Meb Faber unplugged

The market landscape is in a constant state of ebb and flow… As conditions change, it’s important to remain open-minded about your investment strategy. There are countless methodologies out there… and the more you know about each one, the better prepared you’ll be for any type of market.

Meb Faber, CEO and chief investment officer of Cambria Investment Management, joins me today to discuss the “quant” method of investing. In this wide-ranging interview, Meb breaks down his thoughts on today’s markets… plus the best investing opportunities you can take advantage of right now [17:14].

If you’re thinking about following the crowd into tech giant Micron Technology, listen to my educational segment first [51:30]. There’s another company I like even better…

Transcript

Wall Street Unplugged | 677

Meb Faber unplugged

Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on main stream.

Frank Curzio: What’s going out there. It’s July 10th. I’m Frank Curzio, host of the Wall Street Unplugged podcast while I breakdown the headlines and tell you what’s really moving these markets. There’s so many different investment styles. Nowadays most people separate them, I would say simplify it into two categories, which is fundamental and technical. Which I know most of you are familiar with, but investment styles, they go so much deeper than that. For example, you have large cap investing, investing just for income, investing for growth. Top down where you’re looking at the macro picture, bottoms up, which is more about the company, less about the macro. You have your classic technical investing. You have momentum investing.

You buy and hold venture investing, angel investing, which is investing in early stage companies, investing in collectibles, real estate investing, REITs, MLPs, with sector investing, you can Algo investing, hedging, trend investing, short-selling investing, asymmetric investing, option investing, sediment trading, overseas investing, emerging markets, ETFs, speculators, speculate investing, quants, crypto investing, value investing, get deep value investing, right?

Deep, deep, deep value, which is… I don’t know. With the people who think they’re really good value investors basically call themselves, we’re not value, we’re deep value, we’re deep value investors, and I keep going on and on about these investor strategies, but you can go anywhere, and my point is all of these strategies work at one time or another. It depending on marketing conditions, and some of them don’t. I mean there’s not a strategy out there, as you guys know that works 100% of the time. Renaissance may have be pretty close to that. So they have, what is it, 160 $170 billion in there but there’s not really a strategy that works, there’s zero strategy that work 100% of the time.

Or say that something that could provide you with a 7% risk free return. Do you have something like that? Good luck. Start yelling fund, you’ll have $100 billion go right into it right away. But imagine all those investment styles I just broke down. Imagine if you could become an expert on every single one of them. You could definitely do it. Anyone could do it, right? It just takes time, dedication, hard work. A willing to check your ego at the door because most analysts I know and good analysts, yeah, they all believe they’re the best, and their style is superior to everyone else’s, they’re supposed to feel that way. It’s fine.

It’s just like if you have James Harden, Kawhi Leonard, Kevin Durant, Lebron James who’s the best player in the world? All of them are going to say, “I’m the best player in the world.” And sometimes that creates an ego where you do not want to change. Hey, this works. This is my style. That’s it. But just imagine if you didn’t have just one style of investing, you became an expert or get really knowledgeable on all these styles of investing.

For example, we have a ton going on with trade right now. China, also India, Middle East tensions, Europe is the cheapest, it’s been a long time. We’ve seen slower growth. We have low interest rates. Going to remain low for a while after what Paolo was saying, so being expert or having a deep understanding of a bunch of investment styles. You could determine what geography or country you want to invest in, which is the macro. Maybe you’re a speculator or an angel investor, so hey, “You know what? In these countries, I’m interested in learning more about the small and micro-cap names.” You have a deep understanding of big cap companies. And a lot of those big cap companies, especially international pay dividends, that’s income.

You also understand that income is usually a factor of growth, right? In other words, if you want to generate income, well make sure you’re buying a stock with solid yield of course, but you have to make sure that it’s also growing or has growth catalysts or that 5% dividends is going to be pretty much meaningless when you’re down 30% on the stock. A lot of people just look at the dividend, say, “Wow, there’s several piece paying six, 7%.” If you lose 20% of the stock is kind of meaningless. Got to look at the company, the company in order for that dividend to be solid, it’s the capital gains plus dividends that are going to give you that kind of income.

You look at the volatility of the market you’re investing in. You could trade it using Algos or play momentum on both the long and short side. You use options to do that because remember you’re an expert and everything as well as options. Or you could say, “Hey, I’m a value guy, go look at Japan, Greece where … Looking to buy and hold long term.” These are two markets that are cheap and also, hey they starting to gain a little bit of momentum right now.

Or you could look at these specific companies and say, “Hey, you know what? I’d rather invest in the debt of these companies in corporate bonds.” But imagine having that sort of access. If you’re knowing every investment style, being familiar with almost every publicly traded stock, knowing most of the major trends, and you’re in these things because you have great content, but you’re able to get these trends before they go mainstream and people are talking about them. You don’t want to be aggressive, and you know went to retreat and be conservative because knowing all these investment styles, if you think about it, if you knowing them and when to use them, it’s going to basically allow you to find new ideas pretty much all of the time and in any market conditions, you can go long or short, but you go always, always going to have opportunities.

I know what you’re thinking, it sounds crazy, how could we learn all these styles of investing? Hey, most of you listening to this right now, you have jobs. A lot of you have jobs outside of an investment area and you’ll listen to me to get the real story and no bullshit that you hear out there in the media all the time and that’s cool, but you guys do own your own businesses, some of you just … It’s not easy finding the time to learn all of this because you also have families as well.

Plus, if you commit to learning these investment styles and say, “Frank, I want to be a smart investor. I want to learn all this stuff. Where do you start? How much money is it going to cost to gain access to this information?” We could learn all of this by simply listening to this podcast and my interviews. I have interviewed Rich Sup Meyer, trading, talks about the macro, the smartest guy becomes allies to Fed balance sheets, a balance sheet analysis for the Fed and Marc Lichtenfeld on whose an income specialist, Ken Fisher, portfolio manager who I interviewed a while back, and they reach out to us. He wants to come back on the podcast. Ken Fisher, that Ken Fisher on TV. He’s familiar with my dad as well, back in the day, he’s been around for a while.

Mike Alkin introduced the short investing options. Chris MacIntosh, asymmetric investing. Marin Katusa resource investing, [Lou Basenese 00:07:34] technology, interviewed [Muhammad Hilarion 00:07:36], which is global economies. Chris Wood is great small cap tech analyst. James Altucher is seed investing, venture investing. I mean he’s able to get into ideas. I know James well. Steve Sjuggerud, sediment trading and ETFs. Dan Farris, deep value, Jim Cramer, battling your momentum growth. And I keep going and going. I mean we’re talking about probably over a thousand people that I’ve interviewed over the last 11, 12 years. That’s how long I’ve been doing this.

And how much does this cost you? It costs you nothing. You get all this for free through this podcast, and again, I’ve been in this for a long time, interviewed the best analyst on Wall Street and that’s where my education comes from. Well, I was able to learn so many different investment styles through these interviews. It’s important because guys, as an investor, please listen to me here, as an investor you always, always, always have to be willing to adapt to the markets.

