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Authored by Ryan McMaken via The Mises Institute,

It’s becoming increasingly clear to even mainstream media outlets that things are unlikely to return to “normal” after the 2020 election.

No matter who wins, it is likely the losing side will regard the winning side as having obtained its win using dirty tricks, foreign meddling, or through relentless propaganda offered up by a heavily biased and one-sided news media.

And if about half the country regards the winning president as illegitimate, where does one go from there?

The survey data isn’t exactly calming on this issue. As reported by Politico last week, the percentage of Americans who believe it is justified to use violence to “advance political goals” has quadrupled since 2017, for both Republicans and Democrats.

After all, political invective has reached a fever pitch since Hillary Clinton declared that a sizable portion of the United States population constituted a “basket of deplorables.” Perhaps not since the 1870s and 1880s—when Catholics, Southerners, and Irish (all core constituents of the Democratic Party) were denounced by Republicans as spies, traitors, and drunks—has half the country so despised the other half. As early as 2017, when asked of the chances of another civil war in the United States,  about one-third of foreign policy scholars polled said it was likely.

Perhaps, then, it is not shocking that we are now seeing articles even in mainstream publications suggesting that maybe, just maybe, the United States can’t continue in its present form. Moreover, the view is now increasingly being promoted by writers and ideologues outside the usual conservative and libertarian groups that have long advocated in favor of decentralization and local control.

On September 18, for example, Steve Chapman in the Chicago Tribune asked: “Can the United States survive this election?” For the past century, the answer given by most any mainstream journalist would have been a decisive yes. The usual narrative has long been this: “Of course America will endure for centuries to come! We Americans are masters of compromise. We’ll all soon realize we are all in this together and come together in unity!”

But now Chapman writes:

The concept of splitting off is as American as the Fourth of July. The high point of separation sentiment came after Abraham Lincoln’s election in 1860, resulting in the Civil War. But New England states contemplated leaving over the War of 1812….The bonds that hold Americans together have frayed, and what happens on Nov. 3 may do additional damage. No nation lasts forever, and ours won’t be the first. This election won’t be the end of the United States. But it could be the beginning of the end.

Moreover, Chapman notes that while many no doubt will continue to see the United States as strong and likely to endure indefinitely, such assumptions may be unwise given the reality of experience elsewhere:

In 1970, the Russian dissident Andrei Amalrik wrote a book titled, “Will the Soviet Union Survive Until 1984?” At the time, the idea of a giant superpower disintegrating sounded like a fantasy. But it eventually came true. … Countries like Czechoslovakia and Yugoslavia also have broken apart. Britain is leaving the European Union, and Scotland could push to leave Britain. It would be folly to think the United States is immune to these forces.

Chapman is not alone.

Last month in the Philadelphia Inquirer Chuck Bonfig suspected that maybe the end is near:

The country has gone through many periods of strife in my time here: assassinations, recessions, desegregation, inflation, gas crisis, Watergate, hanging chads, the AIDS crisis, 9/11. Maybe it’s the 24-hour news cycle or the immediacy of social media that makes the landscape seem so bleak, but I don’t recall us ever being so divided.

No one in our country seems happy today. The right is angry. The left is despondent. Our nation reminds me of those married couples who try to stay together for “the children” but end up making everyone around them miserable.

Maybe it’s time for a breakup….Just think about it, America. I know breaking up is hard to do. We used to be good together. But what is the point of having the “greatest country in the world” if none of us actually like it?

The debate over separation and secession has been additionally pushed into the national debate by Richard Kreitner and his book Break It Up: Secession, Division, and the Secret History of America’s Imperfect Union. Kreitner, who writes for the leftist magazine The Nation, suggests that the United States has never been as unified as many suggest and also concludes that secession and division may be a necessary tactic in bringing about the left-wing reforms he’d like to see. In an interview with The Nation, Kreitner discussed how he began to think about secession as a serious solution:

What if the United States broke apart? Would that be such a bad thing? Is it possible that the progressive policies and programs that I wanted to see put into place might be easier to enact in a smaller entity than the United States, with its 330 million people and the need to always convince people with very different attitudes and interests? So with that question, I was curious if anybody else in American history had favored secession for noble or progressive reasons—not to perpetuate slavery but even to oppose it.

