Dispersion b/w US vs Ex US has never been this stark

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revhappy
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Dispersion b/w US vs Ex US has never been this stark

Post by revhappy »

The dispersion between US and non US equities is just so stark now.

VEU - All country ex US is up only 3% YTD
SPY - 26% YTD

Does the mean reversion logic even work?
scout1
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by scout1 »

“It's not supposed to be easy. Anyone who finds it easy is stupid.” -Munger

IMO buying the lowest priced stuff is often the easiest thing to do.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by unclescrooge »

scout1 wrote: Mon Nov 29, 2021 10:47 pm “It's not supposed to be easy. Anyone who finds it easy is stupid.” -Munger

IMO buying the lowest priced stuff is often the easiest thing to do.
It's the simplest thing to do, but it's not the easiest.
Buying an asset class that has been a dud for a decade definitely feels like a stupid thing to do.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Marseille07 »

revhappy wrote: Mon Nov 29, 2021 10:39 pm Does the mean reversion logic even work?
No, there's no such logic to begin with. The stock markets are bounded by countrylines for the most part because the law & financial regulations etc etc are all different. There's nothing to say if US prospers so much then Japan & Europe & China have to bounce back.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by pascalwager »

I'd say "disparity", but at 61/39, the overall YTD = 17%. Not so bad considering it comes with global diversification.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by visualguy »

unclescrooge wrote: Mon Nov 29, 2021 11:00 pm
scout1 wrote: Mon Nov 29, 2021 10:47 pm “It's not supposed to be easy. Anyone who finds it easy is stupid.” -Munger

IMO buying the lowest priced stuff is often the easiest thing to do.
It's the simplest thing to do, but it's not the easiest.
Buying an asset class that has been a dud for a decade definitely feels like a stupid thing to do.
Cutting your losses and dumping it is fine as long as you stick to that and don't go back and forth. I would dump it and stay out of it if I owned it. The amazing thing is that ex-US stocks are actually pretty expensive relative to their history even after all this lousy stock performance.

Thinking that there may be a renaissance in European/Japanese economies and stock markets seems detached from reality, and so does thinking that the US will go down without dragging the other markets with it. Bogle's view on this was solid.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Tinyz »

The problem with diversification is over diversification resulting in lower returns but increasing risk. Looking at how they slice the world apart, it is difficult for a 1% allocation of a particular country to deliver any meaningful returns. It will take a huge shift of market cap from US to allocate to other countries in order for an impact to occur, for eg. 30% of US market cap shifted to one country. However, if that occurs, I will say good luck with the world.

Truth is nobody will know the future. All these theory about mean reversion, international/US cyclical returns are based on...the past! If its true, I can obviously time the market isn't it?

The winner can stay as winner forever and the loser can stay as loser forever. Who knows?

Is strange to me that Boglehead will act quite unBogle-like.

You need to have a stronger conviction, don't just blindly follow! Ask yourself why you want to diversify with international. Do you believe US will not have a good and strong business environment in future or Do you believe somewhere else will have a much greater business environment in future so much that the government of US had forsake the Americans?

I do foresee that this thread will be closed by the mods though.

:annoyed
Last edited by Tinyz on Tue Nov 30, 2021 1:11 am, edited 1 time in total.
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JoMoney
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by JoMoney »

Energy stocks have been a dud for over a decade + , but aside from a few "ESG" posts, I don't see people talking about dropping that segment of their equities.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Bluemnatra »

US could outperform for another 100 years and the exUS proponents here wouldn't change their talking points. This thread will go nowhere.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Nathan Drake »

So much confirmation and recency bias in this thread.

Why is it when US stocks drop 2% after compounding at 16% for a decade we’re quick to “back the truck up” for a screaming bargain at CAPE10 of 40.

Yet, valuations in other markets are trading at half or less. I’m going to continue buying nothing but SCV and exUS stocks while letting my 20% US LCG portfolio ride with the expectation that it will significantly lag 80% of my portfolio over the next twenty years
Last edited by Nathan Drake on Tue Nov 30, 2021 2:27 pm, edited 1 time in total.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Bluemnatra »

Nathan Drake wrote: Tue Nov 30, 2021 12:26 am So much confirmation and recency bias in this thread.

Why it when US stocks drop 2% after compounding at 16% for a decade we’re quick to “back the truck up” for a screaming bargain at CAPE10 of 40.

