The Maleficent 7

+ Charlie Ellis, Paul Singer, Michael Cembalest, Niall Ferguson, Chick-fil-A & More

Author

The Idea Farm
March 16, 2025

Sponsored by

“The world economy is like an ocean liner without life boats.”

— Stephen King

Research

With as the “Maleficent 7” pushing the S&P 500 index to the brink of correction, Goldman Sachs updates their S&P 500 EPS and valuation forecasts for 2025.

Source: FactSet, Goldman Sachs Global Investment Research. As of March 11, 2025.

Michael Cembalest’ 15th annual energy paper examines the current state and progression of the global energy transition. It covers the speed of the renewable transition, electrification,, the high cost of decarbonization in Europe, nuclear power, the LA fires, Trump 2.0 energy policies, and more.

Historian Niall Ferguson introduces a principle suggesting that a great power is at risk of decline when its debt servicing costs surpass its defense spending. This threshold, termed the "Ferguson limit," indicates a tipping point where escalating debt obligations limit the resources available for national security.

Ferguson uses historical case studies to show it is rare (but not unprecedented) for a great power to return to the right side of the Ferguson limit. For context, the United States' net interest payments reached 3.1% of GDP last year, overtaking defense spending at 3.0% for the first time in nearly a century.

Note: A shorter version was published in the Wall Street Journal.

GQG makes the case for emerging markets, specifically India, Indonesia and Brazil. They highlight improved economic policies, healthier banking sectors, reduced leverage, and robust corporate earnings.

McKinsey highlights a resurgence in private equity (PE) activity amid ongoing global uncertainties. After two years of decline, 2024 saw a notable rebound in dealmaking and distributions.

Source: McKinsey & Company, PitchBook, SPI by StepStone. As of September 30, 2024.

Bonus Content

Verdad finds that roughly half of the valuation differential between the U.S. and international stocks is from the domicile of listing. Link

Owen Lamont explains what, if anything, the spending on AI capex means for the market. Link

The Wall Street Journal wrote about Chick-fil-A’s obsession with optimizing the drive-through process by using drones and ‘game film.’ Link

VenCap’s David Clark highlights the return of the power law in Venture Capital and what he expects for the industry going forward. Link

Emerging Markets Shareholder Yield

The Cambria Emerging Shareholder Yield ETF focuses on high-cash distribution companies located in emerging markets.

EYLD’s process goes beyond focusing on just dividends alone to include buybacks and debt paydown, a trio collectively known as shareholder yield. The result is a portfolio of companies that rank highly on shareholder yield and offer strong free cash flow characteristics.

Get emerging markets exposure with companies focused on dividends and buybacks with the Cambria Emerging Shareholder Yield ETF, EYLD.

Distributed by ALPS Distributors, Inc. Investing involves risk, including possible loss of capital. To determine if this Fund is an appropriate investment for you, carefully consider the Fund's investment objectives, risk factors, charges and expense before investing. This and other information can be found in the Fund's full or summary prospectus which may be obtained by calling 855-383-4636 (ETF INFO) or visiting our website at www.cambriafunds.com. Read the prospectus carefully before investing or sending money.

Podcasts

2/21/2025 - 58 minutes

Legendary investor Charlie Ellis discusses his path through finance, the evolution of his investing philosophy, and his new book, Rethinking Investing.

2/26/2025 - 39 minutes

One of the world's most influential activist investors walks through the intricacies of activist investing and why he says the market is "just about as risky as I've ever seen."

What Else Is Happening

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