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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
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Kids sure are impressionable little turds. After a few nuggets of advice from my high school economics teacher, I decided to study economics in college rather than business (“you can always go to business school later, economics is more broadly applicable” – all pretty terrible advice in retrospect). In college, I constantly questioned the things professors tried to instill in us about classical and Keynesian economics. There were always strange assumptions that seemed to invalidate entire theories (“rational man”, for one), implicit or explicit political undertones, and things that just really never made sense.
This was compounded during the 2008 financial crisis when it became clear that very few economists or others predicted it yet still offered up explanations afterward about how it made sense with their models. At that point, I started searching for another perspective. I dug into Austrian economics but that also fell apart as I poked at the seams so I continued searching. Eventually I stumbled upon PragCap – Cullen’s blog. His framework made sense, didn’t depend unassumable assumptions, and was based entirely in concrete real-world processes and interactions. It was truly a breath of fresh air and made me feel sane again after wondering for years if I was crazy to disagree with so much of the economics taught in universities.
I continued to follow Cullen’s blog for years, watching him successfully describe how policies and market events would impact the financial world using his framework and then saw those things all pan out as described (Take a look at his predictions section on his blog to see some). I peppered him with questions throughout the year and he always patiently responded and explained things simply.
This book is the culmination of years of Cullen’s thoughts and posts distilled into an easy to digest read. If you are well versed in economics and finance but have always questioned why many theories fail to predict anything, please do yourself a favor and buy this book. If you’re new to the world of economics, this is still a generally approachable book that avoids unnecessary jargon as much as possible. You can also search on PragCap for additional explanations of anything that may be confusing.
This is an awfully long review so nobody is probably reading at this point but all of this is to say, I really wish Cullen would get more press or interviews because the world would truly be a better place if more people understood how macroeconomics worked. Buy this book and make this world a better place.
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
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