Title: Cambria Global EW 3 ETF and 351 ETF Conversions (GEX) Show: The Meb Faber Show / Cambria webinar recording (YouTube) Speaker: Meb Faber (co-founder & CIO, Cambria Investment Management; The Meb Faber Show podcast; The Idea Farm) Date: 2026-08-19 URL: https://youtu.be/9dkWdd4-wTc Length: 51:32 Note: fillers (um/uh/you know/tic "like") removed and stutters collapsed; wording otherwise verbatim, timestamps unchanged. Auto-transcript garbles decoded: "EDUB 3" / "G E X" = the new Cambria Global EW ETF, ticker GEX; "SWLD" = SYLD (Cambria Shareholder Yield ETF); "FYLE" = FYLD (Foreign Shareholder Yield); "EWLD" = EYLD (Emerging Shareholder Yield); "TY LD" = TYLD; "E and D W" = ENDW (endowment-style fund); "Raffi" = RAFI / Research Affiliates (Rob Arnott); "Balchunas" = Eric Balchunas (Bloomberg); "Schiller" = Shiller; "the Qs" = QQQ; "RAA" = RIA. Cambria ~$4.45B AUM, 20 funds. Product webinar pitching the fall 351-exchange launch (GEX, mid-November) plus Q&A across the Cambria lineup.
00:00 Cambria, a day job. Getting ready to cross 4.45 billion. Knocking on five. This has been a pretty monster year for us. We have a lot of funds that are really having some pretty incredible years. Up 20 25%. This goes back to the paper we wrote a few years ago called the bear market diversification where we're really seeing the inverse happen over the last few years where former assets like foreign stocks and emerging market stocks and things like value and small caps are all
00:39 starting to rebound and have some pretty explosive returns. That having been said, I don't know if you all know this. This is one of the first papers that we've ever written, was on the four-year in the presidential cycle, 12-month and four-year cycle, and it looks at the market and then small cap over the course of the year.
01:00 And we're about to enter the best 12-month period really, and starting in like October, I think. Or really a best six-month period. But with the big big daddy of all the biggest month of returns of that whole cycle for small cap and small cap value is in January. So, we'll see if it remains true.
01:22 Anyway, it's a special time. We're excited. Us getting up the ranks in assets certainly allows us to try out and offer some products, continued low cost but also some pretty innovative ideas. We're 20 funds now. And so it's a pretty eclectic lineup. You can see a bunch of the ideas.
01:43 Happy to get into some of those questions as we get into it later. We've talked about the good news. Market's been ripping and roaring. The bad news, we're about to take it out, y'all. I'm cheering for it. All-time high on the Schiller CAPE ratio is within spitting distance.
02:05 I talked to Professor Schiller What was it? Back in '22 when we were knocking on it. I said, "Do you think we're going to take it out?" And he's very soft-spoken and thoughtful. He says, "I don't know." And here we are, and I think we are. We're like one week of rallies away from the sucker eclipsing 99, which was like 44 and change.
02:28 So, but if we know anything about markets, there's no ceiling on valuation. There's nothing that says this has to stop at 45. It could easily go up to 50 or 60, in Japan even hit even higher. So, but you've seen plenty of other times on this chart where I mean, even not that long ago, 2009 feels like a lifetime ago for some of y'all.
02:50 Young'uns listening to this who started their career post-GFC. I mean, if you started a career post-GFC, you're 22, that makes you 40. My god, you're an old fart now, and you've really never had a bear market or a bad one. But look at that. You started your career, CAPE ratio was like 12.
03:12 Anyway, but things like XUS look great. They're much cheaper. And until the last year or two, hadn't really participated in this big move the past 17 years, and you can see that it's started to, but still pretty wide alligator mouth there. This is true for other assets like small caps.
03:32 It's true for value, but you're really seeing a nice rebound. I don't think anyone cares. Your clients likely don't care. You probably might not even care until the S&P kind of starts to go sideways or down. I mean, this is 2 years of outperformance now where a lot of things like foreign and value went up 30 percent last year, is up another 25% this year.
03:55 So, they're definitely creaming the S&P, but no one really cares if the S&P is still doing 15%. So, never once in history have we found a market that closed a year, a country, at a CAPE ratio of 40 and had above average 10-year real returns. So, the batting average is pretty low, zero. Doesn't mean they have to be bad, in fact they were okay in many cases, but in general it's a gravity and it's a weight.
04:24 So, we'll see. We'll check back in 2036. Actually, it'll be the end of 2036, so 2037. See if that stayed true or not. But in general, this setup is yellow light. Expensive market going up, and now there's some competing assets that are starting to compete, including old-school bonds. Pretty good yield on those old-school bonds.
04:47 You guys know this because the media talks about it every day. The thing about market cap and just buying the market, which historically is a good strategy, is it concentrates you in the biggest positions, which sometimes and often doesn't matter, but for the really small countries, it matters or sectors or when you have a market cap-weighted boom or bubble.
