International Asset allocation: Australian vs International

Discussion in 'Shares & Funds' started by Zenith Chaos, 18th Feb, 2017.

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  1. The Falcon

    The Falcon Well-Known Member

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    Cheers @austing I'm buggered from all this imputation stuff - need to recuperate at work tomorrow. Will leave currency for a few days :)
     
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  2. Redwing

    Redwing Well-Known Member

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    Only 2% and the US has had a great run of late, but the ASX has still done well

    Vanguard 2016 chart

    upload_2017-6-5_11-28-26.png
    upload_2017-6-5_11-29-25.png
     
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  3. Redwing

    Redwing Well-Known Member

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    Big call

    Stock market will rise 50 percent, esteemed economist says

    It’s not very often that a Nobel Prize-winning economist who is known for his bearish calls turns extremely bullish.

    Last week, professor Robert Shiller of Yale, who called the housing collapse 10 years ago, proclaimed that stocks could rise another 50 percent in the next few years based upon his latest research. Meaning Dow 30,000!

    That got the attention of many folks, especially the Wall Street analysts, many of whom don’t understand this market.

    Shiller accurately saw the housing bubble and predicted that it would end very badly, as it did. He also co-developed the S&P/Case-Shiller index, which is a benchmark to measuring housing prices around major US cities.

    What many may not know is that in the 1990s he developed a stock price measurement ratio called the cyclically adjusted price-to-earnings (CAPE) ratio for stock valuations.


    The CAPE ratio measures stock prices in relation to long-term earnings and inflation. At current levels, Shiller’s own CAPE ratio is not flashing a buying opportunity, which makes his call even more interesting.

    In fact, based on his CAPE ratio, stock prices are actually high right now. However, like many of the other ratios out there in academia and on Wall Street, interest rates are not weighted in it.
    Continues..
     
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  4. Hodor

    Hodor Well-Known Member

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    30 year Aussie bond returns are interesting redwing, hadn't realised how well they have done. I'm a good study of close mindedness to them and not investigating them properly I guess.
     
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  5. dunno

    dunno Well-Known Member

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    Not at the household level, but you should be able to get a reasonable feel for this from using the national accounts, specifically, using the income component from where GDP is calculated using the expenditure method.

    upload_2019-10-4_18-23-5.png

    Data source:https://www.abs.gov.au/AUSSTATS/[email protected]/DetailsPage/5206.0Jun 2019?OpenDocument

    The other thing to think about in deciding level of currency exposure is asset pricing. Capital flows more freely than consumption. So, if you are an accumulator of assets you probably want a fair dose of protection also against asset inflation caused by currency deflation.

    We can fool ourselves with a smoothly increasing income in local currency but measured in US$ our income is going backwards significantly this decade and that is what people actually feel when they come to bid on a property against an expat/foreigner or consume something with a increasing national import component.

    upload_2019-10-4_18-52-22.png
     
    Last edited: 4th Oct, 2019
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  6. Zenith Chaos

    Zenith Chaos Well-Known Member

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  7. Nodrog

    Nodrog Well-Known Member

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    Read a more detailed article about same in the AFR the other day:

    Australia is rich, dumb and getting dumber

    Makes for depressing reading. I was almost contemplating going 100% International equities by the time I finished the article:eek:o_O:).

    Another one with a tiny bit of positivity:
    Australia is rich but lacks complexity and is falling behind
    A rebuke to the earlier negative AFR article but still finished on a somewhat negative note :

    Analysts challenge Harvard's criticism of Australia's economy
    Add to this the relentless attacks on the major Banks being a large part of the market and energy sector etc it’s almost like Australia is becoming more and more anti-capitalist. God forbid now even the Liberal Party seems keen on populist business bashing:rolleyes:.

    I can’t help but imagine that for risk mitigation and just as importantly my SANF our current 30% Global Equity allocation will increase overtime.

