Animal Spirits Podcast - Talk Your Book: International Investing

Episode Date: December 17, 2018

We discuss US outperformance over foreign stocks, comparing valuations across countries and markets, why it still makes sense to diversify internationally, does factor investing work better overseas, S&P 500 envy, the problem with single variable stock picking analysis and much more. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is sponsored by iShares. Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing. Hosted by Michael Battenick and Ben Carlson, two guys who study the markets as a passion and invest for all the right reasons. Michael Battenick and Ben Carlson work for Ritt Holt's wealth management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Rittholt's wealth management. This podcast is for informational purpose. purposes only and should not be relied upon for investment decisions. Clients of Ritthold's wealth management may maintain positions in the securities discussed in this podcast.

From 1970 to today, $1 invested in the S&P 500 grew to $134. $1.00 invested in the MSCI World X USA grew to just $60. Home country bias worked. Is that you're telling me? Well, what do you say to that? Well, the problem is it's kind of, of crazy. So we looked at this numbers and I think you were the first one to figure this out and it kind of blew my mind. So obviously if you look at from 1970 to 2018, the U.S. has done much better. But pretty much the entirety of that growth has come since 2008. So we also looked at the growth of a dollar, 1970 through June 2008. And it's identical. Like the graphs are almost on each other and they meet at the same point. So this brings us to a bigger issue that

when you are looking at back tests or even real data or anything like that, probably the most meaningless data point is growth of a dollar. I think it tells you virtually nothing. It's also true that when you're talking about compounding over that long of a time frame, even small amounts can have a big impact. So I looked at the S&P versus the MSCI Europe and it was a similar thing. So from 1970 to 2018, the S&P has done 10.4% a year. Europe has done 8.8. and that's like a 12,500 percent return for the S&P and a 6,000 percent return for the MSCI Europe, so it's double. But from 1970 to 2007, the MSEA Europe actually did better, and it was up 11.3 percent versus 11 for the S&P, and they were both at like 5,000 percent. But 2008 to 2018,

the S&P is up 132 percent in total. MSCI Europe is up 3 percent in total. So it's kind of crazy that that whole period since the financial crisis has made investing internationally look horrid in a lot of ways. So from some time later in 2007 until today, S&P 500, growth of dollar 236, MSCI, world growth of dollar, a dollar 11 cents. So basically more than a double for the S&P 500 and flat for the world without the S&P 500. However, this is a hill that I am willing to die on. I cannot be convinced that home country bias is a good thing. Like you cannot convince me that investing in the rest of the world outside of just your home country, whether your home country is Canada, the United States, Mexico, Germany, wherever, I cannot be convinced that diversifying

across the world is not a good idea. See, this is the one time where you can use the Japanese example and it works because you can say, people always say, what about Japan when talking about long-term buy and hold? But what about Japan if you have a home country bias and that's the only market you invest in? Then you're screwed. Yeah, I think I did a post on this recently actually talking about Japan. Japan at one point was more than 50% of the acquit, if I recall it correctly. Yeah, it got to be an enormous amount. And it was giving 22 or 23% returns for, I think, a couple decades throughout the 70s and 80s. And of course, the performance this year hasn't helped the home country bias thing because the S&P is up a little bit. I think 2% to 3% and

then develop markets and emerging markets both down 11 or 12%. And so it hasn't really helped I mean, last year, international help. But so what do you say to the people that tell us, well, the SMP 500 gets half of its revenues from overseas. Why don't I just own all U.S. companies? Not good enough. Yeah, I agree. If you want exposure to international markets and you think that you're getting it from McDonald's,

nope, not good enough. You are getting all the idiosyncratic risk within those businesses. So I do not think that that is a substitute for owning international stocks. So a better way to analyze this, rather than just looking at the growth of a dollar, is to look at rolling returns. And maybe if you look at rolling three returns, you get a better sense of how cyclical the relationship is between the U.S. and the rest of the world in terms of leadership. And actually, right now, if you look at consecutive rolling three-month periods of outperformance,

the U.S. is outperformed looking at rolling three periods for over 100 months. It is by far the longest period of outperformance. So why don't we pick this back up after our conversation with Holly from I shares? We have Holly Framstead. She is the U.S. head of factory ETFs that I shares. Holly, thank you very much for coming on the show today. Thank you for having me. So, INTF seeks to maximize exposure to factors that have historically outperformed the

broad market, quality, value, size, momentum, while maintaining a similar level of market risk. So I guess a good place to start off with is if market cap waiting is suboptimal, why is it so difficult for most funds to beat it? It's a great question. And I would start by saying that it's not my view or our view as a firm that market cap weighting in itself is suboptimal. In fact, we believe that cap weighted exposures have a very important part in most client portfolios.

