Episode #57: Radio Show: Meb’s 17 Different Million-Dollar Fintech Ideas
Guest: Episode #57 has no guest, but is co-hosted by Jeff Remsburg.
Date Recorded: 6/7/17 | Run-Time: 1:32:48
Summary: In this episode, Meb discusses his 17 different “million-dollar” fintech ideas. In essence, Meb has had various business ideas over the years which he’s wanted to pursue, but hasn’t had the time. Some he’s tweeted about, some he’s blogged about, others he’s kept to himself. But in Episode 57, he’ll run through all 17, diving into more detail.
Can a listener take one and run with it? Sure. Let us know how it works out! Or work on it with us. We’re open to ideas.
Either way, here are the 17 concepts:
- Our new “podcast compilation” idea
- Liquid alts newsletter
- Quant backtester
- Tax harvesting
- Best ideas newsletter
- Research boutique for crowdfunding companies
- Syndicate podcast/newsletter
- Ruykeyser reborn
- The Street 2.0
- Tactical roboadvisor
- Free Acorns/Stash clone
- Free ETF trading brokerage
- FreeShares ETFs
- Quant cookbook
- The “Forever” fund
Are all of these ideas good? (We have our doubts…)
- Lyft – Request a ride and you’ll be on your way in minutes. Request. Ride. Repeat.
- YCharts – The modern financial data research platform.
- Freshbooks – Small business accounting software that makes billing painless.
Comments or suggestions? Email us Feedback@TheMebFaberShow.com or call us to leave a voicemail at 323 834 9159
Interested in sponsoring an episode? Email Jeff at firstname.lastname@example.org
Links from the Episode:
- 3:48 – Million Dollar Fintech Ideas
- 4:00 – 6 Million Dollar Fintech Opportunities
- 9:55 – How To Get A Hedge Fund Job
- 11:20 – “160,000 to get an MBA…”
- 12:20 – The Idea Farm
- 21:14 – Public Liquid Alts Newsletter
- 23:44 – Daily Alts
- 23:50 – Morningstar ETF
- 24:54 – Tax Harvesting
- 26:08 – Fee X
- 28:14 – Investment newsletter focused on Best Ideas
- 29:24 – Manual of Ideas
- 29:34 – Private Investment Brief
- 30:11 – “Our buddy Wes Gray started a website – Active share”
- 31:11 – RealVision
- 31:20 – Just One Trade
- 32:00 – The Wealthy Barber
- 35:27 – Quant Backtester
- 36:10 – “A Quantitative Approach to Tactical Asset Allocation” – Faber
- 38:20 – Marketocracy
- Investment research boutique focused on private crowdfunded companies
- 40:37 – Investment research boutique focused on private crowdfunded companies
- Lots of conferences
- 44:51 – Early Investing
- 47:34 – Clarity Money
- 50:17 – Rukeyser Reborn
- Ritholtz Masters in Business
- Frank Curzio
- Epsilon Theory – Ben Hunt
- Michael Covel’s Trend Following
- The James Altucher Show
- Wharton Business Radio – Jeremy Schwartz and Co
- The Investors Podcast – Preston and Stig
- Invest Like the Best – Patrick O’Shaughnessy
- RealVision TV – Raoul Pal
- Macro Voices – Erik Townsend
- The Meb Faber Show
- 52:13 – com 2.0
- 54:39 – Seeking Alpha
- 59:18 – HedgeFundLetters
- 1:01:27 – NewsLetterSampler
- 1:03:58 – Daily Dirtnap
- 1:04:40 – Tactical Roboadvisor
1:16:00 – Free Acorns / Stash clone
1:17:23 – “One of the articles is called Millennials that can’t do math”
1:18:33 – Free ETF Brokerage
1:20:12 – Freeshares
1:24:31 – Quant Cookbook
1:27:24 – Forever Fund
Transcript of Episode 57:
Welcome Message: Welcome to the Meb Faber 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.
Disclaimer: Meb Faber the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions, and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Sponsor: Today’s podcast is sponsored by the ridesharing app Lyft. Well, I only live about two miles from work, my favorite means of getting around traffic clog Los Angeles is to use the various ridesharing apps, and Lyft is my favorite. Today, if you go to lyft.com/invite/meb, you get a free $50 credit to your first rides. Again, that’s lyft.com/invite/meb.
Meb: Welcome podcast listeners. Today we have a really fun episode. We’re calling this $17 million Fintech ideas. After a long string of interviews, we’ve got Jeff back in the studio. Welcome Jeff.
Jeff: Hey, what’s happening?
Meb: This is gonna be a lot of fun today. We’re gonna go back and forth and talk about a lot of my terrible ideas, many of which we published in the past, we’ll be updating them. But a lot of new ideas, too. So hopefully, if you listen to this and starting a new business, give us a 10% cut one day. What do you know? You just wanna jump right in? We’re gonna talk about it and then get started?
Jeff: No, no. I mean, let’s add a little context before we jump right in. First of all, give us a baby update. How is Tony Huge?
Meb: Super easy. It’s been great.
Jeff: Wait. But by the way, do you wanna explain the etymology of Tony Huge for his listeners?
Meb: His name is Anton Hugo, which he didn’t have for the first day, five days of his life. I was holding out for, of course, Meb or Mebane, and then Gunner.
Jeff: It should be Mebson.
Meb: Yeah, but we have a pretty funny piece of paper from the hospital that has about a dozen names crossed out, circled. Jackie didn’t approve of any of them really, so eventually we settled on it .Love it, looks just like it. But we had some other names. But once he came out, he kind of was like, “He doesn’t look like that.” But Gunner, Gunner was sad. It was sad when I had to cross off. Maybe next child.
Jeff: I’m curious of having a kid has changed your perspective on anything life, money, work-life balance. You hear about new fathers who suddenly [crosstalk]…
Meb: I drink a lot more whiskey. I’m just kidding. No, it’s been great. No, it’s been great. I have seven nieces and nephews, so I’ve seen this kind of story play out before, but it’s been great.
Jeff: All right. Well, anything else on your end?
Meb: The first night however, I was like why did I do this? This is the worst night of my life. What did I just do? After that, it’s been fun.
Jeff: Just one night?
Meb: That’s only for the first night, it was so bad. Changed like 10 diapers, it was like black and yellow. Every father and mother can sympathize, but yeah, it was first time stuff.
Jeff: You’ve only I struggled with the one night, I think you’re way ahead of the game compared to most parents there.
Meb: Knock on wood. Let me knock on wood there.
Jeff: Yeah. All right. Well, why don’t we jump in? But give us a little bit more background here on what we’re doing today. So it’s gonna be, is it 17 or 16 [crosstalk]…
Jeff: You sure?
Meb: So, we named that more so we can get up to 20. Over the past five years, maybe even longer, we had opined on a lot of Fintech space. And we did a series of posts called “Million Dollar Fintech Ideas,” and a lot of these were, I mean, we could call them terrible and Fintech ideas. So you may think these are awful. We just thought they were great. And we then updated it and said, “Hey. Here are some that have been done. Here are some that haven’t been done.” And so, we’ll kind of go through the list of all the ones we mentioned before, and then add a whole bunch of new ones.
I just think it would be lot of fun because it sparks a lot of curiosity and brainstorming, and maybe people listening to this say, “I would love to run with that,” or maybe will say, “This is terrible.” So, we’ll see.
Jeff: All right so you’re just giving these away for free. If anybody has the interest [crosstalk].
Meb: Well, I mean, and so, the general theme of almost all of these, is I wish someone was doing this, I would probably pay for this. I either don’t have time or don’t have the expertise or the interest in doing a lot of these, but it’s something I would pay for. That’s usually the genesis of me looking around saying, “Man I wish I had this resource. I don’t. I wish someone would do it.”
Jeff: If somebody was interested in working on this but they wanted to be partnering with you, would you be willing to sort of have a partnership if they did the heavy lifting?
Meb: Of course, email Jeff. I would love email@example.com or feedback in the Meb Faber Show.
Jeff: You’ve got enough on my plate right now.
Meb: No, we would love to. That’s a great idea.
Jeff: All right. All right. Well, I’ll quickly backtrack on that idea.
Meb: Yeah, I mean, some of these, many of these would even fun. I mean, depending if it’s the right people. But it all comes down to the people, and this is probably a good starting point where the biggest challenge with people looking for jobs or starting companies but also with their career in general, it comes back and think about how they spend their time and how they approach things. We get resumes every day, right. I get one every single day. And the way that people go about getting a job, 99% of time is a 180 degrees the wrong way. Let me explain this because I think it’s important, and I was guilty of this for the vast majority of my 20s, vast majority of my life. And here’s the way that most people go about getting a job, and I actually printed this out.
This is an actual email. I will make this anonymous to protect the innocent. But here’s the email I get. Subject line, research analyst/consultant. Dear Mebane, I’m contacting you to see whether you would be interested in my profile. I’m looking for a reliable person to take my career to the next level, and from whom I can learn. Then it goes on from there for 10 more paragraphs. Okay. This is the exact wrong way to get a job. And I think most people would know that. They should let well these maybe I’ll personalize or whatever, but the way that most people go about getting a job, and this applies also to people at midcareer, we’ll talk about that in a second, is they’re making a lot of asks.
Okay. So let’s look at this email. First ask. They’re asking me and or our team to read the email. Okay. So take time out of your day and read this email. Two, they’re then asking, “So are you interested in my profile?” Two, they’re asking you to take time to read their resume. Third, then they’re asking time set up a call. So that’s another half an hour, hour than having the call. And then they ask is, “I want you to take my career to a new level and I want to learn from you.” So that’s six different asks, right? None of which remotely is that person offering anything of value whatsoever. So this one usually goes into the trash can immediately. Okay?
And that’s the problem with 99% of the way that people apply for jobs, is they think they’re Miss Brazil and Miss Universe contests, where they’re like “Hey. You need to pick me.” And that’s why no one almost ever gets responses or jobs. I mean the way …and you may not remember this, but the way that a lot of people…the correct way to do it is, let me demonstrate my value. Okay. Let me make an Epstein [SP] from the Cubs. Had a great interview the other day where he said, and this applies more to mid-career but it’s the same concept. He goes, “If you wanna get better at your job or move up, go up to your boss or go to the people you work with and say, “What is the worst 20% of your job, that you hate doing, that you don’t wanna do? Because I’ll do that.” And so all of a sudden, you learn so you get to do part of their job which is someone above you, but also you’re taking off their plate a bunch of terrible stuff. Same thing when you’re applying for a job so. Here’s how I would approach it.
