We Study Billionaires - The Investor’s Podcast Network - TIP370: Inflation Masterclass w/ Cullen Roche

Starting point is 00:00:00 You're listening to TIP. We have episodes we're excited about. We also have episodes we're even more excited to share with the world. And then we have episodes like these with Colin Rhodes that takes all of us to another level. You can't find a hotter financial topic than inflation here in 2021. And you probably can't find a more misunderstood concept either. Ladies and gentlemen, here are our masterclass in inflation with Mr. Colin Roach.

Starting point is 00:00:25 You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Welcome to The Investors Podcast. I'm your host, Dick Bruterson, and today I'm here with one of my good friends, who also happens to be a fan favorite, and that is Mr. Colin Roach. Thank you for joining me our audience here today, Colin. Hey, Stig, thanks for having me on again.

Starting point is 00:01:05 Colin, this episode is named Masterclass in Inflation in our podcast feed. So it might sound a little surprising that I would start with a, let's call a softball question, but there is more to it than it seems. So let me kick this off by asking, what is inflation and what is inflation not? We were just joking that you could, we could do an entire podcast on just this one question. So it's so controversial and really complex. So from a really strict economic perspective, inflation is an overall upward movement in the price of goods and services. And so the Bureau of Labor Statistics in the U.S., the BLS, measures this by basically quantifying consumer price index, the CPI.

Starting point is 00:01:57 And, you know, there's a lot of different ways to measure this. the Fed actually, the various Fed entities actually measure this in a very different way across the board. Some of them use the PCE. Some of them use the trim median price. And there's all sorts of different measures of this. But as a general rule, what the BLS is trying to do is they're trying to find an aggregated basket of consumer goods and services that roughly reflects what the median household consumes over the course of an average year. So, you know, getting into, what inflation is not, it's probably important to cover what I think is one of the biggest and most misleading myths with inflation, which is the idea that inflation is an increase in the money

Starting point is 00:02:45 supply. And I'll tell you why I don't find this to be a terribly useful definition, because in the type of monetary system that we have, we actually experience the growth, the quantity of money over any sustained period of time due to mainly because of economic growth. And so people have this sort of view that money necessarily causes inflation. And this is kind of old school monetarist thinking or some Austrian school thinking that leads people to believe that the more money you create, the more inflation will have and the worse off will be. And the reality is that the way that the modern monetary system works is that most of the

Starting point is 00:03:28 money supply is in existence basically because money in today's economy is mostly deposits. And deposits come into existence through the lending process. And so what ends up happening is from an accounting perspective, money is just a really simple credit agreement. It is both an asset for the lender and a liability for the borrower. And that in and of itself is never necessarily a good or a bad thing. like to talk about the liability side of balance sheets, but they often neglect that there's an asset side of a balance sheet. And so from a deposit creation perspective, when a bank makes a loan,

Starting point is 00:04:11 and that has become the dominant form of money in the modern monetary system, the deposit is an asset for borrower and a liability for the bank. And so from a pure just balance sheet perspective, from an accounting perspective, when a loan is made, no one is. necessarily better or worse off. And it depends on all sorts of other factors. And the fact that the money supply increases because of this, it really doesn't tell you much about anything. It just tells you that balance sheets have expanded. And over the course of very long periods of economic growth, we actually want balance sheets to expand. And so even though people like to focus on the liability aspect of this, the reality is that the asset aspect is just as important. And whether or not

Starting point is 00:04:56 that has a positive or negative impact on the economy in the long run depends on all sorts of different variables. I mean, to cherry pick an example, for instance, I mean, if somebody borrows a million dollars and creates some, you know, world-changing sort of invention that makes all of our lives fantastically better, well, yeah, there's technically, there's a million dollars more of money that is in supply. But this invention, whatever it may be, will dramatically improve our living standards across time. And so, you know, it's just, it's a lot more complex than money and the sheer quantity of it. And I think that a lot of people have a tendency to fall into sort of a political bias with a lot of these conversations where you think of the

Starting point is 00:05:44 government primarily as being a money creator. And the reality is that most of the money today is created in really a fairly market-based type of system where it's just, it's almost a meritocracy in terms of who can borrow and who cannot. And the banks are mostly assessing your lending capabilities, your borrowing capacity based on really how valuable they think those loans might end up being, or what the collateral is that exists. And so it's a really complex issue and narrowing it down to purely the money supply just doesn't tell you anything because, frankly, the money supply pretty much always increases over any long period of time. We've recently seen many headlines with inflation numbers in the quarter 5% range.

Starting point is 00:06:32 Again, depending on how you measure it. Some of that is so-called base effects, meaning that it would look artificially high because it compared to 2020 prices when prices were falling. And that was at the time primarily due to the drop in commodity prices at the time, especially in the spring. Now, how much of the inflation numbers we're seeing right now are due to these so-called base effects, and how much of that is, let's call it true inflation? Yeah, good question.

Starting point is 00:07:02 Base effects are essentially, the way to think about this is that the way that the BLS measures the CPI, for instance, is just a simple price measure. And so it looks basically like if you were to look at just a chart of the pure price inflation, it basically is just a measure that goes from the bottom left of the chart up to the top right. And it pretty much always goes up a little bit. And what the Fed is focused on is the rate of change, the annual or year over year or month over month rate of change.

Starting point is 00:07:33 And so what happens with base effects is that it's a lot like the stock market actually. When the stock market goes down, you know, 25 or 30 percent like it did in March of 2020, you have a base effect where if you measure the gain from that base, from the lows, it looks really big, whereas if you measured it from the previous high in, say, January of 2020, it doesn't look as high. And the CPI works the exact same way where we had a little hint of declining inflation back in March. And so you had this base or a low that on a year-over-year basis, it exaggerates the way that the gain looks. And so this is a really hot topic right now and whether or not a lot of the inflation that we're seeing is going to be transitory or not.

Starting point is 00:08:27 And the thing that makes that so difficult to measure is really whether the base effect that we're seeing from last March is something that is going to be more sustained or is it something that is actually going to be end up being transitory? And what's kind of confusing and I think almost counterproductive about the way that the Fed talks about this stuff is that, inflation, like I mentioned with the way that the chart always goes from the left to the top right, basically, is that inflation never really is transitory in any useful sense. I mean, at least in the eyes of a consumer especially, I mean, you know that if a beer at your favorite

Starting point is 00:09:07 bar costs $5 in January of 2020, and then all of a sudden in January of 2021, it costs 5% more. you walk in and it costs $5.25, you pretty much know that that price change is not going to be transitory, meaning that that $5 beer, you're never going to drink another $5 beer at that bar. It's going to go $525 to $5.35 to $5.50 or whatever. But the thing that's, I think, almost counterproductive in the way that the Federal Reserve and a lot of economists talk about this is that the term transitory implies that that $5 price might come back at some point. And that's really not the way that they're trying to communicate it. What they're really trying to say is that the rate of change will decelerate over time. So when Jerome Powell says that inflation is

Starting point is 00:10:02 likely to be transitory in the future, what he really means is that you're not going to see five percent year over year continued inflation going forward. You might see two and a half percent inflation in 2022, or if we were to see zero percent inflation in 2022 for some reason, he would argue that that's transitory, even though your beer still costs $5.25. I think that's a great segue into my next question, because whenever we do talk about inflation, we also have to consider expected inflation. Expected inflation is a very important metric because expectations in itself can drive the actual inflation number. How so?

