Ignore the Mega-Bubble Mania and Prioritize Shareholder Yield

Episode #356 | April 8, 2024

Episode #356 | April 8, 2024

Ignore the Mega-Bubble Mania and Prioritize Shareholder Yield

In This Episode

On this week's Stansberry Investor Hour, Dan and Corey are joined by Meb Faber. Meb is the chief investment officer and co-founder of asset manager Cambria Investment Management. He joins the podcast to explain why shareholder yield is crucial despite being overlooked, how to manage risk, and which areas of the market have him worried.

Dan and Corey kick off the show by discussing inflation staying persistently higher, rampant government spending and money-printing, and the repercussions of the Federal Reserve's decade-plus of low interest rates. Dan argues...

It was a huge mistake to keep interest rates at zero for most of the period from 2008 to 2022. And that's the problem. Coming back from that is going to be rough. Doesn't feel like it right now with the market near all-time highs and stuff, but I think it's going to be rough for the next decade.

Next, Meb joins the conversation to talk about the exchange-traded funds ("ETFs") at Cambria and why the team focuses on shareholder yield when picking stocks for these ETFs. He breaks down the importance of shareholder yield in mega-bubble markets like today's and urges investors to pay more attention to it...

You have to account for share issuance. And this is the one that I think a lot of people ignore to their detriment – in particular, looking at the tech stocks in the U.S. So many of these tech stocks are just issuing so much stock-based compensation to the C-suite, to the CEO, to employees... It's a huge dilution to the shareholders.

Meb then discusses managing risk on a portfolio level, including focusing on quality and value. He also covers why emerging and foreign markets are so attractive today, the opportunity in fixed-income investments like bonds and Treasury bills, and how higher interest rates have changed the game.

Finally, Meb describes himself as a value investor and shares which areas of the economy he's most concerned about. He talks about inflation driving commodities sharply higher, gold hitting new highs, and why investing at all-time highs can still be a smart choice. When discussing the importance of avoiding making bad decisions, Meb says...

Everyone loves to focus on, "Hey, what's cheap, or what's in an uptrend, or what has a good buyback yield?"... Equally as important in every one of those [approaches] embedded is what you're also avoiding... If you're a trend follower, you're investing in uptrends. Guess what? You're also avoiding downtrends.