Does "international" offer any diversification?

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Patzer
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Re: Does "international" offer any diversification?

Post by Patzer »

Northern Flicker wrote: Thu Jan 27, 2022 4:21 pm
nigel_ht wrote: Thu Jan 27, 2022 9:12 am
Northern Flicker wrote: Wed Jan 26, 2022 10:25 pm
nigel_ht wrote: Wed Jan 26, 2022 7:09 pm
Northern Flicker wrote: Wed Jan 26, 2022 3:21 pm
It is moderately hard even looking back with 20-20 hindsight. And there was no clear indicator that the US would rise from the ashes of the great depression with the strength it displayed.
The co-equal standing with the British in the interwar years was an indicator.
Co-equal standing during the depression?
In the primary metric of the day: number of battleships and carriers. We finally starting rebuilding in the mid-30s during the depression. In 1933 the contracts for the Enterprise and Yorktown was awarded, WWI battleships got some modernization (mostly AA) and new hulls laid down.
This is the first time I've heard the idea that the number of battleships and carriers in a nation's navy was a signal predictive of the prospects for the nation's equity market to outperform relative to that of other nations.
Interesting thought. Tonnage is probably more relevant than total ships.
In terms of tonnage, USA's navy is much strong right now, but at their current annual investment, they become closer and closer over time.
2021: USA 2.3X China
2030: USA 1.7X China
2040: USA 1.4X China
2050: USA 1.3X China
2060: USA 1.2X China
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Re: Does "international" offer any diversification?

Post by Thesaints »

Soviet Union had lotsa tonnage...
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Re: Does "international" offer any diversification?

Post by abuss368 »

vineviz wrote: Wed Jan 26, 2022 6:53 am
balbrec2 wrote: Wed Jan 26, 2022 6:44 am Diversification yes, correlation no.
Diversification = low correlation + high variance. It's all related.
Vince -

That makes sense but is this subjective to the time period chosen including the length of any time period?

Tony
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Re: Does "international" offer any diversification?

Post by nigel_ht »

Northern Flicker wrote: Thu Jan 27, 2022 4:21 pm
nigel_ht wrote: Thu Jan 27, 2022 9:12 am
Northern Flicker wrote: Wed Jan 26, 2022 10:25 pm
nigel_ht wrote: Wed Jan 26, 2022 7:09 pm
Northern Flicker wrote: Wed Jan 26, 2022 3:21 pm
It is moderately hard even looking back with 20-20 hindsight. And there was no clear indicator that the US would rise from the ashes of the great depression with the strength it displayed.
The co-equal standing with the British in the interwar years was an indicator.
Co-equal standing during the depression?
In the primary metric of the day: number of battleships and carriers. We finally starting rebuilding in the mid-30s during the depression. In 1933 the contracts for the Enterprise and Yorktown was awarded, WWI battleships got some modernization (mostly AA) and new hulls laid down.
This is the first time I've heard the idea that the number of battleships and carriers in a nation's navy was a signal predictive of the prospects for the nation's equity market to outperform relative to that of other nations.
It's an indicator of superpower status...at least according to Mahan. The Chinese today seem to agree. If you can't control your sea lanes for commerce you don't really control your own destiny. If you can't project power on a global scale you aren't a world power...and power projection still requires sea power.

The leading power of the day, whether Spain, England, US had strong navies. Leading powers of the day get to do things financially that other nations can't get away with. Like we get away with given reserve currency status and whenever there is a flight to safety.

Rome is something of an outlier but even so they owned the Med.

Reject the concept and there's a good chance you end up like Qing China...carved up. For the British Empire to give up being larger than the next two navies meant their economy and empire was in decline. That the US was allowed to build as many ships as the Empire meant we were ascending.

PLAN having a larger number of ships than the USN is an indicator...and not a good one for us. Still, the US 7th fleet would still win in a straight up fight anywhere not close to Chinese shores. When this stops being true I'll be overweight China regardless of the other risks. At that point China will likely not be emerging market anymore either.
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Re: Does "international" offer any diversification?

Post by Northern Flicker »

If you look at Table 2 in the link below, it shows the UK having the worst equity performance among leading economies during the period 1848-1914 despite the size of the Royal Navy.

https://globalfinancialdata.com/four-ce ... retrospect

You also can see the benefit of international diversification by seeing different countries with the best and worst performance in the tables for different time periods.
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Re: Does "international" offer any diversification?

