Capital Flows and Asset Markets

Is there one market that western macro investors just can’t seem to get right - its Japan. The only thing that is constant is that once they think they get it, they really don’t. For someone who used to live in Japan, I can say with 100% confidence, foreigners are always the last ones to get the memo. The closest I have ever come to being an insider was near the end of my high school exchange, and...

It was a wild month in equities, where momentum investing got destroyed. The GS US High Beta Momentum Index shows it well. You have to go back to 2008 to see a similar size move. Semiconductors were the area to get nailed in July. Philadelphia Semiconductor Index fell nearly 30%. What really stood out to me was the rally in heavily shorted names. The GS Short Momentum Index rallied through the mon...

At the heart of the AI discussion is one issue and issue alone. Are the hyperscalers spending too much? The Economist provides a nice guide, basically showing that we are twice the dot com boom in half the time! Goldman Sachs also provides a comparison, which puts total amount of capex on a par with the dot com boom. So basically we have huge amount of capex - more than any other boom on some meas...

I have done a LOT of short selling in my life. In my previous career I ran a hedge fund of one sort or another from 2006 to 2021, so a 15 year continuous stretch. I was long from 2006 to 2007, then short 2008 to 2010, when briefly long, and then went short again, where I stayed short until 2020. I probably should have gone long in 2016 - but that’s another story. In 2013 and 2014, we were probably...

Bloomberg notes that CDS on hyperscalers are all beginning to sell off. Oracle has by far the highest CDS - because it has so much debt. USD 167Bn of debt, with a big increase in 2026. I am a bit surprised by the increase in Nvdia CDS, as it has USD 80bn of cash on the balance sheet -with relatively little debt. Google now has 118bn USD of debt from USD 25bn two years ago. Microsoft has USD 125bn...

For a long time Goldman Sachs have published a pair trade of momentum longs versus momentum shorts. It tells you what everyone who works in asset management knows - momentum is great until its not. We have once again entered the bloodbath stage of momentum investing. It may look like this falls apart when the long book crumples. But back in 2002, everyone was short tech names, and these rallied, t...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Calling a top in semiconductors has been a tough gig for nearly ten years now. I thought 2018 was a top and was wrong. 2022 was a head fake too, and was 2025 Deepseek sell off. But here we are again, with the SOX down 20% from a peak in June. The bull market in semis is very easy to understand. Pricing power has be...

Bear markets are funny things. They tend to start small, and isolated, and then suddenly they become a big problem. Almost all the talk now is about whether the AI “bubble” is bursting. From the numbers being reported out of Google last night, maybe you could argue this is as good as it gets, but bursting seems a stretch at the moment. The backlog number and token usage numbers look great to me. M...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com I have been talking about GLD/TLT for so long, even I was getting bored of it. Since starting to talk about it in 2022, it has been on absolute tear. But from a high in February, it has had a chunky 26% fall. And for the first time since 2022, went through the 200 MDA, and completed a dark cross. For technical only...

I have been pretty sure that yields on JGBs were going to go much higher, and this has been right. I did have an expectation that this would drive yields much higher elsewhere. This has not been so true. US yields are higher, but still within a level that we have seen before within living memory. And the biggest surprise have been the collapse in Chinese bond yields, to close to all time lows. Wha...

I always think of this as one of my all time great notes, for two reasons. First, almost no one had looked at this before I did, and second, after I looked at it, I had research providers trying to sell me this as their own research. In some ways, this is a timely note - as once again ETFs (this time leveraged single stock ETFs) are causing market havoc. Japanese US REIT funds and the Buy Case for...

Republican and in particular Trump energy policy can be summed up as “Drill, Baby Drill”. It has become de rigueur in Substack and elsewhere to praise US policy, and the criticise European energy policy. The UK has come in for particular abuse. The main nature of this abuse is that high energy costs in the Europe and a pursuit of net zero has led to business stagnation. This Economist article is p...

