Good Reason to Hold Bonds and International Stocks - 1990's Japan

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BHawks87
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Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by BHawks87 »

Pretty interesting data below looking at different allocations for a Japanese investor in the 90's. Who says that the US can't go through a prolonged period like this?


To read the below chart, look at 1990 (or any other date) on the left and that is your start date. Each block to the right is a year of returns. Red = Bad

This is the returns for 100% LCB Stocks in Japan.

Image



Here is 100% Intermediate Japanese Bonds

Image




Japanese 60/40 (stock/bond)

Image




100% Stocks 60/40 (Japanese/US)

Image




60/40 (stock/bond; Stocks are 36/24 Japanese/US)

Image



*Charts and data are from portfoliocharts.com. The site creator posts here :happy
Nathan Drake
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Nathan Drake »

The US can’t go through a period like Japan because it has the greatest stock market performance, has the best demographics but without the risks of the countries with faster growing demographics, has the best legal protections, a market that never gets overpriced, and has the most dominating growth stocks of our time that will dominate now and in the future which will never get regulated and will never have competition.

Oh and US stocks also get most revenue from overseas so investing internationally isn’t even necessary. So basically US stocks are the perfect things I like to look at, and we can safely ignore any other negative aspects because in my limited world view they don’t matter.

Did I cover them all yet? :-D

Sarcasm aside, I agree that it can happen in the US, and that there’s never been a country in history that hasn’t eventually had its geopolitical power erode. I’m sure people thought it to be unfathomable during the height of the British empire as well.

The greatest tool we have to fight the hazy nature of the future is diversification.
Nathan Drake
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Nathan Drake »

What’s interesting is the density of dark green immediately proceeding the sea of red.

Often the investments that have had the best performance seem like the sure bet. Japan was going to take over the world economy with their proficiency and industrial might. And then stocks got overvalued, and then that rosy picture of the future never managed to materialize. It’s always a good idea to stay humble and modest in your projections and realize that investing now will not capture the returns of yesterday.

Now, had Japanese equities never been so good overvalued, these graphs would look quite a bit different and the investment returns would not have been so awful.

Also interesting to note how a modest allocation outside of the domestic market managed to alleviate significantly poor outcomes.

100% anything (even US) is playing with fire when all you need is a small hose in case your thesis turns out to be incorrect.
visualguy
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by visualguy »

BHawks87 wrote: Wed Jun 23, 2021 1:00 am Who says that the US can't go through a prolonged period like this?
I wouldn't say "can't", who knows what can happen in the distant future, but I would say extremely unlikely in my lifetime. Even if something like this happened within a timeframe that matters to me, I don't see how investing in the ex-US index would save me. Europe and Japan to the rescue? Seriously?
Derpalator
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Derpalator »

visualguy wrote: Wed Jun 23, 2021 2:53 am
BHawks87 wrote: Wed Jun 23, 2021 1:00 am Who says that the US can't go through a prolonged period like this?
I wouldn't say "can't", who knows what can happen in the distant future, but I would say extremely unlikely in my lifetime. Even if something like this happened within a timeframe that matters to me, I don't see how investing in the ex-US index would save me. Europe and Japan to the rescue? Seriously?
Well, then, what about China and the Pacific Rim/Remainder of Asia? India, Saudi Arabia? AFRICA?
rchmx1
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by rchmx1 »

BHawks87 wrote: Wed Jun 23, 2021 1:00 am Who says that the US can't go through a prolonged period like this?
When you read up on the incendiary factors which led to Japan's economic difficulties in the 90s etc, at least to me they seem extremely cultural and specific. I wish Japan was used with a bit less earnest-ness when employed as a thought experiment as to what could happen in the US. To me, this is just another reminder of the truth that we benefit from diversification, and the graphs illustrate the point elegantly. :beer
seajay
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by seajay »

This CNN article indicates that as of 2016 the major capitalist countries had in combination printed $9 Trillion https://money.cnn.com/2016/09/08/news/e ... index.html Since then even more trillions have been printed. Buying up bonds, stocks ...etc. What if that continued ... to collectively buy up all stock, bonds, properties etc. and perhaps even saw situations where it became illegal for private investors to buy/trade investment grade assets similar to how the US prohibited buying/trading gold between the 1930's and mid 1970's ?

As part of that likely asset values would soar, private investor would see their portfolio values do very well with such big buyers with deep/unlimited pockets and some might even sell stuff to buy .. what? Everything else is high priced also. At some point something breaks and the capitalist form a agreement that you can't just print money so freely, that instead money should be finite/restrained as it was in the 19th century - limited by something tangible/finite.

Could be a case of the whole world having turned Japanese. In which case foreign holdings may be no protection, maybe even worse.

Noticeably the UK have printed the least. For centuries the Pound was the primary reserve currency and it was backed by gold. Inflation broadly averaged 0% with equal amounts of inflation and deflation, sometimes extreme levels (very high levels of inflation/deflation tended to cluster). When investors lent to the state - bought Treasury bonds, they were rewarded with a real reward - bought back more ounces of gold that was fixed in price. Investors back then primarily just bought bonds, perhaps some safe bonds (treasury), sometimes business bonds (more speculative).

