Meb Faber: 2 Big Mistakes Investors Make With Their Portfolios

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Today’s guest is Meb Faber. Meb is a co-founder and the chief investment officer of Cambria Asset Management. Meb just released a new book called Investing in America: The Rise of a 250-Year Bull Market. We enjoyed so many things about our conversation with Meb, but first and foremost was the overall tone of hope and optimism looking back over the long history and the long success of American financial markets. We also really liked his comments about the importance of having a written investment plan, and why he thinks we’re starting to see a bull market in diversification.

Episode Highlights

• Investing in America and US Market Resilience
• AI, Innovation, and Investment Booms
• What Could Drive a Market Rotation?
• Why Investors Should Diversify Beyond US Stocks
• Hetty Green and the Future of US Investing
• Putting Your Investment Plan in Writing
• Do Private Markets Belong in Portfolios?
• Why Faber Is Optimistic About Investing

If you have a comment or a guest idea, please email us at TheLongView@Morningstar.com.

Transcript

Ben Johnson: Welcome to The Long View. I’m Ben Johnson, head of client solutions with Morningstar.

Amy Arnott: And I’m Amy Arnott, portfolio strategist for Morningstar.

Johnson: Today’s guest is Meb Faber. Meb is a co-founder and the chief investment officer of Cambria Asset Management. Meb’s just released a new book called Investing in America: The Rise of a 250-Year Bull Market. Amy, I enjoyed so many things about our conversation with Meb, but I think first and foremost was just the overall tone; the tone of hope and optimism is a lesson I think we can all learn from looking back over the long history and the long success of American financial markets.

Arnott: I also really liked his comments about the importance of having a written investment plan, as well as why he thinks we’re starting to see a bull market in diversification.

Johnson: Well, let’s dig in with Meb. Meb, welcome to The Long View. Thank you so much for joining Amy and me.

Meb Faber: Great to be here, my friends.

Investing in America and Market Resilience

Johnson: Meb, you’re here in no small part on the occasion of the recent release of your latest book. You’ve been prolific over the years across a variety of media, from The Idea Farm to podcasts to books. I’m curious: With this latest one, Investing in America, what inspired you to write this particular book, and why was now the moment to write it?

Faber: Like most of us during covid, we were kind of stuck in our houses with nothing to do. We just watched sports, and then they cut off sports, and everyone looked around, and particularly the young cohort—which is true of all young people throughout time, nothing particularly unique to these—but they love to gamble on sports and then say, “Well, we can’t bet on the Broncos anymore. What are we going to do?” And then they turned their eyes to the stock market, which, on one hand, is fantastic. Great. I love that people are interested in the investing markets. We don’t teach it in school. That’s sort of my white whale. I think we should teach money starting in elementary school. But the problem was they got led through the casino doors, meaning their education came from apps that threw confetti at them when they hyperactively traded throughout the day, when they guided them to, “Hey, you like meme stocks. What about zero-day options? What about, now, prediction markets?” The long history of investing, as we know, these are very bad, terrible, no good, awful ways to invest. And I wanted to strangle them because, look, this was me in the ’90s. You guys remember the internet dot-com boom. I was trading dot-coms during college, so were my professors. My Robinhood was E-Trade, but I wanted to strangle them and say, “You don’t understand the story is better than any of this. You have this magical compounding machine and all you got to do is make a little money, save a little money, invest it, and magically 10, 20, 50 years later, you’re rich.” And so, we set out to write this book.

Almost everyone, if you go to a financial advisor, they have this long-term chart of the stock market for the past hundred years in their office that shows, yes, it jiggled and yes, there were tons of crisis events, but over time you make a ton of money. And I said, “But it didn’t start a hundred years ago. It actually started 250 years ago.” So, let’s start at the beginning and let’s tell this full story of American capitalism, where this sounds almost unbelievable. One dollar turns into tens of millions of dollars. Today, I think it’s actually like $200 million. It just sounds too fantastical to even say, but this compounding machine: you don’t have to gamble, you don’t have to hyperactive trade; you just have to invest along with this amazing, amazing engine of creative destruction and free markets that we call the stock market.

Arnott: The book’s central thesis really centers on market resilience, and going back 250 years in the United States, we’ve been through wars, depressions, political turmoil, market crashes, but long-term investors in US stocks have consistently been rewarded. What do you think explains that resilience?

Faber: You’ve actually got to start the party a little earlier. If you go back to the Age of Exploration—we’re talking Mayflower—I don’t know about y’all, but when I was in elementary school, they taught me 1492, Columbus sails the ocean blue. And then they said, well, there were a lot of these immigrants coming, particularly from Europe, who were escaping religious persecution and [seeking] freedom and a better life. All that’s true, but also there was a profit motive. I wasn’t taught this in school. The vast majority of these expeditions were funded by companies. And you say, oh, that’s interesting. And so, there’s innovation at the time: If you wanted to fund a ship, if you were a queen or a rich merchant, well, one ship is risky, right? You put money on one ship; it sinks, pirates come grab you, Blackbeard—too bad, you lose all your money.

