Russell Clark on Two Troubled Sectors

Published on
November 9th, 2018
70 minutes

Russell Clark on Two Troubled Sectors

The Interview ·
Featuring Russell Clark

Published on: November 9th, 2018 • Duration: 70 minutes

Russell Clark of Horseman Capital has been building a short thesis on US shale oil and semiconductor stocks. He thinks that the decline in shale sand efficiency will be a force that drives the oil price higher and put downward pressure on the USD as future foreign investment diverts away from the US to alternative international opportunities. Filmed on October 11, 2018 in London.


  • JM
    John M.
    10 November 2018 @ 05:42
    Russel says that 'if the Fed steps in to become a buyer...then dollar collapses'. But BoJ is currently buying JGBs and Yen has not collapsed.
    • RA
      Robert A.
      12 November 2018 @ 00:44
      John, FWIW that was my thought exactly...I wonder if it might work differently for the World’s reserve currency, but I’m really curious what his differentiating factor is—pretty sure he must have one on the tip of his tongue.
    • JU
      Jay U.
      3 December 2018 @ 00:02
      Japan also has a current account surplus and no inflation, whereas US has a massive CA deficit and positive inflation. The current account, ex-oil, is at the highest deficit ever, as a percentage of GDP. Since the CA deficit has been suppressed by US shale production, if he’s right about shale production declining, CA deficit will really explode.
  • SR
    Steve R.
    10 November 2018 @ 23:34
    Great interview - I very much like the independent thought process! Idea for RV: How about adding a reference section to the RV website to detail all these freely available resources? Provide website addresses, links, urls etc. Would be great to build up a library of these kinds of resources to help RV subscribers do their own research and become independent thinkers. Eg: ISM, Housing Permits, etc, but not just US based, think global!
    • BO
      Bob O.
      11 November 2018 @ 06:09
      Great idea Steve, I raised something along these lines in an RV questionnaire a while ago. Information and training that would help investing gromits (like me) improve their decision making. I called it 'making sense before dollars'. I can understand way there hasn't been a move in this area, what with the rapid uptake of this platform, but maybe this issues' time has come. What do you think subscribers and RV?
    • RP
      Raoul P. | Founder
      11 November 2018 @ 14:32
      With the sheer amount of videos and many, many news series coming, we think the best thing to do first is have more entry level content to get people up the learning curve, including some explainer type series and fill in from there. That was why the website has been redeveloped so people can choose the kinds of content more suitable for them - a bespoke platform, as it were.
    • BO
      Bob O.
      11 November 2018 @ 22:46
      Thanks for the feedback Raoul. I have thoroughly enjoyed the RVTV content todate and am looking forward to the platform changes ahead. Regards Bob One very happy subscriber.
    • EF
      Eric F.
      12 November 2018 @ 23:51
      Sounds great. Some 101s on e.g. bonds (no previous exposure so a blind spot / area of ignorance for me). Some content goes over my head as I just haven't got the fundamentals. What RV has done with gold has been completely eye opening for me, I feel I really get gold now. I wouldn't have had that if not for RV.
    • SS
      Stan S.
      27 November 2018 @ 14:32
      I would second Steve's point in adding some type of "show notes" the way many podcasts do. There one finds links, books referenced and any other outside material that either the interviewer or the interviewer feels would enrich or embellish the video and the experience.
  • DP
    D P.
    27 November 2018 @ 13:38
    Very good interview job.
  • EN
    Eric N.
    23 November 2018 @ 22:26
    1:03:30 (6.00 mins before the end) He meant it's a great lead indicator on rational behaviour. Great interview!
  • MC
    Matthew C.
    17 November 2018 @ 09:04
    I wish i was young enough to try out as an intern for his company - great thinker and a trade idea generation process i can totally relate to.
  • SN
    Sean N.
    17 November 2018 @ 06:24
    This is classic RV content for me. I love Russel’s approach and thinking, will have to watch again to really absorb. So many interesting insights into his process here. I agree with him.. parsing the real data is more useful than opinions..
  • PO
    Phillip O.