Some see the current US based approach, only to have inflation and revise rates/printing to maintain such as being a broken system. The main argument sustaining that is TINA, there is no alternative. But just maybe someone will form/agree a alternative sooner or later. Arabia, China, Russia, ECB, etc. are all slowly working to such alternatives different choices at present but where one or a combination might be commonly agreed sooner or later. TINA -> TIAA (there is a alternative).

Interesting times.
dogagility
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by dogagility »

I don't think these Black Swan events necessitate holding fixed income investments for the accumulator. However, diversifying into world stock might be a good idea for the accumulator.
The more flexibility you have the less you need to know what happens next. -- Morgan Housel
UpperNwGuy
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by UpperNwGuy »

I hate these Japan 1989 posts, but I guess they'll keep coming as long as the evangelists for global market weight investing continue to try to convince the unconvinced.
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anon_investor
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by anon_investor »

UpperNwGuy wrote: Wed Jun 23, 2021 5:34 am I hate these Japan 1989 posts, but I guess they'll keep coming as long as the evangelists for global market weight investing continue to try to convince the unconvinced.
People should study Japanese culture and history to understand why 1989 happened. Yeah, I am not worried about that happening in the US. VTSAX and chill!
Somethingwitty92912
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Somethingwitty92912 »

This doesn’t take into account so many things. Just the geographic size of the states vs Japan creates a huge problem. How about population? This tired old the states can be japan argument just isn’t valid. Two entirely different situations in different time periods with different technology with different economic systems with different culture…. Blah blah blah. I could go on, but why? /thread
Somethingwitty92912
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Somethingwitty92912 »

anon_investor wrote: Wed Jun 23, 2021 5:39 am
UpperNwGuy wrote: Wed Jun 23, 2021 5:34 am I hate these Japan 1989 posts, but I guess they'll keep coming as long as the evangelists for global market weight investing continue to try to convince the unconvinced.
People should study Japanese culture and history to understand why 1989 happened. Yeah, I am not worried about that happening in the US. VTSAX and chill!
+1
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UpsetRaptor
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by UpsetRaptor »

Japan also had a CAGR > 20% over forty years heading into 1990, and a CAPE that hit 90. Crazy bubble.
Nathan Drake
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Nathan Drake »

UpsetRaptor wrote: Wed Jun 23, 2021 8:40 am Japan also had a CAGR > 20% over forty years heading into 1990, and a CAPE that hit 90. Crazy bubble.
And at the time, people truly believes they’d be the dominant economic power and there wasn’t a better place to invest. US equities had been awful for about a 15 year period. Things seemed bleak as a US investor.

Turns out, when things look bleak and are priced as such for very large economic regions, those tend to be the best times to buy.

I bet the Japanese investor felt uncomfortable investing in those “awful” US equities while sleeping well at night and staying the course in 100% Japanese stocks while they were compounding at 20% annually because recent outperformance gives anyone a false sense of security…
Johnathon Livingston
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Johnathon Livingston »

Ok, so the unique disaster that is the Japanese stock market followed by over a decade of poor performance makes the case for investing in Japanese stock and other international stock. Got it.
ljford7
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by ljford7 »

So the US had a great depression, bad inflation in the 70s, Black Monday, the Dot Com bubble, the Great Financial Crisis, etc.

Guess you shouldn't invest in the US either. :wink:
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UpsetRaptor
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by UpsetRaptor »

Nathan Drake wrote: Wed Jun 23, 2021 8:52 am
UpsetRaptor wrote: Wed Jun 23, 2021 8:40 am Japan also had a CAGR > 20% over forty years heading into 1990, and a CAPE that hit 90. Crazy bubble.
And at the time, people truly believes they’d be the dominant economic power and there wasn’t a better place to invest. US equities had been awful for about a 15 year period. Things seemed bleak as a US investor.

Turns out, when things look bleak and are priced as such for very large economic regions, those tend to be the best times to buy.

I bet the Japanese investor felt uncomfortable investing in those “awful” US equities while sleeping well at night and staying the course in 100% Japanese stocks while they were compounding at 20% annually because recent outperformance gives anyone a false sense of security…
If we're referencing the 15-yr period preceding Japan's bubble popping in 1990, from 1975-1989 the US had a CAGR of 16.7%. Not as high-flying as Japan certainly, but I wouldn't characterize that as "awful".
hyperon
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by hyperon »

So how about some double-reverse sarcasm?

Gambling on individual stocks - absolutely unacceptable.

Gambling on individual countries - sound practice.

It Bogle's the mind.
Nathan Drake
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Nathan Drake »

UpsetRaptor wrote: Wed Jun 23, 2021 10:31 am
Nathan Drake wrote: Wed Jun 23, 2021 8:52 am
UpsetRaptor wrote: Wed Jun 23, 2021 8:40 am Japan also had a CAGR > 20% over forty years heading into 1990, and a CAPE that hit 90. Crazy bubble.
And at the time, people truly believes they’d be the dominant economic power and there wasn’t a better place to invest. US equities had been awful for about a 15 year period. Things seemed bleak as a US investor.