But if you could invest 10% in 10 ships, hey, boom, you just discovered portfolio diversification, and it sounds like venture capital, right? You go back, and they actually used to call them adventure merchants, which became the phrase venture capitalists. The reason I tell you that is that prior to the founding of our great republic, we had a couple hundred years of this concept they used to call the joint-stock company. Now, we just call it stocks. The party really got started in Amsterdam in 1600. Then you fast-forward 200 years, and the center of the world moved to London and eventually to New York City. But by the time the US got started, we already had this foundation. And so you had all these people that had moved to this new country, and then all of a sudden you had these new stock exchanges in Philly, in New York, and the party really got started.

We started in 1800 and demonstrate that in the 200 years prior, I mean, my God, all sorts of crazy geopolitical events. And then even within the US, 50% bear markets, one haymaker, the Great Depression, 80% plus you lose your money. Despite all that magical wealth, as Getty said in the book, we have a lot of little quotes throughout history: “The door to the Millionaires Club is not locked.” Over 50 years, if you do 10% a year, that’s a hundred-bagger. Ten grand turns into a million bucks. The whole point of the book is we zoom out. We say, yes, look how crazy this decade was. Look how crazy this other decade was. But you zoom out: What were your returns over the next 10, 20, 50 years? Once you zoom out, stocks become less volatile than bonds, and that really happens at sort of the 20-year time frame. We try to instill this long-term thing, which is hard in a time of TikTok and nonstop attention grabbers; being able to zoom out is really important.

Johnson: I feel like, Meb, all along that timeline, we bump up against these moments where people say, “Well, yes, but …” Yes, but this time is different for all these reasons. Yes, but as we sit here in 2026, we’re facing some weird combination of really premium valuations and stocks, long-term interest rates are rising, inflation’s stubbornly high, and oil prices are up above $100 a barrel as we’re recording this today in mid-September. Why do we constantly seem to get past these “yes, buts,” and what does the episode that we’re living through today, when you look back over the past 250 years, most closely resemble in terms of historical, I’ll call it a “yes, but” moment?

Faber: If you go back in time, let’s say Ben and I were sipping tea or some mead or wine, I don’t know, whatever they drank back then in 1799, it wasn’t altogether clear that the US would one day become two-thirds of the world stock market or that it’d be a quarter of the world’s GDP. You may place bets on the time, obviously on the UK, but maybe places like Brazil or Argentina or countries like Japan, on and on, right? And so I think there’s something very unique about the United States, but it is not a characteristic that is only for the United States. The United States definitely has a culture of ownership, of risk-taking that I think dwarfs everywhere else in the world. It’s totally OK to fail in the US. In fact, we encourage it. We love it. I mean, if you look at our sports teams, there’s nothing we love more than watching someone fail.

The only thing we like watching more of that is when they succeed after that. And so this kind of creative destruction of markets—you look back, one of my favorite charts in the book looks at the top 10 stocks by decade, and we all know what they are right now: the Mag Seven, US tech. But you go back in various decades, there are Chinese stocks in there, Japanese stocks dominated in the 1980s, and you’ve known me for a long time. I’m very much a global investor. Investing in just one country, despite how much I love the US, is a terrible idea. Spreading those bets globally, even if you do the market-cap Vanguard Jack Bogle index, you’re still putting 10 times the amount in the US as you would in another country. I actually thought about doing in-notes. I wasn’t going to title it “yes, but,” but maybe just kind of like, “Well, in the next 10 years …,” and this is what the struggle for everyone is: The path matters.

Everyone wants a crystal ball to look into the future, and no question, US stocks are expensive. And so, what is the path over the next one, five, 10 years? I wouldn’t expect 15% returns as we’ve seen since 2009. I mean, it’s been an astonishing, one of the best periods in history for US stocks over the past 17 years. And all that means is your expectations say, “Hey, look, maybe I’ll expect lower returns,” but over the 20-plus years, the valuations start to wash out. The next one to 10, anybody’s game, and we’ve been long bulls on ex-US markets that are much cheaper. We think it absolutely makes sense to diversify globally, but it’s that balance that matters. The whole takeaway of the book is getting to the finish line. If you sold in 2008 or 2009 because you couldn’t take it anymore, I mean, how many people have we heard that phrase from? Just a devastating outcome.

Part of the book is that we want people to have the historical understanding and say, look, this could have happened. Are you mentally prepared for stocks to go down 50%? Are you mentally prepared, in an outside scenario, for them to go down 80? Are you mentally prepared for other countries like China and Russia to close their market, say, thank you very much, it’s going to be a zero, or other countries’ hyperinflation? So, part historian to say, I understand how crazy the past has been. Also, part comedian to look to the future and say, I know it can be different and even weirder when we discover aliens; is that bullish? I don’t know. What do you think? Is the stock market up or down on the day that we confirm aliens are real? It’s hard to say.

