Best Macroeconomic Book

Hey guys, RE development guy here, looking for a better general understanding of the global economy. Can anyone recommend a good book on the topic? I wouldn't say that I'm completely without knowledge, but seeking pretty basic info. I regularly read WSJ, but would love a book to shore my info up.

Any help?

Thanks

 

The following books show how some global macro managers run their money:

Inside the House of Money (profiles of a number of macro managers) The Invisible Hands (personally I really like this. Shows how some of the macro guys navigated the crisis) Alchemy of Finance The Market Wizards series (many of the people profiled in them are now billionaires...kovner, jones etc)

As for a guide for macro analysis, I really liked Ahead of the Curve. Written by an ex-star retail analyst. Tells you a lot about how to analyze a number of economic indicators.

 

i am old school but i the original Market Wizards...paul tudor jones, bruce kovner, etc...i also like Reminisences of a Stock Operator especially the annotated version that has the real history behind the original text which has fake names/places. That version also has a forward/interview with Paul Tudor Jones that is in itself worth the cost of the book. Inside the House of Money is good but about half the people in their blew up in the crisis.

 
Best Response

Personally, I confess an intense dislike for IToM. There are things in it that I find deeply objectionable. From an interview w/John Porter, the Barclays treasurer who doesn't mark his positions to mkt (why on earth is he in a book about global macro hedge funds?); to a chapter on Andres Drobny who has never run an ounce of risk in his life; to tales of big balls, which send completely the wrong message.

As to the people in the book: - Christian Siva-Jothy closed his fund due to poor performance (I hear he is planning a comeback though) - John Porter gone from Barclays during the LIBOR purge - Peter Thiel's fund lost 90% of its assets through 2008-10 period; not sure if it's still around - Dwight Anderson's Ospraie closed its flagship fund in 2008 (came back with new funds in 2009, though) - Rob Standing and David Gorton's London Diversified lost 90% between early 2008 and late 2009; I think they're still around, but not sure what shape

 
Martinghoul:

Personally, I confess an intense dislike for IToM. There are things in it that I find deeply objectionable. From an interview w/John Porter, the Barclays treasurer who doesn't mark his positions to mkt (why on earth is he in a book about global macro hedge funds?); to a chapter on Andres Drobny who has never run an ounce of risk in his life; to tales of big balls, which send completely the wrong message.

As to the people in the book:
- Christian Siva-Jothy closed his fund due to poor performance (I hear he is planning a comeback though)
- John Porter gone from Barclays during the LIBOR purge
- Peter Thiel's fund lost 90% of its assets through 2008-10 period; not sure if it's still around
- Dwight Anderson's Ospraie closed its flagship fund in 2008 (came back with new funds in 2009, though)
- Rob Standing and David Gorton's London Diversified lost 90% between early 2008 and late 2009; I think they're still around, but not sure what shape

I saw peter theil speak at a conference last year and he ran thru a bunch of ideas including a few liquid markets trades. Then he talked about a rule he has that any investment should have the ability to double ones capital or its not worth putting on. In the Q&A i asked him if he sizes liquid markets trades this way, because to do the kind of size that would allow one to double his capital in some of the trades he mentioned (for example "long US 10yr notes") a trememndous amount of leverage would be neccesary and therefore one would have a big chance of blowing up. He did not like the question at all and went crazy about how traders are too focused on the process rather then the idea and that this problem is prevalent in other industries as well, etc...it was kind of an insane answer that amounted to "i dont care about position sizing or risk management". So basically he sizes every trade like tis the next paypal and thats why he's down 90% from peak...i wouldnt take trading advice from him which is too bad because I think he is a very interesting person and i agree with alot of his libertarian politics.

But yes he and Clarium are still around and I know a few people who interviewed recently to manage money for him.

 

Yeah, Thiel sounds like he might be interesting, but, as a trader, he's completely useless, based on what I heard. Your experience appears to suggest same. I mean with the attitude that "idea" is what matters and "process", including risk management, is secondary, you're destined to be a blowup artist. I can't think of a worse quality for a macro trader.

 
Martinghoul:

Yeah, Thiel sounds like he might be interesting, but, as a trader, he's completely useless, based on what I heard. Your experience appears to suggest same. I mean with the attitude that "idea" is what matters and "process", including risk management, is secondary, you're destined to be a blowup artist. I can't think of a worse quality for a macro trader.

i gave u a SB for that post which is rare for me as i am cheap with my SBs...i rant alot on this board about how the trade ideas are almost meaningless (slight exageration but not much)...as soros said "it doesnt matter how often you are right and how often you are wrong, it only matters how much you make when you are right and how much you lose when you are wrong.".

 
Bondarb:
Martinghoul:

Yeah, Thiel sounds like he might be interesting, but, as a trader, he's completely useless, based on what I heard. Your experience appears to suggest same. I mean with the attitude that "idea" is what matters and "process", including risk management, is secondary, you're destined to be a blowup artist. I can't think of a worse quality for a macro trader.

i gave u a SB for that post which is rare for me as i am cheap with my SBs...i rant alot on this board about how the trade ideas are almost meaningless (slight exageration but not much)...as soros said "it doesnt matter how often you are right and how often you are wrong, it only matters how much you make when you are right and how much you lose when you are wrong.".

Awwwww, thank you...

I actually heard somewhat similar stories about Siva-Jothy, incidentally. Much less extreme than Thiel, but, again, someone who seemingly cannot imagine the possibility of being wrong.

In fact, this is, more generally, why I can't bring myself to like books about trading and traders. Most of the time people in these books are the ones who have the most to say. My experience suggests that, with a few exceptions, people who have the most to say are the least worth listening to.

 

http://www.amazon.com/Recursive-Macroeconomic-Theory-Lars-Ljungqvist/dp…

Just to end this retarded back and forth that has nothing to do with macroeconomics...This is real macroeconomics. Not the retarded wall street watered downed bullshit everyone else seems to be drinking.

If you don't know enough math to feel comfortable then read Romer.

If you don't know enough math to feel comfortable then go read a differential equations book, you have no business with macroeconomics but you can read blanchard if you want a very very watered down gist of macro theory.

and someone tell me how reminisces of a stock operator is a macroeconomics book...some straight up bad info

 
jktecon:

http://www.amazon.com/Recursive-Macroeconomic-Theo...

Just to end this retarded back and forth that has nothing to do with macroeconomics...This is real macroeconomics. Not the retarded wall street watered downed bullshit everyone else seems to be drinking.

If you don't know enough math to feel comfortable then read Romer.

If you don't know enough math to feel comfortable then go read a differential equations book, you have no business with macroeconomics but you can read blanchard if you want a very very watered down gist of macro theory.

and someone tell me how reminisces of a stock operator is a macroeconomics book...some straight up bad info

i assume the guy is asking about macro trading, not academic macroeconomics which are two vastly different topics. You see, this website is called Wall Street Oasis. If the OP wants to become an economics professor then i wholeheartedly agree he should skip reminiscences of a stock operator, but if that were what he was interested in I dont think he'd be posting on a forum about hedge funds.

And Reminiscences of a stock operator is a macro book because its basically the diary of a trader who speculated in equity, commodity, and currency markets. That is what macro hedge funds do.

 

I'm guessing the Siva-Jothy problems had a lot to do with moving from trading a bank line to trading real capital (I mean having P&L calculated on your fund's AUM as opposed to VAR). The "career highlights" he mentions at Goldman are usually in times of crisis when the bank probably gave him a bigger line to cover the drop in other areas' activities and where he could probably see market dislocation first-hand and front-run the buyside. The expectations are way different when running client money.

The Jim Leitner interview is probably my favorite. Running just your own money seems like the ideal set-up to me if you're willing to give up the fees. His asset bucket approach reminds me a little of the risk parity portfolios that have been talked about so much lately, yet with the flexibility that would hopefully have considered the scenario of the past month. (It's crazy how any discussion about risk parity mentioned the risk at a turning point for bonds and yet no one running that strat seems to have done anything about it. Dalio's All-Weather is the perfect example.)

The first two Market Wizards, the Drobny books, Reminiscences of a Stock Operator and Alchemy of Finance (do read the whole thing) get my vote. I'd also throw in Hedgehogging by Barton Biggs and Bernard Baruch by James Grant. The Biggs book covers some very interesting territory about "process" while the Baruch book is another good example of a guy who was willing to trade/invest in a variety of opportunities while being aware of risk.

 
Martinghoul:

Personally, I confess an intense dislike for IToM. There are things in it that I find deeply objectionable. From an interview w/John Porter, the Barclays treasurer who doesn't mark his positions to mkt (why on earth is he in a book about global macro hedge funds?); to a chapter on Andres Drobny who has never run an ounce of risk in his life; to tales of big balls, which send completely the wrong message.

As to the people in the book:
- Christian Siva-Jothy closed his fund due to poor performance (I hear he is planning a comeback though)
- John Porter gone from Barclays during the LIBOR purge
- Peter Thiel's fund lost 90% of its assets through 2008-10 period; not sure if it's still around
- Dwight Anderson's Ospraie closed its flagship fund in 2008 (came back with new funds in 2009, though)
- Rob Standing and David Gorton's London Diversified lost 90% between early 2008 and late 2009; I think they're still around, but not sure what shape

Good stuff... I actually purchased a used copy of the book on Amazon after reading this thread. I suppose I'll have to be somewhat more skeptical now.

 
Bondarb:

I saw peter theil speak at a conference last year and he ran thru a bunch of ideas including a few liquid markets trades. Then he talked about a rule he has that any investment should have the ability to double ones capital or its not worth putting on. In the Q&A i asked him if he sizes liquid markets trades this way, because to do the kind of size that would allow one to double his capital in some of the trades he mentioned (for example "long US 10yr notes") a trememndous amount of leverage would be neccesary and therefore one would have a big chance of blowing up. He did not like the question at all and went crazy about how traders are too focused on the process rather then the idea and that this problem is prevalent in other industries as well, etc...it was kind of an insane answer that amounted to "i dont care about position sizing or risk management". So basically he sizes every trade like tis the next paypal and thats why he's down 90% from peak...i wouldnt take trading advice from him which is too bad because I think he is a very interesting person and i agree with alot of his libertarian politics.

