Meb Faber Endorses Tim Draper’s Cash Management Strategies

Meb Faber, the founder of Cambria Investment Management and a renowned podcaster, recently spoke about adopting a strategic approach to cash management during financial uncertainty. According to Faber, focusing on yield and capital appreciation can effectively navigate market volatility and achieve long-term financial stability.

On March 24th, Tim Draper, the renowned American venture capitalist, shared valuable insights on fund management amid the current financial turmoil triggered by the recent Silicon Valley Bank (SVB) crisis.

His observations spanned various critical aspects, such as risk diversification, fraud prevention, vulnerability awareness, and the importance of yield and capital management.

Faber backs Draper’s financial tips

In light of Tim Draper’s recent tweet regarding inflation, investor Marc Faber shared his thoughts. Faber emphasized that the quest for yield and capital appreciation is especially significant in times of higher inflation.

#3 is particularly meaningful in a time of higher inflation….my non-consensus view here…https://t.co/yBkjXezTmn

— Meb Faber (@MebFaber) March 24, 2023

Draper highlighted the crucial role of yield in cash management, emphasizing its significance for several years. Draper advises that despite lower interest rates and inflation, the yield has remained a significant factor in cash management.

Draper mentioned that, while discussing the current influence of yield, he emphasized the importance of understanding risk and return. He added that since there are high-interest rates and inflation, it becomes crucial to be aware of the risk and return on a company’s cash, which could be mission-critical. Draper also noted that a company’s treasury department is typically focused on conserving money, which differs from regular times.

It is worth noting that Faber not only responded to Draper’s arguments but also highlighted his unconventional investment strategy. On March 5, 2020, he released a non-consensus portfolio, emphasizing the potential risks of financial investments and challenging the commonly held belief in the safety of Treasury bills.

Inflation’s hidden impact

He explained that the returns of T-bills seem safer, but he quoted, “not exactly.” He said that nominal returns are an illusion because they don’t consider inflation and that what matters to any investor is the returns after inflation or actual returns. He added that if you measure the returns of T-bills after inflation, you would see a different story. However, he pointed out that this is a story most investors have yet to see.

Draper went into further detail regarding various risky elements and stressed the importance of awareness. He even mentioned that the government is not immune to these risks and is “at risk of becoming insolvent.”