Info

The Meb Faber Show

Ready to grow your wealth through smarter investing decisions? With The Meb Faber Show, bestselling author, entrepreneur, and investment fund manager, Meb Faber, brings you insights on today’s markets and the art of investing. Featuring some of the top investment professionals in the world as his guests, Meb will help you interpret global equity, bond, and commodity markets just like the pros. Whether it’s smart beta, trend following, value investing, or any other timely market topic, each week you’ll hear real market wisdom from the smartest minds in investing today. Better investing starts here. For more information on Meb, please visit MebFaber.com. For more on Cambria Investment Management, visit CambriaInvestments.com. And to learn about Cambria’s suite of ETFs and other investment offerings, please visit CambriaFunds.com.
RSS Feed
The Meb Faber Show
2018
December
November
October
September
August
July
June
May
April
March
February
January


2017
December
November
October
September
August
July
June
May
April
March
February
January


2016
December
November
October
September
August
July
June


All Episodes
Archives
Now displaying: Page 1
Dec 12, 2018

In Episode 131, we welcome Todd Harrison. Meb begins the conversation asking Todd about what got him into the cannabis space. Todd discusses his intellectual curiosity of the space, and what he has learned about the history of cannabis, from the 30,000 year relationship we have had with it as humans, to the US weaponizing marijuana.

Meb then leads into the topic of governments and states changing their attitudes. Todd talks about it being a confluence of things, but gets into a personal story of how he discovered the efficacious ability of cannabis by working with Dr. Julie Holland after struggling with a decade long treatment of PTSD with a Western medicine protocol.

The conversation then turns to the marketplace. Todd relays that there is quite a bit ahead for the consumer space. In hearing what scientists have to say, it has painted a much different picture for the breadth of wellness that is going to be disrupted going forward.

Next, Meb and Todd discuss a little background on cannabinoids in general. Todd describes that there are over 200 different cannabinoid strains that exist. CBD and THC are two that have been popularized, but when you drill down, there are far more, including CBN, that aids sleep.

The conversation shifts to the broad marketplace for investors. Todd describes the four primary arbitrage opportunities he sees that present opportunity: 1) Time Vs. Policy, 2) Price vs. Institutional Flow, 3) Perception, and 4) Liquidity.

Meb follows by asking Todd about the firm’s investment approach. Todd talks about taking the long view. He mentions that the space has had two 50% drawdowns this year, and they count on disciplined position sizing and light use of puts to layer on with the long view but are using the current volatility to their advantage right now.

Meb then asks Todd about the leading countries in the global landscape right now. Todd talks about Canada being the most mature, Australia looking compelling, and sees the U.S. as having the best opportunity set.

Meb asks how Todd diversifies across industry groups and various verticals. Todd talks about there being about 500 listed stocks right now, and that there are probably 50 to 55 companies that his firm wants to invest in, and probably up to half of them at any given time. He thinks in 10 years’ time the survivors can offer a significant market cap. He and his team are focused on sticking with the companies they think are positioned to win. 

Meb then asks what Todd’s favorite vertical is if he had to pick one to be invested in for 5 years. Todd mentions it would be biotech, even though it may take longer for those investments to pan out because they still have to go through the traditional biotech process.

Todd then gets into his approach for analyzing stocks. Todd discusses the importance of understanding the management teams, and “betting on jockeys as much as the horse,” as well as taking the fundamental perspective by getting a read on the company through a DCF analysis. 

All this and more, including a few names in Todd’s portfolio, and some suggestions for resources investors can tap for research on the industry in Episode 133.

 

Dec 5, 2018

Episode 132 has a radio show format. In this one, we cover numerous Tweets of the Week from Meb as well as listener Q&A.

For our Tweets of the Week, a few we cover include:

  • A chart from Longboard about returns. Since 1989, the worst performing 11,513 stocks – which is 80% of all stocks, collectively had a total return of 0%. The best performing 2,942 stocks (20% of all) accounted for all the gains.
  • A tweet about another option selling fund blow-up.
  • A Jason Zweig post about how many investors should question the dogma of “stocks for the long” run since history shows that a portfolio of bonds has outperformed stocks surprisingly often and for long periods.
  • The statistic “According to Goldman, its indicator at 73% marks the highest bear-market reading since the late 1960s and early 1970s, which (with a few exceptions) is consistent with returns of zero over the following 12 months.”

We then jump into listener Q&A. Some you’ll hear include:

  • In your book, Global Asset Allocation, you compare the results of well-known asset allocations and find that the returns are quite close. Over a long period of time, would you also expect the results of a momentum / value strategy to be similar? Is the main advantage that it allows for better behavior (lower drawdowns, etc) or would you also expect the performance to differ (net of fees)?
  • Would you rather own a stock with a high free cash flow yield or high dividend yield?
  • I was wondering if you could touch on the process of launching an ETF. What are the startup costs, how much AUM and at what fee would the ETF breakeven?
  • I've heard you (and others) extol the benefits of a diversified global allocation but I rarely (if ever) hear the counter argument: that the US deserves a premium to the rest of the world because it has the largest and deepest capital markets, has comparatively lower regulation and fosters innovation and creative destruction. Do those factors warrant an over-allocation to US equities?
  • How much should the average investor be willing to spend (as a percentage of portfolio value) in order to carry some protection in the form of puts?
  • What beats the 60/40 portfolio over the next 5 and 10 year periods?

As usual, there are plenty of rabbit holes. You’ll find them all in Episode 132.

Nov 28, 2018

In Episode 131, we welcome economist David Rosenberg.

