As predicted, markets would generally speaking look through the current crisis and spike in oil prices. Equities are long lived, and its hard to believe this crisis will be long lived. Already oil majors are rushing to add capacity elsewhere, and countries are turning to coal and other energy sources. For me, this is fundamental proof that the energy weapon of Russia and OPEC is a spent force. At some point, Iran and Russia will need to come to some understanding with the US. And this is in many ways bullish asset markets. I am sure many “analysts” will disagree - but the market agrees with me - and that is all that counts.
I have been doing this job a long time (too long maybe?) and I have come to realise that I am good at two distinct things. The first thing I am good at is drawing together lots of different assets classes and ideas to make a single theory. Call this “macro thinking”. Traders tend to love the macro thinking. Why? Because traders love owning things that are going up - but do not want to admit they own it just because its going up - so if I can give them a macro reason - it makes them sound smarter. For example, a trader could say, I own gold or silver because its going up (see Jesse Colombo for example) OR they could say I own gold because no central bank wants to own US treasuries anymore (Russell Clark Macro Thinking).
The other thing I am good at is “sausage making”. So once I have a theory, I then need to find assets that are going the right way to make the macro thinking actually look sensible. I call it sausage making, because it is often just me sitting at Bloomberg wondering why an asset is not moving the way it should be, or liking the way as asset is moving, and wondering if it fits in the framework. Its not “beautiful” like macro thinking - but if macro thinking is the recipe, sausage making is the cooking. You need both.
I am looking at the bounce in markets, and thinking about whether I need to change the cooking a bit.