The answer, I quickly found, is yes: There were disunion abolitionists who were fiercely against slavery and who wanted the northern states to secede from the union in the 1840s and 1850s as a way not only to protest slavery but to undermine it. Taking in their arguments and their rhetoric was really, really interesting.

Kreitner goes on to note that secession has long been at the forefront of American political ideology. This, of course, goes back to the secession of the American Revolution and can also be found in the secession movement favored by abolitionists and in New England’s efforts to secede during the War of 1812.

Kreitner is right.

Secession has long been entertained by many Americans, and not just defenders of the old Confederacy. In the early days of Southern secession, many Americans—including those who didn’t like the South or slavery—were fine with the Confederacy’s departure. New Yorker George Templeton Strong, for instance, declared in 1861, “the self-amputated members [the Southern states] were diseased beyond immediate cure, and their virus will infect our system no longer.” That same year, other New Yorkers seriously discussed leaving the Union and becoming a city-state devoted to free trade. In 1876, the battle over who won the presidential election very nearly produced a national split, with the pro-Democrat governor of New York “promising state resistance” to the Republican usurpers.

Nor were the nation’s founders necessarily opposed to division. Thomas Jefferson expressed prosecessionist views, even when he was a sitting president. In an 1803 letter to John Breckinridge, Jefferson explained that if the future states of the Louisiana Territory sought to secede that was fine with him:

[If] it should become the great interest of those nations to separate from this, if their happiness should depend on it so strongly as to induce them to go through that convulsion, why should the Atlantic states dread it? But especially why should we, their present inhabitants, take a side in such a question?

And in 1804, Jefferson wrote to Joseph Priestly stating:

Whether we remain in one confederacy, or form into Atlantic and Mississippi confederacies, I believe it not very important to the happiness of either part.

Only Decentralization Can Save the Union

At this point, there is only one strategy that can prevent a continued slide toward conflict, disunion, and (possibly) violence: decentralization of political power.

Thanks to decades of growing centralization of power in Washington, DC, American policy is increasingly made by the national government and not by state and local authorities. This means American life is more and more governed by one-size-fits-all policies hatched by faraway politicians in DC. Thus, with each passing election, the stakes become higher as gun policy, healthcare, poverty relief, abortion, the drug war, education, and much more will be decided by the party that wins in DC, and not in the state capitol or in the city council. In other words, the laws that govern Arizona will be primarily made by politicians and judges from other places entirely. These faraway politicians will be more concerned with the needs and ideology of a national party, rather than with the specific needs of people who live in Arizona. 

It is only natural that as the national government becomes supercharged in this way many Americans might start considering ways to get beyond the central government’s reach.

It doesn’t have to be this way. The United States could follow another path in which domestic policy is created and enforced in a decentralized manner, in which laws for Texans are made in Texas and laws for Californians are made in California. This, of course, is what Thomas Jefferson imagined when he wrote that the states should be self-governing and unified only on matters of foreign policy:

The true theory of our constitution is surely the wisest and best, that the states are independent as to everything within themselves, and united as to everything respecting foreign nations. Let the general government be reduced to foreign concerns only.

In a decentralized political scheme such as this, the stakes in a national election are much lower. It doesn’t matter as much for Ohioans which party is in power in Washington when relatively few laws affecting Ohioans are made at the federal level. 

To adopt this way of doing things, however, would require a sizable departure from the current ideology that reigns in Washington. On the left especially, it seems few can imagine a world where people in Iowa or Indiana are allowed to run their own schools and healthcare systems without meddling from Washington. While conservatives’ efforts to force marijuana prohibition on states like Colorado show that the Right is not immune from this impulse, it is abundantly clear that the Left is quite enthusiastic about the idea of sending federal enforcers to ensure the states enact abortion on demand, adopt Obamacare, and enforce drug prohibitions as dictated by Washington.

