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

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

Post by lostdog »

vv19 wrote: Tue Jul 09, 2024 12:34 pm
lostdog wrote: Tue Jul 09, 2024 12:15 pm
vv19 wrote: Tue Jul 09, 2024 11:25 am
ez_mode wrote: Tue Jul 09, 2024 10:42 am As someone that is 100% US, I will say that backtesting is relevant to me to the extent it proves that either position is irrelevant, not that US is superior. For example, 2000-2010 is mentioned as a reason to invest in ex-US. The conclusion I reached is that it didn't matter a whole lot. Let's assume someone started their investing on 01/01/2000 and put in $1k/month until 2010. The 100% US investor vs 50/50 investor is a whooping $15K difference between the two at the end: https://www.portfoliovisualizer.com/bac ... boNDMuwjrY

Rather than ask myself is it worth it to focus on "win rate" as Mr. Nathan Drake does,I simply ask myself is it worth it? Do I want to inherent currency risk, political risk, geography risk, demographic risk, increased tax liability, and a litany of other risk for the off chance I can juice my returns by an extra 1% return? No, I do no not want to take on that risk.

Which I why I think Bogle emphasized that ex-US is not necessary for the US investor. He never said it was foolish, wasn't without merit, or could have some benefits, he simply said it wasn't necessary. I agree with that.
That remains my base case since 2020 when I exited from ex US equities. Given how strong the US economy and the $ are, I don’t see a world where exUS outperforms (big if, mind you) US market by more than .75-1%. For that sort of performance, the inherent risks that come with international investments are just not worth it with the risk/reward heavily favoring US stocks.
That remains the base case when I exited Apple. I don't see a world any other company will outperform General Electric and Sears for many decades to come. The inherent risks that come with investing in other companies outside of these two are just not worth the risk/reward heavily favoring these two rock solid companies. :oops:

What's the difference between stock picking and country picking? While you're at it, why didn't you drop the U.S index and buy the Australian index?
Your comparison with what I stated vs picking 2-3 random stocks is flawed & I would think you know that already.

The best companies in the world with biggest moat & balance sheets are American companies. The economic climate in America remains favorable for these companies to thrive and new companies to emerge eventually. Why would I pick Australian index (or any other exUS index) when I am aware of this reality and take unnecessary additional risks? Makes no sense to me, but to each their own.
You're engaging in performance chasing behavior and trying to convince us that you have a crystal ball that says the U.S. will outperform ex-US from infinity and beyond and you're 100% sure about it. Human emotion and investing don't mix.
vv19
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by vv19 »

lostdog wrote: Tue Jul 09, 2024 12:41 pm
You're engaging in performance chasing behavior and trying to convince us that you have a crystal ball that says the U.S. will outperform ex-US from infinity and beyond and you're 100% sure about it. There are many flaws with this behavior.
If that is what you inferred from my posts, then it is your problem - I can’t help it.

And no, I am not 100% certain, neither do I think it will continue for infinite time. I am assessing the economic climate that it in front of me as of now, and placing my bets accordingly. This is not a risk free approach, but nothing in investing is risk free. I am happy to accept this risk & the eventual outcomes.
msterrr
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by msterrr »

vv19 wrote: Tue Jul 09, 2024 11:43 am
rockstar wrote: Tue Jul 09, 2024 11:28 am According to Powell, US productivity grew at 2% annually for the last four decades, which is double Europe’s rate. Maybe that has something to do with it.
Of course it does. The US economic machine continues to march on. No one knows how long it will last, but I can’t see the train stopping anytime soon.
US equity valuations already reflect expectations of continued US outperformance. The "train" here is US outperformance that continues to find ways to exceed current expectations of US outperformance.

And anyone who has already exited a significant portion of their US equities at these valuations should congratulate themselves on their good luck.

But counting your paper gains and patting yourself on the back that your concentration risk related to overweighting US equities has generated outsized returns to date (relative to a global weighting) is a really strange take if you haven't exited that position yet. It's likely an even worse take if you're midway through your savings period and expect to continue to choose to overweight US equities at current valuations that imply lower future expected returns.
ez_mode
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by ez_mode »

lostdog wrote: Tue Jul 09, 2024 12:41 pm
vv19 wrote: Tue Jul 09, 2024 12:34 pm
lostdog wrote: Tue Jul 09, 2024 12:15 pm
vv19 wrote: Tue Jul 09, 2024 11:25 am
ez_mode wrote: Tue Jul 09, 2024 10:42 am As someone that is 100% US, I will say that backtesting is relevant to me to the extent it proves that either position is irrelevant, not that US is superior. For example, 2000-2010 is mentioned as a reason to invest in ex-US. The conclusion I reached is that it didn't matter a whole lot. Let's assume someone started their investing on 01/01/2000 and put in $1k/month until 2010. The 100% US investor vs 50/50 investor is a whooping $15K difference between the two at the end: https://www.portfoliovisualizer.com/bac ... boNDMuwjrY

Rather than ask myself is it worth it to focus on "win rate" as Mr. Nathan Drake does,I simply ask myself is it worth it? Do I want to inherent currency risk, political risk, geography risk, demographic risk, increased tax liability, and a litany of other risk for the off chance I can juice my returns by an extra 1% return? No, I do no not want to take on that risk.

Which I why I think Bogle emphasized that ex-US is not necessary for the US investor. He never said it was foolish, wasn't without merit, or could have some benefits, he simply said it wasn't necessary. I agree with that.
That remains my base case since 2020 when I exited from ex US equities. Given how strong the US economy and the $ are, I don’t see a world where exUS outperforms (big if, mind you) US market by more than .75-1%. For that sort of performance, the inherent risks that come with international investments are just not worth it with the risk/reward heavily favoring US stocks.
That remains the base case when I exited Apple. I don't see a world any other company will outperform General Electric and Sears for many decades to come. The inherent risks that come with investing in other companies outside of these two are just not worth the risk/reward heavily favoring these two rock solid companies. :oops:

What's the difference between stock picking and country picking? While you're at it, why didn't you drop the U.S index and buy the Australian index?
Your comparison with what I stated vs picking 2-3 random stocks is flawed & I would think you know that already.

The best companies in the world with biggest moat & balance sheets are American companies. The economic climate in America remains favorable for these companies to thrive and new companies to emerge eventually. Why would I pick Australian index (or any other exUS index) when I am aware of this reality and take unnecessary additional risks? Makes no sense to me, but to each their own.
You're engaging in performance chasing behavior and trying to convince us that you have a crystal ball that says the U.S. will outperform ex-US from infinity and beyond and you're 100% sure about it. Human emotion and investing don't mix.
Human observation and a tad of analytical thinking has resulted in better returns, less risk, and a simpler portfolio. The decision to not invest in ex-US is not an emotional one, for the US investor is a rational one.
lostdog
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by lostdog »

ez_mode wrote: Tue Jul 09, 2024 12:50 pm
lostdog wrote: Tue Jul 09, 2024 12:41 pm
vv19 wrote: Tue Jul 09, 2024 12:34 pm
lostdog wrote: Tue Jul 09, 2024 12:15 pm
vv19 wrote: Tue Jul 09, 2024 11:25 am
That remains my base case since 2020 when I exited from ex US equities. Given how strong the US economy and the $ are, I don’t see a world where exUS outperforms (big if, mind you) US market by more than .75-1%. For that sort of performance, the inherent risks that come with international investments are just not worth it with the risk/reward heavily favoring US stocks.
That remains the base case when I exited Apple. I don't see a world any other company will outperform General Electric and Sears for many decades to come. The inherent risks that come with investing in other companies outside of these two are just not worth the risk/reward heavily favoring these two rock solid companies. :oops:

What's the difference between stock picking and country picking? While you're at it, why didn't you drop the U.S index and buy the Australian index?
Your comparison with what I stated vs picking 2-3 random stocks is flawed & I would think you know that already.