Post by Da5id »

Northern Flicker wrote: Fri Jan 28, 2022 1:45 pm If you look at Table 2 in the link below, it shows the UK having the worst equity performance among leading economies during the period 1848-1914 despite the size of the Royal Navy.

https://globalfinancialdata.com/four-ce ... retrospect

You also can see the benefit of international diversification by seeing different countries with the best and worst performance in the tables for different time periods.
Wait, the "naval size factor" doesn't work in all periods?!? I thought the data was supposed to be really solid. That time period was clearly an outlier.

Anyway, not sure the whole size of navy thing is a great way to *pick investments*. And if it is not, not clear why it is relevant here. YMMV.
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Re: Does "international" offer any diversification?

Post by steve r »

Da5id wrote: Fri Jan 28, 2022 2:14 pm...
not sure the whole size of navy thing is a great way to *pick investments*.
...
Didn't Paul Allen (of Microsoft) have a bigger yacht than Larry Ellison (Oracle), so there is that! :beer
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Re: Does "international" offer any diversification?

Post by nigel_ht »

Da5id wrote: Fri Jan 28, 2022 2:14 pm
Northern Flicker wrote: Fri Jan 28, 2022 1:45 pm If you look at Table 2 in the link below, it shows the UK having the worst equity performance among leading economies during the period 1848-1914 despite the size of the Royal Navy.

https://globalfinancialdata.com/four-ce ... retrospect

You also can see the benefit of international diversification by seeing different countries with the best and worst performance in the tables for different time periods.
Wait, the "naval size factor" doesn't work in all periods?!? I thought the data was supposed to be really solid. That time period was clearly an outlier.

Anyway, not sure the whole size of navy thing is a great way to *pick investments*. And if it is not, not clear why it is relevant here. YMMV.
People ask why overweight in the US. We're the global superpower. What's an indicator of this status? We can go anywhere we want in the world and nobody can really stop us short of nukes if we really want to go.
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Re: Does "international" offer any diversification?

Post by Da5id »

nigel_ht wrote: Fri Jan 28, 2022 3:19 pm People ask why overweight in the US. We're the global superpower. What's an indicator of this status? We can go anywhere we want in the world and nobody can really stop us short of nukes if we really want to go.
The US has had periods of better and worse performance during the time we've been a superpower. I'm dubious that the "superpower" factor is worth investing in. And as always, if it exists could reasonably be thought to be baked into valuations.
Last edited by Da5id on Fri Jan 28, 2022 3:45 pm, edited 1 time in total.
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Re: Does "international" offer any diversification?

Post by Northern Flicker »

nigel_ht wrote: Fri Jan 28, 2022 3:19 pm People ask why overweight in the US. We're the global superpower. What's an indicator of this status? We can go anywhere we want in the world and nobody can really stop us short of nukes if we really want to go.
I think the data demonstrated clearly that this does not drive equity returns.
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Re: Does "international" offer any diversification?

Post by asif408 »

Northern Flicker wrote: Fri Jan 28, 2022 3:30 pm
nigel_ht wrote: Fri Jan 28, 2022 3:19 pm People ask why overweight in the US. We're the global superpower. What's an indicator of this status? We can go anywhere we want in the world and nobody can really stop us short of nukes if we really want to go.
I think the data demonstrated clearly that this does not drive equity returns.
Who needs data when you have stories and narratives?
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Re: Does "international" offer any diversification?

Post by nigel_ht »

Northern Flicker wrote: Fri Jan 28, 2022 3:30 pm
nigel_ht wrote: Fri Jan 28, 2022 3:19 pm People ask why overweight in the US. We're the global superpower. What's an indicator of this status? We can go anywhere we want in the world and nobody can really stop us short of nukes if we really want to go.
I think the data demonstrated clearly that this does not drive equity returns.
For one such period yes. On the other hand they had no bear markets for that time period. It would be interesting to see why the UK seems to have a consistently lower equity premium.

We certainly don't always outperform but we're a safe bet. When flight to safety happens money tends to flow into the US.

You guys can do whatever you want...I prefer to be overweight in the US market. What happened to the Nikkei is not as likely to happen to us.

In the long run US vs International will be a wash as one or the other outperforms and I hold enough VXUS to have sufficient diversity for my needs.
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Re: Does "international" offer any diversification?