05:12 Hesitate to use that word, but really above 40, you're getting into bubble territory. But you concentrate in the things that have gone up the most, which usually are the things that are also the most expensive. So, this is true certainly in the US and getting more so by the day. And so a lot of people kind of read those last two slides and say, "Okay, Meb, I get it. I hear you.
05:34 I get it. These high valuations, but I'm stuck in these positions. I'm stuck in the Qs or SPY or the Mag 7 or whatever, and I don't want to pay Uncle Sam. I just can't. I hate both sides of the aisle. These politicians are numbskulls and I really can't pay these guys extra taxes right now.
05:57 So you got two dilemmas. You either just hold it and accept this risk, which by the way a lot of people may acknowledge this but not that many actually do anything about it, which is concentrated positions on average are a horrible, terrible very bad idea. Now, everyone's like, yeah, yeah, but that's not me, I got rich owning Nvidia or I got rich owning Berkshire whatever may be.
06:28 But no one's taking that position that owned Enron or CMGI or on and on. And so it's a gamble for sure having highly concentrated positions. So some people you could also just say I can't take anymore. Sell. Trigger capital gains taxes. And that's painful for people and not an ideal solution.
06:53 So for a long time there's a couple things you could do. You could try to do like an exchange fund, which historically are very expensive. They have some limitations. Sometimes if you got Nvidia or SpaceX, they won't take it because that's what everyone got. Seven-year hold, you got to put a little into privates. But over the past few years and I'm probably the one on top of the mountain top more than anyone just about yelling about this is the 351 ETF exchange.
07:21 We first heard about this, we immediately saw opportunity here as a wonderful solution. And by the way, exchange funds are just accredited. So this is anyone can do this. And we're going to just kind of cruise through this because I feel like y'all have heard this 100 times, but we'll definitely just cover the top. The 351 ETF exchange is very simple.
07:45 It's a transfer of assets. So, essentially mainly it's just publicly listed liquid stocks and ETFs. You contribute to the seeding of an ETF and only on the seed and you get an ETF back in exchange. There's probably been 20 billion of these that have been done. If you include mutual fund conversions, hedge fund conversions, that's well into the hundreds of billions.
08:11 We had someone on Twitter the other day was like, "Oh, I did one of these in the '90s, but it was separate accounts into like a mutual fund or something." So, they've been around for many, many decades. They just really kind of found their perfect partner in the ETF structure. There's really two big rules that y'all need to be aware of for clients.
08:27 The first one is top position can't be above 25%. So, you got 10 million of Berkshire, say, "Look, Uncle Warren's a AARP member now. He's retired. It's time to move on." You can't just do 10 million of Berkshire. You could do 2 million and then 8 million in something else. Now, that something else because the top five positions can't be above 50%, you really need about 11 or 12 stocks or ETFs are pass-through.
08:56 So, SPY looks through the underlying holdings. So, you could have theoretically Berkshire and SPY as an example of contributors. And so, we kind of walk through there's a ton of resources on the website. So, if you go to cambriafunds.com/351, we have videos and PDFs and it walks through a lot of stuff.
09:14 Hey, here's some things that would work. What do you know? People love to email in, "Hey, I got this tiny microcap junior miner." We're not going to take that. Hey, this is a US fund and I have foreign stocks. That's not going to work. Hey, I have hedge fund or mutual fund or derivatives or options on and on, futures.
09:31 None of that works. Dogecoin. Really just think liquid stocks and liquid ETFs. And it should roughly match the fund prospectus and strategy we're launching. So, for us, we're doing one this fall in November, Cambria Global EW ETF, G E X. And really this is trying to break the market cap link.
09:55 We say, "Look, if you're a global investor, if you're a US investor, but certainly global, if you're putting all your money into the top positions, these passive market cap indices are problematic because you're putting all your money into only a few handful of stocks, which are very expensive.
10:15 So, one of our favorites, Rob Arnott, he talks about market cap weighting and he says the problem is they buy high and sell low, and we definitely are feeling that today. So, this is going to come out in November. If you want to contribute, you really need to do so in the next month.
10:32 If you haven't been through one of these, we've had hundreds of people at this point do it. Certainly reach out to the team. We can walk you through it. You got to go through a financial advisor. And 25 basis points, very few global equity ETFs are that low, particularly the ones that are not market cap weighted.
10:52 That's less than ACWI, by the way. And you're going to get a portfolio essentially of global large cap companies. Pretty basic, pretty simple. This isn't our first rodeo. We've now done five of these. Can't believe it. Time flies. Cambria is hitting our 20-year anniversary this year.
11:12 We're hitting all sorts of milestones. Our three shareholder yield ETFs, 10-year milestone. I think the podcast and Idea Farm are 10 years, on and on. Shareholder yield SYLD is now a pesky teenager. So, hopefully that volatility we see will be up volatility, not down volatility. As teenage years goes. But we first was TAX and then we did E N D W and then GOO and USU and can't even come up with a good acronym for GEX.
