Pods & Recs: No. 143
Today we have an improvement to the CAPE ratio, a platform company for schools who want to offer ISA’s, Ed Altman on the credit cycle, and Meb Faber on how to handle portfolio construction going forward.
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Investing
Behind the Markets Podcast: Adam Kobor & Thomas Philips. Kobor and Phillips both teach at NYU and are the authors of “Ultra-Simple Shiller’s CAPE: How One Year’s Data Can Predict Equity Market Returns Better Than Ten,” which is the topic of the episode. The make adjustments to the traditional CAPE and end up with better out-of-sample forecasts for the S&P 500. They discuss some of the changes/adjustments they make (such as removing outlier quarters) and then Professor Jeremy Seigel pushes back on some topics, including whether or not the U.S. deserves to trade at a premium and the use of GAAP earnings. [November 27, 2020–35 minutes] iTunes Podcast | Spotify | Google | Breaker | Website Link
This Week in Startups: E1144 Rising Stars of SaaS 7: How Income Share Agreements (ISAs) are solving education financing & aligning incentives in a broken system with Meratas CEO Darius Goldman. Meratas is a platform to allow schools and education programs to provide income sharing agreements (ISAs) for students (host Calacanis explains it as AWS for ISA’s). The well-known Lambda School uses their platform, along with programs for diesel mechanics, pipe welders, nurses, and sales development reps. The episode covers how an ISA works and why it’s an improvement over student loans because it aligns the student’s outcome with the school. It also addresses criticism ISA’s receive, and how universities (like Purdue) have begun to offer ISA’s to students. [November 25, 2020–1 hour, 3 minutes] iTunes Podcast | Spotify | Google | Breaker | Website Link
Meb Faber
The Meb Faber Show: #267 — Edward Altman, NYU — We Had More Billion Dollar Bankruptcies In 2020 As Of September Of This Year Than Any Year Ever. Altman is an NYU professor and the creator of the well-known Altman Z-Score Model for predicting bankruptcies. As 2020 has seen a huge number of bankruptcies, it couldn’t be a more timely episode to hear from Professor Altman. He explains the foundation of the model which he created in 1968, how it has evolved over time, and why it still has predictive power even to this day. He also touches on what the Altman Model was predicting before COVID hit, the fallen angel trade, and why he is bullish on high quality junk bonds.[November 25, 2020–52 minutes] iTunes Podcast | Spotify | Google | Breaker | Website Link
The Compound Show with Downtown Josh Brown: The Portfolio Puzzle of Our Lifetime. As stock valuations are elevated and bond yields are almost zero, Josh Brown brings on two people to discuss how to handle portfolios going forward. The first guest is Bob Haber, the founder and CIO of Proficio Capital Partners and part owner of the Boston Celtics. He says the next 10 years will look different than the last 10 and you have to adjust your strategy since you can’t depend on bonds as a hedge. He uses European and Japanese stock markets this year as an example — stocks went into a bear market and bonds provided nothing. Then he walks though his idea portfolio, which includes 25% gold. At 44:30, Meb Faber, CIO of Cambria Investments, joins to talk about home country bias and why thinking that the U.S. will continue to outperform the rest of the world going forward is a big mistake. He looks at CAPE ratios around the world and why he believes investors need to have a minimum 20-year horizon when evaluating an investment strategy. Meb finishes with looking back at his post from March that gave a bull case for the rest of the year. [November 27, 2020–73 minutes] iTunes Podcast | Spotify | Google | Breaker
That’s where people get upside down so much. They bet on one future, and as we know, the future’s uncertain.
Absolute Return Podcast: #100: Leadership Chat: Trend-following with Meb Faber. Faber talks about what piqued his interest in trend following and why he uses a quantitative approach, and gives some background on Cambria and the approach he takes to launch an ETF. He also talks about some of his more popular strategies, including a $TAIL risk strategy that is popular for obvious reasons in 2020. He also talks about his takeaways from doing 250+ podcast episodes. [November 27, 2020–53 minutes] iTunes Podcast | Spotify | Google | Breaker | Website Link
RECOMMENDATIONS
Books
Anson Dorrance (Head Women’s Soccer Coach & 22x National Champion, UNC):
- The Second Mountain: The Quest for a Moral Life by David Brooks
- Hillbilly Elegy: A Memoir of a Family and Culture in Crisis by J.D. Vance
- Coach: Lessons on the Game of Life by Michael Lewis
- When Nobody Was Watching: My Hard-Fought Journey to the Top of the Soccer World by Carli Lloyd
Salem Abraham (Founder, Abraham Trading):
Eugene Wei (Former Product, Amazon & Hulu):
