The Meb Faber Show - Better Investing

In episode 138, we welcome Yariv Haim. Yariv begins with his backstory. He had been working for a family running marketing and business development. He was asked to get involved with the investment management needs of the family, and through a path of his own, had gained enough knowledge to crystallize an approach he now follows at Sparrows Capital. Yariv discusses how he focused on evidence from impartial academic institutions and research, and refers to the strategies derived from them as evidence-based investing strategies. After doing his research, he saw an informational gap in the industry, and it still exists today. Yariv then gets into 6 core principles 1) return is primarily a function of risk, 2) certain risks attract persistent premium, 3) Diversification works, 4) stock picking and market timing seldom add value, 5) remain invested across the full cycle, 6) costs matter (although it isn’t the only prism to evaluate investment opportunities). Next, Meb asks about factors and smart beta. Yariv discusses his opinion that Wall Street is a marketing machine, and the term “smart beta,” while it sounds sexy, ends up becoming an umbrella for all things. When asked about factors and when it’s time to stop using them, Yariv responds by discussing resources available, and the importance of doing the homework, and not to invest until you fully understand what you are investing in. As far as favorite factors go, Yariv talked about not having one, and expanded by saying he sees factor timing as a problem. He recommends a blend of factors to clients, starting with the most diversified portfolio, and building tilts. The conversation then shifts to a discussion of behavioral investing. Yariv talks about how investors are all human beings, human beings are filled with biases and emotions, and feelings of optimism and pessimism can affect the way we make decisions. He finishes his comment by saying he feels that for people who wish to invest on their own, that it is always helpful to have someone by your side who is potentially slightly less emotional about the way your portfolio behaves in the short term. As the conversation winds down, Meb and Yariv get into socially responsible investing and environmental and social governance themes. Yariv believes it is a trend that nobody can ignore today. He discusses some research conclusions the efficiency of markets and how higher returns investors have earned on vice companies is compensated for the additional risk they bear for owning them. He makes the point that there is more to investing than purely outcome in the form of returns, and that if an investor’s ethical compass steers them in the SRI/ESG direction, it is sensible to invest that way. The pair then conclude with how Yariv puts all of these ideas together to form investment portfolios. This and more in episode 138. Learn more about your ad choices. Visit megaphone.fm/adchoices

In episode 137 we welcome the sibling duo, Emily and Morgan Paxhia. Emily and Morgan begin by discussing their backstory, and how coming from a family with an entrepreneurial background influenced their path to start Poseidon Asset Management to specialize in cannabis investing. Emily and Morgan each describe their previous roles and the skills they acquired in their respective industries (Consulting for Emily, and Investment Management for Morgan) that helped them build foundations that transitioned well into asset management. Next, the pair discusses starting their fund, and the journey that included seeking service providers, raising capital, and the many challenges and hurdles they faced along the way. Morgan mentioned that even with all the hurdles, they knew they were on to something and continued to drive forward. Meb then asks about cannabis industry trends and what the space has in store looking forward. Emily covers some regulatory and political issues and then talks about the challenge they will face as a firm as they try to allocate capital before the industry really opens up down the road. Morgan follows with some catalysts that include legal cannabis in California, a number of countries approving medical cannabis, and expanded media coverage. The conversation shifts to the regulatory environment. Morgan talks about the progress that has been made, although state programs are varied, which makes it difficult to see where the standout model lies. There’s also bi-partisan support, New York is looking serious at legalizing, and the environment is moving forward. Meb follows with questions about the investment process and portfolio building, as well as a question on what areas people aren’t thinking about that have disruptive potential. Emily and Morgan talk about looking at the industry by subsector such as ag-tech and technology and being invested everywhere on the spectrum from plant cultivation to end consumer product consumption and that the portfolio construction process leans on a very diversified approach but is very flexible and dynamic. In searching for ideas, they rely on a “boots on the ground” approach to understand the industry and operator dynamics, as well as identify quality teams. Meb then asks about any areas people aren’t thinking about that have disruptive potential. Emily and Morgan respond with 100% industrial hemp as a product that has disruptive potential with almost endless applications. Hear all this and more in episode 137, including the names of some portfolio companies and their most memorable investments. Learn more about your ad choices. Visit megaphone.fm/adchoices

