Author Topic: International Developed Stocks Same Price as 2006  (Read 1842 times)

hodedofome

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International Developed Stocks Same Price as 2006
« on: September 16, 2020, 07:41:26 AM »
For all those pushing international stocks 'because they are cheap,' how you feeling after 14 years getting dividends only + a bunch of volatility? How do you know you're not in a value trap?

Methinks this is what the US is going to look like in the future when our population stops growing from immigration, and if we ever stop being the tech HQ of the world.

Retire-Canada

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Re: International Developed Stocks Same Price as 2006
« Reply #1 on: September 16, 2020, 10:10:08 AM »
Well if you tell me now what the best performing indexes are for each of the next 5 decades I'd just invest in them during each period. Given that I don't have that information I'll keep my globally diversified stock portfolio. Yes I won't get the maximum possible return. Yes there will be an index I probably wish I did not own once I look back when I am 100 years old. That's okay. At least I don't have to worry I totally missed the correct indexes by chasing returns.

In the end my goal is to have a successful 50 year retirement investment based around ~4%WR. If I make that happen I'll be happy. I'm not worried about dying as rich as possible.
« Last Edit: September 20, 2020, 07:57:42 PM by Retire-Canada »

Heckler

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Re: International Developed Stocks Same Price as 2006
« Reply #2 on: September 16, 2020, 02:13:29 PM »
My fund of choice, XEF:TO has hypothetical growth from 10K to 18K CAD since April 2013 (price of $20 to $30.34 CAD).  Data doesn't go back to 2006, what's your source?

https://www.blackrock.com/ca/individual/en/products/251421/ishares-msci-eafe-imi-index-etf#chartDialog

v8rx7guy

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Re: International Developed Stocks Same Price as 2006
« Reply #3 on: September 16, 2020, 02:21:00 PM »
and if we ever stop being the tech HQ of the world.

Isn't this somewhat of an argument as to WHY you should have international stocks?  If the USA stops being the tech HQ of the world, it would sure be nice to be investing in whatever country takes its place?
« Last Edit: September 16, 2020, 02:23:08 PM by v8rx7guy »

PDXTabs

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Re: International Developed Stocks Same Price as 2006
« Reply #4 on: September 16, 2020, 04:58:30 PM »
Do you have a source for that? Because the FTSE Developed All Cap ex US looks to be up ~80% in the last 10 years before dividends.

AdrianC

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Re: International Developed Stocks Same Price as 2006
« Reply #5 on: September 17, 2020, 06:47:11 AM »
https://www.portfoliovisualizer.com/backtest-portfolio
VTSMX for US
VTMGX for Developed International ex US

Developed International ex US
2007-now 2.53% CAGR
2010-now 4.99% CAGR

Now go to Vanguard and look at PE ratios
VTSAX 27.5x (Yield 1.6%)
VTMGX 18.3x (Yield 2.5%)

International is far cheaper. Maybe it should be cheaper? That much cheaper?

Radagast

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Re: International Developed Stocks Same Price as 2006
« Reply #6 on: September 17, 2020, 01:56:02 PM »
https://www.portfoliovisualizer.com/backtest-portfolio
VTSMX for US
VTMGX for Developed International ex US

Developed International ex US
2007-now 2.53% CAGR
2010-now 4.99% CAGR

Now go to Vanguard and look at PE ratios
VTSAX 27.5x (Yield 1.6%)
VTMGX 18.3x (Yield 2.5%)

International is far cheaper. Maybe it should be cheaper? That much cheaper?
Yup yup yup. US is 50% more expensive per dollar of earnings and dividends purchased. In order for the US to be a better investment 20 years from now, its shares will need to grow at a more than 1.2% annualized rate faster than international over the next 20 years, assuming valuations remain the same for both. If valuations equalize the US will need to grow 3% faster annualized for 20 years.

MustacheAndaHalf

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Re: International Developed Stocks Same Price as 2006
« Reply #7 on: September 18, 2020, 08:43:38 AM »
For all those pushing international stocks 'because they are cheap,' how you feeling after 14 years getting dividends only + a bunch of volatility? How do you know you're not in a value trap?

Methinks this is what the US is going to look like in the future when our population stops growing from immigration, and if we ever stop being the tech HQ of the world.
Notice how the original post was completely silent about the great financial crisis of 2008.  And yet their time frame neatly extends back to right before that crisis - they cherry picked 14 years, and ignored what started those 14 years.

soccerluvof4

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Re: International Developed Stocks Same Price as 2006
« Reply #8 on: September 18, 2020, 02:09:03 PM »
For all those pushing international stocks 'because they are cheap,' how you feeling after 14 years getting dividends only + a bunch of volatility? How do you know you're not in a value trap?

