Capital Flows and Asset Markets

Hosted by Russell Clark

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Aug 2026

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August 21, 20266 min

TIME FOR BITCOIN?

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% drawdown earlier this year did make me nervous. I know in the more “excitable” corners of substack they have been all in on other debasement trades like bitcoin, silver and even platinum. I generally avoided these assets, for one reason and one reason alone. I know People Bank of China buys gold, but I don’ think it buys any of those other assets. Silver and platinum are really poor alternatives to gold, and have traded as such, with gold outperforming over a long period of time. Gold was looking expensive versus silver earlier this year, but looks okay here. Bitcoin is not being purchased by the PBOC, and in fact China has a hostile view on crypto. But Bitcoin is very popular in emerging markets, and so COULD do well in a weak dollar environment. So lets look at some of the indicators on Bitcoin. I look at shares outstanding on IBIT to gauge enthusiasm. Shares outstanding fell slightly in June, but hard to say that investors had completely given up on the trade. Short interest did rise somewhat in IBIT recently, but very small compared to outstanding. The best days to buy bitcoin was when the market was very negative on it. A good proxy for this was Strategy short interest. Short interest remains at lows, and a quick check shows that cost of borrow remains GC. I also have a view that the market cap of Tether was a good lead indicator on Bitcoin. When Tether market cap was rising, you knew money was coming into the crypto environment - which would be bullish for crypto assets. Tether market cap is actually falling. Given the weakness in bitcoin this year, I would have assumed the trend following community would be short - but CFTC data actually shows record longs. The most bullish thing about Bitcoin are the technicals. It has broken above its 200 MDA, which has usually been a good time to buy. When I started writing this note, I thought the data would point to good risk reward. But it looks like everyone is long already. I don’t like that set up - at least with gold you have the PBOC as an anchor buyer. 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

August 20, 202612 min

NOT THE BEGINNING OF THE END, BUT PROBABLY THE END OF BEGINNING

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 Argentina until recently as least. Typically the price of being fiscally liberal has been higher interest rates, and usually a weak currency. Turkish Lira has NOT been a safe store of value. But even with large fiscal deficits, the US dollar has been conspicuously strong to stable against other currencies. And perhaps most importantly, corporate borrowing costs have stayed at low levels, with only the Covid era seeing lower yields. In fact corporate yields have fallen under Trump 2.0. Why worry about fiscal deficits if corporate American can borrow cheaply? But a lot of the lowering in corporate bond yields has been driven by collapsing spreads. Of the market pricing corporate and sovereign yields very similarly. Spreads are as tight as they get. For the last few years I have marvelled at the ever lower gap between lets say 30 year JGBs and US corporate debt. Both have inflation risk. The JGBs are long dated, KDP is short dated but has default risk. Essentially the market has been saying, inflation is the problem, but default is not. This sort of makes sense, but also doesn’t. If inflation is a problem, eventually governments will do something about it, and then default risk will go up a lot (this assumes a policy of austerity and increased competition to get prices down). Originally, I though the market was saying the time to worry was in 2025, when gold started to outperform the S&P 500, but S&P 500 has been fine, even as gold has done well. To be brutally honest with you, market based signals worked well in the 1990s, 2000s and early 2010s, but since 2016, policy has been the much better signal. That’s why recent policy changes are so interesting. First of all the US and Japan tried to intervene in the currency market. This is pretty easy to understand. Persistent Yen weakness has caused inflation to rise in Japan, and bond yield to rise. Strengthen the Yen should hopefully allow JGB yields to fall. The problem is that real Yen strength would probably require austerity from the Japanese government - and that looks unlikely. And now the US treasury has increased its purchases of 30 year treasuries via selling more bills. While still early days, neither the Yen or 30 year treasury have moved that much. Why? Well the problem is the Yen and the Treasury are both reacting to loose fiscal policy. When you intervene in bonds or currency markets, you send a big signal that nothing is going to change. You are going to keep spending, your just trying to find ways of making it cheaper. It would be like going to your bank and saying, I am really struggling with my mortgage, could you cut my interest rate please? A good bank would probably ask you to start paying more, or make changes. That is by saying your bill is onerous, you invite it to become more so. The reason I call this the beginning of the end is that yields have been rising for a few years now, and markets have generally speaking been happy with this. But now the US government is saying, things are a problem. A good proximate reason is that interest payments are now greater than defence spending in the US. So here is the rub. In Turkey, President Erdogan, who shares much in common with President Trump, has tried very hard to get interest rates lower. The problem is that when the market thinks interest rates should be higher, the only way to get capital is to basically steal it. And once you start stealing capital, more of it wants to leave, creating a viscous cycle. Now Turkey is Turkey. And the US is US. The US has far more leverage to convince people to lend to it and uncommercial rates. So maybe the party can carry on, who knows? But what we learnt this month is that for the US treasury we are now at a pain point. I wonder is markets try pushing a bit further to see what breaks? The key issue would be a derating of US equities. Typically equities de-rate in an inflationary environment - but in the US have seen the opposite. I thought 2025 was the beginning of the end. Maybe its 2026. One thing I have learnt in life, when something can’t carry on, then it does end. Just sometimes takes a bit longer than you think. 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