Starting point is 00:10:46 Well, this is the big concern with any sort of inflation spiral is that it becomes sort of self-reinforcing, almost a snowball effect inside of it. And so you see this in periods of very, very high inflation where the way to think of this is basically that it's very similar to like a decline in the stock market, where people's emotions basically become the dominant driving factor in what is causing the price declines. And so you see this in like really panicky environments. And the, an inflation is essentially a panicky price decline in the basically your purchasing power. And so what you'll see is the people's expectations end up driving this snowball effect where inflation can kind of get out of control. And the, the federal reserve and

Starting point is 00:11:37 the government worry about this just because obviously if you were to lose control of the narrative, you risk the potential that people's fear of future prices cause them to go out and buy more goods and services today, which causes prices to surge even more and exacerbates the whole thing. It's become kind of controversial whether or not inflation expectations are as important as people assume because especially in the last 10 to 15 years, we've seen this environment where inflation concerns have been fairly high at times. And inflation just never really came and to materialize the way that a lot of people expected. Not that there hasn't been inflation, but mainly that looking at things like the Fed's balance sheet or the amount of government

Starting point is 00:12:28 spending that we've seen at times, a lot of these things that people expected to cause inflation didn't really cause much inflation at all. And so I think my big conclusion from the last 10 to 15 years and all of the different policies that have been implemented in everything is mainly that inflation is one of the most complex things that we try to measure in the global economy. And the factors that drive it are so much more complex than just looking at like the Fed's balance sheet or the amount of government spending or the amount of money that's been created. There are all these other factors that can have an impact on it, things like demographics and technological changes and globalization and the power of the labor class versus the capitalist

Starting point is 00:13:20 class. All of these things have varying degrees of impact on the rate of inflation. And they're all different in different economies. That's the other crazy thing is that you can have economies where some of these, items have a huge impact. Like, I would argue demographics has a humongous impact in places like Japan, whereas demographics aren't quite as important in other countries because the amount of demographic change, the rate of change of the population growth just isn't as material in a lot of other economies as it is in a place like Japan. And so in Japan, regardless of what the

Starting point is 00:13:55 government does, I mean, they've done, I mean, from a policy perspective, they're almost a decade ahead of everybody in terms of the way they've been doing QE, the way they've been implementing fiscal policy. Their debt to GDP is depending on how you measure it, you know, 250 to 300 percent of GDP. They have all of these things that you look at you, that you would have assumed would cause some inflation. And here we are. They have zero percent inflation year after year after year. And I think the main driver of that is just a really unusual demographic situation that's a very specific to Japan and applicable to other parts of the world. But it's interesting in the specific case of Japan because it proves that these other items are so, they can be so much more important

Starting point is 00:14:43 than simple policy measures that looking purely at the policy measures or things like the quantity of money, it just provides such a narrow perspective that it doesn't provide you with a very coherent conclusion. Colin, I wanted to go back to one of the other things you said about Jerome Powell, and this whole thing about is the current inflation temporary or not? Since August 2020, the Fed has targeted an average inflation rate of 2% or the entire economic cycle. And currently the Fed expects inflation to be 3.4% at the end of the year. So we can talk about what Jerome Powell said, but we can talk about what Jerome Powell said. But I'm curious to hear, what do you think? Do you agree with him? It's interesting. I think that the Fed is likely.

Starting point is 00:15:30 to be more right than wrong in the end on this. But I do wonder if the Fed is underestimating some variables. I, gosh, I mean, I was kind of, I was super vocal coming out of the financial crisis that I thought disinflation was coming. And that was largely because of the policy perspective that I had. But coming out of COVID, I kind of had, I wouldn't say a polar opposite view, but I was much, much more worried about inflation coming out of COVID than I was the financial crisis, mainly because the size of the stimulus packages were so enormous that it just, and combined with the supply chain issues, there was just no way we weren't going to have, you know, three, four, even five percent inflation. And so we're kind of in this really interesting period

Starting point is 00:16:21 where, yeah, we've had these four to five percent inflation readings. The really strange thing about the current inflation is that from a measure like the Bureau of Labor Statistics CPI, you're seeing the driver of this come from a very specific set of the underlying indicators. And so, for instance, like in last month's CPI, the used cars and truck measure was it accounted for 33% of the overall increase in the CPI. And so, you know, everyone kind of knows by now, used cars and trucks are up, I don't know what the exact number is year over year, 50, 60 percent, something crazy, something that nobody ever would have predicted. And that has been just a huge driver in the CPI.

Starting point is 00:17:07 And how sustainable is that? Is that likely to continue? In fact, we're starting to see that like the Mannheim used car index has started to moderate substantially already. And so I think that a lot of the drivers, in addition to the base effect issue that has kind of exaggerated a lot of this. The underlying core drivers have been so acute that I do suspect that the rate of inflation is likely to moderate. I don't know that we're going to revert right back to, you know, kind of the two percent range that we had for so long in the post-financial

Starting point is 00:17:45 crisis period, just because there's a lot of stuff that's different right now. For instance, One of the big drivers that I worry about increasingly is real estate, where real estate prices have gone just totally crazy in the last 18 months. And the way that we typically experience inflation through housing prices is not the housing prices themselves really, but really it's primarily, especially the way the BLS measures, it is through rents. And rents tend to lag prices a little bit. So homeowners typically can't pass on the cost increases from that they'll experience during a housing price boom immediately. So they end up, you know, having to renegotiate prices over the course of a longer period of time. And so rents end up lagging typically a little bit. And

Starting point is 00:18:34 rents and shelter in the CPI are about a third of the overall measure. And so you could have a situation here where the CPI is lagging the house. house price indexes over time and causing inflation to look a little bit higher than it otherwise would. And I suspect that that some of these underlying factors are not going to be so transitory. They're not, we're not going to see kind of going back to what I was talking about earlier, I do not think we're going to see anything like the 1970s. This isn't really a, it's not an environment that's right for like stagflation, something like that, which was, I mean, the 70s were really more so an oil crisis than anything else.