Take Dan Loeb for example, great hedge fund manager, billions in assets under management. Always figured him kind of like his value guy would describe him, large cat macro investing, but he saw the writing on the wall, he knew interests rate is going to be low. We’re in a growth environment, even later on with Trump getting elected, with tax reforms are coming. Inflation is low, so he knew growth is in favor, and you know what? He bought Google, Facebook, Alibaba, and he made a killing on those names.

To me that’s great. That’s a person taking advantage of what’s being given to him. He’s not fighting it. On the other side, you have a guy like David Einhorn. Also, billions of the manager, which have been shrinking, but he’s more of a value, deep value fund manager. He refused to adapt to the markets. No technology really in his portfolio, at least growth technology, but he got crushed buying value stocks as before, it has been terrible for over five years.

Well the markets had been in a Super Bowl market of the same time frame being led by those growth names like Netflix, Facebook, Microsoft, Amazon, I’m just using an example, I’m not picking on Einhorn who I’m a fan of, I think he’s brilliant, but you have to understand it’s like buying resource companies in a cyclical declining market. I mean if that’s all you do then you know what, you pretty much, excuse my language, you going to be fucked for six years because that market’s been out of favor and starting to come back to favor now, which we all know, gold and silver broke out.

But imagine just doing that, just being at a resource analyst and that’s all you do. What do you do? Because it doesn’t matter about the companies. It’s a macro environment. There’s amazing companies trade but all of the whole sector’s down 60, 70, 80% still from their highs in 2000, late 2011, 2012, it doesn’t matter what you pick, who the management team is, how big the deposit, doesn’t matter where the sector’s out of favor, can’t say, “Wow, value, this guy’s really goo…” Doesn’t matter. Doesn’t matter as him as the pope’s running that company, nothing, nothing in that sector has done well.

Again, it’s starting to pick up. But imagine just, “Hey, I refuse to learn, and I’m a resource analyst and that’s what I write about.” It’s pretty crazy to think about it. It’s funny because people ask me all the time, “Why do I do this podcast?” And it’s funny because I hear this from our competitors and publishes in the industry and they’re like, “Frank, you are insane, man.” I mean it just provides too much free information. You’re crazy for doing that. And I don’t know anyone who’s made money that well, we are able to establish our own business but through that podcast, because we are fortunate to have a pretty good following. But as you can see, I have a front seat to the best analysts in the world and after I interviewed, they become great contacts, which helped build my network into a powerful list of who’s who in the industry.

I mean, I don’t really have my interviews set up for months in advance. It’s usually two, three days ahead of time when I call these people because I have a good contact list, and these guys like to come on the show, give you guys information, say, “Hey you got room to …” Okay, cool. I’d say 90% of the time the people I ask say yes because even if they’re going away, they’ll do it away. If they’re on a trip or in the field, if they’re with their families, I’d rather they don’t do it and just, you need that time with your families and stuff. But it definitely helps. I don’t have the plan these interviews for three, four months in advance.

These people become great contacts and most important it … Learning from these guys and allow me to adapt to different styles of investing and take advantage of what the market is giving me. It’s also fun because a friend, close friend described me and just described me to a bunch of his friends. He said, “Hey, this is Frank. He’s a growth investor.” It was about nine months ago. “He focuses on growth. That’s his specialty.” I’m like, “I don’t focus on growth. I’ve just invested in growth over the past six years because that’s the market, That’s what it has been giving me.” Well, giving us. I mean, I would actually think I’m more of a value investor. That’s my background. Growing up with my dad, deep value.

For going to Kramer who was totally the opposite, but I didn’t realize that kind of education I’m getting because you don’t really learn those two different investment styles, momentum, growth and then deep value. It’s kind of pretty separate right? It’s two different things. We both investment styles, just two different things, turned out to benefit me tremendously. I didn’t know it at the time, but it did, just gave me two educations, but value it’s out of favor and then you could do it. Don’t fight it. Don’t say, “Wow, look how, so cheap and I don’t care if they have growth cows, whatever. Just so cheap. I’m going to buy it.” And it’s a growth market. Then you’re David Einhorn, you’re getting crushed.

And what value does come back into the favor, which we’re starting to see in uranium, and I mentioned other resource sectors, gold and silver, breaking out a little bit here. They’d all adapt, allocate money to these deep value plays. Recommend a lot of them in my newsletters. But I’m going to take what the market gives me.

So, why am I telling you all this? What’s the purpose of this? As an investor you have to be open to change. You have to be open to new ideas, especially if you’re older. If you’re a male, and you’re stubborn, we become so stubborn, 50, 60s and we’re like this is the way things are done, and we don’t want to learn anything and forget about that stupid mobile phone. Those things are stupid. Just don’t be that way, adapt, learn. It’s so easy to learn about anything. You can go on Google, you can do all the stuff for free.

But you have to be open to change, and it’s a biggest flaw I see with professional investors, which is crazy stubborn. You have to be open to learning new ways to make money. It actually should be your sole responsibility as an investor since the goal among other things, I think for most of us here and people say, “Oh I invest, I want to be rich, I want to …” The goal is to create generational wealth, to make sure your family’s taken care of, and your kids, kids are taken care. I mean, that’s the ultimate goal when you’re investing, that’s what you want to look at.

At least that’s what I look at. Maybe that’s not the goal for everyone, but for me it is. For most people I speak to it is, and you know what, this is a great segue because the guest I’m about to interview is one of the best analysts I know. If you know me, I do not say that often because I think I’m the best analyst. I’m being honest. You know I’m not arrogant, but I put in the work. I’m competitive as hell. I’ve been doing this for over 25 years. I take pride in it. I love doing this. I hate when I’m wrong that’s why I call my losers more than my winners, which my winners far outpace my losers or I wouldn’t be doing this for 25 years.

I’m sure if you ask most analysts, they feel that way as well, doesn’t mean I’m not open to new things. I’ve checked my ego at the door and learned so many different investment styles, but let’s just say you don’t hear me say that often when I’m saying this is one of the best analysts I know, so you know I mean it. I know this person for five years, spoke at conferences together, golf together, I had some fun, but I’m always blown away by his research, which is original, it’s contrarian and it’s often right.

You’re about to get a front seat education to several different investment styles, including international investing, value investing, ETF investing, even cannabis investing, which I know so many of you love. That’s just a few among other things, we’re going to cover a lot, so really cool stuff. The analyst name is Meb Faber.

He’s the co-founder and chief investment officer of Cambria Investment Management, authored several books and white papers on investing. He’s been a squawk box guy just about every major media outlet out there he’s been on. You’ve seen him, I’ve seen him just everywhere. Someone I admire because I just really love reading his research, and he also hosts his own podcast called The Meb Faber Show podcast.

