JACK OTTER: THE VOLATILE AND
UNPREDICTABLE MARKET HAS
INVESTORS REALIZING THEY CAN’T
RELY ON THEIR TRIED-AND-TRUE
STRATEGIES.
MEB FABER IS HERE WITH HIS TAKE
ON WHERE THE MARKET IS HEADED
NEXT.
THANKS FOR COMING ON THE SHOW.
LET’S START WITH THE NEWS AT
THE END OF THE WEEK.
WHAT’S THE TAKE AWAY FOR
INVESTORS FROM SILICON VALLEY
BANK’S IMPLOSION AND YOU EXPECT
CONTAGION?
>> THE FIRST THING IF YOU ARE A
BANK DEPOSIT OR, DON’T PUT YOUR
EGGS IN ONE BASKET, I DON’T
EXPECT CONTAGION, THE STORY IS
SIMPLE.
IT IS A STORY AS OLD AS TIME
WHICH IS A BANK, YOU CAN
SUBSTITUTE THE WORD HEDGE FUND,
MADE A SPECIFIC BET AND THEIR
BET WAS THEY INVESTED A LOT IN
INVESTMENTS THAT DO POORLY,
DEALS WENT UP.
THAT’S WHAT HAPPENED.
IT IS SIMPLE, THIS HAPPENS TO A
LOT OF INVESTORS.
YOU CAN SUBSTITUTE BONDS FOR
REAL ESTATE OR COMMODITIES OR
STOCKS OR WHATEVER IT MAY BE,
BUT WHEN PEOPLE HAVE AN
INVESTMENT AND DON’T COVER THE
POSSIBLE OR IMPROBABLE RIGHT
TAIL LEFT TAIL EVENTS THEY CAN
GET INTO TROUBLE, NOT JUST A LITTLE TROUBLE BUT CATASTROPHIC
LITTLE TROUBLE BUT CATASTROPHIC
TROUBLE.
JACK OTTER: YOU ACCURATELY
PREDICTED THE MARKET HAD
FARTHER TO FALL.
WHAT YOUR CRYSTAL BALL TELL YOU
NOW?
>> BAD NEWS FIRST AND THEN THE
GOOD NEWS.
GOOD NEWS, STOCKS ARE STILL
EXPENSIVE.
THIS IS BROUGHT MARKET, S&P
STYLE, WE LIKE TO DO THE 10 YEAR RATIO AROUND 30.
YEAR RATIO AROUND 30.
NOT AS HIGH AS IT WAS.
OVER TIME THE AVERAGE IS 18 TO
22.
WE ARE STILL HIGH.
THE PROBLEM COMES IF INFLATION
HANGS AROUND THE AVERAGE IS 18
TO 22, IT IS ABOUT 12.
12 IS A LONG WAY FROM 30.
THAT’S THE BAD NEWS.
THE BROAD US MARKET, THE GOOD
NEWS, IT IS ONE OF THE BEST
TIMES IN HISTORY TO INVEST IN
VALUE STOCKS.
IF YOU LOOK AT THE SPREAD, WE
LIKE TO USE THE WORDS
SHAREHOLDER AND YIELD, THEY PAY
OUT DIVIDENDS AND BUYBACKS AND
HAVE A LOT OF CASH FLOWS, THESE
ARE THE BIGGEST THREADS WE HAVE
EVER SEEN IN THE UNITED STATES
AND THE BIGGEST THREADS IN
FOREIGN DEVELOPED OR EMERGING
TOO.
TWO SIDES OF THE SAME COIN.
IT IS PROBLEMATIC AND LOTS OF
PLACES YOU THINK YOU CAN HIDE
OUT.
JACK OTTER: STARTING WITH
VALUE, WHAT CHANGE MAKES YOU
THINK THIS IS THE BIG SWITCH
WE’VE BEEN LOOKING FOR?
>> I THINK THE REGIME SHIFT IN
2,020 WHICH IS THE INTEREST
RATE BOTTOM AS WELL AS
INFLATION BOTTOM, WASN’T LONG
AGO, AFTER SOVEREIGNS IN THE
WORLD HAD NEGATIVE YEARS,
INTEREST RATES HAVE BEEN
RUNNING UP AND WE ALSO HAD A
SECOND INFLECTION POINT, THE
END OF LAST YEAR WHICH IS PEAK
IN THE US DOLLAR, 20% OVER
VALUE VERSUS CURRENCIES SO THIS
DOUBLE TAILWIND.
IF IT’S A TRIPLE TAILWIND,
EXPECT INFLATION TO CONTINUE.
ALL THESE THINGS HAPPENING AT
THE SAME TIME.
SHOULD BE WONDERFUL FOR VALUE
STOCKS, ALSO MY FAVORITE, EMERGING MARKETS, DEEP VALUE AS
EMERGING MARKETS, DEEP VALUE AS
WELL.
JACK OTTER: YOU HAVE THE
FOLLOWING DOLLAR, AND STOCK
MARKET PERFORMANCE.
THEY ARE DESTINED TO DO WELL. >> YOU SEPARATE THE BUSINESS
>> YOU SEPARATE THE BUSINESS
FROM THE STOCK, CISCO AND 99.
THE STOCK WENT NOWHERE.
IF YOU LOOK AT THESE FOREIGN
COUNTRY STOCK MARKETS, AND MANY
OF THEM HAVE GONE NOWHERE AND
EVEN KNOW WHERE THEY’VE GONE
DOWN.
YOU TALK ABOUT HIGH SINGLE
DIGIT DIVIDEND YIELDS ON TOP OF THAT, ALL THESE ARE WONDERFUL
THAT, ALL THESE ARE WONDERFUL
SIGNS.
AND AND FOREIGN STOCKS VERSUS
US STOCKS, WHICH ONE
OUTPERFORMS ANY GIVEN YEAR.
WE FINISHED ONE OF THE LONGEST
PERIODS, STOCK DOMINANCE.
ALMOST HALF THE WORLD IS ABOUT
LABOR SHORTAGES. >> MOST INVESTORS ARE
>> MOST INVESTORS ARE