But unless Americans have a change of heart and begin to decentralize the political system, expect a growing unwillingness to accept the outcomes of national elections and growing resistance to the federal government in general. What follows is unlikely to be pleasant.

Over the past decade, western central banks have generated countless hours of derision, mocking and scorn because while it has become painfully obvious that their two primary objectives – pushing stocks higher and hammering the currency – have nothing to do with their stated objectives of full employment at stable prices, central bankers have been steadfastly stubborn in their baseless claims that what they do is for the greater good. So much so, that the very same Fed whose catastrophic monetary policies of the past decade have spawned the greatest wealth and class inequality in US history in their pursuit of weaker currencies and higher asset prices, are now actively pretending they are pursuing an end to racial inequality, which is nothing but pure propaganda to justify printing even more money until maybe one day, inequality somehow magically ends.

But there is one place where officials are not hypocritical about their true motives and desired outcomes: Russia, where the government minister in charge of getting companies to keep production at home thinks the ruble’s recent 20% plunge against the dollar is simply “awesome.”

In an interview with Bloomberg on Wednesday, the Russian Industry and Trade Minister Denis Manturov said that companies that don’t rely heavily on imports “are in a sweet spot right now.” He was referring to the plunge in the Russian currency: the ruble is one of the worst-performing currencies this year due to a slump in global oil prices and concern the U.S. and European Union may introduce new sanctions.

And while economy Minister Maxim Reshetnikov said in parliament Thursday that the currency is undervalued, while the central bank has warned the devaluation may push inflation above a 4% target, Manturov disagrees.

Anticipating the weakness of its currency, the Kremlin introduced measures to get companies to be less reliant on imports since US and European sanctions curbed Russia’s access to international markets in 2014. Manturov said three years ago that a ruble rate of 62 per dollar would be an optimal level for the policy to blossom.

And with the currency was trading near 78 per dollar…

… this has meant an even faster recovery for Russia’s export-oriented business. In fact, after a deep slump in the second quarter, the Russian economy bounced back over the summer after many lockdown restrictions were lifted. Industrial production will probably only shrink 4.5% for the full year, while manufacturing will contract 2%, Manturov said.

Of course, there is the possibility that the drop will only accelerate further as Russian virus infections have surged in recent weeks with daily tallies surpassing levels reached in the spring, although unlike in the West there is little discussion of a new round of shutdowns. Furthermore, unlike many western nations, Manturov said the government isn’t discussing any plans to prolong support measures for businesses. “We hope that the peak is over,” Manturov said. “The recovery was very quick in many industries.”

But what is more important to Russia is that its goods and services are now about 20% cheaper to its foreign trading partners than they were at the start of the year, resulting in a foreign-led demand boom.

The bottom line is that while every developed nation is now engaged in massive QE precisely in hopes of devaluing their own currencies to even a modest degree of what Russia has achieved, they will never admit to it (the BOJ for example has constantly stated that a weaker yen is not one of its policy intentions, just a boost to inflation… as if yen weakness isn’t a key driver of that). Which is why in a world of endless lies and constant hypocrisy, hearing at least one financial official admit the truth that it is “awesome” to see one’s currency collapse, is delightfully refreshing.

Authored by Ben Zeisloft via Campus Reform,

A postdoctoral researcher at Brown University took to social media to explain that Black AirBnB guests may be traumatized by Trump signs.

Carycruz Bueno, a postdoctoral research associate at Brown University’s Annenberg Institute, tweeted that vacation rental company Airbnb “doesn’t understand the trauma” of Trump signs for a Black person.

Airbnb rentals are privately owned properties listed for short-term and long-term rental on Airbnb. Airbnb, unlike hotels, does not own the properties. It is the platform that connects private owners with renters and facilitates payments.

