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Gavekal-IS
If You Must Hold Bonds
Didier Darcet
19 Dec 2024
Interest rates cannot play nice with both gold and long-dated government bonds at the same time—it is a one-or-the-other deal. Some investors reluctantly find themselves tied to bonds, whether for asset-liability management reasons, or regulatory requirements. Are they doomed? Not necessarily, explains Didier in this report.
Gavekal-IS
Inside Musk’s Mind
Didier Darcet
5 Dec 2024
Elon Musk has been charged with making the US government efficient. Many observers dismiss this goal as unattainable. However, Didier argues that by applying an evolution of the Pareto principle, which dictates that 80% of results come from 20% of causes, Musk might just achieve the impossible.
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Schumpeter Was Right
From the birth of stars and planets to the rise of life itself, a drive for greater efficiency has shaped the universe, says Didier. But the same force that builds also destroys. In this piece, he relates the effort to create a universal law of nature to investing—and to the idea of markets reaching a critical tipping point.
The Retreat Of The American Empire
Donald Trump’s sweeping electoral victory signals that the US may be at a turning point, contends Didier Darcet. The financial effects that flow from his decision to pick nation over empire will have far-reaching consequences.
A New Currency For BRICS?
The 16th BRICS summit, held in Kazan, Tatarstan two weeks back, saw much talk of a new BRICS currency and related banking payments system, which could challenge the US dollar’s supremacy. Didier seeks to decompose what the underlying basket for such a diffuse currency would look like.
Economic Success And Culture
Innovation thrives when individuals have freedom, but too much can lead to chaos and therefore authority is a necessary constraint. The interplay between these factors shapes the economic systems of today, as they once influenced family structures before the industrial revolution. Didier examines what this can tell us about how to drive economic growth, and where to allocate various asset classes.
Too Much Governance And Too Much Debt: Why?
What is the link between housing, milk and paper toilet rolls? For Didier, the answer lies in pricing distortions created by the administrative state that have led to too much, or too little, of such basic items being made available to consumers. Investors need to beware the hand of such interventions.
Antifragile Asia
A decade or so ago, Professor Nassim Taleb introduced the concept of antifragility, whereby a small number of financial assets thrive under stress. Gavekal-IS has taken Taleb’s idea further, developing models and algorithms to measure an asset’s ability to do well even in extremely volatile times. Among the world’s fiat currencies, it turns out that the yen is the most antifragile, while Chinese stocks have also acquired this trait over the past five years. In today’s report, Didier explains why this might be the case.