AI, Innovation, and Investment Booms

Arnott: The book also looks at the role of technological innovation in driving wealth creation across time. You look at things like the development of railroads and the internet. Do you think the current AI investment cycle will follow a similar pattern with a kind of boom-and-bust reset and then resuming long-term growth?

Faber: There are so many lessons in this discussion. If you go back in history, you mentioned a few of the big ones. Look, if you invest in the early days of the US, you’re buying banks and insurance companies, and there weren’t that many of them. And then later in the 19th century, it’s going to be all railroads and canals, and you get these various manias: 20th-century electronics, plastics, Nifty Fifty, dot-coms, microprocessors, mobile, on and on. And this creative destruction is great. If you look back at the companies, [Hendrik] Bessembinder, one of my favorite authors, academics, talks about this a lot where he is like, look, you buy the average stock, it doesn’t make any money, underperforms T-bills, and only a handful drive all the returns of the market, but those names change over time. You look back at the names from 10, 20, 50 years ago; we’re not talking about Kodak KODK or Polaroid anymore.

We have one chart in the book that’s like, what was the first stock to hit various milestones? First million dollars, 10 million, 100 million, a billion, 10 billion, 100 billion, a trillion. You look back at those names, and you’ve probably never heard of most of them. What’ll be the first 10 trillion? It may not even exist yet. That all having been said, there are some unique parts about today. These companies are so big and so dominant. We had a chat with Paul Kedrosky recently on the podcast, and he said that the Anthropic, SpaceX SPCX, and OpenAI IPOs would combine to be bigger than all the IPOs in the ’90s combined. The scale is hard for us humans to grasp and put our hands around. No doubt it’ll be interesting and weird and different. But the beauty of investing is you don’t have to just buy Grape-Nuts or Wheaties or nothing.

There are thousands of choices, even thousands of choices within the US stock market. Currently, the decision is not, well, do I put all my money in US stocks or zero? It could be, well, maybe I invest in value or shareholder yield or mid or small cap, all of which we think have a Grand Canyon-wide valuation spread to a lot of these Big Tech companies. That’s really the Achilles’ heel of market-cap weighting. It is the market, and it is the average, but at times when things go sort of bananas to the upside and a little crazy, it has no tether or link to valuations, and that’s true right now. The good news is the rest of the world looks much more reasonable, and I think there’s plenty of opportunity everywhere, even if the US looks expensive. But to be clear, if you look at the valuations, we’ve seen worse, and there’s no ceiling.

Japan in the 1980s, which we often joke about with people—they assume the US has held the crown as the largest stock market forever, but within my lifetime, Japan was the biggest stock market and then, of course, went nowhere for 10, 20, 30 years. Looks great now, but these things can happen at scale too. And the US, more than anything, the healthiest outcome is a rotation, which I think already started two years ago.

I think starting in 2021, you’re starting to see—we wrote a paper called The Bear Market in Diversification—where this period for US stocks over the last 17 years has been almost unique in history, with the exception of World War II, where it just creamed everything else, just absolutely just smoked everything. I think the inflection has already happened, where you’ve seen a bunch of ex-US stocks, value stocks, go up 30%, 50% last year, up another 30% this year. I don’t think anyone’s noticing until the US kind of tapers off a little bit. The long takeaway is I love the US. It should be a bedrock of our portfolios. The default, though, doesn’t have to be the S&P 500, and it doesn’t have to be all of your allocation.

What Could Drive a Market Rotation?

Johnson: Meb, oftentimes those rotations can happen, I think, much more sort of suddenly and violently than investors might expect them to, or certainly would like them to. Curious in your mind when you look at where we’re at today, and you mentioned before US stocks representing over two-thirds of global market cap, within even that small handful of names really driving things forward at the margin, what do you see as the things that might begin to either break down or erode at the margin that tilt the scales back in the favor of either companies within the US that aren’t among the largest handful of names or get investors to look overseas? I mean, is it valuations? Is it that this earnings growth just slows down or doesn’t meet expectations, all of the above, and more?

Faber: It’s always tempting to look back in history and want to find the perfect analog and say, oh, this moment looks exactly like the late ’90s or the 1970s or the 1920s, whatever it may be. That way we can forecast the future. The reality is it rarely rhymes exactly, though there tend to be some very similar outcomes. If you look at valuations today, we mentioned the 10-year P/E ratio. Who knows, by the time this publishes, I kind of want to take out the highs of the late ’90s just to say we experienced that again. We got 44 and change in ’99, and I said, “I’ll never see that again in my career.” And as of this, I think we’re about 41 or 42, so we’re close. And historically, and we’ve done this for all the countries in the world, if you use the starting point of a 40, 10-year CAPE ratio over the next decade on average, returns have never been above average for any country we’ve ever found.