But yes he and Clarium are still around and I know a few people who interviewed recently to manage money for him.

I don't think Peter Thiel has his heart and mind in global macro/Clarium at all. He is much more focused on his social media/web 2.0 VC funds in search of his next Facebook. Personally If I were an investor/LP I would be very wary of putting my money in a HF whose chief strategist is more focused on other investment endeavors.

I think Thiel should stick to VC. His M.O and investment philosophy are much more suitable for that type of investments than global macro. And yeah I am glad he is such an active donor to libertarian causes--love his "water world" idea. Also Thiel funded GoProud, a fantastic organization that has been instrumental in convincing Republican politicians to come around on the gay marriage issue.

Too late for second-guessing Too late to go back to sleep.
 
Bondarb:
jktecon:

http://www.amazon.com/Recursive-Macroeconomic-Theo...

Just to end this retarded back and forth that has nothing to do with macroeconomics...This is real macroeconomics. Not the retarded wall street watered downed bullshit everyone else seems to be drinking.

If you don't know enough math to feel comfortable then read Romer.

If you don't know enough math to feel comfortable then go read a differential equations book, you have no business with macroeconomics but you can read blanchard if you want a very very watered down gist of macro theory.

and someone tell me how reminisces of a stock operator is a macroeconomics book...some straight up bad info

i assume the guy is asking about macro trading, not academic macroeconomics which are two vastly different topics. You see, this website is called Wall Street Oasis. If the OP wants to become an economics professor then i wholeheartedly agree he should skip reminiscences of a stock operator, but if that were what he was interested in I dont think he'd be posting on a forum about hedge funds.

And Reminiscences of a stock operator is a macro book because its basically the diary of a trader who speculated in equity, commodity, and currency markets. That is what macro hedge funds do.

how much macro theory ("academic macro") does one need to know in order to be a macro trader?

 
LLcoolJ:
Bondarb:
jktecon:

http://www.amazon.com/Recursive-Macroeconomic-Theo...

Just to end this retarded back and forth that has nothing to do with macroeconomics...This is real macroeconomics. Not the retarded wall street watered downed bullshit everyone else seems to be drinking.

If you don't know enough math to feel comfortable then read Romer.

If you don't know enough math to feel comfortable then go read a differential equations book, you have no business with macroeconomics but you can read blanchard if you want a very very watered down gist of macro theory.

and someone tell me how reminisces of a stock operator is a macroeconomics book...some straight up bad info

i assume the guy is asking about macro trading, not academic macroeconomics which are two vastly different topics. You see, this website is called Wall Street Oasis. If the OP wants to become an economics professor then i wholeheartedly agree he should skip reminiscences of a stock operator, but if that were what he was interested in I dont think he'd be posting on a forum about hedge funds.

And Reminiscences of a stock operator is a macro book because its basically the diary of a trader who speculated in equity, commodity, and currency markets. That is what macro hedge funds do.

how much macro theory ("academic macro") does one need to know in order to be a macro trader?

literally none...it doesnt hurt obviously, but i know many succesful traders who dont know anything about macroeconomics in the academic sense. The stuff you have to know and learn through experience mostly is what i would call "market macro"...how different markets react to one another, how different policies effect markets, etc. The theory is interesting and is helpful to inform longer-term opinions, but the time horizon that matters to most traders, especially early in their career when they dont have alot of margin for error, is much shorter.

 

This is the main problem with people who didn't get a good education. They don't realize when two subjects coincide or when they are locked in a logic ring.

Macro trading and academic macro are two very different things? Maybe that's a function of you thinking you understand one topic and realizing you have no chance in hell of understanding the other.

The goal of a macro hedge fund is to purchase assets based on longer term relevant macroeconomic predictions

If macroeconomists at an academic level can't do this consistently with accuracy I cannot for the life of me understand why a bunch of people without formal mathematics and computational skills think they can?

This part of finance is pure probability without comprehension (a.k.a. luck). In other words why would you waste time reading a book on how to be lucky; you either are or you aren't.

Go out there and be lucky my man, you don't need to read anything!

 
jktecon:

This is the main problem with people who didn't get a good education. They don't realize when two subjects coincide or when they are locked in a logic ring.

Macro trading and academic macro are two very different things? Maybe that's a function of you thinking you understand one topic and realizing you have no chance in hell of understanding the other.

The goal of a macro hedge fund is to purchase assets based on longer term relevant macroeconomic predictions

If macroeconomists at an academic level can't do this consistently with accuracy I cannot for the life of me understand why a bunch of people without formal mathematics and computational skills think they can?

This part of finance is pure probability without comprehension (a.k.a. luck). In other words why would you waste time reading a book on how to be lucky; you either are or you aren't.

Go out there and be lucky my man, you don't need to read anything!

Ooooh-la-la, this is a little misguided...

I am no fan of the "lucky ones", but I think you're really barking up the wrong tree here.

 

I am completely impartial to someone gaining wealth through means they don't comprehend. Chances are they will get it all back into this economy within this generation or the next. This means it is most likely a win for society that a lucky capitalist amass a small fortune.

I am not, however, a fan of people passing along fables and one off successes as knowledge.

Decisions based purely on emotion and techniques of unverifiable strategies that succeeded with no mathematically conclusive evidence are nothing more than a fool's religion.

 
jktecon:

I am completely impartial to someone gaining wealth through means they don't comprehend. Chances are they will get it all back into this economy within this generation or the next. This means it is most likely a win for society that a lucky capitalist amass a small fortune.

I am not, however, a fan of people passing along fables and one off successes as knowledge.

Decisions based purely on emotion and techniques of unverifiable strategies that succeeded with no mathematically conclusive evidence are nothing more than a fool's religion.

Hmm, let me try to understand this a bit better...

Do you believe that there's such a thing as empirical evidence? Or does all evidence have to come in some sort of a closed form mathematical format? If you accept that there is such a thing as empirical evidence, what are your thresholds for when observations actually become evidence?

Question I am really asking is whether you completely exclude the possibility that, among all the stories of balls and emotion, there is a small number of genuinely skillful people? If you do exclude this possibility, on what "mathematically conclusive" basis do you base such an assertion?

 
jktecon:

This is the main problem with people who didn't get a good education. They don't realize when two subjects coincide or when they are locked in a logic ring.

Macro trading and academic macro are two very different things? Maybe that's a function of you thinking you understand one topic and realizing you have no chance in hell of understanding the other.

The goal of a macro hedge fund is to purchase assets based on longer term relevant macroeconomic predictions

If macroeconomists at an academic level can't do this consistently with accuracy I cannot for the life of me understand why a bunch of people without formal mathematics and computational skills think they can?

This part of finance is pure probability without comprehension (a.k.a. luck). In other words why would you waste time reading a book on how to be lucky; you either are or you aren't.

Go out there and be lucky my man, you don't need to read anything!

well i've been making a good living at it for the better part of a decade now and the firm i work for has a track record of more then20 years...if you attribute it to luck then thats fine we can agree to disagree and you can go back to reading about macroeconomics while i focus on the process of managing risk which is the heart of macro trading. Let's come back in a decade or so and see who has been "luckier".

 

Maybe you, maybe me, who knows who will get luckier subject to the constraint of death.

Who will be remembered after their death?

Me

I would prefer to build the base of human knowledge and get these capital markets back on the road that they were designed for. Just FYI it was not to build up a single individual's wealth.

IDK what kind of risk your managing when it's quite clear that your mentality is the biggest risk to society your corporation and yourself.

 
jktecon:

Maybe you, maybe me, who knows who will get luckier subject to the constraint of death.

Who will be remembered after their death?

Me

I would prefer to build the base of human knowledge and get these capital markets back on the road that they were designed for. Just FYI it was not to build up a single individual's wealth.

IDK what kind of risk your managing when it's quite clear that your mentality is the biggest risk to society your corporation and yourself.

Ok then we are talking about two different things. My job is to make money trading in markets and thats what I am talking about...as far as helping to reform markets, being remembered after death, or building the base of human knowledge, well then maybe your right that your reading list is better for those goals....I wish you well in them.

 
jktecon:

This is the main problem with people who didn't get a good education. They don't realize when two subjects coincide or when they are locked in a logic ring.

Macro trading and academic macro are two very different things? Maybe that's a function of you thinking you understand one topic and realizing you have no chance in hell of understanding the other.

The goal of a macro hedge fund is to purchase assets based on longer term relevant macroeconomic predictions

If macroeconomists at an academic level can't do this consistently with accuracy I cannot for the life of me understand why a bunch of people without formal mathematics and computational skills think they can?

This part of finance is pure probability without comprehension (a.k.a. luck). In other words why would you waste time reading a book on how to be lucky; you either are or you aren't.

Go out there and be lucky my man, you don't need to read anything!

Give me a break dude. If the two subjects coincide, mind pointing me to an econ PhD that's on the Forbes list thanks to his career in macro trading? I've taken reasonably advanced macro classes (not PhD but in a master's program that is a major feeder for top US PhD programs) and none of that stuff would make a huge difference trading macro. It may help me have a better grasp on what the Fed or ECB is likelier to do but that's about it. And a year at the Fed's money market desk or in a major European corp. treasury would have given me that understanding tenfold.

If you plan on being remembered after your death, power to you. Just remember that unless your name was Keynes or Friedman, you would have failed at that this past century.

 
Martinghoul:
jktecon:

I am completely impartial to someone gaining wealth through means they don't comprehend. Chances are they will get it all back into this economy within this generation or the next. This means it is most likely a win for society that a lucky capitalist amass a small fortune.

I am not, however, a fan of people passing along fables and one off successes as knowledge.

Decisions based purely on emotion and techniques of unverifiable strategies that succeeded with no mathematically conclusive evidence are nothing more than a fool's religion.

Hmm, let me try to understand this a bit better...

Do you believe that there's such a thing as empirical evidence? Or does all evidence have to come in some sort of a closed form mathematical format? If you accept that there is such a thing as empirical evidence, what are your thresholds for when observations actually become evidence?

