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Welcome, everyone.
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A "Forbes" article about Meb Faber's book
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begins with the question, how does an investment manager
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reconcile all of the various prognostications
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he hears on a daily basis?
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His curt and brief response was, ignore them.
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Over 70 years ago, Ben Graham and David Dodd
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proposed valuing stocks with earnings
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smoothed across multiple years.
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Robert Shiller later popularized this method
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with his version of the cyclically adjusted price
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to earnings, or the cape ratio, in the late 1990s
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and correctly issued a timely warning of poor stock returns
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to follow in the coming years.
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Our speaker today Mr. Faber applies this valuation metric
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across his global investments.
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He's a co-founder and CIO of Cambria Investment Management
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and has authored numerous white papers and three books--
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"Shareholder Yield," "The Ivy Portfolio," and "Global Value."
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A frequent speaker and writer on investment strategies
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who has been featured in the "Barons,"
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"The New York Times," and "The New Yorker,"
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he is here today to speak about his investing philosophy.
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So without further ado, friends, let's welcome Mebane Faber.
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MEBANE FABER: It's great to be here today.
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This is a nice, intimate audience.
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So I usually fly through this pretty quick.
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So if I'm going too fast, I say something
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you don't understand, just raise your hand and wave at me.
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This is interesting.
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Because this is probably the first time in my entire life
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I've been the most dressed up person in the room.
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You know, suits for me, it's normally weddings, funerals.
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I live down in So Cal.
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So casual is kind of our normal entire anyway.
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So it's a bit humorous.
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Anyway, all right.
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So we're going to get started real fast.
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Since I don't see too many familiar
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faces, quick introduction.
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Again, my name is Mebane Faber, although I go by Meb.
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Mebs lately have had a lot of great press.
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This is the Meb who just won the Boston Marathon.
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And as one of my friends' moms on social media
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said when I posted a link to this,
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said I didn't even know you ran, I said, well,
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I know if you've seen any photos,
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but he's in much better shape, much skinnier than I am.
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I grew up in Colorado before spending some time
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in North Carolina.
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I went to college at University of Virginia.
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So if anybody is watching the College World Series tonight,
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go Hoos.
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We're playing Vanderbilt.
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So pretty excited about that.
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May have to make a last minute trip to Omaha
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here if we win one of the first two games.
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Actually studied engineering in biology so.
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I feel like I'm in good company today.
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Probably a lot of engineers here.
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My first job out of college was in Washington, DC.
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Worked as a biotech analyst for biotech stocks
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and was going to grad school at the time
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before moving to San Fransisco.
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So I lived in the Bay Area for about a year and a half
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and then a brief-- and actually lived
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with an early Google employee.
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So I was gravitating more towards the quant side
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of the business of the time.
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So moved away from the bench, from the science--
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I was always really terrible at it anyway--
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but more towards quantitative investing.
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A brief stop in Lake Tahoe, where I can get away
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in most of the country saying that I actually
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had gainful employment there.
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But most to you can see through that and say,
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you're probably a ski bum.
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As you know, there's probably not a lot
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of high investment companies going on in Tahoe.
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But an interesting side story was that when I did live there,
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I managed to sneak my way into a really, really great Google
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party.
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And if any of you all have been around long enough--
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this is probably 2004-- anybody here
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that used to go to the parties they had at Squaw-- wow, OK.
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We got a couple.
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So, I mean, we're talking six stages--
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this is probably pre-IPO days.
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You could still get away with this.
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Six stages and ice sculptures and fire.
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And they flew almost everybody in from around the world.
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And of course, I wasn't working at Google
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but had a number of friends did.
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So I managed to sneak my way in.
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And I remembered as I was walking today.
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I'd completely forgotten about this.
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But they gave every Google employee two drink tickets
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and then I think you had to buy the rest or something.
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But the good news is, most of my friends
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worked in travel employment up there.
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So I had it from friends working the hotel front desk
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setting up the tents with the guys.
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One of the guy says, here, you want some drink tickets?
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You know, because we're all obviously
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sneaking into the parties.
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And he said, sure.
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You know, you only get one or two.
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He goes, here's 50.
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Needless to say, I managed to get kicked out
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of the party later that night, or the after party,
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but really had a great time there.
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It was really a lot of fun.
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Moved down to LA.
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I guess this should be a Kings photo now.
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But I've been in Manhattan Beach for the past seven years.
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When I started my company Cambria Investment Adviser,
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spent a lot of time learning how to surf.
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But I'm pretty terrible.
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Look like this and this.
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And if you've see the videos on YouTube lately,
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one of the benefits of having technology,
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of course, the go pros of the world,
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is you get amazing footage, right?
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But also, you learn some things you really probably
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didn't want to know.