Starting point is 00:19:16 But I don't think we're in an environment where we're likely to see very high sustained, say 10% inflation or something like that just because I think that the secular headwinds are, they're so big, there's so much different this time around where you don't have, you have not necessarily a Japanese type of demographic issue in the developed world, but it's much more similar to Japan than it is, say, like a baby boom situation or something like that where the population is growing, you know, pretty significantly and meaningfully. But in addition, you have all these other factors like the technological factor, the globalization factor is one of the biggest. I mean, you could argue that the world has never had so much accessible, cheap labor

Starting point is 00:19:59 in its existence. And so globalization puts a huge secular downward trend on inflation. And so a lot of these big macro trends, I think, they don't necessarily put a ceiling on inflation, They make it very, very difficult, especially for policymakers to create a lot of inflation. And I think that, you know, the thing that is most interesting about the last 18 months is that you had this big, huge policy response. I mean, it wasn't really the Fed so much. It was mostly the U.S. Treasury, I would argue, that really caused a lot of the inflation because the government, the Treasury spent six and a half trillion dollars in the last 12 to 18 months. It's just The numbers are colossal.

Starting point is 00:20:45 And so it's interesting because mainly going forward, those numbers are not going to continue. We're likely to run, you know, trillion dollar deficits going forward, but we're not likely to run $6.5 trillion of spending year after year after year. And so you don't have this sustained fiscal tailwind that caused a lot of the inflation that we're experiencing right now. And I think as a lot of these things taper off, you are likely. to see prices that look what the Fed would call transitory, but that will end up probably not being as transitory as the Fed, I think, expects. And so if you end up with even inflation that's in

Starting point is 00:21:27 the, say, three and a half percent range by year end, and let's say that that sustains in the 2022, you could have a situation where the Fed is getting pretty concerned about that sort of feedback loop where they start to worry about the snowball effect, in essence, of the price increases, where you have something that's a little more sustained and so far from their target. I mean, 3.5% is a pretty significant shift away from their target range of 2% that you could have easily rate increases, I think, in 2022 that start to reflect the Fed's concerns about continued inflation. Let's take a quick break and hear from today's sponsors.

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Starting point is 00:26:34 American home prices are 15% more expensive than the same time last year. Yet in America, the Euro area, Britain, rents remain beneath the pre-pandemic trends. And in Australia, rents have fallen through the pandemic. So this might sound super weird. And it's important to understand since rent is called a third of CPI. So could you please paint some color around us? I mean, it's kind of interconnected to a lot of the other stuff that's going on. There is such a supply shock across so many segments of the economy.

Starting point is 00:27:08 And real estate is one of the really big ones where coming out of the financial crisis, I think home builders had built so much that inventories had jumped so much that once prices collapsed 30 percent and you had this sort of unprecedented environment, I think a lot of the builders, well, in addition to just going out of business, a lot of the builders were just in shock coming out of the financial crisis. And it was a sustained shock. I mean, inventories have remained low. And so you've had this really unusual supply shock in the real estate market where there just aren't nearly enough homes. And, you know, I think there's a, there's probably a regulatory component to a lot of this. I mean, having gone through this whole

Starting point is 00:27:52 process, I mean, it's crazy. I live in, I live a mile from the beach. And there is a five-acre lot. directly behind me that's completely empty. And it's been completely empty because, and I know the developer at this point, because I tried to work with him when I was going through our whole permit process, because I was trying to tie into his sewage line. And this guy could not build. And California is a crazy, crazy example, but like, they made this guy do a six month bird survey, a bird survey for six months. So stuff like that that is just really unusual regulatory hoops that they're making people jump through combined with just the lack of building, I think, has created these big, big supply bottlenecks in the real estate market where there's huge

Starting point is 00:28:42 demand for homes and there's just not enough houses out there. And so going forward, I mean, the worrisome thing from an asset price perspective is that it's hard to imagine that this is going to abate anytime soon just because that's, that supply demand dynamic is it's one of the things that's so different now versus 2008. The other one being that the quality of the demand is totally different. I mean, the average credit score right now, for instance, for buying is super high compared to what it was in the 2005 period. And so there's not a lot of this sort of crazy speculative fervor that you saw going on in 2005,

Starting point is 00:29:24 2006. And so the real estate market is really, it's really almost confusing right now because you have prices that by any measure appear really unsustainable, but have these really, really big macro drivers that it's very hard to imagine that those drivers are going to abate. And a lot of this is, I mean, gosh, they say location is so important to real estate. And of course, that's, that's so, so true. And so this is different. I'm talking from mainly a U.S. perspective, but from a global perspective, it's, it's similarly true.

Starting point is 00:30:03 But there are specific areas where, like, I have a Canadian buddy who always jokes with me, he says, oh, you think there's a bubble in housing, hold my beer, you know, it's like, shows me what's going on in Canada. And they've had basically this whole situation going on for 10, 20 years. I mean, they never really had a downturn in 2000. and eight prices. And so these things can sustain for much, much longer than we expect. And they're much more. Real estate is just like you said, because of things like moving, there's so many factors that go into real estate. It is the ultimate macro asset class just in terms of how

Starting point is 00:30:42 important it is to the economy and how complex it is. I mean, that was one of the things that I found just astounding when I went through the whole process of building my house was just how incredibly complex a modern home was. And I, you know, kind of going back to our original comments about what inflation is and everything, I was really just amazed at the quality of the difference in homes. And this is one of the things that makes inflation so hard to quantify is that it's so subjective the way that we perceive our living standards that it can be really hard, especially over very long periods of time. It can be very hard to quantify how our living standards are changing. But when you go in and you knock down a 40-year-old home

Starting point is 00:31:30 and you look at some of the trash that was used to build that thing, you realize, and then you go in and you buy modern materials, you're like, holy cow, a modern house is a huge piece of incredible technology, whether it's the fiberglass insulation that's being used now versus, you know, 40 years ago or the drywall, even the drywall is completely different than it was 30, 40 years ago. These little tiny things that you look at, I mean, the paint, the paint on the wall is a completely different thing. They make like, you know, I put this paint on my exterior of my home that is virtually bulletproof. I mean, so there's things, these little tiny things that we take for granted that we look at that we say, oh, you know, that's just a house. It's just completely, completely

Starting point is 00:32:16 different than it was 40 years ago. And so a lot of that makes it so hard to quantify. And the BLS, they try to do a good job with what they call hedonic adjustments. And I mean, frankly, it's just, it's impossible to quantify the difference. I mean, how do you measure the difference in the quality of modern paint versus paint that was made 30, 40 years ago? I mean, how can you put a number on something like that? It's just, it's so subjective to some degree. And the BLS tries to do a good job of it, it just ends up being a super imperfect measure because, frankly, it's all so subjective. So, yeah, it's interesting, mainly because coming back to the real estate market, it's just housing is so complex. There's so many great big factors that work into it that it makes it

Starting point is 00:33:04 very, very difficult to imagine that a lot of the current trends are going to change anytime soon. Let's zoom out a little here. We see in the news, you know, we obviously the U.S. inflation numbers are very prevalent, but you also see inflation creep up in European Union. Japan is sort of like a story in itself for a bunch of different reasons. But if we talk about the regional differences, let's just say Japan or Europe and America here, do we have technical differences between how inflation is measured, like the actual numbers that's being published, or it's just a question of, say, America, they just have more

