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

[Vulcan]

TL;DR: are we still looking for pro-diversification arguments?

No, we've moved on to performance chasing.

Which this graph also suits!

Any "why not 100% international" threads yet?

[watchnerd]

No, we've moved on to performance chasing.

Which this graph also suits!

Any "why not 100% international" threads yet?

You can start one!

[LadyGeek]

Let's keep this to one thread.

[like2read]

YTD:

EFA = 9%
HEFA= 4%
DXY = (5%)

Punchline:

==> More than half of Int'l return YTD is from falling dollar.

One reason I diversify internationally is to hedge currency risk. It is working.

+1

[TextualChocolate]

Just to counter a bit the ExUS gloating… looking at the 2000-10 period, the most recent decade of sustained ExUS outperformance, a 50/50 US LCG/SCV portfolio beat a 70/30 US/ExUS portfolio, as well as 100% ExUS

https://www.portfoliovisualizer.com/bac ... 83lcrh569V

Corporate HQ is not a Fama French factor

[index245]

Delete

[CraigTester]

Just to counter a bit the ExUS gloating… looking at the 2000-10 period, the most recent decade of sustained ExUS outperformance, a 50/50 US LCG/SCV portfolio beat a 70/30 US/ExUS portfolio, as well as 100% ExUS

https://www.portfoliovisualizer.com/bac ... 83lcrh569V

Corporate HQ is not a Fama French factor

Naw.... Just need to end your backtest at any point from Jun 2007 to July 2008 to keep the ExUS gloating rolling on...

[Beensabu]

Just to counter a bit the ExUS gloating… looking at the 2000-10 period, the most recent decade of sustained ExUS outperformance, a 50/50 US LCG/SCV portfolio beat a 70/30 US/ExUS portfolio, as well as 100% ExUS

I don't know if you noticed, but small cap is taking a bit of a dump at the moment. Small growth (nearly to correction territory) more so than value, but still...

[TextualChocolate]

Just to counter a bit the ExUS gloating… looking at the 2000-10 period, the most recent decade of sustained ExUS outperformance, a 50/50 US LCG/SCV portfolio beat a 70/30 US/ExUS portfolio, as well as 100% ExUS

https://www.portfoliovisualizer.com/bac ... 83lcrh569V

Corporate HQ is not a Fama French factor

Naw.... Just need to end your backtest at any point from Jun 2007 to July 2008 to keep the ExUS gloating rolling on...

100% ExUS underperforms through December 2008…

[TextualChocolate]

Just to counter a bit the ExUS gloating… looking at the 2000-10 period, the most recent decade of sustained ExUS outperformance, a 50/50 US LCG/SCV portfolio beat a 70/30 US/ExUS portfolio, as well as 100% ExUS

I don't know if you noticed, but small cap is taking a bit of a dump at the moment. Small growth (nearly to correction territory) more so than value, but still...

We’re not even 3 months into the year!
But agree, SCG is generally trash … SCV where it’s at historically… LCV doing ok recently

[Beensabu]

But agree, SCG is generally trash … SCV where it’s at historically… LCV doing ok recently

I don't think it's trash.

SCV is down as much as TSM this dip, btw. You kind of have to look at the historical context of past performance, and not just market conditions but whether that asset class was under/over valued at the time (and how much).

[Always passive]

[Thread merged into here --admin LadyGeek]

Do these performance results once and for all point to the fact that global diversification is really important and the point that some make that investing only in the S&P 500 is far from right!
Any comments??

[watchnerd]

Do these performance results once and for all points to global diversification and the point that investing only in the S&P 500 is not enough!
Any comments??

This should go in the existing US vs International thread.

But my short answer, despite being a holder of global market cap:

It just adds to the pile of existing data. So far, it's a short period of outperformance.

[PeaceLily]

A quote that I've been thinking about recently,

"One must wait until the evening to see how splendid the day has been" Sophocles

Once it is all said and done it will be interesting to see what would have been best, % international, but for now I stick to my IPS which does not include international until a certain invested amount.

