Papic Marko - An Investment Framework for Predicting the Future

1. Chapter 1
2. Chapter 2
3. Chapter 3
4. Chapter 4
5. Chapter 5
6. Chapter 6
7. Chapter 7
8. Chapter 8
9. Chapter 9
10. Chapter 10
11. Chapter 11
12. Chapter 12

By
Marko Papic

Copyright 2021 by Marko Papic. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Names: Papic, Marko (Geopolitical strategist), author.

Title: Geopolitical alpha : an investment framework for predicting the future / by Marko Papic.

Description: Hoboken, New Jersey : John Wiley & Sons, Inc., [2020] | Includes bibliographical references and index.

Identifiers: LCCN 2020025448 (print) | LCCN 2020025449 (ebook) | ISBN 9781119740216 (hardback) | ISBN 9781119740230 (adobe pdf) | ISBN 9781119740223 (epub)

Subjects: LCSH: Investment analysis. | GeopoliticsEconomic aspects. | Economic forecasting. | Investments.

Classification: LCC HG4529 .P37 2020 (print) | LCC HG4529 (ebook) | DDC 332.67/253dc23

LC record available at https://lccn.loc.gov/2020025448

LC ebook record available at https://lccn.loc.gov/2020025449

Cover Design and Illustration: Tata Wijana Warsita

Author Photo: Steven Drobny

This book is dedicated to the country that no longer exists.

Pjevaj nek te uju, ko ne slua pjesmu sluae oluju!

Montreal. February 2017.

A cold, dark, and ice-stormy night.

I met Marko Papic for the first time over dinner at a spot he enthusiastically called the coolest restaurant in town. Upon entering, I found a dark and empty restaurant save for a bartender, a waiter, a mitre d', and a lone customer sitting in the back corner. I started strategizing a polite early exit. But the food and drinks were incredible, and we proceeded to have an excellent, wide-ranging conversation. We stayed late and got totally blasted. It was the first of many times I would observe Marko make a correct, out-of-consensus call.

Within minutes of meeting Marko, I knew he was unique. My singular skill is sniffing out quality from crap and gathering the good ones around me be it finding new money managers to run capital for our institutional clients, bringing together smart investors on a deal, backing founders of new financial technology companies, or convening the most interesting people in the world at an event in some far-flung location. I also seek out those with unique skills and try to persuade them to join the Clocktower Group team.

By the time I met Marko, I'd been looking for a chief strategist for a while. I needed someone to act like a basketball center, a big man in the middle to gel the team. I was looking for a beautiful mind to sit on top of our unique and exclusive information flow, then channel it into a coherent form for our clients. At first, I looked for the typical economist. Over the past 40 years, bond markets, central bankers, and finance ministers drove markets and the world. It was the Lords of Finance and the Committees to Save the World who pulled the puppet strings, and the alpha lay in correctly forecasting their next move.

Enter 2016.

The passing of the Brexit referendum and the election of Donald Trump marked a sea change in the macro game. Populist movements in developed countries drove home the point that the era of the economist and the interest rate soothsayer was over. In the post-Trump, post-Brexit era, geopolitics are all that counts. With interest rates pegged to the zero lower bound for the foreseeable future, the Lords of Finance and Committees to Save the World have run out of ammo.

As such, Clocktower's chief strategist needed not be an Ivy-trained economist with a perfect rsum coupled with a PhD, CFA, MBA, and other meaningless acronyms. We needed someone not locked on the movements of the Fed & Co., but focused on international and domestic politics. The battles and power players of today (and tomorrow) are Trump versus Xi, the UK versus Europe, Putin versus world, MBS, Macri, Bolsanaro, etc.

Enter Marko Papic: a geopolitical expert who grew up getting chased by packs of wild dogs in collapsing Yugoslavia; who subsequently moved to Iraq, Jordan, Switzerland and Texas; and who married a Tejana and settled in Canada. Whispers of an unorthodox geopolitical thinker with out-of-consensus market views drifted from clients and prospects. A strategist out of Montreal who more often than not, turned out to be right. For many, Marko, the nihilist Serbian, was their favorite strategist. I realized he was just the stateless, unbiased, enthusiastic, unique idea generator that the team in Santa Monica needed to fill out our global macro squad.

After following Marko's calls for a year and test-driving him at a few client events, I spent the better part of 2018 convincing him that the beaches of Southern California are a better place than the slopes of Mont-Tremblant. In December 2018, Marko signed on to join Clocktower Group as our chief strategist. In 2019, he crushed it. In January 2020, I said, Marko, that was great, but now it is time to take the training wheels off, and made him write this book. I've written two books about global macro and was halfway through writing my third: the final installment in my trilogy. Contract was signed, chapters were in the can, and an advance was paid. Halfway through, the world changed. It was time to pass the ball to the big man in the middle.