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

[BizarroJerry]

What this tells me coincides with my original hypothesis. All the “for “ points tend to be best argued/supported when talking about withdrawals and decumulation (i.e. smoothing out volatility, providing longer sequence of withdrawals etc. preserving money as a diversifier). We can agree on that. But during accumulation, where one likely continues to DCA and does not just lump sum an amount into a time period and begin to withdraw or wait and never invest another dollar, it seems there have been more times than not where exUS has both hampered one’s returns because it pulls back the run up during US outperformance periods and also does not meaningfully protect against the downside (and usually recovers slower) against US downturns. It simply offers as a diversifier to lower volatility and smooth out the portfolio, but it is best served once a portfolio reaches critical mass in my opinion. If I had already “hit my number” it would make more sense to have some in international to smooth out the decumulation phase and have different buckets to draw from, but when trying to get there I want to bet on the fastest horse. Outperforming by 6-7% over a specific decade and then in another decade giving back those gains and then some, becoming noise and overall mostly holding back the portfolio, in my opinion, is not worth the lower volatility exUS offers when one has 30 years to invest.

As far as holding something other than market cap weight, if you are tilting anything at all you are contradicting a common argument by exUS apologists that owning 100% US is performance chasing. If you repeat your sentence about emerging markets and replace the words emerging markets with US stocks, would you feel the same way?

It’s not just about decumulation.

The arguments are the same regardless. There’s zero guarantee that the US avoids a multi decade period of poor performance and does not meaningfully recover.

If US equities go from CAPE of 40 to CAPE 10 over a period of decades while the US dollar falters, a 100% US only MCW, retirement may be impossible despite someone’s best efforts without meaningful reductions in quality of life.

It’s happened to many other single countries, including those that are highly developed, it’s certainly not impossible for the US

But even if that happens, and there is still a differentiation to be made here between any country you name and the one with a world reserve currency as they historically will not behave the same or lose their status as such without a massive global conflict, during the times of multi decade poor US performance having 30-40% in exUS only gave you a 6-7% maybe 15% maximum better return, and that was only when being born/retiring at two very specific time points in US history. So in the worst of times you ended up with 15% less going 100% US, which did not make or break you, and at the best of times you ended up with multiples more by going 100% US, to the point where even a big drawdown would still leave you with a higher balance than a global market capper experiencing the same drawdown. And over the long, long, long term, they have the same returns. That, to me, does not indicate going 100% US to lead to sure and total ruin and Global Market Cap to lead to a scrooge mcduck scenario, but that is the way it is sold to folks. I seem to think it moreso does not matter until the US loses their world reserve currency status. If you already have international, no need to change.

[Nathan Drake]

It’s not just about decumulation.

The arguments are the same regardless. There’s zero guarantee that the US avoids a multi decade period of poor performance and does not meaningfully recover.

If US equities go from CAPE of 40 to CAPE 10 over a period of decades while the US dollar falters, a 100% US only MCW, retirement may be impossible despite someone’s best efforts without meaningful reductions in quality of life.

It’s happened to many other single countries, including those that are highly developed, it’s certainly not impossible for the US

But even if that happens, and there is still a differentiation to be made here between any country you name and the one with a world reserve currency as they historically will not behave the same or lose their status as such without a massive global conflict, during the times of multi decade poor US performance having 30-40% in exUS only gave you a 6-7% maybe 15% maximum better return, and that was only when being born/retiring at two very specific time points in US history. So in the worst of times you ended up with 15% less going 100% US, which did not make or break you, and at the best of times you ended up with multiples more by going 100% US, to the point where even a big drawdown would still leave you with a higher balance than a global market capper experiencing the same drawdown. And over the long, long, long term, they have the same returns. That, to me, does not indicate going 100% US to lead to sure and total ruin and Global Market Cap to lead to a scrooge mcduck scenario.

The British pound at one point had exactly the same world reserve currency status.

Why do you think world reserve currency status is something not at risk? Even if it remains, any marginal competition that lessens its role can prove devastating

And no, it wasn’t 6-7% higher return in 1966-1982. Why are you assuming the 2000-2013 period is the only possibility?

Truth is, you cannot look at a backtest and say with any confidence what will happen in the future

[BizarroJerry]

But even if that happens, and there is still a differentiation to be made here between any country you name and the one with a world reserve currency as they historically will not behave the same or lose their status as such without a massive global conflict, during the times of multi decade poor US performance having 30-40% in exUS only gave you a 6-7% maybe 15% maximum better return, and that was only when being born/retiring at two very specific time points in US history. So in the worst of times you ended up with 15% less going 100% US, which did not make or break you, and at the best of times you ended up with multiples more by going 100% US, to the point where even a big drawdown would still leave you with a higher balance than a global market capper experiencing the same drawdown. And over the long, long, long term, they have the same returns. That, to me, does not indicate going 100% US to lead to sure and total ruin and Global Market Cap to lead to a scrooge mcduck scenario.

The British pound at one point had exactly the same world reserve currency status.

Why do you think world reserve currency status is something not at risk? Even if it remains, any marginal competition that lessens its role can prove devastating

It is always a risk, but it is not a risk that will happen upon waking up tomorrow. Each time in history it has happened with a global conflict that basically brought all markets down and then the new winner’s markets rose out of the ashes over time. If there was ever a global conflict, US stocks would not go to zero while exUS doubles… they would all go down. If at that point one were still able to invest, they should probably then just invest new money into exUS from then on since their portfolio would have been cut in half either way.

