The Global Macro Trader and Economics
In case you couldn't tell from the title, macro traders use economics a lot in their search for the best opportunities across the globe. The macro trader trades stocks, bonds, commodities, and currencies. Not only do they trade all four major asset classes but they trade them across the globe. That means that they need to follow at least the G-20 nations. This obviously multiplies the number of markets that they must have a solid grasp of.
Now that you understand that the macro trader covers everything everywhere it should make sense as to why they must understand economics. The macro trader must have a solid grasp of global macroeconomics as well as country specific economics.
One good example of a country that is a huge part of global trade but has an economy very much different from the United States is that of Japan. In the early nineties Japan entered a long period of stagflation meaning that they didn't really grow at all for the next twenty years. Their inflation has run at under one percent the entire time and occasionally they have a deflationary quarter. And this after billions of stimulus over the years and the lowest interest rates on the globe.
Obviously if you had decided to invest in Japan without understanding the macroeconomics at play you would have lost a lot of money. In fact without understanding the economics and practicing risk management you would have made no money at all from 1982 all the way to 2009. Yeah stocks for the long run works except when it does not.
Our next great example of a successful macroeconomic based trade was that of buying commodities in 2002. We had just had a global tech bust and commodities had been underinvested for several years.
If you were tuned into the macro economy you would have noticed the BRIC nations picking up considerably and gone long. You would have bought Brazil, oil, base metals, etc. as the emerging markets expanded at a very fast pace for a while.
Value investors and supposed pure stock pickers are notorious for claiming to not need economics. We only buy stocks they say. Well the truth is that all stocks are part of and are affected by the economy. You can lose fifty percent of your money when a supposed surprise economic disaster happens or look at the signs, see it coming, and profit.
Global macro trading and macroeconomics are very much intertwined and are excellent disciplines for all investors to learn. Don't be close minded and instead broaden your horizon and you will find a lot of money out there. - 23162
Now that you understand that the macro trader covers everything everywhere it should make sense as to why they must understand economics. The macro trader must have a solid grasp of global macroeconomics as well as country specific economics.
One good example of a country that is a huge part of global trade but has an economy very much different from the United States is that of Japan. In the early nineties Japan entered a long period of stagflation meaning that they didn't really grow at all for the next twenty years. Their inflation has run at under one percent the entire time and occasionally they have a deflationary quarter. And this after billions of stimulus over the years and the lowest interest rates on the globe.
Obviously if you had decided to invest in Japan without understanding the macroeconomics at play you would have lost a lot of money. In fact without understanding the economics and practicing risk management you would have made no money at all from 1982 all the way to 2009. Yeah stocks for the long run works except when it does not.
Our next great example of a successful macroeconomic based trade was that of buying commodities in 2002. We had just had a global tech bust and commodities had been underinvested for several years.
If you were tuned into the macro economy you would have noticed the BRIC nations picking up considerably and gone long. You would have bought Brazil, oil, base metals, etc. as the emerging markets expanded at a very fast pace for a while.
Value investors and supposed pure stock pickers are notorious for claiming to not need economics. We only buy stocks they say. Well the truth is that all stocks are part of and are affected by the economy. You can lose fifty percent of your money when a supposed surprise economic disaster happens or look at the signs, see it coming, and profit.
Global macro trading and macroeconomics are very much intertwined and are excellent disciplines for all investors to learn. Don't be close minded and instead broaden your horizon and you will find a lot of money out there. - 23162
About the Author:
If you need actionable trading ideas then check out The Macro Trader It is a weekly global macro hedge fund strategy advisory publication with frequent intra-week updates for time-critical analysis and actionable trading ideas.
posted by X - Men @ 3:15 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home