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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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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 5, 2018

Episode 120 has a radio show format. In this one, we cover numerous Tweets of the Week from Meb.

We start by announcing the arrival of our new Trinity ETF next week. We’re happy it will finally be available to the public. Then there’s discussion of Meb’s upcoming travel, which bleeds into a comment he made comparing crypto and airplane travel miles which, apparently, ruffled some feathers. We then touch on Amazon hitting a $1 trillion valuation.

Then, there’s a tweet from Ian Cassel, generally:

“Berkshire compounded at 20.2% from 1965-2010. If Berkshire was a 2 & 20 hedge fund it would have returned 13.5% net to investors vs 9.4% for the S&P.”

But the more interesting part was a follow-up tweet from Steve Burns:

“If you've invested $1,000 with Buffett in 1965, it would currently be worth $4.3 million.  However, if Berkshire had been a hedge fund charging 2 & 20, that $4.3 million would have accrued $300K to the investor with a stunning $4 million to the manager.”

This leads into a discussion of fees. We tie in a Tweet from Edmon Rakipi, which analyzes the average expense ratios for various mutual funds.

This dovetails into a discussion of asset allocation, fees, and tax alpha with the idea “does your allocation really matter all that much?”

We also touch on a Tweet reporting how corporate R&D expense is up (which doesn’t support the anti-buyback argument that buybacks starve R&D expenditures). Then there’s discuss of a new Wes Gray paper which highlights the conflict between longer-term returns and shorter-term performance.

Then a new "speed round" of listener questions from Twitter. 

All this and more in Episode 120.

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.

Aug 8, 2018

In Episode 116, we welcome entrepreneur, CEO, and fund manager, Sarah Ketterer. Meb dives right in, asking about a quote on Causeway’s website which references how the shop blends fundamental and quant analysis. Sarah gives us her approach, which details how the fundamental and quant approaches work together, supporting one another.

Meb pushes for more details. What’s Causeway’s actual process? Does it begin with a quant screen then an analyst takes over, or the other way around?

Sarah tells us it depends on the client. She provides more details, but her feelings about the importance of a quant approach really comes through when she tells us “without a quant risk model, I’d argue an investment manager is completely blind”.

Next, Meb brings up value, and asks what role it plays in Sarah’s approach, and how she sees value today.

Sarah tell us that every strategy Causeway manages has a value emphasis to some degree. The more fundamental, the heavier the value exposure. And the quant-focused funds also have value, but those use momentum as well. This dovetails into a discussion of how not all clients want to sit through deep value cycles. They want returns now, not on a rolling 3-5-year basis. But a great value manager has to think in that time frame. Sarah notes how investors have to be patient with a value approach, yet human nature is not inherently patient.

This bleeds into a discussion of cheap countries and career risk, and the gap between value and growth – Sarah tells us this gap has reached extreme levels. Meb asks about the opportunities she’s seeing. Sarah notes how the opportunities depend on the amount of risk you want to take. For instance, she can find you a good Turkish bank right now, but do you want that level of risk exposure?

There’s way more in this episode – some opportunistic finds in Britain… Why Sarah is “wildly bullish” on China… Sarah’s view on the biggest mistakes investors make regarding risk… And, of course, her most memorable trade.

All this and more in Episode 116.

Aug 1, 2018

In Episode 115, we welcome entrepreneur and opportunity zone expert, Steve Glickman.

Meb jumps right in, asking “what is an opportunity zone?”

Steve tells us about this brand-new program that was created this past December. Most people don’t know about it yet. It was the only bipartisan piece of the Investing in Opportunity Act, which was legislation packed into the tax reform bill.

Opportunity zones were designed to combine scaled investment capital with lower-income communities that haven’t seen investment in decades. You can essentially roll-over capital gains into opportunity funds – special investment vehicles that have to deploy their capital in these pre-determined opportunity zones. It could be a real estate play, a business venture play, virtually anything as long as the investment is in the opportunity zone and meets the appointed criteria. And the benefit of doing this? Steve tells us “ultimately, if you hold for…10 years or more in these opportunity zones…you don’t pay any new capital gains – ever.”

Meb hones in on the benefits, clarifying they are: a tax deferral, a step-up in basis, and any gains on the investment are free of capital gains taxes. He then asks where these zones exist now, how one finds them, and how they were created.

Steve tell us the zones exist in every US state and territory, including Puerto Rico – in fact, the entire island of Puerto Rico is now an opportunity zone. Steve goes on to give us more details.