The best companies in the world with biggest moat & balance sheets are American companies. The economic climate in America remains favorable for these companies to thrive and new companies to emerge eventually. Why would I pick Australian index (or any other exUS index) when I am aware of this reality and take unnecessary additional risks? Makes no sense to me, but to each their own.
You're engaging in performance chasing behavior and trying to convince us that you have a crystal ball that says the U.S. will outperform ex-US from infinity and beyond and you're 100% sure about it. Human emotion and investing don't mix.
Human observation and a tad of analytical thinking has resulted in better returns, less risk, and a simpler portfolio. The decision to not invest in ex-US is not an emotional one, for the US investor is a rational one.
It sounds like you're better off watching CNBC then trying to convince buy the haystack investors engage in country/stock picking. Most boglehead members are buy the haystack, set it and forget it and go live life types.

It took me awhile to eventually figure it out and stop tinkering. I became enlightened and decided that I don't know anything so I bought the haystack.

The more I hung around this forum and read posts like yours, I would end up tinkering.
vv19
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by vv19 »

msterrr wrote: Tue Jul 09, 2024 12:49 pm
vv19 wrote: Tue Jul 09, 2024 11:43 am
rockstar wrote: Tue Jul 09, 2024 11:28 am According to Powell, US productivity grew at 2% annually for the last four decades, which is double Europe’s rate. Maybe that has something to do with it.
Of course it does. The US economic machine continues to march on. No one knows how long it will last, but I can’t see the train stopping anytime soon.
US equity valuations already reflect expectations of continued US outperformance. The "train" here is US outperformance that continues to find ways to exceed current expectations of US outperformance.

And anyone who has already exited a significant portion of their US equities at these valuations should congratulate themselves on their good luck.

But counting your paper gains and patting yourself on the back that your concentration risk related to overweighting US equities has generated outsized returns to date (relative to a global weighting) is a really strange take if you haven't exited that position yet. It's likely an even worse take if you're midway through your savings period and expect to continue to choose to overweight US equities at current valuations that imply lower future expected returns.
I would rather count my paper gains & be happy with my simple portfolio which allows me to sleep peacefully at night than take unnecessary additional risk on investing in international stocks, and then hope/pray that its performance reverses and catches up to US equities.
lostdog
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by lostdog »

vv19 wrote: Tue Jul 09, 2024 12:57 pm
msterrr wrote: Tue Jul 09, 2024 12:49 pm
vv19 wrote: Tue Jul 09, 2024 11:43 am
rockstar wrote: Tue Jul 09, 2024 11:28 am According to Powell, US productivity grew at 2% annually for the last four decades, which is double Europe’s rate. Maybe that has something to do with it.
Of course it does. The US economic machine continues to march on. No one knows how long it will last, but I can’t see the train stopping anytime soon.
US equity valuations already reflect expectations of continued US outperformance. The "train" here is US outperformance that continues to find ways to exceed current expectations of US outperformance.

And anyone who has already exited a significant portion of their US equities at these valuations should congratulate themselves on their good luck.

But counting your paper gains and patting yourself on the back that your concentration risk related to overweighting US equities has generated outsized returns to date (relative to a global weighting) is a really strange take if you haven't exited that position yet. It's likely an even worse take if you're midway through your savings period and expect to continue to choose to overweight US equities at current valuations that imply lower future expected returns.
I would rather count my paper gains & be happy with my simple portfolio which allows me to sleep peacefully at night than take unnecessary additional risk on investing in international stocks, and then hope/pray that its performance reverses and catches up to US equities.
Once again, you just admitted tthat you're 100% sure U.S. stocks will outperform from here and into infinity.
ez_mode
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by ez_mode »

lostdog wrote: Tue Jul 09, 2024 12:56 pm
ez_mode wrote: Tue Jul 09, 2024 12:50 pm
lostdog wrote: Tue Jul 09, 2024 12:41 pm
vv19 wrote: Tue Jul 09, 2024 12:34 pm
lostdog wrote: Tue Jul 09, 2024 12:15 pm

That remains the base case when I exited Apple. I don't see a world any other company will outperform General Electric and Sears for many decades to come. The inherent risks that come with investing in other companies outside of these two are just not worth the risk/reward heavily favoring these two rock solid companies. :oops:

What's the difference between stock picking and country picking? While you're at it, why didn't you drop the U.S index and buy the Australian index?
Your comparison with what I stated vs picking 2-3 random stocks is flawed & I would think you know that already.

The best companies in the world with biggest moat & balance sheets are American companies. The economic climate in America remains favorable for these companies to thrive and new companies to emerge eventually. Why would I pick Australian index (or any other exUS index) when I am aware of this reality and take unnecessary additional risks? Makes no sense to me, but to each their own.
You're engaging in performance chasing behavior and trying to convince us that you have a crystal ball that says the U.S. will outperform ex-US from infinity and beyond and you're 100% sure about it. Human emotion and investing don't mix.
Human observation and a tad of analytical thinking has resulted in better returns, less risk, and a simpler portfolio. The decision to not invest in ex-US is not an emotional one, for the US investor is a rational one.
It sounds like you're better off watching CNBC then trying to convince buy the haystack investors engage in country/stock picking. Most boglehead members are buy the haystack, set it and forget it and go live life types.

It took me awhile to eventually figure it out and stop tinkering. I became enlightened and decided that I don't know anything so I bought the haystack.

The more I hung around this forum and read posts like yours, I would end up tinkering.
Does your haystack include commodities like pork bellies, bitcoin, NFTs, classic cars, art work, and baseball cards? You do buy THE haystack, meaning every investable instrument under the sun, right?

Most Bogleheads consider the haystack to be the US market if they live in the US. The Jack Bogle (of Boglehead fame if you unfamiliar) agreed.
unwitting_gulag
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by unwitting_gulag »

CraigTester wrote: Tue Jul 09, 2024 12:23 pm How will we know when we've reached full capitulation in Int'l stock investing....?

This time is different... Check
Dollar should remain strong forever... Check.
Valuations don't matter.... Check.
All the experts are wrong.... Check.
US stocks have crushed Int'l for the last decade.... Check
Yes... except that the same observations could have been made 5 years ago.

This thread is almost a year old (two weeks left); congratulations, Craig! But to my earlier point, your quintet of points could have been the opening post of this thread. Reviewing a year later:

* This time is different; well, US equities' run has been a year longer, than a year ago...
* Dollar strong. As of this writing, it's incrementally stronger than it was this time, last year.
* Valuations don't matter... valuations are more stretched now, at least with US large-cap, than they were a year ago. Disparities with other market segments, such as US small-cap (never mind ex-US) are even starker.
* Experts being wrong... well, I love reading the quarterly Vanguard predictions, and laughing at how they're more wrong each successive quarter.
* US stocks have crushed... well, a year later, the trend seems to be continuing.

If I may venture with an innocent question: what are we going to do, if this thread actively runs for another year, and thence, we find that your quintet of capitulation-markers... remains unchanged?
lostdog
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by lostdog »

ez_mode wrote: Tue Jul 09, 2024 1:13 pm
lostdog wrote: Tue Jul 09, 2024 12:56 pm
ez_mode wrote: Tue Jul 09, 2024 12:50 pm
lostdog wrote: Tue Jul 09, 2024 12:41 pm
vv19 wrote: Tue Jul 09, 2024 12:34 pm
Your comparison with what I stated vs picking 2-3 random stocks is flawed & I would think you know that already.

The best companies in the world with biggest moat & balance sheets are American companies. The economic climate in America remains favorable for these companies to thrive and new companies to emerge eventually. Why would I pick Australian index (or any other exUS index) when I am aware of this reality and take unnecessary additional risks? Makes no sense to me, but to each their own.
You're engaging in performance chasing behavior and trying to convince us that you have a crystal ball that says the U.S. will outperform ex-US from infinity and beyond and you're 100% sure about it. Human emotion and investing don't mix.
Human observation and a tad of analytical thinking has resulted in better returns, less risk, and a simpler portfolio. The decision to not invest in ex-US is not an emotional one, for the US investor is a rational one.
It sounds like you're better off watching CNBC then trying to convince buy the haystack investors engage in country/stock picking. Most boglehead members are buy the haystack, set it and forget it and go live life types.

It took me awhile to eventually figure it out and stop tinkering. I became enlightened and decided that I don't know anything so I bought the haystack.

The more I hung around this forum and read posts like yours, I would end up tinkering.
Does your haystack include commodities like pork bellies, bitcoin, NFTs, classic cars, art work, and baseball cards? You do buy THE haystack, meaning every investable instrument under the sun, right?

Most Bogleheads consider the haystack to be the US market if they live in the US. The Jack Bogle (of Boglehead fame if you unfamiliar) agreed.
A little extreme to get your point across. I think most members know what I mean.

I've been in these discussions before a long time ago. Last resort comments usually end up being the "Jack Bogle was right" comment and virtual high five each other. Most don't want to make a bet on single countries and stock picking. We realize we can't predict the future and would rather be prepared, so we just buy US and ex-US and be done with it.
ez_mode
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by ez_mode »

lostdog wrote: Tue Jul 09, 2024 1:21 pm
ez_mode wrote: Tue Jul 09, 2024 1:13 pm
lostdog wrote: Tue Jul 09, 2024 12:56 pm
ez_mode wrote: Tue Jul 09, 2024 12:50 pm
lostdog wrote: Tue Jul 09, 2024 12:41 pm

You're engaging in performance chasing behavior and trying to convince us that you have a crystal ball that says the U.S. will outperform ex-US from infinity and beyond and you're 100% sure about it. Human emotion and investing don't mix.
Human observation and a tad of analytical thinking has resulted in better returns, less risk, and a simpler portfolio. The decision to not invest in ex-US is not an emotional one, for the US investor is a rational one.
It sounds like you're better off watching CNBC then trying to convince buy the haystack investors engage in country/stock picking. Most boglehead members are buy the haystack, set it and forget it and go live life types.

It took me awhile to eventually figure it out and stop tinkering. I became enlightened and decided that I don't know anything so I bought the haystack.

The more I hung around this forum and read posts like yours, I would end up tinkering.
Does your haystack include commodities like pork bellies, bitcoin, NFTs, classic cars, art work, and baseball cards? You do buy THE haystack, meaning every investable instrument under the sun, right?

Most Bogleheads consider the haystack to be the US market if they live in the US. The Jack Bogle (of Boglehead fame if you unfamiliar) agreed.
A little extreme to get your point across. I think most members know what I mean.

I've been in these discussions before a long time ago. Last resort comments usually end up being the "Jack Bogle was right" comment and virtual high five each other. Most don't want to make a bet on single countries and stock picking. We realize we can't predict the future and would rather be prepared, so we just buy US and ex-US and be done with it.
Funny how you keep speaking for most members and most bogleheads. I think most would actually disagree with you on both points. Too bad we can't do polls on this forum.

Again, if you can't predict the future and insist that the haystack is ALL investments, then why haven't you put your money where your mouth is?

The fact is you can't define the haystack for others. If that includes the entire world for you, then go for it. If pedantic arguments, theories, and expert opinions help you sleep at night knowing you should be right even though your portfolio just doesn't quite agree when you look at your returns, by all means have at it. For those us that have opted to keep things simple, decide the US is good enough, and have reaped the rewards of which would take many decades of drastic ex-US outperformance at this point to invalidate our decision, we are happy with actual results instead of should-haves :sharebeer
vv19
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by vv19 »

ez_mode wrote: Tue Jul 09, 2024 1:28 pm Funny how you keep speaking for most members and most bogleheads. I think most would actually disagree with you on both points. Too bad we can't do polls on this forum.

Again, if you can't predict the future and insist that the haystack is ALL investments, then why haven't you put your money where your mouth is?

The fact is you can't define the haystack for others. If that includes the entire world for you, then go for it. If pedantic arguments, theories, and expert opinions help you sleep at night knowing you should be right even though your portfolio just doesn't quite agree when you look at your returns, by all means have at it. For those us that have opted to keep things simple, decide the US is good enough, and have reaped the rewards of which would take many decades of drastic ex-US outperformance at this point to invalidate our decision, we are happy with actual results instead of should-haves :sharebeer
The “buy the haystack” crowd is quite funny to me. If you truly believe that, you would just buy a world index fund (for your equities portfolio) and be done with it. I would bet less than 5% of BHs actually do that. If you are not buying the world index, you are most certainly catering to a specific bias & investing accordingly; you are just not admitting it for whatever reason.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by LadyGeek »

The discussion is getting contentious. As a reminder, see: General Etiquette
We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones.
Please remove the emotion from your post and state your concerns in a civil, factual manner.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Beensabu »

vv19 wrote: Tue Jul 09, 2024 1:43 pm If you are not buying the world index, you are most certainly catering to a specific bias & investing accordingly; you are just not admitting it for whatever reason.
That's true.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CRC_Volunteer »

vv19 wrote: Tue Jul 09, 2024 1:43 pm If you are not buying the world index, you are most certainly catering to a specific bias & investing accordingly; you are just not admitting it for whatever reason.
I maintain VTI/VXUS at a ratio I am comfortable with. Vanguard currently has VT a 65/35 ratio. However at its discretion, Vanguard can change the ratio. I prefer to control the vertical and horizontal.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by vv19 »

CRC_Volunteer wrote: Tue Jul 09, 2024 2:29 pm
vv19 wrote: Tue Jul 09, 2024 1:43 pm If you are not buying the world index, you are most certainly catering to a specific bias & investing accordingly; you are just not admitting it for whatever reason.
I maintain VTI/VXUS at a ratio I am comfortable with. Vanguard currently has VT 65/35 ratio. However at its discretion, Vanguard can change the ratio. I prefer to control the vertical and horizontal.
That’s exactly what I meant with my post above. You have a bias which leads you to that allocation/ratio that you are comfortable with. For the record, I don’t think there is anything wrong with it if you stick with that portfolio and sleep peacefully at night - I just think most investors are impervious to those biases and/or don’t want to admit that they have one.

The “I don’t know the future so I will buy the haystack” investors certainly don’t want to admit it or else they would just buy the world index & call it a day.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CRC_Volunteer »

vv19 wrote: Tue Jul 09, 2024 2:37 pm
CRC_Volunteer wrote: Tue Jul 09, 2024 2:29 pm
vv19 wrote: Tue Jul 09, 2024 1:43 pm If you are not buying the world index, you are most certainly catering to a specific bias & investing accordingly; you are just not admitting it for whatever reason.
I maintain VTI/VXUS at a ratio I am comfortable with. Vanguard currently has VT 65/35 ratio. However at its discretion, Vanguard can change the ratio. I prefer to control the vertical and horizontal.
That’s exactly what I meant with my post above. You have a bias which leads you to that allocation/ratio that you are comfortable with. For the record, I don’t think there is anything wrong with it if you stick with that portfolio and sleep peacefully at night - I just think most investors are impervious to those biases and/or don’t want to admit that they have one.

The “I don’t know the future so I will buy the haystack” investors certainly don’t want to admit it or else they would just buy the world index & call it a day.
You could not be more off base. I am choosing a ratio instead of having someone choose it for me. Who says Vanguard doesn't have an implied bias?
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by vv19 »

CRC_Volunteer wrote: Tue Jul 09, 2024 2:59 pm You could not be more off base. I am choosing a ratio instead of having someone choose it for me. Who says Vanguard doesn't have an implied bias?
Of course they do, they are in the business of making money, after all. I am not debating whether the ratios they are coming up with are right and should be followed by investors without giving it a thought.
You are choosing a ratio based on your bias and/or your understanding of economic events along with what your comfort level is - that’s what I meant.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by lostdog »

Beensabu wrote: Tue Jul 09, 2024 2:10 pm
vv19 wrote: Tue Jul 09, 2024 1:43 pm If you are not buying the world index, you are most certainly catering to a specific bias & investing accordingly; you are just not admitting it for whatever reason.
That's true.
100%. I buy the haystack with VT and call it day.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CRC_Volunteer »

lostdog wrote: Tue Jul 09, 2024 3:29 pm
Beensabu wrote: Tue Jul 09, 2024 2:10 pm
vv19 wrote: Tue Jul 09, 2024 1:43 pm If you are not buying the world index, you are most certainly catering to a specific bias & investing accordingly; you are just not admitting it for whatever reason.
That's true.
100%. I buy the haystack with VT and call it day.
VT has 9823 stocks it is tracking, while VTI/VXUS has 12,287 stocks it is tracking. At that level, the difference doesn't move the needle much, it just lets you pick a ratio you are comfortable with.
"Let me explain. No, there is too much. Let me sum up." (Inigo Montoya) | | 65/30/05 | 53% VTSAX | 12% VTIAX | 30% VAIPX | 5% CASH
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Beensabu
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Beensabu »

CRC_Volunteer wrote: Tue Jul 09, 2024 3:41 pm
lostdog wrote: Tue Jul 09, 2024 3:29 pm
Beensabu wrote: Tue Jul 09, 2024 2:10 pm
vv19 wrote: Tue Jul 09, 2024 1:43 pm If you are not buying the world index, you are most certainly catering to a specific bias & investing accordingly; you are just not admitting it for whatever reason.
That's true.
100%. I buy the haystack with VT and call it day.
VT has 9823 stocks it is tracking, while VTI/VXUS has 12,287 stocks it is tracking. At that level, the difference doesn't move the needle much, it just lets you pick a ratio you are comfortable with.
I'm not VT either. I'm all sorts of wacky stuff that I could probably switch to VT/BNDW and call it a day. But I haven't. Because I'm catering to specific biases and investing accordingly.

At least the "index believer" poster admits their bias: they only believe in a particular index, not the actual concept of indexing.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
vv19
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by vv19 »

Beensabu wrote: Tue Jul 09, 2024 5:15 pm I'm not VT either. I'm all sorts of wacky stuff that I could probably switch to VT/BNDW and call it a day. But I haven't. Because I'm catering to specific biases and investing accordingly.

At least the "index believer" poster admits their bias: they only believe in a particular index, not the actual concept of indexing.
What is the concept of indexing?
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Beensabu
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Beensabu »

vv19 wrote: Tue Jul 09, 2024 5:18 pm
Beensabu wrote: Tue Jul 09, 2024 5:15 pm I'm not VT either. I'm all sorts of wacky stuff that I could probably switch to VT/BNDW and call it a day. But I haven't. Because I'm catering to specific biases and investing accordingly.

At least the "index believer" poster admits their bias: they only believe in a particular index, not the actual concept of indexing.
What is the concept of indexing?
Maximum available diversification at lowest possible expense.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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HomerJ
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by HomerJ »

unwitting_gulag wrote: Tue Jul 09, 2024 1:16 pm
CraigTester wrote: Tue Jul 09, 2024 12:23 pm How will we know when we've reached full capitulation in Int'l stock investing....?

This time is different... Check
Dollar should remain strong forever... Check.
Valuations don't matter.... Check.
All the experts are wrong.... Check.
US stocks have crushed Int'l for the last decade.... Check
Yes... except that the same observations could have been made 5 years ago.

This thread is almost a year old (two weeks left); congratulations, Craig! But to my earlier point, your quintet of points could have been the opening post of this thread. Reviewing a year later:

* This time is different; well, US equities' run has been a year longer, than a year ago...
* Dollar strong. As of this writing, it's incrementally stronger than it was this time, last year.
* Valuations don't matter... valuations are more stretched now, at least with US large-cap, than they were a year ago. Disparities with other market segments, such as US small-cap (never mind ex-US) are even starker.
* Experts being wrong... well, I love reading the quarterly Vanguard predictions, and laughing at how they're more wrong each successive quarter.
* US stocks have crushed... well, a year later, the trend seems to be continuing.

If I may venture with an innocent question: what are we going to do, if this thread actively runs for another year, and thence, we find that your quintet of capitulation-markers... remains unchanged?
People were posting this stuff TEN years ago.

Not saying they are wrong now. But people have been talking about valuations for a LONG time. Heck, Nathan referenced Cliff Asness, super genius, PhD, CEO of AQR.

That guy predicted 1% 10-year real returns for the US stock market in 2011.

2011.

13 years ago.

And he was right to do so, based on the data we had at the time (Because he didn't have 2002-2012, or 2003-2013, or 2004-2014, or 2005-2015, etc. 10-year data in his dataset)

But then we got like 11% real instead for 10 years. Now the data is very different, because we have 13 more data points of good 10-year returns at high valuations. So if he wrote the same paper today, he'd predict a much higher real return.

The "experts" don't really know anything. There are too many variables, not enough data points. Heck, human emotions are involved.

I have no idea what will happen next. I'm still about 20% International on my stock side, mostly just from inertia.

Nathan has been really sure for 10+ years that valuations are useful for changing one's asset allocation. So far, that hasn't worked well.

But it might going forward. That's absolutely true. I guess we'll see.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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CraigTester
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CraigTester »

unwitting_gulag wrote: Tue Jul 09, 2024 1:16 pm
CraigTester wrote: Tue Jul 09, 2024 12:23 pm How will we know when we've reached full capitulation in Int'l stock investing....?

This time is different... Check
Dollar should remain strong forever... Check.
Valuations don't matter.... Check.
All the experts are wrong.... Check.
US stocks have crushed Int'l for the last decade.... Check
Yes... except that the same observations could have been made 5 years ago.

This thread is almost a year old (two weeks left); congratulations, Craig! But to my earlier point, your quintet of points could have been the opening post of this thread. Reviewing a year later:

* This time is different; well, US equities' run has been a year longer, than a year ago...
* Dollar strong. As of this writing, it's incrementally stronger than it was this time, last year.
* Valuations don't matter... valuations are more stretched now, at least with US large-cap, than they were a year ago. Disparities with other market segments, such as US small-cap (never mind ex-US) are even starker.
* Experts being wrong... well, I love reading the quarterly Vanguard predictions, and laughing at how they're more wrong each successive quarter.
* US stocks have crushed... well, a year later, the trend seems to be continuing.

If I may venture with an innocent question: what are we going to do, if this thread actively runs for another year, and thence, we find that your quintet of capitulation-markers... remains unchanged?
As discussed up-thread in the Meb Faber video, it's too bad they had to slip in another $500B of stealth-QE after "officially" ending QE in Mar 2022.... Would have been fascinating to see how it would have unfolded without the "help"....

But despite this, as a post-QE "reformed" 100% US'er, Global Market Cap is a pretty peaceful place to coast for the time being...

https://www.portfoliovisualizer.com/bac ... w39DiWDlEZ
grahamite
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by grahamite »

You invest in businesses (either via their equity or their debt) because both generate cash flows and therefore are investments not speculations. So that narrows down the haystack considerably. Arguably with all the Fed intervention bonds weren't really investments post GFC (offering return-free risk) but thankfully that's changed now.

The argument for not investing outside the USA is that a) US companies are mostly multinational businesses so you are getting exposure to foreign markets and foreign currencies b) US exceptionalism c) over 150 years of historical data supporting the US stocks for the long run thesis.

These are sound and strong arguments but the problem is with stock markets is that once investors become incredibly certain about an investment outcome they drive prices up to a level whereby future returns are likely to disappoint. So the relative valuation gap between the US and the ROW is a bit of a cause for concern and this valuation risk can be diluted by a sensible allocation to EAFE/EM etc. The US market is also increasingly concentrated in technology stocks and that creates a sector risk which can also be diluted by a sensible allocation to EAFE/EM. And you can still participate to a large extent if US outperformance continues over the next decade or two. But if it doesn't then you'll be thankful that you've got some exposure to international stock markets that may well do better given more modest valuations, earnings expectations and tech exposure.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by HomerJ »

CraigTester wrote: Tue Jul 09, 2024 9:11 pm
unwitting_gulag wrote: Tue Jul 09, 2024 1:16 pm
CraigTester wrote: Tue Jul 09, 2024 12:23 pm How will we know when we've reached full capitulation in Int'l stock investing....?