Yet, valuations in other markets are trading at half or less. I’m going to continue buying nothing but SCV and exUS stocks while letting my 20% US LCG portfolio ride with the expectation that it will significantly lag 80% of my portfolio over the next twenty years
We’ll see how well this ages.

And it’s quite possible international ends the year with a negative return.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by garlandwhizzer »

I have up to now been a stalwart for INTL exposure, staying roughly at global cap weight. Valuations are now strikingly better for INTL than for US. On the other hand INTL valuations have as a rule always been more attractive than US, although not as strikingly so as now. The reason why INTL has such attractive valuations now relative to US is that INTL returns have severely underperformed US for more than a decade. When your relative returns suck vigorously for more than a decade you become deep value relative to the alternate asset. Numbers from Portfolio Visualizer:

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Those of us who have held on to INTL waiting for reversion to the mean have paid a massive opportunity cost for our patient faith for a decade.To put it very mildly mean reversion did not occur. The cheap got cheaper. The expensive got more expensive. Valuations have been historically the best predictors of future returns although the best predictors are still very far from perfect. A 10 K investment in the S&P 500 fund 10 years ago is now worth 43.8 K. Meanwhile a 10 K investment in VXUS is now worth 17.8 K. That amounts to a 26 K opportunity cost which is 260% of the the initial investment amount of 10K. Will that deficit ever be made up? A good question, and I currently expect the answer is no.

INTL did provide diversification but it was mostly in the wrong direction. INTL had deeper maximal drawdown and greater volatility. So now those of us who held on to 40% or even 50% of INTL are in hole we dug for ourselves wondering if we'll ever catch up to the expensive overpriced US that just keeps getting more expensive and more overpriced. I find myself questioning whether valuations as measured by things like PE, PB, PCF are still valid predictors of future returns in the current information based economy where markets are dominated by professionals and algorithms. Algorithms alone drive more than 60% of all stock trades in the US. In theory algorithms are unemotional and perhaps not driven to emotional excesses that have historically driven valuation's predictive value.

After more than a decade in which valuations have counterproductive predictors of future returns, I am getting a bit tired of throwing good money after bad with rebalancing. Perhaps there is a valid reason why many cheap stocks are cheap and many expensive stocks are expensive. I also wonder whether the professionals and algorithms which determine market prices now may be better tuned in to the future than standard valuation measures that worked well in the distant past in a manufacturing/bricks and mortar economy when markets were dominated by mom and pop investors. Time will tell. For now, I'm stubborn enough to hold on to INTL at market weight which used to be 50% but is now 38% due to persistent underperformance. I do believe it will increase diversification (perhaps however in the wrong direction) and it will provide some protection from deep risk like persistent high inflation in the US. So I'll keep on keeping on with INTL, but it feels more and more like swimming upstream against a strong current.

At some point in time hard reality may make us accept that Bogle was right with 100% US equity, or if you insist up to 20% INTL. Vastly higher returns, lower risk, less volatility are hard to argue against when it goes on for a long, long time. We also may have admit that current valuations are inherently flawed predictors of future returns as are all other predictors. It is entirely possible that reversion to the mean in valuations is much like the play, "Waiting for Godot," in which the entire cast faithfully waits for the wonderful magical Godot to walk into the room but he never does.

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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Chief_Engineer »

Bluemnatra wrote: Mon Nov 29, 2021 11:55 pm US could outperform for another 100 years and the exUS proponents here wouldn't change their talking points. This thread will go nowhere.
If US outperforms for 100 years the world index will be 95% US and this debate will continue to be meaningless.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by visualguy »

garlandwhizzer wrote: Tue Nov 30, 2021 1:47 pm The reason why INTL has such attractive valuations now relative to US is that INTL returns have severely underperformed US for more than a decade. When your relative returns suck vigorously for more than a decade you become deep value relative to the alternate asset.
The thing is that ex-US didn't just underperform US in returns. It underperformed in earnings as well, and Europe/Japan have massively underperformed in the formation of major new companies in recent decades. Even with all the underperformance in returns, ex-US is currently expensive relative to its history. Less expensive than US, but far from a bargain.

I don't think the situation with ex-US is all that mysterious if you bother to look at what you're actually investing in.
Last edited by visualguy on Tue Nov 30, 2021 2:19 pm, edited 1 time in total.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by arcticpineapplecorp. »

revhappy wrote: Mon Nov 29, 2021 10:39 pm The dispersion between US and non US equities is just so stark now.

