Edward Conard

Top Ten New York Times Bestselling Author

  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
Upside of Inequality Oxford Unintended Consequences

AI Summary. The author argues that energy, rather than fixed income, now serves as the true hedge to equity positions, pushing investors, companies and countries to review their energy allocations and policies. Chinese government bonds diversified equity risk when no other major bond market did, which the author attributes to China being the only major economy without a meaningful inflation problem.

Louis-Vincent Gave Gavekal
Date Posted:

Prior to the war, investors had largely stopped hedging energy-driven inflation. Gave argues that now “the true hedge to equity positions is no longer fixed income, but energy,” and notes China is “weathering the storm better than others.”

Has energy replaced fixed income as the true hedge to equities?

Core argument: The author argues the balanced portfolio is dead and that energy, not fixed income, has replaced fixed income as the true hedge to equity positions, a claim that holds truer the more policy worldwide remains unpredictable.

The past two weeks have once again illustrated that the balanced portfolio is dead and that the true hedge to equity positions is no longer fixed income, but energy. The more policy around the world remains unpredictable, the truer it will be. The closure of the Hormuz Strait is now forcing investors, companies and entire countries to accept this simple truth and review their energy allocations and policies. Once again, in this crisis, Chinese government bonds did their job diversifying equity risk when no other major bond market did so. This makes sense since China is the only major economy with no meaningful inflation problem. China is also one of the few major economies to have followed a rational, and consistent, energy policy over the past decade. [Since the start of the Iran War] Chinese government bonds did their job diversifying equity risk when no other major bond market did so. This makes sense since China is the only major economy with no meaningful inflation problem.

Takeaways by Macro Roundup® AI

  1. The author argues the balanced portfolio is dead and that energy, not fixed income, has replaced fixed income as the true hedge to equity positions, a claim that holds truer the more policy worldwide remains unpredictable.
  2. Chinese government bonds diversified equity risk since the start of the Iran War when no other major bond market did, which the author attributes to China being the only major economy without a meaningful inflation problem.
  3. The closure of the Hormuz Strait is forcing investors, companies and countries to review their energy allocations and policies, with China cited as one of the few major economies to have followed a rational, consistent energy policy over the past decade.

Related Articles:

  • High Prices and Upside Risks for Longer — Oil flows through the Strait of Hormuz are projected to stay at just 5% of normal levels for six weeks before a gradual one-month recovery. The authors expect the resulting supply shock to prompt policymakers to rebuild strategic reserves and markets to price a security premium into long-dated oil.
  • You Can’t Print Molecules — Rebuilding after a disruption to a key shipping strait would require governments to finance defense, strategic reserves, domestic energy production, and infrastructure at the same time that inflation expectations are raising funding costs. The author argues capital will rotate out of asset-light sectors that thrived on open sea lanes and cheap energy into asset-heavy physical ones.
  • Fighting Words: The Energy Transition in 2026 — Estimates based on primary energy overstate how much electricity is needed to replace oil in passenger cars, since electric motors convert 80%-90% of electricity into motion versus about 18% for gasoline cars. Measuring useful final energy net of waste heat avoids this "primary energy fallacy": the US consumed 45 exajoules of useful final energy versus 95 exajoules of primary energy.
Showing 48 database articles primarily about Energy