The Meb Faber Show

In Episode 63, we welcome Gary Beasley and Gregor Watson, co-founders of Roofstock. If you’re one of our listeners who has written in requesting an episode on rental real estate, be sure not to miss this one. We start with some quick background on the guys, how they came to found Roofstock, and the way in which their company is aiming to make rental real estate investing far easier. In essence, they want to simplify things by separating the “investing” side of rental real estate from the “operational” side of owning a rental home. After the background, Meb starts with a broad, contextual question: So how would a new rental real estate investor start? In the old way, you would identify a market in which you’re interested, look at tons of homes, make some offers, perform due diligence on the ones where the offers have some traction, renegotiation the price and finally buy, then find a property manager to handle operations for you. But the guys then tell us how Roofstock is making this traditional process far si

In Episode 62, we welcome journalist and author, Ron Lieber. Meb begins by congratulating Ron, as it was Meb's pregnant wife who read Ron's book about how parents should discuss financial matters with their kids, and promptly told Meb he needed to read it and get Ron on the podcast. Turning attention to Ron's book, "The Opposite of Spoiled," Meb begins by asking about Ron's motivation for writing it. Ron tells us there were three factors: one, a pointed question from his three-year-old ("Daddy, why don't we have a summer home?"); two, the focus of Ron's writing at work (young people who borrow vast sums of money to pay the huge college tuition bills); and three, his own situation as a teen, having seen the collegiate financial aid application process thanks to his mother. All of this together led Ron to the conclusion that "we're not having the right kinds of conversations with our kids about this stuff." Meb mentions how it's a shame that they don't teach personal finance in high school, which makes it all

In Episode 61, we welcome Jack Vogel, CFO/CIO of Alpha Architect, and the partner of Wes Gray, who you may remember as one of our earliest Meb Faber Show guests. After Jack tells us a bit about his background and how he came to be at Alpha Architect, Meb jumps in, starting with "factors" - specifically, the value factor. Meb asks about Jack's value philosophy in general, and how he creates a value portfolio. What follows is a great look at how a professional portfolio manager/asset allocator creates a portfolio. Using quantitative tools, Jack starts by constructing the universe of potential assets to include, keeping in mind scale. Next, Jack applies some forensic accounting in order to exclude certain toxic assets that one wouldn't want in a portfolio. Then, he screens for value. Jack likes using enterprise multiples. Finally, he looks for "quality." These are things like free cash flow, margin growth and marketing stability. Meb then points the conversation toward momentum investing. Jack offers us a gener

In Episode 60, we welcome the great William (Bill) Bernstein. Bill starts by giving us some background on how he evolved from medicine to finance. In short, faced with his own retirement, he knew he had to learn to invest. So he studied, which shaped own thoughts on the matter, which led to him writing investing books, which resulted in interest from the press and retail investors, which steered him into money management. After this background info, Meb jumps in, using one of Bill's books "If You Can" as a framework. Meb chose this as it starts with a quote Meb loves: "Would you believe me if I told you that there's an investment strategy that a seven-year-old could understand, will take you fifteen minutes of work per year, outperform 90 percent of financial professionals in the long run, and make you a millionaire over time?" The challenge is the "If" in the title. Of course, there are several hurdles to "if" which Meb uses as the backbone of the interview. Hurdle 1: "People spend too much money." Bill give

Episode 59 is a radio show format. This week we're diving into some of the recent market stories which Meb has found most interesting. We also bring back some listener Q&A. We start with a Tweet from Cliff Asness, in which he rebuffs a Bloomberg article titled, "The Death of Value Investing." The article states that value isn't working. Sticking to that approach has resulted in a cumulative loss of 15 percent over the past decade, according to a Goldman Sachs Group Inc. report. During roughly the same period, the S&P 500 Index has almost doubled." So is value investing dead? Meb gives us his thoughts. We discuss its underperformance, mean reversion, and factor-crowding. Next up is a New York Times article referencing a recent stance-reversal from Burt Malkiel, a passive investing legend. He's now saying he recognizes where active investing can exploit certain market inefficiencies. The same article has some great quotes from Rob Arnott on the topic of factor investing, and the danger in tons of quants all lo