11:42 But the cool part is, this is now hitting the mainstream. There's been articles in Bloomberg, articles in the Journal. Balchunas had a podcast today about 351s. And so you're seeing this stair-step in size. To me this hasn't hit its really damn breaking moment yet where in my head I was like, "Man, there's such a massive opportunity here.
12:09 These are going to be raising well into the billions. And you're starting to see some pretty big ones. But our expectation is they're going to continue to grow in size as more and more people and more of the plumbing gets built. For example, there's still a few like if you're at a wirehouse, it's really tough unless you have assets that you trade off or away. Schwab loves it.
12:30 They have a whole 351 department. Fidelity won't do it. Fidelity won't do a lot of things. They won't do long short equity on and on. So really it's not fully, which is an opportunity by the way. If you're an independent RIA listening to this, you have the ability to eat if you care about raising money, which most of you do, and assets, I think there's hundreds and hundreds of billions up for grabs in the next couple years that if you are thoughtful and enterprising and have an intelligent
13:01 approach. Like if I was listening to this and I was a financial advisor, right after this call I'd go call the 10 public companies in my state and I'd say, "Hey, look, I want to give you a presentation to your investor relations, to your C-suite, talk about concentrated stock solutions that I'm pretty sure you don't have ever heard of."
13:18 I would go do it to my local VCs and private equity people who have never heard of this and despite their job being to have these companies go public. On and on, but also founders. The list of founders that I've ever talked to that own a ton of equity that know about this is I could probably count on one hand.
13:39 And usually they're just podcast listeners. So again, if you're interested, we usually Last year we did two of these. One more comment is if you're an asset manager or your financial advisor like, "Look, Meb, we got 500 million. We want to do this, but we actually just really don't want this fund.
13:57 Could you do maybe a global shareholder yield? Could you do a strategy like an asset allocation strategy? We would be really interested in working with you on a custom idea." Reach out to us and we'll certainly have that conversation. We're having that with a number of different advisors currently.
14:14 So while we would usually target two, spring and fall, for these funds, if there's something you want in particular that's not this, reach out and let's have that conversation and that could happen actually pretty quick. So this will be mid-November. Let you be done with everything well before the end of the year, before Thanksgiving.
14:33 And really, all the major work is done by the end of September, early October. So the next month, while everyone else is napping, not back to school yet, you could be making some really important moves. Lots of contact info here, email address, website, on and on.
14:56 I'm going to start to do Q&A now, so we can open it up. We got a handful of questions. And I'll start from the most recent and go back, because the most recent are about 351s and then the early ones are a little more wide-ranging. So the last question is, "What kind of inflows have you seen in the four existing strategies?" Cambria in general has seen pretty steady inflows the last few years. Not surprising.
15:26 Look, this won't always be the case. There'll be plenty of times in the coming years where our funds do poorly and we look really stupid. This is not really one of those times. All of our funds that are Morningstar rated have three, four, or five star funds.
15:43 They've done really well. And part of the market environment looks a lot more rational to what we would kind of expect the world to look like. So, we've definitely seen flows. As far as the 351s, all of it I need to look up that because all of them have appreciated, I think. They're all bigger than when they launched.
16:03 Part of that is just due to the market going up. The one that's probably not is our first one, which is arguably one of my favorite ideas in all of investing, but perhaps one of the worst marketing ideas. There's hundreds of billions and a whole culture of dividends and income. And we can't say proved, but we've demonstrated in the academic literature that if you're a taxable investor whose focus is compounding, the last thing in the world you want is dividends.
16:37 So, TAX is a fund that targets stocks paying low to no dividend yield. And if you're reinvesting, the last thing you want is to take money, pay tax, and reinvest it. It's crazy. It's crazy that anyone of you would even consider doing that. And yet, the whole world operates as if that's the ideal scenario. And so, TAX, if it even comes close to matching the indices on an after-tax level, will do much better.
17:02 Right now, it's not that big of a deal versus the S&P because the S&P yields an all-time low dividend yield of 1.04%. It's really targeting the high dividend strategies. So, if you're historical dividend strategy, not today, but today it's two, three, four, crazy. But historically, that was like six, eight, 10.
17:20 This is vastly more tax-efficient than those strategies. So, I think this fund and concept will be a 100 billion plus concept at some point. People need to get there, right? They're still stuck in their sort of dividend fantasy land of passive income. So, we'll see on that one.
17:43 But, in general, yeah, our fund lineup has been growing quite a bit. Minimum contribution, that kind of depends on your advisor. We try to tell like if you're an independent RIA, we try to say per relationship, so across all your clients, ideally it's like 5 million. If you're an individual listening to this and say, "Wait, I don't have a financial."
18:04 First of all, if you have a financial advisor, tell them to reach out. If you don't have a financial advisor, there's ones we work with that'll help assist this process for an extremely low fee. And they're really thoughtful about they've done four or five of these, so they understand how it all works.
