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It took awhile, but finally I worked it out

In my career, I tried to build up expertise in short selling, mainly as this is an area where there tends to be little competition. On most metrics, I thought the US looked like a prime market to short in 2016, when US net worth to GDP hit 500% - but what we have seen is that this metric has continue to soar.

I would say if you asked the average American investor or commentator why this is, the first and only answer might be just be “because we are awesome”. That one is hard to accept, as at the top of every investing cycle, domestic investors always think “we are awesome”. I saw it in Japan in 1990, US in 2000, China in 2007 and Brazil in 2011.

While I used net worth to GDP for the US above, most other nations do not produce that sort of data. What I found was that Net International Investment Positions (NIIP) was a more universal measure and gets extreme at tops. Under this analysis, it also showed that 2016 should have been a top in the US. What has been really odd is that US NIIP has become more extreme since 2016, but with no offsetting increase elsewhere. Somewhere between USD four to six trillion was missing from NIIP numbers.

As I showed in my recent presentation, big tech companies are showing surging service based revenue in the rest of the world, but this is not turning up in the US current account data. So there seemed to be a lot of hidden data out there.

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Capital Flows and Asset Markets
Russell Clark