Excess Returns Podcast Summary

Episode: The Bull Market You Don’t Want to Believe | Rupert Mitchell on China vs. the Mag Seven
Date: November 7, 2025
Guests: Rupert Mitchell (Blind Squirrel Macro), Host: Matt Zeigler

Episode Overview

In this episode of Excess Returns, Matt Zeigler interviews Rupert Mitchell of Blind Squirrel Macro to discuss why he’s bullish on China’s markets, the risks facing the “Magnificent 7” U.S. tech stocks, global market rotation, and building diversified long-term portfolios. Rupert shares vivid on-the-ground impressions from his travels in China, critiques Western equity valuations, and explores alternative investment approaches—from credit plays, emerging markets, to gold mining stocks.

Key Discussion Points & Insights

1. Why China—And Why Now?

• Rupert’s China Thesis:

  • Recent travels to Hong Kong and Shenzhen show surging business confidence and economic momentum, which Mitchell believes are underappreciated in global markets.
  • Quote:
    “Just in the last five years, [China] has gone into warp speed. I really think that we’re in the foothills of potentially an 8 to 10 year bull market here.” (00:00)
  • Cites the Made in China 2025 industrial policy as critical to the country's advancements, particularly in autos and advanced manufacturing.
  • Chinese equities remain deeply undervalued relative to global peers, with "global quality stocks...trading at dirt cheap valuations." (03:28)

• Cultural and Strategic Factors:

  • The “trade war” is a peripheral concern to business owners in China.
  • China’s industrial supply chain dominance is now "impossible for the rest of the world to replicate." (05:11)

2. China vs. the Mag 7 and US Equity Valuations

• US Market Cautions:

  • The “Mag 7” (top S&P tech stocks) have become a liability due to excessive Capex in AI, transforming once cash-rich businesses into heavily invested ones with uncertain returns.
  • Quote:
    “The capex time bomb...sitting underneath the Mag 7...is more of a liability at these valuations than an opportunity.” (00:44, 07:02)
  • US equities have seen “trend P/Es double in the last decade,” raising sustainability questions. (13:38)
  • Rupert distinguishes the Mag 7 ("the real driver of S&P earnings") from the “Forgotten 493” which receive little investor attention due to passive flows.

• China’s AI Approach:

  • Tencent, a “lazy long” in his portfolio, is leading with capital-efficient AI integration—capex is only 10% of revenues compared to US tech giants going “all-in.”
  • Quote:
    “They [Tencent] are not betting the farm but they're getting equally intriguing outcomes. They’re not aiming for digital God at all cost; they're just using LLMs to make their verticals more powerful.” (08:15)

• Global Rotation & Market Flows:

  • Mitchell sees developed markets ex-US and emerging markets as set for outsized performance, provided they attract even a “fraction of the flows” that dominated US markets for over a decade. (12:53, 13:41)
  • India noted as expensive (“absurdly expensive”), yet Western narratives label China “uninvestable”—“The irony is not lost.” (11:48)

3. The Bond and Credit Markets: Looming Opportunity?

• Current Signals:

  • Bond markets are signalling caution—“trying to tell you that people should be buying bonds, not stocks”—which is at odds with strong credit markets. (17:37)
  • Private Credit's Impact:
    Private credit has siphoned away the riskiest borrowers from public high-yield indices, upgrading their quality.
  • Trade Strategy:
    Holding on to a credit hedge (e.g., SJB—ProShares Short High Yield), with the intent to flip long on high-yield bonds if "spread blowout" occurs.
  • Quote:
    “1-80s are the most difficult thing to do in finance...but I’ve flagged it very clearly: I will be a buyer [of high-yield] when the time comes.” (20:47)

• Stock-Bond Correlation & Diversification:

  • Skeptical of "risk parity" and classic 60/40 portfolios.
    “Zero is not a hedge...You need this to be properly negatively correlated for that whole 60/40 thing to work.” (25:37)

• Alternatives & Portfolio Construction:

  • Mitchell’s "beta portfolio" heavily features alternatives (CTAs, trend-following funds), EM local-currency bonds, and precious metals as diversification from traditional bonds. (26:18–29:41)

4. Precious Metals & Emerging Market Signals

• Gold and Miners:

  • Stays long physical gold (“hedged out” with a zero-cost collar). Recently sold mining equities after momentum broke; plans to add back miners when chart signals stabilize.
  • Quote:
    “Gold miners have earned a terrible rap...I think capital allocation discipline has been beaten into them...almost to the extent they're scared of their own shadow.” (30:59)

