Meb Faber: Controversial Investing Insights

Meb Faber is the co-founder and CIO of Cambria Investment Management, which has over $2B in assets under management. He’s also the host of the excellent financial podcast the Meb Faber Show. 

In this episode of World of DaaS, Auren and Meb discuss global portfolio allocation, bitcoin ETFs, controversial investing strategies, and little-known financial industry secrets. They discuss the most common mistakes Meb sees in investment portfolios, the importance of global diversification and tax efficiency strategies for founders. 

This is a high-level investing strategy discussion, with Auren and Meb diving deep on the relative safety of different assets, ETFs vs mutual funds, and Meb's learnings from angel investing. They close out the conversation with Meb’s thoughts on the role of optimism in investing in startups, conspiracy theories, and his views on conventional wisdom in investing.

World of DaaS is brought to you by SafeGraph & Flex Capital. For more episodes, visit safegraph.com/podcasts.

You can find Auren Hoffman on X at @auren and Meb on X at @MebFaber

Follow World of DaaS @WorldOfDaaS 

Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)

Transcript

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everything in our world is driven by power laws so the big huge winners my Venture Capital friends understand this the startup World understands this far better than my public market friends for some reason two-thirds of stocks underperform the broad index it's about half don't make any money over their lifetime and like a third straight up go to zero but the average mutual fund manager out there does not invest any money in his own fund invest any it's zero any zero hello fellow data nerds my guest today is Meb Faber Meb is the CEO and chief investment officer of Cambria funds which has 14 ETFs and two billion in assets he's also the host of the Meb favor show which covers investing and Global Financial landscape Meb welcome to World of Das great to be here longtime listener first time uh participant awesome I love it all right well okay you publish this cool list of beliefs that you hold that the vast majority of your peers disagree with like what are what are some of those beliefs that are like most controversial let's just get right into it oh man just Canon balling into the pool huh exactly you know um I I kind of live in the macro World broad investing space and what you hear most of the time you turn on TV Bloomberg CNBC whatnot um people love talking macro because macro is interesting there's always crazy stuff going on in the world somewhere what the interest rates are or you know Middle East problems or those things yeah and because that's you sound smart when you talk to macro right you do and it and it skew is a little pessimistic so that gets that angle yep um so we started this list because uh and it's 20 strong I think at this point but the the concept was you sit down at a at one of your famous dinner parties and you make this statement with a bunch of people people in the industry so professionals 75% would shake their heads or say Meb you're an idiot um some are very specific some are very triggering but we'll we'll do a couple I think the one that almost no one agrees with would be and I don't even have a strong opinion on this but um say something along the lines of the Federal Reserve has done a good job no matter who you are you either think one of two things interest rates are too high or they're too low right the FED needs to raise the FED needs to cut on and on everyone thinks the FED are just a bunch of idiots and I have a bit of a conspiracy theorist take which is I think the FED just goes to the meetings they get a six-pack of beer maybe some uh White claws perhaps some some white wine they watch reruns of Seinfeld and they just Peg the FED funds rate to the two-year Bond and and if you pull up a long-term chart of the FED funds rate versus the two-year it's like they're twins sometimes it's higher sometimes it's lower but on average I think they could just put it on autopilot so you say that no one agrees with that one because you end up on either side no matter what no one ever is uh okay with the they could just put on autopilot like what's even the need for them like couldn't we just like automate the fed or something or yeah I think they should you know they get some uh data nerds Like Us in there and and they probably could um the problem is you get into our world of investing where so much is driven by the animal spirits and you start to get into expectations and if everyone's targeting this certain number does that change things some uncertainty in there you know it makes a fun behavioral question but it's great to talk about on TV because you can never disprove what someone said there's no alternate uh reality uh in the metaverse where we can look say oh had they not raised interest rates on and on but I'm pretty sure that if I was to give most investors a place Playbook with the path of interest rates I'm not sure it would help them I I I I don't know if they would be better off or not okay what what do you think are the factors that most people just frequently Overlook when it comes to their own investment portfolios yeah um factors has a special meaning in my world um so if you say factors it could mean things like PE Rao or on and on so you got me on on the two other things that trigger people when I get on Twitter would be stock BuyBacks or or long-term valuation metrics hello fellow data nerds if you're enjoying this episode please hit that subscribe button I would super appreciate you being a subscriber to World of Das now back to the episode but if you mean General factors on what drives investing portfolios um we did an old paper where we looked it uh like the old food pyramid from our youth that basically said when we were kids you wanted to eat as much carbs as possible so we're talking bread pasta like that was the base of the pyramid right which is probably inverted with from the knowledge we may have today and as we talk about that with investing too and we kind of go start from the bottom and move up you know so much time on the podcast or elsewhere we're talking about like the final two or three pieces of the pyramid because we assume that people probably have the basics right when and often in reality is they they actually probably don't base of the pyramid it's like cooking my mom is is not too far away from you in the South North Carolina she was an old school Southern cook you know recipe is not exact it's it's like by feel by taste so if you make chocolate chip cookies as long as you have the made ingredients they're probably going to end up okay if you leave out chocolate chips or you leave out butter or you leave out flour something's going to mess up so we say the starting point the default for portfolios and I'll promise I get to the to your question in a second is you