We jump right into David’s view of the current economic landscape. David talks about the global economy, especially the US looking classically late cycle, as the economy is running low on skilled workers, and states “If next year is not a recession, it’s going to feel like it.”

Meb asks about the indicators he relies on. David discusses that there are 15 equally weighted indicators he’s looking at, 14 are screaming late cycle, and two stand out the most. ??? Two of the most important indicators for the US are the lack of skilled workers, with a lot of growth coming from people with no better than a high school education, and an immigration policy that has decreased the pool of labor.

This leads into a discussion about inflationary pressures.  While the strong dollar has been deflationary, more and more companies are passing on costs to customers. Services, which dominates the consumer spending pie, is sensitive to labor costs, and the inflation we will see going forward will be from wages.

Meb then asks David about his thoughts on how this plays out for investors given the nature of the late cycle. David tells us that historically, the S&P has annualized an average of 17% per year in bull market conditions, however, this time around, it has done so with nearly half the typical economic growth rate to back that up. He suggests investors be defensive, focus on liquidity, have some cash on hand, and emphasize quality. For fixed income investors, be mindful of duration, and if focused on credit, be thoughtful of upcoming refinancing risks.

The conversation then turns to sentiment. David draws parallels to the dotcom bubble, with FAANGM making up 17% of the S&P 500 market cap at September highs, which is similar to the late 1990s when there was a concentration of about six stocks making up a large chunk of the S&P 500 market cap.

Next, Meb asks about David’s views on corporate bonds. David sees this in two lights. First, corporate balance sheets are the weakest they have ever been. The BBB component, which is a downgrade away from being rated “junk,” has grown from 30% of issuance to 50%. The alternative, more positive view is that companies are anticipating a lack of bond issuance coming up.

Meb then asks about the health of the Canadian economy. David explains it is meandering; the oil price has been a drag and has traded at a significant discount to WTI due to a glut of production, and lack of pipeline capacity. In addition, an overinflated housing market that is deflating, and overextended household balance sheets serve as big impediments. Provinces are tending toward a pro-business direction politically, so that could serve to be a positive going forward. As a strategist, he is seeing much of the bad news priced into financial assets as the TSX is trading down to a 13 multiple, in line with emerging markets, and a discount that has been seen only 5% of the time historically.

All this and more in Episode 131.

Nov 21, 2018

In Episode 130, we welcome Eric Falkenstein. The show starts with Meb and Eric discussing ice fishing in Minnesota (where Eric is currently located). But then Meb asks for Eric’s origin story. Eric tells us about being a teacher’s assistant for Hyman Minsky, wanting to be a macro economist, the turn that pushed him toward investing, and a well-timed put option that made him a boatload in the ’87 crash.

Next, the conversation turns toward Eric’s interest in low volatility. He tells us about being one of the first people to study low-vol. He was early, and the broader investing community wasn’t ready for the findings. People dismissed the suggestion that high volatility stocks (with high risk) didn’t outperform low vol stocks. Eric tells us that given all this, “low vol” wasn’t enough of a selling point – you had to layer on another factor just to get people to pay attention.

Meb asks about the main value proposition of low-vol. It is a smoother ride? Better returns? And why does this factor persist?

Eric’s answer touches on CAPM, high beta, low beta, risk, various premiums, high flying stocks, and alpha discovery. This bleeds into a conversation about factoring timing relative to valuations. Eric tells us he tried factor timing, but didn’t find it to be too helpful out of sample.

The conversation bounces around a bit, with the guys touching on Meb’s paper, “A Quantitative Approach to Asset Allocation,” bonds and how the US is flirting with the top bucket of bond yields, whether low vol translates to global markets and different asset classes, and Eric’s take on risk parity.

After that, the guys turn to crypto. Despite the current pullback, Eric believes “in the long run, it’s going to work.” He believes that crypto will eventually replace Dollars as people will want an alternative to fiat currency, something not susceptible to manipulation by politicians. He tells us that he sees a tipping point coming.

There’s plenty more in this episode – Eric’s books, pithy quotes and maxims, how people often think about the specific investment they want, but not the “plumbing” such as the bid/ask spread of that investment, the volume, and so on… And as always, Eric’s most memorable trade.

Get all the details in Episode 130.

Nov 14, 2018

Episode 129 is a solo-Meb show. Meb has been out on the road, giving speeches. In this “Mebisode,” you’ll hear Meb’s most recent talk. It covers forward-looking return expectations, an offer to book some time to chat with Meb one-on-one, best and worst starting points for new investment dollars, improving upon the global market portfolio, what corners of the market to look at now, and far more.

If October’s market turbulence left you feeling some jitters, this episode will help you reorient your market views looking forward. All this and more in Episode 129.

Oct 31, 2018

In Episode 128, we welcome pension fund expert, Claude Lamoureux. We start with Claude’s background, which took him from Met Life to running the Ontario Teachers Pension Plan.

When Claude took over the pension, the fund was invested in just Canadian debt, and the size of the pension obligation was underestimated. Claude decided to use derivatives to diversify the portfolio. He expanded into the S&P, recruited an investment department, and within three years, had successfully reallocated the fund into the broad asset classes they wanted.

Meb asks how investing is different for a pension allocator versus an individual investor managing his own portfolio. Claude tells us that in the pension world, people don’t want to take responsibility. He wanted to do the opposite. He wanted to create a culture where people become entrepreneurial.

This dovetails into a conversation about valuations. Claude is a big believer in having a realistic valuation of liabilities and potential returns. He mentions that today, many U.S. pensions are expecting around 7% returns, which he finds unrealistic. Claude says people should earn the money before they spend it.

The conversation eventually turns toward Claude’s general market approach. Claude had a somewhat traditional policy portfolio, yet used lots of derivatives to diversify into stocks and non-Canadian bonds. He mentions how when you have a large deficit, you must go heavily into equities. He also liked private equity and real estate. And there was a great deal of leverage.

The conversation turns toward problems in the U.S. pension system. Claude gives us his take on the issue. In short, many pension liabilities here in the States aren’t measured properly. He also mentions interest rate assumptions and the fees of outside managers. Finally, Claude points toward politicians and how they don’t want to face the facts.

There’s plenty more in this pension-themed episode: the importance of being a student of the market history…the Canadian Coalition for Good Governance…the sage advice of “when you have to make a decision, always make the one that will let you sleep better, not the one that will let you eat better”…and of course, Claude’s most memorable trade.

All this and more in Episode 128.

Oct 24, 2018

Episode 127 has a radio show format. In this one, we cover numerous Tweets of the Week from Meb as well as listener Q&A.

We start with Meb telling us about his recent back-and-forth over Twitter with Elon Musk, discussing short-selling. Meb uses this as an example to give us more information on shorting in general, as well as short-lending.

We then answer a question we’ve received (in various forms) for years – “why is the S&P (or whatever) outperforming your strategy?” For anyone looking longingly at S&P returns for the last many years, you might want to listen to this one.

Next up, we tackle some of Meb’s Tweets of the week. There’s a discussion about mixed valuation signals – on one hand, there’s the Russell 3000, with the number of companies trading for more than 10-times revenue now approaching levels from back in 2000. On the other hand, there’s a tweet claiming that “if history is any guide, with 90% confidence rate of positive correlation, this market is going to deliver between 3 to 4% per annum for the next 10 years.” Additional tweets support both sides so Meb tries to resolve it for us.

Then there’s a tweet about the challenges of sticking with your strategy during bad years. It references how the little voice of doubt in your head is all it takes “to turn the hardest resolve into the emotional putty that has destroyed generations of investors.”

There are several other tweet topics – how Research Affiliates views the probability of 5% real returns at just 1.5%... how one forecast for private equity is calling for just 1.5% returns while a different private equity manager is trumpeting the asset class’s superior performance… and how marketing is nearly as important as performance and fees when it comes to attracting investor assets.

We then jump into listener Q&A. Some you’ll hear include:

  • You often say that over the long term, asset allocation doesn't matter much. However, isn't it important to note that because the nature of compounding, a small difference in CAGR over time can amount to a large dollar amount difference in your savings?
  • What are your thoughts on using leverage with momentum?
  • Do you have any recommendations for someone looking to diversify their trend following sleeve by applying a few different rules? For example, I've been doing 1/3 50-DMA, 1/3 200-DMA, and 1/3 crossover.
  • You speak frequently about the benefit of taking a lump sum and investing now versus later. With current equity valuations (at least US) so frothy, is that still true?
  • I’m wondering about how to take losses and how to determine when it’s appropriate to take one and when it is not. Do you, as a quant, have set rules in place?

All this and more in Episode 127.

Oct 17, 2018

In Episode 126, we welcome entrepreneur, author, and investor, Karen Finerman.

The episode starts with an interesting connection – Karen and Meb’s wife both attended the same high school in Los Angeles, and apparently, it’s the only high school in the U.S. with a working oil rig on campus. From here, Karen gives us a brief walk-through of her history after graduating Wharton, heading to Wall Street, where she eventually launched her own hedge fund.

Meb asks about the framework she used in the hedge fund as she launched. Karen tells us they were fundamentally focused. Coming out of the savings and loan crisis, there were many smaller banks that had been unfairly stigmatized. Many were absurdly cheap with great balance sheets. Karen was able to take advantage, and developed an expertise in the space. She notes it was interesting how badly the market could mis-price an entire sector. She continues by telling us her strategy was mostly long focused. Her shorts were generally idiosyncratic, intended to hedge the portfolio. Beyond that, tax efficiency was a big focus.

Next, Meb and Karen dig into her methodology for evaluating specific investments. Karen gives us the details, mentioning fundamentals, growth at a reasonable price, users that tend to be inelastic on price, and various other details, culminating with a specific example of a company she likes.

Meb asks what Karen is seeing now. She tells us she’s a little spooked by the tariff situation. Perhaps a big exogenous risk. She then changes gears, going into details about a specific company she likes – Alphabet – noting what she finds attractive (and where she feels they could improve). But overall, she’s very impressed.

The conversation gravitates toward “selling”. After all, buying is generally the easier part – it’s when to get rid of an investment that can be tough. Karen tells us that if an investment hits their target return, they’ll lighten their position. These leads into a conversation about investment theses and how that plays into selling.

The years 1999 and 2000 come up, with Karen telling us she feels her group did the right thing then, avoiding getting sucked into the bubble. The new metrics at that time (stocks trading at a multiple of eyeballs) just didn’t make sense to her. She notes there are some similarities today, as there are certain companies that are losing lots of money despite posting growth numbers.

This dovetails into a discussion of Tesla. It turns out Meb and Elon Musk shared a few words about short-selling on Twitter on the morning we recorded this podcast. Surprising no one, Elon is not a fan of shorts. Listen in for the details.

There’s way more in this great episode: the ETF-ization of investing… Karen’s book… How to address the great investing education problem… and of course, Karen’s most memorable trade – actually, she shares two, a good one and a bad one. On the good side, there was an undervalued convenience chain in which Karen got involved at the right time and enjoyed a nice payday when Diamond Shamrock showed up at the buyer’s table. The bad trade relates to when United Airlines was supposed to go private. Karen didn’t factor in the possibility that the deal would collapse. Just how bad was the damage?