18:22 Theoretically on Schwab, the minimum per account could be as low as 150 grand. So, my dream is to get that as low as possible and anyone can do this. I don't know that if it's worth your headache if you're an advisor and you're going to be doing a bunch of these with your clients. We try to say 5 million per advisor just to kind of say, "Hey, look, be serious about doing this, be thoughtful, and kind of work through the process."
18:45 Any Cambria ETFs for European investors? Nope. Sorry. That's a EU problem, not a Meb problem. One day maybe we'll launch some over there. Ideally, you just find a brokerage that'll let you buy some, but unfortunately, the rules and regulations don't let European investors buy our funds or any really US ETFs, which is a shame.
19:06 Is this for regular folks or 351 with folks with millions? That's the beauty of this is it's theoretically available for everyone. However, I will say everyone's tax situation is different. There are young people who maybe have very low income where you should almost be like, "Hey, you should be not tax loss harvesting, you should be tax gain harvesting.
19:30 Go ahead and take the gains now because you have very little your tax rate is very low. On the flip side, you could be an old person and you say, "Look, I'm donating my stock. I don't care at this point. I'm not going to hit the estate minimum." There's all sorts of different tax setups.
19:47 Usually when you have the big gains that you want to diversify, so if you bought a stock and it's gone up 20X and you no longer want that concentration risk, usually you've made some money. So, you put in 10 grand, and you got a 20 bagger, well, you have a lot of money.
20:06 So, on average, yes, it tends to skew more high net worth, family offices are probably the number one adopter of this. They're very tax-minded, they're very intelligent, they get it, they're super smart. So, we definitely tend to see it skewed that way more than anything. But, we've had hundreds over thousands of different positions.
20:27 Always interesting to see what people hold and then submit. Yeah, you missed it. Fees expense ratio. The only fee is a 25 basis point management fee. That's it. Is it fair to say the resulting fund would be similar to EFA? EFA, no. This is a global fund. So, if you think about the global market cap, that usually means depending on who's the weighting, the US is somewhere around half or to 2/3, right? So, it is global, but EFA is XUS only.
20:57 I can't comment on funds that may or may not be included in other ETFs. I can say that you can see them. Any of our ETFs' holdings are updated daily, y'all. So, you can always check see what we're up to. What qualifies as global? Yeah, that's everything. There's probably 45, 50 investable countries around the world.
21:24 So, it's really kind of ACWI MSCI developed emerging countries. I don't think it goes into frontier. That tends to be pretty small, but really think top 500-ish market cap companies around the world. Any option to introduce tax-aware global funds? I love it. I mean, look, TAX is US-focused low dividend yield, but it's like our second smallest fund or third smallest fund.
22:01 So, if you guys tell me, "Hey, I'll see this or I got commitments 50, 100, 200 million for XUS low dividend yielders, we'll do it." It just I don't love subsidizing these forever. Cost me about a quarter million each. So, I'm willing to let it marinate for as long as it needs be, but I feel like we want to see a little bit of demand or requests. But, I hear you.
22:25 I mean, to me, it's a category-generating idea that doesn't really have any competitors. It's a blue ocean opportunity. What happens if a 351 shrank to the point that we would close it? First of all, I don't ever want to close any of our funds. We've only closed one two No, we closed one, repurposed one, and then closed it.
22:58 My goal is to never close funds. And we don't really close them for small assets. We don't close them if it's a good strategy, it could easily have a bad 5 years. And so we're not closing them for short-term performance. We're closing them for a reason that either like we A good example would be FAIL.
23:19 We have a tail risk US hedge fund that I think is a really thoughtful approach to tail risk hedging. We originally had four listed. US stocks, foreign stocks, long bond, and corporate or junk bond, all tail risk. TAIL was the first. We did FAIL. BAIL we kind of missed the trade, honestly, because interest rates went from zero to five.
23:42 So, the tail risk trade kind of already happened. Corporate and junk we still may launch because those are like razor thin spreads. At some point those blow out and I think that strategy will do really well. Why do we close FAIL? Well, the problem historically has been almost no US investors own foreign stocks, which we think is a big mistake, first of all.
24:07 Second is to the extent they do hold them, they think they're screaming cheap because they've gone nowhere for 15, 20 years and they don't want to hedge them. So, that is not something that's probably going to reconcile anytime soon. I mean, these markets need to go up, some of them 50% before even they're like normal valuation.
24:30 So, we thought that one just wouldn't see the adoption really. And then usually if people wanted to hedge the beta of foreign stocks, they would just hedge through US stocks beta because they're more expensive, if that makes sense. You may still see the junk hedge fund come out at some point. We'll see. Maybe not.
24:49 Oh, but the question is what if a 351 got too small? So, ignoring what I just said, which is we have no intentions to close any funds, you could merge one. But if one was to be closed, the Yeah, I mean, you would then realize the taxable event because the fund would close. The assumption would probably be though that the strategy was terrible and the performance is really bad.