start with a globally Diversified asset allocation and what does that mean that means Global stocks Global bonds and Global real assets the vast majority of Americans we talk to and investors all over the world it's true everywhere do not have that portfolio they have a highly concentrated portfolio almost always in their own country so my Brazilian friends do this I say almost everyone I know is like very weighted toward S&P 500 and you're you're what you're saying is that's bad thing essentially so the US is a percentage of what we call Global Market Cap in stocks is about 60% so the default is you should on an index basis put 60% in us and the rest should be the rest of the countries in the world but no one does this the people in the US put all their money in the US but the crazy thing is this is true everywhere jaanese Chinese friends Brazilian friends Greek friends and and if you ask anyone in the US over the past 15 years they're like amazing idea it's crushed I put all my money in US St particularly S&P you ask anyone in any other country in the world say was it a great idea to put all your money in Russian stocks or even British stocks and China is like one of the worst performing markets in the last five years right yeah and so um you know you go back to the long Arc of History my favorite investing book uh invest um um oh my God the name of it um Triumph of the Optimus sorry uh by Dimson Maron is a fantastic book because it shows the full history of invest in various markets and it'll surprise a lot of people us was one of the best performing markets it went from uh not the largest market cap country in the world in 1900 uh UK was but went uh all the way up to 60% so huge uh move but Ty South Africa and Australia were actually better performance why is like you know us is roughly like 20% of global GDP but 60% essentially of like market cap like what is it just like just the winners of crew and especially we like the Magnificent 7 Etc you know they just tend to be more global companies or you know why why is the US like three times its weight in market cap there's a handful of of topics uh that you've just touched on there the first is looking at any point in time one of my favorite tables and we can send it over to you is a snapshot of the top 10 stocks in the world by market cap by decade and so right now that sucker is almost all us right and particularly heavy in Tech but if you go back at various points in history 20010 uh probably had a lot more Diversified China was was probably um uh pretty well represented if you go back to the 1980s it's like all Japanese uh so it in in Japan in the 80s was the largest stock market in the world at the time bigger than the US um which is crazy when you think about that today right nobody would have thought that you know in Japan is such a great case study uh for so much I'm actually headed to Japan this week the yen is struggling so a great time to travel um but um Japan's a great case study because it's not some T tiny country on the periphery it's a top three World economy top market cap country and it had the biggest bubble we've ever seen in stocks so my favorite bubble was 99 right uh I was in college right down the road from you at Virginia and you know my professors Trad in stocks class people just going nuts and but that was cute in comparison to the 80s bubble in Japan was um almost double what we saw in the US but the Japanese stock market has now had decades and Decades of no performance since then um and again this isn't like the 30th biggest country in the world this is one of the big three so Al Japan is very in some ways is very different like Japan is still doing zero interest rates um you know so they're still well you know much more weight toward like trying to grow versus inflation now here's the interesting part is you're starting to see some changes you know we uh manage a number of international portfolios and the culture around uh governance how Japanese companies compete um and really think about uh creative destructive has been changing in the past 10 years uh so we actually are pretty I mean we're quantitative it's not like I can say like we're waking up being bullish but the models have been pointing towards Japan looking a lot better certainly than it was 10 20 30 years ago so we're getting pretty excited and old old war Warren Buffett Uncle Warren has been buying up some Japanese companies too and that's that's usually a good sign when when you think of like most Americans you know are 100% probably people on listening to this podcast are very familiar with S&P 500 and they probably most of them own S&P 500 or or some sort of like derivation of something very close to that like is there just like a simple index that you would suggest of like okay here's the simple index outside that isn't talking your own book but just basically like you know Global index everyone everyone uses let me do a quick one minute um deviation first of all 2024 best time ever in history to be an investor there's Limitless Choice particularly in the United States you can invest in tax efficient ETFs for almost no cost it you are about a 0.03% cost unbelievable and if you actually include short lending that portfolio is probably uh expense ratio negative meaning you're getting paid to own this portfolio yeah and that has its Origins 50 years ago and what Jack Bogel the late great founder of Vanguard did with indexing and indexing what it used to mean 50 years ago and this is loss on a lot of investors so stick with me for a second is if you're to talk to your spouse your neighbor your child and say hey we invest in the S&P or something like it what does that mean and I think a lot of investors they kind of understand they say well it's the biggest companies it's like apple and Microsoft and Google they say yeah but how do you how do you actually wait those and I think most investors miss that because it's actually just the price of the stock times the number of shares there's no tether to the actual fundamentals does this company have earnings is it growing does it have sales what's the valuation none of that which is it rebalancing every month every quarter like how are they rebalancing the true definition of market cap weight is you simply own everything so as a company gets bigger you own more as it gets smaller you own less and market cap is a great way of being average but what it really um enabled the huge muscle movement and this is going back to your question 10 minutes ago is that it allowed investors allowed companies to offer investing products for very low cost because you don't do anything you don't have to rebalance a market cap index ever other than if like m&a or spin-offs those sort of thing you don't do anything so if you don't do anything you don't have to charge much and that was a huge Innovation but fast forward 50 years where trading is frictionless mostly at this point you can offer other investing strategies