally underway?
Betteridge's law of headlines dictates; “Any headline that ends in a question mark can be answered by the word no.”

But I won't go that far. International stocks may indeed do better going forward than US stocks. No one knows. Not me, not you. Not even this writer above.

Note the phrase "long-anticipated" included in the headline is proof that no one knows. It's a CONFESSION that "we financial writers are wrong all the time".
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CraigTester
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CraigTester »

HomerJ wrote: Mon May 13, 2024 12:45 pm
CraigTester wrote: Mon May 13, 2024 11:03 am “International stocks are poised to beat the S&P 500 - here's why - Is the long-anticipated resurgence of international stocks finally underway?
Betteridge's law of headlines dictates; “Any headline that ends in a question mark can be answered by the word no.”

But I won't go that far. International stocks may indeed do better going forward than US stocks. No one knows. Not me, not you. Not even this writer above.

Note the phrase "long-anticipated" included in the headline is proof that no one knows. It's a CONFESSION that "we financial writers are wrong all the time".
Since no-one knows, I assume you have adopted a neutral Global Market Cap allocation....?

P.S. Plenty of articles with headlines like, "Can the US continue to Out-perform?" By your logic, can the question be answered by the word "no"...?
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by rockstar »

So when is the dollar index going to weaken? The last time we saw international outperform the dollar index tanked.

There is a definitely an argument for valuation difference. This could be mostly sector driven. LVMH on its own did very well.
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HomerJ
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by HomerJ »

CraigTester... the problem is that you haven't internalized that economics is not a hard science. You were very good at your job, so you expect professionals in other jobs to be just as good. You think if you put in the study and the hard work, like other professions, it will pay off and you can become an expert investor.

Look at all the TV channels, and magazines, and websites, and financial institutions full of "experts" who have PhDs and have studied this field their entire lives. It MUST be a profession like all others, right?

But economics doesn't work like that. It IS a profession. A profession for making money. But NOT for making accurate predictions.

Shiller said this in 2014...
'One thing I've noticed about history, you can search on newspapers going back hundreds of years, search for "economic forecast", you don't find it. It would be very rare to find it,' he says.

'Why didn't newspapers publish economic forecasts? Well, I think that maybe they had the right attitude. Forecast sounds scientific, right? They used to think "well, it's a matter of opinion, you know". And they didn't tabulate the mean opinion of analysts because they would think, I'm guessing, "what's the point of that, they don't know, it's just opinions".'

Shiller also suggests that misplaced faith in 'economic science' could be one of the reasons we stumbled into the financial crisis.

'I think part of the reason we got into this crisis is that we had an impression that economic science was more of a science than it really is and there was a sense that central banks had learned how to stabilize everything.'
That is Shiller of Shiller CAPE saying that. Even he thinks "Nobody knows".
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CraigTester
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CraigTester »

HomerJ wrote: Mon May 13, 2024 12:59 pm CraigTester... the problem is that you haven't internalized that economics is not a hard science. You were very good at your job, so you expect professionals in other jobs to be just as good. You think if you put in the study and the hard work, like other professions, it will pay off and you can become an expert investor.

Look at all the TV channels, and magazines, and websites, and financial institutions full of "experts" who have PhDs and have studied this field their entire lives. It MUST be a profession like all others, right?

But economics doesn't work like that.

Shiller said this in 2014...
'One thing I've noticed about history, you can search on newspapers going back hundreds of years, search for "economic forecast", you don't find it. It would be very rare to find it,' he says.

'Why didn't newspapers publish economic forecasts? Well, I think that maybe they had the right attitude. Forecast sounds scientific, right? They used to think "well, it's a matter of opinion, you know". And they didn't tabulate the mean opinion of analysts because they would think, I'm guessing, "what's the point of that, they don't know, it's just opinions".'

Shiller also suggests that misplaced faith in 'economic science' could be one of the reasons we stumbled into the financial crisis.

'I think part of the reason we got into this crisis is that we had an impression that economic science was more of a science than it really is and there was a sense that central banks had learned how to stabilize everything.'
That is Shiller of Shiller CAPE saying that. Even he thinks "Nobody knows".
So isn't the only logical conclusion to adopt a "neutral" allocation...?
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CraigTester »

rockstar wrote: Mon May 13, 2024 12:58 pm So when is the dollar index going to weaken? The last time we saw international outperform the dollar index tanked.

There is a definitely an argument for valuation difference. This could be mostly sector driven. LVMH on its own did very well.
I think its safe to say that timing currency moves is quite difficult....

However, perhaps long-term investors should ask a different question:

Can the dollar stay at this historically high level forever ..... ? (e.g. Is this time different?)
Tamalak
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Tamalak »

CraigTester wrote: Mon May 13, 2024 1:21 pm
rockstar wrote: Mon May 13, 2024 12:58 pm So when is the dollar index going to weaken? The last time we saw international outperform the dollar index tanked.

There is a definitely an argument for valuation difference. This could be mostly sector driven. LVMH on its own did very well.
I think its safe to say that timing currency moves is quite difficult....

However, perhaps long-term investors should ask a different question:

Can the dollar stay at this historically high level forever ..... ? (e.g. Is this time different?)
That's my question too - when I look at DXY long term, it hovers between 80 and 120.

Are those "reasonable bounds", and the expectation is that it will likely hover in that range in the long run?

Or is there some dynamic that can start up that will make it rise or fall in the long run?