    PS: another thread I see was created about this:

    Sorry Australia does not have a diversified economy...
     
    Last edited: 9th Oct, 2019
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  8. dunno

    dunno Well-Known Member

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    A country return quilt. "World" is the diversified position - It never wins but it never loses either.
    Australia is a pretty wild performer (US$ perspective) being a commodity currency. Some of that volatility we don't notice so much because we tend to think and spend in AUD. We also tend to compare our wealth on a relative basis against fellow Australians who are also generally impacted similarly by the currency, so long as we don’t fall behind with the “Jones” next door, we stay fairly unmindful to changes in our wealth from a global perspective.
    upload_2019-10-9_10-10-37.png
     
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  9. PKFFW

    PKFFW Well-Known Member

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    @Nodrog the AFR links seem to be behind a pay wall for me at least. You wouldn't happen to know of any mirror publications?
     
  10. dunno

    dunno Well-Known Member

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    I’m not so sure I would mark Australia too harshly for concentrating on our strengths. Playing to your comparative advantages and trading what you are good at for what you are not so good at is a way to increase your wealth. We as a country have done that well.

    Some problems obviously loom. Trump and his anti-globalist agenda. We rely on trade we would not fare well as a closed economy.

    I’m not sure of the split between thermal and coking coal in the attached graphic, but thermal coal is probably a dying industry because of the environment. Other commodities over time may also face pressure from the same front.

    It’s quite possible but not certain that the next thirty years may not be as kind to us as the last thirty if we continue to pursue only comparative advantage of our resource export.

    A lot of the thinking on financials comes out of the USA. We can’t follow them on the topic of global diversification. Its something we have to think through from our own perspective. I suspect we should be more diversified globally than Americans need be. I think being a commodity currency has both pros and cons for us when it comes to the diversification equation. I suspect we still have a fair bit of thinking in front of us (well I do at least) before we get entirely comfortable that we have an appropriate global/currency allocation for an unknown future.
     
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  11. Big A

    Big A Well-Known Member

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    Maybe this is why it’s best to keep it simple. 50% Vas and 50% Vgs. Can add some aus and international active around those two as well.
     
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  12. oracle

    oracle Well-Known Member

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    @dunno I while back I did some comparison between Australia’s stock market concentration of mining and financial against some of the other developed nations. See this post

    I felt except US our markets are not as bad when looking at some other developed market sector allocations.

    Cheers
    Oracle
     
  13. mtat

    mtat Well-Known Member

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    Interesting note on the behavioural aspect. If Australia goes on a bull run, we will feel it and be more tempted to jump in (at higher prices).
     
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  14. Zenith Chaos

    Zenith Chaos Well-Known Member

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    Open in incognito window.
     
  15. Burgs

    Burgs Well-Known Member

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    Try putting the article heading Australia is rich, dumb and getting dumber into Google search and try that.
     
  16. RogTheBear

    RogTheBear Well-Known Member

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    That sort of only works for sites like the SMH, who don't know how to do paywalls properly. AFR do, alas.

    But if you google, as suggested in the next post, you'll find the article on reddit, where they have an "all information must be free" policy in place... :D
     
  17. ChrisP73

    ChrisP73 Well-Known Member

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    Or just turn off JavaScript (site exception list) for that site.
     
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  18. Redwing

    Redwing Well-Known Member

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    A World of Opportunity in Equities

    upload_2019-11-28_5-59-45.png
     
  19. oracle

    oracle Well-Known Member

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    Amazing 36% (2.8 billion of the 7.7 billion total) of world population in 2 countries namely China and India and they only represent 4%

    Hmmm

    Cheers
    Oracle
     
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  20. Redwing

    Redwing Well-Known Member

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    China climbs up around another 6.5% or so if you add in A class shares (only available in China) which puts it in second place (see the byline on the original image)

    Hong Kong is separate to China (and still larger by capitalization than India apparently)
     
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