that are not market cap weight because the Achilles heel of market cap waiting first of all it's totally fine okay don't don't take the wrong message here totally fine the Achilles heel is when you have these boom euphoric bubble periods so 99 uh China in 2007 Japan in the 80s on and on you can find these periods the market cap waiting because it has no tether to fundamentals goes completely banana so you end up putting most of your money in the most expensive companies countries sectors at the worst possible time and so in Japan was the largest stock market in the world if you a global investor you put most of your money in Japan when it was 100 PE in the 80s that's crazy so um moving away from this market cap way to something that has some sort of valuation Focus like a a Berkshire haway Warren Buffett style investing is a slightly better way to do it um and you can do it in today's day and age with better uh with ETFs that are tax efficient so International investor there's plenty of international ETFs and indexes that'll get you to the to the starting point on um and Vanguard we certainly believe is is one of our favor what's the point when someone should even like really care like I mean if you have a let's say under a million dollars investable assets like and you spend all this time you know you could probably spend that time like saving money um like you know getting better deal on your rent or something like that you could you could spend more time just like Gathering knowledge you get you if instead of getting a six% raise if you got an eight% raise like in some ways like that would be a much higher return compounding um like should you just focus all like is but then at a certain point like maybe it does make sense like is there a Tipping Point where it actually makes sense to like actually really think about your portfolio here here's the here's the challenge and here's the problem um the diagnosis is correct if you spend time getting set up and have a good allocation doesn't have to be perfect just a good allocation from the get-go you could do that and not look at it again for 10 20 years and probably be 90% of your friends right low cost tax efficient Global allocation you can do that in in all-in-one funds today Target date funds all these sort of things we have a couple um but the key is getting it set up okay and then second and this is the hardest part for everybody is not mucking around with it just not touching it yeah and the problem is we're all human right the Euphoria the um you know uh the late great Charlie Munger Warren Buffett's partner used to always say um you know if I've heard Warren say this a 100 times it's not Fe fear and greed that drives markets it's Envy so if you're neighbor you know has invested in the mag 7 last year and is bragging about you know their vacation to the Mal Dives and how much money they're making and their new house they're buying in Napa or they're invested in you know some startups that hit like you feel that very real fomo my favorite real example of this is if you look they have a a sentiment study they ask investors are you bullish uh are you neutral are you bearish on stocks and it goes back many decades and the single highest bullish reading ever recorded in this study was December 1999 the single worst time to buy stocks in my entire lifetime the single most bearish people were March 2009 the single best time to buy stocks during my lifetime yeah so the struggle is getting it set up and then not doing a bunch of dumb stuff now if you're interested in markets and you it's a hobbyist that's one thing but we did a post we like how much the best way to add yield to your portfolio is to not spend any time on it because um the amount of your calculate your per hour fee how many hours you spend a week scrolling Reddit Twitter um not listening to podcast because that's hugely value out but of course of course course but uh doing these things um and you actually think it's going to be value added I think is is um is a stretch so getting the basics set up I think is the most important part now for Americans most of people listening here are Americans um you know us has a Global Tax net uh an Nexus you you can't outrun the tax man you got so so thinking about things that are tax efficient are quite valuable for Founders and a lot of people here are founders like what would you kind of advise Founders to start thinking about outside of just maybe let's say the qsbs which would be like a more common thing like a lot of Founders think about I mean qsbs we did a poll is like what percentage of people and I have a pretty um concentrated audience of professionals is like who even knows what Q qsbs is and the extent you use it almost no one knew now the the founder startup Community probably knows more but let's start with the basics on the investing portfolio then we can get to the periphery um and and we did a piece on this years ago called sidewalk money which was kind of fun which talks about things individuals can do um but one was look simply moving from a structure of example of a mutual fund your standard average mutual fund to an ETF in a taxable account if you're a stock investor on average average the benefit is usually bigger than the expense ratio benefit so the average mutual fund today is still 1.25% now you can get them they're down around 0.1% but on average the average one is 1.25% and the average ETF is much cheaper it's roughly half of that but on top of that the tax benefit and no one usually cares about taxes till April rolls around whatever the deadline is now um but if you think about it that that simple structural because the ETF tends to be more tax efficient is about just to explain in the ETF you only pay tax when you sell the ETF right so let's say you've got a a gain after you know five years you sell it you pay tax on that gain whereas on if you're owning the S&P 500 you're paying tax on the underlying assets which could have dividends could have other things that happen during that time you're so you're probably so here's the differentiation um you're going to pay taxes likely on dividend no matter what CU they get distributed but let's say you bought spy spids S&P 500 back in the 90s and held it to today you would have had zero capital gains distributions ever um because the structure of the ETF does it all in the background doesn't matter how much turnover on the fund is um you should have no capital gains distributions on average for that entire period a mutual fund just the way it's structured if money comes in money comes out they have to buy and sell every day and so then like so last year um or year prior there were mutual funds that were down 20 30% and on top of that we're paying out 10 or 20% of the fund as capital gains uh income and so you had this like double whammy you're like wait I lost money on this fund and I have to pay taxes on it it's it's a pretty nerdy wonky topic the the simple takeaway