So first, let’s say I was emailing and I’ll say, “Dear Meb, first, just want to say love your research. I’ve read all your books. I’ve read all the white papers. I’ve read every single blog post and I’ve listened to every single podcast.” Okay. One, so they come, they’ve made an effort, and this doesn’t apply to me, it applies to anyone. If you’re going to apply for a job, you need to do your homework. You can’t just start out by saying, it’s a totally anonymous email or like, “Hey are you interested in me?” Okay.
Jeff: Well, let me stop you there, because implicit upon what you’re saying is a fundamental sort of paradigm shift in the attitude of the applicant. I understand the plight of the applicant, because you’re out there trying to find something, you’re throwing anything against the wall, but that’s not going to get anywhere. If you truly want to get the hired, it takes the time and the energy and the research to actually, number one, know what you want to do. Narrow down the universe to those few companies or opportunities that truly fit what you want, and then put in the time to actually do the background work, to understand where you could add value, what they’re doing, what the company wants to do, where they’re going.
Meb: I agree with all of that except the “know where you’re going.” Even if you’re coming out of college and you don’t know what you wanna do, but you decide to select an industry or a company, do the homework.
Jeff: Well, to the extent you know where you’re going.
Meb: Correct. Correct. So if you look into some, do the homework. Do the homework on all the people you’re gonna interview it. Read as much as you can about them. I mean, we’ve written articles about this on the blog. We’ll link to them. We called it something like, “How to get a hedge-fund job,” and it’s five years ago. Similar things and one that I remember old crame article. He’s like, “If I was gonna do a hedge-fund interview, I would show up an hour early. I buy Krispy Kreme to the office. I’d be the first person there,” all these things. And we used to joke our favorite unclaimed.org idea, where people get to look, search for unclaimed assets. I say, “I would show up at the interview. I would search every single person in the office, see if the government owes them money, and then by the end of the interview say, “Hey look, just you know what, I don’t want to think this is creepy, but just so you know, I did this actual work, and oh by the way, the government owes your office $15,000.”
So already, I’m kind of neutral on you hired me. So you kind of should hire me. I just saved you 15. Anyway, but here’s what I would say, I’d say, “Hey look, I’ve done my homework. I’ve read your stuff.” I mean, that’s just bare bottom. And then say, “Look, here’s how I could be of value. Here’s the things that I could do for you. Hey, I read this.” So, maybe if they’re looking for a research post. They said, “Look, I read this research post of yours,” or I said, “Hey, have you ever thought about this? And why don’t I work on this research project for you?” Or, “Hey Meb, I saw you talked about one of these 17 million Fintech ideas, why don’t I run with it?”
And so, we’ll use one as a case study, which is an idea that we just published recently on the blog called $160,000 to get an MBA, or get paid to get a master’s in investing. And so we’ll call this our first one, which is essentially an idea that we struggle with all the time, which is news and research curation. So, a couple of years ago, we started one of our million Fintech ideas, which is I struggle with a needle in a haystack as far as investment research. So much out there. Every day I get dozens, if not, hundreds of pieces from Morgan Stanley and Goldman Sachs, and newsletters and tweets and everything about various just research process. And very little of it is actually actionable or useful. And so, the challenge of winnowing that down, and so for the longest time, I’d say, “Man, I would love to pay someone to curate Twitter for the best possible tweets or to curate investment research.” So eventually, we just did it on our own and we have a lot of subscribers now because they find a lot of value in that service because it saves your time.
Jeff: The Idea Farm.
Meb: The Idea Farm, so that’s an example of one. But then we started tweeting a few months ago I said, “Look, there’s a whole new area, these podcasts.” And so when we got started, we weren’t one of the first, but we were earlier Red Holts [SP] and a few other were doing them, and now there’s probably two dozen good finance investing startup podcasts. Right? So let’s say there’s 30. Each one puts out one per week, some put out more, some less, but let’s say one per week is the stand and they’re an hour long usually, right? That’s 30 hours a week. Who has 30 hours a week to listen all those? Maybe 10 of them or 5 are exceptional, 10 are good and maybe 20 are just average poor, terrible, right?
Jeff: I found those even in the average or terrible ones, there could be a great little section.
Meb: Yeah, and so you could have one that’s absolutely awful for an hour and a half. And I actually have FOMO while listening to many, because a lot of times, it’ll be a great guest, world-renowned guest. And I just sit there just nails on a chalkboard, it’s terrible. And then there’s five minutes at the end that’s just a total goldmine. Right? And so, but that’s a problem, who has 30 hours a week to listen? Even if you listen 2x speed, which I do. By the way, I saw a new app came out that now let’s you do 3x. I’m not quite there yet, but 2x. So even if you’re just spending 15 hours a week, I mean, that’s a ton of time and you’re wasting half of that time, at least.
So, we were tweeting we said, “Hey look, I would love for someone to curate the podcast and just send me an update once a week, top five top. Here’s five investing ones, and also, maybe here’s the best clips from all of them, you know, mashed into one.” And we’ve got dozens of responses on Twitter with people like, “I love that idea,” a lot of famous people, investors were like, “Hey, I would help fund that, totally, me too.”
And so I said, “Look, I’ll tell you what, why don’t we do it on our own? We being Jeff and I and the team here. I said, so we announced this on the blog and we’ll put a link in the show notes and we said, “Look, we’re gonna hire a handful of people. This could be as few as one, as many as maybe five, but the way that we’re gonna see if those people are any good is we’ll do a three month trial period. And so, the offers is this. One of the templates that we’ll put on, the people that are interesting. So if you’re interested in this, for example, again, send an email to firstname.lastname@example.org. But essentially you’ll listen to the podcast each week, you’ll rank them one to ten. You’ll write down any of the top moments, almost like a SportsCenter or Talk Soup for, the Talk Soup, the E! show. Is it still around?
Jeff: I think it’s off now.
Meb: But basically, it’s just like a highlight reel of the best parts of these podcasts. And so, the people that let…so we’ll do this for three months, and at the end of three months, we’ll hire those people that have demonstrated to be excellent at this fully-paid position.
Jeff: Potentially, if we’re getting the quality we want just as a disclaimer.
Meb: Right. I mean, assuming they’ll be at least…I mean, we’ve had 30 people respond already. And it’s only been up for an hour, so assuming. So, and there’s two ways to look at this. One was, “Hey, why not crowd source it.” And then the problem is most of these sites don’t let you rate episodes. Apple’s terrible at it. I think there’s a couple of sites that let you, but even then, like you said, the episode could be one star out of five, but have some great moments. So, we’re gonna pay people to do it just for our own personal use, to the extent that we build something that we think the community at large will find of interest, we’ll share with the community or build something out of it. But this is literally for my own use, I mean, think about it for them.
Let’s say I value my time at 100 bucks an hour. Right? What is that yearly? I’m trying to think that’s 200 grand. All right. That’s way more than I’m worth. But we’ll call it 100 bucks an hour. An average advisor on here probably makes 300 grand. You high net worth advisors out there. But let’s say you’ve got your time and a100 bucks an hour, and half the podcast is there shit. So right there, if we just eliminated half of the podcasts, I mean there’s nothing better than listening to a good podcast. There’s nothing worse than this or that right there saves 25 grand worth your time per year. It’s something that we’re willing to pay for just for our own internal use and maybe we’ll share with community. But so here’s an example of the original tweet is like, “I would hire an intern to do this, to rate the podcasts,” and then I’ve got dozens people like, “Me too, I would love to do this.” Like, let me submit, zero emails people actually willing to make the effort. Right?
Going back to the whole conversation of be of value, be of effort. So we’re doing it as a contest three months. And Jeff will send the info to the people that are interested where you listen to podcasts, you rate them, add some notes. If you make it through a month one, we’ll give you a free Idea Farm subscription. That right there is 500 bucks, 400 bucks, excuse me. So if you make it in a month three and you get selected, we’ll pay you going forward.
So the worst case scenario is you’ve listened to a bunch of podcasts, so particularly if you’re a younger investor, an MBA, a college student or even someone who’s just interested in finance, people that listen to podcasts already, what a great gig. Worst case scenario is you listen to all these great podcasts, come over the much new ideas, new investment ideas, new concepts. Now, and best case, you get paid to do these podcasts. So, first million dollar idea is essentially this podcast Talk Soup, podcast SportsCenter, curated podcasting.
Jeff: To clarify though, this is the one that we’re actually running with. The remaining ones are gonna be more open to other people.
Meb: Well, I mean, look, someone can steal this and run with it. But I mean there’s…and this is the same problem with tweets. We used to tweet a lot about Twitter is just a firehose. So even if use lists or whatever, it’s just a total mess. And so, I used to tweet, I said, “Look, I wish I could sort my tweets based on most favorite or most re-tweeted, and there’s one website lets you do it called Favstar or Favstar, terribly designed but it actually works. And so there are some apps that came out to try to do it, and that was one, but they are all those try to do just the link. So I think you need the human curation. Maybe AI gets up at some point, but right now it’s not.
Jeff: The psychology behind going with sort of the, whoever ranked something the highest seems a little off to me, because I think people’s tendency is to respond more when they’re angry or upset, and they give you a bad ranking versus…
Meb: Yeah. I mean, maybe, I mean the good news is, I think having instructions for a smaller group of people with very specific, “Hey look, this is what we want.” Maybe it’s multiple grades, maybe it’s one to ten on storytelling and interest, maybe it’s one to ten on usefulness. We’ll see, we’ll figure it out but we’ll build the template to get this started. I think this will be a lot of fun. But again, just this is a classic example of something that if I was applying for a job, you demonstrate your value first.
Jeff: By the way so a quick aside, do you wanna give the quick story of that email, we received recently two emails. The first was, “Hey Meb, love your podcast, especially loved the recent like Van Simmons episode.” And then the second email was accidentally sent to us. It showed the template that said like, “Hey Meb, really enjoyed your [insert here].