[barnaclebob]

Only another decade of this and they might be even lol. I've kept my international allocation and every time I've opened up my account to see what the damage is, its been less than i thought so probably some dampening from international and bonds helping out.

Soon we may even see "100% international?" threads.

[HighLonesome]

Do these performance results once and for all point to the fact that global diversification is really important and the point that some make that investing only in the S&P 500 is far from right!
Any comments??

You are basing your investment criteria on 70 days of data? Um OK.

[Rhino01]

An immutable thread title if there ever was one.

[toddthebod]

Do these performance results once and for all point to the fact that global diversification is really important and the point that some make that investing only in the S&P 500 is far from right!
Any comments??

I've been saving for retirement for more than two months.

[fulltilt]

Only another decade of this and they might be even lol. I've kept my international allocation and every time I've opened up my account to see what the damage is, its been less than i thought so probably some dampening from international and bonds helping out.

Soon we may even see "100% international?" threads.

Interesting idea that might just work.

From my experience, international is kind of a hybrid investment.

It has the volatility of stocks and the returns of bonds.

[LadyGeek]

I merged Always passive's thread into the ongoing discussion.

(Thanks to the member who reported the post and explained what's wrong.)

[stan1]

Are folks with lots of Int'l saying things like, "because Int'l valuations are already so low, they probably don't have that far to fall....So a downturn just let's me reinvest more fat dividends at better prices..."

To me, what I'm hoping is that some expensive "insurance" I've been carrying (ex US investments) will pay out. Same as someone who held gold for decades. I took the "insurance" view of post-2008 diversificaiton with ex US years ago (along with having it in taxable accounts so harder to change my mind).

[watchnerd]

Only another decade of this and they might be even lol. I've kept my international allocation and every time I've opened up my account to see what the damage is, its been less than i thought so probably some dampening from international and bonds helping out.

Soon we may even see "100% international?" threads.

Interesting idea that might just work.

From my experience, international is kind of a hybrid investment.

It has the volatility of stocks and the returns of bonds.

???

Please show your math re: return of bonds

[fulltilt]

Interesting idea that might just work.

From my experience, international is kind of a hybrid investment.

It has the volatility of stocks and the returns of bonds.

???

Please show your math re: return of bonds

It's a joke based on the premise that the returns for international has been poor relative to US returns since I chose them to be 50% of my equity allocation 14-15 years ago.

[Glawen]

Only another decade of this and they might be even lol. I've kept my international allocation and every time I've opened up my account to see what the damage is, its been less than i thought so probably some dampening from international and bonds helping out.

Soon we may even see "100% international?" threads.

You joke, and I'm still at 50-50, but the last year I've been about other weightings:

• 33-33-33 US/INT/EM
• 25-25-25-25 with US-EUROPE-PACIFIC-EM
• capping US weght at 2x or 4x the weight of the next highest country in the global index (ie. VT), ie 10% or 20% US
• 25-25-50 US/Global hedged/Global un-hedged

[steve r]

???

Please show your math re: return of bonds

It's a joke based on the premise that the returns for international has been poor relative to US returns since I chose them to be 50% of my equity allocation 14-15 years ago.

I hear you on the recent past.
An equity risk premium existed in the UK since 1700.
https://papers.ssrn.com/sol3/papers.cfm ... id=3805927

[Beensabu]

From my experience, international is kind of a hybrid investment.

It has the volatility of stocks and the returns of bonds.

???

Please show your math re: return of bonds

They're not pulling it out of their rear. I noticed that awhile ago too.

Look: https://legacy.portfoliovisualizer.com/ ... MnRtgdGgju

[Glawen]

That's comparing a long bull bond market to a long bear international market

[Beensabu]

That's comparing a long bull bond market to a long bear international market

It has not been a bear international market. It's been a normal low-growth market with a few downturns thrown in.

Where do you think 50/50 and rebalance came from? Diversifying with uncorrelated assets?

Look: https://legacy.portfoliovisualizer.com/ ... KZXWqDBjjy

Isn't that amazing?