Soon, the conversation turns toward the problem these opportunity zones are trying to solve – the growing inequality in America. As part of this discussion, Steve tells us about his group, EIG. He created it to work on bipartisan problems that had private sector-oriented solutions. He wanted to address the unevenness of economic growth in the US – why are some areas getting all the capital, while others are getting left behind?

Meb points the guys back to opportunity zones and how an investor can take part. He asks what’s the next step after selling all my investments for capital gains. What then?

Steve tells us all the capital has to flow through an opportunity fund. It can be a corporation or partnership, include just one investor or many, can be focused on multiple investments or just one…. Most people have identified a project in which they want to invest, but some groups are now creating funds to raise capital, then will find a deal. Steve provides more details on all this. 

There’s way more in this special episode: the two industries that the government won’t allow to be included in opportunity zone investments… The three different tests for how a business qualifies as an opportunity zone investment… What regulatory clarity is currently missing from the IRS… The most common naysayer pushback they’re hearing… The slippery issue of gentrification… And far more.

Opportunity zones have the potential to be a game-changer for many investors. Get all the details in Episode 115.

Jul 25, 2018

In Episode 114, we welcome entrepreneur and author, David Gladstone. We start with David’s backstory, which dovetails into how he got into farming, and subsequently, launching a farmland REIT.

Meb asks for David’s broad thoughts on investing in farmland.

David tells us “farmland is one of the most stable assets one can own.” He goes on to say how it correlates with gold, not with the stock market. David gives us an overview of the farming landscape – how corn and wheat are the big categories, but this isn’t where David goes with his REIT, too much competition. He focuses more on berries and specialty crops, which are far more profitable. He mentions how tree/vine/bush crops have a great long-term record for making money for farmers.

Next, Meb asks about operations – does David manage the farms? Just rent them out?

David tells us they use triple net leases with their farmer tenants. Sometimes they will also have a revenue participation, but that’s unusual. David goes on to say how farmland is becoming more scare, so they choose farmers who are experienced and trusted. As an investment, farmland has done quite well. NCREIF publishes a farm index – it has done 12.2% annually over the last 10 years. David believes that due to the growth and stability of farmland, it’s an excellent place to put money – especially as it’s a hedge against inflation. He references a Buffett quote that touts owning farmland versus owning gold.

Meb asks whether there are any current trends in the farming space. David tells us the number of acres per person is declining. It’s now down to about 0.5 farmed acres per person in the world. The conversation segues into water. David makes the point that his team only buys farms with access to their own water. This makes a huge difference. He references the California drought in recent years and notes it was an incredibly profitable period for them since their farms, with their own water supply, continued operations.

Next, Meb asks about David’s framework for finding new farms. What’s the process, and what’s the capital structure?

David tells us that’s what important is to have a tremendously strong farmer. They only deal with the top 20% of farmers in any growing area, so it’s a detailed vetting process. In terms of capital structure, they tend to finance about 50% of the purchase price. They use a variety of lenders.

The guys soon turn toward “risks.” David tell us that rising rates are a risk since they use debt. As rates rise, the price of the farms they purchase will need to drop in order to make the numbers work. Another risk are tariffs. This has a been a big problem for seeds. What if China or Mexico reduces their purchases?

There’s far more in this unique episode: David’s thoughts on expanding farmland REITs globally… the role of automation in farming… and why there aren’t more farmland REITS. If you’re curious about farmland as an investment, this is definitely the episode for you.

Get all the details in Episode 114.

Jul 18, 2018

In Episode 113, we welcome entrepreneur and hedge fund expert, Stan Altshuller. Meb starts by asking Stan to give us his backstory, and how he came to co-found Novus Partners.

After Stan gives us his origin story, Meb asks about Stan’s broad approach to the markets. Stan tells us that at Novus, they start with data. This data encompasses everything from public data from regulatory filings, to private data from daily holdings reports. They bring it into an accessible, searchable database. Then engineers and programmers write various algorithms that capture and present the details of that data. This helps identify takeaways such as where the risks might be in a portfolio, and how various portfolios compare to others.

Meb asks about common takeaways from all this analysis. Stan points toward “diworsification.” As the name implies, too many investors have far too many holdings in their portfolio – from a diversification perspective, more than is needed or helpful. Stan tells us that 12 different investments is as beneficial as 100. Another takeaway Stan points toward is “conviction.” Are you truly adding value to your portfolio given your weighting decisions? Meb notes how you have to have greater position concentration to make a real difference in your portfolio. He then asks how Stan measures conviction.  