VEU - All country ex US is up only 3% YTD
SPY - 26% YTD

Does the mean reversion logic even work?
not sure if your numbers are off for international because you're using all country ex us or some other reason, but i use total international and they're not as bad as you state.

also US isn't up as much as you think too, unless you're using numbers from some other date??

looking at YTD through yesterday (market's not closed yet today):

Image

sure, while total international has done worse than US, it's still up and there's a 7.14% spread between the total international return and the total US bond return. That's a respectable risk premium over bonds wouldn't you say?
Last edited by arcticpineapplecorp. on Tue Nov 30, 2021 4:58 pm, edited 1 time in total.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Nathan Drake »

visualguy wrote: Tue Nov 30, 2021 2:08 pm
garlandwhizzer wrote: Tue Nov 30, 2021 1:47 pm The reason why INTL has such attractive valuations now relative to US is that INTL returns have severely underperformed US for more than a decade. When your relative returns suck vigorously for more than a decade you become deep value relative to the alternate asset.
The thing is that ex-US didn't just underperform US in returns. It underperformed in earnings as well, and Europe/Japan have massively underperformed in the formation of major new companies in recent decades. Even with all the underperformance in returns, ex-US is currently expensive relative to its history. Less expensive than US, but far from a bargain.

I don't think the situation with ex-US is all that mysterious if you bother to look at what you're actually investing in.
It underperformed mostly due to changes in valuation. Earnings changes were minor in comparison.

The solution to low prices is….low prices. No, this time is not different. US can still have better earnings growth and be a worse investment precisely due to valuations. The market is pricing in significantly more growth or less “risk” than exUS
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by arcticpineapplecorp. »

by the way, one year or even YTD dispersion isn't really meaningful. How would you have felt about US performance relative to international between 1983-1989:

Image
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Walkure »

arcticpineapplecorp. wrote: Tue Nov 30, 2021 2:45 pm by the way, one year or even YTD dispersion isn't really meaningful. How would you have felt about US performance relative to international between 1983-1989:

Image
I would love to see this same chart except with the relative performances shown in dollar-hedged values to back out the currency fluctuations and focus on just the equity valuations.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Thesaints »

In the mid-80's the dollar was very strong. So the EAFE outperformance is despite of currency exchange, making it even more impressive.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by mrspock »

arcticpineapplecorp. wrote: Tue Nov 30, 2021 2:45 pm by the way, one year or even YTD dispersion isn't really meaningful. How would you have felt about US performance relative to international between 1983-1989:

Image
With respect, these charts are very misleading when you leave out context, namely the Japanese bubble (the giant mountain in the 80s) which — lets face it, nobody on this board would have ridden. They have been selling off their international holdings once Japans PEs blew past 50.

Without that, this chart would suggest US is the way to go. Quality counts, not manias which make the tech bubble in 2000 look like rationality.

And to answer your question: I’d have stayed away from INTL with a ten foot pole. Sort of what I’ve done now. I’d have been vindicated for thirty years hence.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by 6NDone »

garlandwhizzer wrote: Tue Nov 30, 2021 1:47 pm I have up to now been a stalwart for INTL exposure, staying roughly at global cap weight. Valuations are now strikingly better for INTL than for US. On the other hand INTL valuations have as a rule always been more attractive than US, although not as strikingly so as now. The reason why INTL has such attractive valuations now relative to US is that INTL returns have severely underperformed US for more than a decade. When your relative returns suck vigorously for more than a decade you become deep value relative to the alternate asset. Numbers from Portfolio Visualizer:

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Those of us who have held on to INTL waiting for reversion to the mean have paid a massive opportunity cost for our patient faith for a decade.To put it very mildly mean reversion did not occur. The cheap got cheaper. The expensive got more expensive. Valuations have been historically the best predictors of future returns although the best predictors are still very far from perfect. A 10 K investment in the S&P 500 fund 10 years ago is now worth 43.8 K. Meanwhile a 10 K investment in VXUS is now worth 17.8 K. That amounts to a 26 K opportunity cost which is 260% of the the initial investment amount of 10K. Will that deficit ever be made up? A good question, and I currently expect the answer is no.

