The Compound and Friends - Salt of the Earth

Episode Date: April 5, 2024

On episode 137 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Meb Faber, co-founder and Chief Investment Officer of Cambria Investment Management to discuss: hedging market risk, dividends vs buybacks, trend following, momentum stocks, international markets, the ETF landscape, and much more! This episode is sponsored by AdvisorShares! Visit https://advisorshares.com/etfs/dwus/ to learn more! Sign up for The Compound newsletter and never miss out: https://www.thecompoundnews.com/subscribe Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

We have a funny story where we did a whole series back in the day called like, what's your best idea? We got people on be like, you know, small caps India. But we I don't really monitor the podcast inbox. My producer does. But there we get a lot of garbage. I'm sure you guys do. But there was someone who had emailed in. He's like, hey, I have a great idea.

This stock I would love to pitch on your show. And the stock's game stop and it was roaring kitty no the year prior to it going crazy and so we never responded i was like you know who's gonna respond to somebody named roaring kitty that's pretty wild and then it went nuts so yo is this a compliment you refer to somebody or somebody refers to you as the salt of the earth. Yes, of course. Yeah. Are we sure?

Absolutely. 100%. Nobody has ever said I'm the salt of the earth. No. You're not salt of the earth guy. I'm not. Why am I not?

Why? Does anyone call you a salt of the earth? No. What about you? You're like the magnesium of the earth. He's the iron of earth.

Potassium. What does it mean? Cobalt. What is salt of the earth? It's like the mention of the Midwest. Yeah. So What does it mean? Cobalt. What is salt? It's like the mensch of the Midwest. Yeah. But it's... Go ahead. It's a Midwestern mensch.

I want to hear from Rob on this. All right. Salty there means you're a regular guy. You put your pants on one leg at a time. You're... But it's blue collar? Is there a blue collar connotation? So why is that good?

It's like a farm thing. It's like you're salt of the earth. You came from the earth. You sprang from the earth. Again, it's... But farm thing. It's like you're salt of the earth. You came from the earth. You sprang from the earth. Again, it's – but to me, that sounds like you're calling somebody like mid. This is why you're not salt of the earth. You're a primadonna. In the middle of the country, they like that.

They like that. Okay. I get when somebody says it to somebody, it's meant as a compliment. Right. I understand that. But why is that – why are any of these attributes good? You need to start tweeting out idiom of the day. No, it's a regular person as opposed to…

Doesn't it literally mean you're like down to earth? I don't know. Here's what it means. Here's what it means. Here's what it means. I'm sorry, sir. Your room is not ready. No problem.

I'll go for a walk Your room's not ready. No problem. I'll go for a walk. Oh, that's not me. That's why I switch hotels. Wait, why are you asking though? That's when I ask for the manager. I'm at my most Karen when the room's not ready. Especially if I'm there to speak at someone's f***ing event. It's like, you couldn't just have my room ready.

It's 2 o'clock in the afternoon. They're like, sorry, sir. 4 p.m. is check-in. So, hence, you're checking. Hence, you're not that guy. You're not that guy. You got to start putting in the retainer a day early. I don't think I want to, I don't think I aspire to be salt of the earth. And don't worry, you're not, you're no danger of becoming it either. No, that's fine. I'm just saying like, it's okay. I don't think it's that great of a thing to say, say to somebody, it's like, oh, you're simple.

Where's this coming from? That is not like you're simple. I was having a conversation with somebody who goes, oh, yeah, this guy's salt of the earth. I'm like, no, he's not. He's just a moron. There's nothing special about him.

He's just a lump of clay. It's like in the South where you say, bless their heart. Well, that's not... Yeah, that's not so much... That's condescending, right? Duncan, do you say, oh, bless his heart?

Bless your heart is an insult. Yeah. Most of the time, yeah. That's like Southern for go f*** yourself. do you say, oh, bless his heart? Bless your heart is an insult. Yeah. I mean, most of the time. That's like Southern for go f*** yourself. Yeah. No, but that's not what people mean when they say salt of the earth. They really mean it like, oh, he's such a good- No, it's a compliment.

Yeah. Yeah, f*** that. Pepper of the earth, what's up? What's up? So, I want to talk before we get started about, Stevie Cohen had a great interview yesterday with Sorkin. Josh, you watched this. I did. And I thought what he said, he said something to me that was pretty profound.

What do you mean he said it to you? Did I say that? Well, I thought he was talking to me. Dude, he was looking right at me. He's making an investment in golf. Not just for this reason, but this is just another reason in this pile of reasons to make this investment that he thinks that there's going to be more leisure due to more productivity and the four-day work week is coming.

Like Friday is basically – we're basically ready. Let me stop you. We hear from people that Fridays are just not – people are not as productive on Fridays. And so I just think it's an eventuality when it happens hard to know but that should fit into a theme of more leisure for people which means golf rounds will go up and people are going to play more interest will go up and so yeah I guess courses will be crowded what are the other investment ideas then around that idea well anything around you know I would say leisure travel right experiences all that type

of stuff right i mean that makes you know if people have more time they're gonna and are you well but you don't anticipate letting your traders and pms not work off the market frankly on saturday they're working you know something if if they're if they're taking off friday and they have a portfolio that's a problem okay it's the market okay i mean the vast majority not my people everyone else that's a problem. Okay? It's the marketing. Forgetting us. Okay? I mean, the vast majority of people forget about us.

No, but he's right. It's coming. But that's if like, when's the last time you heard someone say, you know what? I just, I have six hours to spare

all the time. Like a big chunk of my day. Five hours, go play golf. Oh, the time will get filled. It'll get filled with leisure activities. That's the point.

How many people are at Cambria? You're a lot now. Mid-teens. Mid-teens. Mid-teens. Okay. You're not low-jacking these people.

You don't know where they are all day. What does that have to do with golf? My point is, if they get their shit done and they golf at 9 a.m. on a Thursday, do you honestly care? In Los Angeles, when COVID happened, they closed everything, including the beach. They closed the ocean. But they didn't close the golf courses. That's really funny. Yeah.

I remember they closed tennis. And it's like, well, is there a sport where you're further apart from your opponent than tennis? But speaking of like bio, I mean, speaking of unintended consequences, there was like the bioluminescent ocean came. It was like a once in a lifetime thing in LA. And there was patrol cars at night

saying you can't go on the beach. And so then what did everyone do? They lined up on the sidewalk, the strand. And so then they were shoulder to shoulder. It's like- It was so stupid. Bill Maher just did a thing about this to close his show on Friday.

You know how presidents always ask, are you better off now than you were four years ago? So he's like, let's think about it. Four years ago, March of 2020, I'm pretty sure we're all better today than we were then. And he went through this litany of stupid shit we did, like the flight from hell, where they kept these people on a plane for nine hours because they came off that cruise ship. One of the funnier things that he showed was a picture of a baseball stadium with cardboard cutouts in the stands. What a weird time. So weird, right?

Did he also say like negative interest rates? Did he go into finance? Not at all. But think about like the logic was, all right, people, all right, we're bringing back baseball because people need something to watch at home on TV, but we can't risk fans, but it looks really weird to have nothing in the stands. Let's do cardboard cutouts of fake fans and stand them up in the seats yeah this is how insane we were i forgot about a lot of the things that he pointed

out yeah so 90 times yeah glad we're back to normal hey can i tell you one funny thing lol can i tell you one of the funniest things that i've ever seen in my life and you were responsible for it when we did the first future proof you you know what I'm going to say, right? I do now. Okay. When we did the first future proof, everyone was like sponsoring and you're an ETF company.

And of course you're a sponsor, but then you had a booth, but then you also rented a plane to do Scott, not skywriting, but what's the thing where they tell a sign? It's like the spring break, but light plane. That's right.

Yeah. So you got one of those for the, for your tail risk etf which we could talk about today and it was like the ticker symbol for the etf but the pilot was either drunk or inexperienced or or maybe both hilariously he was flying so low people were like freaking out on the ground at the event it was he was crop dust and future proof. It was also that it was super loud. And it was super loud. And you guys, your conference is outdoors, so no one could hear the speakers.

And we were recording podcasts. We held a surf lesson, you know, for 50 people. And then he was supposed to go at noon when nobody was talking. Yeah. And like you said, the person clearly wasn't listening. And I come out of the surf session to a million texts from Josh being like, yo, and Barry being like, hey, man, call off. Can you ground your plane? And I was like, what do you mean?

They're not even supposed to be on until noon. And so out of respect for you guys, we canceled them the next day. If it had been any of these other conferences, I would have been like, you know what? Just hover. Just hover. Actually, instead of one hour, let's do eight. And you can just sit there. But the best part was that CPI printed the next day super hot and the market was down 5%.

I actually remember how bad the market was in September of 22. It was toward the end of the bear market, but it was brutal. And I remember people on Twitter, because I looked at the hashtag, and people were like making fun of like, oh, a thousand financial advisors are all at this beach party while the market's down. And I don't respond on Twitter anymore, but I want it to be like, hey, dickhead, that's because we're not panicking out of portfolios. Salt of the earth. You see? No, but you know what I mean? Like, what should we be doing?

Like, with our heads between our knees in the fetal position? Like, this is what we do. We go to the beach. Like, that's part of the vibes. Well, we're coming to Los Angeles. I get to see you guys three times in one month. Colorado, LA, New York. It's like your old idea of getting the Airstream, touring the country.

No, it's going to be fun. We got to plug this LA thing real quick. So you know we love Los Angeles, and we now have an office in Manhattan Beach, which is your hometown. I actually met you through Scott, and Scott's from Manhattan Beach, right? By the way, this office is much nicer than the office. I have a very distinct memory hanging out with Barry in New York when he was contemplating starting Ritholtz.

Yeah, that was not a great office. That was not good. And he was hemming and hawing. And I was like, you know, Barry, what are you waiting for? You know the answer to this. Yeah. As my old man would say, like, crapper, get off the pot. Let's go.