This time is different... Check
Dollar should remain strong forever... Check.
Valuations don't matter.... Check.
All the experts are wrong.... Check.
US stocks have crushed Int'l for the last decade.... Check
Yes... except that the same observations could have been made 5 years ago.

This thread is almost a year old (two weeks left); congratulations, Craig! But to my earlier point, your quintet of points could have been the opening post of this thread. Reviewing a year later:

* This time is different; well, US equities' run has been a year longer, than a year ago...
* Dollar strong. As of this writing, it's incrementally stronger than it was this time, last year.
* Valuations don't matter... valuations are more stretched now, at least with US large-cap, than they were a year ago. Disparities with other market segments, such as US small-cap (never mind ex-US) are even starker.
* Experts being wrong... well, I love reading the quarterly Vanguard predictions, and laughing at how they're more wrong each successive quarter.
* US stocks have crushed... well, a year later, the trend seems to be continuing.

If I may venture with an innocent question: what are we going to do, if this thread actively runs for another year, and thence, we find that your quintet of capitulation-markers... remains unchanged?
As discussed up-thread in the Meb Faber video, it's too bad they had to slip in another $500B of stealth-QE after "officially" ending QE in Mar 2022.... Would have been fascinating to see how it would have unfolded without the "help"....

But despite this, as a post-QE "reformed" 100% US'er, Global Market Cap is a pretty peaceful place to coast for the time being...

https://www.portfoliovisualizer.com/bac ... w39DiWDlEZ
Just recognize that since "stealth-QE" supposedly exists, that means your plan* of overweighting US market if QE starts up again isn't very viable.

Since you may not know about "stealth-QE" until after the fact.

*That may not be your plan anymore. At one point, you posted that as a plan of action. But maybe you've changed your mind since then, especially since you've learned about "stealth-QE".
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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HomerJ
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by HomerJ »

grahamite wrote: Wed Jul 10, 2024 6:58 am You invest in businesses (either via their equity or their debt) because both generate cash flows and therefore are investments not speculations. So that narrows down the haystack considerably. Arguably with all the Fed intervention bonds weren't really investments post GFC (offering return-free risk) but thankfully that's changed now.

The argument for not investing outside the USA is that a) US companies are mostly multinational businesses so you are getting exposure to foreign markets and foreign currencies b) US exceptionalism c) over 150 years of historical data supporting the US stocks for the long run thesis.

These are sound and strong arguments but the problem is with stock markets is that once investors become incredibly certain about an investment outcome they drive prices up to a level whereby future returns are likely to disappoint. So the relative valuation gap between the US and the ROW is a bit of a cause for concern and this valuation risk can be diluted by a sensible allocation to EAFE/EM etc. The US market is also increasingly concentrated in technology stocks and that creates a sector risk which can also be diluted by a sensible allocation to EAFE/EM. And you can still participate to a large extent if US outperformance continues over the next decade or two. But if it doesn't then you'll be thankful that you've got some exposure to international stock markets that may well do better given more modest valuations, earnings expectations and tech exposure.
Very reasonable post.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
murkyfuture
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by murkyfuture »

Excerpt from an interview with a 100% home bias investor:

"My home country has the largest stock market capitalization in the world, so I don't need to invest internationally."

"My home country market has had exceptional returns for the past 10 years, so in back tests my home country outperforms the rest of the world the last 5, 10, 50 years! As far back as we have data, my home country outperforms as long as the data set ends now!"

"My home country has higher P/E ratio than the rest of the world, and higher than it was 10 years ago."

"My home country is full of large multinational companies that have production and sales in other countries, so international stock exposure isn't necessary."

"My home country has the most high-tech companies and the leaders in technological innovation."

"My home country has the best business culture and best workers in the world."

"My home country currency has strengthened over the past 10 years, boosting my returns."

Was this a:

A) UK investor in 1870
B) Japanese investor in 1989
C) US investor in 1999
D) US investor in 2024
LukeHeinz57
Posts: 174
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by LukeHeinz57 »

E) All of the Above!

Proving the wisdom of the market weight or at least 20% positions.
"Contentment", the only thing you ever truly need more of!
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CraigTester
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by CraigTester »

To maintain a comprehensive list, I just added the below linked chart to the Arguments list in the OP of this thread.

The chart comes from poster thatdarnfish in a thread discussing why Vanguard chose 40% international stocks for their default portfolios?

https://preview.redd.it/why-you-should- ... 809ad484e4

The original source doc for the chart is: https://www.morningstar.com/portfolios/ ... 24-edition
Last edited by CraigTester on Sun Jul 14, 2024 8:21 pm, edited 1 time in total.
Xrayman69
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Xrayman69 »

In my target date 2045 funds the international component was higher than I was comfortable for my entire portfolio. However, the diversity of having international was a part of my investment thesis and thus a part of my AA and thus I keep international. That being said over the past year the international component has been decreasing in percentage as a result of me decreasing funds directed to the 2045 and loading up on bonds. The 2045 fund overall was only about 10% of my portfolio to start and thus international just a small portion to begin with. Apparently I was only comfortable with the theory of having international but never had the conviction of truly having a significant international component over these past 20 years of my investment life. I bought into the comfort of my large caps were sufficiently international. There is psychology and emotion in this and thus my human nature is kicking in despite my efforts to just be an algorithm
Andy12345
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Andy12345 »

Well a year later and I still can’t decide what to do. My portfolio is around 95% us stocks. My AA is 100% stock but not sure what to do with international. I will say now seems like a good time to buy.
BizarroJerry
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by BizarroJerry »

I just thought of something: This thread is titled, “Intl vs US,” but that seems to be the wrong way to look at it… That title IMO assumes one is better than the other or that one has to “choose” which will outperform. Owning global market cap weight is not one versus the other by definition, it is simply “owning what is.”

Some people on here are making bets by overweighting intl expecting a mean reversion. That is market timing, and is not the same conversation as owning market cap weight. If this conversation morphs to that, it is a completely different conversation. The intl apologists seem to not leave it at “market cap weight because nobody knows,” and seem to have more of a conviction that intl will for certain outperform US over the next decade, and they are making a bet. That is no better or different than saying US will outperform.
Tom_T
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Tom_T »

Andy12345 wrote: Fri Jul 12, 2024 9:41 am Well a year later and I still can’t decide what to do.
Because nobody here has a crystal ball. You've undoubtedly noticed that there are a lot of very strong/vocal opinions on the topic, but the reality is that whatever arguments they've presented to support their opinion, it's still their opinion, not fact. And even if one person or another proves to be correct, it might not be in your investment lifetime! Or it might not be a significant difference. Nobody knows.

If you decide to go 90/10 domestic/international, or 85/15, or 80/20, it's not going to move the needle much on your future goals. What is more important is your overall AA (stock/bond). I try to determine what return will allow me to reach my goals. I can't possibly know in advance what AA will maximize my return. If someone else "bets" correctly and earns 12% while I earn 7%, I'll still be fine.

Personally, I like having some international just to hedge my bets. I have no expectation that I will have the highest return as compared to someone else, but I don't need the highest return. I just need something that is good enough.
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Nathan Drake »

BizarroJerry wrote: Fri Jul 12, 2024 9:48 am I just thought of something: This thread is titled, “Intl vs US,” but that seems to be the wrong way to look at it… That title IMO assumes one is better than the other or that one has to “choose” which will outperform. Owning global market cap weight is not one versus the other by definition, it is simply “owning what is.”