For many, it serves really as their core allocation because it gives them the lowest cost exposure possible to that market cap beta. It's a critical component, but alongside market cap beta, what we find are that clients are often looking for something that can differentiate the outcome above and beyond simply what the market alone would be allowed to deliver. And that's really where historically, investors have had to turn to active management, because traditionally it was the only product set on the market that allowed them to deviate from the outcome that the market was going to deliver. If they needed more growth, for example, they had to seek active

managers that were going to be more aggressive than the market to achieve that outperformance. And if they wanted to reduce risk, they had to seek managers that were going to take a more defensive position. The market cap weighting is critical at that core, but many clients are looking to differentiate beyond that. So what I would say is, while we know that there are certain attributes of securities that are more likely to drive better returns than the market in risk-adjusted return space over time, the key challenge with actually delivering on that outcome for many active managers is really threefold. I would say time horizon, human error, and fees. So first, there are a lot of attributes to securities that tend to drive better returns. Value stocks or buying stocks that are

priced inexpensively relative to fundamentals is something that I think we're probably all pretty familiar with. But the challenge with that is value stocks can go through really long periods of underperformance. So unless you're willing to hold that investment for long enough, you won't actually get to achieve that outperformance. And if you pair that with a human who is, potentially then trying to differentiate in the securities that they choose and maybe making the wrong call and charging 100 basis points for it, all of a sudden the hurdle rate is really high. You've introduced a lot of idiosyncratic risk into the process. And if you don't invest long enough, then you're not actually capturing that factor premium either. And so I think those

three things are really what has compounded to making it so difficult to beat market cap waiting despite the fact that we know what should beat market cap waiting over time. So in terms of talking clients off the ledge here who have been invested internationally and in value stocks, what kind of things do you say to help rein in expectations and then maybe give them some lead at the end of tunnel going forward since stocks internationally have done so poorly relative to the U.S. markets. So, Holly, just to put that into context, to Ben's point, EFA over the last five years, and that's an I shares developed XUS stocks, is up around 11%.

And over that same time, U.S. stocks are up almost 70%. And U.S. stocks, I'm talking about the S&P 500. So it's quite a big spread over the last five years and even over the last 10 years. Yeah, I mean, it's a critical distinction to make. And I would say, you know, what investors need to keep in mind is why they have diversification in the first place. You want to diversify internationally because you don't want to take on a ton of single country risk.

And unfortunately, most client portfolios have a huge home country bias, which has worked very well as long as the U.S. markets are doing incredibly well. But, you know, the second international markets start to grow will have a different story on our hands. And so the challenge, I think the biggest challenge for our financial advisors in particular is really keeping their clients invested in a balanced allocation when everyone is watching the S&P. We call that S&P envy within BlackRock. And it's a very real phenomenon. And so I think it's important to make sure that clients understand what each part of the strategic asset allocation is playing for their long term growth objectives so that they can focus more on the macro picture and the long run picture of diversity. So we'll get into some of the multi-factor stuff, size, value, quality. But when you're combining all of those factors, is it possible that at the end of the day, you just end up back with beta? It absolutely is possible. And that's where portfolio construction matters. In fact,

to take it a step away from factors, we've done a number of analyses at the portfolio level for clients who deliver a list of holdings that are the underlying holdings of all of the funds and the managers that they own. And when we analyze that list of securities in aggregate, oftentimes it looks something like the market. In fact, we did an analysis for a very large institutional client once that gave us a portfolio that basically looked like acqui. And the challenge is sometimes buying a lot of managers expecting diversification can really mean that you actually negate the benefits of each manager that you've chosen in the first place. And so in factor space, how that could play out is if you purchased a fund that is a value fund,

fund that is a momentum fund and a quality fund and a size fund and, you know, any number of factor-based products, if they're not built or constructed to go together properly, what you will find is that you're negating some of the bets in one fund to take on different bets in another fund. And so when we think about multi-factor space, that's precisely why we don't believe that the optimal portfolio construction is that sleeved approach, some quality, some value, some momentum, the rather selecting stocks that have all of those attributes or as many of those attributes as possible so that we aren't canceling out the choice of attributes that we're looking for in one security over another.

