I am THRILLED to announce the official launch of the Discipline Fund ETF, which is now trading on the NYSE under the ticker DSCF.
$DSCF
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Cullen Roche
@cullenroche
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Chart of the week here - average hourly earnings.
Despite a robust labor market the wage price spiral risk continues to dissipate which bodes well for future inflation.
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The City of Encinitas CA banned all helium balloons so I guess I’ll never get to see this Chinese balloon.
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As you get older you’ll learn that most conversations with your spouse will occur while you’re both in different rooms. The bigger the house the less you can hear them.
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"Why are people obsessed w/a big house?"
Most answers will be functional: "I need extra space for a home office"
If you keep digging, you might discover that the real answer for some people is:
"I want a big house because that's what I was taught successful people have"
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I'll be here live at 5pm pst. Mostly explaining all the mistakes I made during my life and how you can avoid them. 😁
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Join myself and panel of amazing speakers tonight at 8pm EST to chat do’s and don’ts of growing your wealth (and more…)
You don’t want to miss this one!
@cullenroche @IAmClintMurphy @ChrisDunnTV @SteveOnSpeed @stockgeekTV
twitter.com/i/spaces/1YpKk
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And yes, the eggs are dramatically better than the bleached store crap. I’m a Dominos eating, light beer drinking idiot, but I’m an egg snob because the difference is that big.
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And none of this accounts for buying the birds, building an adequate coop, heating them in winter if necessary, burying them (ugg, burying them) etc.
I suspect you break even at best. But they’re a lot of fun to own and the kids love them. But they’re not an investment.
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Chickens are shockingly easy to own, but they eat. And they eat A LOT. And that feed has gone way up in cost.
If you own 3 chickens you’ll get about 1 egg a day. That’s 30 a month or 2.5 cartons. That’s maybe $15 at the store vs $25 in feed per month.
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I’ve owned chickens for 10+ years. I joke that they’ve been a great investment, but you will NOT save money on eggs by owning chickens.
Forget Pandemic Puppies. Meet the Inflation Chicken.
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Lastly, if you own something like this it's a little silly to judge it on a 1 year time horizon. In my All Duration model a 60/40 ends up being a 12 year instrument. So you have to consider it long-term money in your portfolio.
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All in all, 60/40 does a lot of things really well. Its:
1) Diversified
2) Tax and fee efficient
3) Simple.
But if you use it you still need to customize it around your other needs where necessary.
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2) If owned in a single or handful of positions you could find yourself in a liquidity crunch if the stock/bond markets become correlated.
In other words, if you needed liquidity last year 60/40 failed you because the blended asset allocation reduces liquidity.
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Two potential flaws in 60/40:
1) It's not very risk balanced because 85% of the volatility comes from just 60% of the portfolio (because stocks are so much more volatile than bonds).
This can result in a lack of diversification when stocks perform very poorly.
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Is the 60/40 portfolio dead?
No. But that doesn't mean it's the right portfolio for you. See my detailed answer here:
youtu.be/sOBx27dosis?t= via
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Triple true if their commercials are infomercials.
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This is doubly true when it’s combined with any form of life insurance.
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Here’s a pretty good rule of thumb for avoiding scams and BS investments:
The stock market averages 6-7% long term real returns with very high volatility. If someone is guaranteeing more than that you should automatically be VERY skeptical and probably run for the exit.
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No real surprises here. No pivot commentary. They're going to 5% and holding it all year.
If they "pivot" it likely won't come until inflation is MUCH closer to 2% or below.
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Core CPI is still at 5.7 and core PCE is still at 4.4. The Fed’s target is 2%. They have A LOT of work left to do even tho inflation is trending in the right direction.
There is no pivot coming and I’d be shocked if they imply anything otherwise today.
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Great chart here from my buddy Ryan showing the cost of subjectively removing XOM from an index in recent years.
