There were a lot of questions from the Q&A so I am going to break this up in two posts. I hope it’s helpful.
Lebron to Cavs?
CR: He made the right choice for his family and himself. Seems like the right move from a personal perspective.
1) Do you feel that the U.S. economy will accelerate in the coming quarters? 2) Is wage growth a lagging indicator of inflation?
CR: I don’t think the US economy is going to accelerate sharply from the expected 3.2% growth this quarter, but I see no signs of a significant slow-down or recession.
There’s a lot of debate about this. I don’t think there’s a clear answer. If spending is a function of income relative to desired savings then there are more factors at work in the inflation equation than wages. Given that the data on wages is often lagging to some degree, but highly correlated with inflation I’d argue that wages are, at a minimum, pro-cyclical.
G H says:
Why did you change your RSS service to not include the full text of the articles in the feed? You don’t seem to be selling any ads on your site so it seems bizarre to require going to pragcap.com to view the full article.
CR: I do run ads on the site and unfortunately, if no one visits the actual site then there’s not much use in me running it. So the abbreviated feed actually helps make it worthwhile to run the site. I know it’s a minor inconvenience for readers, but if the whole internet were free then there’d be no incentive for many people to publish content to it. While the ad revenue isn’t substantial, it does pay for some overhead of running the site.
Tom Brown says:
What’s your favorite color?
Will Japan start experiencing hyperinflation by 2016?
OK, you ready? Now what’s your view on Sraffa’s argument here about supply curves?
Finally, can you explain this to me, because I’m not getting it (the zero universe theory?)
CR: No favorite color.
No, Japan will not suffer hyperinflation by 2016. I think their demographic problem is so substantial that sustaining high growth/inflation is going to be a persistent problem in the Japanese economy for many years to come.
Sraffa argued that the conventional view of supply curves as shifting upward was not necessarily right. And I think a bit of logic confirms that. Anyone who’s run a business knows that higher demand doesn’t always lead to higher prices. Firms tend to carry a substantial amount of spare capacity. So it’s possible that the supply curve is often flat. I’d hate to paint with too broad a brush there because this answer obviously depends on specifics, but Sraffa made a valid point that probably doesn’t garner enough attention when applying economics to reality.
“Quantum conspiracy” – ha. The only quantum I know is Quantum Leap.
I just bought a bunch of Buffalo Bills paraphernalia in anticipation of the upcoming season. Do you think this was a good allocation of capital?
CR: I never understood why people buy minor league sports paraphernalia. (I am a Redskins – can I still say that – fan so God bless us both).
1. Are you a homeowner? (not stalking just wondering if you own CA real estate)
2. What is your favorite music/performer in the rock genre?
CR: I moved to San Diego in 2006 and was very bearish on housing so I rented. The market is still down about 15% since then so I feel pretty smart having allocated my capital elsewhere. The southern CA rent/own ratio is still pretty bad so I still favor investing in other ventures – especially as a business owner. But this is a very personal view as many likely know. Personal factors could change this in the coming years….
Have you ever had Physical Therapy? If yes, then was it a good experience?
CR: I guess it depends. I run and bike a lot and lately I’ve been doing some long distances so yes, a deep tissue massage and a good physical therapist is the difference between quick recovery and long recoveries….Try it out. You can’t know if you like someone else rubbing your body as you lie on a comfortable bed until you’ve tried it. But I don’t know many people who don’t like that in some form or another (see what I did there?).
You seem optimistic about the most recent jobs report with approximately +300,000 jobs added. Does it concern you that this figure comes from 500,000 full-time jobs being lost and 800,000 part-time jobs being gained?
CR: I actually don’t put much weight in the employment reports. First, it’s lagging. Second, it’s heavily revised. Third, there are other indicators that tell us much more about the future state of the economy. The media makes a big deal about the employment reports, but I wouldn’t read into them too much.
Why should I buy your book if I have access to your perspective for free on your website?
CR: Good question! The book is a succinct explanation of my views on macro finance and econ. Not only does it contain a significant amount of information I’ve never published here, but it’s consolidated and organized in a way that the website doesn’t allow for. My hope was to write an educational and informative book that spanned the worlds of macro econ and macro finance (which, as far as I know, hasn’t been done before in the sense that I wrote the book). And a book format allows me to do so in a much more reader friendly manner that serves as a superior resource relative to the unfortunate black hole of information that blogs often are….
Part 2 to come tomorrow….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.