Meb Faber: Intro
Just like the markets he studies, Meb Faber is a dynamic force. As a co-founder and the chief investment officer of Cambria Investment Management, Faber offers his wealth of knowledge not only to his clients but also with the public through his highly popular books as well as with numerous white papers.
Faber has been featured in several prominent publications and news media, including The New York Times, Barron’s, The Wall Street Journal, CNBC, and The New Yorker.
Faber graduated from the University of Virginia with a double major in engineering science and biology. He has authored a number of white papers, and his published books on the stock market and investing include Invest with the House, Global Asset Allocation, Global Value, Shareholder Yield, and The Ivy Portfolio.
Launching Meb Faber Research
One of the challenges to successful investing that many investors face is getting access to high quality investing ideas and strategies.
Based on Faber’s successes in investing, he decided to launch Meb Faber Research, an investing informational blog that explores a variety of industry topics, including a wide range of investing strategies and ideas.
He started the blog after noticing a lack of information about investing strategies and certain aspects of the financial world.
It’s been ten years since Meb Faber Research was launched, and, in that time, Faber has come to develop unique insights into the changing landscape of financial blogging. Most notably, Faber has witnessed a shift in how financial information and ideas are shared online.
The accessibility of blogging and the wide audience afforded by the web has allowed everyone from experts to do-it-yourself investors to share their tips, tricks, and strategies.
Image Source: Pexels
Leveraging the Internet
In essence, the Internet has taken conversations about money – once considered a social no-no – and made them not only more acceptable but more available.
As Faber points out in his chat with AdvisoryHQ, the Internet is a place for people who “have great ideas or terrible ones, want to pick fights or interact and network.”
Faber’s Twitter account is an example of this kind of interactivity. His account boasts over 24,000 followers who receive tidbits of Faber’s investment ideas and observations – observations that can also be found in long form by reading one of his several books.
Image Source: Meb Faber
Interview with Meb Faber
AdvisoryHQ sat down with Faber to gain some insight into his investment strategies, his take on the markets, and the non-linear path to his current role.AHQ: You’ve been blogging since 2006. What inspired you to start Meb Faber Research?
Meb Faber: It was two-fold. There were a couple of areas of investing research with very little coverage in the academic literature or practitioner space. I wanted to interact with people around the world and find more information.
The first reason was to find out if it was possible to track and piggyback on hedge fund stock picks through government filings. The disclosure is commonly known now as the 13F, filing which is actually the topic of our recent book Invest with the House. The second reason was the ability of U.S. investors to invest in publicly-traded, foreign-listed hedge funds in Europe. That was a very common vehicle at the time in Europe, but in the U.S., there was very little information.
I was also writing my first ever academic paper, so I wanted to share that and get some feedback. Two different areas, but it was — I would say — a very pleasant accident to begin writing a blog.
AHQ: Have you found that financial blogging has changed in the years since you began writing?
Meb Faber: Actually, I just went back the other day and skimmed every post I’ve ever written, and the biggest thing you notice (and I even Tweeted this) is something to the effect of: With companies, ideas, as well as bloggers, it’s a huge compliment just to have survived. Of course, partially, that is the beauty of creative destruction, but it also illustrates how challenging it is to sustain being a writer — particularly when blogging is not necessarily income-generating.
It’s been hugely beneficial for me, mainly due to the people I’ve gotten to meet over the years and the constructive feedback they have offered
How it’s changed? The soapbox has gotten taller, and if you have great ideas or terrible ones or want to pick fights or interact and network … the platform is there.
In the early days, you couldn’t go and find a beautiful Squarespace or WordPress template, but now you can access seamless and beautiful publishing technology.
AHQ: What else do you do beyond blog writing?
Meb Faber: My main day job is to manage Cambria Investment Management. We are a public ETF issuer with 7 ETFs out, soon to be 8, and across all the different quantitative investing styles and asset classes. The goal there is to launch hedge fund-like strategies, but for ETF-like fees. We still have a private fund, and we will be launching an individual account service hopefully this quarter as well, so stay tuned!
AHQ: When did you first become interested in finance as a career?
Meb Faber: I have been interested in investing ever since I can remember, and through college, I spent a lot of time reading company reports and studying stocks. I actually studied bioengineering as an undergrad, and before going back to my PhD, I took a year off to work as a biotech stock analyst, and it was fascinating to me.
The PhD kept getting a little bit further away. One year became two, and two became three, and three became ten. I kept gravitating away from the biotech world and, specifically, more to the quantitative side of the business — which also fits my personality much more.
AHQ: You have an impressive Twitter presence and, through your blog, have established yourself as a thought leader online. What advice would you give to someone who’s looking to become an influencer in their field?
Meb Faber: Some of the best advice I’ve ever heard was from probably the highest-performing hedge fund manager of all time, which is James Simons. Someone asked him for advice: “Should I study math very broadly but not too deeply, or should I focus on a specific area and become a world expert on that?”
He said, “I can make cliché either way.” What he meant was that one can point towards examples of people that have done well for each scenario and have been incredibly happy and it’s been a great experience, and one can also find negative examples for each as well.