Some people on here are making bets by overweighting intl expecting a mean reversion. That is market timing, and is not the same conversation as owning market cap weight. If this conversation morphs to that, it is a completely different conversation. The intl apologists seem to not leave it at “market cap weight because nobody knows,” and seem to have more of a conviction that intl will for certain outperform US over the next decade, and they are making a bet. That is no better or different than saying US will outperform.
You can make a tilt towards international allocation higher than market cap weights, based on valuation/currency starting points and expected returns, and it's not market timing. It's simply taking into account existing prices. There are other reasons some may tilt towards higher intl, due to having concentration of other risks highly correlated to positive US outcomes (job, social security, etc).

This is NOT the same as those that only invest 100% in the US because they believe strongly it will always outperform. I still own plenty of US based assets due to diversification benefits even though I believe international has higher expected returns.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
beardsicles
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by beardsicles »

murkyfuture wrote: Wed Jul 10, 2024 10:50 am Excerpt from an interview with a 100% home bias investor:

"My home country has the largest stock market capitalization in the world, so I don't need to invest internationally."

"My home country market has had exceptional returns for the past 10 years, so in back tests my home country outperforms the rest of the world the last 5, 10, 50 years! As far back as we have data, my home country outperforms as long as the data set ends now!"

"My home country has higher P/E ratio than the rest of the world, and higher than it was 10 years ago."

"My home country is full of large multinational companies that have production and sales in other countries, so international stock exposure isn't necessary."

"My home country has the most high-tech companies and the leaders in technological innovation."

"My home country has the best business culture and best workers in the world."

"My home country currency has strengthened over the past 10 years, boosting my returns."

Was this a:

A) UK investor in 1870
B) Japanese investor in 1989
C) US investor in 1999
D) US investor in 2024
This is actually really funny.
Circle the Wagons
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Circle the Wagons »

Nathan Drake wrote: Fri Jul 12, 2024 4:07 pm
BizarroJerry wrote: Fri Jul 12, 2024 9:48 am I just thought of something: This thread is titled, “Intl vs US,” but that seems to be the wrong way to look at it… That title IMO assumes one is better than the other or that one has to “choose” which will outperform. Owning global market cap weight is not one versus the other by definition, it is simply “owning what is.”

Some people on here are making bets by overweighting intl expecting a mean reversion. That is market timing, and is not the same conversation as owning market cap weight. If this conversation morphs to that, it is a completely different conversation. The intl apologists seem to not leave it at “market cap weight because nobody knows,” and seem to have more of a conviction that intl will for certain outperform US over the next decade, and they are making a bet. That is no better or different than saying US will outperform.
You can make a tilt towards international allocation higher than market cap weights, based on valuation/currency starting points and expected returns, and it's not market timing. It's simply taking into account existing prices. There are other reasons some may tilt towards higher intl, due to having concentration of other risks highly correlated to positive US outcomes (job, social security, etc).

This is NOT the same as those that only invest 100% in the US because they believe strongly it will always outperform. I still own plenty of US based assets due to diversification benefits even though I believe international has higher expected returns.
I agree. I think global market cap weight should be the minimum allocation to ex-US right now for U.S.-based investors (those having the other reasons mentioned to hedge domestic risks).

I admit to a fear that I'll regret this post in 5-10 years.
Da5id
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Da5id »

Nathan Drake wrote: Fri Jul 12, 2024 4:07 pm
BizarroJerry wrote: Fri Jul 12, 2024 9:48 am I just thought of something: This thread is titled, “Intl vs US,” but that seems to be the wrong way to look at it… That title IMO assumes one is better than the other or that one has to “choose” which will outperform. Owning global market cap weight is not one versus the other by definition, it is simply “owning what is.”

Some people on here are making bets by overweighting intl expecting a mean reversion. That is market timing, and is not the same conversation as owning market cap weight. If this conversation morphs to that, it is a completely different conversation. The intl apologists seem to not leave it at “market cap weight because nobody knows,” and seem to have more of a conviction that intl will for certain outperform US over the next decade, and they are making a bet. That is no better or different than saying US will outperform.
You can make a tilt towards international allocation higher than market cap weights, based on valuation/currency starting points and expected returns, and it's not market timing. It's simply taking into account existing prices. There are other reasons some may tilt towards higher intl, due to having concentration of other risks highly correlated to positive US outcomes (job, social security, etc).

This is NOT the same as those that only invest 100% in the US because they believe strongly it will always outperform. I still own plenty of US based assets due to diversification benefits even though I believe international has higher expected returns.
I'm an international allocation believer. But tilting based on predictions is in fact market timing IMO.

The first definition that I saw of market timing googling was:
"Market timing is the act of moving investment money in or out of a financial market—or switching funds between asset classes—based on predictive methods."

IMO overweighting ex-US is a bet that markets have wrongly priced assets. Whether or not that bet or evaluation is correct, I don't see how it differs from any other market timing strategy that dynamically changes one's asset allocation.
Nathan Drake
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Nathan Drake »

Da5id wrote: Fri Jul 12, 2024 5:59 pm
Nathan Drake wrote: Fri Jul 12, 2024 4:07 pm
BizarroJerry wrote: Fri Jul 12, 2024 9:48 am I just thought of something: This thread is titled, “Intl vs US,” but that seems to be the wrong way to look at it… That title IMO assumes one is better than the other or that one has to “choose” which will outperform. Owning global market cap weight is not one versus the other by definition, it is simply “owning what is.”

Some people on here are making bets by overweighting intl expecting a mean reversion. That is market timing, and is not the same conversation as owning market cap weight. If this conversation morphs to that, it is a completely different conversation. The intl apologists seem to not leave it at “market cap weight because nobody knows,” and seem to have more of a conviction that intl will for certain outperform US over the next decade, and they are making a bet. That is no better or different than saying US will outperform.
You can make a tilt towards international allocation higher than market cap weights, based on valuation/currency starting points and expected returns, and it's not market timing. It's simply taking into account existing prices. There are other reasons some may tilt towards higher intl, due to having concentration of other risks highly correlated to positive US outcomes (job, social security, etc).

This is NOT the same as those that only invest 100% in the US because they believe strongly it will always outperform. I still own plenty of US based assets due to diversification benefits even though I believe international has higher expected returns.
I'm an international allocation believer. But tilting based on predictions is in fact market timing IMO.

The first definition that I saw of market timing googling was:
"Market timing is the act of moving investment money in or out of a financial market—or switching funds between asset classes—based on predictive methods."

IMO overweighting ex-US is a bet that markets have wrongly priced assets. Whether or not that bet or evaluation is correct, I don't see how it differs from any other market timing strategy that dynamically changes one's asset allocation.
Do you overweight stocks versus bonds because you have a preference for higher expected returns?

Using that loose definition, setting an asset allocation is market timing

It loses all meaning of it’s intended pejorative term
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Da5id
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Da5id »

Nathan Drake wrote: Fri Jul 12, 2024 6:17 pm
Da5id wrote: Fri Jul 12, 2024 5:59 pm
Nathan Drake wrote: Fri Jul 12, 2024 4:07 pm
BizarroJerry wrote: Fri Jul 12, 2024 9:48 am I just thought of something: This thread is titled, “Intl vs US,” but that seems to be the wrong way to look at it… That title IMO assumes one is better than the other or that one has to “choose” which will outperform. Owning global market cap weight is not one versus the other by definition, it is simply “owning what is.”

Some people on here are making bets by overweighting intl expecting a mean reversion. That is market timing, and is not the same conversation as owning market cap weight. If this conversation morphs to that, it is a completely different conversation. The intl apologists seem to not leave it at “market cap weight because nobody knows,” and seem to have more of a conviction that intl will for certain outperform US over the next decade, and they are making a bet. That is no better or different than saying US will outperform.
You can make a tilt towards international allocation higher than market cap weights, based on valuation/currency starting points and expected returns, and it's not market timing. It's simply taking into account existing prices. There are other reasons some may tilt towards higher intl, due to having concentration of other risks highly correlated to positive US outcomes (job, social security, etc).

