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Tan Kai Xian

Statistician & US analyst
After graduating with a first-class degree in Quantitative Finance from The Hong Kong University of Science and Technology, Kai Xian joined Gavekal as Statistician, responsible for creating and maintaining databases, developing models and indicators. KX, as he’s universally known around the office, also assists valiantly in our coverage of the US economy. He first worked with Gavekal in 2012 and officially joined the research team in 2013. Born and raised in Malaysia, Kai Xian is fluent in English, Mandarin, Cantonese and Malay.

For KX's article archive click here.


KX applies the Austrian Business Cycle Theory (ABCT) by utilizing measures such as the “true money supply” as defined by economists of the Austrian School and the unemployment-NAIRU gap to identify where we are in the business cycle and provides a portfolio recommendation. By request, some of KX’s charts on this subject are provided below, with the data updated daily.


Interactive chart

When the true money supply growth is growing significantly faster than real GDP growth (say more than one standard deviation above its 10-year moving average), investors should go “all-in” on risky assets (in this model portfolio, a 50-50 balanced portfolio of S&P 500 and 10-15 year investment grade corporate bond is used). On the flipside, when the relative growth rate falls substantially (more than one standard deviation below its 10-year moving average), investors are recommended to de-risk (here, T-bill is used as the “riskless” asset). When the spread is above or below the moving average, risk assets should be over- or under-weighted accordingly.



Interactive chart

The spread between US unemployment rate and the non-accelerating inflation rate of unemployment indicates whether the US economy is running above or below its potential. When the economy overheats, real profits falls and borrowing rises. This significantly increases the odds of an economic collapse when money supply falls as there are more leveraged businesses in the system. Therefore, investors should be extra cautious and allocate a smaller weight to the risky assets, at least relative to periods of economy running below its potential.



Interactive chart

The combined rule provides higher Sharpe ratio as compared to S&P 500, the Merrill Lynch 10-15 year investment grade corporate bonds index and the 50-50 balanced portfolio of S&P 500 and the corporate bond index as well as the equally weighted portfolio of S&P 500, the corporate bond index and treasury bills, and has successfully pared risk before all of the recessions since 1973 (see A Portfolio For The Monetary Cycle).

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