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Regarding pauleckler's comments on international equities not being a good diversivication choice for US equities, I agree that as time goes on these two groups seems to be moving more and more in step with each other. More so than they had in the past. I still believe, however, that they are a better diversification choice for say, large US equities than US small equities.

I wish I could remember where it was that I saw it but there is an interesting graph showing correlation of US equities (S&P500 I think) with EAFE. What was shown was that the correlation hasn't been monotonically approaching 1 over time but had moved in cycles. This strongly suggests that international equities can and do have a good diversification effect. The chart may have been in one of Bernstein's books (either one William or Peter) or maybe it was somewhere else. Anyone?

Hyperborea
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