Episode 99 is a radio show format. We start discussing some of Meb’s “Tweets of the Week.” The first involves a presentation from Rob Arnott at Research Affiliates, which Meb considered “required reading for financial advisors everywhere.” It involves the amount of extra alpha you’d need to generate in order to offset taxes given various market approaches.
Next, we discuss another Tweet from Meb in which he asked readers to guess at the largest drawdown in US bonds in real terms between 1900 and 2010. Turns out, the majority of respondents were far off. Meb gives us the results and takeaways.
Then there’s a discussion of taxes in light of crypto gains (and losses). It seems lots of people may not be factoring tax payments into the equation. Not sure the IRS is going to look favorably on that…
We then jump into listener Q&A. Some of the questions you’ll hear answered include:
There’s plenty more, including why Meb is still very bullish on emerging markets, the realities of mutual fund investing with fees/taxes included, and Meb’s upcoming travel plans.
Check it all out in Episode 99.
In Episode 98, we welcome a true market veteran, Dr. Ed Yardeni.
The episode starts with a fun story about Ed’s school days, studying off Janet Yellen’s notes in James Tobin’s class. But Meb soon brings up Ed’s new book, Predicting the Markets. In it, he writes that if books had theme songs, the appropriate song for his would be the 80s hit, “Don’t Worry Be Happy.” Ed explains this is because, when looking back over the past 40 years, the market has been extraordinarily bullish as a whole. There were plenty of reason to worry along the way, but all in all, the market rewarded brave investors.
This eventually leads into a conversation about valuations today that appear somewhat grim, and what Ed’s thoughts are looking forward.
Ed tells us it’s okay to be bearish, but don’t forget to get back into the market. He says, “history shows the smartest thing to do is just to invest over the years as you’re getting old, keep putting more money into the markets…recognizing that sometimes you’re going to get bargains and sometimes you’re not.”
The conversation drifts toward making macro predictions and the effect of Washington DC on the market. Ed tells us we’re overwhelmed with information and news, which is all the more reason to try to find the fundamental truth that’s out there. Washington doesn’t matter as much as Washington likes to think it matters. Ed gives us more of his thoughts on the market response to Obama, Trump, and the Fed, as well as what he believes actually creates jobs.
The conversation turns toward bonds, with Meb asking why bond movements can be challenging to predict. Ed points toward inflation, taking us back to the 50s to discuss bond yields and how they’ve moved in the years since. He brings in nominal GDP and central bankers into the mix.
A conversation about negative yielding sovereigns brings various central bankers into the spotlight. Ed walks us through a look back at some of the effects of Fed involvement. He has some interesting thoughts on what the Fed does well – and not so well.
This is a great show, melding market history, implementable market wisdom, and Ed’s fascinating career. There’s way more, including where Ed sees the biggest changes coming in technology, and how it will affect markets… Ed’s favorite three indicators… which period over Ed’s 40-year career stands out the most… Ed’s movie reviews… and of course, his most memorable trade.
What are the details? Find out in Episode 98.
In Episode 97, we welcome one of the most successful syndicate leads in angel investing, Phil Nadel (he also happens to be Meb’s favorite syndicate lead on Angel List).
After Phil runs us through his background, Meb asks about Phil’s group, Forefront Venture Partners and its connection to Angel List. Phil gives us the run-through, noting how when Angel List announced its syndicate feature, he felt it was a great way for smaller angels to get involved, so he signed up. Today, he’s one of the largest/most active leads on Angel List.
Meb asks how the syndicate process works. Phil tells us that accredited investors can register and sign up with syndicate leads like Forefront. This enables them to see the deal-flow of the lead, and invest on same terms. There’s no management fee, instead, investors pay a 20% carry on the backend if there’s a profit. You can invest small amounts – sometimes as little as $1K, yet you get all the same due diligence and legal review as a big investor.
Meb notes how syndicates have removed so much of the hassle and made the entire process simpler – which is both good and bad.
