MacroValueQuant

Why I am a MacroValueQuant
I can tell that I take trading too seriously because I have named my strategy. I couldn’t really describe it many years ago when I first started but I know that it has changed over time. The reason why I describe it as a MACROVALUEQUANT is because it represents a combination of what I slowly have morphed into. The first part of my anagram is MACRO, which describes my growing focus on truly understanding macroeconomics or the working of national economies. So I spend a large part of my reading and listening to stats about the US economy and even global economies. I truly believe that this is a strong approach when evaluating stocks because it gives you a lay of the land. So if you flashback over the past few years, I believe my investing alerts are more likely to be successful if I have better sense of the possible economic scenarios stocks face in the US. A few timely examples of MACRO events that were helpful to be aware of were the housing crisis and the financial crunch. The goal can be either to direct investments to areas that may benefit the most or to simply identify times where it is best to preserve capital.

QUANT represents my love affair with all things quantitative. Purdue University gets a little (okay a lot of) credit for the great mathematical emphasis on quant and statistical analysis. I’ve come to appreciate analytical models and scenarios that may produce highly probable events over time. I remember when I first learned about the January effect and the inefficiencies that exist at times in the efficient market theory. Some of these inefficiencies are due to human nature, things like fear and greed, and a quant approach can help alert when opportunities are available to benefit or stay away from.

VALUE helps to determine whether or not a stock is cheap. I truly have personally experienced not much good can come from buying something overvalued…stocks included. I don’t even really like buying many things at their normal value and prefer discounts and ‘margins of safety’.

So to summarize MACRO helps me find the most likely sectors and industries to benefit from. QUANT screens alert me of opportunities. And VALUE helps me verify that when I buy an alert, I am buying most of my stocks at a discount.
MACRO find of the Month:
If you get the opportunity check out a rare but great interview by Ray Dalio, the manager of the world’s largest hedge fund. He shared some great insights and is an interesting economic thinker. He was recently on CNBC and his interview pointed out the following themes:

• US equities are cheap
• Currency devaluations lead to cheap US equities
• Capital flows will also benefit equities
• Portfolios contain too much dollar denominated currencies

Stay tuned to find out how these themes, help shape my thoughts.