Meb: Yeah. That poor guy. Poor guy, he got crushed on Twitter. That’s a thing nowadays, like if you make mistakes like that on social media. There was once an email. Forbes was trying to get into the blog aggregation space back in like ’08. So Forbes has all these writers ranging from Kingfisher all the way down to me, at the bottom. And so, but they sent out a mass email and didn’t BCC everyone. And it was about how much you’re getting paid and all this stuff. So, the vast majority contributors got paid nothing, and it was the most amazing thread you’ve ever been on, and it went on for a week where we were like, “Unsubscribe me.” And then the one was like, “Why am I not getting paid?” It’s the all time social media snafu. It was so much fun. But yeah, that was a funny one. Okay. We better start moving on or this is gonna be a five-hour episode.
So idea one kind of curated podcast episodes. We notice there’s a cool…we’ve seen this for curated book summaries as well as curated ones called getABSTRACT. There was someone tweeted out a summary for podcasts. The startup space podcast wire, I think, but none of them rank them and sort them. Product Hunt does top podcast of the year, but again, it’s just kind of this mishmash of everything. So anyway, ours is highly focused. We’ll see. That will be fun. Email Jeff, not me. Move on.
Jeff: Move on. Number two. liquid alts.
Meb: This goes back to one of the very first posts we did. And again, this is something that I would literally pay someone to do. And here’s the problem. So, most investors so this isn’t just individual retail, but also pros, all the tens of thousands of financial advisors out there, I think have a hard time making heads and tails of all the funds that come to market. So you now have these thousands of VTS, over 10,000 mutual funds, how do you do the research on that? So there’s great sites obviously Morningstar, etc. write a lot about that, but particularly with a liquid alts space.
Jeff: Right. So real quick just contextualize for anybody out there, what’s a liquid alts?
Meb: So liquid alternatives, so it’s not just your traditional buy and hold indexing like U.S. stocks or foreign stocks or bonds, but stuff like managed futures which we’ve talked a lot about or maybe currency strategies long/short equity, hedge-fund-like strategies, even these volatility triple levered, who knows what funds. So, the simple idea would be to write a monthly piece or quarterly, but I think you would have to be monthly, and you could do a freemium model where you have a free website that covers liquid alts space specifically and then a paid subscription that really dives deep into these funds and ideas. And our last guest would actually probably be like the perfect person to do it. Unfortunately, the CEO of ETF.com, so Nadig he knows more about ETFs than anyone. You have a list that’s up so there’s a lot of fun.
But so, for example, like we get questions every single day people like, “Hey, Meb. I love your comments on managed futures, can you tell me which ones are good and which ones are bad or what I should do? And we can’t talk about funds. We can’t make recommendations to non-clients and all this stuff. So there’s a Grand Canyon wide difference between the structures and the strategies and everything else in between. But how much are you asking someone to do, to do research on those thousands of fund? Even to keep up, like it’s literally my job. We launch ETFs and use ETFs. I can’t keep up with all the funds out there and what’s going on me.
Jeff: That was Dave’s point at the end, when we were talking about his best advice for listeners. He was saying how the various smaller things he discussed, the spreads, commissions, all of that, that’s nothing compared to what he called what’s under the hood of the ETFs.
Meb: So this is a big opportunity. And so, of the old ideas will mention some of the contenders, as anyone doing it, as anyone approach it, are they not. So the contenders in this space right now are Brian Haskin who runs DailyAlts, great free website. I’ve been trying to convince him to do a paid product for years. Morningstar has two good publications. One called ETF investor, and the other is called like fund investors and mutual fund investor, and Morningstar does, I think, the best job on fund analysis and education, but there’s nothing specific to liquid alts. So they may cover liquid alts in their ETF investor, but nothing specifically. And I actually think the right way to do it is you actually have to have a recommended list.
So say look, we’ll cover managed futures but here’s five that we would use or like. we’ll cover long/short equity funds, but here’s some that we would use, and here’s some that you should run away from no matter what. Some other people, we try to hire Sam Lee at one point, one of my favorite writers, but he went and started his own IAR RIA, and then so there’s not a whole lot of players out there, huge opportunity. And so by the way, if you are a listener and you know of other sites doing these things or something we’ve glossed over, choose an email one included in the show notes. I think this is really low-hanging fruit. So this again, qualifies under the idea of something I would pay to subscribe to tonight.
Jeff: There you go.
Meb: All right, next.
Jeff: Next, tax harvesting.
Meb: Tax harvesting was an example of something we wrote about really before it started to become pretty widespread. So it went from an idea where I was like, “Hey, wouldn’t it be nice if you could just type in your portfolio and have a website that would automatically send you updates and when the tax harvest it?” And so tax harvesting is nothing new. I mean, it’s been around for decades, Parametric was doing it in the 1990s.
Jeff: Give a [crosstalk].
Meb: Tax harvesting is just the concept that if you have a portfolio of ETFs or fund or stocks or whatever, that if you consistently take the losses and you wait 30 days for the wash sale rule, so sell a stock or fund, and then replace it with a near identical one, is that you’re consistently taking losses and lowering your tax bill because you can claim those losses against future gains and you’re delaying the gains for the future, right.
Jeff: Yeah. Because you’re in similar funds, you’re maintaining the same balance in your portfolio.
Meb: Yeah. And so this is a good example of a good business concept. Actually, it just became a feature. So a lot of the robo-advisors were very quick to add this. Almost all of them have it now. Wealthfront was early, Betterment does it. Parametric been doing it since the ’90s. There’s a cool app website called FeeX that lets you type in funds as well as things that’s doing something similar. Richard Smith does trade stops, and there’s a lot more. But it really didn’t become a standalone business. It became this feature rather, which is fine, and it’s good and we’re glad to see it incorporated because it could be a lot of value.
What’s interesting is that as financial planning and investment management progresses, I mean, there is a scenario, for example, where you don’t wanna be doing tax harvesting. You wanna be doing the opposite where you wanna be taking gains early. And the one of the reasons why is, for example, if you’re a very young investor with very low tax rates you say, “Well look, no, I wanna be booking my gains now because I know that in 5, 10, 20 years, I’ll be making orders of magnitude more salary and my tax rate will be higher.” So eventually, the tax planning software may get that sophisticated but right now in general, it’s a better use to delay and to harvest than not.
Jeff: What’s missing from what’s available on the market now, where is the real value add that you’re seeing?
Meb: Okay. I don’t think there is. I think it’s been incorporated in enough places. It just goes back to digital advisors in general. I was talking to someone the other day, having implemented it personally as well as for our clients, I can’t fathom ever going back to not having an automated digital advisor solution for my own investments for my clients. Once people implement it, I can’t fathom anyone ever going back. It’s like going from the iPhone back to the StarTAC flip phone. You probably would, knowing you, right?
Jeff: [Crosstalk] flip phone. Flip phone is amazing. Well, hold on, but if this is on the list, it’s already been done. Why is it on the list?
Meb: So I said, in the first five, we’re covering old ideas as an example of things just updating them, some of them done, some have not. And it also goes to show how some have been tackled, some haven’t, some become features, some become entire companies
Jeff: Well, that would be interesting if something that made the list X years ago, which has largely been done. You now see a current way to take it to the next level.
Meb: Are you done with tax harvesting?
Meb: All right. Best ideas newsletter.
Men: Best ideas newsletter was a concept that…there’s a lot of idea conferences. So like Iris Soan [SP], there’s Whitney Tilson puts on one, but there’s a lot of these charity events where you’ll have Jeffrey Gundlach or David Einhorn will come on and say, “Here’s my best stock idea right now.” And a lot of them were for charity or whatnot, and I always said, “Hey, man. It’d be fun to actually just have like a newsletter.” One that the interview process in a lot of podcasts and newsletters have a similar flow, tell me your background, let’s talk about research, whatever. But to actually have one just be like, the entire show is just like. “All right. What’s your best idea? Now, let’s just talk about it.”
Some managers can talk about it, some don’t want to for various reasons, but I always thought that was fun. So then, there’s a handful of companies and shops that have been in this area. The Idea Farm is one that we started. It has a list of all these idea conferences and resources, so if you go to theideafarm.com and the resources it will have a lot of these. But here’s a number of other people that have tried to tackle this. There’s a newsletter called “The Manual of Ideas.” That’s actually really long and good. It does some conferences under this banners well.
There was one called “The Private Investment Brief” which was a spin out of Santangel’s. SumZero, which I don’t know if you’re familiar with, is a by side community that’s about sharing best ideas. It’s very similar to Joel Greenblatt’s Value Investing Club. Joel’s, you have to actually apply for, and you have to submit like two ideas a year to stay active. But I think they have award like five grand a month to the best idea. And Joel Greenblatt, the guy that wrote “Little Book That Beats Market” Columbia professor hedge-fund manager. That’s a really cool website. What else? Oh, and our buddy Wes Gray by the way actually wrote a paper and said, “Do these websites offer any value depicts?”
And so he did a West PhD study of SumZero and Value Investing Club and found that yes, indeed that actually you could find alpha there. So it’s pretty a cool idea. I mean we’re not stock pickers here, so we’re spending a lot of time there, but if I was a stock picker value guy or hedge funder, those would be two really cool resources.
Jeff: Yeah, I love the idea but you would have to keep your group somewhat small, I would think, because so much of the potential alpha is found and who’s willing to put in the due diligence and find ideas that aren’t common knowledge.
Meb: Well, yes and no, I mean…
Jeff: If you’re blasting this out, if like Gundlach or somebody that’s coming on and saying, “My best idea is investment ABC,” and all of a sudden tens of thousands of podcast listeners hear that. I mean, it’s not gonna…
Meb: Correct. So my concept for the newsletter was focus on this. So attend all the conferences, summarize them but also do an interview series where that’s the only question. That was just the theme. Right? So a lot of people are attacking this in various iterations. This is, again, is an old five, seven-year-old one. Our friends had Real Vision TV do something similar. John Mauldin, I don’t know if it still exists, but had a publication called “Just One Trade.” It was under the same banner, pretty expensive but similar idea. So again, this is an idea that we wrote about a long time ago, but a lot of people are starting to tackle, and a lot of good resources there as well.
Jeff: So, it makes me have an idea. The O’Shaughnessy podcasts you had me listened to, it was a few days ago. He had on the guest the rich barber, the guy from Canada. What I found fascinating in that was how much due diligence that guy was putting into just a handful of trades, he would be calling up.
Meb: The wealthy barber, by the way.
Jeff: What did I say?.
Meb: You know, it’s funny, that’s a book that I had actually never heard of, and it was a fun interview. So Jeff’s referencing Patrick O’Shaughnessy’s Invests Like The Best podcast, and it is worth listening to. You should definitely listen. See, if you had access to our curated podcasts, you would probably know that that would be one of the best interviews. But most people haven’t listen to it because they don’t know. Anyway.