You did. I remember you being encouraging. We were in someone else's office on Fifth Avenue, I think. You guys are all grown up. This is great. Thank you, man. All right, what are we talking about, LA? So we're coming to LA, and we're going to do a live podcast recording.

Have you ever done a live recording of your show? So we started out live like this, and then after a few, we went to pretty much remote. No, I mean like live in front of an audience have you ever done that at a conference or anything like that yeah we did it future-proof when it was 110 degrees in the booth without Romick it was awesome yeah outdoors that that box that they built us with no ventilation yeah yeah so we're gonna do this we actually got a really nice venue we're gonna be at Rolling Green on Mateo.

And I mentioned this for any of our LA listeners, LA viewers. This is your opportunity to come out and see a live recording of the Compound and Friends. We have several special guests for this. We have Jerome Powell. What? We don't? I thought you said we have him. All right.

Well, we're going to confirm that. That's not definite. I don't want anyone to go crazy. Ray Dalio. Who else? Do we have Steve Cohen? I'm not 100% sure who this special guest is, but I'm going to tell you right now, Michael Batnick, myself, Duncan, we're going to be there.

It's going to be amazing. And food, drink, networking, it's going to be pretty epic. So if you are – I'm going to turn that off. If you're in the L.A. area and you want to come out and see us, that's your opportunity. And there will be plenty of links and stuff in the description so you can see how to do that. All right. Ready to get on the way?

Let's get it going. Let's get it going. 1.30. Coming in. It comes out in three. It's excellent. One. It's out. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnick,

and their castmates are solely their own opinions and do not reflect the opinion of Redholz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. First, the advisor shares Dorsey FSM US Core ETF, ticker DWUS. This thing is attempting to answer the question, what part of the US large cap market should you own? They're using relative strength in a systematic rules-based approach so that they can find the real long-term winners and avoid the long-term losers. the real long-term winners, and avoid the long-term losers. There's another fund, DWSH, which is the advisor shares Dorsey Wright short ETF. If you want a true hedge, not an inverse, during times of market turbulence, or even if you just want to reduce market risk and get risk neutral, DWSH turns relative strength on its head.

It shorts companies demonstrating relative price weakness. For more information, including risk factors on the ETFs discussed, visit the link in the show notes. Meb Faber in the house, ladies and gentlemen. Crowd's going nuts for you already. You get this kind of reaction everywhere you go? What's up, guys? Good to be here. Yeah, man. Good to see you.

Hey, Meb is one of our oldest friends in the business, co-founder and CIO of Cambria Investment Management, and hosts the Meb Faber Show. Meb has been featured in Barron's, the New York Times, the New Yorker, and many other places. I first met you. You had written a post that went semi-viral during the financial crisis. And basically you took this very simple concept that had been out there prior to you writing on it, but you took a 200 day moving average for the S&P 500. 10 month. 10 month moving average, excuse me. And you said, all right, look, it's not perfect,

but if you just followed this, this whole 2008 thing is not an issue for you. You're literally sitting in cash or short-term T-bills or whatever and waiting this thing out. And it also answers the question of when do you get back in? Now, of course, it's overly simplified, but you did the data. You did the back test. Oh, wait, hang on. There's more. Just not to correct the record, but I have to. You wrote that before the crash. Yep.

Oh, seven. In the Journal of Wealth Management. My one and only academic paper. And when I published it, it came up online written by Melanie Faber. I'm in my 20s. It's my first paper. I'm so excited. I'm refreshing every 30 minutes to see it.

I want to send it to my mom and Melanie. Look, I got a funny name. I get it every day at my local coffee shop, but I was really sad. So we ended up stealing the idea for one of our earliest proprietary trend following strategies. And it's obviously not exactly that, but just the concept.

We want to be taking more risk when the market is in a statistically defined uptrend. We want to be taking less risk when it's either neutral or in a negative trend. And we need to write some rules around this so that someone doesn't start reading the Wall Street Journal economics section and start weighing in and doing bullshit. That concept, I think, is really powerful. And I don't know why you haven't done more with it. You haven't written a book. You haven't updated the article. That article is one of the most read academic papers ever.

But the best part is my wife's an academic. So I love to bring that up to her. It's a soft spot. Was it ever number one in SSRN? I think it's probably, if not still, it's one or two. But look, the theory, as you mentioned, has been around for 100 years. DAO theory, right? There's been famous trend followers.

One of my favorite stories is the Turtles with Jerry Parker. I mean, what a cool story. And all these trend followers that have been around since the 80s and 90s were actually launching a fund with Jerry coming up soon, a Managed Futures product. But trend following, depending how you do it, there's many flavors. And I think what was popular about this strategy, most academic papers are totally unreadable.

I mean, they put all the exhibits in the end. It's words that no one understands. It's a ton of formulas. And we tried to make it relatable, right? And again, not inventing anything, but trying to describe how it worked. Again, you mentioned the reason it was really popular was it came out before the crisis. If it came out after,

you'd probably never be talking about it. But there's a million different ways to do trend. Trend usually only looks particularly great when something's hitting the fan. Global financial crisis, 2000, 2003. Because it gets you out. COVID. Yeah. But some other flavors, like right now, this is some of the old school. I love when people say trend following doesn't work. And there's a couple of trend followers that have 30, it might even be 40-year track records now, right? It's 40-year track records. Mulvaney, Dunn. Some of these trade pretty esoteric markets,

long and short, right? So you have twice as many chances to be right and be wrong. And they trade like Malaysian palm oil. But they also trade things like euro dollar, yen, stocks, cocoa. Mulvaney put up in February and March, I think back to back, 40% months. This is at 40% each month. These guys have been around since the 80s. And I love it because I feel like most of the big hedge funds these days, when they get to scale, you see their vol compressed. They're like, dude, I'm just going to run 8% vol. I'm just going to hang on to this money and charge fees. Because 2% of $10 billion is a lot of money. Gone are the giant Soroses,

the Swashbuckers, like Druckenmiller, you know, like these type of guys that swing for the fences. But you see these trend followers, they just do not care. And they say, you know what, I'm going to run this sucker. And Dunn is a similar one. We've had him on the podcast, but it's a super fun story. The way we published it was long flat. So you just moved to cash. You're not short the market in a downtrend.

You're in cash. I mean, we showed in the paper that you could also short, but for most people, they can't handle it. I mean, people always want to talk about leverage and talk about shorting, and then you put it in reality and say, this is actually pretty tough to deal with. But as a diversifier to traditional buy and hold,

long short's great. When we implemented this back in 2014, the impetus for us was, listen, we're like more or less efficient market guys. Like we believe that markets work and that they're extraordinarily difficult to beat, but we're all salt to the earth guys. We're very salty. But we also, I never wanted to be in a position to say to a client, don't worry about it. Markets always come back because we know the history and we know that there's lost decades and there's no reason that they're gone forever.

And when I brought your paper to Josh, you remember what you said to me? Bullshit. He's like, why doesn't everyone do this? Yeah. And my answer- Very skeptical. My answer was, it's not bullshitty enough. Yes.

To your credit, you said, why doesn't everyone do it? No, you said that. No, but you said in response to me, why doesn't everyone do it? Because you can't put two and 20 on this. It's too simple. Yeah. And that actually, you actually ran the numbers two and 20 pretty much destroyed it, makes it almost so you're better off in a checking account.

But so one of the reasons, one of the reasons that I think is so appealing about this is getting out of the market is the easiest thing in the world, right? We've all panicked at some point in time, getting back in, that's the hard part. I mean, you guys have a lot more interaction with sort of wealth management clients than we do. And how many times have you heard over the years, probably less now, but 2010, 2012, 2014, I sold everything in 2009 and I haven't got back in. That was the first five years of our existence. This is one of the things that we heard every other conversation in 2012, 13, like every other.

It sort of slowed down in, I don't know, 16 or 17. But it was constant. The other thing is, though, that some markets are more whippy than others. So this is not something that works great, for example, on the NASDAQ. I mean, it would have in the last five years. But generally, in a back test, doesn't look as good in I mean, it would have in the last five years, but generally in a back test doesn't look as good in small caps as it looks in large caps. So now you might be tempted to say, all right, well, what if I don't use the 10 month? What if I use a hundred months or what, you know,

so you could play all those games. But I think like one of the hardest things to do about trend following is decide we're drawing the line here. And there's always going to be that one month or week where you're supposed to make a move and you just know it's the wrong thing. But you have to decide here and now. We're either rules-based or we're bullshit. Look at Coco right now. I mean, Coco for many years was not a market

that was particularly conducive to trend. And, you know, many people probably said, you know, we're just not going to trade this. It's not a trending asset. And it's gone from $2,000 to $10,000 just in like a month or two. But if you look at the biggest struggle with buy and hold investing, which is great.

Buy and hold, globally diversified, done right, fantastic allocation. The trouble with buy and hold is you're not doing anything. So 2009 happens, 2020, whenever COVID was going down. People struggle with just watching the account decline and just saying, you know what, just you got to rebalance. You got to hold on, right? That's hard for people. Trend following is hard, not usually because of that, because it usually does great during crisis periods. Trend following is hard because you look different. So 2009 to 2022, the S&P has mowed down everything. And so having, I mean, and we're writing a new piece recently,

this phrase we heard, which is like a bear market and diversification. If you did anything other than S&P, every quarterly you say, why do we own emerging markets? So at Breakthrough in Colorado, I love to test the sentiment and ask people, I mean, emerging markets? Are you kidding me? No one wanted to talk about emerging markets. You guys had Jason on the show. Every quarter, you're like, why do we own foreign stocks?

Why do we own bonds? Why do we own real estate? Why do we own anything? But the trend following historically, and so we have probably the highest trend following allocation of any advisor in the country for our flagship allocations, 50%. Five, zero? Five, zero. Most institutions, it's like 10%. But if you run any of the historical simulations, optimizations, anything with any of the trend following indexes, it usually is like 50%. But then people are like, oh, no, no, no, we can't, you know,

we can't do that much. That's crazy. Everything's flawed. Nothing's easy. Nothing's perfect. The problem with trend following, there's problems with everything, especially the more you do a managed future strategy, is that people just can't stick with it. And unfortunately, they tend to bail at the worst possible times. If it looks so different, and it has for the last 15 years, it's not that the strategy is flawed or broken.