25:21 Like maybe it was a strategy that went down 80 or 90%. You got to remember that most of these funds the assets are going to be fairly sticky from what's contributed. And the reason being is that it's a tax deferral, not a tax dodge. So, when you sell the underlying positions, you're paying taxes on what you contributed.
25:40 And the media often gets this wrong. They're like, "Oh, this is a tax dodge." And you're like, "No, to be clear, most likely these funds will grow, they will compound, and the tax liability will actually be bigger. It's just delayed, right? So, the media often gets that wrong.
26:00 There's been a little talk the last few weeks about the Treasury and they're looking into all sorts of different ideas and long short and 351s. And I welcome it. I hope to God they take a look at 351s and clarify the rules because I think that clears the deck on making them available everywhere, Merrill and Morgan and on and on.
26:20 It also hopefully eliminates the bad actors. I'd like to think that Cambria is one of the good guys and is extremely conservative on how we think about this and what we do. Like you'll see some firms launch a portfolio and turn it over on day one, which makes it look as if the only reason they were doing this was tax related.
26:41 And to me that's not thoughtful. You should want to invest in the strategy no matter what. And this global strategy is amazing to me because it's super low cost. It gives you this global non-market cap weight, which I think at some point could be a $50 billion category. If you told me in 2 years that these are our largest funds, I wouldn't necessarily be surprised.
27:05 All right, what else y'all got? And it doesn't have to be 351 related. I'll just start hammering some questions here because we got about 20 minutes. Shareholder yields How come you have shareholder yield ETFs dedicated exclusively to small caps when SYLD has some small caps, yet no exclusive mid cap? Okay, so we have five shareholder yield ETFs, three of which now have a 10-year track record, which is crazy. EYLD just hit 10 year.
27:32 So, SYLD, FYLD Got my FYLD hat right here. FYLD which just hit a 10-year track FYLD has hit it EYLD's 10-year track. All three of those funds we just sent out an email, y'all probably got it. We're top decile over the past 10 years. Awesome, super cool, we're really proud of that. Some of them it's like top 5% versus their category.
27:53 We since launched and all three of those are cap size agnostic within their geographies. They're sector agnostic, they're country agnostic, there's caps, so they're not going to be over a third in a country or sector. We then launched a US large cap and a US small cap because there were people that were specifically saying, "Hey look, I just I want my style box.
28:18 I want my small cap value. I want my large cap value." They've done great. And I'd be happy to launch 10 more shareholder yield ETFs. You want a Japanese one? Great. You want a UK one? Great. You want a tech or a healthcare one? Great. You want a mid cap? Sure. For me it's always a balance of what do we want? What do we think is a good idea? And then what do end clients actually want? And sometimes we'll launch funds and maybe we had some perceived demand and maybe there's
28:47 just not as much or maybe it's just not the right moment. So, if you guys have requests, maybe you want shareholder yield gross. We've had some requests over the years for hey look, I just want a global shareholder yield ETF. It's too much to ask me. I don't want to buy SYLD, FYLD, EYLD. Just give me a global.
29:02 So, that fund's been filed. I think if we get enough requests or commitments, we would certainly do that fund as well. So, if you really want a mid cap, let me know. We could crank one out as well. I'm somewhat agnostic. On the Idea Farm, how do you select the various research? We suffer from the same problem that everyone else does, which is too much info.
29:33 It's just a flood and it's only gotten worse. Now you got not just email and banking research, you got books and podcasts and TikTok and Instagram and everything. And it hadn't gotten any better. And so, Idea Farm, the whole premise, we used to charge 500 bucks for this. It's free now, was that we're going to send out the top two or three research pieces per week, top two or three podcasts, and then a kind of potpourri of some other ideas and papers.
30:02 And I love it. I look forward to it. We have a whole channel at work and if somebody reads something great, they throw it in there. But it's a mass effort filtering problem. It's not some magical algo that we have that selects these. It's still very human. And then to me there's nothing else like it.
30:23 I'd love you guys share it. If you think it's great, send it along. We talk to people all the time and they're like yeah, your funds are great, but the Idea Farm, really awesome. So, if you haven't subscribed, theideafarm.com, it's free once a week on Sunday. We got a sad trombone who says I custody at Fidelity.
30:46 We've had people that have just opened with like, "Look, my client wants this. They need this. They're freaking out. We're just going to open account elsewhere. Altruist, whatever, Schwab, Pershing." And we've heard entire RIAs and some of these billion-dollar RIAs that have moved off Fidelity, not just for this reason, for a handful of reasons, including the $100 ETF fee.
31:16 Oh my god, Fidelity, what are you doing? Anyway, hopefully they'll approve it at some point. My guess is they'll try to offer it on their own and ditto with a long-short direct indexing. I think they'll just offer it and block any other providers. National debt question. Yeah, I mean, that's always politicians are always a concern, them doing dumb stuff.
