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Old 01-26-2011, 11:48 PM   #21
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I had thought that I was invested less than most folks in internationals. But it seems like I'm for the most part on par. Thanks for the replies.
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Old 01-27-2011, 07:14 AM   #22
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Originally Posted by LOL! View Post
Since "equities" includes US and foreign equities, I don't understand this statement.

I infer you meant "1/3 US large cap, 1/3 US small/mid cap, and 1/3 foreign developed large cap". You have no foreign small cap and no emerging markets of any cap.
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Old 01-27-2011, 07:24 AM   #23
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i have no idea how one could figure out their international exposure held in domestic equity funds via s&p 500 or total stock market index. i have about 12% in international. i'm surprised at the high % of international holdings but it totally depends upon your risk tolerance and asset allocation.
The idea that US companies in the S&P500 or TSM index have quite a lot of international exposure works both ways: Many foreign companies in the foreign indexes have quite a lot of US exposure. You do not even have to think hard to come up with RoyalDutchShell, BP, Toyota, etc.
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Old 01-27-2011, 11:40 AM   #24
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I am not familiar enough with international accounting standards or international politic to venture into foreign investing. I have enough trouble keeping up with US equities. I am strong believer in sticking with what I know and limit myself to the US. With that said several of the companies I have have strong foreign operations. The whole international/US equities issue is way overblown as is asset allocation and diworsification.
Neither am I, but I'm going to assume that if a company is paying dividends (in any currency) then it's producing enough income to stick around for a while.

I don't think that a foreign company can mess with its accounting anywhere near as creatively as an American one. But I also suspect that there is at least one foreign country in the world which will grow faster than the U.S., and I think it's appropriate to put a percentage of my assets there.

Using words like "overblown" and "diworsification" makes it hard to judge the quality of the debate, let alone the appropriate percentage to be allocated, on its own merits.
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Old 01-27-2011, 12:22 PM   #25
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I'm basically 50/50 International/Domestic.

I think Vanguard upped their recommendation recently to 30-50% international instead of the 20%+ international it used to be.
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Old 01-27-2011, 12:35 PM   #26
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About 40% of my equities are international, with about 2/3 of that in developed markets and 1/3 in emerging.
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Old 01-27-2011, 03:05 PM   #27
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I target 50/50, and also try to have 20% of my fixed income allocation be international.
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Old 01-27-2011, 03:15 PM   #28
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"Using words like "overblown" and "diworsification" makes it hard to judge the quality of the debate, let alone the appropriate percentage to be allocated, on its own merits."

What kind of low blow is that? Hard to judge in what way? I am not sure what point you are going to make other than being rude.

In case I am taking it the wrong way here is the definition of overblown: done to excess and seeming exaggerated. As in the emphasis on asset allocation and international exposure is excessive.

Diworsification is the vernacular for over diversifying.

For me the appropriate percentage in international is zero as I don't invest in what I don't understand. Asset allocation is a myth as the 2008 meltdown confirmed. When the underpinnings of an economy come unglued (fall apart), assets fall in lock step.

Much of asset allocation comes from modern finance theory which only works well in theory, especially since it projects that past as a future prediction.
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Old 01-27-2011, 04:49 PM   #29
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AS pointed out a lot of the top companies on the S&P 500 have significant international businesses. With many a trip thru the annual report would tell you. When you get large enough you have to reach outside the US to grow. Cat for example has a large international business as well, and we heard that the new GM sells more cars in China than the US.
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Old 01-27-2011, 06:53 PM   #30
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"Using words like "overblown" and "diworsification" makes it hard to judge the quality of the debate, let alone the appropriate percentage to be allocated, on its own merits."

What kind of low blow is that? Hard to judge in what way? I am not sure what point you are going to make other than being rude.

For me the appropriate percentage in international is zero as I don't invest in what I don't understand. Asset allocation is a myth as the 2008 meltdown confirmed. When the underpinnings of an economy come unglued (fall apart), assets fall in lock step.

Much of asset allocation comes from modern finance theory which only works well in theory, especially since it projects that past as a future prediction.
I was trying to figure out what investment plan you used that eschewed asset allocation instead of just calling it "overblown". I figured you'd base your logic on performance history and make a positive contribution instead of using words like "diworsification".

If you feel those comments are rude then you're not gonna be a very happy camper here. Of course "rude" and "low blow" might be in the same camp as the other pejoratives you've been using.

We've seen the vocabulary before and we understand their meanings, but I thought you'd share what you're doing to avoid what you see as unsatisfactory investing approaches.

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Old 01-27-2011, 07:19 PM   #31
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75 % stock, 15 % cash, 10 % bond. Only 5% is in international, but as others have said, s & p index has a lot of international exposures. Slowly changing my mix, decreasing equity over the next few years.
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Old 01-27-2011, 08:07 PM   #32
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You don't need to play word police, just ask.

I am a value investor and invest in companies I can understand selling a deep discounts to their underlying value. It reduces risk and focuses on primary objective of increasing returns. I vary between 60% equities and 40% to cash to 95% stock and 5% cash. I have no bond exposure and no international exposure.

If your your horizon is long term bonds are likely to add risk. (Not the price fluctuation type in mpt). How investment selection changes over time should be very tightly linked to an individuals circumstances. If you have a $10 million portfolio and need $2 million to fund your retirement your decision making is going to be different than if you have $1 million.

Relying on an asset allocation rule of thumb is giving investors a false sense of security. It does achieve lower returns over the long term.

If I was not willing to do the work I would be forced to accept lower returns and be forced to diversify a bit more.

Bonds (treasuries) may look a bit more attractive when finally retire, but I have no interest until that point. While I am accumulating I intend to accumulate as much as I can. If I exceed my target by enough I will have very little in bonds.

The one concession I do make to asset allocation is delineating between hard and soft assets. I am actively looking to add raw land (that is just my preference). If all markets implode at least I can grow some corn.

So that would be my advice. Worry more about hard versus soft assets; avoid bonds unless you think they will outperform equities over the long term; invest in equities trying as best you can to invest in what you know even if i means investing in the S&P 500 because you are familiar with a large number of the companies it is comprised of. Avoid using modern finance principles to base investment decisions on because these principles have failed to perform in practice.
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Old 01-27-2011, 09:03 PM   #33
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Interesting perspective, bcinvest - thanks for sharing. Would you care to share a bit more detail regarding your method of assessing "underlying value"? Also, do you trade a lot, or do you tend to buy and hold?
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Old 01-27-2011, 09:47 PM   #34
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I favor companies with large amounts of liquid assets to market cap or hidden assets. I go in with the intentions of buy and hold. Some of my positions are ten plus years a few don't make a year. The short term ones usually have some disrupting event that causes them to have a large rapid upward price adjustment. Investors don't have to accept mediocre investments. They can filter out the chaff and only select the best. Some companies have the odds so stilted in favor of a favorable return that the risk is to a large extent removed.

Here is an exaggerated scenario that is not that far off from what exists in the companies I favor. You decide to form a company and raise ten million dollars. Your company has one line of business, investing in treasury bonds and you invest all ten million in treasuries. The market values you company at $8 million for what could be numerous reasons. I decide I want to invest in your company because my downside risk is small. Even if you are a completed bonehead as a CEO I am likely at some pint to see your company valued at $10 million so I wait. Sometimes I wait a couple of years without a whole lot to show for it. Eventually enough investors take notice and the price rises and this price rise attracts more investors who bid the price up to $12 million primarily because the price is rising. At this point I find a better value and move to the next opportunity. Or you become a wildly successful bond investor and show the ability to consistently run your business generating excellent returns and I stick around until some other event changes the dynamic.

I vary from large cap to microcap depending where I can find the best values. It is much more difficult in the large cap arena due to the greater attention these companies see.

I pick my share of bombs, but the successes far outweigh an occasional mistake. It take a lot of time, but I enjoy it so it doesn't seem like work. The rewards are worth it.

