Capital Flows and Asset Markets

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...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Lets talk about macro. There are lots of big macro questions to answer, but I think we now have enough data, and market action to answer them in a coherent and simple way. There are two (or three) big macro conundrums which I think we can answer with a single model. First of all, why did JGB yields fall from 1990 o...

Markets have had a rough month in August so far. The favourite reason given is the unwinding of the carry trade - precipitated by rising interest rates in Japan. For most investors in the market, the idea of Japan ever being able to raise interest rates seems like a fantasy - and the episodic unwinding of the carry trade is seen as one reason. One popular carry trade has been long Mexican Peso fun...

I had been fairly relaxed about markets. Nothing much looked like it was unwinding, and yet we saw Nikkei VIX touch 70 this week, a level seen during the GFC and Covid. Current levels have tended to be associated with crises of some sort. The move in VIX is even more surprising to me as leading indicators like Japanese banks and JGBs were pointing to continued wage growth and inflation in my mind....

As I write this, markets have gone for a good old growth scare. It has also happened at a time when the BOJ is beginning to tighten policy. We are getting big moves. Yen has rallied substantially. Markets are pricing in much more rate cutting from the Federal Reserve. The two year yield has fallen substantially. While the market had been pricing in a BOJ tightening, the real surprise has been weak...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Only a week ago I asked if it was time to bet on deflation again? As I pointed out, the biggest lead on inflation and deflation has been JGBs, which correctly pointed to deflation from 1990s onwards, and correctly pointed to inflation from 2020 onwards. With JGB yields at highs, I was of the view inflation was stil...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I spent most of July on the road in Europe. 11 days in Sweden, karting with my oldest son and then 9 days in Portugal with the entire family on a bit of rest and recreation. I try and avoid coffee when I am on holidays, and I find it allows me to think more clearly, if more slowly. Markets are heavily politicised t...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Apologies for the radio silence, which has been driven by two things. First of all, US politics is in such a state of flux, it felt better to refrain from any “hot takes”. Secondly, I am currently in a state of caffeine detox. I drink a lot of coffee - the shirt I am wearing above was GIVEN to me by local coffee sh...

In the UK, Labour has the opportunity to introduce pro-labour policies. Given that the election was more about the rejection of the Tories than embrace of Labour, the new government should be under real pressure to deliver results in its 5 year term. If we assume a “neo-con” policy like the US is not possible in the UK, then what should we expect? Labour winning the election has been widely expect...