This is NOT the same as those that only invest 100% in the US because they believe strongly it will always outperform. I still own plenty of US based assets due to diversification benefits even though I believe international has higher expected returns.
I'm an international allocation believer. But tilting based on predictions is in fact market timing IMO.

The first definition that I saw of market timing googling was:
"Market timing is the act of moving investment money in or out of a financial market—or switching funds between asset classes—based on predictive methods."

IMO overweighting ex-US is a bet that markets have wrongly priced assets. Whether or not that bet or evaluation is correct, I don't see how it differs from any other market timing strategy that dynamically changes one's asset allocation.
Do you overweight stocks versus bonds because you have a preference for higher expected returns?

Using that loose definition, setting an asset allocation is market timing

It loses all meaning of it’s intended pejorative term
It seems to me that is a different question. Dynamically changing the percentage of stocks relative to bonds based on market conditions is IMO timing. Setting and keeping an allocation, or having a predetermined date based glide path is not.
Nathan Drake
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Nathan Drake »

Da5id wrote: Fri Jul 12, 2024 6:22 pm
Nathan Drake wrote: Fri Jul 12, 2024 6:17 pm
Da5id wrote: Fri Jul 12, 2024 5:59 pm
Nathan Drake wrote: Fri Jul 12, 2024 4:07 pm
BizarroJerry wrote: Fri Jul 12, 2024 9:48 am I just thought of something: This thread is titled, “Intl vs US,” but that seems to be the wrong way to look at it… That title IMO assumes one is better than the other or that one has to “choose” which will outperform. Owning global market cap weight is not one versus the other by definition, it is simply “owning what is.”

Some people on here are making bets by overweighting intl expecting a mean reversion. That is market timing, and is not the same conversation as owning market cap weight. If this conversation morphs to that, it is a completely different conversation. The intl apologists seem to not leave it at “market cap weight because nobody knows,” and seem to have more of a conviction that intl will for certain outperform US over the next decade, and they are making a bet. That is no better or different than saying US will outperform.
You can make a tilt towards international allocation higher than market cap weights, based on valuation/currency starting points and expected returns, and it's not market timing. It's simply taking into account existing prices. There are other reasons some may tilt towards higher intl, due to having concentration of other risks highly correlated to positive US outcomes (job, social security, etc).

This is NOT the same as those that only invest 100% in the US because they believe strongly it will always outperform. I still own plenty of US based assets due to diversification benefits even though I believe international has higher expected returns.
I'm an international allocation believer. But tilting based on predictions is in fact market timing IMO.

The first definition that I saw of market timing googling was:
"Market timing is the act of moving investment money in or out of a financial market—or switching funds between asset classes—based on predictive methods."

IMO overweighting ex-US is a bet that markets have wrongly priced assets. Whether or not that bet or evaluation is correct, I don't see how it differs from any other market timing strategy that dynamically changes one's asset allocation.
Do you overweight stocks versus bonds because you have a preference for higher expected returns?

Using that loose definition, setting an asset allocation is market timing

It loses all meaning of it’s intended pejorative term
It seems to me that is a different question. Dynamically changing the percentage of stocks relative to bonds based on market conditions is IMO timing. Setting and keeping an allocation, or having a predetermined date based glide path is not.
I see absolutely nothing wrong with market timing, then.

If bonds are yielding well below inflation and stocks have an attractive equity risk premium I would absolutely adjust based on long term preferences as set by starting conditions
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
WhiteMaxima
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by WhiteMaxima »

Is ex-US less tax efficient? I mean no foreign tax credit.
Da5id
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Re: International (Non-US) versus US Equities (The "Arguments")

Post by Da5id »

Nathan Drake wrote: Fri Jul 12, 2024 6:41 pm
Da5id wrote: Fri Jul 12, 2024 6:22 pm
Nathan Drake wrote: Fri Jul 12, 2024 6:17 pm
Da5id wrote: Fri Jul 12, 2024 5:59 pm
Nathan Drake wrote: Fri Jul 12, 2024 4:07 pm

You can make a tilt towards international allocation higher than market cap weights, based on valuation/currency starting points and expected returns, and it's not market timing. It's simply taking into account existing prices. There are other reasons some may tilt towards higher intl, due to having concentration of other risks highly correlated to positive US outcomes (job, social security, etc).

This is NOT the same as those that only invest 100% in the US because they believe strongly it will always outperform. I still own plenty of US based assets due to diversification benefits even though I believe international has higher expected returns.
I'm an international allocation believer. But tilting based on predictions is in fact market timing IMO.

The first definition that I saw of market timing googling was:
"Market timing is the act of moving investment money in or out of a financial market—or switching funds between asset classes—based on predictive methods."

IMO overweighting ex-US is a bet that markets have wrongly priced assets. Whether or not that bet or evaluation is correct, I don't see how it differs from any other market timing strategy that dynamically changes one's asset allocation.
Do you overweight stocks versus bonds because you have a preference for higher expected returns?

Using that loose definition, setting an asset allocation is market timing

It loses all meaning of it’s intended pejorative term
It seems to me that is a different question. Dynamically changing the percentage of stocks relative to bonds based on market conditions is IMO timing. Setting and keeping an allocation, or having a predetermined date based glide path is not.
I see absolutely nothing wrong with market timing, then.

If bonds are yielding well below inflation and stocks have an attractive equity risk premium I would absolutely adjust based on long term preferences as set by starting conditions
If it was easy for investors to generate alpha by market timing, IMO active fonds would do better. I'd rather just believe that markets are pretty efficient. YMMV. I guess this isn't really the topic of the thread, so having agreed it is market timing I guess nothing more to say on it.
Nathan Drake
Posts: 6414
Joined: Mon Apr 11, 2011 12:28 am

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

Post by Nathan Drake »

Da5id wrote: Fri Jul 12, 2024 7:37 pm
Nathan Drake wrote: Fri Jul 12, 2024 6:41 pm
Da5id wrote: Fri Jul 12, 2024 6:22 pm
Nathan Drake wrote: Fri Jul 12, 2024 6:17 pm
Da5id wrote: Fri Jul 12, 2024 5:59 pm

I'm an international allocation believer. But tilting based on predictions is in fact market timing IMO.

The first definition that I saw of market timing googling was:
"Market timing is the act of moving investment money in or out of a financial market—or switching funds between asset classes—based on predictive methods."

IMO overweighting ex-US is a bet that markets have wrongly priced assets. Whether or not that bet or evaluation is correct, I don't see how it differs from any other market timing strategy that dynamically changes one's asset allocation.
Do you overweight stocks versus bonds because you have a preference for higher expected returns?

Using that loose definition, setting an asset allocation is market timing

It loses all meaning of it’s intended pejorative term
It seems to me that is a different question. Dynamically changing the percentage of stocks relative to bonds based on market conditions is IMO timing. Setting and keeping an allocation, or having a predetermined date based glide path is not.
I see absolutely nothing wrong with market timing, then.

If bonds are yielding well below inflation and stocks have an attractive equity risk premium I would absolutely adjust based on long term preferences as set by starting conditions
If it was easy for investors to generate alpha by market timing, IMO active fonds would do better. I'd rather just believe that markets are pretty efficient. YMMV. I guess this isn't really the topic of the thread, so having agreed it is market timing I guess nothing more to say on it.
It’s not about generating alpha; it’s about setting an allocation based on risk/reward preference
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Da5id
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Joined: Fri Feb 26, 2016 7:20 am

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

Post by Da5id »

Nathan Drake wrote: Fri Jul 12, 2024 7:41 pm
Da5id wrote: Fri Jul 12, 2024 7:37 pm
Nathan Drake wrote: Fri Jul 12, 2024 6:41 pm
Da5id wrote: Fri Jul 12, 2024 6:22 pm
Nathan Drake wrote: Fri Jul 12, 2024 6:17 pm

Do you overweight stocks versus bonds because you have a preference for higher expected returns?