It's the people using them. It's really, really hard to stay with. Especially if a drag is like, I don't know. Well, what happened last quarter? Oh, we were short wheat. Well, why the f*** are we short wheat? Like that just grinds people down. Professionals too.

Yeah, because you have to explain, as the advisor in the middle, not the asset manager, but the person who recommended the strategy, you have to come up with explanation. And it becomes really frustrating to keep calling your client and saying, yeah, we underperformed by 300 basis points last quarter again.

And this time it's because we didn't hedge the yen out of our Japanese allocation. Well, we lived that in 2022. We got whipsawed to shit in the trend following model. And we know that's part of it, right? Like we weren't surprised by it. It was painful. But this is part of the deal. This is what you signed up for.

If you want to miss the extreme drawdowns, well, then this is the downside to the upside. Yeah, but it's true on the buy and hold side too. I mean, from 2014, when we published a book, Global Asset Allocation, we looked at a lot of allocations. There's risk parity, endowment, 60-40. After publication of that book, in the S&P, we had a chart we sent to you guys where if you look at the rolling 10-year returns of the S&P for the last 100 years, there's four times the S&P has done 15% a year for a decade. We have this. They all have names, right?

It's the Roaring 20s, the Nifty 50s, the Internet Bubble, and COVID meme stock mania. So it's not that it never happens. It's just somewhat rare, right? And if you line those up, they also are times when Sharpe ratio of one. Sharpe ratio one, traditionally any buy and hold assets 0.3. And so these are exceptional times. And so the S&P has mowed down everything, including buy and hold strategies. And so there's the longest years of underperformance of most buy and hold strategies in terms of years in a row and magnitude in the last, I believe, 100 years. So what is this? This is rolling 10-year? This one's rolling 10-year sharp, which looks almost nearly identical to rolling 10-year

return. So that's 10-year returns. Okay. Well, but the sharp looks the same, which is performance adjusted for risk. So not only has performance been incredibly well, done incredibly well over the last decade plus, but it's done so with relatively little volatility compared to prior eras of this type of run. Yeah. To your point, we need a name for this bull market. Well, I think we had one.

It was just, it was the Zerp era, no? Well, when does it start? I like COVID meme stonk era. When does it start? But the flip side of this too is you can see the times when the S&P had returned nothing, and that's great time to be buying, right? Early 80s, GFC, and Great Depression.

Right, but that's the time where most people, myself probably included, are very well-versed in all the reasons not to buy. But so, Meb, I think most listeners would agree that the bear market for diversification will not last forever. In fact, you could argue that we're coming out of it now. 2022 was really, I think, the inflection. Managed futures had a kick-ass year, right? I mean, a lot of things had a great year. Value had a great year. I think we'll look back at that as the inflection point for value as well. Really, 21, 22.

Short sellers had a great year. Are there any left? inflection point for value as well. Really, 21, 22. But short sellers had a great year. Are there any left? I think they're almost extinct. I think David Einhorn had one of his best years in 20 years in 22. No, it's at a 52. We kind of have for the first time in God knows how long emerged market value stocks.

It's been a minute. I hear you. So it's worth talking about the current state of the market right now. I think the predominant theme when you listen to talking heads like myself explain what's happening is the rally broadening out. Meaning Apple is not at an all-time high right now. And the stock market doesn't need it to be, which is a change. Like in 23, the NASDAQ did 50%. The S&P did 25%.

All of the leadership was coming from 50 very large stocks, right? And you had a ton of small caps down on the year, lots of mid caps down on the year, lots of sectors flat. It's weird to have a whole sector where the stock's flat with an S&P rally of 25%. But that's what it was. This year is not that. This year, tech, I don't think, is even in the top three sectors.

So how meaningful is that to you, given your work on allocation and market cycles? How do you think about breadth and whether or not the market's broadening out? Well, we're seeing it. You know, our oldest shareholder yield strategy in ETF had really a great end of last quarter, beginning of the year, this year. And that tends to skew a little more mid,

kind of small, even though we did own Apple for almost a decade, ending in 2020. But we're seeing it in the foreign and emerging too. Shareholder yield, I'm sorry for the audience, that's SYLD. purging too. And what- Shareholder yield, I'm sorry, for the audience, that's SYLD. That's one of your first ETFs. And that you're looking at not just dividends, but buybacks too, which is what sets it apart. And the key part of that statement is net stock buybacks, right? So everyone focuses on buybacks, but equally as important, it's like if you're investing in value stock. Yes, it's great you're investing in cheap companies, but it's equally important that you're avoiding the expensive. So you're avoiding the company trading 100 times revenue. Buybacks, yes, the buybacks are all well and good, but it's also you're avoiding the share issuers.

And so this is a big deal in the US, particularly in the tech sector, where there's a lot of tech companies that have just been making it rain with stock-based compensation. And some of these, it's like 20% of revenue. And Buffett knows it's a cost. Everyone else knows it's a cost. But people love to say, hey, this isn't a cost. We're just sliding it. So if you're issuing 5% of shares and you're buying back 5%,

that's a net zero. But there's companies out there that actually have net negative yields. So you may have a 2% dividend yield and a minus 4% share issuance. You actually have a negative yield. That's crazy. Which is% dividend yield and a minus 4% share issuance. You actually have a negative yield, which is why a lot of those strategies struggle. But I'll give you an interesting data point. So many of our friends on Twitter and elsewhere, they say, yeah, yeah, you value guys. You don't get it. You're missing tech. And I say, well, hold on. Let's qualify that, what you mean. Because what you mean is you largely avoid tech in the United States.

But in our emerging market shareholder yield fund, tech is the largest sector. And it's because they're a lot cheaper, right? You know, the emerging markets in general are much cheaper, but the tech companies are there. Our number one holding there is actually a better performer than NVIDIA over the past year. And I tweeted, I was like,

I've seen it mentioned once on Twitter in the last six months, right? Is this true social? It's a semiconductor stock. But, you know, because nobody cares about emerging markets. Which is it? ASML? It's called Hanmai.

It's a South Korean semiconductor company. And so, but again, so I was like, we're sector agnostic. And traditionally, you see some of the main sectors across all three, but not always, you know, tech teams. So when you say so there are companies that are doing sterilized share issuance, basically. So they're saying like, okay, we're going to issue X amount of shares in SBC to our employees, most likely our executives. Okay. And it's like hundreds of

millions of dollars, let's say, or billions of dollars. And at the same time, we're going to buy back the equivalent amount of stock so that it gives the appearance that we're not issuing all this stock. That's not going to use the shareholder capital. That's not shareholder yield. And this is why buybacks get a bad name in some circles. The problem is buybacks are the exhaust

and what the politicians and the gurus and many lawmakers and writers should be focusing on and what they're intending to focus on is the stock-based compensation that's largely going to the C-suite. And that's a board issue. And so the buybacks, for many cases, has nothing to do with that. So you really want the net buybacks. But the crazy part is when you do a shareholder yield approach, the average company coming in to any of, we have four shareholder yield funds now, is double-digit shareholder yield. Now in the US, that's majority buybacks. In foreign, developed and emerging, it's about half dividends and buybacks. Culturally speaking, it's not as prevalent abroad. All you're seeing it

change in places like Japan. The governance, they're starting to really focus on this as Japan hits a new all-time high for the first time in 30 years. I've been waiting to ask you this question actually. We'll skip to this right now. Yeah. I have this like idea in my head that all of these… Do you want to guess what he's going to ask? I don't know where he's going with this. All of these countries just like looked back at the United States.

Like every country screwed up, including us, but they looked at the one thing that we have that none of them do good stock market, amazing stock market. And what that, what that, now they might be looking at a symptom and not the, the real, the real thing is we have tech and innovation. It manifests itself in the form of a NASDAQ that's up, you know, 20% of you over the last 10 years. It's extraordinary.

But whatever. It seems like China wants its stock market higher. Japan wants its stock market higher. I don't mean just in rhetoric, but in actual things that they're doing. So is that the cheat code for a country? If you want to fix your economy, get people taking risk in the stock market again. Like, am I crazy to think that it might be the reverse of what we would normally think is cause and effect? Yeah, I mean, I think, look, eventually they're going to follow the fundamentals.

And I think, you know, they sort out over time. But as far as the interest and the sentiment, that's always the squishy part, right? What is Japan doing to juice the stock market? Because they have very low stock market participation. They're encouraging more retirement savers to get involved. Well, it's interesting because when I went over there over the years, we would do like a meetup down in Tokyo at a micro brew pub and was chatting with some local traders. And like, buy and hold isn't even a thing. No. Right. It's like it's gone nowhere. But I think-

They're all trend followers. They have like a kind of a famous name and shame situation where if your stock's trading low values, like they're printing your name out. Oh, really? They're like, hey – and in Japan, that shame emotion is a very big driver as opposed to here where I don't think anybody might care. But I think it eventually follows the fundamentals. But you got to remember, Japan had the biggest bubble we've ever seen. Like not even close in the 80s. Like what a crazy, almost 100 on the Cape.

It's 35 years enough time to like get over that. Yeah. I mean, it's an entire generation. Before we get back to what's going on inside the market today, I'm curious. The world has to know, why does Meb Faber hate dividends? Man, you know, I love dividends. I love dividends. favor, hate dividends? Man, you know, I love dividends. I love dividends. Your local, one of my favorite professors, NYU, Damodaran, damn and darn, I can never get it right. No, you had to

write the first time. I don't know what you just did after. He says, look, they should be called tax-efficient dividends or flexible dividends. That's buybacks. And if, oh, sorry, what'd you say? Why do I hate dividends? Okay. So I'm trying to say they're the same thing. And if you read an article, it's easy to tell if the person's biased by you can substitute one for the other. And if the story reads different, then you can see that they're clearly biased.

