Comparable to buying a single stock whose sell side analysts harp on sub par/inexperienced/weak management teams. Leaves a lot of blue sky potential on simple upgrades.
It seems like the market has been pricing in 1st order impacts (buy energy exporters, sell energy importers), while you are looking at 2nd and 3rd order impacts. This makes me think that you can probably reclassify countries from energy independent and energy dependent into countries that are CAPABLE of being energy independent and those that are not capable of being energy independent along any timeline. Does this mean we may be looking at underperformance of EM ex-China going forward from here? Or is that maybe an exaggeration given that I would assume most of the energy related ramifications of the conflict will be resolved within 12 months?
I really think the second order effect is to cause an acceleration in the move away from fossil fuels - as domestic energy supply becomes a paramount objective. Countries further along that path will do better. So Em ex china could well underperform
It does not fully explain the underperformance but the fact that GLD has become a 30% vol assets also doesn’t help (when you initially started with this trade the vol was much more similar). Plus, another factor that could explain gold inverse correlation to oil is some central banks selling to defend their own currencies (seems Turkey has swapped some of its reserves) - even though the ETFs outflows have also been meaningful
Comparable to buying a single stock whose sell side analysts harp on sub par/inexperienced/weak management teams. Leaves a lot of blue sky potential on simple upgrades.
As i tell my wife... the key to happiness is low expectations
It seems like the market has been pricing in 1st order impacts (buy energy exporters, sell energy importers), while you are looking at 2nd and 3rd order impacts. This makes me think that you can probably reclassify countries from energy independent and energy dependent into countries that are CAPABLE of being energy independent and those that are not capable of being energy independent along any timeline. Does this mean we may be looking at underperformance of EM ex-China going forward from here? Or is that maybe an exaggeration given that I would assume most of the energy related ramifications of the conflict will be resolved within 12 months?
I really think the second order effect is to cause an acceleration in the move away from fossil fuels - as domestic energy supply becomes a paramount objective. Countries further along that path will do better. So Em ex china could well underperform
It does not fully explain the underperformance but the fact that GLD has become a 30% vol assets also doesn’t help (when you initially started with this trade the vol was much more similar). Plus, another factor that could explain gold inverse correlation to oil is some central banks selling to defend their own currencies (seems Turkey has swapped some of its reserves) - even though the ETFs outflows have also been meaningful
There is the risk that gold goes the way of bitcoin. Against that.there are still large Treasury holdings in China that need to go somewhere....