The reasons behind the rally, and the coming inflation - Cullen Roche talks with Alpha Trader
This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with Cullen Roche, the founder and chief investment officer at Orcam Financial Group, and author of the Pragmatic Capitalism blog. First up for discussion is Friday's employment report, the massive numbers of jobs lost, and stock investors reacting by continuing to buy low and sell high. Roche isn't expecting another Great Depression for a couple of reasons ... 1) Today's U.S. economy is so much more diverse, and 2) The response this time around - trillions in fiscal and monetary stimulus - is 180 degrees different than that of the 1930s, when policies were tightened in response to the downturn. So, contends Roche, the stock market - marching higher in the face of bad economic data - is pricing in what just might be super-high, or even record corporate profits in 18-24 months. See also Roche's recent article: "What the hell is the stock market doing" As for the sectors/names that have led the rally, Roche says there's very good reasons stocks like Amazon (AMZN), Peloton (PTON), and Zoom Video (ZM) have done so well during the pandemic, but he's skeptical such outperformance is sustainable. Roche, in fact, suspects value stocks - which have suffered relative to growth for many years - may soon have their day. Why? There's a not negligible chance of rising inflation becoming the story within a couple of years. Growth is where you want to be in times of disinflation, says Roche, but it's the staid, Buffett-like plays that do well in the opposite environment. There's plenty more, including Roche's take on The Oracle's ([[BRK.A]], [[BRK.B]]) reluctance to put any money to work, and his thoughts on Bitcoin (BTC-USD) in the wake of Paul Tudor Jones' recent investment in the most-popular of cryptos.