is on average default to ETFs for two main reasons on average they're much cheaper in mutual funds and expenses matter and second on average they're much more tax efficient than uh mutual funds are yeah and not only they more tax efficient but then you also get to choose when you essentially when you pay the tax so correct you can say okay this year I'm GNA take the gain for whatever reason I'm gonna whereas this other year like that game might not might be useful for me or if it goes down I could sell and take the loss that year whatever it is yeah what what do you think of for people who have Ross um and you know some people over time can get a pretty sizable Roth if they're putting you know even if they have a 401k and they're putting the maximum in and stuff like that how do you decide okay you've got a taxable account um and you got your WTH You can invest out of both like do you put like more tax inefficient things like bonds or you know something like that in your WTH and then you put less you know more you know more efficient things in your tax like how do you think of assuming like you're just thinking about one portfolio you know um we often tell people they sort of uh analysis paralysis when it comes to all these different accounts and saving vehicles and if you look at the the own goals like in soccer you score a goal on yourself just the dumb decisions people make that are far more important than the exact specifics like we say get the main things right so how much you save and invest in the first place we believe outweighs almost all the other topics Y and in most investors if you look are you maxing out your 401K are you saving whatever the number is 10 20 30% of your income come that usually swamps all the other decisions down the line once you have everything in place and not investing in a bunch of hairbrain things um then you can start to optimize the tax efficiency but even then the challenges is you know um with various people you can kind of make the cliche either way some people are going to be higher income and lower in retirement and some are vice versa some are be like you know what I'm going to move to PTO Rico so on average you want to be paying less taxes than more so having things like the the higher income type of Investments we have yield again for the First Time and Forever in bonds uh by the way which is uh that was such a weird period negative negative yielding interest rates um but we have yield again and those type of yielding Investments you know if you want to put it in a tax sheltered account you're not going to be paying taxes on it but um there's a lot of variability in this and the hard and fast rules a lot of people talk about I think can get a little squishy too main Keys just save and invest that sucker in the first place now for people in the tech sector um you know they they've got obviously like a job in the tech sector um they're they're either owning the S&P 500 they're probably owning a lot of tech stocks either way it's super weighted toward Tech they may even own real estate in the San Francisco Bay area which is very weighted toward Tech like should they start should that be some concern like should they start thinking about like somehow uh like it should where you work be a factor of how you you know if you think about um times past there were certainly a lot of people who used to invest they would work at a company and invest their retirement all on the company's stock which is scenario you know you can always show the Amazon or microsofts or Googles of the world where that was a great idea but the thousands of other companies um that did poorly I mean like one of the biggest takeaways about investing in stocks and one of the reasons that market cap indexing work that we talked about earlier is you own everything and everything in our world is driven by power laws so the big huge winners my Venture Capital friends understand this the startup World understands this far better than my public market friends for some reason even though they do it every day is the McDonald's the um uh you know apples these huge multibagger what we call winners that do 20% a year for a decade or more drive all the return so it's like two-thirds of stocks underperform the broad index it's about half don't make any money over their lifetime and like a third straight up go to zero and so as you think about that from a um retirement standpoint and how you invest your money the chances are probably slim that you're going to end up with the next Google right and so diversifying makes a lot of sense the example we gave up earlier and it's called Home Country bias where everyone invests most of their money in their own country this is true with bonds too it's actually true geographically in the US so not surprisingly people in California have a much higher Tech waiting people in Texas have a much higher energy waiting people in the Northeast have a much higher Financial waiting okay so and and this is this is a topic that I wrote a paper on a few years ago this is one of my least read papers uh it was called what is the the world's safest asset or um we did a during covid we did a a multi-part series where uh it was like a four-part series the first one is how I invest my own money and it's a sad State of Affairs listeners but the average mutual fund manager out there does not invest any money in his own fund uh his or her his or her fund which is really sad invest any zero any zero the average on average is zero even though they probably get they probably have a no fee relationship with their own fund they still don't invest in it you know it's this in this concept of skin in the game and I say you know but you want they go on TV and tell tell everyone to buy their fund you say well do you own any so always I always joke I said if you're an investor ask they how much do you own and I put all my public assets into our funds um but then we did a a portfol an article called the stay Rich portfolio and the get-rich the get-rich and stay Rich yeah and we were talking about how it's it's a different mindset and I said that the struggle with the stay Rich portfolio is you think in terms of like what is the safest asset out there and how do you invest and starting to think about your human capital and I said this is somewhat of a chairlift conversation meaning you know I love to ski like you're sitting with some friends on a chairlift nothing to talk about so you start talking about these weird topics and and thinking about your risks and um I tend to be pretty non-consensus on this discussion so going back to our beginning where um if you look at any asset and you ask people say what's the safest asset most people are going to say t- bills uh or you know short-term treasuries money at the bank and then you got the the handful that listening to this that are the the coiners right it's Bitcoin or nothing or crypto whatever some people might say real estate but the