We are going to do a new 3 Minute Macro “Ask Me Anything” edition. It should be out next week or so.
Please use the comments below to ask me anything and if you ask a really, really good question I’ll include it in the video. Each question will include up to a 3 minute response so anything is fair game.
You can also email me here if you prefer that they be privately submitted.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
Stanley
Hi Cullen. Great to see the comments open again! Thanks for all the work you do.
I was wondering if you think the USA could actually default this time around and whether there would be a big impact on bonds? I know it seems far fetched, but it’s starting to feel different every time we go through this debate and the participants seem to be getting closer and closer to actually allowing a default. How realistic is that?
Thanks,
Stanley
User123
What keeps you up at night?
LuckyLou
You’ve stated that deposits fund loans, but banks don’t multiply deposits. I still can’t wrap my head around that. Can you clarify?
Rudy
Mr. Cullen Roche,
Can you explain how QT has a similar impact as rate hikes? Will the bond market be able to absorb the Fed’s balance sheet reduction or will it put downward pressure on bonds? The market seems to anxiously await the Fed’s decisions on rate hikes but little attention is given to QT which will continue for much longer.
Rudy
Scott
Thoughts on the FIRE movement and investing for early retirement?
Jones2
You have to pick one asset for the next 1 year – what is it?
German
Can you recommend any books to better understand macroeconomy and finance? What books were important to you in shaping your vision for finance and macroeconomy?
Mark Pozner
Hi Cullen:
I have never seen you discuss annuities, specifically Immediate Annuities (SPIA’S). I began buying SPIA’S at age 61 about 12 years ago. I have bought a total of 8 ending a few months ago. My last one has a 9.37% payout including return of principal. Academic Wade Pfau recommends taking Bond Investment money to buy SPIA’S for older investors. They clearly provide fixed income until I die. No inflation protection. But increased income can increase savings if you are careful. Future inflation can be dealt with by buying more annuities. This stock market drop has not upset me much because of guaranteed income. At 73, who wants to wait years for stock market to reach new highs? Of course diversification requires still having money in the stock market. But it should also include SPIA’S. That is seldom recommended or discussed. However, the complex of variable annuities offered are mostly sales techniques than real solutions. Thank you for your incisive analyses over the last many years.
Mark
C T Kemmerer
IF you enter the market and experience shortly after a big down event, it takes years of +X% gains to get back to where-ever your were. One never recovers the gain opportunity loss. If then after many(12) years you experience the normal? market performance you may have an overall better status. But if you then experience another big down event, you find yourself back at the same place you started. That is exactly what we had happen being with a major well know advertised financial firm. And we only ever needed income just had to take RMWD’s. Hard to fathom isn’t it?
What do you say then about all the standard investment advice based upon historical data and hype to someone like us now in our 80s?? It seems timing of entry and exit as well as the fees, taxes and management are the major factors??? Thus exit to where and what is the question?
Henry
1. Like Mark, I would also love to hear how you weigh buying annuities
2. From my perspective, stock investors of the last 40 years realized the earnings growth as result of globalization, population growth, and the wide adoption of computers and the internet. As a young investor (26) is it crazy to think the next 40 years won’t be nearly as great? What/who do you think could be the driving factors behind the trends of the next few decades? I am not trying to make a concentrated bet on a country or sector, I am genuinely curious what you think. Thanks Cullen.
Anthony
Cullen,
Regarding the Fed, last April you said, “the subjective nature of discretionary interest rate policy has left them doing what they typically do – looking at 12 month trailing data in a reactive manner and then responding after the fact when it becomes clear that the economy is drunk.” You followed this up two months later with your post titled, “The Fed’s Policy Mistake has Been Made.” Can you explain why then, when people like you and Lakshman Acuthan of ECRI point out that forward-looking data may indicate more of a deflationary risk, the Fed continues to focus so much on the rear view rather than leading indicators? Is their decision making influenced that much by politics, or perhaps the perception of political influence?
Thank you for your always insightful blog.
Cullen Roche
Fantastic questions everyone. Thanks for contributing.
Steve S.
Not a question, just a comment:
Thank you for publishing as you do. This is one of the most common-sense blogs and I appreciate that.
Scott
Are you going to do a 529 for your children? Why or why not?
Ernest
How to think about the role of Social Security, pensions, and annuities (typically SPIA) in selecting stock/bond allocation mix in retirement? Particularly now with the GOP House seriously threatening to disrupt Social Security, Medicare, and US guarantee against Treasury default which is a new major element of political risk to retirement income that hasn’t existed since WW II. This is on top of the Social Security Trust Fund cliff (@2034 benefits would be cut about 25% across the board) that I am factoring in as a likely event (probability > 50%) for retired people with greater than median income.
A sidebar question is the role that Social Security/Medicare spending play as an economic flywheel in recessions where seniors have steady guaranteed income that gets spent every months as soon as it comes in. A reduction in reliable income could result in more volatile spending patterns with economic impact.
Vlad
We saw equities and bonds respond very similarly to the Fed’s steep rate hiking in 2022. What could be the next macro change that will cause equities and bonds to behave like two different asset classes that they used to be?