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Decoding the Signals

Our approach mixes qualitative and quantitative analysis, applying economics, history and political science to analysis of the global economy.

This approach is in RGE’s DNA. In 2006, our chairman, Dr. Nouriel Roubini, looked at the United States and realized it looked and acted like a big emerging market, with unsustainable practices. In response, we developed the foundation of our approach; a systematic, analytical framework to explore balance- sheet weaknesses that can contribute to the onset of financial crisis. Traditional analysis focuses primarily on flow variables. We study correlations and interconnections between macroeconomic variables, economies, markets, asset classes and policies. Additionally, RGE monitors the buildup of asset mispricing, vulnerabilities and imbalances.

What sets us apart is our examination of stock variables in a country’s balance sheet. Our national balance-sheet approach provides an indispensable and lucid view of risk for those who need to understand what’s going on and why.

RGE’s work is based on three types of balance-sheet analysis:

  • Maturity mismatches: Garner insight into gaps between short-term liabilities and liquid assets that open the door to fierce emerging market-style bank runs
  • Currency mismatches: Uncover exposure to exchange-rate risk
  • Capital structure problems: Explore excessive reliance on debt versus equity financing

While balance-sheet vulnerabilities can persist for years without precipitating a crisis, monitoring balance-sheet mismatches across economies and sectors allows us to understand the potential of a shock that might appear contained at first glance.

 

EXPLORE OUR SERVICES
  • Coverage of Six Asset Classes:
    • Rates
    • Currencies
    • Credit
    • Commodities
    • Equity 
    • Emerging Markets
  • Action Market Intelligence:
    • Directional calls built on an unrivaled
    • Recommendations by asset class macro foundation
    • Near-term and long-term views
    • Identifying new ternds
    • Market-experienced strategists 

Turning Signals into Actionable Insight

Our Macro Strategy Team draws from a wealth of experience in leading global financial institutions. RGE strategists build on the work of the macroeconomic research team and incorporate market dynamics, answering crucial questions and generating actionable investment recommendations. Roubini Macro Strategy focuses on several questions:

  • Are macro imbalances, geopolitical risks, structural and secular changes causing bubbles or busts?
  • How can actions by policymakers and multilaterals affect these outcomes? What are the right policies, the wrong ones and the most likely ones?
  • Is this time different? Understanding the answer requires a deep knowledge of Crisis Economics, from utter failures and collapses to resolutions and rebounds.

Depth and Rigor: RGE's research team projects their analysis and forecasts onto each asset class we cover. They assess whether expectations and their associated risks are priced in, with an emphasis on unsustainable imbalances and structural breaks outside of consensus and conventional wisdom.

Top-Down, Disciplined Approach: Our expertise in each individual asset class means we are aware of the fundamental, bottom-up drivers and technical factors as well as how those inputs are affected by macroeconomic changes. RGE strategists develop frameworks to measure what is priced in and what target levels to expect under our base- case scenarios.

Cross-Team Dialogue: Our strategists form their views as a team, exchanging ideas and challenging correlations across regions and asset classes. The result is a holistic source of directional guidance informed by the input of our macroeconomists.

White Swans: RGE is not afraid to consider regime breakdowns, and our extensive experience with emerging markets tempers our reliance on quantitative methods. At RGE, we view such events as part of the global economy, not exceptions to normality. Crises, as Nouriel Roubini has said, "are white swans, not black." As consensus lapses back toward cheerleading mode, RGE stays independent and unbiased.

Quant Unbound: Modern portfolio theory and the capital asset pricing model are not useless, but incomplete; stylized models lack any value during periods of stress or structural change. The Great Recession has definitively proved the need to grapple with crises before they start. RGE views these dangers as identifiable and even manageable. From a strategy point of view, they are sources of investment opportunity, and even those not focused on macro investing now know the price of ignoring their "macro blind spot."

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