If DXY is expected to bounce between 80 and 120 I'm fine with that level of currency volatility.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by HanSolo »

CraigTester wrote: Mon May 13, 2024 11:03 am “International stocks are poised to beat the S&P 500 - here's why - Is the long-anticipated resurgence of international stocks finally underway?“ Morningstar

https://www.morningstar.com/news/market ... -heres-why
Due to the above, we need a new bullet point under "Global Market Cappers":

* Some global-market-cappers cite predictions proclaiming that "International stocks are poised to beat the S&P 500".

Otherwise, the list isn't complete!
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CraigTester »

HanSolo wrote: Mon May 13, 2024 4:30 pm
CraigTester wrote: Mon May 13, 2024 11:03 am “International stocks are poised to beat the S&P 500 - here's why - Is the long-anticipated resurgence of international stocks finally underway?“ Morningstar

https://www.morningstar.com/news/market ... -heres-why
Due to the above, we need a new bullet point under "Global Market Cappers":

* Some global-market-cappers cite predictions proclaiming that "International stocks are poised to beat the S&P 500".

Otherwise, the list isn't complete!
As I've already "confessed", if I was going to tilt at this point, it would be toward Int'l....

The Arguments (partially copied below) are pretty compelling.... And the end of whatever QE did to distort results has me watching very closely ....

But what's stopped me from switching so far is the assumption that it's already all priced in...for now..., So why not just enjoy the free lunch that balanced diversification uniquely provides .....


60% Int’l. "Buy low, Sell High".
  • Valuation differences are too good to pass up
  • Reversion to the mean always happens eventually (e.g. currency, valuation, opinion)
  • US is at 60% global market cap already - Trees don’t grow to the sky.
  • Int'l includes a very long list of world class companies - Someday this will again become obvious
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Beensabu »

CraigTester wrote: Mon May 13, 2024 9:14 pm As I've already "confessed", if I was going to tilt at this point, it would be toward Int'l....
You can't cite randos with articles originating on MarketWatch that have 3-month total return numbers that don't make sense and a non-existent accompanying chart.

I've been wrong today. It's okay. Just... higher bar for links maybe.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CraigTester »

Beensabu wrote: Mon May 13, 2024 9:25 pm
CraigTester wrote: Mon May 13, 2024 9:14 pm As I've already "confessed", if I was going to tilt at this point, it would be toward Int'l....
You can't cite randos with articles originating on MarketWatch that have 3-month total return numbers that don't make sense and a non-existent accompanying chart.

I've been wrong today. It's okay. Just... higher bar for links maybe.
That's kind of fair....

Except as discussed above, earlier in the thread there was quite a debate between Morningstar's 10 year historical analysis versus VanGuard, where MS used some very sketchy "analysis" to arrive at a different conclusion than VG, so it seemed relevant to include today's new MS article...

Also as discussed, the article provided a bit of a heads up about the recent switch for those who have previously stated they would buy Int'l once Int'l started to out-perform.... Which raises the interesting question of how they define "Int'l starting to out-perform"...?
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HanSolo
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by HanSolo »

CraigTester wrote: Mon May 13, 2024 9:14 pm As I've already "confessed", if I was going to tilt at this point, it would be toward Int'l....
Yes, "if". But you're not. What we know is:

- You're a global-market-capper.
- You cited a prediction proclaiming that "International stocks are poised to beat the S&P 500".
- Other global-market-cappers have used similar assertions in support of global-market-cap.

The above disproves the oft-cited canard that "global-market-cappers don't indulge in beliefs about future outperformance".

Therefore, regardless of whether or not we add a bullet point, the following remains a fact:
HanSolo wrote: Mon May 13, 2024 4:30 pm * Some global-market-cappers cite predictions proclaiming that "International stocks are poised to beat the S&P 500".
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by unwitting_gulag »

CraigTester wrote: Mon May 13, 2024 1:04 pm So isn't the only logical conclusion to adopt a "neutral" allocation...?
Not quite.

Suppose that we're tossing a weighted coin. We have reason to believe - but aren't sure! - that the coin is indeed weighted, say 60/40 in favor of heads. It would be foolish to wager everything, on the next toss coming up heads, even though the odds favor heads. But it would also be foolish to assume 50:50 odds. Most reasonable would be tilting towards heads... maybe 60/40, maybe something else... but something.

So, we might "know nothing" in the sense of not asserting any clairvoyance or factual predictive power. But this doesn't mean that we're completely agnostic about likely outcomes. We acknowledge that no individual happening is itself predictable. We don't acknowledge that the overall trend is completely opaque or random.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by HanSolo »

CraigTester wrote: Mon May 13, 2024 1:04 pm So isn't the only logical conclusion to adopt a "neutral" allocation...?
The answer to your question was previously delivered upthread (and for reasons exhaustively given already):
SB1234 wrote: Tue Apr 30, 2024 12:08 am Sure. holding at global cap can be a fine choice for someone. But I do maintain that holding at global cap has not been unambiguously or indisputably established as the best/chosen/favored alternative for everyone. it is just one of the allocations within a spectrum of allocations that can be appropriate.
Thanks for asking.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CraigTester »

unwitting_gulag wrote: Mon May 13, 2024 10:30 pm
CraigTester wrote: Mon May 13, 2024 1:04 pm So isn't the only logical conclusion to adopt a "neutral" allocation...?
Not quite.

Suppose that we're tossing a weighted coin. We have reason to believe - but aren't sure! - that the coin is indeed weighted, say 60/40 in favor of heads. It would be foolish to wager everything, on the next toss coming up heads, even though the odds favor heads. But it would also be foolish to assume 50:50 odds. Most reasonable would be tilting towards heads... maybe 60/40, maybe something else... but something.