Look, I think they're both fine, but they are what they are. They are not the same thing. They are. At intrinsic value, it's like finance 101. But we're not intrinsic investors. Okay. So, right.

If they trade below intrinsic value, buyback's a great use of capital. If it's above, it's a terrible use of capital, and you should be issuing shares. I'm not even suggesting that. I understand economically, financially, they're the same thing. I'm just saying people are not rational agents, as we very well know. If you get a check in your mailbox every 90 days, you do not think of that the same way as what is the share count of this company I'm invested in.

And that's just on the surface. On a deeper level, like there's this idea in America, the proof is in the pudding. You can't fake a dividend. I mean, I guess you can, but it would be very hard to fake dividends. You can?

But they have, you hit on this in that they have a great narrative. We wrote an old piece on dividends. It's tangible. We call it like the PepsiCo's Coke taste test. They used to mail a check though. Like historically, John Rockefeller said there's nothing he enjoys more than opening up the mailbox for his dividend checks. Like there's a tangibility to having that cash paid out to you,

even if it's in your brokerage account. Yeah. And now on the flip side, you have Buffett, who's like, look, we're not going to pay a dividend. We paid it once. I was in the bathroom, right? He's like, the best you can do is grab your stock certificate out of the lockbox and fondle it.

He's like, we're not going to give you a dividend. So, I mean, look, I think they're both… All right. Joe Biden enacted an excise tax on dividends last year that I think is 1%. Buybacks. Excuse me, on buybacks. It's 1%. Their dividends have a tax rate long associated with, and I know that moves, but it's still significantly higher than 1%.

The political tax, we all agree. The political tax on buybacks are ridiculous. I wanted to ask you if the dividend tax, which by the way, you and I agree is double taxation, right? It taxed the company on earning the money. Then you tax the shareholders on receiving their share of the earned money. It's crazy. We agree.

All things being equal though, if Biden were to get that, I don't think he's going to do it. If he were to get that buyback tax to be closer to the dividend tax, would you feel differently than you currently feel now? Would the math, not your feelings, but would the math change? I always say we shouldn't give the politicians too hard of a time because we don't teach personal finance in school. So they didn't study it either. So they don't know what they're talking about and we should feel sorry for them. And by the way, that's my white whale. I think we should teach money in school, so they didn't study it either. So they don't know what they're talking about, and we should feel sorry for them.

And by the way, that's my white whale. I think we should teach money in school really everywhere. But let's take a step back. Let's say when Elizabeth Warren or the politicians say, all right, we're going to make buybacks illegal, all right? And what they're hoping is going to happen is

all of a sudden these CEOs are going to magically say, oh man, okay, I'm going to pay my employees more. I'm going to hire more employees. Let's give everyone a raise. We're going to do a bunch more R&D that we don't do. And as you know, a lot of my CEO friends, what is more likely to happen? They're going to start naming stadiums. They're going to build buildings.

They're going to buy jets. And they're going to pay themselves more. It's more likely, honestly. A raise. Right. Right. Right. So if you go back 100 years, there used to be governments and investors that required the companies to pay back dividends or buy back stock. There's always this, you know, people always love to say buybacks are illegal.

That's never been true, ever. All right? So that's false. So you go back 100 years, people used to require it to keep these people honest, right? Because if you just stockpile the money, you're going to spend it if you can't return it. And so to me, I was like, this is going to have the exact opposite effect. I was like, watch CEOs. Now, the problem is they need to detach compensation from some of the things that move it for the CEOs, right? But that's a board issue. All of this comes back to the board, not just being a rubber-stamped CEO board, right?

Like favorable to them. Well, so one of the drivers behind the buyback, vilifying buybacks is the inequality stuff, which is real. We might differ in opinion on what's causing it or what are the biggest causes of it, but you can't deny this idea that we're now in a

situation where nobody even needs to have an income. You could get to a certain bracket of American society where your holdings are throwing off so much cash that even having an income on which to pay income tax is irrelevant. And you pay yourself a dollar and then you go announce it. Hey, I only make a dollar. So, and it's even further than that. Now we have the ability to borrow money against stocks. So now not only do you not need an income, but just by being a shareholder

of a publicly traded company with a low cost basis and a big amount of stock, you can fund an entire lifestyle and never even pay taxes on having to sell shares. You can securitize your shares, borrow money, pay it back with the dividend from those shares. So this is a new time in history where we really do have the billionaire class

pulling further and further away. Now, what buybacks have to do with any of that, it's again, it's a symptom. Well, I laugh every time it comes up because I'm like, how has carried interest just avoided this? Every cycle, they figure out something else because they're politically savvier than the Chamber of Commerce. So my point is, what do buybacks do? Basically, they make it so that the earnings of the company are spread out amongst less shares. Therefore, people with large positions in the stock get even more of the earnings, which is how it should work. So this is intentional.

It's not evil. It's just one of those things. Yes, if you own a lot of shares of something that's successful, you're going to be rich. And other people who don't are going to be less rich and the more those stock prices rise the further people will pull away so is the answer let's take away from the people that position or is a better answer how do we get more people to become shareholders i'm of the second i'm of the opinion that the second one is more productive politically but no one else seems to be well i think it's changing we wrote an article a a couple of years ago called like how to,

how to close the wealth gap in the United States. And it's like four different ideas. One of which was various people have talked about, I know Barry's talked about it, about a baby born in the US, you give them some amount of money. So Brad Gerstner is trying to get that done right now. The invest America. And I think it's a pretty good idea, broadly speaking. I think there's some issues around the edges, but I think it's a great idea. Less even the money amount, but more that it puts people on the same team. Imagine what that's going to do to CAPE ratios. Yeah.

Oh, my God. Meb, I'd love to ask you. So we're in a wildly healthy uptrend. Jason Gebfried, a sentiment trader, said the Q's just slid into its fifth longest streak above its 200-day moving average. By the way, we're having a pretty nice reversal day today. But that's neither here nor there. What I wanted to ask you was this.

What's the best explanation you've ever heard or perhaps created or given somebody as to why markets trend? There's a handful, you know, and it's funny because there's only two states. There's like, we wrote a paper in the pandemic called, is investing at all-time high is a good idea? No, it's a great idea. Right. And I think, you know, it markets either an all-time high or it's in a drawdown, but trends exist the majority of the time. When we wrote this paper, we talked about one of my least favorite statistics that people love to use, which is if you just miss the 10 best days in the market,

your return gets crushed, right? And then on the flip side as well, if you miss the 10 worst days, your return is amazing. But the vast majority of both of those happen in downtrends. And why is that? It's because the markets are more volatile in a downtrend. So when stocks are going down, why is it more volatile? It's because people use a different part of their brain when they're losing money. And that's easy to describe to anyone listening. You know, if the market is down 50%, if you think back to 2009, you're not opening your statements. You're not even thinking about the market because you probably also lost your job. And this is another problem with the challenges of buy and hold is it kind of all correlates when it's hitting the fan.

And so in this downtrend, you're using a totally different part of the brain than you are now, which is, hey, man, I'm making money. I'm thinking about buying a timeshare in Cabo. I'm thinking about buying a new car. I'm so smart for buying NVIDIA. I got to tell my friends. There's a great old John Neff. We do our Twitter quote of the day,

and we have a great old John Nett quote where he's like, just when I think about bragging, it's usually time to sell. But trend following as to why it works. I think there's the statistical reasons, which we just kind of talked about. You avoid these big losses. And I'm not talking about 20 percenters. I'm talking the big dudes, 50, 80, 90. And you guys have talked about it before, where they're not equal on the upside and down. So you lose 50, 80, 90. And you guys have talked about it before where they don't, they're not equal on the upside and down. So you lose 50, you got to get a hundred, get back to even. You lose 75, it's 300%. Yeah. It's asymmetric. Yeah. Upside and downside. I think there's a lot of, I was, my son's here this week, six years old, and we're riding the elevator at our hotel

yesterday. And I go, hey man, watch this. I was like, I can predict this number in the elevator, it's going to skip 13. He's like, no way. I go, watch. He goes, 10, 11, 12, 14. He's like, what? I go, yeah, there's no 13th floor. And he's like, why? I go, it's unlucky. And he's like, what do you do? So they build it without a 13th floor. I was like, well, there is a 13th floor. They just call it the 14th floor. He's like, why did you do? So they build it without a 13th floor. I was like, well, there is a 13th floor. They just call it the 14th floor. He's like, why did they do that? I was like, look, man, it's 2024. It's not 1800 right now.

And people are still building buildings everywhere with a 13th floor. They're just calling it not a 13th floor. And so people are human. They're irrational, right? They have superstitions. And dealing with markets that are emotional. My favorite sentiment stat is the most bullish people ever were in the AI survey, December 1999. The literal worst time to be bullish

in the history of the survey and the most bearish, March 2009. Is that right? You couldn't make it up. It's like literally that perfect on the nose? Literally that perfect. Do you know where Y13 is an unlucky number? No.

Do you? Do you know? Jesus, Judas. No. What do you think? Taylor Swift likes it. OJ. I don't know.

But you're never curious? I don't know. No? Would you like to know? I think I'm right, but keep going. You think it has to do with what? Jesus, but keep going. No, say why.

Well, Judas was like the last person to show up. And anyway, just keep going. It's a Knights Templar thing. Oh, okay. They were betrayed and they were all murdered on Friday the 13th. Now we're getting into the Illuminati. No, no, no. It's not Illuminati.

The Knights Templar actually existed. It's not like theory. Okay. It's not folklore. And they were, they were betrayed. So the church wanted them out of the way. They were too powerful. And they were all assassinated on every country in the continent of Europe and in the Holy Land.

They were like in the night, one by one by one, assassinated. Kind of like the end of the first Star Wars trilogy where they hunt down all the Jedis. It was like that. And it happened on Friday the 13th. So why is it there? Order 66. So there shouldn't be a 13th. So why is it there? Order 66. So there shouldn't be a 13th floor. That's what you're saying.