Jeff: What if he had a small group five guys and you each committed to six months of due diligence on something you know what I mean?
Meb: No, so that’s when like, what you’re talking about is what every hedge fund does on the planet, which is these ideas dinners, where like these hedge-fund managers in New York and I’ve been to some of these San Francisco where they would like, “Hey, let’s go get dinner,” and each person pitches an idea. And so you have these small networks. I mean, that’s what like literally like the entire the entire group of Tiger funds. You pull up Tiger’s funds and they all own the same stocks, different flavors, but, so these people and their networks and their methodologies, they share, but Value Investing Club as well SumZero are closed networks. Okay.
It wasn’t really my idea for this. My idea was for this for it to be the [inaudible 00:32:58] and say, “Look, I’m gonna go, just report on all these conferences and clubs and feature these ideas.” Many of ideas is probably closest by the way, but also to interview people and that just be the style of the interview.
And we actually thought about…I don’t know if we thought about. I thought about this on this podcast, was doing it where we just said, “Let’s interview people and we’ll say, ‘What’s your best idea?'” I mean eventually, it comes out somehow, like, we’ll talk to Jared Dillian and then he talks about his thesis for shorting Canadian housing stock, stuff like that, but it’s never just that explicit. Maybe that’ll be our 2017 or 2018 question. You know, 2016 was beautiful, useful, magical. 2017 has been what’s your most memorable trade? Maybe we’ll just start doing what’s your best idea?
Jeff: I like it.
Meb: Maybe start asking all three, anyway. All right. So someone should write that newsletter that it doesn’t quite exist.
Sponsor: And now a word from our sponsor. Today’s podcast is sponsored by FreshBooks, the best cloud-based small business accounting software. Look, I’ve never taken accounting class in my life, and found FreshBooks easy to navigate within the first 30 seconds. Here’s an example. Say you’re racing against the clock to wrap up three projects. Prepping for a meeting late in the afternoon all while trying to tackle a mountain of paperwork. Welcome to life as a freelancer. Challenging? Yep, but our friends have FreshBooks believe the words are so worth it. Look, the working world has changed, with the growth of the internet, there’s never been more opportunities for the self-employed. To meet this need, FreshBooks is excited to announce the launch of an all-new version of their cloud accounting software.
It’s been redesigned from the ground up, custom built for exactly the way you work. Get ready for the simplest way to be more productive, organize, and most importantly get paid quickly. The all-new fresh books is not only ridiculously easy to use, it’s also packed full of powerful features such as creates in professional-looking invoices in less than 30 seconds, set up online payments with just a couple of clicks, and get paid up to four days faster. See them when your client has seen your invoice, and put an end to all the guessing games.
FreshBook is offering a 30-day unrestricted free trial to my listeners. To claim it, just go to freshbooks.com/meb and enter the Meb Faber Show in the how-did-you-hear-about-us section. Again, that’s freshbooks.com/meb. Now, back to the show.
Jeff: All right. Quant backtester.
Meb: Quant backtester was an idea where back when we wrote this in ’05, ’06, ’07… or sorry, ’05, five years ago, 2007 to 2012, was there wasn’t a great resource to go online and backtest asset allocation or tactical asset allocation models. So if you wanted to go test the permanent portfolio versus the endowment portfolio versus readout, like, you couldn’t. Right? So we eventually built it in Excel, and that’s a feature for the Idea Farm we send out once a year, we update it, and you can test any asset allocation back to 1972 as well as taxable models.
In the meantime, a lot of other websites have sprung up. So when we wrote our tax class and allocation paper back in ’07, a lot of people are like, “Hey, this is cool, but I wanna update it. Maybe I want it short. Maybe I wanna do exponentials.” So all of these websites have now sprouted up, which is great. So, Wes, our friend and Alpha Architects, we mentioned already has modules that do it. Ned Davis is an institutional level, certainly a boutique that’s very expensive for the institutional crowd where clients that can do it, and there’s a number of individual focus. So when I say that, it’s either less than 100 bucks or probably free, or something like that. ETF replay is a good one, Portfolio Visualizer is a free one, Extra Dash is another tactical one, as is allocate smartly.
Jeff: Is this another idea that you originated years ago?
Meb: This has mostly been done.
Jeff: Did you see a new tweak that can be made now that would enhance?
Meb: Well, so there have been some. So, I’ll name a few others, and then before we’ll get into it. So, Portfolio Charts is one, Quando Systematic Investor. Again we’ll link to these on the show. But Quantopian is an example of one that’s taken the idea and run with it. So, Quantopian has crowdsourced algorithms, where you could go in, test your algorithms on their data set, and it only goes back to like 2000 or something. So they don’t have that much data strangely. But you can easily get monthly data back to the 1920s with French Fama, that’s free online or through various resources. Global Financial Data is a paid one we use. But Quantopian basically is trying the idea of, “Hey, you create these algorithms. We’ll crowdsource it. We’ll run a fund based on it.” Stevie Cohen invested in it, former S.A.C. now at Point72.
The challenge I’ve always had of the crowdsourced stuff is like, yes, it’s potentially good to come up with ideas, but you still need someone probably to dial in the knobs. The crowdsource, which isn’t what we’re talking about here, but the crowdsourced investment idea is a Arlington style size graveyard of companies. I mean, there are so many companies that have tried to do crowdsourcing investing and have failed very miserably. I mean, in the old as you go back as Marketocracy.
So the white hairs and no hairs that are listening remember it back to the 1990s, that was like the first version of, “Hey, we’re gonna crowdsource the theory that good stock pickers exist anywhere. They’re not just Peter Lynch, but it could be a doctor in Idaho that knows these by tax and they’ll manage their own portfolios, will curate the best ones, and then will let them run a mutual fund.” I mean, that sounds actually pretty legit in theory, and they’ve done it and it’s done horribly. And now, so some of the…
Jeff: Why? Why?
Meb: Well, some of the commentary on that is that it comes down to who’s dialing the knob. So, is the underlying methodology that you’re trying to find talent and then let them run these portfolios or are you just chasing performance? And so that’s the biggest concern with a lot of these algorithm websites that lets you…some people at Covestor tried to do this in the early days, Wealthfront. Many people don’t know, it was originally called KaChing. It was a Facebook game. Same thing with the lets you track investors then KaChing pivoted to tracking managers, and the managers could charge up to 3%, and then eventually knew those works they transformed to Wealthfront.
But there has been just dozens, if not hundreds of companies that have tried that. Anyway, sorry, that was a kind of offshoot of Quantopian and Quantopian is trying to do a crowdsourced fund. So they’re actually going to manage money. But my key is that do you have someone reasonable? And Swensen would be an example, who runs Yale’s endowment, that is battle tested and knows how to put a portfolio together, and not just pick the best algorithms or whatever.
So anyway, the quant backtester exists in many forms. We send it out the Idea Farm. There’s lots of good websites. There’s three or four of my favorites on here that are good, but that’s an idea that for the most part exists but there’s probably still some opportunity there. We have the domain tacticalassetallocation.com. Do you know that?
Jeff: I do.
Meb: So, if anybody wants to run with that domain, as well as our favorite we tweeted about the other day, one-click divorce, please, that’s not on our list of Fintech ideas, but if you want to run with it, let me know. We have so many demandDomains. My God.
Jeff: How many do you own now? What was your max at one point?
Meb: It was probably only like 50, but 50 times $10 or whatever cost per year $5, $10. Anyway, all right, where are we? Remember…
Jeff: You sort of dovetailed into the next one. Research boutique for crowdfund companies
Meb: No, totally different. So this is…
Jeff: A little bit
Meb: It’s totally different because…
Jeff: I disagree.
Meb: Let me explain why. So, over the past few years, you’ve had this explosion ability to, for companies to, crowd fund or raise money either for accredited or non-accredited. And my comment has always been this is that people spend more time picking out a TV or car, then certainly focusing on their investments. And I see the crowdfunded space is like the worst example of that. So you could go on and put a $100, 1,000, a million, whatever you want in a lot of these companies, and it’s so easy now. And there’s a lot of boutiques that let you do it. So AngeList, EquityZen, Wefunder, and there’s like ten others, right? It’s a great thing. You can invest these companies, and we’ve done two crowdfunding rounds. I mean, we’ve raise…I mean ironically, we’ve been one of the most successful crowdfunding companies that’s actually raised money.
So we raised, I think, 3.3 or 4 million across two crowdfund campaigns. We did on our own because we didn’t wanna charge the high fees as a lot of these sites do. But that’s not the opportunity. The opportunity is that you go to this website and you read the abstract say you’re doctor again in Idaho, and you’re like, “Oh man, this sounds cool.” Thousand bucks. Boom. Put it in. Well, the problem is there’s like almost no information. So even if it’s a late-stage private company where its secondary liquidity is still like Lyft or maybe even Uber, there’s more information, you can get the revenue maybe, but for a lot of these really small ones, there’s almost no information.
And so I said look, huge opportunity for someone to start research boutique. So you would probably need half a dozen people. But this is a great MBA, probably a semester or a yearlong project thesis. You say, “Look, we’re going to cobble together a boutique and we’re gonna do a heavy due diligence into these companies.” And I think the best way you had to do it was you’d say, “All right. We’re gonna make a buy, sell, hold recommendation or make at least bought one buy recommendation per month.”
So there’s lot of ways to do it. You’ve seen these syndicates sprout up on AngeList which is people saying, “Hey I think this is a good idea. You can tag along and invest with me. I’ll take 15% carry, AngeList takes five and you could invest and it’s just like pooled VC.” But I said instead of doing as a syndicate, why not do it where you look at the opportunities everywhere? And you do deep dives and so people could either buy the research reports to say, “Hey, here’s one that just came out. I wanna buy the research report on it for a 100 bucks or whatever”. Or it’s a different service where it makes recommendations where you put in an actual portfolio or say these are ones you should buy, should not buy.
Jeff: My impression is that when you’re dealing private companies like this, the numbers are so slim in terms of the percentage of the companies that work. So to what degree…
Meb: Well, that’s the true example of value added research.
Jeff: Agreed, but if you’re doing you said deep dives, that’s a lot of manpower and there’s a lot of companies on these sites. So, A, that’s potentially a hell of a lot of time to do this. But even if you find great companies, isn’t that smarter to try to amortize your money over a hundred of these things rather than just might be one or two?
