Education Bill Bernstein Interview

Discussion in 'Share Investing Strategies, Theories & Education' started by Nodrog, 19th May, 2019.

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  1. Nodrog

    Nodrog Well-Known Member

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  2. blob2004

    blob2004 Well-Known Member

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    I think Bernstein has not been very fond of EM for a while. In most his podcasts he mentions historically EM has had a lower returns compared to DM due to share dilutions (specifically China). He also doesn't trust these countries to act in the best interest of foreign shareholders.

    However I don't think he is completely against EM as he still recommends it for diversification/rebalancing purposes. I believe he has said previously that he thinks EM is more fairly valued at the moment compared to the US markets, and thus expected future returns should be higher at least in the short to medium term.
     
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  3. Nodrog

    Nodrog Well-Known Member

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    Actually he’s still believes EM should generally be in the portfolio but purchased when it’s undervalued. This could be considered market timing but given the relatively poor performance of EM vs Developed he appears to be more inclined to take this approach as opposed to regular rebalancing. That’s my interpretation which might be incorrect.

    I don’t like EM so I liked his view as it feeds into my confirmation bias:).
     
  4. The Falcon

    The Falcon Well-Known Member

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    Listened to this. Very hard to argue with Bernstein. Looking at the way the world is going, the narrative around CCP China liberalising has proven false....not hard to conceive a time when foreign (read US custodian) assets are appropriated. I see increasing risk in multi country EM vehicles where China exposure is high...question is, are you adequately compensated for that risk? Not sure.
     
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  5. Nodrog

    Nodrog Well-Known Member

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    Yes interesting to hear you view, perhaps a bit more cautious than previous?

    I do not like the way China is heading at all. My view on EM has not changed. If anything my conviction for not needing it in our portfolio has gotten even stronger.

    I don’t believe investors are adequately compensated for risk. And EM sharemarkets don’t necessarily reward investors with the same benefit of growth in their actual economies.

    Further unless an investor holds a large enough allocation to EM then it’s hardly going to make much difference overall. Which it then comes down to the question “are you willing to take potentially unrewarded risk in holding a sizeable enough exposure to EM”? For me that’s a big fat NO. Beside it’s one less holding in our portfolio which I like from a simplification perspective.

    I go back to the view that ironically I’ve seen from some immigrants out of the likes of China that they prefer the safety of “developed” markets. When a EM has proven itself worthy of inclusion in the Developed Market Index (robust regulatory environment and rule of law etc) then these investors like me will be happy to own it. Ironically it’s returns might be higher than compared to when it was an EM even without taking risk into account.
     
    Last edited: 22nd Jun, 2019 at 11:37 AM
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  6. The Falcon

    The Falcon Well-Known Member

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    @Nodrog I’m torn on the issue. 5-10% portfolio range I think is OK but no more. Load up on VGS and you get a LOT of Japan, is that a good bet? I think you’ll always be uncomfortable with a portion of the portfolio if properly diversified.
     
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  7. oracle

    oracle Well-Known Member

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    I sold out of VAE recently and bought more IJR.

    Main reason I am bit concerned about China. It might sound strange but I was feeling do I really need so much diversification and thirdly it was also the costs at 0.4% in my books not cheap enough.

    So for me it’s Australia and US (IVV + IJR).

    IVV gives US plus some overseas exposure
    IJR gives mostly domestic US

    Happy with these two markets only in terms of diversification.

    Cheers
    Oracle
     
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  8. Hodor

    Hodor Well-Known Member

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    Great discussion.

    I just can't be bothered with EM currently, I do enjoy the growth story and I am often tempted. VAS and some LICs along with VGS gives me enough sleep at night. Hopefully it will prove to be 80% right in the long run.
     
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  9. Redwing

    Redwing Well-Known Member

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    International stocks outperformed the US over the period 2001 to 2008 and with the US currently at nosebleed levels, at some stage I expect international will have another good run
     
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  10. Snowball

    Snowball Well-Known Member

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    With 50% VGS you’d have just 4.2% Japan in the portfolio, that doesn’t seem like much overall.

    And wouldn’t Japan’s negatives be well known and factored in?

    Curious on your thoughts.
     
  11. The Falcon

    The Falcon Well-Known Member

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    @Snowball I suppose that’s one way to think of it. 8.4% position size in VGS, used to be a bit higher. I suppose the point is it’s not a market I’m bullish on, but hold it anyway. If you are well diversified there will always be components that you don’t like, but trust the market to get it broadly right over time.
     
  12. Nodrog

    Nodrog Well-Known Member

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    As least with Japan you’re not likely to lose your assets.
     
  13. Nodrog

    Nodrog Well-Known Member

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  14. Redwing

    Redwing Well-Known Member

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    upload_2019-6-24_13-16-45.png

    VTS ASX last 5 years
     
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  15. Zenith Chaos

    Zenith Chaos Well-Known Member

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    For a number of reasons suggested, there's a valid argument for the el-cheapo MER Aus-domiciled portfolio of:
    A200 + IVV + IJJ + IJR

    You may not cover EM, Europe or REIT directly, but indirectly there is exposure.
     
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