Well, 100%. I mean, unless you don't care about the Knights Templar, certainly not. But I think there's a lot of, like, you know, over the years, there's been a lot of reasons. There's overreaction, underreaction. There's hedging of commodities in that world, talking about why things trend. But I think it's simpler. I think humans are involved in markets. And if you look at something as simple as cocoa, I mean, my God, I like that thing. Anyway, we could spend a lot of time debating this, but I think there's both. People refer synonymously to momentum and trend,

but they're not the same thing. Can you unpack that for the listeners? Yeah, they're like first cousins. I mean, we like to think of momentum as sort of like race cars around a track, right? Is like one is leading the other, but it's relative speaking. Like, you know, if 10 stocks are all going down,

the one that's going down the least is the best momentum, right? Trend following is like a time series, what you call it. Is something going up or down? That's it. And you can measure it different ways. A lot of the traditional trend followers use breakouts. Some of the books from the 60s, Darvish and others talked about breakout stocks, which is like a range rectangle.

And really both work. In this paper we used recently, the 12-month breakout works just as good as a 10-month moving average. But they're capturing the same thing, which is this big move in the middle and never getting the turns right and wrong. So much of the trouble with momentum is, first of all, the marketing of momentum is amazing. It just sounds good. It's like these are the stocks that are going up the most. It sounds awesome. stocks that are going up the most. It sounds awesome. The problem is the how of managing a fund and executing on that because timeframes are so subjective. So something, you could have a

stock that's a high momentum stock if you're measuring it like this week, but it could be a stock that's at a 52 week low and underperforming the whole market if you're measuring it by six months. Let me give you two ideas real quick. One, the most classic trend-following portfolio of all time is the market cap-weighted portfolio. S&P 500. Right. You own more and more of a stock as it goes up. That's your position sizing.

And as it goes down, you own less and less. Right. That's it. And the more it goes up, the more you own. Now, that's also the Achilles heel of market cap weighting is it has no tethered evaluation. So when things go totally nutty to the upside, so US stocks, late 90s, Japan in the 80s, that becomes a huge problem because you put most of your money in the most expensive things.

Wait, hang on. Not to nitpick. I'm sorry to cut you off. The biggest cap weights are not always the most expensive. When things go nutty to the upside, they really are. No, when things go nutty. But there was a steady state where Apple was the biggest stock for a long time. It wasn't expensive.

Yeah. But if you invest in the largest stock in any market cap, this applies to sectors. It applies to industries. It underperforms by about three percentage points per year. There's a fun chart from Ned Davis.

It's like, if you just invest in the largest market cap at any point in history, it's a horrible investment strategy. It's a great chart. But the second thing is, one way to do momentum, we tell people, if you're going to be a stock investor,

we actually do this in our shareholder yield ETF. If you do momentum on both sides, it's a ton of turnover, right? And that becomes problematic for people. But if you have like a fundamental strategy, value strategy, you just have it be the final sort on the buy decision. So, you know, we do a final sort. We get all of our shareholder yield stocks and say you get your last 50,

you rank them on momentum. So you're taking, say, the top 10, trying to avoid the value traps that just keep going down. And historically, that added about a percentage point on returns. This has a huge impact, what you decide,

which layer you decide is first. Because the other way to do that is to say, all right, here's our universe. This is the top decile of highest momentum stocks. So this is our new universe. Now, what are the cheapest stocks from among that? That would not be the same portfolio as here are the cheapest stocks.

Now, which of these has the best momentum? Yeah, I think they both work. People love to debate which is better. I think it gets to the same place. First cousins. It's like value and channel. I'm sorry. Dividend.

Whatever. You know what I'm talking about. I'm sorry. I wanted to ask one more thing. Is quality a better screen than value in the modern marketplace

where it's clear there's an investor preference for high quality companies? There is not any investor desire for cheap whatsoever. So if you were to say, okay, instead of cheap momentum, I want quality momentum. And we know people that run products in that vein. Isn't that like an intelligent way to just say tastes have changed and it's not true that they're definitely going to go back?

and it's not true that they're definitely going to go back. Quality is often a way, if you get leverage on the balance sheet, to where the kind of junky companies, high leveraged, are going to move a lot more. And the better quality tends to be lower volatility. And my preference skews towards high quality. So in our shareholder yield, we skim off the top of the most over leveraged. But often the most over leveraged is what really moves when the times are good.

So you can leverage a portfolio or you can pick leveraged stocks. Almost always, though, I default to less risk, less chance of things going bust and being junky on average if I get to that intersection. So that's kind of a quality screen. Edward Cole, who's the head of multi-strategy equities at Mangroove, was writing about momentum in the Financial Times. And the hedge fund long U.S. equity portfolio, their exposure to momentum stocks – and momentum stocks are – I guess this is the idea that winners are going to keep on winning, which is a good strategy. I guess this is the idea that winners are going to keep on winning, which is a good strategy. But their exposure to momentum stocks is as high as it's been at any point in time over the last 20-odd years.

Oh, wow. So this is hedge funds crowding into momentum stocks. So the thing is, as Meb well knows, this cuts both ways. So when momentum reverses, like one of the Achilles heels of momentum is the idea that they can all go bust at the same time. It's rare when value and momentum overlap. That's my favorite investment is something's cheap. It's in an uptrend. And often the third thing, third leg is it's hated. And I put emerging markets there right now on the value side.

It's like all three of those. But, you know, often value and momentum don't look like each other. Sometimes they do. He goes on to say, far from entering bubbled territory. It's like all three of those. But, you know, often value and momentum don't look like each other. Sometimes they do. He goes on to say, far from entering bubble territory, so he zooms out, momentum could have a fair way to run. If you want to see what momentum looks like during a real bubble, take a look at the period and then run up to the dot-com crash. John, you have this chart? So this is the three-year rolling return of the momentum fund.

I don't know if this is long, short, or whatever. It doesn't really matter. But even though it looks pretty extended today, the factor, I mean, it's had crazier runs. So much of the implementation matters too. You know, you've seen this with the ETFs. There's some momentum ETFs that only focus in the giant large caps. There's some that do a once-a-year rebalance. There's some that do it much more actively monthly.

With emergency rebalances. Yeah. Why don't you have one? You don't have a momentum ETF, do you? We have a global momentum and trend ETF that's global macro. So it can be 100% in cash and bonds. It can be global. And it's done totally fine. It's not surprisingly totally invested in all things equity right now. The only other things that are really going up, gold's going up, Bitcoin's going up, anything income related. We actually just put out a new fixed income piece talking about the fixed income space. Anything bond related is low momentum all the way at the bottom. Real estate's

down there too. But a lot of the commodity complex has been popping up in there as well. But it's mostly equities. I want to switch gears. Why do you hate CalPERS? So I'm mainly because they've neglected to interview me any of the last three times I've applied for this. You are relentless on social media about CalPERS and you have been, it's not new. Yeah. You just, you look at them as like a very misguided organization. But explain why you feel that way.

I think it's an example of a nearly unwinnable problem and situation where you start to see this. You've seen it with Harvard's endowment. You start to see it with a lot of places where there's a lot of vested interests that have their say. And you see it almost like as this giant complexity where their position statement is 300 pages long. Their policy on how they're going to invest is just pages and pages and pages and pages. And it's this sort of crazy setup to where you take a step back, and we've written articles over the year. The first one was called, should CalPERS be managed by a robot? And the most recent one was,

should CalPERS fire everyone and just buy ETFs? And you could basically buy five ETFs, replicate their portfolio, and be done with it. And my offer to them was always said, look, I'll do it for free. We'll do a once a yearly meeting. You are a California citizen. We'll have some IPAs, some beers. We'll sit around

and we'll rebounce the portfolio. We just had a guest on our podcast that I love more than anything in this story who runs the Nevada Pension Fund. And he's famous as the guy that doesn't do anything. One employee, $60 billion. I read that article. He's so good. And he's the nicest guy. And they beat CalPERS. you know? And it's a very – so the assumption that complexity equals – Wait, what's in his portfolio? It's three TFs? I mean, it's just – Three index funds?

It's an index portfolio, largely. So what does he sit there and do? He reads the newspaper? Yeah. Okay. That's an amazing story. It's an amazing story. By contrast, CalPERS is hundreds of CFAs and MBAs and geniuses running around trying to be as racially and gender inclusive as possible, trying not to offend anyone, trying to make investments, but also at the same time satisfy climate issues.

And so there's a lot of politics in the invest in there, but then there's also this proclivity to select very high cost alternatives. And that's like a whole department of CalPERS where it's hedge funds and it's presentation. And your argument is, yeah, I get it. But what if you just didn't do all that shit, save the state, how much money in fees? I mean, it would be hundreds of millions. Hundreds of millions. And the results would end up much better and more explicable to how many people are getting retirement benefits from CalPERS right now. Do you know the number?

I'm sure it's in the millions. So, Mav, you must love this. There was just a proposal to increase the $483 billion funds position in assets such as private equity and private credit from 33%, because that's not enough, to 40%, and it was approved on Monday. 40%. Are you a fan? You know what their historical return on VC is?

0.5%. How is that possible? And they've been doing it during the best VC period ever. And so, look, it also applies to a lot of other world-beating organizations. We did a similar article for Bridgewater, you know, multi-hundred billion dollars. Talk about having the best assets ever.

I mean, best team, best minds there. It's just very hard to have a diversified global market portfolio. That sets a pretty high bar. Like, that's a good portfolio, right? You know, that's good. portfolio, that sets a pretty high bar. Like that's a good portfolio, right? You know, that's good. In fairness, what CalPERS is probably thinking is in a market like 2008, which we'll probably see something similar to that in our lifetimes. If you have a portfolio that doesn't have hedges or doesn't have things that are non-correlated and it's just like solely correlated to stocks and bonds and both are selling off at the same time.

We saw a mini version of that in 2022. I was laughing. You're getting ready to unintentionally set up the best softball all the time. That's what I'm trying to do. But I'm saying this is why it's this way. It's not because they want to pay hundreds of millions in fees. They think that what they're doing is protecting them or hedging them in some way that a three ETF portfolio wouldn't.

