Skip to main content

Macro themes dominate the investing world

The rise of global macro investing and the increased importance of weighing macro themes in everyday investing were the subject of this recent Wall Street Journal piece entitled, "Macro Forces in Market Confound Stock Pickers" (Hat tip: Abnormal Returns).

An excerpt from that piece:

"
The market turmoil has battered many investors over the past few years. But for stock pickers like Neuberger Berman LLC's David Pedowitz, it has made their entire investing approach feel like an exercise in futility.

Mr. Pedowitz buys and sells stocks based on research and analysis of individual companies. His investment strategy, he says, has been upended by a tidal wave of "macro" forces—big-picture market movers like the economy, politics and regulation.

More and more investors aren't bothering to pore through corporate reports searching for gems and duds, but are trading big buckets of stocks, bonds and commodities based mainly on macro concerns. As a result, all kinds of stocks—good as well as bad—are moving more in lock step.

"It's unbelievably frustrating," says Mr. Pedowitz, who helps manage $4.5 billion for wealthy clients and has 25 years of investing experience. "It's enough to make you crazy."

That kind of talk has become widespread on Wall Street as stock pickers discover that long-held investment strategies are no longer working very well..."

Note that Gregory Zuckerman, author of The Greatest Trade Ever, is a co-writer of this article. Which makes sense, given that the main subject of his book, John Paulson, was a convertible arbitrage trader turned macro-focused hedge fund manager who scored big with his now-famous subprime short trade.

Paulson's not the only one to embrace the macro approach; exhaustive researchers and value oriented stock pickers, David Einhorn and Michael Burry have also delved into macro investing in recent years with their subprime-related short trades and forays into gold, farmland, and commodities.

The authors of the WSJ piece note that in the aftermath of the 2008 financial crisis, many investors woke up to the fact that a big picture theme or an "unexpected" storm can wreak havok on their investment returns. Now, they are starting to look more at big picture trends in the economic and geopolitical spheres, as they realize these events can greatly influence their performance.

Witness this quote from David Einhorn:

"For years I had believed that I didn't need to take a view on the market or the economy because I considered myself a 'bottom-up investor,'" said hedge-fund manager David Einhorn of Greenlight Capital last year. "The lesson that I have learned is that it isn't reasonable to be agnostic about the big picture."

There you have it. The big picture outlook has permeated the investment world. Is this a temporary vogue in favor of macro investing, or are we all, to some extent, global macro investors now?

Related articles and posts:

1. Michael Burry: an up & coming macro star? - Finance Trends.

2. Must hear interview with John Burbank of Passport Capital - Finance Trends.

Popular posts from this blog

The Dot-Com Bubble in 1 Chart: InfoSpace

With all the recent talk of a new bubble in the making, thanks in part to the Yellen Fed's continued easy money stance, I thought it'd be instructive to revisit our previous stock market bubble - in one quick chart.

So here's what a real stock market bubble looks like. 

Here's what a bubble *really* looks like. InfoSpace in 1999-2001. $QQQ$BCORpic.twitter.com/xjsMk433H7
— David Shvartsman (@FinanceTrends) February 24, 2015
For those of you who are a little too young to recall it, this is a chart of InfoSpace at the height of the Nasdaq dot-com bubble in 1999-2001. This fallen angel soared to fantastic heights only to plummet back down to earth as the bubble, and InfoSpace's shady business plan, turned to rubble.

As detailed in our post, "Round trip stocks: Momentum booms and busts", InfoSpace rocketed from under $100 a share to over $1,300 a share in less than six months. 

In a pattern common to many parabolic shooting stars, the stock soon peaked and began a…

New! Finance Trends now at FinanceTrendsLetter.com

Update for our readers: Finance Trends has a new URL! 

Please bookmark our new web address at Financetrendsletter.com

Readers sticking with RSS updates should point your feed readers to our new Finance Trends feedburner.  



Thank you to all of our loyal readers who have been with us since the early days. Exciting stuff to come in the weeks ahead!

As a quick reminder, you can subscribe to our free email list to receive the Finance Trends Newsletter. You'll receive email updates about once every 4-8 weeks (about 2-3 times per quarter). 

Stay up to date with our real-time insights and updates on Twitter.

William O'Neil Interview: How to Buy Winning Stocks

Investor's Business Daily founder and veteran stock trader, William O'Neil shared his trading methods and insights on buying winning stocks in an in-depth IBD radio interview.

Here are some highlights from William O'Neil's interview withIBD:

William O'Neil's interest in the stock market began when he started working as a young adult. 

"I say many times that I didn't get that much out of college. I didn't have much interest in the stock market until I graduated from college. When I got married, I had to look out into the future and get more serious. The investment world had some appeal and that's when I started studying it. I became a stock broker after I got out of the Air Force."
He moved to Los Angeles and started work in a stock broker's office with twenty other guys. When their phone leads from ads didn't pan out, O'Neil would take the leads and drive down to visit the prospective customers in person.

"I'd get in the c…