[BizarroJerry]

But even if that happens, and there is still a differentiation to be made here between any country you name and the one with a world reserve currency as they historically will not behave the same or lose their status as such without a massive global conflict, during the times of multi decade poor US performance having 30-40% in exUS only gave you a 6-7% maybe 15% maximum better return, and that was only when being born/retiring at two very specific time points in US history. So in the worst of times you ended up with 15% less going 100% US, which did not make or break you, and at the best of times you ended up with multiples more by going 100% US, to the point where even a big drawdown would still leave you with a higher balance than a global market capper experiencing the same drawdown. And over the long, long, long term, they have the same returns. That, to me, does not indicate going 100% US to lead to sure and total ruin and Global Market Cap to lead to a scrooge mcduck scenario.

The British pound at one point had exactly the same world reserve currency status.

Why do you think world reserve currency status is something not at risk? Even if it remains, any marginal competition that lessens its role can prove devastating

And no, it wasn’t 6-7% higher return in 1966-1982. Why are you assuming the 2000-2013 period is the only possibility?

Truth is, you cannot look at a backtest and say with any confidence what will happen in the future

Well backtests are all people like Ben Felix use to justify exUS exposure. And if you are using evidence of a time’s existence as support for the argument, then the value of said time needs to also be looked at i.e. by how much did it outperform? During its best case historical example, how much better did it actually do for you. So we can see concrete examples as opposed to the non actionable, academic pontifications we usually see from folks trying to sell international funds.

Also, can you tell me what the return was from 1966-1982 (16 years, so not multi decade but definitely the longest recent example we have) if an investor invested $1000 in 100% US and then continued to DCA monthly from 1966-1982, versus one who invested in global market cap and did the same during that timeframe? As opposed to a lump sum.

[Nathan Drake]

The British pound at one point had exactly the same world reserve currency status.

Why do you think world reserve currency status is something not at risk? Even if it remains, any marginal competition that lessens its role can prove devastating

It is always a risk, but it is not a risk that will happen upon waking up tomorrow. Each time in history it has happened with a global conflict that basically brought all markets down and then the new winner’s markets rose out of the ashes over time. If there was ever a global conflict, US stocks would not go to zero while exUS doubles… they would all go down. If at that point one were still able to invest, they should probably then just invest new money into exUS from then on since their portfolio would have been cut in half either way.

Why is your imagination only limited to the last century of financial markets?

Why do you think a global conflict is the only catalyst for weakening reserve currency status?

This is the problem with many of these 100% US arguments, they rely heavily on survivorship bias of a known winner to continue doing what it has in the past and fails to consider that all the financial backtests in the world will tell you almost nothing about what will happen during your specific future time horizon

Global real returns have been 5%. US has been about 6%, with a major caveat that this has only been 1% better immediately after two large wars and in the last decade (which may be given back). What’s the point of chasing 1% extra if it exposes you to twice the risk of failure?

[BizarroJerry]

It is always a risk, but it is not a risk that will happen upon waking up tomorrow. Each time in history it has happened with a global conflict that basically brought all markets down and then the new winner’s markets rose out of the ashes over time. If there was ever a global conflict, US stocks would not go to zero while exUS doubles… they would all go down. If at that point one were still able to invest, they should probably then just invest new money into exUS from then on since their portfolio would have been cut in half either way.

Why is your imagination only limited to the last century of financial markets?

Why do you think a global conflict is the only catalyst for weakening reserve currency status?

This is the problem with many of these 100% US arguments, they rely heavily on survivorship bias of a known winner to continue doing what it has in the past and fails to consider that all the financial backtests in the world will tell you almost nothing about what will happen during your specific future time horizon

Global real returns have been 5%. US has been about 6%, with a major caveat that this has only been 1% better immediately after two large wars and in the last decade (which may be given back). What’s the point of chasing 1% extra if it exposes you to twice the risk of failure?

This is predicated on the assumption that that 1% MUST be given back as if it is a scientific law. It could never be given back as a possibility as well.

Also we are talking about the last 100-150 years because that is the only time frame where the common person (and very little up until the last 50-60 years) had access to be able to even buy stocks. The markets behaved differently hundreds of years ago when only a select few elite and countries, etc. were able to buy stocks and most common people did not own them.

[Nathan Drake]

Why is your imagination only limited to the last century of financial markets?

Why do you think a global conflict is the only catalyst for weakening reserve currency status?

This is the problem with many of these 100% US arguments, they rely heavily on survivorship bias of a known winner to continue doing what it has in the past and fails to consider that all the financial backtests in the world will tell you almost nothing about what will happen during your specific future time horizon

Global real returns have been 5%. US has been about 6%, with a major caveat that this has only been 1% better immediately after two large wars and in the last decade (which may be given back). What’s the point of chasing 1% extra if it exposes you to twice the risk of failure?

This is predicated on the assumption that that 1% MUST be given back as if it is a scientific law. It could never be given back as a possibility as well.

No, it’s not. Over a long enough sample, it can still outperform by 1% and yet have a higher failure rate because the sequence of returns matters

[BizarroJerry]

This is predicated on the assumption that that 1% MUST be given back as if it is a scientific law. It could never be given back as a possibility as well.

No, it’s not. Over a long enough sample, it can still outperform by 1% and yet have a higher failure rate because the sequence of returns matters

Okay so you are using samples to support that statement, correct? Backtested timeframes?