Bueno recalled that she and her husband rented a property in Maine. When they arrived, she said they saw “Trump signs and other white nationalist symbols” in the yard. Bueno was “immediately scared” for her life and the safety of her family.

According to Bueno, AirBnB stated that it could not do anything, which Bueno described as a “prime example [of] how White companies make a BLM statement,” yet “do nothing” when a Black person says that she doesn’t “feel safe.”

Bueno alleged that Airbnb is “only words no action,” and should “do better” than making Black people “retell a traumatizing experience.”

She also called for a “greenbook version of AirBnB” so that BIPOC (black indigenous people of color) would not have “to pay to feel uncomfortable and scared.”

Bueno mentioned that the American flag could also be a symbol “used in many places to scare Black people,” in addition to KKK and Confederate iconography.

Cruz Caridad Bueno, an “anti-racist feminist economist,” chimed in as well: “Disgusted, not using Airbnb anymore.”

Brown University Students for Trump President Emma Rae Phillips told Campus Reform that she is “disappointed by Bueno’s comments.”

Phillips, who majors in economics, said that Bueno’s “tweets do not seem to show much understanding of how free markets work” since AirBnB’s customers have the choice to take their business elsewhere. 

Additionally, she says that “American flags and Trump signs are not racist in any way, shape, or form.”

Campus Reform reached out to Bueno for comment but did not receive a response. 

After federal agents this summer moved to detain and charge multiple visiting Chinese academics for their undisclosed links to the People’s Liberation Army while at US research universities or laboratories (often involving outright deception to federal agencies), Beijing has escalated things with its own unprecedented warning. 

A WSJ exclusive published Saturday cites several sources to say Chinese government officials are threatening to arrest American nationals working or residing in China in response to the DOJ prosecutions of Chinese military-linked researchers. The report cites a series of warnings communicated via “multiple channels” since the summer, including directly to the US Embassy in Beijing.

Recall too that after a developing tit-for-tat, last month the Trump administration announced that it is “blocking” many students from China from obtaining visas to America, specifically graduate students focusing on research in scientific and medical fields over fears they could steal sensitive research, especially related to coronavirus data or the search for a vaccine. 

And there was also the mid-July diplomatic fiasco involving Chinese national Tang Juan, a University of California-Davis researcher previously admitted on a J-1 visa, who was alleged to have hid out in the Chinese consulate in San Francisco after being sought by the FBI for lying about her PLA affiliation. She was taken into custody and charged later that month, along with a handful of others, including a visiting scholar at a Texas research institution.

And three weeks ago a Chinese scientist accused of stealing trade secrets from a leading American researcher at the University of Virginia had all charges dropped against him after a court concluded he had authorization to access the information in question. But there’s now been monthly instances of the DOJ rounding up Chinese academics under such suspicions. 

It now appears Beijing too is ready to go ‘gloves off’ as the WSJ details:

The Chinese message, the people said, has been blunt: The U.S. should drop prosecutions of the Chinese scholars in American courts, or Americans in China might find themselves in violation of Chinese law.

Though the threats up until now have not been detailed to the public, the warnings via diplomatic backchannels began this summer, according to the report, which characterized the communications as a “blunt message”.

“China started issuing the warning this summer after the U.S. began arresting a series of Chinese scientists… the people said,” the report adds.

Though both sides, including the US State Department, are keeping mum over the potential retaliatory move Beijing is said to be mulling, the US last month did issue a travel advisory telling Americans that given deteriorating Sino-US relations on multiple fronts, especially the Hong Kong national security law issue and a growing blacklist related to Chinese tech firms, they must remain hyper aware when traveling of the possibility for the Chinese government to detain other countries’ citizens “to gain bargaining leverage over foreign governments.”

However, Beijing has claimed that this is precisely what the United States and Western governments are doing in the first place, offering as a foremost example the case of Huawei executive Meng Wanzhou, which has marred Canada’s diplomatic ties with China. Beijing has said the US was clearly an “accomplice” in her continued detention. 