Question I am really asking is whether you completely exclude the possibility that, among all the stories of balls and emotion, there is a small number of genuinely skillful people? If you do exclude this possibility, on what "mathematically conclusive" basis do you base such an assertion?

No of course I believe in open form solutions as well ;D.

Well empirical evidence is nice when we have to study animals and other creatures unable (maybe apathetic? depending on your philosophical bend toward animal cognition) to analyze their own actions. All of human advancement in the western ideology/tech/academic sense of the word is due to this analysis of thought.

Go down the road of history and realize what it means for human beings to strive to this end (analyzing thought). I guess maybe I'm going too deep for a wall street forum but what exactly is the point of a human being who is focused on consumption?

>

I am under the premise that you have accomplished nothing if you haven't truly advanced knowledge. This again requires analysis into my definition of knowledge and it's this point that you focused on because I don't think we really know anything if it isn't written down formally as mathematics.

I am saying the excessively successful traders are most likely statistically to be expected. The fact that one knows a large number who are successful by one strategy or another is most likely selection bias and says nothing about the strategy.

If I am wrong to this end, then it does not change the fact that the trader stories with no conclusive mathematical formalism have not helped anyone but themselves in terms of trading knowledge. IF these trader's would have only shared their formally proven winning strategies then we could have done a lot with it. Since they choose not to share we HAVE to attribute it to luck. How lucky are they? Where did the luck stem from? How do we reproduce this luck?

Now I think you can realize where the issue is. Bondarb states that his company has been lucky for twenty years and he for 10. I can assure you that this, to the human without formal mathematics is luck, to me it is some sort of stochastic function/ dynamic stochastic model. Now he has no care for mathematics and formalism so who is to say when his luck will run out (to me when the function no longer fits the model)?

This would imply that there is literally no point to reading these stories, you may as well be reading Beowulf. And that is why I said what I said.

 
jktecon:

No of course I believe in open form solutions as well ;D.

Well empirical evidence is nice when we have to study animals and other creatures unable (maybe apathetic? depending on your philosophical bend toward animal cognition) to analyze their own actions. All of human advancement in the western ideology/tech/academic sense of the word is due to this analysis of thought.

Go down the road of history and realize what it means for human beings to strive to this end (analyzing thought). I guess maybe I'm going too deep for a wall street forum but what exactly is the point of a human being who is focused on consumption?

<>

I am under the premise that you have accomplished nothing if you haven't truly advanced knowledge. This again requires analysis into my definition of knowledge and it's this point that you focused on because I don't think we really know anything if it isn't written down formally as mathematics.

I am saying the excessively successful traders are most likely statistically to be expected. The fact that one knows a large number who are successful by one strategy or another is most likely selection bias and says nothing about the strategy.

If I am wrong to this end, then it does not change the fact that the trader stories with no conclusive mathematical formalism have not helped anyone but themselves in terms of trading knowledge. IF these trader's would have only shared their formally proven winning strategies then we could have done a lot with it. Since they choose not to share we HAVE to attribute it to luck. How lucky are they? Where did the luck stem from? How do we reproduce this luck?

Now I think you can realize where the issue is. Bondarb states that his company has been lucky for twenty years and he for 10. I can assure you that this, to the human without formal mathematics is luck, to me it is some sort of stochastic function/ dynamic stochastic model. Now he has no care for mathematics and formalism so who is to say when his luck will run out (to me when the function no longer fits the model)?

This would imply that there is literally no point to reading these stories, you may as well be reading Beowulf. And that is why I said what I said.

So Ghandi, Jesus, Hitler, Napoleon, the Founding Fathers... achieved nothing because they didn't have analytical proofs for what they said or did? If you're actually serious about being an economist, how could it possibly be that you haven't noticed that any model you build analytically relies on assumptions and that these necessarily fail to grasp the complexity of real life which will eventually blow a whole into your model?

You seem to have zero understanding of probability or what happens when a so-called "proven strategy" is put out in the open. The reason some people consistently make money is because of market inefficiencies. If a strategy is said to be "proven," the rest of the market will adopt it, thereby closing up that inefficiency, at least for a time.

As far as certain funds being lucky, take a good luck at Soros or even better Jim Simons and tell me they're doing nothing more that riding some stochastic function in the right direction.

You clearly aren't willing to acknowledge the existence of risk management which is precisely what makes trading a different endeavor from flipping a coin.

To be honest, if you're an econ PhD candidate or econ professor, I'm appalled at your lack of intellectual curiosity.

 
jktecon:
Martinghoul:
jktecon:

I am completely impartial to someone gaining wealth through means they don't comprehend. Chances are they will get it all back into this economy within this generation or the next. This means it is most likely a win for society that a lucky capitalist amass a small fortune.

I am not, however, a fan of people passing along fables and one off successes as knowledge.

Decisions based purely on emotion and techniques of unverifiable strategies that succeeded with no mathematically conclusive evidence are nothing more than a fool's religion.

Hmm, let me try to understand this a bit better...

Do you believe that there's such a thing as empirical evidence? Or does all evidence have to come in some sort of a closed form mathematical format? If you accept that there is such a thing as empirical evidence, what are your thresholds for when observations actually become evidence?

Question I am really asking is whether you completely exclude the possibility that, among all the stories of balls and emotion, there is a small number of genuinely skillful people? If you do exclude this possibility, on what "mathematically conclusive" basis do you base such an assertion?

No of course I believe in open form solutions as well ;D.

Well empirical evidence is nice when we have to study animals and other creatures unable (maybe apathetic? depending on your philosophical bend toward animal cognition) to analyze their own actions. All of human advancement in the western ideology/tech/academic sense of the word is due to this analysis of thought.

Go down the road of history and realize what it means for human beings to strive to this end (analyzing thought). I guess maybe I'm going too deep for a wall street forum but what exactly is the point of a human being who is focused on consumption?

<>

I am under the premise that you have accomplished nothing if you haven't truly advanced knowledge. This again requires analysis into my definition of knowledge and it's this point that you focused on because I don't think we really know anything if it isn't written down formally as mathematics.

I am saying the excessively successful traders are most likely statistically to be expected. The fact that one knows a large number who are successful by one strategy or another is most likely selection bias and says nothing about the strategy.

If I am wrong to this end, then it does not change the fact that the trader stories with no conclusive mathematical formalism have not helped anyone but themselves in terms of trading knowledge. IF these trader's would have only shared their formally proven winning strategies then we could have done a lot with it. Since they choose not to share we HAVE to attribute it to luck. How lucky are they? Where did the luck stem from? How do we reproduce this luck?

Now I think you can realize where the issue is. Bondarb states that his company has been lucky for twenty years and he for 10. I can assure you that this, to the human without formal mathematics is luck, to me it is some sort of stochastic function/ dynamic stochastic model. Now he has no care for mathematics and formalism so who is to say when his luck will run out (to me when the function no longer fits the model)?

This would imply that there is literally no point to reading these stories, you may as well be reading Beowulf. And that is why I said what I said.

Check out John Meriwether, his crew at LTCM and their models of how the economy works. I believe jktecon mentioned Bondarb's 10 year run because:

  • 10 years is considered the most relevant timeframe for investors, when most important variations in returns and conditions come through

  • Every decade has had it's own distinctive characteristics, at the end of each of these most investors tended to discount the next decade to be similar to the previous one (when in reality every major asset class has had great and terrible decades) and as a result there have been great shifts in wealth

But I have to agree GoodBread. You're trying to model out with your 'theoretical' models something that has proven dozens of Nobel Prize winners to be wrong.

[quote]The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.[/quote]
 
GoodBread:

Give me a break dude. If the two subjects coincide, mind pointing me to an econ PhD that's on the Forbes list thanks to his career in macro trading? I've taken reasonably advanced macro classes (not PhD but in a master's program that is a major feeder for top US PhD programs) and none of that stuff would make a huge difference trading macro. It may help me have a better grasp on what the Fed or ECB is likelier to do but that's about it. And a year at the Fed's money market desk or in a major European corp. treasury would have given me that understanding tenfold.

If you plan on being remembered after your death, power to you. Just remember that unless your name was Keynes or Friedman, you would have failed at that this past century.

Robert Merton and Myron Scholes both have in PhDs in economics and did rather well for themselves at LTCM (not sure whether they ever made to the Forbes list) until it blew up, ironically, right after they were awarded the Nobel Prize in economics.

I guess Messeur Merton and Scholes will indeed be remembered after their death, but that is as much for their academic contributions (i.e. the mathematical formulas and models that Jktecon so blindly worships) as the spectacular failure of the hedge fund they built based on said mathematical formulas.

Mathematical models are only as good as the assumptions they are based on. In the case of financial economics, the difficulty of incorporating fat tails into standard models cause them to severely understate true underlying risks which profoundly limit the practical usefulness of these models. At the end of the day, risk management is a profoundly human endeavor that requires a lot of discretions. No amount of mathematics cannot substitute for experiences, instincts and good old common sense.

Too late for second-guessing Too late to go back to sleep.
 

i wanted to avoid this discussion, but i think alot of it centers around the definition of "advanced knowledge". When it comes to trading markets, econometrics is just not the right advanced knowledge at all...you might as well say "that guy cant be a good auto mechanic, he doesnt know how to fix an air conditioner!". Fact is that advanced knowledge in trading is a different animal and we could argue about what it constitutes but i know for a fact that an advanced degree in economics does not have alot to do with this job, because you see I actually DO this job on a daily basis. Some folks with advanced econ degrees are good at it, others are not at all.

Also I do agree with jktecon in one way: one should not assume a trader is any good without seeing him demonstrate aptitude (or what he calls "advanced knowledge")...even where i work where it is very hard to get hired most new PMs do not make it. However, having done this for awhile i can see with my eyes within a couple of weeks whether somebody has a good chance or whether its a disaster...but the tests have nothing to do with their economic pedigree, its how they think and talk about risk, how they trade, how they run their business, and their general mentality towards the market. This is all going to be way to qualitative for jtkecon, but i stand by it as an actual practicioner in the field as opposed to a student.

 
jktecon:
Martinghoul:
jktecon:

I am completely impartial to someone gaining wealth through means they don't comprehend. Chances are they will get it all back into this economy within this generation or the next. This means it is most likely a win for society that a lucky capitalist amass a small fortune.