[Nathan Drake]

No, it’s not. Over a long enough sample, it can still outperform by 1% and yet have a higher failure rate because the sequence of returns matters

Okay so you are using samples to support that statement, correct? Backtested timeframes?

Yes. Backtests aren’t worthless, but their limitations need to be taken in context.

An investor from 1950-2018 did not capture the suggested US premium. So any arguments about US outperformance need to acknowledge the extremely small time period they needed to be invested in US markets to capture it.

Were they lucky enough to be invested in 1946-1950?

[BizarroJerry]

Okay so you are using samples to support that statement, correct? Backtested timeframes?

Yes. Backtests aren’t worthless, but their limitations need to be taken in context.

An investor from 1950-2018 did not capture the suggested US premium. So any arguments about US outperformance need to acknowledge the extremely small time period they needed to be invested in US markets to capture it.

Were they lucky enough to be invested in 1946-1950?

I agree backtests are not worthless, I just wanted to clarify where you stood on them, because above you stated, “Truth is, you cannot look at a backtest and say with any confidence what will happen in the future.”

I agree with you on the value of backtests, so I would then logically say that the outcome of these backtests must then be looked at to determine how much better global market cappers did during these times than USers in actuality. We cannot say that backtests are valuable but then disregard the outcomes of said backtests and say the outcomes are unimportant. When we look at how well global market cappers did versus 100% US during the backtested time periods specifically used as the poster children for advocating for exUS, we see it made a tiny difference at best one way or the other if you kept DCAing and you were fine either way.

[Nathan Drake]

Yes. Backtests aren’t worthless, but their limitations need to be taken in context.

An investor from 1950-2018 did not capture the suggested US premium. So any arguments about US outperformance need to acknowledge the extremely small time period they needed to be invested in US markets to capture it.

Were they lucky enough to be invested in 1946-1950?

I agree backtests are not worthless, I just wanted to clarify where you stood on them, because above you stated, “Truth is, you cannot look at a backtest and say with any confidence what will happen in the future.”

I agree with you on the value of backtests, so I would then logically say that the outcome of these backtests must then be looked at to determine how much better global market cappers did during these times than USers in actuality. We cannot say that backtests are valuable but then disregard the outcomes of said backtests and say the outcomes are unimportant. When we look at how well global market cappers did versus 100% US during the backtested time periods specifically used as the poster children for advocating for exUS, we see it made a tiny difference at best one way or the other if you kept DCAing and you were fine either way.

As mentioned previously, the difference from 1966-1990 was not tiny

And the difference for a Japanese only investor from 1990-2024 thinking they should be 100% Japan because it outperformed massively from 1950-1990 was not tiny either, they made an enormous mistake by not being more diversified

[BizarroJerry]

I agree backtests are not worthless, I just wanted to clarify where you stood on them, because above you stated, “Truth is, you cannot look at a backtest and say with any confidence what will happen in the future.”

I agree with you on the value of backtests, so I would then logically say that the outcome of these backtests must then be looked at to determine how much better global market cappers did during these times than USers in actuality. We cannot say that backtests are valuable but then disregard the outcomes of said backtests and say the outcomes are unimportant. When we look at how well global market cappers did versus 100% US during the backtested time periods specifically used as the poster children for advocating for exUS, we see it made a tiny difference at best one way or the other if you kept DCAing and you were fine either way.

As mentioned previously, the difference from 1966-1990 was not tiny

And the difference for a Japanese only investor from 1990-2024 thinking they should be 100% Japan because it outperformed massively from 1950-1990 was not tiny either, they made an enormous mistake by not being more diversified

If one started investing in 1990 and continued to DCA into Japan from 1990-2024 they would be happy today no?

Also, you mentioned the difference from 1966-1990 was not tiny,
I have yet to find where that may be found or see the actual numbers for that time period. Do you have them?

[Nathan Drake]

As mentioned previously, the difference from 1966-1990 was not tiny

And the difference for a Japanese only investor from 1990-2024 thinking they should be 100% Japan because it outperformed massively from 1950-1990 was not tiny either, they made an enormous mistake by not being more diversified

If one started investing in 1990 and continued to DCA into Japan from 1990-2024 they would be happy today no?

Also, you mentioned the difference from 1966-1990 was not tiny,
I have yet to find where that may be found or see the actual numbers for that time period. Do you have them?

Relative to a global investor, a Japanese investor that DCA did significantly worse. The Japanese index has gone nowhere for decades. DCA’ing into that falling knife did not save you.

Here’s a picture starting in 1970

[comeinvest]

I don't know if it's just me; but I feel that the last few dozen pages were almost entirely circular repetitions of what was said on the first few dozen pages of this thread, lol

[Tom_T]

I don't know if it's just me; but I feel that the last few dozen pages were almost entirely circular repetitions of what was said on the first few dozen pages of this thread, lol

It's not just you. There are no new arguments to make. We simply have a small number of people who cannot leave this subject alone without having the last word. The best part is that no matter what happens over the next ten years, one side or the other will say it doesn't matter - so nobody is ever wrong!

[Da5id]

I don't know if it's just me; but I feel that the last few dozen pages were almost entirely circular repetitions of what was said on the first few dozen pages of this thread, lol

It's not just you. There are no new arguments to make. We simply have a small number of people who cannot leave this subject alone without having the last word. The best part is that no matter what happens over the next ten years, one side or the other will say it doesn't matter - so nobody is ever wrong!