I’ve been very blessed to find a career and purpose that I love, that I get excited about every day. Some people find that when they’re teenagers; some people find it… My mother, who’s in her 70s, famously says, “I still don’t know what I wanna be when I grow up.” It’s easy to give advice, but each person needs to find their own path and find the approach that works for them.
AHQ: What differentiates Meb Faber Research from other financial blogs out there?
Meb Faber: I simply write about what I find interesting, and, luckily, there’s a small fraction of the world that is as nerdy as I am about some of the topics, and it resonates with them. There’s certainly plenty who don’t resonate with what I write about. Any time you write online, there’s plenty of hecklers.
If you’re honest and that passion shows through, it doesn’t matter if it’s quantitative investing strategies or surfing. Writing good content or content people care about takes time and effort.
AHQ: What are some basic investment principles you think new investors should be aware of?
Meb Faber: There’s a number of distractions and things that entice. Warren Buffett says it best: “It’s not the greed and fear that drive the market, it’s envy.” If you don’t have a broad-based background education, particularly knowing the pitfalls and knowing what’s possible, someone could market to you the ability to make 20% a year or tell you they have a very low-risk investment that just can’t lose.
Most people won’t know that’s impossible. If you were to tell the average person in the street, “Hey, I have a buddy who can dunk a basketball in a 20 ft hoop,” you would say that’s ridiculous. No one can do that. In investing, it sounds possible, and there’s always a few outliers. So, you get bad behavior. People chase returns, buy tops and bottoms, get seduced by the possibility of a lottery ticket. That’s a big one – paying too much in fees and costs, too.
AHQ: What are some good habits you think any smart investor should get into?
Meb Faber: The first is just to be thoughtful and not be in any rush. Take time and say, “I’m gonna take a year, or two years, or five, or 10 and learn the craft of investing” And also learn what fits your personality. Get a broad-based education in markets, in history, as well as to understand what type of investing may work the best for you.
So, in the beginning, start with something like a financial advisor or even a very small trading account. Many people say they’re not interested in this or it’s too hard. An advisor is a perfectly reasonable way to go as long as they don’t charge too much in fees.
AHQ: What are your favorite types of investments?
Meb Faber: Most people gravitate toward a particular style or an area of market. We think there’s times when certain asset classes are better and other times when they’re terrible, so we try to remain asset-class agnostic. We believe in most traditional assets: equities, bonds, real assets. There’s none in particular that we prefer over others, but there’s some that we’re particularly fond of right now, which includes foreign stocks; in particular, we like emerging markets and the cheapest stock markets in the world, a lot of which are in Europe.
AHQ: What is your strategy when choosing stocks and investments?
Meb Faber: We’ve written five books, and some of them touch on how we think about stock investing. The starting point is always the market cap portfolio index at a very low cost, so in the U.S., that is the S&P 500.
We think that’s the base case, and you can certainly do better whether it’s the tilts toward value or tilts toward momentum, but when you start applying an active approach, it still needs to be low-cost, and it still needs to be very transaction cost-aware, and you also need to realize that you’re going to be different than the broad market, which at times is great and other times not so great.
AHQ: Which stocks or investments do you find particularly interesting right now and why?
Meb Faber: In one of our books, called Global Value, we talked about valuing stock markets around the world. We take a very long-term look at valuation, price earnings ratio, and displays over a long time period – 1 to 10 years. This is not going to help you in the next year or quarter, but it’s going to help you in the next five to 10 years.
U.S. stocks are certainly expensive right now. We don’t think they’re terrible, and they’re not in the bubble like they were in the 90s, but it does mean that their future returns will be lower, so expect around 4–5% in U.S. stocks going forward per year.
The good news is that most of the world is really cheap, so if you look at foreign markets, in particular, emerging markets are cheaper. If you focus on 25% of the cheapest countries in the world – so, of about 45 investible countries, maybe about the top 11 or 12 you find are really cheap. They have a P/E ratio of around 9 versus 25 for the U.S. and then average around 16 for most markets.
Most of these foreign markets have been underperforming since the global financial crisis. But, in general, foreign versus U.S. is a coin flip…. Usually, what’s done really poorly will reverse over a longer time period.
AHQ: If there was one piece of advice you’d like to impart to readers, what would it be?
Meb Faber: Go read all our books. Just kidding! Don’t be in any rush; try to read as much as you can. Our book Global Asset Allocation is a great review of market history, but there are plenty of other books we mentioned on our blog and on our reading list that we think are wonderful as a great introduction. Everything written by Jack Bogle is a great start, too.
Conclusion: Key Takeaways
It is clear that Faber’s blog tackles topics he is sincerely interested in, and that he creates content that is both informative and engaging.
If we were to give Meb Faber’s investment advice to a novice in a nutshell, it would be to educate yourself about the markets, be patient, and avoid letting greed be your primary motivation. A desire to see astronomical returns in a short space of time is a dangerous goal, and investors should be wary of those who say they can make it happen.
For those eager to learn more, Faber’s books provide a starting point for learning about how the markets operate, along with an overview of the market’s history, and serve as a great springboard for the eager student.
Then again, if you’ve got the assets, there’s always the option of becoming a Cambria client to see for yourself.
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