31:40 Would it be great if they spent more efficiently, on and on? Sure. I don't know if that's something I can but what does that have to do with macro? I think all roads to me lead to inflation. And in that world you have to be an owner and own assets. And Americans, if you guys get our new book, if you didn't get our book, go buy the book, by the way, it's awesome.
32:04 All proceeds go into Investopedia charity. But over the years politicians have been dumb forever. And but the US is somewhat unique in that the vast majority of the population is an order of magnitude people that invest more than in other countries, even in Europe. It's US investors are equity owners, which is great, because inflation is a destroyer of wealth.
32:32 If you don't put that money to work. So, yeah, I mean, worried about debt, for sure. I think there's a lot of portfolio ways to be exposed to that. We didn't talk about fixed income today. One of my hills to die on is there's not enough yield in fixed income. Our TYLD ETF as a tactical approach, strategic approach to fixed income.
32:54 We have two fixed income ETFs. One is a value approach and one is a trend. So, the value fund is really only moving into the risky sleeves of bond market when there's enough spread. And the trend obviously does what trend does. So, it'll invest in various sleeves when they're uptrending.
33:10 Both are really cool funds. Both sort of a yin yang exposure to fixed income. And currently not a whole lot of overlap because relative to T-bills, there's just not enough yield in these fixed income markets. I feel like a lone wolf out there talking about this, but it feels like rates could and should go higher, which I think would surprise a lot of people.
33:33 We're winding down questions. You guys are falling asleep, went to lunch. Feel free to throw in a few more before we finish this up. What's the name Cambria? Cambria weirdly predated me when we started this company 20 years ago. I wish there was a better origin story narrative.
33:52 There's kind of two parts to this. Cambria is a little town up the coast. They got great wine if you all have ever been there in a sort of central coast California, beautiful off the beaten path area. Second is that it's an original name of kind of Wales and part of that part of the world, you go back in the olden times.
34:12 And so it was kind of a dual meaning, but nothing that is anything super insightful. I'm going to make something up at some point. It's a really gnarly surf break undiscovered in South America. All right. So, Meb, for core satellite, which Cambria ETFs would you see as core and which is satellite? All right, so we have four asset allocation ETFs that are technically you just buy it and are done.
34:42 And they range from GAA, which is a buy and hold global allocation, and then on the other end you have this trend fund, which is GMOM, which targets a similar universe, but GMOM can be concentrated and it can also be 100% in cash and bonds. Right now, and it's based on momentum and trend. So buy and hold and then trend.
35:06 The trend fund, not surprisingly, if you had to guess what it owns right now, you say, "Okay, what's trending? What's doing really well? Equities, some sectors, a smattering of commodities, and that's what's in the fund, right?" However, if things start to roll over, it'll exit those positions and could be 100% cash and bonds.
35:23 A lot of people are not trend following investors or don't use that allocation. To me, those two come together and form sort of the perfect all-in allocation for me, which is called Trinity, TRTY, which I think is our largest allocation ETF, and it's what I do with most of my money.
35:43 And so that's like a half buy and hold asset allocation, half trend. And then we recently launched the endowment style, which is an aggressive allocation strategy. It's leveraged, so 140% gross. It's targeting like Yale endowment style returns. And will be volatile at some point, that's roughly 70% equities, 30% fixed income, 20% real assets, and 20% alts.
36:13 So awesome portfolio, but it's going to have some juice to it. So as you think about those as core, I mean, for a traditional allocator that like, "Wait, wait, man, I don't want all that stuff. Just actually the shareholder yield or core equity positions." They're like LEGO building blocks.
36:29 I take out my US equities, I put in SYLD or EYLD for emerging equities, right? Those are very simple substitutions. Satellite, there's definitely some stuff we have that's a little further afield. Our global deep value fund is pretty unique. There's not a lot of funds that concentrate that heavily in deep value.
36:50 VAMO is an interesting satellite fund for the nervous nellies that want equity exposure but want to be hedged. That one can hedge up to 100% of the portfolio with futures, so it can go from zero to 25, 50, 75, 100. Currently, it's 50% hedged because the broad market's expensive but going up. So, you can tell I love talking about all these funds.
37:10 We got 20 of them. And some are much more plain vanilla and some like our tail risk fund, hey, you want to bet on the market going down or puking, that's a pretty good choice. It sits in 10-year bonds and then buys a ladder of puts on the stock market. Not surprisingly, it's down this year because US stocks are doing great.
37:27 But if and when we have US stocks do poorly, it's a pretty good solution. But the three biggest things, we've said this so many times that the main mistakes, personally, that I think if you look at a traditional allocation in the US, and this isn't just retail and pro and an institution, A, they put all their money in US only.
37:51 So, it's just in US stocks and bonds, so they don't have any foreign exposure. B, it's market cap weighted, so they don't tilt to value or mid or small, which I think you should, especially right now. They don't own any real assets. And real assets can be commodities, commodity equities, TIPS, which look pretty good now, global REITs.
