Gold not following fundamental model

 

The chart above is the gold attribution model for UBS. Their chief strategist notes that the residuals have gotten larger since the Ukraine-Russia War. The argument is that the buying of gold has not followed the classic link between the dollar, real rates, and uncertainty. The residuals have gotten larger and have been on one side. The residuals indicate that gold is being driven by other factors, and the link to fundamentals has weakened. If we do not have a strong reason for the delinking, then there is reason to believe that gold will mean-revert.

What is driving China stock market

 

One of the biggest surprises in the global stock markets has been the move in China. With a gain of over 30% relative to the 13% move in the MSCI world, it does not make sense. The trade war issues with the US make these kinds of moves odd. Additionally, China's internal politics are not particularly friendly to business, and global investors still avoid investing there. Nevertheless, firm fiscal and monetary policies, coupled with measures to finance share buybacks and discussions of improved corporate governance, may be making Chinese equities a better alternative to the property market. Internal money flows may be the key driver. 

Nobel prize in economics - innovation and growth critical

 

We too often focus on the macroeconomic cycle. Of course, it is immediate, yet if you want to change the lives of many and a society, you need to focus on innovation, which leads to growth and productivity. The Nobel Prize winners in economics are three economists who concentrate on this critical issue. Moyr is an economic historian who closely studies the environment for innovation. Why did innovation occur at a particular time and place? The other two economists focused on endogenous growth through a Schumpeterian view of creative destruction.

Moyr is considered part of the idealist school of thinking on innovation. The culture matters when it comes to innovation. Aghion and Howitt are viewed as part of the materialist school, which focuses on modeling growth to explain how innovation drives it. 

Innovation drives growth, and we need to always think about how to foster it to increase growth and productivity.

There are no stocks to trade

When looking at the reasons for the rise in private equity investing, we cannot dismiss the role of fewer publicly traded stocks. Over the last 30 years, the number of listed companies has declined by 50%. Of course, the decline of public and rise of private equity is caused by some other factor. It could be the cost of regulatory requirements associated with being listed. It could be an advantage to work with a limited number of investors over a diverse set, regardless of the regulation. No matter the reasons, fewer companies are easily traded by investors on exchanges. The choices have fallen, and the diversification possibilities have declined.