Find out in Episode 126.

Oct 10, 2018

In Episode 125, we welcome famed short-seller and early stage investor, Tom Barton.

We start by going way back, after Tom graduated from Vanderbilt. He walks us through his early career experiences which helped him sharpen his business analysis skills, as well as his operational skills. He developed a great understanding of different industries, yet also what it was like to actually work in them. This was the foundation for the short-selling career that was soon to begin.

In 1983 Tom went to work for a wealthy Dallas family, and in the process met one of the original fraud short-sellers, nicknamed “The Mortician”. Tom knew nothing about stocks at that point, but under the guidance of his new mentor, realized that his analytical skills aligned perfectly with sniffing out short-selling candidates. He reasoned “isn’t it easier to spot something that’s going to fail than be certain on something that’s going to succeed?” He then began digging into the research, and finding slews of fraudulent companies.

What follows is an incredibly entertaining story-after-story of the various frauds Tom sniffed out (and made money on). There was a company claiming it could change the molecular composition of water… one deceiving customers about building-restoration after fires… a biotech claiming it could cure HIV… By the time 1990 rolled around, Tom’s returns were over 80% and he had generated a couple billion dollars.

There’s a great bit in here about “The Wolf of Wall Street” (Stratton Oakmont). Tom is the guy who took them down. Related, the “Wolf” himself snaked an apartment out from underneath Meb a few years ago out here in Manhattan Beach, CA. The guys share a laugh over this.  

Eventually the conversation morphs from short-selling to when Tom’s strategy changed to going long. It involves managing money for George Soros, and some of Tom’s early long winners.

This dovetails into how Tom got into biotech, which is where he’s spending lots of time today. Tom tells us about his introduction into gene therapy, then successes with the company Intrexon. He talks us through some small companies he’s been a part of that have already sold for huge paydays…for instance, one purchased by Novartis for $9B.

This is a must-listen for any short-sellers, market historians, private investors, and biotech investors. And Tom’s most memorable trade is a doozy. This one involves buying puts for a hundred and something thousand dollars…which he sold for $13M.

These details and far more in Episode 125.

Oct 8, 2018

We recently published The Best Investment Writing, Volume 2. The first book was a hit, with MoneyWeek concluding that it “should be on every investor’s bookshelf.”

But we made the second volume even better – we expanded it to include 41 hand-selected investment articles, written by some of the most respected money managers and investment researchers in the world.

We thought it would be fun to bring on some of the authors so that they could read their specific chapter from the book. That’s what you’re getting in today’s special bonus episode.

If you’re interested in picking up a copy of The Best Investment Writing, Volume 2, head on over to Amazon or our publisher’s website, which is Harriman House.

Also, know that your purchase would benefit charity, as all writer-proceeds go to the charity of the specific author’s choosing.

So, enough from me, let’s let Wes take over with this special bonus episode.

Oct 3, 2018

In Episode 124, we welcome legendary investor, Howard Marks. Meb begins with a quote from Howard’s new book, Mastering the Market Cycle, and asks him to expound. Howard gives us his top-line take on market cycles, ending with the idea that if you understand them, you can profit from them.

Meb follows up by asking about Howard’s framework for evaluating where we are in the cycle. Rather than look at every input as individual, Howard looks at overall patterns. What is the collective mood? Or is it depressed, sad, and people don’t want to buy? Or is it buoyant? Second, are investors optimistic and thrilled with their portfolios and eager to add more, therein increasing risk? Or are investors regretful and hesitant, burned by recent experience? Then there are quantitative aspects – valuations, yield spreads, cap rates, multiples, and so on. All of these variables help give Howard a feel for whether assets are high- or low-priced.

Next, Meb asks Howard to use Oaktree’s actions during the Financial Crisis as a real-world example of how an investor could act upon cycles. Howard tells us there are two parts to what happened during the Crisis – what Oaktree did during the run-up to the meltdown, and then what it did during the event itself. In short, Oaktree was cautious during the lead-up. They raised their standards for investments. Why? Howard notes that they didn’t know ahead of time how bad things would be. Rather, they were hesitant because they looked at the securities being issued, and it seemed that every day, something was coming out that didn’t deserve to be issued. This was a tip-off.

Then the event happened, culminating in Lehman bankruptcy, and that’s when Oaktree became very aggressive, buying half a billion dollars each week for 15 weeks. Howard tells us that, yes, our job as investors is to be skeptical, but sometimes that skepticism needs to be applied to our own fears. In other words, skepticism also might appear like “no, that scenario is too bad to actually be true.”

Meb notes that the challenge is investors want precision, picking the exact top and bottom. But this isn’t really how it works. Meb asks if there a time when Howard felt he misinterpreted a point in the market cycle.

Before answering Meb’s questions, Howard agrees that trying to find the bottom or top is a huge mistake. He notes that trying to find the perfect day upon which to buy or sell is impossible. In terms of potentially misreading the cycle, Howard tells us that Oaktree has been perhaps too conservative over the last few years, so they haven’t realized all the gains of the market. That said, he stands by his decision telling us, “anybody who buys or holds because of the belief that something that’s fully valued will become overvalued…is embarking on a dangerous course.”

Meb asks how Howard sees the world today.

Howard tells us we’re in the 8th inning of this bull market. Assets are highly priced relative to history. People are bullish. Risk aversion is low. He notes it’s a time for caution – but – we have no idea how many innings there will be in this game.