In episode 136, we welcome Steve Romick. The conversation begins with Steve explaining that he hated losing more than he enjoyed winning, and while there wasn’t one event that led him to value investing, he considers his aversion to loss a contributor to being drawn to the value-oriented investment approach. Meb then transitions the conversation by asking Steve to characterize the investment strategy of FPA’s Crescent Fund. Steve talks about the value investing framework as investing with a margin of safety and how it has morphed over the years from being about the balance sheet to now, through technological innovation, the corporate lifecycle has been as short of it has ever been with the most of the density of innovation happening in the past 50 years. Next, the discussion turns to investment framework. Steve describes this team of 11, and how the job of his team is to understand the business and industry first on both a quantitative and qualitative basis. He describes the go-anywhere mandate as a potential recipe for disaster as there are more places to lose money. Steve then discusses looking at equities and debt for the portfolio. In the equity space, they’re looking at two categories, the high quality growing businesses considered “compounders,” and more traditional value investments, where there’s potential for 3 times upside to downside. Meb then asks Steve about Naspers, and Steve follow’s up with commentary about one of the biggest losers the portfolio’s ever had, but reiterates that his biggest concern is permanent loss of capital, and as the holding is still in the portfolio, he’d be surprised if they didn’t make money on it long-term. Meb asks Steve about credit. Steve talks about high yield and distressed debt as an asset class being periodically attractive and one doesn’t need to be there all the time. He explains that the gross yield of roughly 6.5% looks interesting on the surface, but once you consider the history of defaults and recovery, the yield drops significantly to 4.4%, right above the investment grade yield, and it isn’t so attractive. Steve talks about how the fund allows the freedom to seek asset classes that offer value, and that for the first time, they now own a municipal bond. Steve then discusses the small allocation they have to farmland. Meb follows with a question about holding cash. Steve expands by talking about going through the research process, and when there aren’t enough opportunities that meet their parameters, cash results as a byproduct. The discussion then gets into Steve’s background at FPA, and what it was like going through the late 1990s. Steve talks about trailing the market going into the late 90s as valuations appeared unsupportable, but fast forward a few years and he and the team were validated. They allocated to high yield, small cap, and value, and made money in 2000, 2001 and 2002 when the market was down. Meb then asks how Steve views the rest of the world. Steve responds that while it is more expensive generally here in the U.S., it is important to remember that international exposure can be had by owning U.S. stocks with revenue exposure overseas, and that like-for-like companies are trading at similar valuations outside of the U.S. Next, Meb and Steve discuss the importance of managers investing alongside their clients. Steve feels it is important that investor’s energy should be aligned with the client’s interests and holdings. All this and more, including Steve’s thought on the catalysts that could end the current bull market in episode 136. Learn more about your ad choices. Visit megaphone.fm/adchoices

In Episode 135, we welcome Karan Wadhera. We start with Karan giving his backstory that includes a stint at Goldman Sachs and some entrepreneurship. After some time studying the industry, he ultimately got involved in the Cannabis space with Casa Verde. Meb then asks about what Karan sees as a “why now” investment opportunity. Karan talks about the opportunity coming out of the existing black market that is transitioning into a legal market and a range of products that have more to do with other things than just getting high. Next, the conversation shifts to the political landscape, and Karan provides some detail on the gap between the state and federal level, and the federal view of cannabis as a Schedule 1 controlled substance. He discusses how dramatically things are changing, especially in the political space. Meb then asks about the investment landscape for cannabis. Karan talks about how volatile the public market space is, and how when evaluating the theme, Casa Verde saw an opportunity in the ancillary space, companies involved in the industry but not in cultivation, manufacturing, or retail. He then provides detail on the kinds of involvement Casa Verde has in the portfolio companies, as well as some background on portfolio companies leaflink, green bits, trellis, and metric. Karan then talks about some of the areas of the industry that need improvement such as financial services until the industry reaches federal legalization, ag-tech, and biotech. Meb then asks about investor interest in the space. Karan talks about how more traditional institutions are now starting to explore it, and how U.S. investors will be limited on what they can do until there is a federal regime in place. Karan follows up with some resources available to learn more about the industry. This and more, including Karan’s most memorable investment in episode 135. Learn more about your ad choices. Visit megaphone.fm/adchoices

