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Cullen Roche  

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  • The Fed Would Be Nuts To Raise Rates [View article]
    That's because this author didn't think the economy was very strong back then. Still don't think it's very strong....
    Aug 21, 2015. 04:06 PM | Likes Like |Link to Comment
  • What Is Portfolio 'Risk'? [View article]
    The terminology is quite precise actually. In economic terms Saving is a flow item. SavingS is a stock item. In this article I am using the economic term as a stock of savings. It sounds grammatically incorrect because most people don't take economics ONE O ONE. :-)
    Aug 17, 2015. 12:55 PM | Likes Like |Link to Comment
  • Is More Information Making Us Worse Investors? [View article]
    The first line of the article is:

    "professional money managers just aren't very good at investing."

    ;-)
    Aug 13, 2015. 02:00 PM | 1 Like Like |Link to Comment
  • Is More Information Making Us Worse Investors? [View article]
    That's a nice comment. I don't think fame is something I have to worry about too much. Most of the things I write about are pretty mundane even if they're popular with a very small portion of the public. Consider yourself one of the select nerds in the world who is smart enough to care about this very important topic. :-)
    Aug 13, 2015. 01:59 PM | 4 Likes Like |Link to Comment
  • Is More Information Making Us Worse Investors? [View article]
    The chart shows that while the asset weighted expense ratio has fallen by 27% industry fee revenue has grown by 78%. This means that investors MUST, by definition, be earning a low return on their invested dollars. In other words, on a dollar weighted basis, way too many investors are still chasing higher fee products and not reaping the benefits from the market gains as a result.
    Aug 13, 2015. 01:55 PM | 3 Likes Like |Link to Comment
  • Is More Information Making Us Worse Investors? [View article]
    Hi PN, Great thoughts. Thanks for that.

    I should add - I posted this above via M*:

    http://bit.ly/1J2tjVD

    That's the asset weighted revenues from fees. Despite the fact that expense ratios are falling investors seem to be getting sucked into more and more higher fee funds. This is probably due to chasing performance in a lot of the newer ETF style products that sell various forms of active management like hedging styles or leveraged products. This is just increasing fees without increasing performance.
    Aug 13, 2015. 12:36 PM | Likes Like |Link to Comment
  • Is More Information Making Us Worse Investors? [View article]
    Great comment and thanks for the compliments. I always tell people to treat their "investment" account like a "savings" portfolio. It is, after all, literally our life's savings. So, if you can get away from the gambler's mentality and the "beat the market" mentality then you're likely to come out doing much better. Allocate your savings like it's savings and not like it's some get rich quick scheme.

    Thanks for the nice comment and best of luck out there!
    Aug 13, 2015. 12:32 PM | 1 Like Like |Link to Comment
  • Is More Information Making Us Worse Investors? [View article]
    It's not an assumption. It's a fact. Here's the asset weighted revenues from investment expenses over the last 10 years:

    http://bit.ly/1J2tjVD

    You'll notice that despite falling commissions and expense ratios the investment firms are making a lot more money on those assets under management. This has to be due to higher turnover and more investors chasing returns.

    The higher turnover is money coming directly out of the retail investor's pockets going into the pockets of the investment firms!
    Aug 13, 2015. 12:29 PM | 2 Likes Like |Link to Comment
  • Alan Greenspan Is (Still) Worried About Bond Bubbles... [View article]
    Hi there. Sorry if I came across as arrogant. That really wasn't my intent. It's probably just a bit of frustration coming out in my writing due to saying the same things for 7 years straight....I'll try to be more mindful of it in the future.

    Thanks.
    Aug 11, 2015. 08:39 PM | 1 Like Like |Link to Comment
  • Why Countercyclical Indexing Makes Sense [View article]
    That's what the model would say to do. Historically, implementing this inverted portfolio has actually performed very well because you're basically overweighting stocks during their least risky phases and reducing exposure as they become more risky.
    Aug 8, 2015. 01:59 PM | Likes Like |Link to Comment
  • Why Countercyclical Indexing Makes Sense [View article]
    Money Market funds are just short term bills (mostly T-Bills). They're "fixed income" by another name. People have started to think of Money Market funds as something totally different from bonds in recent years because they earn no interest. But for the purposes of this analysis it's really best to just combine the MM and FI pieces. So, your situation is still relevant to the points I am making. It's just that the MM fund doesn't decline because you were overweight fixed income (including MM funds) in terms of relative risk to stocks before they fell 50%.
    Aug 6, 2015. 04:51 PM | Likes Like |Link to Comment
  • 3 Keys To Navigating A Low Return Environment (Video) [View article]
    No. Not at all. Hussman's main fund costs 1%+ so that alone disqualifies it.

