Below is the full 2011 Bespoke Roundtable Q&A Mebane Faber of World Beta.


2) What surprised you the most and least about financial markets in 2010?


Financial markets will continue to be volatile and extreme returns are common.  The fact that market returns are not normally distributed has been known for at least half a century.  We don’t see the returns of this past decade as anything out of the ordinary (no black swans here).


6) What are the various indicators that you follow closely telling you right now about where the stock market is headed in the near term (next couple of months)?


Our model (which can change vastly from week to week) currently has us exposed to nearly a full allocation to risky assets.


8) What do you believe is the contrarian call on equities right now?  The economy?  Is investor sentiment currently misplaced?


The biggest contrarian plays right now (at least for a one to two month period) are municipal bonds (especially closed-end funds) and bearish on precious metals.


9) There has been a lot of commentary about the US entering into a “lost decade” similar to Japan in the 90s.  What is your take on this?


Entering a lost decade?   The US has already experienced a lost decade in equities with the S&P 500 having negative returns for the period 2000-2009.    Going forward, we think investors need to prepare themselves for any market scenario, whether inflation or deflation, a secular bull or bear market, rising interest rates or declining, and even the two deflationary decades in Japan that leaves equities 75% below their market peak.


10) In what ways have you had to change your investment strategies over the past couple of years? 


We continue to incorporate more quantitative models into our portfolios that focus on asset price reversion as well as fundamental factors.  However, at the end of the day we are still trend followers that live by the rule “Don’t fight the tape.”


24) How will the new Congress impact the stock market and the economy in 2011?


We think the end of the year and beginning of 2011 are setting up to be quite bullish and we extend the reasons why in a post on our blog titled “Will the January Effect and The Presidential Cycle Combine for a Big January in Stocks?”. 


31) Please provide readers with any stocks that you really like right now and for 2011 and beyond (and why).


In general we do not make stock picks, but we certainly think there are managers that are worth watching as an idea farm of new ideas.  Following managers such as Einhorn, Pabrai, or Klarman can be wonderful sources of stock ideas.  Here is a blog post that touches on the concept and you can also go to AlphaClone to test your own strategies.


You can also view this post as a potential screen for microcap and smallcap ETFs (and their constituent stocks) that could be candidates for The January Effect.