Michael Cuggino, Permanent Portfolio Family Funds, on his funds performance and the market

If there. And it's. Jamie Dimon is getting ruled that Washington. DC and stocks that are well but I found them with a look at the Dallas feet down fifteen point students so that he said he is sorry. That was one of the things he says this -- got to be sold Gerson to -- Does he was the darling of Wall Street for he's been down her 2030 years. -- -- or problem used to work for sandy Weill and are you remember that name -- the use of big. Wall Street tycoon in Jamie worked for him and and and now and he's sorry hit and now it's our Dow is down seventeen points -- 500 is flat NASDAQ down three -- down a dollar 8388. -- US treasury at one point 642 nets -- Old is seven dollars twenty cents to sixteen point one our guest is Michael congenial he's a portfolio manager for the permanent portfolio. Family of mutual funds might welcome to show -- Good morning -- -- yourself. A wanna congratulate you on your returns he returns during the last five years have been pretty strong. What have you done that would it would be even bind to get such strong returns in your mutual funds. Well we brought an asset allocation fund that we had a broad array of diversification not only typical stocks and bonds and in US on and on US stocks bonds but also. Commodities precious metal. On an currency to some degree as well also that's sort of mix of investments tended to keep us in the the middle of the road if you will despite all the volatility -- asset classes around us. It allowed us to have. Sort of a less volatile applaud -- us that we years. It looks like he made a lot of money in gold is that a fair suggestion. No question of if you look at their history go over the last ten to twelve years so it's it's -- a fantastic run and you know about 20% of our portfolios allocated towards gold as a store of value -- of currency. Aspect is so there's no question would be helped by that. -- what do you what do you think about precious metals and energy during the next twelve months Goldman Sachs on Monday of this week late Monday. Announced that they think it precious metals and energy prices are gonna rise by 40% over twelve month period of time you agree. Well I don't know about the numbers but I do agree that a lot of those stalks. And in the price of metals have been beaten down there at the lower end of the trading ranges a lot of negativity is slower worldwide growth as the price and and I think in the long term but we -- long term investors. That's the sort of environment you look out for longer term growth so -- probably agree with the premise by I have no insight into their number. But it's an area that we're looking closely. -- you say play currencies the Euro set a dollar 25 should we think that it's gonna go lower than a dollar 25% hit bottom. Well it could very well global oil and and we we have currency exposure in the Swiss franc which. Is sort of an offset to to the Euro to some degree as well the US dollar all cases a lot of book currency and liquidity being printed. On but I think you could go a lot lower depending award goes on in Europe by I think the European. Issues are structural or long term in nature. I don't believe that that the populist since fully understood the ramifications of what's going on over there until. That's done and you have the right policy mix of austerity and private sector growth but actually government grow. -- but you're gonna. You're gonna cut about throughout like we're doing with stopgap measures and really just kicking the problem down the road. Says it's safe to assume you're not buying European stock yet. I would say that for the most part that's true although there are some attractive opportunities especially the energy -- How do you do how do you play the UK do you look at the UK separately from Europe. We do what I think we probably at like we do what all of our international -- it's the most part investors in US based. You know we want stock exposure but -- -- currency exposure in our -- so we tended to have invested in sort of American depository receipts eighty yards away for US investors to deploy a -- US -- and that takes the currency aspect out of the the stock holding it keeps it purely as an equity move one way or the other. How much cash he said no no Mike. I would say probably in the low -- at this point I don't of the exact number that hand but. We consider cash not a sterling money in the bank although there is a small amount of that but. More are short term treasuries. And other sort of -- related assets. So what are you looking to -- if you're golden thirteen 14% in cash she must have some on your shopping months. Well I think you know like I imagine there are some opportunities and stalks up precious metals have been attractive in the lower into the trading range. The and in the bond market continues to provide some opportunity. Not just horrific would all agree that you know the -- are historically overvalued right now but. There is movement among the curb so to speak and you can not depending on you play that you can make some money in in that trading range we have done that. By adding -- also provide you protection against deflation and -- all the concern about slowing worldwide economic growth here and abroad. Emerging markets that are Barnes helped you to protect you or you downside of that apartment. Do you still like death FedEx used to be used to own quite a bit -- FedEx is still haven't. Yeah we do at a and I think that you know that speaks to our sort of view the long term that that the global growth story is there I think it ebbs and flows right now I think it's. It's adding a little bit. But I think of a long term you know there's there's a multi year if not multi decade story there I think. Equities that are leveraged to that growth. -- Of FedEx in the transportation area should do well over the long term. It's 11 sort of split to our equity exposure but it's still involved in the equity markets lately I think a lot of people a bit more. Defensive in nature would utilities and consumers in the light it -- tend to gravitate more towards the longer term more more growth leveraged -- About State Street it's a local company appear. Absolutely have a lot of experience what that very it's still holding. And we still like it for a lot of reasons we always tablets. Not necessarily a bad experts say sort avoided many of the issues not all of them -- -- -- qualified it's rescue of the areas where was affected in the financial crisis. But it's a very streamlined operator services institutional assets around the world. And we think that in the longer term there's growth there at State Street does a great operator in the space. Technology people. Understating the lines of businesses there there is going to be a long term weather. What are your expectations for the stock market during the next say eighteen to 24 months are you waiting until the presidential elections are over to have an opinion. Well there's no question of the presidential elections are significant and and the congressional elections but my dad yeah. On you know I think in the short term which had a great run since the S&P downgrades and that budget discussions but last summer. You look at stocks they've given back some of those games that we are early in the year but still. Net net it was good rally that speak to potentially consolidation. On you could definitely see deflation in asset prices in general that would include stock. If we do go into a double dip or economic slowdown there you know whatever those things are for the short term -- you know it could be a little -- little. But I figure the longer term that presents opportunities bite might you on the US economy probably the worldwide economy is that. On you know the United States has a significant economic engine that right now on the performing its potential. On site you would almost like and undervalued stock in the but edit waiting for the right. Policy initiatives. Fiscal initiatives. Things -- and its business activity to our blocks some of that value and if that does I think the US will grow. And I think the world like roles where like I said is still there -- and the US can can definitely help but oral performance. You think tax reform is holding us back in the fact that we of this. Tax I think some we called the tax would get me as the day. Would you which is a pretty good term report. I mean I I I just look at and I say it's it's unconscionable. That we don't know what our tax rates are going to be in less than seven months. Well it it isn't if you translate that to business owners and I'll use myself as an example you know if if you don't know what escape. And you don't have clarity with respect what the rules are going to be go forward. But how do you make longer term investments in your business whether hiring people whether it's -- capital expense improvements etc. so I think. It explains to me a large degree like corporations are sitting on tons of cash right now on the ballot sheet -- banks. And they're reluctant to put a lot of it to work shop because beyond certain that there I think tax reform as one aspect of of the overall. A problem might think regulatory reform in general you know I think the -- -- -- testimony today that exist today at what's wrong with the banking system. -- you know what but. Mike we got to run it got to let it go but thank you very much your great guest I hope you come back some time what. What do explore what about the guys who would love to. All right Michael could geno -- bigger at the reform. Permanent portfolio family of mutual funds joining us today.