What follows is a great conversation about bull markets, what ends bull markets, and how to implement market cycles into an investment approach. The guys touch on investor exuberance… whether markets need to be exuberant for a bull market to end… bullish action despite bullish temperament… the need to “calibrate” your portfolio… and the average investor’s ability to live with pain.

There’s so much more in this episode: How Howard’s market approach has evolved over the years… how “it’s not what you buy, it’s what you pay for it that determines whether something is a good investment or bad investment”… Howard’s thoughts on contrarian investing… and, of course, his most memorable trade. This one yielded him 23x.

What are the details? Find out in Episode 124.

Oct 1, 2018

We recently published The Best Investment Writing, Volume 2. The first book was a hit, with MoneyWeek concluding that it “should be on every investor’s bookshelf.”

But we made the second volume even better – we expanded it to include 41 hand-selected investment articles, written by some of the most respected money managers and investment researchers in the world.

We thought it would be fun to bring on some of the authors so that they could read their specific chapter from the book. That’s what you’re getting in today’s special bonus episode.

If you’re interested in picking up a copy of The Best Investment Writing, Volume 2, head on over to Amazon or our publisher’s website, which is Harriman House.

Also, know that your purchase would benefit charity, as all writer-proceeds go to the charity of the specific author’s choosing.

So, enough from me, let’s let Russel take over with this special bonus episode.

Sep 26, 2018

In Episode 123, we welcome entrepreneur and renowned angel investor, Fabrice Grinda. The guys begin by discussing their mutual love for skiing, talking about heli-skiing in Canada, powder skiing in Japan, and the steeps of Chamonix in France. 

Meb asks Fabrice to recap his background. What follows is a fascinating look at the professional path of a wildly-successful entrepreneur and angel investor. Fabrice’s history involves consulting with McKinsey, building the equivalent of eBay in Europe and South America, starting another company that brought ringtones, mobile games, and wallpaper to the US (and eventually did $200M in revenues), and then consulting for fellow CEOs. Ultimately, Fabrice and his partner launched FJ Investments, which is where he’s currently focused.

Meb asks about Fabrice’s investment approach and the frameworks he uses. Fabrice tells us he invests in about 75 new startups each year, mostly seed and pre-seed. He writes smaller checks (about $500K), as compared to the bigger VC firms. He provides us insights into his selection criteria – one of the most important of which is unit economics. The degree to which a founder understands his/her economics is an indicator as to how well he/she understand the business. Fabrice has deployed about $140M to date, mostly personal money. He’s had 150 realized exits on 400 investments, with a realized IRR that’s pretty staggering. You’ll have to listen to get that detail.  

The guys hit on a handful of topics next: Fabrice’s experience with Beepi, which ends with Fabrice’s advice to “nail it before you scale it”…. Why investing in the U.S. is often a wiser choice than looking internationally… Fabrice’s preference for investing in marketplace-oriented businesses… And how “we’re still at the very beginning of the tech revolution… we are day one.”

Next, the guys talk about the specifics of creating an angel portfolio, with Meb bringing up the phrase “spray and pray”. Fabrice tells us that’s not his methodology. He’s more selective. That said, in private markets, returns tend to follow power law, meaning the top few deals account for most of the returns so it’s important to have some of those deals in your portfolio. Given this, for most people, there’s real value in diversification.

Meb asks what lessons Fabrice has learned throughout his experiences so far. Fabrice tells us that if you’re going to invest in this asset class, you need to be diversified. He mentions that if you have less than a certain amount of investments, you’re going to lose money.

Another lesson is that investors needs to stick to their guns. For instance, Fabrice has found that his thesis, the company team, the business, and the valuation (deal terms) must all be within his desired parameters in order to move forward. There was a time when he would fall in love with a founder, and would use that as an excuse to slide on some of his other criteria. But doing so sometimes lost him money.

Other lessons involve honesty and transparency, as well as the importance of knowing your true value-add.

There’s way more in this angel-themed episode: The current angel market, including opportunities and valuations… How Fabrice sees the broader economy and recession risk… How a crypto-hacker got into Fabrice’s crypto wallet… and Fabrice’s most memorable trade. Any entrepreneurs will likely be able to relate to this one.

All these details and more in Episode 123.

Sep 24, 2018

We recently published The Best Investment Writing, Volume 2. The first book was a hit, with MoneyWeek concluding that it “should be on every investor’s bookshelf.”

But we made the second volume even better – we expanded it to include 41 hand-selected investment articles, written by some of the most respected money managers and investment researchers in the world.

We thought it would be fun to bring on some of the authors so that they could read their specific chapter from the book. That’s what you’re getting in today’s special bonus episode.

If you’re interested in picking up a copy of The Best Investment Writing, Volume 2, head on over to Amazon or our publisher’s website, which is Harriman House.

Also, know that your purchase would benefit charity, as all writer-proceeds go to the charity of the specific author’s choosing.

So, enough from me, let’s let Rick take over with this special bonus episode.

Sep 19, 2018

In Episode 122, we welcome investor and entrepreneur, Phil Haslett. Meb jumps in, asking Phil to tell us more about his company, Equity Zen.

Phil gives us an example involving a hypothetical employee. This employee owns equity in her private company but wants some liquidity from her stock options. Equity Zen is a platform where she can sell some her shares to a private investor looking to investor in that company, even though it’s not a publicly-traded company. So, Equity Zen is a place that connect buyers and sellers of late-stage, private companies that are pre-IPO.

Meb asks about the process. There’s rarely great information on these private companies – for instance, their valuations and revenues. So, what’s the discovery process like on Equity Zen?

