Stop reading the news thoughtlessly and develop a macro framework.

When I joined the industry, fresh analysts like myself would flit through the morning newspaper like a drowning man who clutches one spar after another for support. Our attempts to stay abreast were as haphazard as that man's attempts to stay afloat. On page 1, we would read an article concerning Greece's tussle with Germany but forget it by the time we reached page 8.

It took me some time (two years) to develop a coherent macro framework on which every news article now fits to compound my existing knowledge. It took me an immense amount of conscious effort (reading) to become familiar with historical context of individual economies but the rewards have been so fruitful that I would encourage every young analyst/associate (or potential analyst/associate) to do the same. This is because unless you know the historical context, the time you spend reading news/raw information will be much less productive and when the need for that information arises, you will most likely find your memory wanting.

A very useful way to start is by examining global balance of payments. The beauty of analysing balance of payments is that the world is a closed system so actions in one part of the world (for instance QE in the US) will necessarily create an equal and opposite impact on other parts (Japan or Eurozone or China). Balance of Payments data is available on the IMF website for free and you will easily find free articles on the Internet analysing historical trends in major economies. A very good example at the moment is the Eurozone's surplus (driven by Germany's surplus and deficit reduction through unemployment in peripheral economies, especially Greece), which combines with China's surplus and efforts by the US to reduce its deficit to create a potent threat of rising global unemployment and recession – i.e. the world is experiencing a savings glut.

Another useful approach is examining business cycles. Ray Dalio's 'How the economic machine works' is a very good video on understanding business/credit cycles and I'd recommend his other essays as well. Latin American economies are going through a bad patch right now, Eastern Europe was battered last year by the Ukraine/Russia conflict; the Eurozone had its last crisis in 2011/12, the US in 2008 and Asia in 1998. As a result, most regions are experiencing very different phases of the standard business cycle but it is helpful to remember that the world is much more coordinated than we think and regional influences (which may seem very important) often give way to an overwhelming global bull or bear market.

A third approach is examining domestic fiscal and monetary policies through the lens of a simple IS/LM model (or Mundell-Fleming model). Paul Krugman does this brilliantly in his blog. For those of you who need to refresh their IS/LM concepts, Khan academy videos are a good source. For those without any background in macroeconomics, Gregory Mankiw's 'Introduction to Macroeconomics' is the gold standard for Macroeconomics 101.

For most developed market economies, there is enough good content online to understand the historical context by individual economies. For emerging market economies, I find rating agency reports to be a fairly good source. If you do not have access to rating agency reports, I'd recommend IMF articles (which are free), in particular the Article IV reports, as another good source.

Once you have developed a historical context, you'd find that the time you spend reading macro news can be cut down to no more than 30 minutes a day and you'd still be well informed on the important global macro trends.

I would love to hear about approaches that have worked for others (such as the balance of payments approach, business cycle approach for global macro) and would also love to hear any thoughts on how to understand a larger breadth of industries. I definitely think that industries are under-analysed and stocks over-analysed. I have met very few people who understand industry dynamics across a wide breadth and can suggest relative value opportunities across industries the way a competent analyst can highlight such opportunities across stocks in his/her coverage universe. So appreciate thoughts from equity strategists/investors etc.

Mod Note (Andy): #TBT Throwback Thursday - this was originally posted on 4/19/14. To see all of our top content from the past, click here.

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Comments (48)

Apr 12, 2015 - 5:15am

thanks for sharing, very interesting post.

Observe. Learn. Share.
Apr 12, 2015 - 8:35am

Great post, well written too.

It says great things about people (like yourself) who are willing to devote their time helping younger guys get a better understanding of the industry they want to go into. Thanks.

Cause who wants to be in the 99%?
Apr 12, 2015 - 6:11pm


Great post, well written too.

It says great things about people (like yourself) who are willing to devote their time helping younger guys get a better understanding of the industry they want to go into. Thanks.


Totally agree. Thanks!

Best Response
Apr 13, 2015 - 9:55am

LeadBalloon wrote:

Great post, well written too.

It says great things about people (like yourself) who are willing to devote their time helping younger guys get a better understanding of the industry they want to go into. Thanks.


Totally agree. Thanks!

Thanks guys. I was a bit disappointed when I noticed that my post had annoyed someone so much that they decided to throw monkey shit at it. But you guys just made my day - so thanks to you as well.

There are no bad securities, only bad prices.
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Apr 12, 2015 - 10:17am

+1 great post.

The Economist's Economist Intelligence Unit website is a great site with updates on all countries. Some is free. Some requires subscription. But you can follow the headlines of the updates and continue your research. Plus they breakdown paid subscription write ups into individual articles for purchase.

  • 1
Apr 12, 2015 - 9:19pm

Great post. Nassim Taleb has written some interesting stuff on this.

"My dear, descended from the apes! Let us hope it is not true, but if it is, let us pray that it will not become generally known."
Apr 13, 2015 - 9:52am


Great insight! Do you happen to have any books that you would recommend?

For the balance of payments framework - Michael Pettis' 'The Great Rebalancing' is an excellent book
For the business cycle approach - Plenty of stuff on the internet but read the essays/notes by Ray Dalio
For the IS/LM, Mundell Fleming model aproach - Krugman's blog is pretty good

There are no bad securities, only bad prices.
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Apr 13, 2015 - 6:33pm

Very good post.