Meb: Right. So it’s I mean it’s a hundred rather than a thousand, or it’s ten rather than a hundred. So if you winnow down this list, at least get rid of all the crap. So if you like these are really terrible ideas and in some cases the problem with some of these sites, like AngeList depending on the syndicates, I mean there’s like a setup fee. I saw one the other day and it was like 20% set up fee usually only a couple percent, but you’re like already you’re taking a haircut of 20% and then it’s 20% perform and like it’s just, the biggest problem is that you have to do it as a private newsletter. You couldn’t do it as a public facing boutique because you can’t write about these deals publicly, it runs afoul not for you but the sites will block you.
So I tweeted once on AngeList. I was like, “Oh my god, look, so-and-so is raising money,” and they’re like, “Meb, can you please take that down. It seems general solicitation, maybe that will change.” So you do it as a private newsletter and private boutique. So you could charge for a coverage of individual companies or you could charge for recommendations, which I think which is the way I would like to see it. There’s one website doing it called Early Investing and they actually do a really good job. So we’ll link to it.
There’s a lot of companies tackling a sort of the data side of it. So there’s one called Triton Research, there’s one called Disruption, another called Data Fox, another called CB Insights and Matter Mark. All those are in the universe of this area, but no one is actually other than Early Investing is doing it where they’re saying, “Hey look, this is what you should buy. This is what you should sell.”
And I think the best way to do it would be the writer of the newsletter has to be I’m putting my own money in along with you, and maybe you can just piggyback. If we weren’t doing Cambria and everything else here, this would be a really fun area, because it’s fascinating to me. Getting the information on and yes, where you’re a bull market so you start to see some really crazy awful terrible ideas that are getting funded for crazy amounts, but there’s also some really cool companies that are growing fast and hitting these new niches that I think are great investment. And so in a world, particularly where a lot of the public companies are waiting longer to go public, this is kind of a part of the asset class, if you’re looking at equities, the private equity VC a lot of people have less exposure to. So anyway, I think it’s a good opportunity.
Jeff: What’s the latest company you saw in one of these sites that grabbed your attention?
Meb: My two favorite sites are certainly still AngeList and EquityZen. And AngeList has pivoted to this like syndicate model. So it’s people that bring a deal to the site and you subscribe to the syndicates, which means you just follow them, but some you can autofill and some not. And we’ve seen either other innovations like Jason Calacanis left and then just started his own because to avoid the fees. So he’s like, “I’ll just indicate my own deal of my own.” So as far as specific names, I’m trying to remember I love and this is a little biased because I’m a consumer of these. I still love the subscription boxes, and I subscribe about ten of those.
Jeff: How many times I’ve come to your house and seen something of random things lining up.
Meb: Our dog has learned to open cardboard boxes. Actually, I’m going to get a video and post it to the podcast, because there’s so many boxes come. We’ve taught him to open the boxes for us. But I mean there’s some good one of those you know Birchbox is the original one. It’s an entire industry now so it’s saturated. But it’s such a great business model because to the extent you do find one that works, it’s sticky money, because people forget about it, or they actually love it. So there’s one that’s based out of L.A. and I forget what it’s called but it’s targeted just at gamers. We actually tweeted about this. And they make hundreds of millions of dollars, like it’s unbelievable business model.
So I subscribe to about a dozen of these. By the way a great app is an app called Clarity Money that it’s like a Mint or something where you sync your accounts, but it lets you know what your subscriptions are so that you can cancel them. It’s like do you know you’re paying. And I like examples like do you know you’re paying $15 a month for audible.com? I had no idea. How long has that been going on? So, there’s two business models already there. So I love those. And so there are some that I like and I never even heard of. I invested in a few where just the sales are increasing, they’re doing better. I mean it’s just. Anyway let’s move on or we’re gonna be going forever.
Jeff: All right. Rukeyser Reborn.
Meb: You skipped another one, which was a part of this similar idea, which is what we called the syndicate podcast and newsletter. And so, this is like…if that was…what number was that?
Meb: So that was 7A. This is 7 B but we’ll still call it A or whatever or seven whatever, because this is in the same ballpark. Which is it cool to have a podcast if you then interviewed all the syndicate leads and said “What are your best ideas right now? So tell me about what the syndicate you’re raising.” And the big problem with this and of course is that you can’t talk about them publicly. So until the rules change or you could do it as a private newsletter radio show, where you had on like the Shark Tank once again Barbara Corcoran, she has one that’s actually has a ton of good deals. I think she’s really…I don’t know if it’s her network or the people running it, but she has a lot of really cool syndicates on there. But have her on and say, “Barbara, what’s your best one you’re leading right now?” Again, it probably ties in with the one prior which is the boutique or newsletter concept, because it has to be private. If you’re talking about it publicly, you’re gonna get cited. So I know no one doing this, but I don’t know that you can.
Jeff: Prior to working with you we were actually in talks with Barbara’s I guess lead syndicate guy, Phil Nadel has been pursuing that idea and didn’t go anywhere. But it had legs for a little while.
Meb: Cool. I got an email from him this morning.
Jeff: Oh nice. Okay. Any more on that?
Meb: No. But syndicate, by the way, the syndicates are the all-time best deal with the syndicate leads. I mean getting 20% carry on something for doing nothing other than just raising the capital for it, I mean, that is a awesome business model.
Jeff: Since that’s what you would be doing if you not running Cambria.
Meb: No, but I think it’s way too much. I mean that’s why we did the crowdfund rounds on our own and didn’t charge any carry. Because that mean that that carries a huge drag. But I mean look, if you if you can deliver great deals and consistent, then it’s great job.
Jeff: Feels very much like 2 and 20.
Meb: That’s more than 2 and 20 probably. All right, keep going.
Jeff: Rukeyser Reborn.
Meb: This is one that’s actually funny because Louis Rukeyser was the old school Wall Street Week and he used to do it. I think it was I think is every Friday. So he would have on like Marty’s Y [SP] again all these just great long form conversations. So the whole point of this idea was that we need more long form conversation. We need less CBC, Fox, Octobox where there’s nine people shouting each other and more time for people to thoughtfully converse. Since this has come out, there’s a couple of things that have happened. One is that podcasts have blown up.
So you’ve had this huge launch of all these podcasts which didn’t exist when we wrote this. Ironically, Wall Street Week got re-launched by Scaramucci. So he actually bought it and then re-launched it. I haven’t watched a single one, so I don’t know if it’s doing well or not and how they’re syndicating or where they’re publishing it. And then I think the best version honestly is and for full disclosure, they’ve been a sponsor of the podcast but Real Vision I think is doing a really good job at that. I think the first iteration, and this is long form video, we did an interview from the Caymans but it’s like an hour high-quality video. They have an app. It’s a Real Vision TV with some of the best minds out there is they got Carl Bass, all these guys talking, interviewing with each other.
The first iteration of the site was the interface wasn’t well-built. But I think the second iteration is. I think they got a big lead as well as a million podcast. I mean, we published on Twitter a list of about 20 podcasts we really liked the other day. But that’s grown from two or three to now and again, this category for Rukeyser Reborn has been so successful, it’s now generated the new first idea which was we need to curate this idea right. There’s so much good stuff that we need to we need to curate it.
Jeff: Next one, The Street 2.0.
Meb: This is one of my favorite ideas. And this idea doesn’t just apply to finance and investing.
Jeff: Back at what was The Street 1.0 for people who aren’t sure?
Meb: It’s the current TheStreet.com.
Jeff: Which is?
Meb: A website.
Meb: Oh, if you haven’t heard of TheStreet.com? It’s been around forever Jim Cramer helped start it. And it’s funny because the list of writers that have been either came out of The Street or wrote for The Street at some point, it’s like a who’s who of the investing space, particularly the early writers. So I wrote there for about a year, until I got fired, which is a great story.
Jeff: I don’t know that story.
Meb: So and it’s funny because TheStreet.com was so innovative in many things. So they had the free version which was The Street. They have the paid version which was called Real Money, and they had a columnist conversation which is essentially was an early version of Twitter. So you would have the columnist able to interact with each other and they would post. Now you had to go through this arcane terrible something that was like DOS 95 version of WordPress where you actually had to write code in. It was really, really bad.
Anyway, so a common conversation, you could probably go search all my old articles on there. I don’t know if they purged them, but I would cite mine, so I would say source and at one point they, which is by the way the standard way, correct way of writing and research, you source your sources. And eventually, like, “No, you’re linking back to your own sites, and other sites too much, like we can’t have that.” And I was like, “Well, that’s literally the best practices, whatever.” But it was funny because a couple of years later the guys that fire me, they’re like, “Hey, man. Would you like to join our new site?” I’m like, “Do you guys remember how this ended?”
Anyway The Street has been so poorly managed for the past two decades. The private equity companies got involved and it’s consistently trades at cash value. And the problem is it makes a ton of revenue, but it then spends all of it. And here’s the idea. So the idea was, what’s the biggest expense for a site like The Street or a newly successful competitor Business Insider? The biggest expense is headcount. So Business Insider probably has hundreds of journalists. You think about it and you say, “All right. Well, look, we live in a world where there’s a lot of…and there is the similar site which is Seeking Alpha,” which has I forget what it is like 40,000 contributors or something. So it’s the exact opposite of that idea. You say, “All right. Well, we already know we could identify, I don’t know, 10 to 50…it was called 10 to 20 of the best investment writers out there.”
So we could just go down the list, Red Holts, and Josh Brown, and all of these guys, right. Most people could, they may not agree but you could identify with a lot of them, and say, “Why not get the top 10 or 20 together, form a website almost like a coop, and either republish articles but have them be heavily branded and with the authors?” Because you have a site like Seeking Alpha, which has 40,000 contributors which it’s just it’s like Yahoo message boards times a thousand. It’s just that the quality is so poor. It’s just a ginormous firehose.
And you see a theme on a lot of ideas which is curation and trying to find the signal from the noise. So give me the few gems. So, if you could edit that site and republish or convince any of the writers to only publish their, all of a sudden you have the best of the best. You have the best writers. You eliminate the number one expense, which is headcount. And so all of a sudden you have a site with almost zero startup costs, and already the people that control all the traffic.
Jeff: You basically are replicating Wirecutter for various industries that you like.