I was just building this up. I was doing a good job really building that up until I got to the name of his podcast. They call it The Meb Faber Show podcast, is it a show or is it a podcast? I don’t know. It’s like saying I feel like 100% 100%. I think he’s got to take out the word show there. Kind of show on podcast I was like ready to drop the word or drop “the” in Facebook, just drop the “the”. I think Meb needs to drop the sh … I’m going to talk to him about that. I haven’t changed any of the podcast. Anyway, sorry to get sidetracked, but I love Meb. I built that up so much and I read his podcast name, The Meb Faber Show podcast.

It’s a podcast. His name is popular. Meb Faber podcast that’s at least what I’m going to call it. But anyway, without further ado, here’s my buddy. Awesome analysts. Really great guy Meb Faber. Meb Faber thanks so much for coming back on the podcast.

Meb Faber: Great to be here bud. Thanks for having me.

Frank Curzio: Well, I want to bring everyone in here and assuming that people just … We’re getting a lot of new listeners to the podcast and for people who don’t know you, which is not a lot of people out there if you’re in an investment community.

Meb, I know for a long time, incredibly smart, authored several books and white papers, as an asset manager with a focus on basically all the markets, not just US, international as well. And a lot of his decisions are based on data, and the data you’re able to find in so many market related topics, to me is always amazing. I love reading your stuff because this data usually goes against what most people believe, sometimes what even I believe.

So, I want to start off with this. You wrote a really good article, you published on your blog, mebfaber.com where you highlight how 80% of the average person’s portfolio just living in America isn’t US-based stocks. So, not bonds, not gold, not art collectibles, but stocks. And you call this home country bias. So, there are people listening to this right now who’s saying, “Thank God that’s my asset allocation,” because the market really kicked ass over the past, whatever since the credit crisis. But would taking a closer look at a data which you did, it tells a much different story, doesn’t it?

Meb Faber: Well, here’s the thing. So yes, if you’re heavily overweight US stocks congratulate yourself, pat yourself in the back, awesome. You’ve had a massive run in the past 10 years. And we’re just talking about stocks right now. We’re not talking about other assets, so just of the global stock portfolio. Most people don’t realize that of the world market cap, US is only half. So, if you’re an index investor, if you go to Vanguard or anywhere else and you go to the global market index, you should only be putting in half. And by the way US is only about a quarter of world GDP, but most people in the US put about 80% in the US and we call that home country bias. Now, the interesting thing, and Vanguard writes a lot about this, it happens everywhere. It’s not unique to the US, if you go to Australia, they put most of their money into Australian stocks. Japanese do the same thing. Canadians do the same thing, although theirs probably all gold miners and cannabis.

But my point being is this, it’s a really, really, really bad idea. And one of the reasons it’s a bad idea, it’s just uncompensated concentration. So, the same reason most of our listeners wouldn’t just put all the money into one stock. Well why would you arbitrarily put it into one country. And it makes sense to most people because they feel this level of comfort, this false sense of security. They say, “I invest in what I know.” And often you say, we’ll do you really know that much to be making that much of an overweight bet. It’s a pretty bad idea right now in the US specifically in 2019 because US market is expensive.

And we don’t think it’s crazy, it’s not like the late ’90s, but it’s on the expensive side. So, to be making this huge overweight bet is that first of all, at least be aware of it. But second of all, be aware that US is quite expensive, which is one of the drawbacks of market cap weighting. So, we often tell people to be mindful of it and the first advice would be to at least get back down to 50% and put half abroad, which by the way, no one will do.

Frank Curzio: Why is that? Why will nobody do it? Because I’ve seen you, you’ve spoken at conferences and two or three of them that I saw you because we speak in same conferences. You start out with saying, “Hey guys, just going to pass around a piece of paper. Let me know what you ask allocation.” You say it’s funny because it always comes out to like 80% of these people are in US based stocks. Why is that? Why don’t people want to change?

Meb Faber: Here’s a good stat. The last 70 years, if you look at US stock returns versus the rest of the world, the US has outperformed foreign XUS by about a percent per year and percent doesn’t sound like a whole lot, but you compound over 70 years and it’s a massive, massive amount and the US has been the darling of the world and it makes sense because in the postwar period the US has become the biggest economy in the world. Has really been the darling of the 20th century across almost any measure of economics and network, et Cetera.

Now the problem is okay, people say, “Well Meb, so the US is allowed to be more expensive.” We calculate on a long-term P/E ratio, it’s around 30, low thirties. One of the most expensive in the world and long-term average is around 17. If they okay, if you believe that it’s allowed to be more expensive because it’s exceptional, we are right? Everyone believes they’re more exceptional at everything. I’m sure your listeners are brighter or more attractive, but you say, if that’s true, what is the historical valuation premium of the US versus the rest of the world? And the answer is zero and you say, “Okay, well if the US has outperformed the last 70 years, how much of that has come since 2009.” And the answer is all of it.

And so what you’ve had to set up, if you look back and we have a bunch of these on our blog and books and elsewhere, you look at valuation since say the 1980s, the US versus the rest of the world it’s kind of just oscillates back and forth. There’s some times US is more expensive. There’s sometimes it’s cheaper. Right now you’ve had this sort of alligator jaws over the last 10 years where the US stock market has just robbed, beaten everything else in the world, but usually that’s a 50, 50 proposition and so you have what we wrote, we called the biggest valuation spread in 40 years where the US is more expensive. So foreign the rest of the world is down around low twenties. Emerging markets, which are my favorite, are down around 15 P/E ratio.

If you look at the cheapest detritus at the bottom of the ocean, the really cheap countries, the Russia’s, Greece, Brazil, which by the way are having phenomenal years, I think raises up 40%. Russia is up like 30. They’re down around a P/E ratio of 12. And so there’s a huge spread right now. But if you go back, it’s not always the case. You go back to 2009, everything was trading in low teens P/E ratio. You go back to the ’80s, there was a huge spread, but in the opposite way, the US was cheap and other countries particularly Japan, which is the biggest equity bowl we’ve ever seen ending in 1990, the P/E ratio of almost 100 was a big, huge spread but it was the other way around.

So, what we tell people is say, “Look, it’s hard, for the same reason I’m a Broncos fan, for the same reason that other people will cheer for their local team, their local country and state and it’s great to be a patriot but not with your money.” You should be agnostic, asset allocation, asset agnostic over time and really look to where value is.

So, long winded answer to your question, but if you look at it right now where people are putting 80% in the US which is one of the most expensive in the world, say, “Look, think about getting back to 50%.” And if you’re really weird and different and concentrated like I am, you’d actually want to tilt even more towards value, which happens to be towards the rest of the world. And in 2019 we say there’s no reason as we think about the globe, you should really be borderless and sector agnostic and that’s hard to do, which is the main reason that nobody wants to do it.