This used to happen in different threads. It is the same phenomena, just concentrated into one thread. Which I think is an improvement , just like concentrating I-bond stuff when it was all over a few years ago into one thread was a win. On the one hand it is very repetitive. On the other hand, I think people who aren't part of this particular back and forth can

1) more easily avoid it the topic they want to
2) see the arguments in the original post (as it is often on the front page of bogleheads)
3) see the rehash of many of those arguments in the last 100 posts (dunno if that is actually useful, but at least it keeps it out of other threads)
4) be, like you, incredulous spectators who can't seem to ignore this highly repetitive topic even if they have nothing left to learn about it :p

[watchnerd]

Think of Japan in the 1980s-1990s:

Anyone who stuck with a Japan-centric stock investing strategy for too long based on past results got crushed.

My thinking of how it would be a bad idea to invest in a country that is very heavily dependent on imports for raw materials, energy, vs the land of milk and honey is probably a simpleton way of me justifying how investing 100% in the Nikkei is quite different than the Sp500…I’m a simpleton I guess.

By that criteria, you wouldn't have invested in UK stocks at the height of the British Empire and industrial revolution in the 19th century and left a lot of money on the table.

[watchnerd]

I don't know if it's just me; but I feel that the last few dozen pages were almost entirely circular repetitions of what was said on the first few dozen pages of this thread, lol

Yes, because all points of view except the global market cap are full of internal contradictions and logic holes.

So people have to keep debating to paper over their cognitive bias and re-justify their faith in their current stance.

[watchnerd]

I don't know if it's just me; but I feel that the last few dozen pages were almost entirely circular repetitions of what was said on the first few dozen pages of this thread, lol

It's not just you. There are no new arguments to make. We simply have a small number of people who cannot leave this subject alone without having the last word. The best part is that no matter what happens over the next ten years, one side or the other will say it doesn't matter - so nobody is ever wrong!

The funny part is that there is a decent chance over the next 10 years that stocks turn out to underperform other assets entirely.

If we get a repeat of 1970s persistent inflation, then Money Market Fund and TIPS have a decent chance of beating stocks, no matter what US vs ex-US split you have.

Then the bond and cash zealots get to mock all the stock die hards for buying at high prices when earnings yields were near all time historic lows (like they are now).

[seajay]

It's not just you. There are no new arguments to make. We simply have a small number of people who cannot leave this subject alone without having the last word. The best part is that no matter what happens over the next ten years, one side or the other will say it doesn't matter - so nobody is ever wrong!

The funny part is that there is a decent chance over the next 10 years that stocks turn out to underperform other assets entirely.

If we get a repeat of 1970s persistent inflation, then Money Market Fund and TIPS have a decent chance of beating stocks, no matter what US vs ex-US split you have.

Then the bond and cash zealots get to mock all the stock die hards for buying at high prices when earnings yields were near all time historic lows (like they are now).

Also funny that those that advocate broad diversity of assets, may then propose that you concentrate into just one group of assets. Owning a home + imputed rent is somewhat stock + dividends like, combine that with domestic stocks + international stocks ... as your 'equity' allocation. Combine T-Bills with bonds and gold as your 'bond' allocation. Initial equal weightings of those = 50/50 "equities" and "bonds". Rebalancing or not, can yield similar overall outcomes, with non rebalanced the tendency is towards ending up with a high weighting in the asset(s) that performed the best, low weighting in the assets that performed poorly. If you leave your home value non-rebalanced, rebalance the remainder US stocks, Int Stocks, cash, bonds, gold - that's generally fine. The collective of that is inclined to be a less volatile middle road portfolio value, in contrast to the individuals that wax and wane in some cases significantly - that opens up debates such as comparisons of outcome via selected time periods when one asset performed exceptionally well, or poorly.


UK data chart, British RPI (inflation) adjusted

Have reasonable expectations, a 3.33% 30 year return of your inflation adjusted capital, supplement that with additional withdrawals if/when the portfolio value has, as more often will be the case, performed relatively well.

Some may lose out via over-analysis paralysis or repeated profit-chasing (changes) .... "if you held this tilt instead then the rewards were greater" (over a particular period). Or "results were lousy if you held this asset" (again over a particular period). Fundamentally concentration risk is the major risk factor, easily diluted.

[watchnerd]

The funny part is that there is a decent chance over the next 10 years that stocks turn out to underperform other assets entirely.

If we get a repeat of 1970s persistent inflation, then Money Market Fund and TIPS have a decent chance of beating stocks, no matter what US vs ex-US split you have.

Then the bond and cash zealots get to mock all the stock die hards for buying at high prices when earnings yields were near all time historic lows (like they are now).

Also funny that those that advocate broad diversity of assets, may then propose that you concentrate into just one group of assets. Owning a home + imputed rent is somewhat stock + dividends like, combine that with domestic stocks + international stocks ... as your 'equity' allocation. Combine T-Bills with bonds and gold as your 'bond' allocation. Initial equal weightings of those = 50/50 "equities" and "bonds". Rebalancing or not, can yield similar overall outcomes, with non rebalanced the tendency is towards ending up with a high weighting in the asset(s) that performed the best, low weighting in the assets that performed poorly. If you leave your home value non-rebalanced, rebalance the remainder US stocks, Int Stocks, cash, bonds, gold - that's generally fine. The collective of that is inclined to be a less volatile middle road portfolio value, in contrast to the individuals that wax and wane in some cases significantly - that opens up debates such as comparisons of outcome via selected time periods when one asset performed exceptionally well, or poorly.


