Fu Peng: “Framework Handbook for Major Asset Classes” - From Macro Theory to Medium Micro Trading Logic

Summary of this issue

The secret to unlocking the gap between macroeconomists and traders

What's in this issue

In the opening part, we didn't just start sharing, because many problems can't actually be solved within our framework. At the beginning, what I wanted to share with you is actually the formation of my worldview, which will influence our exploration of many current issues.

Boss Dai asked me earlier that it seems difficult to get along between macroeconomists and traders. I said that's right. He said what's the secret behind this? I said the secret here is very simple. Remember, macroeconomists never discuss questions that are right or wrong; they discuss the causes, possible results, and possible methods; but for traders, we don't need to participate in this kind of discussion, because sometimes this kind of discussion doesn't make any sense.

Therefore, sometimes when traders look at the macro, they need to look more at the contradictions and logical relationships, speculate on economic trends from this, and then know what they should do in the following system. This is actually the so-called context between macros and traders. If you don't understand this context, you will make many mistakes.

For example, in the past 10 years, many macroeconomists who think they are good may tell a large story about the Middle East, tell a large part of the Middle East's strategic issues and the US energy strategy, and come directly to the conclusion that oil prices will rise after speaking. When the investor structure was immature in the past, it was very easy to catch investors. Why? I can understand what you said on the left, and I can understand the conclusion on the right. OK, just follow your conclusions. But there's a lot missing in the middle.

The “Fu Peng Talks” program I've been sharing with Wall Street News in the past two years is actually not a conclusion. I rarely directly talk about conclusions with everyone. I don't think there's any point in doing that; I'm more telling everyone about the missing part in the middle.

For example, everyone has seen crude oil prices rising in the past two days. People who don't understand will say that because of Iran's problems, oil prices are rising, and spot premiums are being pushed upward, but why are payments so tight that oil prices may be adjusted quite drastically? I'll explain to him that current macro-events, such as Saudi Arabia's promised increase in production, have actually had an effect on remote prices, but in the near end, this incident only affects sentiment, not actual supply and demand, so there will be a high spot price premium.

You'll find that I explained the median conduction path, and the later results are very easy to recommend. However, many people who do pure macros make this kind of mistake. After the previous explanation, the results are directly given, but in fact, the middle section is more important than the previous one. A few friends I know have suffered this kind of loss. They said that before you mentioned this stuff, we thought there was no problem with this kind of deduction. For example, gold preservation and gold inflation. Economists first talk about a long period of gold history, and then directly come to the conclusion that gold will definitely rise. Let's buy it.

This actually goes directly from pure finance to conclusion. It is not possible to form a complete trading system; there is a piece missing in the middle. But that's not to say that the macroscopic study on the left is useless.

I wrote a diary a few days ago. Is the subject macro really useless? Because someone wrote an article saying that the macro is useless. This is another kind of extremism. He thinks the macro is useless; it is better to look directly at the trading methods and trading methods on the left. He realized the shortcomings of pure macro. He realized that in fact, many macroeconomic issues were discussed for half a day without any substantial results, which did not help traders, so he came to the conclusion that the macro was useless.

I think both of these views have gone to the extreme: the macro is completely useful; it can replace medium and micro research; I can tell you wrong; the macro is completely useless; it just focuses on the micro and pure trading methods; I can tell you that they are wrong too.

In principle, we should try to ensure the integrity of this chain, but you need to be clear about what exactly you want to talk about at every point. For example, everyone is sitting and laughing at the mountains. I can say that the policy should not be done; this is called laughing at the mountains and chatting, but when it is being implemented, I don't rely on this stuff to make trading decisions, but I have to understand what is happening.

So our first post is a very broad one, but it's important.

That is the content of this course, thank you all.

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