The Meb Faber Show - Better Investing Rob Arnott & Cam Harvey on Passive Investing Risks, The AI Boom & Stimulus That Doesn’t Stimulate | #587
71 snips
Jun 20, 2025 Rob Arnott, Founder of Research Affiliates, and Campbell Harvey, Professor of Finance at Duke University, dive into pressing financial themes. They dissect the risks of passive investing in today's market dominated by megacaps. The conversation explores the AI boom's potential to reshape investment strategies and parallels between today's market and the Dot-Com era. They also highlight opportunities in small caps and foreign markets, scrutinizing government spending's role and the pressing need for reform in the face of rising national debt.
AI Snips
Chapters
Transcript
Episode notes
Passive Investing Creates Value Opportunities
- Large-scale passive investing creates valuation wedges between index members and non-members.
- This dynamic sets the stage for a value investment recovery over the next decade.
Passive Investing Erodes Market Efficiency
- Growth in passive investing and retail trading reduces market efficiency.
- This decline in efficiency may boost future active investing returns.
Small Caps Priced for Outperformance
- Large caps trade at a historic premium of 150% over small caps based on fundamentals.
- This suggests a strong long-term opportunity for small cap value outperformance.