UK data chart, British RPI (inflation) adjusted

Have reasonable expectations, a 3.33% 30 year return of your inflation adjusted capital, supplement that with additional withdrawals if/when the portfolio value has, as more often will be the case, performed relatively well.

Some may lose out via over-analysis paralysis or repeated profit-chasing (changes) .... "if you held this tilt instead then the rewards were greater" (over a particular period). Or "results were lousy if you held this asset" (again over a particular period). Fundamentally concentration risk is the major risk factor, easily diluted.

What is 'House PO' and what is FTAS?

[Andy12345]

I followed this thread pretty close over the last year plus. I might have missed a few hundred posts but still

At the end of the day nothing really persuaded me one way or the other. The majority of my savings are in s and p 500 because that was the cheapest option available when I started saving.

Now I’m putting money into a TD fund which has some international. I really don’t have any idea what I should do besides save. I’ve read articles about determining ones AA but I don’t really have an opinion one way or the other.

With 95% of my savings in US equities I just dont feel compelled to make any large scale shifts to international. Maybe after ten years of putting money into the TD fund my AA will be 80us/20exus or something like that.

Im 40 now. Maybe when I turn 60 I’ll figure out what I’m supposed to do.

[seajay]

Also funny that those that advocate broad diversity of assets, may then propose that you concentrate into just one group of assets. Owning a home + imputed rent is somewhat stock + dividends like, combine that with domestic stocks + international stocks ... as your 'equity' allocation. Combine T-Bills with bonds and gold as your 'bond' allocation. Initial equal weightings of those = 50/50 "equities" and "bonds". Rebalancing or not, can yield similar overall outcomes, with non rebalanced the tendency is towards ending up with a high weighting in the asset(s) that performed the best, low weighting in the assets that performed poorly. If you leave your home value non-rebalanced, rebalance the remainder US stocks, Int Stocks, cash, bonds, gold - that's generally fine. The collective of that is inclined to be a less volatile middle road portfolio value, in contrast to the individuals that wax and wane in some cases significantly - that opens up debates such as comparisons of outcome via selected time periods when one asset performed exceptionally well, or poorly.


UK data chart, British RPI (inflation) adjusted

Have reasonable expectations, a 3.33% 30 year return of your inflation adjusted capital, supplement that with additional withdrawals if/when the portfolio value has, as more often will be the case, performed relatively well.

Some may lose out via over-analysis paralysis or repeated profit-chasing (changes) .... "if you held this tilt instead then the rewards were greater" (over a particular period). Or "results were lousy if you held this asset" (again over a particular period). Fundamentally concentration risk is the major risk factor, easily diluted.

What is 'House PO' and what is FTAS?

British FT All Share stock index, and House Price Only (excluding imputed rent benefit)

[seajay]

Also funny that those that advocate broad diversity of assets, may then propose that you concentrate into just one group of assets. Owning a home + imputed rent is somewhat stock + dividends like, combine that with domestic stocks + international stocks ... as your 'equity' allocation. Combine T-Bills with bonds and gold as your 'bond' allocation. Initial equal weightings of those = 50/50 "equities" and "bonds". Rebalancing or not, can yield similar overall outcomes, with non rebalanced the tendency is towards ending up with a high weighting in the asset(s) that performed the best, low weighting in the assets that performed poorly. If you leave your home value non-rebalanced, rebalance the remainder US stocks, Int Stocks, cash, bonds, gold - that's generally fine. The collective of that is inclined to be a less volatile middle road portfolio value, in contrast to the individuals that wax and wane in some cases significantly - that opens up debates such as comparisons of outcome via selected time periods when one asset performed exceptionally well, or poorly.


UK data chart, British RPI (inflation) adjusted

Have reasonable expectations, a 3.33% 30 year return of your inflation adjusted capital, supplement that with additional withdrawals if/when the portfolio value has, as more often will be the case, performed relatively well.

Some may lose out via over-analysis paralysis or repeated profit-chasing (changes) .... "if you held this tilt instead then the rewards were greater" (over a particular period). Or "results were lousy if you held this asset" (again over a particular period). Fundamentally concentration risk is the major risk factor, easily diluted.

What is 'House PO' and what is FTAS?

It's reasonable to assume that given the exact same social/economic conditions, interest rates, inflation rate, earnings/dividend yields etc. that another might buy a house/stock/bond/gold/etc. for a similar inflation adjusted amount as what you paid for that asset. As might you have done the same when you bought that asset. Individually however each asset can (in some cases considerably) vary around that 'trend' line. Combine multiple assets and the collective deviation is smoothed down. 1960's to 1980 and US stocks lagged others - as Japan grabbed a significant amount of global market share from the US. 1980 to 1999 and that pendulum swung back the other way ...etc.

Some assets are productive. Buy a farm and work the land and that yields dividends. Buy a farm and leave the land idle and you might just get back what you paid for that farm in inflation adjusted terms when you sell it years later. Owning a home avoids having to find/pay rent to others, stocks pay dividends. Gold, cash, bonds are non productive, might just offset inflation.

Owning your own home, domestic stocks, international stocks, cash, bonds, gold ... a equal six way initial split 16.6% each, and you might opt to periodically rebalance, or not. Broadly it doesn't matter - with non rebalanced if you start with 50/50 in two assets you may end with 80/20 weightings ... similar to as though you'd time averaged 65/35 in the better/worse assets. Rebalanced yearly back to 50/50 and the overall rewards might generally compare to that. In practice one or the other will be the better of the two, but that's random - washes.

