The 80/20 rule tells us that 20% of your customers – the VIPs – accounts for 80% of your revenues. It is derived from a fundamental law – the Pareto Law – driving ecosystems towards a stable and efficient form of self-organization.

In 2000, developed countries accounted for 70% of world GDP and 80% of world GDP growth. In 2021, developed countries produced only 53% of the world’s wealth, and less than 20% of world GDP growth.

The economic and political world is undergoing a transition phase, which destabilizes the Pareto distribution. Yesterday’s VIPs may not be tomorrow’s.

In this reconfiguration, Japan is a pivot country in need of scrutiny. Japan is at a geopolitical crossroad, which could lead it East or West, as shown in the newfound volatility of its currency (the worst performing one among main currencies this year) and its stock market (the best performing one).

The Japanese yen is a mystery.

Much like Japan, in fact, the sole region in the world (in our macroeconomic partition) that is both a country and major economic center on its own.

The Japanese yen exhibits two unconventional properties:

Why? And how do we trade the mysterious yen?

Currency management is often the side-lined theme of portfolio construction. Portfolio managers tend to focus first on risk assets’ allocations, then on their currency exposures. And the last one of the climbing team is undoubtedly dragged by the first rope leaders.

The foreign exchange market, however, can provide hedges to cautious investors as well as easy leverage and high returns (uncorrelated to equities) for risk-takers.

Here is a simple quantitative solution to arbitrate the four main currencies of the world: the dollar, the euro, the yen, and the yuan.

Inflation, growth, profits, energy supply. So many uncertainties today.

One definite macroeconomic fact is the US monetary policy. The Fed will take a new trajectory on its balance sheet in a few weeks, for months and potentially years: A sustained contraction of a trillion USD per year.

This is a first in world monetary history.


What is happening on the battlefield in Ukraine left aside a second war (not military this time) in the monetary sphere. Roles are reversed. The Western world pushes hard to collapse the ruble, and thus destroy the Russian economy, and so, Russia retaliates. In both wars, resistance seems to be much stronger than expected. In three weeks’ time, we’ll see if Europe yields to President Putin’s requirement to pay Russian gas in rubles, or not.

The outcome could be a monetary game-changer.

As for any economic indicator, monetary polices can be viewed from two interdependent yet different angles:

A major “price” signal took place two years ago, announcing the debasement of major fiat currencies and the awakening of gold. Since then, gold has spiked 40%. A “volume” signal took place just one week ago, announcing a second wave of world liquidity in USD intimately correlated with the second wave of the COVID pandemic.

The consequences of the “volume” signal on asset allocation (if it lasts) could be as significant as the one on “price” some two years ago.

« All the things I could do, if I had a little money » chantait ABBA en 1976.

Aujourd’hui, ce n’est plus l’argent qui manque. Les grandes banques centrales des EtatsUnis, de l’Europe et du Japon, en ont imprimé entre 6 et 7 billions de dollar américains depuis le début de l’année 2020. Comment comprendre cette monnaie ? Est-elle surévaluée, sous-évaluée ?

« All the things I could do, if I had a little money » ABBA sang in 1976.

Today, there’s no shortage of money. Since the beginning of 2020, the major central banks of the United States, Europe and Japan have printed between six and seven trillion US dollars combined. How can we approach this currency? Is it overvalued or undervalued?

Entering December, the Gavekal TrackMacro model turned positive on world trade from neutral. Is TrackMacro misreading international trade? If not, how can ‘trade’ be accelerating in an environment of rarefied liquidity?

We cannot fill our car tanks with letters of credit, and we can’t have banknotes for dinner. This is because ‘Wealth’, and ‘Money’, are fundamentally different. This is an issue we have considered in many of our papers, defining asset value and wealth out of free energy, not money. Today, we argue that cash rates set at artificially low levels by major Central Banks for too long deeply affect developed economies’ wealth creation.

One of the notable financial events of 2019 was the switch by major central banks to a ‘Keynesian-type’ global monetary policy. Keynesian polices target the ‘euthanasia of the rentier’, so we know quite well who is likely to suffer from them. The question is, however: who benefits from the crime?

Gold’s purchasing power has remained remarkably stable in the past 400 years, at least until the end of the Bretton Woods system in August 1971. The ensuing debasement of major currencies created a new competition between gold and currencies to attract world savings, and also between currencies themselves. This letter looks to describe the terms of the competition and identify the best moments to buy currencies rather than gold.