Starting point is 00:33:45 inflation than your other regions? Yeah, I mean, there are technical measurement differences, but I would argue that the big lesson coming out of COVID and really the COVID recession versus the financial crisis is that fiscal policy makes a huge difference. And the response from the United States was so much bigger than almost every other major developed country that I would argue that the main driver of the current inflation, I mean, in addition to all the unusual supply chain issues, I mean, what we basically had happened was in March of 2020, it looked like we were going to have a massive deflationary collapse

Starting point is 00:34:33 in the economy. And so what you had was a situation where businesses basically went through a couple quarters where they expected for the absolute worst. And so they're selling inventories off. They're not reinvesting and producing a lot of these things. And like used cars is such a good example. I mean, you had you had Hertz and companies like that that were about to go bankrupt or ended up going bankrupt. And they ended up selling off their entire fleets. And so used cars now. and rental car prices are just crazy, crazy expensive because there aren't that many cars. These buyers, these perpetual buyers of cars were suddenly liquidated. And so you had this really acute supply issue. But then you combined that with a government policy that, I mean, the amazing thing about what the United States government did was that they basically maintained aggregate demand. They actually overshot it.

Starting point is 00:35:32 I mean, looking at a lot of different measures, personal income. comes, personal consumption, consumption expenditures, things like that, everything's higher than it was in the pre-COVID period. So you have demand that because of government policies is actually higher than it was pre-COVID combined with this really unusual supply shock where now the supply is lower. And so a lot of the inflation just comes down to this basic supply demand dynamic where we did, for all practical purposes, print a ton of money coming out of the financial or the pandemic and during the pandemic. And you have just unprecedented demand for all this stuff now. And compared to the rest of the world, the numbers just aren't really that comparable.

Starting point is 00:36:19 I mean, the EU did put together surprisingly a fiscal package. It was amazing that they even got any fiscal package. I mean, coming out of 2008, I'm sure you remember, they were austerexious. was the name of the game. And so it was amazing that they even put together a fiscal package at all. But the United States, I think, was very, very proactive. I think the one thing that policymakers seem to have learned is that, and this is the big bazooka with a lot of inflation discussions, is that the Federal Reserve is not as powerful as you think it is. And, you know, they increase their balance sheet, trillions of dollars coming out of the financial crisis and they implemented all these lending programs and they supported the banks, all the

Starting point is 00:37:06 bailouts, all this stuff. And we got barely sustained one and a half percent inflation from all of this. And that was the big lesson of the financial crisis was that the central bank, and this is not to imply that central banks aren't extremely powerful, but I think we tend to have this view that the central bank is the money printing entity and that the central bank has the big bazooka. And I think what we've kind of learned in the post-COVID period is that it's actually the treasuries that have the big bazookas. And a lot of what the central banks do, and I discuss this in a lot of my papers on the operational dynamics of things like the monetary system and quantitative easing, that the central bank to a large degree is a secondary actor in all of this,

Starting point is 00:37:54 that the real money printing, if you want to call it that, is done by the treasury. And And, you know, so to use a concrete example, when the Treasury runs a deficit, meaning that they spend more than they actually take in tax revenue and they end up having to borrow, you could call those bonds. They're printed from thin air. They're completely net financial assets. They are, if the Fed was to find or the government was to finance their spending by by dumping cash on the ground, for instance, rather than dumping bonds on the public sector or the private sector, they would literally be printing cash. They would literally be printing. money. And so, of course, we don't do that in a modern era. We finance spending by printing bonds, basically, but those bonds are net financial assets. And what the Federal Reserve does, to a large degree, is they come in after the fact. And when they implement something like quantitative easing, they're just changing the quantity of the finance or the composition of the financial assets that the private sector then holds. So they're printing a reserve deposit and they're exchanging it with the bond. And if you

Starting point is 00:38:59 think about this from the order of operations, well, they're just exchanging the different types of financial assets. They're adding a deposit and they're taking the Treasury bond out of the market. So where did the real money printing occur in this order of operations? Well, it occurred at the treasury level. The Treasury's deficit was the net financial asset. It was the balance sheet expansion that really mattered. The Fed technically expands their balance sheet, but in the process of doing so, the way to think of it is that, yeah, they expand their balance sheet to create reserves and they buy the bonds with them, but then they remove the bond from the private sector. And so what impact does that have?

Starting point is 00:39:36 It's from a consumer's perspective, it's a lot like swapping a savings account, which is basically what a treasury bond is for a checking account. And ask yourself, how does your financial situation change when you swap a checking account with a savings account? It doesn't really meaningfully change at all, except for the fact that you actually have lower income now. So I think you could make an argument that something like quantitative easing is marginally deflationary because it reduces the private sector's income. But that's the big lesson from the post-COVID period versus the post-financial crisis period is that fiscal policy has a much,

Starting point is 00:40:19 much bigger impact. And it's, you have to look at it comprehensively. You can't just look at the Fed's balance sheet and say, oh, look, we have, we've printed all this money because let's say that let's say we were Europe in the post financial crisis period and we were running basically budget surpluses or sort of negative or flat balance sheet expansions from the Treasury level, well, who cares if you're doing quantitative easing in that sort of environment? Because then there really is no meaningful balance sheet expansion at the Treasury level. And the Fed or the the European Central Bank is just swapping those bonds for deposits. And so you've got to look at things comprehensively. And to make all of this even more confusing in the case of something like

Starting point is 00:41:05 Japan, you have to consider all these other factors like demographics. And so all else equal, fiscal policy is hugely, hugely important. And the degree to which those policies are implemented and then sustained will have a meaningful impact on aggregate demand and future inflation. So Colin, let's transition from the first part of the interview where we talk a few definitions, what inflation really is. And then into the second part, we're going to talk a lot more about the investing piece, how we as investors should take action according to inflation. So students worldwide in business schools, they'll learn about the interest rate parity.

Starting point is 00:41:47 So for those of you who are so lucky, as opposed to me, who haven't gone to business school, it's sort of like a non-arbitroth condition under which investors can't make a higher return by investing in a country with a higher interest rate. So you might hear about this is the interest rate in Turkey or this is the interest rate in Argentina. And so you might be thinking, well, why don't I just invest in those countries and then, you know, make a lot more money than it would in the States. But that is assumed to be inflated away.

Starting point is 00:42:17 that inflation would be reflected in the change in interest rate. So that's why we have this interest rate parity. This is sort of like an assumption we say we'll hold true in the long run. But first of all, we can discuss the validity of the parity. But I guess right now I'm curious about the difference in inflation across the globe and all the changes we're seeing right now. Does it provide investors with opportunities to bet against the interest rate parity temporarily. Boy, I mean, that's, you talk about a question that really gets into a ton of different risk variables and macro factors. My basic view is that interest rates basically reflect the future expectations of Fed policy. And Fed policy reflects their future expectations of inflation.

