Meb Faber on the Big Bear Market in Diversification and Tactical Allocation
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What is the main topic discussed in this episode?
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Hello and welcome to another episode of the All Thoughts Podcast. I'm Tracy Alloway.
And I'm Joe Weisenthal.
Joe, do you ever feel like the investment gods are punishing you?
Oh my god. I think about this all the time. Like, 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. Yeah, some
hard assets, some stock funds. Some stock
funds. I'm gonna invest internationally. I'm gonna invest a little bit in emerging markets. I'm gonna like buy some re 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. Yeah. Yes. Over over time I've become a little bit more spired I. You capitulated. Yeah, I capitulated. It probably means it's the top.
No, I had the same thing. So obviously we're journalists and we can't really invest Yeah we don't
trade.
Right. We don't trade. Uh, but for instance, we have retirement options, right? And there are retirement options that are like, oh, an X 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 and China and like Europe even, um, coming out of the Eurozone crisis. And it turns out that was a bad idea.
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 and some sort of target date fund. Yeah. Which is a cool idea because as you get older. It's the Vanguard one, right? I 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.
Why have diversified portfolios underperformed the S&P 500 in the past decade?
That seems like a good idea. I don't want to like think about it too much. So it'd be nice if it were just sort of uh automatic. But man, all of this diversification is killing me. What a mistake.
All right. Well, today we need to talk a little bit about why diversification for the past ten 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 five hundred. You certainly would have made a lot more money if you just, I don't know, bought Apple or something like that. Yeah, Apple QQ Q. Yeah, like the
mo yeah, just big cap tech.
So why is that? We need to talk about why uh we're being collectively punished for being prudent. We have the perfect guest to talk about this. We're gonna 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 like 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. him, you read all his stuff, maybe listen to a show, see him on Twitter certainly. Dog. And yet we've never had him on the show. We've just taken him for granted.
Or an outrageous oversight that we must now rectify.
Yes. Okay. 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 AllBots. I feel so bad that you haven't been on before. I can't believe it.
It's great to be here, y'all, as a Colorado native.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:01–2:44
2
Why have diversified portfolios underperformed the S&P 500 in the past decade?
2:44–9:51
3
What evidence shows the U.S. market has outperformed international markets since 2009?
9:51–15:38
4
How does Meb Faber define the “global market portfolio” and why is it hard to beat?
15:38–29:00
5
What is tactical asset allocation and how can it improve returns in a “bear market of diversification”?
29:00–49:23
6
Why do expenses, tax efficiency, and ETF structure matter more than asset‑allocation choices?
49:23–52:44
Speakers
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