Buy Low, Sell High

Crescat Capital Research Letter & Performance Update

The current macro environment across global equity markets presents a sharply divided investment setup for 2024 and the remainder of the decade. While our concerns are fueled by the pervasive speculation in the US stock market, there also exists a parallel narrative where long-neglected economies present themselves with exceptional value and promising growth opportunities. Utilizing Warren Buffett’s preferred valuation indicator, …

Deconstructing the Powell Pivot

Crescat Capital Research Letter & Performance Update

Season’s Greetings and Happy Holidays from Crescat! Our overriding Great Rotation theme just received a jumpstart with the Fed’s pivot to easier monetary policy at its December 13 meeting. Jerome Powell and Company signaled lower interest rates in 2024. Since the central bank’s shift, note the outperformance of undervalued junior gold mining stocks, including the exploration-heavy TSX Venture Exchange Index, …

A Profusion of Recession Indicators

Crescat Capital Research Letter & Performance Update

A Profusion of Recession Indicators Despite the growing popularity of the soft-landing narrative, the current scenario presents a multitude of macro factors forewarning a major recession. The dangerous disconnect of highly inflated valuations of financial assets within a market environment substantially different from the easy money conditions of the past few decades defies logic. With the US economy teetering on …

Something More Has to Give

Crescat Capital Research Letter & Performance Update

Investors in US Treasury bonds have experienced extraordinary losses in the post-Covid stimulus era as evidenced by the iShares 20+ Year Treasury Bond ETF (Ticker: TLT) which is down 47% on a total return basis from its August 2020 high. Such a large drawdown in a supposedly safe asset class led to several bank failures in early 2023, but the …

September Performance and Positioning Update

Crescat Capital Performance Update

Crescat’s three hedge funds delivered strong performance in September in a down month for broad equity and fixed-income markets. All five short themes in the Global Macro Fund and all four in the Long/Short Fund delivered gains. Last month, we introduced a new macro theme entitled ESG Rethink which included winning shorts in NextEra Energy and other financially challenged utilities. …

Redefining 60/40 Portfolios

Crescat Capital Research Letter & Performance Update

We believe conventional investment strategies are poised to undergo a significant restructuring, placing a prominent emphasis on investments in hard assets. As illustrated in the accompanying chart, the valuation history of 60/40 portfolios unfolds through extended cycles, and we are currently experiencing another critical juncture in this dynamic. In August 2021, the combined valuation of overall equities and US Treasuries …

A Clarion Call to Macro and Value Investors

Crescat Capital Research Letter & Performance Update

I am writing this personal letter to Crescat’s clients and followers ahead of our regular monthly research letter to literally pound the table on what I believe is one of the best times to deploy capital to Crescat’s strategies in our firm’s history. The set-up is the most exciting macro and value combination play on both the long and short …

Violent Repricing

Crescat Capital Research Letter & Performance Update

There is a high probability of a recession in the next twelve months according to the NY Fed’s statistically significant yield-curve inversion model. One wouldn’t know it by looking at risk premia across equity and credit markets. Sub-investment-grade corporate bonds are just one area where there is a glaring imbalance. As one can see in our model below, in the …

Monetary vs. Fiscal Dissonance

Crescat Capital Research Letter & Performance Update

Monetary and fiscal authorities are currently running what we believe are unsustainably divergent policies. The simultaneous rise in the cost of debt by central banks and their deliberate reduction of balance sheet assets is entirely incongruous with the exponential growth in government debt. Following the COVID era, we have entered a period of fiscal dominance among major developed economies. Hence, …

Three Overriding Macro Themes

Crescat Capital Research Letter & Performance Update

Dear Investors: At Crescat, we have three overriding, high-conviction macro themes supported by our independent research and proprietary models that we believe are poised to unfold in rapid succession over the short and medium term: We see highly overvalued long-duration financial assets as ripe for a second major leg down due to the rising cost of capital and the imminent …