I am not, however, a fan of people passing along fables and one off successes as knowledge.

Decisions based purely on emotion and techniques of unverifiable strategies that succeeded with no mathematically conclusive evidence are nothing more than a fool's religion.

Hmm, let me try to understand this a bit better...

Do you believe that there's such a thing as empirical evidence? Or does all evidence have to come in some sort of a closed form mathematical format? If you accept that there is such a thing as empirical evidence, what are your thresholds for when observations actually become evidence?

Question I am really asking is whether you completely exclude the possibility that, among all the stories of balls and emotion, there is a small number of genuinely skillful people? If you do exclude this possibility, on what "mathematically conclusive" basis do you base such an assertion?

No of course I believe in open form solutions as well ;D.

Well empirical evidence is nice when we have to study animals and other creatures unable (maybe apathetic? depending on your philosophical bend toward animal cognition) to analyze their own actions. All of human advancement in the western ideology/tech/academic sense of the word is due to this analysis of thought.

Go down the road of history and realize what it means for human beings to strive to this end (analyzing thought). I guess maybe I'm going too deep for a wall street forum but what exactly is the point of a human being who is focused on consumption?

<>

I am under the premise that you have accomplished nothing if you haven't truly advanced knowledge. This again requires analysis into my definition of knowledge and it's this point that you focused on because I don't think we really know anything if it isn't written down formally as mathematics.

I am saying the excessively successful traders are most likely statistically to be expected. The fact that one knows a large number who are successful by one strategy or another is most likely selection bias and says nothing about the strategy.

If I am wrong to this end, then it does not change the fact that the trader stories with no conclusive mathematical formalism have not helped anyone but themselves in terms of trading knowledge. IF these trader's would have only shared their formally proven winning strategies then we could have done a lot with it. Since they choose not to share we HAVE to attribute it to luck. How lucky are they? Where did the luck stem from? How do we reproduce this luck?

Now I think you can realize where the issue is. Bondarb states that his company has been lucky for twenty years and he for 10. I can assure you that this, to the human without formal mathematics is luck, to me it is some sort of stochastic function/ dynamic stochastic model. Now he has no care for mathematics and formalism so who is to say when his luck will run out (to me when the function no longer fits the model)?

This would imply that there is literally no point to reading these stories, you may as well be reading Beowulf. And that is why I said what I said.

I notice that you have not answered my specific questions, but rather given me emotion and more "fool's religion", of a different sort to what you referred to.

So my question to you still stands. Do you have a "mathematically conclusive" method to prove that ALL traders are just "lucky"? If not and if you admit that you are willing to accept empirical evidence as proof of some sort of "skill", rather than "luck", what amount of evidence of this nature will be satisfactory to you?

Again, I stress that I have some sympathy with a view that you're attempting to express. I am a big fan of behavioral finance and I have read "Thinking Fast and Slow". But you have to realize that by making broad, unfounded claims, you're guilty of the very same sin that you're accusing the others of.

 

To the guy making the "stochastic" argument about the success of Bondarb and other macro traders who lack conclusive, formal, mathematical proofs of their strategies: you do not seem understand the relationship between mathematics and the actual world well enough to be taken seriously on a complex by most intelligent people on a topic this complex.

Ask a theoretical physicist whether its his theories or the mathematical language he expresses them in that explain particle behavior. If you think that just because something can be modeled as a stochastic process that the outcome necessarily must be due to pure randomness, you are seriously misguided. Or, for that matter, tell Bruce Kovner or George Soros that their results were due to luck rather than a qualitative understanding of macro trading when they fail to give you "proofs" of their strategies.

 
mb666:

Can you guys recommend more books, even if remotely related, in addition to the academic vs. PM discussion?

Most of the books with good anecdotal evidence and personal stories have been mentioned already. My favorites are "Alchemy of Finance", "The Market Wizards series", "More Money Than God", "Inside the House of Money", "Reminisences of a Stock Operator" and "When Genius Failed".

But if you want books on "Macroeconomics" from a theoretical/academic point of view, here is a list that you might find useful. These are books that I have read either as part of a class in school or for my own enjoyment. I've also tried to include books that even people without an economics background can understand.

General Macroeconomics (listed in ascending order of difficulty)

“Macroeconomics” by Mankiw. This book is an easy introduction for those who’ve never taken a course on Macroeconomics before. http://bcs.worthpublishers.com/mankiw7/#t_517719____

“Introducing Advanced Macroeconomics: Growth and Business Cycles” by Sorensen and Jacobsen. Great intro to more a more “mathy approach to macro”. Suitable for undergrads. http://highered.mcgraw-hill.com/sites/0077117867/information_center_vie…

“Economic Growth” by Barro and Sala-i-Martin. A very thorough introduction to standard macro growth models. The appendix has one of the finest economic treatments of continuous-time dynamic optimization. Suitable for advanced undergraduates. http://mitpress.mit.edu/books/economic-growth

“Advanced Macroeconomics” by David Romer. A classic macro-book for advanced undergrads. Is an alternative to Barro & Sala-i-Martin. If you are familiar with differential equations this book can teach you a lot about the dynamics governing the macroeconomy. http://highered.mcgraw-hill.com/sites/0073511374/information_center_vie…

“Recursive Macroeconomic Theory” by Ljungqvist and Sargent. My favorite textbook on how to analyze macroeconomic questions through recursive methods. Also contains a great introduction to Markov Chains. Suitable for 1st year grad students or very advanced undergrads. http://www.Amazon.com/Recursive-Macroeconomic-Theory-Lars-Ljungqvist/dp/0262018748/ref=pd_sim_b_5

“Recursive Methods in Economic Dynamics” by Stokey and Lucas with Prescott. A technical alternative to Ljungqvist and Sargent. It’s very thorough and not super practical, but it’s on my list as Lucas is my all time favorite economist :) http://www.Amazon.com/Recursive-Methods-Economic-Dynamics-Stokey/dp/0674750969

“Introduction to Modern Economic Growth” by Acemoglu. The “bible” of modern macro. Basically all the above collected in one volume. A must if you want to read academic macroeconomics. http://www.Amazon.com/Introduction-Modern-Economic-Growth-Acemoglu/dp/0691132925/ref=pd_sim_b_3

Time-series If you want to fully study macroeconomics you also need a good grasp of macroeconomic time-series:

“Time Series for Macroeconomics and Finance” by Cochrane. With a focus on applications within finance and macro these notes are very worthwhile read for the advanced undergraduate. And they are free! http://faculty.chicagobooth.edu/john.cochrane/research/papers/time_seri…

“Time Series Analysis” by Hamilton. The bread-and-butter of time series econometrics. This is the standard text for advanced undergrads and 1st year grads. http://www.Amazon.com/Series-Analysis-James-Douglas-Hamilton/dp/0691042896

Other stuff I’m really interested in Monetary Economics and Asset Pricing; i.e. how the Fed works in setting the interest rate and inflation and on how financial assets are priced. For this type of stuff I can recommend these:

“Monetary Policy, Inflation, and the Business Cycle” by Galí. The canonical introduction to the New Keynesian framework. http://press.princeton.edu/titles/8654.html

“Monetary Theory and Policy” by Walsh. A good overview of modern research in monetary economics, focusing on both theory and applications. https://mitpress.mit.edu/books/monetary-theory-and-policy

“Asset Pricing” by John H. Cochrane. My favorite book on asset pricing seen from an economists view. http://www.Amazon.com/Asset-Pricing-John-H-Cochrane/dp/0691121370

“Arbitrage Theory in Continuous” by Björk. This was the first book I read on the use of stochastic calculus in finance (i.e. Black-Scholes), and I really liked it. Most American programs use the Shreve books instead, but I’ve found this more intuitive. Note that this book teaches asset pricing from the (mathematical) no-arbitrage point of view. Whereas the Cochrane book takes the “Economic Theory” view and derives asset prices from consumption behavior. http://www.Amazon.com/Stochastic-Calculus-Finance-II-Continuous-Time/dp/0387401016

I hope this was helpful. But remember: You can’t learn macro trading by just reading a book! It’s like riding a bike, it’s learning by doing. And the best way to learn is to start trading early. Bondarb has written some great threads over the years on how to begin trading while you are in college or in a non-front office job. E.g.: //www.wallstreetoasis.com/forums/how-to-start-trading-compliments-of-bond…

 

Macro trading is tough to recommend books for. I think a basic (ie., undergrad intermediate/advanced level) understanding) of academic macroeconomics helps you think clearly about the relationship between fundamentals in the underlying economy. But what really matters for macro trading is the relationship between those underlying fundamentals and asset prices, and how you think about and manage risk. And I don't know of any book in particular that really addresses this at length. Some of the free research posted on Bridgewater's website can give you a handle on the kind of stuff I'm referring to though.

 
Dhanam:

I hear the term "manage risk", "run risk", etc thrown around a lot. Can someone explain this to me and how exactly it relates to a specific macro trade?

basically risk management (to me) encompasses position sizing, stop outs, add levels, managing the correlations in your book, etc...basically everything except coming up with the actual trade ideas. If you run your own business i also would add in operational risks such as margining risk, risks arising from prime brokerage relationships and stuff like that.

 

given a decent amount of intelligence and a Bloomberg terminal, do you think someone can deduce these relationships and pick up these risk mgmt skills on their own, without the benefit of observing a PM? have you seen it done, and how common/rare is it?

Bondarb:
The stuff you have to know and learn through experience mostly is what i would call "market macro"...how different markets react to one another, how different policies effect markets, etc.
Bondarb:
basically risk management (to me) encompasses position sizing, stop outs, add levels, managing the correlations in your book, etc...basically everything except coming up with the actual trade ideas. If you run your own business i also would add in operational risks such as margining risk, risks arising from prime brokerage relationships and stuff like that.
 
Martinghoul:
jktecon:
Martinghoul:
jktecon:

I notice that you have not answered my specific questions, but rather given me emotion and more "fool's religion", of a different sort to what you referred to.

So my question to you still stands. Do you have a "mathematically conclusive" method to prove that ALL traders are just "lucky"? If not and if you admit that you are willing to accept empirical evidence as proof of some sort of "skill", rather than "luck", what amount of evidence of this nature will be satisfactory to you?

