Without question the worst investors over the last ten years have been macro investors. The one trade I probably talk about the most on this substack has been long Yen, which I now call the widowmaker trade. There was a time when Yen would rally when US stocks were weak - but not anymore.
Another foolish trade from the macro community is that higher Japanese and US bond yields would have some sort of negative effect on US stock valuations. Very wrong indeed.
Macro investors used to insist that large fiscal deficits would lead to a weak currency. Brazil has a 10% budget deficit, which outside of Covid is the highest deficit since the 1990s.
And yet the Brazilian Real remains near levels first seen in 2002.
The macro community have been leaning heavily on comparisons with past investment booms to drive a bearish view on AI. This chart from NBER is indicative.
And yet this fear of overinvestment that stalks the market, all I see is pricing in the compute space still rising.
As are DRAM prices.
Some of the other more amusing macro calls has been bullishness on Chinese tech. And yet, this somehow also does not work.
The reason I am pointing this all out, is that I too used to use macro thinking for investing. But, it has not been a winning strategy for a long time now. The best reason I can come up for it not working is that governments now operate much more openly to secure desired economic outcomes. Both the Chinese and West are acting to keep Chinese tech down, so that does not work. The Americans have only just showed some interest in strengthening the Yen, after years of benign neglect. And the market is obviously saying that fiscal spend is bad for bonds, but good for equities. Macro is good, but when it does not align with politics, its a waste of time.
