Capital Flows and Asset Markets

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com As laid out in a recent post, I think I see an opportunity for a fund. As explained in many posts, I see politics moving pro-labour and away from pro-capital. This makes me bullish on wages and real assets, and bearish on financial assets. The simplest (and so far best) way to express this has been long GLD, short...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Last time I talked about McDonalds was to cover my short positions . I have talked about the fast food chains at length, as they represent the pinnacle of pro-capital policies in many ways. All the risk is now driven down to franchisees now, while the franchisor collects a royalty no matter the profits of the franc...

If you have been following recent posts, I have been surprised at the continued growth in AUM for private equity. In fact based on AUM growth, alone, I would probably have to pitch Blackstone as a buy. Dividing market capitalisation by AUM gives a range for Blackstone of between 20% and 8%. At current levels of 11% is not a bad valuation if you believe in the promise of private equity. However, on...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com The Hamas attack on Israel creates a level of geo-political uncertainty. The most concrete example was the 4% rally in the oil price. Theoretically you would also think VIX would spike. War and potential for a spike in the oil prices is bad no? You would be wrong. VIX ended Monday close to where it was on Friday. W...

So the trade I have been recommending for a while now is long GLD/Short TLT. It has been trading great, and I suspect it will continue to trade great. Now typically in fund management, managers and allocators rely heavily on back testing as a way of working out the riskiness of a trade. This back testing would currently be suggesting that either the dollar is too strong, or bonds are oversold (whi...

As explained in a post from a year ago - there are three profit centres to short selling. Capital gains, carry and currency. Capital gains is the easiest to understand, and strangely the least profitable of the three centres. Why least profitable? In my experience crowded shorts tend to visit huge losses on short sellers. GME and AMC are recent examples, but for many years Tesla was the biggest sh...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com One of the first things I learnt when I started in the fund management industry was that Japanese banks were where value investors went to die. After a huge bull market in the 1980s, that made Japanese banks the most valuable in the world, a long drawn out bear market has ensued. Having been involved in the 2003 to...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com When I first outlined my view on a shift to a pro-labour world, I saw private equity as a structural short. One of my favourites places to short were companies recently listed by private equity firms. They were almost always starved of capital investment, and typically laden with debt. I saw the rise of interest ra...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Back when I was managing money, I was told that my fund was described as a macro fun that uses single stocks to express an opinion. Macro funds tend to use stock indices, bond and commodity futures to express views, but I found it more efficient to use single stocks. Indices are designed to go up, and can never go...

I have written a number of posts about the enormous profits of US tech companies, and how they are comparable to profits of the East India Company. The implication was that at some point, there would be an “anti-Empire” movement, that would directly attack the structure of these companies. On the surface of it, it is very easy to compare Pax Americana to the British Empire. At its peak, the Britis...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Has the Federal Reserve fucked up? Markets were a bit unsure of what the decisions would be from the Federal Reserve. Looking at monetary policy history, they would have seemed wise to pause interest rates increases. Looking at the US bond market, with it deeply inverted, this has typically been seen as a sign of “...

This week’s Economist has a leader, criticising America’s new drug-pricing rules. I knew this was going to be a subpar article when the first line is “A quirk of American law long barred Medicare, the public-health insurer for the elderly, from negotiating with drug firms over prices.” To describe this as a quirk is a stretch. It is almost certainly the product of lobbying buy US drug companies, a...

Aston Martin is an iconic car brand. It has been James Bond’s choice of car since the 1960s. It is a brand that could be compared to Porsche, Ferrari and other premium car marques. The problem is that the brand has not been managed as well as these other brands. Aston Martin the company can been generally loss making since 2011. Initial investors in its 2018 IPO have lost over 90% of their capital...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com In my fiftieth year on this planet, I can confirm that old habits die hard. For years my investment process always started with macro, before I would think about anything else. And even though I “hate” bonds, even I have to admit recent macro data from the US makes me think that maybe bonds are a buy here.

Despite concerted efforts by the current government, net migration to the UK reached a new all-time high of over 600,000 in 2022 according to the Office of National Statistics (ONS).  Students are the single biggest group of immigrants, with over 361,000 arriving in 2022, up from 301,000 in 2021.  In comparison immigration for humanitarian reasons rose to 172,000 in 2022 from 57,000 the year befor...

As the Western world deals with uncomfortably high inflation, China has been cruising along at inflation levels that could even be considered too low. Its latest print it only just above zero. In recent years, US CPI has been above China - allowing the US economy to grow much faster than China in nominal terms. Almost all market participants have been surprised by the lack of a “reopening” trade i...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com When I listen to market commentary, you would think strong dollar was “the macro trade” of the day. Chinese Yuan has breached 7 - and the world is about to end - again. And yet, for me strong dollar is strangely present in the places it shouldn’t be, and totally absent in place where it should be. Commodity prices...

One thing I learnt from my American friends over the years is that the profit incentive is the only thing that can be relied on in the US. And there is a lot to be said for such a system. It is transparent, it rewards effort, and when money is the centre of a political system it allows for concessions and agreements (you can always buy off your opponents). Broadly speaking, when I talk of pro-capi...

The US led free world (Western Europe, Japan and Australia) during the cold war were offered a pretty good deal. Mutual economic access (to a degree) and US military protection. In return the US got to set the majority of the economic terms. This was a very good deal for all involved. With the collapse of the Soviet Union and communism, this deal was extended to more countries. Eastern Europe, res...

When Ben Bernanke and the other central bankers started talking about QE after the GFC - I really wondered why they thought it was a good idea. The long experience of Japan showed that it did nothing for creating inflation, and in my mind made things worse. My understanding of boom and busts in a free market capitalist world was that capital flows would create a boom, and then its reversal a bust....

The strength of the dollar has generally been a surprise to macro investors (in my view). It did not weaken materially during the surge in commodity prices in 2021, and the old theory of twin deficits (the addition of current account and fiscal deficits) has also broken down in recent years. I have also pointed out that terms of trade changes also used to move currencies has broken down. I was a h...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com In a recent post I recommended reading the Economist backwards. I pointed out that the science and technology section often had good (or interesting) investment ideas. A recent article talked about ispace - a recently listed company that just saw its moon lander crash while trying to land on the moon. As most of it...

I recently posted about the Economist as a contra. I highlighted how the front cover of the Economist often marks peaks and bottoms in various economic and financial cycles. Hence the recent front cover on the success of the American economy was somewhat concerning. What I should highlight is that the Economist is, despite its “contra” status, a very good “newspaper” (I think of it as a magazine,...

When I talk about a political shift from pro-labour to pro-capital policies, I have tended to talk about the Thatcher/Reagan revolution beginning in the 1980s. This was more out of convenience than anything else, as no one is going to argue with dating a pro-capital shift to the rise of Thatcher. However, the reality of political revolutions is that they start out small and then seem to happen all...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com How do you stop a country from developing? That is the question that is confronting US policy makers. At the moment, the US is adopting a number of policies including stopping technology transfers, tariffs and other regulatory barriers. The US has used this type of policy against North Korea, Cuba Venezuela and Ira...