Capital Flows and Asset Markets

I get asked who in financial markets do I read? The answer is not many people. For some reason, people with not much to actually say will pad out their comments with all sort of superfluous gunk (quoting ancient Greek history or alluding to some esoteric science are classic signs of a time wasting financial writer). But if I do read someone, and they made me money, then I will keep reading their s...

One thing I love about being a in the markets is you develop and idea, and then apply and you are almost immediately told if you are right or wrong (or too early or too late). GLD/TLT has been such a good trade, I am surprised its managed to be as weak as it has this year. Down 26% from the highs, and down 8% this year. This has indeed focused my mind. What could have changed in markets to drive s...

Red pill/blue pill is an analogy I have used before. I like it, because it goes to heart the angst markets put me through occasionally. Red pill is for the hard truth, and blue pill is for the comfortable lie. But in financial market terms - you want to be taking the red pill, when everyone else is taking the blue pill. My red pill is that governments are now “pro-labour”, so we will see a prolong...

Since a peak earlier this year, GLD/TLT has entered a bear market, down nearly 23% from the peak. At the time I expressed my surprise at this move, as it coincided with a steep rise in the oil price - which I would see as gold bullish and bond bearish. We have also seen a period of pronounced dollar strength. What seems to be driving movements in GLD, TLT and DXY is short term interest rate expect...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com The use of levered ETFs has grown substantially over the years. This year has seen record notional volumes. 200 stocks have their own levered or inverse stock ETF now. It should be unsurprising that long leveraged ETFs dominate.

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com There are an increasing number of divergences in markets, which typically signal caution. Furthermore, there are signs of increasing amount of leverage in the both bond and equity markets.

Generally speaking, I have gotten most of the big calls right. Unlike the vast majority of the "macro community”, I did not think closing the Straits of Hormuz was going to be a massive problem (see my Gays of Hormuz note). In essence, I argued that closing the Straits only really hurt China as an oil importer, and would just accelerate the development of alternative energy sources. That is chasin...

The Economist happened to be hosting a conference on “Commercialising Quantum Global” at a venue that was about seven stops down the tube line for me - so I decided to pop along. When I started in markets from 2000 onwards, I learnt that tech and pharma stocks were the most unpredictable of investments, so generally avoided them if I could. The last ten years has shown that is not a viable option...

With the bull market and now bear market in gold, I had lost sight (temporarily) of what I am trying to do with GLD/TLT. My thoughts for the last few weeks were all on why was gold so weak. And this is fair enough. But the real issue is why has TLT not been weaker? My thoughts on TLT were reignited when I was reading a Special Report on the treasury market in the Economist. Generally speaking a go...

I think gold still looks interesting - mainly because Donald Trump is still President. This makes owning treasuries seem unattractive, AND makes it likely he will pressure the Fed. That being said, it is some 25% down from it peak, and squarely in bear market territory. These days people typically talk about passive investing distorting the market - see Michael Green’s work. Personally, I have fou...

I have like gold as part of GLD/TLT trade for a long time, and it has been a great trade - but last few months it has been very lacklustre. It has traded right back and now through its 200MDA, which might mean its time to add, or its breaking down. What follows is a stream of consciousness analysis….. The truth of the matter is that all the price action has been in the gold part of the trade. I th...

When I first starting to think about the idea of a pro-labour theory of markets, I assumed the cost of capital would rise for political reasons. The long period of "pro-capital” policy had lead to the creation of large pools of capital. The first, and most exceptional in my view were foreign reserves. The idea of buying another countries fixed income was a completely foreign idea before 1980. All...

The big news is that Nasdaq fell 4% on Friday, which takes it all the way back to where it was a month ago. The AI trade has become huge. And it is noticeable that equities have diverged from HYG. When HYG is going down, then equities tend to follow. But credit spreads remain tight. The real driver is the market reassessing the likely interest rate path of the Federal Reserve. US 2 year rates sold...

The way I work is I try and think about the world we live in, and what are the most likely long term outcomes. As of today, I still think a pro-labour world which drives higher inflation, and an eventually dearth of capital. My favourite way to play this has been GLD/TLT. This has been a great trade - but to paraphrase Monty Python, is seems to be having a bit of a lie down after a long squawk. I...

I have been generally very bullish on fertility rates rising again. I saw three big changes - first was rising wages, the second was improved reproductive technology, and thirdly was the rise of “work from home” culture, which made raising children easier. The one country that might be the first to show an inflection higher in birth rates was Denmark, which has greatly liberalised its access to re...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com GLD/TLT actually lost 1.7% in May, as gold remains lacklustre, and TLT which looked like it was ready to break down, staged a rally. The US 30 year treasury briefly broke 5%, but came back again. Coming into the month, it was beginning to look like credit markets were backing away from endlessly financing AI spend...

I had lunch with an old client a few months ago. One thing he said to me was the GLD/TLT was my only idea. A little harsh, but maybe is is the only idea I have been REALLY committed to for the last four years or so. And why not? It WAS a great idea. But since a blow off peak in January it has been going sideways. The really problematic part at the moment is gold. For the first time since 2024, its...

The original thinking behind the Pro-Labour trade was that politicians everywhere were being forced to address imbalances in the economy. The main one was sky high property prices. After the GFC, another property crash was off the political cards more or less. This left politicians with only one choice, raise wages while keeping property prices flat in nominal terms. This issue, as I saw it, was t...

In a recent note, I was looking at Softbank and Oracle, and thought they looked the weakest link in the AI financing chain. In simple terms, all the other AI players have access to the cash to compete, while Softbank was relying on margin loans on its ARM and OpenAI holdings. Looking at debt markets, CDS were also signalling weakness. The law case that Elon Musk had against OpenAI was dismissed, a...

There was a time when a prospectus was a dime a dozen. As an analyst in the 2000s, my main job was to read them and then go the management lunch, and work out if they were a buy or not. I love a good prospectus - its the only time management has to be clear and up front about risks. But with the rise of private equity and venture capital, IPOs have become much rarer. But today we get to go through...

Three years ago I wrote a note on How to Read The Economist . A lot of financial people do not take the Economist seriously - there is the famous contra indicator of the cover being the exact wrong thing to do. I do not disagree with this. But as I say above, and in my previously published note, the key to the Economist is to read it backwards. The first thing you find at the back is the Obituary....

After a blow off move in January, GLT/TLT has been going sideways since then. As mentioned numerous times, I am more bearish TLT than bullish GLD, but I needed to have GLD just in case the Fed did YCC or something similarly foolish. And in 2024 and 2025, gold has been much the better trade. As is the case with all these relative value trades, the market fell in love with the side that is working -...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I am thinking of going to New York for 10-11 June. If you are an allocator, and would like to meet, then drop me a line. Below is really a short thesis on AI - why its has blown up so aggressively, and how it could fall apart. Generally speaking, bullish ideas have relatively low value, but short ideas are very val...

I like Goldman Sachs research. They tend to produce big bits of research with enough raw data for you to make your own decisions. If you wanted a single image to explain the market explosion higher, then these next three graphs would probably be it. In the first graph, it shows that GS thinks “agent” demand for tokens is going to grow demand 13 times more than current token demand by 2030. My gues...

There was a time, not that long ago, when the cheapest provider would be the corporate winner. Remember the days when online shopping was always the cheapest option? Or when streaming was much cheaper than buying DVDs? This was a period when government enforced competition, which has sadly disappeared. These days, particular in tech world, its how much capital you raise that is the most important...