Meb Faber on Why Prudent Investors Keep Getting Punished

For decades, investors have been told that diversifying is a good thing. You should hold a basket of stocks across different sectors and geographies, plus bonds, maybe some commodities or real estate, and so on. But, it turns out that you probably would have done better if you just bought large-cap US stocks in the form of an S&P 500 ETF like SPY. So why haven't diversified investments performed better? In this episode, we speak with Meb Faber, CIO of Cambria Investment Management, the host of the Meb Faber show, and the author of one of the most-downloaded research papers on SSRN. He says the last 15 years have "arguably been the worst period ever for an asset allocation portfolio. This transcript has been lightly edited for clarity.

Key insights from the pod:
Meb Faber’s background — 4:45
A Quantitative Approach to Tactical Asset Allocation — 6:17
Why diversification can be good — 7:32
Why diversification hasn’t paid off recently — 10:40
Flows driving performance — 13:43
Where are the great non-US companies? — 16:30
Why value stocks are like single men in New York — 18:45
The importance of fees and taxes — 19:46
351 exchanges and Meb’s new ETF — 24:37
The process of building ETFs — 35:13
The next big thing in ETFs — 42:27