Meb Faber

Meb states that Trend Following (Managed Futures) solves portfolio problems by capturing "right tail" events (like the massive move in commodities) while chopping off the "left tail" (drawdowns in stocks). He mentions these strategies are up double digits year-to-date (Jan 2026). In a world where stocks are expensive and commodities are volatile/trending, traditional 60/40 portfolios fail. Managed Futures automatically adapt to go long commodities and short bonds/stocks if trends dictate, acting as a necessary diversifier. Long Managed Futures strategies to hedge against US equity valuation compression. Whipsaw markets (trendless volatility) where the strategy bleeds slowly.

Meb confirms Gold, Silver, and Copper are hitting all-time highs (Silver broke $120). He notes that trend followers are "chock full" of these assets and that "normal" investors have zero exposure (under-owned). This is a classic Trend Following setup. The assets are breaking out to new highs, institutional ownership is low, and the "fear of missing out" (FOMO) phase hasn't fully hit the retail public yet. The breakout signals a continuation of the trend. Long Precious Metals and Industrial Metals via liquid ETFs. A sharp reversal in inflation expectations or a liquidity crunch causing a sell-everything moment.

Meb confirms Gold, Silver, and Copper are hitting all-time highs (Silver broke $120). He notes that trend followers are "chock full" of these assets and that "normal" investors have zero exposure (under-owned). This is a classic Trend Following setup. The assets are breaking out to new highs, institutional ownership is low, and the "fear of missing out" (FOMO) phase hasn't fully hit the retail public yet. The breakout signals a continuation of the trend. Long Precious Metals and Industrial Metals via liquid ETFs. A sharp reversal in inflation expectations or a liquidity crunch causing a sell-everything moment.

Speaker states foreign and emerging markets had a "monster year" (e.g., +30%), and you could see an "extended move in foreign equities over the next few years." This is due to a combination of relative undervaluation, recent outperformance, positive momentum, and most investors being structurally under-allocated to non-US markets after a long cycle of US dominance. LONG because the shift away from US concentration and toward global diversification is believed to be in its early stages and could persist for years. A resurgence of US market strength and dollar momentum could halt or reverse the relative outperformance.

The biggest Achilles heel of market cap weighting is people are kind of stuck in these positions and they get bigger and bigger. Theoretically, if you could sell out of them, recycle into for example small caps, smaller companies, that theoretically makes the ecosystem a little bit stronger. The current tax code creates a dead weight loss that traps capital in massive, appreciated mega-cap stocks because investors refuse to pay the capital gains tax to sell. As the financial industry scales tax-efficient diversification tools, this trapped capital will finally be unlocked and recycled down the market cap spectrum into under-owned, smaller companies. LONG. The proliferation of tax-efficient exchange funds and ETF conversions will systematically funnel capital out of the top-heavy indices and into broader, smaller-capitalization equities. The IRS cracks down heavily on Section 351 and 721 exchanges, keeping capital permanently trapped in mega-cap tech stocks due to the friction of capital gains taxes, or small caps continue to suffer from higher relative interest rates.

"For the category, which is Morningstar Midcap Value, [the P/E was] 17.86." While the speaker is pitching a specific active fund (SYLD), he explicitly benchmarks it against the Midcap Value category. He notes this entire category is trading at a massive discount to the S&P 500 (17.86x vs 27.61x). Investors who prefer passive exposure over active management can still capture this thematic "value spread" by buying the index tracking the Midcap Value sector. Long Midcap Value as a sector rotation play away from expensive large caps. Economic recession could hurt mid-cap companies more than diversified large caps.

"For the category, which is Morningstar Midcap Value, [the P/E was] 17.86." While the speaker is pitching a specific active fund (SYLD), he explicitly benchmarks it against the Midcap Value category. He notes this entire category is trading at a massive discount to the S&P 500 (17.86x vs 27.61x). Investors who prefer passive exposure over active management can still capture this thematic "value spread" by buying the index tracking the Midcap Value sector. Long Midcap Value as a sector rotation play away from expensive large caps. Economic recession could hurt mid-cap companies more than diversified large caps.

