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Pragmatic Capitalism

Practical Views on Money, Finance & Life

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The Alpha Paradox

strategy

Here are a few things we know about the financial markets: Beating the market or obtaining “alpha” (excess return) is extremely difficult as evidenced by the annual SPIVA Scorecards. Alpha doesn’t exist in the aggregate because we all hold what sums to one portfolio wherein we earn the after tax and after fee return of… Read More

Why You’re Probably a Libertarian Keynesian

macro

In a recent post I said that my political views are independent. But if I was forced to describe them more specifically I’d probably say they’re consistent with Libertarian Keynesianism. Yes, I know that’s a totally made-up thing, but it just describes someone who’s socially liberal and fiscally conservative within the boundaries of understanding the… Read More

Auto Loans Aren’t a Repeat of the 2008 Financial Crisis

myth

John Oliver had a provocative piece on last night’s show about US auto loans referring to it as the next 2008 subprime crisis. Specifically, he compares it to the “medium short” as opposed to the “big short” because the auto loan market is small relative to the total economy. But this comparison is still overstating the… Read More

Money – The Window to Understanding the Economy

macro

We live in a monetary economy. That is, unlike a barter system we have created “money” which serves as the medium by which we exchange goods and services in our economy. Therefore, to understand the economy you must understand money. You must define it, understand where it comes from and understand how it impacts the… Read More

How They’ll Sell you Higher Fees

strategy

The paradox of lower expected returns is that investors get scared investing their own money so they turn to professionals. In doing so, they’re often hiring high fee advisors or portfolio managers who might actually manage these assets better than they can on their own, however, what the manager puts in one pocket with better behavior… Read More

What Does it Mean to be a “Modern” Monetary System?

macro

When I wrote my popular paper on the monetary system (which is now, to my shock, ranked #7 all-time on SSRN) I specifically wrote it with the “modern” monetary system in mind. But what does it mean to be a “modern” monetary system?  It’s a strange and interesting question that I always find myself pondering… Read More

Ten Attributes of Great Fundamental Investors

strategy

Fantastic note here by Michael Mauboussin of Credit Suisse. Mauboussin is the rare fundamental analyst who is both a good analyst and a good communicator. That is, he can break big complex matters down in such a way that they don’t just sound like a bunch of numbers thrown at a wall. In his latest… Read More

Do Savers Deserve a Risk Free Return?

strategy

Low interest rates have led many people to conclude that savers are being unjustly punished by a lack of interest bearing savings. In this case, we’re referring specifically to people who are trying to generate a reasonable return in a risk free or nearly risk free instrument like a Treasury Bill, CD or money market… Read More