CNN Radio: Europe, Bond Vigilantes and More
I joined the guys on CNN radio last Friday to discuss some of the bigger macro topics impacting markets today. Some of the topics:
- Why we’re closer to the end of the Euro crisis than the beginning.
- Why Europe has to move towards fiscal union or fully disband.
- Why the fiscal union is the more likely outcome.
- Fiscal union or some sort of Euro bonds will mark the definitive end of the Euro crisis.
- The end of the Euro crisis will mark the start of a long-term secular bull market.
- Why talking to blonde women is better than talking about Europe’s financial woes.
- Why Germany will not let anyone defect from the Euro.
- Eliminating the solvency risk is the key to fixing the Euro.
- Why the bond vigilantes aren’t coming to Japan or the USA.
Listen to the full interview here.
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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12 Comments
“Why we’re closer to the end of the Euro than the beginning.” Should read ‘Euro crisis’?
Instead of ‘blonde’, suggest ‘attractive’. or even ‘interesting’.
Thanks Colin. I’m an equal opportunity lover of women with all different hair colors. But the interview mentions a “blonde”. No guarantee that all women or blondes are “interesting” either. Boy, I am going to get myself in trouble if this conversation continues.
Thanks Cullen for the clear explanations. You’ve gotten very good on radio.
Does that imply I used to be “very bad” on radio?
Just kidding. Thanks. Hopefully this helps tie together some big picture items.
“The end of the Euro crisis will market a long-term secular bull market.”
Interesting statement. Why? There is still going to be vast quantities of USDs and Euros in the system?
If you eliminate the solvency crisis then the big risk has been eliminated. Euro bonds or a fiscal policy of some equivalent won’t fix the Euro entirely, but it will remove this huge risk and stabilize the region enormously. Sort of like the ARRA in the USA combined with the bank bailouts. This didn’t fix the USA’s problems, but it eliminated the big risk which was collapse of the banking system. Same thinking here.
great interview — I’d subscribe to your podcast. maybe read the weekly Q&A into your Mac.
anyway – continuing the ARRA parallel, would you say Europe (non-bank) stocks are priced as the US was in late 08 / early 09 — there’s the risk of that final plunge (Feb 09), but overall attractive in a longer time-frame? Interestingly ARRA came into existence 2/17/09, and immediately we had a near-20% drop to the 3/09 lows…
Well, I don’t really do value investing so my opinion on pricing probably isn’t much use.
Hi, Cullen.
This made me wonder again about the series of youtube videos you had made earlier. I understand that after helping to develop MMR, you may not value those earlier videos as much. But I’m hoping you will make a new series. That format is very helpful for me and my own understanding (and probably what I might first like to point someone else to who is unfamiliar with the concepts).
I’ve been meaning to redo them. Haven’t found the time yet though. Hopefully soon.
The REAL danger for any government is actually the lack of inflation (called deflation, remember ?) for both the US and Japan. Japan (in deflation) was able “”to kick the can down the road”" for 20 more years because the rest of the world was still leveraging up and absorbing japanese products (e.g. electronics).
People at the US Treasury actually have said that they don’t worry about the growing amount of debt because they said we’re going to pay back those debts with cheaper USDs. And that’s why a strengthning USD is actually the last thing the Treasury wants. Because it makes rolling over that debt and paying interest much more difficult. The Treasury overlooked that in deflation the senior currency becomes chronicly strong. The Treasury (or any other central bank) or government ever planned for deflation.
“• The end of the Euro crisis will mark the start of a new long-term secular bull market” (is this what you meant to say, Cullen?).
Cullen, I agree with this point, but that is only because I believe that the Euro crisis will not end for at least 2 more years, and possibly three. Then the new long-term secular bull market would start about 2015, about 15 years after the March 2000 peak in the Nasdaq and SPX. Secular bulls and bears have been averaging a length of between 14 and 17 years.
There could be a false start where all EZ nations agree to Eurobonds, but then later one or two renege on agreements and back out, perhaps due to an election with popular sentiment running against the loss of sovereign budget control.