    14 November 2018 @ 06:19
    Raoul, Could we please get an interview very specifically focused on crude oil/ oil products that touches on some of these same topics mentioned? I think there is so much more detail that could be discussed on differed WTI/Brent spreads. I agree on the decline rates in the Permian but I think you could easily spend over an hour on other factors that weren’t mentioned here. Examples: When takeaway capacity in the Permian expands, does that actually drive more bbls for export, having less flows to Cushing, thus tightening WTI/Brent arbs or does dock space become the next constraint and Middy/MEH collapses while keeping WTI/Brent wide? What impacts will IMO 2020 regulations on sulfur levels in (shipping) fuel oil have on arbs? Will a shortage of 0.5% sulfur fuel oil cause shipping rates to skyrocket and keep WTI/Brent wide? What impacts will IMO 2020 have on light/heavy grades as less complex refineries need lighter and sweeter crude to meet sulfur regulations? Can these simple refineries offset the negative crack margins on fuel oil or do they shut in and have unexpected impacts on demand for crude grades? Based on the above answers, what happens to gasoline and distillate cracks? I know these are extremely detailed questions, but if there was ever any place that could provide an interview with that level of knowledgeable discussion I would think it would be RV. Thanks, Phil
    • JH
      Johan H.
      15 November 2018 @ 19:25
      interview Phil.
    • PO
      Phillip O.
      16 November 2018 @ 16:31
      haha. I'm not qualified to answer all those questions. I could point to some people that are but I doubt they'd be willing to go on camera.
  • SU
    Shakeel U.
    14 November 2018 @ 00:29
    Excellent! As a retail trader RV is invaluable to me.
  • SU
    Shakeel U.
    14 November 2018 @ 00:28
    Excellent, as a retail trader RV is invaluable to me.
  • ZH
    Zayd H.
    13 November 2018 @ 12:32
    RV & Russell - I certainly thank you for being so open and eager with sharing your knowledge and time. There are entire courses on finance at elite business schools that barely deliver this quality of educational content and wisdom. And they charge $100k/year!!! I love my RV subscription more than my Netflix or Amazon Prime...
  • VS
    Vasil S.
    13 November 2018 @ 10:46
    Great stuff! Russell has this really nice way of simplifying extremely complex topics and situations and presenting them in easy to understand, completely laymen terms. Really enjoyed his last interview and this one did not disappoint. What a smart, genuine, down to earth guy. Roger, nice work on the Gazelles!
  • rr
    rlw r.
    13 November 2018 @ 04:44
    I agree with a comment below, Roger asks thoughtful questions and he also demonstrates a broad knowledge base. Russell's creative thinking offset by his low key deliver is so interesting, his viewpoints are tremendous thought provokers.
  • BS
    Buy100oz S.
    12 November 2018 @ 15:13
    Like Russell Clarke only because he makes some of the overthinkers in the hedge fund space look irrational. As to is Netflix a bubble (the standard view is lack of free cash flow, re-investing lots for content, using cheap finance etc etc....) I'll throw this one out there (and I have no opinion on netflix, nor looked at it closely) about the potential for "stickiness" of its suscriber base. Consider this...If netflix continues to improve/provide high quality content it grabs hold of its suscribers even more, they will eventually get to a point (and maybe its already there) that they could up the fees eventually, without losing revenue. All of that would fall straight to the bottom line as free cash flow.
    • EF
      Eric F.
      12 November 2018 @ 23:46
      Good argument, but there will be some price sensitivity, especially abroad. It'll be tricky to maintain quality while scaling and higher cost of debt could be a real issue. Worry is this could be the poster boy for zirp (along with Tesla). Let's see how this business operates in a real rates environment, or who is naked when that tide does eventually pull out?
  • CB
    Conor B.
    12 November 2018 @ 16:22
    Was listening to this at 2x speed and dialed it back to 1x because i missed something and it sounded like the two of them were drugged ;) Overall great interview.
  • DF
    Dominic F.
    12 November 2018 @ 11:29
    Both Russell and Roger are excellent. It has always been RV's strength that the interviewers are knowledgable and there is a great respect between interviewer and interviewee. Its the conversation that makes you interviews so good. Well done, keep it up :-)
  • DS
    David S.
    10 November 2018 @ 09:37
    The Fed must keep the US short-term rates high enough to attract a great deal more capital because of budget deficits. It is the relative difference that matters; not the absolute value. In addition, it is not the Fed interest rates that will cause the recession, it is the trade war which is self-inflicted by the US administration. There are significant trade issues that need to be addressed, but the bull in the china shop will not correct these behaviors. It could easily, however, bring about a worldwide recession. DLS
    • dd
      darrell d.
      10 November 2018 @ 17:33
      It’s the business cycle that bring recession. Pull back of liquidity and credit.
    • DS
      David S.
