Capital Flows and Asset Markets

I have always wondered why the seven wonders of the ancient world were concentrated in nations that now seem underdeveloped - Egypt, Turkey, Iraq and um.. Greece (!!). Why were the once the richest nations in the world, but are now second tier powers as best? Did these nations all lose their way? I think the answer lies in the old silk road which terminated at these nations, and was the key source...

In 2016, the first Trump victory and the Brexit referendum created a deep sense of angst in me. I often thought of both Trump and Brexit as the wrong answers to the right question - that income inequality had become so stretched, that politicians and voters needed to become pro-labour. This suggested to me that policies to promote wage growth would be enacted, and inflation would be greater than e...

A lot to take in, and think about, but here are are collection of thoughts. It always seemed clear to me that whoever won, the US deficit was not going to shrink. With the US 30 year treasury yield spiking back to 4.6% the market knows this as well. Why investors have continued to be bullish on TLT remains a mystery to me. Shares outstanding in TLT US should really be falling, not rising, but old...

Unlike a lot of fund managers and business people, President Trump really destroyed my business model. In its most simplest form, I see pure capitalism, or what I call pro-capital policy as being inherent deflationary. If you look at the performance of S&P 500 versus US treasuries, the performance has tended to align, and periods of outperformance in equities, like the dot com boom, then sees the...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com In a recent post, I lamented that rather than chasing macro trades, I should have just indexed. The problem with indexing, as far as I am concerned, was that inflation trade seem to imply indexing is a disaster trade waiting to happen. One very long dated chart that I liked looking at was the performance of the S&P...

I recently rewatched “Silence of the Lambs” - fantastic movie. It was with a bit of a shock that I realised I had a lot in common with Hannibal Lecter - I mean other that the killing and eating people part. He has his own moral code, he enjoys analysing people to try and work out what pushes their buttons, has little tolerance for arrogant hacks, and can be very patient in working for his goals. I...

Boeing was a frustrating short for me back in the day. In many ways its a very transparent company. Together with Airbus it has a duopoly on the commercial aircraft, enjoying good pricing and margins. The only real driver has tended to be orders from airlines, which tends to ebb and flow with the economy. Airlines may go bust, but Boeing and Airbus would always be there, ready to make more planes....

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com One thing that this year has made clear, there is no going back. When Trump lost to Biden, there were some changes in foreign policy, but financial policies stayed pretty much the same, and in the upcoming Harris/Trump face off, whoever wins, financial and economic policy will not change that much. Why? Well ultima...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com If you are wondering what a contra is - its an indicator that the market has gone too far, and ready for a tumble. One of the most famous, possibly made-up example, is Joe Kennedy selling the stock market after getting stock tips from a shoeshine boy in 1929. The cover of the Economist is seen as a leading contra i...

As hard as it may seem now, peak oil was a big thing around 2007 or so, as the oil price surged. The idea was that all the easy oil had been extracted, and that oil production was headed for a period of decline and high oil prices would be with us forever. Of course, economics and finance suggests that high prices will attract capital and innovation, and eventually drive supply. This is exactly wh...

I was wondering why US stocks have continued to do well when GLD/TLT is also trading so well. I thought that the continuing boom in tech stocks recalled the dot-com era, but as interest rates normalised, the boom would end. This was the case with a subsection of the tech area - mainly the speculative area that ARKK specialises in. While I knew that many of the leading tech companies were much bett...

GLD/TLT has carved out a new high in recent days, which is pleasing. The original idea behind GLD/TLT is that in a world where governments are becoming more “populist” (i.e. more concerned with raising wages rather than asset prices) - then inflation will be entrenched, and central banks will need run much tighter monetary policy to keep inflation under control. This year has really been the year...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com To be bullish on China, you have to be comfortable with sanction risk. What I mean by that is you won’t become a forced seller due to sanctions. When Russia invaded Ukraine, sanctions made Rosneft uninvestable. In practical terms, foreign investors (via ROSN LI) who owned Rosneft saw the value of the stock collapse...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Performance was poor this month, and I am left in a quandary. The original inflation trade - long GLD/TLT is trading fine, and just as expected. But all my attempts to try and build related ideas around this fail. Why is this? I have come up with a number of options: a) As opposed to when I was started back in 2002...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com The HSCEI has rallied 26% this month. Is it worth chasing? Well for the technical minded, HSCEI/S&P 500 has completely unwound all the outperformance it achieved from 2000 to 2010. Even with the move this month, its has barely begun to catch up. One unusual feature of this rally is that it has not been associated w...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I have always liked the idea of trading a reaction rather than action. For example, if the BOJ commits to a policy to weakening the yen, then Japanese equities will surge. But if the BOJ has a hawkish surprise, then your short yen and long Nikkei trade burns you badly. But lets say after the Yen has devalued, and n...

I was deeply influenced by an Economist article written all the way back in 2018, comparing the big tech to the East Indian company. The important paragraph is reproduced below. A few years later I successfully shorted Chinese tech names, as the government decided to reign them in and regulate them. While this is portrayed very negatively by western media, much of the regulation was extremely sens...

For the best part of 20 years, commodity prices seem to ebb and flow with the vagaries of Asian economic growth. The 1990s saw the collapse of the Soviet Union, the busting of the Japanese economic bubble, and the heavy restructuring of the Chinese and Indian economies to free market policies, and then finally the Asian financial crisis. As mentioned in previous posts, I see gold as an Asian asset...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I got my first job as an emerging market analyst because I was cheap. I was a graduate working for UBS in Sydney, and UBS offered a two year program to work elsewhere in the bank with the central office picking up most of the tab. I found a role at GAM in London working on an emerging market fund and away I went. I...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com The short end of the treasury market seems fairly convinced that unemployment is about to rise, and interest rates will be cut dramatically. Since 2000, the 2 year yields have signalled recessions. But in 1990s the two year yield fell dramatically in 1994 and 1998, both years of emerging market crises but were fail...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I know I have my own brand of fund management. It is perceived as aggressive, while in my mind it seems conservative, which I guess is just a matter of perspective. One thing I know for sure is that it is not working at the moment. Whenever something is not working for me, I go back to my intellectual foundations,...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com August seemed like one of those months that went on forever. It started with the BOJ raising rates, and a weak employment number in the US, driving huge volatlity. We saw a rapid rally in the Yen, and Nikkei VIX top 70. This briefly caused GLD/TLT to dip, but was fully recovered by the end of the month. I had assum...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I like Japanese banks as an inflation trade. Of all the markets I look at it, it seems that changing policies could turn into a long bull market for the banks. I was particularly drawn to the relative trend change in Japanese banks to the Topix. Of course this is only useful if the Topix is in an uptrend. Topix is...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com When I got my first fund back in 2006, I had nothing to lose. I had no money, and only one investor. I was bullish on emerging markets, but almost as soon as I got fully invested in April 2006 (100% long) and made a quick 10%. Then the markets dumped, and I drew down over 20%. I remember going home to my new wife a...

For years Japan had a tourism imbalance. Japanese went and travelled the world, but the numbers of tourists visiting Japan was limited. Under Prime Minister Abe a number of policies were implemented to promote tourism. Since 2011, the number of tourist has surged six fold and has recently eclipsed pre-Covid levels. In Japanese current account data, Japan now receives more from tourism that it spen...