In an article, "What's the Point of Macro?" Societe Generale Dylan Grise remarked,
``So my advice to anyone about to embark upon Einhorn's path of using macro to "actively manage your long-short exposure." is to think long, hard and honestly about what your sphere of competence actually is." (thanks to my dear friend Mr. Laird Smith)
``So my advice to anyone about to embark upon Einhorn's path of using macro to "actively manage your long-short exposure." is to think long, hard and honestly about what your sphere of competence actually is." (thanks to my dear friend Mr. Laird Smith)
If importation of product X is my business, and suddenly our government prohibits the imports of this item and its related lines, then what's the effect to my business? Obviously I'd have to either shift to other products where imports are allowed or close shop! [yes my dad suffered from this predicament nearly 30 years ago]. In short, business conditions respond to macro policies.
Thus my corollary: The more the government intervenes in the marketplace, the more macro perspective becomes relevant, and vice versa, in determining the viability of investments.
Put differently, the usefulness of the macro perspective relative to risk-reward tradeoff depends on the expected level or degree of government interventionism or inflationism.
As a caveat, while macro does matter, we shouldn't ignore the micro developments. Importantly, we should NOT depend on mathematical formalism to make macro appraisals.
Put differently, the usefulness of the macro perspective relative to risk-reward tradeoff depends on the expected level or degree of government interventionism or inflationism.
As a caveat, while macro does matter, we shouldn't ignore the micro developments. Importantly, we should NOT depend on mathematical formalism to make macro appraisals.
2 comments:
Hello, again just dropping by. I always like reading your posts. They exercise my most of the time moribund grey matter. :)
Both macro/micro economics would always be useful for they instill a certain semblance of normalcy and predictability on the thing that traders fear (or love, depending on your school) the most.
Lest I verge on something as sacrilegious as forecasting economic activity, I'd like to posit that such is indeed the holy grail for both areas - which they would of course deny point blank.
That's probably one reason why on June 10, 2010, Google acquired a web startup which is in the business of predicting futures using social analytics.
Incidentally, I wrote a terrible post on my blog about the topic which I don't recommend.
Cheerios!
Dannybuntu
Hi Danny,
Thanks for your comments
Benson
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