    Further, I would NEVER take a prolonged short biased approach to the financial markets. Do you know how difficult it is to bet against corporate America for a prolonged period of time? I do not at all agree with the approach he has been implementing for the last few years where he's essentially short via options. It's expensive, too short-term and ignores the most powerful macro trend in the world - the human desire to innovate, produce and progress!
    Jul 17, 2015. 04:55 PM | 2 Likes Like |Link to Comment
  • Charts That Make Me Go Hmmm [View article]
    Hi Lynn.

    It looks very confusing, doesn't it? The survey asks managers if they're net protected. So, what we're looking at here is a chart showing that most managers AREN'T net protected. Therefore, a positive reading would mean that most managers are net protected. So, this chart shows that more managers are net protected than they have been. Ie, a lower reading of negative net managers is actually an increase in bearishness.

    I hope that makes sense. I know it's confusing. I did a double take on it while reading the survey and had to think about it for a second.

    Take care.

    Cullen
    Jul 15, 2015. 01:23 PM | Likes Like |Link to Comment
  • Q&A Answers - Interest Rates, Greece And Other Unfun Stuff [View article]
    Hi David,

    You said:

    "I was saying that the FRB cannot set interest rates that are not supported by the market."

    This is the point that is incorrect though! The Fed determines the quantity of reserves in the interbank market by expanding its balance sheet. It is a monopolist. Monopolists are price setters, BY DEFINITION. The "market" cannot set the price of reserves. Only the Fed can do this. If inflation were 10% and demand for credit was through the roof the Fed could still keep rates at 0-0.25%.

    In fact, we've seen this happen. The demand for credit has risen quite sharply in the last few years. Loans and leases are growing at 7.8% YoY. Despite this, the Fed has kept rates low and the "market" has been unable to lift the overnight rate because they don't have any control over it! The "market" controls the longer end of the curve and the price of instruments they directly issue relative to the demand.

    The key point you're missing is that the demand for Fed Funds is ALWAYS high because the Fed regulates the quantity of reserves by requiring that banks hold reserves. Banks can't, in the aggregate, reduce their demand for reserves. They hold the quantity of issued reserves as set by Fed policy. So, this is all a supply side pricing mechanism as set by the Fed. The "market" has absolutely no power to move rates above what the Fed wants the rate to be if they are paying IOER.

    I think it's quite clear that the data doesn't support your view. And the fact that the market front runs the Fed is widely known and fully expected. The Fed is very transparent about the path of short-term interest rates and banks and traders always try to arb the Fed's next moves. So your data is totally consistent with well established facts about how the Fed's "open mouth policy" sets rates before they even change rates.

    It's very common to assume that the "market" controls short-term interest rates, but this is not true of the price of reserves. It's simple monopolist economics. To deny this fact is to reject econ 101!
    Jul 8, 2015. 01:51 PM | Likes Like |Link to Comment
  • Q&A Answers - Interest Rates, Greece And Other Unfun Stuff [View article]
    David,

    You still don't have this right. Maybe a few references will help. This paper from the NY Fed on excess reserves is very good and explains the dynamics I am discussing:

    http://bit.ly/1HLRWd9

    Some key quotes:

    "The total level of reserves in the banking system is determined almost entirely by the actions of the central bank and is not affected by private banks’ lending decisions. "

    "When banks earn interest on their reserves, they have no incentive to lend at interest rates lower than the rate paid by the central bank. The central bank can, therefore, adjust the interest rate it pays on reserves to steer the market interest rate toward its target level."

    I'd go have a read of that paper. It explains all of this in much more detail.

    I hope that helps.
    Jul 7, 2015. 05:53 PM | Likes Like |Link to Comment
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