So your portfolio does look different. There are 235 holdings as of the last reporting with an active share of 89%. So how does I shares think about tracking error and how comfortable are your clients with tracking error? Yeah. So the way that we think about factor portfolio construction is factors and a multi-finding factor fund is typically one component of a client asset allocation. My job would be a dream job if I was talking with clients all day that we're starting from a portfolio of cash and building it optimally from the ground up. The reality is that most clients that we talk to actually have holdings

today, many of them are already I-share's clients and own a lot of our market cap-weighted core products, and they're looking to differentiate beyond that in some way with some portion of their portfolio. And if that's the case, then what you want is a factor product that has the strongest exposure to the factors possible, while maintaining some controls around diversification, of course. But I would say almost the higher, the tracking error, the better here, because it's going to give you a more capital-efficient way to allocate a portion of your portfolio to something that is factor-oriented, meaningfully changing the factor exposures at the portfolio level, without having to sell out of everything that you own to buy an entirely new fund.

So when constructing something like this, there's obviously a couple different ways you can put together a multi-factor portfolio. portfolio, you could pick stocks within each factor on its own, so you could do a sleeve of value stocks, sleeve of momentum stocks, and so on. Is that the way you guys are building this portfolio, or are you looking at multi-factors within individual stocks and going that way to pick the stocks that have the best of each characteristic for these different factors? So our process is absolutely the latter of what you said. What we're looking for is not a sleeved approach. In fact, we have single-factor ETFs that we could have stacked together or

combined together in a portfolio and called it multi-factor, and that certainly would have been the simplest and fastest way to market for us. Instead, what we chose to do is take a more holistic approach to portfolio construction so that we can have a more concentrated portfolio and can deliver stronger factor exposures. What I mean by that is you may have a stock that is displaying very positive momentum, but companies that have been trending for long enough are probably not cheap, so that positive momentum stock may have negative value. And the opposite can be said with a typical value security, which like ideally is cheap because it has not been trending in the market. And so that positive value is displaying negative momentum. And if you simply stack

the two together in a portfolio, you would end up with something that is market-like exposure to both of those factors. And that's obviously not the goal here. So instead, what we're looking for are stocks that are simultaneously underpriced, smaller in size, with strong balance sheets and stable earnings, and which are trending. Now, I would say to find the stock that has all four of those attributes. We'll call that the unicorn, and there are probably a couple in every multi-factor fund, but certainly not a whole portfolio's worth. So while we can't get all four of those attributes in every stock all the time, what we do want is a portfolio that has securities that have as many of those positive attributes as possible, and as importantly,

does not have negative attributes to those factors that we're targeting. So for example, I will take a stock that is underpriced and maybe not trending strongly, but I don't want a stock that is underpriced and trending downward because that's contributing negative momentum to the portfolio. Since you are having sort of a bigger sandbox here, just investing outside of the U.S., are there any big constraints in terms of sectors or countries that you guys look at to sort of keep some guidelines around the portfolio construction? Yeah, that's a great question.

And I think it's critically important, particularly with a strategy that is holding far fewer stocks than certainly the investable universe in the market. So when we think about investing in factors broadly, what we want is a portfolio that is giving you the strongest exposure to the factors possible, but that in its total construction can be combined and sit at the core of a client's asset allocation. What I mean by that is for a client that was owning market cap-weighted S&P 500 exposure, IVV, for example, if they want to pair multifactor alongside that, then we want the multi-factor strategy to look something like the market so that it's an appropriate pair at that core. For all of our exposures, domestic and

international, what we look for then is to keep sectors in line with the broad market. So we're looking for no more than a 5% deviation from the market cap weighting of a given sector within this fund. We want to make sure that we're not taking on any oversized bet to one stock. So there are also constraints at the security level and constraints at the risk factor level because while I'm not targeting growth as an example in this portfolio, I don't necessarily want it to become an anti-growth portfolio. So we're going to try and keep risk factors outside of those targeted in line with the market broadly. And what we think this will deliver is an exposure that overall looks and feels like the

market, but is giving you access, more access than you would in cap-weighted space to stocks that are more likely based on their underlying attributes to try better returns over time. So when I look at the portfolio characteristics, one thing that really sticks out is the weighted average market cap for MSCI-EFA is roughly $38 billion. And again, this is as of the end of June 2018. So it's $38 billion for EFA and just under $18 billion for INTF. Is this going to resemble some sort of, you know, a mid-cap ETF or is this going to be dominated by the size factor versus other factors like a quality, momentum, and valuation?

