对冲基金经理Russell Clark：美债是比AI更大的投机泡沫，AI巨头烧钱是为「防住马斯克」

Original Author: Zhao Ying

Original Source: Wall Street Sights

A hedge fund manager bluntly stated: The biggest speculative bubble in the market isn't AI, but U.S. Treasury bonds—he predicts the yield on the 10-year Treasury will rise to 10%, and believes tech giants' massive spending on AI is essentially a defensive move to "guard against Musk."

Recently, hedge fund manager Russell Clark shared a series of contrarian views on the podcast "Other People's Money," in an interview with host Max Wiethe. He discussed several hot market topics, including the U.S. Treasury market, the logic behind AI capital expenditure, trends in the semiconductor industry, and the risks of private credit.

Clark, who is based in London, manages a hedge fund and regularly writes market commentary on Substack. His series of judgments has garnered attention in the market, with the core logic being: We are transitioning from an era of "capital surplus and low interest rates" into a new political-economic cycle characterized by "high wages, high inflation, and high interest rates."

U.S. Treasuries Are the Biggest Bubble: 10-Year Yield Target at 10%

Amidst the heated debate over the AI bubble, Clark has instead targeted a much larger market.

"I still have a 10% yield as my target for Treasuries this year," he stated, throwing out this startling figure.

His logical chain is clear: If the U.S. political goal is to make housing affordable again for people under 40, wages need to grow by about 7% annually, doubling within 10 years; meanwhile, nominal housing prices should remain stable while real prices continue to fall. To achieve this, real interest rates need to be around 3%—combined with inflation, this means interest rates need to rise to about 10%.

"If real interest rates stay around 3%, people will deposit their money in banks rather than invest in physical assets."

Clark places this judgment within a broader historical perspective. He cites the leading indicator significance of Japanese government bonds (JGBs)—"I've always believed JGBs are an excellent leading indicator for U.S. Treasuries"—pointing out that JGBs were once called the "widowmaker trade," with the market discussing their debt unsustainability for nearly 30 years, "until it finally collapsed."

He also notes that the freezing of Russia's foreign exchange reserves in 2022 is a signal worth heeding: "If a country holds foreign exchange reserves, why keep them in that place?" He believes global reserve assets will naturally shift from Treasuries to gold—a trend that is quietly occurring, albeit slowly.

More broadly, Clark argues that the current political transformation is the fundamental driver: Since the Reagan Revolution of 1980, capital accumulation has suppressed wages and interest rates; now, the political pendulum is reversing, with demands for "full employment and high wages" once again dominating the policy agenda. This means inflation will persist, and interest rates will continue to rise.

"Tech Giants Aren't Spending on AI for AI's Sake—It's to Keep Musk at Bay"

On the issue of AI capital expenditure, Clark offers an interpretation starkly different from the mainstream narrative.

"The real problem is that Elon Musk, through SpaceX, is essentially signaling: I want to enter the AI space too. I produce computing hardware, and I have a way to build cheaper computing devices."

He believes this is the real motive behind the massive spending by tech giants like Google, Microsoft, and Amazon—not betting on AI's future, but defensively protecting their existing business moats.

"Companies like Google, Microsoft, and even Amazon have highly profitable businesses. They are all striving to stay ahead, trying to prevent Elon Musk from gaining a foothold. That's how I see it."

Clark draws a parallel with Tesla's rise: Traditional automakers struggled to produce competitive electric vehicles because they were trying to protect their existing combustion engine businesses. The result is that "Tesla's market cap is several times that of traditional combustion engine manufacturers." He argues the tech industry is experiencing the same logic: "If we don't invest, we're finished."

For this reason, he remains highly skeptical of views predicting sharp cuts in AI capital expenditure: "I seriously doubt we'll see Microsoft, Meta, Google, or Amazon announce a 50% cut in AI capex tomorrow—I think the first to cut spending are often the companies that are about to lose money."

As for whether AI will disrupt the labor market, thereby undermining his macroeconomic narrative of a high-wage era, Clark is unperturbed. He believes AI's impact will be concentrated on professional white-collar workers—lawyers, accountants, fund managers, senior doctors—"whose wages are already tied to asset prices," rather than affecting the lower-end labor market. He cites the post-WWII era as an example: Major technological breakthroughs like nuclear energy and jet engines arrived one after another, yet wages rose by 1000%. "Technological change and wage issues are actually two different topics."