Authored by Jonathan Turley,

Below is my column in the Hill on the nomination of Judge Amy Coney Barrett and the oddly disconnected questions during her confirmation hearing.  While I have written about the revealing moments of the hearing, the Democrats clearly elected not to focus on the nominee but the election. When they did attack the nominee, they fired wildly and missed completely in three areas.

Here is the column:

Benjamin Franklin once said, “it is hard for an empty sack to stand upright.” It took almost 300 years, but Franklin’s observation finally has been proven demonstrably true. The three-day Senate Judiciary Committee hearing for federal appellate judge and Supreme Court nominee Amy Coney Barrett can best be described as an empty-sack confirmation that simply would not stand upright.

From the outset, committee Democrats were dealing with a highly qualified nominee who has the intellect, the temperament and the background to be an exceptional justice. And that was the problem.

Democrats decided to use the hearing as a springboard for the coming election. They never intended to put anything in the sack against Barrett. Yet, to frame this effort, they advanced a number of false premises that collapsed on their own weight:

The Affordable Care Act (ACA) is about to be killed

Barrett was surrounded in the hearing room by photos of ill individuals who could perish without national health care. It made Barrett look like some judicial serial-killer.  However, these were not her victims. Indeed, the entire premise was false.

Senate Democrats were suggesting that the pending case of California v. Texas was just one vote shy of striking down the ACA. It left many of us watching in disbelief. While a district court struck down the whole act, an appellate court wanted to send it back to consider the elements of “severability.” The vast majority of experts believe that the striking down of one provision — the individual mandate provision — should not result in the loss of the entire act. More importantly, a clear majority of the Supreme Court appears to believe that. Chief Justice John Roberts and Justice Brett Kavanaugh both are expected to vote to uphold the rest of the act. Indeed, a Justice Barrett could well vote with them.

What is clear is that it is extremely unlikely that the ACA is teetering on destruction. Numerically, the current head-counting means that it is as likely that a unanimous court would support severability as a five justice majority would strike down the whole act.

None of that mattered, however, as Democratic committee members spun a conspiracy theory that Barrett’s nomination was all about supplying that needed fifth vote just before a Nov. 10 court hearing on the case. It was an empty sack that just laid there as Barrett explained this was a narrow question of severability and she has never ruled on the issue of severability.

Abortions are about to become illegal in America

Barrett is undeniably pro-life. She’s said so over and over. She also said she does not consider Roe v. Wade to be a “super precedent.” As such, the case is not inviolate and can be revisited.

However, even if Barrett were to supply the fifth vote on the court to overturn Roe — which remains unlikely — it would not make abortion illegal. Indeed, former Vice President Joe Biden himself has explained why. He said recently that if Barrett helped overturn Roe, his “only response [would be] … [to] pass legislation making Roe the law of the land. That’s what I would do.”

Put aside for the moment that forcing states to accept abortion, if it is no longer a constitutional right, could be challenging under the 10th Amendment. The broader point is still valid: Such a decision would simply return the question to the states. And the majority of states likely would continue to guarantee the right to abortion as a legislative matter. In other words, Roe might end — but it would not end the right to choose, as a matter of state law.

Ironically, Barrett is a huge defender of states’ rights and would likely defend pro-choice states in asserting such federalism powers.

Barrett is unethical because she will not recuse herself

One of the weakest arguments is that Barrett cannot be confirmed unless she agrees to recuse herself from the ACA case or future election controversies. The reason is that Democrats say there is an appearance that President Trump really wants her on the court to vote on such issues. However, that logic would seem to require not just the recusal of the other two Trump-nominated justices — Neil Gorsuch and Brett Kavanaugh — but a host of other justices who were confirmed a year before elections in prior administrations.

There is no reason for Barrett to recuse herself under the court’s governing standards. She has no personal or financial interests in these challenges and did not work on any of the underlying litigation, including election litigation that has not occurred yet. Nonetheless, Barrett pledged to consider recusal if anyone raises the appearance of a conflict and to apply the governing standard of 28 U.S. Code § 455. That was not enough for Sen. Mazie Hirono (D-Hawaii), who responded to her pledge by saying “the fact that you wouldn’t even bring forth the recusal process says to me that voters may decide there is an appearance of conflict.” That was as confusing legally as it was grammatically for most of us.

We ended this hearing where we began it, with nothing from Senate Democrats relevant to the actual nomination. Instead, they gave us probing questions about Barrett’s views on global warning and how she felt about putting immigrant children in cages. No serious answers were expected by the Democrats, and no answers given.

Indeed, for much of the hearing, Barrett seemed as relevant to senators as the ficus plant in the corner of the hearing room. Speeches were made. Pictures were paraded. Voters were beckoned. Even the Houston Astros were maligned. But nobody could get that empty sack to sit upright.

At the start of 2012 Horseman Global did something which virtually none of its peers dared or would dare to do: it took its formerly 100% equity net long exposure to deep net short, launching an 8 year period in which the fund would be bearish month after month on stocks, yet as the monthly P&L table below shows, it also manged to generate impressive annual returns over this same period (with the exceptions of 2016 and 2019) despite constant central bank intervention pushing stocks relentlessly higher, largely thanks to the Fund’s significant bond long position.

Yet after a dismal 2019, in which fund CIO Russell Clark finally met his match in Powell as it full-on fought the Fed and the Fed won, resulting in a 35% drop last year, things changed dramatically at Horseman, which has since rebranded itself as Russell Clark Investment Management.

First, as we reported back in April, the fund suddenly ditched its long-running bet on deflation, with Clark saying he used the opportunity offered by the Covid-19 crisis “to exit deflationary positions. We have sold all our government bonds, and I am now trying to short assets that have benefited from very low interest rates, wages and commodity prices, namely commercial property, restaurants and utilities (and potentially private equity).”

And yet, the fund was still net bearish on stocks, because as Clarke explained, “if inflation appears, then US markets are in big trouble. For me, the 1970s and stagflation beckons. Short bonds and long commodities look right, with a bias to shorting US equities. I see inflationary assets outperforming deflationary assets.”

Fast forward six months later, when things aren’t working out quite as expected because in a year that had seen wild swing in the fund’s P&L, September proved to be the worst month of 2020 for Clark, with the fund losing 9.25%, and cutting its return for the year by more than half to 8.75%. Worse, it also meant that the AUM for the Russell Clark Investment Management strategy had dropped to just $100 million, from $150MM at the start of the year. 

… and was less than 20% of what it was at the start of 2019, which with a -34.9% return, would end up the worst year on record for Clark (in May of 2019, Bloomberg profiled Clark saying he is “betting it all on a market crash“, which did in fact materialize… unfortunately several months too late to help the hedge fund CIO).

But what we find most notable is that sometime in the past few months, Horseman, pardon Russell Clark, underwent a historic position and sentiment shift and after 8 years of being net short, the fund is now back on the bullish bandwagon with a 23.2% net long position (with no exposure to bonds).

So what happened?

Well, as is customary, Russell first gives a big picture view of what is going on in the hedge fund world, where it is hardly a secret, nothing works any more as central banks flipped the market on its head in their nuclear bomb response to the covid pandemic, and handed it to 16-year-old Robinhood daytraders on a silver platter. Needless to say, that made chasing momentum and consensus positioning critical, and crushed any contrarians who shied away from the herd. Sadly for Clark, he was among them, and the result has been a rollercoaster for both the fund, and Clark’s investment positioning, with the fund manager claiming that Covid-19 not only “allowed central banks to short circuit the natural de-leveraging process”, but also “literally turned the world upside down” making it extremely difficult for Clarke to “develop new ideas.”

Your fund lost 9.25% this month, from the long book and the currency book.

