Why I Recommend Being a Global Macro Long-Short Investor

I’m at a stage of my life in which I want to pass along principles I’ve learned that have helped me to people who want them, especially principles about investing because I have a demonstrated subject matter expertise in that area, which is important. This brief note is about how to approach investing.

Most investors find themselves investing in certain markets and in certain ways because they accidentally stumbled into them rather than because they chose the type of investing they want to be doing. If one were to choose the best type of investor to be without any prior strong biases to be a certain type, I would recommend being a global macro investor because:

• All markets are affected in big ways by global macro forces. The most important decision you have to make is what asset allocation you have—how much in stocks, bonds, commodities, real estate, gold, etc. and where to have these things. That’s a macro decision. The big moves in the value of your portfolio come from the relative shifts in the values of asset classes which are driven by macro forces. With an understanding of global macro, you can know how to structure a balanced portfolio which will allow you to make tactical movements between asset classes much better than without it. All other types of investing are focused on just one asset class in a specialized area that goes through big cyclical waves of good and bad times that for long-only investors take their portfolio values up and down in ways that are beyond their controls. In contrast, by being a global macro long-short investor who can invest in different liquid markets (stocks, bonds, gold, and other markets) in all countries from either the long side or the short side allows you to move into to what is good from the long side or bad from short side, which allows you to bet on practically anything and make money in any type of environment. So, by being a global macro long-short investor, there is no excuse for not making money other than one’s own bad decision making.

• If you don’t understand the big (i.e., macro) changes that are going on in the world (i.e., globally) you can’t adequately understand the full range of risks and opportunities that you need to understand to be successful over the long run. To close yourself to understanding the opportunities and risks that come from abroad and are reflected in their markets (which you can invest in) lowers your opportunities and increases your risks.

• Global macro investing—i.e., understanding what is going on in the world and testing your ability to navigate it by betting in the markets—is a very fun, enthralling, and rewarding game. Global macro investing is very interesting because it leads you to focus on all the big things that are happening around the world, it’s very fun to be able to convert your theories about the world into bets that constantly get scored to provide you with the feedback that helps your understandings of the world get better, and it’s very rewarding because it pays very well if you can play this game well. It also gives you a great macroeconomic understanding of the forces driving politics, geopolitics, and culture, without which I don’t believe you can really understand what’s happening in the world.

• Unlike illiquid private markets, liquid public markets give you a) more flexibly to rebalance and to change your positions as circumstances and your views change and b) more and better information than private markets which keep you stuck with in your position with less information that is less reliable. (Footnote: There are some reasons that lead some people to prefer private markets vs. public ones, although the history of average private equity returns has been about the same as public equity returns. Sometimes there are private deals that are uniquely attractively priced that one can “get in on” sometimes there are tax advantages, and sometimes investment managers get involved with the deal to improve the business and its returns).

Those are the reasons that I think that striving to be a great global macro long-short investor is the most rewarding type of investor to strive to be. That’s true even if you later evolve into being another type of investor because after being a global macro long-short investor for a while you will carry with you an invaluable understanding of global macro forces that will help you in your more specialized job.

While that’s how I see it because I love global macro long-short investing so much and have done it for so long (about 60 years), I might be biased in favor of it, so you should ask others about these points of mine and their points of view and then decide.

By the way, I want to help you be a great global macro long-short investor. I will be regularly passing along principles and thoughts so you can look over my shoulder while I am playing the game and describing the principles that are motivating my moves. But if you want to really get into my approach, I recommend the Dalio Market Principles Online program I built with the Wealth Management Institute of Singapore, which has received a 100% recommendation rate from past participants. You can learn more here.