Meb: Well, and the cool part about this is then you could then take it to any demographically. You’re like, “All right. You care about microbrew.” So, here’s how the world has changed that when we wrote this, like I still used to go to individual writer’s blogs. I would go to Barry’s Blog, I would go to all these various people’s blogs. I haven’t done that, and I can’t even remember the last time I did that. I’ll see someone will mention a post or an article on Twitter, or get it through the GrapeVine or through these apps. Remember RSS feeds, right, these were people where they curate.
But if you can have everything in one place where they had the best writers, that would be a great resource. And so if you do the evaluation on Seeking Alpha or The Street or Business Insider, and we did an article on the blog called “How Much Content is Seeking Alpha Gotten For Free.” So meaning the writer, all these poor writers post and they don’t get paid for, and they get paid some tiny fee now, I think. But it’s like the last time we checked there was like 50 million or 100 million, or I think there was $120 million.
So the site gets all the benefit, but the writers get none. But we live in a world now and you see this changing in the publishing industry. You see it changing with podcast and everything, where the content creators are able in YouTube especially, are able to monetize their writing. And so I said, “Look we’ll have a site. We’ll get the best writers together. We’ll run it for them.” Again going back to Forbes, how they did it ten years ago where there’s like your name has like a tiny byline at the end. So the world is changing to where the content creators should own their content and really monetize it. So, basically it’s thinking of a platform for that. But then that applies everything. You’re interested microbrewery. Let’s get the ten best guys writing about brewing beer. If you’re interested in polo, horse playing polo, then we could do the same thing.
And so you could then take it to almost any vertical if you wanted to. I just said we should do it investing because we know a lot of the people, and I actually took it all the bloggers and guys say, “What do think about this idea? I’m going to build a site. We should have you run a Jeff. Build a site, we’ll fund it with a million bucks, and a blogger will give you equity and, I don’t know, half the revenue from the pages that you have content. And by the way, we’ll let you use our advertising network if you want, as well as have all of your offerings available to the public, etc., etc.” Of course they’re going to say yes, why would you not? Anyway, so they were all on board but we got enough to on our plate to where it’s not a priority for us, but I think it’s I think it’s an awesome idea.
Jeff: Yeah. Well, I mean as the riches are in the niches. That’s like the same guys, you know.
Meb: I’ve never heard that.
Jeff: It’s a good one. Who is it?
Meb: Okay. I don’t know where I picked that up.
Jeff: All right we’re done with this?
Meb: Yeah, let’s go on.
Jeff: Hedge fund letters.
Meb: And original name for that when we first wrote about it in like, I don’t even know when it was called, Blog Raider [SP], or blog aggregator and I even got some cool logo designs on 99designs. We had a new name for it the other day. I can’t remember what it was. Anyway, if you got a good name for that site, let me know.
Jeff: Hedge fund letters.
Meb: What number are we up to?
Meb: Not barely halfway. Hedge fund letter is a simple one. It’s a website we had started anonymously years ago, and then shut down because it was being a headache. And the concept was I love reading old hedge fund letters whether it’s from Einhorn or Soros or Julian Robertson, and it’s such a shame that there’s not like a Wikipedia or resource for these somewhere. And the world’s gotten a lot more transparent back in the early day’s hedge funds were so secretive and they didn’t want people reading their stuff, but the world’s really changed. And so my idea was, let’s start a website, we’ll archive and link to all these old letters. Not only that, the 2.0 version will reach out to all these hedge funds and say ,”Hey, you can claim your profile here and it be verified, and if you want to post all your old letters, I’m sure it’ll be seen as an amazing thing by the community, and you’ll get traffic and interest.”
I still think it’s a great idea and I think it used to get a ton of traffic, by the way, the website because no one is writing about this long tail hedge of funds. You Google some of these hedge funds, even still like the number one result is hedge fund letters, because there’s just not that much content. So I think that would be a really fun area. I don’t know anyone that’s archiving the letters still.
Jeff: Well, listeners, if you hear this and you actually look up hedgefundletters.com, we did actually put that site together. So there’s something up there. You can go there and see the idea and then…
Meb: News to me.
Jeff: And a crew, that’s up there.
Meb: Okay. No, I know. I just didn’t know there’s anything there. So apologies for the content, by the way. But I think it’s a good idea. It’s a simple one it’s not one that’s hard. So if you’re a young guy or someone who just loves hedge funds, like, that’s probably a million dollar idea. You could probably get a million dollars as well.
Jeff: So it’s sort of the second evolution of that which ties into your Wirecutter idea was actually would be to read all of the old hedge fund letters, and scrap out the stuff that’s relevant only to say what was happening in the market ten years ago. You find the pithy nuggets of wisdom that are timeless. So you find something has a learning lesson, and you present that versus having to trudge through countless pages of stuff that’s no longer applicable.
Jeff: All right. Newsletter sampler.
Meb: This is one that we kind of built and then it’s again just sitting there. The concept was for those who aren’t familiar, Mark Hulbert, one of the best writers out there for the longest time wrote an article…or sorry, newsletters and I am blanking on what it’s called.
Jeff: Hulbert Digests.
Meb: Well, yes Hubert Digest where he would review and track the performance of all the investment newsletters. And not surprisingly, many of them weren’t very good, but there’s a handful that have been consistently great, etc. so provided to services and not only is shown some disinfectant light on the newsletter space which is notoriously snake oily, but also it had a way of tracking some of the best ones, and there were some good ones and great research and we subscribed to a handful of professionals well as broad-based newsletters today. So my concept was, it would be nice to A, at the very end, so Hulbert stop publishing that about a year or two ago, which is a crying shame. It really is terrible.
And so, the first concept was like let’s at least just have a white pages of investment newsletter space. So you wanna go somewhere and learn about all the investment newsletters, here you go. Second would be you could reach out to all the newsletter and say, “Hey, send us a sample. We’ll post them on the website that way people can look at these newsletters and get a lot more information that’s all in one place.” Lastly was hey, you could do a paid her freemium subscription where you send out once a week a different newsletter.
So that way people get an exposure. You charge like a 100 bucks a year say hey. And the newsletters are lucky because they get potential new customers and signups, and the investors like it because they get a different newsletter every week. That’s a cool idea. Again, that’s something that I would like it, even the crappy ones. Like it would be fun just to flip through.
Jeff: But not only that, but even just the tiniest bit of information in the space would help because there are literally thousands upon thousands of newsletters out there, and it’s hard to distinguish, all right, which one has 200,000 subscribers and it’s legit and it’s been around for a while, versus who’s doing this in a basement and has 20 followers, because they all have websites and you can’t really tell because there’s so little information.
Meb: Yeah, and there’s some really some amazing ones where every time I get a newsletter, it’s like for me, it’s like Christmas Eve. Christmas morning where they’re so good and packed with information. I mean, we’ve mentioned Jared Dillian’s, by the way who just started a podcast, and is in his newsletter called The Daily Dirtnap. I read it every day and that he’s a great…part of his because he’s a great writer. He’s into entertaining has been right, but it’s just it’s a fun read. So, I’m sure there’s a lot out there that I don’t even know about that I would like to read.
I feel the same way about Leuthold Green Book, but that’s institutional and I don’t think could pay for it if you wanted to, maybe you could. Anyway, so this is a website we actually have up. It’s a skeleton website. If you wanna run with this, please reach out to Jeff. This is something that I think is, we’re going to hire another Jeff. If you wanna take over and then be Jeff’s assistant also, email Jeff. If you would like pizza from Domino’s on Saturday night, email Jeff. All right. So that’s a cool one. Check it out, move on.
Jeff: Tactical robo-advisor.
Meb: Yeah, I mean, this is one that is a good example of, and we’ve been writing about the robo-advisor space ever really since it got started, and it’s actually played out. Look, will be the first to admit mistakes and dump predictions we’ve made, but the robo-advisor space has played out really exactly like we predicted, which was there’s a lot of innovation but the incumbents have an incredibly unfair advantage, that are the issuers that have their own funds, because they can launch at a much lower fee, and also have the scale of their current client base. So that’s what’s played out Vanguard and Schwab were late to the game, but Vanguard, I think, is now at like 70 billion. They raised more at this past quarter I think than all the other robos combined. And then Schwab’s number two and then Betterment and Wealthfront, Betterment and then Personal Capital. So that’s really the top five.
Jeff: Do you think this is going to squeeze out anybody who doesn’t have their own in future?
Meb: I think everyone have one no matter what. So Kraft, Morgan Stanley, they’ve all announced digital offerings. And again, we were talking about earlier, for someone who’s used one as well as the clients use them, no one will ever go back like it’s such a better interface. So we partner with Betterment on ours. I mean, clients don’t pay commissions on the trades. So, you go back to paying $20, $40 commissions, why would you ever do that?
It’s such a no-brainer. So but there’s some other things that have evolved that we didn’t really foresee in it and part of it is that, the best business model has become the cyborg, which is a digital advisor paired with the humans. So Vanguard’s 30 basis points comes with an advisor. Schwab did zero, but then they also came out with a 28 basis point that comes in advisor. Betterment pivoted to including an advisor for a higher fee.
Jeff: How much is the advisor doing right now?
Meb: I mean, I don’t use any of them. Granted our buddy Steve Lochon [SP] the other day was telling everyone he’s like, “Just sign up for all of them, a lot of them don’t have minimums.” If you’re an advisor, and you don’t have an account, every single one of the robo-advisors says you’re an idiot because it’s…for most of them, yeah, he’s like, “You should be doing your due diligence and see what the competition is doing.” Some have minimums. So we didn’t really foresee the cyborg being the killer app of this, meaning, it’s an advisor that’s lower cost, but it still has a digital solution. I think Wealthfront of the only, I mean there’s a couple but while front the only one at scale that still has an added advisory side.
So but the floor has been set. So if you’re a advisory platform, digital advisor that doesn’t do planning or offer you know human-based element the floor is zero. So that’s been set. We’ve done it, Cambria is done at zero, Schwab’s at zero. So if you’re just doing investment management, that’s now the floor. And the problem for a lot of advisors is that, the floor on the advisory side is really that 30 to 50 BIPs. I mean personal capital is higher. They’re up at 80 or 90, and they’re still successful with 4 billion. And let’s be honest here. There’s still, I mean even at what, 100 billion this is meaningless compared to how much AUM, Morgan, Merrill, all these other guys have. But they should be aware and be scared because 30 BIPs is now the floor or the standard.