In Episode 134, we welcome Chris Cole. Meb kicks off the show by asking Chris to describe his nontraditional background. Chris studied cinematography in film school at USC, while trading options in his spare time. He eventually made a career switch and began in Merrill Lynch’s analyst program in New York, while trading in his spare time. With his trading, he eventually created $1 Million to start his firm. Next, the conversation transitions to Chris’s work, including his take that “Volatility is the only asset class.” Chris follows by discussing how returns can be deconstructed to represent either “short-vol” or “long-vol” strategies. He mentions that the average institutional portfolio is a 98% short-volatility portfolio that will not perform all that well during a period of regime change. Meb then brings up some recent events that have transpired to lead into a chat about short vs. long volatility, and some dangers when thinking about the strategies. Chris discusses how volatility can be expressed in both tails, for example, the right tail being high volatility and high asset returns, and provides an example that volatility was averaging around 25 in the late 90s when the market was going up 30% per year. He follows with a stat that at-the-money vol moved more in January of this year than it did in the February move most might be familiar with. Chris then provides his thoughts about regime changes, what is possible, and what he sees in the market. He starts with his recent paper, Volatility and the Alchemy of Risk. In that paper, he uses the example of the Ouroboros, or “Tail devourer” as a metaphor for the current short-volatility trade. What he sees as a worry are the explicit short-vol traders, $1.4 Trillion of implicit short-vol strategies that are re-creating a portfolio of short options by financial engineering, and corporations using leverage to buy back shares, suppressing volatility. All together these scenarios represent a snake eating its tail. Meb then asks Chris to talk about market pressures that have resulted in liquidity changes. Chris explains that this is the only bull market in history with less and less volume, and less and less volatility. He mentions that what was scary about February’s volatility was that liquidity vanished. He follows with a discussion of passive vs. active investing, and the role active investors play in the market. Meb then asks about catalysts for stress in the market. He talks about the passive strategy not being understood by investors as something that could lead to de-stabilizing conditions, and that over 50% of the investment grade debt is in the lowest rated tranches, and over $2 Trillion of debt that needs to be rolled in 2019 and 2020. He mentions that what could potentially cause an issue is inflation leading to higher rates, a minor turn of the business cycle given the amount of leverage and gearing on corporate balance sheets, as well as the reliance of stocks and bonds being un-correlated if the markets enter a period where stock and bond correlations are in fact positively correlated. Next, through an example of rental car insurance, Chris gives some background on implementing long-vol strategies by using quantitative analytics to help identify points in time where you are paid to own “insurance” against market declines, in addition to predictive analytics that provide an informational edge to help understand whether or not it might be productive to own protection against market volatility risk. Meb follows with a question on the Japanese Vol Monster. Chris describes the short-vol trade that has been going on in Japan for a long time. He then describes philosophically that volatility is the instrument that makes us face truth. This and more in episode 134. Learn more about your ad choices. Visit megaphone.fm/adchoices

In Episode 133, we welcome Todd Harrison. Meb begins the conversation asking Todd about what got him into the cannabis space. Todd discusses his intellectual curiosity of the space, and what he has learned about the history of cannabis, from the 30,000 year relationship we have had with it as humans, to the US weaponizing marijuana. Meb then leads into the topic of governments and states changing their attitudes. Todd talks about it being a confluence of things, but gets into a personal story of how he discovered the efficacious ability of cannabis by working with Dr. Julie Holland after struggling with a decade long treatment of PTSD with a Western medicine protocol. The conversation then turns to the marketplace. Todd relays that there is quite a bit ahead for the consumer space. In hearing what scientists have to say, it has painted a much different picture for the breadth of wellness that is going to be disrupted going forward. Next, Meb and Todd discuss a little background on cannabinoids in general. Todd describes that there are over 200 different cannabinoid strains that exist. CBD and THC are two that have been popularized, but when you drill down, there are far more, including CBN, that aids sleep. The conversation shifts to the broad marketplace for investors. Todd describes the four primary arbitrage opportunities he sees that present opportunity: 1) Time Vs. Policy, 2) Price vs. Institutional Flow, 3) Perception, and 4) Liquidity. Meb follows by asking Todd about the firm’s investment approach. Todd talks about taking the long view. He mentions that the space has had two 50% drawdowns this year, and they count on disciplined position sizing and light use of puts to layer on with the long view but are using the current volatility to their advantage right now. Meb then asks Todd about the leading countries in the global landscape right now. Todd talks about Canada being the most mature, Australia looking compelling, and sees the U.S. as having the best opportunity set. Meb asks how Todd diversifies across industry groups and various verticals. Todd talks about there being about 500 listed stocks right now, and that there are probably 50 to 55 companies that his firm wants to invest in, and probably up to half of them at any given time. He thinks in 10 years’ time the survivors can offer a significant market cap. He and his team are focused on sticking with the companies they think are positioned to win. Meb then asks what Todd’s favorite vertical is if he had to pick one to be invested in for 5 years. Todd mentions it would be biotech, even though it may take longer for those investments to pan out because they still have to go through the traditional biotech process. Todd then gets into his approach for analyzing stocks. Todd discusses the importance of understanding the management teams, and “betting on jockeys as much as the horse,” as well as taking the fundamental perspective by getting a read on the company through a DCF analysis. All this and more, including a few names in Todd’s portfolio, and some suggestions for resources investors can tap for research on the industry in Episode 133. Learn more about your ad choices. Visit megaphone.fm/adchoices