Gold: A Far Superior Alternative

Crescat Capital Research Letter & Performance Update

The US debt ceiling issues likely present a much greater risk to financial markets than currently perceived by investors. Although prior concerns related to this matter have proven to be mostly peripheral, today’s set of circumstances is different. The possibility of a technical default looms once again, however, our main concern is the potential macroeconomic consequences following a resolution between …

Whistling Past the Graveyard

Crescat Capital Monthly Research Letter, Research Letter & Performance Update

US policymakers continue to act as if they have the stability of the financial system, the economy, and consumer prices under control. Instead, their ongoing deficit spending and debt monetization since the 2008 crisis have created a trifecta of macro imbalances: Historic overvaluation of long-duration financial assets; Systemic solvency problems posed by excessive leverage; and Embedded structural inflation. This unholy …

Loosely Tight Conditions

Crescat Capital Research Letter & Performance Update

The last 12 months have marked one of the steepest Fed rate-hiking cycles in history. Meanwhile, financial conditions remain too loose for secular inflationary forces but too tight for financial assets near record valuations. If this is the beginning of another multi-year period of higher-than-average cost of capital, overall equity markets are yet to reflect these changes in fundamental multiples. …

Mispriced Inflation

Crescat Capital Research Letter & Performance Update

In our view, inflation is the most mispriced macro variable in markets today. CPI growth is 5.1% higher over the last two years, but five-year forward inflation expectations are essentially unchanged. Based on our analysis, structural forces are likely to keep the annual growth rate in consumer prices elevated for much longer and substantially higher than currently priced into markets. …

Mining Industry Renaissance

Crescat Capital Research Letter & Performance Update

We believe we are at a key inflection point for the precious metals industry today. The overwhelming social pressure to adopt the green revolution, renewable energy technologies, and electrification has forced the gold mining industry to shift its capital and attention to so-called “critical” metals. Consequently, there has been a declining interest from major mining companies in deploying capital to …

Recession Looms

Crescat Capital Crescat Updates, Research Letter & Performance Update

Recession Highly Probable The percentage of inversions in the US Treasury yield curve just breached the critical 70% level last week. As Tavi Costa’s research at Crescat shows, every breach of this threshold in the history of the data back to 1970 has led to a near-term recession.     Buy Gold/Sell Short Stocks Furthermore, Mr. Costa’s work has identified …

The Golden Era of Macro Investing

Crescat Capital Research Letter & Performance Update

The wheels are coming off the global economy. The painful increase in cost of debt in combination with the relentless appreciation of the US dollar and tightening of monetary conditions have exposed long-standing macro imbalances. These forces are interconnected, self-reinforcing, and in our opinion completely unsustainable over the long run. Ultimately, policy makers must restore a financially repressive environment. Allowing …

Seeking Value, Avoiding Bull Traps

Crescat Capital Research Letter & Performance Update

In Crescat’s analysis, it is still way too risky to buy the dip in mega-cap tech stocks. Valuations are still higher than the PEAK of the dotcom bubble as we show in the two charts below. There is substantial downside ahead based on the comparison to the early 2000’s tech bust at its washout point. Our first chart shows the …

Sell Big Tech, Buy Explorers, Hedge with Yuan Puts

Crescat Capital Research Letter & Performance Update

The Crescat Global Macro Fund was up 2.9% net in August and 38.8% net year to date. Mega Cap Growth shorts were the best performing theme overall generating a 2.3% absolute return to the fund while the S&P 500 was down 4.1%. The Long/Short and Precious Metals Funds were also up in August. All Crescat strategies have outperformed their benchmarks …

A Vicious Stagflationary Environment

Crescat Capital Monthly Research Letter

Today’s restrictive Fed policies in a rapidly deteriorating economy are the preconditions for a steep recession. Contrary to the unprecedented monetary and fiscal support we had following the last economic downturn, we are currently experiencing a major withdrawal of liquidity at a time when corporate fundamentals are starting to contract. Despite the deepest yield curve inversion in decades, the Fed …

