On this week's Stansberry Investor Hour, Dan and Corey welcome Eugene Fama to the show. Eugene is a Nobel Prize-winning economist and widely recognized as the "father of modern finance."

Eugene kicks things off by talking a bit about his efficient-market hypothesis, whether he believes it's still relevant in today's economy, and how passive investing plays a role in all this. He also discusses what it's like winning a Nobel Prize, the impact of his five-factor model on investing and the rise of factor-based funds, rationality versus irrationality, and the importance of luck in markets. Comparing investing with gambling, he notes...

Lots of the winners are just lucky. They're not good, they're just lucky... You don't go to Las Vegas in the expectation of making a lot of money. You go in the expectation that you know you're going to lose some amount because the house takes [its cut] and the state takes [its cut], and you get what's left over.

Next, Eugene argues against a New York Times article claiming that a PhD in economics won't bring affluence or prestige anymore, laments the lack of new breakthroughs in financial theory/modeling, and comments on the modern competitive environment in economics that didn't exist 60 years ago. Things then take a more personal turn, and Eugene talks about his how he discovered his love of economics and what he wanted to focus his research on...

I worked for a professor, Harry Ernst, at Tufts during the summer of my junior and senior years. And my job was to come up with ways to beat the market. And I was really good at it... Harry always kept a little data out of the sample that I used to fit the models to. And my models never worked out of sample, so there was a big message in there for me that kind of guided me thereafter in looking at models.

Finally, Eugene shares what it was like in Chicago back when the city was the epicenter of financial research, including his experience working with some other notable economists. After that, he gives his opinion on market bubbles. Speaking about the dot-com era, he says that the total value created from the industry is a big part of international wealth today, so it can't be considered a mistake. And he closes things out with a conversation about uncertainty in making predictions...

I look forward. I see this unexpected value going out. But around it there's just an enormous amount of uncertainty that is unresolvable. You cannot resolve it at this point. And that's what we live with all the time, especially investing in equities. It's that uncertainty.

Click here or on the image below to watch the video interview with Eugene right now. For the full audio, including Dan and Corey's post-interview thoughts, click "Listen" above.

Additional past episodes are located here.)

The transcript is coming soon.

This Week's Guest

Eugene Fama won a Nobel Prize in economic sciences in 2013. Widely recognized as the "father of modern finance," his research is well known in both the academic and investment communities – especially his efficient-market hypothesis. Much of his research is focused on the relation between risk and expected return and its implications for portfolio management. On top of everything else, Eugene is among the most cited researchers in economics. A prolific author, he has written two books and published more than 100 articles in academic journals. Also, he was the first elected fellow of the American Finance Association in 2001.

Eugene earned a bachelor's degree from Tufts University in 1960, followed by a Master of Business Administration and PhD from the University of Chicago Graduate School of Business (now the Booth School) in 1964.