Frank Curzio: Well, the most important thing I got from that, from the whole conversation right there was it’s, you said it’s better to be a Bronco fan, but I’m a Mets fan, so I think that’s a little bit-

Meb Faber: You said a Bronco fan? [crosstalk 00:24:40] I can sympathize with your long-term suffering because I was a Bronco fan growing up when they lost all the Super Bowls. I learned disappointment before they eventually won some. So I can sympathize with long droughts of struggle.

Frank Curzio: That’s great. And you did also you said some amazing things there that I want to get to because you … And you said right now marks one of the wise valuation spreads in history of foreign markets trading, how much retrieval loads in the US but the tough question here that I’m going to ask is this kind of was the same case where maybe not in history, but this has been a widespread in 2016, 17 and 18 and doing that, anyone listening to this argument, which could almost be made back then put their money into some of these international markets. And they watch the US really go through it.

Now this is in hindsight, right? Everybody’s running morning comp quarterback. But I guess the question I’m asking you is timing is always the biggest issue here. So, why now is the time to do it when it seemed even two years ago was a great time to do it because of those spreads, was so different and it made sense to just allocate to other areas in the market and diversify?

Meb Faber: Yeah, and to be very clear. I would say this exact same thing and I have been saying it for the last couple of years is largely because you don’t know when these events happen. They’re almost always obvious in retrospect and in hindsight, and you look back and say, “Oh, that’s what happened. That was the catalyst for that event.” Whatever it may have been. You look back now and say, “Oh, this global financial crisis was obvious? All these things that led up to it.” But the challenge is over history. If you look back modeling and you buy expensive countries, you have a much bigger chance of a big fat draw down in the next three to five years and you go look across all countries.

The US isn’t always the expensive country. Sometimes it’s Asia, sometimes it’s Latin American countries in the mid two thousands, everyone was romping stomping bulls for the bricks. India and China were trading in the ’40s and ’60s, and the reason they’ve had terrible returns since 2007 is because they were really expensive. If you look at the Japan example, they’ve had horrible returns for decades because it took that long to work off that valuation bubble.

So, you never know when it’s going to be, but the way to think about it is these really expensive markets are just more fragile. Now, let me impress upon one more thing, I said, again I don’t think the US is in a bubble. That’s when you get up to a P/E ratio of the highest ’30s and ’40s and ’50s and ’60s. The US, all the takeaway is that it’s going to probably return low single digits going forward. And that’s not horrible, but it’s barely not the eight to 10% people expect. And John Bogle bless him before he passed away said same thing. He said, “I expect US stocks to do low single digits.”

And so it’s more of a … There’s two ways takeaway. One is expectations. So, if you’re going to invest in US stocks and people expect 10%, which is what all the surveys say, I think the most recent one that came out by Schroeder said 10.7% is what people expect their investments to do. That’s probably unrealistic, just probably take your medicine, but second, if you actually want to try to get higher returns, tilting away from market cap weighting, which historically by the way has been a very suboptimal way to invest. And the hard part, for the listeners of course is they get off listening to this, close the podcast app down, log onto their broker and say, “Oh my gosh, I just listened to this amazing, really brilliant guest Meb. I need to go buy some Russian stocks.”

That is probably seen as kind of a crazy thing to do, if you’re a broker and an investment advisor and you do that and a year from now they do well, “Congratulations.” Your clients pat you on the back. It does poorly, you get fired. And there’s a lot of career risks for looking weird and different. So, we don’t ever say you need to go buy one country, you need to do anything where you concentrate everything, we just say need to be mindful about, hey, “If you want to look towards value put probably half in foreign.” That’s our first step. And then even more would be to put … If you have a value tilt, tilt even more towards other countries and other investments. Never go all in on one, our largest fund invest in the cheapest 12 countries in the world, that way for every Turkey you have, literally you have Russia and Greece to balance it out.

Frank Curzio: Now I’m glad you said that because you mentioned your fund there, but how could individual investors listening to this, because I know you said, “Hey, I really like emerging markets.” Earlier you said it’s some of your favorites and you want them to diversify. But sometimes it’s difficult where a new investor but we say new investors, it doesn’t mean what people, it means I have a lot of wealthy people, people in their own businesses, but they just, they don’t have the time to focus on the stock market like we do, which is our profession.

So, how does the average investor go in and look at this. Because if they go on Google, they’re going to see a whole bunch of ETFs. They’re going to look at fees, they’re going to see exposure. They’re not going to really be too … They’re not going to know what stocks or whatever is in the portfolio, whether their each, if they’re good, their waiting, what’s the easiest way for them to do and the safest way to really invest if they do want to expand and allocate it to international markets.

Meb Faber: It’s never been a better time to be an investor. We’ve written a bunch of articles on this where we say, “Look, to the extent you wanted to buy a global portfolio, not just stocks, bonds, real estate, commodities.” And by the way the global market portfolio. If you just went and bought every asset in the world and publicly traded, you get about half stocks and about half bonds and about half of that is US and about half is foreign. We didn’t even get to foreign bonds, but that’s the global market portfolio. That’s the default index allocation. The good news is you didn’t buy that portfolio for 0.05% that’s five one hundredths of a percent which is essentially once you include not to go down the huge nerd rabbit hole, a lot of these funds like ETFs or index mutual funds. We vastly prefer ETFs because they’re more tax efficient, but you’re essentially getting an investment strategy that gives you every security in the world 20,000 plus securities for free.

Five basis points, which is 0.05%, you include short lending. The fact is that portfolio probably already pays you to own it. So, you have a negative expense ratio. And that’s awesome. I mean, think back to the days of the ’80s when people were paying 2% commissions, 2% management fees, financial advisor fees, you had no stock right? And now there’s never been a better time to be an investor. The challenges where you just mentioned, there’s what, 10,000 mutual funds and over 2,000 ETFs. The default we say, because you want to use ETFs because there are more taxes in the mutual funds. That’s a hidden cost if you’re a taxable investor of about 0.8% per year and a lot of people don’t know that.

So, ETFs are the default and low cost is the default. You can forget about the whole active passive debate. Bogle once said, “Look, the conflict of interest in the industry is not active versus passive. It’s low fee versus high fee. So, default to the cheaper funds. Of course we’d love it if you buy our funds. But I’m really agnostic. Vanguard is one of the best shops as is Schwab and many others. The whole key is you want international exposure in general and there’s many, many funds that would be perfectly fine. The problem is avoid the really expensive ones. As it’s just a … Think about it as like a pole vaulter, high jumper. It just raises the bar for that out performance you need to have to overcome those fees.

Frank Curzio: Yeah Meb, I know you’ve interviewed guests, I interview guests on your favorite podcasts and you’re a modest guy so I know you’re not going to say anything so I’m going to do it. If people want to find more information on your funds, is it Cambria that they would go to, because you also have your Meb Faber site and you also The Med Faber podcast.

Meb Faber: Yeah, my day job, my work job is managing these funds, Cambria funds and Cambria investments where you can go and find more information and you want to hear this monotone drone on for longer? You can find Frank on the other end of the mic on our podcast as well.