August 17, 20268 min

THE CREDIT MARKETS PUZZLE ME - BUT EQUITIES PUZZLE ME MORE

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 works again. Politically, markets seem to be doing what I would thought they would so. Growth would be good, and government bond yields would rise. The ONLY issue is when do rising government bond yields begin to act as a brake on asset markets. My first guess at when this would be the case, was wildly wrong. Higher JGB yields has had no effect on the S&P 500 (I did mention macro investing doesn’t work anymore - yes?). What has worked is just looking at corporate spreads. This one is from Bloomberg. Plainly when this widens, equities do bad, and when its low, equities do good. Simple. What is unsettling is this measure is so at odds at most other measures I look at. Below is the Morningstar leveraged loan index - 100 is good here. Below 100 is not so good. It has been at 95 or so most of 2026. Leverage loans are mainly used by private equity, so in a rising rate environment, you are right to be cautious. But even in the still relatively unleveraged balance sheets of tech, CDS have been selling off. How does this not feed into corporate credit spreads? But what is really bugging me is a sudden rise in the KDP High Yield daily. It has risen from a low of 5.4% to 6.5% this year - with a spike this month. Usually when this goes up, equities go down. I normally look at this as a spread to the 5 year treasury. And to be fair the spread is tight - but I still find markets tend to be weaker when this spread goes up - not at all time highs. I must say I thought markets were headed for a bit of credit driven weakness - especially when I see HYG trading down through its 200MDA. So credit says that US equities should not be doing so well. Interesting. I also note that S&P Dividend Futures have also not confirmed the break out in the S&P 500. If the dividend future was falling, and S&P 500 going up, that would be a VERY bad sign. At the moment it is just not confirming. I also note that the GS High Beta Momentum Short Index has been breaking higher. This tends to happen before market problems. Why? When you crush short sellers, you force them to buy back shorts - which is a one time trade. Once they cover, its bombs away! Basically, both equities and credit are sending mixed signals. My best guess is that everyone has learnt to “buy the dip”. See leverage ETF flows. I thought the time to worry about rising government bond yields was when gold started to outperform S&P 500. This happened in 2025, but has had a huge reversal this year. One wonders if this is turning again? All is really adding up to a bearish outlook again. Maybe the macro guys won’t look like idiots for a month or two. Lets see. 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

August 12, 20267 min

WHAT'S THE DEAL WITH THE YEN INTERVENTION?