In Episode 58, we welcome Axel Merk from Merk Investments. After a bit on Axel's background, the guys jump in, discussing the Fed's decision to raise interest rates today (recorded on Wed 6/14/17). Axel discusses how the Fed has announced the normalization of its balance sheet and the pace at which it would like to do so - but they've left out lots of details. He likens it to driving into a tunnel with no lights on. In essence, the Fed doesn't know where it wants to go. Axel's response touches upon our current low volatility. Meb hones in on this, asking if the low volatility is in part due to actions from the Fed. Axel believes this to be the case (central banks in general, not just the Fed). Yet there's plenty more, involving how central bank activity has fueled this up, up, up market, with investors piling into risk assets. But Axel thinks asset prices are likely to come down from here. He says "A lot of that (rising asset prices) has been induced by central banks. The unwinding of that is going to be, at

Episode 57 is another "radio show" format, yet this one is different than our others. In this episode, Meb discusses his 17 different "million-dollar" fintech ideas. In essence, Meb has had various business ideas over the years which he's wanted to pursue, but hasn't had the time. Some he's tweeted about, some he's blogged about, others he's kept to himself. But in Episode 57, he'll run through all 17, diving into more detail. Can a listener take one and run with it? Sure. Let us know how it works out! Or work on it with us. We're open to ideas. Either way, here are the 17 concepts: Our new "podcast compilation" idea Liquid alts newsletter Quant backtester Tax harvesting Best ideas newsletter Research boutique for crowdfunding companies Syndicate podcast/newsletter Ruykeyser reborn The Street 2.0 HedgeFundLetters.com NewsLetterSampler.com Tactical roboadvisor Free Acorns/Stash clone Free ETF trading brokerage FreeShares ETFs Quant cookbook The "Forever" fund Are all of these ideas good?

In Episode 56, we welcome Meb's good friend, and CEO of ETF.com, Dave Nadig. Per usual, we start with some background information. Dave tells us about his early days in the investment industry, starting a consulting firm that was working on a then-new idea: fee-only financial advising. His first client was a little shop that went on to become none other than BlackRock. After some professional twists and turns, including running money for a while, Dave ended up at ETF.com. Meb then dives in by referencing an article Dave wrote toward the end of last year, called "Outlook for ETFs in 2017." There were several key points in the article which Meb thinks can help provide a general, 30-thousand-foot overview of the ETF space. The first point - ETF flows. Dave tells us "this is a big year for ETFs." He then takes us through a quick recap of the evolution of ETFs, going from a purely institutional product back in its early days, to something embraced by investment advisors, to an investment vehicle for retail investo

In Episode 55, we welcome Ed Easterling. Meb starts by referencing a survey he just conducted, asking readers’ opinions as to the single best investing book out there. It turns out that Ed’s book, Unexpected Returns, made the top 50 list, so Meb offers Ed a kudos. But the guys hop into market discussions quickly. Ed tells us that the stock market is not driven by randomness. It’s predictable in the long run, driven by three components: 1) earnings growth, 2) dividend yield, and 3) the change in valuation level. Stock market returns over the short-term are unpredictable, but over the longer-term they’re highly predictable. And the key driver is the starting level valuation. Meb brings up how numerous investors are currently expecting 10% returns (based on long-term averages). He asks Ed if that’s warranted. It turns out, we need to distinguish between long-term returns (say, 100 years) and a return-period that’s more relevant to the average investor (say, 10 or 20 years). This is because changes in PE levels

In Episode 54, we welcome Elizabeth “Liz” Dunn, author of the book, “Happy Money: The Science of Happier Spending”. Meb suggests they walk through the book using its five broad takeaways as their outline. But before they dive in, he asks Liz about her inspiration for writing the book. Liz tells us that when she began making a “real, grown up” salary, she wasn’t entirely certain what to do with it. She was curious how to use it most effectively to promote her own happiness. Interestingly enough, there wasn’t a great deal of research on the topic. Next, Meb asks Liz to discuss her first main finding (and likely the best-known finding) – our happiness tends to increase when we spend money on experiences rather than things. Liz gives us the key takeaways, after which Meb asks why buying experiences over things is hard for us, when we know that’s what we should do. Meb and Liz soon move on to the second takeaway from the book: “make it a treat.” One of the greatest misunderstandings of happiness is the idea that i

