Louis-Vincent Gave, CEO and co-founder of Gavekal Research, sees a dramatic paradigm shift playing out in the world economy. In this in-depth conversation, he explains how investors should position themselves for the future.
Louis-Vincent Gave is a master of the big picture. The co-founder of Hong Kong-based research boutique Gavekal is one of the most esteemed writers about geopolitical and macroeconomic developments and their impact on financial markets.
In this in-depth conversation with The Market NZZ, Mr. Gave shares his views on the Dollar, stock markets, oil and gold prices — and he explains why the United States are starting to act like a «sick emerging market».
«This year’s debt buildup in the US has funded zero new productive investments. No roads, no airports, railroads, nothing»: Louis Gave. (Images: Laurent Burst)
Mr Gave, 2020 has been a catalyst for some big shifts in the global investment environment. Looking into the future, what are the biggest topics for you?
I’ve spent most of my career in Asia, so my lens is fundamentally biased towards Asia. With that disclaimer, I would say this: When the Covid crisis started, the view in the West was that this would be China’s Chernobyl Moment. That they completely screwed up, which would eventually weaken the regime. Fast forward to today, and China comes out of this looking much better than most Western countries. If there is one big divergence in the world, it is this: In most Western countries, the population is angry at how their government dealt with the pandemic, either because they think the government did too much or too little. But in China, there is a feeling that there were two big crises in the past 15 years, the Global Financial Crisis in 2008 and now Covid, and China in both cases came out ahead of the West. Most of Asia actually came out of this much better than the Western world.
What else do you see?
When I look at markets, there are three key prices in the world economy: Ten year Treasury yields, oil, and the Dollar. One year ago, yields were going down, oil was going down, and the Dollar was going up. Today, Treasury yields are going up, oil is going up, and the Dollar is going down. This is a huge reversal. When I see a market where interest rates are rising and the currency is falling, alarm bells go off.
Why?
This is what you would see in a sick emerging market. If you’re invested in, say, Indonesia, rising interest rates and a falling currency is a signal that investors are getting out, because they don’t like the policy setting there. Today, the US is starting to act like a sick emerging market. We even have a question mark over whether they have the ability to run a fair election. Suffice to say that at least 30% of Americans believe their election system is rigged. This is mindblowing.
Source: Mark Dittli | The Market
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