Hey Reader,
"Don't be a homer" has finally gone mainstream
Why I keep the overwhelming majority of my net worth in emerging and frontier markets, and why the safe looking alternative is the bigger gamble
Most sophisticated investors I know think I take too much risk with my own money. Roughly 77% of my net worth is concentrated in emerging and frontier markets, and when it comes up the response is almost always a version of "that seems awfully risky". They are right about the short-term volatility. Over a lifetime, though, the bigger risk runs the other way: holding almost everything you own inside the most expensive and most crowded market on earth, and calling that the safe option.
It used to be a lonely argument to make at dinners, and it still is - however, it is getting less lonely. Last month Porter Stansberry (one of the most widely read independent financial writers in the US) published a piece for his Porter & Co. readers called *Don't Be A Homer*,. When a big American newsletter starts making my argument to its own readers, you know it has gone mainstream. A "homer", borrowing his friend Meb Faber's term, is the investor with a home country bias, the one who keeps most of his money in his own market. For an American, that home is the US. For Europeans (and probably for most other regions in the world), I would argue that “home” is two markets at once: your own domestic index and the US mega-market that now dominates every global benchmark. The case against staying put in either has rarely been this strong.
The world's most expensive market is also its most crowded
Start with price. The US market trades at a cyclically adjusted price-to-earnings multiple (the Shiller CAPE, which smooths a decade of earnings) of about 42, against a long-run average nearer 17. It has run above a CAPE of 40 only twice in its history, at the dot-com peak and again right now. Meb Faber has studied every country that ever reached a CAPE of 40, the US in the late 1990s, Japan in the 1980s, China and India in 2007, and in every case the following decade delivered close to zero or negative returns after inflation.
US Shiller CAPE since 1871. At about 42, Aug 2026, one of only two readings ever above 40. Source: multpl.com, data courtesy Robert Shiller
Price is only half of it. The ten largest companies in the S&P 500 now make up more than 40% of the entire index, well above the roughly 27% they reached at the dot-com peak, and almost all of them trace their fortunes back to the same technology trend. Forty cents of every Dollar going into a passive US index fund is buying just ten stocks. The fund looks like a bet on the whole American economy. Most of it is a bet on the same handful of names, all riding a single technology wave.
The ten largest S&P 500 companies now make up a bigger share of the index than at the dot-com peak. Source: FactSet, S&P, J.P. Morgan Asset Management (as of 18 May 2026)
Step back to the global picture and the mismatch is even starker. American stocks are now just over half of the world's total equity value, while the US economy is only about a quarter of world output in nominal terms (or even less than 15% in PPP terms). Emerging markets are home to more than 85% of the world's people and, in purchasing-power terms, close to half of global output, and yet on the free-float indices most investors track they come to only around a tenth of global stock market value. It is a smaller investable share than the roughly one-quarter I have cited before on a full-market basis, but either way it is a fraction of their weight in either people or economic output. Since 1980 the US and foreign markets have carried almost identical average CAPE ratios of around 22, so the premium for owning America over everywhere else has, on average, been nothing at all. Today that spread is one of the widest it has been in forty years.
It is worth remembering what happened to the last market that carried this kind of adoration. In 1989 Japan was the biggest, most admired market in the world, the one every prudent investor wanted to own, and boat loads of it. The Nikkei did not reclaim that peak until February 2024, some thirty-four years later. An entire working life just to break even in nominal terms, forget about breaking even in real terms.
The Nikkei 225 took ~34 years to reclaim its December 1989 peak, finally doing so in February 2024. Source: Macrotrends (Nikkei 225 Index)
I am not saying America is Japan in 1989. The lesson is narrower. The most expensive, most admired, most heavily weighted market is the one you least want to hold in size, because all of the good news is already in the price and there is a very long way to fall back down, once the sentiment around that market vs. other markets starts to mean revert. Today that market is the United States, and most portfolios I look at are more exposed (directly and indirectly) to it than their owners realise.
Japan at least came back. The longer history is less forgiving. The UBS Global Investment Returns Yearbook, the Dimson, Marsh and Staunton dataset, tracks more than 120 years of returns across the world's markets. Several that once looked permanent went on to hand their owners a total loss. Russian and Chinese shareholders were wiped out in full last century. No one knew in advance which markets those would be. The case for spreading capital across many countries, rather than trusting one, is less about a few extra points of return in the good years, and more about never being the investor whose one market is the one that breaks. On the risk-adjusted record the Yearbook has kept since 1900, spreading across many countries has beaten trusting any single one, for almost every investor outside the US.
It is fair to ask whether these markets are just cheap for a reason, and to look at more than one flattering decade. The longer record answers it. Since the MSCI Emerging Markets index began in 1988 it has compounded at close to 10% a year in Dollars. For the first two decades it ran well ahead of the S&P 500, compounding at close to 14% a year against roughly 10% for the US through 2010. Only the past fifteen years, dominated by a rising Dollar, have pulled the long-run figures level. What the average hides is how it was earned, in violent swings tied to the Dollar. Emerging markets soared in the early 1990s, were battered by the Asian and Russian crises at the end of that decade, then compounded at close to 16% a year through the 2000s while the S&P 500 handed American investors a lost decade. The following ten years reversed it, with emerging markets crawling along while the US ran to record highs. Almost all of that reversal lines up with one thing, a relentless bull market in the US Dollar after the Lehman crisis, which has now spent years looking expensive on the same measures that flagged the last turn.