Episode 53 is another “radio show” format. This means we tackle a handful of topics from Meb’s blog and tweets. TOPIC 1 – VALUATIONS 3 DIFFERENT TAKES ON CURRENT VALUE PICTURE: Meb’s recent blog post “A Bar Too High” indicated that for stocks to meet expectations over next 10 years, valuations must rise to highest they’ve ever been in history. With a current CAPE ratio of 29, that means the stock market multiple needs to INCREASE to all-time 1999 bubble highs to meet investor expectations. He thinks tepid growth is more realistic. On the other hand, James Montier, member of the asset allocation team at the Boston-based asset manager GMO, is convinced that the US stock market is in bubble territory. However, European equities aren’t particularly cheap, either. Only emerging markets value-stocks appear vaguely attractive to him. Investors should be patient and hold a lot of cash in their portfolios in order to be able to buy when markets are correcting. What would make the US equity market attractive again – ho

In Episode 52, we welcome Jason Hsu, joining us all the way from Taipei. We start with a bit of background on Jason and his company, Rayliant, which is a spinoff off Research Affiliates. Listeners might recognize the name Research Affiliates, as it was co-founded with another Meb Faber Show guest, Rob Arnott. Rob and Jason decided to spin off Rayliant to enable Jason to focus on his investing passion, China. As the conversation naturally led to China, Meb decides to run with it. He brings up how a prior Meb Faber Show guest (Steve Sjuggerud) is incredibly bullish on China. Meb asks Jason for a “boots on the ground” perspective. Does Jason agree with Steve’s bullishness? In short, absolutely. Jason has two hypotheses as he evaluates China: One, as China continues moving toward, and eventually becomes, the world’s largest economy, investors will realize they’re underexposed to this market. Given this, there will be major rebalancing into Chinese equities; Two, Jason tells us that approximately 80-90% of Chinese

In Episode 51, we welcome Mark Kritzman. Per usual, we start with Mark’s background. He tells us a bit about his 40-year career in investing, leading to Windham, where he focuses on asset allocation and risk premia strategies. But it’s not long before the guys jump in, starting with Mark’s 7th book, A Practitioner’s Guide to Asset Allocation, which will be coming out soon. Mark describes the process of asset allocation, starting with the basics, then taking us a layer deeper, discussing asset allocation as a way to balance the goal of increasing wealth while minimizing drawdowns. In essence, you need to identify the asset classes you want, evaluate their expected, long-term returns, then estimate the volatility of each and – just as importantly – estimate the correlation between the asset classes. With all this, you then find the particular allocations that give you the highest return for the same level of risk – the efficient frontier. Next, the conversation takes a turn toward investing fallacies, including

Episode 50 is a return to our “radio show” format, in which we discuss current market news, Tweets Meb finds interesting, various research papers of note, and anything else on Meb’s mind. But first things first: A huge congratulations to new father, Meb Faber. His “spin-off” came in the early morning hours just a few days ago. In fact, this episode was recorded with Meb calling in from a spare room at the hospital. The Meb Faber Show also just passed the one-million downloads mark. So a huge thank-you to everyone who has tuned in, listened, and recommended us to your friends. We’re genuinely grateful to everyone for giving us their time each week. Diving into the financial content, we start with Meb discussing the need for investment literacy with kids and new investors. The problem is that most of us learn to invest incorrectly – generally, we learn about single stock valuation. As Meb tells us, the problem is that far more historical context is needed before even getting to this point. What have equity and

In Episode 49, we welcome Dr. Steve Sjuggerud. The conversation begins with Meb and Steve reminiscing about the origin of their friendship, which dates back some 10 years. This leads the guys into Steve’s background, and how he transitioned from being a broker into being the highly-popular investment newsletter writer he is today. Meb asks Steve to describe his investing framework. Similar to Meb, Steve likes both value and trend. Specifically, he looks for 3 things: assets that are “cheap,” “hated,” and “in an uptrend.” This methodology applies to all sorts of asset classes. The guys dig deeper into value and trend, leading to Steve ultimately to say, “If I had to choose between one or the other, I would actually choose momentum over value.” Meb agrees. Next, Meb asks how the world looks to Steve today. Is he buying? Defensive? Where’s he looking? And so on… Steve tells there are always reasons to sell or stay out of the market. Despite this, Steve’s thesis is that interest rates will stay lower than you can