Turns out, when things look bleak and are priced as such for very large economic regions, those tend to be the best times to buy.

I bet the Japanese investor felt uncomfortable investing in those “awful” US equities while sleeping well at night and staying the course in 100% Japanese stocks while they were compounding at 20% annually because recent outperformance gives anyone a false sense of security…
If we're referencing the 15-yr period preceding Japan's bubble popping in 1990, from 1975-1989 the US had a CAGR of 16.7%. Not as high-flying as Japan certainly, but I wouldn't characterize that as "awful".
My timeframe was not the exact peak of the Japanese bubble, but during the late 70s coinciding with the death of equities article
Actin
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Actin »

Daily international coping thread

Alternative thread title.
"Why you should try to time the market"
Nathan Drake
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Nathan Drake »

Actin wrote: Wed Jun 23, 2021 11:34 am Daily international coping thread

Alternative thread title.
"Why you should try to time the market"
Setting an appropriate allocation is now market timing and coping.

Interesting
Actin
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Actin »

Nathan Drake wrote: Wed Jun 23, 2021 12:23 pm
Actin wrote: Wed Jun 23, 2021 11:34 am Daily international coping thread

Alternative thread title.
"Why you should try to time the market"
Setting an appropriate allocation is now market timing and coping.

Interesting
OP's entire rationale is that Japan could happen to the US any day now. That's market timing.
Nathan Drake
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Nathan Drake »

Actin wrote: Wed Jun 23, 2021 12:42 pm
Nathan Drake wrote: Wed Jun 23, 2021 12:23 pm
Actin wrote: Wed Jun 23, 2021 11:34 am Daily international coping thread

Alternative thread title.
"Why you should try to time the market"
Setting an appropriate allocation is now market timing and coping.

Interesting
OP's entire rationale is that Japan could happen to the US any day now. That's market timing.
What?

No…OP is not saying he thinks it will happen and is going 100% exUS as a result of this market timing thesis

He is saying it’s a possibility, with many examples throughout history where being 100% any country was devastating to your portfolio.

Since the future is unknown, diversify we must…
Actin
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Actin »

Nathan Drake wrote: Wed Jun 23, 2021 12:54 pm
Actin wrote: Wed Jun 23, 2021 12:42 pm
Nathan Drake wrote: Wed Jun 23, 2021 12:23 pm
Actin wrote: Wed Jun 23, 2021 11:34 am Daily international coping thread

Alternative thread title.
"Why you should try to time the market"
Setting an appropriate allocation is now market timing and coping.

Interesting
OP's entire rationale is that Japan could happen to the US any day now. That's market timing.
What?

No…OP is not saying he thinks it will happen and is going 100% exUS as a result of this market timing thesis

He is saying it’s a possibility, with many examples throughout history where being 100% any country was devastating to your portfolio.

Since the future is unknown, diversify we must…
That's market timing. You obviously expect this to happen on a short time frame because you wouldn't make this very of someone guaranteed you it wouldn't happen within another decade.

The past is irrelevant. We now live in a global economy. Every single US company in the S&P does business internationally. The inverse isn't completely true though.
Nathan Drake
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Nathan Drake »

Actin wrote: Wed Jun 23, 2021 1:04 pm
Nathan Drake wrote: Wed Jun 23, 2021 12:54 pm
Actin wrote: Wed Jun 23, 2021 12:42 pm
Nathan Drake wrote: Wed Jun 23, 2021 12:23 pm
Actin wrote: Wed Jun 23, 2021 11:34 am Daily international coping thread

Alternative thread title.
"Why you should try to time the market"
Setting an appropriate allocation is now market timing and coping.

Interesting
OP's entire rationale is that Japan could happen to the US any day now. That's market timing.
What?

No…OP is not saying he thinks it will happen and is going 100% exUS as a result of this market timing thesis

He is saying it’s a possibility, with many examples throughout history where being 100% any country was devastating to your portfolio.

Since the future is unknown, diversify we must…
That's market timing. You obviously expect this to happen on a short time frame because you wouldn't make this very of someone guaranteed you it wouldn't happen within another decade.

The past is irrelevant. We now live in a global economy. Every single US company in the S&P does business internationally. The inverse isn't completely true though.
:oops:
Actin
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Actin »

This is the issue with these daily international threads. The pro international group has convinced themselves that their position is common sense simply because it sounds correct.

Diversify? Of course that's a good thing. I want diversification in my portfolio. No way a fund with 3000+stocks doing business globally is diversified enough for me. I have to add in another 3000+ stocks that have historically underperformed. Any year now it will flip. Totally not market timing though.
Nathan Drake
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Nathan Drake »

Actin wrote: Wed Jun 23, 2021 1:19 pm This is the issue with these daily international threads. The pro international group has convinced themselves that their position is common sense simply because it sounds correct.