INTL did provide diversification but it was mostly in the wrong direction. INTL had deeper maximal drawdown and greater volatility. So now those of us who held on to 40% or even 50% of INTL are in hole we dug for ourselves wondering if we'll ever catch up to the expensive overpriced US that just keeps getting more expensive and more overpriced. I find myself questioning whether valuations as measured by things like PE, PB, PCF are still valid predictors of future returns in the current information based economy where markets are dominated by professionals and algorithms. Algorithms alone drive more than 60% of all stock trades in the US. In theory algorithms are unemotional and perhaps not driven to emotional excesses that have historically driven valuation's predictive value.

After more than a decade in which valuations have counterproductive predictors of future returns, I am getting a bit tired of throwing good money after bad with rebalancing. Perhaps there is a valid reason why many cheap stocks are cheap and many expensive stocks are expensive. I also wonder whether the professionals and algorithms which determine market prices now may be better tuned in to the future than standard valuation measures that worked well in the distant past in a manufacturing/bricks and mortar economy when markets were dominated by mom and pop investors. Time will tell. For now, I'm stubborn enough to hold on to INTL at market weight which used to be 50% but is now 38% due to persistent underperformance. I do believe it will increase diversification (perhaps however in the wrong direction) and it will provide some protection from deep risk like persistent high inflation in the US. So I'll keep on keeping on with INTL, but it feels more and more like swimming upstream against a strong current.

At some point in time hard reality may make us accept that Bogle was right with 100% US equity, or if you insist up to 20% INTL. Vastly higher returns, lower risk, less volatility are hard to argue against when it goes on for a long, long time. We also may have admit that current valuations are inherently flawed predictors of future returns as are all other predictors. It is entirely possible that reversion to the mean in valuations is much like the play, "Waiting for Godot," in which the entire cast faithfully waits for the wonderful magical Godot to walk into the room but he never does.

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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Triple digit golfer »

Deleted.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Tinyz »

In the mid 80s, it was the Japan era that deliver the highest returns outside of US by speculation of real estate and stock. It went burst due to the lack of monetary tightening action or slowness by the Japanese government.

In the 2000 dotcom, much of the reason was due to rapid rise of interest rate by the fed, resulting in the capital being dried up for tech startups that have no track record but kept borrowing in credit.

[OT comment removed by admin LadyGeek]

Many people have akin the 2020 to be the same as dotcom but the main difference now is the overvaluation of strong tech stock that has track record of earnings and the required cash flow for the company. There are obviously some tech stock that are highly overvalued with a lack of track record recently and we must indeed be careful of such stock.

From what I see, many things happen because of improper regulatory actions as well as borrowing of credit. Through this year, I see rise of concerns for speculation by IPO and borrowing of credit. The world is too addicted to low interest rate.

I think what's important is the government policy to provide a good and strong encouragement for business as well as a strong tightening of monetary policy. Btw, every time the graph that comes with cyclic returns of US/international has always shown me that I can time the market which is funny and unBogle-like.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Beensabu »

After 13 years, it should be obvious by now to everyone that 15% CAGR is the new norm for the US stock market, which shall persist forever, and any asset class that returns less than that is obviously inferior and has no place in a reasonable investor's portfolio. Duh. Right? Totally. Makes complete sense. Why would anyone accept less? It's not even like it's risky. At all. Absolutely no chance whatsoever of ever making less than 15% nominal / year on average. Probably no less than 6% for any given year (and let's be real, how long has it been since that even happened?). Definitely not ever negative. As if we could actually ever have a negative annual return?! For US stocks? Naaaaaah... Dream on! :wink:

Edit: ^^^ This is sarcasm ^^^ and I have added the appropriate emoji to indicate that in the interest of being a responsiblish adult.
Last edited by Beensabu on Wed Dec 01, 2021 9:26 am, edited 1 time in total.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by donaldfair71 »

Beensabu wrote: Tue Nov 30, 2021 8:41 pm After 13 years, it should be obvious by now to everyone that 15% CAGR is the new norm for the US stock market, which shall persist forever, and any asset class that returns less than that is obviously inferior and has no place in a reasonable investor's portfolio. Duh. Right? Totally. Makes complete sense. Why would anyone accept less? It's not even like it's risky. At all. Absolutely no chance whatsoever of ever making less than 15% nominal / year on average. Probably no less than 6% for any given year (and let's be real, how long has it been since that even happened?). Definitely not ever negative. As if we could actually ever have a negative annual return?! For US stocks? Naaaaaah... Dream on!
Why diversify into “US stocks” and dilute your returns? Just invest in Mega Cap Tech, it never lags you see.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Nathan Drake »

mrspock wrote: Tue Nov 30, 2021 8:02 pm
arcticpineapplecorp. wrote: Tue Nov 30, 2021 2:45 pm by the way, one year or even YTD dispersion isn't really meaningful. How would you have felt about US performance relative to international between 1983-1989:

Image
With respect, these charts are very misleading when you leave out context, namely the Japanese bubble (the giant mountain in the 80s) which — lets face it, nobody on this board would have ridden. They have been selling off their international holdings once Japans PEs blew past 50.