challenge is everyone thinks in terms of a nominal World day-to-day prices and they they ignore inflation and so if you look at any one asset it doesn't matter if it's US Stocks who've declined over 80% uh real estate so REITs publicly traded REITs have declined that much commod certainly bonds most people say t bills well they've never declined we say well hold on a second after inflation they've declined by over half and so you end up saying okay well how do I think about building this safe portfolio well the first thing you want to do is not put all your money in one risk yeah and the vast majority of people put that all that money in one risk which is the S&P essentially or you know even worse targeting their own um exposure through Equity Investments and a lot of startup Founders are certainly um uh exposed to this and it turns out and I I can't say prove because that's not something you can say in my world you can demonstrate that a globally Diversified portfolio is actually safer than sitting in t- bills so by volatility by maximum draw down um and and we were talking about this before the last couple years so listeners if you own a bond fund there's good chance that sucker is down 10 20 50% in the last couple years a lot of people don't know this right they think bonds differently and that's a lot and if you think about because that's because interest rates have gone from zero to five so but a globally Diversified portfolio has done great and so we said a lot of people are going to start to think about this with their Safe Money personally what do I do with my cash if I have to save for an expense in 10 20 30 years kids education Etc but also corporate Treasury and then what do they do with their money and then all of a sudden you saw the Silicon Valley Bank all that stuff go down last year um and people really started to rethink what do they do with their safe money but it's a good I think healthy exercise to have to think about this concept of mentally bucketing all right this is sort of my get-rich portfolio and this is sort of my stay Rich because it's a conclusion that and this is actually what we do at at Cambria we actually invest our quote safe money and don't just put it in t bills which I don't know really anyone else I think Michael sailor had the same exact thinking and diagnosis but then he took a hard left and said all right you got to put it on bitcoin we took a hard right and say globally Diversified which by the way Bitcoin is you know a percentage of that Global Market portfolio speaking of Bitcoin I mean what it's probably the biggest news in the ETF world has been these uh Bitcoin ETFs is that a big deal is a small deal like where do you come out on that um I've been a sideline cheer cheerleader uh I haven't had a whole lot of involvement um other than uh I loved a joke I had a tweet on Twitter X back in 2013 and and back then I was like there's no way an ETF is coming to Market anytime soon all my friends are spending Millions on legal fees but um I said uh I'm willing to make a bet with anyone that ETF spot Bitcoin ETF comes to Market let's do dinner I prefer Sushi and then I used 2013 because in I Us in the beginning of 2013 um I think Bitcoin of Bitcoin was like $50 or something like that it's like there's no way it's coming to Market like The Regulators are just not going to allow it um but then over the last year two with my friends in that world they're like it's getting pretty close um look I uh I I I'm I have a really unsatisfying take on this for everyone because there's the Bitcoin lovers and the Bitcoin haters and it's going to be equally unsatisfying to both people will come up to me over the last decade and say me I'm thinking about putting some money in Bitcoin or whatever ethereum um what do you think and I say hey look the starting point is the global market portfolio which we mentioned earlier if you just buy every public asset in the world every public stock every public Bond every public trading uh real estate um and then Commodities too what do you end up you end up with a portfolio that's roughly half stocks and roughly half bonds and it's globally Diversified foreign bonds are actually a bigger asset class um than than us bonds are um and that's around let's call it rounding 200 trillion the two things that are missing from that are single family real estate and the rest of the world as well as a lot of Farmland uh which we talk a lot about on the podcast but um of that Bitcoin let's call it maybe half a percent of the world market cap I say all right you want to put Bitcoin your portfolio um you know if your portfolio is 100 Grand you can put in what is that 5 bucks 500 bucks no one wants to hear that they either want to hear I got to put in half my money yeah or I got to put in none or short it you know right like and people the binary way of which people think about any Investments um is really dangerous uh we always say going hav very technical term is a thoughtful way to think about it so for us you put in half a percent and it goes up 10x God bless you now you have 5% um pausing I got a oh sorry I had a notification that my camera was Walky but it's it's back um so your year at a half percent it goes up great now you have a 5% a 10% a 20% um and it goes a zero it's not that big of a deal so thinking in terms of that I think market cap default is useful although most won't won't go that route there are scenarios where you know all of a sudden something becomes like an overweight like let's say you're an early Bitcoin person and you put you know you had a high conviction you put 1% in it and now 15% of your portfolio or something and you're like I don't know what to do I if I I don't know if I can sell and take the tax loss I don't know how I can deal with that like what do you deal what do you what do you suggest somebody once they're overweighted somewhere yeah there's um you know there there's a lot of Behavioral biases we have as investors there's uh a lot of wonderful writers and books on this topic and and I have all the biases which is why I'm a Quant right I'll take too much risk if you give it to me I'm overconfident my favorite analogy here when talking about positions to investors and say if you ask investors and we love to do polls on my Twitter and I said do you have a written investing plan it's like 90% do not and if not more um and I say it doesn't have to be complicated it could be on one sheet of paper it could be on one index card it could be yeah I invest in the global portfolio rebalance once a year boom I try to contribute 10% of my earnings to to savings it could be a 20page document I think Calpers is like 300 pages but um it it it does doesn't have to be but why is that useful it's useful because if Bitcoin goes to 500,000 you pull that thing out and you say okay this was my default here's how I can maybe deviate from this or think about it but most people are just winging it and it's important not just from