Meb Faber on the Big Bear Market in Diversification and Tactical Allocation

SPEAKER_1 (0:03)

Bloomberg Audio Studios, podcasts, radio, news.

Tracy Alloway (0:20)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:24)

And I'm Joe Weisenthal.

Tracy Alloway (0:26)

Joe, do you ever feel like the investment gods are punishing you?

Joe Weisenthal (0:30)

Oh my God. I think about this all the time. You know, when I first started investing my money, I'm like, I'm going to be a very prudent diversifier, and I'm gonna buy some bond funds.

Tracy Alloway (0:42)

Some hard assets.

Joe Weisenthal (0:43)

Some stock funds. I'm gonna invest internationally. I'm gonna invest a little bit in emerging markets. I'm gonna buy some ETF so I get a little income. Yes, I thought I was being very smart for that, but all it turns out is I should have just bought QQQ or, you know, the big tech stocks, and I would have been doing so much better. Spire die. Spire die, yeah.

Tracy Alloway (1:07)

Yes.

Joe Weisenthal (1:08)

Over time, I've become a little bit more spire die.

Tracy Alloway (1:11)

You capitulated.

Joe Weisenthal (1:12)

Yeah, I capitulated. It probably means it's the top.

Tracy Alloway (1:15)

No, I had the same thing. So obviously we're journalists and we can't really invest.

Joe Weisenthal (1:19)

We don't trade.

Tracy Alloway (1:20)

Right, we don't trade. But for instance, we have retirement options, right? And there are retirement options that are like, oh, an ex-US dividend fund or something like that. And I remember in the sort of mid 2010s, people talked a lot about international equities and like, don't just put all your eggs in the America basket. Make sure you have exposure to emerging markets in China and like Europe even coming out of the Eurozone crisis. And it turns out that was a bad idea.

Joe Weisenthal (1:51)

Totally. You really should have just bought US big caps. You know, you mentioned like retirement, like in our like 401k options. I think I have money in some sort of target date fund, which is a cool idea because as you get older and theory-

Tracy Alloway (2:04)

That's the vanguard one, right?

Joe Weisenthal (2:06)

I think so. You know, and like in theory, as you get older, you're supposed to take on less risk and stuff like that. And so, great. That seems like a good idea. I don't want to like think about it too much, so it would be nice if we were just sort of automatic. But man, all of this diversification is killing me. What a mistake.

Tracy Alloway (2:25)

All right. Well, today we need to talk a little bit about why diversification for the past 10 years or so at least has turned out to kind of be a bad idea. You would have made a lot more money just putting stuff in the S&P 500 You certainly would have made a lot more money if you just, I don't know, bought Apple or something.

Joe Weisenthal (2:45)

Yeah, Apple QQQ. Yeah, just big cap tech.

Tracy Alloway (2:48)

So why is that? We need to talk about why we're being collectively punished for being prudent. We have the perfect guest to talk about this. We're going to be speaking with someone who I actually cannot believe hasn't been on the show before. I feel like he has, but then I realized that he's sort of like the Rocky Mountains in the sense that he's just always kind of been there, but you kind of take him for granted. He's like out there. You know him. You read all his stuff. Maybe listen to a show, see him on Twitter, certainly. And yet we've never had him on the show. We've just taken him for granted.

Joe Weisenthal (3:21)

Outrageous oversight that we must now rectify.

Tracy Alloway (3:24)

Yes. OK, so I'm very excited to say we are going to be speaking with Meb Faber. He is, of course, the co-founder and CIO of Cambria Investment Management and also the host of the Meb Faber Show, the podcast. So Meb, thank you so much for coming on Odd Lots. I feel so bad that you haven't been on before. I can't believe it.

Meb Faber (3:42)

It's great to be here, y'all, as a Colorado native. Maybe the Mountain Analogy is spot on.

Joe Weisenthal (3:47)

That was better than you guys. By the way, we're still out. Even though it's long past, we are recording this at the Future Proof Conference in Huntington Beach, California. Meb, you live like an hour away, huh?

Meb Faber (3:58)

Yeah, sadly, we invited Joe and Tracy to come surfing. They skipped out again for our surf lessons, but beautiful day. Glad y'all are here.