Frank Curzio: Yeah, that was a great time. So, that was a couple of weeks ago. So, I want to turn the discussion over to ETFs because there’s a lot of negativity out there saying there’s so much money in these things. There’s a lot of program trading going on. And for me, as long as you study the markets 25 years, you see it. I mean, when companies miss earnings they’ll go down, I’m thinking Myer Piper back five, 7% and they start off five, 7%, they finish the day down 20%. Same thing on the upside, where you’re just seeing so much program trading and just a lot of money flowing into these things.

So, someone who knows probably more about ETFs than anyone I know. What are your thoughts on this? Because it just seems like whenever anyone out there, if it’s CNBC talks about ETFs, they talk about it in a negative way because they’re getting too big. But I just wanted to get your sediments. Someone’s in this industry who really knows what’s going on.

Meb Faber: Well let’s dispel some rumors and misunderstandings and I’m, as you can tell, very opinionated about some things and other things I’m not opinionated at all. But on this topic I am, ETFs are basically like a little speck of sand on the beach of world money. And that may be a little bit of an exaggeration because you’re getting anything that has a T after it with trillion, you’re starting to get into real money. ETF’s are one fifth the size of mutual funds. So, the mutual fund business is still four or five, six times the size of ETFs.

And even then most wealth that’s held around the world and in sort of the real money funds over a hundred billion, whether it’s sovereigns, whether it’s large family offices, everything else is often direct investments. So ETFs I think most of the criticism is not warranted, one. However, asterisk star caveat, anytime you have a fund, there’s a mutual fund, Ektron sovereign fund, ETF doesn’t matter. That there’s more money coming in relatively asset class size. So, if you’re trading large cap US stocks, you’d be moving around 10 [inaudible 00:34:31] time and not even break a sweat.

If you’re trading micro-cap Brazilian financials and you do that in whatever the wrapper is, the wrapper doesn’t matter. You do that in a wrapper where you’re moving too much money across too little opportunity set, flows move assets. We all know that. So, you put a ton of money, it doesn’t matter what it’s into, gold futures, you put enough money into that, it’s going to affect it. You put enough money into some micro-cap stock, Frank recommends some cut stock trading in a 10 million market cap, you’re probably going to move that stock.

So, ETF is nothing more than a wrapper. Now it’s by far my opinion the best wrapper because it’s vastly more tax efficient. But it just sounds to me like it’s immediate darling for the same way that people are complaining at linked about buybacks. It’s something that I don’t think has a lot of merit, but there are times when it could be an influence on markets and move markets around. But remember the big guns are not in the ETF world, it’s mutual funds and the bigger sovereigns that are moving it at exponentially more assets than ETFs have.

Frank Curzio: No, thanks. Yeah, I love asking that question because you do, you hear so much stuff out there. I’m sure you see so much stuff. Even when it comes to the earning side and I see people talk about different things, I’m like, “Come on. That’s a Twitter’s 40 just go in there.” And really comes-

Meb Faber: [crosstalk 00:36:01]. Not to interrupt you, but there’s a great chart that shows the annual revenue by investment vehicle and ETFs and index mutual funds are just minuscule because they have lower fees. But if you look at active mutual funds and hedge funds, it’s like over 200 billion in fees because they’re much higher. The average mutual fund is 1.25%, average ETF is half of that. But hedge funds are two in 20, but you’ve got to remember is who supports that ecosystem of all the remoras around the shark, where those funds being super active generate a ton of fees of trading and everything else to the ecosystem. So, they’re supported.

But going back to our friend Bezos, he says, “Your profit margins my opportunity,” and if you look at the asset management industry, one of the highest profit margin industries in the world of 150 industries, that is an area that in my opinion is going to change. So, you will see more flow zone ETFs and some of the weird ones may see some distortions in markets, but that’s the way markets have always been for a hundred years, I think.

Frank Curzio: Yeah, definitely makes sense. So, I want to get to the research part, which I love picking your mind at. Since we both do a lot of research. And I mentioned earlier you authored several books, several white papers. If you go to most blog, pretty amazing. I mean there’s the data that you put out there that’s awesome through the research and we’re all told, right, because a lot of this research, what do we do is we can’t compare it to historical, right? Because we’re told at least through many the most popular investment books that we’ve read over our lifetime, that history repeats itself.

And of course that’s true to some extent, but today we have a Fed that seems like it’s not really operating alone. I don’t want to get into the political aspect of it, but just the way that they turn so quickly where it went from timing to easing was pretty remarkable following the current administration’s lead. We also have a Fed that load industries to levels this country has never seen in its history. We have a Fed that is intent on keeping rates low for a very, very long time. And also a government that was willing to hand consumers checks to buy cars and houses as well as take stakes in our banks in numerous companies or in a credit crisis, which does make these times different and unique.

So, my question to you is, do you factor in some of this in your research when using, say comparative analysis with different markets, especially maybe when you’re evaluating US-based stocks with the rest of the world who don’t have a printing press on call to print money whenever there’s any hint of any risk or problems in the world.

Meb Faber: A lot of good wrapped in there Frank, the first part is I think it’s instructive and important for any investor to try to be a student of history. Obviously we’re on the younger side versus a lot of the old gray hairs, no hairs that have been investing for decades. So, the way to combat that experience is to become a student and look at what’s happened in markets over the past 150 plus years even further than that. And I know you do too. One of my favorite books is Triumph of the Optimists that looks at returns of equities, bonds and bills and inflation in dozens of markets around the world back to 1900 and listeners you can get a free version of this book called The Global Investment Returns Yearbook that Credit Suisse puts out every year.

So, the challenge is that you look back in history and almost everything has happened. You’ve had markets go completely to zero in China and Russia. You’ve had even in markets that have been the best performing stock market in the world, the US declined over 80% of The Great Depression. You’ve had markets where for the first time in history, they always surprise you, right? 2017 the first time that US stocks went up for every single month in a calendar a year, they’re always surprised with something new happening and if you look at the macro environment, taking the macro data, and I would say discretionary or subjectively coming up with an investing strategy is really, really hard, which is why we’ve … Are quants over here. So we try to come up with rules that have worked, hopefully not just recently, but for the past a hundred plus years as well. We try to find academic and practitioner research that supports it where it’s worked for decades.

So, the two biggest pillars we use are value. So, trying to buy cheap stuff or not buy expensive stuff and momentum and trend and so trying to buy things that are going up and not trying to buy things that are going down. Both of those have been around since the early 20th century. Back to the time of Charles Dow and Ben Graham had been writing about it, slightly different interpretation and implementation.

So, as you look around the world today, despite all the geopolitical stress, and I think if I just listened to geopolitical news, all I would do is buy puts all day long. It will be my only investing strategy. There’s ways to protect yourself. The first thing is you have an asset allocation strategy that should perform well in any market environment, even if it’s buying hold, should do just fine.