Owning a home (price only value) and you should really consider the imputed rent benefit that provides.
Own/use credit cards and that might be considered as covering the 'cash' allocation.
Have pension(s) and that might be considered as the 'bond' holdings.
Leaving surplus residual capital to be spread across domestic stocks, international stocks and gold.

It's non viable to rebalance either the home or pensions elements, so leave them as non-rebalanced, just rebalance the liquid assets.

Broadly might be considered as being 50/50 productive/non-productive (domestic stocks, international stocks, house / cash, bonds, gold). Another may rent instead of owning, have no pensions, not use credit cards - and just hold domestic stocks along with a 10 year treasury or other bond asset allocation, from which they have to cover paying their rent and cash flows. It's not unreasonable to assume the broader diversification and more liability matched (imputed rent) is inclined to be the overall safer choice of the two.

We own our own home, have pensions (that are more than enough in 'bonds'), have several credit cards that collectively cover into 5 digit amounts of 'cash'. Living in England and UK midcap stocks, US large cap stocks, gold supplement those 'assets. From a liquid assets perspective 67/33 stock/gold has been superior to 50/50 stock/bonds https://www.portfoliovisualizer.com/bac ... MpF9DNexh7

We could drop the foreign stocks, just hold domestic stocks alone, as might we drop the gold holdings and opt for bonds - but that's tilting the portfolio, expanding concentration risk, is more inclined to see wider deviations - where our primary concern is avoiding to deepest of negative side deviations.

[vv19]

Highly recommend listening to the first half of this podcast and understanding why the “US stocks are overvalued because the traditional metrics imply so” is the wrong way to look at this debate.

In essence, the current mega tech companies are vastly superior to anything we have seen in the history of capitalism which in turn attracts more investments from ex US markets, and that will continue to push the US market higher.

https://podcasts.thecompoundnews.com/sh ... zi-sleeve/

[abuss368]

Hi Tycoon -

Appreciate the response.

What do you invest in on the international side?

Total Stock and S&P 500?

Best.
Tony

No international for me.

Hi Tycoon -

Thank you for the response.

Appears you have a very simple and effective investment portfolio.

The question, and challenge for many investors, if the ability to tune the noise out and stay the course with the markets.

Investors must development and implement a strategy (US or US & International) and stay the course in all types of market environments.

Best.
Tony

[abuss368]

The British pound at one point had exactly the same world reserve currency status.

Why do you think world reserve currency status is something not at risk? Even if it remains, any marginal competition that lessens its role can prove devastating

And no, it wasn’t 6-7% higher return in 1966-1982. Why are you assuming the 2000-2013 period is the only possibility?

Truth is, you cannot look at a backtest and say with any confidence what will happen in the future

Hi Nathan Drake -

A fair question nonetheless regarding the British Pound and world reserve currency status.

I do however think (and perhaps struggle a bit) on what alternative currency would replace the US Dollar.

Perhaps it is more to your point, if I understood correctly, of not replacing the US Dollar, but rather chipping away at that status by other global competitors. That can (and will) have impact.

When you have a moment, please share your thoughts.

Best.
Tony

[abuss368]

Highly recommend listening to the first half of this podcast and understanding why the “US stocks are overvalued because the traditional metrics imply so” is the wrong way to look at this debate.

In essence, the current mega tech companies are vastly superior to anything we have seen in the history of capitalism which in turn attracts more investments from ex US markets, and that will continue to push the US market higher.

https://podcasts.thecompoundnews.com/sh ... zi-sleeve/

Hi vv19 -

I listen to and enjoy all the podcasts from the Ritholtz Wealth Team.

I too at time wonder if this time it is different with markets. But that can be a dangerous road!

Does a global investment approach still as meaningful or have the impact it historically has had? US Global technology is unlike any other market with these companies MINTING money.

Are there any technology companies that are ex-US as dominating (example Samsung)?

However, what I have read, and the Ritholtz Wealth Team has discussed this, is international provides industry (sector) diversification which existed more in the US decades ago but has since shifted to technology companies.

Best.
Tony

[watchnerd]

The British pound at one point had exactly the same world reserve currency status.

Why do you think world reserve currency status is something not at risk? Even if it remains, any marginal competition that lessens its role can prove devastating

And no, it wasn’t 6-7% higher return in 1966-1982. Why are you assuming the 2000-2013 period is the only possibility?

Truth is, you cannot look at a backtest and say with any confidence what will happen in the future

Hi Nathan Drake -

A fair question nonetheless regarding the British Pound and world reserve currency status.

I do however think (and perhaps struggle a bit) on what alternative currency would replace the US Dollar.

Perhaps it is more to your point, if I understood correctly, of not replacing the US Dollar, but rather chipping away at that status by other global competitors. That can (and will) have impact.

When you have a moment, please share your thoughts.

Best.
Tony

There doesn’t have to be a single replacement just an erosion of dominance (which has been happening).

If international trade and globalization decline, and US trade deficits decline, it’s not as necessary for others to hold dollars.

[watchnerd]

Highly recommend listening to the first half of this podcast and understanding why the “US stocks are overvalued because the traditional metrics imply so” is the wrong way to look at this debate.