Cheap is necessary, but on its own it is a trap
Up to here, Porter and I are in complete agreement. What I want to add is the piece I can only really see after fifteen years buying listed companies on the ground across Southeast Asia.
Porter's first rule for emerging markets is a good one, and I wouldn’t argue against it as a starting point. His rule is to insist on a high, well-covered dividend, to make the business hand you money every quarter for the use of your capital. He points to a study by S&P Dow Jones Indices covering sixteen years of emerging market equities, where the dividend payers returned an average of about 16% a year while the non-payers managed less than 4%. The difference is enormous. A company that can pay you consistently is usually a company that earns what it claims to earn.
The trouble is that in the markets I spend my life in, a high dividend is a workable qualifying anchor, but nowhere near sufficient. On its own, a big payout can hide a great deal. Much of Southeast Asia's listed universe is family controlled, with thin free float, which means the controlling owner is often on both sides of the table. A headline yield of 8% or 10% tells you very little on its own. It might be masking a balance sheet full of idle capital that should have been put to work years ago. It might be funded by rising leverage or one-off asset sales rather than by the cash the business throws off. It might be handed out by a controlling family that treats the listed company as a private piggy bank and its minority holders as an afterthought. A screen cannot tell these apart. The dividend line looks the same in every case.
What has protected our capital here is governance we can verify up close and, wherever possible, influence. A yield filter never did that work. We want to know how capital has been allocated over the past ten years, and who really controls the company. We want to know how the controlling owner treats outside shareholders between the big announcements, and whether the incentive architecture points the same way as ours. None of that comes off a stock screen. It comes from being close enough to the boardroom to tell a business that pays a dividend because it is a disciplined compounder from one that pays a dividend to keep minorities quiet.
The subtler homer buys the whole index and calls it diversified
There is a second kind of ”Homer” that nobody warns you about, and it is more common among sophisticated investors than the first. The obvious homer owns only the S&P 500. The subtler one finally accepts the argument, buys a single broad emerging market ETF, owns the same crowded index names as everyone else, and tells himself he is now diversified. He is not really. He has just outsourced the single most important decision, which companies are wheat and which are chaff, to an index that weights holdings by size rather than by quality or governance.
Nowhere is that clearer than in Southeast Asia. Most institutional investors still bundle the whole region into one line in their emerging market sleeve, accessed through an index fund and reviewed once a year. Underneath that one line, five countries are running structurally different capital market reforms at the same time, each with its own timeline, its own mechanism, and its own kind of opportunity, something we walked through in an earlier letter. Vietnam has just completed a seven-year upgrade. Indonesia is rebuilding its governance under external pressure. Malaysia, Singapore and Thailand are each running their own version of a Japan and Korea style value-up. Treating those five very different situations as one interchangeable allocation call is what kept serious investors underweight the region for a decade and a half. The way through is to get close enough to sort it company by company.
What this looks like in practice
To make it concrete. A few years ago Endurance Capital took a position in a leading listed securities broker in Southeast Asia, a business with more than a million clients and a large digital footprint. We built a shareholder alliance of around 30% and took a board seat. From there we helped reposition the company from a pure retail brokerage into a broader financial-services platform, re-list the company from a less liquid stock exchange to the Ho Chi Min City main board, and support a change of chief executive. We backed the business a second time after that management change, and the position compounded at an IRR in the low thirties. The company itself is beside the point here. The mechanism is what carried the result: a modest ownership position, used well and up close, gave us far more influence over the outcome than a much larger passive holding ever would. Across roughly thirty exits over the past decade, this way of working has produced an average USD IRR of 22%.
The wider setup is hard to pass up. Emerging markets trade at roughly 12 times forward earnings, close to half the US market's roughly 22 times on the same forward measure and around a 40% discount to developed markets as a whole (and Southeast Asia is right in on the cheaper end of it). The underlying companies include consumer, banking, healthcare and digital infrastructure leaders with enduring economics, in markets full of young and growing populations, and the governance direction across the region is improving faster than at any point I can remember. The path forward is not a straight line, it never is, and any of these markets can stay cheap and frustrating for longer than feels reasonable. Even so, the combination of a deep discount, improving governance and businesses with a significant minority shareholder can get close to and influence, is a rare one.
One last thing. Pull up your portfolio and draw the map by country rather than by sector. Work out how much of everything you own is tied to just two markets, your home country and the United States. Then see how much of that is concentrated in the single most expensive market on earth. Take the little you hold beyond those two markets and ask how much of it you truly understand, and how much you own only because an index put it there. Reducing the US exposure is the easy call. Knowing what to buy once you have left is the whole game, and it is where the returns are won or lost.
Christopher B. Beselin
Investing, compounding & exiting
Christopher B. Beselin - is the Chief Investment Officer of Endurance Capital. The views & opinions expressed in this newsletter is for informational and educational purposes only and should not be considered investment advice.
PS. If you are a qualified professional investor and want to think through how to structure long-term Southeast Asia exposure with an active ownership lens - feel free to schedule a 1-to-1 emerging market strategy call with Christopher B. Beselin via this link. DS.