Macro Dragon Special S1E1 - Initial Thoughts... Macro Dragon Special S1E1 - Initial Thoughts... Macro Dragon Special S1E1 - Initial Thoughts...

Macro Dragon Special S1E1 - Initial Thoughts...

Macro 4 minutes to read
Kay Van-Petersen

Global Macro Strategist

Summary:  This is the first of a series of Macro Dragon Specials that will come through over the year - in this first series we will attempt to capture KVPs current thoughts on global macro and cross-assets over 2020, current outlook and assumptions, current strategic positioning views, risks, hedges and contingency plans... as well as what seems to be consensus vs what the market does not seem to be focusing on. Note these are very different from the daily Macro Dragon cross-asset views

(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you read this things may have changed.)



Macro Dragon Special S1E1 - Initial Thoughts 

Current 2020 Macro Ideas, The Craft, T-Views, Contingency Plans, Risks… 

This is the first of a series of Macro Dragon Specials that will come through over the year – in this first series we’ll attempt to capture KVP’s current thoughts on global macro & cross-assets over 2020, current outlook & assumptions, current strategic (long-term) positioning views, risks, hedges & contingency plans… as well as what seems to be consensus vs what the market does not seem to be focusing on (yet). Note these are very different from the daily macro dragon cross-asset views

This is MDS S1E1 - as always all thoughts / comments / constructive feedback appreciated


Initial Thoughts… 

Before you take stock of someone’s views, its key to know where they are coming from – what are their frameworks, beliefs, assumptions & principles around markets, plus wealth creation in general.

Here is what KVP currently believes:

  • There are infinite ways to be profitable in the markets, from virtually near sub second intraday systematic trading to perpetual investment horizons that is the bread & butter of the Buffet folks. From strictly bottom up fundamental views & company drivers for equity or credit focused players, to solely top down big picture macro tailwinds & headwinds cross-asset traders, to some kind of combination between the two.
  • The market is way more complex than physics, it’s a CAS – complex adaptive system – that is more similar to biology. There is no winning against the market, nor against other players really (unless HFT is your game) over time. It is really you that you are competing against.
    • And if you dig a layer deeper you are competing against the psychology in the market that either makes entry points easy or difficult from a pnl contribution basis (i.e. move against the crowd or move before the crowd, plus sometimes move with the crowd). Part of that playbook is also your own psychology.
  • The point is to do you. Gravitate towards what resonates with you persona, stick with it & work on the craft. If its something that you are not passionate or interested in… fantastic outsource it someone who is – otherwise the risk is dabbling in wealth creation = wealth destruction.
    • On this sub point, only take the advice of brick makers in relation to bricks…
      • Basically there is no better filter than skin in the game & keep that in mind when synthesizing views from all analysts, economists as well as strategists including KVP – who has never trusted a skinny chef or chubby trainer or doctor.   
      • The most important thing is not what you listen to, digest, absorb, seek counsel from… its what you do not listen to digest / absorb, who you do not seek counsel from. The vast majority of people think they need more information, they believe that is where the edge lies. Less = more.
      • It’s more likely that the edge is in your process & systematic approach around filtering that information, transforming that into a potential trade/investment thesis view, then the trade construction & management of that thesis. It is simple, yet it’s a lot more work – do the WORK or  be honest with yourself & outsource it. Once again – psychology & biology – awareness of human behavior (including our coded instincts, irrationality & emotions) & discipline are sacrosanct. Discipline = Freedom
  • The two biggest advantages that private individuals who are managing their own wealth have over “professionals” is time: they are not subject to day to day mark to markets & they can afford to wait for a thesis to play out, as well as take advantage of the compounding effect of wealth over time. The second advantage is the ability to weather drawdowns & move when others are not able to move.
    • If you are at a HF & love BYND @ $100 & build up a large concentration in the stock, if it drops by 50% yet the thesis is still intact, you will be hard pressed to add @ $50 – if you are even still allowed to hold it.
  • Personally KVP’s preference is for a discretionary macro approach (both fundamentals & technicals) that is top down & is broken into two broad baskets.
    • Strategic trading views that can take anything from 3 to 18 months to play out & henceforth need a lower capital allocation & wider stops to run over those horizons.
    • Tactical trading views that are a lot more opportunistic, such as our profitable call on buying the dip / fading the risk-off move at the start of the year on the US/Iran conflict
  • Further there are general a handful of big opportunities a year to catch when trading Global Macro on a cross-asset palette – the good news is you only need one to have a great year & if you catch two, then you are laughing all the way into the sunset
    • For 2019 here are a few that come to mind, by no means exhaustive & yes KVP had a number of duds – including Cannabis which got hosed last year.
    • Tactical Views (Sub 3 months)
  • Strong views loosely held – when circumstances change, potentially so should we.
    • To thrive in riding the CAS that is the market, one had to be the paragon of adaptability & constant growth. Obviously a fine line, when in doubt get out – one can always get back in. The mental pnl is worth a lot more than the physical pnl.
  • Its never different this time.
    • Process > Outcome. Process, Next Best Trade (PNBT, PNBT, PNBT!).
    • Stay humble, keep learning & working on you craft.. anything worth pursuing in life is a campaign.
    • Trade structure > trade thesis. She who filters best wins the information synthesis game. Know what your wealth creation objectives & risk appetite are.
    • Integrity is the foundation of all principles.
  • The most important decision is not how you play the game, it’s the game you choose to play.
    • You can choose to have your lifestyle dictated to you based on how you trade / invest, or you can trade / invest around the lifestyle you want to manifest.
    • On the latter - & after +15yrs in the sunshine, rainbows & unicorns that is the finance world - KVP can literally only think of only three people who do this – & they are three of the most successful people he has ever met. Not just from successful in the market & wealth creation, yet more importantly in family, personal growth, contribution, low stress & anxiety – they are crushing it in life.



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