Back Up the Truck

Crescat Capital Monthly Research Letter

The recent pullback in commodities is a gift. It is allowing Crescat and our investors to secure even more of the world’s future critical resources at ultra-cheap valuations ahead of a new secular bull market. That is exactly what we have been doing, and it is already bearing significant fruit performance-wise in July. While commodities have sold off sharply recently, …

The Rise and Fall of the Consumer

Crescat Capital Monthly Research Letter

After experiencing the largest government-financed consumption boost in history, household demand for goods and services is poised to fall off a cliff. The US economy simply cannot handle the Fed’s continued monetary tightening. This is the onset of a vicious stagflationary environment. The unprecedented combination of excessive debt, the bursting of speculative asset bubbles, and the persistence of inflation due …

May Performance Estimates

Crescat Capital Performance Update

Crescat’s May performance was negatively impacted by to the downturn in the precious metals markets. The pullback was caused by declining medium and long-term inflation expectations during the month. This was all due to continued market apprehension over the Fed’s planned interest rate hikes. General market perception today and aversion to precious metals, in our opinion, is no different than …

May Research Letter – Too Soon

Crescat Capital Monthly Research Letter

Too Soon to Buy the Dip, Unless It’s Commodities The valuation of the Wilshire 5000 US Total Stock Market Index reached a historic high of 207% of GDP in 2021 in the wake of the Covid-19 stimulus and record corporate earnings. We are now entering what in Crescat’s analysis is an inflationary recession. The index is off 15% from its …

April Performance Estimates

Crescat Capital Performance Update

The Crescat Global Macro Fund delivered a great month in April, up 10.2%, during a broad selloff in the US equity market with the S&P 500 and Nasdaq 100 indices down 8.7% and 13.3% respectively. Our US dollar versus Chinese yuan long call options, equity short themes, and high yield bond put options delivered the bulk of the profits as …

A Plethora of New Macro Trends

Crescat Capital Monthly Research Letter

We are currently experiencing profound changes in the global economy that are likely to unleash a plethora of early-stage secular trends in a new inflationary regime. These are long-overdue structural shifts powered by decades of easy money policies and record levels of debt-to-GDP among developed economies: Governments and central banks to seek high-quality international reserves in attempt to restore the …

Crescat Thrives in Market Turmoil

Crescat Capital Performance Update

We are excited to report that Crescat has delivered strong absolute and relative performance across the firm year to date as financial markets have been in turmoil. Crescat’s flagship Global Macro Fund is up an estimated 25.6% net year-to-date through March 18. In comparison, the S&P 500 is down 6.1% while the HFRX Global Hedge Fund Index is down an …

February RESEARCH LETTER – A Trifecta of Macro Imbalances

Crescat Capital Monthly Research Letter

For the first time in history, the US is experiencing a confluence of three macro extremes all at once: High government debt to GDP like the post-war 1940s Excessive stock market valuation on par with 1929 & 2000 bubbles A resource-driven inflationary crisis environment comparable to the 1970s Any one of these three economic states endangers the health of markets …

December Performance Estimates

Crescat Capital Performance Update, Videos & Interviews

The Year of the Great Rotation Welcome to 2022. More than ever, we believe it is time to get out with the old and in with the new. At Crescat, we believe investors today face a twofold problem: The imperative to not get sucked into a financial asset bubble destined to implode. The need to outpace structurally rising inflation. Starting …

DECEMBER RESEARCH LETTER – Pipe dreams and ponzi schemes

Crescat Capital Monthly Research Letter

Pipe Dreams and Ponzi Schemes Normally, as part of the creative destruction process in economic downturns, the financial system gets purged of excesses. In the subsequent recovery, the health of the economy is restored in a natural way as new leadership arises from sectors and industries that are inherently different from those of the prior expansion. In the wake of …

December Research Letter and Performance Update – Software is the Tell

Crescat Capital Monthly Research Letter, Performance Update

Equity Market Warning The recent weakness in the broad US equity market is being masked by the outperformance of mega-market cap companies that remain near record valuations. With that in mind, it is remarkable to us how the NASDAQ Composite is just 2.6% from all-time highs while only 35% of its members are above the 200-day moving average. Such a …