Post by Bluemnatra »

nigel_ht wrote: Fri Jan 28, 2022 3:50 pm
Northern Flicker wrote: Fri Jan 28, 2022 3:30 pm
nigel_ht wrote: Fri Jan 28, 2022 3:19 pm People ask why overweight in the US. We're the global superpower. What's an indicator of this status? We can go anywhere we want in the world and nobody can really stop us short of nukes if we really want to go.
I think the data demonstrated clearly that this does not drive equity returns.
For one such period yes. On the other hand they had no bear markets for that time period. It would be interesting to see why the UK seems to have a consistently lower equity premium.

We certainly don't always outperform but we're a safe bet. When flight to safety happens money tends to flow into the US.

You guys can do whatever you want...I prefer to be overweight in the US market. What happened to the Nikkei is not as likely to happen to us.

In the long run US vs International will be a wash as one or the other outperforms and I hold enough VXUS to have sufficient diversity for my needs.
Just out of curiosity if you're such a believer in US why do you hold any VXUS?
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Re: Does "international" offer any diversification?

Post by Da5id »

nigel_ht wrote: Fri Jan 28, 2022 3:50 pm What happened to the Nikkei is not as likely to happen to us.
I believe there isn't enough information to predict the odds of that happening to the US (or any country).
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Re: Does "international" offer any diversification?

Post by nigel_ht »

Bluemnatra wrote: Fri Jan 28, 2022 3:57 pm
nigel_ht wrote: Fri Jan 28, 2022 3:50 pm
Northern Flicker wrote: Fri Jan 28, 2022 3:30 pm
nigel_ht wrote: Fri Jan 28, 2022 3:19 pm People ask why overweight in the US. We're the global superpower. What's an indicator of this status? We can go anywhere we want in the world and nobody can really stop us short of nukes if we really want to go.
I think the data demonstrated clearly that this does not drive equity returns.
For one such period yes. On the other hand they had no bear markets for that time period. It would be interesting to see why the UK seems to have a consistently lower equity premium.

We certainly don't always outperform but we're a safe bet. When flight to safety happens money tends to flow into the US.

You guys can do whatever you want...I prefer to be overweight in the US market. What happened to the Nikkei is not as likely to happen to us.

In the long run US vs International will be a wash as one or the other outperforms and I hold enough VXUS to have sufficient diversity for my needs.
Just out of curiosity if you're such a believer in US why do you hold any VXUS?
For the same reason I hold GLDM and SCV. Why do folks insist that everyone must either be 100% for or against something? I hold around 20% international. I have no real need for 40% international. Nor do I see a great need for international small cap. I do actually hold a little international bonds.

If I were rich I'd hold a few hundred K in Euros, Yen and even RMB. Plus an extra passport of two.

That has nothing to do with believing in the US as it stands today as much as insurance if the situation changes.
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Re: Does "international" offer any diversification?

Post by nigel_ht »

Da5id wrote: Fri Jan 28, 2022 3:58 pm
nigel_ht wrote: Fri Jan 28, 2022 3:50 pm What happened to the Nikkei is not as likely to happen to us.
I believe there isn't enough information to predict the odds of that happening to the US (or any country).
That's fine. I disagree.
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Re: Does "international" offer any diversification?

Post by z3r0c00l »

nigel_ht wrote: Fri Jan 28, 2022 4:07 pm
Da5id wrote: Fri Jan 28, 2022 3:58 pm
nigel_ht wrote: Fri Jan 28, 2022 3:50 pm What happened to the Nikkei is not as likely to happen to us.
I believe there isn't enough information to predict the odds of that happening to the US (or any country).
That's fine. I disagree.
Based on what evidence?
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Re: Does "international" offer any diversification?

Post by nigel_ht »

z3r0c00l wrote: Fri Jan 28, 2022 4:08 pm
nigel_ht wrote: Fri Jan 28, 2022 4:07 pm
Da5id wrote: Fri Jan 28, 2022 3:58 pm
nigel_ht wrote: Fri Jan 28, 2022 3:50 pm What happened to the Nikkei is not as likely to happen to us.
I believe there isn't enough information to predict the odds of that happening to the US (or any country).
That's fine. I disagree.
Based on what evidence?
2008 and 2020. We've played some serious games which most other countries can't get away with. I suppose the jury is still out if we got away with 2020 but it wasn't as severe as the issues in 2008.

