Interview of Bill Roller with Jeff Kropf on the Jeff Kropf Show, April 4, 2012
7:35 to 7:45 am.
It is always a great time talking with Jeff about politics and the market.
Click to listen->KUIK 1360 AM, April 4, 2012, On-Air Interview
Jeff Kropf: Well, let’s go to our friend, Bill Roller, BR Capital in Vancouver. How are you, my friend?
Bill Roller: Well, I’m connecting with my inner James Brown this morning, oh, good god, watching the market. It’s dropping faster than Keith Olbermann’s income today. [Laughter]
Jeff Kropf: Which Keith Olbermann’s dropping income was about as bad as his drop in ratings.
Bill Roller: Well, that’s right. When you’re only talking about one thing, people kinda get a little tired of it, too.
Jeff Kropf: Yeah, well, that’s true. I mean, that’s why I try to veer off into other areas other than just politics, and the market is one of those areas. I’m a small-time investor. I’ve got the market up on my screen real-time, and this is not a good day. What’s going on, and why?
Bill Roller: Well, a couple things going on. The big concern is starting to hit The Street, and that is Spain, whereas remember, we’ve talked several times about Greece. Greece is kind of a small player, but Spain, fourth largest economy in Europe, serious player, serious problems. And so, what happened today that’s spooking the market is they had a bond auction, and they didn’t sell nearly enough of their bonds, so rates are going up. And if you caught my closing market report yesterday, we saw Spanish unemployment is starting to spike up as well. On an annual rate, it’s up to about nine percent.
Jeff Kropf: Well, that’s happening all over Europe.
Bill Roller: that’s right, but –
Jeff Kropf: So, all right, so that explains what’s happening today. Now, two things I wanna get into, I wanna ask you about. First of all, what will Bernanke’s immediate reaction be today, and there will be one if there hasn’t been one already and I’ve missed it, and secondly, what’s the long-term outlook? A lot of people are saying we’re due for a pullback in the market, but the market’s being sustained because Bernanke is just pumping tons of dollars into the marketplace, so what do you think Bernanke’s gonna do to this news about Spain today? They gonna do something –
Bill Roller: No, I think –
Jeff Kropf: – to try to signal something at the very least today to try to get the market back in place?
Bill Roller: Well, I think the signal came out yesterday, and actually, the market’s reacting to that signal, and that was the minutes of the Federal Open Market Committee were released from the March 13th meeting, and they said that they’re gonna hold off on increasing any kind of monetary stimulus unless they see prices start to rise – or I should say prices slow down slower than its two-percent target. So, that’s actually already being priced into the market, and that’s also cause for concern, so Bernanke’s not gonna react short term to the Spanish news. He’s gonna wait and see, and so nothing’s gonna happen for a month at least, or probably more.
Jeff Kropf: Well, he’s already tried to shore up European Central Bank and other banks by offering them this discount window, the Fed facility. They can just – they can go in there and buy at this – and borrow money, rather, at this incredibly cheap price.
Bill Roller: Yeah, which is a mistake. It’s kind of like enabling an alcoholic. Cheap money got –
Jeff Kropf: Well, it is.
Bill Roller: Well, cheap money got Europe into a lot of its problems now, and it’s certainly doing the same thing to us, so giving them extra access to that in the absence of large government restructuring or restructuring their social safety nets isn’t gonna help, and that’s certainly what we’ve seen with Greece and now with Spain. What’s really ironic abou tSpain is that they were the home of the green energy movement. I mean, they put a huge amount of money into unicorn power, windmills and the rest of the green stuff, and they just killed their economy.
Jeff Kropf: Yeah, and in fact, there’s an interesting report that was written by Todd Wynn, at the time was at Cascade Policy Institute here in Portland, about how Spain’s green jobs program was actually destroying more jobs by far than it created.
Bill Roller: Oh, absolutely. I mean, if you wanna get – I mean, I’ve said before the best green energy program is nuclear power, which is very politically incorrect. You don’t need 10,000 people pulling maintenance on windmills. You need one guy – you need Homer Simpson in the nuclear power plant supplying power for the entire economy. You need the efficiency that it provides, not jobs created through inefficiency.
Jeff Kropf: Homer Simpson. [Laughter] That’s pretty good. All right, long-term outlook for our market, a lot of people saying it’s time for us to have a little breather, little pullback. What do you think?
Bill Roller: Well, I’m definitely seeing some signs of that consolidation, and some of the leading indicators are looking a little bit iffy there, and also, we’re – it’s a little bit early to come into the silly season. And usually May to August is pretty flat. The old saying is “sell in May and go away.” To a certain extent, that’s been repudiated over the last few years because we’ve seen huge amounts of volatility during the summer, but, yeah, I think we’re gonna be just kinda setting up to be moving sideways or a little bit down. And then –
Jeff Kropf: What do – so, in that regard, you think we’re gonna be more sideways to down as opposed to a little breather and then going back up again?
