Why Macro?

I would like to rant about why I think macro analysis is important.

There is a constant cycle of excessive focus placed on what is perceived as revolutionary. The problem with pegging your future on a single asset or single outcome is that it has ZERO alignment with how the world works. 

The economic and financial world is not characterized by a single problem that #Bitcoin, #AI, #blockchain, #EV, #3D printing, or any other technology solves. Problems are a constant and there is no such thing as a single technological solution that results in you never having to worry about uncertainty, risk, chaos, or volatility again. 

On top of this, our biggest problem in the world today is not connected to a single technology or asset. It is connected to the dollars those are denominated in. 

Let me explain something very simply: any asset has a value but that value is denominated in the local currency. Asset prices can move all day long as they price in the changes in their respective cash flows that they lay claim to. 

However, if the actual currency changes, then EVERYTHING becomes much more volatile. These TYPES of changes are what we call “Macro Volatility.” NVDA stock has soured because its underlying cash flows have increased. 

However, what happens when the value of the currency and the actual price of money change? Over the last 40 years, everything in macro land was relatively stable. Sure we have some issues here or there but the bond market has always remained a bedrock of safety. Even if stocks go down, at least your bonds go up. 

So where are we now with all of these ideas? 

There are two things you need to remember: 

1) Macro volatility is back and you can’t make bets in your world without being aligned with the macro backdrop. 

2) There is NOT a single asset or answer that functions as a “liferaft” to safety through macro volatility. Macro volatility means that even if you pick the right company with a revolutionary technology, it can still go down if we have an inflationary bear market. 

So if there isn't a single asset that functions as a liferaft and macro volatility is going to be a large force moving forward, how do you benefit from this volatility instead of getting crushed by it? 

The answer: It is very simple (but difficult), 

When there is a greater frequency of volatility, greater adaptivity is required to benefit from it. The tail risks in today’s world are increasing. From levels of debt to passive ownership in the market, to geopolitical volatility and even the validity of democracy, the necessity of adaptability is fundamental.

Essentially I think there is a misconception about macro volatility, we think we can avoid it by just owning assets for the long term which allows for less short-term process and analysis, that is the furthest thing from the truth. it almost requires MORE. A long-term holding period means that you better be right.....I mean really right. Long-term thinking doesn't give you the right to slack off and say I will adjust every 6 months and be fine.