Colm O'Shea (COMAC Captial) O'Shea is a macro global trader - a strategy style that seeks to profit from correctly

anticipating directional trends in global currency, interest rate, equity and commodity markets. O'Shea views his trading ideas as hypotheses. A arket move counter to the e!pected direction is proof that his hypothesis for that trade is wrong, and O'Shea then has no reluctance in liquidating the position. O'Shea defines the price point that would invalidate his hypothesis before he places a trade. "e si#es his position so that loss from a move to that price level is limited to a small percentage of assets. Brief about Colm O'Shea After graduating from $ambridge in %&&', O'Shea landed a (ob as a trader for $itigroup. "e was profitable every year, and his trading line and responsibilities steadily increased. )y the time O' Shea left $itigroup in '**+ to become portfolio manager for Soros's ,uantum -und, the was trading an e!posure level equivalent to a multi-billion dollar hedge fund. After ' successful years at Soros, O'Shea left to become a global macro strategy manager for the multimanager fund at )alyasny, a portfolio that was to be the precursor for this hedge fund, $O A$, formed ' years later. Interview (with my comments in italics) When did you first become interested in markets ? .t was one of those incredible chance occurrences. /hen . was %0, . was backpacking across 1urope. . was in 2ome and had run out of books to read. . went to local open market where there was a book vendor, and , literally, the only book they had in 1nglish was 21 .3.S$13$1S O- A S4O$5 O612A4O2. . was an old, tattered copy. . still have it. .ts the only possession in the world that . care about. 4he book was ama#ing. .t brought everything in my life together. What hooked you ? /hat hooked me early about macro was..... o! " meant #hat hooked you about the book? $he book has nothin% to do #ith macro& . disagree. .ts all there. .t starts off with the protagonist (ust reading the tape, but that isn't what he developed into. 1veryone gives him tips, but the character r 6artridge tells him all that matters, 7.ts a bull market.7 4hat's a fundamental macro person. 6artridge teaches him that there is a much bigger picture. .ts not (ust random noise making the numbers go up and down. 4here is something else going on that makes it a bull or bear market. As the book's narrator goes through his career, he becomes increasingly fundamental. "e starts talking about demand and supply, which is what global macro is all about. 6eople get all e!cited about price movements, but they completely misunderstand that there is a bigger picture in which those price movements happen. 6rice movements only have meaning in the conte!t of the fundamental landscape. 4o use a sailing analogy, the wind matters, but tide matters too. .f you don't

know what the tide is, and you plan everything (ust based on the wind, you are going to end up crashing into the rocks. 4hat is how . see fundamentals and technicals. 8ou need to pay attention to both to make sense of the picture. 2eminiscences is a brilliant book about the (ourney. 4he narrator starts out with an interest in watching numbers go up and down. . started out with an interest in politics and economics. )ut we both end up in a place that is not that far apart. 8ou need to develop your own market e!perience. 8ou are only going to fully understand what traders in you books were saying after you have done it yourself. 4hen you reali#e, 7Oh, thats what they meant.7 .t seems really obvious. )ut before you e!perience it and learn it, its hard to understand. What #as the ne't step in your (ourney to becomin% a trader after readin% )eminiscences ? . went to $ambridge to study economics. . knew . wanted to study economics from the age of %', well before my interest in markets. . wanted to do it because . loved economics, not because . thought that was a pathway to markets. 4oo many people do things for other reasons. What did you learn in colle%e about economics that #as important ? . was very lucky that . went to college when . did. .f . went now, . think . would really be disappointed because the way economics is currently taught is terrible. $ell me #hat you mean by that& /hen . went to university, economics was taught more like philosophy than engineering. Since, then economics has become all about mathematical rigor and modeling. 4he thing about mathematical modeling is that in order to make problems tractable, you need to make assumptions. Assumptions then become a!iomatic for the entire sub(ect - not because they are true, but because they are necessary to get a solution. So, it is easier to assume efficient markets because without that assumption, you can't do the math. 4he problem is that markets aren't efficient, but that fact is (ust conveniently ignored. And the mathematical models can't include the unpredictable impact of speculators! either& 4hat's right. )ecause once you introduce them, you have a mathematical model that can't be solved. .n the current world of economics, mathematical rigor is valued above all else. .t's the only way you will get your 6"9: it's the only way you will get a career in academia: it's the only way you will get tenure. As a consequence, anyone . would call an economist has been moved out of the economics department and into history, political science, or sociology. 4he mathemati#ation of economics has been a disaster because it has greatly narrowed the scope of the field. 9o you have a favorite economist; 5eynes. .t's a shame that 5eynesianism in the <S has become this weird word whose meaning is barely recogni#able.

$hats because in the *S! people apply the #ord +eynesianism to refer to deficit spendin%! re%ardless of #hether it occurs in an economic e'pansion or contraction& 4hat's not what he said. " kno# that& Althou%h he certainly #ould ha,e fa,ored deficit spendin% in -../ and -..0! he #ould ha,e had a ,ery different perspecti,e about deficit spendin% the e'pandin% economy that pre,ailed in pre,ious years& 8es, 5eynes was a fiscal conservative. " am curious as to your ,ie#s re%ardin% the critical dilemma that currently faces the *S& On one hand! if deficits are allo#ed to %o on! it could #ell lead to a catastrophic outcome& On other hand! if you be%in substantially cuttin% spendin% #ith current unemployment still ,ery hi%h! it could tri%%er a se,ere economic contraction! leadin% to lo#er re,enues and up#ard pressure on the deficit& 4he argument for fiscal stimulus is a perfectly coherent, logical case. 4he counterargument that we should cut spending now is also a perfectly rational case. )ut both sides are often e!pressed in totally irrational ways. . think the biggest mistake people market is to assume there is an answer when, in fact, there may not be a good answer. My Comment - Accepting there is not optimal solution to every problem itself could be optimal solution. " actually had the same perception after -../ presidential election& i thou%ht the economy had been so mismana%ed bet#een the combination of e'plodin% debt and post bubble collapse in economic acti,ity that there mi%ht not be any solution& the American humor ne#spaper! the Onion! captured the situation perfectly& $heir headline after Obama #as elected #as! 1Black Man 2i,en ation's Worst 3ob&1 All solutions that will work in real world have to embrace the fact that <S is not as rich as Americans think it is. ost political solutions will be in denial of that fact. 9id you know what you wanted to do when you were in university ; 8es, become a trader. Although looking back at it, at the time, . didn't quite know what that meant.