Just like myself, you may have heard of the term “global macro” before, and may be unsure of what it exactly means. And you have every right to be unsure.
There aren’t many resources and material out there for one to find out more (think of all the numerous amounts of books/courses on value investing), and the fact that professional global macro practitioners can’t really agree on a single, succinct and definite meaning doesn’t help as well.
To put it simply, it is an investment style or strategy that looks at developments across the world (hence “global”), and uses a holistic and economic reasoning to develop investment ideas (hence “macro”). However, it isn’t just solely investing based on macroeconomic principles or fundamentals.
It is a way of understanding how economic forces, political developments and social trends influence the way assets are priced and how the financial markets move, as well as understanding the supply and demand of investment flows across various markets.
Hence, practicing global macro is akin to playing a game of chess, with the world as your oyster, just as the picture shows:
In fact, some of Wall Street’s most successful investors belong to this clan – George Soros, Stanley Druckenmiller, Ray Dalio, Bruce Kovner, Paul Tudor Jones, Louis Bacon and John Burbank (just to name a few).
To provide an analogy of a global macro investor: imagine yourself as a surfer. You spent a great amount of time studying the art of surfing and practicing it on the beaches closest to your home. However, since you only look at the coast by your home, you could only wait for a good tide that comes occasionally enticing you to rush out and surf.
Now a surfer friend of yours (global macro equivalent) wouldn’t be interested to stay at the same beach as you. He would be looking across the entire world and scouring for the best tides to surf; this way, if he’s timely, he could surf all-year long as compared to the lesser amount of times you could surf.
Global macro investors are those surfers navigating across the world’s markets, and they are willing to play both sides of the markets (long or short) across all asset classes as long as they feel the potential rewards are worth the risks. They do this via an inductive thought process in analyzing global events and approach the financial markets with a holistic mindset. This way, they don’t have to stick to a few currency pairs, or a specific commodity or a single country’s stock market. Wherever the opportunity is, you can be sure a global macro investor is already there.
It is akin to ‘playing’ the markets on an entirely whole new level than what many of us have been exposed to.
Being able to play both sides of the markets is a HUGE advantage to those who insist that they are only willing or able to play one side of the market. Not every asset will trend upwards forever, and not every market will bask forever in its days of glory. Global macro investors can exploit these facts to their advantage, and this allows them to compound their capital for the long haul as they can navigate bull and bear market conditions. It’s no wonder that some of the wealthiest investors are global macro practitioners.
I was fascinated with this form of investing, so 5 years ago I decided to pursue attainment and mastery of this skill. I’ve scoured the libraries and talked to professionals in the industry over the years as well, and only from there did I slowly begin to understand what global macro investing is all about.
I have also realised that it’s a lifelong journey of learning not just about the complex world that we live in but also over my own strengths and weaknesses, as well as my own subjective biases of the environment.
But for you, you may not need to do as much work as I did.
The good news is that I recently discovered that there is an online course offered on Udemy.com that allows one to learn the basics of global macro investing. The course breaks down the whole quintessence and structure of global macro, explaining not just the philosophy of it but also the basic concepts that entails the investment style.
While you may not be interested in this investment style, there could be certain lessons or takeaways from the course that could help you in your trading/investing.
I highly recommend this course for those interested – check it out, you may learn a thing or two!
Additionally, for those interested in this art/school of investing, I will also be posting on great books I have read that have helped me develop a global macro investment style. Stay tuned!
*cover image from http://www.hedgethink.com/resources/global-macro-strategy/* *The views and endorsement above are my own, I have no business relationship with the course provider or with Udemy.com*