Now, they don’t have to be terrible, they don’t have to crash, they don’t have to be awful, but it’s a high bar to set when valuations are that high for growth. The rest of the world, again, looks much better. They haven’t participated in the returns since 2009. When you look back, there’s been three periods where the US, over a 10-year rolling basis, has compounded at 15% per year, and they all have names: Roaring ’20s, Nifty Fifty, internet boom, covid meme stock mania, whatever you want to call it now. And then on the downside of those slopes, if and when it happened, we had the Great Depression, inflationary ’70s, dot-com bust. It doesn’t mean we have to be followed by one of those, but it does mean you should perhaps be cautious. There is massive opportunity, we believe, in many corners of the world.

If we had to criticize the average portfolio we see, and this is both individual as well as institutional, there tend to be two big mistakes. The first one is that they almost always invest in just one country, and this is true in the US, but it’s also true everywhere. We talk to our Canadian, Japanese friends, on and on. They put most of their money in their own country, and this home bias is a terrible, awful idea for many reasons we mentioned earlier. Diversifying globally, I think, is a huge key to survival. Second is that investors almost never have any real assets. What do we mean by that? That’s things like commodities, commodity equities, real estate, REITs, or TIPS that help you balance out inflation, unexpected inflation as well. And then after you put those sort of pieces together, tilting toward value, particularly right now, I think is a very thoughtful idea.

All those combined, it gets you a pretty killer portfolio. We then get into some pretty far-field topics that are starting to get into nonconsensus views, like adding trend-following to that portfolio. But that’s a pretty good portfolio to start as your base case starting ground that I think will probably outperform most institutions over time.

Why Investors Should Diversify Beyond US Stocks

Arnott: You mentioned seeing massive opportunity in other parts of the world. Are there any non-US markets that you think are particularly attractive?

Faber: So many. In 2026, there’s really no reason to be invested in just one country. Borders are becoming increasingly meaningless. Sectors, even, are meaningless. You could have a stock or a company based in the UK that has no local revenue; ditto in the US. And so, is that a local company? Is that an international company? People love to make the argument, yeah, but US companies have a high percentage of sales from abroad; therefore, I’m diversified. Well, the US actually ranks last on developed markets as a percentage of foreign revenue. It often surprises people when I tell them, say, guess how much the emerging markets are as a percentage of world GDP? Because the stock market cap is like 12%, and the answer is over half. As you start to look around the world, you say, OK, I’ll be agnostic. Well, valuations, it’s like a giant alligator jaw.

This is arguably the biggest valuation spread we’ve ever seen between the US and the rest of the world, with the exception of the 1980s. And then in the ’80s, early ’80s and through the ’80s, excuse me, late ’80s, it was flipped. The US was cheap and the rest of the world was very expensive. You could obviously just grab this by buying foreign developed, foreign emerging. Within those, the value, shareholder yield, we believe is an extreme case where it really, I think, peaked in the 2021 or 2022 period. You’ve had some pretty great returns for foreign developed and emerging the last couple of years, and it seems to be accelerating. But the thing about money is money’s lazy. Money wants to hang out, doesn’t want to go anywhere until something bad happens. As long as the US is cruising along at 15% a year, I don’t think anybody’s going to move until one of the three Ds happens, and that’s death, divorce, or depression, meaning a downturn or drawdown.

And then once it leaves, it looks around and says, “OK, where should I go now?” But making that decision ahead of time, I think, is super thoughtful. Looking to history in the book too, there’s been plenty of periods where, hey, stocks can go nowhere for a decade. Are you prepared for that? For any asset? We talk a lot about bonds on Twitter because I don’t think people really understand bonds. I mean, this has been one of the worst periods ever for bonds over the past five years, but every asset class has its day in the sun and day in the shade as well.

Hetty Green and the Future of US Investing

Johnson: Meb, if you were to look back through the 250 years’ worth of history that you explored in the book and had the opportunity to invite one of what is a pretty expansive and colorful cast of characters that have featured prominently in the history of American financial markets, who would you be most interested in inviting on to maybe an episode of your podcast and why?

Faber: Well, I mean, come on, Ben Franklin. A lot of listeners don’t know this, which is what I love about the sidebars in the book. The book follows this path of looking at each decade, and it kind of talks about some interesting ideas and topics, one of which was that the motto on the US coin wasn’t always “In God We Trust.” In fact, it used to be “Mind your business,” which I think is so funny and hilarious, on the Fugio cent. It had a sundial, and it wasn’t like, “Hey, you snooty neighbor, mind your business.” It was more like, time is short; be industrious, be thoughtful with this time we have on this planet, and make good use of it. But the one I definitely would pick would be Hetty Green. A lot of investors haven’t heard of her. Her nickname was The Witch of Wall Street.

Wall Street, as we know, is still today dominated by males. During the Gilded Age, she was one of the wealthiest women in America and one of the richest people in the country, period. She had an amazing ability to really think about trading, and she lent millions to railroads and banks and even cities, particularly when people were going through a crisis and didn’t have any money. She had a lot of ideas like, “Hey, capital survives by discipline, not excess,” and always having some cash. It was a very Buffett-like kind of mindset during the panic of 1907, if y’all have even heard of that. She was like J.P. Morgan. She was like the lender of last resort. So, pretty cool, unique person, especially female, which had a big impact over a hundred-plus years ago.

