Capital Flows and Asset Markets

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I like to think I am smart - and I am smart enough to know that I am not smarter than the market. Generally speaking, I like to get an idea of where we going, and then bet WITH the market on that direction. So before I get to individual trades (and the paywall), let me look at the overall market trends. As mentione...

President Trump is the first “social media” president. You can see it in how he looks to not only dominate the social media narrative, but remains heavily influenced by it. If a policy gives good traction on social media, you should expect him to run with it. But ultimately, all his policies seem to be advancing an “America First” agenda. The Liberation Tariff day sell off was all about giving Tru...

Unlike almost anyone else I know, my route to finance was via a currencies. I was working in HK in 1998, when the currency peg came under attack, and was fascinated by the way it affected interest rates and stock markets. I went back to university and wrote my thesis on private currencies (HK is last place in the world where private banks issue banknotes) and applied for a job at UBS. I then built...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com It has been plain that a war with Iran has been coming for awhile. The question was what would it look like? Would it be a Venezuelan style coup d’état? Or would a popular uprising sweep away the ancien régime? Or would it become a quagmire. Two weeks in, and the likelihood of the first two outcomes, which would ha...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com After I closed my last fund, and spent a few years thinking about how the world works, I realised that politics trumps macro. And even when it looks like macro is winning, it just that the politics is allowing it to win. First of all, I recognise that all the doom scrolling headlines on Iran could be true. And mayb...

When I look at the Israeli stock market, it is hard to see any signs of war pressure in this market. In fact it is at all time highs. The Economist has a good article on why Israelis would feel so secure. Iranian offensive ability has been severely degraded, with not only the amount of munitions being launched by Iran falling, the numbers actually making through falling precipitously. They have al...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com It was a war we knew was coming, but had no idea how it would start or end. Would it be one and done like Venezuela, or would somehow this be a new Iraq, a quagmire with no end? The problem with prognosticating on the war today, is that so many players have an interest is spreading disinformation. This mean basing...

Japan and Korea have been by far the weakest markets since the war in Iran started. Nikkei is down 8% this month - but as any day trader or amateur market technician would tell you, so far not even a correction in an uptrend. Kospi 200 is a meatier 20% this month, which meets the definition of a bear market - but again still in an uptrend. No prizes for guessing the catalyst. Asian LNG prices have...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com The current catalyst for a market shift is the war in Iran - and as it is a crisis, the market thinks all moves are temporary. For me, crisis tends to accelerate what the market is doing anyway. In the 40 year bull market in bonds, there were always crises, which would drive yields lower, but that was just an accel...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com One of the problems with getting older, is that you see similar market set ups, and you start thinking “uh-oh” I have seen this before. I am certainly getting 2007 deja vu all over again in February. Before I get into all that, let me tell you how we did in February.

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com No doubt this will confuse my American readers. I can see themselves saying “Why is this guy talking about a failed short?” Generally speaking my American’s friends advice to me is to talk about how awesome you are, and never show weakness. I have spent enough time in the US to understand why that is sound advice i...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I suspect in a special hell just for hedge fund managers, they are forced to run net short all the time. Making money shorting is tough - and even when it goes well, it can so easily reverse. While stocks can surge higher every day without a correction, I have never known a short not to bounce with perhaps one exce...

I have a lot of time for Brad Setser. In a recent FT article he claimed that China was still buying treasuries, but just via policy banks rather than as official foreign reserves. He provides this chart to support his view. Not the most intuitive chart, but basically the red line goes up when the Renminbi goes up, showing that banks in China buy more treasuries when the Renminbi goes up. The impli...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I have seen various short selling markets in my career. The first one, the dot com bust, was driven by over investment in a huge variety of internet and telecom assets. The second bear market I saw was the GFC - which at its heart was overinvestment in the housing market. The third was the commodity and emerging ma...

It is remarkably common to hear 50 something investment managers and strategists to compare the current AI boom to the dot com bubble. For those too young to remember - the dot com bubble burst in 2000, and the S&P 500 had three down years in a row. There were many poster childs of excess from that period, but perhaps the best was Cisco. Everybody needed to build an online presence, and a thousand...

During my formative years in finance, I learnt to be a “currency first” investor. Basically, I noticed most equity fund managers tended to get currency risk totally wrong, so if I got that right - I should outperform. It has taken a few years to shake off this “currency first” mentality. But I was going through some slides from my friends at 36 South (full disclosure, I am their landlord in London...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I have been bearish on private equity, partly because they stopped returning cash to investors even though markets are at all time highs, and partly because I thought the cost of capital rising would be bad for them. For corporates, cost of capital has not really risen. Over the last couple of years, high yield cos...

The reason I was known at the most bearish fund manager on the planet back in the day, was that I ran the emerging market bull market all the way up from 2002 to 2007, and was pretty sure emerging markets were going to be a huge waste of time going forward. This view was correct as MSCI Emerging Markets has only recently surpassed the highs of 2007nearly 20 year later. Are Emerging Markets worth c...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com As mentioned in my last post, Eurohedge nominations often happen at inflection points in the market for me. So the recent nomination, has made me nervous that my theory that we are in a world of rising cost of capital could be played out, and it is back to deflation trades. On top of this, an investor I respect wro...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I am bearish bonds, and I have built a portfolio around the idea that we will have rising inflation, rising yields and a rising cost of capital. The fund has had a good move last year, and a good move this year. So the question that has to be asked, is it done? Firstly, in my experience, Eurohedge awards can mark t...

I am surprised by this. Performance has been good - but not that good. My nomination probably comes from maybe not that many funds launched last year or I have a great sharp ratio having not had a down month last year. Two other funds have been nominated. Hunters Moon website says they specialise in financial stocks - so should have done well. Orgueil is run by former colleagues at Horseman, Steph...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com The Nikkei has been on an absolute tear over the last year or so. I don’t have many longs, but over half of them have been in Japan.

A few years ago, I looked at the rise of populism as the rise of “pro-labour” politics. I saw the return of industry policy, tariffs, unions and fiscal spend as all designed to raise the share of wealth going to workers and to reduce the share going to the owners of capital. To me it meant inflation would be entrenched, UNLESS, central banks acted to tighten monetary policy. So I put on a long gol...

I have like gold as a part of a pair trade - long gold short long dated treasuries, or GLD/TLT (using the ETFs codes that capture this trade). GLD/TLT has been a great trade, but I am old enough to know that nothing lasts forever, so have to wonder if we are near the end on this trade? I did manage to create a very long term GLD/TLT charts, which suggest we still have a ways to go. Clearly, GLD/TL...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I have been sceptical about the AI trade. The main reason was that pricing for AI chips looked so out of whack for pricing for other chips, my assumption was that eventually supply would overwhelm demand and pricing would fall. I looked at TSMC pricing history, and thought we were similar to the dot com bubble. In...