Travails of the Modern Macro Tourist




My Sunday Washington Post Business Section column is out. This morning, we look at travels and travails of the macro tourist.

That was the name of the online version; in print edition of the paper, it was Is your money subject to the travails of a macro tourist?.

Here’s an excerpt from the column:

“How’s your macro?

Not too good? Terrible? Unsure what that even means?

Let’s start here: Macro refers to the large geopolitical moments, and the natural and man-made disasters, that some investors track as potential market moving events. Large economic trends or reversals, diplomatic breakthroughs, political crises and even war are all macro events. Think: a tsunami that knocks out a Japanese nuclear power plant; the Arab Spring; the systemic failure of the credit markets in 2008-09; Russia’s annexation of Crimea. The ongoing Greek saga that has Europe on edge is all too macro.

Hanging on every twist and turn of the headlines are a group of folks we call “macro tourists.” They are a terrific source of chatter at any cocktail party — such as “Tsipras may have just doomed the Greeks for the next decade.”

Why does this matter to investors? For two reasons: First, macro tourists are everywhere; and second, they seem to be terrible stewards of your capital.”

I bet you can guess where I end up with this one . . .



The travels and travails of the macro tourist
Barry Ritholtz
Washington Post, July 19 2015

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. esop commented on Jul 19

    “The class war had turned democracy into a contest in legislative looting.” (p. 554)

    From Will and Ariel Durant’s Story of Civilization, section – The Decline and Fall of Greek Freedom: 399–322 BC .

    Sound familiar?


  2. b_thunder commented on Jul 19

    I’m really glad that BR mentioned that “…It has been 645 days since the S&P 500 saw even a 10 percent drawdown.” Is it “normal” or the “new normal?” How long can it last?
    If this is “new normal” is a permanent thing then of course the “macro tourists” are in trouble. But also the investors/speculators will no longer be afraid of so much as losing 10% and they will pile on into stocks (including borrowing on margin) and then our market will soon outdo the Shnghai, and then will go to infinity and make everyone trillionaire, right? How likely is that?
    But if the market ever revers to its pre-2000 inner workings*, I think the “macro investors” will again be doing just fine.

    So, the investing based on macro event has not been working. What has been working is buying every time a major index approaches 100- and 200-day averages (to front-run the algos that monitor the same levels) and buying before every Fed rate announcement. Basically, what pays now is to be a “chartist.” It would be great if Barry wrote what he thinks about the “technical” investors who, unlike the “macro tourists,” have been making very solid returns lately. One can’t really criticize them now, can you? Even if you think that their approach in the longer term is not much better than astrology! (I’m not saying it is or it isn’t.)

    * by inner workings I mean dominance of HFT/algos, QE and rate cuts (no rate increases for 5 years) from a number of Central Banks, and an explicit Central Bank “put” (as in “Bullard put” in Oct 2014)

    • orsogrigio commented on Jul 19

      b_thunder : I think that chartists, in the long run, are not better than astrology or coin tossing. So fundamentalists do not do, chartists the same. Indeed if a guy could have invested 1 $ in 1900 and not made mistakes (i.e. has followed the index) how much would him posses now ? simple index was about 80 then, now it’s 18086, that is 226 $ in 115 years, not that big. But GDP went from less than 80 B$ to over 50.000 B$, that is 625 times, so where is problem ? I have a little idea of mine.

  3. RW commented on Jul 19

    Good article. Macro tourism can indeed be perilous to investment health but so also can the assumption of quasi-efficient markets — the peculiar notion they’ve already priced in front page news for e.g. — to say nothing of the implicit assumption that investment professionals have a reasonable grasp of even the most basic macroeconomic concepts.

    I’ve been following the Greek/Euro crisis for awhile in an attempt to make sense of Europe in strategic asset allocation terms as well as attempting to clear up confusion in my own mind WRT some key macro issues particularly vis-a-vis cultural factors and Eurozone trade; this article clarified much.

    German Economic Thought and the European Crisis

    … The point of the euro as a currency union was, to put it in a nutshell, to give Greece the interest rates of Germany and Germany the exchange rate of Greece. With the debt capacity of Germany behind it after it joined the euro, Greek firms and the Greek government would be able to borrow at interest rates previously available only to those in northern Europe, …

    …what the value of the assets underlying those private debts and what the value of the Greek government’s taxing capacity would have been had Europe not fallen into what will soon be called the Greater Depression is not clear …. But in the world as it is, Greece’s ability to borrow at German interest rates was a trap. Greece has gained nothing out of joining the euro. And it has gotten a Greatest Depression out of it by giving up its ability to adjust via exchange-rate depreciation.

    Germany, by contrast, has benefited enormously from the euro. Just consider what the state of Germany’s export sector would be right now if Germany were not part of the euro, and had the real exchange rate of Switzerland. ….

  4. VennData commented on Jul 19

    Tourists with cameras.

    Only these are pointed at them and broadcast on biz-fo-tainment TV.

    Another excellent BR article.

    Always speak truth to power. You may get wiped out but you’ll have your dignity.

  5. orsogrigio commented on Jul 19

    I’m a bit uncomfortable because I can suspect that Mr. Ritholtz could take this a flattery, and other readers a kind of pas de deux, but the article is a gem, a true gem like I haven’t read often. Of course my interest are about the math reasons leading to ‘macro tourist’ behaviour, or better why such a behaviour doesn’t offer results above the simple laws of probability (it’s always the old problem of forecasts via extrapolation, second principle of thermodynamics and such). But the article is a gem. Chapeau, Barry

Posted Under