Cullen Roche: Pragmatic Capitalism

Discussions on interest rates tend to fall into two camps – the state based view and the market based view. The state based view says that the government can always control the cost of its interest while the market based view argues that the market (typically “bond vigilantes”) can control the rate of interest. I find both of these views confused or at least misleading. One of the nice things about being an actual bond portfolio manager is that I see how prices are set every day. I’ve...

The idea of a “Green New Deal” is all the rage on the left these days. This is a huge, bold plan to transform the US economy. Here are some highlights from the proposal: Net zero greenhouse gas emissions within 10 years by replacing “all existing buildings in the USA” to achieve maximal energy efficiency. “High quality health care”. “High quality education, including higher education”. “Affordable housing”. “Guaranteeing a job with a family sustaining wage” and full benefits. Save the...

(I did a quick hit on Bloomberg TV yesterday discussing buybacks, but I wanted to dive in in a bit more detail. You can see my brief comments here at the 5:30 second mark.) In today’s edition of People Are Saying Stupid Things About Stock Buybacks I want to talk about the Chuck Schumer and Bernie Sanders proposal to ban stock buybacks. Here it is in case you want to become a little bit dumber. Snark aside, I found the op-ed kinda lazy. Their proposal can be boiled down to: “Share buybacks...

One of my favorite things to think about in investing is the theoretical investor who slept through 1987. We all know about “Black Monday”, the crash of 1987, when stocks fell 23% in one day. It was terrifying. But the craziest thing about 1987 is that the S&P 500 had a total return of 5.81% that year. The stock market was positive in a year that is known for being a terrifying crash! So, if you had checked your portfolio on January 1, 1987 and then slept through the entire year and...

Modern Monetary Theory (MMT) is in the news a lot lately. And that has resulted in a number of “critiques”. Most of these critiques are, to be blunt, trash. You see, the thing is, MMT is really, really confusing and most people don’t get it right at first. So we tend to see lots of “critiques” of MMT that aren’t based on a sound understanding of it. I know this because I went through a phase almost 10 years ago where I first encountered MMT, thought it was largely right and then realized...

Sometimes it feels like our world is becoming more closed off despite the fact that we’re more interconnected than we’ve ever been. This interconnectedness is new and scary in ways. I get it, but it’s also exciting and something I think we should try to embrace. Of all the investments I’ve ever made in my life travel is certainly among the very top. I was fortunate to be born to parents who loved to travel. My mom and dad would lug all 8 of us all over the USA and the world. It not only...

Jack Bogle is gone, but his impact will last forever. That’s certainly true for me. No single person had a bigger impact on my firm and career direction than Bogle did. He is, essentially, what I’ve modeled so much of my life and work around. It started with “Enough”, Bogle’s second most brilliant piece of work (behind the Little Book of Common Sense Investing). I remember reading it in the depths of the financial crisis and it shaped the way I see so much of life. The key message of the...

Alexandria Ocasio-Cortez (AOC)…wow, like a whirlwind, she went from virtual nobody to Congressional sensation. These days it’s almost impossible to avoid hearing about her. Rightfully so, her story is a pretty amazing one. I won’t rehash that story, but she does have some bold economic views so I am going to force my unwanted opinions on you regarding that topic. AOC is a Democratic Socialist like Bernie Sanders. I’ll be honest – I don’t tend to like extremists on either end. I spend a lot...

Back in 2010 I came across Modern Monetary Theory (MMT) for the first time and found it somewhat appealing. This is the theory that Alexandria Ocasio-Cortez promoted along the way to her meteoric rise to Congress. MMT is a theory of economics that says some pretty controversial stuff – the government has a real budget constraint unlike a household, monetary policy is very ineffective and the government should run large scale Job Guarantee programs to ensure full employment. I like a lot of...

Well, I thought that 2018 had to be peak stupidity for humanity, but we are not off to a good start in 2019. I opened the Wall Street Journal this morning to find this article which has a falsehood in every single paragraph. 10 for 10. Let’s review this impressive mess. First, the title, “The Fed’s Obama-Era Hangover” is just catchy politics. The Fed is an independent entity and President Obama had nothing to do with the policies enacted by the Fed, but the entire article disparages...