Meb Faber
Episode #322: Radio Show (June 21, 2021)
Link.
- March 2020: Pandemic bottom
- Summer 2020: interest rates bottom
- Fall 2020: Election
Going back to the 1920s, worst year for value was 1999 and best year for value was 2000. That was till 2020, which was actually a worse year for value than 1999.
US CAPE is 38 right now.
This is a high US valuation unless there is some explosion in innovation in earnings, the likes of which we’ve never seen before.
Foreign developed has a CAPE of 23.
Emerging has a CAPE of 15.
Meb likes strategies that are not popular.
In 2021, buy and hold investing is a commodity.
Meb is forcasting zero real returns on US stocks & US bonds.
ETFs have a better structural wrapper than mutual funds.
Owning active mutual funds in a taxable account is a big no-no. Active ETFs don’t have nearly as much of a tax drag. The active mutual fund tax drag can be up to 70bp per year!
Companies are doing conversions to mutual funds to ETFs.
Turns out the big catalyst for ETFs taking over is something as boring as taxes.
Codifying rules helps with decision making and to build discipline in hard times. Automatically investing a portion of your paycheck in a retirement plan is a great example.
Episode #311: Radio Show
Link.
You should build an investing portfolio with a plan with the knowledge that at some point, you’ll encounter something you’ve never seen before.
2020 was the fastest time from an all time high, to a bear market, and back to all time highs.
Stock risk is correlated with what’s going on in the real world, with your human capital.
His current pinned tweet shows graphs that demonstrates all the craziness that’s going on right now. It’s hard to get through this pinned tweet without feeling nervous, especially what’s happening in the United States.
Bonds are easy to forecast nominally. The yield is almost always what you get nominally.
US stock market valuations are really high. Expectations are unrealistic. Investor allocation to stocks is higher than ever in history. Interest rates are going up. Taxes are going up. Only thing left is for the trend to turn. We’re up to ~37 on the CAPE ratio.
Market cap weighted indexes don’t include fundamentals or valuation.
When CAPE has been so high historically:
- 1998-2000 in US
- 88-89 & 99 EAFE (Japan was super high in the late 80s)
- 2007 Emerging markets (China & India were super high)
Japan had zero returns for 30 years. Looks amazing now.
You have to consider that the large cap US stocks will offer zero returns.
Value got to historic spreads. 2020 was the worst year for value. 1999 before was the best year for growth / worst year for value.
US investors put 80% in the US and that seems crazy to Meb.
AQR pointed out that the recent crazy outperformance of the US is almost entirely attributable to multiple expansion.
Russia has CAPE of 8. US is 38. They’ve had same stock market performance over the last 5 years.
Meb thinks the story has finally changed in the last year. He thinks there’s been a regime change and value is now set to outperform.
In the summer we were coming off 10-year yields of 0.5%.
US bonds are some of the highest-yielding in the world, which is crazy. Lots of countries have negative yields.
Meb has been blogging for 15 years.
How Meb invests his money
March 9, 2020
Link.
Majority of Meb’s wealth is in Cambria and The Idea Farm.
Rest of Meb’s wealth is allocated as follows:
- 36% farmland
- 36% 150 private company investments
- 18% Trinity allocation
- 6% foreign equity funds
- 4% tail risk ETF
Farmland is a stable, income producing asset.