Why is that wrong? Do you know when they sold all their tail risk funds? They had a large tail risk allocation. I think it was literally the month before COVID started. It was like the best time. Other than 1987,

it was probably the best time. Round of applause. But look, part of it says, look, this is how hard, and look, Yale has been the gold standard. They've absolutely part of it says, look, this is how hard, and look, Yale has been the gold standard. They've absolutely been the model.

David Swenson. David Swenson, the late Swenson, like the goat of all institutional allocators. It'll be interesting to see like how long of a runway do they get

if they struggle, you know, or underperform. Because Harvard, CalPERS has had six CIOs in the last 10 years. I think the universities, though, especially the ones with business schools that are turning out a lot of people into the asset management world, they would tell you that these investing organizations that they've built to manage their own money are in part educating their students. So that's not necessarily negative.

It's a private college. They should do whatever they – this is what they want to do with their own endowment. Years ago, I wrote an article about Harvard where if – when Harvard was doing great, the student population would complain about how much Harvard was paying their internal team. And when the fund endowment was underperforming, they're saying this is unacceptable. We need to hire more talent. This portfolio, it's unacceptable. It's underperforming the peers and other people. So it's just – look, it's a hard problem. I think complexity is not the answer, though, necessarily. CalPERS said that they still think that private equity has the highest

long-term expected returns. I'd love to hear your thoughts on that. And zero volatility, which is great. Look, we've done a lot of this on the podcast. My personal belief is private equity can be easily replicated with public stocks. I think there was a time for a very long period. Look, I grew up in the old days of Barbarians of the Gate. My high school in North Carolina was R.J. Reynolds High School. So I got to see a first-hand seed of this. But back then, these LBOs were going off at six times enterprise value to EBITDA. And now they're down a little bit from the peak a couple years ago. But the valuation gap between public and private and just so much money in private equity, plus the 2 and 20, it's a high bar to overcome. I've changed my mind on this over the years.

I think the illiquidity is a feature, not a bug. Now, if you claim it's five vol, I think that's, you know, straight to jail, right? Like it's, it's a ethical violation. But I think having the long-term holding period is probably better than not. So my take on this is that everybody like air quotes, everybody sort of the allocators to know what's up. And I think that they are happy to pay for the illiquidity. Like, they don't want to see the marks. Lie to me. I'll pay you 100

basis points behind the benchmark so I don't have to stomach the volatility. And it's great if we can't puke this up at the bottom. Right, well, there's that too. And my second thing is, on the explosion of private credit, you should really see, I mean, I've said this a lot, but my inbox tells the story. Absent a real credit event, I think these funds are going

to be okay. And I'm generally speaking, the reason why I say that is because there's so much money waiting. There's so much money waiting to buy the dips that might not be, that might not materialize on paper. And even though we know that the statistics are bullshit with the volatility laundry that Cliff always talks about, I think if there's not a real global credit event, I think they're going to be okay. The challenge with the fixed income space right now is that, and we just put a paper out on this, where it doesn't make a whole lot of sense to me for a long time that if you have T-bills at five, for example, and somebody comes up and is offering you corporate bonds or junk bonds or emerging market or something for also five, you say,

well, why would I do that? I can buy T-bills. God forbid less, which some markets are even less than T-bills are now. So we modeled it out historically, and not surprisingly, kind of like a value approach to stocks. When the spread to T-bills for all these bond markets was above average, you did great. And when it's below average, you did terrible. And right now, this is on the public side. It's tight as shit right now. I mean, not a single one would be on a buy signal.

You ever do trend following with spreads? Done trend following on bonds. Yeah. Which was one of the reasons trend followers in the managed future space did great in 2022 is because they were the only thing that was short bonds, right? But so, you know, one of three things needs to happen. T-bill yields need to come down. The entire curve, including REITs, including mortgage back, including 30-year, including junk, corporate bonds, all needs to move up or both. But you've had the longest period of inverted yield curve right now. And so it's just the math doesn't really make sense to be, in our opinion,

to be quantitatively moving out and taking on this risk. How that and when that will resolve, we'll see. When you say these funds should be fine, like people will get their money back. Yes. Yeah. They're not going to have amazing returns. No, no, no. All I'm saying is that, and again, there might be get their money back. Yes. Yeah. They're not going to have amazing returns. No, no, no. All I'm saying is that, and again, there might be a global credit event.

I hope not. But I'm saying absence of major liquidity event where people, you know, I think when I say everything's going to work out, I don't mean everyone's going to beat whatever the ag or anything like that. I just think that the calls for like a bubble or this is going to end badly. Like, I don't know. We'll say. Well, you see, this is why financial advisors, like you go to speak at the lockups, like you

guys, this is one of the key behavioral things is you guys stand in between the client and doing something dumb. Private equity and the lockups do the same thing by saying, ha ha, you can only look once a year or whatever it may be. If we could eventually figure this out on the public side, it'd be a great, a great setup. Last thing on the private side. So there's been a lot of enthusiasm returning to the stock market, right? The rally is broadening out. You know where it's not broadening out? Certain areas of private markets. So there was a headline this week.

Tiger Global VC Fund closes 63% below target with $2.2 billion. There is no appetite for that, obviously. No IPOs. And also, John, chart on, please. The market cap of young, unprofitable technologies has, this is from Michael Semblist, has not even close to recovered. So, what we're looking at is, again, it's the percentage of the total technology market cap for companies that have a negative net income in two of the last three years,

less than five years since their IPO, and annual has grown more than 50%. Nobody wants to shit. These have not recovered. No, I, because there's no exits yet. Isn't this a, this is an IPO story, right? You get the IPO market back. You'll see valuation returns. So if you say, I don't think it's right. It's cause it's cause and effect. If I can't sell this to anyone, of course, these are publicly traded stocks. Nobody wants this. The unprofitable tech stocks in an environment when things are broadening out, nobody wants. It's part of the same story, for sure. I'm just saying these are publicly traded.

So that's an interest rate story too, which, all right. I wanted to ask you, just the ETF business in general, it's obviously gets more competitive every year, but it's been super successful. It's 10 trillion. How much money is in ETFs? Seven? Five? Lots. Yeah. been super successful. It's 10 trillion. How much, how much money is in ETFs? Seven, five?

Lots. Uh, yeah, globally. Um, you know, uh, it's, it's not quite crossing mutual funds yet because, you know, we've had a bull market, but I think eventually that's, uh, we're getting closer and closer to that inversion happening. Okay. And you have now 50, came, we have 15, 14 years. First of all, what are your assets these days? Two and a half billion. It's a hard business. I mean, we

kind of grown up together, you know, in this business. It's not drowning. We really did. I want to show you, I want to show you this

crazy chart. John, give me the State Street chart versus S&P Global Inc. So, Meb, I know what you're, I know you know

what you're looking at, but for the listener, basically what we're showing you here is publicly traded companies. One is S&P Global Inc. So, Meb, I know you know what you're looking at, but for the listener, basically what we're showing you here is publicly traded companies. One is S&P Global, which owns the rights to the indexes and licenses those indexes to, among other people, asset management firms. The second chart is State Street, which owns SPY, the most successful ETF in the world, or the longest lived. Not most successful. Or the largest. Yeah, largest.

The largest. Okay. The ETF's not making that much money apparently, but the index licensing is a way better business. S&P Global's stock is up. We didn't do this in percentages, but it looks exponential. Well, no, Josh, here's about this.

So in 2016 or 17, they were the same size. We didn't do this in percentages, but it looks exponential. Well, no, Josh, here's about this. So in 2016 or 17, they were the same size. They were both at $25 billion. State Street is still at $25 billion and S&P Global is at 136. We were looking at State Street's revenue. They have had flat revenue for seven years. And this is one of the largest ETF. You getting excited by what you see happening over there? There's only been one time out of 500 episodes where I did a beer tasting on my podcast.

It was podcast number two. And I heard it. Patrick O'Shaughnessy. And it was a disaster. Wait till you see what's about to happen here. All right. So that's how tough this business is, I think is the point. That's my takeaway, that you could have an issuer like State Street, which owns SPY, where revenue does not... I don't know if there's other businesses under that umbrella, but it's just the point. Well, ironically, they're paying S&P. Right. So they have to pay S&P a licensing fee. And I think it's like two out of the three basis points or something like that. So Matt, Balchunas calls this a They have to pay S&P a licensing fee. And I think it's like two out of the three basis points

or something like that. So, Matt, Balchunas calls this a pterodome. I'm sure you get aspirational asset managers all the time. You've been, you're an entrepreneur. You've been really successful doing this. What do you say to people that are trying to get into the ETF industry? Yeah.

Hey, Matt, I want to start an ETF. Do it. I say call my friends at Tidal or ETF Architect. Venuto and West Gray. But I say there's big one major issue that people do, and it permeates everything nowadays. But they have way, way too short of a time horizon. They expect to launch it the next day. It's going to be a pot of gold in a rainbow, $100 million, billion dollars.

And so many of my friends launch. And they sit at $2 million, $5 million. And they say, well, this is costing me $250,000 a year, which is roughly the cost if you don't have any assets. And they say, I'm going to close it down after a year. That's what it costs to have any. If you sit at zero, that's probably your minimum payments. Now, I would say the best thing that could happen is you seed it or you have someone that's going to put in $50 million from day one. You're seeing a lot of the conversions.

People cannibalize some of their book already or they know there's some pinup demand. But those that are willing to just take a swing, I say, look, man, you need to give this five years, maybe 10. Or, and hear me out, it's thematic and you fucking nail the timing. You're lucky. Hack. Cybersecurity. The hack was just – Yeah.

I mean, Bitcoin, that ship has sailed. There's already nine of them. But that's the kind Get lucky. Hack. Cybersecurity. The hack was just one. Yeah. I mean, Bitcoin, that ship has sailed. There's already nine of them. But that's the kind of thing where, like, if there were a Coco ETF that somebody started last year, right now, they would think they're a genius. But you have to be in the game, right? You have to have it out. And then it has to happen. And so then also the next best thing you can do is build out a lineup.