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 curtailing inflation. You can see this most clearly in food inflation in Japan. Japan had no food inflation form 1990 to 2013 or so. I think in that period, low interest rates make total sense. But in a period of rising food inflation, loose monetary policy is a political and economic mistake. The BOJ has not been TOTALLY negligent. Interest rates have risen from lows. But still remain at below 1%. But plainly this is not enough to stop food inflation or Yen weakness. The obvious answer it to raise interest rates to slow down growth, or strengthen the Yen or both. The Japanese yield curve is a bit odd - it only really inverted in the late 80s, early 90s. Even then, getting back to 50bp spread seems a reasonable target. This would imply raising BOJ rates another 70bps. Plainly the US treasury and BOJ want to avoid that - hence the FX intervention. Yen appreciation would help deal with inflation - and particularly food inflation. Its not hard to understand why the US doesn’t want Japan to raise interest rates. The US treasury is already at the upper limits of Bill issuance. Having more competition for issuance at the short end would be a problem. It is easy to see this is a a borrowing problem. US and Japanese governments are borrowing too much, and trying to keep interest rates down. I see it differently. The growth outlook for Japan is now so good, deposit flows are starting to slow. While loan growth is accelerating. In essence, the pool of available money to invest in to JGBs is declining. And if there is less money for JGBs, then there must be less money for Japanese to buy Treasuries as well. The Yen intervention could help with Japanese inflation, and maybe the BOJ would not need to raise rates. But the real problem is growth is so strong now, the pool of capital for governments to borrow from is shrinking. And Yen intervention will not help with that - only a recession. But that is not on the cards either. I think the greater risk is that Japanese start bringing money home to invest domestically. Then the Americans will really be in trouble. Then the Yen will surge and Treasuries will collapse - but that is a problem for another time. 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

August 10, 20268 min

CONFIRMED - SEMIS ARE THE NEW OIL

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 tended to be a catalyst for recession and bear markets. A similar dynamic was at play in Japan. Rising energy prices tended to coincide with weak equity markets, and poor growth. Here we can look at Japanese Energy CPI has a proxy. The period from 2007 to 2011 was particularly dire for Japan. But despite high energy prices from 2020 onwards, Japanese economy and equity markets has been fine. Being an oil exporter was (usually) the only way to record a very high current account surplus. Norway for instance has had a current account surplus over 10% for most of the 21st century. Taiwan now runs a 22% of GDP current account balance, with Korea not far behind. Korea has always been a diversified export powerhouse - but now semiconductors dominate. The big change is that semiconductor pricing no longer falls. This is the log scale of semiconductor pricing. But oil was very similar. For decades the crude price of oil was fixed, but when supply became restricted, oil pricing surged, and the modern macro world was born. In real terms, oil fell through most of the 1900s. I expect when oil spiked, it was as great a surprise as I feel looking at DRAM prices up 500% And as we have seen rising semi prices is NOW good for the equity market, even more than the negative of rising oil prices. The surge in oil prices this year, historically associated with weak equities. Not this time. The big question is whether surging semi prices are come to be seen as inflationary or not? It seems like they should be. The other very interesting comparison to oil, is that the US great economic rival has a very different approach to semiconductor industry. The USSR kept energy prices low, even during the 1970s, which undoubtedly was seen as a political and economic advantage at the time. China seems to be pursing a similar economic model where AI is cheap, but so is its semiconductor pricing. SMIC prices much cheaper than TSMC (not totally apple for apple comparison - but indicative). Chinese AI pricing is also much cheaper than the US. The “great” thing about capitalism is the boom/bust cycle does mean that capacity gets built, as pricing encourages it. In China, given pricing and the lacklustre equity performance, it must be driven in some parts by diktat. What are the implications of semi as the new oil? Well one would be that central banks should be raising interest rates more. Korea has started to raise rates. Given the enforced supply restraint on semiconductor supply (ASML monopoly, and restrictions in China), the only way pricing can fall is if a monetary policy is used to create a recession. This was what happened in the 1970s, until supply side reform saw an increase in oil production. From a practical point of view, the implication is that inflation and interest rates are likely to go higher. 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

August 5, 20261 min

IT FINALLY MIGHT BE TIME

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 since Covid, when the Federal Reserve stepped in as a buyer of corporate credit, credit spreads have become tighter and tighter. This is bullish for equities, and as of today, these spreads are at very tight levels. Binding corporate and sovereign credit together is pretty common in emerging markets. While it is great for corporates, it tends to not be so good for sovereign yields. So the question is when do rising sovereign yields begin to affect equity markets?

