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Meb Faber Profile picture
@MebFaber
Feb 4, 2021 • 38 tweets • 13 min read • Read on X
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As my southern grandmother would have said, "What in tarnation?!"

Below is a list of my favorite charts demonstrating the US stock market is bubbly, bubbly, bubbly...

You may not agree, but it should give you pause...and at least reflect!

Any I missed?
This will be a big airdrop of charts so strap in!

First up, valuations...everyone loves to dunk on me for CAPE ratio valuations, but as you will see these are the least extreme indicator...

US stocks expensive (rest of world, cheap!)

mebfaber.com/2020/01/10/the…

HT: @GlobalFinData Image
People love to justify high valuations due to interest rates, but at least historically, dark times ahead...

mebfaber.com/2021/01/06/sto…
Median stock worse than 00

HT: @LeutholdGroup Image
Size and valuation level all time highs

HT: @hussmanjp Image
Image
At least on a relative basis mid and small cap less expensive...

HT: @LeutholdGroup Image
Sentiment is euphoric...US investors expect > 15% returns

HT: @SchrodersUS Image
And average sentiment on II (since 1950s) has been high for last few years...which is usually awful time to invest

HT: @LeutholdGroup Image
Image
Everyone expects stonks to be #1

HT: @barronsonline Image
which, given the flows, is a bit like this

Image
People are increasingly getting pushed out the risk curve, or said more technically, doing really stupid shit.

HT: @business Image
maybe this time will be different but historically SPACs have been a $ incinerator... Image
smaller traders are YOLOing into options

HT: @Greenbackd Image
and despite GME situation, most stocks have very low short interest (largely due to short sellers going extinct)...

HT: @business Image
@Jesse_Livermore old favorite indicator, stocks as a % of household assets near or at all time high...

HT: @NDR_Research Image
why not add some leverage? romp up in margin debt... Image
everyone attracted to the expensive stocks too... Image
I'll add to this thread in the coming days, weeks, and months as things get sillier. In the meantime, you may like my old paper on tail risk and hedging the bad times, if they ever come again!

PDF

cambriainvestments.com/wp-content/upl…
I love valuation charts where the turning points are obvious and get the big ones correct (early 80s cheap, late 90s bubble, GFC cheap, and now ¯\_(ツ)_/¯)

via @LeutholdGroup with Price to peak cash flow, Green Book my single favorite monthly read! Image
Another one
cannabis stocks are up, checks phone twice, over 50% in the past week.
finance.yahoo.com/news/crypto-mo…
benzinga.com/news/21/02/195…
cnn.com/2021/02/12/inv…
no money mo problems via @LeutholdGroup Image
via @LeutholdGroup Image

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More from @MebFaber

Meb Faber Profile picture
Jul 15
What's the best performing stock of all time?

We're talking about a total percentage gain of 265,528,901%.

$1,000 invested in this stock would be worth over $2.5 billion today.

To answer this question, we turned to Hank Bessembinder, who authored the famous academic paper "Do Stocks Outperform Treasury Bills?"

80 stocks have returns of over 500,000% in their lifetime.

Some guessed Berkshire (BRK), but that was only a 792,053% return. Microsoft (MSFT)? A paltry 622,498%.

The winner was Altria (MO)!

mebfaber.com/2024/05/03/hen…
Most people probably assume that the best performing stock returned something like 30% or 50% per year.

Only six stocks out of the top 100 had returns of over 20% per annum.

Most of the best performing stocks had returns in the mid teens, not shabby of course and better than the broad index, but not the eye popping returns you see being advertised on Instagram...

The key is just that they did it for a very long time.
No one guessed the #2 best performing stock (Vulcan Materials (VMC)) but lots got MO right.

Here's the rest of the top 20:

mebfaber.com/2024/07/15/wha…
Read 5 tweets
Meb Faber Profile picture
May 16
The Bear Market in Diversification

(Email we recently sent to clients - sign up for updates at the end)

“Investing goes off track when you believe you are entitled to high returns because you did all the right things.” - @AswathDamodaran

First, a warning.

If you’re an investor or, even worse a financial advisor, with a globally diversified portfolio, you may want to stop reading now.