Stan tells us that conviction can mean different things. For equities, the highest ROI comes from stocks with a 7.5% position or higher. But if your portfolio is highly diversified, you’re unlikely to have a single position of this size. Stan adds that, for an allocator, the threshold is about 5%.

Next, Meb asks about the state of active management. With so many headlines about flows going into passive, what are Stan’s thoughts?

Stan gives us a great synopsis, covering “dispersion” and “correlation.” The presence, or lack thereof, of these market characteristics can have much to do with the success of active managers. Overall, Stan says conditions are now setting up such that we’re seeing alpha being generated in the hedge fund space again. He tells us “I’m bullish on active management, but I think that you need a correction for people to remember why hedge funds exist in the first place.”

Meb asks about Stan’s process – what analytics help identify the good funds, what they look for, the red herrings… Stan says the first thing to do is ask whether the manager is telling you the same thing as what the data is telling you. You’re basically double-checking the manager’s stated skill set. Next, analyze whether the manager is truly going to add value to a portfolio. For instance, if you add another manager, how much diversification benefit will t actually provide? If not much, do you really want to pay their fee? Then you look at whether the manager is still generating alpha. Has there been style drift? Is he/she managing significantly more money now than in past years?

Meb hones in on one part of Stan’s comments – “performance as a metric.” This is a great part of the interview in which Stan really draws out the point that looking at performance alone isn’t necessarily all that helpful. You need to understand how a manager created his alpha. Unless you understand that, you’re a duck in the water. You cannot invest based on performance alone. 

There’s so much more in this great interview: What percentage of managers are really adding value with their short book… Stan’s take on whether hedge fund managers truly deserve their fees… When is it time to give up on a manager if performance has been lagging… A major risk in today’s hedge fund space… And Stan’s most memorable trade…

This one involves Amazon and Google. Listen to Episode 113 for all the details.

Jul 11, 2018

In Episode 112, we welcome Professor Peter Ricchiuti. We start with Peter’s origin story, which includes his time in the investment world, then managing money for the state of Louisiana, then teaching at Tulane where he created, and now runs, the Burkenroad Reports program (a student stock research program).

Diving into investing, Meb asks Peter about his broad approach to the markets and the economy. Peter tells us that from an economist’s perspective, “labor” is a huge factor when evaluating economic conditions. And he believes the U.S. is facing challenges with its labor pool. From a narrower, equity-perspective, Peter tells us that right now things look perhaps a little too good. He notes “you’re better off investing when things look miserable.” At present, given so much market optimism, he’s pulling back.

The conversation turns toward the global market, and how interconnected we all are these days. Peter tells us that part of the reason we’ve done so well over the past several years is because so many countries were growing at a positive pace at the same time. This dovetails into a discussion about today’s elevated PEs. Peter believes that, here in the U.S., we’re on a “sugar high” from the tax cuts. Companies have been using that money to buy back stock or buy each other. But what they haven’t been doing as much is building for expansion. Peter believes companies haven’t been focusing as much on planning for future growth.

Next, Meb asks a question that he admits hating to get himself – what causes this bull market run to end? What are the main risk factors?

Peter points toward higher interest rates. He believes we’re going to see Treasuries at 3.5%. Plus, earnings growth will begin to slow. He tells us that the economy is at or close to its peak right now – it could last longer, but as far as the peak goes, we’re in that general area now.

The conversation turns toward the Burkenroad program, bouncing around a bit: An interesting takeaway from a lunch with a small-cap company’s CEO… the attributes that Peter and his students look for in the companies they vet… the illiquidity advantage over institutions… even one great find through the program – a stock that went from $0.72 to about $150.

Meb asks which mistakes the students make repeatedly. Peter points toward looking at the past more so than evaluating the future. One manifestation of this is paying more attention to past earnings than the prospect of future earnings. Also, many of the students lack patience.

There’s way more in this fun episode: The recent Buffett op-ed piece on short-termism and Peter’s take on how to teach students to focus on the long-term… How Peter’s approach to markets has changed through his experiences running the program… The actual Burkenroad Fund, which has been around about 17 years and outperformed boatloads of competition… And of course, Peter’s most memorable trade.

Get all the details in Episode 112.