Plus larger population, GDP, natural resources, geopolitical power, etc vs Japan.

It's not impossible but it's not as likely.
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Re: Does "international" offer any diversification?

Post by Northern Flicker »

nigel_ht wrote: Fri Jan 28, 2022 3:50 pm
Northern Flicker wrote: Fri Jan 28, 2022 3:30 pm
nigel_ht wrote: Fri Jan 28, 2022 3:19 pm People ask why overweight in the US. We're the global superpower. What's an indicator of this status? We can go anywhere we want in the world and nobody can really stop us short of nukes if we really want to go.
I think the data demonstrated clearly that this does not drive equity returns.
For one such period yes. On the other hand they had no bear markets for that time period. It would be interesting to see why the UK seems to have a consistently lower equity premium.
1 out of 2 it worked. 1 out if 2 it failed. Sounds more like a coin toss to me.
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Re: Does "international" offer any diversification?

Post by z3r0c00l »

nigel_ht wrote: Fri Jan 28, 2022 4:27 pm
z3r0c00l wrote: Fri Jan 28, 2022 4:08 pm
nigel_ht wrote: Fri Jan 28, 2022 4:07 pm
Da5id wrote: Fri Jan 28, 2022 3:58 pm
nigel_ht wrote: Fri Jan 28, 2022 3:50 pm What happened to the Nikkei is not as likely to happen to us.
I believe there isn't enough information to predict the odds of that happening to the US (or any country).
That's fine. I disagree.
Based on what evidence?
2008 and 2020. We've played some serious games which most other countries can't get away with. I suppose the jury is still out if we got away with 2020 but it wasn't as severe as the issues in 2008.

Plus larger population, GDP, natural resources, geopolitical power, etc vs Japan.

It's not impossible but it's not as likely.
Okay I'm convinced, highly unlikely and certainly not going to happen without global repercussions which were largely absent when Japan's bubble popped.
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Re: Does "international" offer any diversification?

Post by nigel_ht »

Northern Flicker wrote: Fri Jan 28, 2022 4:30 pm
nigel_ht wrote: Fri Jan 28, 2022 3:50 pm
Northern Flicker wrote: Fri Jan 28, 2022 3:30 pm
nigel_ht wrote: Fri Jan 28, 2022 3:19 pm People ask why overweight in the US. We're the global superpower. What's an indicator of this status? We can go anywhere we want in the world and nobody can really stop us short of nukes if we really want to go.
I think the data demonstrated clearly that this does not drive equity returns.
For one such period yes. On the other hand they had no bear markets for that time period. It would be interesting to see why the UK seems to have a consistently lower equity premium.
1 out of 2 it worked. 1 out if 2 it failed. Sounds more like a coin toss to me.
Without seeing the data I'm not willing to suggest start date sensitivity...especially given the London market looked mostly boring for long periods.

If you guys don't believe there's an economic and financial advantage to being the preeminent power, that's up y'all.
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Re: Does "international" offer any diversification?

Post by nigel_ht »

z3r0c00l wrote: Fri Jan 28, 2022 4:32 pm
nigel_ht wrote: Fri Jan 28, 2022 4:27 pm
z3r0c00l wrote: Fri Jan 28, 2022 4:08 pm
nigel_ht wrote: Fri Jan 28, 2022 4:07 pm
Da5id wrote: Fri Jan 28, 2022 3:58 pm

I believe there isn't enough information to predict the odds of that happening to the US (or any country).
That's fine. I disagree.
Based on what evidence?
2008 and 2020. We've played some serious games which most other countries can't get away with. I suppose the jury is still out if we got away with 2020 but it wasn't as severe as the issues in 2008.

Plus larger population, GDP, natural resources, geopolitical power, etc vs Japan.

It's not impossible but it's not as likely.
Okay I'm convinced, highly unlikely and certainly not going to happen without global repercussions which were largely absent when Japan's bubble popped.
If we get close to Nikkei valuations I'm still selling everything. Plus we did go through 1929. But for the most part the US is considered safe...
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Re: Does "international" offer any diversification?

Post by Da5id »

nigel_ht wrote: Fri Jan 28, 2022 4:34 pm If you guys don't believe there's an economic and financial advantage to being the preeminent power, that's up y'all.
One could believe that and believe that market valuations reflect it. The position of the US in the world is hardly a well kept secret.
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Re: Does "international" offer any diversification?