Episode 132 has a radio show format. In this one, we cover numerous Tweets of the Week from Meb as well as listener Q&A. For our Tweets of the Week, a few we cover include: A chart from Longboard about returns. Since 1989, the worst performing 11,513 stocks – which is 80% of all stocks, collectively had a total return of 0%. The best performing 2,942 stocks (20% of all) accounted for all the gains. A tweet about another option selling fund blow-up. A Jason Zweig post about how many investors should question the dogma of “stocks for the long” run since history shows that a portfolio of bonds has outperformed stocks surprisingly often and for long periods. The statistic “According to Goldman, its indicator at 73% marks the highest bear-market reading since the late 1960s and early 1970s, which (with a few exceptions) is consistent with returns of zero over the following 12 months.” We then jump into listener Q&A. Some you’ll hear include: In your book, Global Asset Allocation, you compare the results of well-known asset allocations and find that the returns are quite close. Over a long period of time, would you also expect the results of a momentum / value strategy to be similar? Is the main advantage that it allows for better behavior (lower drawdowns, etc) or would you also expect the performance to differ (net of fees)? Would you rather own a stock with a high free cash flow yield or high dividend yield? I was wondering if you could touch on the process of launching an ETF. What are the startup costs, how much AUM and at what fee would the ETF breakeven? I've heard you (and others) extol the benefits of a diversified global allocation but I rarely (if ever) hear the counter argument: that the US deserves a premium to the rest of the world because it has the largest and deepest capital markets, has comparatively lower regulation and fosters innovation and creative destruction. Do those factors warrant an over-allocation to US equities? How much should the average investor be willing to spend (as a percentage of portfolio value) in order to carry some protection in the form of puts? What beats the 60/40 portfolio over the next 5 and 10 year periods? As usual, there are plenty of rabbit holes. You’ll find them all in Episode 132. Learn more about your ad choices. Visit megaphone.fm/adchoices

In Episode 131, we welcome economist David Rosenberg. We jump right into David’s view of the current economic landscape. David talks about the global economy, especially the US looking classically late cycle, as the economy is running low on skilled workers, and states “If next year is not a recession, it’s going to feel like it.” Meb asks about the indicators he relies on. David discusses that there are 15 equally weighted indicators he’s looking at, 14 are screaming late cycle, and two stand out the most. ??? Two of the most important indicators for the US are the lack of skilled workers, with a lot of growth coming from people with no better than a high school education, and an immigration policy that has decreased the pool of labor. This leads into a discussion about inflationary pressures. While the strong dollar has been deflationary, more and more companies are passing on costs to customers. Services, which dominates the consumer spending pie, is sensitive to labor costs, and the inflation we will see going forward will be from wages. Meb then asks David about his thoughts on how this plays out for investors given the nature of the late cycle. David tells us that historically, the S&P has annualized an average of 17% per year in bull market conditions, however, this time around, it has done so with nearly half the typical economic growth rate to back that up. He suggests investors be defensive, focus on liquidity, have some cash on hand, and emphasize quality. For fixed income investors, be mindful of duration, and if focused on credit, be thoughtful of upcoming refinancing risks. The conversation then turns to sentiment. David draws parallels to the dotcom bubble, with FAANGM making up 17% of the S&P 500 market cap at September highs, which is similar to the late 1990s when there was a concentration of about six stocks making up a large chunk of the S&P 500 market cap. Next, Meb asks about David’s views on corporate bonds. David sees this in two lights. First, corporate balance sheets are the weakest they have ever been. The BBB component, which is a downgrade away from being rated “junk,” has grown from 30% of issuance to 50%. The alternative, more positive view is that companies are anticipating a lack of bond issuance coming up. Meb then asks about the health of the Canadian economy. David explains it is meandering; the oil price has been a drag and has traded at a significant discount to WTI due to a glut of production, and lack of pipeline capacity. In addition, an overinflated housing market that is deflating, and overextended household balance sheets serve as big impediments. Provinces are tending toward a pro-business direction politically, so that could serve to be a positive going forward. As a strategist, he is seeing much of the bad news priced into financial assets as the TSX is trading down to a 13 multiple, in line with emerging markets, and a discount that has been seen only 5% of the time historically. All this and more in Episode 131. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

Episode 129 is a solo-Meb show. Meb has been out on the road, giving speeches. In this “Mebisode,” you’ll hear Meb’s most recent talk. It covers forward-looking return expectations, an offer to book some time to chat with Meb one-on-one, best and worst starting points for new investment dollars, improving upon the global market portfolio, what corners of the market to look at now, and far more. If October’s market turbulence left you feeling some jitters, this episode will help you reorient your market views looking forward. All this and more in Episode 129. Learn more about your ad choices. Visit megaphone.fm/adchoices

In Episode 128, we welcome pension fund expert, Claude Lamoureux. We start with Claude’s background, which took him from Met Life to running the Ontario Teachers Pension Plan. When Claude took over the pension, the fund was invested in just Canadian debt, and the size of the pension obligation was underestimated. Claude decided to use derivatives to diversify the portfolio. He expanded into the S&P, recruited an investment department, and within three years, had successfully reallocated the fund into the broad asset classes they wanted. Meb asks how investing is different for a pension allocator versus an individual investor managing his own portfolio. Claude tells us that in the pension world, people don’t want to take responsibility. He wanted to do the opposite. He wanted to create a culture where people become entrepreneurial. This dovetails into a conversation about valuations. Claude is a big believer in having a realistic valuation of liabilities and potential returns. He mentions that today, many U.S. pensions are expecting around 7% returns, which he finds unrealistic. Claude says people should earn the money before they spend it. The conversation eventually turns toward Claude’s general market approach. Claude had a somewhat traditional policy portfolio, yet used lots of derivatives to diversify into stocks and non-Canadian bonds. He mentions how when you have a large deficit, you must go heavily into equities. He also liked private equity and real estate. And there was a great deal of leverage. The conversation turns toward problems in the U.S. pension system. Claude gives us his take on the issue. In short, many pension liabilities here in the States aren’t measured properly. He also mentions interest rate assumptions and the fees of outside managers. Finally, Claude points toward politicians and how they don’t want to face the facts. There’s plenty more in this pension-themed episode: the importance of being a student of the market history…the Canadian Coalition for Good Governance…the sage advice of “when you have to make a decision, always make the one that will let you sleep better, not the one that will let you eat better”…and of course, Claude’s most memorable trade. All this and more in Episode 128. Learn more about your ad choices. Visit megaphone.fm/adchoices

