Capital Flows and Asset Markets

When I first heard about Modern Monetary Theory (MMT), to me it just sounded like the sort of policies we see in emerging markets all the time. Turkey has been running a version of it for some time. MMT seems to endorse ever increasing government spending - something that Turkey has been doing for awhile now. Below is a log scale Turkish government spending. In essence MMT endorses the idea of kee...

Long time readers will know that I “despise” the clearinghouse model. Despise is a strong word - but justified in this case. The move to central clearing was means to make the system more robust, and remove “too big to fail” moral hazard from the financial system. The opposite has occurred, which the system more prone to failure, and requiring almost constant bail outs, with profits largely accrui...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I have very MIXED feelings about June. So the core trade of GLD/TLT finished the month on lows. So even though this trade still looks good to me, it was a headwind in June. I also think long gold/short SPX makes sense here, but again this finished the month near lows, so was another headwind. I also think the cost...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com In my previous post, I lamented how momentum investing has become the most successful style of investing in the last 10 years, after having a decidedly mixed outcome from 2000 to at least 2012. Michael Green (who writes the “ Yes, I give a FIG ” substack) emailed me to say basically its a bubble driven by passive f...

It is funny to hear my non-finance friends start worrying about their jobs. AI has been infecting finance for decades. Algorithmic trading, AI programs that analyse releases in an instant, and even Bloomberg Industries, that collates industry data has replace my earliest job in finance - collecting data. One thing that became apparent to me is that the rise of AI made investors very reluctant to g...

Generally speaking the fund management community thinks of the dot com boom and the housing bull markets as “bubbles”. Looking at US net worth to GDP, the dot com bubble say net worth to GDP rise form 375% to 450% from 1995 to 2000. And the housing bubble saw it rise from 400% to 475% of GDP. This current cycle has seen “the bubble” rise from 400% to 600% and is till at 560%. With US equities back...

It has been axiomatic that problems in the middle east would cause problems for the world, mainly through spikes in the oil price. Stagflationary 1970s was driven by the two oil price shocks, driven mainly by OPEC embargo on selling oil to the US. Over this period oil rose from USD 1.70 a barrel to USD35 a barrel driving rampant inflation. Believe it or not, this is before my time. I am old enough...

I have two sons. Of the two, I would say the youngest one is far more money focused. The other day, he asked how I made money. So I told him, I write a substack where people can subscribe for free. I then ask people to pay for the posts that are concerned with investing. On top of that for people who like what they see, they can invest in a fund based on the same ideas. He was suitably impressed b...

Ever since shale production was commercialised, US natural gas production has surged. The US produces so much natural gas, that the Permian region can see negative prices for natural gas from time to time. This happens as Permian oil producers also produce natural gas as a by product - so will produce natural gas almost by accident. Just these two graphs alone make the idea of the US suffering fro...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I have recently gone long of two defence stocks. Despite growing backlogs, both still trade below all time highs. Does that mean these stocks are bargains, or does it mean something else? Generally speaking, stocks tend to follow order backlogs - as it gives you confidence that the sales will be there. If we take a...

I have liked the long gold, short treasury trade for a few years now. But recently, I have seen a lot of chatter about bonds being a buy again, and gold having topped out. It has had a good move - but has been moving sideways of late. If we are going back to the craziness of the 1970s, then we have plenty of upside left in the tank! Why anyone thinks 5% on the 30 year treasury is a buy is a myster...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Macro analysis, much like movies about the future, has a natural dystopian bias. Why? Because people like to hear about doom and gloom - it sells well. This is a fact. In my investment career - I have made more money being long, but raised far more money when I am net short. The logic of it is easy to understand. I...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com It is hard to believe now, but after the Great Depression, FDR regulated the production of oil so that prices would not fall. The Texas Railroad Commission (TRC) was charged with controlling production to prevent falling prices. As almost all oil was drilled in the Texas, they had great power. The TRC was in some w...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com May was an up month. How much? Well we are just ironing out some issues so waiting for a final valuation. It is taking a bit long as this is first time we are doing the calculation - next month should be quicker. I have written the newsletter, and just now waiting for final valuation. All I know is that we were net...

European defence is a hot area to invest right now. You can always tell its become a big topic among allocators when Goldman Sachs develops a thematic basket. In case you were wondering what stocks this included - here is the make up of this index. The first stock, Rheinmetall, is now EUR82bn market capitalisation (USD93bn market capitalisation). This compares to USD 113bn market capitalisation fo...

I have begun to tire of reading articles about how Trump is changing the world, and everything is going to change. Why? Because it is basically backward looking, and tells me what has happened, not what is going to happen. Reactive research is basically toilet paper, no matter how well written it is. Unless your research produces a clear forecast of the future, please stop bothering me. What predi...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Even though I am known for short selling, like everyone else in fund management, I have made more money from longs than shorts (its just the nature of the beast). Before I closed my fund in 2022, I did quite like defence as a long theme, and this area has really moved. One stock I owned was Rheinmetall (RHM GY). At...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com My interest in markets began in 1998 with the Asian financial crisis, grew with the dot com bust, and matured with the global financial crisis. If you wanted to make it, you needed to be the smartest guy in the room - and a sure fire way to win was to keep an eye on where capital had flowed the most. If you could g...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com As many people have noticed and commented on, markets have recovered all the losses from “Liberation Day”. In some ways, this is very rational. Trump just showed tariffs was just a negotiating tactic. What tariffs if any will remain in the end is very unknown - but the political aim for Trump is for other nations t...

Moody’s downgraded the US over the weekend. Yields have gone up and down, but we see that the 30 year is only marginally higher than where they were on Friday. Meanwhile in Japan, the long end of the bond market decided it may as well trade as if it was the one suffering a downgrade. Japan still has a lower credit rating than the US. In contrast, even with the sell off, Japanese 30 year JGBs yield...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com A few years ago, my models were saying the US looked a short, so I started to took for reasons for that to be the case. They were not too hard to find to be honest - the US corporate debt market looked a mess then, and it looks a mess now. But as learnt in the the GFC and Eurocrisis, debt markets can look insane fo...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Before I talk about markets, I would like to thank Sam Knight for providing me with a much better logo for Brumby Capital. If you are looking for someone to help you with strategy and branding - Sam is someone you should get in touch with. I have been in markets through three big inflection points - the dot com bub...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com A few months ago, I thought semis looked a good short. Bond yields looked to be going higher, and DeepSeek and its collaboration with SMIC had showed that the current model built around OpenAI and Nvidia was probably too high cost. A quick look at the ASP of SMIC compared to TSMC (the fab that Nvidia uses) showed a...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com It seemed like Trump wanted a trade war with everyone, then only with China, and in the end with no-one at all. Basically we are where we were at the beginning of April. All the macro strategists and traders look foolish again as they are living in a past that does not exist anymore - but cannot bring themselves to...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com It felt so real. I am sure in April we saw the culmination of Trump 2.0, with the repudiation of the trading and security order that existed since the end of World War II. I am sure the two largest economies in the world entered divorce proceedings, and are now in the process of trying to work out who gets what ass...