the standpoint of when you're losing money so you buy a stock at 100 it goes down to 80 well that was dumb I shouldn't have listened to my neighbor goes I I'll just sell when it gets back to 100 well then it goes down to 50 and you're like I'm never talking to that person again it goes down to 20 there's no point selling it now it goes to zero right it's also useful on the flip side you buy a stock at 100 it goes to 200 you're like oh my God I can't believe I'm making so much money I'm uh thinking about this vacation to the Amalfi Coast you know or I'm thinking about this new Tesla I'm going to buy on and on but every 10 100 bagger was at once a double yeah right and so so thinking in terms of how you're going to deal with not just the losers but the winners is hugely important and and think and so this is why we often say you know learning history is table Stakes for investors because it gives them expectations on all the weird stuff that's happened in the last 150 years with the knowledge it could get weirder right and so thinking hey the Russian stock markets paused well that's happened before um you know certain Market China is down like you mentioned what 60 70% now well that's happened before and so you have this base case to to to work from and thinking in terms of the things that do great we become emotionally attached to our investments you don't believe me listeners pause this walk out to your garage look at all the junk you got in there and think hey if I cleaned out my garage there was a flood and the garage was empty would I go buy all that stuff again of course not chance in the world but investors become attached we all become attached to uh what we own and that creates a problem which is the emotions get in and then that fractures all of our logic and reasonable reasoning now on Angel Investing you you've made a lot of personal Angel Investments I think you made over 250 um in the last decade what are what are some of like the big learnings there okay so there's a lot so you know um when this started and I've kind of publicly documented this on the podcast and on the blog um you know my day job is managing ETFs we got over 100,000 investors but I like to learn about other topics uh on on our podcast we talk about investing in Kazakhstan or Farmland investing investing in Africa all these topics but I I from the standpoint of an area that I don't know about I like to um start small but also have some skin in the game you know it reminds me of Warren Buffett used to talk about hey I want to track this company I'm going to buy one share in their stock that way I get an annual report every year and I'm forced to read it and it keeps you engaged so when we started this a long time ago I said look this is an area I don't know much about and I would like to learn a lot and I know my style uh it's like teaching you know where you you are forced to learn and pay attention and if I'm using real money which is painful for me to lose uh I'll pay more attention so I said all right well if I lose all my money I'm going to be I'm going to do this for say three five years if I lose all my money I'm okay with that if I break even great if I match the S&P gravy if I make money um wonderful but I'm going to consider this education and tuition Y and I'm gonna start to learn uh and and everyone I know in this world that gets started has this massive Temptation because it's fun and exciting in where they just want to cannonball in right you see a couple deals you want to put all your money in and I said look I'm going to space this out over five years I'm GNA place a lot of small bets and learn and realize I'm going to make a lot of mistakes but this concept of these power laws and we have a piece on our blog called journey to 100x that has a lot of links and resources again because public markets this is true as well um and and start to understand the goods and the bads and we've seen a lot of it I tend to tweet about a lot of the the bad behavior too um but yeah I think it's up close to 350 companies now I might even be knocking on 400 um and some of them are just like okay you're in like some angelist Syndicate and you put a really tiny amount in and stuff so you know you can you can start this we tell listeners um there's a handful of the platforms um angelist is probably the biggest uh we funder and then there's some esoteric ones that focus on specific areas like um agriculture uh and then there's also a lot of direct ones Jason calanus has one um and traditionally the model is these Syndicate leads will bring a deal that is is a VC deal so it's an actual round that maybe seoa or other groups are doing and you end up paying a carry for that opportunity um to me uh if I tell people I say sign up for every possible Syndicate you can and you don't have to start investing like you can just kind of paper invest for a year understand the lingo understand uh some of the the um links that these investors may have incentives that may not line up with the end investor on and on and on and just start to wait in you don't have to dive in head first yeah and a a lot of the syndicates like the minimum check size may only be $1,000 or something so it's a it's a lot more um accessible for most people yeah and uh and this is true with public markets too resist the temptation that feel like you have to be Allin or all out and and come up with a plan say look I'm going to do this for five years I'm going to write 10 checks a year roughly a thousand bucks a year and and try it out um and maybe after two years you're like this is too much work um for me it's been hugely beneficial because it does two things one it helps you kind of look around the corner to public markets two it's out my business a lot because we see companies and ideas that we can incorporate and use and there's been a ton of those over the years and it's infinitely optimistic so going back to my world of public markets all day long it's just pessimism and negativity and this is one every company is well not every company some are just like you know not that exciting but others like you know changing the world we're doing cool stuff the night you have to be the naive optimism of a Founder because the reality is most of us fail you know it's like like you uh you have to think you're going to be one of the the special ones which it's hard as as as you know now um I I love asking Founders how investing made them a better CEO but for you I want to really ask you how podcasting has made you a better investor or has it yeah so um the first academic paper I ever wrote was uh came out in7 in the journal wealth management this is also the only academic paper I've ever written um part of which is because I the the academic Pro process which seems to be in the news a lot recently um you know is a very long and Antiquated process like my paper went behind a pay wall all this just nonsense and I said you know what I can post a paper online and I'm going