Post by Northern Flicker »

nigel_ht wrote: Fri Jan 28, 2022 4:34 pm
Northern Flicker wrote: Fri Jan 28, 2022 4:30 pm
nigel_ht wrote: Fri Jan 28, 2022 3:50 pm
Northern Flicker wrote: Fri Jan 28, 2022 3:30 pm
nigel_ht wrote: Fri Jan 28, 2022 3:19 pm People ask why overweight in the US. We're the global superpower. What's an indicator of this status? We can go anywhere we want in the world and nobody can really stop us short of nukes if we really want to go.
I think the data demonstrated clearly that this does not drive equity returns.
For one such period yes. On the other hand they had no bear markets for that time period. It would be interesting to see why the UK seems to have a consistently lower equity premium.
1 out of 2 it worked. 1 out if 2 it failed. Sounds more like a coin toss to me.
Without seeing the data I'm not willing to suggest start date sensitivity...especially given the London market looked mostly boring for long periods.

If you guys don't believe there's an economic and financial advantage to being the preeminent power, that's up y'all.
I do believe that these advantages hold true. What I don't believe is that it translates into a higher expected return for equities. British assets did not just perform below the top performer over the 67 years when they had the largest navy, but returned 2.6% annually-- the worst of any leading economy.

It is alot harder for an economy to grow by 10% when it is the largest economy than when it is the smallest economy. And even economic growth has been a poor indicator of equity return in the past.

Why would any investors invest in riskier emerging market stocks if they had a lower expected return?
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Re: Does "international" offer any diversification?

Post by Tinyz »

Interesting tables. I feel that table might have lack of information or uses weird methodology. Would like to present a paper for British stock market by Gareth et al. (May 2019)

BEFORE THE CULT OF EQUITY: NEW MONTHLY INDICES OF THE BRITISH SHARE MARKET,1829–1929

We can see that during that period by table 2. Dividends was pretty much the metric for the returns of stock market. Perhaps due to the safe British, the dividend for British is lower than places such as France, Belgium, Germany playing catchup, just my opinion. From 1850-1910, its actually about 5-6% total returns for British stocks. Another paper which also conclude that dividends are the most important component of returns, the paper studies the period from 1820-1870 by Graeme et al. (Dec 2009) Rule Britannia! British Stock Market Returns, 1825–1870. Funnily enough, the second paper had also states that British starts its decline from 1870 due to increasing competition.

After 1914, it is the world war and as we know, it devastate Europe badly with US rising to supremacy.

I am not much of a researcher but these data very much dependent of methodology. Different methodology can paint different narrative. I wing mine for my graduation paper so I know. :D

Will US continue its supremacy? I don't know but betting on another world war is silly and not meaningful. :beer
Last edited by Tinyz on Sat Jan 29, 2022 3:09 am, edited 1 time in total.
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Re: Does "international" offer any diversification?

Post by vanbogle59 »

Tinyz wrote: Fri Jan 28, 2022 8:12 pm Interesting tables. I feel that table might have lack of information or uses weird methodology. Would like to present a paper for British stock market by Gareth et al. (May 2019)

BEFORE THE CULT OF EQUITY: NEW MONTHLY INDICES OF THE BRITISH SHARE MARKET,1829–1929

We can see that during that period by table 2. Dividends was pretty much the metric for the returns of stock market. Perhaps due to the safe British, the dividend for British is lower than places such as France, Belgium, Germany playing catchup, just my opinion. From 1850-1910, its actually about 5-6% total returns for British stocks. Another paper which also conclude that dividends are the most important component of returns, the paper studies the period from 1820-1870 by Graeme et al. (Dec 2009) Rule Britannia! British Stock Market Returns, 1825–1870. Funnily enough, the first paper had also states that British starts its decline from 1870 due to increasing competition.

After 1914, it is the world war and as we know, it devastate Europe badly with US rising to supremacy.

I am not much of a researcher but these data very much dependent of methodology. Different methodology can paint different narrative. I wing mine for my graduation paper so I know. :D

Will US continue its supremacy? I don't know but betting on another world war is silly and not meaningful. :beer
I certainly did not digest your paper, but if this means anything like I think it means, it's absolutely wonderful to be a retail investor during and after the fall of the empire!

