Episode summary
Every Bear Went Broke | Meb Faber on Why America Won for 250 Years — And If It Can Last
Excess Returns
· · 1 hr 2 min · Guests: Meb Faber
Summary
Meb Faber argues that the United States has been an extraordinary long-term compounding machine, but not because its success was inevitable. He traces American market history back to joint-stock ventures, early colonial financing, and the rise of an ownership culture that made risk-taking and reinvestment central to the economy. His larger point is that stocks reward patience: over very long horizons, equity compounding overwhelms cash and bonds, even though the ride is volatile.
He emphasizes that the long record of U.S. outperformance should not be confused with a guarantee about the future. Faber says the broad U.S. market is expensive today, with a very low dividend yield and elevated valuations, while other assets and non-market-cap-weighted U.S. stocks look more attractive. He argues that bear markets are a normal feature of capitalism, not a reason to abandon equities, and that investors should expect large drawdowns as the price of long-run growth.
The episode also stresses diversification across global stocks, bonds, and real assets. Faber says no single asset class wins forever, notes that gold and REITs have outperformed U.S. stocks since 2000, and argues that starting early matters enormously. He is optimistic about America’s future, but only if investors stay diversified and avoid assuming the recent winners will always stay on top.
Key takeaways
- Faber says the U.S. became a market superpower through ownership culture, joint-stock financing, and risk-taking rather than by historical destiny.
- He argues stocks beat bonds over very long horizons, and claims that around 20 years the stock/bond tradeoff tilts decisively toward equities.
- Faber says the broad U.S. market is expensive now, with an all-time-low dividend yield, even while he remains bullish on America long term.
- He argues bear markets are a normal part of capitalism and can be healthy because they wash out speculative excess.
- Faber says diversified portfolios across global stocks, bonds, and real assets can stay competitive even when U.S. stocks lag.
- He believes early investing and compounding matter more than trying to time exact entry points, especially for young investors.
Notable quotes
“The man who is a bear on the future of the United States will always go broke”
“Stocks are the less volatile that bonds at the 20-year time horizon, which is crazy to think about, right? But on average, it's true”
“I am super optimistic on the long-term prospects of the US economy and stock market and I am hella bearish on how expensive the S&P 500 market cap weight is”
“the path matters and particularly the losses when you're going through volatile periods”
“I think it's a feature, not a bug, right”
How the episode opens
The reality is you got to remember like even at the start of the 20th century you look at where the US was. I don't think it was pre-ordained that this is guaranteed to happen. If you look at any of the surveys are Americans is it a good idea to start a company it's like 90%.
Rest of the world it's like 10%. Uh what percentage of Americans own stock and how much do they put in stock? just order of magnitude greater than if you go talk to people in Europe.
In addition to not having air conditioning, they generally don't invest in stocks. Stocks are the less volatile that bonds at the 20-year time horizon, which is crazy to think about, right? But on average, it's true.
There's a great quote that we end the book on from old JP Morgan, uh, and he said, "The man who is a bear on the future of the United States will always go broke. You're watching Excess Returns, the channel that makes complex investing ideas simple enough to actually use, where better questions lead to better decisions. I'm Matt Ziggler.
Justin Carbono is with me, and we have an old friend of the show with a new book, Investing in America, co-founder and CIO at Cambria Investment Management, Meb Faber. Welcome back.
What's up, y'all? Good to be back. So this book, let's be honest, you're answering the age-old question that I've long wondered, which is were Washington and Franklin really just Andre and Horowits of America, a Toz?
It's a beautiful thing. You you happy with this book? You happy with how this came out?
You know, I learned a lot. This is book number eight, and uh I haven't written one in a decade. I had a child, so that's part of it.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- us market dominance
- long-term stock returns
- valuation and dividend yield
- bear markets and volatility
- diversification across asset classes
Companies and tickers mentioned
- Cambria Investment Management
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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