Starting point is 00:43:11 So to me, when you think about interest rates and the amount of risk that exists across different countries, what you really need to consider is the central bank's position versus the outcome of potential likely inflation. And so, for instance, like I was saying in the United States, I think that there is, there's still a risk that inflation could overshoot the Fed's targets for longer than they expect. And so, you know, compared to someplace like Europe, I would argue that Europe has kind of the opposite situation where they're much more likely to experience a sustained lower rate of inflation because in large part, their policy expectations have been different. And so you could

Starting point is 00:43:58 argue that, you know, I think that the market does a fairly good job of pricing the risks of these different interest rate parodies, I think for the most part, very well. And it's very hard to capture the existing, I think, arbitrage between these because what you end up essentially making is a future inflation prediction about what's going to transpire in the future. You're not really able to capture an existing current arbitrage because the future risks are so unknown. And that's what makes, I think, trying to utilize a strategy like this somewhat, I don't want to say counterproductive, but it's much harder to capture those interest rate differentials than I think it is just looking at it from a sort of nominal perspective. And the

Starting point is 00:44:47 largest contributor to that is mainly that the main reason why higher interest rates exist in some parts of the world and others is because there are just unusual risks. I mean, it's sort of, if you look at it from a corporate level, using kind of a dumb down example, the reason junk bonds have higher interest rates is because there's just a lot more unknowns versus an investment grade bond in that area of the world. And so when you look at it from a global macro perspective, the same basic thing exists. An interesting real-time example is like cryptocurrencies. I mean, if you look at cryptocurrencies right now, there's a lot of these high yielding

Starting point is 00:45:25 cryptocurrency accounts that people say, oh, well, why would you keep your money in a 0% interest-bearing bank account when you can go in and earn 10% per year in XYZ cryptocurrency. And the real answer there is that you can wake up one morning and that cryptocurrency might not even exist. So there is an embedded risk component that's priced into that market that is, you know, I don't want to call it efficient, but it's accounted for to a large degree. And you know, you're not going to wake up one morning and find that your Bank of America just doesn't have your deposits. It's just the likelihood of that is zero. The FDIC has literally never lost a single penny in FDIC insured deposits. And so that's why to a large degree, you don't earn interest in an

Starting point is 00:46:13 environment like this on a deposit because there is no risk. So the risk is fully priced in. It's fully accounted for. And so to me, you know, to make a long winded answer really short, I do not think it's possible to find these interest rate differentials and really benefit from them without making a future inflation prediction. And that's ultimately what this comes down to on a country by country basis is you have to look at the interest rates as a measure of risk in some degree. And looking at like Turkey, for instance, would I feel comfortable buying a 10 year or 30 year Turkish bond, you know, just because it has a higher interest rate. rate? Well, absolutely not because the risk of hyperinflation in that sort of situation is just through the roof. And so the interest rate reflects a certain degree of risk in that. And I think that, you know, from a, this is a really interesting theoretical concept from a country perspective,

Starting point is 00:47:12 because the interest rate does, to a large degree, reflect the credit quality of that specific country. And I think that a lot of what you're seeing in the developed world where interest rates are very low is really a reflection that inflation to a large degree is a reflection that the demand for that money is so high that the perceived future credit risk is perceived as extremely, extremely low. And from a country perspective, the interest rate and the inflation rate to a large agree, which they tend to correlate to a large degree over long periods of time, it reflects the credit quality of that specific country. And, you know, so we think of sovereign governments as being, you know, risk-free. But the reality is that a 10% yielding sovereign bond is really

Starting point is 00:48:09 for all practical purposes. It's like a junk bond. It's a really junky bond compared to something like a 10-year treasury, which, you know, in today's environment, even though it's yielding 1.3%. The reason that that's like that is it's not just the Fed. To a large degree, it's the perceived expectation that the credit quality of the United States is not going to be in jeopardy anytime soon and that the likelihood of you losing a nominal amount on that bond is extremely low. So it reflects the demand for money and the demand for money is a reflection of risk to a large degree. Let's take a quick break and hear from today's sponsors. No, it's not your imagination.

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Starting point is 00:51:57 investing, including objectives, risks, charges, and expenses. This and other information can be found in the income fund fund's prospectus at fundrise.com slash income. This is a paid advertisement. All right, back to the show. Let's use that to transition into the next question because I wanted to talk to you about how we as investors should position ourselves if we are worried about rising inflation. And one of the things you hear a lot is that you should take on debt with a fixed rate and a long maturity. In which situation, if at all, is it a good idea for us as investors to do that?

Starting point is 00:52:34 Yeah, I mean, this is a pretty personal question. But I mean, kind of going back to what we were talking about before with, you know, whether debt is good or bad, a lot of it depends on, you know, the rate of interest that you're able to get. I mean, for instance, is it better to go out and binge on a bunch of things that you consume that on a credit card might end up costing you, let's say the interest rate on your credit card is 25%, just to use a crazy example, versus is it smart right now to leverage up your balance sheet a little bit and purchase a home that you can get a mortgage rate on that, let's just say, is two and a half percent? And compare that to the rate of inflation. Well, now think of it in real terms. Well, what's the likelihood of generating a real return on that credit card debt versus

Starting point is 00:53:37 the two and a half percent mortgage. Well, obviously it's, you know, the risk reward dynamics are completely different. But it's also a question of, of relative asset class returns. You know, I always, when someone comes to me and says, hey, should I refinance my, my mortgage? Well, you ask yourself, well, what can you borrow at? If you can borrow at, let's say it's two and a half or three percent, well, what's the expectation of what you might otherwise be able to do with that cash? And that's the big kicker is that are you going to take the cash that you would have to, say put into either a refi or a new purchase of a home, what's the rate of return that you're likely to be able to earn on that portfolio

Starting point is 00:54:15 if you weren't to borrow the money? And if you can lock in a fixed rate that you believe is on a risk-adjusted basis, basically allows you to earn a superior risk-adjusted return by holding on to that cash, in essence, well, yeah, then you shouldn't just, you should borrow. You should go out and it's a good risk-reward analysis that the thing that makes real estate so tricky these days is that when you look at something like a 30-year mortgage, I mean, typically housing prices are pretty boring over long periods of time. So you can make a pretty good projection over very long periods of time about what a house price is going to do.

Starting point is 00:55:01 When you get into these really funky environments where real estate prices go up, you you know, 20% year over year and stuff like that. Well, you've now introduced a whole different type of risk into all of your analysis where you can't just look at the risk of actually the mortgage versus all of the relative asset classes like stocks and bonds. You now have to consider your ability to stomach the potential for, say, a 25% decline in home prices. And, you know, what would that do to your balance sheet and how would that play out over the course of a 10, or 20 year period and how would that impact your personal balance sheet. As a very sloppy general rule of thumb, you want to analyze what your expected rate of return on using the cash versus borrowing is.