I'd also recommend tracing some of this philosophy back to the source. I wouldn't mention the guys name publicly(he's extremely unpopular with bulge bracket execs due to how he called out some shady practices) but the guy who pioneered the integration of business cycles into economic forecasting is Martin Armstrong. The perspective of putting everything you read in the context of global business cycles and capital flows can yield some results which are very different from the norm.

The biggest mistake a lot of people make is assuming linearity rather than accounting for the cyclical nature of industries and markets. How often have you seen a financial model which assumes straightline growth over the next five years? And how often does that actually happen in real life?

Apr 13, 2015 - 11:10pm

awesome post; read my mind - I'll read 20 BB articles, 10 MW articles, and BLS/ECB releases and sometimes my recall is lacking when I need the info. Definitely agree with having a set framework so info. doesn't 'get scrolled off like movie credits'...

"Go for a business that any idiot can run – because sooner or later, any idiot is probably going to run it." - Peter Lynch
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Apr 15, 2015 - 5:57pm

Thanks a lot everyone

There are no bad securities, only bad prices.
Apr 16, 2015 - 7:02am

Interesting post. Thanks for sharing with us.

Jordan Liang
Apr 17, 2015 - 7:50pm


Awesome stuff, do you (intend to) invest according to those macro trends?

Yes, in fact that's my job right now

There are no bad securities, only bad prices.
Apr 18, 2015 - 6:00am

I have always been so jealous of my peers that study Accounting and Finance due to how much of their curriculum is "directly applicable" in the workplace, but posts like this remind me about all that Economics has given me, which I now take for granted. Great post, I would definitely agree that you need to develop a rigid framework to push all the noisy information through. At the end of the day, if you cannot drive insights from information, it is of no use.

Apr 28, 2015 - 10:50am

@ Stalagmite, great post! I find myself reading the macro news but not really grasping the big picture. Do you have any specific recommendations (i.e. articles, books) that have helped you get up to speed? I know you mentioned checking out Ray Dalio, Mankiw and IMF websites but any others that you would recommend?

Aug 2, 2015 - 1:37am

How would you propose thinking about and analyzing a country's economic situation in a historical context? By simply learning about that nation's economic history?

Hi, yes unfortunately that is the only way I know. To do this, you have to spend your evenings/weekends reading books, watching documentaries, reading IMF/rating agency reports etc. Its is a painful effort but the rewards are worth the effort in my opinion.

There are no bad securities, only bad prices.
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Jan 8, 2016 - 2:33pm

Just came across this from the top discussions of 2015. Has anyone used the website finimize? I found a reference to the website on here a few weeks back. Not as great for evaluating countries from a historic context, but does an awesome job of putting current news into a a broader macroeconomic context. A link to the website is here . Let me know what you all think!

Apr 13, 2016 - 9:41am

Thanks for your insights Stalagmite. As an Econ undergrad, I can vouch for many saying that it is extremely rewarding learning how to my field of study to the markets. Any tools to help leverage my fundamental knowledge into real world experience is valuable.

Apr 16, 2016 - 3:50pm
Apr 16, 2016 - 4:55pm

just make an excel sheet with the following categories (i prefer excel over Microsoft OneNote):-
1.topics (can include deals, policies, political process, etc)
2.sources (people/orgs),
5.important figures/facts
according to the sector you are assigned and the economy in general, keep hard copies of newspapers, articles, whitepapers, industry reports, etc if reading on the screen gets too much

MUST keep the source documents organized before you even apply for the job, also use Mozilla Session Manager to manage links, it is better than using bookmarks since you can open up multiple links with one click, always search for contradictory articles that would challenge the consensus, choose your sources of information overtime so that you can filter out the unnecessary ones, and

REVISE EVERYDAY the excel sheet you have made and/or some of the articles, etc after your day ends .. revision is must to see how particular situations have been developing so that your narrative shows some reflection

then after you have revised your excel sheet then read/watch some more news, follow relevant sectors, read your coworkers' research notes (ask them first)

economies do not necessarily follow economic models but are directed by economists working with politicians/public servants (the extent of this depends upon how you country's administration works), so understanding the background of the decision makers is more important in order to make sense of the policies they make and/or what they might do next, looking at it this way makes news easier to understand since you deal with the mindsets of individuals rather than just looking at flows of money, demand/supply, knowing the decision makers in person is even better, however, if some basic economic concepts are weak then sure go ahead read them up

Apr 18, 2016 - 8:12am

Might have been mentioned before, but - use OneNote/Evernote as a diary to keep track of your observations. Revise from time to time.

EDIT: Just realised that Qureshi beat me to it. Sorry for hijacking, bro!

Apr 18, 2016 - 9:39am

no problem... One Note has been mentioned over here as well…

I will make a list of links for ER on WSO and else where so that it can be easy for others to find stuff on WSO, for those who are new

repetition is good and just shows that people who take their work seriously keep track of what they have done and what they intend to do adds weight to the idea by acting as a cross-checking of sorts, for some people one person's opinion is NOT enough (I myself am one of them, I constantly cross check what people tell me and most of the time, most people have a different opinion about the one issue but they are so sure of themselves that they think it is THE way to go or that one Silver Bullet they have, that is where people are mislead into making wrong career decisions for themselves or for others)

sometimes people can miss one lengthy message or part of a message but a few lines, like in your message can be read easily for example:-

'some people use sites like to keep track others use excel sheets, some use pen and paper'

Jun 3, 2016 - 2:43am

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