38:14 Oh, we have global REIT ETF, BLDG, which is I think a five-star fund, is really interesting. Having a great year. REITs are a little bit surprise to me in this year. But they're putting up some pretty great returns. And then lastly is trend following which I'm probably the most afield on from a traditional allocation.
38:32 Oh, we got a question. How do you compare yourselves to DFA and Raffi? I mean, what great comps. I love both those companies. For those listening, Dimensional started by David Booth who we just recorded a podcast with. So, coming up soon. It's a really fun one. We started with a pretty fun story about him buying the original rules basketball for 4 million bucks and who he was negotiating against who he didn't know at the time, but is another podcast guest. They do great work.
39:02 And then Research Affiliates, Rob Arnott, one of my favorite people. He's been on the podcast half a dozen times probably. They're both great. We were talking about this this morning with a group and I said, "There's a whole list here of funds and strategies and ideas I can debate with you.
39:19 I can quibble about, but if you tell me I have this portfolio, I'll be like, "Look, man, that's fine." We're probably first cousins. Those two firms I'd be honored to say we're like first cousins or siblings. There's a whole list of like 80% of the world that is just absolute moronic, horrible, terrible ideas, on and on.
39:39 Really expensive, tax inefficient where if you show me your portfolio of that, I'd be >> [snorts] >> like, I'm trying to be nice, but this is like a hot pile of garbage. DFA and Raffi, fantastic. I think they're gold star shops. How do advisors charge fees post exchange if it's an ETF? Well, presumably most advisors are fee-based listening to this.
40:05 So, doesn't matter what you own. You're a fiduciary. Whether it's an ETF, whether it's stocks or on and on, you charge 50 bips, 100 bips. And it's an ETF just like any other ETF. If you're like a broker that gets kickbacks or loads or everything else. Sorry, that's why the ETF is 25 basis points.
40:29 That's a dying profession that I think is not going to be future-proof in a world of AI and automation. I think you're facing an uphill. But if you're fee-based, it's same as any other holding you would have. And interestingly, for a lot of advisors a lot of times concentrated wealth is held away.
40:50 Meaning, you got a client, they got a 100 million, and they're like, "By the way, I got like 75 million over here in Home Depot stock." You're not charging on that because you can't do anything with it. If you ever can figure out something to do with it one day, let me know. And so it's a huge opportunity to be able to provide a solution that's great.
41:07 And then be able to say, "Hey, actually this is now part of the umbrella." And there's a whole world trillions of those type of people with those type of problems. Again, the amount of research on concentrated stock being a horrible idea is really really long. >> [sighs and gasps] >> Oh, boy, you're talking about dividend growth question.
41:31 Funny bone, we published a paper years ago called the dividend growth myth. When we wrote the shareholder yield book we talked about shareholder yield and why we think it's a better strategy than high dividend yield, dividend growth, on and on because historically, if you modeled it out, shareholder yield beats them all.
41:50 And we even did a paper a couple years ago when Morningstar put out an article called like finding the best dividend funds. And so they did hundreds of funds, examined all of them, and of course they left out shareholder yield. And I was like, "You guys, the subtitle of the book was a better approach to dividend yield.
42:07 The whole point was these hundreds of funds ignore buybacks, which you can't do because buybacks are bigger than dividends and for the last 20 plus years. And so we sent them an email, I'm being a little bit obnoxious. I go, of all the funds in here, every single fund, mutual fund, ETF, these dividend funds they profiled.
42:24 I said, do you know how many when we publish this, how many of these funds shareholder yield outperformed? And the answer was all of them. And so to me this is the whole world has not woken up. I would have thought, if you told me 13 years ago when we launched SYLD, how many shareholder yield funds will you see in the next decade? I was like, 30, 50.
42:48 Like BlackRock, Vanguard, everyone should do one. The hard part for them is they're in sort of a narrative jail where if they've been promoting dividend growth for 30 years, all of a sudden they say, just kidding, let's incorporate buybacks. So it almost needs to be a new product.
43:05 Dividend growth is also largely based on a faulty study. I hate being the Grinch who tells you Santa's not real. If you go read our article called the dividend growth myth, you can see that the chart that every asset manager publishes on dividend growth is based on a faulty study. But if you actually look at it in our book about dividend growth and you screen it, dividend yield is a better strategy and dividend growth is really market like, which is a surprise to a lot of people.
43:35 So sorry to be the Grinch. We got a question on GVAL, what's the strategy? So GVAL is based on another book we wrote, was basically like, hey, let's break the market cap link and instead of investing globally and not doing bottom up, let's do top down and let's pick countries and we'll take the top third, I think, of countries out there based on valuation.
44:01 Maybe it's a quarter. It's changed over time, but there's about 45 countries, so let's call it 12 to 15 countries. And so you end up a basket of this deep value where many of these countries are like high single digit, low double digit CAPE ratios. Remember the US is 42 today. So the bad news is we launched that fund in 2014 and so for the first what 6 years foreign just sucked it up versus the US.
