Global Macro blogby Karl Martin Lind

Welcome to the Global Macro blog and the place where I share my research and trade ideas.
I have interned at the CBOT as a trader assistant, held a number of internships at the Norwegian investment bank DnB NOR Markets and worked as a buy side analyst in London. There I helped manage the firm’s absolute return fixed income and fx mandates for institutional clients world wide. On a day-to-day basis I built investment tools, monitored strategies and formulated trade ideas based on global secular trends and cyclical, country level macro dynamics; interest rate and currency return patterns.

My trade ideas on this blog will focus on the most liquid global markets, and my research on macroeconomic imbalances, macroeconomic themes, global market trends and the socio-economic impact of government policy.

My investment philosophy starts with the idea that in order to make money, you must first not lose what you already have. Secondly, it dictates that in order to generate superior returns over the long run, you need an edge; something that makes your investment decisions better than that of the majority. From this follows my four investment principles, which make up the foundation of my investment philosophy.

I) Be quick to cut your losses
Knowing that avoiding the big losses are what will make any investment strategy successful in the long run, I swear by the rule to always limit my downside. Furthermore, I believe that the best track record is built on a high batting average rather than a mix of brilliant successes and dismal failures. To achieve this I size my trades conservatively and follow rock solid risk management techniques; they are systematic, automatic and rigid.

II) Know your edge
My main distinguishing advantages are:
i) My ability to identify when the major markets I follow have swung far enough away from their long term equilibriums to offer the skewed risk/reward potential I look for, and to time the change in trends with greater accuracy than the majority of market participants.
ii) A flexible mind, able to see changes in the rules of the game, whilst maintaining the discipline to follow my investment plan.
iii) My ability to remain objective, rational and detached during market volatility. This enable me to both run with the crowd and take contrarian positions when either one is warranted.

III) Only seek out tremendous risk-reward opportunities
Principle III means I only look for trade ideas that I believe have limited downside, a high upside and where I have an advantage over other traders. I believe my advantage to be greatest in far from equilibrium situations – where the expected reward far exceeds the risk.

I have found 3 such circumstances:
i) When market participants’ bias increasingly diverge from the underlying economic fundamentals for a prolonged period of time.
ii) When participants’ behaviour is able to significantly and persistently impact the fundamentals and prices in a repeated, self-reinforcing and “reflexive” pattern.
iii) When market expectations are so homogenous that it becomes suffocated by the lack of new market entrants, leading to swift countertrends and trend exhaustions.

In other words, I look for trade ideas rooted in behavioural biases and market technicals, and when these directly and repeatedly impact security prices.

As circumstances i and ii can last far longer than most would expect – timing is everything. To help me with this, I am guided by technical analysis and statistical techniques, which can also be used with great advantage in spotting opportunities with the asymmetric risk-reward profile I look for. Used in this manner, quantitative tools broaden my vision and improve my intuition.

As I believe markets are undetermined, which is different from saying that they are efficient, I always maintain two alternate, often contradicting market views – this lends objectivity to my conviction. It also means that I do not make forecasts. My positions are always conditional on the current situation and will change accordingly. Forecasts are not necessary, and can in fact be a hindrance to my focus, which should be on the present situation, and what may alter it.

IV) Stay with your winners
Macro trends are generally slow to start; they carry momentum and draw strength from well-rooted economic fundamentals, government policy and dogmas. This means that once I have correctly identified such a trend, there are very good reasons for it to continue. My job is to sit tight and adjust the trailing stop loss as the market moves further into my favour.


Putting it all together
The practical implementation of above 4 principles blends multiple strategies, timeframes and markets; in pursuit of a diversified investment strategy that does not rely on a general appreciation of an asset class or market condition. Positions are implemented across four asset classes: currencies, commodities, fixed income and equities, using the most liquid global markets, primarily exchange traded futures, options and ETFs.

My aim is to generate high (>15%), uncorrelated and stable returns with less-than-commensurate risk, through long-term compound growth and a disciplined risk management process.
Success in this requires doing my own research, learning from those more experienced, the discipline to follow my plan and having the patience to wait for the right trade. I need the confidence to pull the trigger, a mind open enough to see what others do not, yet maintain scepticism so never to be fooled by a crowd.

More than anything, I believe that success in trading requires a passion for understanding the market and the perseverance to succeed.

- Karl Martin Lind