Again, I stress that I have some sympathy with a view that you're attempting to express. I am a big fan of behavioral finance and I have read "Thinking Fast and Slow". But you have to realize that by making broad, unfounded claims, you're guilty of the very same sin that you're accusing the others of.

You should read more analytically. In terms of wondering whether I would accept empiricism as truth I said that I don't think an empirical study would show any trend to strategy predicting wealth (that was the statistically to be expected portion). I went on to say that only if people could rigorously show their algorithmic approach to trading a strategy could we effectively say whether or not it was a robust and effective strategy in the long run.
 
Bondarb:
Dhanam:

I hear the term "manage risk", "run risk", etc thrown around a lot. Can someone explain this to me and how exactly it relates to a specific macro trade?

basically risk management (to me) encompasses position sizing, stop outs, add levels, managing the correlations in your book, etc...basically everything except coming up with the actual trade ideas. If you run your own business i also would add in operational risks such as margining risk, risks arising from prime brokerage relationships and stuff like that.

To speak to Bondarb's point, I think (but am not positive) that Peter Thiel once had accurate macro outlook for whatever time period it was. But he didn't know how to do all the things between the underlying view and running the actual book that come under the heading of "managing risk" so he actually got crushed that year, in spite of being "right."

 
jktecon:

I went on to say that only if people could rigorously show their algorithmic approach to trading a strategy could we effectively say whether or not it was a robust and effective strategy in the long run.

Which is precisely the problem. A rigorous algorithmic approach is unlikely to work under all circumstances and will certainly lose its long-term effectiveness if others are able to adopt it.

 
SlyGuy:

To the guy making the "stochastic" argument about the success of Bondarb and other macro traders who lack conclusive, formal, mathematical proofs of their strategies: you do not seem understand the relationship between mathematics and the actual world well enough to be taken seriously on a complex by most intelligent people on a topic this complex.

Ask a theoretical physicist whether its his theories or the mathematical language he expresses them in that explain particle behavior. If you think that just because something can be modeled as a stochastic process that the outcome necessarily must be due to pure randomness, you are seriously misguided. Or, for that matter, tell Bruce Kovner or George Soros that their results were due to luck rather than a qualitative understanding of macro trading when they fail to give you "proofs" of their strategies.

I think this was a troll post but yea I think I do understand the relationships between mathematics and the actual world. Seeing as how your definition of math aptitude is completely arbitrary, I think everyone with a first grade education actually meets the basic criteria.

In regards to physics, idk why you bring this up because it's clear from your vocab that you're not a theoretical physicist. Since I was often close to theoretical physicists I don't think I'm misguided to say that a physicist would state that many people have probably had good ideas on the mechanics of the universe, yet only the ones able to express themselves with rigor (aka math) are respected and able to push the subject forward.

People have this odd concept of math being numbers and weird concepts that don't apply to the real world. It's nothing more than a rigorous language so that there is no confusion in colloquialisms and it helps to find logical implications and verify faster the logic rings that a human being is trapped in.

Do you realize how difficult it is for you to truly comprehend Shakespeare? The phrases, the definitions of words, the culture everything is different and oral language is not suited to stay true.

Leibniz's Calculus remains.

Bondarb is a better human being for not insulting me in his follow up, regards. You have to realize, however, that all you need to accept after you've accepted that point is that if there were an unlimited (really just a huge)amount of computing power and if people continued to track reactions to important human events then everyone would be able to realize when their model for individual assets was better than the old model of that asset.

I am saying it is wiser to share your ideas of the macro economy. Why? Because you have absolutely no idea what this probability density/stochastic function looks like. What really makes you think you aren't Lehman Brothers, Bear Stearns, Bank of America, Knight Capital, LTCM or one of the countless other firms with numerous geniuses under hire that failed miserably. Some people manage to fail even with insider information.

I think human beings are predictable in larger groups. The larger the group, the better the prediction. The law of large numbers with human adjustment.

 
jktecon:
I am saying it is wiser to share your ideas of the macro economy. Why? Because you have absolutely no idea what this probability density/stochastic function looks like. What really makes you think you aren't Lehman Brothers, Bear Stearns, Bank of America, Knight Capital, LTCM or one of the countless other firms with numerous geniuses under hire that failed miserably. Some people manage to fail even with insider information.
For one, I kind of doubt Bondarb's firm is consistently short vol.
 

Of course one can never know for certain whether they will in the future make drastic mistakes, but I think the way to avoid being the next financial disaster is to study the previous ones and learn from them....I dont really see why this requires an advanced degree or higher order math skill. Most of the above cases (all except knight capital i believe) involved common denominators such as excessive leverage, illiquidity of positions, and blind trust in historical data....no I cant prove that I am not the next LTCM, but I can discuss the reasons why LTCM blew up and the reasons why my trading style is unlikely to produce similar results and I can also show you a fairly lengthy track record that looks much different from theirs both in terms of actual returns and in terms of markers that tend to predict such blow-ups as described above.

By the way even with some serious higher order math and impeccable back-testing you cant prove with any certainty that ANY strategy will perform in the future...all you can say is that it would have performed well in the past and that you have an unprovable hope that the future will look like the past. I dont think anyone who isnt very stupid or trying to sell you something would say that they have "proven" that a trading method will make money going forward.

 
jktecon:
SlyGuy:

To the guy making the "stochastic" argument about the success of Bondarb and other macro traders who lack conclusive, formal, mathematical proofs of their strategies: you do not seem understand the relationship between mathematics and the actual world well enough to be taken seriously on a complex by most intelligent people on a topic this complex.

Ask a theoretical physicist whether its his theories or the mathematical language he expresses them in that explain particle behavior. If you think that just because something can be modeled as a stochastic process that the outcome necessarily must be due to pure randomness, you are seriously misguided. Or, for that matter, tell Bruce Kovner or George Soros that their results were due to luck rather than a qualitative understanding of macro trading when they fail to give you "proofs" of their strategies.

I think this was a troll post but yea I think I do understand the relationships between mathematics and the actual world. Seeing as how your definition of math aptitude is completely arbitrary, I think everyone with a first grade education actually meets the basic criteria.

In regards to physics, idk why you bring this up because it's clear from your vocab that you're not a theoretical physicist. Since I was often close to theoretical physicists I don't think I'm misguided to say that a physicist would state that many people have probably had good ideas on the mechanics of the universe, yet only the ones able to express themselves with rigor (aka math) are respected and able to push the subject forward.

People have this odd concept of math being numbers and weird concepts that don't apply to the real world. It's nothing more than a rigorous language so that there is no confusion in colloquialisms and it helps to find logical implications and verify faster the logic rings that a human being is trapped in.

Do you realize how difficult it is for you to truly comprehend Shakespeare? The phrases, the definitions of words, the culture everything is different and oral language is not suited to stay true.

Leibniz's Calculus remains.

Bondarb is a better human being for not insulting me in his follow up, regards. You have to realize, however, that all you need to accept after you've accepted that point is that if there were an unlimited (really just a huge)amount of computing power and if people continued to track reactions to important human events then everyone would be able to realize when their model for individual assets was better than the old model of that asset.

I am saying it is wiser to share your ideas of the macro economy. Why? Because you have absolutely no idea what this probability density/stochastic function looks like. What really makes you think you aren't Lehman Brothers, Bear Stearns, Bank of America, Knight Capital, LTCM or one of the countless other firms with numerous geniuses under hire that failed miserably. Some people manage to fail even with insider information.

I think human beings are predictable in larger groups. The larger the group, the better the prediction. The law of large numbers with human adjustment.

Perhaps you are close to theoretical physicists. But I know at least one very well-known macro PM with a vast track record who thinks quant-based models with fancy math made under the (implicit) assumption that the same, finite, defined series of inputs will inevitably lead to the same set of outputs in the future is one of the most common errors in the financial industry. Reliance on quant models without rigorously and repeatedly scrutinizing their relationship to fundamentals is why Knight Capital and LTCM blew up. I'm not saying great macro PM's don't use technicals and math at all, but that they regard math as merely a means of describing an aspect of the world they care about, albeit imperfectly.

 
Bondarb:
Dhanam:

I hear the term "manage risk", "run risk", etc thrown around a lot. Can someone explain this to me and how exactly it relates to a specific macro trade?

basically risk management (to me) encompasses position sizing, stop outs, add levels, managing the correlations in your book, etc...basically everything except coming up with the actual trade ideas. If you run your own business i also would add in operational risks such as margining risk, risks arising from prime brokerage relationships and stuff like that.

this is more of a thought experiment, not questioning your ability/value as a macro PM: if rigorous risk management is the centerpiece of being a macro PM, do you think you would be able to program a computer to do most of what you do?

i imagine you have some form of formulaic decision rules for sizing positions, setting stops/take profits, etc. (sure you might vary them slightly depending on the particular situation). whereas the idea generation part sounds like it would require a greater amount of human creativity i.e. not automatable.

what do you think?

 

Didn't a lot of the macro greats recently blame the central banks for distorting the historical tendencies and manipulating asset prices?

I know that in books you hear that the traders in the free markets are more powerful than central banks but that may pertain more so to banks of smaller countries, England being an exception. But when you have the FED and ECB increasing the money supply, dictating what banks do with their balance sheets (prospects of regulation), while unprecedently purchasing assets (securitized debt) then the traders may not have enough ammo to overpower the central bankers. It is one thing to attack a weak currency that is pegged to the dollar, even Sterling/Mark, but it is a different animal to bring down the Euro or USD.

 

Off topic, but how do macroeconomists price currency valuations? I understand the factors that can make a currency stronger relatively against another, but is there a specific formula/theory that states why 1 euro buys 1.28 USDs?

Also, it is confusing because it is relative. Let's say that two central banks, Canada & Brazil, simultaneously raise the discount rate 50 basis points. Assuming all other factors will remain unchanged, including future expectations, and assuming that the current base rate is 1% in Canada and 8% in Brazil, which currency will theoretically strengthen against the other?

I find macro way more intellectually stimulating than buying small caps or seeding "dream" business model companies. Thanks for the Drobny book, reading it now. Well written work.

