Does the policy approach below to financial crisis end up preferentially juicing US stonks or it spread to everyone?
1 Like
The thing about this bit is, it can only ever be answered in real time if we frame the question this way, if we are in adherence to the axioms that “past performance does not guarantee future results” and “we cannot predict the future,” right? “Past performance,” in the minds of some folks, apparently tells us nothing, and the second part is prima facie, everyone should agree with it.
As for me, I’m happy to compare past returns, because that is literally the only measure between the two that we possess. I mean, sure, that old stock broker cya statement still rings true, but if I ignore it and just go on feels, I am attempting to predict the future, in a sense, and we’ve already established that I/we suck at it.
But even more than that, and @CanadaMatt3004 referenced it above, foreign markets are heavily dependent on the fortunes of US companies, for better or worse. So many of the S&P, not just the Mag whatever, have factories, subsidiaries, clients, customers, employees, partnerships, subcontractors, suppliers, trade agreements, sanctions, imports, exports, tariffs, etc etc and on and on; those markets are going to rise and fall based in no small part on US markets’ performance.
Then there are the assorted additional risks carried by foreign stonks: exchange rate risk, country risk, economic and political instability, differences in regulations and tax rates and tax reporting requirements and the like.
And the global currency (at least for now) is still the dollar.
(If you’re into appeals to authority, ironically even Jack Bogle himself said to only invest in domestic companies, as so many of them derive so much of their revenues from selling their goods and services overseas.)
lol well in addition to the data, Warren “Master Jedi Yolo” Buffet was the one who first said it, not I
That, or a combination of that plus the lack of added risks associated with foreign stocks as I posited above. But it’s way more than just those things.
One of my few strongly held beliefs about investing other than “index and chill” is that vanguard is just plain wrong about international.
1 Like
Yeah, I mean, their products are fantastic. Just take the VXUS out and leave the VTI and BND and you’re gtg with minuscule fees. But they’re still selling stuff to us rubes. They do that by convincing everyone that “diversification” is the primary goal, even over returns. “Diversify” = buy more of our funds so we can scoop more fees because no one in retail ever looks at those.
Go look at r/bogleheads sometime. They’ll downvote you to the second circle of hell because you hold VOO or SPY because “not diversified enough.” 
I’m not sure about other countries, but i do know there is enormous amounts of forced demand every week due to 401k plans for specific things like SP500 funds while international stuff is mushed together in generic titles and probably less attractive to the average schmuck with a retirement plan.
1 Like
So you smartypants say I should dump my international index for more us stonkdex?
Yeah diversifying is good, unless you want to diversify with some international and some US, then it’s bad, because USA #1.
these arguments suck
#1 - S&P 500 is already diversified internationally…. Ok but owning international stocks provides more diversification. Why do I only want Boeing and not Airbus, GM and not Toyota, Apple and not Samsung?
#2 - American exceptionalism Ok but the “regulatory and political framework of the US” is known. It is baked into future expected returns.
#3 - The US has outperformed Ok this is just a circular argument.
Obligatory link to the “The Arguments” thread. In the first set of bullet points you can find these three arguments and several more.
3 Likes
My stocks are approximately 60/40 U.S.
US stocks are a lot more expensive than International stocks per dollar of earnings. That’s an important and objective measure between the two. Consider what that means about expected future returns.
This is important to appreciate. Just naive cap-weighting makes you ludicrously overweight on US equities relative to any other measure you could think of. Skewing even harder in the direction of US equity doesn’t have an obvious justification.
EDIT: To me, the more interesting question is what non-US people are doing or should do. Tax issues and regulatory risk are a much bigger issue when a single foreign country is 60% of your portfolio vs 2%
IIRC you’ve talked before about how equity returns are heavily dependent on a small number of home runs. I’m curious how this dynamic works in this discussion. There are three companies that are worth more than the entire UK stock market, and they’re all American startups that you would have gotten basically for free if you’ve been indexing over the long term. Does US still outperform if you drop a few big tech companies? If not, can you tell a story where US brain-drains great entrepreneurs → gets all the amazing start-ups listed on US exchanges → US equities crush overall? If that’s the dynamic behind outperformance, it’s clearly at risk from US immigration politics and Trump.
If you want to do the “sort by past returns, become investing genius” thing, then you should definitely be 100% US Small Cap Value.
1 Like
Mine is this except with bonds in my roth. Or actually bond ETFs, I haven’t bought an actual bond since I don’t even remember. But a big reason for that is I’ve been rebalancing shit and consolidating recently because I went nuts and opened too many brokerage accounts wanting to “try them out” and I’ve got stuff all over the place.
ETA damn it’s only 2.4%
One other thing is we just have way more entrepreneurs.
Why do you guys think Denmark’s stock market has outperformed the US stock market by so much over the past 55 years? Better regulatory and political framework? More entrepreneurship?
Tulip bulb moass obv
2 Likes
China being a Communist country is diametrically opposed to having a stock market. Foolish for a foreigner to invest a penny there. It’s when, not if, you will have the rug pulled out from you.
