Capital Flows and Asset Markets

Someone asked me about Yen the other day. It was a good question. The old widowmaker trade was shorting JGBs. Short JGBs was a very popular if unsuccessful trade from 1994 to 2016 or so. As Japanese bond yield were so low, hedge fund used to love shorting JGBs and going long higher yielding bonds like US treasuries or Aussie bonds. The problem was that every crisis would see hedge funds gross get...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com A surprisingly good month, despite relative tame macro moves.

Economists really don’t like thinking about politics. If forced to choose between an economic reason and a political reason for something to happen, they will always choose the economic reason. I used to be exclusively “economic” in my thinking, but around 2021 I realised that politics was a far bigger driver. I have tried various different political ideas to make sense of the world, and give a fr...

In my last post, I had guessed that something was brewing in markets. What I suspected was a sell off in long term bond yields. I still think that is going to happen, but what the market got was capitulation from Jerome Powell to President Trump. With this capitulation, there are no longer any independent financial institutions left in the US - or to put in another way, fiscal and monetary policy...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Every now and then, positioning, sentiment, and technicals all match up to make something wild seem possible. It is starting to look that way again.

One of the effects of a pro-labour world would be that governments would come under pressure to lift real wages - which means avoiding currency devaluation. In Japan, this has meant falling foreign exchange reserves. The overriding investing theme for me is “pro-labour” politics and the rising cost of capital. The lodestar for this theme has been the inflection of JGB yields higher. Rising yields...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I was asked the other day what was a good book or film to watch to understand Japan better. I suggested that Tom Cruise’s Last Samurai. Its a movie with some serious problems, but it does manage to capture aspects of the Japanese desire for perfection. I also suggested the Tom Selleck vehicle, Mr Baseball. It is a...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I have tended to be a “mean reversion” type of investor - thinking that boom is followed by bust. This has been the pattern in every market I had ever looked at, until this bull market in the US. I look at the returns of the S&P 500 relative to long term bond returns, it was mean reverting from 1975 to 2020 maybe?...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Second quarter earnings have advanced a number of themes I am looking at. Here is a quick review.

It is pretty safe to assume that the Federal Reserve will be run by a dovish Chairman in the foreseeable future who will be looking to cut interest rates. Does that make long bonds a buy? If I look at the trend on the US 10 year yield, we have not had a break out in yields since 2023. Certainly for most of my investment career, if we started to see signs of a weakening US housing market, I would b...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com If AI is a “strategic” asset, and it is hard not to see it as such, then China is probably going to have to invest even more money into data centre builds. One knock on feature of this AI race is that the market has recognised that electricity generation which has been stagnant in the developed world is going to ha...

As mentioned in previous posts, I have a small coffee problem. Two or three espressos a day is common for me. So once a year, normally in the summer, I take a break from coffee. The first week tends to be hell, with bad headaches and a need for long naps in the afternoon. But for me this is just my body realising how fatigued it is without stimulant effect of coffee. After a week, I adjust, and st...

After I published a note yesterday, I got a long email basically saying, “No it is a bubble”. As I read the note, I found that I agreed with most of the points. In simple terms it made the following points: * OPEN AI and Anthropic are burning cash * Corporate take up is lower than expected * No one is willing to pay for it * Many of the key customers seem to have a vendor financing relationship -...

Old men and women are always obsessed with the past. When I first started working in finance in 2000, the oldies in my office would go on about the 1970s. There was a lady working in the cash management department who had started with the company in 1960s as a secretary, and kept telling me about 1974 crash. She said it was like a light switch was turned off. The managing partners came in and basi...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com July was a volatile month. The core trade of GLD/TLT broke higher during July, to then pull back in the last week to finish near lows. The other core trade of gold versus S&P 500 had a late month breakdown to approach the 200MDA. The Dollar Index also saw a late month rally. With so many core themes reversing in th...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Hating private equity is easy to do. It often feels like they use debt to drain the life out of a company. The most recent example would be UK beer company, Brewdog . While the company still operates, the value of equity given to employees and private investors has been wiped out by the value that has accrued to th...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com You are probably wondering why I think its exciting times? The potential bear market set up of the rise of Deepseek and Trump’s tariffs have come and gone, and the S&P 500 is back at new all time highs. Even the announcement of 15% tariffs on Japan and Europe are seen as bullish as the expectation was for more (to...

AI is incredible. I have always wanted to make a short film about a story I heard about a fund manger in the early 1990s that went to Korea. Its a funny story, and I thought it would make a good short film. I always wondered how I could do it and low and behold with Google’s VEO I was able to make it. It is on my Tiktok, or you can see it here on substack . In 2019 when I looked at big tech, and i...

The blessing and curse of getting older is that you know that everything can change. The blessing and curse of being young is thinking nothing will ever change. I found myself explaining a recession to a 27 year old the other day. He looked at me like a mad man - but maybe I am the crazy one for worrying about them. We have not seen a prolonged period of unemployment in the US for over 10 years. I...

Generally speaking the US government fiscal position has looked terrible. On a 12 month rolling basis, for the last 15 years despite full employment and record asset prices, revenue to the US government has never looked close to meeting outlays. Which has fuelled an ever large amount of federal debt to GDP. Inflation, and soaring stock markets have usually led to falling debt levels, but in this c...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com When Deepseek turned up earlier this year I thought we had seen a top in Nvidia share price. After a period of weakness we are back at highs, and the world's first USD 4 trillion market cap company. As I understand it, Nvidia has a 90% share of GPUs, TSMC has 90% share of cutting edge chips and ASML 100% share EUV...

The release of ChatGPT has been transformative to say the least. How does this effect me I wonder? I have an AI agent on my landing page at www.brumbycapital.com which I have been experimenting with. Much like almost all computer programs - it is great at repetitive chores (I have loaded it up with my last 100 substack posts - so it can tell you my recent thoughts on anything). But plainly it does...

A well spent youth travelling around the world in my early 20s meant that I was very old to join UBS as a graduate trainee at the age of 25. I was even older to start as a fund management research analyst at the age of 27. I was extremely hungry for success, and I would spend all my time studying what the successful fund managers at my firm were doing. At the time the most successful manager at my...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com The vast majority of fund management theory rarely survives contact with market reality. Back testing various theories would have told you to sell the American market years ago, and here we are today, pushing new highs. Fund managers, facing performance and career pressure will almost always become index huggers of...