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So being a surfer in Manhattan beach
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and all of a sudden realizing that, yes,
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underwater there's a lot of great white sharks.
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So you've been seeing a lot of these videos coming out lately
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where stand up paddleboarders are just
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watching these great whites swim through the line up.
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I would rather just not know, of course,
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that our friends are there.
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But they're harmless, right?
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A bit about my company-- we started in 2006.
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We manage about 430 million, maybe 440 million now.
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We do individual accounts.
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We manage public funds.
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The goal-- and I feel like this try to include a Silicon Valley
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term-- disrupt traditional high fee investing.
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I have 100% of my net worth invested in our public fund.
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So this isn't a theoretical exercise
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we're going to talk about today.
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But this is what I do with all my own money.
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Now, before we start, this is a fun little quiz
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we're going to pass around.
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It's anonymous.
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So don't worry.
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Nobody's going to see what you wrote down.
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But asked a simple question is for those of you
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invest in stocks-- so ignore bonds.
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Ignore real estate.
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Ignore commodities or whatever else you
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may trade-- currencies.
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And you have to be US resident.
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Otherwise, you'll bias the data.
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How much do you put in the US?
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So let's say you have 80% in the US, 20% in Japan.
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Write down 80%.
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So there's a little piece of paper
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that's going to go around.
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Just write down a number.
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And then when it gets to the end, raise your hand.
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And we'll get back to this a little bit later.
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You can find a lot of information that we write about
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and publish.
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Again, I have a blog-- Mebfabor.com.
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My company's website-- Cambria Funds.
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There's a third site called The Idea Farm, but all of which
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we publish.
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Most of it is free.
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There's 1,500 articles I've written
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on the blog, about a dozen white papers, three books.
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And as a benefit of sitting here during a lunch break
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or taking the time out today or if you're watching the webcast,
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I'm more than happy to send you a free book.
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You can only pick one, though.
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But the topic of this one today is a book
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we put out a couple months ago called "Global Value."
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But we've also published two others.
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But I'll have more than happy to send you one.
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Shoot me an email.
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My personal email address-- mebane@gmail.
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I tried to get meb@gmail in the early days,
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but they said, no three letter Gmail addresses when it first
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came out, sadly.
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But anyway, shoot me one.
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"Ivy Portfolio" is best in harder paperback.
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It came out at a time when the Kindle software
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wasn't that great yet.
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So I would recommend reading that one in a hard cover
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or paper back.
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The other two, I would be happy to send you a free copy.
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All right, so we're going to get started on the talk now.
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And it's interesting.
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Because a lot of people, when you talk about investing,
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it's an interesting science.
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And it's interesting because so many people
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have such widely held beliefs, right?
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And so, talking about it, in many ways,
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to certain people, especially that aren't as open minded,
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it's like talking about politics.
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It's like talking about religion, right?
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Trying to convince a buy and hold indexer
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that you should be tactical is just
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as difficult as trying to convince a Republican to be
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a Democrat or someone to switch religions.
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It's really difficult.
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But we're going to talk about some interesting stuff
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today that probably goes against a lot of conventional wisdom.
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So keep an open mind.
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You may agree with some of it, may not.
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But it should be interesting.
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I was going to name this chart or this topic
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You Suck at Investing.
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And when I say this, I don't mean any of you specifically.
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I'm not pointing out any one of you, although most of you do.
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But you're terrible at investing.
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This is the broad investing public.
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This is an example of a study that comes out
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by Dow Bar that shows investor returns, dollar
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weighted returns.
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As you can see, typically, everything
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did good except for the average investor.
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Morningstar replicates this study for funds, right?
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So the average investment fund-- when the money comes in,
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when the money comes out.
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And typically, what happens-- people are emotional.
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They have a behavioral bias or they
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rush into stocks or performance of a fund at the top
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and then sell at the bottom.
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And they do it over and over and over again.
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That costs you roughly about 2% a year typically, right?
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So all you that are getting really excited about stocks
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again after the fifth year of this bull market
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but weren't investing in 2008 or 2009,
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you maybe want to take a little bit of pause, think about it.
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But it's important to come up with a systematic investment
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approach to avoid some of these genetic behavioral biases
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we have.
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A good visual representation of this
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is, there's an American Association
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of Individual Investors-- polls their readers and says,
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simple question.
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Are you bullish on the stock market, bearish, or neutral?
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This goes back to late '80s.
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So the red is kind of average values.
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The green triangle is where we are now.
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So kind of average.
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What you can see, though, is a little bit of complacency.
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The neutral is a little higher than normal, right?
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And that kind of reflects what's going on the market.
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There's low volatility.
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A lot of people haven't really participated.
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They got out in '08, '09, and have never really gotten back
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in.