Brainstorms: Telephone, Macro Webinar

Questions I wished I asked

If you are reading this then you have a desire to learn and a curiosity for exploring how the world works. One of the beautiful things about life is that you get to ask questions about how the world works. Questions function like a chisel in sculpting out the life that you want. Unfortunately, many times our questions and the answers we get don’t have 100% clarity. As a result, your goal shouldn’t be trying to find out a single answer and “take off” but set up a process of information flow, feedback, and critical interaction in your life. This is part of the reason I write this Substack.

I want to expand on these ideas in this article and share some macro thoughts about markets along the way.

(as a reminder to free Subscribers, TODAY will be the last day to lock in the price of the Substack at $50 a month or $600 annually. The price will increase to $60 a month or $720 annually on April 1st).

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Macro Webinar:

Every month I do a macro webinar for paid subscribers expanding on the macro report and recent research I have been focusing on. Here is the most recent macro report and alpha report:

• Comprehensive Macro Report

• Trades: Alpha Report, Week Ahead, Macro Convo

This month, I am going to do something a little different and accept questions from EVERYONE about ANYTHING. You can send me a question about anything in any of the following ways:

• Comment on this Substack post

• Email me: Capitalflowsresearch@gmail.com

• DM me on Twitter: here

• Message me in the Discord: https://discord.gg/d88tj932Ur

I will respond to any question you have and post the video for everyone. I will also be sharing the top 3 things I wish I knew when I first started learning about macro.

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Telephone:

Remember the game Telephone?

Telephone is a game where players form a line, and the first player whispers a message to the ear of the person next to them, who then whispers what they heard to the next person, and so on, until the last player announces the message they received out loud. The fun lies in seeing how much the original message changes from start to finish due to mishearing and whispering.

What I realize more and more is that sharing macro views is very similar and it can really mess you up if you’re not aware of it. For example, I have a weekly conversation with one of the traders I work with where we break down all the trades we are running, what catalysts are ahead, and how we think things will play out. While I know the macro side of things much better, he will never just copy my views. He ALWAYS takes what I think and uses it as an input into his current thought process.

This is what you want to do in your information flow. Take whatever people say as input into a preexisting framework you have for your own actions. I can’t tell you how many people I know who just try to go back up the Telephone line to figure out what x person said and copy them. For example, there will be some rumor about the positioning of some high-level trader or fund and people will try to go back through the telephone line to figure out what the person thinks. This is really stupid in my mind.

Copying other people is a sure way to face disaster in financial markets. This doesn’t even account for the lack of real-time access you have to x person. Let me provide another example, let’s say Druckenmiller makes an offhanded comment about being long ES. You don’t know his conviction level, how much he is in the money, and if he could take off the position tomorrow. Is it nice to know? yeah sure. But conviction level and emphasis can only be reflected in position sizing and real-time P&L which are typically private. So why in the world would you blindly buy an asset just because you hear an offhanded comment from someone you respect? DYODD!

I say all of this because so many people I run into are in this copying mindset for trading and honestly a lot of things in life. Instead of trying to copy someone else, turn yourself into a formidable thinker who can take inputs from other’s analysis and use it in your own decision-making. Let me also say, A LOT more people will want to work with you because they won’t feel the pressure of the consequences as you rely on them for a copy trade.

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Macro:

One of the things I touched on in the macro report was the attribution for GDP components:

Let me put some more perspective into the distribution of growth. Here is a breakdown of the NFP line items. Services in orange, goods in blue, and government in purple:

Do you begin to realize why we say that services has become such a large portion of the US economy? This isn’t some offhanded comment. Before 1990, if you hiked interest rates, it would have a much larger impact since the goods portion accounted for more of NFP. This has been shifting over the past 40 years as services take a HUGE attribution for growth.

Since 1945, there have been 13 recessions in the United States. This is the sample set of historical parallels we are operating with which is reasonable but still not incredibly comprehensive. The structure of the economy has shifted significantly over the past 40 years.

If the structure of the economy shifts then by definition you are going to have discontinuity that you need to account for. And yet, we still hear people spouting phrases like “this time isn't different” without taking into account any discontinuity.

https://twitter.com/Globalflows/status/1765038416566395038

There will always be a space for professionals who quantify complex tensions without being swayed by reductionistic narratives. Be this person!