Without that, this chart would suggest US is the way to go. Quality counts, not manias which make the tech bubble in 2000 look like rationality.

And to answer your question: I’d have stayed away from INTL with a ten foot pole. Sort of what I’ve done now. I’d have been vindicated for thirty years hence.
So if the chart is misleading due to the Japanese bubble in the 80s, what about the US bubble in the 90s and 10s?

We just going to hand wave that?
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by thenextguy »

mrspock wrote: Tue Nov 30, 2021 8:02 pm
arcticpineapplecorp. wrote: Tue Nov 30, 2021 2:45 pm by the way, one year or even YTD dispersion isn't really meaningful. How would you have felt about US performance relative to international between 1983-1989:

Image
With respect, these charts are very misleading when you leave out context, namely the Japanese bubble (the giant mountain in the 80s) which — lets face it, nobody on this board would have ridden. They have been selling off their international holdings once Japans PEs blew past 50.
If there wasn't a bubble in Japan and there wasn't a big spike in the graph in the 1980s, those returns would have just occurred in other areas of the graph. They wouldn't just disappear from the chart. You could just as easily attribute the poor performance of international in the 1990s to the Japanese bubble of the 1980s.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Bluemnatra »

right now all you have as a holder of international exposure is hope. Hope that your faithfulness and patience will someday bear fruit.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by zaboomafoozarg »

unclescrooge wrote: Mon Nov 29, 2021 11:00 pm
scout1 wrote: Mon Nov 29, 2021 10:47 pm “It's not supposed to be easy. Anyone who finds it easy is stupid.” -Munger

IMO buying the lowest priced stuff is often the easiest thing to do.
It's the simplest thing to do, but it's not the easiest.
Buying an asset class that has been a dud for a decade definitely feels like a stupid thing to do.
I do feel dumber and dumber every year for investing 1/3 in international. If I had invested only in US stocks for the last 10 years, I'd be retired now before the age of 40.

But I'm afraid if I pull out, it'll be like when I switch lanes at Walmart - the one I was in starts going much faster than the one I switched to!
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Wannaretireearly »

Vemax, emerging market near 12 month lows.
Tempted to do the hard thing and buy some
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Marseille07 »

zaboomafoozarg wrote: Tue Nov 30, 2021 10:16 pm I do feel dumber and dumber every year for investing 1/3 in international. If I had invested only in US stocks for the last 10 years, I'd be retired now before the age of 40.

But I'm afraid if I pull out, it'll be like when I switch lanes at Walmart - the one I was in starts going much faster than the one I switched to!
I understand the feeling. Maybe stop contributing new money toward international?
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Beensabu »

Bluemnatra wrote: Tue Nov 30, 2021 9:23 pm right now all you have as a holder of international exposure is hope. Hope that your faithfulness and patience will someday bear fruit.
What some of us have (at least with VTIAX) is fractional ownership of 7760 different mostly very large corporations domiciled around the world, with a 5-year average earnings growth rate of 7.7%, along with a trailing twelve-month dividend yield of ~2.5%. Admittedly, that's not good enough for a bunch of people considering what else has been on offer. But it's more than just hope.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by 000 »

Bluemnatra wrote: Tue Nov 30, 2021 9:23 pm right now all you have as a holder of international exposure is hope. Hope that your faithfulness and patience will someday bear fruit.
Security returns don't care about your feelings.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Ocean77 »

Raise of hands please, for those who are in the accumulation phase:
- Are you cheering on the ever higher stock prices in the US, if that's where all or most of your assets are allocated?
- Are you bemoaning the stock "sale" seemingly going on forever outside the US, if that's where your assets are?

I think even here on BH, many get this one wrong.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Nathan Drake »

Marseille07 wrote: Tue Nov 30, 2021 10:35 pm
zaboomafoozarg wrote: Tue Nov 30, 2021 10:16 pm I do feel dumber and dumber every year for investing 1/3 in international. If I had invested only in US stocks for the last 10 years, I'd be retired now before the age of 40.