Methinks this is what the US is going to look like in the future when our population stops growing from immigration, and if we ever stop being the tech HQ of the world.
Notice how the original post was completely silent about the great financial crisis of 2008.  And yet their time frame neatly extends back to right before that crisis - they cherry picked 14 years, and ignored what started those 14 years.
Well if you tell me now what the best performing indexes are for each of the next 5 decades I'd just invest in them during each period. Given that I don't have that information I'll keep my globally diversified stock portfolio. Yes I won't get the maximum possible return. Yes there will be an index I probably wish I did not own once I look back when I am 100 years old. That's okay. At least I don't have to worry I totally missed the correct indexes by chasing returns.

In the end my goal is to have a successful 50 year investment based around ~4%WR. If I make that happen I'll be happy. I'm not worried about dying as rich as possible.

This and This!

Telecaster

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Re: International Developed Stocks Same Price as 2006
« Reply #9 on: September 18, 2020, 02:36:11 PM »

Now go to Vanguard and look at PE ratios
VTSAX 27.5x (Yield 1.6%)
VTMGX 18.3x (Yield 2.5%)

International is far cheaper. Maybe it should be cheaper? That much cheaper?

It is valid to compare PE ratios across countries like that? 

AdrianC

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Re: International Developed Stocks Same Price as 2006
« Reply #10 on: September 19, 2020, 06:36:49 AM »

Now go to Vanguard and look at PE ratios
VTSAX 27.5x (Yield 1.6%)
VTMGX 18.3x (Yield 2.5%)

International is far cheaper. Maybe it should be cheaper? That much cheaper?

It is valid to compare PE ratios across countries like that?
Hence my "Maybe it should be cheaper?".

Stocks are worth what you can get out of them. There's probably a greater chance with international that more of the earnings don't end up with the stock owner, so some countries should be cheaper than the US. But, they're a lot cheaper. Mean reversion due? Don't know.

LWYRUP

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Re: International Developed Stocks Same Price as 2006
« Reply #11 on: September 19, 2020, 06:42:55 AM »
FWIW, I switched my allocation from 60/40 US to 50/50 in late August due to this issue.  So far so good, I think in the last few weeks int'l has fallen less than U.S., but I rarely make changes and keep them years -- so we'll see.

I have heard that one issue with developing country stocks is simply that for various reasons the returns on economic growth are less likely to be captured by shareholders.  To the extent that's due to wage increases, that's good for the world.  To the extent that's due to corruption, it's not. 

Globally diversified portfolio + ignore the noise seems to be the best bet, on average. 


cincystache

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Re: International Developed Stocks Same Price as 2006
« Reply #12 on: September 20, 2020, 07:28:00 PM »
Well if you tell me now what the best performing indexes are for each of the next 5 decades I'd just invest in them during each period. Given that I don't have that information I'll keep my globally diversified stock portfolio. Yes I won't get the maximum possible return. Yes there will be an index I probably wish I did not own once I look back when I am 100 years old. That's okay. At least I don't have to worry I totally missed the correct indexes by chasing returns.

In the end my goal is to have a successful 50 year investment based around ~4%WR. If I make that happen I'll be happy. I'm not worried about dying as rich as possible.

Great points...

TheAnonOne

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Re: International Developed Stocks Same Price as 2006
« Reply #13 on: September 22, 2020, 09:23:34 AM »
Keep in mind international funds usually have higher yields as well. I know VXUS is nearly 3%. Obviously, you'd still be in the hole against VTI but, it's not nothing.

Buffaloski Boris

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Re: International Developed Stocks Same Price as 2006
« Reply #14 on: September 22, 2020, 07:04:19 PM »
International stocks are not the great deal they were a few months ago. Relative to US theyíre still probably a better deal. Long term you should have a diversified portfolio. Iíve pretty much bought what I want of international for now. Iíll buy US when/if the pricing looks favorable compared to international. It probably will at some point due to mean reversion.

PDXTabs

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Re: International Developed Stocks Same Price as 2006
« Reply #15 on: September 22, 2020, 11:32:40 PM »
Iíll buy US when/if the pricing looks favorable compared to international.

I just buy global market cap weighted.

Buffaloski Boris

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Re: International Developed Stocks Same Price as 2006
« Reply #16 on: September 23, 2020, 04:35:38 AM »
Iíll buy US when/if the pricing looks favorable compared to international.

I just buy global market cap weighted.
Thatís not a bad strategy although for me itís going to be too heavy on US and too heavy on US large cap. Specifically the 10 or so mega caps that dominate the US market. In 30 years will it matter? Maybe not.

