The Rise of Macro Investing

Here’s an excerpt from a recent research piece published at Orcam (read the full piece here). Obviously, with my macro focus and an entirely new company designed around this macro focus, I’ve made a big bet on the future. And I think there are few things changing the landscape of investing more than the trend towards global macro investing.

Among the big trends I see coming is the diversification of corporations across the globe. As developed economies mature and emerging economies demand superior living standards there is a massive convergence occurring that is becoming increasingly expedited by technology and globalization. This is diversifying corporations, broadening customer bases and bringing supply and demand together in a way that has never before been scalable. This can best be seen in the growth in S&P 500 revenues where the trend is quickly changing towards a global S&P 500. I presume the day will come when the vast majority of S&P 500 profits will no longer come from within the USA. In fact, if we become a truly global economy then one day we should expect the overwhelming majority of S&P 500 revenues to come from abroad:

“S&P 500 corporations are no longer just US companies. They are increasingly global corporations. This is
a trend that is becoming more and more pervasive. 2015 is likely to be the first year where most of the S&P 500’s revenues were generated from foreign countries. As emerging markets become increasingly developed and developed economies continue to mature we’re likely to see this convergence continue.

The USA, for instance, currently represents 23% of global GDP, but US corporations are generating 46% of their revenues from abroad. It’s not unreasonable to assume that the natural trend for S&P 500 revenues
is towards something in the 70-80% range as the developed economies mature and corportiaons reach out to higher growth revenue sources. There is a huge growth opportunity that domestic corporations
are still only partially taking advantage of. This means US markets are becoming international markets. In other words, US assets are becoming international assets.”

(Source: Orcam Financial Group)

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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Rik

    Will also depend whether or not the US (NY) can remain the financial capital, of the world. A lot of things might point independently in another direction, but the direct competition is making an even bigger mess of it.
    Anyway investing in companies that might go with these trends (US percentage down and anyway more not local but international) will do the job.

  • Alberto

    Cullen the companies you’re talking about were born in the US but now are not american companies. They do not pay taxes in the US and in any other country (real tx rate of Google or Apple is less than 10%) and are listed in many stock exchanges. They can find man power where is more convenient (that is not necessarily the cheaper place) and raise capital where the conditions are better. So yes this is definitely a macro trend, started at least 15 year ago, we can call it the rising of the extra national powers and who missed it, can’t understand the world as it is today with the vaning influences of the goverments all over the world. Philip Dick or William Gibson made much better forecasts than 99% of the economists.

  • SS

    I think you’re probably right. I never used to pay attention to macro, but I feel like I’ve been forced to learn it over the years because it dominates market movement.

  • Boston Larry

    There are many practitioners and fund managers out there who say that it is best to completely ignore macroeconomics and macro forecasts. It is already priced in before the next macro forecast comes out to the public. So the only edge you can have is to watch the price and volumes and be a technician (only price matters). That is the other side opposite where you stand, Cullen. Can you beat the technical analysis momentum players? Does your macroanalysis produce enough value to generate alpha?

  • http://www.chpc.biz Brian_Ripley

    re: “Will also depend whether or not the US (NY) can remain the financial capital, of the world.” Rik

    I have an abbreviated piece about High Net Worth (the one and two percenters) preferences with respect to financial centers, power centers and real estate attraction which favour the established with a bead on the rising power centers.

    Abbreviated piece with tables: http://www.chpc.biz/2/post/2012/11/super-rich-are-peevish.html
    Full piece (Frank Knight & Citi Private Banking): http://www.thewealthreport.net/

    London may replace NY, Beijing, Shanghai, or Singapore may replace London.