November Research Letter – The Catalyst for The Great Rotation

Crescat Capital Monthly Research Letter

The Catalyst for The Great Rotation Based on the firm’s current equity and macro models, and our investment team’s analysis, we believe we are in the explosive first wave of an inflationary cycle in the US and globally that will elevate consumer prices at a much higher annualized rate and for significantly longer than priced into financial markets today. The …

The Macro Case for Precious Metals

Crescat Capital Macro Research

Where are we in the precious metals cycle? There is no shortage of questions on why gold has significantly underperformed during such an ideal macro setting. Let’s start by looking at the usual fundamental trends of this industry as part of prior historical cycles. Gold and silver stocks have never peaked at historically undervalued levels. Miners are now trading at …

OCTOBER RESEARCH LETTER – A MACRO REGIME CHANGE

Crescat Capital Performance Update

We are experiencing a macro regime change that is an abrupt reversal of a four-decade trend of disinflation in the most financially repressive moment in history. With the largest imbalances yet in both overall debt to GDP and financial asset valuations, the levitation of the entire equity and fixed income markets, and the stability of the economy, have become dependent …

September Performance Estimates

Crescat Capital Crescat Updates, Performance Update

The Psychology of Inflation Today’s macro environment is indeed very different than any other period we have experienced in the last four decades. Inflation is infiltrating the mindset of US households in a way not seen since the wage-price spirals of the 1970s. Prices for the goods and services that individuals require to meet basic needs have been increasing at …

September RESEARCH LETTER-Three Themes Coalescing

Crescat Capital Monthly Research Letter

September 21, 2021 Dear Investors: Three Themes Coalescing With unsustainable imbalances in the global economy and financial markets today, we see unprecedented opportunities to grow and protect capital in both the near and long term. Crescat is focused on investment strategies that offer uncommon value and appreciation potential. We believe that all of Crescat’s strategies offer an incredible entry point …

August RESEARCH LETTER – The Tech Bubble Then and Now

Crescat Capital Monthly Research Letter

August 30, 2021 Dear Investors: The Tech Bubble Then and Now In our analysis, the US stock market today is historically overextended and poses substantial risks. To understand, we need to start by comparing it with the tech bubble in 2000. When Bill Gates retired as CEO of Microsoft that year, he was the richest person in the world. His …

Quinton Hennigh Joins Crescat Full-Time

Crescat Capital Crescat News

World-Renowned Gold Exploration Geologist, Quinton Hennigh, PhD, to Join Global Investment Manager, Crescat Capital Crescat Capital LLC, a Denver-based global investment manager, is pleased to announce Quinton Hennigh, PhD, will become its full-time Geologic and Technical Director, effective August 16, 2021. As Crescat’s former independent advisor, Dr. Hennigh’s expertise has been a vital component to the firm’s success in its …

July Performance Estimates

Crescat Capital Performance Update

We are excited to report that Crescat’s newest hedge fund, the Crescat Precious Metals Fund just finished its first full year with exceptionally strong results. The fund was up an estimated 235.4% net in its debut year compared to a 5.8% decline for the benchmark Philadelphia Gold and Silver Index. Spot gold was down 8.2% over the same time frame, …

July Research Letter-Not Your Mother’s Inflation

Crescat Capital Quarterly Letter

July 27, 2021

Dear Investors:

Investors are always looking to history for guidance by attempting to find the most economically comparable period to the present. Two timeframes are the most conspicuous, the 1940s and the 1970s. Some macro investors today are citing the 1940s to validate the Fed’s hypothesis that the recent rise in consumer prices will prove to be transitory. Ironically, if the past …

June Performance Estimates

Crescat Capital Quarterly Letter

July 11, 2021

Dear Investors:

US Stock Market at Risk of P/E Deflation The US stock market is 51% overvalued and at risk of a 34% decline. The catalyst is inflation which has arrived in spades and is likely to stay for a while. We think shrewd investors should be getting positioned now for the Great Rotation to both protect against and profit from this …

June Research Letter-A Tale of Two Destructive Outcomes

Crescat Capital Quarterly Letter

June 26, 2021

Dear Investors:

