The Meb Faber Show - Better Investing Folgen

In honor of this Sunday’s Super Bowl, Episode 38 is a special, bonus “gambling” podcast. We welcome mystery guest, E.V. Better, which is an alias for “Expected Value Better.” Meb starts by asking E.V. how he got to this point in his career. E.V. had a traditional finance background, working at a long/short hedge fund for 5 years, but realized he could apply certain predictive analytics that work in the financial world to the sports betting world. He helped create a basketball model at Dr. Bob Sports and enjoyed it so much that he made the jump from traditional finance. Next, Meb requests a quick primer for the non-gamblers out there; for instance, how the various types of bets works, the “lines,” the most popular bets, and so on. E.V. gives us the breakdown. The conversation then drifts toward examples of “factors” when it comes to gambling (such as “value” or “momentum” is in the stock market). E.V. tells us there are really two schools of thought in traditional investing – fundamental and technical investing. When it comes to gambling, there are similarly two schools of thought; you have the strength of a team that’s measured by traditional stats (for example, net yards per pass) or technical factors (having been on the road for 14 days…having suffered 3 straight blow-out losses). When you combine these two factors, you better a better idea of which way to go with your wager. These leads to two questions from Meb: One, how many inputs go into a multi-factor model? And, two, how do you replace older factors that don’t have as much influence or predictive power as they used to? E.V. gives us his thoughts. Meb asks about “weird” or interesting factors that are effective. E.V. points toward “travel distance,” though the effect has diminished over time as travel has become easier. He also points toward “field type.” This leads into a discussion about betting against the consensus (contrarian investor, anyone?). And this leads into a common investing mistake – recency bias. For example, because the Broncos won the Super Bowl last year, people expected them to be great again this year…and they didn’t even make the playoffs (Meb is still bitter). Meb steers the direction away from the NFL. Whether basketball, baseball, or whatever other sport, you’re simply trying to find an edge over the house. Meb brings up “variability” (the more games the better if you have a slight edge), and asks how this changes over different sports. E.V. says duration of season is a huge factor. Also, the level of data available for analysis is key (for example, the amount of data in baseball is amazing). But overall, E.V. says the goal is reduce the variance to make thing as simple and predictive as possible to find your edge. Finally, we get to the topic du jour – the Super Bowl. Meb asks E.V. directly, “Who do you like with New England at -3?” If you’re thinking about betting this Sunday, don’t miss it. There’s far more in this bonus episode, including discussion of betting on the results of the Super Bowl’s coin toss… How long it will take for Luke Bryan to sing the National Anthem… How many times will “Gronkowski” will be said by the commentators during the Super Bowl broadcast… Want to put the odds in your favor? Then join us for Episode 38. Learn more about your ad choices. Visit megaphone.fm/adchoices

In Episode 37, we welcome John Bollinger, creator of Bollinger Bands, one of the most widely-used analytical tools in investing. As John is also a market historian, Meb start by asking him about his historical influences – those individuals who helped shape John’s perspectives on the markets and trading. John gives us his thoughts, identifying who he believes is one of the most important figures in technical analysis. This leads to an often-forgotten takeaway – that many of the most effective market concepts have been around for a long time. Some very profitable strategies that still work today were being explored 100 years ago. Meb redirects, asking John about his background. It turns out, John was in the film business as a cameraman. But by a few twists of fate, he ended up in front of the camera, providing technical commentary on markets for a fledgling financial broadcast network. This leads into a discussion of John’s famous “Bollinger Bands.” He gives us an overview of the tool, and how he came to establish it. In essence, Bollinger Bands can help investors identify relative market bottoms and tops, helping find direction for profitable trades. Meb then asks if John’s thinking on Bollinger Bands have changed since the early days. John tells us that the core concept stands the test of time, though he has added some extra indicators. Next, Meb asks about combining two types of analysis – technical and fundamental – something John calls “rational analysis.” For many people, you fall into one camp or the other. But John was able to find overlap between them. He tells us how, and even ropes in two additional types of analysis to include – quantitative and behavioral. He thinks combing all four works better than using any single one. Meb asks how you actually use them all together, to which John gives us his thoughts. Meb then asks which sector John is currently identifying as a good source of potential trading profits – but he immediately discounts the validity of his own question. You’ll want to hear why. This leads into a great takeaway – using the right charts for entry/exit in a trade. Specifically, a trader may use a short-term chart to initiate a position, but then not move to a medium-term chart to help him navigate how long to hold the position. Instead, he keeps looking at the short-term chart, which obviously will oscillate, and potentially scare the investor out of the trade. John says “People have this time frame confusion that I think does a huge amount of damage.” Meb then asks about trade management. John says the most neglected issue is position sizing. People need to know how much capital to commit to their strategy, and there is a mathematical “optimal” answer. In essence, the problem is “betting too large.” This leads John to reference the trading concept of “regret” – the percentage of time you’re in a drawdown. Turns out it’s about 80% or 90% of the time you’re invested. The only times you’re not in a drawdown are when you’re setting new highs, and that’s pretty rare. But most investors hate drawdowns and just don’t do well with this reality (part of the reason why investing is so hard for most of us). There’s far more in the episode, including the most influential books John has read, Bitcoin, currencies, how to trade volatility, and John’s most memorable trades (good and bad). What were they? Find out in Episode 37. Learn more about your ad choices. Visit megaphone.fm/adchoices

We’re back with the first Q&A episode of 2017. We start by discussing the “Zero Budget Portfolio,” about which Meb wrote a recent blog post. The quick idea is that when considering your portfolio, you should start from scratch, or “zero.” Imagine your perfect portfolio – which markets you’d like to own, which assets, tilts, etc. Now compare that perfect, hypothetical portfolio to your actual portfolio. To the extent that your real, owned assets have a place in your perfect portfolio, you’ll continue owning them. Any assets that don’t fit, you sell immediately. But it’s not long before we dive into listener questions. A few you’ll hear tackled are: -         How do I decide whether I should use a robo-service or manage my portfolio myself? How likely am I to underperform a robo?   -         We know that value can lag market returns, but should lead over time. What is the time horizon by which you determine whether a strategy like value is successful?   -         Are there are country ETFs that you would not trade in a global, low-CAPE portfolio because of country risk?   -         How has your timing model performed since you introduced it a decade ago?   -         Will you discuss momentum investing versus chasing performance? It seems that a long-only momentum portfolio basically chases what has already gone up.   -         Given real world tax issues, is active investing still a better strategy than buy-and-hold?   -         Given that 44% of the S&P 500 revenue and profit comes from overseas, is there really a home country bias if you are invested in the S&P? And with this in mind, what is the right allocation to Emerging Markets? As usual, there are plenty of additional rabbit holes, including options, currencies, and even the Baltic Dry Index. What’s Meb’s take on it? Find out in Episode 36. Learn more about your ad choices. Visit megaphone.fm/adchoices