Because of the petrodollar theme, I don’t think we’re going to see a dollar collapse. So I think people should be very careful about shorting the U.S. dollar.

As a lot of people found out last year . . .

And even this year. You know it’s not really off that much. I think the weakest currency is probably the euro, and maybe the pound. These have been the core beneficiaries of the petrodollar recycling.

How scaleable are your macro plays?

They are pretty scaleable, but you never know. We are not going to scale it beyond the point where it doesn’t make sense. From a manager’s perspective, you want to scale it to infinity. From a return to investor’s perspective, there is some limit—maybe it’s $5 billion, maybe $10 billion; somewhere in that range is the limit for a global macro fund that’s not doing a diversified multi­strategy approach.

How do you use leverage?

We calibrate it by the riskiness of the assets. You don’t want to use very much leverage with equities. I think with fixed income or currencies, you can use somewhat more. We try to avoid incredibly leveraged and theoretically offsetting positions that are popular. I think that’s one of the lessons from Long Term Capital Management.

That theoretically offsetting positions start to correlate under pressure . . .

They start to correlate, yes, so we think of each of our positions on its own merits. We don’t look at them as much on a portfolio basis, so that somewhat constrains the amount of leverage you can use, if you’re not taking these theoretically offsetting positions.

When you’re considering a position, what’s the breakdown between quantitative, fundamental analysis and the “gut,” or more qualitative factors, you consider?

It’s a combination of both. We try to bring quantitative analysis to bear on the problems we are looking at. Those problems are, by their nature, however, not entirely quantifiably reducible. We’re not at a point yet where we have a computer program that can do classic global macro investing.

Petrodollar recycling is a shorthand adopted after the first oil shocks in the early 1970s to describe the process by which proceeds from the sale of oil are reinvested by oil producing countries in either hard or financial assets, usually in oil consuming countries.

Peak oil is the theory that global production of oil has (or soon will have) reached its peak.

The Greenspan put is the former Fed chairman’s policy of providing massive liquidity injections after market shocks—first employed in the wake of the 1987 market crash and most recently in the wake of the dot-com bubble.

Long Term Capital Management was a $5 billion highly leveraged arbitrage hedge fund that suffered massive losses during a flight to quality after the Russian default in the late 1990s. Many of its positions were designed to offset one another, but they began to move in the same direction during a severe market sell-off.

Photograph by Thomas Hart Shelby.