Josh Crumb Answers the Hedgeye 21 - HE 21 questionnaire crumb thumb JULY17

1. What is the single biggest market risk right now?

Same as the past 3 decades, Central Banks and unstable FX management…but compounded, with the risks buried deeper and more thoroughly each bailout cycle.

Global Central Banks have removed (and paid up) for $10 trillion in risk assets from the markets since the GFC (more than the entire mined gold supply in human history), and global net-issuance of government debt has been ~0$ for first time in world history for nearly two years now.


Adding that much liquidity was a tightrope walk we should give them credit for, they’ve “saved” a capital markets-centric economy in the short term, but the risk is likely our political systems when they are forced to withdraw or add more. We are mispricing volatility (which is the key determinant of all markets) on such a massive scale, that the only remaining buffer in our global-cap structure, during an inevitable spike in volatility, is now our currency. ..But the risk is not the lofty valuation of assets and equites, but currency and the notion of reverting to “risk free” is now the ultimate trap.

An entire generation has been disincentivized to save, calibrated on bailout economics, lacing massive bias’ in all ETFs and algorithm products, and the vast majority of “main street” assumes this is part of a normal market cycle and a “dollar is always a dollar”. Moral hazard is embedded in market incentives to the point that the next guaranteed-recessionary bailout (from thinking this all “worked”) will likely break this half-century-old currency regime, and likely take many political systems with it.

So the risk is social. Assets and income has to converge, either through capital stock deflation, or wage inflation. Since their system is allowing neither, nature will find a way. I hope I’m wrong of course, but the fact that we aren’t allowed to even debate this economic view within an accepted band of opposition has elevated the risk of unpreparedness and lack of backup planning.

2. Where do you think the most attractive 1-2 opportunities exist for investors?

In general, stay “short currency, long scarcity”.  Keep accumulating gold; follow Buffett’s lead and own oligopolistic distribution networks with this gift liquidity; and good real estate (probably higher-end in “second tier” cities that didn’t get the first wave reflation-bubble near financial, tech, energy, or revolving door-political cities). Don’t be afraid of “expensive” if it has Ricardian rents or monopoly power, it will only get more expensive as the denominator falls in value. Measure with gold.  

3. What investment would you avoid like the plague? 

Perpetually profitless assets – return free risk (Tesla and the “tech 3.0” wave that doesn’t believe in profit; most cryptocurrencies & ICOs, low & negative yielding sovereign duration). 

4. Are we on the road to a cashless society?

No. Some want to take us there, but they’re on the wrong side of history. QE emboldened this crowd, but their NIRP + Cashless hubris will ultimately end them (governments will have to decide if they support it or not; if they do, regimes will end alongside that line of economic thinking). Investors should understand and position for this inevitable path.   

5. If you could travel back in time, where would you go?

1998 Russia (I wasn’t there until 2002).  Super interesting culturally, and good opportunity to pick up a few global assets classes at that time!   

6. If you were an animal, what would you be?


7. If you could listen to only one album for the rest of your life what would it be?

Toss up: Chopin - Complete Nocturnes, or Nirvana MTV unplugged. 

8. What really annoys you?

Short answers 

9. What is your favorite movie of all time?

Dead Poets Society or Fight Club

10. What are you watching on TV?

I cut the cable two decades ago, don’t really watch TV.  But I Netflix binge now and then, currently Better Call Saul and Sons of Anarchy.

11. What’s the most important book you’ve ever read?

That’s like picking your most important child! My core economic thinking is probably shaped by: The Prize, House of Morgan, Black Swan, Guns, Germs and Steel, and Adam Smith’s Moral Sentiments.

I also love Victorian Internet, Five Equations that changed the world; Gödel, Escher, Bach; Deep Simplicity, and everything I’ve read by Ray Bradbury, Hunter S. Thompson, Fyodor Dostoyevsky, and Nikolai Gogol!

12. If you could tell your 14-year old self one thing, what would it be?

Spend more time learning music. ...also, really seek to understand trust and all of its complexities. At the core there is two kinds; intellect and intent. Neither is good enough without the other, and they overlap less than we’d like. Maybe 4% of the population are high caliber in both – if natural power laws apply – seek out these people always.

13. What is the greatest invention of all time?

I’m still working on it ;)

…In the past, toss-up between the telegraph, Haber process in fertilizer synthetization, Patterson and Newton’s Bank of England framework (and the worst being its corruption!)

14. If you could only eat one thing for the rest of your life…

Wendy’s spicy chicken sandwich

15. If you were a car, what year, make and model would you be?

2003/4 Nissan Pathfinder (or QX4). Last and best of the real sport-utility wagon era. Yes, I’m still driving my second one.

16. Are America’s best days behind or ahead?

Depends on who you are.

Administrative middle class peaked well over a decade ago. 1% peaking now. Lower middle class and minorities will have much better days ahead after a tough past decade, but probably more short term pain in near future.

But overall, I’m optimistic if we can clear the decks of this rigged political-economic system sooner rather than later. I’m excited by our social progress and many technologies, depressed that our central planning systems only know how to get worse with time (what other product is so objectively worse three decades later than our currency?).

17. What’s the best piece of advice you’ve ever received? 

During grad school: quit your engineering job, become a brewery-tour guide at Coors; learn how to communicate and explain things to anyone, and how to create happiness with information.

18. What’s your favorite quote?

“The Edge... there is no honest way to explain it because the only people who really know where it is are the ones who have gone over.”
–Hunter S. Thompson 

19. What do you want written on your tombstone?

He finally found time to sleep  

20. What’s your favorite (and least favorite) word?

Favorite: Weird.

Least: Bureaucratic (because of what it is, and because I can never spell it the first try)

21. What is your biggest fear?

Not being able to finish certain things I’ve started, thus letting down those that have paid the costs for my time and passion.


Would you rather have pancakes for feet … or bacon for fingers?

Bacon fingers, mobility