Capital Flows and Asset Markets

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I have been bearish on TLT for a while now. But since October it has had a big bounce, but still in a downtrend in my view.

Back in the summer, I took a long look at Irish tax policy . In essence, Irish tax policy is basically set in consultation with large US corporates. The OECD is trying to introduce a new policy that allows governments like the UK to tax large multinationals like Apple on where they generate the revenue, rather than were they book the profits. In a recent budget, the Exchequer (UK treasury) estimat...

I have always been a big fan of the late historian, Eric Hobsbawm. Reading his classic trilogy, Age of Capital, Age of Empire and Age of Extreme, made me acutely aware that much of the world that we take for granted is relatively new. Capitalism as a way of organising society only really has a history of 200 years or so. Its benefits are manifold. Efficient use of assets and resources. Decentralis...

The basic view I have is a world that is moving pro-labour and away from capital friendly policies. De-globalisation, anti-immigration, anti-free market are all pro-labour policies in my view. One observation is that rapidly rising food prices tend to cause political change. US food prices remained under control until 1970s. This caused a big political change from the 1980s onwards. We seem to hav...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I will do a more in-depth post about markets next week - in particular what I have gotten right and wrong in 2023. In this post I will talk about the portfolio performance in November, changes I have made to the portfolio, and general thoughts on the market.

There is very little I am sure about in this market, except that the bull market in bonds is over. A lot of people disagree with this view - but that’s fine by me. The “chat” from analysts and other market observers was that the change in bond markets, would herald a long awaited change in market leadership. I also thought this would be the case, but after threatening to happen in 2022, 2023 has s...

I had always marvelled at the awesome ability for the market to mete out justice. Japanese property bubble I experiences first hand when I was 17, and over the subsequent years saw the Japanese deflation take hold of the Japanese economy. I spent 1998 in HK as the Asian Financial Crisis took hold. My first job out of university was with UBS, about a month before the peak in the dot com bubble. Wit...

One of the core ideas of a pro-labour world is that governments are now in the position to raise real wages if they so choose. Tariffs, protectionist policies, capital controls, are all back on the policy table. Both China and the US use these policies, so there is no reason why anyone else cannot. In December 2018, Mexico elected Andrés Manuel López Obrador as president. The change in real wages...

One of the quiet joys of writing a newsletter is that everyone knows what you are thinking so without any encouragement on my part, I am often told how I am wrong. The trades that I am “wrong” on, tend to be the best ones. And of late, I seem to be inundated with people telling me how wrong I am on bonds. Like the grim reaper, the solemnly tell me the short bond trade is done - and my demise is im...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com One of the great things about money is that is really focuses the mind. Now that I am thinking of launching a fund again, I am thinking deeply about the two problems that all fund managers have to deal with. How to make money, and how to raise money. Young and naïve fund managers often have a belief that as long as...

Historically, luxury was a bad business. High operating costs, with variable demand meant that luxury stocks tended to act as high beta play on markets. LVMH fell 50% during the Asian Financial Crisis, 60% during the dot com bust, and 50% during the GFC. However since 2008, LVMH has not really had a sustained fall. In fact it has been a quintessential buy the dip stock, and Bernard Arnault has bee...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com The portfolio has been build around the idea of a political shift to favour pro-labour policies. There are numerous repercussions in the investment world, and as it is based on politics, is subject to change. The essential idea is that move to pro-labour policies would mean that inflation would be endemic, and that...

Early October saw a big spike in GLD/TLT which moved it a long way from its moving averages. Over the last week or so, it has come back to a degree, mainly through a rally in TLT. Just looking at TLT US, a technical minded trader may see TLT rallying back to it 200 moving day average (MDA), which would be around 99. That would another 13% from here and 20% from its low. What are the bond bulls loo...

Currencies do not trade the way they used to. In many posts I have pointed out the collapse in old correlations between macro data and currency movements. I have even put forward and new strong dollar model in an old post . It was a step in the right direction, but it still feels somehow lacking. In general most macro analysts also feel like the US dollar is a short, but Brett Johnson of Santiago...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I have been thinking more about individual stocks as I gear up to publish a model portfolio in November. Since I started publishing this substack, I have been mainly focused on trying to understand why macro does not work the same way. The old rules of macro were most pure in currency markets, but do not really wor...

It is pretty easy to be negative on private equity. Their business model seems to be built around the use of leverage to juice returns, while using the cover of private markets to give the illusion of stable returns (which is important when using leverage). That was why I was surprised to see that despite the bond bear market, AUM at Blackstone has hit new all time highs. Taking a closer look at B...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com In thinking about portfolio construction, I want to stay close to my core theme of pro-labour politics. The core investment idea is that real assets rise with wages, while financial assets are suppressed to try and keep inflation under control and allow real wages to rise. The key trade has been long GLD (gold) and...

The energy markets have been undergoing huge changes. Starting with the shale revolution that saw the US go from producing 6mn barrels a day of oil in 2012, to over 13mn barrels a day today. A knock on effect is that the US does not need its Strategic Petroleum Reserve (SPR) anymore. In fact much of the stored oil under the SPR was in the wrong place. The Biden administration has taken advantage o...

The idea I have been pushing for awhile now is long GLD/short TLT to capture the move in politics to pro-labour. It has been working well, with a recent spike. Without question the short TLT leg of the idea has been the big winner. Falling from 160 to 83 today. Even as it has fallen, “investors” have been piling into TLT. Shares outstanding has more than quadrupled since 2022. Over the same period...

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...