But on top of that, try to have some tilts that help you out. And then the two big ones for me are value and momentum and trend, and I implement that in a rules based systematic way that hopefully should be able to take into account any market environment or regime that’s going on in the world, whether it’s inflation, disinflation, whether it’s teat markets, expensive markets. And I still read the news, I’ll gossip with you over a beer if we’re hanging out. But we try to listen to as little of it as possible and make its way into the portfolios. Because that’s totally where the emotions creep in. When the emotions creep in as we know, that’s when people start making really, really dumb decisions.

Frank Curzio: Yeah. For everyone out there, we’ve been doing this for a long time, and I know I get emotional sometimes. I mean, it’s hard not to be totally emotional and people say, “Well, take the emotions out of it,” but sometimes you do get a little bit emotional, but it’s good to just kind of step back because that could hurt you. And also we’re just programmed to buy things when they’re exciting and then to sell things when everybody hates them, when it’s the opposite when it comes to investing right? So, it just kind of weird when you program sentiment into everything I guess.

But I want to talk about just more into the ETFs because when I look at Cambria you guys have a whole bunch of offerings. We talk about international ETFs and so many things. But right before we started, you said something interesting because you were going to launch a brand new cannabis ETF, which is a big industry, people love right now. But there’s a couple of things that seems like get really exciting on your front, but you’re planning to launch this pretty soon, aren’t you?

Meb Faber: So, as you look around the landscape of funds, we only launched funds that we think, I mean, of the thousands of funds out there, do we really need tens of thousands of funds? We say we only launch funds that I want to invest my own money into. And it’s a surprising fact, but it is a fact. Morningstar reports this, majority of mutual fund managers invest $0 in their own fund. So, not a hundred thousand or a million or 10 million, $0. In some cases it’s up to 80% in some categories. The manager has nothing invested in their own fund.

So, I invest all my public assets into our funds and the vast majority of them in one fund. And so I just want to lay it out there that I think it’s important to have skin in the game, but we only launch funds we want to invest in. Otherwise, if Vanguard does it better, I’ll just go buy a Vanguard’s fund. So, it has to be based on some sort of academic practice and research. We have to think we have some sort of edge or else we just won’t do it.

And then lastly, of course is, is it better or cheaper than what’s out there? And [inaudible] harder these days because we’re competing with these firms that have trillions of assets like Vanguard, but in some cases it does still happen. And historically we’ve shied away from thematic space. But cannabis is an interesting use case in that it’s an industry that already exists. It has very wide adoption, not just in the US, but globally in many different forms. We’re not just talking about marijuana and the usage of people smoking it but we’re talking about hemp production, we’re talking about CVD and you have a somewhat black market elicit demand. It very quickly over the past few decades is becoming mainstream.

And so often in the thematic world, you have industries that are being created from scratch, whether it’s the internet of things or some 3D printing, which was hot. And people chase these and they put a bunch of money in them and they sort of fade away. This is somewhat different in my mind because it’s the industry that’s been around for a long time already, and we’re going back to the earlier conversations, most investment funds in the ETF space or our market cap weighted indexes. And the problem was market cap weighted index for listeners out there is because back in the 1970s it was a massive innovation. But the reason it was a massive innovation was not the actual index it was the fact that the index being market cap weighted meant you don’t do anything. You just buy the largest stocks and move on, which allows you to have very little turnover, very little costs because you’re not doing anything you can offer for very little fee.

So, the Vanguard, Wells Fargo innovation in the 1970s as opposed to the index fund, the real innovation was the low cost. So, the problem with mark cap weighted funds is there is no tethered of value. So, often the largest stocks get to be the most expensive. And that’s true in the US right now. And it’s always true where the largest stock in the stock market at the time, it’s the biggest goes on to underperform the market by about three percentage points per year over the next decade. Same is true with sectors. Same is true with countries. You want a good investing strategy, all you have to do is avoid the largest stock in each sector, country or index because there is no tethered of value. Gets to be the biggest because of price appreciation.

So, as you look about in the cannabis space, we think it’s a really interesting opportunity to invest in a rapidly growing industry. One that is getting into the tens of billions of dollars of revenue already and is only going to go we think exponential from here. And on top of that, it makes sense not to market cap weight index it, otherwise you’re going to have scenarios where you just end up with a lot of these companies where there has to be a fair amount of speculation and the big problem we talked about earlier with investing in global markets is trying to avoid buying companies that are really expensive, which market cap often does.

So, it’s not a market cap weighted index, but we do think there’s a lot of opportunity and it should be fun. And again, the caveat, if you listened to me over the past number of years, you would know this would be a very, very small part of your portfolio. The big muscle movements should be the large asset classes. And this would really be something that would be a sematic smaller portion, but we think it will be interesting.

Frank Curzio: Yeah. And this seems like the fun part of portfolio, super high growth, lots of risk, which is going to bring me to something which I find interesting. When I was doing a little research on you and the fact that you … After college you worked in Washington as a biotech equity analysts and you have a double major in engineering, science, biology, and you get in a cannabis sector. The biotech industry is a lot of fun. It’s crazy. It’s nuts. Do you still follow that? Is that something that you’re into? Because going from biotech into money management field and quant and stuff like that seems like a big leap, but biotech is a pretty cool industry if [crosstalk 00:48:02]. Yeah.

Meb Faber: I graduated in the year 2000, which was a really exciting time. That was the original bubble for us. The late ’90s internet bubble. Such a fun bubble. I mean there’s a lot of echoes today with a lot of what’s going on in the world. But it was also a dual bubble, if you remember, because biotech stocks were also in a bubble. The human genome was getting sequenced, really exciting time in the biotech world. I was ready to go back for a PhD. I took a year off to work as a biotech equity analyst while going to grad school at Hopkins.

I was working for a fund that did biotech investing. And this is what actually really started to drive me to be more of a quant because biotech investing is the ultimate binary outcomes. You have some of these stocks, they get approval, they don’t, you know this, you’ve been in the small cap world for forever. They’re either going to go up 200% or they’re going to go down 90% and is the ultimate binary events. And so I spent a lot of time trying to quantify an area that’s pretty hard to quantify, but really over the years that’s what drove me away from really discretionary investing more towards quantitative.

And at this point, biotech look has become more of a hobby. I certainly follow along. I think it’s fascinating. I’ve gone through all the ancestries and everything else and love to keep in the loop, but really I think it’s most important on my side as for most investors to automate their investing, try to have it on autopilot so you’re not mucking around with it. You could have a little fun play account, but I keep an eye on biotech but not actively involved on a day to day basis. But you are seeing as you mentioned some interesting overlap going on between the cannabis and bio pharmaceutical space as well.