August 4, 20267 min

MACRO AND JAPAN

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 I have been playing with the basketball team for an two hours a day, during school term, and six hours a day during the summer. We had shed blood, sweat and tears together, when at the beginning of training one of my teammates mates came over to me and said “we are not talking to Tanaka today - he skipped training yesterday. Ok?” I said ok, and did not talk to Tanaka as instructed. I had mixed emotions - I felt sorry for Tanaka, but I was also pleased I have finally made it to the inside. If you have never heard of Japanese high school club training, “bukatsu”, perhaps watch some Japanese high school baseball videos on Youtube. Intense is the key word here. And team spirit is everything. Anyway, the key issue is never trust a foreigners view on Japan - they know nothing. I remember in 1997, Steve Roach, a very famous economist for Morgan Stanley, was very bearish on JGBs. If memory serves, he called the 10 year JGB at 3%, the short of the century. They or course went to zero, or where the greatest long of the century. In fact short JGB trades destroyed so many hedge funds, it came to be known as the widowmaker trade. Associated to this was Yen strengthening during times of US recession. Early 1990s and again after the GFC gave rise to Yen being seen at a “safe haven” currency. I always felt this trade was easier to understand in terms of Korean Won. Macro traders often preferred Korean won to Japanese Yen as it had higher interest rates, and similar industrial structure. The Won/Yen carry trade was always popular with macro traders. Periods of Yen weakness against the Won tended to be followed by periods of Yen strength. The “macro community” has learnt from this, and have been pushing long Yen trades for a while now. In recent days the US and Japanese government have intervened to strengthen Yen. The macro community has started melting down again. Here is a couple of choice selections from Twitter. Lee Roach seems to be pushing for a huge carry trade unwind (what is with people called Roach and Japan?!?) and Michael A. Gayed thoughts are not totally clear to me, but I do know he is “VERY EXCITED” about Yen moves. What do I think? Well in the political world we live in I have a really simple view on Yen. I think it goes exactly where the government thinks it should go. Which basically means, they like it weak, but not too weak. Do I think we are going to be a catastrophic Yen carry trade unwind? Well the Japanese (who would know if this was going to happen) would be buying JGBS in that case. They did that in 2007. Today, not so much. Do I think Yen is about to be catastrophically weak? Like an Argentinian Peso or Turkish Lira? I think you need to see Japanese interest rates ABOVE US rates and still weakening to really believe that. That may happen - and then we would have to consider that risk. But for the time being Japanese yield remain below US yields. I think the simple story is Japan has inflation now, and is much more a “normal” country now. Why was it so special for so long? Japan challenged the US in the 1980s, so agreed to economic policies that hamstrung it for three decades. But now that China is the challenger, Japan is free to do as it pleases. And it chooses inflation. And we know, inflation is good equities and bad for bonds. Personally I look at the above, and I am neither bullish or bearish on Yen. I am bearish on JGBs, but also bullish on Japanese equities. As a for “macro investors”, they are so much like the generals of old, always fighting the last war. 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

