Diary of a Hedgehog: Biggs' Final Words on the Markets

Introduction

Macro investing as I try to practice it is simple but never easy. It’s not just about wrestling with the global environment and getting your asset allocation positioned. Good information, thoughtful analysis, quick but not impulsive reactions, and knowledge of the historic interaction among companies, sectors, countries, and asset classes under similar circumstances in the past are all important ingredients in getting the legendary “it,” that we all strive so desperately for, right. A worldview is essential, but you don’t have to be Henry Kissinger gazing out the window to the far horizons and thinking deep, world-shaking strategic thoughts.

Moreover, there are no relationships or equations that always work. Quantitatively based solutions and asset allocation equations invariably fail as they are designed to capture what would have worked in the previous cycle, whereas the next one remains a riddle wrapped in an enigma. The successful macro investor must be some magical mixture of an acute analyst, an investment scholar, a listener, a historian, and a riverboat gambler, and be a voracious reader. Reading is crucial. Charlie Munger, a great investor and a very sagacious old guy, said it best:

I have said that in my whole life, I have known no wise person, over a broad subject matter who didn’t read all the time—none, zero. Now I know all kinds of shrewd people who by staying within a narrow area do very well without reading. But investment is a broad area. So if you ...