Who is Cullen Roche?

I am a girl dad, entrepreneur, author and financial expert.  I’ve been self employed since I was 25 having started multiple financial firms and becoming 100% financially independent before the age of 30. I am currently the founder of Discipline Funds where I specialize in low fee global macro asset management with a focus on building multi-asset portfolios. Prior to founding Discipline Funds I worked at Merrill Lynch on a $500MM team and then managed a private partnership which generated 17% annualized returns between 2006-11 (14% after fees) while the S&P 500 averaged 1.9% annualized returns. The partnership had no negative calendar year returns during this period (including 2008).

I wrote my first book, Pragmatic Capitalism in 2014, but am probably best known for the writing I do here at this site. In 2015 I was proud to be named as one of Investment News’ top “40 Under 40” in the finance field. I’ve appeared regularly on financial TV including Bloomberg and Fox Business and also regularly speak around the country at investment conferences. My work here on the website is regularly distributed at MarketWatch, Seeking Alpha and other large financial media platforms.

Although I am not an academic economist I’ve become well known for my work on monetary economics including my white paper “Understanding the Modern Monetary System” which is one of the 10 most widely read papers in the entire SSRN database. My work on Quantitative Easing is widely read and many of my contrarian views on QE have been validated over time (including my low inflation and low interest rate predictions). As a market practitioner who has been directly involved in the financial markets, banking system and accounting world I bring a unique understanding to how the financial markets and economy actually work. While many economists work from a theoretical policy perspective I try to base all of my work on a more operational perspective thereby working more like an engineer trying to establish truths about how our financial world is actually constructed.

Though I’ve become best known for my work on the monetary system, I am really a portfolio construction expert. My 2016 paper “Understanding Modern Portfolio Construction” includes much of my original thinking on the subject and has quickly become one of my most distributed pieces of research on the topic. As a market practitioner I’ve found that my lack of exposure to professional academic training (like a PhD program) has been a strength as it’s resulted in a more independent, unbiased, operational and less theoretical understanding of the financial system.

I grew up in Washington DC to 2 amazing parents and my 7 best friends in the world, my brothers and sisters. I now live in Encinitas, California with my wife Erica, our Australian Shepherd, our flock of chickens and our two amazing daughters.  In my free time I obsess over extremely nerdy financial theory, run slowly and make many bad jokes. For the last 10 years I’ve been on a relentless search to find my six pack, but seem to consistently find myself in front of a stack of carbohydrates. I am on an endless search to understand the “big picture” of everything slowly learning that the further along the journey I get the more I realize how little I know. I fight every day just to be a little bit better than I was yesterday. It’s not always easy, but I am trying my best.

What’s your view on “investing”?

I think it’s important to be clear about the word “investing”. Investment, in an economic sense, means “spending, not consumed, for future production”. Real investment is done by firms and individuals who spend for future production. It’s generally high risk and long-term oriented. Unfortunately, the term “investing” has taken on a whole different meaning in the world of finance where we now focus on getting rich quick and trying to beat the market. This is largely backwards in my opinion.

When firms issue shares of stock to raise funds for the purpose of investment the buyers of these shares are not truly “investors” in the firm. They have merely allocated their savings to the shares. All the financial assets issued in the world are held by the world’s savers who merely reallocate them at times. Most portfolio management isn’t “investment” in the pure sense of the word. We are savers reallocating our savings. I think it’s important to be specific about the terminology because the allocation of savings is not sexy or exciting, but that tends to be the way “investing” is perceived. You have “Mad Money” and “Fast Money” and the idea that this is all a “get rich quick” scheme. I think that’s misleading and when one approaches the world of financial assets as a place where you allocate your savings I think you’re inclined to take a much more practical and realistic view of the world. That’s why I like to call an “investment” portfolio a savings portfolio. It is your literal life’s savings.

I like to view our personal assets from the perspective of what I call the “Total Portfolio”. This is a comprehensive planning based focus on our assets that starts with the fact that most of our actual “investing” is done in our own personal skills and the work that will help us maximize our future production and income. This is our real investment and our unspent income generated from this investment is our literal savings. I am an advocate of taking that savings and applying what’s called an “asset liability matching” approach. This means we build a financial plan that estimates future liabilities/expenses and then matches those liabilities across specific time horizons with the assets that will give you the confidence of meeting those cash flow needs across specific time horizons. To implement this I recommend having a thorough personalized financial plan done so that you can map your future potential liabilities and match them with current and future potential returns. This process helps reduce our behavioral biases by giving us certainty across specific time horizons of future potential uncertainty.

As for specific asset allocation – I am an advocate of any Discipline Based Investing strategy as core asset allocation. This means any strategy that establishes clear goals over specific time horizons and instills systematic methods that help you maintain that process and plan over time. Most indexing strategies, target date strategies and most systematic rebalancing strategies fall into this category. Personally, I agree with the way that John Bogle managed his personal assets – using a countercyclical indexing methodology. I think asset allocators should keep things simple and control what they can control – their taxes, fees, allocation and most importantly, their own behavior. While I believe a market cap weighted approach (like most of what Vanguard does) is sufficient for most people I am personally an advocate of a countercyclical indexing in many cases. If you can afford to then you should construct satellites around that core. This might include things like portfolio insurance, other forms of insurance, asymmetric bets, etc.

I am a big time behavioralist. I believe that the imperfect portfolio you stick with will treat you better than the perfect portfolio you abandon. Investors have an inordinate amount of trouble staying the course and being disciplined. I want to help people be better at being disciplined with their money and their portfolios.

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How Do You Invest Your Money?