Frank Curzio: Yeah, absolutely. And last thing here, I know you love skiing and surfing. Is there any chance we can get back on the golf course again since we talked about this and mentioned it sometimes. The last time, I think it was because of me. Maybe I had a couple of years, but it was actually the first hole. It was on a hill and I forgot to put the brake on the car just started going. And you kind of saved me from a lot of probably expenses and stuff like that. But what about golf? Are you still going to get back at a golf course or did you give it up yet?

Meb Faber: I will play and I will love to hack around, for me it’s like weddings and any other social events I’ll get out there, they’re opening a top golf right next to my office. So, that might be my practice range for a while but I’d love to play, I’ll do anything. You come out of here. We’ll get you on a surf board. We meet up in Colorado or Vancouver, we’ll shine the skis up too, I’m game.

Frank Curzio: It sounds like a plan. So, last thing here, if someone wants to learn more about you and please give Twitter as well, because I love that you do surveys on there and so many people respond, you have a very big following and your blog. But if people want to learn more or read some more stuff that you’re writing, how could they do that Meb?

Meb Faber: If you want to watch me pick fights then Twitter’s the best place @mebfaber. If you want to read the blog post and follow the podcast and it’s just mebfaber.com and if you want to see what we’re doing in my day job, then it’s all the Cambria sites, Cambria Fund and Cambria Investments.

Frank Curzio: All right Meb thanks so much for coming on. Listen, open invitation fee, whatever you want. Loved talking to you. I know my audience loves you, finally for years, lovely stuff and I really appreciate taking the time to come on buddy.

Meb Faber: It’s been a blast, see you in Los Angeles. Come say hello.

Frank Curzio: All right, you got it man. I’ll talk to you soon.

Meb Faber: Right.

Frank Curzio: Man I can talk to Meb for hours. In fact I was on his podcast. He mentioned that a few weeks ago and he did the full hour interview think it was even longer than an hour and we covered so many different topics, so many different sectors, just awesome. I love talking to him. And the one thing you realize about him is he would do this for free if he didn’t make money. I mean the passion and how much he loves it, how he really digs into the numbers. He takes pride in that, and he’s a good guy. He’s someone if we did have a conference, he’d speak out in a heartbeat. He’s just, he’s great analysis he is even a better guy. But again, I do these interviews for you. I try to get the best sounds in front of you, guys that I vet that really do the work that I trust.

But this podcast is about you, not about me. So I want let you … Let me know what you thought frank@curzioresearch.com, is frank@curzioresearch.com. Again, I loved that interview. I love picking his mind. I learn about new strategies and different things, but yeah, I want to get your feedback again, this podcast is about you, so be sure to send e-mails, questions or comments especially in the interview at, its frank@curzioresearch.com.

So, sorry the interview went a little long, run a little late, but I did want to provide education second for you. And I was going to ask you guys to do some homework for me. Well, homework for yourselves. It’s not like you have to send it to me, and if you want, send it to my e-mail or whatever, hopefully we get a couple of … No don’t worry about it.

But here’s the project because I know so many of you are familiar with Micron, right? Produces DRAM, flash memory, USB drives, flash drives, very, very, very popular company. Right? I don’t think, if you’re an investor, most people have heard of Micron. And what’s crazy about this stock that I don’t see with the other stocks is the coverage from Wall Street is all over the place. And usually when you see a big company like this, which is a $45 billion market cap, you know, revenue streams are going to go up and down single company.

Most of the analysts estimates … They’re not the same, right? I mean, of course it’s more aggressive if the analyst is bullish and we’re concerned if the analysts is bearish. But it’s never like, outside of Tesla, which you have diehards and the people who hate it, but you don’t see a stock that’s trading at 40 where you got price targets at 20 and price targets at 90, you really don’t see that. And I cover if not thousands of these stocks, you don’t see that, you don’t see … IBM is 140, you’ll see $175, $200 price targets and maybe 130. You don’t see like 85 and 300 which is all over the place. Especially when you have so many analysts covering that particular stock.

My analyst I mean, the sell side, the City Group’s, the JP Morgan’s, Goldman Sachs’, Morgan Stanley’s. So I look at Micron is trading at $43 and the stock fell from 50 to 35 and this is 12 months from July last year through June and surge back over 40 bucks. Mostly because it’s a big supply to Huawei, which Trump blacklisted as a company the US won’t do business with and that crushed the stock because you have 13 I think percent of sales, 13% of sales from Micron that are accounted from that one company.

Now he changed his mind, the stock rebounded, right, which we see all the time with this president just back and forth, who knows what’s going on, which is fine. Again, politics aside you just know how it is, you don’t know it’s just … If you look at Micron and you look at the last three to four months, and that whole thing, that whole was driven by Huawei in that news flow.

Now look at the buy sell, hold recommendations for Micron. 20 firms have a buy rating on, 20, 12 have a hold and four firms have a sell. So, to look at all those analysts, right? Tons of them over 30 analysts, the entire world covers a stock. Everybody knows everything about it. You’re not really going to find anything that you don’t know about it because again, it just has so much coverage and it’s out there. It’s talked about all the time, in CNBC in all the media outlets and stuff like that.

Now when I go into the price targets, right? So that might not sound too crazy, 20 buys, 12 holds, 4 sells. Okay. Yeah, that’s not too crazy but listen to some of the price targets, [Web 00:55:39] which has a $30 price targets, that’s 43, and they have a neutral rating, a neutral rating $30 target with that much downside. I mean if you have more than 10% downside, you should have a sell rating, and you’re looking at 25 plus percent decline, and you’re looking at a neutral rating, if they’re downside. RBC has a $50 target, City has a sell rating $30 target. Credit Swiss has a $90 target. The more than a double from here. Robert Baird. Well a boutique firm, $21 price target, a more than 50% decline from here. Morgan Stanley, $32 price target, and big firm and it’s all over the place.

So as an investor you’re going, “Wait, I don’t understand. I mean do I like the stock? Do I don’t like the stock.” If you want to look at sediment, is sediment positive, you can’t really tell, everyone’s all over the place. People hate it, people like it. You just really don’t see that much with discrepancy, especially in price targets. And when you factor in everyone’s crazy targets, all these guys, you come up with the average of $43 where the stocks trading today, which is kind of interesting.

To make matters worse, you look at the funds, I mean Appaloosa has a monster position in the stock, but started selling shares last quarter, I think it was like two quarters ago. Again, Huawei news and stuff like that, or may get advisors close their full position. I think it was last quarter or the quarter before, SARS closes position as well. Fidelity increased at stake last quarter. Wellington increased the stake by over 60% last quarter, close to $900 million position in the stock. So again, when you look at the funds and trying to gauge how people feel, everyone’s all over the place.

