Macro vs. Detailed Perspective

Saturday, May 24, 2008 | 10:15 AM

Hotnot_20080523185708I'm a macro guy; that means I try to see the world from the 40,000 foot view. I look for big themes, long arcs, threads that run throughout the tapestry of the capital markets -- trying not to get too caught up by the day-to-day noise.

That's my biggest biggest peeve about financial journalism -- they do a rather poor job separating the noise from the signal. While the day-to-day action matters very little in the grand scheme of things, its often fodder for the tv channels that have an inordinate amount of air time to fill.

This doesn't mean the details matter any less; its just that some shorter term observations just hint at the bigger picture. For example, this week's Barron's Trader column observes:   

"In recent weeks, crude and stocks have rallied in tandem, with bulls interpreting rising petroleum prices as yet another sign of robust global growth. But the two parted ways last week: As crude and gasoline both rallied for the eighth time in nine weeks, stocks pulled back hard to register their second decline in six weeks, amid increasing nervousness that rising energy costs will cut into consumers' already tight wallets."

Now, I do not disagree with anything in that statement. Its an accurate assessment of what happened this week-- but I simply believe it understates a bigger theme that is now occurring in the markets.

After many months and months of denial, there is a slow recognition of the following:

1. The Economy is slowing -- possibly dramatcially
2. Inflation is problematic --a nd getting worse
3. The consumer is being hurt by #s 1 and 2
4. The Fed may not be able to save the day -- at least in terms of a recession

Another way to contextualize this is to consider what thought sets the bulk of investors -- both pro and am -- believe may be least worthy of replacement with a different set of beliefs. . Its been my view that these market tremors are the process by which one belief system gets replaced with another.

What beliefs? Consider each of these investment postures and the belief systems they embody:

Bull into Bear
Long into Short

Cheerleader into Realist
Possibly False into likely True
Stocks into Cash

Regardless of your personal perspectives or investment posture, its worth considering what belief sets you may be swapping. Its a subconscious process, one that you may not even be aware of.

What beliefs are you reconsidering?


Stocks Fall Hard As Oil Hits New Highs
Barron's May 26,2 008

Saturday, May 24, 2008 | 10:15 AM | Permalink | Comments (48) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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All judgements of truth are relative to the amount of information you have.

If I may give my favorite quote from Donald Rumsfeld, "Donald Rumsfeld we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know."

I know a lot therefore I know that there is a lot I don't know.

Which is why it's often so hard to know whether to be a bull or bear. Today, I'm a bear.

Posted by: Rock | May 24, 2008 10:56:51 AM

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