A Romping, Stomping Optimist: Five Lessons from Meb Faber
What 250 years of American markets taught the author of Investing in America
Meb Faber published his eighth book on a Saturday, in the summer, on a holiday nonetheless. But he knew exactly what he was doing. “I don’t think anyone in history has ever published a book on a Saturday, in the summer, on a holiday. It’s like a triple witching of things not to do when publishing a book, and I don’t care. I’m doing it.” The holiday was July 4th, America’s 250th birthday, and the book is Investing in America: The Rise of a 250 Year Bull Market, a self-published coffee table book with no author photo because he forgot to put one in. When Meb, co-founder and CIO of Cambria Investment Management, joined us to walk through it, we got a decade-by-decade tour of the most successful stock market in history from a man who calls himself “a romping, stomping optimist” and can also cite every crash, closed exchange, and lost decade in the record. The conversation ran from joint stock companies in 1606 to a hypothetical pint in a postwar British pub, with the optimism getting more convincing the darker the history got.
Lesson 1: America Was a Venture Bet Before It Was a Country
Meb opened with something he said he hadn’t shared widely. There are actually two coffee table books. The first one he wrote was a history of global stock markets dating back to the 1600s, since the economic party started in Amsterdam before the United States existed. The research meant skimming somewhere between 30 and 70 financial history books he had never heard of, and all the digging yielded a conclusion that added layers of complexity to the founding story we all learned in elementary school. Immigrants fleeing religious persecution in search of freedom and a better life? All true, but if we know anything about incentives and money, many of those voyages were funded by joint stock companies. The Virginia Company, chartered in 1606, backed Jamestown. Plymouth Colony and the Mayflower were similarly financed. Even the Puritans, who everyone assumes would never do such a thing, arrived under the Massachusetts Bay Colony, and the Dutch and the Swedes ran their own ventures in New Netherlands and New Sweden.
The backers of these voyages were called merchant adventurers, which, Meb pointed out, sounds a lot like venture capitalists. The economics were pure venture economics too.
Talk about the most risky portfolio diversification idea. You finance a ship to go get a bunch of gold in the New World. That sucker sinks, some pirates take it over. You lose all your money. That’s a big zero.
Since almost nobody could finance ten ships alone, investors pooled capital into joint stock companies that could, and spread their bets. Jamestown even found product-market fit; there was no gold, but tobacco grew nicely. The country Americans own stock in today began as something its financiers would recognize instantly, a portfolio.
Lesson 2: US Dominance Was Not Preordained
We brought up one of the book’s wilder charts, made by Bryan Taylor. A dollar invested in US stocks in 1800 grows to over $4 million, against $51,000 for the rest of the world. Asked what drove that gap, more risk-taking or more ownership, Meb gave a two-word first answer: “Hindsight bias.”
Then came the serious version of the joke. Even at the start of the 20th century, he argued, “I don’t think it was preordained that this is guaranteed to happen.” If you were placing hundred-year bets on countries back then, a dozen choices might have looked interesting, and the US didn’t even hold the crown the whole way through. Japan had the largest stock market in the world in the 1980s; tell an investor in Tokyo that it would shrink to 5% of world market cap within decades and they would have called you crazy. Or find a pub in postwar Britain and explain that the Korean War just ended, the country is getting chopped in half, and the bottom half will have a bigger stock market than the UK’s in 50 years. They would have told you that you’d lost your mind, and both of those things happened anyway. China and Russia went further, at some point simply closing their stock markets and taking every position to zero. One of Meb’s favorite books, Triumph of the Optimists, follows every individual country back to 1900, and plenty of them never made it.
Big takeaway, don’t lose world wars.
Austria, he noted, had pretty tough returns. He still calls the US the best country in the world, and it leads on the measures he rattled off, Nobel laureates, R&D spend, venture funding, energy production, and he’d bet on it again. A guarantee is a different thing, and the first 250 years never came with one either.
Lesson 3: The Long Term Is Decades, and Almost Nobody Acts Like It
Every chapter of the book dives into one chaotic decade, then pulls back to the full logarithmic chart, where even the Great Depression shrinks to a blip you can barely find. A dollar in US stocks in 1800 is $200 million on that chart, and Meb knows the number annoys people. Critics on social media protest that nobody in 1800 could buy an index fund, and he doesn’t fight the objection, since the chart is meant to be conceptual, a visualization of an idea Ben Franklin already understood. “Money makes money, and the money that makes money makes money.” He could have used $100 growing to $20 billion instead, he said, but people would only get angrier.