Your strategy does have the virtue of set it and forget it, which for most people I think is a wise move. I also like the target date retirement funds that the major mutual fund companies have. You could pick a late out year, say 2050 or later on, and just forget it. You could tweak that approach to add sectors you want to more heavily weight. Over time thatís probably the long term approach Iíll take as I rotate out of international.

hodedofome

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Re: International Developed Stocks Same Price as 2006
« Reply #17 on: September 23, 2020, 09:25:41 AM »
Sorry, haven't checked the board in a bit. EFA (international developed ETF) share price 5/1/2006 - $65.43. EFA share price today - $63.60. Highest price EFA has ever achieved since the financial crisis: $75.27 at the beginning of 2018. Data is from ThinkorSwim.

The only thing investors got from this fund is dividends. No price appreciation.

The point of the post is to watch what happens when countries/the world stop growing.

ChpBstrd

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Re: International Developed Stocks Same Price as 2006
« Reply #18 on: September 23, 2020, 02:41:01 PM »
For a long time the rationale for international stocks being cheap was that their systems of governance were less developed and stable, and their governments were less creditworthy.

In just a couple of short years, that rationale seems to have been turned on its head.

Buffaloski Boris

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Re: International Developed Stocks Same Price as 2006
« Reply #19 on: September 23, 2020, 03:28:48 PM »
For a long time the rationale for international stocks being cheap was that their systems of governance were less developed and stable, and their governments were less creditworthy.

In just a couple of short years, that rationale seems to have been turned on its head.

I think itís also a function of lower transaction costs and relatively stable developed world currencies. If you look at an investment as buying a series of expected cash flows, what do I as an investor care what country it comes from? If I can buy a similar series of cash flows from say Germany for less than I would in the US, then why wouldnít I? The transaction costs are now pretty much immaterial, and itís anybodies guess as to whether the Euro or the Dollar will hold its value better 10 years hence.

ChpBstrd

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Re: International Developed Stocks Same Price as 2006
« Reply #20 on: September 24, 2020, 07:32:18 AM »
For a long time the rationale for international stocks being cheap was that their systems of governance were less developed and stable, and their governments were less creditworthy.

In just a couple of short years, that rationale seems to have been turned on its head.

I think itís also a function of lower transaction costs and relatively stable developed world currencies. If you look at an investment as buying a series of expected cash flows, what do I as an investor care what country it comes from? If I can buy a similar series of cash flows from say Germany for less than I would in the US, then why wouldnít I? The transaction costs are now pretty much immaterial, and itís anybodies guess as to whether the Euro or the Dollar will hold its value better 10 years hence.

Good point. Currency volatility means earnings volatility and return volatility.

The U.S. is well on its way to being a zero-taxes place entirely financed by the creation of new USD to be exchanged for the hard work of foreigners. That was probably Arthur Laffer's dream anyway. However, I wonder if China's blockchain project could suddenly (within a few years) upend that apple cart. Their project has the attention of the Federal Reserve, which has commissioned studies into how a blockchain/digital alt-dollar might compete. Recall that the USD replaced the British pound as the world reserve currency within the span of a decade. Could technology cause things to change faster?

The_Big_H

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Re: International Developed Stocks Same Price as 2006
« Reply #21 on: September 24, 2020, 05:05:20 PM »
How do you know we are not at "death of equities - 1980" for international?

15 year long dogs happen, even in the US stock market, not a big deal when you are investing for 50 years.

FTR I do 20-25% intl 75-80% us stock

Buffaloski Boris

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Re: International Developed Stocks Same Price as 2006
« Reply #22 on: September 24, 2020, 07:00:46 PM »
How do you know we are not at "death of equities - 1980" for international?

15 year long dogs happen, even in the US stock market, not a big deal when you are investing for 50 years.

FTR I do 20-25% intl 75-80% us stock

We donít. Weíre making educated guesses at best. Thatís why we diversify.

rab-bit

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Re: International Developed Stocks Same Price as 2006
« Reply #23 on: September 25, 2020, 11:01:35 AM »
Sorry, haven't checked the board in a bit. EFA (international developed ETF) share price 5/1/2006 - $65.43. EFA share price today - $63.60. Highest price EFA has ever achieved since the financial crisis: $75.27 at the beginning of 2018. Data is from ThinkorSwim.

The only thing investors got from this fund is dividends. No price appreciation.

The point of the post is to watch what happens when countries/the world stop growing.

I don't think you can look at just the share price to determine total return (because of capital gains and dividend distributions). According to the iShares page for this fund, the annualized total return is 4.58% since fund inception in 2001. For comparison VTSAX has returned 7.41% per year since 2000. So it may not be the greatest return, but it is more than just the dividend yield.

Source: https://www.ishares.com/us/products/239623/ishares-msci-eafe-etf
« Last Edit: September 25, 2020, 11:13:33 AM by rab-bit »