Episode 127 has a radio show format. In this one, we cover numerous Tweets of the Week from Meb as well as listener Q&A. We start with Meb telling us about his recent back-and-forth over Twitter with Elon Musk, discussing short-selling. Meb uses this as an example to give us more information on shorting in general, as well as short-lending. We then answer a question we’ve received (in various forms) for years – “why is the S&P (or whatever) outperforming your strategy?” For anyone looking longingly at S&P returns for the last many years, you might want to listen to this one. Next up, we tackle some of Meb’s Tweets of the week. There’s a discussion about mixed valuation signals – on one hand, there’s the Russell 3000, with the number of companies trading for more than 10-times revenue now approaching levels from back in 2000. On the other hand, there’s a tweet claiming that “if history is any guide, with 90% confidence rate of positive correlation, this market is going to deliver between 3 to 4% per annum for the next 10 years.” Additional tweets support both sides so Meb tries to resolve it for us. Then there’s a tweet about the challenges of sticking with your strategy during bad years. It references how the little voice of doubt in your head is all it takes “to turn the hardest resolve into the emotional putty that has destroyed generations of investors.” There are several other tweet topics – how Research Affiliates views the probability of 5% real returns at just 1.5%... how one forecast for private equity is calling for just 1.5% returns while a different private equity manager is trumpeting the asset class’s superior performance… and how marketing is nearly as important as performance and fees when it comes to attracting investor assets. We then jump into listener Q&A. Some you’ll hear include: You often say that over the long term, asset allocation doesn't matter much. However, isn't it important to note that because the nature of compounding, a small difference in CAGR over time can amount to a large dollar amount difference in your savings? What are your thoughts on using leverage with momentum? Do you have any recommendations for someone looking to diversify their trend following sleeve by applying a few different rules? For example, I've been doing 1/3 50-DMA, 1/3 200-DMA, and 1/3 crossover. You speak frequently about the benefit of taking a lump sum and investing now versus later. With current equity valuations (at least US) so frothy, is that still true? I’m wondering about how to take losses and how to determine when it’s appropriate to take one and when it is not. Do you, as a quant, have set rules in place? All this and more in Episode 127. Learn more about your ad choices. Visit megaphone.fm/adchoices

In Episode 126, we welcome entrepreneur, author, and investor, Karen Finerman. The episode starts with an interesting connection – Karen and Meb’s wife both attended the same high school in Los Angeles, and apparently, it’s the only high school in the U.S. with a working oil rig on campus. From here, Karen gives us a brief walk-through of her history after graduating Wharton, heading to Wall Street, where she eventually launched her own hedge fund. Meb asks about the framework she used in the hedge fund as she launched. Karen tells us they were fundamentally focused. Coming out of the savings and loan crisis, there were many smaller banks that had been unfairly stigmatized. Many were absurdly cheap with great balance sheets. Karen was able to take advantage, and developed an expertise in the space. She notes it was interesting how badly the market could mis-price an entire sector. She continues by telling us her strategy was mostly long focused. Her shorts were generally idiosyncratic, intended to hedge the portfolio. Beyond that, tax efficiency was a big focus. Next, Meb and Karen dig into her methodology for evaluating specific investments. Karen gives us the details, mentioning fundamentals, growth at a reasonable price, users that tend to be inelastic on price, and various other details, culminating with a specific example of a company she likes. Meb asks what Karen is seeing now. She tells us she’s a little spooked by the tariff situation. Perhaps a big exogenous risk. She then changes gears, going into details about a specific company she likes – Alphabet – noting what she finds attractive (and where she feels they could improve). But overall, she’s very impressed. The conversation gravitates toward “selling”. After all, buying is generally the easier part – it’s when to get rid of an investment that can be tough. Karen tells us that if an investment hits their target return, they’ll lighten their position. These leads into a conversation about investment theses and how that plays into selling. The years 1999 and 2000 come up, with Karen telling us she feels her group did the right thing then, avoiding getting sucked into the bubble. The new metrics at that time (stocks trading at a multiple of eyeballs) just didn’t make sense to her. She notes there are some similarities today, as there are certain companies that are losing lots of money despite posting growth numbers. This dovetails into a discussion of Tesla. It turns out Meb and Elon Musk shared a few words about short-selling on Twitter on the morning we recorded this podcast. Surprising no one, Elon is not a fan of shorts. Listen in for the details. There’s way more in this great episode: the ETF-ization of investing… Karen’s book… How to address the great investing education problem… and of course, Karen’s most memorable trade – actually, she shares two, a good one and a bad one. On the good side, there was an undervalued convenience chain in which Karen got involved at the right time and enjoyed a nice payday when Diamond Shamrock showed up at the buyer’s table. The bad trade relates to when United Airlines was supposed to go private. Karen didn’t factor in the possibility that the deal would collapse. Just how bad was the damage? Find out in Episode 126. Learn more about your ad choices. Visit megaphone.fm/adchoices

