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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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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.

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