A shameless plug

It's the holiday season. which is the time for giving gifts to the friendly punter(s) in your life.  While Macro Man normally avoids the provision of gift-giving advice like the plague- he has enough issues trying to sort out his own shopping- this year he can heartily endorse a volume that will stimulate anyone interested in macro investing specifically, or the evaluation of trading and investment performance generally.

The Global Macro Edge by John Netto isn't exactly a stocking stuffer; at nearly 600 pages and a couple of kilos, it's a weighty tome.   But this is a good thing, because it covers a wealth of topics that quite literally make it a textbook on crafting and evaluating a macro trading strategy.

Let's be clear, however; it's not a connect the dots, "do A, B, and C, then profit"empty bag of putative miracles.  Instead, it provides the reader with a framework with which to understand risk and market fundamentals, an introduction to various types of macro trading strategies, some examples of implementation and, most importantly, the tools with which to assess a strategy's success.

This is teaching the reader to fish, not the promise of free salmon for life.  The ultimate goal, as it says on the cover, is to maximize the return per unit of risk.  In doing so, The Global Macro Edge introduces a novel approach to evaluating investment returns, not only looking at them relative to ex-post drawdowns, but also relative to an ex-ante risk budget.

The utility of such an approach is obvious.  Simply looking at ex-post nominal returns ignores the drawdowns inherent in a strategy;  generating a 20% annual return with a 10% drawdown is a lot better than doing so with a 30% drawdown.  By the same token, risk budgets matter as well.   Generating that 20% return with a 5% stop loss is a hell of a lot more impressive than doing so with a 25% stop, or no stop at all.  The Netto number, introduced in the book, combines these concepts into a single, easy-to-understand measure that can then be used to evaluate (or even compensate) a range of investment strategies.

Netto calls on a an array of market practitioners to share their insights with the reader.   Helpfully, there are also a few tutorials on how perform various types of analysis on Bloomberg for those readers with a terminal.   By way of disclosure, Macro Man is a contributing author to the book, having been brought in late as a sort of Winston Wolfe to tidy a few things up and help put the book to bed.  Readers have occasionally asked him if he ever planned to write a book; this is as close as he's come to doing so.

At $149, you won't find the book on the same shelf as your John Grishams or your Macro for Dummies.   But that's kind of the point; this isn't a book for dummies.   Instead, it's a text for readers looking to assimilate new techniques into their trading strategy and to properly assess the performance of that strategy relative to the capital at risk.  And that kind of knowledge is very valuable indeed.