Yeah, that's a really important distinction here. So when we talk about size across, well, across any product, what you need to look at is kind of the relevant securities that we're choosing from. And in a majority, or at least our flagship funds, INTF is an example of this. we're choosing from a large and mid-cap universe. So when we say that size effect, what we really mean is that we're teasing down into the mid-cap space from a large mid-universe as opposed to a universe

that is all-cap in nature selecting from large, mid-and-small-cap securities. The size exposure within the portfolio is an important one, and it's certainly one that can be a material driver of performance. What I would say is anytime you deviate from market-cap waiting, you're going to get some size exposure anyway. And then in this portfolio in particular, we are specifically choosing securities that are smaller in size. And so our goal is to give our clients the strongest exposure that we can to that size factor over time. When we think about the way we choose stocks, though, we are not favoring size exposure over value or quality or momentum exposure.

All have an equal ability to contribute to whether or not a security is selected in the portfolio. So we aren't choosing to overweight size versus value or momentum. what you may find is that the stocks that are value-oriented and high quality in nature may be smaller at certain times in the market. And so you might have a variation in that size exposure over time simply because of the opportunity set. But it is certainly not something that we are favoring or that we intend to have drive returns in a more impactful way than any of the other factors. So in the U.S., everyone is pretty well aware that the S&P 500 has been fairly hard to beat over the last cycle for sure. And it seems to be driven by a few stocks. And pretty much

most factor strategies have struggled in that environment. How have things looked internationally? Is the environment better over there in foreign stocks for factors lately or are the expectations set up to be better over there going forward? How are those things different between the U.S. and foreign markets? I think the U.S. has been in a very interesting phenomenon where, as you said, a few stocks are really driving the market's returns. And internationally, you'll have far more securities and far more diversification between stocks. And so you tend to have less of that individual stock driving the overall market. But I think impactfully, when you have more stocks to choose from, you have a better opportunity to create a portfolio that is differentiated from the

market and that is maximizing exposure to rewarded factors without taking on a ton of idiosyncratic risk. And I think the most important message here really is that when you seek a multi-factor exposure, you want to have balanced exposure to factors that will work well at different times and in different stages of the cycle. Because by doing that, you can improve diversification within the portfolio or within the fund itself and hopefully increase the consistency of the outcome, outperformance in this example. So if we take INTF as an example, since inception, the fund is outperformed in 62% of rolling six month periods. So what that means is more than half the time, if you hold this fund for as short as six months. Historically, it had beat the market cap-weighted index. How much time do we have in terms of

how many rolling six-month periods do we have, roughly? 37 rolling six-month periods. So 23 out of 37, it has outperformed historically. And you guarantee that, well, I'm just kidding. Absolutely no guarantees. But I think, you know, the reason why we look at rolling periods is to not make it time-bound. So we don't want the period of evaluation to be dependent upon exactly what happened at the beginning or the end of any given year. So a rolling time frame with a one-month step gives us a more accurate understanding of historically what an average investor would have experienced. And if we extend that holding period to one year, 77% of the time, INTF had historically beat its market cap-weighted selection universe. So that's 24 out of 31 rolling one-year periods. And that's pretty

phenomenal, I think, when we're talking about factors that tend to work over an entire economic cycle. So I would say what the takeaway there is, by adding quality and momentum to your value exposure, value may take five or in some cases 10 years to begin to achieve its outperformance, but adding momentum and quality alongside that value exposure then has improved the consistency and the ability of the portfolio to beat the market in those times where value itself might be out of favor. All right. Well, I think we're going to leave it there. That was great, Holly. Thank you so much to you and the team of I shares for coming on today. We really appreciate it. Thank you so much for having me.