• Sentiment Contrarianism with Country ETFs:

  • Finds opportunity when single-country ETFs (like Nigeria or Egypt) are closed for lack of investor interest—often signals market bottoms and generational entry points.
  • Quote:
    “When sector ETFs or country ETFs are being closed, have a closer look, see what else you can be doing around that.” (32:54)

• Uzbekistan Frontier Opportunity:

  • Details an upcoming privatization fund for Uzbek state assets, with strong macro and value credentials—“buying banks growing book at 30% per annum at 1.2 times book, and on a two to three times PE.” (34:13–38:05)

5. The “Acorns”: Where to Hunt for Outlier Returns

• US Shorts & Fast Casual:

  • Bulk of US equity ideas are on the short side, particularly fast-casual restaurant chains (e.g., Chipotle, Carvana, Wingstop), which remain expensive despite sharp corrections and have weak consumer trends—“The tough lot of the innkeeper.” (41:58, 49:00)

• International Longs & Thematic Bets:

  • Stays net long China, favors low-beta exposures to avoid sharp drawdowns.
  • “Degenerate” natural gas trade for winter, long Gulf equities (UAE, Qatar, Saudi) due to economic restructuring.
  • Positive on global refiners, Canadian E&Ps, and offshore drillers:
    “No one's in a massive hurry to build these assets...We're going to be using them for way, way longer than anyone talks about in an IEA fantasy.” (44:29)

• Strategic Petroleum Reserve Trade:

  • Sees long-dated oil futures as a real asset hedge in the portfolio, complementing other alternatives. (47:00–47:59)

Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote | |---|---|---| | 00:00 | Rupert Mitchell | "Just in the last five years, China has gone into warp speed. I really think that we're in the foothills of potentially an 8 to 10 year bull market here." | | 05:11 | Rupert Mitchell | "[China is] enjoying the fruits of a decade-long Made in China 2025 Industrial Policy Plan... impossible for the rest of the world to replicate." | | 07:02, 13:38 | Rupert Mitchell | "The capex time bomb...sitting underneath the Mag 7...is more of a liability at these valuations than an opportunity." | | 08:15 | Rupert Mitchell | "[Tencent is] not betting the farm but they're getting equally intriguing outcomes... they're just using LLMs to make their individual verticals a bit more powerful." | | 11:48 | Rupert Mitchell | "The irony is not lost...India is seen as the next China opportunity by people who claim China is uninvestable." | | 25:37 | Rupert Mitchell | “Zero is not a hedge...You need this to be properly negatively correlated for that whole 60/40 thing to work.” | | 30:59 | Rupert Mitchell | "Gold miners have earned a terrible rap...I think capital allocation discipline has been beaten into them with a blunt instrument over the last 10 to 15 years." | | 32:54 | Rupert Mitchell | “When sector ETFs or country ETFs are being closed, have a closer look, see what else you can be doing around that.” | | 47:00 | Rupert Mitchell | "A barrel of energy should be viewed as a real asset." |

Timestamps for Important Segments

• 00:00 – 03:28: China’s accelerating market momentum and business climate
• 05:11 – 06:30: Made in China 2025 and global supply chains
• 07:43 – 13:41: Charting US vs. international equities, Mag 7 critique, and market flows
• 15:14 – 16:00: The “Forgotten 493” S&P stocks and impact of passive flows
• 17:33 – 22:23: Bond and credit market dynamics, private credit’s role in high-yield indexes
• 25:37 – 26:18: Stock-bond correlation and risk parity skepticism
• 26:18 – 30:59: Alternatives, portfolio construction, precious metals
• 32:54 – 39:25: Frontier/emerging market ETF closures as contrarian signal, Uzbekistan opportunity
• 41:58 – 44:05: Thematic US shorts, global refiners, and energy strategies
• 49:00 – 52:55: Restaurant stocks as economic indicators, state of the US consumer

Closing Thoughts

Rupert Mitchell presents a dynamic case for global diversification beyond the US “Mag 7” narrative, advocating for value-driven, capital-efficient leaders in China and select emerging markets. With skepticism toward passive US equity dominance, classic 60/40 strategies, and enthusiasm for alternatives—including real assets, upgraded credit indices, and momentum/trend strategies—Mitchell offers practical, contrarian frameworks for long-term investors.

Find more from Rupert Mitchell: blindsquirrelmacro.com | Twitter: @squirrelmacro