"Despite the deficits in construction, the FT30 is closest, in terms of constituents, to our blue-chip index. We therefore splice our end-of-month blue-chip index on to the end-of-month values of the FN30 and FT30, to create a monthly blue-chip index for the UK stock market from 1829 to 2018, which is shown in Figure 6. "

https://postimg.cc/njx0nkdM
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Re: Does "international" offer any diversification?

Post by INLAFF »

nigel_ht wrote: Fri Jan 28, 2022 3:19 pm
Da5id wrote: Fri Jan 28, 2022 2:14 pm
Northern Flicker wrote: Fri Jan 28, 2022 1:45 pm If you look at Table 2 in the link below, it shows the UK having the worst equity performance among leading economies during the period 1848-1914 despite the size of the Royal Navy.

https://globalfinancialdata.com/four-ce ... retrospect

You also can see the benefit of international diversification by seeing different countries with the best and worst performance in the tables for different time periods.
Wait, the "naval size factor" doesn't work in all periods?!? I thought the data was supposed to be really solid. That time period was clearly an outlier.

Anyway, not sure the whole size of navy thing is a great way to *pick investments*. And if it is not, not clear why it is relevant here. YMMV.
People ask why overweight in the US. We're the global superpower. What's an indicator of this status? We can go anywhere we want in the world and nobody can really stop us short of nukes if we really want to go.
Since the 1960s, the US has pretty consistently been beaten in wars by guys wearing pajamas and sandals, and nevertheless equities have risen spectacularly, so I wouldn't really bet all my money using such metrics to make stock predictions.
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Re: Does "international" offer any diversification?

Post by Tinyz »

vanbogle59 wrote: Fri Jan 28, 2022 11:01 pm
I certainly did not digest your paper, but if this means anything like I think it means, it's absolutely wonderful to be a retail investor during and after the fall of the empire!

"Despite the deficits in construction, the FT30 is closest, in terms of constituents, to our blue-chip index. We therefore splice our end-of-month blue-chip index on to the end-of-month values of the FN30 and FT30, to create a monthly blue-chip index for the UK stock market from 1829 to 2018, which is shown in Figure 6. "

https://postimg.cc/njx0nkdM
:D Going back to the topic though, Does "international" offer any diversification? The first paper concluded that for the period 1870-1913, theres almost no benefits to investors from sending their money overseas while the period before 1869, benefit of investing overseas (I don't know what foreign stock from which country they used though) is much greater. However, its difference is not as wide as today, this two decade is abnormal by a long shot throughout history.

So few things to conclude:
1. Supremacy does not mean higher return but it may have similar returns while having less risk. Higher risk does not mean higher returns.
2. Market cap weightage is not the best methodology for best return but its not the worst.
3. Not even world war 1 destroyed British stock market returns, delivering 7.7% in 1910-1919. Heck, its even higher than foreign stocks. What happened after 1929 though? :(
4. Time in Market > Timing market.

My opinion:
US market has always been weird. It reminds me again with the phrase. Do not bet against America. All in all, there just isn't one best fit all investing strategy that works throughout all period as things change. What is more important is to remain investing.
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Re: Does "international" offer any diversification?

Post by nigel_ht »

INLAFF wrote: Fri Jan 28, 2022 11:17 pm
nigel_ht wrote: Fri Jan 28, 2022 3:19 pm
Da5id wrote: Fri Jan 28, 2022 2:14 pm
Northern Flicker wrote: Fri Jan 28, 2022 1:45 pm If you look at Table 2 in the link below, it shows the UK having the worst equity performance among leading economies during the period 1848-1914 despite the size of the Royal Navy.

https://globalfinancialdata.com/four-ce ... retrospect

You also can see the benefit of international diversification by seeing different countries with the best and worst performance in the tables for different time periods.
Wait, the "naval size factor" doesn't work in all periods?!? I thought the data was supposed to be really solid. That time period was clearly an outlier.

Anyway, not sure the whole size of navy thing is a great way to *pick investments*. And if it is not, not clear why it is relevant here. YMMV.
People ask why overweight in the US. We're the global superpower. What's an indicator of this status? We can go anywhere we want in the world and nobody can really stop us short of nukes if we really want to go.
Since the 1960s, the US has pretty consistently been beaten in wars by guys wearing pajamas and sandals, and nevertheless equities have risen spectacularly, so I wouldn't really bet all my money using such metrics to make stock predictions.
Guys in pajamas and sandals half a world away don't deeply impact your empire until they actually sack it. In the case of the British Empire it's their colonial holdings which is more vulnerable but for the US its CONUS.