Diversify? Of course that's a good thing. I want diversification in my portfolio. No way a fund with 3000+stocks doing business globally is diversified enough for me. I have to add in another 3000+ stocks that have historically underperformed. Any year now it will flip. Totally not market timing though.
Having diversification across countries is the industry standard fiduciary advice based on gray or black swan scenarios that have done grave harm to individual novice investors. It’s why every target date fund has an allocation internationally. So yes, is it common sense? Well apparently not since we continue to have discussions on this forum with novice investors that haven’t learned lessons from the historical record and continue to apply a litany of logical fallacies as to why they completely avoid most of the world.

Continue deluding yourself into believing that it’s not a risk worth protecting against at your own peril. I’m sure the Japanese investor wondered why they should include those darned underperforming US stocks when they can load up on better performing Japanese stocks instead.
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vitaflo
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by vitaflo »

Actin wrote: Wed Jun 23, 2021 1:04 pm Every single US company in the S&P does business internationally. The inverse isn't completely true though.
Whether you know it or not, you just added another reason to invest internationally.
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by JBTX »

Thanks for posting this. Took me a while to process those charts. Diversification really paid off in this scenario.
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by JBTX »

Actin wrote: Wed Jun 23, 2021 1:04 pm
Nathan Drake wrote: Wed Jun 23, 2021 12:54 pm
Actin wrote: Wed Jun 23, 2021 12:42 pm
Nathan Drake wrote: Wed Jun 23, 2021 12:23 pm
Actin wrote: Wed Jun 23, 2021 11:34 am Daily international coping thread

Alternative thread title.
"Why you should try to time the market"
Setting an appropriate allocation is now market timing and coping.

Interesting
OP's entire rationale is that Japan could happen to the US any day now. That's market timing.
What?

No…OP is not saying he thinks it will happen and is going 100% exUS as a result of this market timing thesis

He is saying it’s a possibility, with many examples throughout history where being 100% any country was devastating to your portfolio.

Since the future is unknown, diversify we must…
That's market timing. You obviously expect this to happen on a short time frame because you wouldn't make this very of someone guaranteed you it wouldn't happen within another decade.

The past is irrelevant. We now live in a global economy. Every single US company in the S&P does business internationally. The inverse isn't completely true though.
Japan NIKKEI companies at their peak did a lot of business internationally. That didn't help their long term performance.
Last edited by JBTX on Wed Jun 23, 2021 5:07 pm, edited 1 time in total.
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anon_investor
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by anon_investor »

JBTX wrote: Wed Jun 23, 2021 1:44 pm
Actin wrote: Wed Jun 23, 2021 1:04 pm
Nathan Drake wrote: Wed Jun 23, 2021 12:54 pm
Actin wrote: Wed Jun 23, 2021 12:42 pm
Nathan Drake wrote: Wed Jun 23, 2021 12:23 pm

Setting an appropriate allocation is now market timing and coping.

Interesting
OP's entire rationale is that Japan could happen to the US any day now. That's market timing.
What?

No…OP is not saying he thinks it will happen and is going 100% exUS as a result of this market timing thesis

He is saying it’s a possibility, with many examples throughout history where being 100% any country was devastating to your portfolio.

Since the future is unknown, diversify we must…
That's market timing. You obviously expect this to happen on a short time frame because you wouldn't make this very of someone guaranteed you it wouldn't happen within another decade.

The past is irrelevant. We now live in a global economy. Every single US company in the S&P does business internationally. The inverse isn't completely true though.
Japan NIKKEI companies at their peak did a lot of business internationally. That didn't help their long term stick performance.
Japan is different than the US for a variety of reasons. The US is pretty unique, I think 100% US is fine.
sandan
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by sandan »

vitaflo wrote: Wed Jun 23, 2021 1:32 pm
Actin wrote: Wed Jun 23, 2021 1:04 pm Every single US company in the S&P does business internationally. The inverse isn't completely true though.
Whether you know it or not, you just added another reason to invest internationally.
So good.

I'm not big on international because of expense ratios, but the OPs charts are simple and informative. It's amazing how it's evoking emotions.
TropikThunder
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by TropikThunder »

Actin wrote: Wed Jun 23, 2021 1:04 pm The past is irrelevant. We now live in a global economy. Every single US company in the S&P does business internationally. The inverse isn't completely true though.
I view it as less of US vs other, but as a sector bet.
- VTI is 31% Tech, 15% Consumer Discretionary, 15% Financial, 13% Healthcare, and 10% Industrial.
- VXUS is 22% Financials, 17% Tech, 13% Industrial, 11% Consumer Discretionary, 9% Basic Materials

Also, here's the breakdown of the biggest companies in the world across various business lines:
- 7 of the 10 biggest heavy equipment manufacturers
- 6 of the 10 biggest power tool manufacturers
- All of the 10 biggest mining companies
- 6 of the 10 biggest banks
- 8 of the 10 biggest carmakers
- 6 of the 10 biggest pharmaceutical companies
etc, etc, etc
All ex-US
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by happyisland »

