The Chart That Ends US Dominance | Rupert Mitchell on the Regime Change No One Sees

Key Concepts

• Macro Shift: A potential shift in global market leadership from developed markets to emerging markets, particularly China and Latin America, driven by commodity cycles and policy changes.
• Value Over Growth: A strategic move away from high-growth tech stocks (“Mag 7”) towards investments in companies with tangible assets and strong cash flows (“atoms versus bits”).
• Commodity Bull Market Anticipation: Expectation of rising commodity prices, benefiting resource-rich countries like Brazil and Indonesia.
• US Equity Market Risks: Concerns regarding the hyper-financialization of US equities and potential for a market derating.
• Content & Community Building: Rupert Mitchell’s strategy of disseminating macro insights through live broadcasts, newsletters, and a dedicated Discord community, in collaboration with Ben Bry.

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Global Macro Outlook & Portfolio Positioning (Part 1)

Rupert Mitchell outlines a macro thesis centered around a potential long-term downtrend in developed markets relative to emerging markets, signaled by the “Chart of Truth” (MSCI developed markets vs. emerging markets) which has been declining since 2012. He positions his portfolio for a cycle resembling 2002-2007, favoring emerging market exposure. While acknowledging Google’s recent performance, he observes topping formations in the rest of the “Mag 7” tech stocks, suggesting a potential reversal in their dominance.

Mitchell highlights China’s intention to establish domestic equities as a legitimate savings vehicle and emphasizes the country’s capacity for targeted fiscal stimulus – a key driver of equity markets. He is significantly overweight Latin America, anticipating a commodity bull market and the normalization of Venezuela’s role in the regional economy, potentially reversing the refugee crisis impacting countries like Colombia and Chile. He cautions against solely basing investment decisions on political shifts, prioritizing commodity price movements. Concerns are raised about the hyper-financialization of US equities, driven by stock-based compensation and share buybacks, anticipating a potential derating as focus shifts to productive assets.

He advocates for a move towards “short duration” investments and “atoms versus bits,” favoring companies with tangible assets and closer-to-cash flows over long-duration tech stocks. He believes the outperformance of low capital-intensive businesses may reverse. Specific examples include investments in Tencent (China) due to its position in the consumer tech landscape and potential in wearable technology, and a long-term perspective on commodity investments exemplified by his history with Glen Call (copper). He benchmarks his portfolio against a 60/40 target date retirement portfolio but deviates significantly, avoiding US Treasuries and incorporating trend-following strategies, metals, and emerging market exposure. Risk management is achieved through OTC hedges (Eurusd puts, SMH call options) and a ProShares SJB ETF (T-bills + credit hedge).

Collaboration & Content Strategy (Part 2)

Rupert Mitchell has partnered with Ben Bry, a finance professional with a background in quantitative analysis and hedge fund management (including roles at Fidelity and managing a tail risk fund since before the 2008 GFC), beginning in late October/early November. Their collaboration takes the form of live broadcasts on Twitter and Substack twice weekly (Sundays and Thursdays at 7:00 p.m. Eastern Time), subsequently uploaded to YouTube with supporting materials. Mitchell independently produces two weekly letters under the “Blind Squirrel Macro” banner and moderates an active Discord community where subscribers discuss and share ideas.

The host of XS Returns highlights Mitchell’s expertise as a source of unique and timely information, specifically regarding Venezuelan news and broader Latin American developments. Future plans include expanding the XS Returns network with an “international edition” featuring Mitchell, Louis, and Vincent Gav. A standard disclaimer is provided, stating that information shared is not investment advice and that holdings of the hosts or their clients may be discussed.

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Conclusion

Rupert Mitchell presents a compelling macro thesis advocating for a shift towards emerging markets and value-oriented investments, driven by anticipated commodity cycles and a potential reversal of the long-standing dominance of US growth stocks. His investment strategy emphasizes tangible assets, risk management through hedging, and a top-down macro approach. Complementing this, his collaborative content creation and community building efforts aim to disseminate these insights to a wider audience, fostering independent research and discussion.