We fought our own wars of colonialism and while bitter it was on our own continent and so decisive that losing our territorial empire is very unlikely.
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Re: Does "international" offer any diversification?

Post by GAAP »

vanbogle59 wrote: Fri Jan 28, 2022 11:01 pm
Tinyz wrote: Fri Jan 28, 2022 8:12 pm Interesting tables. I feel that table might have lack of information or uses weird methodology. Would like to present a paper for British stock market by Gareth et al. (May 2019)

BEFORE THE CULT OF EQUITY: NEW MONTHLY INDICES OF THE BRITISH SHARE MARKET,1829–1929

We can see that during that period by table 2. Dividends was pretty much the metric for the returns of stock market. Perhaps due to the safe British, the dividend for British is lower than places such as France, Belgium, Germany playing catchup, just my opinion. From 1850-1910, its actually about 5-6% total returns for British stocks. Another paper which also conclude that dividends are the most important component of returns, the paper studies the period from 1820-1870 by Graeme et al. (Dec 2009) Rule Britannia! British Stock Market Returns, 1825–1870. Funnily enough, the first paper had also states that British starts its decline from 1870 due to increasing competition.

After 1914, it is the world war and as we know, it devastate Europe badly with US rising to supremacy.

I am not much of a researcher but these data very much dependent of methodology. Different methodology can paint different narrative. I wing mine for my graduation paper so I know. :D

Will US continue its supremacy? I don't know but betting on another world war is silly and not meaningful. :beer
I certainly did not digest your paper, but if this means anything like I think it means, it's absolutely wonderful to be a retail investor during and after the fall of the empire!

"Despite the deficits in construction, the FT30 is closest, in terms of constituents, to our blue-chip index. We therefore splice our end-of-month blue-chip index on to the end-of-month values of the FN30 and FT30, to create a monthly blue-chip index for the UK stock market from 1829 to 2018, which is shown in Figure 6. "

https://postimg.cc/njx0nkdM
I see a paradigm shift here: at some point capital gains became more important to investors than dividends. I know that dividends as the reason to invest was still taught in college in the 1980s, but I'm not so sure that's true anymore.

I wonder if this trend will continue, or something else entirely will replace both gains and dividends. Since I'm not psychic, I just invest in the global market index and trust that as others chase those trends, my investments will follow the capital flow.
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Re: Does "international" offer any diversification?

Post by Northern Flicker »

So the countries with the big navies have equities with less risk to be discounted into their equities.
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Re: Does "international" offer any diversification?

Post by GAAP »

Northern Flicker wrote: Sat Jan 29, 2022 1:04 pm So the countries with the big navies have equities with less risk to be discounted into their equities.
If it's historically navies due to the ability to project force, then perhaps hypersonic or space-based technologies will be the key in the future. Actually, given the current state of tech in general, cyber-warfare may be the best indicator...

I still see a global allocation as the best way to diversify against risk due to the relative failure of any particular economy -- whether for economic, military, or some other factor.
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Re: Does "international" offer any diversification?

Post by nigel_ht »

GAAP wrote: Sat Jan 29, 2022 1:27 pm
Northern Flicker wrote: Sat Jan 29, 2022 1:04 pm So the countries with the big navies have equities with less risk to be discounted into their equities.
If it's historically navies due to the ability to project force, then perhaps hypersonic or space-based technologies will be the key in the future. Actually, given the current state of tech in general, cyber-warfare may be the best indicator...

I still see a global allocation as the best way to diversify against risk due to the relative failure of any particular economy -- whether for economic, military, or some other factor.
Project force and protect shipping.

Or deny shipping to their enemies.

There’s a reason why China will continue to develop a blue water fleet…one is to be able to defend sea lanes to Middle East oil…the Saudis are Chinas biggest source…

The second is to deny us ours if we ever fight…although I’d guess most shipping comes from then anyway…
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Re: Does "international" offer any diversification?

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I removed an interchange on corporate scandals in Japan. This thread has run its course and is locked (topic exhausted - derailed on political policy, going in several directions). See: Locked Topics
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