Jeff: I’m curious on a side note, what do you think about the role for advisors? Let me back up. Now you’ve written at length about how over the long term any legit global asset allocation model is gonna end up in the same place down the road. They might travel different paths to get there. But if it’s well diversified they’re largely going to be the same. So the actual advisor can make himself worth whatever’s fee if he basically keeps his client from doing dumb stuff. So, basically, I mean, if you have some ability just to set your asset allocation model, and then turn away from it, do you need the advisor?
Meb: We’ve also commented on those robos over the years and said, “Look, it’s going to be really hard when we have the next bear market because you don’t have that Chinese wall of someone to talk to, to close your account.”
Jeff: No buffer between you and…
Meb: Yeah, at least if you have an advisor, you can call them and say, “Hey, Jim, I’m freaking out. Can you sell everything and close my account?” And I’ll say, “You know, that’s probably not the best idea because here’s the goals, here’s what we set out to do, this is totally within the parameters, you know, yada yada.” So the advisors are worth at their waiting gold there, so that’s why there kind of this digital cyborg I think is the best offering, where you still have someone. But if it’s like a call center one, or if it’s just you have one in name only, and you don’t have a personal interaction with them, does that count? I don’t know. Probably not, but people behave poorly with advisors too as well. So it’s very dependent on what’s going on in the world and what the bear market looks like. In general I think, if I was an advisor today, I would say, “Look, I’m gonna implement a digital solution and I’m gonna focus like hell on estate planning and tax management.”
Jeff: I was thinking there’s got to be more than just the holding the hand.
Meb: And not only holding your hand, I wanna meet all your children because it’s only one in five accounts where the children inherit when the parents die, keep the same advisor. They move on. They do something else. They find someone they like. So, I would focus all of my efforts on the other stuff, including education as well as just being… I was a concierge but being involved in their lives and being an advisor in my old school way of thinking about it, it was meant to do. And the cool thing is you implement a digital solution, you spend zero time on trading and asset management and commoditize.
Jeff: Yeah. That’s the [inaudible 01:10:44], so you get to focus on the relationship side.
Meb: Now, that’s a nice background for this idea, because we’re not even talking about the idea yet. The idea was tactical robo-advisors. So my point was, when we wrote this, and this is before this even happened, I said that the sponsors and custodians will be impossible to beat here, because they have their own funds. Now if you look at and we’ve done a lot of articles here, I mean, Google, Betterment versus Wealthfront, I think is Betterment versus Wealthfront, versus Schwab, and Goldman, too, all of these guys do the same thing, and that’s not bad. They do a buy and hold, low cost, asset allocation, tax harvest. And there’s some bells and whistles, some have a little more in foreign. Some maybe have commodities, some don’t.
But backed us in 1972. They all essentially do the same thing and that’s fine. But there is zero differentiation, so if you’re one of those, you should go with the cheapest one. Right? And that’s who will eventually win and they’re all…so like I tweeted the other day, I said, “Look the top five robos, they’re all fine. I mean, I’d like some better than others but they’re all fine.” So this way before we even launch one, but I said if you had one that’s different or other ideas maybe, so CREF, TIAA-CREF announced that they’re doing it ESG focused ability. I think Motif did the same thing. He said, “Younger clients care about this, and you can screen out various investments or stocks.” Great.
So we’ve done obviously the Cambria Digital Advisor, we do Trinity portfolios which we’ve talked about at length where it’s roughly half in buy and hold allocations and half in tactical allocations, all with a tilt towards momentum and trend and value. That’s the best way we think we know how. And including a little bit of alts, too. There’s a handful of others. I don’t even know how many of these still exist. I mean obviously Westhoff Architects. There’s one called Huygens H-U-Y-G-N-E-S. I’m terrible with that name. Hedgeable and Hedgewise, I don’t know if those still exist, they probably do. But meaning, you can’t…even if you believed in that world, it’s hard to compete with a Vanguard or a Goldman when they’re charging zero to 30. So if you’re going to do a robo I said consider doing tactical. Anyway, we did it so we’ll see.
Jeff: Makes me think of it’s a little different but research affiliates are not who have the smart beta backtesting, if you could find a way to target that sort of Bolton asset allocation pieces.
Meb: And it is funny because there’s other offshoots. So for example we were talking about Dimensional Fund Advisors the other day. So DFA is a classic mutual fund shop. They only distribute through financial advisors, and so they have great funds, they’re like 400 billion now, very traditional factor based out of the French Fama world and they have a great business model because they attract [inaudible 01:13:26] following. You have to apply to get approved on their network. They send you through classes and it’s a good offering, but the challenge is if you’re an investor the only way to access DFA funds is having to pay an advisor too, and some of his advisors charge 2% a year.
So I said if I was a young guy and believed in buy and hold yada yada and I wanted to be raised a lot of money I said I would become the low-cost DFA provider. I said, you know what I’m gonna do this for 30 BIPs. The goal is one we could find I think was like 50. Asset builder was one of the earliest robo-advisors, by the way, doesn’t get much press. Scott Burns shop who I think is now retired but they are 800 million maybe on DFA funds and so low cost. But most of them around 50 BIPs. I’d come in I said look I’m going to launch a DFA shop and I gonna advertise all over the place. And I’d say look I am the low cost DFA option. You want DFA, great, 25 BIPs, boom. I don’t do any planning but you get DFA funds. I think I’d raise a lot of money, it would piss off a lot of people.
Jeff: This idea has the…
Meb: You make to be angry. DFA they now, by the way, is subdivided on some John Hancock ETF. But anyway it’s…
Jeff: This idea has the biggest scale ability but it also has the biggest seed. Initial seed you need to actually get started.
Meb: Well, you need armor from all the DFA advisors coming to murder you from disrupting their business.
Jeff: When you launched your no-fee fund I will mention here and we’re not supposed to mention names. Were you worried about the market’s reaction to you?
Meb: Yes it is actually funny. I don’t even know if you know this story but there was definitely something amiss. A night or two nights where we launch, NYC called us and was like hey, you can’t launch there’s some this that or that we’re like “what are you talking?” like it was the most meaningless. And they’re like, yeah, there’s some people that were complaining, it was like this weird…I don’t do conspiracy theories. But to me, this was such a conspiracy theory. Someone didn’t want and we’re still the only 0% management fee permanent fund out there. One of the lowest cost now it’s only like 50 million. I think it’s getting ready to eat or maybe somewhere in the mid40s, 50 million. So, it has done nothing to disrupt the entire 2% management fee asset allocation buy and hold world, because that has almost a trillion. Maybe we’re early. We’ll see. Maybe we just haven’t marketed enough. But yeah, that one definitely gets its share of critics, for sure.
Jeff: A little shady there.
Jeff:. All right. Moving on. Free acorn/stash clone.
Meb: What number are we at, 13?
Meb: Oh, we’re getting close to the end. So, acorns and stash, if you’re not familiar and there’s a handful of these other ones are essentially like these savings apps. So we all know that people are terrible at saving. The best way to kind of do this is to automate it or to have ability to take money out of your checking account or whatever. Just the behavioral nudges that make savings and investing easier. So it sounds great on theory, and most of these charge almost all of them have the same business model. They charge dollar month and over $5,000 balance. They’ll charge you 25 basis points for a portfolio to invest it plus fund fees. So, it’s same as every other robo-advisor.
Sounds great, right? And so they’ve literally had millions of accounts signed up, been hugely successful, problem is in every single journalist that writes about this never gets it right. They don’t do any homework, is that they’re hugely predatory. And the reason being is the average account size for a lot of these is $30 to a $100. So if you’re charging $12 a year on a $30 account, that’s 30% fees, and a $100 accounts 12% fees. So a dip shit investor just go open account on Bank of America, or somewhere where you’re not gonna be paying, now there’s other fees of course, if you don’t watch out, or just keep the money under the mattress.
So it makes tens of millions dollars revenue for these savings accounts app. So I said, “Look, if you’re,” we called it, I think one of the articles is “Millennials That Can’t Do Math,” but I said, “What happens if Vanguard or Schwab or someone I mean, Betterment to my knowledge is doesn’t have an account minimum, like, why wouldn’t you just go sign up with one of these that are zero fee?” I guess it’s good marketing and good branding, but eventually there’ll be someone who’s going to launch a clone of these totally for free. I mean, look at Robinhood Trading Brokerage, they launched at zero dollar trading, and they just got a value to I think 1.3 billion. Just do the math, yeah.
Jeff: That much?
Meb: Yeah. What’s his name? The famous Russian investor who’s done a lot of the startups here, just invested around in them. But they’ve amassed a huge user base. So by the way, investors are want to trade Cambria ETF, they’re free on Robinhood. Anyway, I think someone eventually launch a clone of these for free, we consider doing it. A lot of work to build the app or to partner with someone we’re not too interested in but it’s opportunity [crosstalk].
Jeff: Yeah. Account sell less for 30 to 100 bucks, that’s a lot of accounts to make this sizable.
Meb: Yeah. All right. Like I said, not all these with the title of this is “17 Terrible Million Dollar Fintech Ideas.”
Jeff: All right. Keeping on the free theme, what about free ETF trading brokerage?
Meb: So, the challenge I have with Robinhood is I don’t really see a business model. They say they’ll do a…they’ll charge for margin lending, which is not in the investor’s best interest. So, we’ve seen with the Forex brokerages that if you build a company that is predatory or not in your investor’s best interest, it doesn’t last its huge churn. And then or you have like a gold level, and I’m not commenting on Robinhood. I’m sure it’s a great brokerage, but it’s not clear to me how they’ll ever make money. They have a gold level which lets you fund like start trading even before the funds hit and do some other stuff. Early access IPOs, I don’t know.
Jeff: Is it illegal?
Meb: I don’t know. So but my idea was that, so there’s all these brokerages. So for example, you can trade our funds commission free on interactive brokers. And interactive brokers are smart, because they just say “Hey look, you pay the commission what the investor would have paid and everyone wins.” So, Cambria gets assets. The investor gets 0% trading costs. Interactive brokers gets the revenue from the trading. So it’s good for everyone. Anyway, the commissions have come down a ton over the past few years. I mean, five…if you’re paying more than $5 in general, it’s probably too much at this point. But we said if you could do one where it’s totally free but implement that, you can have a sustainable business model. But to kind of benefit like everyone wins, there’s no real downside to me, anyway.
Jeff: Yeah, I like it.
