The Meb Faber Show - Better Investing Folgen

In Episode 60, we welcome the great William (Bill) Bernstein. Bill starts by giving us some background on how he evolved from medicine to finance. In short, faced with his own retirement, he knew he had to learn to invest. So he studied, which shaped own thoughts on the matter, which led to him writing investing books, which resulted in interest from the press and retail investors, which steered him into money management. After this background info, Meb jumps in, using one of Bill's books "If You Can" as a framework. Meb chose this as it starts with a quote Meb loves: "Would you believe me if I told you that there's an investment strategy that a seven-year-old could understand, will take you fifteen minutes of work per year, outperform 90 percent of financial professionals in the long run, and make you a millionaire over time?" The challenge is the "If" in the title. Of course, there are several hurdles to "if" which Meb uses as the backbone of the interview. Hurdle 1: "People spend too much money." Bill gives us his thoughts on how it's very hard for a large portion of the population to save. We live in a consumerist, debt-ridden culture that makes savings challenging. Meb and Bill discuss debt, the "latte theory," and the stat about how roughly half of the population couldn't get their hands on $500 for an emergency. Hurdle 2: "You need an adequate understanding of what finance is all about." Bill talks about the Gordon Equation, and how investors need an understanding of what they can realistically expect from stocks and bonds - in essence, you really need to understand the risks. Hurdle 3: "Learning the basics of financial and market history." Meb asks which market our current one resembles most from the past. Bill tells us it's a bit of a blend of two periods. This leads to a good discussion on how higher returns are more likely to be coming from emerging markets than the U.S. Hurdle 4: "Overcoming your biggest enemy - the face in the mirror." It's pretty common knowledge we're not wired to be good investors. So Meb asks the simple question why? And are there any hacks for overcoming it? Or must we all learn the hard way? Hurdle 5: "Recognize the monsters that populate the financial industry." Basically, watch out for all the financial leeches who exist to separate you from your money. Bill tells us a great story about being on hold with a big brokerage, and the "financial porn" to which he was subjected as he waited. There's way more in this episode: Bill's thoughts on robos... What Bill thinks about any strategy that moves away from market cap weighting (Bill thinks "smart beta" is basically "smart marketing")... How buying a home really may not be a great investment after all... Cryptocurrencies... and even Meb's "secret weapon" of investing. All this and more in Episode 60.

Episode 59 is a radio show format. This week we're diving into some of the recent market stories which Meb has found most interesting. We also bring back some listener Q&A. We start with a Tweet from Cliff Asness, in which he rebuffs a Bloomberg article titled, "The Death of Value Investing." The article states that value isn't working. Sticking to that approach has resulted in a cumulative loss of 15 percent over the past decade, according to a Goldman Sachs Group Inc. report. During roughly the same period, the S&P 500 Index has almost doubled." So is value investing dead? Meb gives us his thoughts. We discuss its underperformance, mean reversion, and factor-crowding. Next up is a New York Times article referencing a recent stance-reversal from Burt Malkiel, a passive investing legend. He's now saying he recognizes where active investing can exploit certain market inefficiencies. The same article has some great quotes from Rob Arnott on the topic of factor investing, and the danger in tons of quants all looking at the same data and trading on it. Meb gives us his thoughts on factor timing and rotation, using trend with factors, and the behavioral challenges involved in both. Another Arnott quote steers the conversation toward backtesting - the pitfalls to avoid when backtesting, so you don't create a strategy that looks brilliant in hindsight, but is hideous going forward. Next up are some listener questions: I still can't wrap my head around how to use commodities in a portfolio. The Ivy Portfolio promotes putting 20% in a broad commodity index, but in the podcast, I've heard you discuss the financialization of commodities futures leading to loss of roll yield. So what's the answer here? Include commodities as an inflation hedge but be prepared to pay the price of long term drag? Or forget about commodities and just focus on stocks/bonds/real estate? Please explain the difference between the unadvised practice of performance chasing and the highly encouraged practice of momentum investing. I would like to know your thoughts on implementing lifecycle glidepaths for an individual or clients' portfolio. Your quant-style approach looks at risk a lot different than most, but I do see value in reducing portfolio risk as you come closer to withdrawing the money - the question is which risk, or what approach do you use to reduce the risk? Regarding your trinity style approach, does that mean reducing from a Trinity 5 to a Trinity 3 (for example) a couple years prior to retirement? There's plenty more - including our new partnership with Riskalyze, which enables advisors to allocate client assets into Trinity portfolios. But the more interesting story is how Meb gave his wife food-poisoning the other night. How'd he do it? Find out in Episode 59. 

In Episode 58, we welcome Axel Merk from Merk Investments. After a bit on Axel's background, the guys jump in, discussing the Fed's decision to raise interest rates today (recorded on Wed 6/14/17). Axel discusses how the Fed has announced the normalization of its balance sheet and the pace at which it would like to do so - but they've left out lots of details. He likens it to driving into a tunnel with no lights on. In essence, the Fed doesn't know where it wants to go. Axel's response touches upon our current low volatility. Meb hones in on this, asking if the low volatility is in part due to actions from the Fed. Axel believes this to be the case (central banks in general, not just the Fed). Yet there's plenty more, involving how central bank activity has fueled this up, up, up market, with investors piling into risk assets. But Axel thinks asset prices are likely to come down from here. He says "A lot of that (rising asset prices) has been induced by central banks. The unwinding of that is going to be, at the very least, let's put it in quotes "'interesting.'" Meb then focuses the conversation on equities. He says how here in the U.S. they're expensive. So what does Axel see as the opportunity set in equities around the globe? You'll need to listen for the details, but Axel likes a pairs trade, going long France and short the S&P. Of course, he is quick to say he could be wrong on both legs. Meb segues to China, as Axel had mentioned it earlier. If you're a regular Meb Faber Show listener who heard Steve Sjuggerud and Jason Hsu's thoughts on China, you'll want to hear Axel's thoughts for a different take. He's not nearly as bullish. He concludes by saying "I happen to think that if you want to be looking at the one risk event that's out there, that's going to get people's attention, China is certainly at the very top of the list." Since Axel is a currency guy, Meb then brings currencies into the conversation, asking how investors might think about them in a broader portfolio context. Axel gives us a great overview of different currency markets, with additional detail on the Dollar vs Euro. Overall, he sees the Dollar toward the top of its cycle, and the Euro toward its bottom. He concludes by predicting that the Euro will be substantially stronger a year from now. There's a great deal more in this episode: whether retail investors should be following an endowment allocation... how holding cash is not necessarily a bad investment choice... a great discussion on gold, and how it fits into a portfolio... even Axel's thoughts on cryptocurrencies and Bitcoin. And of course, we get Axel's one piece of investment advice for listeners, as well as his most memorable trade (Hint - he bought Apple early). Find out all the details in Episode 58.