So, we might "know nothing" in the sense of not asserting any clairvoyance or factual predictive power. But this doesn't mean that we're completely agnostic about likely outcomes. We acknowledge that no individual happening is itself predictable. We don't acknowledge that the overall trend is completely opaque or random.
Is your above coin weighted toward US or Int'l....? ... and how do you know? ... and why doesn't everyone else also know ...? and if everyone else knows, then surely this thing we all know must be priced in.... you know.

So once again, isn't the only logical conclusion to adopt a "neutral" allocation...where we get the free lunch of diversified risk...?
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by HanSolo »

CraigTester wrote: Mon May 13, 2024 11:01 pm So once again, isn't the only logical conclusion to adopt a "neutral" allocation...where we get the free lunch of diversified risk...?
So once again, here's the answer:
SB1234 wrote: Tue Apr 30, 2024 12:08 am Sure. holding at global cap can be a fine choice for someone. But I do maintain that holding at global cap has not been unambiguously or indisputably established as the best/chosen/favored alternative for everyone. it is just one of the allocations within a spectrum of allocations that can be appropriate.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CraigTester »

There's an interesting table (equity returns for various countries by decade) in the attached link from Ben Carlson

https://awealthofcommonsense.com/2024/0 ... t-decades/
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by BizarroJerry »

I agree with Han. This thread was started, not with the neutral notion that holding global market cap makes sense due to nobody knowing nothing, but instead established from the jump with the slant that exUS is sure to outperform US moving forward due to how well US has done recently, and how going global market cap (or even overweight intl) will yield greater returns going forward. That notion is something we cannot know or predict, and is not a sufficient answer for holding exUS the same way “number always go up” is not a sufficient answer for holding 100% US.

If we were to instead say what we have learned from this thread objectively, that over the long term US and exUS have basically the same returns, and that holding global market cap is not a way to increase returns but a way to make sure you do not run out of money during decumulation if either exUS or US is the outperformer for that decade. During accumulation, I think this matters less. I think if you take 3 investors, one 100% US, one 100% exUS and one 60/40 US/exUS, over 30-40 years, if they never look at the account and DCA, they will all do well and the difference will likely be negligible at best. Now, once one is drawing in retirement, it may make sense for the 100% US investor and the 100% exUS investor to diversify with one or the other to prevent risk of running out of money in case of a crash in US or exUS. Now, from what I have seen, crashes in the US have also made exUS drop a lot. So, these things are not inversely correlated at all. But, it could still help I suppose.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Da5id »

BizarroJerry wrote: Tue May 14, 2024 11:22 am II think if you take 3 investors, one 100% US, one 100% exUS and one 60/40 US/exUS, over 30-40 years, if they never look at the account and DCA, they will all do well and the difference will likely be negligible at best.
I think this is incorrect. I think you can't predict which will do better. But likely negligible? No, it is very sensitive to start date whether it is negligible or not, I expect for a given start date for them to be widely different. e.g. starting 30 years ago today with $10K and adding $5K/year (for your DCA scenario) gives https://www.portfoliovisualizer.com/bac ... IuBjNiGLtE. 100% exUS is about 40% of the value of 100% US at the end of the 30 year period. Not negligible, actually pretty material. Different start dates would give different outcomes of course, and all recently ending periods presumably favor US.

I think the best argument for me to have some exUS is that I can't meaningfully project the future returns of either asset class and thus prefer to diversify in the face of that uncertainty. Can't say I care that much what others do though.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by watchnerd »

BizarroJerry wrote: Tue May 14, 2024 11:22 am holding global market cap is not a way to increase returns
Global market cap is never a way to increase returns as it's always a blend of the best and the worst.

So right up the middle.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by greedygus »

CraigTester wrote: Mon May 13, 2024 12:41 pm 2) Multiple posters on this thread have stated they won't buy Int'l until it starts to Out-perform.... Whereas other posters countered with questions of " by how much and by how long...?"

So will those posters now buy Int'l....?
I'm vaguely watching for a 'japan in the '70s & '80s' kind of situation. So a multi-year to multi-decade flocking to the companies in another country's stock market, with a fundamental narrative explanation available which makes some sense. Otherwise I'll stick with the US entirely for now, which has the growth and narrative that makes sense to me. A few months of international starting to catch up to US's YTD gains doesn't move the needle. I'm perpetually willing to be late getting in or getting out of big shifts like that on the country level, a stance which I think is going to be better in the longterm. I'm happy to jump into inflating bubbles and go with the momentum. I understand that other peoples' psychology is the reverse of that, where they never want to be late getting out or getting in.

On the country level, it just doesn't seem to have anything like the dynamic of the company level (where if you are trying to pick individual companies, missing the few winners can cause you to miss most of the total market gains). For example if just investing in the US stock market caused me to kick myself that I missed all the gains which ended up coming from India total market 2 years ago and Switzerland total market last year, that would be a different story.

And as long as I continue to see tons of market pessimism, and see plenty of people who are in my opinion under various confusions like that government debt is a negative thing or that QE is printing money which was driving the stock market, then I'm not too worried about the US being overpriced or even being correctly fully priced in. I do have sympathy for these confusions and their resulting cognitive dissonance experienced ('the US can't keep getting away with this, it's surely about to end!'). And I find it totally understandable that many people buy total world market cap to never have to even vaguely watch for country trends or have the hubris to think they know something about macro (which we can all be wrong about).
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by watchnerd »

Rather than just ex-US into one big blob, I like that this tables breaks things out by country.