Jul 4, 2018

Episode 111 has a radio show format. In this one, we cover numerous Tweets of the Week from Meb, as well as some write-in questions.

Before jumping in, a few housekeeping items… Meb discusses a proxy campaign with which we need your help, an award Cambria just received, Meb’s new Office Hours, when the Trinity ETF will launch, a new webinar we’re going to put on later this summer, and more.

We start with some of Meb’s Tweets of the Week. We discuss a WSJ op ed piece penned by Jamie Dimon and Warren Buffett, in which they suggest short-termism is harming the economy. Specifically, they believe public companies should reduce or eliminate the practice of estimating quarterly earnings.

Next, there’s a quote from Jim O’Shaughnessy: “Money is like manure; if you pile it up it stinks to high heaven, but if you spread it around, it does a lot of good.” This is a springboard into a conversation about the role of cash in a portfolio, especially in today’s market.

This segues into the next subject – how Americans are reaching retirement age in worse financial shape than the prior generation, for the first time since Harry Truman was president. This leads to a conversation about starting investing early, but also focusing on active income and delaying the retirement age.

Next, there’s a tweet about early stage private investing. We use this as an opportunity to catch up on Meb’s private investments.

Other topics are fund-flow differentials between ETFs and mutual funds, as well as Meb’s dissection of Wealthfront’s latest fee structure. If you’re a Wealthfront client, you’ll want to listen to this.

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

  • Given today's valuations, I’d like Meb’s perspective on the pros and cons of allocating to the following "hedges" – cash, gold, tail risk/put strategies, and managed futures.
  • What advice does Meb have for people trading companies in their field? For example, a realtor making a move on home builders or a programmer stock-picking an AI firm.
  • Would Meb please share his opinion on multifactor funds and the role they should play in an investor's portfolio?
  • A question about advisor fees and whether they’re deserved.
  • Besides portfolio construction and behavioral coaching in times of stress what are some other advisor value-adds? Are we reaching the limit of value added services?
  • As ETFs grow, under what circumstances could securities lending become a substantial risk to one's personal assets and possibly a systemic risk to the financial system--are processes in place now to prevent that problem before it happens?

All this and plenty of other rabbit holes in Episode 111.

Jun 27, 2018

In Episode 110, we welcome author and market data expert, Dr. Bryan Taylor.

Meb begins by asking how Bryan built the massive financial database that is Global Financial Data. Bryan walks us through how the database developed over time.

The conversation soon turns to Bryan’s book, Debts, Defaults, Depression and Other Delightful Ditties from the Dismal Science. Bryan tells us this is actually the first of two books. It includes stories about the past that people might find interesting – some of the crazy things that have happened in the financial markets, as well as an inference about what that might mean for the future. The follow-up book will focus on a number of specific cases, from The East India Company, all the way up to some of Trump’s companies.

Next, Meb changes gears – there are a few contenders getting close to becoming the first $1T company. Meb uses this as a chance to look back at the first $1B company.

Bryan tells us that title goes to Standard Oil. He then walks us through its history, including its practice of pushing prices down to drive competitors into bankruptcy, the Sherman Anti-trust Act, the break-up of Standard Oil, and the effect on shareholders.

This conversation dovetails into a conversation about which company today – Apple, Amazon, Facebook, or Google – is more likely to face a threat from government oversight. Listen in to get Bryan’s thoughts.

The guys then get into inflation. It turns out, the 20th Century had the highest inflation ever. What might be in store for us in the 21st Century? Bryan and Meb discuss this, touching on various governments’ ability to pay debt, growth rates, Bryan’s red-flag metric (when the interest coverage ratio to GDP exceeds 5%), as well as the most likely path for US and global interest rates.

Meb then uses his recent trip to Greece as a springboard for a discussion about the future of the EU. Bryan tells us it’s an all-or-nothing situation. And the concern now isn’t over Greece, it’s over Italy. It might be the first country to drop out of the Euro. If so, it will face severe consequences in trying to be independent. Plus, it could have a domino effect, leading to other countries leaving and the entire system falling apart. He concludes by telling us that “at some point, the stresses are going to be so great that some of the countries (in the European Union) are eventually forced to leave.”

Next, Meb moves toward Asia. He brings up a quote from Bryan about the future market-cap of Asian stock markets (as the biggest in the world) and asks if this is a no-brainer “buy Asia” right now. Bryan gives us his thoughts but notes that Asia has lots of internal issues that need solving before they can challenge the US as the primary engine of returns going forward.