Also, should I invest the time to studying Keyne's "The General Theory of...."? I already own the book and tried skimming it but it is too tedious. Will it help for macro?

 
mb666:

Didn't a lot of the macro greats recently blame the central banks for distorting the historical tendencies and manipulating asset prices?

I know that in books you hear that the traders in the free markets are more powerful than central banks but that may pertain more so to banks of smaller countries, England being an exception. But when you have the FED and ECB increasing the money supply, dictating what banks do with their balance sheets (prospects of regulation), while unprecedently purchasing assets (securitized debt) then the traders may not have enough ammo to overpower the central bankers. It is one thing to attack a weak currency that is pegged to the dollar, even Sterling/Mark, but it is a different animal to bring down the Euro or USD.

I won't waste time saying where I lean on this because I am just as unaware in my predictions as the better models. I will say that there is no question that Central Banks are pushing their beliefs of economics onto everyone in society and very few are aware of the size of the power shift that's taking place (from wall street banking to Fed Banking). I'm not going to push my views but I would say that one should at least look at what has occurred to the money supply and how new regulations in combination with this may help accomplish the goals central banks have put in place. If this power shift is real, I don't see how people can still throw out the idea of studying the subject, it's clearly more and more relevant every day (regardless of it's current predictive ability).

I think the Romer presentation of the Solow model is really quite nice for a just fine introduction to growth econ. I am not a general fan of a lot of advancements in econ, I believe computational macroeconomics will come up with accurate predictions of economic growth and effective policy. The Solow model in Romer, however, gives you a good grasp of just how the mathematics comes into play in the world of dynamic adjustment. Comprehend what you read in that chapter and attempt to work out in your mind the things Robert Solow left out and you most likely will touch on things that came up later in macro theory.

Not sure if i can sell math on here but it is definitely a guide line rather than the boundary that somehow people have made it out to be. I think that Solow model can really open your eyes to that if you know differential equations. I used to write my thoughts down in English all the time and forget what exactly I was trying to say or what my thought process was. Those problems don't occur when I write my thoughts down mathematically and that is its strength. Do yourself a favor and attempt to read only the first chapter of Romer. I won't say that you will immediately understand anything about economics better but I will say that you will most likely analyze questions that concern macro events more deeply. And if I'm not mistaken that is a central goal of a trader.

I truly feel this is time better spent than reading about how Jesse Livermore made money back in the 20's. I think I'm actually more in line with the Jesse Livermore style of investing by suggesting not to read old biographies and descriptive stories.

 
jktecon:
mb666:

Didn't a lot of the macro greats recently blame the central banks for distorting the historical tendencies and manipulating asset prices?

I know that in books you hear that the traders in the free markets are more powerful than central banks but that may pertain more so to banks of smaller countries, England being an exception. But when you have the FED and ECB increasing the money supply, dictating what banks do with their balance sheets (prospects of regulation), while unprecedently purchasing assets (securitized debt) then the traders may not have enough ammo to overpower the central bankers. It is one thing to attack a weak currency that is pegged to the dollar, even Sterling/Mark, but it is a different animal to bring down the Euro or USD.

I won't waste time saying where I lean on this because I am just as unaware in my predictions as the better models. I will say that there is no question that Central Banks are pushing their beliefs of economics onto everyone in society and very few are aware of the size of the power shift that's taking place (from wall street banking to Fed Banking). I'm not going to push my views but I would say that one should at least look at what has occurred to the money supply and how new regulations in combination with this may help accomplish the goals central banks have put in place. If this power shift is real, I don't see how people can still throw out the idea of studying the subject, it's clearly more and more relevant every day (regardless of it's current predictive ability).

I think the Romer presentation of the Solow model is really quite nice for a just fine introduction to growth econ. I am not a general fan of a lot of advancements in econ, I believe computational macroeconomics will come up with accurate predictions of economic growth and effective policy. The Solow model in Romer, however, gives you a good grasp of just how the mathematics comes into play in the world of dynamic adjustment. Comprehend what you read in that chapter and attempt to work out in your mind the things Robert Solow left out and you most likely will touch on things that came up later in macro theory.

Not sure if i can sell math on here but it is definitely a guide line rather than the boundary that somehow people have made it out to be. I think that Solow model can really open your eyes to that if you know differential equations. I used to write my thoughts down in English all the time and forget what exactly I was trying to say or what my thought process was. Those problems don't occur when I write my thoughts down mathematically and that is its strength. Do yourself a favor and attempt to read only the first chapter of Romer. I won't say that you will immediately understand anything about economics better but I will say that you will most likely analyze questions that concern macro events more deeply. And if I'm not mistaken that is a central goal of a trader.

I truly feel this is time better spent than reading about how Jesse Livermore made money back in the 20's. I think I'm actually more in line with the Jesse Livermore style of investing by suggesting not to read old biographies and descriptive stories.

Thanks great info!!

Regarding the Solow model, is it usually covered in Romer's textbooks?

Haven't studied differential equations in years but I actually ordered Recursive Macroeconomic Theory yesterday (was it you that recommended the book??) so I will soon see how knowledgeable I am on the math side.

Reminiscences is one of my favorite books. I've actually made my gf read that book as it is the best book on trading imo.

Also, I majored in econ as an undergrad and took a grad level econometrics as a hobby but it was a waste of time... all stats and no econ theory involved. I need a well balanced qualitative/quant macro econ textbook. Being a conservative I cringe at reading Blinder or Krugman. I try to read the free material on Mises' site but that is also biased (and outdated). I will try Mankiw or Romer next.

 
primus:
mb666:

Can you guys recommend more books, even if remotely related, in addition to the academic vs. PM discussion?

Most of the books with good anecdotal evidence and personal stories have been mentioned already. My favorites are "Alchemy of Finance", "The Market Wizards series", "More Money Than God", "Inside the House of Money", "Reminisences of a Stock Operator" and "When Genius Failed".

But if you want books on "Macroeconomics" from a theoretical/academic point of view, here is a list that you might find useful. These are books that I have read either as part of a class in school or for my own enjoyment. Disclaimer: I have a PhD in Economics, but I've tried to include books that even people without an economics background can understand.

I appreciate the list!!

I have read all of the popular books (I had a stint as a trading assistant) and will review the Recursive Macroeconomic Theory textbook as soon as I receive it. I put many other titles on my wishlist.. may order the time series book although I am somewhat rusty on the quant side nowadays.

Just curious what career you're pursuing with an economics PhD? Do you think Dalio's short write-ups as being too simplistic?

I'm also very interested in monetary policy. I've been using St. Louis FRED tool to study relationships between monetary policy and the impact on asset prices. I recently read "The Liquidity Theory of Asset Prices" but was pretty disappointed. Last year I read "Tail Risk Killers" and found it fascinating albeit it sounds partly like a conspiracy book. But yea, central banks have more power these days considering they are introducing unprecedented policy tools (buying long-term debt, securitized loans, regulation oversight especially at the Bank of England, etc.). On the St. Louis Fed site they have a few money supply charts and some are insane... no idea what long term consequences will be... the world is battling deflation vs. inflation. Also, what's the deal with stopping to publish M3 #s?

 
jktecon:

I think the Romer presentation of the Solow model is really quite nice for a just fine introduction to growth econ. I am not a general fan of a lot of advancements in econ, I believe computational macroeconomics will come up with accurate predictions of economic growth and effective policy.

Surely someone as infatuated with academic/ivory tower economics as you are would remember the Lucas Critique. That rational expectations and adjustments by the rational actors in the markets essentially render much of economic policy useless?
Too late for second-guessing Too late to go back to sleep.
 

M3 money supply figures were canned because the Fed had less and less control over that variable thanks to advances in securitizations, shadow banking... and they decided it had become irrelevant from a policy-making perspective (http://www.federalreserve.gov/Releases/h6/discm3.htm.

There is no real formula to assess the value of a currency, it's all relative even if some people might attempt to find a theoretical price target compared to peers. All other things being equal in your example, the Real would appreciated more because of the interest rate differential (carry trade) but of course in real life there are a lot of other factors at play including expectations of real rates.

Chapter 12 of Keynes' General Theory is likely to be the most relevant to your interests.

 
whalesquid123:
Bondarb:
Dhanam:

I hear the term "manage risk", "run risk", etc thrown around a lot. Can someone explain this to me and how exactly it relates to a specific macro trade?

basically risk management (to me) encompasses position sizing, stop outs, add levels, managing the correlations in your book, etc...basically everything except coming up with the actual trade ideas. If you run your own business i also would add in operational risks such as margining risk, risks arising from prime brokerage relationships and stuff like that.

this is more of a thought experiment, not questioning your ability/value as a macro PM: if rigorous risk management is the centerpiece of being a macro PM, do you think you would be able to program a computer to do most of what you do?

i imagine you have some form of formulaic decision rules for sizing positions, setting stops/take profits, etc. (sure you might vary them slightly depending on the particular situation). whereas the idea generation part sounds like it would require a greater amount of human creativity i.e. not automatable.

what do you think?

indeed my risk management process is in part formulaic so I definitely think there is value in creating a model to help you at least have a starting point. I have a couple of different forulas that create position sizes and stops based on historical data and then i will tweak that based on what i think about the present environment relative to the data. I also constantly track my results to see if I have been trading too big or too small given my tolerence for risk of ruin. I dont want to come off as anti-computer...im not at all...I use alot of quantitative tools and most of them are to manage risk.

 
jktecon:
mb666:

Didn't a lot of the macro greats recently blame the central banks for distorting the historical tendencies and manipulating asset prices?

I know that in books you hear that the traders in the free markets are more powerful than central banks but that may pertain more so to banks of smaller countries, England being an exception. But when you have the FED and ECB increasing the money supply, dictating what banks do with their balance sheets (prospects of regulation), while unprecedently purchasing assets (securitized debt) then the traders may not have enough ammo to overpower the central bankers. It is one thing to attack a weak currency that is pegged to the dollar, even Sterling/Mark, but it is a different animal to bring down the Euro or USD.