Image
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Gaston »

watchnerd wrote: Tue May 14, 2024 2:17 pm Image
Nice chart. Do you happen to know whether the percent returns depict US dollar or local currrency returns?
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by watchnerd »

Gaston wrote: Tue May 14, 2024 3:51 pm
watchnerd wrote: Tue May 14, 2024 2:17 pm Image
Nice chart. Do you happen to know whether the percent returns depict US dollar or local currrency returns?
I don't -- I assumed it was USD
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by HomerJ »

watchnerd wrote: Tue May 14, 2024 4:23 pm
Gaston wrote: Tue May 14, 2024 3:51 pm
watchnerd wrote: Tue May 14, 2024 2:17 pm Image
Nice chart. Do you happen to know whether the percent returns depict US dollar or local currrency returns?
I don't -- I assumed it was USD
Problem is, none of us invest in JUST Japan or Sweden (or Canada or Spain), so we really need to see the full International numbers.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by unwitting_gulag »

CraigTester wrote: Mon May 13, 2024 11:01 pm
unwitting_gulag wrote: Mon May 13, 2024 10:30 pm
CraigTester wrote: Mon May 13, 2024 1:04 pm So isn't the only logical conclusion to adopt a "neutral" allocation...?
Not quite.ion

Suppose that we're tossing a weighted coin. We have reason to believe - but aren't sure! - that the coin is indeed weighted, say 60/40 in favor of heads. It would be foolish to wager everything, on the next toss coming up heads, even though the odds favor heads. But it would also be foolish to assume 50:50 odds. Most reasonable would be tilting towards heads... maybe 60/40, maybe something else... but something.

So, we might "know nothing" in the sense of not asserting any clairvoyance or factual predictive power. But this doesn't mean that we're completely agnostic about likely outcomes. We acknowledge that no individual happening is itself predictable. We don't acknowledge that the overall trend is completely opaque or random.
Is your above coin weighted toward US or Int'l....? ... and how do you know? ... and why doesn't everyone else also know ...? and if everyone else knows, then surely this thing we all know must be priced in.... you know.

So once again, isn't the only logical conclusion to adopt a "neutral" allocation...where we get the free lunch of diversified risk...?
If we believe that nothing is knowable and all markets are efficient, then we should be allocating at market-weight across all addressable markets. That means stocks and bonds, real estate and private equity. It means that our stock to bond ratio should follow the total capitalization of the stock market and the bond market. Complete ignorance means complete agnosticism.

But even if we disclaim any specific predictive power, we can be reasonably sure that for example stocks will outperform bonds, over the "long term". This is far from certain, but it is reasonable. And so, we do a stock:bond allocation according to risk tolerance, investment horizon, eventual withdrawal needs and so on. It becomes more of a personal calculation than a market calculation. After all, if we knew that bonds would outperform stocks in 2000-2009, we should sell stocks in 2000 and pile into bonds, regardless of our personal situation

I don't believe that the market is fully efficient, that everything is fully priced in, or that it's fully priced-in correctly. There are too many anomalies and dislocations to have sustained such belief. I observe the coin toss coming up heads over and over again. Sure, that could be just chance, but the probability is higher, that it's a weighted coin. I can not prove this without weighing the coin, but it wouldn't be silly and petulant bias to claim, from observation, that the coin is weighted.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by SB1234 »

unwitting_gulag wrote: Tue May 14, 2024 7:48 pm If we believe that nothing is knowable and all markets are efficient, then we should be allocating at market-weight across all addressable markets. That means stocks and bonds, real estate and private equity.
I don't think the above claim is true. I think we can all agree that different markets will have different risks, eg certain assets such as derivatives or exotic currencies will be much more risky than certain other ones. Depending on the persons risk preference they may not be willing to allocate to riskier assets even if accepting that markets are totally efficient.
So prima-facie the above claim is false.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by unwitting_gulag »

SB1234 wrote: Tue May 14, 2024 8:05 pm
unwitting_gulag wrote: Tue May 14, 2024 7:48 pm If we believe that nothing is knowable and all markets are efficient, then we should be allocating at market-weight across all addressable markets. That means stocks and bonds, real estate and private equity.
I don't think the above claim is true. I think we can all agree that different markets will have different risks, eg certain assets such as derivatives or exotic currencies will be much more risky than certain other ones. Depending on the persons risk preference they may not be willing to allocate to riskier assets even if accepting that markets are totally efficient.
So prima-facie the above claim is false.
If I know nothing, than I have no knowledge of what is or isn't riskier. I can have a risk preference, but have no means of acting on it. It could not be ruled out, that next Tuesday at 3:37 pm East Coast time, every single nickel would be pulled out of the US stock market and put into commercial real estate. Is that silly? Not if we have identically zero knowledge! We then lack basis to distinguish between silly and serious.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by SB1234 »

unwitting_gulag wrote: Tue May 14, 2024 8:10 pm
SB1234 wrote: Tue May 14, 2024 8:05 pm
unwitting_gulag wrote: Tue May 14, 2024 7:48 pm If we believe that nothing is knowable and all markets are efficient, then we should be allocating at market-weight across all addressable markets. That means stocks and bonds, real estate and private equity.
I don't think the above claim is true. I think we can all agree that different markets will have different risks, eg certain assets such as derivatives or exotic currencies will be much more risky than certain other ones. Depending on the persons risk preference they may not be willing to allocate to riskier assets even if accepting that markets are totally efficient.
So prima-facie the above claim is false.
If I know nothing, than I have no knowledge of what is or isn't riskier. I can have a risk preference, but have no means of acting on it. It could not be ruled out, that next Tuesday at 3:37 pm East Coast time, every single nickel would be pulled out of the US stock market and put into commercial real estate. Is that silly? Not if we have identically zero knowledge! We then lack basis to distinguish between silly and serious.
You have some knowledge. You have knowledge about the inherent riskiness of the asset (at least by the conventional measure of risk). So you can certainly use that information to decide on your allocation decision.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by HanSolo »

