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Pragmatic Capitalism: What Every Investor Needs to Know About Money and Finance Hardcover – July 8, 2014
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Roche, financial consultant and blogger, aims to offer a sensible framework for considering money, finance, and economics in our interconnected macroeconomic world and presents his principles and understandings of the global financial system to help us invest, save, and participate within this changing system. The author explains the new macroeconomy and how it is changing portfolios, including commentary on understanding risk, setting realistic goals, having realistic expectations, and learning important guidelines for picking active managers. He defines the field of behavioral finance as “the study of understanding the economy through the psychologically driven actions of its participants.” Learning about ourselves and how we and others think is important preparation for participants, and our worst enemy in the financial world can be our human emotions. Roche shares lessons from his investing experience, which are never let emotions drive your decision-making process, never participate in what you don’t understand, mistakes will be made and always learn from them, and hope is not a strategy. This challenging, thought-provoking book offers valuable information. --Mary Whaley
"Roche cuts through the noise to provide a guide that people can actually understand. There's no agenda or hidden motives behind his opinions. He doesn't spend time covering political narratives or arguing about topics that have have no relevance to your financial decisions. He sets out to help provide perspective, something that's generally lacking in the finance industry.
- Ben Carlson, Founder, A Wealth of Common Sense
"Finished the book and highly recommend it!" - Jim OShaughnessy, CEO OSAM, LLC
“It has never before been more crucial for investors to understand the way our modern monetary system affects the capital markets. Huge fortunes have been made in recent years as a direct consequence of this awareness, billions have been lost by those who've failed to make the right connections. With Pragmatic Capitalism, Roche has written the definitive book on the topic--investors of all experience levels are advised to read this to get up to speed.” ―Joshua M. Brown, author, Backstage Wall Street, The Reformed Broker blog, and on-air contributor to CNBC
“Pragmatic Capitalism takes an ambitious and engaging tear through our often misguided perceptions about markets, money and behavior. Cullen brings investors back to reality by smartly forcing a no nonsense gut check. Ignore his wisdom, and life is harder.” ―Michael W. Covel, President, Trend Following
“Cullen Roche explodes all the myths that might hurt the performance of small or big investors in the financial markets. He explains in simple terms why investors can rely on neither mainstream macroeconomic theory nor the efficient market hypothesis. He shows how the monetary system truly works, such as the likely impact of public budget deficits or quantitative easing on price inflation and interest rates.” ―Marc Lavoie, Professor of Econonics, University of Ottawa
“Chapters 7 and 8 should be required reading for all investors, economists and politicians (and anyone else wanting to understand the macroeconomic system). Cullen has done the world a great (and rare) service by seeking to talk about the economy as it actually is, rather than how it should be.” ―James Montier, Analyst, GMO and author of The Little Book of Behavioural Investing
“In Pragmatic Capitalism, Roche combines sensible advice for investors with a lucid primer on the role of money, banks and central banking in the modern world.” ―James Galbraith,Professor at University of Texas, Austin
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Top Customer Reviews
Now comes his book "Pragmatic Capitalism", which in ways is sort of an extension of the topics that he and his "Pragcap blog" group have been ruminating on for the last few years. The first six chapters present sound advice to the "young investor", that I could not agree with more. Common sense is often not that apparent in the world of finance. This is especially important to know when you are just getting started, and trying to put your tiny "stash" where it will safely grow. Nothing seems worse than losing your hard-earned money just as you started to get a bit ahead. Mr. Roche has pointed out many unobvious pitfalls, together with some of his own "negative learning" experiences. All and all the advice given in the first six chapters are easy to read and absorb. (Mr. Roche writes very well.)
The seventh chapter is the "meat" of the book, I think. The chapter "Understanding the Modern Monetary System" originated when Mr. Roche began his blog, and with time this essay has undergone several rewrites over about five years. Some of the concepts have migrated a bit, but the best part is that gets better and better, as the "Understanding" gets better of the puzzle pieces that make up our economy. I can personally attest that this information can be complicated, but we have to understand this! This is important, not only for our own portfolios, but also for understanding the many very serious flaws in our Nation's politics.
Of course, I have to mention the one "nit" I wish to pick. The puzzle pieces are difficult to fit together in order make a coherent picture of the macroeconomic environment that we seek to bring into focus. I think this could be easily fixed with a summary of the jargon and a chart explaining the "Kalecki Decomposition". This type of analysis would bring the puzzle pieces together, in my mind at least. Since many these macroeconomic puzzle pieces are common in the world economy, one could construct "Kalecki" charts for some other countries that control their own fiat currencies. With those puzzles completed, it seems to me, one could puzzle out a better understanding of how various economies worked over time. Whether or not an individual investor could use this to make forward-looking investment decisions, I don't know. This type of analysis has been mulled over on his "Pragcap" blog and I miss it in this book: http://pragcap.com/james-montier-the-risk-to-corporate-profit http://pragcap.com/the-kalecki-equation-a-brief-follow-up
Because the book covers complex topics, it requires a close reading. I learned a lot, and recommend the book to anyone interested in money, portfolio construction, or behavioral finance.
As a financial markets professional, I am each and every day inundated with far more research and analysis than I can possibly ever read. Yet, no matter how busy I am, I always make it a point to visit the Pragmatic Capitalist blog several times per week. One of the reasons that I have been a regular reader of the Pragmatic Capitalist blog has to do with the humility and honesty with which the author, Cullen Roche, deals with complex and difficult macroeconomic and investment strategy subjects. Most financial commentators tend to convey the impression that they know it all. By contrast, Roche seems to approach financial and economic problems with the attitude that there is probably more to learn than he ever could know, but that there is still great value for him and his readers in exploring a particular subject in a little more depth in order to gain just a little more insight. After all, to succeed in financial markets you don't need to know it all -- you just need to have a little more insight than the investors that are at any given point in time setting prices at the margin in the marketplace.
If you are serious about becoming an investor that is knowledgeable about key macroeconomic issues of our day -- particularly issues related to the US monetary system and its impact on the US economy and financial markets -- then reading this book will be a good way for you to take a step further down that path. The treatment is accessible to individual investors that are willing to be challenged, as well as to professionals that want to step up their game with regards to big-picture macroeconomic and portfolio strategy issues.
I found the chapter on monetary policy to be highly insightful, and I also appreciate Mr. Roche's repeated assertion that investing in one's own productive capacity is far more important than trying to win the capital markets lottery.
At times the book gets fairly jargon-y without entirely defining the terms. A good amount of prior knowledge is assumed here, and thus is probably most benefiting to finance pros and savvy amateurs looking to fine-tune their understanding.
For what it's worth, I also found the prose itself to be a bit flat; but whatever the author loses in style points is made up in sharp, informative content. Overall, a good read.
Most Recent Customer Reviews
In this era of so much political noise and mythology about the Fed, money and the even the national debt, Cullen Roche writes clearly, tying his...Read more