Starting point is 00:55:53 And if you're able, if you're someone who has a really good credit score and you're able to get a really good interest rate, well, yeah, on a relative basis, it can, a lot of the times it can make a lot of sense to be able to borrow because you're essentially able to utilize your existing cash in a manner that allows you to earn a higher rate of return than you otherwise would. And so what you end up with is you end up with basically a much higher ROI return on investment than you otherwise would if you were to just pile all that cash into the house itself or something in a situation where you can borrow to buy the house and you can put the money into a diversified portfolio of stocks and bonds and earn a rate of return that ends up actually being higher than

Starting point is 00:56:37 the house would. So it's a situation where you have to perform basically a relative risk analysis on the asset classes and consider for your personal situation, you know, how risky is the debt and the interest rate applied to it relative to all of your other options. So this is a super personal question, but I mean, as a general rule of thumb, it can make a lot of sense to borrow because there's a there's prudent ways to borrow especially if you're investing it might mean really investing is in consumer basically spending for future production and producing something that's going to be very productive going back to my original example of something that's like a world changing innovation versus you know going out and and binging

Starting point is 00:57:24 on on consumer goods that are literally going to disappear the second you consume them so the answer is it depends. I like that. As with so many other things here in investing and finance, it depends. Colin, last time you were on our show on episode 331, you praised value stocks because they by nature have more predictable cash flows. And one of the things you mentioned was that a company like Facebook could potentially become a lot less attractive in a high inflation environment because the cash flows are somewhat unpredictable, you mentioned that they're not necessarily based on the real economy, but based on the internet-based economy. And so one of the reasons why I wanted to bring this up, and one of the reasons for my previous question was that I've been

Starting point is 00:58:13 thinking a lot about how to position my own stock portfolio due to my own concerns about inflation. And I would be the last person on this plan to say shouldn't invest in value stocks. That's not what I'm saying at all, but one of the things that does concern me is that companies that are, you know, referred to as value stocks very often have capital expenditures. So think about the Unipacifics of the world. They are companies who you might not, or perhaps you do, I want to throw it over to you in a bit here, because they have to spend all dollars to pay for the high maintenance capics in new inflated dollars. And so could you please talk to us about the whole value versus growth stocks in the time of inflation?

Starting point is 00:58:57 This is pretty timely. I want to point the audience to a paper that came out May 25th that is called the best strategies for inflationary times. And that paper goes into a really granular detail about all of this. And so you can get really granular inside of this discussion. And so kind of going specific to what you were talking about, For instance, you know, value has done really well in the last six to 12 months relative to growth.

Starting point is 00:59:29 And a big part of that is that when you look at the granular drivers of that, you find that, for instance, energy stocks have had a huge resurgence. And so if you go and you look at this paper, you can find the performance summary in Exhibit 2. And what they do that's cool in this paper is they get very granular on the exact equity factors that perform really well. And they go into sector factors as well. So they find, for instance, that consumer durables are just about the worst thing you can

Starting point is 01:00:00 possibly own in a high inflation environment. They find that energy stocks and commodities are extremely, extremely good. And so you have to get more granular. What I loved about this paper was that they didn't just study the equity factors. studied all the different asset classes. So they took a super zoomed out macro perspective and they found that like energy commodities are the top performing, the top performing sector in a high inflation. They found that trend following does really well. Trend following commodities does really well. Industrial commodities, industrial stocks, obviously like gold and precious metals do really well,

Starting point is 01:00:44 but trend and momentum actually perform really well. And this is especially interesting compared to the value factor because there have been so many studies in the last 10 years that find that combining trend or momentum with value is a really profitable long-term strategy because they both tend to exhibit sustained outperformance in the long term. And so, and they kind of to some degree, they tend to counterbalance each other to some degree. So from a pure value perspective, again, what's cool about this paper is that kind of kind of does a deep dive into the exact factors that drive a lot of this. So yeah, you know,

Starting point is 01:01:26 it depends on on the specifics of the of the sector. But I mean, during a high inflation, yeah, Exxon Mobil has to or Union Pacific, they have to update their infrastructure. But the commodity price increases in their underlying sector are so dramatic that they're able to pass on. They have a huge amount of pricing power where they're able to pass along those increased costs to, their end consumers. And so that's a lot of it, whereas something like consumer durables, they just don't have the same degree of pricing power. And so this one's really, it's really tricky. I mean, from a high inflation perspective, I actually, you know, even though I, I say that you, as a general rule, I tend to fall into sort of a market cap waiting,

Starting point is 01:02:16 a boring sort of old school market cap waiting perspective where I think if you're trying to assess the risk of the market, you generally are better off combining non-correlated assets to the equity markets because finding the pockets of specific risk protection within the equity market is just so, so difficult to do. I mean, for instance, people often ask me like, you know, instead of buying bonds these days, why don't you just buy like defensive stocks? I say, oh, you mean defensive stocks? Like the ones that defensive stocks that fell 50, 60 percent in 2008? Like there was nothing defensive about defensive stocks in 2008. And so in my mind, when you often find that stocks are stocks or stocks or stocks or

Starting point is 01:03:04 stocks. And all of these stocks tend to some degree reflect just huge amounts of principal risk. And so if you want really uncorrelated protection from certain things, you need to go outside of that asset class. And in the case of inflation, I think that to a large degree, and this is largely consistent with what this paper concludes is that you need to go into things like commodities or you need to go into completely uncorrelated strategies like trend following. And trend followers use predominantly, they're using derivatives and they're using commodity derivatives. And so they're using things that are really truly uncorrelated to the equity market itself. But as a basic rule of thumb, the stock market is a pretty fantastic inflation protector. I mean, people kind of going back to like all these boring periods of inflation, I would argue that, yeah, it's nice to have inflation protection when inflation is really high. But really, it's a lot more important in my mind to have

Starting point is 01:04:08 just a very sustained inflation protection. I mean, you don't think often of needing protection from 2% inflation, but the reality is that I think that those boring inflationary environments are much more important to protect yourself against because they're just so much more likely to occur. I mean, the likelihood of a Wimar Republic occurring in the United States or something like that or Zimbabwe, in my mind, it's just super low. And so if you're going out planning for some environment and you're building your whole portfolio around something like that, you're building your portfolio around a really low probability asymmetric bet that, yeah, it might have a huge potential upside, but the likelihood of it actually coming to fruition is just

Starting point is 01:04:53 not very high. And so it's a lot more important to build your portfolio around the more likely outcomes, which is just that inflation, yeah, it's always going to go up from the bottom left of that chart to the top right. And you have to protect yourself from that. And that means that the risk of a two and a half percent or three percent inflation is much higher. It has a much bigger impact on your overall quality of life than sitting around worrying about a Weimar Republic or a Zimbabwe. And so equity market as a whole has been a fantastic way to protect yourself and generate a real return regardless of whether or not there was ever going to be a hyperinflation. And so from a pure purchasing power protection perspective, stocks as a whole

Starting point is 01:05:42 are a wonderful way to protect yourself from inflation. And so you've got to get really comprehensive about it, but from just a very boring macro perspective, thinking of stocks as a as a continual purchasing power protector is, I think, a useful mental model, a good framework to start with when you're considering your purchasing power protection. Let's talk a bit more about it, be very practical about it, because it's often said that we should invest in real assets and not financial assets in time of inflation. And so your real assets, that could be precious metals, commodities, real estate, land, equipment, natural resources. And to some people, including myself, you know, some of that can sound quite intimidating because

Starting point is 01:06:29 you want to have the actual physical asset. Do you want to store gold in your own home? What do you do with those 100 bells of oil or whatnot that you're going to put somewhere in your garage, right? So many investors therefore prefer to buy paper assets due to the convenience of not having to go through transactions with real assets. And this might sound confusing since you can have paper assets, for instance, stocks where you own a company with many real assets. And so could you clear that up for us, Colin?