I won't waste time saying where I lean on this because I am just as unaware in my predictions as the better models. I will say that there is no question that Central Banks are pushing their beliefs of economics onto everyone in society and very few are aware of the size of the power shift that's taking place (from wall street banking to Fed Banking). I'm not going to push my views but I would say that one should at least look at what has occurred to the money supply and how new regulations in combination with this may help accomplish the goals central banks have put in place. If this power shift is real, I don't see how people can still throw out the idea of studying the subject, it's clearly more and more relevant every day (regardless of it's current predictive ability).

I think the Romer presentation of the Solow model is really quite nice for a just fine introduction to growth econ. I am not a general fan of a lot of advancements in econ, I believe computational macroeconomics will come up with accurate predictions of economic growth and effective policy. The Solow model in Romer, however, gives you a good grasp of just how the mathematics comes into play in the world of dynamic adjustment. Comprehend what you read in that chapter and attempt to work out in your mind the things Robert Solow left out and you most likely will touch on things that came up later in macro theory.

Not sure if i can sell math on here but it is definitely a guide line rather than the boundary that somehow people have made it out to be. I think that Solow model can really open your eyes to that if you know differential equations. I used to write my thoughts down in English all the time and forget what exactly I was trying to say or what my thought process was. Those problems don't occur when I write my thoughts down mathematically and that is its strength. Do yourself a favor and attempt to read only the first chapter of Romer. I won't say that you will immediately understand anything about economics better but I will say that you will most likely analyze questions that concern macro events more deeply. And if I'm not mistaken that is a central goal of a trader.

I truly feel this is time better spent than reading about how Jesse Livermore made money back in the 20's. I think I'm actually more in line with the Jesse Livermore style of investing by suggesting not to read old biographies and descriptive stories.

Livermore went broke and blew his brains out at the Sherry Netherland Hotel on 5th Avenue...so its not really a success story (just an aside i wanted to point out). I think learning the theory is good, and I spend alot of time focused on just about every central bank and their actions, but I do think that if one wants to be a PM at a macro fund (if that is what the OP meant by "macro") then you are going to need alot more depth on the market side then the theory side. This is really only acquired through trading or sitting near traders, but the closest approximation one can get in college is reading about traders. I can tell you with certainty that if you spend many years getting a PhD in economics you are going to have to spend another big slug of time learning about markets, and those opportunities usually arent there for people in their early 30s...there is an opportunity cost to becoming an academic. I can give many examples of people who I like and who often are older and smarter then me, but have no chance of ever managing money because they just cannot hang when it comes to talking about trading and how to implement and manage their ideas...they end up being career economists who explain their ideas for me, I implement some of them, and if they are right i get paid the bulk of it. They can still make a very good living, but its not what I think most on this forum are looking for. So choose which path you want, but be realistic about the idea that you are going to have PhD-level econ chops but also know how to trade in a really professional way...life is usually too short for that and I havent really seen it too often in practice. This is no commentary on whether this is good for society, or "right"...it just is.

Also, let's remember from the begining that i didnt knock your ideas, you called my exchange with another poster stupid and said I was an basically an irresponsible idiot because I read more about the practice of trading rather then the theory of macroeconomics.

 
brandon st randy:
jktecon:

I think the Romer presentation of the Solow model is really quite nice for a just fine introduction to growth econ. I am not a general fan of a lot of advancements in econ, I believe computational macroeconomics will come up with accurate predictions of economic growth and effective policy.

Surely someone as infatuated with academic/ivory tower economics as you are would remember the Lucas Critique. That rational expectations and adjustments by the rational actors in the markets essentially render much of economic policy useless?

Well yes the Lucas critique does tear down the solow model to Economics theorists. Romer builds up the Ramsey Kass coopman's model next I think to help to this end and you can see how ridiculous it is to attempt to model an economy from a micro level. I hate microeconomics theorists to be honest. I personally don't understand walrasian auctions and I don't understand how arbitrarily modelling a consumption function is getting you closer to reality. Waste of time to me.

I am hoping that a person who actually cares about real world economics will analyze what is missing from the Solow model and attempt to model the world as they see it.

Primus just gave you a very hardcore list of macro books including the Ljingqvist Sargent. Acemoglu is probably the most academic macro book and it may make it hard to come back to reality from there. I like Recursive macro because so many of the questions are relevant and will hit really close to home.

You're right Bondarb I definitely made the more rude comments. I truly in my heart believe, however, that every human being with sound mind can have a PhD level understanding of macroeconomics. Students at MIT study Romer in Junior year of the economics sequence I think. In the year 2013 I think it's time that people really attempt to push their knowledge level to new heights. If we all simply limit ourselves to understanding one small niche in this current reality our world will become a more corrupted one.

You may think I am an economics phd at this point. I will give you this much info about my background because I'm just not an economics PhD. I realized that the more I read the more people begin to call me a genius. It's this reason why I believe that outside of the Ramanujan (gods visiting you in dreams and handing you math equations) personalities out there that genii is really a nonexistent human construction. Everyone is a genius who is either willing or unwilling to accept their capabilities.

 
jktecon:
I truly in my heart believe, however, that every human being with sound mind can have a PhD level understanding of macroeconomics. Students at MIT study Romer in Junior year of the economics sequence I think. In the year 2013 I think it's time that people really attempt to push their knowledge level to new heights. If we all simply limit ourselves to understanding one small niche in this current reality our world will become a more corrupted one.

What's your definition of a sound mind? I doubt more than 5% of the world's population could grasp PhD macro on an 'intuitive' level, let alone be able to follow and reproduce the math behind it. Juniors at MIT aren't remotely representative of the average individual, that they used advanced macro books has very little implications for most people with "sound minds" unless you're restricting that to at most 1% of the population.

I'm sorry if I've been harsh with some of my comments but you've been quite aggressive with your viewpoints. While you seem to have an excellent grasp of academic macroeconomics, you also strike me as being somewhat out-of-touch with markets and what knowledge is actually useful in the pragmatic sense.

 

This thread seems to be a . I'm not sure it OP means Global Macro or Macroeconomics. I assume he means Global Macro. If you want both read anything by Soros. If you want that plus something more trading focused read "Dark Genius of Wall Street: The Misunderstood Life of Jay Gould."

 
primus:

“Monetary Policy, Inflation, and the Business Cycle” by Galí. The canonical introduction to the New Keynesian framework.

Don't read New K. anything. It's garbage. Read Post-Keynesian economics.
 
GoodBread:
I've taken reasonably advanced macro classes (not PhD but in a master's program that is a major feeder for top US PhD programs) and none of that stuff would make a huge difference. It may help me have a better grasp on what the Fed or ECB is likelier to do but that's about it. And a year at the Fed's money market desk or in a major European corp. treasury would have given me that understanding tenfold.

If you plan on being remembered after your death, power to you. Just remember that unless your name was Keynes or Friedman, you would have failed at that this past century.

^Needs to learn the economics of uncertainty. Only the heterodox schools properly emphasis this.

 
GoodBread:
jktecon:

No of course I believe in open form solutions as well ;D.

Well empirical evidence is nice when we have to study animals and other creatures unable (maybe apathetic? depending on your philosophical bend toward animal cognition) to analyze their own actions. All of human advancement in the western ideology/tech/academic sense of the word is due to this analysis of thought.

Go down the road of history and realize what it means for human beings to strive to this end (analyzing thought). I guess maybe I'm going too deep for a wall street forum but what exactly is the point of a human being who is focused on consumption?

<>

I am under the premise that you have accomplished nothing if you haven't truly advanced knowledge. This again requires analysis into my definition of knowledge and it's this point that you focused on because I don't think we really know anything if it isn't written down formally as mathematics.

I am saying the excessively successful traders are most likely statistically to be expected. The fact that one knows a large number who are successful by one strategy or another is most likely selection bias and says nothing about the strategy.

If I am wrong to this end, then it does not change the fact that the trader stories with no conclusive mathematical formalism have not helped anyone but themselves in terms of knowledge. IF these trader's would have only shared their formally proven winning strategies then we could have done a lot with it. Since they choose not to share we HAVE to attribute it to luck. How lucky are they? Where did the luck stem from? How do we reproduce this luck?

Now I think you can realize where the issue is. Bondarb states that his company has been lucky for twenty years and he for 10. I can assure you that this, to the human without formal mathematics is luck, to me it is some sort of stochastic function/ dynamic stochastic model. Now he has no care for mathematics and formalism so who is to say when his luck will run out (to me when the function no longer fits the model)?

This would imply that there is literally no point to reading these stories, you may as well be reading Beowulf. And that is why I said what I said.

So Ghandi, Jesus, Hitler, Napoleon, the Founding Fathers... achieved nothing because they didn't have analytical proofs for what they said or did? If you're actually serious about being an economist, how could it possibly be that you haven't noticed that any model you build analytically relies on assumptions and that these necessarily fail to grasp the complexity of real life which will eventually blow a whole into your model?

You seem to have zero understanding of probability or what happens when a so-called "proven strategy" is put out in the open. The reason some people consistently make money is because of market inefficiencies. If a strategy is said to be "proven," the rest of the market will adopt it, thereby closing up that inefficiency, at least for a time.

As far as certain funds being lucky, take a good luck at Soros or even better Jim Simons and tell me they're doing nothing more that riding some stochastic function in the right direction.

You clearly aren't willing to acknowledge the existence of risk management which is precisely what makes a different endeavor from flipping a coin.

To be honest, if you're an econ PhD candidate or econ professor, I'm appalled at your lack of intellectual curiosity.

It doesn't matter whether the theory is true or false as long as it leads to a desirable outcome. In other words it is better to be right for the wrong reasons than it is to be wrong for the right reasons. It's about letting go of one's intellectual pride and adopting a results based emphasis.

 

If you want to understand the "theory theory" of academic macro, just read Keynes's original General Theory and one the many books mentioned that have come after it. Modern macroeconomic debates center largely around debates inspired by Keynes's 1936 book and I think it's useful to have read it, if you want to really get to the bottom of what academic macro debates are about.

 
SlyGuy:

If you want to understand the "theory theory" of academic macro, just read Keynes's original General Theory and one the many books mentioned that have come after it. Modern macroeconomic debates center largely around debates inspired by Keynes's 1936 book and I think it's useful to have read it, if you want to really get to the bottom of what academic macro debates are about.

