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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.
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Now displaying: September, 2018
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.

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