I like having a strategy to attack markets with. When you have a strategy, you can makes adjustments to improve it as you get new information. In my career as an analyst and fund manager from 2004 to 2021, I was very heavily macro focused, because that was what worked. But from 2016 onwards, it stopped working. Currency moves, and asset moves that I expected rarely followed through. The only big trade I could right was shorting Chinese tech in 2021 - and that was purely from getting Chinese politics right.
For me, I had always tried to focus on macro, and that had been good for me - but when I look back, I realise how much everything was politically driven. The bond bull market was driven by the politics of destroying unionised labour. One of my best trades ever, buying Irish bonds at 10% yield, even though I justified it in macro terms at the time, I knew was also a political bet. I could not see the US, UK, and Europe could allow Ireland to default.
From a political point of view, I see wages rising, and hence inflation also rising, which is why I have pushed, GLD/TLT as a trade. This is a profoundly political trade.
The macro part of me looked back at the 1970s, the big driver of inflation was surging oil prices. When I look at gold/oil prices we seem to be at very depressed oil prices - relative levels seen only during the Great Depression and Covid.
It seemed to me the politics for a pop in oil prices was also in place. It seemed to me that the US was negotiating with Russia to make sure the oil market would be supplied if either the US or Israel bombed Iran. I also saw US oil investment had slowed, and forward gas market pricing looked firm. But somehow the politics was for lower oil prices -and somehow the US managed to convince the Saudis to increase supply. From a peak of USD 80 a barrel in January, we are now at USD 57.
From a macro perspective, the move in gold, treasuries and oil don’t really fit together. The correlations are all over the place. But politically, they make total sense.