unwitting_gulag wrote: Tue May 14, 2024 7:48 pm If we believe that nothing is knowable and all markets are efficient, then we should be allocating at market-weight across all addressable markets.
unwitting_gulag wrote: Tue May 14, 2024 8:10 pm If I know nothing, than I have no knowledge of what is or isn't riskier.
Speaking of risk... at the risk of possibly violating a "should"... there's a certain "addressable market" I can think of that I decline to participate in (i.e., the unmentionable asset)... oh, the rebel that I am...
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CraigTester »

unwitting_gulag wrote: Tue May 14, 2024 7:48 pm
CraigTester wrote: Mon May 13, 2024 11:01 pm
unwitting_gulag wrote: Mon May 13, 2024 10:30 pm
CraigTester wrote: Mon May 13, 2024 1:04 pm So isn't the only logical conclusion to adopt a "neutral" allocation...?
Not quite.ion

Suppose that we're tossing a weighted coin. We have reason to believe - but aren't sure! - that the coin is indeed weighted, say 60/40 in favor of heads. It would be foolish to wager everything, on the next toss coming up heads, even though the odds favor heads. But it would also be foolish to assume 50:50 odds. Most reasonable would be tilting towards heads... maybe 60/40, maybe something else... but something.

So, we might "know nothing" in the sense of not asserting any clairvoyance or factual predictive power. But this doesn't mean that we're completely agnostic about likely outcomes. We acknowledge that no individual happening is itself predictable. We don't acknowledge that the overall trend is completely opaque or random.
Is your above coin weighted toward US or Int'l....? ... and how do you know? ... and why doesn't everyone else also know ...? and if everyone else knows, then surely this thing we all know must be priced in.... you know.

So once again, isn't the only logical conclusion to adopt a "neutral" allocation...where we get the free lunch of diversified risk...?
If we believe that nothing is knowable and all markets are efficient, then we should be allocating at market-weight across all addressable markets. That means stocks and bonds, real estate and private equity. It means that our stock to bond ratio should follow the total capitalization of the stock market and the bond market. Complete ignorance means complete agnosticism.

But even if we disclaim any specific predictive power, we can be reasonably sure that for example stocks will outperform bonds, over the "long term". This is far from certain, but it is reasonable. And so, we do a stock:bond allocation according to risk tolerance, investment horizon, eventual withdrawal needs and so on. It becomes more of a personal calculation than a market calculation. After all, if we knew that bonds would outperform stocks in 2000-2009, we should sell stocks in 2000 and pile into bonds, regardless of our personal situation

I don't believe that the market is fully efficient, that everything is fully priced in, or that it's fully priced-in correctly. There are too many anomalies and dislocations to have sustained such belief. I observe the coin toss coming up heads over and over again. Sure, that could be just chance, but the probability is higher, that it's a weighted coin. I can not prove this without weighing the coin, but it wouldn't be silly and petulant bias to claim, from observation, that the coin is weighted.
What if the coin had a higher frequency of heads from 2008 to 2022 because of a temporary thumb on the scale like say, QE....?

But now the thumb has been removed (maybe?).

So after the fact, we can now explain why heads defied probability during this time period, yet this still tells us nothing about the next toss...

So once again, if the above is true, aren't we back to the only logical conclusion being to adopt a "neutral" allocation...where we get the free lunch of diversified risk...?
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by HanSolo »

CraigTester wrote: Tue May 14, 2024 9:15 pm So after the fact, we can now explain why heads defied probability during this time period, yet this still tells us nothing about the next toss...

So once again, if the above is true, aren't we back to the only logical conclusion being to adopt a "neutral" allocation...where we get the free lunch of diversified risk...?
I'll reference SB1234 again, whose last 2 posts adequately addressed the issue.

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Re: International (Non-US) versus US Equities (The "Arguments")

Post by watchnerd »

unwitting_gulag wrote: Tue May 14, 2024 7:48 pm If we believe that nothing is knowable and all markets are efficient, then we should be allocating at market-weight across all addressable markets. That means stocks and bonds, real estate and private equity. It means that our stock to bond ratio should follow the total capitalization of the stock market and the bond market. Complete ignorance means complete agnosticism.
Some of us do so.

With caveats around what qualifies as publicly available and investable.

See the threads around the Sharpe portfolio.

The bond allocation in my risk portfolio, along with other assets, is set by market cap for the designated assets vs stocks.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Soobs »

As I've been learning as I go over the past 20 years of my career (now in my 40s) my total equity AA has always been total US / total EX-US at market weight. Had I gone 100% total US or S&P 500 I would have done much better to present. That can be a tough pill to swallow...

...And so this is why I keep ending up reading these US vs EX-US threads. Blackrock, Vanguard, Schwab, and Fidelity all recommend international. I continue to stay the course with global market weight diversification but I have to say if I was a single guy and had the risk tolerance I'd probably go 100% total US in my equity AA. This is not due to past performance, but because I believe the US is the holy grail of capitalism and in the long run will continue to be where the highest number of best performing companies park. So if I feel this is the case why do I continue invest in international? Because my "feeling" is nothing more than a casino bet albeit one that has worked out for countless people; however, I'm not sure I have the tolerance to be wrong. So, middle of the road it is for me. If by some miracle a global portfolio outperforms total US over the long run I'll be one happy camper, but I think if everyone is being honest with themselves it is reasonable to assume this is not likely.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Nathan Drake »

Soobs wrote: Fri May 17, 2024 9:58 am As I've been learning as I go over the past 20 years of my career (now in my 40s) my total equity AA has always been total US / total EX-US at market weight. Had I gone 100% total US or S&P 500 I would have done much better to present. That can be a tough pill to swallow...