But I'm afraid if I pull out, it'll be like when I switch lanes at Walmart - the one I was in starts going much faster than the one I switched to!
I understand the feeling. Maybe stop contributing new money toward international?
That'd be like not contributing to US stocks in the late 70s through 80s while exUS was taking off. You stop contributing at the wrong time?

But "US equities were dead" back then. So you looked foolish, until you got wealthy staying the course with your AA.

Stocks are the some of the only items I can think of, other than luxury goods, where getting things for cheaper is fundamentally difficult to do because the recent past blinds you from making the best long-term decisions.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
hnd
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by hnd »

I decided in 2016 that my US/exUS contribution would be split at the 80/20 number and would never rebalance it. meaning sell US to buy exUs. I still do for equities vs bond. I'm currently at 14% international and i'm not changing anything. how will it play out in the end? who knows, but i'll take my chances.
Nathan Drake
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Nathan Drake »

Bluemnatra wrote: Tue Nov 30, 2021 9:23 pm right now all you have as a holder of international exposure is hope. Hope that your faithfulness and patience will someday bear fruit.
ALL stock investors of ANY type are HOPING for future returns to go in their favor. Rationally diversified HOPE is what investing is all about.
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Marseille07
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Marseille07 »

Nathan Drake wrote: Tue Nov 30, 2021 10:51 pm
Marseille07 wrote: Tue Nov 30, 2021 10:35 pm
zaboomafoozarg wrote: Tue Nov 30, 2021 10:16 pm I do feel dumber and dumber every year for investing 1/3 in international. If I had invested only in US stocks for the last 10 years, I'd be retired now before the age of 40.

But I'm afraid if I pull out, it'll be like when I switch lanes at Walmart - the one I was in starts going much faster than the one I switched to!
I understand the feeling. Maybe stop contributing new money toward international?
That'd be like not contributing to US stocks in the late 70s through 80s while exUS was taking off. You stop contributing at the wrong time?

But "US equities were dead" back then. So you looked foolish, until you got wealthy staying the course with your AA.

Stocks are the some of the only items I can think of, other than luxury goods, where getting things for cheaper is fundamentally difficult to do because the recent past blinds you from making the best long-term decisions.
You need to advise zaboomafoozarg, not me. I am not the one lamenting 1/3 in international.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Bluemnatra »

Beensabu wrote: Tue Nov 30, 2021 10:39 pm
Bluemnatra wrote: Tue Nov 30, 2021 9:23 pm right now all you have as a holder of international exposure is hope. Hope that your faithfulness and patience will someday bear fruit.
What some of us have (at least with VTIAX) is fractional ownership of 7760 different mostly very large corporations domiciled around the world, with a 5-year average earnings growth rate of 7.7%, along with a trailing twelve-month dividend yield of ~2.5%. Admittedly, that's not good enough for a bunch of people considering what else has been on offer. But it's more than just hope.
Ask the guy above how he feels about fractional ownership of 7760 different mostly very large corporations domiciled around the world...it's meant paltry returns. People keep buying it though and that to me is amazing. What if the last 10 repeat the next 10?
"The greatest enemy of a good plan is the dream of a perfect plan"
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Bluemnatra »

Nathan Drake wrote: Tue Nov 30, 2021 10:55 pm
Bluemnatra wrote: Tue Nov 30, 2021 9:23 pm right now all you have as a holder of international exposure is hope. Hope that your faithfulness and patience will someday bear fruit.
ALL stock investors of ANY type are HOPING for future returns to go in their favor. Rationally diversified HOPE is what investing is all about.
Whatever helps keep you motivated :beer
"The greatest enemy of a good plan is the dream of a perfect plan"
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by visualguy »

Bluemnatra wrote: Tue Nov 30, 2021 9:23 pm right now all you have as a holder of international exposure is hope. Hope that your faithfulness and patience will someday bear fruit.
I guess hope springs eternal for some folks... Can't see where that hope would be coming from with ex-US indexing. When I look at Europe and Japan, I feel despair about their stagnation, not hope. When I look at China, I feel despair about my inability to benefit from their economy by owning their stocks, not hope. Where's the hope? What is a credible scenario where Europe and Japan revitalize? I know my life is way too short to put money on something like that.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by bigdog34 »

given my young age and the current interest rate environment, I've comfortably shifted my 10% bond allocation into total international stock indexes over the past year or so (thus increasing my international exposure to 1/3 of my total equities). It very well might continue underperforming US over the next decade, but I'd be shocked if my regular DCA into international doesn't beat out BND in the long run, so I'm ok picking up more international equities at times like these.

