Cullen Roche: Pragmatic Capitalism

Share the post "Covariation Bias and the Bear Market “Genius”" Covariation bias is the tendency for people to overestimate the relationship between fearful stimuli and negative outcomes.  The classic example in scientific studies is people’s reactions to spiders.  Death from spider bites are extremely rare and there hasn’t been a recorded spider death in Australia (where spiders are most common) since 1979 (see here and here).  But you’d be hard pressed to find someone who doesn’t think...

Share the post "Three Things I Think I Think – We Are All Stupid Edition" Here are some things I think I think: 1)  The older I get the more I know how little I know.  There’s some version of this quote in many places, but I think it’s always a good reminder to remember that we live in an inordinately complex and dynamic world that no one fully understands. If I’ve ever had one strength it’s that I know how much I don’t know (in other words, I know I am pretty stupid about a lot of...

Share the post "The Budget Deficit is (Mostly) Endogenous" People love to assign economic blame or credit to the President.  Government debt and deficits are particularly popular talking political points when one is trying to confirm their political bias.  For instance, since President Obama took over in 2008 we constantly hear Republicans talk about how he has expanded government debt.  Since 2011 he’s been widely credited by Democrats with bringing the deficit down.  This is almost...

Share the post "Three Things I Think I Think – Illiteracy Edition" Here are some things I think I am thinking about…. 1. Americans are financially illiterate.  Here’s a scary statistic from the Wall Street Journal and S&P: Just 57% of U.S. adults passed this test. This is a test that includes questions like this: Gulp. 2. How about this stock market?  Despite persistent worrying about Greece, China, rate hikes and countless other items the US stock market is just shy of its all-time...

Share the post "Why Not Just Print More Money?" With zero signs of inflation and weak economic growth we’re starting to see more comments about “printing money” to boost the economy.  For instance, the other day in the New Yorker John Cassidy discusses Adair Turner’s proposal to print more money: Adair Turner, an academic, policymaker, and member of the House of Lords, has another idea. In his new book, “Between Debt and the Devil: Money, Credit, and Fixing Global Finance” (Princeton),...

Share the post "The Best Time to be Living is Only a Few Seconds Away" As I get older I find myself sometimes reminiscing about “the good old days”.  I’ll listen to music and say to myself “what is this crap”?  Or I look at the state of politics and I wonder to myself “things seemed so much better back when Reagan and Clinton were running things”.  I can’t be totally positive about this, but I think there are a couple of things going on here that lead me to forget that there’s never been a...

Share the post "When Theory Meets Reality" As a market practitioner who reads way too much academic economics and finance I often find myself disagreeing with theoretical perspectives.  This is the result of this strange disconnect on Wall Street where economists and financiers are often segregated.  Although finance and economics overlap in many ways they are viewed as two distinctly different worlds.  This creates a huge gap between theory and reality because the academic economists are...

Share the post "ISIS is About to Make the Euro Crisis a lot more Challenging" 2015 has seen an increasingly challenging environment across Europe. The Greek crisis nearly boiled over to a defection earlier in the year and now the tragic attacks in Paris are likely to make things even more challenging as we head into 2016.  There are two effects from the terrorist attacks that are likely to exacerbate the Euro crisis: Budget deficits are likely to expand and create more tension over the...

Share the post "My Interview on The Investor Podcast" I did an interview earlier this month on The Investor Podcast with Preston Psyh and Stig Brodersen.  We covered a lot of different topics, but focused mainly on my white paper “Understanding the Modern Monetary System”.  We discuss: The importance of forming a sound operational understanding of the monetary system not only for investment purposes, but for political purposes How innovation can overcome regulations and demographic...

Share the post "The Impractical Economics of Bernie Sanders" Extremist views don’t mesh well with economics.  While they often sound good in theory they don’t work well in practice.  This was the crux of much of my criticism of the Republican debates last week (see my comments on the gold standard and Rand Paul’s views).  Unfortunately, some of the same (well, very different actually) extremist views are on display in the Democratic debates.  Bernie Sanders is front and center here and...