Meb: I don’t wanna be in the brokerage business, so run with it.
Jeff: Free shares ETFs.
Meb: I love this idea. I was chatting with Venuto [SP] first from Tesoro on this. So Mike, if you’re listening, apologies for publishing this idea, but we talked about it a few weeks ago on the podcast anyway, and I’m not dumb enough to do it. But essentially, a lot of people don’t know this but ETFs or mutual funds can often will lend out the securities in their fund, the short sellers, charge a fee. And the good guys, the mutual funds like Vanguard will then return that fee to the shareholders.
So it comes out as additional yield. Well, if you have a low cost fund, so there’s a handful of ETFs, BlackRock, etc. that do this. Let’s say the fund charges 20 basis points, so 0.2% per year Well, they may get 50 basis points in short lending. So in effect, you’re getting a fund that not only doesn’t charge 20 basis points, it’s a negative 30 basis point fees. So you’re getting paid 30 basis points to own this fund. So not only is the fund free, you’re getting paid to own it. That’s just awesome. That’s bad ass, right? A lot of people don’t know that.
So, we live in a world where there’s free funds already. Not my idea. My idea was, “Okay, target the three or four or five areas that are volatile, that so short lending in general, you get a higher revenue on high short interest names.” So usually the names in the news, whether it’s Tesla or stocks that people think are expensive, that are highly shorted, people will charge 1%, 5%, 20% a year to borrow that stock. So you’ve got to be a really confident short seller to pay 20% a year borrow costs. So you’re assuming it’s going to go down more than 20% the next year.
So, my idea was, all right, target three high short interest areas, so biotech, semiconductors, maybe real estate, even the Russell 2000 launched a suite of 0% fee funds, so the most that fund can charge is 0%. You undercut obviously everyone. So you should gain a ton of assets, and the prospectus you say, “All right. We’ll keep the first 50 basis points or short lending, and then we’ll return the rest to shareholders.”
Jeff: What do you know about any historical case studies of short lending blowing up on the investors?
Meb: It’s all in the design, so they require collateral. So for example, if we lend you our shares of Tesla, typically the short seller has to pledge whatever the amount is in cash or T-Bills or something, plus like 120%. So you got to 20 and a nugget is marked to market nightly. And so, the custodians who manage this process, take a fee for doing it. So usually for the bigger guys, it’s like 80-20, 90-10 to the fund company and 10% of the custodian, and they manage it. And you can write in whatever you want say “Look, I want to be as conservative as possible. We’re only gonna work with the best names. We’re not working with bucket shop out of Jersey that no one’s heard of, that’s gonna be trading in these names that doesn’t post collateral,” or you know whatever it is, you can be conservative. And on top of that, you cannot lend out a high percentage. There’s a lot of things you can do to mitigate the risk, and you can stop at anytime, of course.
Jeff: I’m curious at the opening of this little idea, you mentioned you’re not stupid enough to do it. This sounds interesting.
Meb: We have enough ideas that we launch funds where I’m like, “This is a brilliant fun idea, and no one seems to agree with me. This fund sets at $10 billion.” And so that’s a real cost. But then again, I see funds launched and they go to a billion dollars that I think are stupid as well. So, who am I to know? I think someone will do this. And it’s funny because there is a laundry list of very large failed ETF providers, that when I say a “very large” meaning they probably manage in the hundreds of billions elsewhere, and they don’t know what to do. Are they going to launch another smart beta large cap value fund? I mean, come on, they’ve already missed the boat. They don’t have any ideas. They’re bankrupt as far as a brand or what to put out. Here’s an idea for you. So, you guys run with it.
Jeff: All right. There you go.
Meb: We’ll sell you the domain if you want it.
Jeff: Two more. Quant cookbook.
Meb: This is fun. And not technically Fintech, but it was inspired by some stats Quant stuff. There was a 538 post Nate Silver site on ranking videogames…or no, board games by their Quant ratings. And so we talked about Wirecutter that does this curation of various sources. And so our idea was, there’s an area everyone likes probably the number one bookselling category, if you want to make big money in books. And ironically, it’s probably self-help and weight loss and cooking. So the two are diametrically opposed. And we said, “Look, there’s all these websites that have recipes, and if you…and they have thousands of reviews from many of these recipes. Why not curate them and find the highest rated ones, and granted if it’s a five-star recipe with 5,000 reviews, chances are pretty good.”
So we wrote a post on the blog where we found, I don’t know, the 20 best recipes on the internet. And it was funny because a lot of them a lot of these cooking websites are horribly designed, like you couldn’t search them, you couldn’t rank them. You couldn’t do anything. You could find the recipe page for apple cobbler and would have a rating, and that’s it, like, you couldn’t go to the…anyway. So it’s someone with some programming ability could write this cookbook and it was interesting because a lot of the recipes are very comfort food. It’s mac and cheese, it’s the world’s best lasagna.
Jeff: Mashed potatoes.
Meb: Yeah. I mean, you’re not getting sous vide pork chops with lemon rosemary sauce. I was like, “I’m going to cook some of these.” And I cooked some and they’re great, but it’s an interesting idea for a cookbook. So if you decide, or a website. There’s a better recipe outside out there that one could go source all the other recipe websites, and just do a simple ranking of the world’s best recipes. I wonder if that’s it. Well, because I don’t like wasting time on nonsense. So here’s a good example. How many restaurants you go to or the food is just crap? How does that restaurant not…I mean, I know your taste, so there’s your bar is much lower. How did that restaurant, how is this crappy hamburger joint not go down the street to in and out and five guys and a thousand of good hammers. We’re just gonna copy what they do. And Lisa’s like, “Well, let’s take a Shake Shack’s recipe. They just put out a cookbook and we’ll do Shake Shack with our twists. Like, that’s not that hard.”
Anyway, so, the same thing with recipes, why waste your time and again, if there’s a common theme to these ideas that that’s probably it, curating and ranking, because there’s no need at this point to be cooking shitty recipes and listening to terrible podcasts. Way more?
Jeff: On that note, last one. Forever fund.
Meb: By the way and Jeff is skipping like two or three that he wants to run with that he thinks you people will steal and or is too good of an idea to share. So, blame Jeff for not giving you a couple of the best ones. Which one is this? Oh, forever fund. This was an idea, we spent a lot of time talking about investor behavior and, “Hey, put your money where your mouth is. If you really are a long term investor, then act like it.” So we said, “What are the best ways we can behaviorally nudge people to do the right thing with investing?” And so, they have our ETFs/ They can sell them. They have a separate account. They can close it.” There’s no real barrier between them being stupid.
And so, one example was I said, “Let’s start a fund and you could do it as a mutual fund, and say ‘All right. It’s 0% fee. So we’re not gonna charge anything.’ And you know invest another ETFs, another ETF. So it’ll be low cost, less than 50 BIPs, all in give you a globally asset allocation portfolio. So kick ass fund and asset allocation low costs, tax efficient.” However, we’re gonna implement both a penalty and a reward system. So the penalty is it’s going to be a ten-year declining redemption fee. So year one, maybe it’s 5% or 10%, maybe should be really just egregious, and it declines all the way to year ten where it’s zero. So if you hold the fund for ten years, and maybe it’s five, I don’t know. We’d figured out, but ten seems sufficiently long.
Jeff: You need to be at least one business cycle, at least.
Meb: So ten years, if you hold it for ten years, there’s no redemption fee. But people don’t really respond as I was brainstorming the Jason’s Wag about this other day, and he said there was actually a fund that did a long lockup and then it was very successful until 1999-2000 after everyone sued them.
Jeff: And then litigation.
Meb: So this wouldn’t have a lock up, but to say you’re paying a fee on the way out. Tough. But the beauty is I would say, “Look, we’re gonna call this the irrationality dividend or the long-term thinking dividend, or something where we say, ‘Everyone who paid that redemption fee for this year, gets dividend into all the other investors in the fund as a bonus. Right?” So someone short-term thinking sucks for them, but it’s gonna get dividend it out all the investors that stayed the course. Like what a cool, so not only do you penalize people who are acting stupid. You reward people for acting long term.
Jeff: I would love to see sort of the mine warfare. Let’s say two neighbors who both get into the fund. Things start getting a little south, one neighbor comes over the other, trying to get them to sell out of the fund.
Meb: I mean, there’s got to be some potentially amazing arb opportunities where like let’s say you had another 2008 in the fund, was it a billion dollars and then everyone panicked and sold. It went down to 300 million, but you have all these massive fees. Then if you’re an investor, I mean, you have to get some huge dividend from sticking around. Anyway, I like that idea. We have enough funds out there right now that are underwater. So, maybe when we hit, what’s a good number, we launch this, hit five billion, ten billion.
Jeff: Sure. It’s going ten. We initially talked about doing some market commentary, but we’re an hour and a half deep. Why don’t we save that for maybe do another one later this week or throw another podcast out next week?
Meb: Great. Well, look, I mean also listeners, if you got any cool ideas that we haven’t thought of, if they’re really terrible, send them over to Jeff. If you want to be Jeff’s assistant, send him an email at email@example.com, or feedback @mebfabershow.com. Anything else Jeff you think about?
Jeff: Not on this one.
Meb: Great. Awesome. All right. Well, it was a lot of fun. I’ve run out of voice. Thanks for taking the time to listen today, you guys. Hey, please leave us a review. We’ve had 40,000 downloads on episode on average now, and a 100 of you have left your reviews. So that’s like .01% of you. So, get off your couch. Five minutes. You don’t need to get off your couch. Just go to iTunes, leave a review. We read them all. So it’s really thoughtful, we would like it. There is gonna be a lot of show notes for this episode. But always you can find the rest to mebfaber.com/podcast. You can subscribe show on iTunes, and thanks for listening, friends and good investing.
Sponsor: Today’s podcast is sponsored by YCharts. YCharts is a web-based investing research platform that I’ve been subscribing to for years. In addition to providing overall market data, it offers investors powerful tools like stock and funds screening, and charting analysis with Excel integrations. It’s actually one of the few sites that calculates both shareholder yield, as well as ten-Year P/E ratios for stocks, two factors that are notoriously hard to find elsewhere. The YCharts platform is fast, easy to use, and comes at a fraction of the price of a larger institutional platforms. Plans start at just 200 bucks a month, and if you visit go.ycharts.com/meb, you can access a free trial, and when you do, you’ll receive up to 500 bucks off an annual subscription. That’s go.ycharts.com/meb.