...And so this is why I keep ending up reading these US vs EX-US threads. Blackrock, Vanguard, Schwab, and Fidelity all recommend international. I continue to stay the course with global market weight diversification but I have to say if I was a single guy and had the risk tolerance I'd probably go 100% total US in my equity AA. This is not due to past performance, but because I believe the US is the holy grail of capitalism and in the long run will continue to be where the highest number of best performing companies park. So if I feel this is the case why do I continue invest in international? Because my "feeling" is nothing more than a casino bet albeit one that has worked out for countless people; however, I'm not sure I have the tolerance to be wrong. So, middle of the road it is for me. If by some miracle a global portfolio outperforms total US over the long run I'll be one happy camper, but I think if everyone is being honest with themselves it is reasonable to assume this is not likely.
That holy grail of capitalism couldn’t outperform
Europe for nearly 70 years starting in 1950

So, like many narratives, closer inspection reveals they’re simply not true.

It’s not good enough to be the “holy grail” of capitalism, that gets priced in even if it were true. You need to be holier than anyone else thought you were.

I think your argument does stem from recency. You likely wouldn’t make that comment had exUS performed like US the last decade
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Soobs »

Nathan Drake wrote: Fri May 17, 2024 11:54 pm
Soobs wrote: Fri May 17, 2024 9:58 am As I've been learning as I go over the past 20 years of my career (now in my 40s) my total equity AA has always been total US / total EX-US at market weight. Had I gone 100% total US or S&P 500 I would have done much better to present. That can be a tough pill to swallow...

...And so this is why I keep ending up reading these US vs EX-US threads. Blackrock, Vanguard, Schwab, and Fidelity all recommend international. I continue to stay the course with global market weight diversification but I have to say if I was a single guy and had the risk tolerance I'd probably go 100% total US in my equity AA. This is not due to past performance, but because I believe the US is the holy grail of capitalism and in the long run will continue to be where the highest number of best performing companies park. So if I feel this is the case why do I continue invest in international? Because my "feeling" is nothing more than a casino bet albeit one that has worked out for countless people; however, I'm not sure I have the tolerance to be wrong. So, middle of the road it is for me. If by some miracle a global portfolio outperforms total US over the long run I'll be one happy camper, but I think if everyone is being honest with themselves it is reasonable to assume this is not likely.
That holy grail of capitalism couldn’t outperform
Europe for nearly 70 years starting in 1950

So, like many narratives, closer inspection reveals they’re simply not true.

It’s not good enough to be the “holy grail” of capitalism, that gets priced in even if it were true. You need to be holier than anyone else thought you were.

I think your argument does stem from recency. You likely wouldn’t make that comment had exUS performed like US the last decade
The reality is markets go to where the liquidity is and liquidity goes to where the money is and right now and since 2008 the US has been where you want to be and literally nowhere else. I can’t see the future which is why I’m still continuing at market weight in international, but if I was a betting man I’d bet US knocks the socks off of ex-us for a long time to come. I don’t think this because of recency, but from the factors that caused US investments to climb are still very much in play today. Had exUS performed like US over the past decade and still had all the variables to continue supporting it then sure, I’d bet on that. I have to say though it’s also recency bias to look at blips where ex-US did well and use that for your reason to market weight ex-US. I do it because it’s middle of the road and spreads risk. I don’t expect it’ll be a top performer portfolio, but it’ll be enough.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Nathan Drake »

Soobs wrote: Sat May 18, 2024 5:36 am
Nathan Drake wrote: Fri May 17, 2024 11:54 pm
Soobs wrote: Fri May 17, 2024 9:58 am As I've been learning as I go over the past 20 years of my career (now in my 40s) my total equity AA has always been total US / total EX-US at market weight. Had I gone 100% total US or S&P 500 I would have done much better to present. That can be a tough pill to swallow...

...And so this is why I keep ending up reading these US vs EX-US threads. Blackrock, Vanguard, Schwab, and Fidelity all recommend international. I continue to stay the course with global market weight diversification but I have to say if I was a single guy and had the risk tolerance I'd probably go 100% total US in my equity AA. This is not due to past performance, but because I believe the US is the holy grail of capitalism and in the long run will continue to be where the highest number of best performing companies park. So if I feel this is the case why do I continue invest in international? Because my "feeling" is nothing more than a casino bet albeit one that has worked out for countless people; however, I'm not sure I have the tolerance to be wrong. So, middle of the road it is for me. If by some miracle a global portfolio outperforms total US over the long run I'll be one happy camper, but I think if everyone is being honest with themselves it is reasonable to assume this is not likely.
That holy grail of capitalism couldn’t outperform
Europe for nearly 70 years starting in 1950

So, like many narratives, closer inspection reveals they’re simply not true.

It’s not good enough to be the “holy grail” of capitalism, that gets priced in even if it were true. You need to be holier than anyone else thought you were.