In essence, the current mega tech companies are vastly superior to anything we have seen in the history of capitalism which in turn attracts more investments from ex US markets, and that will continue to push the US market higher.

https://podcasts.thecompoundnews.com/sh ... zi-sleeve/

Hi vv19 -

I listen to and enjoy all the podcasts from the Ritholtz Wealth Team.

I too at time wonder if this time it is different with markets. But that can be a dangerous road!

Does a global investment approach still as meaningful or have the impact it historically has had? US Global technology is unlike any other market with these companies MINTING money.

Are there any technology companies that are ex-US as dominating (example Samsung)?

However, what I have read, and the Ritholtz Wealth Team has discussed this, is international provides industry (sector) diversification which existed more in the US decades ago but has since shifted to technology companies.

Best.
Tony

TSMC and ASML are very dominant in semi

[gougou]

What happens to these US multinationals when/if China or Europe, for instance, decides it wants to make doing business in their countries harder for them? China is already there. Ask Starbucks how much business it’s lost to Luckin Coffee. If globalization slowly, or quickly, turns into de-globalization, the landscape could look very different. Assuming American investors continue to have access to these markets, I would want part of my portfolio there. I’m as patriotic as the next person, but my money couldn’t care less.

I wouldn’t call this a black swan event, either. To my mind, this is within the realm of real world possibility.

China didn’t really make it more difficult for Starbuck to do business in China. Starbuck is losing out because it couldn’t compete with local companies.

[abuss368]

Hi Nathan Drake -

A fair question nonetheless regarding the British Pound and world reserve currency status.

I do however think (and perhaps struggle a bit) on what alternative currency would replace the US Dollar.

Perhaps it is more to your point, if I understood correctly, of not replacing the US Dollar, but rather chipping away at that status by other global competitors. That can (and will) have impact.

When you have a moment, please share your thoughts.

Best.
Tony

There doesn’t have to be a single replacement just an erosion of dominance (which has been happening).

If international trade and globalization decline, and US trade deficits decline, it’s not as necessary for others to hold dollars.

Hi watchnerd -

Appears to be a slippery (and possible threat to way of life) slope indeed.

I would assume when countries such as Russia and China announce deals in different currency.

Saudi Arabia the same in terms of oil deals.

Is this what you are referring too?

Best.
Tony

[cosmos]

There doesn’t have to be a single replacement just an erosion of dominance (which has been happening).

If international trade and globalization decline, and US trade deficits decline, it’s not as necessary for others to hold dollars.

Hi watchnerd -

Appears to be a slippery (and possible threat to way of life) slope indeed.

I would assume when countries such as Russia and China announce deals in different currency.

Saudi Arabia the same in terms of oil deals.

Is this what you are referring too?

Best.
Tony

There is alot of bluster about 100% tariffs on those BRIC nations for precisely this as of late in the news.

I have no idea where the wind will blow globally so best to own the whole basket.

[Clarky]

What happens to these US multinationals when/if China or Europe, for instance, decides it wants to make doing business in their countries harder for them? China is already there. Ask Starbucks how much business it’s lost to Luckin Coffee. If globalization slowly, or quickly, turns into de-globalization, the landscape could look very different. Assuming American investors continue to have access to these markets, I would want part of my portfolio there. I’m as patriotic as the next person, but my money couldn’t care less.

I wouldn’t call this a black swan event, either. To my mind, this is within the realm of real world possibility.

China didn’t really make it more difficult for Starbuck to do business in China. Starbuck is losing out because it couldn’t compete with local companies.

OK, that wasn’t a great example, perhaps, but the business environment has gotten bad enough that the Chinese government felt the need to reassure foreign businesses… Except I guess they still reserve the right to arrest and detain employees of foreign companies, depending on the weather.

[abuss368]

China didn’t really make it more difficult for Starbuck to do business in China. Starbuck is losing out because it couldn’t compete with local companies.

Hi gougou -

What about the impact of the Luckin Coffee accounting fraud scandal a few years ago?

Best.
Tony

[gougou]

China didn’t really make it more difficult for Starbuck to do business in China. Starbuck is losing out because it couldn’t compete with local companies.

Hi gougou -

What about the impact of the Luckin Coffee accounting fraud scandal a few years ago?

Best.
Tony

I don’t follow it closely, but from my understanding there was accounting fraud that overstated their revenue. But they also run a very strong coffee shop business which is aggressive and competitive.

It’s interesting that Luckin Coffee is planning to expand in the US and sell coffees for $2 to $3 a cup.

[watchnerd]

There doesn’t have to be a single replacement just an erosion of dominance (which has been happening).

If international trade and globalization decline, and US trade deficits decline, it’s not as necessary for others to hold dollars.

Hi watchnerd -

Appears to be a slippery (and possible threat to way of life) slope indeed.

I would assume when countries such as Russia and China announce deals in different currency.

Saudi Arabia the same in terms of oil deals.

Is this what you are referring too?

Best.
Tony

It could be all sorts of reasons that change trade flows

[abuss368]

Hi gougou -

What about the impact of the Luckin Coffee accounting fraud scandal a few years ago?

Best.
Tony

I don’t follow it closely, but from my understanding there was accounting fraud that overstated their revenue. But they also run a very strong coffee shop business which is aggressive and competitive.

It’s interesting that Luckin Coffee is planning to expand in the US and sell coffees for $2 to $3 a cup.

Hi gougou -

Selling coffees in the US for $2.00 - $3.00 a cup would definitely provide a competitive threat to Starbucks and probably Dunkin Donuts to start.