TropikThunder wrote: Wed Jun 23, 2021 2:11 pm
Actin wrote: Wed Jun 23, 2021 1:04 pm The past is irrelevant. We now live in a global economy. Every single US company in the S&P does business internationally. The inverse isn't completely true though.
I view it as less of US vs other, but as a sector bet.
- VTI is 31% Tech, 15% Consumer Discretionary, 15% Financial, 13% Healthcare, and 10% Industrial.
- VXUS is 22% Financials, 17% Tech, 13% Industrial, 11% Consumer Discretionary, 9% Basic Materials

Also, here's the breakdown of the biggest companies in the world across various business lines:
- 7 of the 10 biggest heavy equipment manufacturers
- 6 of the 10 biggest power tool manufacturers
- All of the 10 biggest mining companies
- 6 of the 10 biggest banks
- 8 of the 10 biggest carmakers
- 6 of the 10 biggest pharmaceutical companies
etc, etc, etc
All ex-US
I truly don't understand why everyone wouldn't want to have these companies in their portfolios.
Gaston
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Gaston »

anon_investor wrote: Wed Jun 23, 2021 5:39 am People should study Japanese culture and history to understand why 1989 happened.
For those who don’t want to get out the textbooks, can you enlighten us?
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Eric
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Eric »

BHawks87 wrote: Wed Jun 23, 2021 1:00 amTo read the below chart, look at 1990 (or any other date) on the left and that is your start date. Each block to the right is a year of returns. Red = Bad
Are you sure that each block is a year of returns? If so, I think the last several years of the 1990 row would be the same as the first several years of the 2010 row. But the last several years of the 1990 row are all red (negative returns), while the first several years of the 2010 row are mostly positive returns. I'm thinking the blocks are actually showing cumulative returns through the referenced year, rather than year-by-year returns, and the CAGR legend seems consistent with that. But please let me know if I am misunderstanding.
visualguy
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by visualguy »

happyisland wrote: Wed Jun 23, 2021 2:53 pm
TropikThunder wrote: Wed Jun 23, 2021 2:11 pm
Actin wrote: Wed Jun 23, 2021 1:04 pm The past is irrelevant. We now live in a global economy. Every single US company in the S&P does business internationally. The inverse isn't completely true though.
I view it as less of US vs other, but as a sector bet.
- VTI is 31% Tech, 15% Consumer Discretionary, 15% Financial, 13% Healthcare, and 10% Industrial.
- VXUS is 22% Financials, 17% Tech, 13% Industrial, 11% Consumer Discretionary, 9% Basic Materials

Also, here's the breakdown of the biggest companies in the world across various business lines:
- 7 of the 10 biggest heavy equipment manufacturers
- 6 of the 10 biggest power tool manufacturers
- All of the 10 biggest mining companies
- 6 of the 10 biggest banks
- 8 of the 10 biggest carmakers
- 6 of the 10 biggest pharmaceutical companies
etc, etc, etc
All ex-US
I truly don't understand why everyone wouldn't want to have these companies in their portfolios.
I think it has something to do with the fact that it simply hasn't paid off all that much over the long run to have these old ex-US behemoths in your portfolio. They may be good companies, but they aren't good at making me money - it's not the same thing. The reasons have been beaten to death in other threads on ex-US.
TropikThunder
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by TropikThunder »

visualguy wrote: Wed Jun 23, 2021 3:40 pm
happyisland wrote: Wed Jun 23, 2021 2:53 pm
TropikThunder wrote: Wed Jun 23, 2021 2:11 pm
Actin wrote: Wed Jun 23, 2021 1:04 pm The past is irrelevant. We now live in a global economy. Every single US company in the S&P does business internationally. The inverse isn't completely true though.
I view it as less of US vs other, but as a sector bet.
- VTI is 31% Tech, 15% Consumer Discretionary, 15% Financial, 13% Healthcare, and 10% Industrial.
- VXUS is 22% Financials, 17% Tech, 13% Industrial, 11% Consumer Discretionary, 9% Basic Materials

Also, here's the breakdown of the biggest companies in the world across various business lines:
- 7 of the 10 biggest heavy equipment manufacturers
- 6 of the 10 biggest power tool manufacturers
- All of the 10 biggest mining companies
- 6 of the 10 biggest banks
- 8 of the 10 biggest carmakers
- 6 of the 10 biggest pharmaceutical companies
etc, etc, etc
All ex-US
I truly don't understand why everyone wouldn't want to have these companies in their portfolios.
I think it has something to do with the fact that it simply hasn't paid off all that much over the long run to have these old ex-US behemoths in your portfolio. They may be good companies, but they aren't good at making me money - it's not the same thing. The reasons have been beaten to death in other threads on ex-US.
How do you know these are all “old” companies? I’d be surprised if you could even name more than a few. Most of the big Japanese companies are old, but Tencent was founded in 1998, Alibaba in 1999, etc. It hasn’t occurred to you that things may have changed in the last 20-30 years?

