The Need For A Strategy For Macro

I named the company as a reference to my macro strategy piece “The State Of the Market (SOM)” that I produced over the last ten years while I was at Goldman. The SOM reflected the results of my fundamental economic analysis of macro themes that were likely to reprice markets across assets types and markets. More importantly, I used this framework to identify implementation strategies that provide investors with asymmetric returns with high expected Sharpe rate ratios.  


I believe that my approach offered insights into the potential impact on returns of macro factors and potential strategies that that alternative sources did not. While there were many sources of economic research, few offered implementation strategies. Often those that did based their strategies on the long run using econometric models or with little sense of realistic trading ideas. Others offered ideas based on technical non-economic fundamentals. All of those perspectives offer value, I am sure.


However, I came at the problem from a different angle. I was not interested in economic research in of itself, even though I was an economist by training. I wanted to offer trading strategies using my training as an economist. I did not believe in using models to identify implementation strategies in the macro space, even though I have built many of these models. Model are based on historical data that reflect market consensus and often led to the incorrect conclusion about the future, e.g. look at subprime default models built on historical data of declining losses form 2002-06.  I was not interested in high level asset allocations or strategies but rather I wanted to use my experience of trading and risk management to recommend realistic trade implantation that could take a client from day one mark, to managing the day to day risk and ultimately to guide and investors as to the timing of taking off the trade.  Most importantly, I believe that one of the keys in finding asysmetric payouts for trades in the macro space is to use a framework based on the premise that economic fundamentals do ultimately matter, the key is to find out when.  And that is what I offered to clients when I was with Goldman and that is what I will offer now with SOM Macro Strategies

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