All right. Thank you, Holly, Framsted and I Shares. That was terrific. So, yeah, performance has been very one-sided in terms of international stocks versus the United States. And there was a tweet from a guy named Tom the other day. I'm not going to it, butcher his last name, but we'll look to this in the show notes, showing that Europe-focused ETFs have suffered nine straight months of outflows. And obviously, people are susceptible to performance changing. And this is the exact opposite, where after periods of poor performance, investors run for the exits. How about this for an argument? Obviously, the U.S. has done way better performance-wise than anything international again since 2007-2008-ish. People for a long have pointed to the fact that valuations are much lower overseas. So by any metric you look at, K-Pratio, PE, price to cash flows, price to book, price to sales, dividend yield. We'll put a chart of this in the show notes, but it shows we took this from a few different places. But by any measure you look at, valuations are much lower overseas. Now, is this a good argument to make to invest internationally, or is it not an apples-to-apples

comparison? This is a nuanced argument. I do not think it is necessarily apples to apples, and Lawrence Hemtill has beat this horse to death in terms of looking at sector composition, because one of the reasons why the United States might appear more expensive is because it is 20 percent, a fifth of the S&P 500 is invested in technology stocks, which typically carry higher valuations. On the other hand, Acqui XUS is 24% financials, 11% industrials. Industrials and financials should have a lower, a lower multiple, right?

And the equity has, what, less than 8% in tech? Yeah. Honestly, if you wanted one reason for the difference for the divergence and returns, it's probably the fact that tech has been doing so amazingly well in the U.S. And not very well overseas and there's not much of it, basically. That's right, if you wanted to pinpoint one thing. Yep. I think what you should do to really think about something being cheaper, expensive is compare

it to itself. So how does the AQUIXUS look on a valuation today versus it's historical? But here's the other point is that valuations like, at least to me, when you're looking like big picture stuff, it's really hard, not that you shouldn't be aware of valuations, but should they necessarily drive your entire investment decision-making process? And I say probably not. And getting too obsessed with the sector stuff might just muddy the waters and make you overthink this thing. So I think that you should be aware, but maybe not go too far down that rabbit hole. And the U.S. is a perfect example of this. If you traded purely on valuations, you could have said the U.S. has been expensive this entire time. And you and I pulled up a piece from Henry Blodgett at Business Insider this week. And he talked about how the U.S. valuations were approaching. bubble territory in January of 2010, which is how much, I don't know how many

percentage ago, but a lot. And so I think the U.S. is a perfect example of why you can't use evaluation to time these things. And so that's why I think if you're going to make a bet that in the future international stocks will perform U.S., you can't have a specific date in mind because that's really hard to do. But I think you have to have it based more on a mean reversion thing and the fact that the U.S. has just done a lot better than international stocks. And if you think corporations around the globe are going to have similar returns because we have more of a globalized economy. And I'm sure you can make the point that sure the US does have some built-in advantages. But the fact that it is so much of the world market cap,

I mean, that's a pretty big bet if you're assuming that U.S. is going to have the same level of outperformance going forward that has had in the past. Yeah, that is not a bet that I want to make. And I don't necessarily, I'm not dogmatic about how you get your international exposure if you want to use active management, quant, like rules based like INT, or if you want to hedge the dollar or whatever. But I really do think it is important that if you are investing in the stock market that you consider investing internationally. So one of the things that was interesting to me in terms of composition of the portfolio. So if you look at the top 10 stocks in the S&P 500, they make up around 22% of the S&P 500 on a market cap basis. And of course, that's mostly dominated by tech stocks. If you look at the top 10 holdings in ACWX or the ACWX, the United States, all country or World Index X United States, that represents less than 10%, which makes sense because it's not just one country, it's the globe, but Nestle, Tencent, Alibaba, Novartis, Taiwan, semi, Samsung, Roche. Is it Roche? I got nothing.

All right. HSBC, Toyota, and Royal Dutch. Those are just 10%. So you have a much less concentrated portfolio. And I guess this brings up a second question, which I'll get to in a second. But I was sort of surprised by this, that ACWX, which is also an I shares product, has 3.5 billion in assets. And I NTF has one billion. So that's not as big a spread as I would have thought. Yeah. And I mean, maybe the fact that as Holly mentioned, they've done pretty well has a lot to do with that.