Starting point is 01:07:02 What is that relationship between a paper asset and then this hedge against inflation through real assets? We call what we do investing. And a lot of what people do in the financial markets, it's not from an economic perspective. perspective, it's not technically investing. It's really, we're just reallocating our savings. And so what I mean by that is that when a firm goes out, when an oil company goes out and they buy a million barrels of oil, well, they're not going to do what you just described. They're not going to take those barrels of oil and just stick them in their backyard and hope that the price changes. No, they're typically going to do something with that oil. They're going to literally spend for investment

Starting point is 01:07:46 on it. So they're buying the barrels of oil and then they're doing something. They're who knows, they're turning it into gasoline or they're reselling it to someone who, you know, is going to be able to purchase it to turn it into, who knows, tires or some other product that is actually useful in the long run. And so what they're doing is spending for future production. And that's one of the things that I think people have to be cognizant of when they're analyzing all of this. And it's one of the reasons why I generally, If you're going to apply like a macro rule of thumb to inflation protection, it's nice to own the financial assets in large part because the financial assets reflect what the underlying

Starting point is 01:08:34 spending for future production is actually resulting in. So, for instance, when you buy ExxonMobil, you're not just buying some piece of paper that reflects the craziness of what people think on Robin Hood. But you are, to a large degree, you're buying a piece of paper that reflects the underlying value of what Exxon, the corporation, does with their spending for future production. And so you're getting an embedded inflation protection in there, not because of just the underlying commodity, but really, you're making a bet to some degree on how innovative Exxon Mobile is able to be with their barrels of oil and what they end up ultimately doing with those

Starting point is 01:09:17 barrels of oil. So it is a corporation is really, it is a real entity. I mean, you're, you're basically buying to a large degree. You're buying the real assets of that corporation and what those real assets are likely to be worth in the future. And so that's why things like stocks, they much more reflect the real asset world than just buying the pure play like a commodity because you're getting an embedded inflation protection. And that's, you know, kind of going back to my example of the house, one of the reason that houses end up being at least fairly good inflation protectors over the long term is because when I, for instance, when I bought my house, yeah, I knocked the thing to the ground,

Starting point is 01:10:02 but I was able to rebuild. I was able to reinvest in land. And I was able to do it. I mean, granted, my timing was lucky, I guess. but I was able to do so at a time when the cost of building was low, and now the cost of building and the price of housing reflects the cost of replacement is much, much higher. And so I made what is to some degree an investment in the underlying real assets that exist on my property.

Starting point is 01:10:34 And so a corporation that issues financial assets to fund all of this, like stocks or bonds, well, they're doing something that's very similar. They're doing something that's, frankly, is a lot smarter than buying a home because the ROI is generally so much higher. You can get at it both ways. But the question you have to ask yourself is if you're considering buying, you know, a lump of gold versus buying something like, you know, a company that actually uses that gold and is able to break it down and put it into, you know, technology. that actually have a positive return on investment, well, you have to ask yourself, you know, which better you more comfortable with? Are you more comfortable with that bet that that

Starting point is 01:11:20 commodity is just going to increase in value because of underlying macro factors? Or do you feel better buying something that uses that commodity in a way that ultimately is going to to make it generate a higher return on investment in the long term? And that's why ultimately you come back, to the basic rule of diversification, I have nothing against owning blocks of gold or real estate or physical assets. In fact, I think that roughly, you know, it makes a lot of sense to own something that's pretty close to the global holdings of all of these things. I mean, the market may not be efficient, but the market isn't stupid either. And so I think it makes sense to diversify across a lot of these things. But certainly is practical to think of things like stocks as

Starting point is 01:12:10 real assets because you ultimately, if you were to strip away and use a really, you know, strict Warren Buffett type of methodology to analyze all this, you know, what you have left when you sell a company is all of the real assets and everything that it's worth at a real level. And so that's why the stock market is a wonderful inflation protector in the long term. I can't help but ask you, Colin, with all of this being set, how do you position yourself? It's getting harder and harder. I mean, obviously, I own real estate. I own stocks and bonds.

Starting point is 01:12:48 I think that, you know, it's interesting. People often ask me why I own cash and bonds and the quantities that I do. And I think people tend to have this hyper focus on purchasing power and generating growth. And I mean, maybe I'm just a big wimp. But for me, a lot of investing over an asset allocation, over the long term is about creating predictability. And to me, that's the thing that's super interesting about cash and bonds in particular is that they provide you with a certain amount of principal protection that other asset

Starting point is 01:13:24 classes just by definition don't. I mean, commodities and equities and trend following strategies and all this other stuff that we've been talking about, real estate more so lately. It can't provide you with the principal predictability that things like cash, and bonds do. And so you have to, to me, asset allocation is a personal blending of the two biggest risks in the world, which is purchasing power versus principal volatility.

Starting point is 01:13:51 And, you know, it's a, I often call acid allocation a temporal conundrum. What I mean by that is that you have certain liabilities, oftentimes that are fixed over certain periods of time, that you have to be able to have liquidity for. And that's why, you know, there's trillions of dollars of cash held in the world. There's trillions of dollars of low yielding bonds. And the main reason for that is that there is trillions of dollars daily of short-term

Starting point is 01:14:20 liabilities that people need to fund. And people need daily, monthly annual liquidity for these things. And they need predictability for these things. And so when you look at it from a temporal perspective, well, I like, to think of the stock market, for instance, as like a 30-year high-yield bond. If you were to own nothing but that 30-year high-yield bond, you know, that thing yields on average 7%, but it doesn't come close to actually generating that every year. Some years it does 35%. Sometimes it does negative 35%. And so there's periods where that, if you think of the equity market like a long,

Starting point is 01:14:58 a long-duration bond, well, that thing can provide you with a huge amount of principal volatility in the short term. And that is a terrible way to manage your short term liabilities. You just can't do it. You need to complement it with something else. And so to me, it's just that it's a very personal question and you have to measure for yourself what that asset allocation has to look like to meet your personal situation. For me, I've kind of transitioned more so into a part of my life where I probably value principal protection more so than I do purchasing power protection. But I also have a really unusual situation where I'm a business owner. So I have the vast majority of my net worth, for instance, is tied up in my company. And so from a, from an inflation