Phil tells us that once you get registered and create an account, you can browse the available deals. There will be information about the companies based on what’s available from the public domain. Phil agrees there’s often not great information, so Equity Zen tries to provide as much as possible, backing out revenue and growth numbers. They also show a particular company’s cap table, how they’ve raised money over time, and on what terms. Equity Zen works with shareholders to establish their pricing targets. So, buyers will see the specific price at which a seller is willing to do a deal.

The guys get even more detailed here – discussing fees, whether a buyer actually holders real shares in the target company or not, what happens in certain hypotheticals, and Phil’s thoughts on “carry” and why he’s frustrated with carry applied to a single investment.

Next, Meb asks about the type of companies that end up in Equity Zen’s offerings. Phil tells us they’ve worked with about 110 companies. The valuations have ranged from $500M to $20B, with concentrations toward unicorns. They typically invest in companies that have VC backings. These VCs have their own ideas of exits, which often means nearer-term liquidity is a goal.

The guys get a bit broader here. Discussing where we are in the private company cycle, and how that affects the buying/selling volume on Equity Zen. They then touch on the state of the IPO market. Phil gives us an interesting perspective on companies that stay private (despite being big enough to go public) and the effect that can have on employees, liquidity, and morale.

The conversation drifts toward what the response has been from the companies themselves.  Do they see these private transactions as a good perk, or as an evil process? Phil tells us attitudes have changed over time. Back in 2010, the idea of selling shares was taboo. But today, companies are approaching Equity Zen in order to discuss a process for providing liquidity. It’s becoming a competitive advantage for talent. Phil believes this trend will continue.

There’s plenty more in this episode: a new accreditation definition, and what it means for small investors… the best way to build a private company portfolio… what to evaluate in order to find the right companies for investment… whether buyers should be concerned about differences in share classes… other sites/resources that do a good job of education for private, late stage investors… and Phil’s most memorable trade. This one involves the game, Magic: The Gathering.

Get all the details in Episode 122.

Sep 17, 2018

We recently published The Best Investment Writing, Volume 2. The first book was a hit, with MoneyWeek concluding that it “should be on every investor’s bookshelf.”

But we made the second volume even better – we expanded it to include 41 hand-selected investment articles, written by some of the most respected money managers and investment researchers in the world.

We thought it would be fun to bring on some of the authors so that they could read their specific chapter from the book. That’s what you’re getting in today’s special bonus episode.

If you’re interested in picking up a copy of The Best Investment Writing, Volume 2, head on over to Amazon or our publisher’s website, which is Harriman House.

Also, know that your purchase would benefit charity, as all writer-proceeds go to the charity of the specific author’s choosing.

So, enough from me, let’s let Mike take over with this special bonus episode.

Sep 12, 2018

In Episode 121, we welcome fellow quant, Pim van Vliet. If you’re a low-vol investor, or having been wanting to learn more about low-vol, this is the episode for you.

Meb dives straight in, opening with a quote from Pim: "The low-volatility effect is perhaps the largest anomaly in finance, challenging the basic trade-off between risk and return, as higher risk does not lead to higher returns. Still, it remains one of the least utilized factor premiums in financial markets." He asks Pim to explain.

Pim tell us that low-volatility is the biggest anomaly of them all. People have trouble embracing the concept. We’ve been trained to believe that higher risk should be rewarded with higher returns, but Pim walks us through some counterarguments. He goes on to explain that CAPM (Capital Asset Pricing Model) is great in theory, yet bad at describing reality. He tells us that “the reality is high risk stocks earn low returns.”

Next, Meb brings up a paper Pim wrote called “The Volatility Effect” and asks Pim to walk us through it. Pim tells us one of the broad takeaways is that low-vol works cross borders (unlike some other factors). It’s not just effective in the U.S. – it’s also been proven out in Europe and Japan. In addition, this alpha seems to be getting stronger now rather than waning as have other factors when their visibility has increased.

Meb asks about Rob Arnott and factor-timing/factor valuations. Does factor valuation matter?

Pim agrees with Rob in that valuation does matter. If you only look at low-vol, you might end up buying “expensive defensive”. If so, then yes, your expected returns will be lower. That’s why Pim includes a value filter. He looks at “multi-factor defensive”. Pim mentions Cliff Asness and notes that he likes incorporating momentum into his approach as well.  

The conversation bounces around a bit: where is Pim finding opportunities around the world now… additional details on how low-vol works across countries, sectors, and asset classes… and how low-vol complements a CAPE approach, pointing toward some effective defensive market strategies.

Next, Meb asks about potential biases. For instance, if you focus on low-vol, could that mean you’ll end up with a basket of, say, utility stocks and no tech? Pim tells us that, yes, if you focus purely on low-vol, you could get more sector and country effect. But he goes on to tell us how investors might mitigate that.

There’s plenty more in this fun, quant-driven episode – a discuss of the definition of risk (volatility versus permanent loss of capital)… factor fishing and data mining… how low-vol works from a portfolio perspective… Pim’s forecast of the future… and Pim’s most memorable trade. This is a great story, highlighting how an early loss delivered such a powerful learning lesson, that it probably ended up making Pim money in the long run.

Get all the details in Episode 121.

Sep 10, 2018

We recently published The Best Investment Writing, Volume 2. The first book was a hit, with MoneyWeek concluding that it “should be on every investor’s bookshelf.”

But we made the second volume even better – we expanded it to include 41 hand-selected investment articles, written by some of the most respected money managers and investment researchers in the world.

We thought it would be fun to bring on some of the authors so that they could read their specific chapter from the book. That’s what you’re getting in today’s special bonus episode.

