Global macro investing, market structure, and decision-making in speculative markets.
In the paper "Monetary Policy and the Secular Decline in Long-term Interest Rates: A Global Perspective", the authors document that the changes in yields during the three-day windows around FOMC meetings account for approximately 70%% of the secular decline in…
The paper “Forecast-to-Fill: Benchmark-Neutral Alpha and Billion -Dollar Capacity in Gold Futures (2015-2025)” shows how a NASA physicist and MIT engineers would think about building a trend model. It is very similar to what we see with traditional trend-follo…
Richard Posner was a giant in the study of economics and law. He died yesterday. He was a towering professor of law and a respected federal appellate judge who focused on the intersection of economic theory and legal decision-making. His book, The Economic Ana…
The idea that inflation is a monetary phenomenon fell out of favor in the 1980's. It made a comeback in the the pre-GFC period, but then was dismissed in the post_GFC period when inflation was tame during a period of high money growth. Money again became impor…
from Ruuj @RuOnchain1 The map of quant strategies provides a good starting point for discussing the available choices. You need to think about holding periods and capacity. A strategy has constraints that will limit how much can be extracted from the market. T…
Inflation still needs to be controlled, with October CPI at 3.7% and CPI excluding food and energy rising to 2.6%. Energy prices have fallen since the beginning of the month, but the numbers still aren’t headed in the right direction. Still, this forces the Fe…
The Economist coined the term speedball capitalism to describe the current state of global finance and markets. It combines massive AI capital expenditures tied to rapid hype and inflated equity valuations with the market depressants of high interest rates and…
FOGO - it is not Fear of Getting Old, but FEAR OF GETTING OBLITERATED! Forget about FOMO - fear of missing out. That was yesterday. Now, as Paul Singer and Elliot Investment Management highlighted in a recent investor letter, the real fear should be excessive…
The dollar is not always the safe haven that investors would like. This should concern investors, especially since foreign capital flows are moving into equities. The safety issue of the dollar was well described by Andrew Hauser in "On the safe haven status o…
As Brad Setser has painstakingly demonstrated we live in a world of de-reservification not de-dollarization. Net claims on the US are accumulated by way of state banks, pension funds, and other quasi-sovereign investors. Meanwhile in value terms, the growth in…
The paper "Interpretable machine learning for macro alpha: A news sentiment case study" uses the Global Database of Events, Language and Tone (GDELT) with FinBERT, a bidirectional encoder representation from Transformers (BERT), to construct daily sentiment in…
What are fixed income managers thinking about the direction of rates? Look at their revealed preferences based on their position taking. We can measure their exposure to bond futures, both long and short, to see how their net exposure is changing. Short exposu…
There is a movement for the center of gold trading to be Hong Kong and not London. China has taken five clear steps to become a center for gold trading. 1. Launching the Shanghai Gold Exchange International Board (SGEI) Creating a Bridge for Foreign Capital: I…
A recurring theme in our fixed-income view is that the current rise in yields is a return to normalcy. The excess was the low yields after the GFC. It was a form of financial repression used to boost economic growth, but it was also used as a tool to extend go…
The book Exponential Wealth: Centuries of Stock and Bond Returns provides context on concentration in US stocks. The adjusted HHI index places us at historic levels. The smaller-cap market is being squeezed. Is this good for investors? One could argue that any…
This chart from Exponential Wealth: Centuries of Stock and Bond Returns shows significant, long periods of pain for US stocks. There has been a long drought since our last pain period. Should you be worried about this? We may not be at an inflection point, but…
I like the following graphic from Exponential Wealth: Centuries of Stock and Bond Returns. It makes clear that we were in two great bond environments: pre-1981 and post-1981. The high-inflation period reversed between 1981 and 2020. The real question is whethe…
McKinsey & Company has issued its report "Asset Management 2026: Plenty for the Few," which shows that the asset management business is about scale and increasing concentration. It is about gathering assets to improve operating margins in a world of falling fe…
The paper, "A Taxonomy of Quantitative Signals: One Normalization, Many Mechanisms" by SQV3 is an interesting way to place the type of quant signals used into some type of context. It is not yet posted on ssrn, but it is worthy of a discussion.
We still have two and a half months before year-end, yet we might see another year of double-digit equity returns. It is important to look at the before and after surrounding these periods. The before is usually a strong equity sell-off. The double-digit retur…
Big stories that media and analysts got wrong from a number of sources. Here are some highlights, yet we have to ask the question - should you be a skeptic? What is the cost of being a skeptic? Enron (2001) Global Crossing (2002) WorldCom (2002) New Century Fi…
There has been significant talk about the dollar’s fall, but it often ignores how important the dollar is to global trade and finance on a number of metrics. As US global hegemony declines, dollar dominance will deteriorate, but we are still a long way from th…
Perry Mehrling suddenly died this week, and the monetary economics world will be diminished. He was a monetary theorist and an important economic historian, though his work in history was largely accidental. Mehrling’s defining intellectual contribution is his…
Robert Hall and Michael Woodford are excellent choices for the Nobel Prize in Economics. They have influenced generations of macroeconomic scholars. They were at the forefront of New Keynesian economics through their work on the microfoundations of macroeconom…
The BIS uses the credit-to-GDP ratio as an early warning indicator of financial excess. It clearly showed extremes before the GFC. You can also see the explosion of credit after the Great Pandemic, which was a man-made surprise. Currently, the private credit-t…
Interest rates have been rising with what some may call the "Great Bond Sell-off" of 2026, yet there are other underlying problems that will have much longer-term implications for US debt markets. There has traditionally been a convenience yield associated wit…
The power to synthesize "a vast amalgam of constantly changing, multicolored, evanescent, perpetually overlapping data, too many, too swift, too intermingled to be caught and pinned down and labeled like so many individual butterflies"... requires a "direct, a…
"I am sojourning among the termites." - TS Eliot commenting on his work as an employee of Lloyds Bank Yes, T. S. Eliot was a banker who took the train into the city every day and walked to his job. The work in investment management often involves sojourning am…
Stock returns moderated this year across many key AI industry sectors. Hyperscaler and software returns have moderated sharply. Semiconductors, hardware, and power still show strong performance but have also moderated to some degree. Earnings remain strong, ex…
Don’t act surprised that yields are moving higher. Inflation is not being tamed. Real rates are rising alongside stronger economic growth. The term premium is rising because of risk and bonds' lower diversification value. And we haven’t even mentioned the huge…