Capital Flows and Asset Markets

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I don't really read other macro thinkers. Generally speaking we are looking at the same data - or should be - so I am better off limiting other people's influence of my analysis. However in my 25 years of working there is one guy I will always read, Christopher Woods over at Jefferies. If he wrote a substack I would be a paying subscriber. Sadly he works at a brokerage so you need to be doing busi...

I have thought the world is moving to a 1970s style stagnation. What this means is rising wages would create inflation and higher interest rates. This would lead to asset markets stagnating. I thought the best way to trade this was long GLD short TLT. It has been a good trade - even with the reversal this week. I also thought equities, and particularly the S&P 500 would be a big flat nothing, with...

We have had quite the precious metal frenzy in recent weeks, but with some chunky weakness today. First of all, even though gold has had quite the move, it is only double from its previous peak in 2011, still nothing compared to equities. That being said, on my very long term chart of gold versus treasuries, it has now had a fairly serious move. Still far from the extremes reached in the 1970s - b...

I have dabbled in Bitcoin. When Donald Trump was reelected, I purchase some IBIT, which did okay, but I was a bit late to the trade as my custodian made me wait a day or two. Compared to both equities and gold, Bitcoin has disappointed this year. Why is this? I used to have theory that you should watch Tether market cap to see if liquidity was coming into or out of the crypto space to drive bullis...

The crappy bank trade has been pretty good for investors. I like it as well as it fits in with my view of a world that is turning pro-labour. This should push up the cost of capital, and benefit banks with large deposit franchises. Generally speaking crappy banks have been centred in countries with weak property markets, and low interest rates, Japan and Germany are probably the stand out markets...

One of the first things you learn in finance is that VIX is a fear index. When VIX is going up, then markets should be going down. But a combination of AI and autocallables is turning the market on its head. The KOSPI 200 has surged recently, with the AI boom driving both SK Hynix and Samsung Electronics higher - both big constituents of the KOSPI 200. But we have also seen the KOSPI VIX surge in...

The title of this substack - Capital Flows and Asset Markets - comes from what was a successful use of the idea that capital flows drives asset prices. Long time readers or followers of my work would have seen many charts that looked at Net International Investment Position (NIIP) to explain why China was a short from 2011 onwards, or why Yen used to rally. I stopped using NIIP because US NIIP in...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I have been pushing the GLD/TLT trade for a while. It has been good, even if GLD has been doing most of the work lately. If we are going back to a 1970s style stagflation market, then we still have more to go - although we would be transitioning from a value trade to a momentum trade I think. But this year has seen...

About 5 years ago, I bought shares in Rheinmetall AG, as it was trading at or around book. At the time I told my colleagues, it was extremely rare to find a defence stock trading so cheaply. Its cheapness was due to is defence business being unprofitable, and its auto business really struggling. I think we doubled our money, before selling the shares when I closed down the fund. The Russian invasi...

In the pro-capital/pro-free trade era from 1980 to 2000, we learnt that the Yen was a hard currency. For all the fiat/debasement traders, out there, Japan was a true widowmaker market. With rising debt levels, and a fiscal deficit, and a central bank putting interest rates to zero, you would have assumed gold in Yen terms would have soared at least during the 1990s. You would have been wrong. The...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Bobby Molavi from GS reckons that 56% of the S&P 500 is now tech or tech related. I have no reason to disbelieve him. For me, the dot com boom, and now the AI boom are all about pricing. The closest thing I have to clear pricing trends is TSMC presentations on ASP, which are still rising as far as I can tell. Beari...

I have the trade GLD/TLT as I think we are heading for a rerun of the 1970s. We are getting there. It was a trade that implied that if the US did not run serious monetary policy, then gold would soar. I guess we have our answer. I did express a very negative view on gold miners in my last post. Mainly because in my investing experience, they have been capital destructive enterprises on an epic sca...

I originally became interested in gold as an inflation trade. In simple terms I see governments looking to boost wages, which will create inflation. This could be offset by higher interest rates, but it seemed to me to be we were heading for a re-run of the 1970s. The trade I chose was GLD/TLT. On the long term chart, we are really starting to move. Of the two legs, long GLD or short TLT, the long...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com September was a very funny month. If you are true believer in speculative tech investing, then you made good money. If you are true believer in gold, then you made good money. If you are true believer in Japan, then you made good money. If you are true believer in bonds, you made money. In such an environment, the...

Back in 2011, I started writing and distributing free research. The main aim was to make myself known to the investing community, but it was always enjoyable and interesting to see what comments would come back. And my last post, generated an above average number of comments. Generally speaking, when I write, I write with a point in mind. This post is more to comment on the comments. First of all,...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I caught up with Rupert Mitchell of Blind Squirrel fame and we were chatting about markets. I pointed out that my friend John Hempton (@John_Hempton on X) was having a tough time. John has a different, but very effective, style of shorting selling. In simple terms, he tracks “bad” people as they move from company t...

Long time readers will know that I have very divergent views on fertility going forward. To make a long story short, I saw the current drop in fertility rates being driven by a 40 year cycle that favoured capital over workers - which in essence made it too expensive to have children, which I now see changing. And secondly I saw improvement in technology allowing women to have children later drivin...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I am a generalist investor, but once I get interested in an area I try to get to the bottom of it. My interest in clearinghouse started with this BIS article on the collapse of a small Nordic power clearinghouse. It was further stoked by an a report issued by the biggest users of clearinghouses asking for significa...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com In case you missed it, Oracle, reported numbers last week. While earnings was in line, it surprised the market with a huge pipeline of new AI related cloud bookings. An already large stock gapping 36% higher is extremely rare - and this was on top of a huge run up from the April lows. As the FT points out, Oracle h...

In a recent post, I wondered if the Trump administration was going to force the Federal Reserve out of the “QE Business” - or in other words ban them from buying assets, and get them to focus solely on interest rate markets. This could be a huge issue for markets. Whenever asset markets have threatened to unwind, central banks have stepped in as buyers. The UK gilt market is good example, where th...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com A few year ago, I could see the political winds were moving to getting real wages up again. This could be achieved either by raising wages, or lowering asset prices (the political aim was to get house price to income ratios down). This line of thinking lead me to a long gold (GLD)/ short Treasury (TLT) trade. It ha...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com If you have never read or heard me talk about the clearinghouse trade before, then there is a tab on the home page, where most of my research is housed. The theory of the clearinghouse trade was that the regulatory driven move from an investment bank model, where there were numerous bilateral agreements to a cleari...

I had viewed the political machinations around the Federal Reserve as a transparent attempt of the Trump administration to control interest rates and push them lower. The market has agreed, with 2 year Treasury yields touching 3 year lows. The pressure on the Fed has also led the price of gold to surge, as investors question the safe haven nature of the US dollar. My preferred inflation measure, t...

The Gold/S&P 500 ratio got back to the 200MDA, and then spiked again. Which makes a larger turn in the market more likely, implying either a bigger fall in the S&P 500 or a larger spike in gold. And GLD/TLT finally broke out of its range. Credit spreads have widened a tad - from very low levels. 8 month VIX continues to trade richly - something I have taken to imply that investors are keen to hedg...