[Nathan Drake]

That's comparing a long bull bond market to a long bear international market

It has not been a bear international market. It's been a normal low-growth market with a few downturns thrown in.

Where do you think 50/50 and rebalance came from? Diversifying with uncorrelated assets?

Look: https://legacy.portfoliovisualizer.com/ ... KZXWqDBjjy

Isn't that amazing?

And that's with starting valuations that are through the roof high back in the late 80s for exUS stocks (CAPE higher than 40)

[donaldfair71]

???

Please show your math re: return of bonds

They're not pulling it out of their rear. I noticed that awhile ago too.

Look: https://legacy.portfoliovisualizer.com/ ... MnRtgdGgju

What would we call US stocks from 2000-2010, when they returned 1% a year with quadruple the volatility of US bonds that returned 6% a year?

[fulltilt]

They're not pulling it out of their rear. I noticed that awhile ago too.

Look: https://legacy.portfoliovisualizer.com/ ... MnRtgdGgju

What would we call US stocks from 2000-2010, when they returned 1% a year with quadruple the volatility of US bonds that returned 6% a year?

"excremental" is the word that Bill Bernstein used when referring to the returns of international in an interview one time. I think that word applies in this time period.

[donaldfair71]

What would we call US stocks from 2000-2010, when they returned 1% a year with quadruple the volatility of US bonds that returned 6% a year?

"excremental" is the word that Bill Bernstein used when referring to the returns of international in an interview one time. I think that word applies in this time period.

GREAT WORD.

The kicker is that it was somehow worse if your US allocation was just an SP500 fund. From 2000-2010, it returned .3% annualized. Makes the 1.2% the total US market provided seem like a Bull Market.

[incognito_man]

It has not been a bear international market. It's been a normal low-growth market with a few downturns thrown in.

Where do you think 50/50 and rebalance came from? Diversifying with uncorrelated assets?

Look: https://legacy.portfoliovisualizer.com/ ... KZXWqDBjjy

Isn't that amazing?

And that's with starting valuations that are through the roof high back in the late 80s for exUS stocks (CAPE higher than 40)

Do you have a good source for an exUS benchmark historical CAPE?

[Nathan Drake]

And that's with starting valuations that are through the roof high back in the late 80s for exUS stocks (CAPE higher than 40)

Do you have a good source for an exUS benchmark historical CAPE?

https://mebfaber.com/2024/04/10/global- ... pe-ratios/

[incognito_man]

Do you have a good source for an exUS benchmark historical CAPE?

https://mebfaber.com/2024/04/10/global- ... pe-ratios/

Thanks! I have seen this chart before. I should have been more specific - I'm hopeful to find tabular (ideally daily) data. I'll keep looking!

[Beensabu]

What would we call US stocks from 2000-2010, when they returned 1% a year with quadruple the volatility of US bonds that returned 6% a year?

Disappointing?

A buying opportunity?

Take your pick.

[donaldfair71]

What would we call US stocks from 2000-2010, when they returned 1% a year with quadruple the volatility of US bonds that returned 6% a year?

Disappointing?

A buying opportunity?

Take your pick.

Buying opportunity for sure.

The next 15 years provided the best 15 year return window since 1970.

10 years of losing to inflation. (12 years of losing to TBills 2000-12) followed by...
15 years of >12%+ real annually.

I

[Beensabu]

Buying opportunity for sure.

The next 15 years provided the best 15 year return window since 1970.

10 years of losing to inflation. (12 years of losing to TBills 2000-12) followed by...
15 years of >12%+ real annually.I

The buying opportunity is always in retrospect

[Nathan Drake]

https://mebfaber.com/2024/04/10/global- ... pe-ratios/

Thanks! I have seen this chart before. I should have been more specific - I'm hopeful to find tabular (ideally daily) data. I'll keep looking!

Unfortunately I have yet to see such a resource, international data is quite limited before this period.

Barclays is good for individual countries

[prioritarian]

That's comparing a long bull bond market to a long bear international market

Describing ~7% nominal returns over the past couple of decades as a bear market seems like performance-chasing point of view.

