Capital Flows and Asset Markets

Markets are efficient. I know that there are thousand Substacks claiming the opposite, how everything is a bubble, and we are moments away from collapse. But the fact is that markets are very good at pricing in information in a logical and timely way. The inevitable comeback to the above statement will then be, if markets are efficient, then why did we have the dot com bubble, or the GFC or the Eu...

I ran a competition to find the best finance haiku last year and was overwhelmed by the response. From over 50 submissions last year our winner was this beauty from Kevin: Bull slips on black ice— Frantic dance of hope and fear Fortune rolls her dice I give you this haiku as my 2025 offering: The majestic Brumby Far from the stampeding herd Fearing coming cold Think you can do better?!? (I really...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com (Due to client demand, we will be launching a Yen version of the fund on January 1 - please get in touch if of interest) For a brief period in November, competition and potentially lower prices threatened to break out in the tech world, as finally some sort of competition to Nvidia’s GPU emerged in the form of the...

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Just a very short note. Michael Green has written a very good note on how the poverty line has failed in the US. You can read it here. There is no way to sugar coat this - Michael works far harder than me. He has systematically broken down all costs, and then adjusted them over time to show that the official poverty line is too low in the US, especially compared to the pinnacle of US worker focuse...

Just for a change, I am doing a video update - enjoy. 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

Long time readers will know that I have become more closely focuses on politics - as that is where I think markets are constantly getting surprised. For me, politics is relentless shifting to the left. In the UK, Nigel Farage’s Reform party is outpolling Margaret Thatcher’s Conservatives (and outpolling the Labour party as well) I see their core pledges in the most recent manifesto as pro labour -...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com In the original pro-labour thesis, the idea was that markets would be okay, but that higher yields on bonds would act as a dampener on financial assets. The reality was that we saw equities do very well. I wondered if my original thesis was wrong, and then suddenly markets are trading like I expected again. Strange...

When I first set up Brumby, I had an idea that once it was set up, I would like to tokenise it. I mentioned it in a few meetings in NY, and was surprised by the positive response. In essence, the feedback is that clients want it, and it was already happening with a few money market funds. The big driver is that it would allow investors in a hedge fund to easily sell their position to another inves...

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The way I work is pretty simple. I look at the where we are today, look at when was similar in the past, and then position my portfolio to make money if past repeats itself. I looked at the current politics of tariffs, and anti immigration, and thought that we would see wage rise significantly. In my mind this would drive inflation unless central banks raised interest rates significantly. This led...

Since launching my new fund, Brumby Capital, markets have rallied strongly and yet oddly the short book has not been much of a problem. Why? I don’t short indices, and most of my shorts are in the US. The equal weighted S&P 500 have been pretty flat over the last year. This has been in line with my pro-labour view of markets. Or in other words, the average company in the US has been okay, which it...

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A friend of mine said I should take a look at the most recent Strategy preferred issuance. The headline is that it pays 10% annually, which sounds attractive, but made me think, where is Strategy going to get the cash to pay that dividend? Their Bitcoin holding generates no cash. Looking at the Term Sheet, it seems likely they will never pay any dividends. The key point here is the dividend defera...

Halloween was last Friday, and my youngest went of trick or treating with his friends, I was left at home all alone. After doling out a mountain of sweets (Halloween is a big thing in my part of London), I decided to go to the local pub in my go to costume - Hannibal Lecter. As I drank my chianti, chewed my fava beans while I waited for liver to be cooked (I was having a friend for dinner) - I got...

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My niece, who now lives in San Francisco, was getting married, so I made a flying five day visit to the Bay Area. Its been nearly 10 years since I spent time on the West Coast of the USA. But it had been nearly 20 years since the last family wedding, which was my own. At that time, my niece must have been 11 and a bridesmaid for us, and now here I was watching her get married. Never have I felt th...

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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...