TIP370: INFLATION MASTERCLASS

W/ CULLEN ROCHE

14 August 2021

Investment expert Cullen Roche is back on the show to teach us a masterclass in inflation. You don’t want to miss out on this one!

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IN THIS EPISODE, YOU’LL LEARN:

  • What is inflation, and what is it not.
  • How much of inflation is due to base effects.
  • How can expected inflation drive inflation.
  • If the current inflation is temporary.
  • How is inflation reflected in the real estate prices.
  • Why do we have regional differences in inflation.
  • If investors can profit from the interest rate parity.
  • If investors should take on debt in an inflationary environment.
  • Whether value stocks are a good investment in times of inflation.
  • Whether paper assets can be inflation-proofed?
  • How Cullen Roche has positioned himself.

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Stig Brodersen (00:00:01):
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 Cullen Roche 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, hear our Masterclass Inflation with Mr. Cullen Roche.

Intro (00:00:29):
You are listening to The Investor’s 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.

Stig Brodersen (00:00:49):
Welcome to The Investor’s Podcast. I’m your host, Stig Brodersen. And today, I’m here with one of my good friends who also happens to be a fan favorite and that is Mr. Cullen Roche. Thank you for joining me and our audience here today, Cullen.

Cullen Roche (00:01:03):
Hey, Stig. Thanks for having me on again.

Stig Brodersen (00:01:06):
Cullen, this episode is named Masterclass Inflation in our podcast feed. So, it might sound a little surprising that I would start with a, let’s call it 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?

Cullen Roche (00:01:27):
We were just joking that 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 US, the BLS, measures this by basically quantifying the consumer price index, the CPI. And there’s a lot of different ways to measure this. The various Fed entities actually measure this in a very different way across the board.

Cullen Roche (00:02:07):
Some of them use the PCE, some of them use the trimmed median price. I mean, there are 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, 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 supply.

Cullen Roche (00:02:46):
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 of the quantity of money over any sustained period of time due to, mainly, because of economic growth. And so, people have this view that money necessarily causes inflation. And this is old-school monetarist thinking or some Austrian School thinking that leads people to believe that the more money you create, the more inflation we’ll have and the worse off we’ll be.

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