August 2, 20269 min

JULY UPDATE

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 month. Certainly what I saw during the month. We now know that the hedge fund Situational Awareness became aware it was in a situation, and was forced to sell longs and buy back shorts. This was very reminiscent of LTCM, back in the day. And it was noticeable that markets stabilised once it had deleveraged. The VIX finished the month at 16 which feels VERY at odds with individual stock volatility. Amidst all the drama, the Federal Reserve decided not to raise interest rates, despite the largest investment boom in modern history, and the largest fiscal deficit in modern history. The market decided to sell off Treasury yields, and the 30 year finally pierced 5%. The other, and in my view, highly related move was in Japanese Yen. But for me, the move in Yen was not the big news. It was the amount of Treasury selling that was needed to make Yen move was the big news for me. Estimates range from USD 50bn to USD 100bn. If we look at Japanese official holdings of Treasuries, at USD 1,143bn - it is pretty clear that they spent a big chunk, just to get Yen back to where it was a month ago. That is, if they just intervene, and do not change fiscal or monetary policy they will run down the foreign reserves very quickly. The market clearly wants higher interest rates in Japan, but the BOJ is afraid of what has happened previously. Raising rates in mid 1990s started the Asian Financial Crisis, in 1999 the Dot Com bust, and 2006 the GFC. The thing is that the JGB market sniffed out trouble pretty early in those situations. This time, it keeps selling off. Or in other words, the JGB market sees inflation. I agree. I think people are starting to wake up to what I have been saying for a few years. We are in a rising cost of capital world, driven by rising investment needs, and the realisation that neither our governments (which are populist, or populist threatened) or our central banks are acting to keep inflation at bay. This incentivises people out of cash, and makes inflation even worse. Warsh could have ended this vicious cycle early - I think a 50bp even a 100bp increase was called for. Now the Fed is in catch up mode. What I mean by that, is both the BOJ and Fed will come under pressure to raise rates by a lot more. They could have avoided this outcome - but they chose not to. GLD/TLT has had a long rest, but looks interesting to me. But I think the short TLT looks more interesting than the GLD side here. What I think is more likely is that bond yields rise, and at some point President Trump or American business will ask the Fed to “fix” the bond market. If they attempt YCC, or QE or something like that - THEN gold goes to the moon. That is Fed inaction - causes yields to rise. Fed intervention - causes gold to rise. The only way to get bond yields down now it to jack short rates way about the 30 year yield - which would be 6 or 7%. I don’t see them doing that - especially after blinking in this meeting. The real mystery here is at what level do higher bond yields hurt the S&P 500? Exciting times. 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

July 31, 202610 min

GETTING DOWN TO THE HEART OF THE AI TRADE

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 measures. Adding to this bearish set up - the Capex is now debt financed And you are seeing the CDS respond to debt issuance. And then to cap it all off, the US AI models are getting undercut by Chinese models. If you are bearishly minded, then this is a slam dunk short case. For me, I understood all this, but I saw the capex spending as defensive. With Elon Musk joining the AI party - Google, Microsoft and even Meta could feel threatened, and so would all need to spend aggressively to defend their turf. Or to put it another way, Volkswagon should have massively raised R&D on EVs when Tesla was launched, and now its too late. The big tech was not going to make the same mistake. From this line of thinking, the bear signal would be someone giving up. But I was reading the Microsoft results, which was excellent, and could not stunned by the future contractual obligations they reported. Well over USD 700bn. The most recent quarter also saw their cloud business become their largest single business line - with over 30% year on year growth. If I saw this type of “contractual obligation” growth in my own businesses, I would also be spending big. So the question is can Anthropic and OpenAI actually meet the the US 1 trillion backlog they have built up with the hyperscalers? These two companies alone make up the commitment to the hyperscalers. And here is where it gets hard. Microsoft, Oracle, Google and Amazon must all know that they are extremely reliant on OpenAI and Anthropic. But they also must have their own visibility of the demand for AI related areas. And they should also have good visibility on the capability of Chinese AI, and yet they still spend. So to be bearish you need to take a view that the tech giants have missed something, or have gotten something wrong. And this does happen. The GFC was basically caused by a belief that AIG could not go bust (the investment banks bought CDS from AIG to hedge their MBS business risk. When AIG failed, they were no longer hedged.). What could I see that the big tech companies not see? I don’t know. I think the biggest risk could potentially Chinese AI completely upends the AI system. But Chinese cloud pricing has been cheaper that the West for years without slowing cloud growth. I would also think this was more likely if Nvidia GPUs did not still trade at a premium in China. That China still wants and needs GPUs means that their AI is still built along similar lines, and not a completely different infrastructure. Having lived through big busts in the 1990s and 2000s, I understand the fear that investors have. But I think to really commit to a bearish trade you need to find something that the market has wrong. My personal view is that markets have interest rates expectations wrong - and I have good reasons to think that. But on AI, what I see is that OpenAI and Anthropic have huge obligations to the hyperscalers, which they seem willing to invest on the back off. Given their greater transparency, I find that hard to call that bearish. However, if they are basing their investments on the idea that US 10 year treasury yield is going to stay below 5% - then they have a problem. But that is really not tech specific. 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