to get feedback instantaneously that this how stupid this is or how great people replicate it like it's instant other than having to wait for a year to have four people read it and and it just is a a process that seems um out of date and so um content for me and being able to come up with ideas and publish them over the past 15 years has been um essential now part of that is because we were a bootstrap business and couldn't afford to uh pay out to hire a lot of people or advertise or to Market like we had to bootstrap it and so you know in the early days it was blogs and white papers and books more modern has been podcasting and um Twitter and who knows what else next but um it helps you as you know refine your process and think uh about what do you really believe and not and that as you test things sometimes it causes you to change your views and I've changed my views on a lot of things over the years um as uh as the markets have kind of um developed and podcasting for me more than anything it's just been fun because you can just ring someone up and say Hey you know I'm interested in we did a whole series on investing in space companies uh kind of before it was I think hot and then we did a whole series on investing in Africa a lot of the Emerging Market startup system I think is incredibly um interesting at an inflection point uh over the past five years I think most of my top 10 best performers have been xus at this point which is crazy um but more than anything it lets you test your views and as we know uh with social uh people let you know uh very quickly one way or the other um how they feel about it which has been I think uh useful too yeah one of the things I love about the internet is like you can quickly learn when you're wrong when you're like people have they'll let you know um fact some my best engagement things on the internet have been things that are completely off those are the ones that get the highest engagement not the things that are really interesting or you know are on and to the young people who are thinking about or nervous to start or start publishing things we always say just just start publishing um you learn to develop a thicker skin um we have a lot of friends uh particularly for my female friends you know the world can be a pretty cruel place on social and we say look you know in the moment it often can be hurtful but fast forward a year or two and some of the comments are actually really funny and uh so I say a very cathartic way to go about it is to get a Google sheet anytime somebody says anything really terrible uh or troll just throw it in the sheet because it's kind of like a washing your hands feeling and you forget about it you don't have to respond to it and you don't reflect on it over the years uh and we did a a tweet when we passed two billion in assets that um over the years had just marked all the Milestones but with uh troll comments that people made you know about about me specifically but our firm and ideas and everything is uh as kind of keeping receipts and it it's a it's it's a much more um cleansing feeling and way to go about it than just getting all angry at some cartoon uh avatar on Twitter yeah because it it but it is hard right I mean you need to e either need to attack it the way you are which is kind of like with humor or something you need some sort of strategy to attack it because the the comments can be very hurtful um and and they will if they if they even have some idea of who you are they'll figure out how to hurt you in a way that that can be hurtful right yeah yeah for sure um now uh you know I've heard you say that travel is the really the only way Americans understand currency prices um with that in mind what countries would you recommend our listeners travel to this year um so there's nothing better that an investor can do uh besides studying history than to actually travel because you start to learn a great deal uh outside of our own borders and and so the cultural aspect as side certainly um we we love talking about Japan on the podcast a because I love to ski there and that's a big secret I feel like I should stop talking about it but I say it's a fun fact that most um people around the world don't know that Japan is even a place really to ski but uh Japan again going back to their 80s boom has more ski resorts than any country in the world which I think surprises a lot of people and onp more ski resorts than the US more than the US it's like 500 now a lot of these are little mom and popop ones of course um and I think we've those are fun say you know yeah exactly um and uh the ens the sushi the the ramen on and on great the nicest people in the world but it goes back to the 80s when they had this huge economic boom and like you know I'll do happy hours with Traders and investors in in Tokyo and you talk to them and the concept of like a Buy and Hold investing strategy is is totally foreign they're like why would you Buy and Hold stocks because they don't go up right because their stocks haven't gone up and so you know this discussion of a very everyone tends to extrapolate their own experience with markets so if you talk to someone in any other country about what investing has been like you go over to um my favorite example I've said this many times on the podcast but going down to Columbia and South America I was there at a particular time I think in 2014 where their Market was really expensive but everyone's bullish and the money is pouring in and you can never foresee a time when stocks would go down and here they have gone down a ton since then and now they're really cheap but if you go to a place where stocks are super cheap usually that's because they went down 60 80% already and you tell someone that and they say well that's obvious no crap Meb I know that but we have no money like I might all my money has gone down yeah you talk to people in other countries so anyway um so all right countries uh yeah if you're in a Japan skiing come say hi kich and then um you know I have a few on my to-do list that I haven't been to or spent time in um but the US dollar has certainly been very strong and on a purchasing power parody basis uh it's definitely overvalued it's not totally crazy but towards Japan is one of the bigger spreads um and a way to the old Big Mac index a good way to look at uh you know how to think about currencies um I've never been to Africa so that is high on my list um of places to go I have a six-year-old um so we took him to New Zealand my niece is a vet is in vet school there uh so we ran around New Zealand which is like you know a young kid's playground um it's like the best place in the world to take a six-year-old so uh so I high on my list I've never been to Africa I would really like to spend some time and um uh some countries in South America I've never been to Brazil uh or uguay which may be Christmas time um but opened ideas all right okay cool um couple couple more personal questions