      11 November 2018 @ 08:01
      darrell d. - Thanks for your reply. The business cycle is merely a name we give to the ups and downs in the economy. You and I could both list ten major causes, but the initiation and the misunderstanding of the use of tariffs is currently the tipping point of this market downturn not interest rates and not the Fed. It is also important to note that the market and the economy are not the same. First the market downturn. Then the economic downturn. DLS
    • DR
      David R.
      11 November 2018 @ 22:19
      Business cycle has been replaced by the credit cycle. The US and Europe are by NO means a free market capitalist system anymore. Far, far from it.
    • DS
      David S.
      12 November 2018 @ 07:45
      David R. - I agree, but it seems that there is no terra firma anymore. We are awash with debit and cash from QEs, etc. I really feel sympathy for anyone who must be fully invested. It would be good to hear from Michael Green. DLS
  • RA
    Robert A.
    12 November 2018 @ 00:59
    Stellar interviewing job by Roger, IMO. I loved Russell’s first interview and was just as impressed with this one! I’m hoping I can find an etf that is EEM Ex China (and the Tech that it primarily represents). It’s going to be hard to catch it right on the “flip”, but I really want to establish a significant EEM (Ex China) position and hold for the next 10-15 years as that looks like where the only source of growth is going to be for quite awhile—just based on demographics and the rise of a middle EM consumer class. It would be great to hear the Macro Insiders respond to Russell’s negative US dollar view. It does sound like Russell and Raoul’s interest rate views overlap with Julian not quite in the TLT camp at this point.
  • VP
    Vincent P.
    10 November 2018 @ 22:06
    Interview is well on pace to be appreciated for the insight, content and style. Looking forward to that big reversal is USD. It's going to be a doozy but not quite yet, it appears. Keeping an eye on ADXY. Could be a H&S pattern or perhaps it bottom's out soon? Time will tell. Thanks again for an awesome interview.
  • DK
    Daniel K.
    10 November 2018 @ 20:25
    I loved the interview, thank you guys. Would Real Vision be interested in interviewing Professor Richard Werner? I believe the viewers would really enjoy listening to him. I'm linking one paper he published as a suggestion but you can browse through others that are also interesting:!
    • MM
      Marc M.
      10 November 2018 @ 21:22
      I also read the work of Richard Werner extensively and it would be great to see him on RV. Raoul, you talked on macro insiders about that you don't think that government spending will help to grow the economy. Richard Werner had done the empirical work on this. Government spending doesn't grow the economy because no new money is being created because they don't borow from the banks but from the bond market. When bank make loans they create money. When you borow from the bond market, no new money is being created and gdp won't grow.
  • SA
    Scott A.
    10 November 2018 @ 19:59
    He had me at shale producers may be a catalyst for oil prices to rise. Great interview.
  • FA
    Frank A.
    9 November 2018 @ 20:28
    I would find it hard to believe any supposed void left by shale declining would be quickly picked up by the Saudi's or any number of others.
    • dd
      darrell d.
      10 November 2018 @ 17:39
      That’s the given assumption. But is this still correct?
  • MK
    Michael K.
    10 November 2018 @ 15:21
    I wonder if nie comments would be different now that oil is 20% lower?
    • dd
      darrell d.
      10 November 2018 @ 17:21
      This guy is not looking over two or 6 months but longer term. Wait until cap x is really cranked off and the declines come into focus.
  • AV
    Alex V.
    10 November 2018 @ 14:24
    enjoyed it. Anyone found the spreadsheets he referred to?
    • NT
      Naser T.
      10 November 2018 @ 17:04
      BP report he was referring to, see panel on the right under "key downloads" :
  • KB
    Keith B.
    10 November 2018 @ 10:41
    Hi Russell, Thank you for providing the update on your views on US shale oil. I appreciate that the interview was time constrained, but would very much appreciate if you please expand on the following: While I fully agree that core inventory is scarce, and perhaps more scarce than sometimes appreciated (which hasn’t been helped by everyone drilling their best wells first to flatter their current numbers, though have never heard of any CEO or analyst claiming ‘unlimited potential, unlimited wells’), could you please help RV viewers to understand how lower production and higher prices would be negative for shale oil E&Ps? Wouldn’t this be a major positive, given fewer barrels produced > fewer barrels to replace > fewer marginal wells drilled > better economics/recycle > higher FCF, while higher prices would drop straight through as higher FCF. On the contrary, aren’t lower production and higher prices exactly what will help the industry to mature from value destructive/neutral externally funded ‘growth at any cost’ to value creative living within means by balancing returns on/of capital vs. growth per debt-adjusted share? Further, you note that service stocks have been smacked as activity has slowed, and “people don’t want to accept what a stock’s telling them”. Just wondering what the market is telling us about shale oil E&Ps, which have generally held their ground relative to oil price? Therefore, if you’re calling for production to peak and expect things to slow down further and oil price to benefit (let alone WTI-Brent spread to converge), then doesn’t the trade remain to sell services and buy E&Ps, perhaps in paired format?
  • MC
    Mario C.
    10 November 2018 @ 00:39
    Around 40min in... Interviewer: " Buffet is a genius, he sold put options on SP500, Eurostoxx in 2008-09". That's totally wrong. Buffet sold long dated put options (10Y-15Y maturity) in size to few IBs back in 2005-06-07. His timing was horribly bad, but in a funny twist when market tanked in 08-09, it's some of the IBs facing Buffet that got into heavy trouble due to this deals, as Buffet had (very cleverly) structured the margin calls in a non standard fashion, to his advantage, by having BH only posting on the intrinsique value of the options (instead of MTM). With IBs loosing on the hedges of these options, and not getting the cash from BH margin calls as they should have in a standard option transaction, it created high cash shortfall in the IBs right in the middle of 08 market storm... . At the end, everybody, was saved by Bernanke/Paulson engineered post 08 stock market recovery...
    • JB
      Jack B.
      10 November 2018 @ 01:36
      Yes it was 2005-07!! Good point.
  • CC
    Chad C.
    10 November 2018 @ 00:52
    You can tell Russell doesn't take anyone's word as truth. Very independent thinker
  • SH
    Sin H.
    10 November 2018 @ 00:49
    Love the fact that the interviewer was wearing Adidas sneakers.
  • DH
    Daniel H.
    10 November 2018 @ 00:26
    Great interview, Roger. Thanks to both you and Russell.
  • NH
    Neil H.
    9 November 2018 @ 21:16
    really enjoyed this video. probably have to watch it again as there were so many takeaways.
  • AL
    Andrew L.
    9 November 2018 @ 21:01
    TPL, most unique publicly traded asset out there. Very concentrated shareholder base with little float, interesting it even came up on Russell's radar.
  • RS
    Robert S.
    9 November 2018 @ 20:58
    Great to hear stuff from a guy who really wants to understand things.but .bubbles do exist BITCOIN being one with classic parabolic arc and sell off. I favour a technical approach to markets but I learn a lot from Russell
  • DD
    David D.
    9 November 2018 @ 20:29
    No offense, but I think the interviewer could've done a better job of pulling more content out of Russell Clark. You can tell there's more in there and perhaps I simply want to hear more.
  • PK
    Peter K.
    9 November 2018 @ 19:43
    Why do you wait a month to publish? Filmed Oct 11
    • GS
      George S.
      9 November 2018 @ 20:23
      Does it matter? Content is independent of daily/weekly market vol.
  • WB
    Wes B.
    9 November 2018 @ 16:49
    Nice to see a dollar bear on RV. Too many bulls. Great interview!
    • DS
      David S.
      9 November 2018 @ 18:48
      Both may be correct depending on timing. DLS
  • FK
    Firoze K.
    9 November 2018 @ 17:51
    One of the reasons I love Real Vision is hearing these different views. Great stuff.
  • RM
    Richard M.
    9 November 2018 @ 15:58
    Great interview! Always love hearing Russell Clark's views, he's almost always on target altho sometimes it takes awhile for the thesis to play out. And Roger is becoming a superb interviewer (watch out Grant and Raoul)! :-)
  • DS
    David S.
    9 November 2018 @ 14:15
    Excellent as expected. Thanks to Mr. Clark and the entire RVTV team involved in making this interview available. I really like Mr. Clark's advice on using raw data first and not starting with the opinion. After you understand and manipulate the data, you can critique all opinions. It is Mr. Clark’s curiosity, focus and hard work that have made him successful. I do not think many people will follow this advice, however, as it takes a lot of hard work. I am too old, but really respect the approach for anyone who wants to be a professional. DLS
  • JS
    Jaco S.
    9 November 2018 @ 13:26
    Really very informative and interesting. Nice interview.
  • KO
    Kieran O.
    9 November 2018 @ 13:10
    Russell is the best. He isn't afraid to give you his very unique and well researched view on the global economy. Tons of information and a great perspective.
  • GS
    George S.
    9 November 2018 @ 12:45
    The legend returns!
  • Nv
    Nick v.
    9 November 2018 @ 11:05
    Love this guy. Well done Real Vision