By Cees Bruggemans
It is an excellent question: why should companies, or investment managers bother with macro? With growth for the economy as a whole (to the nearest real decimal while they only think nominal)? With overall CPI or PPI inflation (when the inflation that matters to them is their own cost experiences)?
Interest rates and the Rand affect all the same way, so such macro is relevant if debt is heavy or trade features significantly as imports or exports.
But why otherwise pay attention to the overall growth and inflation experience, except as some vague benchmark?
Companies set their earnings targets in generally ambitious terms as demanded by shareholders. You hardly recognize the real GDP growth and country CPI inflation back in such numbers, except in the most mature, most staid of enterprises.
Companies may still be enjoying rapid growth because their markets are still far from maturity, rapidly unfolding due to demographic, geographic or technological reasons.
Or they are traveling a cost curve where they can progressively take market share. Or they have introduced disruptive technology, changing the nature of their markets game, allowing market share to be taken even as market footprint enlarges anew.
And if none of that applies, companies still can set ambitious earnings targets, but expect managements to go outside their narrow confines (boxes), enter new markets, attempt new technologies, and if truly desperate, seek out foreign markets with better growth potential and thinner competition allowing fatter margins (though never underestimate risk in entering unknown environments).
Similarly, investment managers focus on companies and their underlying business platforms. From the bottom up, not top down. Making target? Explaining deviations? Numbers focused. Micro, micro, micro.
So why do you want to tell me about the local macro?
That government is messing up, is becoming an exceptional disruption in its own right, in the way it runs down the infrastructure, forgets to expand when needed most, allows market inefficiencies to intrude (whether in product or factor markets such as labour), introduces regulatory measures that have many intentions except of furthering growth, interferes in trade regimes, new hiring dispensations, share ownership, and more such stuff?
One supposes someone should care about such things (government for instance, in wanting to understand why it isn’t making ITS targets, with foreign rating agencies threatening to down grade and making its finances a whole lot more expensive and difficult to manage). But that is their problem, isn’t it?
True, if we are electricity intensive, or occupy space targeted by specific unions or government regulations, we have a company-specific problem. This then needs to be addressed and managed in a company-specific way.
Just like so many of us today arrange from pure necessity our own education, healthcare and personal safety arrangements, and of course our pensions and investments, we increasingly become less bothered with the way government does things, and the country does things, except where it interfaces directly with us, in which case it needs to be managed or divestment follows.
One major exceptions is at taxation time, when rudely reminded there is a greater whole burning through resources, much of it wasted, and never enough of it, and wanting more, forever throwing the past at us when it is their own doings that are bringing these things on.
They think we watch the news, their news, while we have our own news sources and ways of assessing reality. The rest of the time is better spent with close family, and of course sport, actively participating to keep body and soul healthy and isolated from the greater foulness surrounding us, and otherwise endlessly watching it, as if in some distant location, participating in global competitions far removed from the local silliness paraded daily in our faces.
That, which has become matter of fact over many decades in many private lives, has been extended to business life and investment life, too.
Our personal lives, and increasingly our businesses, are globally connected and diversified, at arms length from the intense local preoccupations eating so many yet putting little food on the table.
Our interests and preoccupations have increasingly become narrowed down on the micro that matters, out of the reach of those that are loud or disruptive, or even aggressive and obnoxious.
They add zilch to value-added, and are at worst distractions that one can do without.
Provided, of course, they don’t overthrow the dispensation in which we operate and do our own thing. For which purpose we have a Constitution.
Now, kindly stand aside. You are obstructing my view of my favourite share price, rugby or cricket team, tennis, golf, or latest technological gadget. Not forgetting holiday destinations and other pleasure domes. And family.
Macro? Who needs it, short of something really disruptive moving our cheese. Such as financial crisis, epidemic, war. But those only happen infrequently, right?
