Episode summary
Jim Reid, Deutsche Bank: You’re Probably Not Ready for a 17-Year Flat Stock Market
The Meb Faber Show
· · 59 min · Hosts: Meb Faber · Guests: Jim Reid
Summary
Jim Reid argues that long-term investors should think in real, not nominal, terms: a 10% gain means little if inflation is 15%, and cash can be the riskiest asset over long horizons because its real return has been deeply negative in historical data. He frames the big lesson of his 200-plus-year, 56-country study as simple but uncomfortable: diversified equities have beaten cash and bonds over time, while gold’s long-run record is weak even though it has been strong in the fiat-money era since 1971.
He also says history strongly favors global diversification because wars, inflation shocks, and monetary regime changes can wipe out country-level returns. In his view, the move from gold-backed money to fiat money has made inflation more persistent, which makes him skeptical of long-duration government bonds and more open to higher-yielding non-government credit. He expects nominal GDP to remain supported by policy responses, even if demographics and productivity are weak.
On equities, Reid says valuation is the clearest long-term predictor of returns. Cheap markets tend to outperform expensive ones, and current US valuations, especially in AI-linked stocks, leave him cautious even while he expects the US economy to stay relatively strong in 2026. He thinks the rest of the world, including Europe and the UK, may continue to catch up as investors rebalance away from extreme US concentration.
Key takeaways
- Reid says cash can be the worst long-term holding because its real return has been about minus 2% per year in the historical global data.
- He argues valuation is the most reliable predictor of medium- to long-term equity returns, with cheaper markets outperforming expensive ones across 56 countries.
- Reid says fiat money has made inflation structurally harder to control, which makes him cautious on long-duration government bonds.
- He expects nominal GDP to be propped up by policy over time, but says that same dynamic can also support higher inflation and asset-price volatility.
- Reid thinks global diversification and equal-weighted exposure can reduce concentration risk versus a market-cap-heavy US portfolio.
- He sees AI as potentially transformative but says it is not yet clear who the winners and losers will be, which adds risk at current valuations.
Notable quotes
“the riskiest thing you can do in the in the long term is is keep too much cash really”
“the most important thing in medium to long-term investing is valuation. It's just the only thing that is reliably a predictor for future returns”
“if I assume that that fiat money system is going to stay, I naturally assume there will be financial crises”
“for most of financial history in the last two 300 years, money has been tied to gold”
“the biggest thing that keeps me awake every night as a kind of head of blood economics at Deutsbank is what is the AI story going to do”
How the episode opens
Welcome to the Met Favor Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Met Faber is the co-founder and chief investment officer at Camry Investment Management. Due to industry regulations, he will not discuss any of Camry's funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Camri Investment Management or its affiliates. For more information, visit cambrianvestments.com.
If you've been hearing more about 351 exchanges and still have questions, you're not alone. Eligibility rules, asset requirements, timelines, and tax loss treatment all matter, and understanding them upfront is critical. Alpha Architect has operated over 50 351 exchange launches and they've seen firsthand where advisers need clarity most.
That experience informs the education first approach, including their 351 education center with short videos, visuals, and ondemand resources. On February 3rd, they're hosting a live educational webinar to walk through common FAQs, real world use cases, and lessons learned from prior 351 exchanges, plus a look at upcoming fund launches designed to address complex portfolios. Register using the link in the show notes.
Welcome back, everybody. Happy almost Valentine's Day. Today, we got the author of one of my favorite pieces of all of 2025 on the show.
We're joined by Jim Reed, global head of macro research and thematic strategy at Deutsche Bank. Jim's annual report called the ultimate guide to long-term investing as a must-read for all investors with over 200 years of market data from over 50 countries. Jim, welcome to the show.
Thank you for the invite. Really thrilled to be on.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- real vs nominal returns
- long-term stock market outlook
- inflation and wealth destruction
- valuation and long-term returns
- bond market performance
Companies and tickers mentioned
- Deutsche Bank
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from The Meb Faber Show
-
How to Get Out of a Bubble Without Selling Too Early: Jeff deGraaf Explains -
The AI Narrative Is Hiding a Much Bigger Problem -
Vincent Deluard: Why the Stock Market Is More Fragile Than You Think -
It's a Bubble. So Why Is Citi's Dirk Willer Buying? -
36% of Your Portfolio Just Disappeared In the Last 30 Years (Andrew Ang Explains How) -
The Asset That Could Be the Market’s Biggest Mispricing
The Meb Faber Show, this episode and its artwork belong to The Idea Farm. Octagon is not affiliated with the show; this page is an independent summary.
