International Equity Allocation

[Telly]

2004 was a good year for my International funds. TOTAL equities have grown to about 60% of portfolio, about where I want it. Of that 60%, 40% of equity is International. So International is now about 24% of my overall portfolio.

24% in International sounds like a lot... but I'm not sure really WHY I think that. Is it just Ameri-centric thinking? If I was a Canadian would I think the same?* Here are some pro's and con's I have come up with:

Against a large International allocation:
- Risks of International investing - Instability, volatility.
- Currency conversions back to the Dollar.

For a large International allocation:
- Large US Federal budget deficits mean increased borrowing.
- Looking forward, redemption of SS "Trust Fund" virtual bonds means a further heavy increase in Fed borrowing.
- US is only 50% of equity market now, the world is growing. Sort of like the S&P500 vs. Total Stock Market argument.

An old rule of thumb was to have just a small exposure to International to gain an asset class with a lower correlation to the US market, while accepting it's greater volatility.

I'm just not so sure that the old rule of thumb's "only a touch of International" plays well into the future. I'm tempted to leave my International allocation as it is now.
Comments?