对冲基金经理Russell Clark：米国債はAIよりも大きな投機バブルであり、AI大手が資金を燃やしているのは「マスクを防ぐため」

Original Author: Zhao Ying

Original Source: Wall Street Sights

A hedge fund manager bluntly stated: The biggest speculative bubble in the market is not AI, but U.S. Treasuries—predicting the 10-year Treasury yield will rise to 10%, and arguing that tech giants' massive spending sprees on AI are essentially a defensive maneuver to "keep Musk at bay."

Recently, hedge fund manager Russell Clark appeared on the podcast "Other People’s Money," where host Max Wiethe interviewed him on various hot market topics, including the U.S. Treasury bond market, the logic behind AI capital expenditure, the trajectory of the semiconductor industry, and risks in private credit. He shared a series of disruptive views.

Clark, currently based in London, manages a hedge fund and regularly writes market commentary on Substack. His judgments have attracted widespread market attention. The core logic is: We are transitioning from an era of "capital abundance and low interest rates" into a new political and economic cycle characterized by "high wages, high inflation, and high interest rates."

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

Amid the heated debate over the AI bubble, Clark aims his criticism at a much larger market.

"I still set a 10% yield as my target for Treasuries this year," he stated outright, declaring this astonishing 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. At the same time, nominal housing prices should remain stable while real prices decline. To achieve this, real interest rates need to stay around 3%—combining nominal rates with inflation would push rates to about 10%.

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

Clark places this judgment in a broader historical context. Citing the leading indicator significance of Japanese government bonds (JGBs)—"I've always thought JGBs are a perfect leading indicator for U.S. Treasuries"—he points out that JGBs were once called a "widowmaker trade." The market debated their unsustainability for nearly 30 years "until it finally collapsed."

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

On a macro level, Clark believes the current political transition is the fundamental driver: Since the Reagan Revolution of 1980, capital accumulation has suppressed wages and interest rates. Now, the political pendulum is swinging back, with demands for "full employment and high wages" once again dominating the policy agenda, meaning inflation will persist and interest rates will continue to rise.

"Tech Giants Burn Cash on AI, Not for AI Itself—But to Fend Off Musk"

On the issue of AI capital expenditure, Clark offers an interpretation that diverges sharply from the mainstream narrative.

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

He argues that this is the true motivation behind the massive spending sprees by tech giants like Google, Microsoft, and Amazon—not a bet on the future of AI, but a defensive move to protect their existing business moats.

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

Using Tesla's rise as an analogy: Traditional automakers struggled to launch competitive electric vehicles because they tried to protect their existing internal combustion engine businesses. The result? "Tesla's market cap is several times that of those traditional automakers." Clark believes the tech industry is experiencing the same logic—"If we don't invest, we're finished."

For this reason, he is highly skeptical of predictions that AI capital expenditure will be slashed drastically: "I am very doubtful that we will see Microsoft, Meta, Google, or Amazon announce a 50% cut in AI CapEx tomorrow. I think it's often the companies that are about to lose money that start cutting first."

As for whether AI will impact the labor market and thus undermine his macro narrative of a high-wage era, Clark is unconcerned. He believes AI's impact is concentrated on professional white-collar workers—lawyers, accountants, fund managers, senior doctors—"these people's wages have always been tied to asset prices"—rather than hitting the lower-tier labor market. Using the post-World War II period as an example: Major technological breakthroughs like nuclear energy and jet engines emerged 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 proposes an imaginative analogy: Semiconductors are to the present what oil was to the 1970s.

"If you look at the 1970s, holding both oil and gold was actually a good strategy. Oil was key to economic growth everywhere, and its supply was constrained... Modern economic growth is actually driven by semiconductors or computer technology, so semiconductor prices remain high, just like oil in the 1970s."

He notes that Nvidia chip prices have remained high for the past five to six years. Traditionally, semiconductor prices fall as capacity expands, but that hasn't happened this time. At the same time, supply-side hard constraints exist, highly similar to the logic of oil in the 1970s.

Private Credit: A Severely Underestimated Time Bomb

Clark specifically calls out the private credit and private equity sectors—in his view, these harbor the most overlooked risks in the current market.

"Why would I want to hold a private credit fund with extremely poor liquidity? I have no idea about the value of these assets, and their condition is quite bad."

He observes that "redemption restrictions" have already appeared in the market—the amount of redemptions has exceeded new subscriptions for the first time, forcing funds to activate redemption limit mechanisms. He bluntly states that once money market fund yields reach 7% or 8%, rational investors will start questioning the necessity of holding illiquid private credit funds.

"Businesses like private equity and private credit emerged in the 1980s, when we had already stopped following pro-labor policies. To me, these businesses are essentially relics of that era."

He believes these asset problems emerged as early as a year and a half ago, but the market has been slow to acknowledge them. Credit spreads remain extremely low, and stock markets are at highs, masking the underlying real risks. "The problems will still slowly but surely continue to affect the market."

Transcript

Russell Clark: 00:00

If you look at people aged 40 and under, i.e., those in their 20s and 30s, their biggest problem is an inability to afford housing. If you want to bring housing costs back to a more reasonable level, then wages need to grow by around 7% annually to double within 10 years. At the same time, the nominal value of the housing market should remain stable, while real values should decline. This requires real interest rates to stay around 3%, so people will deposit money in banks rather than invest in physical assets. This means interest rates could reach around 10%. That remains my target for this year: a 10% yield on Treasuries. So, the question is: how high can wages actually 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 us today from London is hedge fund manager Russell Clark.

