The 40 CAPE Conundrum | Meb Faber on What High Valuations Mean for Markets

In this episode of Excess Returns, Meb Faber joins the show to discuss valuations, diversification, trend following, value investing, and the evolution of markets and investor behavior over the past two decades. Meb shares insights from his upcoming book, lessons from 400 years of market history, and how investors can position themselves for the next decade. The conversation covers everything from international investing and concentration risk to ETFs, managed futures, AI, and long-term discipline. Topics covered: The four historical periods of 15%+ annualized stock market returns and what followed Why current U.S. valuations don’t necessarily mean an immediate crash How global value stocks are now outperforming the S&P 500 The role of international diversification and real assets in portfolios Trend following and managed futures as the “premier diversifiers” The benefits of blending trend and valuation-based strategies The permanent portfolio and how managed futures enhance it Concentration risk in U.S. equities and what history teaches about market leadership The parallels (and limits) between today’s market and the dot-com bubble AI’s potential role in investing and portfolio management The behavioral traps around performance chasing and when to sell Lessons from launching and running ETFs and the 351 exchange structure for tax efficiency The future of markets, retail investors, and Meb’s upcoming book “Time Billionaires” Timestamps: 00:00 Intro and market performance context 04:00 Are U.S. valuations permanently higher? 09:00 The spectrum of future returns and investor playbook 12:00 International and value investing opportunities 15:00 Trend following and managed futures 19:00 The permanent portfolio and diversification 25:00 Concentration risk and market structure 28:00 AI’s impact on investing 32:00 Comparing today’s market to the dot-com bubble 37:00 The long-term case for value investing 41:00 When to sell and investor behavior 45:00 Lessons from running ETFs and industry evolution 51:00 Understanding 351 exchanges and tax-efficient investing 57:00 What’s changed most for investors over 20 years 59:00 Meb’s new book “Time Billionaires” and closing thoughts