Lead-Lag Live Beyond the Bull: Navigating the 351 Exchange Revolution With Meb Faber
Tax strategies rarely generate genuine excitement, but the 351 exchange is proving to be the exception that financial advisors, investors with concentrated positions, and forward-thinking asset managers can't stop talking about. This little-known provision allows investors to contribute appreciated securities to create new ETFs without triggering taxable events – essentially functioning as a "1031 exchange for stocks."
Matt Faber breaks down how this century-old tax code provision is finally hitting its stride at the perfect moment. With U.S. markets delivering 10-20x returns over the past 15 years, many investors find themselves trapped by potential tax consequences, unable to diversify away from concentrated positions that have grown to dominate their portfolios. The 351 exchange offers a compelling solution by allowing them to contribute these appreciated assets to seed a new ETF, receiving diversified exposure in return while deferring capital gains taxes.
Cambria has already completed two successful exchanges with growing participation, expecting their next fund to reach $300-500 million in assets. While the process requires coordination across financial advisors and custodians, the benefits are substantial – particularly for high-net-worth individuals, founders with concentrated stock positions, and investors needing strategic rebalancing after years of U.S. outperformance.
Beyond this tax innovation, Faber shares insights on dramatic market trends emerging in 2023. International value stocks have delivered returns of 30-35%, with some markets like Poland up approximately 60%, even as U.S. valuations approach record highs. The conversation also explores the potential recovery in cannabis stocks after eight brutal years of declines, positioning them as a contrarian opportunity with significant upside potential if regulatory progress materializes.
Whether you're seeking tax-efficient portfolio solutions, exploring international diversification, or hunting for asymmetric investment opportunities, this conversation offers valuable perspectives from one of the industry's most innovative thinkers. Subscribe to hear more insights on navigating today's complex investment landscape.
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