These threads never go anywhere because the anti-Int’l folks always present the same arguments even when presented with new information.
Da5id
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Da5id »

I was just reading some other threads, and thinking "Gee, we need another international thread. Haven't seen one of those in literally a few minutes". And here one is!

Whether or not something rather like the Japan scenario can happen to the US is actually unknowable. I think regardless Japan is a cautionary tale to not put all ones eggs in one basket. And I would say that the attitudes of the time towards the unchallengeable supremacy of the dominant Japanese companies of the time is echoed in some of the US only arguments...
visualguy
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by visualguy »

TropikThunder wrote: Wed Jun 23, 2021 4:08 pm
visualguy wrote: Wed Jun 23, 2021 3:40 pm
happyisland wrote: Wed Jun 23, 2021 2:53 pm
TropikThunder wrote: Wed Jun 23, 2021 2:11 pm
Actin wrote: Wed Jun 23, 2021 1:04 pm The past is irrelevant. We now live in a global economy. Every single US company in the S&P does business internationally. The inverse isn't completely true though.
I view it as less of US vs other, but as a sector bet.
- VTI is 31% Tech, 15% Consumer Discretionary, 15% Financial, 13% Healthcare, and 10% Industrial.
- VXUS is 22% Financials, 17% Tech, 13% Industrial, 11% Consumer Discretionary, 9% Basic Materials

Also, here's the breakdown of the biggest companies in the world across various business lines:
- 7 of the 10 biggest heavy equipment manufacturers
- 6 of the 10 biggest power tool manufacturers
- All of the 10 biggest mining companies
- 6 of the 10 biggest banks
- 8 of the 10 biggest carmakers
- 6 of the 10 biggest pharmaceutical companies
etc, etc, etc
All ex-US
I truly don't understand why everyone wouldn't want to have these companies in their portfolios.
I think it has something to do with the fact that it simply hasn't paid off all that much over the long run to have these old ex-US behemoths in your portfolio. They may be good companies, but they aren't good at making me money - it's not the same thing. The reasons have been beaten to death in other threads on ex-US.
How do you know these are all “old” companies? I’d be surprised if you could even name more than a few. Most of the big Japanese companies are old, but Tencent was founded in 1998, Alibaba in 1999, etc. It hasn’t occurred to you that things may have changed in the last 20-30 years?

These threads never go anywhere because the anti-Int’l folks always present the same arguments even when presented with new information.
What new information? What changed in the last 20-30 years? Stagnation in Europe and Japan which are more than half of the ex-US index.

You're pointing out China. That's 10% of ex-US, that's all. If you like China, and think you have an effective and safe way to invest there, then great, but that has little to do with investing in the ex-US index. I'm sure there are good slice and dice opportunities in foreign stock markets. The problem with that, though, is the complication and the amount of research and work to initiate and maintain the positions. This relatively small part of the portfolio becomes too time consuming.
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Da5id »

visualguy wrote: Wed Jun 23, 2021 4:29 pm What new information? What changed in the last 20-30 years? Stagnation in Europe and Japan which are more than half of the ex-US index.

You're pointing out China. That's 10% of ex-US, that's all. If you like China, and think you have an effective and safe way to invest there, then great, but that has little to do with investing in the ex-US index. I'm sure there are good slice and dice opportunities in foreign stock markets. The problem with that, though, is the complication and the amount of research and work to initiate and maintain the positions. This relatively small part of the portfolio becomes too time consuming.
After stating his views on the superior prospect of US investing, Bogle noted in his book that
...it is never clear whether these economic factors are reflected in present market valuations. The race for superior market returns around the globe is never an easy one to call
If you feel you know as a fact that Europe and Japan's "stagnation" is not reflected in market valuations correctly, well, clearly you know more than I do. Congrats on that? I'll take what the market gives myself, as I know nothing of the sort.
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by anon_investor »

Da5id wrote: Wed Jun 23, 2021 4:47 pm
visualguy wrote: Wed Jun 23, 2021 4:29 pm What new information? What changed in the last 20-30 years? Stagnation in Europe and Japan which are more than half of the ex-US index.

You're pointing out China. That's 10% of ex-US, that's all. If you like China, and think you have an effective and safe way to invest there, then great, but that has little to do with investing in the ex-US index. I'm sure there are good slice and dice opportunities in foreign stock markets. The problem with that, though, is the complication and the amount of research and work to initiate and maintain the positions. This relatively small part of the portfolio becomes too time consuming.
After stating his views on the superior prospect of US investing, Bogle noted in his book that
...it is never clear whether these economic factors are reflected in present market valuations. The race for superior market returns around the globe is never an easy one to call
If you feel you know as a fact that Europe and Japan's "stagnation" is not reflected in market valuations correctly, well, clearly you know more than I do. Congrats on that? I'll take what the market gives myself, as I know nothing of the sort.
Lack of immigration and declining birth rates = stagnation. Pretty much covers Europe and Japan. This is happening in China now...
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Da5id »

anon_investor wrote: Wed Jun 23, 2021 4:54 pm
Da5id wrote: Wed Jun 23, 2021 4:47 pm
visualguy wrote: Wed Jun 23, 2021 4:29 pm What new information? What changed in the last 20-30 years? Stagnation in Europe and Japan which are more than half of the ex-US index.