Starting point is 01:15:49 perspective, I would argue that my corporation is by far my most important inflation hedge. And so to me, I think that the more diversification you can build into all of this, the better you are in the long run, because you kind of can cover all of those bases in a more widely distributed way. But personally, if you asked me, what are the most important inflation hedges going forward in the next 20, 30 years, I would argue for certain you want to be the owner of things, meaning that to a large degree, owning your own cash flow streams is going to be the best inflation protection, whether that's equities that are publicly traded or whether it means owning, you know, private equity of some sort, or whether it means having your own corporation or being partners in some sort of entity that generates that ownership, cash flow. To me, I mean, that's the bet that I've made. personally that I think is, is for me the most comfortable and the one that, you know, again,

Starting point is 01:17:05 it's just based on my, going back to the concept of real investment, I've invested a ton of time in understanding the financial world and understanding the way the monetary system works and explaining this to people in a very, I think, practical way that helps them kind of navigate things. that's where my return on investment is derived to a large degree. And so my corporation and its value reflects that to some degree. And so each person has to sort of find their own value add in the world. And, you know, ask yourself, what problem can you solve that will help other people derive value from that, you know, whether or not you even need to start a company around it, just being an employee of another firm is the same basic thing. You're just solving other people's problems. And the greater the degree to which you're able to solve other people's problems, the more valuable you'll be, the greater inflation hedge you have embedded in your own

Starting point is 01:18:04 investment portfolio because you've developed skills that have real value to people. And so to me, if you ask somebody, if you ask me to tell somebody how they should protect from inflation, I mean, at the end of the day, you've got to develop skills that are valuable to other people because that will in the long run, it will be by far the biggest inflation hedge you can have because no matter what happens, whether you're pumping septic tanks or you're explaining people how the world works, if there is huge demand for these things, you're going to be valuable in the long term. And there is always going to be a market for that stuff. And so a lot of it's just a personal decision about how you want to try to

Starting point is 01:18:52 to solve other people's problems to some degree. I really like how you approach this. You know, you didn't say 30% negligence and 25% bonds or like, that was not the route to where you were going. You looked at this inflation heads very differently. Really appreciate that, Colin. And really appreciate you again making time to call on the show. It's always a blast having you here.

Starting point is 01:19:14 I would like to give you an opportunity before I let you go to tell the audience where they can learn more about you, problematic capitalism and the Orkin group. The blog is pragcap.com, P-R-A-G-C-A-P-P-A-P-C-A-P.com. My company is Or-C-M-R-C-A-M-G-R-U-P dot com. I would steer people towards, if you haven't looked at it, I have education tabs on both of those websites. And it's just, what I've kind of done is compiled just tons of different links and articles that I've written over the course of time. And a lot of this is just, it's kind of my journey over the course of the last 15 years of writing about all this stuff and frankly, learning about

Starting point is 01:20:00 a lot of this stuff. Because I feel like I learned something new about the financial markets and the economy pretty much every single day, which is part of what makes it so interesting. And so those links are super helpful for people to just really start to build a foundation for understanding what is just an extremely, extremely big macro dynamics and the probable outcomes and building a framework that helps you kind of navigate all that so that you personally don't find yourself picking up pennies in front of a bulldozer or something. So yeah, those two places are probably the best places to start. You can also find me, I'm pretty active on Twitter.

Starting point is 01:20:38 I love, love to answer people's questions, help as much as I can. I know there's so much confusion. There's so much nonsense out there, so much political bias and people who I think, you know, have very, very biased perspective that tend to result in sort of these like hyper, hyper extreme views and things. And, you know, I tend to sort of try to zoom out and take more of a big picture perspective and consider, you know, all sides of an argument. And so I can be found on Twitter. My handle is Cullen Roach, just one word. love to field any questions people have or help however I can. I don't have all the answers, but I've spent a gross amount of time obsessing over all of this stuff to the detriment of many other aspects of my life that at least at this point, I think I've learned a little bit. So I love to spread the knowledge where I can when I can. Learning a little bit, Colin, I think that's the understatement here of the year.

Starting point is 01:21:41 I mean, you're always a wealth information and it's just always so great to have you on. And today to come and talk about a masterclass truly in inflation. I really appreciate that. And I'm sure the audience does too. Well, thanks, Stig. Yeah, I hope everyone is doing well. And it's always, this is one of the best, one of the very best podcast. You guys don't see it.

Starting point is 01:22:02 But the amount of preparation that Stig and the team put into this is just mind blowing. And it's why I think the, you know, the interviews aren't good because the guests are good. Not that the guests are bad, but the amount of prep they put in, I mean, man, talk about a good investment. I mean, you see it in the outcome of the interviews. And kudos to you guys. So really, it's one of the very best. Oh, wow, Colin, you know, I don't want to edit that out because it's fantastic. Thank you so much for saying so.

Starting point is 01:22:33 It's not the reason why what I'm going to say next, but Colin, I really hope we can invite you back next quarter and talk. And I would have said that even if you haven't been so appreciative of the podcast. So Colin, thank you so much for your time. Let's just end with that. And thank you so much. We really appreciate it. Thank you. All right, guys.

Starting point is 01:22:54 So before we end of the episode, I wanted to talk about an interesting opportunity to work with us here on TIP. You know, a lot of things has happened since it was just Preston, me back in the day, doing the podcast. We have more than 50 million downloads now of the main show, 18 people on the team, seven new job openings. So, bunch of stuff happening, and we would really like for you to join us on this journey. One of the positions I specifically wanted to talk about is the position of the new YouTube host. As a YouTube host working from home, you'll be asked to ideate, strategize, and record native YouTube videos and be a part of both live and online events. really as the YouTube host, we expect for you to be the talent.

Starting point is 01:23:37 And then we have a small team of designers. We have three designers work on the YouTube project right now. They will do all the creative work around the video. We're looking for someone who has a very entrepreneurial mindset and ambition. We want to grow the audience first and then figure out how to make money next, sort of like what we did here on a podcast too. And if you can just mention one more thing that's very important is that you enjoy learning yourself, but you also enjoy teaching other.

Starting point is 01:24:04 That's basically the position. Whenever we talk about YouTube posts, we're talking about someone who can also educate our audience. You can read more about the position at theinvestorspodcast.com slash careers. And if you do get the job, the plan is that you'll be trained by me personally here in Denmark the first week of your employment. Please send your application or any questions that you might have to stick

Starting point is 01:24:26 at the investorspodcast.com. That is stick at the ambassadorspodcast.com. Thank you for listening to T-Mastast. Make sure to subscribe to millennial investing by the Investors Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only, before making any decision consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - TIP370: Inflation Masterclass w/ Cullen Roche

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