My guest, this episode, likely needs little introduction.  His paper, a Quantitative Approach to Tactical Asset Allocation is the highest ranked paper on SSRN with over 200,000 downloads at the point of recording.   But Meb Faber’s interests go far beyond tactical asset allocation.  His work over the last decade-plus – from his blog to his podcast to the books he has authored – spans broad topics such as shareholder yield, global value, hard asset alternatives, risk parity, and angel investing to name a few. I rarely enter these podcast conversations with a singular objective.  Being a prolific writer, however, there is very little that someone cannot find out about Meb’s investment beliefs through a simple Google search.  What I was keen to learn in this conversation is what drives those beliefs.  Why does Meb keep searching and exploring?  Is it simple curiosity, or is there a deeper, underlying philosophy that unifies his body of work? As you can likely guess from the title of this podcast, there is indeed a unifying theory.  But I’ll let Meb explain.

In many ways, the topic of conversation for this episode revolves around what ultimately amounts to a fairly vanilla, almost-index like  portfolio. The asset class in question, however, may verge on the exotic for listeners with less fluency in the field of derivatives. My guest is Eric Ervin, President and CEO of Reality Shares, and he has joined me to discuss their flagship ETF DIVY.  I would argue that DIVY is one of the few exposures that fits the definition of both being liquid and alternative.  By tapping into the OTC market, Eric and his team build a portfolio of 1-to-5 year dividend swaps, which have historically earned investors a unique return known as the dividend risk premium. Eric’s confidence to bring such a unique product into the market was borne from his experience as an advisor, where he utilized alternatives extensively with his clientele.  Learning more about this experience in evaluating alternatives and the mental framework he used that allowed him to allocate upwards of 50% of client portfolios to alternatives is where we begin our conversation.

This episode I chat with Toby Carlisle, a managing member at Carbon Beach Asset Management and author of popular value investing books such as Deep Value and The Acquirer’s Multiple.  Toby’s approach to value investing evolved from his observations as a corporate lawyer in Australia during the burst of the dot-com bubble.  Watching investors target cash-rich, business poor dot-com companies confused his traditional, discounted-cash flow mentality.  But after watching these activists get their hands dirty, Toby realized that even bad companies can be attractive if they’re trading at a deep discount to liquidation value. We navigate a wide range of topics, including uses and limits of quantitative investing in the realm of special situations, how Apple can be a deep value stock, and why using the opposite of your signal to build a short book might be a bad idea.  

My guest in this episode is Adam Butler, Chief Investment Officer at ReSolve Asset Management. Adam's story is the near quintessential example of my belief that every investor's approach is colored by their experience. From nearly blowing up his firm's omnibus account at his first job, experiencing the tech wreck first hand, and going all in on the commodity and emerging market super cycle narrative, it took "three frying pans to the face" – his words, not mine – to finally rebuild his mental framework from the bottom up. The evolution of his thinking ultimately lead him to embrace what he believes is the ultimate gift: embracing uncertainty in strategy specifications as a means of exploiting the benefits of diversification.