Cullen Roche: Pragmatic Capitalism

Share the post "Walk it Back, Random Walker"Big news, nerds – Burton Malkiel has changed his mind.  The investment legend, who has spent his entire life chastising alpha chasing active management, has moved over to the dark side. Malkiel, the Chief Investment Officer at Wealthfront has rolled out a new strategy that they’re calling “Passive Plus” indexing. The strategy is another name for Smart Beta which is another name for active deviations from market cap weighting.  This is a big change...

Share the post "Discipline vs Knowledge"Here’s a great post by Ben Carlson discussing the inadequacy of knowledge. He discusses the fact that, despite increased awareness and knowledge of weight loss and health, humans are getting heavier and less healthy.  It’s crazy to think that we can get smarter about something and yet the problem will become worse.  How does this happen?Getting healthy is easy. You eat right and you work out. You can get as smart as possible about how to eat right and...

Share the post "The Era of Irrational Apathy"Here’s a great post from Josh about the stock market’s general apathy that got me thinking about the macroeconomic picture.  The post-crisis period has been a pretty extraordinary economic environment. What many people thought was a foray into a Great Depression style era has actually turned out to be a pretty amazing recovery. Check out some of these stats:One of the general themes of this blog has been the focus on all the bearish BS that people...

Share the post "Your Best Investment"Tadas is continuing his finance blogger wisdom series all week so don’t forget to go back and check them all out. Yesterday’s question was one of my favorites:Question:  If you could (magically) impart one piece of wisdom to all investors what would it be?I said:“Your best investments are likely to be made outside of the financial markets.”People get this backwards every single day. In fact, I’ve argued that it’s the most backwards word in finance –...

Share the post "1,000 Years Worth of Market Data"I love this post by Tadas at Abnormal Returns asking the following:“If we had a 1,000 years of market data what kinds of things would get validated? What things would lack support in the data?”There are so many good responses in there. But here’s what I said:“1,000 years worth of market data would certify that the financial markets did something in the past and that no one knows precisely what that means for the future.Imagine that – with...

Share the post "Chart of the Day – The USA is not a Corporation"Mary Meeker is out with her annual “Internet Trends” presentation and she continues to promote this very misleading view of the US government as a corporation. For instance, here’s a chart showing the “income statement” of the USA:Okay, let’s cut to the chase. Governments are not corporations. Corporations exist to increase shareholder value by earning more income. Governments exist to serve a public purpose that the private...

Share the post "In Defense of Vanguard"Here’s an article criticizing Vanguard. I guess we need to get used to this. As low fee indexing continues to eat the world the high fee alpha salesman are going to have to step up their game or they’ll all go out of business. But this “takedown” is particularly bad. Let me explain.The article repeatedly refers to Vanguard as a non-profit even though the author, at one point, admits Vanguard is not a non-profit. Let’s clear this up. Vanguard is a mutual...

Share the post "Why Do People Like Balanced Budgets?"Here’s a great question from Joe Weisenthal’s morning update:I’ve spilled a lot of ink over the last decade talking about debt, deficits and sectoral balances. My broader points have been largely proven right over that time:The US government does not operate like a household or business and operates with an inflation or currency constraint and not a traditional solvency constraint.The US government was never at risk of a solvency crisis...

Share the post "Why I am an Optimist"If you spend enough time managing money you learn that extremist views are extremely dangerous. Being a permabull is usually right in the long-term, but can expose you to getting crushed at times along the way. Being a permabear will look very right on rare occasions, but will crush you consistently in the long-term. And while both of these positions are dangerous they are dangerous in very different ways.I use a top-down perspective to understand just...

Share the post "The All or Nothing Bias"Have you ever done something where the outcome turns out much better than expected and you said to yourself “man, what if I had only bet more on that outcome?”  Of course this has happened to you because it’s happened to us all. Whether it was buying a single stock that did really well, placing a bet in a casino or buying the slightly better toilet paper (which, as it turns out, was worth a bigger investment all along).This is an exceedingly big...