I think your argument does stem from recency. You likely wouldn’t make that comment had exUS performed like US the last decade
The reality is markets go to where the liquidity is and liquidity goes to where the money is and right now and since 2008 the US has been where you want to be and literally nowhere else. I can’t see the future which is why I’m still continuing at market weight in international, but if I was a betting man I’d bet US knocks the socks off of ex-us for a long time to come. I don’t think this because of recency, but from the factors that caused US investments to climb are still very much in play today. Had exUS performed like US over the past decade and still had all the variables to continue supporting it then sure, I’d bet on that. I have to say though it’s also recency bias to look at blips where ex-US did well and use that for your reason to market weight ex-US. I do it because it’s middle of the road and spreads risk. I don’t expect it’ll be a top performer portfolio, but it’ll be enough.
The reasons are largely change in valuation and currency.

You expect dollar and valuation to continue causing outperformance? That’s pure speculation
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Soobs »

Nathan Drake wrote: Sat May 18, 2024 10:15 am
Soobs wrote: Sat May 18, 2024 5:36 am
Nathan Drake wrote: Fri May 17, 2024 11:54 pm
Soobs wrote: Fri May 17, 2024 9:58 am As I've been learning as I go over the past 20 years of my career (now in my 40s) my total equity AA has always been total US / total EX-US at market weight. Had I gone 100% total US or S&P 500 I would have done much better to present. That can be a tough pill to swallow...

...And so this is why I keep ending up reading these US vs EX-US threads. Blackrock, Vanguard, Schwab, and Fidelity all recommend international. I continue to stay the course with global market weight diversification but I have to say if I was a single guy and had the risk tolerance I'd probably go 100% total US in my equity AA. This is not due to past performance, but because I believe the US is the holy grail of capitalism and in the long run will continue to be where the highest number of best performing companies park. So if I feel this is the case why do I continue invest in international? Because my "feeling" is nothing more than a casino bet albeit one that has worked out for countless people; however, I'm not sure I have the tolerance to be wrong. So, middle of the road it is for me. If by some miracle a global portfolio outperforms total US over the long run I'll be one happy camper, but I think if everyone is being honest with themselves it is reasonable to assume this is not likely.
That holy grail of capitalism couldn’t outperform
Europe for nearly 70 years starting in 1950

So, like many narratives, closer inspection reveals they’re simply not true.

It’s not good enough to be the “holy grail” of capitalism, that gets priced in even if it were true. You need to be holier than anyone else thought you were.

I think your argument does stem from recency. You likely wouldn’t make that comment had exUS performed like US the last decade
The reality is markets go to where the liquidity is and liquidity goes to where the money is and right now and since 2008 the US has been where you want to be and literally nowhere else. I can’t see the future which is why I’m still continuing at market weight in international, but if I was a betting man I’d bet US knocks the socks off of ex-us for a long time to come. I don’t think this because of recency, but from the factors that caused US investments to climb are still very much in play today. Had exUS performed like US over the past decade and still had all the variables to continue supporting it then sure, I’d bet on that. I have to say though it’s also recency bias to look at blips where ex-US did well and use that for your reason to market weight ex-US. I do it because it’s middle of the road and spreads risk. I don’t expect it’ll be a top performer portfolio, but it’ll be enough.
The reasons are largely change in valuation and currency.

You expect dollar and valuation to continue causing outperformance? That’s pure speculation

I think for quite a long time Europe is screwed, asia is a mixed bag, and everywhere else has massive currency issues. Will the ex-US get its affairs in order and eventually boom? Sure, but when is also speculative. And yes I’m speculating which I’ve stated twice now by saying this is just a bet and one that I’m not even driving my investment approach on because I can’t afford to be wrong. The US continues to have a massive lead in innovation which is fueled by both private and government spending. Will it slow and will there bad some fall off a cliff? Sure, but overall I *speculate* it’ll continue being a long-run winner.
Last edited by Soobs on Sat May 18, 2024 12:24 pm, edited 1 time in total.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by watchnerd »

Soobs wrote: Fri May 17, 2024 9:58 am but because I believe the US is the holy grail of capitalism and in the long run will continue to be where the highest number of best performing companies park.
Let's assume for a second that your view on this is correct.

And, even more so, that it is a widely held view.

And that this is one of the reasons why US stock valuations are higher -- because there is a widely held belief in American exceptionalism when it comes to capitalism.

How does that translate to US stocks being a better investment if a huge chunk of the market also thinks the same?
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Nathan Drake »

Soobs wrote: Sat May 18, 2024 12:11 pm
Nathan Drake wrote: Sat May 18, 2024 10:15 am
Soobs wrote: Sat May 18, 2024 5:36 am
Nathan Drake wrote: Fri May 17, 2024 11:54 pm
Soobs wrote: Fri May 17, 2024 9:58 am As I've been learning as I go over the past 20 years of my career (now in my 40s) my total equity AA has always been total US / total EX-US at market weight. Had I gone 100% total US or S&P 500 I would have done much better to present. That can be a tough pill to swallow...

...And so this is why I keep ending up reading these US vs EX-US threads. Blackrock, Vanguard, Schwab, and Fidelity all recommend international. I continue to stay the course with global market weight diversification but I have to say if I was a single guy and had the risk tolerance I'd probably go 100% total US in my equity AA. This is not due to past performance, but because I believe the US is the holy grail of capitalism and in the long run will continue to be where the highest number of best performing companies park. So if I feel this is the case why do I continue invest in international? Because my "feeling" is nothing more than a casino bet albeit one that has worked out for countless people; however, I'm not sure I have the tolerance to be wrong. So, middle of the road it is for me. If by some miracle a global portfolio outperforms total US over the long run I'll be one happy camper, but I think if everyone is being honest with themselves it is reasonable to assume this is not likely.
That holy grail of capitalism couldn’t outperform
Europe for nearly 70 years starting in 1950

So, like many narratives, closer inspection reveals they’re simply not true.

