Question for International Investors

General Discussion on the Permanent Portfolio Strategy

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Tyler
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Question for International Investors

Post by Tyler » Mon Aug 24, 2015 5:58 pm

I've seen various periodic questions about Permanent Portfolio performance in different countries.  I've been brainstorming ways to provide a tool to answer that question in detail without resorting to finding long-term annual returns for every index in every country (which would be really hard to find and a huge pain to update). 

So here's one idea: One could theoretically adjust the annual returns for (as an example) VTI, TLT, IAU, and SHY for both exchange rates and inflation differences between the US and any given country without much of a problem, and I imagine historical currency and inflation data is probably easier to find.  Would the result even be valuable though?  It would still require investing in the US market and not your home country, and that may not even be practical in some parts of the world.  It seems many people may do that anyway, but I have my US-centric blinders on and freely admit I don't know the ins and outs of investing outside of the US.  If it is helpful, I like that it would be possible to easily scale the conversion to non-PP assets as well.

Is this a waste of time?  Is there a better method? 
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KevinW
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Re: Question for International Investors

Post by KevinW » Tue Aug 25, 2015 12:02 am

It's a good idea but somehow I feel like there must be some kind of catch that makes investing through currency exchange rates different from investing domestically (in a different country). Otherwise I think a young Harry Browne would've bought a conservative stock/bond portfolio in Switzerland and called it a day.
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Re: Question for International Investors

Post by lordmetroid » Tue Aug 25, 2015 12:03 am

I think it would be really cool if you could include a few large stock and bond indexes of Europe and Asia, of course as a swedish investor I would like to see OMXS30.
I think it also would be really cool if one could view gold in USDSEK.
Last edited by lordmetroid on Tue Aug 25, 2015 12:45 am, edited 1 time in total.
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Tyler
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Re: Question for International Investors

Post by Tyler » Tue Aug 25, 2015 12:51 am

@KevinW: Yeah, I feel like there must be a catch which is why I ask.  Obviously funds would move differently when adjusted for currency and inflation differences, but the US is such a big market that I assume people in other countries might invest heavily here anyway.  That said, there definitely could be reasons it's not practical nor helpful.

@LordMetroid: The problem with following the individual stock and bond indices (beyond the sheer volume) is finding enough data across multiple funds.  Surprisingly, even getting good data back to the early 70's for various indices in the US (other than the S&P500 and certain treasuries) requires a lot of splicing of different data sets.  I don't have the energy to research and update multiple data sets for multiple indices in multiple countries, but if anyone is aware of any international equivalents of the Simba spreadsheet that has a decent amount of history to it (ideally back to the early 70's to have enough years to make it interesting) I'm all ears!  I offer extra credit for Canada, Australia, or the UK (because they're large countries that can actually read the tool I put together.  ;) )
Last edited by Tyler on Tue Aug 25, 2015 1:46 am, edited 1 time in total.
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Gosso
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Re: Question for International Investors

Post by Gosso » Tue Aug 25, 2015 7:25 am

Norm Rothery has put together a Canadian asset mixer tool.  It seems to have everything you need, although I believe the bond categories include federal, provincial and corporate bonds.

For the excel file you can go to Libra Investment Management Inc (click on link in third last bullet point).  The data is maintained by Norbert Schlenker.

Both Norm and Norbert are regular posters over at Financial Wisdom Forum (the Canadian Boglehead forum), so I'm sure the folks over there would appreciate the work you do on the Canadian data.
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Re: Question for International Investors

Post by Gosso » Tue Aug 25, 2015 8:13 pm

I did some Googling and found most of the information needed to calculate the historical performance of the Japanese PP.  Although if someone has better data or finds an error in my data please let me know and I'll update the excel file.  Here is my excel file. (click on "slow download", it'll take 2 minutes to download).  The highlighted areas in the summary pages provide annual data.

For bonds I used THIS.  They only have reliable data for the 9 year bond, so I assumed this can act as a replacement for short and long bonds, which combined generally have an average duration of 9 years, while a 9 year bond has a duration of roughly 8 years, so close enough.

For stocks I used the Japanese MSCI index (I can't link directly but click on country data, then Japan, then use gross and local currency).

For gold I converted gold into Yen.  Link

Japanese CPI from Fred Fed: LINK

Here are the total real returns for the Japanese PP:

Image

Image

The Japanese PP had a rough 15 years between 1990 and 2005.
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Re: Question for International Investors

Post by Tyler » Thu Aug 27, 2015 5:00 pm

Thanks, Gosso.  The Canadian and Japanese data sets are both very helpful.  I'll see what I can do with that.
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