[Nathan Drake]

America catches a cold and exUS soars…

Quite different than the claims people made that this could never happen

[rockstar]

The US dollar continues to weaken. At least now there is a reason to buy international. Of course, the UK experienced negative GDP growth, so all is not rosy.

[Legitimate-Engine]

Yes, just now there is suddenly a reason to buy international because it has gone up recently and we all know that buying whatever went up in the past 3 months is the simple path to wealth.

[Beensabu]

The US dollar continues to weaken. At least now there is a reason to buy international.

This is hardly the first time USD has weakened in the last 10 years.

[Nathan Drake]

The US dollar continues to weaken. At least now there is a reason to buy international. Of course, the UK experienced negative GDP growth, so all is not rosy.

Doesn’t matter the reason. US besting international was currency and valuations.

The argument, however, that if US stocks decline then international stocks must decline worse is clearly not true overall.

[watchnerd]

"Investors have slashed holdings of US equities by the most on record, according to Bank of America Corp.’s latest survey. Fund managers reported being about 23% underweight in US stocks — a plunge of 40 percentage points from the previous tally.

“Peak US exceptionalism is reflected in record rotation out of US stocks,” strategist Michael Hartnett wrote in a note."

https://archive.is/ZrZEW#selection-2905.0-2921.119

"Investors slash US equity holdings by most ever, BofA survey shows"

"Allocations to US equities plunged 40 percentage points, from 17 per cent overweight in February to net underweight 23 per cent in March, according to Bank of America’s closely watched survey of fund managers. Over the same period, allocations to Eurozone stocks leapt to the highest level since July 2021.

According to BofA analysts, stagflation fears, the global trade war and an end of US exceptionalism have driven a “bull crash” in sentiment."

https://archive.is/IJV4X

So in terms of this thread:

If US exceptionalism is being questioned by the market, what is the rationale to keep holding 100% US?

[firebirdparts]

I thought you were going to say it's time to buy. I took that totally the wrong way.

Anyway, valuations are crazy high, they just are. Crazy high. They might go crazier higher, but they didn't this month, so far. It looks like we hit a genuine down 10% back on the 13th.

I lost half my net worth twice, and so I wouldn't have used such fancy language as they did. That said, the market is so high you can always claim "biggest" whatever in nominal dollars or points. You all know that.

[incognito_man]

^I was part of that move. I went from 100% US equity to 20% US, 40% exUS, 40% MMF in February

This was a (for now, until/unless there is excellent reason to switch in the future) a permanent move for me. I plan to hold that 40% exUS for decades. In effect, I corrected an earlier misallocation and benefitted in the meantime from years of US relative over-performance.

[Beensabu]

If US exceptionalism is being questioned by the market, what is the rationale to keep holding 100% US?

Is it being questioned by the market? Or do fund managers just care about short-term performance?

---

Deregulated corporate tax havens draw business investment regardless?

Calling "peak US exceptionalism" is like calling "peak oil"?

Adequate numbers diversification?

Global revenue?

Stay the course?

Lower tax cost?

Got I-bonds?

Got TIPS?

It's not like American exceptionalism is the only reason given for 100% US on this thread. It's just the one that was always easiest to argue with, because it was a belief and not an actual argument.

[watchnerd]

If US exceptionalism is being questioned by the market, what is the rationale to keep holding 100% US?

Is it being questioned by the market? Or do fund managers just care about short-term performance?

---

Deregulated corporate tax havens draw business investment regardless?

Calling "peak US exceptionalism" is like calling "peak oil"?

Adequate numbers diversification?

Global revenue?

Stay the course?

Lower tax cost?

Got I-bonds?

Got TIPS?

It's not like American exceptionalism is the only reason given for 100% US on this thread. It's just the one that was always easiest to argue with, because it was a belief and not an actual argument.

Well, I intended to frame it as a hypothetical, regardless of what fund managers are saying now.

So if US exceptionalism turns out to be less true than thought, what's the rationale for being 100% USA?