Gurevich believes that it’s an urban legend that gold and the dollar are fundamentally negatively correlated. Instead, he argues that the apparent correlation is simply an illusion caused by gold being priced in dollars, which brings a mechanical link to the dollar. Gurevich is bullish on both gold and the dollar on market liquidity dynamics. He likes trades like long gold and short Australian dollar. He breaks apart some other myths, too. Gurevich doesn’t think the real estate market and equity markets always crash together, notwithstanding what we saw in 2008. Given low interest rates, he is more bullish real estate than equities. Finally, he pours cold water on the notion that yield curve inversions have any predictive power for recessions. He finds much circularity in the reasoning for the link between the two. For example, the Fed will cut rates because it fears a recession, these cuts invert the curve. The fed sees the inversion and cut more, etc.
Why does this matter? Investors often become lazy with their heuristics. Sometimes a simple bit of logical thinking can break open the common links that investors make. The crucial dynamic in markets are coming low interest rates. Start with that, and then make your investment decisions.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)
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