Capital Flows and Asset Markets

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Emerging market investing (at least on the long side) always seems pretty easy. It almost always centres on some sort of “catch up” trade. A classic example is the auto market, where developed markets will have somewhere between 400 to 800 cars per thousand people, and an analysis will look at an emerging market an...

In my first post, “What To Do About India?” On January 4th of this year, I highlighted that India was severely overrepresented in the richest people in the world list, AND, that their wealth relative to the size of the Indian economy really stood them out as the sort of people that should suffer in a swing away from pro-capital to pro labour policies. I reproduce the original table. At the time, I...

(Housekeeping - I post about my son’s karting exploits here now : Jarrett Clark Racing please subscribe if you are interested) One of the biggest headwinds the hedge fund and alternative industry has faced in the last few years has been the consistent outperformance of the US, and particularly large cap stocks. Who needs hedge funds, when you have FANG, or SPY? Why pay fees to an investment manage...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I have been fascinated by the US shale oil and gas industry for years now. It is almost a perfect example of the US economic model. First, a new technology is invented, and then secondly there is a huge rush of capital and participants all seeking to grow as fast as possible (land grab), and then there is the fall...

My focus on food inflation has been looking at the connections between pork prices and grain prices, as well as natural gas prices and fertiliser costs. The reality of both these areas is that recent price action has been more deflationary than inflationary. Chinese pork prices have fallen back to levels that were seen before the problems with African Swine Flu. Fertiliser prices have also fallen...

I am going to talk about McDonald’s which I thought looked a good short about 10% lower than where it is today. But before that, just a quick explanation for the slightly different format. I am about to enter the karting season, which means I will be on the road with my oldest son a lot more. It will be much easier for me to do this on an iPad rather than lugging my laptop everywhere. So this is m...

This was published last week - but now getting out of date - so moving it to free The S&P 500 has bounced and VIX has dropped back to 20 over the last week. Unusually, this rip higher in equities has not coincided with a bounce in high yield bonds (HYG is a high yield bond ETF). Also the spread between spot VIX and 6 month generic VIX (UX6) has moved back to close to 5, suggesting VIX is too low....

As everyone should know, the US has a very unusual mortgage system. I am not going to go into the details, but the key upshot of this mortgage system is that it is relative easily for homeowners with mortgages to refinance when long term interest rates fall. Offered rates on mortgages went as high at 18% under Volker, and fell below 3% under Powell recently. Since 1982, the average rate on outstan...

It is hard to overstate the awesomeness of the bull market in semiconductors. Using the Philadelphia Stock Exchange Semiconductor Index (SOX Index) as proxy, the semiconductor industry has appreciated over 200% from the Covid low. Unlike some other tech industries, semiconductors are a Capex heavy industry. During downturns, it tends to underperform dramatically, and conversely in upturns it outpe...

Since 2016, it has generally made sense to buy the dip. For dip buyers, a VIX around 30 has proved to be a good dip buying opportunity, which is roughly where VIX is today. However, it has also tend to make sense to buy equities when the high yield (junk bond) market is distressed. Even with the recent sell off in high yield, it is still at levels far lower than seen in previous sell offs. One rea...

The most dangerous place to be long invested is a cartel that is about to get disrupted. Payments, and fintech more broadly, seems a good place to look. Typically, a cartel member will have fantastic financial positions, and will generally be considered as either a “quality” or “compounder” stock. One recurring feature of investors in broken cartels is that they tend to buy all the way down as thi...

Typically, the spread on high yield bonds and VIX follow each other. Both are measures of risk or fear. The rise in VIX this year has not been accompanied by a widening in high yield spreads. This would place the S&P 500 in a buying opportunity scenario as seen in 1998 during the Asian Financial Crisis, and in XIV induced sell off in early 2018. Historically speaking, the VIX was purely a simple m...

On most measures market and macro indicators are at extremes. S&P 500 vs MSCI World captures the major extreme. US assets have massively outperformed, even more so than during the dot com bubble, which would mean a “reverting to normal” trade implies shorting US equities. When combined with my own preferred measure of extreme capital flows, net international investment position (NIIP), the US priv...

There are many reasons given for why interest rates have been so low. In my posts, I have been coming more and more to the idea that if wages are not rising, then it is very difficult to have inflation. That is wages drive inflation, and the relative power of “labour” then determines inflation rates. Thinking about inflation this way has some benefits. It easily explains the post World War II infl...

Professional fund managers will often worry about whether they are on the slope of hope, or are climbing the wall of worry. The slope of hope refers to the awful position of being on the wrong side of the market, and holding on in the “hope” that your position will come good. The wall of worry is that you are worried markets might fall in value, but never do. Back in the early 2000s, you could onl...

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.russell-clark.com/subscribe

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.russell-clark.com/subscribe

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.russell-clark.com/subscribe

Please do subscribe if you find this interesting - it motivates me to do more. Comments are welcome. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.russell-clark.com/subscribe

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.russell-clark.com/subscribe