Keynes is good & Minsky is at least 10 times better.

 
Bondarb:

Also I do agree with jktecon in one way: one should not assume a trader is any good without seeing him demonstrate aptitude (or what he calls "advanced knowledge")...even where i work where it is very hard to get hired most new PMs do not make it. However, having done this for awhile i can see with my eyes within a couple of weeks whether somebody has a good chance or whether its a disaster...but the tests have nothing to do with their economic pedigree, its how they think and talk about risk, how they trade, how they run their business, and their general mentality towards the market. This is all going to be way to qualitative for jtkecon, but i stand by it as an actual practicioner in the field as opposed to a student.

Bondarb, I would be very interested in hearing any anecdotes/examples/stores you have about the specific characteristics of PMs that were successful and those that got blown out.

 
Bateman Begins:
SlyGuy:

If you want to understand the "theory theory" of academic macro, just read Keynes's original General Theory and one the many books mentioned that have come after it. Modern macroeconomic debates center largely around debates inspired by Keynes's 1936 book and I think it's useful to have read it, if you want to really get to the bottom of what academic macro debates are about.

Keynes is good & Minsky is at least 10 times better.

For fucks sake...

 
Bateman Begins:
SlyGuy:

If you want to understand the "theory theory" of academic macro, just read Keynes's original General Theory and one the many books mentioned that have come after it. Modern macroeconomic debates center largely around debates inspired by Keynes's 1936 book and I think it's useful to have read it, if you want to really get to the bottom of what academic macro debates are about.

Keynes is good & Minsky is at least 10 times better.

second minksy - he's da shiet

@JKTecon -- you seem a bit snobby

 
Macro <span class=keyword_link><a href=/resources/skills/trading-investing/arbitrage target=_blank>Arbitrage</a></span>:
Bateman Begins:
SlyGuy:

If you want to understand the "theory theory" of academic macro, just read Keynes's original General Theory and one the many books mentioned that have come after it. Modern macroeconomic debates center largely around debates inspired by Keynes's 1936 book and I think it's useful to have read it, if you want to really get to the bottom of what academic macro debates are about.

Keynes is good & Minsky is at least 10 times better.

For fucks sake...

What?

 
jktecon:
Martinghoul:
jktecon:
Martinghoul:
jktecon:

I notice that you have not answered my specific questions, but rather given me emotion and more "fool's religion", of a different sort to what you referred to.

So my question to you still stands. Do you have a "mathematically conclusive" method to prove that ALL traders are just "lucky"? If not and if you admit that you are willing to accept empirical evidence as proof of some sort of "skill", rather than "luck", what amount of evidence of this nature will be satisfactory to you?

Again, I stress that I have some sympathy with a view that you're attempting to express. I am a big fan of behavioral finance and I have read "Thinking Fast and Slow". But you have to realize that by making broad, unfounded claims, you're guilty of the very same sin that you're accusing the others of.

You should read more analytically. In terms of wondering whether I would accept empiricism as truth I said that I don't think an empirical study would show any trend to strategy predicting wealth (that was the statistically to be expected portion).

I went on to say that only if people could rigorously show their algorithmic approach to trading a strategy could we effectively say whether or not it was a robust and effective strategy in the long run.

You're sorely mistaken...

In terms of your first point, I guess we would have to define what an "empirical study" is, precisely. Moreover, why do you think that an empirical study wouldn't show some evidence of skill? There are a LOT of empirical studies out there that should, at the very least, present strong evidence of "persistent trading ability".

Conversely, the other point you make doesn't really help. There is also a LOT of pretty rigorous literature out there on algorithmic or quasi-algorithmic strategies. Unfortunately, the success (however it is defined) of a given strategy in the "rigorous" academic setting commonly provides no insight whatsoever into the likelihood of it succeeding in the real market.

 
Martinghoul:

Personally, I confess an intense dislike for IToM. There are things in it that I find deeply objectionable. From an interview w/John Porter, the Barclays treasurer who doesn't mark his positions to mkt (why on earth is he in a book about global macro hedge funds?); to a chapter on Andres Drobny who has never run an ounce of risk in his life; to tales of big balls, which send completely the wrong message.

As to the people in the book:
- Christian Siva-Jothy closed his fund due to poor performance (I hear he is planning a comeback though)
- John Porter gone from Barclays during the LIBOR purge
- Peter Thiel's fund lost 90% of its assets through 2008-10 period; not sure if it's still around
- Dwight Anderson's Ospraie closed its flagship fund in 2008 (came back with new funds in 2009, though)
- Rob Standing and David Gorton's London Diversified lost 90% between early 2008 and late 2009; I think they're still around, but not sure what shape

I liked Siva-Jothy's portion. Sure, he had some rough times in the crisis, but over the long-term, he's demonstrated quite a successful track record. Maybe that has ended, but you can probably point to some mistake by a lot of Macro guys.

I have ITOM, but prefer the Market Wizards books better (Kovner is the real deal).

 

A bit late to the party but would add that the reason "market macro" might differ so much from "macro theory" is that the bulk of macro theory taught in school is based on economic models that do not accurately reflect the reality of the global economic system. Stuff like the "money multiplier" really being an ex-post facto identity since banks do not and cannot lend reserves is just one example. The general lack of focus on the role of private bank lending to the money supply / economy is another.

I think some of the best macro traders out there have their own framework for understanding the global economic machine. It's their ability to combine that analytical and conceptual framework with a disciplined risk management system that makes them the best.

Great thread...co-sign on the first Market Wizards and Reminiscences of a Stock Operator as the two best books to read for anyone interested in macro trading.

 

Some books on "market macro" that were recently released or are coming out soon:

-Rational Macro by John Butters -The Dao of Capital by Mark Spitznagel (not macro per se) -Global Macro Trading: Profiting in a New World Economy by Greg Gliner

Also found this on Amazon (the price!!!) -Global Macro: Theory and Practice by Andrew Rozanov

Do you have some feedback on this list?

I am curious to read the book by Greg Gliner as he’s a macro PM at AQR

 

Hi, you can try out some chapters of Lipsey's Positive Economics, particularly, the monetary policy sections for a quick recap. For more detailed account, try Mankiw's Macroeconomics.

For applied macro, you may wish to read Frederic S. Mishkin's 'Economics of money & banking'.

 

Thanks for posting this question; I'm looking for more info on this topic too.

The IMF has in depth macro reporting at the world and regional levels. Specifically, they publish a World Economic Outlook and various Regional Economic Reports. Just google "IMF Publications" and on their page you'll be able to see those and others under their 'Essential Reading' heading.

 

As I always do when this come up, if you haven't already, get a twitter account and start following the decent bloggers/big picture guys (Like Ritholtz, etc) and build a large 'network' of sources from which to get stories. Honestly, I find most of my interesting stories and reads off of twitter. Obviously you have to be somewhat selective and understand that there is a ton of random crap out there, especially certain sources which have egregiously bold headlines to get views... those are pretty easy to pick out after awhile.

Another thing I would recommend, is that once you find a couple of your 'go to' sources that you think do a good job go find the opposite. Find sources that will make you question your position, Zero hedge is very good for this, and force you to continuously refine your thinking on a given position. Especially in the macro pictures, looking at everything from multiple sides is a must.

 
 

The most recent article in that collection is 2012 it says. Anything that is recent and updated daily or weekly or even monthly that I can just track to keep informed on international macro/country ETF investing opportunities?

 

I would caution you against reading articles in the WSJ or similar publications and trying to glean investment opportunities based on them. Economists generally always make for poor traders. Commodity online, CXO advisory, financial sense and a few others are interesting. Though I generally just dive into university crop reports and conduct my own due diligence when it comes to commodities.

 

The best Macroeconomics text I ever read might have been the first one I ever read: Macroeconomics, by Paul Samuelson. You may have heard of him.

It was originally written back in the 1940s I think, been updated a few times since then. I don't know what version they are on now but the version I had was extraordinarily well-written, and I referred to it all the time over the years. It's back in a box somewhere back home. I should dig it out.

- If you think hiring a professional is expensive, wait until you've hired an amateur
 

If you're looking for intro-level, Stock & Watson's "Introduction to Econometrics" If you're looking for something introductory but graduate-level, then Hayashi's "Econometrics"

Currently: future neurologist, current psychotherapist Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)
 
hnic:

I'll also recommend "Mostly Harmless Econometrics" It helps you see the big picture when it comes to Econometrics

I can second that, although I do recommend that you learn some of the basics from a textbook before tackling it, as the explanations seem to be shorter and assume you at least know what a standard regression or instrumental variable is.
Currently: future neurologist, current psychotherapist Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)
 

Mankiw is very good. How in depth do you want to get? Just the basics of micro/macro? Do you want to learn basic economic mathematics, game theory, industrial economics, public policy, etc? For the basics, a Mankiw textbook should be fine. If you want more in depth, I'd recommend looking at a few college courses that look interesting and seeing what the syllabus consists of. I'd stay away from classic economic texts, because they tend to be dense, academic pieces that have very limited take-away for the effort you'll spend plowing through them.

 

Mankiw's macro book seems to have the greatest market penetration in major universities around the world. Personally I prefer the text from Abel, Bernanke and King, but both are very good.

Nicholson for Micro.

 

yeah but I'd like to be prepared so I can get my gpa up to get into Ross... will do though, I'll pick up some of the books available from this site right when I get some $$$$$$ (never lol)

If your dreams don't scare you, then they are not big enough. "There are two types of people in this world: People who say they pee in the shower, and dirty fucking liars."-Louis C.K.
 

You want to prepare for your econ classes? The point of your classes is that you learn the material in them so you'll be fine without any preparation. You did well in your principles of econ classes so all I'd recommend is that you make sure your calculus and statistics skills are fresh. If you can do math and you understand basic economics you won't really run into an undergrad econ class that is all that difficult. Don't waste your time learning what you'll get in the classroom. Like derivstrading said, network, learn about the career you want to enter, and look for good work experience this summer.

 

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I win here, I win there...
 

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I win here, I win there...
 

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Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

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From 10 rejections to 1 dream investment banking internship

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