Best.
Tony

[abuss368]

Hi watchnerd -

Appears to be a slippery (and possible threat to way of life) slope indeed.

I would assume when countries such as Russia and China announce deals in different currency.

Saudi Arabia the same in terms of oil deals.

Is this what you are referring too?

Best.
Tony

It could be all sorts of reasons that change trade flows

Hi watchnerd -

Agreed. Trade flows can be fluid and ever changing just like cash flows.

For this reason global investors are comfortable investing in both the US and International companies.

Best.
Tony

[Firemenot]

The arguments will be:

1. Pro ex-US: Stay the course, as International one day "may" revert to the mean, and make up for the decades of under performance. One day... perhaps soon, perhaps when you are long dead, this might happen. You believe this or you don't.
2. Pro US only: USA is exceptional, and has unique advantages (entrepreneurial culture, top notch education, comparatively low regulation, geographic advantages), which explain its sustained performance. You either believe this or you don't.

Curious — which do you believe? I’d always believed #1 based on the very long-term stock data, but the fact that almost all the global mega tech companies are US-listed has me seriously questioning this. Especially since the rise of Big Tech seems to roughly correspond to US out-performance.

[Tom_T]

There's another argument that even if international beats U.S. at some point, maybe it's not worth it. i.e. if you're 100% U.S., and international outperforms for a brief time, who cares? (I don't know that I believe this. It's a devil's advocate argument.)

Another way of saying this is, how long does international have to win in order to make up for the many years of losses?

[vv19]

There's another argument that even if international beats U.S. at some point, maybe it's not worth it. i.e. if you're 100% U.S., and international outperforms for a brief time, who cares? (I don't know that I believe this. It's a devil's advocate argument.)

Another way of saying this is, how long does international have to win in order to make up for the many years of losses?

Good call out. Total international has returned a total of around 25% in the last 15 years or so. In the same time, VTI has gone up more than 4x. It would take multiple decades of US underperformance for exUS to bridge that gap.

[watchnerd]

There's another argument that even if international beats U.S. at some point, maybe it's not worth it. i.e. if you're 100% U.S., and international outperforms for a brief time, who cares? (I don't know that I believe this. It's a devil's advocate argument.)

Another way of saying this is, how long does international have to win in order to make up for the many years of losses?

Starting when?

And how big is the future outperformance?

[Beensabu]

Total international has returned a total of around 25% in the last 15 years or so. In the same time, VTI has gone up more than 4x.

It's called a bubble.

[vv19]

Total international has returned a total of around 25% in the last 15 years or so. In the same time, VTI has gone up more than 4x.

It's called a bubble.

If you say so.

[Nathan Drake]

There's another argument that even if international beats U.S. at some point, maybe it's not worth it. i.e. if you're 100% U.S., and international outperforms for a brief time, who cares? (I don't know that I believe this. It's a devil's advocate argument.)

Another way of saying this is, how long does international have to win in order to make up for the many years of losses?

Good call out. Total international has returned a total of around 25% in the last 15 years or so. In the same time, VTI has gone up more than 4x. It would take multiple decades of US underperformance for exUS to bridge that gap.

Let’s not lie to try and make your point

Total international has doubled its starting value, not 25%.

https://testfol.io/?s=5RXve1y7GFm

[vv19]

Good call out. Total international has returned a total of around 25% in the last 15 years or so. In the same time, VTI has gone up more than 4x. It would take multiple decades of US underperformance for exUS to bridge that gap.

Let’s not lie to try and make your point

Total international has doubled its starting value, not 25%.

https://testfol.io/?s=5RXve1y7GFm

Why would I need to lie when the truth is in plain sight? VTIAX was ~ $26 or so in Dec 2010, it closed ~ $33. I am sure you can do the math.
https://www.google.com/finance/quote/VT ... window=MAX

[Nathan Drake]

Let’s not lie to try and make your point

Total international has doubled its starting value, not 25%.

https://testfol.io/?s=5RXve1y7GFm

Why would I need to lie when the truth is in plain sight? VTIAX was ~ $26 or so in Dec 2010, it closed ~ $33. I am sure you can do the math.
https://www.google.com/finance/quote/VT ... window=MAX

I’m sure you can do the math yourself to understand that price movements are not the sole source of return

[Tamalak]

Good call out. Total international has returned a total of around 25% in the last 15 years or so. In the same time, VTI has gone up more than 4x. It would take multiple decades of US underperformance for exUS to bridge that gap.

Let’s not lie to try and make your point

Total international has doubled its starting value, not 25%.

https://testfol.io/?s=5RXve1y7GFm

Sure, but if we measure before the GFC, international has had ZERO!!! real returns in 17 years:

https://testfol.io/?s=0QkUL1XHMJr

I'm still holding. I lean on the EMH. But the performance of international has been shockingly pathetic. So much so that I'm starting to doubt the EMH. If you spin the roulette wheel 17 times and it's red 15 of those times, shouldn't you doubt?

[vv19]

Why would I need to lie when the truth is in plain sight? VTIAX was ~ $26 or so in Dec 2010, it closed ~ $33. I am sure you can do the math.
https://www.google.com/finance/quote/VT ... window=MAX

I’m sure you can do the math yourself to understand that price movements are not the sole source of return

Going with that logic, US equities have gone up 7x while the exUS has doubled. Wow, man, you made a great point there.

https://testfol.io/?s=3CA2OkaNDkd