A Chat Between Two of My Investing Heroes

Most investors have never heard of 'em, but Jason Goepfert and Meb Faber make my short list of favorite investors.   They do incredibly good, original work. And they share it with the world on their respective websites: SentimenTrader.com and MebFaber.com.   Earlier this month, Meb had Jason as his guest on his excellent podcast.   Jason – to me – is THE most knowledgeable and experienced investor when it comes to sentiment.   I got permission from Meb to share a few of Jason's comments with you about sentiment – and how it should fit into your thinking about investing.   Most investors have no idea how sentiment fits into the big picture. But literally nobody is better to learn from than Jason. Here are a few excerpts from Jason from the podcast…   Where does sentiment research fit in relative to valuation and the trend?  

Like our mutual friend Steve Sjuggerud, he looks for something that's cheap, hated, and in an uptrend. So when you kind of fuse all of them together, I think your odds are much better.

Which is more important, sentiment or the existing trend?  

Trend is most important. So that always gets the most respect. Clearly, you know, stocks for example, stocks are in an uptrend. So we try to respect that even if we're seeing an optimistic extreme in sentiment. It's usually not a good idea to just go short just because there are sentiment extremes. So there's always a balance between the two.

If you could only use one sentiment indicator, what would it be?  

It would be nice if there was this one indicator we could all use, one set of rules that we could all use and that would help us all perform. [But] markets aren't easy. That doesn't happen. So I mean, that's the base of it, is respect the trend, and when sentiment hits an extreme, pay attention.

How long is a sentiment extreme useful?  

For a lot of the indicators that we follow… the most effective time frame is somewhere in that one- to three-month time frame.

How did you get into studying sentiment?  

I went to school for finance and economics. I was taught that people are rational. [But working in finance, I learned that] people are not rational, at least not all people. And so that really triggered my interest in learning more about the sentiment part of it, just the emotional part of it.

Today's DailyWealth is short and sweet – but Jason's words have an incredible amount of knowledge and research behind them.   If you want to know what works in investing, I highly recommend you listen to Meb's podcast, The Meb Faber Show. You can listen to the episode where Jason appeared for free right here. And be sure to regularly check out MebFaber.com and SentimenTrader.com.   Those two are sure to make you a better investor…   Good investing,   Steve

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