A Tale of Two Destructive Outcomes The greatest long-term investments are those capable of performing well under opposing inflationary and deflationary economic forces. Today’s abundance of macro, fundamental and technical reasons to be a gold investor have never been greater. The ongoing monetary and fiscal disorder in the global economy underpins the onset of a secular bull market in precious …

May Performance Estimates

Crescat Capital Quarterly Letter

June 05, 2021

Dear Investors:

We are pleased to report that Crescat had a strong May across all strategies: Performance was driven by our global fiat debasement macro theme which is the largest exposure across all Crescat strategies today. We express this theme through our activist precious metals’ positions. Seven of these positions contributed outstanding gains in May across our hedge funds and precious metals …

May Research Letter-The 3 Pillars of Inflation

Crescat Capital Quarterly Letter

May 19, 2021

Dear Investors:

The Three Pillars of Inflation We strongly believe investors will want to get positioned now for the Great Rotation which is being catalyzed by the three macro drivers of inflation all firing in sync today: Demand Pull Cost Push Monetary Debasement Let us explain why we think inflation is real and what investors should be doing about it. The Demand …

Crescat April Investor Letter

Crescat Capital Quarterly Letter

April 30, 2021

Dear Investors:

April 30, 2021 Dear Investors: “Miner” Setback It is time to evaluate your level of exposure to precious metals. We believe the macro cycle for gold and silver has turned. This could be the last chance to build a position at depressed prices. The economy is likely headed into an inflationary period and it is time to act. Deloitte has …

March Research Letter

Crescat Capital Quarterly Letter

March 30, 2021

Dear Investors:

March 30, 2021 Dear Investors: Two diverging schools of macro thoughts are prevalent today. One calls for a “Roaring 20s” redux while the other believes in a forthcoming liquidity crisis. Both narratives have valid points and flaws. To be clear, we find ourselves right in between the two. Let us elaborate. The central argument of the reflationary thesis is that …

February Research Letter

Crescat Capital Performance Update

The Fed is Trapped Dear Investors: The year is just getting started and the US fiscal deficit already reached another record, now at its worst level in 70 years. The Fed is facing its worst predicament yet. The current fiscal spending path will lead to record Treasury issuance this year. Foreign investors are unlikely to be the ones funding this …

Crescat Capital Quarterly Investor Letter Q4 2020

Crescat Capital Quarterly Letter

January 28, 2021

Dear Investors:

Crescat finished strong in 2020 to capture the top three spots in the Bloomberg News US hedge fund performance table for December. All three Crescat funds made it into Bloomberg’s top 10 for the full year with the Crescat Precious Metals Fund taking the #1 spot. We are working as hard as ever to continue to deliver in 2021. We …

Crescat December Performance Update

Crescat Capital Performance Update

January 9, 2021 Dear Investors: The Great Rotation It is time to gird for full Modern Monetary Theory. With the democratic sweep in place, we are about to experience even more of the double-barreled fiscal and monetary stimulus that we saw in 2020. Overwhelmingly today, such policies have served to incite animal spirits toward financial assets. Investors are already positioned, …

December Research Letter

Crescat Capital Performance Update

December 23, 2020 The End Game Dear Investors: Markets are cyclical. Today, stocks trade at record high valuations while commodities are historically undervalued in relation. The setup is in place for a macro pivot in the relative performance of these two asset classes. Comparable conditions were present with the 1972 Nifty Fifty and 2000 Dotcom bubbles as we show in …

CRESCAT NOVEMBER PERFORMANCE UPDATE

Crescat Capital Performance Update

December 11, 2020 Dear Investors: From a timing perspective, the setup for selling overvalued US equities and buying undervalued precious metals today looks exceptional. The gold to S&P 500 ratio just posted its worst monthly decline in 37 years. In our analysis, this relative performance was an end of cycle move for the S&P 500 but only an early inning …