Max Wiethe: 01:02

Russell, thank you for joining us. You not only write a blog but also manage a hedge fund. I recently read your articles and found the one from last week on AI investment very interesting. Many people think this could be the end of a large speculative bubble. In the AI investment space, you pointed out another asset class that you believe is much larger and more speculative. Can you tell me why you think there's so much risk in this bigger market now? I assume 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 are always obvious signs that things are not right. But people choose to ignore these signs, partly due to human psychology—when problems arise and action is needed, people often prefer to ignore the problem because it's easier. That's probably human nature.

Russell Clark: 02:25

For example, during the 2008 financial crisis, people recognized the housing price problem 3 to 4 years before it materialized. At that time, the issue was indeed starting to show. Everyone thought it was something we could handle because we had dealt with similar situations before. Of course, some also said that these banks' balance sheets were in terrible shape, so this housing crisis would cause bigger problems. Eventually, everyone accepted this fact.

Russell Clark: 02:58

What I want to say, especially regarding the U.S. Treasury, but also government bonds in general, is that in the past few years, voters and politicians have gradually realized that the government is willing to do whatever it takes to maintain economic growth, seemingly more willing to spend money. So if any problem arises, the government will step in—this was the case with the Trump administration. They even took more extreme measures: willing to spend the necessary funds without taxing anyone, especially large corporations.

So, the government spends without trying to increase taxes. If you look closely at the government's financial statements, current revenues can barely cover necessary expenses like Social Security and interest payments. I think these kinds of expenditures account for about 90%. Of course, this doesn't include other areas like defense, education, infrastructure, etc. So overall, the government's spending and tax mechanism is quite well-established. This applies not only to the U.S. but also to Japan.

Russell Clark: 04:23

For me, what's interesting is that in 2022, I was bearish on Treasuries for a while. There were other reasons too, but mainly because after Russia's foreign exchange reserves were frozen, the Russian government couldn't use those reserves following the invasion of Ukraine. I thought, if a country has foreign exchange reserves, and that country is the Russian government, why keep that money there? Thinking further, really, why would any country choose Treasury bonds as foreign exchange reserves?

Russell Clark: 05:20 So, I expect to see a natural shift from the Treasury bond market to the gold market. This seems very likely to me. However, I also suspect that investors seeking fixed income, especially those investing in sovereign bonds, will gradually disappear. In fact, this is indeed happening. The Treasury market has 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 situation in the UK is more complex, and the market remains very volatile. Long-term investors are still selling Treasuries. I think the U.S. Treasury market is doing okay, but investors who are genuinely willing to invest are gradually disappearing.

Russell Clark: 06:13

This is the point I've been emphasizing when talking about this issue. I'm 52 years old now and getting older.

Russell Clark: 06:24 The idea of establishing large-scale sovereign wealth funds and accumulating large amounts of foreign exchange reserves is actually relatively new. Until 1980, people simply didn't know how to hold another country's fixed income as foreign exchange reserves. This makes sense because all foreign exchange reserves at that time were essentially gold. Later, Japan began buying Treasuries heavily because they didn't want their currency to appreciate.

Max Wiethe: 06:55

So, when you look at those 500-year charts, the reserve currency used to be the British pound, and before that, another European currency. We can trace back to the Portuguese era, where people believed this currency was closely tied to the world's strongest navy. However, that's not really the case. Unlike today, we didn't hold other countries' bonds or currencies back then.

Russell Clark: 07:17 So, foreign exchange reserve currencies are a relatively new concept. In the past, gold was the only form of foreign exchange reserves. Usually, countries with strong military power had the most gold for various reasons—basically, they obtained gold from other places or from countries that had it. Therefore, if a country lost a war, its gold reserves would be used to compensate the victors.

So, when people talk about foreign exchange reserves, they often confuse them with major transaction currencies or currencies used for trade. And these currencies were often backed by gold. In fact, until the 1970s, the U.S. dollar was backed by gold. You know, after World War I, the British Empire began to crumble.

Max Wiethe: 08:11

You saw the pound continuously depreciating because their calculations couldn't accurately reflect the actual situation. So, do you think we are 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 very concept of foreign exchange reserves has changed?

Russell Clark: 08:32

They will really disappear. Yes, I think so, because I feel all this is just political debate, not based on factual reasoning. So, people often use empirical data to refute me, claiming that's how things were in the past. My response to them is that we are in a changing political environment, so this change is an inevitable outcome.

Russell Clark: 08:59

I think, since 1980, with the Reagan Revolution, people gradually de-emphasized full employment and rising wages, preferring instead to let prices float freely and wages adjust according to market conditions. Wages could be adjusted in two ways: either cut wages directly or let the currency depreciate, thereby lowering wage levels and improving competitiveness. Therefore, I believe that from the 1980s onwards, when many countries faced fiscal, financial, or current account crises, they typically chose to devalue their currencies. This reduced domestic workers' wages, enabling them to drive economic growth through exports.

This model was further developed in Japan, where the government bought Treasuries to keep the yen depreciated, trying to create inflation and economic growth. Part of these arguments also involved free trade, i.e., lowering trade barriers.

Russell Clark: 10:14

We are gradually moving away from that government-led model of industrial organization. When I was a child, all major airlines were state-owned. Later, the government sold these companies, and labor unions disappeared. In those countries, there were once three major automakers—General Motors, Ford, Chrysler—all heavily regulated and protected by the government. After 1980, Japanese car companies entered these industries, undermining the union's organizations in these companies. Therefore, the entire environment became very unfavorable for wage growth.

For highly competitive countries like Switzerland,