You're pointing out China. That's 10% of ex-US, that's all. If you like China, and think you have an effective and safe way to invest there, then great, but that has little to do with investing in the ex-US index. I'm sure there are good slice and dice opportunities in foreign stock markets. The problem with that, though, is the complication and the amount of research and work to initiate and maintain the positions. This relatively small part of the portfolio becomes too time consuming.
After stating his views on the superior prospect of US investing, Bogle noted in his book that
...it is never clear whether these economic factors are reflected in present market valuations. The race for superior market returns around the globe is never an easy one to call
If you feel you know as a fact that Europe and Japan's "stagnation" is not reflected in market valuations correctly, well, clearly you know more than I do. Congrats on that? I'll take what the market gives myself, as I know nothing of the sort.
Lack of immigration and declining birth rates = stagnation. Pretty much covers Europe and Japan. This is happening in China now...
And you believe that their markets and prospective returns there don't reflect those well known trends? And were those demographic features really that different last time International outperformed US (say 2000-2010)? Maybe so. I don't believe I can analyze such trends or market valuations meaningfully personally, I guess others do.
visualguy
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by visualguy »

Da5id wrote: Wed Jun 23, 2021 4:47 pm If you feel you know as a fact that Europe and Japan's "stagnation" is not reflected in market valuations correctly, well, clearly you know more than I do. Congrats on that? I'll take what the market gives myself, as I know nothing of the sort.
We're back to the "it's all priced in, so returns should be about the same over time" argument. Well, that hasn't worked in the long run in this context before - returns have not been all that close for US and ex-US over the last 20, 30, 50, 120 years. One obvious issue with this argument as I mentioned on another thread is that new companies aren't really priced in. Google, Tesla, nVidia, etc. weren't somehow priced into other stocks before they emerged and flourished. As long as the US cranks these out, while Europe and Japan don't (they haven't done much of that in decades), there is no reason to expect similar returns.
Da5id
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Da5id »

visualguy wrote: Wed Jun 23, 2021 5:14 pm
Da5id wrote: Wed Jun 23, 2021 4:47 pm If you feel you know as a fact that Europe and Japan's "stagnation" is not reflected in market valuations correctly, well, clearly you know more than I do. Congrats on that? I'll take what the market gives myself, as I know nothing of the sort.
We're back to the "it's all priced in, so returns should be about the same over time" argument. Well, that hasn't worked in the long run in this context before - returns have not been all that close for US and ex-US over the last 20, 30, 50, 120 years. One obvious issue with this argument as I mentioned on another thread is that new companies aren't really priced in. Google, Tesla, nVidia, etc. weren't somehow priced into other stocks before they emerged and flourished. As long as the US cranks these out, while Europe and Japan don't (they haven't done much of that in decades), there is no reason to expect similar returns.
Well in that case my 60% US will do well for me. I have less confidence in my ability to predict the future than some, good luck with your investments.
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by anon_investor »

Da5id wrote: Wed Jun 23, 2021 4:59 pm
anon_investor wrote: Wed Jun 23, 2021 4:54 pm
Da5id wrote: Wed Jun 23, 2021 4:47 pm
visualguy wrote: Wed Jun 23, 2021 4:29 pm What new information? What changed in the last 20-30 years? Stagnation in Europe and Japan which are more than half of the ex-US index.

You're pointing out China. That's 10% of ex-US, that's all. If you like China, and think you have an effective and safe way to invest there, then great, but that has little to do with investing in the ex-US index. I'm sure there are good slice and dice opportunities in foreign stock markets. The problem with that, though, is the complication and the amount of research and work to initiate and maintain the positions. This relatively small part of the portfolio becomes too time consuming.
After stating his views on the superior prospect of US investing, Bogle noted in his book that
...it is never clear whether these economic factors are reflected in present market valuations. The race for superior market returns around the globe is never an easy one to call
If you feel you know as a fact that Europe and Japan's "stagnation" is not reflected in market valuations correctly, well, clearly you know more than I do. Congrats on that? I'll take what the market gives myself, as I know nothing of the sort.
Lack of immigration and declining birth rates = stagnation. Pretty much covers Europe and Japan. This is happening in China now...
And you believe that their markets and prospective returns there don't reflect those well known trends? And were those demographic features really that different last time International outperformed US (say 2000-2010)? Maybe so. I don't believe I can analyze such trends or market valuations meaningfully personally, I guess others do.
Sure these are factored into the lower valuations. But in order for those markets to outperform, they need to surprise to the upside. The chances of that happening for a prolonged period is quite low because of those demographic issues. 2000 to 2010 was different, China was not aging out.
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by anon_investor »