As Good As It Gets

Crescat Capital Performance Update

Dear Investors: Crescat Global Macro and Crescat Long/Short hedge funds are having a pullback month to date. We wanted to bring this to your attention because we think it presents an excellent buying opportunity for those considering adding money to Crescat for the end of this month. The opportunity is being caused by the recent run-up in equity markets. We …

Crescat November Research Letter

Crescat Capital Performance Update

Dear Investors: A Vicious Debt Spiral The structure of the global economy today is built on the incessant yet tenuous reliance on monetary and fiscal stimulus. To put it bluntly, policy makers are in a pickle. In accommodating struggling enterprises at large by piling new debt onto them, they have traded off future organic growth for economic zombification. At the …

Crescat October Performance Update

Crescat Capital Videos & Interviews

November 14, 2020 Dear Investors: Crescat’s three hedge funds surged in October to maintain their year-to-date performance leadership within the universe of managers. The S&P 500 declined 2.4% in the same month as US election day neared. All five of the firm’s investment strategies substantially outperformed their benchmarks net of fees in 2020 and since inception. Collectively, the Crescat strategies …

Crescat Capital Quarterly Investor Letter Q3 2020

Crescat Capital Quarterly Letter

October 27, 2020

Dear Investors:

History does not exactly repeat, but it often rhymes. The art and science of macro investing is comparing past business cycles with the present across a mosaic of different indicators and time frames to determine the most probable path forward for markets. Throughout time, financial markets and the economy have been intimately linked to cycles of expansion and contraction of …

The Reckoning Is Upon Us

Crescat Capital Performance Update

September 24, 2020 Dear Investors: The Reckoning Is Upon Us Decades of fiscal profligacy are culminating in an explosion of government debt that is poised to bring simmering monetary debasement to a boiling point. Central bank interventions have aided and abetted reckless government spending that has obfuscated poor underlying organic growth fundamentals. Instead of laying the groundwork for future real …

Crescat Capital Quarterly Investor Letter Q2 2020

Crescat Capital Quarterly Letter

August 28, 2020

Dear Investors:

A New Bull Market for Precious Metals Central banks are facing a serious predicament. After decades of ongoing accommodative monetary policy, the world is now sitting at record levels of debt relative to global GDP. In our view, there has never been a bigger gulf between underlying economic fundamentals and security prices. We are in a global recession, but equity …

Crescat Capital Quarterly Investor Letter Q1 2015

Crescat Capital Quarterly Letter

March 17, 2015

Dear Investors:

Download Letter (PDF) Crescat nailed the oil trade in 2014, helping our hedge funds deliver some of the best performance in the industry. Crescat Global Macro Hedge Fund was recognized by both Preqin and BarclayHedge as a top-10 performing macro hedge fund with a 25.8% net return. Crescat Long/Short Fund delivered a strong 23.2% net return, in the top 5 ...

Crescat Capital Quarterly Investor Letter Q4 2014

Crescat Capital Quarterly Letter

October 22, 2014

Dear Investors:

Ebola outbreak. China economic slowdown. Hong Kong protests. Russia/Ukraine conflict. U.S. military strikes in Iraq and Syria. Europe in recession. The Fed potentially ending QE. There is no shortage of concerns regarding the global economy. Given those headlines, it’s about time we had the proverbial healthy 10% correction in stocks, and we already have. From the highs of the third ...

Crescat Capital Quarterly Investor Letter Q3 2014

Crescat Capital Research Letter & Performance Update

Over the long term, since each strategy's inception, Crescat has delivered strong risk-adjusted returns based on high alpha, low beta, high absolute returns, low downside deviation, and low correlation compared to market indices and other managers. Crescat has endured and prospered for its clients, producing these results cumulatively through two of the worst bear markets in history: the Tech Bubble ...

Blast From the Past: Crescat Capital Investor Letter Q4 2006

Crescat Capital Quarterly Letter

October 26, 2006

Dear Investors:

Fall 2006: Crescat lays out the macro case for the housing bust, financial crisis, and recession before it all unfolds. The housing market has played an enormous role in the US economic expansion over the last five years and we think it will play an enormous role in what will be likely a recession or a significant economic slowdown. We ...