Bill Roller: Yeah, I think we’re gonna be more sideways, ‘cause we’ve had a pretty good first quarter when it was up 12 percent, and so I think it’s just be kinda moving sideways. Plus, the election is still in doubt, so everybody’s trying to wait and see what’s gonna be the outcome from Obamacare when the Supreme Court announces its decision end of June, and then from that we should get clarity on the election, whether we’re gonna have another four years of Obama or move on to something else.
Jeff Kropf: Now, certainly indecisiveness within the market has – well, in the political world has an effect, obviously, in the marketplace. Where do you think then – for the benefit of our viewers, if we’re going to have a flat to down market, I mean, typically April’s a good month, right?
Bill Roller: Usually. It’s kind of hard to say. I mean, the problem is – traditionally, government intervention and government participation really didn’t affect the markets, but really, up until really 2000, the government has become such a large player, it’s made it much harder to game it. The conventional wisdom was, well, it didn’t really matter who was in charge, Democrats or Republicans. We’d still start to see increases in the market. Now, because there’s so much money being thrown around and so much policy both good and bad affecting the market, it’s really become kind of a trading market as opposed to a trending market.
Jeff Kropf: Yeah, no, I think you’re right. It’s gonna be people that are paying attention to the trends, quick on the trigger who are gonna be trading kind of – very, very short-term traders, I think are probably gonna be the ones that can make a little money in a flat to down market –
Bill Roller: Yeah, I mean –
Jeff Kropf: – right away.
Bill Roller: – that’s why we’ve seen really timeframes collapse in the market. It used to be early ‘90s, buy and hold, ride the trend, and there’s all this influence of high-speed trading, high-frequency trading. Well, it’s short – people are just picking off those easy trades and computers getting involved and massive amounts of short-term volatility being injected into the market.
Jeff Kropf: Yeah, those flash trades, a number of other things. I mean, it’s very volatile, and it makes me wonder how should – and what’s your best advice to our audience about given the volatility and the uncertainty – elections, Europe, debt, all these things going on – how should people be approaching manage their – managing their investment portfolios right now let’s say for the next year?
Bill Roller: Well, for the – well, I mean they need to be – as I said before, they need to always have an out point, set stop losses on their stuff. I mean, imagine somebody who owned Groupon, for example.
Jeff Kropf: Right.
Bill Roller: It got whacked pretty hard recently, and looks like it may not necessarily recover, complete with some accounting issues, so when things start to look a little bit toppy, put a hard stop in there and be willing to get out of it. Certainly, looking more at value becomes important, and sometimes it makes sense to look at stuff that has been beaten down that is starting to make a recovery. And then, as I’ve said before, you need to be careful. Do your due diligence on any investment, and if you don’t necessarily buy something, there’s always another bus.
Jeff Kropf: That’s true. What about gold?
Bill Roller: Gold, yeah, a small position in gold probably makes sense, but I think it’s also looking a little bit toppy also. If the market really starts to go down, you’ll see money kind of pulling out of gold and going back into treasuries, like we’ve seen today.
Jeff Kropf: Yeah. Bonds?
Bill Roller: Bonds, yeah, actually bonds, that’s the dog that hasn’t barked, the big selloff in bonds. They’re still looking okay for now, but certainly on your bonds you need to be very careful, and if you hold any bond funds, be especially careful. Stop losses become even more important on bond funds than individual bonds.
Jeff Kropf: Yeah, yeah, absolutely. Stop loss is critical, and even bond funds now have gotten a little weak because of so many cities and municipalities are threatening default. Some are going bankrupt where there are laws that allow that type of thing, ‘cause not every state does allow municipalities and so forth to go broke. So, even with bonds you’ve gotta be careful.
Bill Roller: Oh, absolutely, and even as good a manager as Bill Gross down at PIMCO, you need to be careful of that. I was doing some advising on an investment committee, and this young lady said, “Well, you know” – [Music playing] – “Bill Gross is such a great manager.” Said, “Well, the best manager during the tech selloff lost an awful lot of money in 2000.”
Jeff Kropf: Yeah, well said. How can people learn more about doing business with you?
Bill Roller: Well, they’re welcome to go to brcapitalinc.com. In fact, we just redid our website, so I’m inviting everyone to take a look at that, even though it’s still somewhat under construction. And our phone number, 800-562-7096.
Jeff Kropf: Thank you, Bill, brcapitalinc –
[End of Audio