Our Brave New World

Charles Gave

Louis-Vincent Gave

Anatole Kaletsky

GaveKal Research

Today's global financial system is characterized by a curious mixture of freedom and manipulations. Between the two main currencies of the world, the US$ and the Euro, we have a free float. But between the dollar and a lot of other currencies, especially in Asia, we have a dirty float, or fixed exchange rates, the goal being to maintain the exchange rate at an abnormally low parity to the dollar. To make matter worse, a lot of those countries (especially China and India) have decided to make their currency inconvertible. This would not matter if these currencies were small and irrelevant, but they are increasingly less so by the day. This state of affairs leads to profound price, and volume, distortions, some well understood (i.e.: the RMB is undervalued and can only go up) and some not as well understood. It also triggers a number of important questions. Namely: * What distortions does the intervention of non-market players in the Asian foreign exchange markets engender? * Are the distortions abating? Or accelerating? * How long can those distortions last? * If/when the adjustment comes, what assets will be most at risk? Of all these questions, the last one is probably the most important. As we never tire of writing, money management is often more about avoiding the assets that implode, and diversifying amongst the rest, than about picking outsized winners. While it may be tempting to adopt a very defensive posture in the face of such blatant distortion, there are many reasons to believe that the current overall positive growth environment will continue over the coming years. In The End is Not Nigh, we push some of the themes developed in Our Brave New World a little further and review the reasons that have led us, in recent years, to shy away from prophecies of doom and why we remain positive on global financial markets.

The End Is Not Nigh

Gave, Louis-Vincent, Charles Gave, Anatole Kaletsky and Steven Vannelli

At GaveKal, we have argued at length over recent years that one of the driving forces of the financial markets was the "financial revolution" which was quietly moving from the US and other Anglo-Saxon countries unto the rest of the world. Today, this financial revolution seems to be, at the very best, "put on hold". So what impact should that have on our investment decisions? Just as importantly, this very important change to the investment environment is not the only paradigm-shifting event that has occurred since we published Our Brave New World (now out of print but available for free for download from our website) and The End is Not Nigh. And in periods of drastic change, it is easy to focus on the negative and be overwhelmed by the general media's natural tendency to spread doom and gloom. And undeniably, there are serious reasons to be concerned: - The financial revolution has hit a serious road-bump and will likely detract more from growth than contribute to economic activity for the foreseeable future. - We continue to see, through rising oil prices, an ever greater amount of wealth transferred from market players to non-market players (i.e.: oil money to Venezuela, Iran or Saudi Arabia; growth in Russian reserves etc...). This is rarely conducive to faster growth. - Until Asian central banks decide to bite the bullet and stop manipulating their currencies, inflation in Asia may very well continue to accelerate, prompting counter-productive price-control measures, constraints on bank lending etc... Still, for every reason to be negative, we find some reasons to be positive. These reasons include the fact that more people are getting richer, and freer, than the world has ever seen, and all at the same time. In this new book, we review both our concerns and the factors of growth around the world which contribute to our overall optimism. And, in so doing, we present our "investment roadmap" for the coming years.

A Roadmap For Troubling Times

When Lord Salisbury was asked by Queen Victoria to consider a reform, he famously replied: "Change? Your majesty, aren't things bad enough as they are?" Of course, it is in the nature of conservatives to look askance at change. But sometimes, change is thrust upon us; and in that regard, turn of the century periods tend to be particularly traumatic. Think of a man who fell asleep for 30 years in 1790. Our sloth would have woken up to a very different world in 1820 (France was no longer the dominant European power, Britain was rapidly expanding her global reach, Spain had become a has-been, the United States was experimenting with a new form of government...).

Too Different for Comfort

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Books by GaveKal Research

See the best price to sell, buy or rent books by the GaveKal Research publisher. BookScouter helps to compare book prices from 25+ online bookstores and 30+ buyback vendors with a single search.

Our Brave New World

The End Is Not Nigh

A Roadmap For Troubling Times

Too Different for Comfort