In Episode 48, we break new ground for The Meb Faber Show. Departing from our usual world of stocks and bonds, we welcome expert numismatist, Van Simmons. For anyone unfamiliar with the word, a “numismatist” is a rare coin collector. We start where we usually do – with a bit of background on our guest. Van gives us a quick overview on how he got into his line of work. But it’s not long before the guys jump into the world of rare coins, with Meb asking Van to provide a general, contextual overview. Van’s description of the world steers the conversation toward perhaps one of Van’s biggest contributions to the coin collecting community – the creation of an innovative coin grading standard. Meb believes this grading standard was huge, as “not getting screwed” is such a concern for all sorts of investors. Next, the guys cover a few, quick questions – how has coin space evolved over the years… what were the biggest seismic changes… and which demographic Van sees as the most active in this space. But they dig deeper

In Episode 47, we welcome New York Times bestselling author, Ric Edelman. We start with some quick background on Ric, but then jump into the main topic: the future of technology and how it will affect our lives. In essence, the future is going to look far different than what we’ve known. The tendency is to believe that the future will be similar to what our parents and grandparents experienced as they aged. A linear progression – school, work, retirement, death. Ric tells us this is going to change. The linear lifeline is going away. It will more resemble school, work, back to school, a new, different career, then a sabbatical, more school, and so on… Think of a lifeline that’s more cyclical. What’s the reason? Well, we’re going to be living far longer. Technological and health care advances mean we’re going to be far more vibrant much later in life, so this will change everything we know about retirement and our traditional life-paths. The guys then dig into the role that technology and robots will play in a

In Episode 46, we welcome Real Vision TV co-founder, Raoul Pal. The guys start by going over a bit of Raoul’s background. Raoul started his career by running equity and equity derivatives at Goldman Sachs. Through this, he learned the macro investing world. He then joined a hedge fund, managing its global macro fund before retiring at 36 on the coast of Spain. But it was then that Raoul decided to start a research service, the Global Macro Investor, aimed at large, institutional players. However, in 2008, Raoul realized the ordinary investor had been let down by the system and financial media. So, in an effort to help, Raoul founded Real Vision TV with Grant Williams. Real Vision features the smartest guys in the world teaching you how to invest, what their best ideas are, and so on… After this background, the guys jump in, with Meb asking Raoul about his overall investing framework. Raoul tells us this whole game is about probabilities. To invest successfully, we look for times when the odds are in our favor

In Episode 45, we welcome one of the most often-requested guests for our podcast, Gary Antonacci. After a few minutes on Gary’s background, the guys dive into Gary’s “Dual Momentum” research. To make sure everyone is on the same page, Meb asks for definitions before theory. “Relative momentum” compares one asset to another. “Absolute momentum” compares performance to its own track record over time, also called time-series momentum. Gary uses a 12-month lookback, and compares his results to the S&P and other global markets. In essence, you’re combining these two types of momentum for outperformance. The guys talk a bit about using just one of the types of momentum versus combining them, but Gary tells us “You get a synergy that happens when you use (Dual Momentum).” The compound annual growth rate applied to the indices is 16.2% dating back to 1971, compared to the S&P’s 10.5%. And the reduction in volatility and drawdown is under 20% compared to 51% for the S&P. With the basics of Gary’s Dual Momentum out of

Last week’s solo “Mebisode” was met with lots of positive feedback, so we’re going to do one more in this format before we return to interviewing guests. Therefore, in Episode 44, Meb walks us through his book, “Invest with the House, Hacking the Top Hedge Funds.” Picking stocks is hard—and competitive. The most talented investors in the world play this game, and if you try to compete against them, it’s like playing against the house in a casino. Luck can be your friend for a while, but eventually the house wins. But what if you could lay down your bets with the house instead of against it? In the stock market, the most successful large investors—particularly hedge fund managers—represent the house. These managers like to refer to their top investments as their “best ideas.” In today’s podcast, you will learn how to farm the best ideas of the world’s top hedge fund managers. Meb tells us who they are, how to track their funds and stock picks, and how to use that information to help guide your own portfolio. I