"For the category, which is Morningstar Midcap Value, [the P/E was] 17.86." While the speaker is pitching a specific active fund (SYLD), he explicitly benchmarks it against the Midcap Value category. He notes this entire category is trading at a massive discount to the S&P 500 (17.86x vs 27.61x). Investors who prefer passive exposure over active management can still capture this thematic "value spread" by buying the index tracking the Midcap Value sector. Long Midcap Value as a sector rotation play away from expensive large caps. Economic recession could hurt mid-cap companies more than diversified large caps.

"SYLD... has struggled recently, placing it in the bottom 11% versus its category in 2025... P/E for SYLD was 12.52... S&P a whopping 27.61." The fund has underperformed for two consecutive years (2024-2025), creating negative sentiment and outflows. However, the underlying holdings are trading at less than half the valuation of the broad market (12.5x vs 27.6x). Historically, buying quality strategies during periods of peak pessimism and low valuation leads to significant mean reversion and outperformance. Long positions are warranted to capture the valuation gap as the "rough patch" normalizes. The "value trap" dynamic could persist longer than expected; the strategy is actively managed and may deviate significantly from benchmarks.

Meb points out that European banks have quietly outperformed the "Mag 7" and the S&P 500 over the last 1, 3, and 5 years. This performance divergence signals a regime shift from growth/tech to value/financials that the broader market has largely ignored. The trend is established but sentiment remains bearish/neutral, offering a "wall of worry" to climb. Long European Financials to chase established momentum in a neglected sector. A European recession or ECB policy error cutting rates too aggressively, hurting bank net interest margins.

Faber notes that while the US is trading at a "nosebleed" 40x P/E (implying near-zero real returns for the next decade), Foreign Developed markets are in the low 20s, and Deep Value/Emerging markets are in the low teens. This valuation spread is as wide as it was in the 1980s (Japan vs. World). The mean reversion trade has already started (2025 was a monster year for ex-US), and momentum is favoring the cheapest global assets over the expensive US market cap leaders. Long Global Value and International Shareholder Yield to capture the continued rotation out of the US. A "melt-up" continuation in US tech/growth that defies historical valuation gravity.

Faber notes that while the US is trading at a "nosebleed" 40x P/E (implying near-zero real returns for the next decade), Foreign Developed markets are in the low 20s, and Deep Value/Emerging markets are in the low teens. This valuation spread is as wide as it was in the 1980s (Japan vs. World). The mean reversion trade has already started (2025 was a monster year for ex-US), and momentum is favoring the cheapest global assets over the expensive US market cap leaders. Long Global Value and International Shareholder Yield to capture the continued rotation out of the US. A "melt-up" continuation in US tech/growth that defies historical valuation gravity.

In this 2026 scenario, Faber highlights that Gold is over $5,000 and Silver is over $100. He notes that Costco and Walmart selling gold bars was a sentiment signal that retail demand is structural. Despite US stocks being at highs, Gold has outperformed stocks for the century. The "Real Asset" bucket is historically under-owned by US investors. The trend is explicitly higher in precious metals and miners. Long Precious Metals and Miners (via ETFs or Trend strategies) to participate in the ongoing commodity breakout. A deflationary bust or a sharp strengthening of the US Dollar that suppresses commodity prices.

Faber states that Trend Following is having a "face ripper" year in 2026 after a difficult prior period. His trend fund is heavily allocated to ex-US stocks, value companies, and precious metals. Most investors lack exposure to "Real Assets" (Gold/Commodities) and "Deep Value." Trend following strategies automatically rotate into these winning sectors without the emotional bias of the investor, capturing the "Right Tail" of the distribution (e.g., the move in Gold to $5k). Long Trend/Momentum strategies as a vehicle to access the performing asset classes (Commodities/Foreign) that traditional 60/40 portfolios miss. A sharp, choppy market reversal (whipsaw) where trends fail to sustain, causing the strategy to get stopped out repeatedly.

Faber notes that while the US is trading at a "nosebleed" 40x P/E (implying near-zero real returns for the next decade), Foreign Developed markets are in the low 20s, and Deep Value/Emerging markets are in the low teens. This valuation spread is as wide as it was in the 1980s (Japan vs. World). The mean reversion trade has already started (2025 was a monster year for ex-US), and momentum is favoring the cheapest global assets over the expensive US market cap leaders. Long Global Value and International Shareholder Yield to capture the continued rotation out of the US. A "melt-up" continuation in US tech/growth that defies historical valuation gravity.