138 Comments

Alf, love the content! One suggestion for future articles that would be helpful for us newbies :)

- What are the most important (or just your favorite) lagging, coincident, and leading indicators to monitor and why? How do they interrelate with each other?

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Excellent point, thank you!

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these people might appear smart, so did the people at LTCM. In the end they are only making a semi-educated guess, fraught with all sorts of cognitive biais. I don't want to be a party pooper, but we must keep our eyes open.

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Absolutely! I just wanted to share their views with you guys

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All you can do is find people who understand the markets, make interesting points based on good reasoning and communicate it in an interesting way and from an “in it” perspective. However, you form your own opinions and make your own decisions! Love Alf and his thoughts.

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Dear Alf,

best content!

I would love to hear your views on what would happen in a scenario where the BRIC (along with Saudi-Arabia) creates a gold backed currency and starts trading commodities with it instead of USD?

Pretty please!

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Very kind!

Valid big picture topic to address

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Check out Brent Johnson (Dollar Milkshake) and Jeff Snider (Eurodollar University), as they have a ton of videos on Youtube in regard to what this would mean. You may be surprised to the conclusions they draw.

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Alf - this is great ( tangible, useful, actionable), thank you!!

I would like to understand a bit more why you opt for going long IEF and not TLT (which should fall hardest on an economic downturn?). On the other side of the trade, why you opt for going long SH, not other focused areas of the market (I.e.: real estate like ERK — though not very liquid).

Francisco

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Excellent questions! I haven’t pulled the trigger yet so when I do I will also elaborate on why exactly those instruments

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Will be following closely!! Thx for

responding

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I think long-term treasury rates should be less vulnerable to short-term economic prospects. More likely that a current recession impacts 7-10yr rates than 20+ year.

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Thanks Alf. And for people living in Europe and have euro accounts would this trade be same considering the currency risk?

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Yep I’d say so!

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Worth noting that for products like $IBTM (EU equivalent of $IEF) you can look at the different exchange and currency listings. For example, I prefer trading in $USD since I'm holding as little $EUR as possible. Therefore, I'd express the $IEF long via $IDTM ($USD listing of $IEF on London Stock Exchange). You can find the tickers at the bottom of the iShares product page.

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As always - so well written that it's enjooybable and interesting

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Thank you!

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I wonder whether the implied trade isn't short bond vol to long index vol, rather than outright long bonds to short equities. The risk is a continued worsening of the dislocation we're seeing between bond and equity vol (indices flat, equity vol stable, yields up bond vol up), but even so, for most of the year, equity rvols have been > ivols. If you're realizing your long equity vol position thru e.g. straddles, then even in the case where you get ivols down, you'll likely realize convex delta moves.

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That’s a very smart point - I haven’t implemented it yet and will have a look at cross vols now

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I guess it would've worked out.

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Thank you, appreciate as always your comprehensive and insightful coverage. Have a good weekend!

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You too, and thanks!

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Brilliant insight, Alf, as always. And thanks for the 50 Kalo tip ; )

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Eheh enjoy!

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Thank you for this article and podcast Alf. I deeply appreciate this type of macro strategy alpha trade idea. You differentiate yourself in this way. Assimilating thoughtful macro analysis from some of the most successful portfolio managers in the world, with your experienced perspective, and concluding with a practical way to express it. This is the type of macro environment that requires a diverse (relative value) approach that will add alpha to a portfolio but if wrong, won't blow it up. Directional trades are fine, especially when you get them right, however the beta and drawdown risk can be career ending when you get them wrong. Much appreciated and keep up the great work. Cheers, Filo

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This is an excellent comment. Thanks, Filo!

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Good info Alf. No matter how busy I am I always read your emails.

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That’s very nice to read!

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Alf, great content, I've been following your blog for a few days. I read many of his articles and thought it was fantastic. I would like to know if there is any training you would recommend so that I can understand more about Macroeconomics operations.

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I am planning to make a whole course about this :)

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I wrote a post with the top 25 Macro YouTube channels, podcasts and Substacks to follow if you want to learn more about investing. It includes Macro Alf, of course, and Blockworks which has some awesome content. These are basically all the resources I've used to learn Macro over the last few years

https://theunhedgedcapitalist.substack.com/p/my-favorite-25-investing-podcasts

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Fantastic. I'll check the directions. Thank you very much.

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Alf, you’re the man.

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Too kind :)

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Thanks very much Alf - great stuff.

Enjoyed the MacroCompass masterclass with AXIA - very well explained.

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Glad you liked it!

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Alf, I noticed that you prefer TLT for the long duration treasury exposure. Why not individual bonds?

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Just easier for people to grasp

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Hi Alf,

Congrats for the article. Thank you for writing it. I just have one quick question I would be very thankful if you could answer: I have seen you have explained in other post your estimation of the equity risk premium - https://themacrocompass.substack.com/p/macro-polar-stars#details - but is there not a mismatch comparing expectations of earnings for the next 12 months with expectations on risk free rate after 60 months from now?

Thanks indeed

Best regards

Javier

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Great question.

The idea there is not to compare earnings with real rates, but forward valuations with forward real yields

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