Then there’s the 20-year mark. On rolling 20-year windows, after inflation, the best case for stocks beats the best case for bonds and the worst case beats the worst case, and stocks have been less volatile than bonds at that horizon. That’s crazy to think about, Meb granted, and on average it’s true.
The catch is that almost nobody operates on that clock. People say they invest for the long term, then make decisions off the news, the Fed, the election, or perhaps whatever gold is doing at the moment. The confusion runs deeper than headlines. Cambria ran paid surveys of thousands of individuals and found 70 percent believe dividends are free coupon payments rather than money that must be reinvested for any of the compounding math to work. Meb’s advice to young investors came out sounding like a warning label.
Long term, youngins, is not hours, weeks, months. It’s years and decades.
Lesson 4: If You’re Going to Be an Investor, Get Used to Being a Loser
We read one of the book’s lines back to Meb: if you’re going to be an investor, get used to being a loser. The logic behind it starts with a piece of arithmetic most investors never internalize.
Any investment, stocks, bonds, is either at an all-time high or it’s in a drawdown. There’s only two states that exist.
Investments spend somewhere between two-thirds and three-quarters of their lives in the second state, and the pain scales badly. Meb compared losses to the Richter scale, where every 10 percent past 20 percent lands ten times as hard rather than ten points worse. Most people can handle a 20 percent decline, but when it reaches 30, 40, or 50 percent, the flight response takes over. Individual stocks are crueler as well. Hank Bessembinder’s research, featured in the book, finds that roughly two-thirds of stocks underperform an index over their lifetimes and about a quarter essentially go to zero.
The regrets worth planning around are the ones that survive to the end. Nobody on their deathbed, Meb argued, wishes they had earned 9 percent instead of 8. The regret that lasts is the 8 percent that became zero because you panicked in 2009, sold everything, and never got back in, which he called “a terminal outcome for a lot of people.” Everything he recommends as guardrails, from financial advisors to rules set in advance, exists to prevent that one specific ending. The losses along the way are tuition, part of the cost of doing business. The tuition is only wasted if you drop out.
Lesson 5: There Is No Magic Asset, So Own a Bunch of Them
We pointed to a chart in the book that reliably breaks brains. Since 2000, both gold and REITs have outperformed US stocks. Ask people on the street which of the three won this century, Meb said, and 90 percent, maybe 95 percent get it wrong. “You’ll get your odd Canadian that’ll say, ‘Nope, it’s gold.’”
Cambria once tested the reverse premise in a paper called “What If You Invested In No US Stocks,” a thought experiment that sounds like portfolio suicide. Hold foreign stocks, REITs, gold, and bonds instead, and it turns out “you do just fine.” Leuthold used to call this the donut portfolio, where you pull any single asset out of the middle and the whole thing still works. Meb’s earlier book Global Asset Allocation compared the famous portfolio recipes, 60/40, endowment, risk parity, and found the spread between the best and worst in any given year ran about 20 percentage points, while over the full period they finished within a percent or two of each other, so long as they held the main ingredients of global stocks, global bonds, and global real assets.
His favorite recipe might be the oldest one in the book, a riff on 2,000-year-old advice he calls the Talmud portfolio.
Let every man invest a third in land, a third in business, and keep a third in reserve.
Translate that into stocks, real assets, and bonds and cash, and Meb thinks it would beat the vast majority of institutions over time. The zigs and zags keep an investor solvent, and sane, long enough for the drawdowns to stop mattering.
The Bottom Line: Optimism as a Discipline
Meb told us there is no disconnect in his mind, and he can keep a straight face, between being super optimistic on the long-term prospects of the US economy and stock market and being “hella bearish” on how expensive the market-cap-weighted index looks. The confidence and the caution come from the same 250 years of evidence, which may be why the book’s profits are going to Invest America, the charity behind the new seeded investment accounts for kids. The money matters less to Meb than the muscle. A kid who owns shares stops grumbling about the AI data centers in the backyard and starts thinking, in his words, “Hey, I’m a shareholder in that.” The book closes on a line J.P. Morgan delivered in 1895, before a century that would include the Great Depression and two world wars.
The man who is a bear on the future of the United States will always go broke.
Morgan was betting on the muscle too.
Buy Meb’s book here:
Watch the full episode here: