Cullen Roche: Pragmatic Capitalism

I’ve been with my wife for 17 years. And after all that time I finally figured out something really important when we’re fighting – never, never tell her to calm down when she’s mad. You see, this is very important because I am almost always the cause of her anger. Telling her to calm down after I made her mad is like shooting someone in the belly and telling them not to bleed. Read on because there’s a useful investing analogy somewhere in here…. The all world stock market is down 9.7%...

Remember the Taper Tantrum in 2013?  That was when 10 year T-Bond yields rose about 1.3% off a floor of 1.7% and stocks also fell. Over a 6 month period the All World Stock Index fell about 9% and 30 year T-Bonds fell 15%. Even a 50/50 stock/bond portfolio of US stocks and Total Bonds fell 5%. It seemed like the perfect storm where stocks and bonds both fall making it impossible to hide. But getting scared into this event turned out to be a big mistake. From the trough of the Taper Tantrum...

(The fabulous Scarlet Fu and Eric Balchunas, hosts of ETF IQ)Here’s my appearance from yesterday on ETF IQ on Bloomberg TV in case you missed it. We touched on: 1) Why is the myth of passive investing important to understand? Short answer, but the longer-than-tv answer: passive has become a misnomer as anyone can construct an index fund in an active strategy and then claim to be “passively” tracking that index via an ETF. It’s easy to fall into the trap that passive is good and active is...

Here are some things I think I am thinking about ETFs. 1) Bloomberg ETF IQ – Let’s get this out of the way because it’s very very important. I am going to be in studio in NYC on Bloomberg ETF IQ tomorrow at 1:15 EST talking about Chicken Farming. We’ll be discussing three primary essential elements: 1. How to apply Python Dust to a chicken’s butt; 2. How to properly deal with a broody hen (useful info for men in almost any relationship); 3. How to train your chickens to respond to whistle...

This is way off topic and too political for me, but it’s something I’ve spent a lot of time thinking about in recent years and since it’s Friday maybe most of you will be relaxed enough that it won’t make heads explode….Okay, probably not, but I’ll give it a go anyhow.  Despite common differences and shared values Americans are becoming more politically polarized. And it seems to be happening in large part because our tribal leaders are intentionally dividing us for their own political...

If you’ve been reading my work for any of the last 10 years you know that I’ve sounded like a broken record for much of that time – the USA isn’t bankrupt, interest rates aren’t going to rise significantly and inflation is contained. All of this was based on an operational understanding of the monetary system within the context of a reserve currency issuing economy that was recovering from an unprecedented debt crisis resulting from an asset bust. One of the big conclusions from this view...

I got an interesting email the other day: …Your writing is incomprehensibly objective and apolitical. I was wondering if you could provide some tips as to how you think about things and arrive at more empirical conclusions”. Well, this person is being a bit overly generous. We email a lot so maybe he feels indebted to me and has become behaviorally biased!?!  Still, it’s something I think about a lot and make a serious effort to be aware of. I don’t always succeed here, but I think it’s...

10 years. It feels like yesterday. Then again, sometimes when I look at the economic data it feels like it never even happened. Whether you feel like the crisis is a distant memory or still lingering I think we can all agree that these kinds of big events serve as important lessons for understanding how we will navigate the future. So, 10 years later, here are 10 big lessons I take away from the financial crisis: Fear wins in the short-term and loses in the long-term.  This is probably the...

Here’s an interesting post from John Cochrane on “narrow banking”. Narrow banking is the idea that we could create banks that take a “narrow” type of risk by investing only in very high quality assets like Central Bank reserves or government bonds. This would back the bank’s balance sheet with virtually risk free assets. The argument is that this would be ideal compared to modern banks because there would be no risk of runs and no need for bailouts. As the Cochrane post discusses, the...

A little over 10 years ago I sent out a research note to my clients saying that the financial crisis was entering a new stage and that policymakers were behind the curve. I remember becoming bearish when the yield curve inverted in 2006 and becoming worried that it was a sign of strain in the banking system as it always had in the past. I’d long been bearish on housing, but the way the crisis evolved and spread through the financial system took me by surprise. Still, I was well versed in...