But it is kind of interesting. She brought up a great point that it sounds like their factor works. has done pretty well. And she said over, I can't remember the numbers offhand, but they did pretty well outperforming their benchmark, which brings up a couple of questions. A, is it easier to outperform a benchmark like the EFA when you're investing internationally? Is it almost like the ag in terms of like bond indexing? And B, wait, why? Well, because it's, I think it's a little easier to maybe make certain shifts among countries or among factors than it is in the U.S. since you don't have these big firms dominating like you do in the U.S.

in terms of market cap weighting. So I think Europe is built a little differently where the, yeah, it's not as much of like a momentum funded as like the S&P 500 that has these huge stocks that are an outsized portion of the gain. I think things are more spread out in the EFA and there aren't, there aren't as many enormous players that are that are controlling things. Well, this fund has on, so total return since inception, which is, I think, uh, late 2015, it's a total return is 5.6% for INTF, whereas ACQEXUS is down slightly. And I think Holly said

that it's outperformed in like 23 of 37 rolling six-month periods, which is pretty good. I don't know if multifactor or factor investing in general works better in international stocks. I just, I don't know. Well, if you have, if you want to answer, let me tell you. So I'm thinking, does something like the value premium work better overseas? Because everyone is wondering, is value dead in the U.S. because it hasn't done as well? It's gotten crushed. And again, a lot of this is because growth and technology stocks have done well. But I looked at the numbers from 1994 to 2017, which is as far back as some of these indexes go. So I looked at, first I looked at the MECI EFA versus EFA small value index. And the EFA small value outperforms it by roughly

two and a half percent per year from 94 to 2017. I also pulled up the FOMA French international value index and emerging market small cap and emerging market value. And all of these things crush the EFA, the regular EFA. Same thing from 2008 to 2017. Same thing from 2009 to 2017. So a lot of these, they're working much better. So for instance, from 2009 to 2017, the MSCII EFA is up around 8.8% a year. And the MSCIEFA small cap value index is up 13.8% a year. So up performing it by 5% a year. But as we just said in the first part of the show, looking at performance over a long period of time doesn't necessarily tell you everything you need to know.

Okay, so you're not buying the performance thing. Well, I'm saying what if all of that performance came in the first seven years of that data sample? Okay, but look at the, so I just showed you 1990 or 2009 to 2017, it outperformed by 5% a year. From 94 to 2017, outperformed by 2.3% per year. So over the last whatever decade it has and over the much longer time period it has as well. So does this prove that it works better over there?

I don't know, but maybe because of the sector, sector composition, that makes investing in something like value stocks or factor investing work a little better overseas. What about the fact, and I'm just asking, I have no way of proving this, what about the fact that maybe it has not been arbbed away because they don't have like as developed financial markets as we do in terms of like ETFs and active management and stuff like that? That's possible. I could see that. If you really assume that that has been the problem with value investing here, which I don't know if I necessarily agree with that either, though, because if you assume that index funds and ETFs and smart beta have made value investing harder,

wouldn't value have had a huge outperformance for a while as everyone piled into those stocks as opposed to underperforming like they have? But what if the piling in just squashed the premium? When you get the pile in, you think all those flows would cause the stocks to go up, but that hasn't happened. Value is getting crushed. Good point. Well, that's obviously fed manipulation.

Ah, we finally figured it out. We got to the bottom of this. So, of course, again, this is a big topic. And I think investing internationally has become harder because performance has been so poor. So I think it's much easier for people to give up on it these days. And especially if you've been extremely overweight U.S. in the past decade, you feel pretty good about that decision, which you wouldn't have felt very good about in the 2000s. So there's a paper by AQR called International Diversification Works in parentheses. It says eventually. And I like the way that they, they kind of frame this. So they say international

diversification might not protect you from terrible days, months, or even years, but over longer time, horizons, which should be even more important to investors, where the underlying economic growth matters more to returns than short-lived panics, it protects you quite well. Over the short-term, global diversification can disappoint. Markers tend to crash at the same time, and as a result, globally diversified portfolios are more negatively skewed. And so they say, while the short-term common crashes can be painful, the long-term returns are far more important to wealth creation and destruction. So I think like we've kind of talked about with the performance here, it's easy to look at these even 10-year periods and come to the conclusion

that it makes no sense to invest in foreign stocks and diversify globally. But I think for lack of a crystal ball that shows you exactly how the next few decades are going to unfold and that the U.S. is going to continue to sort of outpace the rest of the world in terms of its stock market performance. I think diversifying internationally is more of a risk management tool than potentially to return diversifier. But I think that that's tough to try to assume that those risks won't be there. Yeah, that's a really good point. Yeah, and I really like this part. Diversification protects investors against the adverse effects of holding concentrated positions in countries with poor long-term economic performance. And that's a really good place to leave it. Thank you,

Holly, Framsted and I shares for coming on the show today. We really appreciate it. Hope you enjoyed the show. And we'll see you next time. Thank you.