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"Exxon was removed to help diversify the index...and add new businesses that better reflect the American economy."-S&P Dow Jones
"We don't see things as they are, we see things as we are." -Anais Nin (non-member of index committee)
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The bigger conclusion is that moralizing and politicizing your investments is a poor way to allocate your savings.
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I use the example of Exxon Mobil. Is XOM an ESG company because they are increasingly pivoting their business towards green energy and investing billions of dollars every year?
Or are they not ESG because of their legacy petroleum business?
It's a subjective value approach.
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My basic view:
ESG is a well intentioned strategy that is poorly executed on secondary markets because:
1) It results in subjective value judgments & stock picking
2) Secondary markets aren't an effective place to enact change because you don't directly impact the company.
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There are two ways to view the "soft landing" narrative.
1) The Fed landed the plane, but now the plane is sputtering at 1% GDP.
2) The Fed didn't crash the airplane.
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Remember, thru all of 2021 they said they wouldn’t raise rates until the unemployment rate was under 4% (when it was way too late). Same applies to the 2% target here.
If they “pivot” it’s not coming until inflation is under their target (or something bad happens beforehand).
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Core CPI is still at 5.7 and core PCE is still at 4.4. The Fed’s target is 2%. They have A LOT of work left to do even tho inflation is trending in the right direction.
There is no pivot coming and I’d be shocked if they imply anything otherwise today.
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My general view is that some level of low inflation is the natural byproduct of an elastic credit based money supply and government spending. But a low (0-2%) rate of inflation isn't necessarily inconsistent with rising living standards.
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This was my favorite question here:
Is inflation necessary or inevitable in a modern credit based monetary system?
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New 3 Minute Macro vid - Part 2 of the Q&A.
Topics include:
1) Bitcoin
2) ESG investing
3) Is 60/40 dead?
4) In inflation necessary?
I hope you learn something new.
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There are only three guarantees in life.
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Replying to @cullenroche
Death, taxes, and @cullenroche disproving garbage monetary policy takes
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Kids are really loving the snow.
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Fact check: we had much higher interest payments as a % of GDP in the 70s and no hyperinflation.
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Interest expense on national debt in 2022: $475 billion
While the average interest rate was 1.9%
Now, rates are 4% - 5%
Interest could be $1 trillion or more this year. They'll have to print money to pay it.
That's how you get hyperinflation.
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Core PCE down to 4.4%, trending in the right direction.
The year of disinflation is fully in motion, but inflation will remain well above the Fed’s target all year (which means they’ll most likely remain tight with a 5% or so overnight rate for most or all of the year).
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Make no mistake. I’m not arguing for perpetual govt expansion. There are good arguments for a reduction in the size of govt.
But the “pay back the debt” narrative is an error of understanding.
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Paying back debts is a fallacy of composition. Yes, YOU can pay back your debts, but only because someone else expands their balance sheet to offset your decline in liabilities.
In the long run liabilities almost always expand and that’s not necessarily a bad thing.
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Eg, here is corp debt. All corporations cannot “pay off” their debts. That’s not how this works. The liabilities are other people’s assets. Balance sheets balance!
Again, it’s reasonable to say it needs to slow down or creates instability, but these debts NEVER get “paid back”.
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We exist in a credit based monetary system. The debts of aggregate sectors are assets for other parts of the economy & expand to meet the growing needs of its users.
It’s reasonable to say the govt should run balanced budgets, but implausible to say it should pay off its debts.
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**Aggregate sectors don’t pay off their debts.**
Paying off the national debt would involve the elimination of trillions of dollars of household & corporate assets & a debilitating reduction in the military, Social Security, Medicare, infrastructure and other essential services.
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The USA needs to pass a 27th amendment disallowing Federal deficit spending in any fiscal year until the National Debt is fully paid off.
We need to shut down the circular financing scheme funding embedded politicians with deficit spending kickbacks else there is no way forward.
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Here's my full segment on with from yesterday. We talked about the future of inflation, Fed policy and potential asymmetric risks to the economy. I hope you enjoy it.
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