I eat my own cooking and invest in a diversified portfolio of low fee, tax efficient ETFs and other assets. I start this process with what I call the Total Portfolio Approach. The Total Portfolio Approach is a holistic approach to asset allocation and starts by making investments in the skills that help us earn our primary income. This is where our biggest “investments” should be made and they will help us optimize our savings over time. For me this means maximizing my value as a financial expert and building value in my company. I allocate the savings from this income in what I call a literal Savings Portfolio. Our savings should be allocated across specific time horizons to help us create certainty around specific time horizons.

I implement this using the same “Defined Duration” strategy that I advocate for here. The Defined Duration strategy is a financial planning based strategy that is designed to match certain assets and liabilities across time that is similar to the way many large pension funds and institutions manage their assets. This results in a hugely diverse portfolio of low cost ETFs that includes stocks, bonds, cash, commodities, gold, REITs, etc. Most importantly, it helps establish specific time horizons for my assets so that I don’t end up worrying about whether I will have certain assets at a certain time in my life. This helps me remain more disciplined and stops me from worrying about the short-term trends in volatile markets.

Within the stock/bond components I am a proponent of using the same indexing strategy that John Bogle advocated for here. I call it Countercyclical Indexing. Bogle discussed the importance of rebalancing a portfolio in a manner that kept you disciplined and comfortable. Frankly, I’ve never understood why multi-asset strategies rebalance back to fixed weights (like 60/40) when we know the underlying market capitalizations change so much. A fixed weight approach means you’re always rebalancing back to a stock heavy allocation that becomes even riskier during big boom cycles. This is highly active and doesn’t even make sense! Rebalancing in a countercyclical manner not only helps me stay more disciplined during booms and busts, but it helps reduce the overall volatility in my financial assets.

What’s Your View of Economics In General?

“Economics” is a big tent and there’s a lot of good and a lot of bad out there.  As a market practitioner I know the dangers of behavioral biases and try not to wed myself to any specific “economic school” or ideology. I try to focus instead on first principles understandings of the world with an emphasis on how things work. You’ll notice that a lot of my work is operational in nature and starts with basic understandings of how things work.

Many elements of mainstream economics remain excessively theoretical in my opinion and don’t focus enough on the operational nature of things. That said, I certainly don’t reject mainstream econ.  There’s a lot of good and bad in both heterodox and mainstream econ.  I tend to think that the two sides overlook the good in the other and in doing so reject quite a bit of useful content.  As such, I wouldn’t describe myself as being aligned with any single “brand” of economics as I take many understandings from the different schools.  I do tend to lean towards the Post-Keynesians in many of my views, but I am not a Post-Keynesian in the sense that a proper Post-Keynesian economist might think.  Therefore, I am essentially an economic independent.

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What are Your Political Leanings?


One question I get a fair amount is about my personal politics.  I’m pretty centrist in general, but I think it’s really important to be somewhat flexible about things. I generally lean socially liberal, but find that my fiscal/economic views very much depend on the state of the economy at given times. I like to think I am fairly open-minded to different perspectives and different people’s political views, but it helps to get an unbiased gauge on where things stand.  According to the Political Compass test I am a slight leftist libertarian which is pretty consistent with centrist views.

While I am socially liberal I tend to take a more flexible view on finance. As you might expect from the name of the website, I am an avid defender of capitalism and competition, but also know that capitalism can create its own weaknesses that require a certain degree of government intervention. I also understand the the economy moves in a cyclical fashion at times and may require government support to help stabilize the economy. I call this a Pragmatic Capitalist perspective. A Pragmatic Capitalist is someone who understands capitalism for what it is and understands that while it has strengths it also has inherent weaknesses that can be helped, to some degree, by government intervention.

So, I guess you could say I am socially Liberal and fiscally I am a Pragmatic Capitalist.

What’s your View on Politics in Economics?

Many people claim you can’t separate politics and economics.  I don’t think that’s true.  I think you can understand the modern monetary system at its core operational roots and devise an understanding that is based primarily on facts rather than beliefs.  There are real truths in banking, finance, economics and the institutional design of the money system that should not be controversial, but remain hotly debated in economics due to competing ideologies.  The creation of Pragmatic Capitalism is an attempt to bridge that divide and establish a foundation for understanding the monetary system by taking the politics and ideology out of the discussion.

As for policy specifics within economics – I think it really depends. I think every economic environment is totally unique and requires a unique set of perspectives to respond to. That said, I am a capitalist as the website names implies! However, I also understand that some level of government intervention is not only good, but necessary. As a whole, I tend to believe that markets work better when they are left to the discretion of the private sector. But like all the roads we share, it can help to regulate, link and structure these roads using public resources. But the government shouldn’t own all the cars, make all the cars or be relied upon to do all the driving. And having a general regulatory and maintenance structure is helpful.

As for policy specifics – my view is that the Fed is way too involved in the economy in most cases. As I explain below, I think that the structure of the Fed as a bank clearinghouse is a public good and a better structure than letting banks try to manage central clearing on their own. But I also believe that interest rates should be fixed at something like the core PCE level and that they should not implement policies like QE. These policies, in my opinion, overstep the Fed’s intended purpose. The more we could automate central banking the better and more efficiently it can operate.

As for government spending – my general view is that government intervention in the markets should be mostly countercyclical. That is, the Treasury should run deficits when the economy is weak and run smaller deficits or surpluses when the economy is strong. This helps to avoid excess variance in the economic cycle. I also believe that the government has a place in certain industries that cannot efficiently generate profits or where profits might create conflicts of interest. Healthcare, fire fighting, and military spending are good examples here. I also believe the government has a role in establishing a tax system that helps to reduce inequality so that our system does not become so unequal that people believe Capitalism needs to be replaced with something like Socialism. In my view a primarily capitalist economy with some level of government intervention is a good balance, but that balance might vary from country to country.