Cullen Roche: Pragmatic Capitalism

Share the post "Repeat After me: “Bonds Don’t Necessarily Lose Value When Rates Rise”"If you take a basic finance course the first thing you learn about bonds is that bond prices are inversely correlated to interest rates. So, when rates rise bonds prices fall and vice versa. This idea is so ingrained into people’s heads that it seems to have become the only thing that anyone can remember about bonds. And in today’s low interest rate environment this thinking is usually applied as...

Share the post "The Global Financial Asset Portfolio is DOWN Since Trump Won"Ah, the market. We hear this term all the time. And we’re rarely specific about “the market” we’re referring to.  After all, what “market” are we talking about when we hear that the market is up or down?  Your local apple market? The stock market? The bond market?  What stock market? What bond market? One thing we keep hearing in recent weeks is that “the market” really likes Donald Trump’s policy ideas. Which is...

Share the post "Why The US Government Should NOT Refinance the National Debt with Longer Bonds"With a change in the US Treasury Secretary soon taking place I get to play fantasy world and imagine how I would handle the transition if I were nominated.¹ One of the common ideas these days is that we should be “refinancing” government debt and “locking in” low rates. Soon to be Treasury Secretary Steven Mnunchin recently said:“we’ll look at potentially extending the maturity of the debt because...

Share the post "Did the Failure of Orthodox Economics Contribute to Trump’s Win?"Here’s a provocative piece from the Institute for New Economic Thinking declaring that orthodox economics has been dealt a “mortal blow” by the Trump victory. Sanjay Reddy writes:“Trumpism is a crisis for the most prestigious methods of understanding economic and social life, ennobled and enthroned by the metropolitan academy of the last third of a century. It has caused mainstream ‘social science’ to fall like...

Share the post "A Lesson from the Market’s Overreaction to Trump’s Win"There were many dire predictions about the stock market in the wake of Donald Trump’s victory. These predictions even looked credible in the moments after his win when the S&P 500 immediately collapsed 5% on the evening of the election. Then, miraculously, the S&P 500 bounced right back and is up about 2% since election day. Global stocks haven’t budged much in the aggregate and emerging market stocks are actually...

Share the post "Curating a Social Media Feed to Make Better Decisions"One of the most common problems in economics and finance is the fallacy of composition. The fallacy of composition occurs when you fail to understand the entirety of an argument. As an example, a common fallacy of composition in finance includes the cash on the sidelines myth. The cash on the sidelines myth is the myth often repeated on financial TV regarding the “cash” on the sidelines that will come into the market and...

Share the post "Understanding the Art of Doing Nothing"Most of what we end up doing in our lives is determined not by what we decide to do, but by what we decide NOT to do. In the course of any given day we decide not to do millions of things. Eliminating all of these actions results in a direction that determines how we end up acting out our day. For instance, at lunch you might think you’re choosing to eat a baloney sandwich. But you didn’t really choose to eat the baloney sandwich. You...

Share the post "What Does President Trump Mean for the Economy & Market?"“President Trump”. Crazy, huh? Well, not that crazy. Part of me is shocked and part of me is not. I first predicted a Trump win in my 2016 annual predictions and then later thought he’d lose due to his divisive commentary and failure to pivot to the center. As it turns out, I was wrong and he didn’t need to pivot at all. But I’m no political polling expert (and based on the disaster in election polling forecasters,...

Share the post "The Failing Pursuit of the Truth…"A little over 8 years ago I started writing this blog about the financial crisis. The website became surprisingly popular and within a few months was generating millions of page views per month. It was a scary time and I noticed an obvious trend in my writing – writing about scary things attracted a lot more attention than anything else. But as the years unfolded the world became less scary to me. By 2010 I was fully in the “recovery” camp...

Share the post "Is Major League Baseball Suffering From a Lack of Socialism?"The argument for socialism in professional sports is really simple – if you let the top market teams keep all of their cash and don’t constrain their spending then they will obtain all of the top talent and the same group of top tier markets will have a huge advantage every single year. As a result of this, professional sports are highly socialist in nature. We cap salaries, we redistribute revenues, we unionize the...