Semiconductors Are the New Oil; Supply Constraints Will Support Prices

Clark puts forward an imaginative analogy: Semiconductors today are what oil was in the 1970s.

"If you look at the '70s, holding both oil and gold as assets was actually quite good. Oil was key to economic growth everywhere, and its supply was restricted... Modern economic growth is actually driven by semiconductors or computing technology, so the price of semiconductors remains high, like the new oil of the 1970s."

He points out that Nvidia's chip prices have remained high for the past five or six years. Traditionally, semiconductor prices fall as capacity expands, but this time, they haven't. At the same time, there are hard constraints on the supply side, which is highly analogous to the logic of oil in the 1970s.

Private Credit: A Severely Underestimated Ticking Time Bomb

Clark specifically calls out private credit and private equity—areas he believes harbor the market's most overlooked risks.

"Why would I want to hold this extremely illiquid private credit fund? I have no idea about the value of these assets, and their condition is pretty bad."

He notes that 'redemption gates' have already appeared in the market—redemptions have exceeded new subscriptions for the first time, forcing funds to impose redemption limits. He bluntly states that once money market fund yields reach 7% or 8%, rational investors will start questioning the need to hold illiquid private credit funds.

"Businesses like private equity and private credit emerged in the 1980s, when we had moved away from pro-labor policies. For me, these businesses are essentially relics of that era."

He believes these asset issues appeared as early as a year and a half ago, but the market has been slow to face them—while credit spreads remain extremely low and stock markets are at highs, masking the underlying real risk. "The problem will continue to affect the market, slowly but surely."

Transcript

Russell Clark: 00:00

If you look at people 40 and under, the 20 to 30 age group, their biggest problem is they can't afford housing. If you want to bring housing costs back to a more reasonable level, then wages need to grow by about 7% a year, which would double them in 10 years. At the same time, the nominal value of the housing market should remain stable, while real values should fall. This requires real interest rates to be around 3%, so people put their money in the bank instead of investing in physical assets. That means interest rates could reach around 10%. This is still my target for this year: Treasury yields hitting 10%. So, the question is: just how high can wages go?

Russell Clark: 00:49

This episode of "Other People's Money" is sponsored by the Tocurium Soybean Fund, ticker symbol Soy B. Welcome to "Other People's Money." I'm Max Wiethe, and joining me today from London is hedge fund manager Russell Clark.

Max Wiethe: 01:02

Russell, thanks for joining me. You're not only blogging but also managing a hedge fund. I recently read your work and found your article from last week on AI investment very interesting. Many people think it might be the end of a major speculative bubble. In the AI investment space, you pointed out another asset class that you think is much larger and even more speculative. Can you tell me why you think this bigger market is so risky? I presume you're talking about the Treasury market. Two questions: first, is the AI market speculative?

Russell Clark: 01:44

So, why do I think there's speculation in the U.S. Treasury market? Typically, when I look back at any major sell-off event in my investment career, there were always clear signs that things were not going well. But people choose to ignore these signs, partly due to human psychology—when a problem arises that requires action, people often prefer to ignore it because it's easier. That's probably human nature.

Russell Clark: 02:25

For example, during the 2008 financial crisis, people recognized the problem in the housing market 3 to 4 years before it actually happened. At that point, the problem was starting to show. Everyone thought it was just a problem we could handle because we had dealt with similar situations before. Of course, some also said bank balance sheets were in terrible shape, so this housing crisis would cause bigger problems. Eventually, everyone accepted that reality.

Russell Clark: 02:58

I'm talking specifically about the U.S. Treasury, but government bonds in general. In recent years, as voters and politicians have gradually realized the government will do whatever it takes to maintain economic growth, the government seems more willing to spend. So, if any problem arises, the government steps in—this was the case with the Trump administration. They even went to the extreme: willing to spend whatever is necessary while not taxing anyone, especially large corporations.

So, you have government spending without trying to increase taxes. If you look closely at the government's financial statements, current revenue can barely cover essential costs like Social Security and interest payments. I think this type of expenditure accounts for about 90%. This, of course, doesn't include other areas like defense, education, infrastructure, etc. So, overall, the government's spending and tax mechanisms are quite well-established. This applies not only to the U.S. but also to Japan.