Next up is an interesting discussion of what investing used to be like, how it changed, and how it might change for us going forward. The conversation touches on investing in the 1800s, how World War I flipped everything on its head, and the current concern of nationalism.

There’s plenty more in this episode – the need to be conscious of how integrated global markets are these days… the historical period that most closely resembles today’s investing climate… what Bryan is working on now… And Bryan’s most memorable trade.

Get all the details in Episode 110.

Jun 20, 2018

In Episode 109, we welcome ETF and crypto expert, Matt Hougan.

After a quick, fun story about Matt’s first job…as a 9-foot tall seal mascot for a minor league baseball team…Meb asks about the state of the ETF industry – where we are today, and where we’re going.

Matt tells us that ETFs have become a dominant force in investing. Since the financial crisis, some $2 trillion of capital has flowed into ETFs. In comparison, the mutual fund industry has seen $0 inflows during that time. In terms of issues that are shaping ETFs and will continue to do so over the coming years, Matt points toward fee wars, distribution networks, and the growing reality that it’s getting harder for smaller companies to get a foothold within the ETF space. Overall, Matt believes the days of fastest ETF growth are in front of us.

Referencing back to the capital flows differential between ETFs and mutual funds since 2008, Meb asks if there will there be a Netflix/Blockbuster moment when the lion’s share of assets leaves mutual funds and flows into ETFs.

Matt believes the stream of asset migration will become a flood in the next bear market. He tells us the only thing that has kept mutual fund asset levels up is the bull market of the last decade. That’s created lots of embedded capital gains which many investors haven’t wanted to realize. Yet when a bear market finally hits… Matt believes we’ll see accelerated flows out of mutual funds when we suffer our next 20% market drop.

Next, Meb brings up something which Matt has tracked for since 2008 – the world’s lowest cost ETF portfolio. He started by taking the lowest-cost ETFs representing six major global asset classes. He was curious how much it would cost in order to get full global exposure. In 2008, the combined, blended fee to own the world was 16 basis points. Today, it’s down to just five basis points. Matt and Meb agree this is a great time to be an investor. 

This bleeds into a discussion of direct index investing, which, Matt tell us, might be the next evolution of investing beyond ETFs. If you’re less familiar with direct index investing, it’s a way to own indexes, yet without paying a fund management fee, while enjoying the potential benefits of tax loss harvesting. This leads to an interesting discussion about implementing direct investing via robos, as well as the tradeoff between tracking risk and the potential for tax alpha.

The guys touch on a few more ETF ideas – broad concerns about the ETF market, active versus passive ETFs, and the use of artificial intelligence in replacing discretionary managers – but it’s not long before Meb switches the conversation to crypto.

Though ETFs are Matt’s first love, he’s long been interested in cryptocurrencies, so he was excited at the chance to join Bitwise, creator of the first currency index. Giving us an overview of the crypto world, Matt tells us “an index-based approach is the only sensible approach to the crypto market, because anyone who tells you they know what’s going to happen in crypto is probably lying to you.”

At Meb’s request, Matt then describes how to put together a crypto index. Matt tells us the goal is to capture the broad-base crypto market. There are 1,500 cryptos out there, but most of the market cap is concentrated in the top 10-15 currencies. There are many challenges to creating an index, including such basics as “how many Bitcoin are there?” (Do you the current number, or what the number will be x years in the future?) Matt goes into interesting detail for us.

What follows is a great conversation for any listener curious to learn more about the crypto world. You’ll hear about Matt’s ideas for other crypto indexes and ways to approach the market… how Meb got in hot water with crypto investors… what the future may be for crypto and its related technologies… the growing institutional interest… when we’ll see a crypto ETF… where crypto fits into a traditional asset allocation… the impact of government regulation… and why cryptos won’t go the way of the tulip bulb.

Finally, you’ll hear Matt’s answer to “if you had to buy one crypto and not touch it for 10 years, what would it be?” And of course, there’s Matt’s most memorable trade. This one lost him about 90%.

What are the details? Find out in Episode 109.

May 30, 2018

Episode 108 has a radio show format. In this one, we cover some of Meb’s Tweets of the Week and various write-in questions.

After giving us the overview of his upcoming travel, Meb shares his thoughts on our recent episode with James Montier. It evolves into a conversation about the importance of “process” in investing.

