Macro Man

Q. Who are you?

A. I am a portfolio manager at a medium-sized London macro hedge fund. I am American, but have lived virtually all of my adult life outside of the United States. In my career, I have also worked on the sell side as an option trader and strategist, and in real money as an economist and portfolio manager.

Q. Why do you write the blog?

A. A number of reasons. I have found the discipline required to set down my thoughts on a daily basis, subjected to public scrutiny, to be highly useful. It provides an archive of my thinking at any particular point in time, and enforces a quality control of ideas. The comments section has proven to be a valuable resource, both in terms of providing feedback to my own thinking and in the ideas that readers occasionally share: a few of the latter have ended up in my portfolio. Finally, it provides a forum for the occasional rant, which is always useful to let off steam.

Q. Why do you post anonymously?

A. Anonymity confers a certain degree of protection, insofar as I can say what I want without legal threats appearing on my desk or bricks through my living room window. When I started the blog, my employer at the time had a rather large business venture in China; given my rather pointed criticisms of Chinese currency policy, I saw no need to jeapordize that by linking my employer's name with my personal views. Of course, anonymity also demands a great deal of responsibility, something that I take very seriously. I believe everything that I write to be true, though of course in discussing naughty behaviour I cannot always prove my allegations.

Q. Does anyone know who you are?

A. The veil of secrecy remained more or less fully intact for the first nine months or so of the blog's life (September 2006-June 2007.) Since then, the secret has slowly seeped out, so most of my brokers/salespeople and a few punters out there know who I am. I have met a few readers offline and have vague plans in the works to meet a few more.

Q. What's with the third person narrative?

A. It started out as an artificial artisitic device to make the blog more interesting to read and more fun to write. Now, after two and a half years, it just comes naturally.

Q. What happened to the old blog portfolio?

A. When I changed jobs in March 2008, the blog portfolio disappeared for a couple of reasons. The first is that my investment remit was broadened, so there was less need to paper trade different products to see if my ideas were any good; I could stick them in my real world portfolio. In addition, I moved from a shop where everything was done on spreadsheets (and thus could be easily cribbed into a blog-friendly format) to one with state-of-the-art technology...which would then require running a separate Excel sheet in parallel to maintain the blog portfolio. I had no interest in doing that, so unfortunately it had to go the way of the dodo.

Q. Can I advertise on your site?

A. No. To accept advertising would transform the site into a commercial venture, which in my own mind would mandate a ramp-up in effort and quality that I am not prepared to allocate to it at the moment. Plus, I don't like the way web advertising looks. See, not every hedge fund guy is motivated purely by money!

Q. Can I do a link exchange?

A. No. I understand there is an etiquette there (which I presume revolves around advertising revenue), but I am too lazy to make a blogroll or include lots of links for the sake of it. Regular readers can probably pick up the sites that I read from the occasional reference; it's probably not as many as you think since I do most of my own research. Rest assured, if I use something from your site I will give due credit.

Q. Can you write less poetry and Sherlock Holmes nonsense and just concentrate on markets?

A. No. Writing the fun stuff keeps me fresh and in some small way satisfies my childhood dream of being a writer.

Q. Can you write more poetry and Sherlock Holmes stuff and less drivel about markets?

A. No. Poetry is for bank holidays, the odd flash of inspiration, and the occasional reader request. The longer stuff is for when I have a good idea and lots of energy. But markets are both fascinating and pay the bills, so that's what I write about most of the time.

Q. Do you read email sent to the contact address?

A. Yes, all of it. I make a good-faith effort to reply to everyone who sends me an email.

Q. Why haven't you replied to my email?

A. If I am busy, out of contact, or inundated with email, things occasionally fall through the cracks. The rule of thumb is that if it falls off the first page of the Gmail inbox, it probably won't get answered. I'm not trying to be rude, so if you want a reply send the mail again.

Q. How can I become a macro man/woman?

A. This is one of the two most frequently-asked email questions. In my experience, every macro trader takes a different career path, which shapes their methodology and style. Many (but by no means all) have spent some time as a sell side flow trader, while others were analysts before making the jump. Still others have spent their entire careers on the buy side, working their way up from being junior dogsbodies to running significant portfolios.

The most important thing in macro, and indeed any trading discipline, is to know your advantage....which is usually something you accrue earlier in your career. This can be technical knowledge, short-term trading ability, extraordinary risk mangement/emotional discipline, or, if you are fortunate, some happy combination of the three.

I spent more than a decade building up a skill set before finally making the leap into macro trading, and while there is certainly no requirement to wait that long I can assure you that it was time well spent.

Q. OK. Can you recommend some reading to help me on my way?

A. This is the other most frequently-asked question. If you don't have a solid grounding in macroeconomics, buy an economics textbook and read it. I did this in the mid 90's, and it was worth the slog. The Economist is a good weekly read to keep up with ongoing developments if you are not accustomed to doing so, though I confess that I tired of its agenda and cancelled my subscription quite some time ago.

In terms of books, I'd suggest Inside the House of Money (Drobny), Hedgehogging (Biggs), the Market Wizards series (Schwager), and Against the Gods (Bernstein) as good places to start. Readers are more than welcome to submit their own suggestions in the comments section. You should be aware, however, of the curious phenomenon in which many macro traders who author or appear in books tend to suffer a disastrous downturn in investment performance soon thereafter. Heck, even Warren Buffett has succumbed to the inexorable "book effect" recently.

Q. Why are you spending time writing this? Shouldn't you be focusing on the market?

A. It's Friday night, Mrs. Macro is out on the town, and there's nothing on TV. I get a lot of these questions, particularly the last two, quite often, and I'm tired of copying and pasting the same answers. Moreover, my email volume has ticked up a lot recently and I think I have probably let a few of these queries slip through the cracks, so this is a way of answering all similar future queries in advance.