Russell Clark: 04:23

What I found interesting was that in 2022, I was bearish on Treasuries for a while. There were other reasons, but primarily because when Russia's foreign exchange reserves were frozen after invading Ukraine, the Russian government couldn't access them. I thought, if a country has foreign exchange reserves, and that country is the Russian government, why keep the money there? Thinking further, why would any country choose to hold Treasuries as foreign exchange reserves?

Russell Clark: 05:20 So, I expected to see a natural shift from the Treasury market to the gold market. To me, this seemed likely. However, I also suspect that investors seeking fixed income, especially those in government sovereign bonds, will gradually disappear. In reality, that's what happened. The Treasury market performed relatively well.

But if you look at more peripheral sovereign bond markets, like Japan, the situation is different. Japan is one of the world's largest sovereign bond markets, but yields there have risen significantly. The UK situation is more complex, and the market remains very unstable. In the long run, investors continue to sell Treasuries. I think the U.S. Treasury market has performed okay, but genuinely interested investors are gradually disappearing.

Russell Clark: 06:13

This is the point I've been emphasizing when discussing this issue. I'm 52 now, getting older.

Russell Clark: 06:24 The idea of establishing large sovereign wealth funds and accumulating large foreign exchange reserves is actually quite new. Until 1980, people didn't know how to hold another country's fixed income as foreign exchange reserves. This makes sense because all foreign exchange reserves were essentially gold. Then, Japan started buying lots of Treasuries because they didn't want their currency to appreciate.

Max Wiethe: 06:55

So, when you look at those 500-year charts, you see that the reserve currency was once the British pound, and before that, another European currency. We can trace back to the Portuguese era, where the currency was linked to the world's most powerful navy. But that wasn't really the case. Unlike now, we didn't hold other countries' bonds or currencies back then.

Russell Clark: 07:17 So, a foreign exchange reserve currency is a relatively new concept. Historically, gold was the only form of foreign exchange reserves. Typically, countries with strong militaries ended up with the most gold for various reasons—basically, they'd get it from elsewhere or from countries that had it. Therefore, if the country lost a war, its gold reserves would be used to compensate the victor.

So, when people talk about foreign exchange reserves, they often confuse them with the main trading currency or the currency used for transactions. Moreover, these currencies were often backed by gold. In fact, the dollar was backed by gold until the 1970s. Remember, after World War I, the British Empire began to crumble.

Max Wiethe: 08:11

You saw the pound depreciating because their calculations didn't accurately reflect reality. So, do you think we're now returning to a historical period—a period where hard assets, especially gold, will become a major component of foreign exchange reserves, or perhaps the concept of foreign exchange reserves has already changed.

Russell Clark: 08:32

They will really disappear. Yes, I do think so, because I feel this is all just a political debate, not based on factual reasoning. So people often use empirical data to refute me, claiming the past was different. My response is that we are in a constantly changing political environment, so this change is inevitable.

Russell Clark: 08:59

I think, after 1980, with the Reagan Revolution, people gradually shifted away from emphasizing full employment and rising wages, preferring to let prices float freely and let wages adjust according to market conditions. Wages can be adjusted in two ways: either cut wages or devalue the currency, thereby reducing wage levels and increasing competitiveness. Therefore, I believe that starting in the 1980s, when many countries faced fiscal, financial, or current account crises, they often chose to devalue their currencies. This lowered domestic wages and spurred economic growth through exports.

This model was further developed in Japan, which bought Treasuries to keep the yen weak, attempting to create inflation and economic growth this way. Part of this argument also involves free trade, i.e., lowering trade barriers.

Russell Clark: 10:14

We are moving away from that government-led industrial organization model. When I was a kid, all major airlines were state-owned. Later, governments sold them off, and unions disappeared. In those countries, there were three big automakers—GM, Ford, Chrysler—all heavily regulated and protected by the government. After 1980, Japanese car companies entered these markets, undermining the union organizations. Therefore, the overall environment became very unfavorable for wage growth.

For highly competitive countries like Switzerland, Japan, or even Germany, they would strive to appreciate their own currencies, then offset this effect by buying dollars. So, this capital-driven growth model was essentially designed to maintain low wages in some way.

Russell Clark: 11:13