Continuing may just be too painful.

We should probably form a support group for those investors who built low-cost, tax-efficient, globally diversified portfolios across stocks, bonds, and real assets. They rebalanced the portfolio and didn’t waver when it hit the fan during COVID.

Despite all that well-researched and thoughtful implementation, they were absolutely steamrolled by the S&P 500.

The following phrases may bring out some PTSD. (Maybe a better acronym would be GAASD for Global Asset Allocation Stress Disorder.)
Raise your hand if you muttered any of the following phrases to yourself. For the financial advisors out there, this list is probably just the beginning…

• “Can you explain why we own foreign stocks? All they do is underperform. China is down 60%!”
• “Why do we hold Gold? Ok, Boomer…”
• “Everyone knew investing in bonds at 1% was a dumb idea, why didn’t you?
• “I read recently that GDP was going to accelerate to 50% a year due to AI. Can we just sell all these underperforming value funds and buy QQQ and NVDA?”
•  “This portfolio is much more volatile than my neighbor’s – he’s in private equity and real estate and it moves WAY less…” 

I could go on, but it would just be cruel.

You know all this because you lived through “The Bear Market in Diversification”.

What exactly do we mean by that?
In 2015, our CIO Meb Faber wrote the book, Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies.

The book examined various asset allocation portfolios and their performance from 1973 – 2013. While most of the portfolios had similar returns to the US stock market, they also featured lower volatility and drawdowns, and subsequently a higher Sharpe ratio than just sitting in the S&P 500. It didn’t matter what specific allocation was chosen; they all did a pretty good job smoothing out the rocky ride that was the US stock market.

So, let’s say you read Meb’s book and decided to invest with a global asset allocation model as your guide.

Then things got tough.
Read 15 tweets
Meb Faber Profile picture
May 10
Two fun Simons stories...

Once, a really long time ago, I interviewed with his family office. They asked me a poker question on pot odds (I got it wrong), and at the end of the interview, said, "It seems like you really want to be a portfolio manager and not an allocator." Didn't get the job, but true of course.

Years later, I was at a wedding in Long Island and randomly passed Jim on a hike in the woods. Mumbled hello I was star-struck!

My favorite quote of his was from this video and I use it all the time, you've probably heard me say it on the podcast..."I can make the cliche work either way."

1:01 mark

Go read the book



and @AcquiredFM podcast lots of fun stories

amzn.to/4afBCBq
podcasts.apple.com/us/podcast/ren…
also chats trend following here a bit

ted.com/talks/jim_simo…
Read 4 tweets
Meb Faber Profile picture
Oct 18, 2023
The biggest bond crash ever?

Below are the long bond historical drawdowns for the past 100 years.

Nominal biggest ever...real getting close...
Image
Image
and the 10 year
Image
Image
and Tbills
Image
Image
Read 4 tweets
Meb Faber Profile picture
Apr 20, 2023
I can't think of a single good reason why US investors put nearly all of their portfolio in US stocks, but they do.

Versus a global stock portfolio, US historical stock returns have been more volatile with larger drawdowns, and valuations are currently much higher than abroad.
Some may cite historical US outperformance, but other countries have beaten the US - you don't put all your money in Oz or South Africa do you?!
Some may cite the "Rule of Law", but according to most rankings, the US is actually pretty far down the list...

worldjusticeproject.org/rule-of-law-in…
Read 6 tweets
Meb Faber Profile picture
Mar 11, 2023
Change "Silicon Valley Bank" to "Kansas Farmers Bank".

Replace "tech startups" with "farmers".

Replace "MBS" with "farm loans".

Do you feel different?

If you were calling for "let them fail" are you now screaming "save them?!"

Or vice versa.

Would any of the tech elite… twitter.com/i/web/status/1…
this tweet was never about "techies" or "farmers", it was about bias.

which, the replies demonstrated in real-time quite clearly.

To all my tech friends dunking on the farmers, here's some farm episodes to learn:

youtube.com/playlist?list=…

To all my youtube.com/playlist?list=…… twitter.com/i/web/status/1…
Anyways here's a longer discussion yesterday

Read 7 tweets

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