Next, we talk about a Tweet from Meb which evaluated what matters more – your savings rate or your rate of return. As you might guess, in the early years, savings trumps, but for longer investment horizons, rate of return is far more influential.

It’s not long before we jump into listener questions. Some that you’ll hear Meb address include:

  • What is the best way to include commodities in a portfolio? Specifically, is it better to have an ETF containing futures contracts or an ETF containing commodities equities?
  • Obviously historical returns from bonds, especially the last 40 years, will not be repeated in the future. How will you position yourself personally – not Trinity, but personally – for the bond portion of your portfolio?
  • What are some viable simple options for individual investors besides having a globally diversified bond portfolio? Or is global diversification the answer? Is the global risk somehow less risky than a U.S. bond allocation?
  • Star Capital studies and your book show that ten year returns of low CAPE ratio countries are impressive. But it doesn’t tell if those returns occurs gradually, or if the path to this performance is just noise and cannot be predicted. If the path is noise, it would make sense to buy a cheap country ETF and wait at least 7-10 years. But your strategy rebalances every year. Why not hold longer to 7-10 years in total?
  • I recently read that 88% of companies that were in the S&P 500 during the 1950’s are no longer in business. If every company is eventually heading towards zero, why are so few people able to make money on the short side? Shouldn’t the ideal portfolio be long the global market portfolio, with tilts to value and momentum, and short specific individual equities?
  • I’ve looked at you Trinity Portfolios and noticed an allocation of 0.88% to a security. Why? Isn’t the impact neglectable?
  • Do you suggest someone get a second opinion on their financial plan much as someone would get a second opinion for major surgery?

There’s plenty more in this episode including data mining, trend following time-frames, and what Meb’s thoughts are on ramping up equity exposure in a portfolio to offset the effects of living longer. All this and more in Episode 108.

May 23, 2018

In Episode 107 we welcome the great James Montier. The chat starts on the topic of James’ questionable sartorial choices. He tells us he’s “always been a fan of dressing badly.” But the guys quickly jump in with Meb noting how James has generally been seeing the world as expensive over the last few years. Has anything changed today?

James tells us no; by in large, we’re still trapped in this world where, frankly, you’re reduced to this game of “picking the tallest dwarf.” In general, every asset is expensive compared to normal. He summarizes, telling us “there really is a serious challenge to try to put together an investment portfolio that’s going to generate half-decent returns on a forward-looking basis.”

Meb digs into, focusing on James’ framework for thinking about valuation, specifically, as a process.

James starts from accounting identities. There are essentially four ways you get paid for owning an equity: a change in valuation, a change in profitability, some growth, and some yield.  James fleshes out the details for us, discussing time-horizons of these identities. One of the takeaways is that we’re looking at pretty miserable returns for U.S. equities.

James notes that we now have the second highest CAPE reading ever. Or you could look at the median price of the average stock – the price-to-sales ratio has never been higher. Overall, the point is to look at many valuation metrics and triangulate, so to speak. When you do, they’re all pretty much saying the same thing. James finishes by telling us that from his perspective, U.S. equities appear obscenely expensive. 

Meb takes the counter position, asking if there’s any good argument for this elevated market. Is there any explanation that would justify the high values and continued investment?

James spends much time performing this exact exercise, looking for holes. He tells us that most people point toward “low interest rates” as a reason why this valuation is justified. But James takes issue with this. From a dividend discount model perspective, James doesn’t think the discount rate and the growth rate are independent. He suggests growth will be lower along with lower rates. He goes on to discuss various permutations of PE and other models, noting that there’s no historical relationship between the Shiller PE and interest rates.

Meb comments how so many famous investors echo “low rates allow valuations to be high.” But this wasn’t the case in Japan. Meb then steers the conversation toward advisors who agree that U.S. stocks are expensive yet remain invested. Why?

What follows is a great discussion about what James calls the “Cynical Bubble.” People know they shouldn’t be investing because U.S. stocks are expensive, but investors feel they must invest. If you believe you can stay in this market and sell out before it turns, you’re playing the greater fool game. James tells us about a game involving expectations – it’s a fun part of the show you’ll want to listen to, with the takeaway being how hard it is to be one step ahead of everyone else.

The conversation bounces around a bit before Meb steers it toward how we respond to this challenging market. What’s the answer?

