Cullen Roche, CIO of Discipline Funds and author of Pragmatic Capitalism, joins Julia La Roche on episode 50 for a wide-ranging discussion of the macro environment and Housing — the risk keeping him up at night.
In this episode, Roche raises the point that when it comes to macro research, many economists argue that the U.S. economy is a housing economy, meaning when the housing market slows down a lot, it filters through everything else.
“It’s really up in the air… Does this environment look more like a 2008-type of slowdown? Is it more like a 2002-ish type of long drawn-out slowdown that nothing really crashes, but things persistently adjust lower?” Roche said on the show.
Roche is in more of the 2002 scenario camp, but he notes there’s still an outlier risk of a credit event lurking that’s more akin to a 2008-style event, but that’s a big outlier.
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0:00 Intro
0:39 Slinging stocks and bonds after college
2:30 Coming full circle to low-cost ETFs
5:40 Understanding the details of what you’re buying
8:45 Big picture macro view
10:40 Process of digesting Fed policies during the pandemic
11:09 The big uncertainty — the housing market
13:38 Housing market is the backbone of everything the credit market is structured around
15:13 House prices boomed 40% during COVID
15:47 Outlier scenario that worries Cullen
17:00 Housing has become a speculative asset
18:45 Looking at the stock market as a multi-decade instrument
20:29 Is your house a great investment?
25:23 Will 2023 be the year of Disinflation?
30:30 Disinflation or deflation?
31:44 Can the Fed remain too aggressive?
38:50 Factor investing
42:20 Bonds
44:40 Importance of understanding time with asset allocation
47:40 Bitcoin as a 90-year instrument
52:00 Parting thoughts