before we leave what is a conspiracy theory that you believe um wow that's a great question my uh my answer earlier on the FED is is a humor one but um is one that I think is um not that far off from reality you know um I think I think we think about everyone in our world having Divine ability to forecast the future and so the amount of time that people gravitate like you know flies um to these forecasts of what is the S SMP going to do this year where bonds going to go with the full knowledge that it's going to make no difference like that's the crazy part like this whole forecasting and looking at the FED of their dot plots and then looking at how wrong they are every single time um you know I think um it shifts the investors uh perspective we we have a quote that we say it's better to be rip fan Winkle than Nostradamus in our world where meaning you invest you have this great portfolio you forget about it for a while versus trying to Divine the future now that having been said you know I run an active management business like our goal is to try to out perform um and so it's weird coming from that starting point but I think I think if the FED watched uh Seinfeld drank um drank some pale ales and just pegged the two-year I think uh uh I think that would that would not be a bad thing all right last question we ask all of our guest what conventional wisdom or advice do you think is generally bad advice oh there's so much oh boy I mean this is essentially my entire 20 list you know I I love to I love to poke a lot of the big boys and and one of my current favorite targets there's there's a lot of these giant institutions around the world cpers is my local favorite um where they spend countless amounts of resources um millions and millions hundreds of millions of dollars on this effort to manage their portfolios not just with people but particularly with fees and um and on average and we've written articles about this we said one many years ago called should cpers be managed by a robot should Harvard be managed by a robot yeah um on and on and on and the evidence shows that they'd probably be better off and um buying firing everyone and buying a bunch of ETFs and that's not popular and I jokingly on Twitter apply for their Chief investing officer role they because they get a new CIO about every other year for the past 10 years I think it's actually more than that it's like it's like the Carolina Panthers head coaching job it's just and there's so much drama situated with this and how much better would it be um you know to to just move on and make this systematic and so I just found out uh Friday that they declined again to interview me for their CIO job so we're gonna we're gonna um we're gonna launch a a a publicly traded um fund ETF that uh that is going to Target say um cpers and all these big institutions and say all right here's your investable benchmark now can you beat me because if you can't um you know you got a lot of constituents to uh to answer to and I think this particular cycle this late stage private Equity world of what they used to call leverage buyouts um is is everyone is hoping this is going to be the Savior for a lot of these investment institutions and um I think there's uh some setting up for quite a bit of disappointment there but um you know here we are in 2024 the US stock market's little bit expensive uh so we'll see but um I think uh I I think uh the CIO job is is not going to be mine again but for these big you know Pension funds or um endowments and stuff like that like they're you know getting wind and dine like to get Super Bowl tickets to you know or whatever like it it'd be very hard for them to just say hey we're giving up our job we're going to go do something else um even though you know they may get paid less than um you know they would at a at another kind of asset management you know more for-profit institution um it doesn't seem like like it doesn't seem like your idea is ever GNA stick it doesn't seem have the political even though they probably like the public would be better off the pensioners would be better off the endowment would be better off Etc you know the um the challenge is their CI role CI CIO role is not an investment role and that sounds funny because the I and CIO is investment but it's really more about being a politician and being able to craft a narrative to all the various constituents about why you're doing what you're doing because there's so many invested parties um the problem with that is you end up with so much um almost like um what are those like rubbe Goldberg machines to just come out with something on the end which is just a basic portfolio um it's kind of a mess so it's actually would be my worst nightmare to be say yeah well also some like if you're if it's an endowment for a big you know University or something then like whatever like I'm okay with that because it is it's just that it's just that that is going to be suffer but if you're if you're actually managing money on behalf of pensioners um then you know you really do have a they're relying on this money to um to to retire on and then you really do have a responsibility to those people these are not usually wealthy people these pensioners right there're they're um you know uh clear middle class folks who really are relying on this to to retire and if you if you significantly underperform um then these these people are really going to suffer I mean if and it's funny because you mentioned the endowments like my very first book was on the endowments and you've seen Harvard and Yale who have been incredibly successful for many decades so going back 50 plus years and Y really being the gold star for this yeah but Harvard really see um the challenges of this model for the past decade plus where the students when uh times are good all these different people complain about how much everyone's making and the um Harvard all these different places investing it shouldn't be investing and then when it's not making good returns everyone's like we need to be making higher returns and so you've seen on Harvard all the downside of this struggle of a lot of people being involved in the model versus Yale which has had a pass because they've just done uh so exceptionally well and it'll be interesting to see in the Post David Swinson who's really the goat of the endowment management World whether they'll be able to sustain this sort of model in the future because it's not it's not easy all right this been awesome thank you me uh me Faber for joining us on World of Das I follow you at Meb Faber on Twitter I definitely encourage our listeners to engage with you there this has been a ton of fun hey man it was great look forward to seeing you in the real world particularly at uh one of these dinners yeah yeah or on the ski looks in Japan and if you're a super data nerd go to world of.com that's dworld of.com and sign up for our weekly data as a service news Roundup[Music] newsletter