Arnott: If you’re looking ahead 20 years, what do you think some of the biggest challenges could be to the US’s current standing as kind of the premier investment destination globally?

Faber: Here’s what I call a ski chair conversation. When you’re sitting on the ski chair, and you start to debate some philosophy, but you only have five minutes, and then you move on with your life; this is one you could talk about to your friends at happy hour. The thing about compounding, again, I mentioned in the beginning, $1 in 1800 is $200 million today. The book was published last year, so even more: $220 million. Now, obviously taxes would’ve taken a chunk; your descendants definitely would’ve spent it all, but the point being is that you have this magical compounding that’s hard to visualize over time, and yet a lot of people try to muck it up. If you look back a hundred years, we have a chart: “Hey, what was the sector compensation?” Well, it was all railroads. Nobody’s investing in railroads today. I mean, there was a bubble in railroad stocks in the 1920s.

They hit a CAPE ratio of like 60. People got all hot and bothered about railroads. So, sorry, it’s a long-winded intro too. The thing I struggle with about the compounding, and I’m a huge, huge fan of the new Invest America for all the kids that are born in the US, get seeded with an investing account, all the proceeds of the book go to that charity. If you scoff at the $76 cost of the book, listeners, first of all, notice it was in honor of 1776, but second, realize it goes to a good cause. It’s less to me about the money, the exact dollar amount—and granted, Michael Dell’s donating a lot more than I am—but the reason you’re seeing young people or other people question capitalism, and it’s like you have to go through this every decade or when you’re a young person, is they may not feel a part of it.

They look around, they see this evil company, Apple AAPL. I mean, when was the last time a CEO or an entrepreneur in a movie was the good guy? I can think of one, and it’s like Iron Man, Tony Stark; that’s about it. You look at the good guys, and you say, “But no, these amazing entrepreneurs and scientists and creators.” If you’re a part of it, and you own part of the stock market, this concept of being the owner, you then want to cheer for it. “Oh, cool. Apple came out with a new phone. That’s great. I own some Apple.” Or, “Hey, McDonald’s MCD is bringing back the McRib. Great, let’s go buy some. I own some,” or on and on. Americans, again, something in the water, I think, are uniquely predisposed to ownership. If you look at the percentage of Americans that own stocks, vastly more than anywhere else in the world, I go chat with my friends in Europe and Asia and talk to them: How do you invest?

They say, “Well, cash in the bank, my savings, and maybe some real estate.” There’s just not a culture of equity ownership. If they do, like my crazy cowboy friends in South Korea, I mean, they make the meme stock traders here look like blue-chip pickers. But here’s my struggle that I’m referring to: When it comes to compounding, the gap widens, and over time, if you’re putting money to work and getting 10% versus someone else who’s getting three, two, or zero or negative, if you don’t invest at all, you’re getting minus three a year, and that gap just keeps growing over time. And that’s a feature of capitalism, right? We reward the big outcome winners; we let companies fail; we let people fail on and on, but over time, that wealth and income gap widens. I think there are definitely some solutions to that. We’re going through a few in the US right now.

I love the superannuation funds in Australia. I think that’s a really smart idea. Getting everyone involved and being on the same team just changes the entire mindset for how you think about the future, not just in this country, but globally as well. By the way, one more comment on that. If you look at the Forbes Top 100, if you look at all the celebrities, all the sports athletes, all the entertainers, on and on, even the influencers, the big money is from business. You look at Jay-Z or Dre, where’d they make their money? It wasn’t from rapping. You look at Dolly Parton; it wasn’t from singing. If you look at, on and on, all these types of business people that you would think are making their money. Michael Jordan, the GOAT, obviously, clearly the premier example of being the owner, is, I think, a lesson that investors really need to embrace and take to heart.

Putting Your Investment Plan in Writing

Johnson: Assuming I’m on the receiving end of $76 worth of proceeds from the sales of your book, aside from the all-important lesson of just this magic of compounding that gets even more magical over time, like the magic of just being a partial owner of all of these different businesses, the growth and just the broader economy, what are some of the other things that you would really try to emphasize, lessons you would try to hammer home with these investors, these recipients of, be it the $76 from the proceeds of your book or a gift from the Dell family or others?

Faber: I think the hard part for investors—it’s like trying to be compliant with a diet or going to the gym. If you’re listening to this, be honest: Do you have a written investing plan? I already know the answer because for 99% of you, the answer is no. And why is that a problem? Even the professionals I talk to say, “Do you have a written plan?” Or they say, “Hey Meb, we bought one of your ETFs.” And I say, “Great.” And they’re saying, “We’ll see how it goes.” I’m like, “What do you mean we’ll see how it goes? You have no plan for this fund. What if it does amazing? What if it does terrible?” And there are two tales to this world. Everyone focuses on what if I lose money? What if it goes down 10%, 50%, 100%? But also what if it succeeds? What if you have an investment that goes up five, 10, 100 times?