I think the ratio of stocks / bonds one holds over the next decade will be way more impactful than the ratio of US /INT.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Beensabu »

Bluemnatra wrote: Tue Nov 30, 2021 11:23 pm
Beensabu wrote: Tue Nov 30, 2021 10:39 pm
Bluemnatra wrote: Tue Nov 30, 2021 9:23 pm right now all you have as a holder of international exposure is hope. Hope that your faithfulness and patience will someday bear fruit.
What some of us have (at least with VTIAX) is fractional ownership of 7760 different mostly very large corporations domiciled around the world, with a 5-year average earnings growth rate of 7.7%, along with a trailing twelve-month dividend yield of ~2.5%. Admittedly, that's not good enough for a bunch of people considering what else has been on offer. But it's more than just hope.
Ask the guy above how he feels about fractional ownership of 7760 different mostly very large corporations domiciled around the world...it's meant paltry returns. People keep buying it though and that to me is amazing.
13.10% nominal CAGR (67/33 US/exUS) from Jan 2009 - Nov 2021 is "paltry"?

For that matter, 7.66% (100% exUS) is paltry?

I was intending to express sarcasm with my initial comment on this thread, but... maybe there are people who actually think that way.
What if the last 10 repeat the next 10?
What if they don't? I'm not talking about exUS "catching up". I'm talking about US with a 7.66% CAGR (or less) over 10 years. It could happen, but apparently such a return is unacceptable. That anyone outright dismisses the possibility is mind boggling. What kind of return are people even planning for?
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
Nathan Drake
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Nathan Drake »

Beensabu wrote: Tue Nov 30, 2021 11:47 pm
Bluemnatra wrote: Tue Nov 30, 2021 11:23 pm
Beensabu wrote: Tue Nov 30, 2021 10:39 pm
Bluemnatra wrote: Tue Nov 30, 2021 9:23 pm right now all you have as a holder of international exposure is hope. Hope that your faithfulness and patience will someday bear fruit.
What some of us have (at least with VTIAX) is fractional ownership of 7760 different mostly very large corporations domiciled around the world, with a 5-year average earnings growth rate of 7.7%, along with a trailing twelve-month dividend yield of ~2.5%. Admittedly, that's not good enough for a bunch of people considering what else has been on offer. But it's more than just hope.
Ask the guy above how he feels about fractional ownership of 7760 different mostly very large corporations domiciled around the world...it's meant paltry returns. People keep buying it though and that to me is amazing.
13.10% nominal CAGR (67/33 US/exUS) from Jan 2009 - Nov 2021 is "paltry"?

For that matter, 7.66% (100% exUS) is paltry?

I was intending to express sarcasm with my initial comment on this thread, but... maybe there are people who actually think that way.
What if the last 10 repeat the next 10?
What if they don't? I'm not talking about exUS "catching up". I'm talking about US with a 7.66% CAGR (or less) over 10 years. It could happen, but apparently such a return is unacceptable. That anyone outright dismisses the possibility is mind boggling. What kind of return are people even planning for?
Paltry is being flat for 10-20 years, which is what the US stock market has been prone to experience occasionally, coinciding with high valuations.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by burritoLover »

It’s amazing that some investors here follow the “move money into whatever does gooder” strategy - as if the longer an asset outperforms, the more certain that it will continue to outperform in the future. You only need to look at history to know how boneheaded that performance chasing strategy is. And usually this is further rationalized by thinking you can predict the future equity returns by country - laughable.

Diversification means something you own will underperform something else and can do so for years. You continue to rebalance into the underperforming asset even if this underperformance lasts over a decade. Bogle wasn’t a fan of international but he definitely would be against stopping rebalancing into your underperforming asset.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by marky2kk »

6NDone wrote: Tue Nov 30, 2021 8:10 pm
garlandwhizzer wrote: Tue Nov 30, 2021 1:47 pm I have up to now been a stalwart for INTL exposure, staying roughly at global cap weight. Valuations are now strikingly better for INTL than for US. On the other hand INTL valuations have as a rule always been more attractive than US, although not as strikingly so as now. The reason why INTL has such attractive valuations now relative to US is that INTL returns have severely underperformed US for more than a decade. When your relative returns suck vigorously for more than a decade you become deep value relative to the alternate asset. Numbers from Portfolio Visualizer:

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Those of us who have held on to INTL waiting for reversion to the mean have paid a massive opportunity cost for our patient faith for a decade.To put it very mildly mean reversion did not occur. The cheap got cheaper. The expensive got more expensive. Valuations have been historically the best predictors of future returns although the best predictors are still very far from perfect. A 10 K investment in the S&P 500 fund 10 years ago is now worth 43.8 K. Meanwhile a 10 K investment in VXUS is now worth 17.8 K. That amounts to a 26 K opportunity cost which is 260% of the the initial investment amount of 10K. Will that deficit ever be made up? A good question, and I currently expect the answer is no.