If you’re interested in picking up a copy of The Best Investment Writing, Volume 2, head on over to Amazon or our publisher’s website, which is Harriman House.

Also, know that your purchase would benefit charity, as all writer-proceeds go to the charity of the specific author’s choosing.

So, enough from me, let’s let Leigh take over with this special bonus episode.

Sep 3, 2018

We recently published The Best Investment Writing, Volume 2. The first book was a hit, with MoneyWeek concluding that it “should be on every investor’s bookshelf.”

But we made the second volume even better – we expanded it to include 41 hand-selected investment articles, written by some of the most respected money managers and investment researchers in the world.

We thought it would be fun to bring on some of the authors so that they could read their specific chapter from the book. That’s what you’re getting in today’s special bonus episode.

If you’re interested in picking up a copy of The Best Investment Writing, Volume 2, head on over to Amazon or our publisher’s website, which is Harriman House.

Also, know that your purchase would benefit charity, as all writer-proceeds go to the charity of the specific author’s choosing.

So, enough from me, let’s let Jeremy take over with this special bonus episode.

Aug 29, 2018

In Episode 119, we welcome entrepreneur and technical analyst expert, Tom Dorsey.

Meb begins by asking about a book which Tom claims had a tremendous influence on his entire life. From this, Tom tells us the story of being a young broker, eventually introduced to a book called The Three Point Reversal Method of Point & Figure Stock Market Trading by A.W. Cohen. After reading just the first paragraph, the clouds on Wall Street parted and he saw clearly. In the end, it’s the irrefutable laws of supply and demand that cause prices to change.

Meb asks for more details, so Tom tells us how Point & Figure charting was created in the early 1900s. You’re watching the up and down movements of an asset – those movements represented by Xs and Os. You’re looking for patterns in these up and down movements.

Meb asks how one goes from charting these Xs and Os into building an actual strategy. Tom gives us an example using just two stocks, Coke and Pepsi. He walks us through how we would analyze the price movements relative to one another to determine which one might be the best investment at that moment. It’s a discussion of relative strength investing.

Meb asks if this approach means an investor can totally ignore fundamentals and value. Tom tells us that fundamentals answer the first question – what should I buy? But relative strength answers the question, when should I buy? You can be a value investor, but you may not want to be the typical value investor who buys a value play, sits back, and waits for a long time before other people see that he’s right. Tom would rather get the stocks that are ready to move now. So, he tells us to take the fundamentals and work from there.

Next, the guys get into a discussion that bounces around a bit: smart indexing… the beginnings of ETFs at the Philadelphia Stock Exchange (Tom was in the middle of it from basically the beginning)… and how 92% of active managers never outperform the S&P. But this last point dovetails into a broader conversation of whether “the S&P” can beat “the S&P”. The topic touches on the difference between cap and equal weighting, as well as myriad other indexes that might exist within the broader S&P universe. One of the takeaways is that index investing can be harder than you might think. He suggests looking at all the indexes, then using relative strength to narrow it down.

Meb asks what the world looks like to Tom today. What areas are showing the most strength? Tom tells us the strength has been in small caps for a few years now. Value has been hurt, which points toward the problem with value – the asset can be down and out, but still not move north as you want it to.

There’s plenty more: the various ways to implement a relative strength strategy… Tom’s affinity for selling covered calls… the benefits of automated investing… how Tom’s team is beginning to apply their strategies to crypto… and an upcoming investing forum Tom will be a part of consisting of five market veterans with a collective two-hundred years of market experience.

And of course, we have Tom’s most memorable trade. This one involves 10 shares of a certain biotech stock that raced higher and made a huge difference for one of Tom’s friends in need.

Get all the details in Episode 119.

Aug 27, 2018

We recently published The Best Investment Writing, Volume 2. The first book was a hit, with MoneyWeek concluding that it “should be on every investor’s bookshelf.”

But we made the second volume even better – we expanded it to include 41 hand-selected investment articles, written by some of the most respected money managers and investment researchers in the world.

We thought it would be fun to bring on some of the authors so that they could read their specific chapter from the book. That’s what you’re getting in today’s special bonus episode.

If you’re interested in picking up a copy of The Best Investment Writing, Volume 2, head on over to Amazon or our publisher’s website, which is Harriman House.

Also, know that your purchase would benefit charity, as all writer-proceeds go to the charity of the specific author’s choosing.

So, enough from me, let’s let Elroy take over with this special bonus episode.

Aug 22, 2018

Episode 118 has a radio show format. In this one, we cover numerous Tweets of the Week from Meb, as well as some write-in questions.

We start by discussing articles Meb posted in his Tweets of the Week. These include a piece by Jason Zweig about how your broker might be making 10-times more money off your cash balance than you could make on it. Then there’s discussion of valuations – a chart by Leuthold shows how one measure of US market valuation has matched its 2000 level, and another has doubled it. At the same time, Longboard released a chart referencing a Goldman market outlook that claims “in 99% of the time at current valuation levels, equity returns have been single digit or negative”. We talk about US valuations and when “selling” might trump buy-and-hold.

Then we jump to foreign valuations. GMO believes emerging markets are the biggest opportunity relative to other assets in the past 20+ years. Meb clarifies what this really means. Then there’s discussion of home country geographic sector bias, whether the VC market is in a bubble (Meb tells us about some bad behavior he’s beginning to see in the space), and how the American savings rate is pretty grim.

