Meb Faber: Playing Defense Against Black Swans
Episode #7: Playing Defense Against Black Swans
Guest: Episode #7 has no guest, but is co-hosted by Meb’s co-worker, Jeff Remsburg.
David Einhorn's Greenlight Capital returned -2.9% in the second quarter of 2021 compared to 8.5% for the S&P 500. According to a copy of the fund's letter, which ValueWalk has reviewed, longs contributed 5.2% in the quarter while short positions detracted 4.6%. Q2 2021 hedge fund letters, conferences and more Macro positions detracted 3.3% from Read More
Topics: With Brexit rattling the markets recently, it’s a good time to revisit the discussion of “black swans” (not that Brexit was a black swan, despite catching many investors off-guard). So what exactly is an investing black swan? And is there anything you can do to protect yourself from one? That leads Meb into a discussion of outliers – specifically, how your returns would look if you missed out on the 10 best market days, but also avoided the 10 worst market days. From there, we discuss a way to help protect your wealth from the biggest drawdown-days in the market. (Hint – it’s how Paul Tudor Jones avoided the ’87 crash, and something you can easily implement in your own account today.) From there we move to actionable takeaways for listeners – after an extended down-period, what markets and/or countries might be cheap and starting to enjoy an uptrend, which would make them good investments right now? And finally, you’ll hear how Meb just lost his entire Kansas wheat crop, destroyed by a fire from an exploded combine. Black swan event? Find out on Episode #7.
Episode Sponsor: TheIdeaFarm.com
Audio below and more here
Links from the Episode:
- Calgary Stampede
- Battle of the Quants
- Nassim Taleb books
- The Failure of Risk Management – Douglas Hubbard
- Technical Analysis: An Academic Perspective– Andrew Lo
- Money Master the Game – Tony Robbins
- The Misbehavior of Markets: A Fractal View of Financial Turbulence – Benoit Mandelbrot
- Are Markets Efficient? – Chicago Booth
- “Three Years Down in a Row” – Meb Faber
- Why Stock Markets Crash: Critical Events in Complex Financial Systems – Didier Sornette
- Finding Alpha – Eric Falkenstein
- Market Volatility – Robert Shiller
- Optimal Portfolio Modeling – Philip McDonnell
- Fractal Market Analysis – Edgar Peters
- More Than You Know: Finding Financial Wisdom in Unconventional Places – Michael Mauboussin
- Manias, Panics, and Crashes – Charles Kindleberger
- Extraordinary Popular Delusions and the Madness of Crowds – Charles MacKay
- Irrational Exuberance – Robert Shiller
- A Short History of Financial Euphoria – John Kenneth Galbraith
- The Panic of 1907: Lessons Learned from the Market’s Perfect Storm – Mark Bruner
- Triumph of the Optimists: 101 Years of Global Investment Returns – Elroy Dimson, Paul Marsh, and Mike Staunton
- Stocks for the Long Run – Jeremy Siegel
- When Genius Failed – Roger Lowenstein
- Ibbotson Yearbook – Ibbotson Associates
- The CRB Commodity Yearbook – Commodity Research Bureau
- The Essays of Warren Buffett – Warren E. Buffett and Lawrence A. Cunningham
- Fortune’s Formula – William Poundstone
- The Great Game: The Emergence of Wall Street as a World Power: 1653-2000 – John Gordon
- Ahrens, Richard (2008). “Missing the Ten Best Days.”Technical Analysis of Stocks and Commodities, 26:4 (56-57).
- Aparicio, Felipe, and Javier Estrada (2001). “Empirical Distributions of Stock Returns: European Securities Markets, 1990-1995.” European Journal of Finance, 7, 1-21.
- Estrada, Javier (2007). “Black Swans and Market Timing: How Not to Generate Alpha”
- Jansen, Dennis, and Casper de Vries, (1991). “On the Frequency of Large Stock Returns: Putting Booms and Busts into Perspective.” Review of Economics and Statistics, 73, 18-24.
Running Segment: “Things I find beautiful, useful or downright magical”: