Capital Flows and Asset Markets

I just got back from a couple of days in Switzerland, where I spent most of my time talking about markets. I also met quite a few Substack subscribers. Here are my thoughts. SUBSTACK Substack tells me that my average article gets 8,000 views. I thought this was exaggerated as the usual 10 to 15 people are commenting on it, and a typical article now only generates maybe 5 or 10 new subscribers. I s...

I will be at the NZZ bar from 4.30 to 6pm at Zurich HB tomorrow, and Café Tartines - Champel in Geneva from 8am to 9am on Wednesday if you would like to say hello. I have tended to make fun of “macro” analysts on this Substack - mainly because they are such easy targets. One of their consistent problems is that they apply economic or accounting logic to sovereign bond markets. Through the mega bul...

Much as been made of the US 10 year bond yield pushing through 5% for the first time since 2007. And much has been made of the fact that net interest payments are much larger than defence payments, and closing in on social security payments. But a weird thing is happening. The US tends to devalue when it is bust. Back in the 1970s, the value of the US dollar collapsed against the Swiss Franc, and...

How you feel about central bank policy making since the appearance of Ben Bernanke around 2000, will pretty much determined by your positioning in asset markets. Private equity love him. Renters not so much. But one think that Ben Bernanke certainly introduced to markets was asymmetrical policy making. Helicopter Ben was all about big dramatic cuts and interventions to the downside, and then only...

Markets are about greed and fear. Greed is easy to understand, but fear is more difficult concept. One way fear shows up is in a rejection of something new, and this in particular appears in older investors. I have a lot of sympathy for this fear. In the markets I grew up in, crises and crashes were the norm - not rare events. Japanese bubble burst 1991, the Tequila crisis in 1994, Asian Financial...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Getting old has pluses and minuses. One recent plus is I can finally play some decent tennis, its only taken 15 years of work! One recent negative is I can only maintain a high standard for one set before getting tired. C’est la vie. I mention this as we move closer and closer to the 20 year anniversary of the GFC....

I was lucky enough to start working at GAM in 2002. GAM was a leader in the fund of hedge fund business just as it was booming. The source of this success was not hard to find, and being at GAM was a great place to see it. The dot com bubble was coming to a head in 1999 - and as one investor told me - funds had to sell value stocks to buy growth stocks or risk underperforming. This Morgan Stanley...

One of Prime Minister Abe’s aim was to get Japanese investors to stop being conservative. He was particularly keen on getting Japanese investors out of JGBs. The main was was to get the Bank of Japan buying basically the entire JGB market. In USD terms, the BOJ balance sheet went from USD 1.7tn to about USD 7tn And this has led to Japanese investments in domestic bonds falling dramatically. In oth...

Like almost everything in my life, if something works, then I keep using it, but when it stops working, I move on. Currencies used to be so reliable in finance, I build my whole investing process around it. I am provoked to write this note, because the Korean Won has just had a straight line 15% move. What is noteworthy for me, is that for the life of me, I could not understand why Korean Won was...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I decided to get in to finance in 1998, when living in HK. I was fascinated at how currencies, interest rates and equities were so tightly bound, and this fascination led me to a hedge fund career. You can read about it my book . In my experience, politicians often intervene in the value of their own currencies. Ei...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com The BUY case for Yen is straightforward. As millions of tourists will happily tell you Japan is cheap. Using the BIS real effective exchange rate measure, the Yen has collapse in value. This measure takes in relative inflation AND exchange rate - so makes the Yen even cheaper than just looking at straight exchange...

First a bit of housekeeping - I will be in Zurich and Geneva on the 29th and 30th of September. If you would like to catch up - drop me a line. Also I am trying Substack video for the first time - feedback appreciated. When I first came up with the idea of GLD/TLT, it was so simple and so obvious, I was almost ashamed to publish it. But as old boss once told me, simplicity breeds elegance. And I d...

I have been pretty sure that bond yields would keep rising, mainly because governments are going to keep spending. But I did think rising bond yields would act as a break on equity valuations. This is very typical in emerging markets, where high interest rates and bond yields have tended to depress equity valuations. Brazil is a good example, where it has historically had high interest rates, main...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com After the surge in DRAM and NAND prices, I thought wafer prices would be the next to go. For context, DRAM prices remain substantially higher than a year ago. If you want an industry primer on wafers, have a look at this note from Brevarthan Research . So what has been going on in the wafer space?

The most pleasing aspect of August was the rally in GLD/TLT to recapture the 200MDA. My view on this is that this will continue to do well until rising bond yields forces the US government to take fiscal deficits seriously. The two big events of the month was that the US Treasury tried to control bond yields rather than control spending (expected and good for gold) and that the Federal Reserve was...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com The big market news over the summer was the unwind of the momentum trade. The Goldman Sachs High Beta Momo Index suffered a 42% drawdown, and the dead bodies in hedge fund world have slowly been rising to the surface. While everyone knows that memory stocks in particular got smashed, the above MoMo index is made up...

ここ1か月ほどの間に、米国は2つの異なる市場介入を発表した。 ひとつは長期米国債市場への介入で、国債の買い戻し（buyback）を拡大するというものだ。もうひとつは為替市場への介入で、円高を促すUNAGASUためのものだった。 長期債市場への介入は比較的理解しやすいし、過去にも例がある。ただし、これまでのところ債券利回りには特に変化は見られていない。 一方で、円への介入のほうが興味深い。こちらは少なくとも、市場に目...

In the last month or so, the US has announced two separate interventions. One in long dated Treasury market, where buy backs have been increased, and another one, where it intervened in the currency markets to strengthen Yen. The intervention in the long dated bond market is pretty easy to understand, and has some precedence. So far though, no change on bond yields. The Yen intervention is more in...

I have been on Substack since 2022, and generally speaking its been pretty good for me. I am on the UK Bestseller rankings, I am slightly above Dan Wotton, but below Dominic Cummings. There is a joke in there somewhere, but it escapes me at the moment. I also do well in the US Bestseller for Finance list. As a London based bestseller, I have been invited to “Bestseller Summer Drinks”. I was amazed...

I know many of the substack/macro community like to pile bitcoin, gold, silver, platinum into a dollar debasement trade. And intellectually that makes total sense. But for the past few years, I have thought GLD/TLT makes more sense (long gold / short treasuries). For me, this felt a much safer trade, than a straight out dollar debasement trade. GLD/TLT has been good, but I wont lie, the 25% drawdo...

Americans love freedom. Perhaps they care about freedom in the rest of the world a bit less these days, but they certainly love freedom in the US. Donald Trump certainly likes the freedom to act as he wishes. Fiscal restraint seems downright un-American. If President Trump wants to run a 6% fiscal deficit, why can’t he? Other nations have tried to work free from constraint - Turkey now, and Argent...

A few years ago, I ditched a purely macro approach to investing, to incorporate a political angle first. I do not regret this decision. I was away last week, and I was catching up with various emails, and all the “macro” investors remain relentlessly bearish. Most no longer manage funds, but I suspect are chomping at the bit to get back into markets once markets stop “acting funny”, and macro work...

The thing about the US/Japan Yen intervention is that it is less about currencies and more about bond yields. Japanese bond yields have led US bond yields lower for more than half a century. And since 2020, they have been leading US bond yields higher. The sell off in the long end is basically saying that Japanese short rates remain too low, and should be higher if the BOJ is serious about curtail...

Technology changes, and the world changes. Back in the original dot com boom, a tightening of the energy markets in 2000 heralded the end of the tech boom, and a rising China then drove an old school “commodity super cycle”. For investors of a certain age (lets say 50 or so), this confirmed an old rule, oil is the dominant driver of markets and economics. Spiking natural gas prices in the US tende...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com The pro-labour theory of markets has played out in all ways but one in my view. First growth would be good, and unemployment would be low. Correct. Second, cost of capital would rise. Correct. Third, equity markets would suffer from higher cost of capital. Not so true. I am going to focus on this third part. Ever s...