Hi Gordon,

John Templeton recommends that investors have 50% of their portfolio invested outside the US. Say what you will about the "experts" interviewed in the article but Templeton is an expert as far as I am concerned and his recommendation should not be summarily dismissed. Larry also recommends 30%-50% in International and he's no dummy either.

" The idea that a theoretically optimal portfolio must hold each geographical component as its market weight simply pushes me further than I would dream of being pushed."

- not a geographical but global market weight diversified portfolio. Yet Jack Bogle recommends the market weighted Total Stock Market Index for the US allocation. But his own portfolio holds small cap index funds in addition to TSM. Global market weight is 44/56 US/International.

Adrian
anenu@tampabay.rr.com

Originally posted in thread: 60328

Adrian,

Diehards contributed to a nice discussion of this topic in post #60253. At my last tally, of those who gave their asset allocation, International investing represented 37% of their equities/29% of their total portfolio. My comfort level allows for 35% of equities/21% of total in International. Where do you stand on the issue, and are you considering changing your AA?

Jeff

Originally posted in thread: 60328

This has already been stated numerous times with respect to Bogle's book he wrote many many years ago...

For a more balanced view of some of Bogle's thoughts to include some of his most recent ones....

See this Diehards.org Forum LINK

Excerpt:

====================
Hello Everyone:

Since there's been so many questions about Jack's current position on International (his old position is well known), I thought I'd pass this along. It's from a current interview Jack did with the publication Bottom Line Personal in their June 1, 2007 issue.

Quote:
"....consider having a large chunk of foreign equity in the portfolio. I'm well-known for ignoring overseas investments--I thought they were too expensive and too full of speculative accounting practices. However, I'm worried about the US economy now--our excessive borrowing for costly wars, an underfinanced pension system and the dollar's weakness. In the next few years, I'm planning to put as much as 20% of my equity holdings into foreign stocks. That includes 10% in developed countries and 10% in emerging markets."


Now you've heard it straight from the man himself!

Best regards to all,

Mel
====================

Originally posted in thread: 60328

In recent years, I have increased my International allocation from 35%-40% to 50% of my equity allocation. This was caused by the change in the global stock market in which the dominant US portion has declined from over 50% to the current 44%.

My overall equity/bond mix is 60/40 so about 30% of my portfolio is outside the US.

Adrian
anenu@tampabay.rr.com

Originally posted in thread: 60328

>This was caused by the change in the global stock market in which the dominant US portion has declined from over 50% to the current 44%.

so you are rebalancing based on the allocation of the global stock market and not your personal predetermined asset allocation target?

this seems flawed to me. aren't you chasing specific holdings as their prices get inflated when you should be doing the exact opposite?

Originally posted in thread: 60328

is check the foreign holdings (equity/fixed income) of our so-called "domestic" holdings. If your holdings are anything like mine, they have steadily increased their foreign equity/fixed income exposure.

Then move on to your international holdings--again both equity and fixed income. Might turn out that you have a larger foreign exposure than you thought.

Certainly, if you hold domestic mega/large caps (GE, for example) you're exposed plenty to international. In fact, GE has gone big-time into emerging markets.

Come to think of it: maybe at least with mega/big caps it's gonna get harder and harder to draw firm distinctions regarding specific companies as to whether they are "domestic" or "international" or both.

Happy to hear other views. Bob U.

Originally posted in thread: 60328

"so you are rebalancing based on the allocation of the global stock market and not your personal predetermined asset allocation target?"

- I first determined a suitable AA for my stock/bond mix (60/40) because it is the single first and most important risk/return determinant. My equity allocation split between US and International is loosely based on the global stock market.

"this seems flawed to me. aren't you chasing specific holdings as their prices get inflated when you should be doing the exact opposite?"

- using your logic, I'd be selling International right now and overweighing the US. Might work but might not. Smacks of market timing to me and even if you stick with it, be prepared to be wrong for a long time. Better off to diversify and not concentrate holdings in one particular market or geographic area. So 50/50 sounds like a good compromise for people like me who cannot predict which markets will outperform.

Adrian
anenu@tampabay.rr.comm

Originally posted in thread: 60328

"Then move on to your international holdings--again both equity and fixed income. Might turn out that you have a larger foreign exposure than you thought.

Certainly, if you hold domestic mega/large caps (GE, for example) you're exposed plenty to international. In fact, GE has gone big-time into emerging markets.

Come to think of it: maybe at least with mega/big caps it's gonna get harder and harder to draw firm distinctions regarding specific companies as to whether they are "domestic" or "international" or both."

- many large international corporations, foreign and domestic use currency hedges so owning GE, etc might not give you the foreign currency diversification you might think. Same goes for large foreign corporations with operations in the US. So rather than try to figure out the hedges and currency exposure, I use the 50/50 US/International allocation.

Adrian
anenu@tampabay.rr.com

Originally posted in thread: 60328

-

chasing the global market allocation means you are sure to buy high and sell low.

Originally posted in thread: 60328

In #5 you seem to be indicating that you have changed your AA based on the Global market cap moving away from domestic stocks.

I would then assume that it is only logical that you also are holding these foreign stocks in proportion to the regions market cap, IE Pacific, Europe, EM. Further, the US is a country not a region, so I assume toy are also holding these regions by their breakdown in country market cap.

History tells us that one country, Japan, held about 40% of the world market cap at one time in the early 1990s.

Are you prepared to see your foreign equities decrease by the huge amounts that Japan did and stay that way for going on 20 years?

How folks can believe in reversion to the mean, and at the same time let market cap the set their equity allocation is beyond me.

If Petrocelli or I came here and said we had increased our foreign exposure based on shifting market cap, you would have been the first to call it performance chasing.

Since the only way that market cap can grow quickly is due to good performance, shifting allocations due to market cap increases is performance chasing whether intended or not, IMO.

Larry has often stated that he slices and dices over TSM, because he wants to decide his AA not the market deciding it.

Isn't the same concept true for global markets?

best,

Bill

Originally posted in thread: 60328

"History tells us that one country, Japan, held about 40% of the world market cap at one time in the early 1990s."

- yet another reason to reduce country exposure which I have done by reducing US exposure.

" I would then assume that it is only logical that you also are holding these foreign stocks in proportion to the regions market cap, IE Pacific, Europe, EM."

- actually, I have slightly EM overweight vs European and Pacific indexes per Bogle.

"Are you prepared to see your foreign equities decrease by the huge amounts that Japan did and stay that way for going on 20 years?"

- actually, that happened with US Large Growth in 1996-2000/2000-2003 (+70% loss) because P/Es became outrageously high like Japan in the late 80's. That's why global diversification is important.

" How folks can believe in reversion to the mean, and at the same time let market cap the set their equity allocation is beyond me."

- what we are seeing are emerging markets becoming mature markets with greater economic power and growth rates while the US has lower growth rate and declining dollar.

" If Petrocelli or I came here and said we had increased our foreign exposure based on shifting market cap, you would have been the first to call it performance chasing.

Since the only way that market cap can grow quickly is due to good performance, shifting allocations due to market cap increases is performance chasing whether intended or not, IMO."

- no I would not call it performance chasing if you did it due to changes in the global economy & for diversification reasons.

" Larry has often stated that he slices and dices over TSM, because he wants to decide his AA not the market deciding it.

Isn't the same concept true for global markets?"

- then why does Larry recommend 50/50 US/International?

Adrian
anenu@tampabay.rr.com

Originally posted in thread: 60328