Chart of the Day

[Running_Man]

Quote:

Originally Posted by Lsbcal Here is my chart of the day. Hope Runningbum does not mind another contribution:

I do not know what Runningbum thinks but RunningMan likes it!

[Lsbcal]

Quote:

Originally Posted by Running_Man I do not know what Runningbum thinks but RunningMan likes it!

Oops, sorry about that name error. Glad you like it too.

[Running_Man]

Lowest quality investment grade debt is not only rising as a % of total investment grade debt but investment grade debt in US to GDP has gone from GDP 10 times IGD in 2008 to 3.9 times IGD in 2018. In 1990 before the FED embarked on its long decline of interest rates the ratio was 14.5 times (BBB was about 10% of total investment grade debt.

[audreyh1]

Quote:

Originally Posted by Lsbcal Here is my chart of the day. Hope Runningbum does not mind another contribution.

Running_Man - don’t confuse them!

[Lsbcal]

Quote:

Originally Posted by Running_Man ... Lowest quality investment grade debt is not only rising as a % of total investment grade debt but investment grade debt in US to GDP has gone from GDP 10 times IGD in 2008 to 3.9 times IGD in 2018. In 1990 before the FED embarked on its long decline of interest rates the ratio was 14.5 times (BBB was about 10% of total investment grade debt.

I'm not sure I follow your statement. Just eyeballing it the below BBB IG bonds look like they were about 30% of total and now 50% of total. Total being the BBB and below grades.

Now I would want to know more to use this information in an intelligent way. Like how much above-BBB bonds there are, and how the durations of those below IG bonds are spread out. Then I'd want to know if experts consider this a problem and why or why not. I suppose that the spreads come into this too. If the BBB spread is wide versus Treasuries then investors are being paid more for the extra risks. Here is one Fed chart of the BBB spread (red line) and it doesn't look like the spread is particularly wide at this point:



Luckily at this time I hold only a modest amount of short term IG bonds. But this sort of chart you showed Running Man would have me more concerned if I held intermediate IG bonds.

I looked at VFIDX (what I would probably hold if I weren't in TIPS) and it has about 15% in BBB and below. Looking a few web sources the term "investment grade" seems to be applied to BBB and below. But the VFIDX fund is called Vanguard Intermediate IG Bond fund even though it only a modest exposure to BBB and below. Confusing.

[Lsbcal]

Quote:

Originally Posted by audreyh1 Running_Man - don’t confuse them!

I did already apologize above.

P.S. I went for a 7 mile run today so Running Lsbcal today.

[copyright1997reloaded]

Quote:

Originally Posted by haha I definitely value this sort of chart, and usually don’t try to psychoanalyse supposed reasons for posting it. How I would try to use it is realizing that German bankers are at least as intelligent as most other bankers, there may be some opportunities here. Ha

Or that there is some systemic issue in Europe effecting the banking sector. Regulation anyone? Too much central control on banking? None of the above?

In terms of a more broad comparison of USA vs Europe, check out the 10 largest holdings in the Europe ETF vs. SP-500:
Europe:
Ticker Name Sector Country %
NESN NESTLE SA Consumer Staples Switzerland 3.25
NOVN NOVARTIS AG Health Care Switzerland 2.82
ROG ROCHE HOLDING PAR AG Health Care Switzerland 2.28
HSBA HSBC HOLDINGS PLC Financials United Kingdom 2.13
FP TOTAL SA Energy France 1.68
RDSA ROYAL DUTCH SHELL PLC Energy United Kingdom 1.66
BP. BP PLC Energy United Kingdom 1.66
SAP SAP Information Technology Germany 1.41
RDSB ROYAL DUTCH SHELL PLC CLASS B Energy United Kingdom 1.40
SIE SIEMENS N AG Industrials Germany 1.20

USA:

Name Symbol % Assets
Microsoft Corp MSFT 3.71%
Apple Inc AAPL 3.36%
Amazon.com Inc AMZN 2.92%
Berkshire Hathaway Inc B BRK.B 1.88%
Johnson & Johnson JNJ 1.64%
JPMorgan Chase & Co JPM 1.54%
Alphabet Inc Class C GOOG 1.51%
Facebook Inc A FB 1.49%
Alphabet Inc A GOOGL 1.48%
Exxon Mobil Corp XOM 1.36%


Anything jump out at you?

[Running_Man]

Interesting look at the long term growth trend in the US

[flintnational]

^^ Reversion to the mean? It looks like periods of sub 3% GDP are followed by periods of above 3% GDP. Lets hope so.

[Lsbcal]

Quote:

Originally Posted by Running_Man Interesting look at the long term growth trend in the US

I'm wondering if it will show a rise as the 10 year window moves through the 2008-2009 period. PE10 should drop this year if all else were to constant as 2008-2009 is gone from that 10 year window.

[NYEXPAT]

Quote:

Originally Posted by flintnational ^^ Reversion to the mean? It looks like periods of sub 3% GDP are followed by periods of above 3% GDP. Lets hope so.

Weird, I see the exact opposite where periods of above 3% growth are followed by periods of below 3% growth, kinda like 2018-2019.

[Running_Man]

I just see a 63 year low in GDP growth over the last 10 years while the market is up 300 percent

[Running_Man]

Looks like international stocks should outperform US for a while.

[Running_Man]

[pb4uski]

Yeah, while I'm sticking to my 30% allocation of equities to international equities, it has taken some talking myself into it at times.

[ERD50]

Quote:

Originally Posted by pb4uski Yeah, while I'm sticking to my 30% allocation of equities to international equities, it has taken some talking myself into it at times.

But if we are thinking in terms of regression to the mean, shouldn't we be increasing allocation to Int'l?

I've got a pretty low allocation, but it is all in some IRAs that are not too large. But it does kinda hurt to see those under-performing, being more obvious as they are segrgated.

-ERD50

[flintnational]

Quote:

Originally Posted by pb4uski Yeah, while I'm sticking to my 30% allocation of equities to international equities, it has taken some talking myself into it at times.

Me too. I have been 30% international for probably 20+ years. I even doubled down about 5 years ago and added an EM tilt. Clearly, we have earned our long term investor badges.

Running_Man, thanks for the charts. Always interesting.

[pb4uski]

Quote:

Originally Posted by ERD50 But if we are thinking in terms of regression to the mean, shouldn't we be increasing allocation to Int'l? ....

Not for me... that would be market timing.... I'm satisfied with just rebalancing to target and taking whatever the markets give me.

[Chuckanut]

Quote:

Originally Posted by pb4uski Not for me... that would be market timing.... I'm satisfied with just rebalancing to target and taking whatever the markets give me.

+1

I think we can safely predict that at some point the regression will take place, but when is the big unknown.

[Lsbcal]

Quote:

Originally Posted by Running_Man Looks like international stocks should outperform US for a while.

Interesting chart. But is there really any theory as to why the average (red line) should be where it is on the chart? Couldn't one draw a small red circle around that 2011 intermediate peak area if one did not know another surge was coming for US stocks?

I think the red line (plus standard deviation lines) would move around quite a bit if using only early data to guess at where things might go for future data (now known) data. In other words such charts are interesting to identify past trends and maybe link them to known historical changes like trade policy. But are they at all predictive?

I'm agnostic on this stuff and don't know how far the US/foreign ratio can change stray. This is why I use a trend following approach to allocate the foreign part of my portfolio.