Next, Meb asks about Phil’s syndicate and the average investor. Phil tells us the average investment in a company is roughly $300K. And they’ve invested in about 44 deals since inception. The average investment per person is around $4-5K. This dovetails into a conversation about how to approach angel investments. Phil tells us a “portfolio” approach is important. He’s against picking only a few companies, as most will go out of business. He tells us “if you try to pick winners, and you only invest in a handful of companies, odds are you’re going to lose your money.” Phil recommends picking companies diversified by industry and stage.
The conversation then drifts into timing. Do you invest all at once, or drip in over time? Phil gives us his thoughts. Then it’s Phil’s rule of thumb about success rates. He tells us that out of 100 investments, 70 will go out of business. About 20-30 will stagnate, or exit as a single to a triple. Maybe one or two will turn out to be home runs.
Meb asks how Phil finds his deals. Turns out, lots of referrals. The guys then dive into what Phil looks for in a company – it includes post-revenues and capital efficiency. But he’s industry and geography-agnostic. His sweet spot is a valuation in the $5-12M range.
Next up, the guys discuss KPIs, or “Key Performance Indicators.” Phil discusses burn and runway, then customer acquisition cost and lifetime value. Phil wants to see that the company knows how to acquire and monetize customers in an efficient and scalable way. He then also looks at margins.
There’s plenty more in this angel-themed episode: the extent of Phil’s involvement in a startup after funding… the critical role that updates from founders play in the startup process… some “bad investor behavior” which Phil has seen over the years… what Phil learned from Barbara Corcoran of the show, Sharktank… and of course, Phil’s most memorable trade.
What are the details? Find out in Episode 97.
In Episode 96, we welcome two of the brightest guys in real estate, Craig Leupold and Jim Sullivan of Green Street.
After touching on Craig’s and Jim’s backgrounds, the guys jump into real estate, with Meb asking about Green Street’s approach to the real estate markets (public and private) and how they think about valuation.
Craig gives us an overview, referencing Green Street’s REIT research (focusing on the public markets), their real estate analytics (focusing on private markets), and their advisory consulting group. Craig touches upon lots of ideas – understanding the value of the properties owned by the various companies… identifying the associated premiums or discounts at which the companies might be trading… a deeper dive into their real estate analytics lineup… looking at how to allocate capital…
Meb asks how the real estate world looks today, and what’s the outlook for 2018. Craig tells us that with the exception of retail real estate, most sectors are seeing increases in rents and occupancies. But fundamentals have moved from “great,” to “good,” to now, “okay.” He goes on to give us his growth forecast over the next four years, as well as what he expects for commercial pricing over the next 12 months.
When Meb brings up “returns,” the guys make the distinction between public and private markets and how there’s a divergence. Private real estate is generally fairly valued today, yet in the public market, REITs are trading at an 11% discount to their unleveraged asset value.
Jim dives into greater detail on this topic, telling us how the average REIT should trade at a modest premium to NAV. The reason for this is that an investor should be willing to pay the fair market value for the property owned by the REIT, but then there’s the added benefit of the management team and the liquidity of the REIT structure; both deserve a premium. But again, today, we’re not seeing this premium today – quite the opposite, in fact.
Meb brings up valuation, asking about how to distinguish between buying opportunities and value traps. Jim tells us it’s situational, and depends on the property type. This dovetails into a discussion about pessimism in the mall sector.
Soon, the conversation turns toward rising rates. The common opinion is that rising rates are bad for real estate, but Jim tells us it’s more complicated than that. If rates are rising due to our economy accelerating, then that could be positive for commercial real estate, leading to higher occupancies and rising rents.
There’s far more in this episode: activism in the real estate space… how the real estate market looks around the world… the challenge of figuring out what risk-adjusted returns should be in different global locations… which geographies look particularly attractive today… farmland REITs… and Craig’s and Jim’s one piece of advice to investors looking to allocate to the REIT space.
All this, as well and Craig’s and Jim’s most memorable trades, in Episode 96.