visualguy wrote: Wed Jun 23, 2021 5:14 pm
Da5id wrote: Wed Jun 23, 2021 4:47 pm If you feel you know as a fact that Europe and Japan's "stagnation" is not reflected in market valuations correctly, well, clearly you know more than I do. Congrats on that? I'll take what the market gives myself, as I know nothing of the sort.
We're back to the "it's all priced in, so returns should be about the same over time" argument. Well, that hasn't worked in the long run in this context before - returns have not been all that close for US and ex-US over the last 20, 30, 50, 120 years. One obvious issue with this argument as I mentioned on another thread is that new companies aren't really priced in. Google, Tesla, nVidia, etc. weren't somehow priced into other stocks before they emerged and flourished. As long as the US cranks these out, while Europe and Japan don't (they haven't done much of that in decades), there is no reason to expect similar returns.
Google, Tesla, nVidia were all founded or greatly influenced by immigrants to the US. The US does not need home grown talent to succeed.
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Nathan Drake »

visualguy wrote: Wed Jun 23, 2021 4:29 pm
TropikThunder wrote: Wed Jun 23, 2021 4:08 pm
visualguy wrote: Wed Jun 23, 2021 3:40 pm
happyisland wrote: Wed Jun 23, 2021 2:53 pm
TropikThunder wrote: Wed Jun 23, 2021 2:11 pm
I view it as less of US vs other, but as a sector bet.
- VTI is 31% Tech, 15% Consumer Discretionary, 15% Financial, 13% Healthcare, and 10% Industrial.
- VXUS is 22% Financials, 17% Tech, 13% Industrial, 11% Consumer Discretionary, 9% Basic Materials

Also, here's the breakdown of the biggest companies in the world across various business lines:
- 7 of the 10 biggest heavy equipment manufacturers
- 6 of the 10 biggest power tool manufacturers
- All of the 10 biggest mining companies
- 6 of the 10 biggest banks
- 8 of the 10 biggest carmakers
- 6 of the 10 biggest pharmaceutical companies
etc, etc, etc
All ex-US
I truly don't understand why everyone wouldn't want to have these companies in their portfolios.
I think it has something to do with the fact that it simply hasn't paid off all that much over the long run to have these old ex-US behemoths in your portfolio. They may be good companies, but they aren't good at making me money - it's not the same thing. The reasons have been beaten to death in other threads on ex-US.
How do you know these are all “old” companies? I’d be surprised if you could even name more than a few. Most of the big Japanese companies are old, but Tencent was founded in 1998, Alibaba in 1999, etc. It hasn’t occurred to you that things may have changed in the last 20-30 years?

These threads never go anywhere because the anti-Int’l folks always present the same arguments even when presented with new information.
What new information? What changed in the last 20-30 years? Stagnation in Europe and Japan which are more than half of the ex-US index.

You're pointing out China. That's 10% of ex-US, that's all. If you like China, and think you have an effective and safe way to invest there, then great, but that has little to do with investing in the ex-US index. I'm sure there are good slice and dice opportunities in foreign stock markets. The problem with that, though, is the complication and the amount of research and work to initiate and maintain the positions. This relatively small part of the portfolio becomes too time consuming.
What happened in 1980 that made the US a better investment despite lagging international for decades?

Oh, right, valuations was likely the correct answer

Just like US valuations are at extreme levels right now despite prices being driven mostly by speculation.
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by Da5id »

anon_investor wrote: Wed Jun 23, 2021 5:23 pm Sure these are factored into the lower valuations. But in order for those markets to outperform, they need to surprise to the upside. The chances of that happening for a prolonged period is quite low because of those demographic issues. 2000 to 2010 was different, China was not aging out.
I believe that it is also for US to surprise on the downside, and given valuations the consequences of that could be sharp. But of course I don't know that will happen, any more than I know that you are correct that the chances of international outperformance is "quote low". You have vastly more confidence in your ability to predict the future based on macroeconomic or demographic trends than I do. For those with such confidence, great. Go all US if you somehow believe you have such insights. You may be right. I'd rather be hedged against prolonged US underperformance myself.
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Re: Good Reason to Hold Bonds and International Stocks - 1990's Japan

Post by anon_investor »

Da5id wrote: Wed Jun 23, 2021 5:29 pm
anon_investor wrote: Wed Jun 23, 2021 5:23 pm Sure these are factored into the lower valuations. But in order for those markets to outperform, they need to surprise to the upside. The chances of that happening for a prolonged period is quite low because of those demographic issues. 2000 to 2010 was different, China was not aging out.
I believe that it is also for US to surprise on the downside, and given valuations the consequences of that could be sharp. But of course I don't know that will happen, any more than I know that you are correct that the chances of international outperformance is "quote low". You have vastly more confidence in your ability to predict the future based on macroeconomic or demographic trends than I do. For those with such confidence, great. Go all US if you somehow believe you have such insights. You may be right. I'd rather be hedged against prolonged US underperformance myself.
I am all US. But I also have time on my side, plus EF and I Bonds. I might be persuaded to buy EM ex-China though.
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