Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets, Revised and Updated

Appendix

A Note to Investors about Global Macro

My interviews with global macro managers hammered home the recurring theme of the growing shortage of opportunities in today’s markets, a trend that seems to be affecting all investment strategies.

In the modern globalized interconnected world, uncorrelated markets seem difficult to come by. Likewise, yield curves are flat and volatilities across various markets are at all-time lows, further reducing investment opportunities. But, as Marko Dimitrijevi stated in his interview, periods of stability and low volatility tend to be a temporary phenomenon. Indeed, historically, long periods of stability are often followed by extreme dislocations as leveraged positions built up during the “safe” environment cause significant bottlenecks when there is a sudden shift in the investment climate and a rush for the exit.

Major imbalances across the globe are building up in many areas today. Central bankers, politicians, and other policy makers are beginning to get concerned that things might be getting dangerously out of line. Housing bubbles, divergent and extreme deficits and surpluses, and unstable currency regimes are compounded by other exogenous uncertainties such as terrorism and natural disasters. But with uncertainty comes opportunity.

Historically, allocations to global macro managers have been reduced during such stable periods. However, ...