Awesome! I loved math. I was just telling someone that I want to go back to high school math and proceed from there. Meaning, I've forgotten everything I learned in those days and want to relearn it! Do you have any recommendations on that front?It's deeply ironic, because I happen to teach calculus. Today we covered Leibniz's rule, about taking the derivative of a definite integral with time-varying limits.Using your analogy, there are at least 3 reasons to participate in a thread like this:A lot of this thread is analogous to discussing the difference between velocity and acceleration with someone who doesn't understand calculus.That doesn't answer the question.
Ah yes, the myriad flavors of EMH. If you're asserting that in fact everything is already "priced in", then there's no reason to choose any stock over another, any index over another, any country over another, or any anything over another. In the strongest form of the argument, I just choose at random one single stock - say, Berkshire Hathaway - and put 100% into it. If everything is already priced in, why even bother with something like the S&P 500? Might as well choose a single stock, that pays no dividend (avoid the tax drag!), and leave it alone.
I'd reply, that we don't really know what is priced in, and what isn't. Or, what's priced in correctly, what's sort-of correct, and what's risibly wrong. Maybe US stocks are over-priced... I'm wrong, the market is wrong, US stocks will horrendously underperform, and the "correct" allocation is 100% ex-US. That is, we admit, possible.
The idea that things are "already priced in", isn't entirely without merit. It healthily inhibits our urges to think that we've stumbled on some screaming bargain. But even if all existing information is already priced-in, and priced-in correctly... it still doesn't follow that new information won't become available. We can speculate about this new information, however we like... because it hasn't happened yet! It hasn't yet entered the realm of facts. The "extra premium" may or may not presently be justified. But my belief is that in the coming years, we'll have an update with new information, as they say on The Word with Perd, which - once it's priced in! - will keep moving US large-caps further and further above... well, likely above everything else.
Your belief in US exceptionalism isn't unique.
So what do you know that millions of investors who are bullish on the US don't also know, and thus used as the basis to buy more and push up the price?
Also, buying a single stock, even if it's priced correctly, exposes you to idiosyncratic, stock-specific risk.
The same could be said for buying a single country.
1) Learn about velocity and acceleration.
2) Teach about velocity and acceleration.
3) Understand how others make decisions affected by velocity and acceleration that don't understand calculus... (e.g. the accelerator pedal is on the right)
IMHO, number 3 might be the most important when it comes to investing..., where we're all on the same highway together ...
And it also explains why you probably don't agree with all the Arguments listed in the OP, but find it useful anyway....
More to the point, our disagreement is less about facts or data, than about beliefs. We have a mental picture of what the future will most likely be. Reasonable people, both well-informed, can have starkly different mental pictures. Can we at least agree on that?
I have no idea what the future will look like - it sounds like you have a mental picture of the future, so yes, our pictures differ because I don't have one. Life has taught me that my plans are usually wrong. If you had asked me who I'd be 10 years ago, my mental picture of myself is radically different from who I turned out to be. I also had no idea that in 2024 we'd be talking about...the things that we see in the news each day. So, I am obviously not bright enough to predict the future of the world.
If I had to invest in a single market, I'd pick the US, no doubt about it. But, I don't have to make that choice.
I agree with some of the thoughts posted in the last few comments - investing in multiple markets is a hedge against currency risk and single country risk.
Basically, to be US-only you have to believe the US will beat all existing and high expectations, USD will remain at current strength or appreciate, etc. It's a lot of stuff that has to happen to justify a 0% ex-US allocation over any significant time period (10-30 years).
Statistics: Posted by coastFIREdude — Wed Sep 18, 2024 12:38 am — Replies 6993 — Views 1694819