James tells us there are really four options, yet not all have equal merit:

1) Concentrate. In essence, you own the market about which you’re most optimistic. For him, that would be emerging market value stocks. Of course, buying and holding here will be hard to do.

2) Use leverage. Just lever up the portfolio to reach your target return. The problem here is this is incompatible with a valuation-based approach. Using leverage implies you know something about the path that the asset will take back to fair value – yet it may not go that route. You may end up needing very deep pockets – perhaps deeper than you have.

3) Seek alternatives like private equity and private debt. The problem here is most are not genuinely alternative. They’re not uncorrelated sources of return. James tell us that alternatives are actually just different ways of owning standard risk.

4) The last option is James’ preferred choice. Quoting Winnie the Pooh: “Never underestimate the power of doing nothing.”

Next, Meb brings up “process” as James has written much about it. James tells us that process is key. Professional athletes don’t focus on winning – they focus on process, which is the only thing they can control. This is a great part of the interview which delves into process details, behavioral biases, how to challenge your own views, and far more. James concludes saying “Process is vitally important because it’s the one thing an investor can control, and really help them admit that their own worst enemy might be themselves.”

There’s plenty more in this great episode: James’s answer to whether we’re in a bubble, and if so, what type… market myths that people get wrong involving government debt… and of course, James’ most memorable trade. This one was a loser that got halved…then halved again…then again…then again…

How did James get it so wrong? Find out in Episode 107.

May 16, 2018

In Episode 106 we welcome market vet, Brian Singer. Meb dives right now, asking Brian for his general approach to the markets.

Brian tells us it’s fundamental in nature. They look at about 100 different asset markets, trading the broad markets rather than individual equities or bonds. They look for mis-pricings, then when one has been identified, they dig in, running both quantitative and qualitative analyses. They follow this with various risk management strategies. The overall portfolios are both long and short.

As Brian often writes about macro factors that affect asset prices, Meb asks which macro factors are influential today. Brian gives us his thoughts – not just on macro factors, but game theaters as well. He talks about populism, energy (which ties into the Middle East game theater), and Chinese growth. Additional game theaters beyond the Middle East he discusses are the European Union and Asia.

Next, Meb asks about Brian’s process. How does it really work when you’re putting together a portfolio?

Brian starts with valuation work. Specifically, they focus on the present value of future cash flows. They then assess things from a qualitative perspective – for instance, how might a certain government policy affect markets? They don’t look at markets on a company-by-company basis. It’s a macro approach, with fundamental value being a critical component. All of this is the “where” stage in Brian’s process. Next is the “why?” For instance, why does an asset mis-pricing exist? This eventually leads to game theory and an assessment of market turbulence and fragility.

Meb brings up Brian’s portfolio and asks about his current positioning. In general, Brian is cautiously optimistic on some equity markets, but generally against bonds. What he finds attractive right now from an equity perspective are Emerging Markets and some European markets. He’s especially attracted to Greece, Brazil, Argentina, and India; and to a lesser degree, China, Indonesia, and Malaysia. Brian talks more about Italy, Spain, and the UK.

Brian tells us most bond markets are unattractive. He gets into more detail regarding investment grade bonds, sovereigns, and junk.

Soon, the guys dive into currencies. Though most investors tend to think “it’ll all net out in the long run,” Brian takes a more active approach. The specific currencies he finds attractive right now include the Swedish Krona, Indian Rupee, Russian Ruble, Philippine Peso, and Turkish Lira. As to overvalued currencies, he points toward the U.S. Dollar, the Euro, the Swiss Franc, the Thai Baht, and the Israeli Shekel.

Next, Meb asks what is keeping Brian up at night as he looks at the markets today. Brian points toward four major concerns: monetary policy, rules-based strategies such as smart beta, the Volcker Rule, and circuit breaker inconsistency. He dives into tons of great detail that supports the notion for some concern, concluding “We don’t know what will trigger the decline, but when it happens, our fear is that it’s sharper and deeper than investors would otherwise expect.”

There’s plenty more in this episode: Brian’s thoughts on what steps can be taken to help protect against a declining market… his stance on cash in a portfolio… whether the 10-year bond will ever get back to 4%-5%... and finally, Brian’s most memorable trade.

This one involves Black Monday. Hear all the details in Episode 106.

May 9, 2018

Episode 105 is a wholly unique show. In this episode, we depart from traditional investment themes, and instead, bring you an episode featuring Meb’s second professional love, biology. Specifically, we welcome the renowned evolutionary biologist and writer, Olivia Judson.

