What is global macro? Before we look at how we trade its important to answer the question What is Global Macro? The best answer weve heard is that its simply looking for the best risk- to-reward opportunities in the world. That means that if the Singapore equities look cheap and we can see why they would go up significantly and they present us with a low risk entry, we buy them. If US Treasuries look grossly overvalued and present us with a low risk shorting opportunity, we short them. If US Investment Grade Bonds have the highest yield spread in 30 years and strong balance sheets, we look for a low risk entry and buy them. If the Euro/US Dollar looks relatively cheap and the interest rate differential is favorable, we look for a low risk entry to buy it. Hopefully you see the basic thought process: We are simply going wherever the best opportunities are.
While many investors only invest in US Equities and possibly US fixed income products, global macro traders focus on every liquid asset class they can find. By doing this, we are able to capitalize on far more opportunities.
Pundits always speak of the benefits of spreading your bets but most of them do a poor job of dispensing advice. They think that 25% in small cap, 25% in mid caps, 25% in large caps, and 25% in bonds is diversifying. The truth is that you are 75% in US stocks and 25% in US bonds most of the time. That is not diversified. To top it off they use index funds which means you will only do as well and as bad as the overall market minus any fees.
If you have been schooled in the ways of the (flawed) efficient market hypothesis, you probably believe that sitting in an index fund or diversifying across US asset class is an ideal situation. You are going to get the returns of the overall market minus the fees, and over time you will create wealth. While this may be the case, what the financial press fails to tell you is that buy and hold only works if you have a very long time horizon.
The long run is fraught with different hazards. Not the least of which is that the market has gone virtually nowhere for up to 20 years at a time more then once in the last 50 years. if you can sit with zero or even negative returns for years on end then be my guest. if you want something better then read on.
Hopefully by now you realize that this is not a sound investment plan and that you can't sit around forever in an index that is treading water or even drowning. If you had bought the SP500 20 years ago as of this writing you would only be up 235% total. That comes out to a meager 4.6% annual return. You could have done that in Treasury bonds with zero risk. Was it worth the ride? No, it was not.
Sitting for 10 and even 20 years on negative returns have you down on investing? If you are like most investors you are frustrated and need help. Look at different investment styles that are really different. A new stock picking strategy is not much different then buying an index of stocks. Instead open your eyes to different asset classes and countries and find the best risk to reward opportunities the world over. Global macro trading allows you to see it all. - 16732
While many investors only invest in US Equities and possibly US fixed income products, global macro traders focus on every liquid asset class they can find. By doing this, we are able to capitalize on far more opportunities.
Pundits always speak of the benefits of spreading your bets but most of them do a poor job of dispensing advice. They think that 25% in small cap, 25% in mid caps, 25% in large caps, and 25% in bonds is diversifying. The truth is that you are 75% in US stocks and 25% in US bonds most of the time. That is not diversified. To top it off they use index funds which means you will only do as well and as bad as the overall market minus any fees.
If you have been schooled in the ways of the (flawed) efficient market hypothesis, you probably believe that sitting in an index fund or diversifying across US asset class is an ideal situation. You are going to get the returns of the overall market minus the fees, and over time you will create wealth. While this may be the case, what the financial press fails to tell you is that buy and hold only works if you have a very long time horizon.
The long run is fraught with different hazards. Not the least of which is that the market has gone virtually nowhere for up to 20 years at a time more then once in the last 50 years. if you can sit with zero or even negative returns for years on end then be my guest. if you want something better then read on.
Hopefully by now you realize that this is not a sound investment plan and that you can't sit around forever in an index that is treading water or even drowning. If you had bought the SP500 20 years ago as of this writing you would only be up 235% total. That comes out to a meager 4.6% annual return. You could have done that in Treasury bonds with zero risk. Was it worth the ride? No, it was not.
Sitting for 10 and even 20 years on negative returns have you down on investing? If you are like most investors you are frustrated and need help. Look at different investment styles that are really different. A new stock picking strategy is not much different then buying an index of stocks. Instead open your eyes to different asset classes and countries and find the best risk to reward opportunities the world over. Global macro trading allows you to see it all. - 16732
About the Author:
Jesse helps people find different Global Macro Trading opportunities. The Macro Trader Looks for the best opportunities across the globe using ETF's for both retail and institutional investors.