Using that loose definition, setting an asset allocation is market timing

It loses all meaning of it’s intended pejorative term
It seems to me that is a different question. Dynamically changing the percentage of stocks relative to bonds based on market conditions is IMO timing. Setting and keeping an allocation, or having a predetermined date based glide path is not.
I see absolutely nothing wrong with market timing, then.

If bonds are yielding well below inflation and stocks have an attractive equity risk premium I would absolutely adjust based on long term preferences as set by starting conditions
If it was easy for investors to generate alpha by market timing, IMO active fonds would do better. I'd rather just believe that markets are pretty efficient. YMMV. I guess this isn't really the topic of the thread, so having agreed it is market timing I guess nothing more to say on it.
It’s not about generating alpha; it’s about setting an allocation based on risk/reward preference
We don't agree on definitions I guess. You appear to be trying to get improved risk adjusted returns compared to a neutral allocation. Sounds like alpha.
Nathan Drake
Posts: 6414
Joined: Mon Apr 11, 2011 12:28 am

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

Post by Nathan Drake »

Da5id wrote: Fri Jul 12, 2024 7:44 pm
Nathan Drake wrote: Fri Jul 12, 2024 7:41 pm
Da5id wrote: Fri Jul 12, 2024 7:37 pm
Nathan Drake wrote: Fri Jul 12, 2024 6:41 pm
Da5id wrote: Fri Jul 12, 2024 6:22 pm

It seems to me that is a different question. Dynamically changing the percentage of stocks relative to bonds based on market conditions is IMO timing. Setting and keeping an allocation, or having a predetermined date based glide path is not.
I see absolutely nothing wrong with market timing, then.

If bonds are yielding well below inflation and stocks have an attractive equity risk premium I would absolutely adjust based on long term preferences as set by starting conditions
If it was easy for investors to generate alpha by market timing, IMO active fonds would do better. I'd rather just believe that markets are pretty efficient. YMMV. I guess this isn't really the topic of the thread, so having agreed it is market timing I guess nothing more to say on it.
It’s not about generating alpha; it’s about setting an allocation based on risk/reward preference
We don't agree on definitions I guess. You appear to be trying to get improved risk adjusted returns compared to a neutral allocation. Sounds like alpha.
There’s no such thing as a neutral allocation. The closest thing would be all investable assets held at market weights, which makes zero sense. People have an asset allocation tailored towards preference.

There exists a spectrum of risk tranches across bonds and equities. Sometimes spreads are wide, sometimes narrow, and there’s nothing wrong with allocating to taste
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Da5id
Posts: 5144
Joined: Fri Feb 26, 2016 7:20 am

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

Post by Da5id »

Nathan Drake wrote: Fri Jul 12, 2024 7:54 pm
Da5id wrote: Fri Jul 12, 2024 7:44 pm
Nathan Drake wrote: Fri Jul 12, 2024 7:41 pm
Da5id wrote: Fri Jul 12, 2024 7:37 pm
Nathan Drake wrote: Fri Jul 12, 2024 6:41 pm

I see absolutely nothing wrong with market timing, then.

If bonds are yielding well below inflation and stocks have an attractive equity risk premium I would absolutely adjust based on long term preferences as set by starting conditions
If it was easy for investors to generate alpha by market timing, IMO active fonds would do better. I'd rather just believe that markets are pretty efficient. YMMV. I guess this isn't really the topic of the thread, so having agreed it is market timing I guess nothing more to say on it.
It’s not about generating alpha; it’s about setting an allocation based on risk/reward preference
We don't agree on definitions I guess. You appear to be trying to get improved risk adjusted returns compared to a neutral allocation. Sounds like alpha.
There’s no such thing as a neutral allocation. The closest thing would be all investable assets held at market weights, which makes zero sense. People have an asset allocation tailored towards preference.

There exists a spectrum of risk tranches across bonds and equities. Sometimes spreads are wide, sometimes narrow, and there’s nothing wrong with allocating to taste
In the context of this thread, the topic is International vs US equities. Not bonds or all investable assets. Not gold or crypto or whatever. In that context, a "neutral" or market allocation is presumably agreed to be global weight of equities. You appear to me to believe that, in the equities portion of your portfolio, dynamically setting the percentage of international based on valuations or other signals will provide better risk adjusted returns. To me, that is market timing with an effort to generate alpha. To you it is something else I guess.
Nathan Drake
Posts: 6414
Joined: Mon Apr 11, 2011 12:28 am

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

Post by Nathan Drake »

Da5id wrote: Fri Jul 12, 2024 7:58 pm
Nathan Drake wrote: Fri Jul 12, 2024 7:54 pm
Da5id wrote: Fri Jul 12, 2024 7:44 pm
Nathan Drake wrote: Fri Jul 12, 2024 7:41 pm
Da5id wrote: Fri Jul 12, 2024 7:37 pm

If it was easy for investors to generate alpha by market timing, IMO active fonds would do better. I'd rather just believe that markets are pretty efficient. YMMV. I guess this isn't really the topic of the thread, so having agreed it is market timing I guess nothing more to say on it.
It’s not about generating alpha; it’s about setting an allocation based on risk/reward preference
We don't agree on definitions I guess. You appear to be trying to get improved risk adjusted returns compared to a neutral allocation. Sounds like alpha.
There’s no such thing as a neutral allocation. The closest thing would be all investable assets held at market weights, which makes zero sense. People have an asset allocation tailored towards preference.

There exists a spectrum of risk tranches across bonds and equities. Sometimes spreads are wide, sometimes narrow, and there’s nothing wrong with allocating to taste
In the context of this thread, the topic is International vs US equities. Not bonds or all investable assets. Not gold or crypto or whatever. In that context, a "neutral" or market allocation is presumably agreed to be global weight of equities. You appear to me to believe that, in the equities portion of your portfolio, dynamically setting the percentage of international based on valuations or other signals will provide better risk adjusted returns. To me, that is market timing with an effort to generate alpha. To you it is something else I guess.
No, a market neutral strategy would include bonds and not just equities, at a minimum.

It makes little sense for an early accumulator to hold a market neutral approach

Valuations are a proxy for risk and return. If one asset class has 2x the valuations it’s less risky with lower expected returns than another. I can have a preference for either the former or the latter
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Da5id
Posts: 5144
Joined: Fri Feb 26, 2016 7:20 am

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

Post by Da5id »

Nathan Drake wrote: Fri Jul 12, 2024 8:03 pm
Da5id wrote: Fri Jul 12, 2024 7:58 pm
Nathan Drake wrote: Fri Jul 12, 2024 7:54 pm
Da5id wrote: Fri Jul 12, 2024 7:44 pm
Nathan Drake wrote: Fri Jul 12, 2024 7:41 pm

It’s not about generating alpha; it’s about setting an allocation based on risk/reward preference
We don't agree on definitions I guess. You appear to be trying to get improved risk adjusted returns compared to a neutral allocation. Sounds like alpha.
There’s no such thing as a neutral allocation. The closest thing would be all investable assets held at market weights, which makes zero sense. People have an asset allocation tailored towards preference.

There exists a spectrum of risk tranches across bonds and equities. Sometimes spreads are wide, sometimes narrow, and there’s nothing wrong with allocating to taste
In the context of this thread, the topic is International vs US equities. Not bonds or all investable assets. Not gold or crypto or whatever. In that context, a "neutral" or market allocation is presumably agreed to be global weight of equities. You appear to me to believe that, in the equities portion of your portfolio, dynamically setting the percentage of international based on valuations or other signals will provide better risk adjusted returns. To me, that is market timing with an effort to generate alpha. To you it is something else I guess.
No, a market neutral strategy would include bonds and not just equities, at a minimum.

It makes little sense for an early accumulator to hold a market neutral approach

Valuations are a proxy for risk and return. If one asset class has 2x the valuations it’s less risky with lower expected returns than another. I can have a preference for either the former or the latter
I disagree, but don't see any point in further discussion.
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