But then that gets even more expensive. But we tell people on average, great, do it. You're in a tailwind industry. ETFs are eating the asset management industry. How many ETFs do you have currently trading? 14. Okay. Are they all on the New York Stock Exchange?

None are. They have been on the New York, and we will launch some New York. We love our friends at the New York and possibly NASDAQ, but they're currently all at CBOE. There's nothing like going to that giant table at the NYSE, the largest table I've ever seen in the world. Oh, in the boardroom? Other than Putin's table.

It's pretty dope. It's amazing. Have costs come down dramatically for new issuers? Largely because of the two white label firms, yes. They've really brought it. I mean, look, when I got my ETF trust, you used to have to get permission to launch ETFs. It took us like 14

months, and I think it was either $300,000 or $500,000 just to get permission. You needed exemptive relief from the SEC. Now anyone can do it, so it's a lot easier. But yeah, we encourage people. Don't call me, though. Call Wes. Fidelity announced this week that they are launching a $100 platform surcharge.

It looks like for smaller issuers in order to make their funds available to users or if their users want to buy these ETFs, Fidelity user wants to buy these ETFs. I'm just going to read this. I want you to go on a rampage right now. Boston-based Fidelity, which manages $45 billion in 67 ETFs, issued a memo March 28th to nine ETF issuers that haven't agreed to pay the trading surcharge. Informing them the new fee will begin being collected June 3rd.

I mean, it's their clients. It's their prerogative. Like part of me wants to say, oh, that sucks because it's a clients it's their prerogative like part of me wants to say oh that sucks because it's a fee and nobody likes fees but then part of me is like alright but

like how do you want them to make money? Trading is commission free You think Fidelity has a hard time making money? No but I think every business wants to make

It's one of the most profitable businesses probably in the world So what do you think they should do? Just continue to provide this open marketplace for anyone's products to get bought and sold? No one does that. Like eBay doesn't do that.

Amazon doesn't do that. I think in our world, there's largely two types of firm and there's not a lot of white space in the middle. I think there's the firms people offerings that will charge as much as possible and see if they can get away with it. And that's a lot of the slimy business models of day's your. There's less today because the internet disinfectant. And then there's the companies like Vanguard that try to charge as little as possible and keep the lights on. We just did something. We said, look, 50 million in assets in any of our funds, no expense ratio for the early adopters. We're trying to head that way and also stay in business.

I think what happens at these large organizations is you get people, and we've publicly been transparent about a number of these. I'm an optimist through and through. I don't like being a pessimist, but when I see something in our world that is particularly predatory, I have to mention it because it gives the rest of us a

bad name. So we talked very publicly about Schwab's decision when they launched their intelligent advisory, where as a fiduciary, they required many clients to be in cash and then paid you nothing on the cash. When they could pay you on cash, they got fined $200 million for that. We were all talking about it back then. We talked about F squared. There's a private equity firm in Texas that I said was a fraud and is a $200 million company, on and on. So I'm not always right, but I call it like I see it. I think this is probably someone mid-tier in the organization that's saying, look, we're trying to figure out, the biggest problem is mutual funds are conflicts of interest. 12B1 fees, front-end loads, back-end loads, on and on and on. That's why you have an average fund fee of 1.25%. ETFs are born without

that. They trade on an exchange. And so all these providers are trying to get their pound of flesh, which they used to have with mutual funds as mutual funds die. So they're coming up with these ideas. And you know what? It's great because Vanguard's like pound sand, buddy. We're not going to do that. On and on and on. And so this decision, I think, if they go through with it, could potentially be an all-time backfire for them. Because here's what's going to happen. You got your grandma in Texas doing dollar cost averaging into our funds or something, 500 bucks a month. And she's getting slapped with a $100 fee. I think the issuer is paying, not the client. No, no.

This is the client paying? Yeah, they can't make the issuer pay for it. So anyway, and again, I do my best not to get in trouble here, but it's anti-competitive. I don't think it's illegal, but you run a marketplace with your own funds, and then you're picking and choosing who's going to be disadvantaged. To me, that feels like if I was an RIA on Fidelity, we custody millions of dollars of Fidelity. I have personal assets there. If you're a retail customer, if you're an RIA, then it's like being stuck in the worst of the wire house model where they can tell you what to own. That's the beauty of the RIA model.

Why would you not move to Vanguard or Altruist or Interactive Brokers or all these other places where you can decide what to invest in? I mean, for the large part of our history, many of our funds were blocked because they were active. Yeah. And I was like, I was like, Vanguard has more active funds than passive. So you would go to a platform, any platform, we don't have to name names, and they would say to you, we don't want our clients to get access to your funds because there's active decision making. And to be clear, all of our funds are in-house indexed, rules-based, systematic, quantitative. Right.

And it's just reasons to say no to advantage their products and offerings. Right. But you've seen, as you guys have done, the vast migration away from these platforms to open architecture RIAs, to people being on their own, to brokerages that let you. And so it's – look, I just think it's kind of slimy. I doubt it goes through. But it's a shame because – You think they won't do it. It's a shame because – well, it's already had effects on a lot of our friends in the industry where for some unknown reason they singled out like 10 firms.

Anyway. friends in the industry where for some unknown reason they singled out like 10 firms um anyway it might have something to do with the size because there's some compliance call there's like some cost to just allowing products on the platform i don't know what that cost is but maybe this is how to either um dissuade smaller issuers from being on the platform because it's not worth it or get people paying more into the ecosystem. I don't really know the right answer. Yeah. So. I think it's unfortunate. That's all.

What else do we want to do with Mab? Oh, we want to do a beer tasting. So you're a beer guy. Josh, I have a very distinct memory of you being a vodka guy. I used to. I don't drink liquor anymore. Josh claimed that he could tell the difference between vodka, which is sort of tasteless, between a well and fancy vodka.

And could I? And he named it immediately. I was with you. I was down in Newport, I think, with Tom Lydon and friends. Hey, no, it was Grey Goose versus well vodka. And, Meb, with all due respect, you could tell the difference, too. You know you can. Now, I'll stipulate a lot of vodkas taste similar.

Meb, one thing that we didn't get to while we're cracking these beers, you're a big Cape guy, and the spread between international and the US has just been bad and ugly for years. What do you think is more likely? I mean, our international stocks, Cape is not going to catch up, right? Why not? Ooh. Why not?

I mean, look, we did a couple posts this past year that people didn't believe when they read them. They said, I think your math's wrong, Matt. We did one where we said- That's bullish, right? Let's look at the global market portfolio. So half stocks, half bonds, half US, half foreign, roughly speaking. Let's just totally eliminate US stocks. Didn't change the outcome. It did, but it was like 40 bps or something. Like in the long term, like if you're going to make wealth. And then we said, all right, let's create a doppelganger clone of US stocks. We did it with

REITs, emerging market, corporate bonds, yada, yada. If you even included a little leverage or if you included a little active management, you can come up with the exact same. The whole point is you can make money anywhere. You don't have to own U.S. stocks. Now, that's the bedrock of everyone's portfolio. I don't know. You don't have to own U.S. stocks.

By the way, it's my largest fund. If I was smarter, I would talk about U.S. stocks all day long. That's half our assets. Instead, I'm telling what I think is true. Do you have fun on the show today? What are we drinking, Josh? All right. This is a Harlem Renaissance Wit.

It's a wheat ale. It's in the Harlem style. And this beer came out in the year 2000. I guess Harlem is the name of the brewery? You're a weed guy. Yeah, I sometimes am. That's like the only beer I usually don't like. I'm not a weed guy. We'll start with the beginning.

But has anyone ever on this show come here, drank beers to pregame? We don't do this shit with anyone. To pregame with Lion King? You're a Lion King? I got my six-year-old in town. I'm like, what are we going to do tonight? Look how much I bought you. No, I think it's great.

You got to get a little buzz to watch. Are you going to Lion King? Really? Okay, it's great. All right, give me the next one. I actually, wait. A dub? I have plastic cups somewhere.

Meb, what's a double IPA? So I'm an IPA guy. I drink double IPAs. I don't know what makes me double. It's a hangover is what it is. I have a hard time with IPAs, double IPAs these days. All right, you can skip. You don't need to skip.

My brother, no, no, no, no, no. My brother has a strong tradition at Christmas where he finds the highest alcohol beer possible. Well, they got 11 and 12%. Oh, no, no, no, no, no, no, no. 15 north, and it's undrinkable. It's disgusting. What is this called?

It doesn't even taste like beer. This is the habitual line stepper. I always call you taste like beer. This is the habitual line stepper. I always call you that, Josh. I am a habitual line stepper. This is 8.1%, so this is healthy. What is that from? Is that Dave Chappelle said that in some... You know what that's from?

Go ahead, Schaefer. That's delicious. Oh, Rick James. He said you were habitual because he steps over the line. Is this good? Very good. It's good. But it's got a punch. If you have a few of these, you're going to wake because he steps over the line. Is this good? Very good. It's good. But it's got a punch.

If you have a few of these, you're going to wake up in the morning with it. If I drank this whole thing, I'd be a monster. I'm drunk already. I'd be quite buzzed. Wait, what is this? Double pale ale. This is the habitual line stepper. Oh, this is a good beer.

I might drink this. The Torch and Crown Brewing Company. By the way, producers, I have in my Twitter thread somewhere deep in the archives is I was in Maine and found a microbrew with Batnick's picture on it. And I tagged him in a Twitter that I was like, Batnick, some of your relatives are clearly from Maine because you were – it was like a cop, you know. I don't remember that. It was a bald guy, I assume. A bald guy. Of course.

We all look the same. All right. Let me tell you something interesting about this one. This is the Al Dente. It's an Italian-style Pilsner. Oh, I'm going to love this. Okay. Talaya is the brewery.