July 30, 202612 min

SHOULD YOU SHORT MEMORY STOCKS?

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 the only fund in London to still be net short - so much so that the GS stock loan desk took us out for Christmas drinks. Apparently we were there best customer by far. I was short Volkswagon all through its squeeze, and eventually made (a small amount of) money on it. That was unpleasant. I also tried and failed to short oil in 2008, putting on shorts in Petrobras in early 2008, but getting squeezed out before it collapsed. Actually my ideal short is a cyclical stock you run long all the way up, and then switch to short when the fundamentals breakdown. The reason I am thinking about this is the ongoing momentum bloodbath in markets. The GS High Beta Momentum Index has lost 43% in just over over a month. The only comparable move that I can remember was 2008. There was a mini one I was on the right side off in 2016, but 2008 was the really big one. What happened in 2008, was that as the GFC started to unfold, the Fed starting cutting interest rates, which weakened the dollar. The China boom was still going, so commodities, and specifically oil and iron ore were going to the moon. But as recession took hold, this cyclical stock that has attracted momentum money got destroyed. Looking at SK Hynix and other memory stocks, its easy to see this type of market again - down 50% this month. The thing is that back in 2008, the commodity stocks moved one for one with commodity prices. Petrobras peaked around the same time as oil. Vale peaked around the same time as iron ore. This time the memory stocks have pre-empted a fall in the underlying. Memory prices are still at or very near all time highs. Or to put it another way, Micron stock is falling even as earning expectations are being revised up. The obvious short case is that hypercalers CDS is beginning to sell off and this will cause Capex to fall. I would be a bigger believer of that if I was seeing long dated bond yields falling - the market would be agreeing that recession is coming. But if you do want to short memory stocks, I can offer one interesting argument. Before memory stocks became THE AI play, power equipment stocks were THE AI play. In the US, GE Vernova was the go to play. It is weak in July - but not broken - not yet anyway. Koreans being Koreans, pushed their own electricity generation equipment stock up 700% in a year, but has halved in the last 2 months. Chinese electricity equipment maker, Harbin Electric, peaked in February, and then halved before bouncing a bit this month. There is a reasonable argument to say Asian stock markets are a lead on the US. As they make physical goods, they tend to have a longer lead time, and can see when things slow earlier. Sometime the Kospi does seem to turn well before the S&P 500, and sometimes it seem to be simultaneous. One of the big problems with this analysis is that other reliable “tells” on the market do not really work. Normally the time to buy Korea was when its currency began to appreciate, and sell when it weakened. In this cycle, Kospi has soared as the currency has weakened, and fallen as the currency strengthened. What I am trying to say is that short selling is hard. I used to only take on shorts when I could see three different catalysts to make money. Right now in memory stocks, you need to memory prices fall. And to make that work, you are basically saying that the hyperscalers will see their rising CDS and decided to cut capex aggressively. I would bet on that if I saw their core businesses going into decline - but I don’t see that (yet). Or if I saw recession - but I don’t see that yet either. 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