Bloomberg Surveillance Appearance

This was very cool and thanks to all the people who reached out with words of support before and after the appearance. I was definitely a little nervous heading in.  Thid was my first time on Bloomberg and I was lucky to be on one of my favorite financial TV shows – Tom Keene’s Surveillance.  The segments are very fast and the show is done so professionally that it flies by, but I tried to get some big picture points in when I had a chance.

Here’s a short summary:

  • Cyprus is a symptom of a much larger unworkable currency within Europe.
  • The Euro crisis won’t end until the Europeans make some permanent changes to the foundation of the money system.
  • As long as recession risk remains low you need to remain cyclically bullish about US equities.
  • Europe’s risk/reward is far less favorable given the erratic behavior of many Euro stock markets.
  • The key to understanding the difference between the USA and Europe has been understanding the deleveraging cycle and the dramatic impact that the decline in net investment had while the private sector pays down debt.
  • Understanding the recovery in household debt has been key to the improvement in private investment and the slow crawling recovery that has been all about incremental improvement
  • Unfortunately, I didn’t get too much into MR and some of the monetary stuff. Not that you’d want that anyhow….

Clip 1:


Clip 2:


Scarlet Fu also picked up on my “poverty effect” piece here. She discusses the big declines in some European markets despite all the intervention from the ECB:




Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Tom Brown

    Cullen, this is great! We can clearly see and hear you (unlike some past interviews), and you had an opportunity to get some important ideas across. I also like Scarlet’s piece. Really nice… well please remember us when you’re asked to do your own show. ;)

  • Frederick

    Nice job CR. I hope you get on TV many more times so you can expand on the message.

  • JL125

    Congrats – It was because of Tom Keene’s mentioning of your web site many years ago that I first visited your site and ever since then, I’ve learned a lot and visit your site on daily base. You probably don’t remember but I asked you what your thoughts was on poker during the NCAA.

  • Cullen Roche

    Thanks JL! Glad you’ve found the site valuable.

  • Ken

    It’s good to see you on the tube Cullen. Really nice job.

  • Indignado

    Nice one Cullen! Congratulations.

  • Anonymous1

    Cullen, you seem like a very nice fellow but honestly the statement “as the consumer takes on more debt it’s a sign of health in essence” made me laugh. How well did the debt work out from the last cycle?

    ps I was surprised by your frequent use of the “yeah” vernacular

  • Tom Brown

    I believe it’s true to say that ALL our dollars (paper & electronic) are based on debt (mostly private, but some gov too). If *somehow* (and that’s a BIG somehow), circumstances were such that as many dollars that are out there were used to pay off all these debts, then all our dollars would disappear (and we may still be left with some unpaid debt). Of course this would NEVER happen… first of all, some people hold dollars which are “permanent” in that they’re unencumbered by debt personally. So how exactly are they coerced to give them up so somebody else can repay their debt?? For example, Person y in this scenario:

    Y’s money was created through x’s debt, but y hold’s no debt herself.

    So back to my point…. and what it it? The point is that moderately expanding debt means more and more money is being created. That’s a good sign.. it means there’s demand for that money, and that money is probably circulating.

    The opposite is almost always a bad sign. If debt levels are shrinking it’s a sign that money is not being used constructively on real goods and services… it’s being used instead to shrink balance sheets (pay down principal and interest). Every dollar of principal repaid, is a dollar less in circulation. However good that might be for an individual, the economy is going to suffer if that’s what MOST people are doing. Now of course this kind of correction is unavoidable if there was a bubble. So I guess you could argue that it’s a painful but necessary step to some degree. But regardless, it’s a sign that times are tough.

    Also I’m not saying that crazy fast growth in debt is good either. That’s probably a sign that a bubble is expanding.

    Could you argue that the optimal solution is neither expansion or contraction of debt levels? I suppose that could indicate an extremely stable situation. Somehow I always think this is what Austrians would consider to be ideal: A gold standard, with a fixed amount of gold out there, and no fractional reserve banking… in that situation being in debt truly does depend on someone else having saved a surplus. Of course that’s not how our system actually works. Not even close!

    At least that’s my take on it!

