Radio Appearance: What Will it Take to Get the Economy Going Again?

I joined the guys on CNN radio again this week to discuss a wide range of topics.  Some of the things we touched on:

  • Why there is no quick fix for the economy. ┬áThe only REAL fix is TIME.
  • Why there’s a case for more stimulus.
  • Why the Fed’s policies are not the optimal fix.
  • Why the one channel through which monetary policy is most effective could actually makes things worse.
  • Why this was never a banking crisis.
  • Why housing doesn’t have much downside, but is unlikely to enter a v-shaped recovery.
  • Don’t run out and buy a home just because interest rates are low.
  • Why rates are unlikely to rise any time soon.
  • Why gold is still in a bull market.

You can hear the full segment here.

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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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  • http://www.stableinvesting.com Ryan Melvey

    Hi Cullen,

    I thought your take on gold was spot on. I was wondering what your thoughts were on Harry Browne’s Permanent Portfolio. It is basically a balanced beta lazy risk-parity-esque portfolio.

    25% Stocks (Prosperity)
    25% 30 year Treasuries (Deflation)
    25% Gold (for the purposes you described)
    25% T-Bills (Hedge against “tight money” recessions)

    It is held passively regardless of economic conditions.

    Thanks,
    Ryan

  • Jay

    Don’t mean to speak for Cullen, but I can just about guarantee you he’d view that 25% allocation to gold as borderline insanity. Even with a bullish near-term outlook on gold, I’ve seen him state previously that gold should be used as an insurance/hedging mechanism and make up no more than 5 to 10% of one’s portfolio.

  • http://www.orcamgroup.com Cullen Roche

    Well, I can’t and don’t provide investment advice here so I can’t really talk portfolio specifics. But I agree with Jay’s general comments. I would not design a portfolio with a 25% gold position for ANYONE. The way I construct portfolios is totally against having a non-performing asset as a key piece of the portfolio. I’m not against lazy portfolios for the investor who doesn’t want to actively manage a portfolio or doesn’t find it necessary, but this is not the one I would pick…..

  • http://www.stableinvesting.com Ryan Melvey

    Fair enough. Just thought I would test the waters because the way you described gold’s role in a portfolio is exactly how I use it.

    IMO 25% is necessary to acheieve risk parity with the aforementioned asset classes, but I can understand if risk parity is not for you.

    Thanks,
    Ryan

  • Jim

    Hi Cullen,

    I thought you really nailed it with your comments on residential real estate. Generally speaking, especially when you have the responsibilities of a grown-up, we’ve been long overdue to think of a house primarily as a roof over your family’s head, and secondarily as something that you might make a few bucks on down the line. Personally, I’m happy to see some air taken out of home prices in my neighborhood of 30 years, where young families were being priced out. It keeps us engaged in critical residential institutions like schools and parks, and that’s a healthy thing.

  • Mikael Olsson

    CR: Now do the same over here in Europe please. Assuming you can even find a radio show that discusses these things that is. =/

  • Dismayed

    It’s clear that the interviewer does not understand the monetary system.

  • Cowpoke

    I would substitute that 25% Gold for a basket of 2% of each, Gold, Silver, Copper, lumber, Oil, Gas, Orange Juice, Pork Bellies, Rubber, Steel, Aluminum, Molybdenum..in other words, Diversify your commodity exposure if you are a minerals heavy weighted investor.

  • micro2macro

    Off Topic, but I just cant help myself…….From Great Investors
    Best Ideas Conference.

    Bass: Don’t Own Japan

    Bass said that there’s 80-200 trillion in global debt. In 18 months Japan will structurally fall apart. “There’s no chance at Japan repaying their debt.”

    He says psychology is important so look at anchoring bias. It’s important to think about how others think about debt. Japan’s debt to GDP is the worst in the world. Their debt is 25x their revenues. (David Einhorn was checking out Bass’ slideshow).

    Bass said there’s 3 axioms that are actually false:

    1. Positive current surplus, Japan not self-funding: This is flat false he says.

    2. Bank of Japan not monetizing the debt: Bass says they’re already buying 2/3rds of the bonds today.

    3. Retail investors will always support JGB’s: Bass says Japan has a secular population decline.

    We highlighted how in the past Bass has said that Japan would be selling more adult diapers than kids’ ones and that’s now the case. He also pointed out how the country is having “adult diaper fashion shows.”

    He also illustrated how Japan is trying to sell JGB’s by showing advertisements of a schoolgirl band selling them and sumo wrestlers pitching JGBs.

    Touching on the Softbank/Sprint deal since it was mentioned earlier in the panel by Lee Cooperman, Bass noted that Softbank paying 20 billion yen to buy broken telecom is Softbank exporting yen as investors are starting to flee the currency.

    Bass says that Japan has one of the “largest structural fiscal deficits in the world.” He doesn’t know when exactly this collapse happens as this could go on for a few years? He notes the timing on this sort of thing is very hard to peg, but it will “absolutely happen.”

    He wrapped up talking about playing options on this scenario because if it happens, you get paid a ton. But in the mean time while you wait for it to happen, you only lose a little. For more on this manager, we’ve also recently posted up Bass on Europe and how he’s investing.

    Read more: http://www.marketfolly.com/2012/11/kyle-bass-on-supermedia-debt-japan.html#ixzz2B2XwJPXN

  • http://www.stableinvesting.com Ryan Melvey

    Dismayed,

    Yeah I thought Cullen was going to jump in and address some of his US solvency non-sense, but Cullen (probably wisely) took the more diplomatic approach. I just worry that the deficit hawks mentality is so ingrained that it will become increasingly difficult to dislodge in the future.

  • http://www.orcamgroup.com Cullen Roche

    I’ve learned that radio shows aren’t the time to pick those battles. There’s not enough time. Plus, I think I am making a lot of progress with these various shows. If you noticed, Dan is open to deficits via tax cuts or even “efficient spending”….That’s very good progress IMO.

  • DAB

    Yeah, I was a bit surprised by what he said and your responses, but after reading your explanation it seems like the prudent way to do these things.

  • Mikael Olsson

    Japan is trailblazing here. Are they monetizing the debt? Of course they are. Is it working? You betcha.