Now say if you look at Micron, gets to my point here, and you do the research and say, “You know what, I’ve really liked this stock. I think it’s a buy.” Before you ever buy a stock. That whole entire research process. After you’re done, before you buy, you’ve done your research and like the stock. There’s one thing that you need to do. Look at its competitors. Because you could be right on Micron and Micron might go up say 15, 20% over the next 12 months. But a stock inside that sector, and again you’re investing in a sector you think is going to go higher, but you could find one of its competitors that could go up 200% over the next 12 months, and you’re not really going to notice too. But that’s a huge … People associate losses where if you’re losing money, when in fact you are losing money because instead of getting a 25% gain, and you’re probably happy, and you didn’t really do that, it’s called Comp analysis. We compare it against the industry.

I mean you might find a stock that cheaper, growing more and then you start looking, insiders are buying, and a couple of big hedge funds bought. But it just off your radar because Micron is covered by the entire world so everybody knows what’s going on, and you’re like, “Wow, this company is in much better position. They don’t have exposure to Huawei.” Which who knows which way depending on how the president wakes up, that news is going to flow, and it’s moving this stock 15, 20% depending on if he says, “We’re in good standing.” Or “They’re still blacklisted.” See you remove that risk.

When I look at Micron, before I would buy something like that right now today, today’s price, you may want to look at Intel. I know stock is falling at the breaking through to $55 level that the management said, “Expects to grow into the low-mid-single digits over the next three years.” So, it did pull back on that news, but they’re into a lot of growth markets and when I look at Micron, which is up huge over the past month as they recover those losses through the Huawei it’s stocks now trading at 17 times forward earnings. Saturday night was super negative, last month. Now it’s really positive. They just reported decent results last quarter and the stocks up sharply.

Say we’re going to stock where expectations are high, and it’s trading at an average market multiple ESP 517 times. Yet they have lots of headwinds and DRAM and the END prices are falling. They’re falling hard. Your 13% of sales related to Huawei again, it’s still a risk depending on that political risk. I just went over that and China negotiations, whatever.

But this is a company that you’re seeing where earnings are going to decline year to year, sale’s going to decline year to year. But yes, trading at a market multiple where the average company S&P is expected to see, I think it’s about 3, 4% growth in sales over the next 12 months and about 5% to 6% growth in earnings.

You should probably that are buying the SP 500 plus Micron doesn’t even pay dividend. But when I look at Intel, it just tells a much better story. And again, it’s comparable analysis. Not that Intel’s a direct competitor to Micron, but they’re both pretty much in the same industry. When you do this type of research, yeah, that original, maybe again Micron goes up even 50% over the next 12 months, but if there’s a competitor or whatever, that goes up 100%, that’s money you left on a table because you just didn’t take that extra step to research and compare it against the rest of the industry. And that’s what I learned. Because those returns are huge.

I mean, I see it happen so many times where people tell me, “Oh man, I had Amazon. I sold out. I had Tesla at 45, 50. Oh man, I sold out.” That was someone who invested in cannabis growth, in its early stage financing and sold it at like seven or something or six or whatever they sold it at, which seemed like a great trade at that time, and they made a lot. But look where cannabis growth went and you’re leaving those gains on the table and people say, “Well I have a 5X gain.” But now you could have a 300X gain in your own boat in your house. By just going the extra step and looking at the industry you may find hidden gems. I mean you might be right in the industry, you might be right in the stock, but it doesn’t mean it’s the best play within that sector.

Because when I look at Intel and compare it to Micron, again, no dividends. How many times forward earnings, earnings SPEC declined year over year [inaudible 01:01:30] year to year. At Intel, there’s super low expectations. Somebody really likes it here. So any positive results in their quarters is going to result probably in a 5% plus pops to the upside. While weak results are kind of likely priced in. So [inaudible 01:01:42] favorable, it’s trading at 11 times forward earnings, solid balance sheet, which Micron has a solid balance sheet as well. But Intel’s going to pay 2.6% yield, which is much, much higher than the SB-500 when Micron doesn’t even pay dividend.

So, for me right now, if you do the homework and you’re looking at these two stocks and you really like Micron, for me, I think Intel’s a much better play. But I see so many people talking about Micron saying, “Why would you buy Micron when you could buy Intel that’s growing faster than, that’s much cheaper, has good balance sheet and a lot of these growth markets.” Of course watch Micron get taken over next week I look like an idiot. But I’m just saying barring anything crazy like that and I don’t know why anyone would. Had a very expensive evaluation now that it’s come back and roared back from the ’30s into 43, 44 and whether you agree with this segment or not … Not whether you agree with this segment or not, but mostly if you agree with, “Hey I like Micron and Frank, Intel’s dog,” or whatever you say, that’s fine.

But the concept, trust me, please pay attention to the lesson here because after you do your research and after you say, “Wow, this company looks great. I love it.” Everything checks, all the boxes that I look for no matter what investment style you use all this stuff that I covered earlier in the intro, before you actually pull the trigger and buy, just check out, do like 10 minutes, 15, 20 minutes of research on like three, four other companies. Just see what they’re trading, see how they’re growing really quick and if anything like triggers and say, “Wow, insiders are buying this thing, why are they buying it.”

Go back, look at the charts, see what happened. Is it down a lot, or if it’s something that’s a temporary thing. Maybe they miss sales or estimates or they had delayed contracts that they’re going to see in the second half of the year and today’s market with Algo’s. “Hey, you missed a quarter.” Nobody cares why. They just go down 10 15%, you’ll see those companies jump right back up after the quarter.

That’s important. Do your homework on this. And when I say do the homework, if you want to send me analysis on why would you buy Micron over Intel? I’m all ears because I don’t know why you would. Again buying Intel over Micron right now at these prices. And not last month, not six months ago, right now today, Intel to me seems a great buy, but hey, if you did the research, you want to do that homework that I just asked, send me an e-mail frank@curzioresearch.com. I promise I will respond to you as fast as I can, busy these days and it’s crazy, but I want to hear why you would buy Micron instead of Intel here.

I’m very interested, maybe you come up with good points. For me I just don’t see it based on growth, based on value, based on long-term growth potential, and that’s how I do my research where it’s not just, “Hey, this is a stock, it’s centered in stone.” No. The last step should be, let me just compare it. Let me look at the competitors because you might find a better idea.

All right, so we covered a lot today. All kinds of analysis, great guest in Meb Faber. Also went over compared analysis, how it’s really important for your portfolio, how it could increase your returns. So, I really hope you enjoyed the show. Any questions, comments. Feel free to e-mail me anytime, frank@curzioresearch.com, that’s frank@curzioresearch.com. Remember, I’m here for you. Guys thanks so much for listening and I’ll see you in seven days. Take care.

Announcer: The information presented on Wall Street Unplugged is the opinion of its hosts and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility. Wall Street Unplugged produced by the Choose Yourself Podcast Network. The leader in podcasts, produced to help you choose yourself.


Editor’s note: The Wall Street Unplugged All-Star Portfolio is an easy way to tap into the very best behind-the-scenes stock picks from Frank’s Rolodex of fund managers, analysts, and billionaires. And it’s one of the easiest ways to diversify your portfolio across a variety of sectors—those that offer the strongest growth potential today. 

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