It’s not good enough to be the “holy grail” of capitalism, that gets priced in even if it were true. You need to be holier than anyone else thought you were.

I think your argument does stem from recency. You likely wouldn’t make that comment had exUS performed like US the last decade
The reality is markets go to where the liquidity is and liquidity goes to where the money is and right now and since 2008 the US has been where you want to be and literally nowhere else. I can’t see the future which is why I’m still continuing at market weight in international, but if I was a betting man I’d bet US knocks the socks off of ex-us for a long time to come. I don’t think this because of recency, but from the factors that caused US investments to climb are still very much in play today. Had exUS performed like US over the past decade and still had all the variables to continue supporting it then sure, I’d bet on that. I have to say though it’s also recency bias to look at blips where ex-US did well and use that for your reason to market weight ex-US. I do it because it’s middle of the road and spreads risk. I don’t expect it’ll be a top performer portfolio, but it’ll be enough.
The reasons are largely change in valuation and currency.

You expect dollar and valuation to continue causing outperformance? That’s pure speculation

I think for quite a long time Europe is screwed, asia is a mixed bag, and everywhere else has massive currency issues. Will the ex-US get its affairs in order and eventually boom? Sure, but when is also speculative. And yes I’m speculating which I’ve stated twice now by saying this is just a bet and one that I’m not even driving my investment approach on because I can’t afford to be wrong. The US continues to have a massive lead in innovation which is fueled by both private and government spending. Will it slow and will there bad some fall off a cliff? Sure, but overall I *speculate* it’ll continue being a long-run winner.
The flaw is that you don’t need good economic growth for quality investment returns

There’s innovation everywhere, the sector mix is just different. Look at the top 10 exUS companies, are they not innovative?
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Soobs »

Nathan Drake wrote: Sat May 18, 2024 12:42 pm
Soobs wrote: Sat May 18, 2024 12:11 pm
Nathan Drake wrote: Sat May 18, 2024 10:15 am
Soobs wrote: Sat May 18, 2024 5:36 am
Nathan Drake wrote: Fri May 17, 2024 11:54 pm

That holy grail of capitalism couldn’t outperform
Europe for nearly 70 years starting in 1950

So, like many narratives, closer inspection reveals they’re simply not true.

It’s not good enough to be the “holy grail” of capitalism, that gets priced in even if it were true. You need to be holier than anyone else thought you were.

I think your argument does stem from recency. You likely wouldn’t make that comment had exUS performed like US the last decade
The reality is markets go to where the liquidity is and liquidity goes to where the money is and right now and since 2008 the US has been where you want to be and literally nowhere else. I can’t see the future which is why I’m still continuing at market weight in international, but if I was a betting man I’d bet US knocks the socks off of ex-us for a long time to come. I don’t think this because of recency, but from the factors that caused US investments to climb are still very much in play today. Had exUS performed like US over the past decade and still had all the variables to continue supporting it then sure, I’d bet on that. I have to say though it’s also recency bias to look at blips where ex-US did well and use that for your reason to market weight ex-US. I do it because it’s middle of the road and spreads risk. I don’t expect it’ll be a top performer portfolio, but it’ll be enough.
The reasons are largely change in valuation and currency.

You expect dollar and valuation to continue causing outperformance? That’s pure speculation

I think for quite a long time Europe is screwed, asia is a mixed bag, and everywhere else has massive currency issues. Will the ex-US get its affairs in order and eventually boom? Sure, but when is also speculative. And yes I’m speculating which I’ve stated twice now by saying this is just a bet and one that I’m not even driving my investment approach on because I can’t afford to be wrong. The US continues to have a massive lead in innovation which is fueled by both private and government spending. Will it slow and will there bad some fall off a cliff? Sure, but overall I *speculate* it’ll continue being a long-run winner.
The flaw is that you don’t need good economic growth for quality investment returns

There’s innovation everywhere, the sector mix is just different. Look at the top 10 exUS companies, are they not innovative?
Against the thousands of companies you haven’t heard of yet within the US? Value and growth can come from many places, but (today and for a good long while) the U.S. fosters and attracts money and innovation better than anywhere else. Will that change in the future? Sure could. Our biggest threat is political landscapes and how 70+ million Americans tend to think Brawndo have what plants crave.
Soobs
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Soobs »

watchnerd wrote: Sat May 18, 2024 12:19 pm
Soobs wrote: Fri May 17, 2024 9:58 am but because I believe the US is the holy grail of capitalism and in the long run will continue to be where the highest number of best performing companies park.
Let's assume for a second that your view on this is correct.

And, even more so, that it is a widely held view.

And that this is one of the reasons why US stock valuations are higher -- because there is a widely held belief in American exceptionalism when it comes to capitalism.

How does that translate to US stocks being a better investment if a huge chunk of the market also thinks the same?
Evidently you have not seen this compelling research and evidence: https://www.threads.net/@particles343/post/C6jg3-mPEfP
Pops1860
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Pops1860 »

Several posts containing political commentary have been removed; this is a "no politics" forum.

Remember forum policy:
This is an investing and personal finance forum. We also maintain a subforum that allow our members to discuss consumer goods and services and recreational activities. Anything else is considered "Off Topic" and is not acceptable on this forum.
Moderator Pops1860
The power of accurate observation is often called cynicism by those who do not have it. ~George Bernard Shaw
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