It turns out Olivia wrote for The Economist in her early years. Meb asks how a scientist got started writing for a business magazine. Olivia tells us of the progression that led from one article submission to several other articles, to a staff job.

Next, Meb asks about the genesis for writing Dr. Tatiana's Sex Advice to All Creation. (For anyone unaware, the book is written in the style of a sex-advice column to animals. It details the variety of sexual practices in the natural world and provides the reader with an overview of the evolutionary biology of sex.) Olivia tells us one of her early articles was the inspiration, though she’d been studying and researching the topic for years. She thought the book would take her only six months to write so she quit her job…she finally finished it four years later.

Meb notes how much of the book identifies a power struggle between males and females, and how this shapes evolutionary dynamics. Olivia expounds, telling us how sometimes what the male wants is not in the interest of the female (and vice versa). These differences create the tensions which affect evolutionary direction.

This leads to a conversation about Bateman’s Principle, namely, the general idea that females are pillars of virtue, while males are cads. Olivia’s book suggested this isn’t necessarily true. Meb asks for more details. Olivia starts by redefining the term “promiscuous,” digging deeper into the word in light of the term “choosy.” It turns out certain females can benefit from having multiple partners, though the reasons can vary. In any case, this awareness is much more prevalent than thought 40 years ago.

A bit later, Meb asks about homosexuality in the animal world, including questions regarding procreation and genes. Olivia gives us a fascinating answer that includes the concepts of “genetic component,” “exclusivity,” and “commonality” and how these factors might affect homosexual genes remaining in the population.

There’s way more in this fun, totally different episode: A dating party where women smelled men’s T-shirts to determine which scent they found most appealing… the male Australian Redback Spider, who actually tries to get eaten by the female during sex… Meb’s surprising discovery from his 22 and Me test that he has more Neanderthal genes than 95% of the population… Olivia’s views on gene editing… Camping on the side of a volcano in Antarctica… and whether we’ll find life beyond our world.

We end with asking Olivia about her most memorable experience in all of her research. What is it? Find out in Episode 105.

May 2, 2018

In Episode 104, we welcome the legendary, Ken Fisher.

Meb starts with a quick word of congratulations to Ken, as his firm just passed $100B in assets under management. The guys then discuss Ken’s interest in fishing with a bow and arrow, which eventually morphs into a conversation about a millionaire who allegedly hid a million dollars somewhere in the Rockies, leaving clues to treasure-hunters searching for it.

The guys then jump into investing, discussing Ken’s early days in launching Fisher Investments. They touch upon one of Ken’s early claims to fame, championing the price-to-sales ratio. This leads to a conversation about being factor agnostic, which includes some interesting takeaways from Ken on capital pricing.

Soon, Meb brings up Ken’s book, Debunkery, and asks about one of its points: namely, the misbelief by so many investors that bonds are safer than stocks. What follows is a great commentary by Ken about short-term volatility risk versus opportunity cost risk. When you look at longer, rolling time periods, it becomes clear that stocks are far less risky than bonds. And in the long term, stocks are less risky than cash. Ken tells us that in his business, it’s his job to focus his clients on the longer-term.

Next, the conversation takes an interesting turn, touching upon the explosion of tech science, and how it’s affecting our lives, as well as the capital markets. It bleeds into Meb suggesting that older investors tend to become more conservative or pessimistic, and so they tilt away from equities, and whether that’s a behavioral challenge Ken has to address with his clients. Ken gives us his thoughts, concluding with that idea that people need to be relatively comfortable in capital markets with things that are generally uncomfortable.

The conversation then veers into politics and the effects on the market. Ken tell us that when you look at presidents and market history, our system gives presidents much less power to affect markets than most people believe.

Meb jumps to Twitter questions, bringing up one that wonders how to position yourself in the end of a bull market. Ken gives us a fascinating answer which I’m going to make you listen to in order to hear, but it tends to focus on large cap and quality.

There’s way more in this great episode: capital preservation and growth… volatility (a great quote from Ken “volatility is your friend, it’s not your enemy, if you use it correctly”)… the media’s impact on investor perception… the Fed and sovereign balance sheets… the senate bill trying to eliminate the ability of public companies buying back their own stock in the marketplace… housing (and the need to account for the full housing costs when calculating returns)… and of course, Ken’s most memorable trade.

What are the details? Find out in Episode 104.

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