Global trade, emerging markets, and the interconnected world.
It’s episode 143 and we’re very happy to have our guest Louis-Vincent Gave, the Founding Partner and Chief Executive Officer at Gavekal Research. Louis has written 7 books, the latest being Avoiding the Punch: Investing in Uncertain Times which reviews how to build a portfolio at a time of rising geostrategic strife. Louis has recently written an article that is referenced in today’s episode. You can read it here: The Revenge Of The Ottoman Empire
Some of the many topics covered include:
- China’s massive real estate bust and its effect on their stock market
- Chinese trade surplus surged when it shifted its export mix and export destinations
- Western sanctions on Russia have had unexpected results on the US dollar
- Why is Mexico doing so well?
- Future opportunities where populations and incomes are increasing
- China is now the number one car exporter
- The US is pumping 1 million barrels more with increased productivity – but oil stocks are not reflecting the positive news
- The US Magnificent 7 bull market vs. normal bull markets in other countries
”I think the perception out there indeed on emerging markets is that it's terrible. Meanwhile, you look at the performance, emerging market bonds have absolutely crushed U.S. treasuries.Louis-Vincent Gave
”China from nowhere five years ago is now the biggest car exporter in the world.Louis-Vincent Gave
”..in the US you've got your Magnificent 7 pointing in one direction and everything else pointing in the other. Meanwhile, you go to Japan, super healthy banks, broad market rising real estate. ..it's all pointing in the same direction. So it's like, okay, this ticks all the boxes of a normal bull market.Louis-Vincent Gave
Hidden Facts of Finance
The total market cap of the Magnificent Seven is now three times the size of every single stock in the Russell 2000 index combined, making just seven stocks the equivalent of 6000 small cap names on average. 47 analysts follow the Magnificent Seven versus just five for a small-cap name. 9% of smaller companies have no followers at all.
There are roughly 16 million American households that are worth 1 million or more, but that number includes primary residences. So the number of a million investable assets is much smaller. Something like 5% of the population.
Since 1800, gold has returned just 0.32% a year after inflation versus 3.07% for the ten-year Treasury and 6.83% for U.S. stocks. Interestingly, we are only 15% above the peak during the American Civil War in the 1860s when inflation was very high. $100 is still below the inflation-adjusted high of $3,333 reached in early 1980.