Rethinking International Investments

[Berkshire_Bull]

I just finished reading a book called America's 60 Familes and it's a rather obscure book i stumbled across in the stacks of the University of Wisconsin La Crosse library. And anyway the jist of it is the suggested title, the wealthy in America and their actions in history. The book was first published in the early 1940s and this print was from the '60s. Anyway, there were two things that i found very intriguing, i'll split the posts. Many people wondered how our economic growth of the last 100 years compared to the other superpower nations of 1900, well here we have it:
In 1900 Britain's median income was 20% higher than the United States, Germany's was 60% higher. These were essentially the superpowers of the time. This would seem to suggest that the United State's fall from grace is very unlikelly, and the returns of our economy should remain consistant with what we have seen in the past. Britain and Germany's first world status did not change over 100 years (although Germany was certainly hurt severelly by losing two wars). Our first world status should not fade, and our wealth should grow appropriatelly. It would suggest that a bet into a second or third world country ammounts to nothing more than a gamble considering the United States gained little ground on the permier countries of the time, despite what I would imagine was exponentially higher risk. It seems that as of late, many have become enamored with international funds and investments. They maybe wise to think otherwise. The world is not the United States. The world is not a democracy. Case in point: Yukos. Peter Lynch said the fools in any stock market are the foreigners. Internationals are a gamble, and while most of you think yourselves to be a generally conservative group, as I would be if i were retired or very close, your international and developing country mutual funds maybe the most risky thing you could possibly buy.

[SDY888]

All true, if one is still living in the 1940's. If one is living in this Century, it is mostly drivel.


Oh, while you are in the library, pick up a text book on grammar..... and a dictionary.

[Berkshire_Bull]

iI apologize if my writing was hard to follow. When i'm thinking about something i tend to ramble. There may however be a kinder way to ask me to refine my posts to a higher degree before I finally post them. Just because it's the internet doesn't mean one's social filters should be neglected.

Hey Berkshire Bull. Simon can be a bit abrasive. It's all part of his charm. My advice is to just let the "Bull"
flow. Works for me

JG

[SDY888]

'Bull,

Point taken. Just re-read the post and should note that I forgot the all telling "".

Keep up the posts, they have often been interesting. Do, though, ignore some of my more odd ball remarks as I am one of the "still working" category and can sometimes have an tetchy day.

S888


PS: It is still one of my pet hates that grammar, syntax and spelling are too often discarded at the alter of expedience in electronic communications.

And I HATE * text/SMS shorthand!!!

[Hyperborea]

PS: It is still one of my pet hates that grammar, syntax and spelling are too often discarded at the alter of expedience in electronic communications.

Shouldn't that be altar? D@mn those homonyms!

Though I agree with you to a certain extent that abandoning grammar, syntax, and spelling are bad - it obscures the writer's ideas and often makes them seem unintelligent - most can't and don't take the time to seriously proofread their writing. This is after all a message board and not a scholarly journal.

[Hyperborea]

In 1900 Britain's median income was 20% higher than the United States, Germany's was 60% higher. *These were essentially the superpowers of the time. *This would seem to suggest that the United State's fall from grace is very unlikelly, and the returns of our economy should remain consistant with what we have seen in the past.

No, that doesn't indicate that. While it is highly unlikely that the US will slip back into 3rd world status there is nothing that guarantees the rate of return that has been seen over the last ~130 years. It is highly possible that much of that return has been due to the climb out of 3rd world status.

Britain and Germany's first world status did not change over 100 years (although Germany was certainly hurt severelly by losing two wars).

Yes, however their growth rates over the last ~130 years has not been in general as high as that of the US. *Of course, Germany experienced tremendous growth from about 1950 until about 1980 as the economy was rebuilt but those invested in Germany in the late 30's suffered tremendous losses.

Our first world status should not fade, and our wealth should grow appropriatelly.

At perhaps a slower growth rate for "mature" economies?

It would suggest that a bet into a second or third world country ammounts to nothing more than a gamble considering the United States gained little ground on the permier countries of the time, despite what I would imagine was exponentially higher risk.

Actually, the US gained tremendous ground - coming from the back to the front of the pack (or near the front in GDP / capita terms). What appears to happen though is that growth rates of advanced democracies converge around 2% (see Kay's Culture and Prosperity and Bernstein's The Birth of Plenty - I'm writing up a small review but I'm still jet lagged and catching up on other stuff).

[Nords]

It is still one of my pet hates that grammar, syntax and spelling are too often discarded at the alter of expedience in electronic communications. And I HATE *>:( text/SMS shorthand!!!

I've read "Eats Shoots & Leaves" and several other popular grammar/syntax books. Most of them whine about the lack of respect for traditional rules & customs and the alarming degeneracy of today's blissfully-ignorant "users". All of the authors' academic & editorial experience seems to have the goal of ossifying the status quo instead of improving it. None of them seem to be interested in discarding rules which clearly aren't working, or in seizing the initiative with new books like "SMS Grammar & Syntax". The more they snivel about the present, the less they can affect the future.

But what if electronic communications IS the next generation of grammar, syntax, & spelling? What if we gave Shakespeare, Hemingway, & Faulkner their own cell phones & IM accounts?

OK, back to what's left of Berkshire's topic. One tenet of conservative investing is diversification, and that leads to the concept that if the S&P1500 or the Wilshire are good proxies for the U.S. stock market, then an international index must be even better diversification on U.S. investing. Tweedy, Browne keeps pointing out that more value stocks can be found from a pool of 20,000 companies than from 10,000. It also diversifies away from one's own currency (hopefully) or at least forces hedging against its swings.

So while the Thai stock market may be a gamble this month, a large index of international equities over a decade is just another facet of diversification.

But rising globalization and communication have also led to rising investment correlation. Considering the speed with which information (fact or falsehood) promulgates today, compared to the 19th & early 20th centuries, I'd be very hesitant to predict the future's timing based on the pace of the past. Even in the last 10 years I've noticed that volatility is way up, which can render sell stops to an expensive exercise in frustration.

And unless your SWR is below 2% for the rest of your life, ER is exactly the wrong time to start getting conservative with your investments.

I'm in Vanguard's International Index which has 89% of their holdings in Europe and Japan (stable democratic countries) and only 11% in emerging markets. Right now I'm about 10% international (5% of total portfolio). This position is to balance the risk that the growth of the US economy will not sustain previous levels. It's likely that I can reduce risk my increasing my international exosure. I'm concerned about doing it now while they are outperforming.