MI2's Global Macro Summit

September 26-29| Vail, CO

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MI2 Celebrates Ten Years of Making Calm out of Chaos

Back in 2008, like many others, Julian and Gretchen Brigden feared that their financial future may not survive the coming crash. Just three short years later, at the request of an iconic hedge fund, they launched Macro Intelligence 2 Partners. For the last ten years, MI2’s unique tangential thought process and strong calls have empowered clients the world over to anticipate movements, execute timely trade and make money from the macro environment.  

After a decade, knee-deep in chaos, we thought it was about time we asked the research team to share some of their wins and war stories, including missed opportunities, the times they wished they had been wrong and favorite trades. 

If only we knew then what we know now

“Almost ten years ago to the day I met an old colleague in a New York bar,” explains Harry Melandri. “Rich B is an ex-Tudor guy and an excellent chartist. He wanted to show me a trade. He ran me through this chart and said he had never seen anything this bullish. The chart was very bullish, so I asked what the company does. He said it builds electric cars. I said I wanted nothing to do with it because one: the company didn’t make money, and two: electric cars are dumb – we don’t have green electricity so what problem do electric cars solve? Do you see where this story is going? Rich B has since moved to Florida and just trades his own money. I’m really happy for him.”

Like most of us, Steven Sweeney wishes he’d had paid more attention to the fringe guys who were talking about Bitcoin ten years ago. “However, more realistically I wish I’d bought some Chipotle Mexican Grill (CMG) back then. The first time I went there with some running buddies I remember thinking not only was it a decent product, but they already had an incredibly enthusiastic customer base. Fast forward a decade and stock prices have increased by almost 3,500%.”

The moments we saw coming – but wished we’d been wrong

“There have been several of these moments over the last ten years,” comments Harry. “The US pulling out of Afghanistan, the rally in gold and Donald Trump’s election win spring to mind. But the one I would highlight is the relative economic decline of the G7. Ten years ago, the G7 amounted to 70% of global output. Now it’s just 40%, and it will keep declining. As it does, so will middle-class living standards in the G7 economies.”

Julian on the other hand disagrees. He says, “Since we set up MI2, we haven’t really experienced any of those moments. That’s because – at least so far – central banks have always had the market’s back. The only important question you should be asking in a market crash is what level you want to start buying. 

“However, back in the Global Financial Crisis, that wasn’t the case. In early 2008, I worked at a bank and was watching the euphoria in markets, especially housing. I must have been the only FX salesperson listening to every conference call of the US home builders and mortgage companies. 

“While I was extremely bearish on stocks and house prices, I hadn’t seen the connection to the underlying stability of the markets. However, after watching Gretchen who worked for one of the monoline insurance companies guaranteeing all this mortgage debt, I investigated further. It became clear that the models and assumptions they were using to take risks were utterly inadequate. That’s when I started to worry that even if I was bearish, the system, and my future in finance, might not survive the coming crash.” 

Trade of the decade 

“My favorite MI2 trade was catching the sell-off on bonds in 2016,” says Julian. “This was the perfect harmony of fundamentals, technicals, market dynamics and, most satisfyingly, a bet against the central banks! 

“In early 2016, equities and commodities shot higher, while central bank dovishness prevented a commensurate move higher in bond yields. It was clear to us that these price divergences couldn’t last. We set out our case for a significant bond sell-off in the second half of the year. Our models suggested the driver was the surge in commodity prices, which would drive inflation materially higher. 

“Having laid the groundwork, we came out with a recommendation to sell 10 Year Treasuries. At the time, they were trading at 1.54%. We then pressed the view through the remainder of the year as yields rose to 2.5% in early 2017.”

As we continue to celebrate our tenth anniversary, we’ll be sharing more stories from the team over the coming weeks. Until then, keep an eye on our trade page for profitable trades from the last two years and follow us on Twitter for daily updates.