University of Carolina Endowment printed 30% last year because they had a bunch in SpaceX, and so it’s a good problem to have, but what are you going to do? I think as you read this book, as you look at what’s happened in the past, and one of my favorite quotes in the book is from George Martin, author of Game of Thrones, where a lot of people—spoiler alert: Red Wedding here, listeners, if you haven’t seen it—the reporters asked George Martin, they said, “You had a sick mind. How’d you come up with all these crazy events?” He’s like, “Oh no, no, no. This is based on history.” To be clear, history is worse. Things that have happened in the past were worse. The base case foundation is to understand what has happened throughout history. Say, OK, this has happened; this could happen.

In my mind, how am I going to behave if stocks go up 15% a year for another 10 years? But what if they’re flat? What if in the interim they go down 50%? What if inflation is 10%, which has happened before? What if it’s zero, which has happened before? What if bonds go to 10%? You look at people pulling their hair out; they’re like, “Oh my God, mortgages, no one can buy a house.” It’s 5%, it’s 6%. Go talk to your parents. They’ll laugh in your face. They’ll be like, bro, my mortgage was 15%. What are you complaining about? But the whole reason I bring that up is to think through these outcomes, because if you don’t have a plan, here’s what happens. You go home, you have a late night, you open the refrigerator, there’s a piece of cake. If you have a diet or if you have a set schedule, you say, OK, you’re not supposed to eat the cake at midnight.

If you don’t, what are you going to do? You’re going to eat the cake and love it. Same thing with investing. It’s like if you don’t have a plan, if you don’t have structured guardrails, you’re probably going to nuke your portfolio at the absolute worst time. We’ve seen this with institutions; we’ve seen it with individuals. The whole point of this whole thing: I heard a great quote from Tim O’Reilly who said that money is like filling up your car with gas. You don’t want to run out because then you’re stuck to the side of the road, but the point of life is not doing a tour of gas stations. Whether you make 9% or 10% is not going to make a difference when you’re 50 or 70 or 90 years old. But whether you make 8% or zero because you did something stupid and you bought some meme coins or NFTs or spent all your money on zero-day options or Kalshi, then you’re going to look back and say, OK, well that was really dumb.

And so, having this base case—and we often say, by the way, the investing part, hugely overweighted, focusing on things like getting the structure right, putting money to work, leaving it alone, paying low taxes, low fees, low expenses—that gets you 90% of the way there. Worrying about the Federal Reserve or gold or if the market’s going to have a bull or a bear market—all that’s somewhat irrelevant relative to the other base case starting point foundation that you need to succeed as an investor and having a long-term time horizon. And listeners, that doesn’t mean day, week, hour, month; that means decades.

Do Private Markets Belong in Portfolios?

Arnott: Over the past few years, we’ve been hearing a lot of buzz around private markets, and a lot of asset managers have been trying to democratize access to private equity and private debt. How do you think about asset classes like that—private equity, private debt, venture capital, farmland, et cetera? Do you think those types of assets should play a role in investors’ portfolios?

Faber: Every time I hear the word democratize, I hear someone’s about to charge me a lot of fees. We make the joke all the time. I learned our buddy, good buddy Eric Balchunas, the other day said when Vanguard launched their index fund in the ’70s, it was like 45 basis points, which today sounds high relative to their five basis points, and that it has been used to always do this kind of lowest-cost portfolio in the world. It’s essentially free to invest today. The table stakes: You could buy a portfolio of ETFs, and it’s essentially zero. After short lending, it has a negative expense ratio. I mean, you’re getting paid to invest. Best time ever to be an investor. However, you can’t be like the puppy who’s just going to sit there and look at a squirrel every time something new and shiny comes, because it’s always weird that the people democratizing with financial assets—why aren’t they charging 25 basis points? Why is it always 4% or something totally insane?

I think for all of us, 99% of the time we should say no. Say, set my foundation: Here’s my global portfolio; I’m going to buy and hold; I’m going to rebalance it once a year. We have four asset-allocation ETFs that do this for you. One of them is the single cheapest fund in the entire category. The point being is that you don’t need something super complicated. However, I grew up in a farming family in Kansas and Nebraska. I love farmland as an investment. I hate running a farm. Oh my God, it’s so much work. I mean, you go back to the early 1900s, we were all farmers. I love to joke with people when they were talking about AI being a huge part of the economy today. I was like, bro, firewood used to be 25% of the US economy.