I think investors have been conditioned to believe that opportunities like this can't exist. They are always out there. They have been extremely plentiful the past few years. Markets involve extremely complex interactions like the people that interact in them. Spontaneous unpredictable self organizing reactions occur that move prices all over the place for reasons unrelated to value. At times companies trade under their value and at time are over valued. If the range was small you wouldn't see it. Share prices on average vary over a fifty percent range during a given year. This is wide enough to give an indication that a given company isn't correctly valued at some point in time over a given year.

Sometimes it is easy to spot and that is the situation I am looking for, when it is so obvious that I have a small risk of being wrong. If you want to see what I see look at CTO. The company does not appear undervalued unless you understand what you are looking at. If you are interested I will walk you through them as an example.
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Old 01-27-2011, 11:32 PM   #35
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I think investors have been conditioned to believe that opportunities like this can't exist.
I don't know how long you've been reading this discussion board, but we have our share of posters who have been able to exploit the gaps in the efficient market hypothesis.
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Old 01-27-2011, 11:52 PM   #36
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CTO looks like a dog with declining metrics at every level of the income statement and weak cash flow. That said, the balance sheet is not too bad - it's awash in retained earnings and has net tangible assets equal to about 68% of its market capitalization.

Still, after reading everything I could find at Yahoo and via my Scottrade account, I don't understand the appeal and would be very interested in a walk-through.
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Old 01-28-2011, 12:17 AM   #37
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I don't know how long you've been reading this discussion board, but we have our share of posters who have been able to exploit the gaps in the efficient market hypothesis.
Actually if you read More Money Than God, you find that hedge funds are all about exploiting the gaps. Someone finds a gap makes a killing then everyone else piles in the gap vanishes and it is off to the next gap.
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Old 01-28-2011, 10:58 AM   #38
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Actually if you read More Money Than God, you find that hedge funds are all about exploiting the gaps. Someone finds a gap makes a killing then everyone else piles in the gap vanishes and it is off to the next gap.
Gosh, I didn't even have to read that book to comprehend that opportunity. If the market was truly efficient then we wouldn't be calling it a "hypothesis".

From a cynical perspective I should point out that if hedge funds were "all" about exploiting the gaps then they'd only charge a share of the profits, not a management fee. And you would expect everyone to be piling all over value investing, but somehow it just never vanishes. The opportunities may dwindle, and there may be more capital chasing too few of the obvious ones, but there's always somewhere else to find a good value investment. I think value investing is too boring, perhaps even too hard, for most investors. Especially when people don't want to pay a management fee.

My point to BCInvest is that a number of the posters on this board have already heard, learned, and profited from the topics upon which he's lecturing. Preachin' to the choir.
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Old 01-28-2011, 12:55 PM   #39
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"Using words like "overblown" and "diworsification" makes it hard to judge the quality of the debate, let alone the appropriate percentage to be allocated, on its own merits."

What kind of low blow is that? Hard to judge in what way? I am not sure what point you are going to make other than being rude.

In case I am taking it the wrong way here is the definition of overblown: done to excess and seeming exaggerated. As in the emphasis on asset allocation and international exposure is excessive.

Diworsification is the vernacular for over diversifying.

For me the appropriate percentage in international is zero as I don't invest in what I don't understand. Asset allocation is a myth as the 2008 meltdown confirmed. When the underpinnings of an economy come unglued (fall apart), assets fall in lock step.

Much of asset allocation comes from modern finance theory which only works well in theory, especially since it projects that past as a future prediction.
Oh sh*t I guess I need to start over

My "diworsification" and overblown AA did just fine thank you

50:50 here with a tilt towards EM

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Old 01-28-2011, 02:08 PM   #40
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My point to BCInvest is that a number of the posters on this board have already heard, learned, and profited from the topics upon which he's lecturing. Preachin' to the choir.
I think it's also worth noting that at least one of us is too new to be a member of the choir and is interested in hearing what bcinvest is willing to share about his investment approach.
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