  • Cullen Roche

    I can see how that comment might have come across badly. The way I’ve been viewing this whole macro situation though is through understanding the weakness in the economy caused by the de-leveraging. So, the consumer has been paying down debt because their balance sheet couldn’t handle more debt. It might sound odd, but in a debt based money system, the improvement in balance sheets actually leads to MORE debt accumulation. That’s a good thing over time as it’s a sign that the consumer’s balance sheet is improving. What you don’t want is debt accumulation with weakening balance sheets. We’re not seeing that. We’re seeing a healthy improvement which leads to gradual improvement in overall economic health.

  • Charles

    Unfortunately without discussing MR at end of clip 1 it sounds just like any democrat/keynesian who runs by a business station and says to spend more or stimuli more (even though stimulus is now a bad word even for the Dems). I know you have a far more nuanced reasoning but with the shortness of the interview for someone who doesnt know who you are you do sound like parroting a political “spend spend spend” philosophy.

  • Anonymous1

    The view of re-leveraging as a positive is what one would expect of “group think” within finance, rarely will you hear debt described as a “two edged sword”.

    ps Too much stuffy money talk and you’ll become an old codger. Get a beer and go see a Nickelback show, you know the song…. hey hey I wanna be an investment rockstar:)

  • Tom Brown

    Cullen, how would you go about determining if a balance sheet is “weak” or not? Are you just looking at the sheet itself, or the entity who owns it? Say the entity was a person. Do you consider the person’s salary and job security in the mix? For example do you look at the size of the person’s debts, the riskiness of their assets, and compare those with the size of their monthly income?

  • Cullen Roche

    Trust me, if I’d had more time I would have delved into so much more. I sent Bloomberg a chart of the Kalecki equation and the collapse in net investment and when you piece that puzle together it all becomes completely obvious that deficit spending has offset the collapse in net investment, but the segment just flies by so fast. I just sound like a Keynesian hack reguritating some old tired message, which is obviously not what I believe. It literally feels like you’re on TV for 3 minutes during a 30 minutes segment. It can never do the message justice unfortunately….You need a Charlie Rose type hour to really explain the entire situation….

  • Cullen Roche

    Well, when you understand our debt based money system you realize that “releveraging” is just a fact of the system. Hate to say it, but credit market debt expansion is a fact of the system we have.

  • Cullen Roche

    There are a number of ways to estimate this. I tend to use the flow through the asset stock in order to understand how much flow is healthy within the overall balance sheet. My prediction of the end of the balance sheet recession (which has been pretty accurate) was based on personal income to household debt ratio. So we’re looking at a debt servicing ratio to some degree. How much cash is servicing debt in other words. It’s improved markedly in recent years which has been a big big help to the economy. As I said in the interview, the BSR is about understanding incremental improvement.

    I wish I’d had 20 straight minutes to break this all down. I would have done so in a very concise laymans manner….

  • Tom Brown

    That link showed an empty graph.

  • Tom Brown

    Have you posted that Kalecki chart here?

  • Sixx

    Good job Cullen. One suggestion for TV appearances is to tone down the hand gestures. Can practice by talking with everyday people without moving the arms much. It’s tough, I know, I’m trying to do this myself b/c someone mentioned to me that making large hand gestures is not only distracting but it reduces credibility in the argument (…for some odd social reason or another).

  • Cullen Roche

    I wave my hands because I learned that magicians wave their hands to distract you from the things that matter. This way I can babble and the listener will be so confused that they don’t understand what I am saying. This leads them to believe I am automatically saying something smart.

    Just kidding. Thanks for the feedback. I really appreciate it. I have a few things I need to work on. Too many “yeahs”. My default equivalent of “um” has become “you know?” and the hand waving makes me look like I am painting a picture with an invisible brush….Ooops.

  • Tom Brown

    Too bad you didn’t have a few extra seconds to at least say “but I’m not just regurgitating some tired old Keynesian message here.”

    Even if you’d left it at that… it may have provoked another question from an intrigued moderator, or at least helped to pique interest from the viewer at home.

  • Gary-uk

    I guess you haven’t read much about the issues in Brazil or India, or looked at their stock markets of late.

    Pity Your readers don’t think for themselves, much like Bloomberg viewers I guess.