Things change. Don’t worry about it. But looking at the portfolio, farmland, a fantastic asset class, it’s pretty hard to allocate to in public markets. There are some solutions maybe coming online that I think might be pretty interesting in the coming years, and you’re starting to see some fractionalization. It’s probably the biggest missing piece of the global market portfolio, along with single-family housing ex-US, to be able to get access to, but you don’t need it. And then if you look at things like private and private credit, again, I think you don’t need it. I do a lot of angel investing, but for a whole host of other reasons, if we have another hour, we could get into it. One, it’s super optimistic for me. I’ve invested in over 400 startups. The geopolitical deluge of public markets is always negative. It’s so depressing. But private markets, as startups, they’re trying to save the world and improve the world.

It’s a lot of fun. But more importantly, as we go down this giant tax alpha, I think tax alpha is 10 times more important than investing alpha. And you look at the QSBS [qualified small business stock] rules that listeners can go look into; when you look into things like ETFs, then ETFs that don’t pay dividends or income, you look at things like 351 [conversions]. These are all Googleable later. We can’t spend all day on these. The point of all these ideas is to set your base portfolio, and if you want to veer elsewhere, go for it. But the default answer should be no in almost all these cases. And then ask, does it actually do anything? Am I actually benefiting this portfolio by adding these, or am I just getting sold? There’s this great quote from Charlie Munger, the late great Munger; he’s talking about fishing. He said a guy goes into a fishing store, and he’s chatting with an old crusty fisherman behind the counter, and he’s looking at these lures, and he’s like, “This one’s purple with shiny feathers and sparkles.” He goes, “The fish really bite this?” The fisherman looks at him and smiles and says, “Son, I’m not selling to the fish.” The concept being, anytime you hear these fancy investing strategies and presentations that are always expensive, they’re never cheap for some reason, ask yourself, “Am I the fish or am I the fisherman?”

Johnson: Meb, I think we’re sitting here in a moment where the number of shiny objects and their overall sort of level of sparkliness might be as great as ever. We started this conversation with you kind of conjuring the image of bringing in new investors through the side door to the casino. But what we’re seeing is that these lines between investing and gambling, if they’re not blurred, they’re all but disappearing like Marty’s siblings in the McFly family photo these days. We’ve got the prospect now of maybe even 40 Act products wrapping up event contracts. I’m just curious about your take there, if there’s any place for it, if that’s all fine and good, if you can kind of keep your wits about you and have a funny money bucket, where do you stand, just directionally, on where we’re headed there?

Faber: You know what cures all the nonsense? Let’s be clear, it’s a spaghetti cannon of nonsense. I say this a lot when I talk about our fund lineup. We have 20 funds. I say we only launch funds that don’t exist, funds that have academic and practitioner research, but most importantly, funds I want to put my own money into. I put all my public assets into our strategies. The average mutual fund and ETF manager puts $0 in their own funds. And I get, in some edge cases, why you might not put all your money in a Puerto Rican muni bond fund if you manage it. But the question that is the second-order question that is my lie detector question, and you can ask portfolio managers, say, “Do you own any of your own fund? Yes or no.” Let’s say no. Say, “OK, but would you? Would you buy this?” The vast majority of these crazy, awful, no-good strategies are predatory.

And we know that. There are two Venn diagram circles, and they don’t overlap. On one side are asset managers like Vanguard; I would like to think we’re in this category. What’s the least we can charge and keep the lights on and deliver an awesome investing product? On the other side is how much can we charge and get away with it? What can we sell that these morons will buy and hopefully make a bunch of money? Let me give you a good example right now. This is an extremely nonconsensus comment I’m about to make. If you made it this far, I apologize because I’m about to offend you. I’m about to tell you Santa’s not real. There is a massive amount of investors today who just don’t understand the words dividends and income. We did a survey, spent many thousands of dollars on this, and asked investors, “Do you understand how dividends work?”

At the most basic high school level, what happens when a stock pays a dividend? Almost all retail investors, individuals, and the majority of professional investors thought that when a company pays a dividend, the stock doesn’t go down, meaning it’s like a bonus, it’s an allowance, it’s this free payment you’re getting. Because when people hear income, what are they thinking? The check they get from their job or this extra payment, but that’s not how it works with stocks. It’s a return of capital. If you look at, all of a sudden, look at this entire universe of income investments, you say, “Oh, wait a second, that’s just being predatory on someone’s knowledge. They don’t understand how any of this works.” If you’re a taxable investor—we wrote a paper on this probably 10, 15 years ago, a very, very unpopular paper. It says the last thing you want on the planet is high dividends and income.

That flies in the face of everything you could possibly be taught throughout investing history, but it’s true mathematically; logically, it’s true. The last thing, and there’s one person that gets it on the planet, and that’s Warren Buffett. Berkshire Hathaway BRK.A/BRK.B has never paid a dividend. He said it paid it once in the very beginning, and he must have been in the bathroom when they declared the dividend. But guess what they have done? And he’s been writing about this since the 1980s. They buy back a bunch of stock because that’s a choice. You don’t have to sell your shares. In fact, if you want to compound and not take the dividend, pay tax, and reinvest, you can.