She opened up next door to our office. That's dangerous. If you walk out the front door and look to the right, she has a place in Brooklyn. Or it's two of them. Their names somehow form Talaya. But they own a place right next door to us. That can't be cheap real estate for a brewery. But they're pulling 12 different handles, and they have all their beers there.

All right. What do you think of an Italian-style Pilsner? Like Stella? Stella Artois. I don't like this. My expectation is this is going to have a little bit— Like a green bitterness? Yeah.

Let's see. I love—Pilsner is my favorite style of beer, I think. You're an IPA guy, right? I love Pilsner. Pilsner is my favorite style of beer, I think. You're an IPA guy, right? I would say if I had to choose a hoppy Pilsner, a pale ale would be my favorite. But, you know, I'm not a snob.

If you gave me a… It's pretty good. It's not bad. Batnick doesn't like it. No, I do. No, I like it way more than I thought I would. And by the way, when you guys said beer tasting, you mean beer chugging. This is coming on a very quick rate. I didn't pour you much.

That was a big pour. I'm pouring this back. Yeah. Spill it back in the blue cup. You can't be the guy that pours the wine out of the tasting. Do you need a bucket to spit it into? You want to spit it into. All right.

Is that the Paul? What was the Paul Giamatti movie with the wine tasting? Sideways. Where he drinks the, he takes the spittoon of spit out wine and drinks it. That's an all time. Josh, you love that movie, right? Hold on. Let me give Rob a time. Let me give Rob a time. Thomas Hayden Church. All and drinks it. That's an all-time. Josh, you love that movie, right? Hold on. Let me give Rob a Thomas Hayden Church.

All right. Next. What? Sideways? Yeah. I'm a Giamatti guy, so. Yeah. All right.

We got a surprise surprise. I love that. It's a hazy epa. Oh, geez. These are like my favorite tasting and the biggest. Punch in the nuts. We have. Hold on.

Hold on. We have similar taste buds because I also am a hazy guy. You like hazy? Why is IPA hazy? How do they do that? It's like unfiltered. Do you know why they're called IPA? Well, it's the Knights Templar.

No, seriously. Do you know? Do you know? I do know, but you got to give me a minute. We don't know. We don't know. I think he does know. I do know. We don't know. Hold on. I think he does know. I do know.

He loves this shit. It has to do with the transport, right? Yes. Not going bad. Yeah. That's all. On the ships. It was a certain type of beer

formulated to make the trip from England to India for the Navy. Yeah. That's why it's in India, Palau. So there you go. All right.

And you know a lot of the traditional light beers in the US were watering down the beer to make it, to make it go. So it could go. Yeah. That is good.

We got one more. Man, Jesus. Just last one. This is a Greenpoint. We'll give you a cup for this one. A double,

okay. A double dry hopped IPA. So I bought a bunch of these for everybody. You saw those in the fridge? Yeah. Okay. We really should have done this at the beginning.

Sean, don't shotgun this. These are 6.4%. We should have done this at the beginning and just watched this deteriorate rapidly. Should have been a train wreck. Yeah. All right. What's your absolute favorite? This is the Greenpoint.

So this is a double. Why is it a double IPA? Double the hops? We should have done it as a blind tasting and said, all right, now what's your favorite? It would be like Bud Light. We tried that with some fancy whiskeys a handful of years ago, and it turned out my favorite was Jack Daniels. Really? Oh, a blind test, so you don't know.

What were the other ones in the contest? I don't remember, but I didn't know how to feel about that afterwards. What about, do you drink tequilas? Yeah. You seem like a tequila guy. I like tequila. Anejo tequila? You know, yeah.

I mean, I don't think I had a reasonable tequila until I was at least 30. Yeah. I don't think there's a bigger spread. There wasn't one, dude. It was only, it was only, it was Patron was like fancy tequila. Patron was the hot shit. I hate the way that smells. I can't, there's a bigger spread. There wasn't one, dude. It was only Cuervo. There was Patron was like fancy tequila. Patron was the hot shit. I hate the way that smells.

I can't do that. But there's no other spread in all of the alcohol industry between the well and the good, I think, than in tequila. That's right. The well is undrinkable. That's right. I was at a casino and I got a tequila and I'm pretty sure I asked for a decent one. And I drank it. What is this? And she says, Jose Cuervo. I'm pretty sure I asked for a decent one. And I drank it. What is this?

And she says, Jose Cuervo. I'm like, come on. Where was this casino? Bahamas. Really? Yeah. They're pouring Cuervo? They should know that you're the guy they can get for $50 on a 1942.

There is one Cuervo. It's Cuervo, right? The Reserva, which is one of the best tequilas around. Which is really good. Yeah, they stepped the game up. By the way, nobody's drinking Jack Daniels anymore. There was an article in the Journal this week that their cells are getting hammered. Why?

Because whiskey's down and Jack Daniels is down bad. I used to be a Jack and Coke guy. When's the last time you got Jack and Coke? I mean, college. On the flight? No. I think the Jack Daniels drinker now, 10 years later, is like a bourbon guy. Like drinking or even rye.

Woodford Reserve? Yeah, yeah. Like that's what happened to the Jack Daniels. All right, last beer. What is this? This is the Greenpoint Distil, which is I think like a Dutch thing. Double dry hopped India pale ale. I like that too.

Six and a half percent alcohol by volume. So that's decent, right? Yeah. But all of these beers have different occasions. I like that too. Six and a half percent alcohol by volume. So that's decent, right? Yeah. But all of these beers have different occasions. They serve different purposes. I think that's my favorite habitual line stepper.

I think so. What do you think? I like this and the hazy, but this was very good. This was very good. Josh, is that beer named after the art movement? Yeah, because look at the can.

Ah, nice. Yeah. Oh, the White Stripes had an album called Distill and it had this kind of design on it. Ah, nice. Yeah. Oh, the White Stripes had an album called Distill. And it had this kind of design on it. Pass this down to Duncan. Here.

I think this one is the favorite. The Habitual Line Stepper. What do you got? What do you think? Do you even remember? It's five too many. The last one is a little harsh for me. It's too hoppy, right?

It's borderline Goose Island. Yeah. That's a little... What? I mean, I like them all. What are you laughing about? Duncan's the guy at the party. He's like, guys, the beer is bad.

Nobody drink the beer. That was just a funny comparison. Just Goose Island. That's too hoppy, right? Would you say? It's a lot of hops. Okay. It's more than you would want.

Probably. Okay. All right. I think we wrap this up before this devolves any further. What do you think? Let's get out of here. Can I tell you a couple things about you? Yeah.

All right. I really look at you as like one of them, like one of those guys that's just – your reputation is sterling over a really long period of time. You constantly come up with new interesting things to show people. You teach more than you take. So this is a community, right? There are givers and takers. I think you are like a huge giver to the community. You don't really ask anyone ever for anything that I'm aware of.

You just put out so much stuff and people that read you get smarter. So I've always felt that way about you. And I know I've told you this before, but I love your podcast. The last thing I want to say is your guest selection, I think, is up there with like the best podcasts in finance. How do you think of like who you want? Because a lot of people who listen to this are podcast fans. So hopefully they're going to go check you out.

How do you like come up with that guest list and book people and like know who should be next? And it's just you've done hundreds of episodes. Same as you guys. It's the and friends part, you know? We just have JC come on. I don't think we work as hard as you do. You really are like having incredible guests all the time.

I don't know if JC works that hard too. He's talking about doing this thing up in Napa. And I'm like, you're just gonna drink wine and look at charts the whole time? Yes. Hey, JC. Look, that's very generous. I love you guys.

You know, I think as a famous great man once said, he's like, you look for guests and say, you know, that's fascinating. Yeah. Like, that's what you want. Shout out to Barry Ritholtz. Yeah. No, you really do a great job casting your, is that what it's called, booking your podcast?

I mean, it's just like people you want to talk to. Yeah. And like everyone's show has their own personality. And so mine veers into weird places that I care about, like farmland investing, investing in startup space companies, investing in, you know. Can we talk about the Idea Farm? Sure.

Okay. That's already now, what, 10 years or eight years? It feels like it's been a long time. Yeah. Tell everyone what the Idea Farm is and why they should sign up for it. Idea Farm is a once a week email. We used to charge, man, I don't even know, 500 bucks.

It's free now. There's 100,000 plus subscribers to it now. 100,000. That's amazing. But it's way better now that I don't produce it. But it's a- You have somebody writing it for you? Yeah, so it's the concept of, look, we're trying to find the needles in the haystack,

curate down the best content of the week. So it's two, top two or three research pieces, usually institutional. So it might be from GMO or Goldman or somebody, but it's pretty wide. There's a handful of quotes or statistics in the top two or three podcasts each week. You guys have certainly been on there. The cool part is there's now five years of archives. So if you wanted to burn through MBA and investing, I think it's a pretty great resource.

We even threw up the playlist on Spotify. So all the archives are on there. If you are an enterprising young analyst, go download all the reports and then put them in a Dropbox somewhere. I was going to say, if somebody wants to get smarter about investing, like that should be one of their first stops,

the Idea Farm. Even if you only understand 10% of the stuff you're reading at first, over time, it'll go from 10 to 20, 20 to 50. And that's like an incredible way to educate yourself for free. So shout to the Idea Farm. I know it's a labor of love for you that you started.

It's pretty cool that you kept it going all this time. So congratulations, man. All right. We're going to wrap up right here. Thank you so much, Meb Faber. What's the Cambria URL? How do people go to your main site? Day job is cambriafunds.com.

Cambriafunds.com. What's your social handle? What's your Twitter? There's not too many Mebs out there. So Meafunds.com. Cambriafunds.com. What's your social handle? What's your Twitter? There's not too many Mebs out there, so MebFaber. Okay, at MebFaber. Meb, you're the best. Great. Thanks, guys.

Thanks, Duncan, John, Rob, Nicole, Sean. Thanks to everyone who worked on the show this week. Daniel, we appreciate it. Thanks to you, the listener. Leave us a rating and review. See you soon. leave us a rating and review see you soon alright should we start recording?

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