From a peak in June, SK Hynix, a DRAM and NAND manufacturer has seen its share price fall 37%. Given the huge run up over the last year, this still leaves it well above its 100MDA. Generally speaking, SK Hynix follows the DRAM price. So it is odd that it has been weak as DRAM prices have hit new highs. You could perhaps argue that we have hit the end of the AI trade - and capex is going to be cut,...

I have been thinking about markets in a political way for a few years. I have this theory that we were moving to a “pro-labour” era, which would be good for wages, but higher interest rates would be bad for asset markets. In some ways we have seen this, with market doing very well while 2 year yields were falling, and now we are getting all sorts of market weirdness now that 2 year yields are risi...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Memory stocks, namely Micron, SK Hynix, Samsung and Sandisk have been wild of late. These stocks have been whipsawed by the increasing use of leveraged ETFs, and the capital raisings from SK Hynix and (potentially) Samsung. A good example would be KORU US, which is a 3 times leveraged South Korean bullish ETF. Sout...

Below is a note from 2013 - In Italics, with added thoughts after Gold buying as a leading indicator of financial distress I wrote a note on gold late last year, pointing out that the gold price and the Indian rupee seemed to be correlated to me. With that view I suspected that if the Indian rupee fell, gold would then also fall. However market action has been the reverse, with gold falling before...

Peak Oil Price From $10 per barrel in 1999, crude oil has been in bull market with the brief exception of the financial crisis in 2008/9. So much so, that the recent rise in Brent oil to $119 per barrel barely generates a mention in the financial press. However, the reality is that the current spend on energy is similar to the level of spending seen during the second oil shock in the late 70s (see...

For various reasons I have been having discussions about gates. A gate for an investment fund is pretty common these days - as it seen as a way to protect investors from themselves. It is so common that is just usually added into many investment fund articles. Personally, I hate gates. I have on occasions had opportunities to impose gates, and have turned them down. When I took over the management...

I was cleaning up some files from my laptop, and I found a stash of my oldest research I first published back in the early 2010, when I was trying to convince everyone China was going wrong (tough sell back then). I am just going to put it here for posterity, so I can easily reference going forward. Enjoy. Three notes, first is on iron ore, second on mining, and third on Brazil - all from 2011 and...

If you wanted to get bearish on the whole AI trade - then you could look at Meta, Microsoft and Oracle share prices and say that the market is taking a dim view of AI. All have been lacklustre recently. There is no mystery to their share price weakness. All are investing heavily in data centres, and so free cash flow after capex is falling. Microsoft it a good example. All of the above is factual....

In my first stint as a macro hedge fund manager, I used to obsess over capital flows into and out of Japan. When the capital was flowing out - you wanted to buy, and went it was flowing back, you wanted to sell. I now realise I was studying the symptoms of a pro-capital world, but having only lived in a pro-capital world, how would I know any different? But now we live in a pro-labour world, and s...

Before the Nasdaq - there was the Nikkei. I was lucky enough to first live in Japan in 1991 as a high school exchange student. If you had told me at the time, that Japan was heading for 30 years of relative decline, I would have not believed you. But that has been the case. MSCI Japan versus MSCI World is a tale of neglect and decline. I have a great deal of respect for Japan and Japanese people....

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com As mentioned in a recent post, I have liked gold since 2022, because when Russian foreign reserves were frozen, I assumed most central banks would stop buying treasuries, and start buying gold. Data has confirmed this view as correct. If central bank buying was the only variable, then there would be no reason to be...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Market moves in June could convince you of any and all of the following set ups: * Deflation is about to return, and market will implode * Inflation is here to stay, and market will keep surging * AI is a failure * AI is a winner That is markets have become a Rorschach diagram, and you can see whatever you want to...

This is a free preview of a paid episode. To hear more, visit www.russell-clark.com Gold has been pretty weak this year since it peaked back in February. I liked gold ever since Russian foreign reserves were frozen. For me, this would drive other big nations to diversify away from treasuries, and for China this could only mean gold. I also took the view that gold would do poorly if US yields rose...