44:27 US just creamed everything. Remember just really amazing period. But once it's a slow strategy, once a year it updates and we publish the valuation metrics every quarter on the Idea Farm. And it's not just CAPE ratio. We use cash flow, we use dividends, we use book and then they usually almost all say the same thing and we'll take an average and say all right, what are the countries that are the cheapest and we're rebalancing once a year.
44:49 Sometimes it doesn't make any trades. If some of these countries usually they get there because they went down 50 or 80% or something. And they change over time, but it's a mix of developed and emerging and but it's still wicked cheap compared to the US. And then we take the top 10 stocks out of the top 30 market cap in each market.
45:12 There's some it pushes you in different places than maybe bottom up because some countries like Czech Republic, they don't have thousands of stocks like Japan does. So it will certainly lead you to a different goal line than necessarily bottom up. All right, we're winding down final 10 minutes.
45:35 Were the waves firing today? No, it was small, but it was nice. Mellow summertime. The water's like 74°, so no wet suits. Anybody wants to go flounder around the surf, let us know. We'll go join you. Better yesterday. Big over the next week. All right, so thoughts on share issuance from [clears throat] companies who have been sole buyers.
46:01 The key by the way, the key takeaway from shareholder yield, much like value, if you're Warren Buffett, you want to buy cheap companies, but it's also you want to avoid the expensive, right? You want to avoid the companies trading a thousand times revenue, whatever. But it's true with buybacks and dividends, too.
46:20 Yes, it's great the company's buying back stock. You're also avoiding the share issuers. Average stock in the US is an issuer. It means you're getting diluted. You don't want that. And so the problem is if you don't look at net, you may see, "Oh, this company announced 5% buyback."
46:34 You're like, "Well, wait, they also give the C-suite 7% a year in shares and stock-based compensation, so it's actually negative buyback yield, meaning share issuance." So you have to look at net. And the problem with all these dividend strategies, the problem with a lot of equity strategies, is they don't look at buybacks. And so you'll be like, "Man, I got a sweet 3% dividend yielder."
46:55 Bragging to your friends on the golf course. And then someone's like, "Well, by the way, that company issues 5% a year in dilution. So you actually have a negative yielding stock." Which is a terrible place to invest. And so part of the shareholder yield methodology walks you down that path. It's not just you're buying the cheap stocks that are trading high quality and doing buybacks.
47:17 It's also you're avoiding the opposite, which has traditionally been a pretty terrible place to invest. Do you have a tool to review portfolios for 351? Yes, we do. It's a great tool. Work with your sales person at Cambria. If you don't have one, just hit us on the email. We can introduce you. They'll hook you up.
47:36 You can throw in your portfolio, see if it qualifies. Again, it's pretty simple. You can do the math in your head. All right. First stock can't be over 25, top five over 50. But maybe you have questions on your small biotech if we want it or not. Chances are we don't, but you can certainly our sales team's been through this five times.
47:56 They're really wonderful at facilitating this whole process to make it as smooth as possible. All right, we're winding down, you guys. There's a question on contributions. I think we already covered that quite a bit. It's basically equities and ETFs. We don't want your leveraged ETFs. We don't want your covered call ETFs.
48:21 We don't want your derivatives or microcaps. What's the relative value of gain? That's up to you. Theoretically, you could contribute a portfolio of 20 stocks that have no gain. Now, I don't really know why you would, but you could. And sometimes people it'll be a patchwork potpourri of some positions that are five-baggers, 10-baggers, 100-baggers, and some that may be up 20% or something.
48:46 Question what about valuations? Questions about like, don't you need to consider differing industry concentrations, different countries? Yeah, sure. That's always the case though. If you look at our new book, Investing in America, wrong side, over here. 100 years ago, 200 years ago, you weren't investing in tech, you're investing in rail and industrials.
49:16 100 years before that, it was banks and insurance companies. That's always changing. And that's part of the dynamic nature. I think it's still company-driven more than anything. The part of the long-term valuation metrics that you're trying to average out some of these influences that may not matter as much over the long time as they would on the short term.
49:42 Because if you're investing for 10, 20 years, you're thinking about the entire country as a market, not just necessarily a couple of stocks. We're happy to be here resources y'all. It was great catching up. If you want to talk about 351s, reach out to our team. If you want to talk about our ETFs, reach out to our team.
50:03 We're here to be a resource. If you got questions that weren't answered, you're too embarrassed, email them over, give us a call, come say hi in Manhattan Beach. Pick up a copy of the new book. We'd love to know what you think. We put a ton of work into this. It's a beautiful coffee table book. All the proceeds go to charity.
50:18 And enjoy the rest of your summer. Get out in the water, enjoy the beach, and come say hi in the real world. Thanks for hanging out y'all, and good investing.