There’s a lot like that in this world where you slowly find out, oh geez, this belief I’d had for so long, it’s actually not true. And then you kind of see the world through a different lens again. The same thing is true with product development and all these crazy ETFs being launched. You say, oh, they’re not thinking in my best interest. They’re thinking in their own best interest. Let’s go back to the book from a very, very long time ago: Where Are the Customers’ Yachts? Still true in 2026.

Why Faber Is Optimistic About Investing

Arnott: Yeah, that’s a great point. The book covers a huge amount of ground, with in-depth research on more than 250 years of market history. After going through that process and writing the book, are you more optimistic or more cautious about the next 25 years?

Faber: Someone said the other day, and I can’t give the attribution, there’s the classic: Are you a glass half-full, glass half-empty person? They said, I think the glass is refillable, which I thought was such a refreshing take on this idea. I’m a sparkling water guy, but I’m a huge optimist. You can have that belief and hold contradictory beliefs in your head as well at the same time, and it doesn’t drive you crazy.

We talk a lot about how it’s a terrible idea to identify with a political party because you sacrifice your objectivity. I think your IQ goes down 30 points whether you identify as a Republican or a Democrat, either way, because as a Bronco fan, same thing. I’m never going to cheer for the Eagles. Are you kidding me? My God, they’re the worst. But I’m not objective when that foul comes or that penalty. The same thing’s true with investments.

This is a very simple test. All the psychology experiments show that investors, when you buy something, you’re attached to it. You place way higher value on it than before you bought it. If you think, I’m just joking, go walk out to your garage or to your closet and take a look around. Would you go buy that old sweater again, that lawnmower, that fish tank? No, of course not. You would never buy that again. Are you crazy? The same thing’s true with investments. This is kind of why we say try to come up with a plan ahead of time because once you buy that SpaceX or that cap-bond fund or that income fund, you have a totally different approach than before you bought it. So, thinking in terms of a blank piece of paper going into it.

But looking ahead, I’m a huge optimist. We say one of the biggest nonconsensus views we have on this topic is that I personally invest all my safe money. My company, the balance sheet, invests all of its safe money. We did a paper called What Is the Safest Investment Asset? A lot of people think the answer is T-bills. And this is another Santa moment. I’m sorry to be the Grinch. Just because you want to live in a world of nominal returns doesn’t mean you get to. We all live in a real returns world, which means after inflation. If you look at bonds, for example, T-bills are currently in a 25% drawdown after inflation. Other types of bonds are down 30%, 50%, 70%. That’s going to surprise people, and they’ll respond, “Yes, but I just buy individual bonds.” That’s bond ETFs. That’s not how this works.

That’s not how this has ever worked. And so, putting together a portfolio, there’s only one other person who agrees with me here and has a very different conclusion, which is Michael Saylor [executive chairman and co-founder of Strategy], and putting all your money in bitcoin. We’ve demonstrated, however, that it is safer on an after-inflation basis to invest part of your safe money—meaning your savings account, your checking account, your corporate cash balance sheet—not in T-bills, but to mix it with a global portfolio of stocks, bonds, and real assets because of inflation. And after inflation, whether it’s one-year volatility or maximum drawdown, you add a couple of percentage points of return over T-bills over time with similar levels of volatility and risk. No one else on the planet believes that, but to me that is very optimistic. I believe in this incredible future.

Sorry, this is a long answer, but we did a program on the podcast about four years ago. And the beauty of startup investing is it helps you see around the corner a little bit. We did this whole series because I kept looking around and kept investing in all these amazing space companies. Sadly, SpaceX wasn’t one of them. I said no to that 24 times, not that I’m counting. But all these companies started having amazing success in traction, hitting milestones, revenue. I mean, there’s no better total addressable market, TAM, than space because it’s infinite, right? I think it’s going to be a lot of fun to watch that develop over the next 10, 20 years, even the next five years. But that doesn’t mean that we won’t see a 50% bear market. Munger used to say if you’re not prepared for your portfolio or your stock to go down 50%, you have no business investing. Even worst case, I think, is worse than that. So, an optimist despite also being a realist in what’s possible.

Johnson: Such a great note to finish on, Meb. There’s always going to be water to go around another pitcher, another faucet, you name it, irrespective of the level in the glass. I love that. I want to say just thank you for spending time with us today, digging in on the book and a whole host of other things. We’ve really enjoyed our conversation.

Faber: It’s been a blast. I’m going to give you one last thought from old J.P. Morgan. Circa 1895, we end the book with this, where he says, “The man who is a bear on the future of the United States will always go broke,” which I thought was a nice end note to this chat today.

Arnott: Thanks again, Meb.

Faber: Thanks y’all.

Johnson: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts. You can follow me on social media at @MstarBenJohnson on X or at Ben Johnson, CFA on LinkedIn.

Arnott: And at Amy Arnott on LinkedIn.

Johnson: George Castady is our engineer for the podcast. Jessica Bebel produces the show notes each week, and Jennifer Gierat copy edits our transcripts. Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at thelongview@morningstar.com. Until next time, thanks for joining us.