My big thing, for what it is worth, is finding something that no one else knows about and then building a fund around that. Ideas like Ireland was not going to default on its bonds, or iron ore prices were going to fall, shale oil drillers will never make any money or mall REITS are shorts. Simple ideas, which you can then build structures around, that both make money and fill an investment need for clients. For that reason, I have tended to shy away from consensus ideas and momentum, unless it explicitly fits in with that big idea.

In the last couple of years, the big idea was that clearinghouses were mispricing risk, market products that sold volatility would cause volatility to spike, and that this should result in a lot of financial bankruptcies and a significantly lower stock market. Covid-19 caused this to come to fore, but also allowed central banks to short circuit the natural de-leveraging process that would have occurred as a result. Usually I have a few ideas on the go, so that I can naturally move from one idea to another, but Covid-19 literally turned the world upside down, and so I have had to push myself harder than usual this year to develop new ideas.

So what is the one unifying idea behind Clark’s latest trades? As he says, “now the simple idea is that inflation is coming. All the inflation indicators that I look at; things like the Australian dollar, the Nikkei, Japanese Government Bond yields, the Transport index, Chinese Yuan and the CRB Raw Industrial Index, all say inflation but the loss in the fund this month says otherwise.”

In terms of specific trades, Clark had focused on the nat gas market whose rebalancing he thought was “signalling inflation.”

And certainly, there are signs of change there – but I can’t help noticing that it is Asian bond yields that are rising, not US bond yields, which is where you would think a rebalancing natural gas market would affect first.”

Perhaps there is a better place to bet on rising prices: Food.

Towards the end of the month, I revisited my presentations and noticed that Chinese pork prices have been very strong and are at 6 times that of the US. Can Chinese food prices really cause inflation in the rest of Asia? The answer is probably yes, but whether that will be bad inflation or good inflation is hard to tell. Naturally, high food prices are negative for consumption, but Asia has more farmers than anywhere else in the world, and high crop prices have tended to create consumption booms in places like India, Indonesia, and the rest of ASEAN. If China starts to increase imports of food from Asia, it could be very economically beneficial.

Still, as Asian bond yields have made it clear, “higher food price will cause bond yields to rise” according to Clark who adds that “food and food prices have been at the heart of every major Chinese revolution and crisis for the last 150 years. For that reason, I expect Chinese rates to stay high, and for the Chinese Yuan to keep appreciating.”

In short, Clark “started the month thinking that oil and gas prices were going to drive inflation, and ended the month thinking it will be food inflation.” He is hardly alone, because as he noted, food exporting currencies are performing “surprisingly well, and food related stocks trading much better than oil and gas names.”

One key anchor to the fund’s new food inflation obsession comes from none other than Warren Buffett according to Clark, who explains as follows:

To answer one final question, how do I know that no one knows about food inflation? Well I just read a long article in The Economist, trying to understand why Warren Buffett bought the Japanese trading houses. The Economist had no idea of course. Japanese trading houses are the number one companies to benefit from food inflation in Asia. That is, I believe, why. If you don’t believe me, start googling about businesses that export pork, bananas or any other major food. We are moving to a portfolio that is long food, short bonds.

One small caveat: last week we wrote “Food Shortage Simulation Predicts 400% Increase In Food Prices By 2030“, so to say that “no one knows about food inflation” may be a bit of a stretch.

Finally, Clark’s latest dramatic portfolio reassessment means that “starting late September, and continuing in October”, Clark is “moving our commodity longs to food related names.” This is likely good news for the fund’s remaining LPs as it also means is that Clark “can focus the fund down to fewer names on both the long side and short side, as I now have a better idea of what is going on, which should reduce volatility going forward.”

Two final observations: while the fund is net long some of the most inflation-sensitive sectors such as financials, basic materials, industrials and energy, it remains short the covid-impacted industries such as restaurants and transports; and while we assume the tech short is just a bet on mean reversion, the substantial short in utilities is just another way for the fund to go short Treasuries.

Finally, in terms of geographic positioning, one can summarize Clark’s latest view simply as “long Asia, short the US.”