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Old 02-05-2008, 09:19 AM   #41
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I think that it's important to point out that higher economic growth doesn't necessarily translate into higher returns to shareholders. The whole growth/value effect.

- Alec
True, but lower economic growth usually does translate into lower returns to shareholders. :confused:
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Old 02-05-2008, 10:16 AM   #42
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True, but lower economic growth usually does translate into lower returns to shareholders. :confused:
I'll have to check back after I re-read J. Siegel's 2005 book, but IIRC, China, for example, had higher economics growth than Brazil, but the returns to shareholders of the stocks of the Chinese companies was about zero real, while the returns to shareholders of the stocks of the Brazilian companies was much higher.

Siegel also shows this with industries and individual stocks [i.e IBM vs Standard Oil].

- Alec
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Old 02-05-2008, 05:04 PM   #43
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0% for reasons that have already been mentioned or alluded to previously, plus simplicity.

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Old 02-05-2008, 06:06 PM   #44
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Have 34% of equities in internationals because I read a study that said this pretty much captured the asset class return. Have been rebalancing into US since internationals have outperformed for last few years. Hold HAINX and DODFX about 50/50 so this is large value portfolio. My bogie is Vanguard Total International which has done OK but not as good as the active funds so far.
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Old 02-06-2008, 09:38 AM   #45
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I'll have to check back after I re-read J. Siegel's 2005 book, but IIRC, China, for example, had higher economics growth than Brazil, but the returns to shareholders of the stocks of the Chinese companies was about zero real, while the returns to shareholders of the stocks of the Brazilian companies was much higher.

Siegel also shows this with industries and individual stocks [i.e IBM vs Standard Oil].

- Alec
Found it.Pages 226-230 of The Future For Investors, Jeremy Siegel [2005]

1992-2003 Real GDP Growth [total return]
China 86%
Brazil -6%

1992-2003 stock returns
China -10% per year
Brazil over 15% per year

Quote:
The conventional wisdom that investors should buy stocks in the fastest growing countries is wrong for the same reason that buying the fastest growing firms is wrong. China was indisputably the world’s fastest growing country, but investors in China realized horrible returns because of the overvaluation of Chinese shares.
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The failure of economic growth to produce good stock returns extends far beyond the case of Brazil and China. Countries with reasonably priced markets, such as Brazil, Mexico, and Argentina gave investors the highest returns, although their economic growth as among the slowest. Even if we exclude China (the fastest grower and worst performer) and Brazil (the second slowest grower and third best returns), the relation between GDP growth and return in those countries is still negative.

The same conclusion holds for developed economies. When Dimson, Marsh, and Staunton, in their landmark study Triumph of the Optimists, analyzed the data from sixteen countries from 1900 forward, they also found a negative relation between GDP growth and real stock returns. Japan had the highest growth of real GDP but poor stock returns. South Africa had the lowest GDP growth but the third highest stock returns, surpassing returns in the faster growing United States. Australia and the United Kingdom had among the weaker real GDP growth rates buy relatively high stock returns. Growth is not enough to sustain a profitable investment strategy.
Again, the whole growth vs value effect. The slower the economic growth and expectations of a firm/country were, the lower priced its shares were, and the higher the investor returns were.

- Alec
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Old 02-06-2008, 09:55 AM   #46
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Found it.Pages 226-230 of The Future For Investors, Jeremy Siegel [2005]

1992-2003 Real GDP Growth [total return]
China 86%
Brazil -6%

1992-2003 stock returns
China -10% per year
Brazil over 15% per year





Again, the whole growth vs value effect. The slower the economic growth and expectations of a firm/country were, the lower priced its shares were, and the higher the investor returns were.

- Alec
Be interested in knowing China and Brazil stock market returns 2003 to date.
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Old 02-06-2008, 12:01 PM   #47
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Be interested in knowing China and Brazil stock market returns 2003 to date.
I was wondering that myself, so I went to iShares' site to get return info for:

MSCI Brazil index [EWZ]

FTSE China 25 Index [FXI]

MSCI Hong Kong index [EWH]

MSCI Taiwan Index [EWT]

Code:
        1 yr          3 yr         5 yr
EWZ      79.56%     59.81%    64.07%
FXI         55.99%     49.01%    46.77%
EWH     41.20%      25.89%    28.06%
EWT       8.38%      11.42%    16.43%
Note: these are the returns for the indices as of 12/31/2007 b/c FXI wasn't incepted until 10/2004.

I wonder if Chinese stocks went from Growth to Value from 92-03? Kind of like Intel today.

- Alec
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Old 02-16-2008, 11:05 AM   #48
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Vanguard used to recommend 20% of equity. Got their quarterly report in mail yesterday and it had their latest "position". Basically 20% is the floor and can be up to 50%
Which report was this? Was it for a particular fund? Do you know if it is available on their web site? Thanks.
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Old 02-16-2008, 11:11 AM   #49
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Two Vanguard reports wrote about this. A recent one refers to the earlier one. See Figure 9 in https://institutional.vanguard.com/i...nstruction.pdf
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Old 02-16-2008, 11:55 AM   #50
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Dude - LOL! has pointed you to a very good article. The specific article I was referring to was in Vanguard's quarterly info mailing to Vanguard investors. I looked online but was unable to find a linkable version....
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Old 02-16-2008, 02:10 PM   #51
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Thank you both.
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Old 02-16-2008, 02:55 PM   #52
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Here's a link to the other paper: https://institutional.vanguard.com/iip/pdf/ICRIECR.pdf

and this similar thread at the Diehards forum: Bogleheads :: View topic - What percent international?
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Old 02-17-2008, 12:56 AM   #53
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Here is a benchmark used by GMO (a privately held global investment management firm that manages $152 billion in client assets).
US Equities: 27.17%
International: 30.49%
Emerging Equities: 7.35%
Fixed Income: 35%
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Old 02-17-2008, 06:43 AM   #54
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Personally? Equities in my portfolio/plan for ER, are 25% international, 75% U.S.

Internationals have been a lot of fun to have in recent years, though I really do TRY not to engage in performance chasing, especially as I get closer to ER.

I also have a tiny account that I use just to satisfy investment impulses and longings and get them out of my system, and right now it is 70% international.
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