In Episode 125, we welcome famed short-seller and early stage investor, Tom Barton. We start by going way back, after Tom graduated from Vanderbilt. He walks us through his early career experiences which helped him sharpen his business analysis skills, as well as his operational skills. He developed a great understanding of different industries, yet also what it was like to actually work in them. This was the foundation for the short-selling career that was soon to begin. In 1983 Tom went to work for a wealthy Dallas family, and in the process met one of the original fraud short-sellers, nicknamed “The Mortician”. Tom knew nothing about stocks at that point, but under the guidance of his new mentor, realized that his analytical skills aligned perfectly with sniffing out short-selling candidates. He reasoned “isn’t it easier to spot something that’s going to fail than be certain on something that’s going to succeed?” He then began digging into the research, and finding slews of fraudulent companies. What follows is an incredibly entertaining story-after-story of the various frauds Tom sniffed out (and made money on). There was a company claiming it could change the molecular composition of water… one deceiving customers about building-restoration after fires… a biotech claiming it could cure HIV… By the time 1990 rolled around, Tom’s returns were over 80% and he had generated a couple billion dollars. There’s a great bit in here about “The Wolf of Wall Street” (Stratton Oakmont). Tom is the guy who took them down. Related, the “Wolf” himself snaked an apartment out from underneath Meb a few years ago out here in Manhattan Beach, CA. The guys share a laugh over this. Eventually the conversation morphs from short-selling to when Tom’s strategy changed to going long. It involves managing money for George Soros, and some of Tom’s early long winners. This dovetails into how Tom got into biotech, which is where he’s spending lots of time today. Tom tells us about his introduction into gene therapy, then successes with the company Intrexon. He talks us through some small companies he’s been a part of that have already sold for huge paydays…for instance, one purchased by Novartis for $9B. This is a must-listen for any short-sellers, market historians, private investors, and biotech investors. And Tom’s most memorable trade is a doozy. This one involves buying puts for a hundred and something thousand dollars…which he sold for $13M. These details and far more in Episode 125. Learn more about your ad choices. Visit megaphone.fm/adchoices

We recently published The Best Investment Writing, Volume 2. The first book was a hit, with MoneyWeek concluding that it “should be on every investor’s bookshelf.” But we made the second volume even better – we expanded it to include 41 hand-selected investment articles, written by some of the most respected money managers and investment researchers in the world. We thought it would be fun to bring on some of the authors so that they could read their specific chapter from the book. That’s what you’re getting in today’s special bonus episode. If you’re interested in picking up a copy of The Best Investment Writing, Volume 2, head on over to Amazon or our publisher’s website, which is Harriman House. Also, know that your purchase would benefit charity, as all writer-proceeds go to the charity of the specific author’s choosing. So, enough from me, let’s let Wes take over with this special bonus episode. Learn more about your ad choices. Visit megaphone.fm/adchoices