INTL did provide diversification but it was mostly in the wrong direction. INTL had deeper maximal drawdown and greater volatility. So now those of us who held on to 40% or even 50% of INTL are in hole we dug for ourselves wondering if we'll ever catch up to the expensive overpriced US that just keeps getting more expensive and more overpriced. I find myself questioning whether valuations as measured by things like PE, PB, PCF are still valid predictors of future returns in the current information based economy where markets are dominated by professionals and algorithms. Algorithms alone drive more than 60% of all stock trades in the US. In theory algorithms are unemotional and perhaps not driven to emotional excesses that have historically driven valuation's predictive value.

After more than a decade in which valuations have counterproductive predictors of future returns, I am getting a bit tired of throwing good money after bad with rebalancing. Perhaps there is a valid reason why many cheap stocks are cheap and many expensive stocks are expensive. I also wonder whether the professionals and algorithms which determine market prices now may be better tuned in to the future than standard valuation measures that worked well in the distant past in a manufacturing/bricks and mortar economy when markets were dominated by mom and pop investors. Time will tell. For now, I'm stubborn enough to hold on to INTL at market weight which used to be 50% but is now 38% due to persistent underperformance. I do believe it will increase diversification (perhaps however in the wrong direction) and it will provide some protection from deep risk like persistent high inflation in the US. So I'll keep on keeping on with INTL, but it feels more and more like swimming upstream against a strong current.

At some point in time hard reality may make us accept that Bogle was right with 100% US equity, or if you insist up to 20% INTL. Vastly higher returns, lower risk, less volatility are hard to argue against when it goes on for a long, long time. We also may have admit that current valuations are inherently flawed predictors of future returns as are all other predictors. It is entirely possible that reversion to the mean in valuations is much like the play, "Waiting for Godot," in which the entire cast faithfully waits for the wonderful magical Godot to walk into the room but he never does.

Garland Whizzer
Beautifully said.
Indeed. How is Garland Whizzer always so spot on?!
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by WarAdmiral »

Ocean77 wrote: Tue Nov 30, 2021 10:48 pm Raise of hands please, for those who are in the accumulation phase:
- Are you cheering on the ever higher stock prices in the US, if that's where all or most of your assets are allocated?
- Are you bemoaning the stock "sale" seemingly going on forever outside the US, if that's where your assets are?

I think even here on BH, many get this one wrong.
Exactly!
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by asif408 »

Nathan Drake wrote: Tue Nov 30, 2021 10:51 pm Stocks are the some of the only items I can think of, other than luxury goods, where getting things for cheaper is fundamentally difficult to do because the recent past blinds you from making the best long-term decisions.
Stocks are definitely Giffen goods.
burritoLover wrote: Wed Dec 01, 2021 5:38 am Diversification means something you own will underperform something else and can do so for years. You continue to rebalance into the underperforming asset even if this underperformance lasts over a decade. Bogle wasn’t a fan of international but he definitely would be against stopping rebalancing into your underperforming asset.
The only diversification people like here is the kind that brings outperformance in the short term. Who wants underperformance diversification?
UpperNwGuy
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by UpperNwGuy »

There's too much sarcasm in this thread. It's hard for non-sarcastic people to know what is sincerely meant and what is said in sarcasm.
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Re: Dispersion b/w US vs Ex US has never been this stark

Post by Independent George »

arcticpineapplecorp. wrote: Tue Nov 30, 2021 2:45 pm by the way, one year or even YTD dispersion isn't really meaningful. How would you have felt about US performance relative to international between 1983-1989:

Image
The problem is that the relevant metric on that chart is the area under the curve, and not the periods on the x-axis - and the US dominates the area under the curve. That chart is mostly telling me that I'm being stupid for holding 40% of my equities in international. I'm doing it anyway, but damn that is hard to look at.
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