We then get into listener Q&A. Some that you’ll hear Meb address include:

  • Are momentum funds just camouflaging another factor? For instance, if Value became the “in” factor, wouldn’t Momentum pick it up, so Momentum would then just look like a Value fund?
  • Assuming the U.S. economy does not enter a recession in the near future, the Shiller PE’s 10-year earnings average will soon consist of all economic boom and no bust as the depressed earnings of 2008 and 2009 roll out of its calculation. How useful is a CAPE that only includes a period of profit expansion?
  • Regarding your global value strategy, have you ever tested the strategy using relative CAPE ratios versus absolute to determine country allocations in order to avoid countries with structurally low CAPE ratios?
  • I've never heard of a 401k plan offering ETF options. Is there a reason logistically, legally, etc. that prevents 401k plans from offering ETF options?
  • How do I structure my portfolio for a 4% yield, after tax?
  • I like your shareholder yield strategy, but if I get capital returned through buybacks and share appreciation, how do I get monthly income without selling shares and triggering taxes? I just don't see how I can implement a monthly income plan with this strategy.

All this and more in Episode 118.

Aug 15, 2018

We recently published The Best Investment Writing, Volume 2. The first book was a hit, with MoneyWeek concluding that it “should be on every investor’s bookshelf.”

But we made the second volume even better – we expanded it to include 41 hand-selected investment articles, written by some of the most respected money managers and investment researchers in the world.

We thought it would be fun to bring on some of the authors so that they could read their specific chapter from the book. That’s what you’re getting in today’s special bonus episode.

If you’re interested in picking up a copy of The Best Investment Writing, Volume 2, head on over to Amazon or our publisher’s website, which is Harriman House.

Also, know that your purchase would benefit charity, as all writer-proceeds go to the charity of the specific author’s choosing.

So, enough from me, let’s let Ehren take over with this special bonus episode.

Aug 15, 2018

In Episode 117, we welcome entrepreneur and wealth advisor, Steve Lockshin. At Meb’s request, Steve walks us through his professional background in the financial services industry. It’s an interesting story, reflecting how wealth management has changed over the decades.

Meb picks up on a term Steve used in describing his early years – “producer” (referencing an advisor) – making the point that if advisors were expected to produce revenue to the degree that “producer” was their name, it pointed toward a potential conflict with the client’s goals. Steve agrees, noting that the conflicts of interest in the business are challenging. He offers us an example using a mortgage payment scenario. If a client allocated capital toward paying down a high-rate mortgage rather than toward funding his equity portfolio, that debt paydown would benefit him, yet would decrease the advisor’s AUM, hurting the advisor’s personal revenue. Given this, the advisor may not be incentivized to make recommendations that are always in the best interest of the client.

Meb asks for more details about Steve’s fee structure at AdvicePeriod, and why it was set up that way. Steve walks us through the details, noting that their fee structure largely emanates from the value they bring. So, their fees are always clear and capped.

This bleeds into a conversation about an advisor’s biggest value add. Meb wonders if it’s estate planning and tax issues, or if it varies. Steve answers by first referencing portfolio construction, asking a question – if we take the top quartile of advisors, what does Meb think they’d produce, over a 20-year period, in true alpha above the market? Meb answers, basically 0%. Steve agrees, noting portfolio construction is not the real source of advisor alpha. Instead, he points toward taxes as a huge source of real value. He concludes saying “Turning that tax dial is a huge return for clients” and “We think the estate planning and tax planning levers are the most important levers to push on for clients”.

The guys bounce around a bit here, discussing high advisor fees, and how the industry was able to hide them for years… the biggest problems Steve sees with new clients when they bring over their portfolios… and how the general advisor/client process works. But from here, the conversation turns toward how one might find a great wealth manager. It’s challenging, as laws prohibit client testimonials, and as Steve says, most clients don’t know which questions need to be asked. He gives us a few examples of good questions:

  • What will your fees be if I tell you that you can’t use any of your own funds?
  • How often would we meet?
  • What software will you use?
  • How much access to information will I have?
  • What’s your transparency level?

Next, Meb asks how things look going forward on the investment advisor side. Steve tells us that as soon as info becomes accessible and digestible by investors, we’ll see people behave differently. We’ll keep seeing fees come down, and transactional fees will go away. And when moving your entire account from one group to another becomes a matter of just a few mouse clicks, we’ll see a massive shift.

Meb asks when we’ll see an “automated Lockshin”, meaning when will wealth management become automated? Steve thinks it’s far closer than people think. He references Google Duplex, which is basically a computer speaking to us, yet fooling the human on the other end of the phone into believe he/she is conversing with another real human.

There’s way more in this episode: Steve’s favorite private investment right now… how tax planning is the biggest alpha generator out there but doesn’t receive the emphasis is deserves… how the industry goes out of its way to complicate things for investors… Vanguard Life Strategy Funds… and of course, Steve’s most memorable trade.

What was it? Find out in Episode 117.

Aug 13, 2018

We recently published The Best Investment Writing, Volume 2. The first book was a hit, with MoneyWeek concluding that it “should be on every investor’s bookshelf.”

But we made the second volume even better – we expanded it to include 41 hand-selected investment articles, written by some of the most respected money managers and investment researchers in the world.

We thought it would be fun to bring on some of the authors so that they could read their specific chapter from the book. That’s what you’re getting in today’s special bonus episode.

If you’re interested in picking up a copy of The Best Investment Writing, Volume 2, head on over to Amazon or our publisher’s website, which is Harriman House.

Also, know that your purchase would benefit charity, as all writer-proceeds go to the charity of the specific author’s choosing.

So, enough from me, let’s let Todd take over with this special bonus episode.

1 2 3 4 5 6 Next »