In Episode 124, we welcome legendary investor, Howard Marks. Meb begins with a quote from Howard’s new book, Mastering the Market Cycle, and asks him to expound. Howard gives us his top-line take on market cycles, ending with the idea that if you understand them, you can profit from them. Meb follows up by asking about Howard’s framework for evaluating where we are in the cycle. Rather than look at every input as individual, Howard looks at overall patterns. What is the collective mood? Or is it depressed, sad, and people don’t want to buy? Or is it buoyant? Second, are investors optimistic and thrilled with their portfolios and eager to add more, therein increasing risk? Or are investors regretful and hesitant, burned by recent experience? Then there are quantitative aspects – valuations, yield spreads, cap rates, multiples, and so on. All of these variables help give Howard a feel for whether assets are high- or low-priced. Next, Meb asks Howard to use Oaktree’s actions during the Financial Crisis as a real-world example of how an investor could act upon cycles. Howard tells us there are two parts to what happened during the Crisis – what Oaktree did during the run-up to the meltdown, and then what it did during the event itself. In short, Oaktree was cautious during the lead-up. They raised their standards for investments. Why? Howard notes that they didn’t know ahead of time how bad things would be. Rather, they were hesitant because they looked at the securities being issued, and it seemed that every day, something was coming out that didn’t deserve to be issued. This was a tip-off. Then the event happened, culminating in Lehman bankruptcy, and that’s when Oaktree became very aggressive, buying half a billion dollars each week for 15 weeks. Howard tells us that, yes, our job as investors is to be skeptical, but sometimes that skepticism needs to be applied to our own fears. In other words, skepticism also might appear like “no, that scenario is too bad to actually be true.” Meb notes that the challenge is investors want precision, picking the exact top and bottom. But this isn’t really how it works. Meb asks if there a time when Howard felt he misinterpreted a point in the market cycle. Before answering Meb’s questions, Howard agrees that trying to find the bottom or top is a huge mistake. He notes that trying to find the perfect day upon which to buy or sell is impossible. In terms of potentially misreading the cycle, Howard tells us that Oaktree has been perhaps too conservative over the last few years, so they haven’t realized all the gains of the market. That said, he stands by his decision telling us, “anybody who buys or holds because of the belief that something that’s fully valued will become overvalued…is embarking on a dangerous course.” Meb asks how Howard sees the world today. Howard tells us we’re in the 8th inning of this bull market. Assets are highly priced relative to history. People are bullish. Risk aversion is low. He notes it’s a time for caution – but – we have no idea how many innings there will be in this game. What follows is a great conversation about bull markets, what ends bull markets, and how to implement market cycles into an investment approach. The guys touch on investor exuberance… whether markets need to be exuberant for a bull market to end… bullish action despite bullish temperament… the need to “calibrate” your portfolio… and the average investor’s ability to live with pain. There’s so much more in this episode: How Howard’s market approach has evolved over the years… how “it’s not what you buy, it’s what you pay for it that determines whether something is a good investment or bad investment”… Howard’s thoughts on contrarian investing… and, of course, his most memorable trade. This one yielded him 23x. What are the details? Find out in Episode 124. Learn more about your ad choices. Visit megaphone.fm/adchoices

We recently published The Best Investment Writing, Volume 2. The first book was a hit, with MoneyWeek concluding that it “should be on every investor’s bookshelf.” But we made the second volume even better – we expanded it to include 41 hand-selected investment articles, written by some of the most respected money managers and investment researchers in the world. We thought it would be fun to bring on some of the authors so that they could read their specific chapter from the book. That’s what you’re getting in today’s special bonus episode. If you’re interested in picking up a copy of The Best Investment Writing, Volume 2, head on over to Amazon or our publisher’s website, which is Harriman House. Also, know that your purchase would benefit charity, as all writer-proceeds go to the charity of the specific author’s choosing. So, enough from me, let’s let Russel take over with this special bonus episode. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. 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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. 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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

Episode 103 is a solo-Meb show. We just finished a short paper that references the old nutritional “Food Pyramid” published by the FDA a couple decades ago. Given what we’ve learned about health-conscious eating in the years since, that old guideline now seems a bit off-base. In the same way, the investing wisdom of yesteryear now seems similarly misguided. Meb walks us through the white paper that delves into these ideas in this short, just-Meb episode, identifying how his “Investment Pyramid” looks today. Also, most of Meb’s books are now free! Just click here. Get all the details in Episode 103. Learn more about your ad choices. Visit megaphone.fm/adchoices

Episode 102 has a radio show format. In this one, we cover Meb’s Tweets of the Week, some write-in questions, Twitter questions, and our first-ever call-in question. We discuss the “Stay Rich” portfolio, and the unfortunate reality that even the safest portfolios can suffer ~25% drawdowns. Next, there’s discussion of stock buybacks and a recent push from Senator Tammy Baldwin to introduce a bill that would prohibit companies from repurchasing their own shares (she claims it’s exacerbating the wealth gap). Then, with volatility showing some life in the market, there’s discussion of volatility clustering. Next up is the investing service, Robinhood, which is now referring to calls and puts as “going up” and “going down.” Also, an ETF for companion pets filed by Gabelli. We then dive into questions. Some that you’ll hear Meb address include: How do you keep a level head when markets are imploding around you? Meb and Elroy Dimson discussed the historical returns of housing and indicated that owning a house is not a high-performing investment, relative to other asset classes. However, if the alternative to buying a house is paying rent, often at a similar cost to a monthly mortgage payment, how does this factor in to the assessment of the investment? I understand that any given strategy can underperform the market for long periods of time. What is a reasonable time-frame to fairly evaluate the results of any particular strategy? Valuation difference in countries is often caused by sector structure. Can you explain that? The AUM of Target Date Funds was at $250B in '08. Many investors were shocked at the bad performance in '08. Target Date Funds AUM is now $900B. What's the industry's level of responsibility to educate? Is Russia worth the current political risk for long term investor (5-7 years)? If so, is it best to look at specific Russian equities or an index such as the RSX? All this and more in Episode 102. Learn more about your ad choices. Visit megaphone.fm/adchoices

In Episode 101, we welcome the great educator, Paul Merriman. We start with Paul’s background; specifically, the story of an early trading experience with commodities. He doubled his money in days…and then lost everything on the very next trade. Then the guys dive in, with Meb bringing up something Paul wrote called “The Ultimate Buy & Hold Portfolio” and asking for more detail. Paul starts with the S&P which, even with all its up-and-downs, has done great over the years. But then he walks us through some tweaks – adding large cap, then small cap – he notes the various percentage returns added by each, as well as the effect on volatility. He eventually arrives at a final portfolio, showing us the power of this diversification. Meb points the conversation toward the behavioral benefit of diversification and says how some listeners will wonder how much money to put into each of the asset classes Paul had identified. Paul tells us he originally put 10% into 10 different asset classes – after all, if each asset class is worthy, then he wants it to be in his portfolio; especially because there’s no way to be certain which one(s) will shine going forward. Agreeing, Meb touches on being “asset class agnostic” and notes that the problem with being, say, a “gold guy” or any die-hard type of investor, is you get wedded to that asset class. This emotional bond can lead to bad behavior. This leads to a discussion about implementation and the challenges of emotional investing. Paul tells us “I don’t want my emotions to have anything to do with how (my) money is managed.” The conversation drifts toward the benefits of investing early, yet the challenges of educating young people as to its importance, as well as different investing needs over a lifetime. The guys note how the best thing for a young person would be the markets tanking for 10 years. Of course, that would be terrible for an older investor in/near retirement. This bleeds into a conversation about formally educating the younger generation about investing. A bit later, Meb asks about the older investor who might have been burned in ’08, is now near retirement, thinks the U.S. market is expensive, yet needs results. What about him? Paul walks us through the realities of losses and gives us his overall thoughts. This morphs into a common question we get – invest everything at once, or drip it in over time? Paul has some thoughts on how to do this in a way that balances math and emotions. There’s tons more in this episode (it’s one of our longest to date): the challenge of investing in the “shiny object”… how to avoid getting screwed by your advisor… investment newsletters… buy-and-hold versus market timing… the critical nature of understanding past performance… giving money to grandkids… and of course, Paul’s most memorable trade; his involves the ’87 crash. What are the details? Find out in Episode 101. Learn more about your ad choices. Visit megaphone.fm/adchoices

To celebrate the milestone of reaching 100 episodes, we’re thrilled to welcome Professor Elroy Dimson, author of Meb’s favorite investing book of all time, Triumph of the Optimists. Per Meb’s request, Elroy starts by giving us a summation of his research history which led to Triumph of the Optimists. He had a heritage in producing indexes and began reaching out to researchers across the globe in hopes of accessing different data sets. Looking at all the aggregated data, it became clear that from a long-term perspective, people who had invested in risky securities at the beginning of the century had done very well. People who had bought bonds and T-bills had not performed as well. The optimists had triumphed. Next, Meb brings up a quote from Elroy about a controversial finding regarding the lack of correlation between economic growth and stock market performance. If anything, the relationship was reverse. Elroy expounds upon this, telling us that if it’s obvious that a market is growing, that’s public information. You can’t trade that since everyone else knows too. So, if you investing in countries where GDP has been growing, that could mean you’re too late. Meb steers the conversation toward valuation, market cap weightings, and home country bias. Elroy walks us through the market cap concept, touching on the historical Austrian empire as well as the Japanese bubble. This leads to a lesson in finance, which includes real yields today, the Gordon Model, the multiple people are willing to pay today (which is higher), and the takeaway that “high valuations don’t necessarily mean that we’re going to see asset prices collapse” – they’re a reflection of the low interest rates we have today. Meb asks about bonds, and whether Elroy has seen another historical period of negative yielding sovereigns. When you look at real rates, how does it play out for future returns? Elroy tells us that real (inflation adjusted) rates are better to consider than nominal rates. And it turns out, real rates have been lower. Negative real rates are not all that rare – what is rare is so many countries experiencing them at the same time. This dovetails into a conversation about inflation and currency hedging. Elroy provides some color on currency issues but notes that hedging is not required if you’re a long-term investor. There’s plenty more in this centennial episode: factors… growth stocks versus value stocks… historical returns of housing… even stamps, musical instruments and the investment returns of a good Bordeaux. How does it compare to that of equities? Find out in Episode 100. Learn more about your ad choices. Visit megaphone.fm/adchoices

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: Why should we listen to your podcast when you say the best ROI is to focus on skills directly benefiting our work performance? You've said you'd like to invest in a farm REIT. But you've written about dividend investing as a suboptimal strategy. Can you reconcile these two apparently contradictory ideas? Which asset class is going to shine 5 years from now? What’s the best strategy for folks with a limited selection of 401k funds? 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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

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. Learn more about your ad choices. Visit megaphone.fm/adchoices