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Gavekal-IS
Antifragile Asia
Didier Darcet
10 Oct 2024
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.
Gavekal-IS
The Big Long
Didier Darcet
26 Sep 2024
In January this year, the global economy entered a rather unusual phase that now demands close attention. Since the US dollar was floated in August 1971, this type of economic configuration has occurred more than a dozen times, says Didier. The important thing for investors is that it has led to dramatic stock market rallies, especially in emerging markets, alongside strong gains in their currencies and in the gold price.
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The Central Bank Of The Real Economy
For years, Gavekal-IS has focused on the strong connection between three key forms of money: fiat currency, gold and primary energy. For a portfolio manager, juggling between bonds and gold on the defensive side of a portfolio poses no problem. However, investing in oil on the futures market, for example, presents a big risk—prices could drop as has been the case this week or, in extreme cases, even go negative. So what to do, asks Didier.
Critical Avalanche
Early August saw turbulence that caused the MSCI World index to slide -6% and the Japanese Topix to slump -20%. The episode left portfolio managers with the choice of cutting all risks and incurring losses, or instead toughing out the market adjustment. In this report, Didier explains why his differentiation between fundamental factors and incidental factors led him to sit tight.
The Invariant Of Savings (Part III)
Charles and Didier have established that a “permanent portfolio” balancing stocks, bonds, cash and gold generates real returns of 3-4% per year across different economies. But why this amount? And are there any circumstances that could destroy the permanent portfolio’s proven performance in the future?
The Invariant Of Savings (Part II)
Charles and Didier continue their search for the invariant element in investment, exploring the vital importance of symmetry in portfolio construction.
The Invariant Of Savings (Part I)
As in mathematics or physics, the holy grail of finance is to identify the invariant in any system. Examining returns on savings over many decades, Charles and Didier have found a promising candidate.
At The Heart Of Economic Diffusion
A client in Asia recently asked Didier why Gavekal-IS tracks the intersection of inflation and growth on an equally-weighted basis, country by country, and not by market importance. He says this is a crucial question, because it gets to the heart of how influence spreads. In other words, it asks whether global trends are driven by major players, like we so often see in fashion, or on the internet.