Where Are The Best Opportunities Today?

During their recent episode, Taylor, Carlisle, and Meb Faber discussed Where Are The Best Opportunities Today? Here’s an excerpt from the episode:

[Meb] I really wanted to add a postscript and just be like, well, just so you know, I’m writing this and the market’s at an all time high. We’ve had arguably the best run in history relative to a diversified portfolio with the exception of World War II. So, hey, maybe don’t expect 15, 17% returns.

[Jake] That’s my birthright as a US citizen.

[Meb] We say that a lot in particular when it comes to real estate too, where everyone’s like, I can’t afford a house. And I was like, bro, I had someone live in my closet when I was in my 20s. It’s not just because you want to live in this really cool, fun city.

There’s no birthright here. Go look for housing in Kansas. It’s a lot cheaper.

[Jake] Eat your Buster’s sandwiches.

[Meb] Yeah. And enjoy it. Get a little Dijon on there.

I mean, look, there’s Grand Canyon wide spreads on value within the United States. There’s no question the broad market is expensive in my view across any metric. Lots of other things look much better.

The paper that we wrote called The Bear Market Diversification, I think it flipped. Like when we wrote it a couple of years ago, you kind of started to see the kink happen. You’ve seen other assets perform, gold, silver.

You’ve seen foreign stocks absolutely have monster years last year, this year. You’ve finally seen the long troubled forgotten small caps in value start to pick up this year, even REITs on and on. I don’t think the world’s noticing yet because the S&P did 17 last year and it’s up 10 this year.

So as long as people are fat and happy, like they got the horse blinders on, they don’t really notice. All of a sudden, you know, if you see that kind of rollover or go sideways or down like a 2000-2003 period, you could see some pretty gigantic rotations. All that having been said, there’s no ceiling on valuation.

And, you know, if this engine just chugs along, there’s no reason the Shiller CAPE ratio can’t hit 50 or 60, right? If we went full Japan, that’s a double from here. So that would be a lot of fun, but also, you know, set the stage for some tough times ahead.

So my expectation would be something, you know, I hate trying to do historical analogues because I feel like it’s just, it’s too tempting. But 2000-2003 feels very similar. I mean, you can go back and look at John Bogle’s got videos about this, people talking about it.

The big difference now between a few years ago, the big one is you have the competing asset of fixed income, which is pretty good yield now as opposed to prior years. So I think what causes that, what’s the catalyst? Who knows?

But my expectation would be S&P pretty meagre next 1-5-7. But overall, there’s a lot of good stuff out there elsewhere, value, quality, ex-US, on and on.

[Meb] I mean, I might set a record on the style box today. Like, you know, I feel like 4% almost on the style box. Come on, guys.

Yeah, it’s a good day.

[Tobias] Let’s get it back.

[Meb] Good day.