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24 The Systematic Investor Series ft Meb Faber – February 24th, 2019

Meb Faber joins the show to discuss his journey into Trend Following, where Trend Following funds have gone wrong in terms of attracting assets & growing AUM, why he started his company Cambria Investments and the difficulties that this involved, the perceived safety of US Treasuries, Mutual Funds vs ETFs, and a lot more.

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Episode Summary

00:00 - Intro
1:30 - Weekly review
6:25 - Meb Faber’s backstory
10:15 - Jerry question: Why don’t CTAs have more AUM?
11:25 - Meb answer: Relates to branding/marketing; The word “futures” scares people; Allocator career risk in not following the herd plays a role (they don’t allocate much to CTAs)
16:50 - Mortiz question: When and why did you start your firm?
17:25 - Meb answer: See podcast
21:00 - Moritz question: Why do you think TF and value is a great blend?
21:50 - Meb answer: Best portfolio structure for the long-term.
28:00 - Niels question: Please talk about the perceived safety of US Treasuries (based on your research) and why you use a broader portfolio.
29:10 - Meb answer: See podcast
36:20 - Niels question: What needs to happen before Betterment (and others) embrace TF?
37:00 - Meb answer: A crisis or bear market could create interest; having US stocks stopped “working” for buy and hold could bring change as well (ex, Japanese stocks)
40:15 - Mortiz question: Why did you set up an ETF vs a mutual fund or another vehicle?
41:00 - Meb answer: I’m product (vehicle) agnostic but ETFs are vastly more tax efficient for equities (only for equities)
50:00 - Jerry question: What needs to happen for mutual funds to be competitive with ETFs (tax wise)?
50:20 - Meb answer: See podcast
53:00 - Niels question: With ETFs do you have to disclose your trading methodology?
53:25 - Meb answer: No, but you do have to disclose holdings daily.
57:00 - Jerry question: What do you think of products designed for client desires/tolerances compared to optimally designed pure TF products?
57:30 - Meb answer: Framing plays a large role in investor reception/adoption.
1:02:30 - Jerry question: What is your opinion on active mgmt = discretionary & index = systematic?
1:03:30 - Meb answer: See podcast
1:11:30 - Niels points listeners to Meb’s podcast with Chris Cole for more on this topic
1:12:30 - Niels questions: What are your favorite factors? How is your competition going with Patrick O’Shaughnessy?
1:18:20 - Meb answers: Value, momentum, and trend. Wants simple, timeless, and universal. See podcast re O’Shaughnessy answer.
1:19:30 - Mortiz question: Do you trade any vol products?
1:19:40 - Meb answer: Not really
1:25:45 - Jerry question: Why isn’t there a distinction between the good (full trading systems) and bad (market timing indicators) parts of systems trading in articles?
1:26:30 - Meb answer: It is in the framing. Investors need a plan (indicator isn’t a plan). The media likes the boogeyman of market timing.
1:30:45 - Performance recap

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