The recent surge in gold prices reflects what we believe are the inevitable consequences of decades of ultra-loose monetary policies, excessive debt accumulation, and fiscal mismanagement. Those who have long dismissed gold’s role as a safe-haven asset are now witnessing a stark reminder of its historical significance. For centuries, gold has served as the cornerstone of monetary systems, offering a …

Excessive valuations and investor overcrowding in US megacap tech stocks in our view represent the biggest risk to the overall US stock market and economy today. Competition from US VC-funded startups, creative destruction from open-source AI innovation itself, and Chinese state-sponsored cyber warfare all threaten the high-margin monopolistic business models of the US tech giants. Crescat may or may not …

The History of US Dollar Cycles Macro regime shifts often stem from systemic imbalances, where excessive concentration of capital in certain sectors, asset classes, or currencies reaches saturation points, leading to a major reallocation of resources. These transitions are often closely tied to the cyclical nature of the US dollar (USD), which serves as a cornerstone of the global financial …

The purpose of this research letter is to illustrate the historic countercyclicality of gold mining stocks versus the broad US stock market over a variety of economic environments. We also highlight divergent valuation opportunities and risks among these two security classes today. The following five charts consider the performance of gold mining stocks compared to major US stock market indices …

What if the rate of inflation is in the process of bottoming out and the Federal Reserve has limited capacity to intervene to contain it? Monetary policy is increasingly evolving into a crucial tool for reducing interest payments on government debt, thus allowing fiscal stimulus to be more strategically channeled towards fostering economic growth, in our opinion. A key factor …

The Federal Reserve has signaled lower short-term rates ahead, but two important macro questions have yet to be answered: Do the asset bubbles of the post Global Financial Crisis zero-interest-rate-policy era still need to be unwound? Has the Fed truly conquered US long-term inflation expectations or might Jerome Powell’s victory lap at Jackson Hole have been premature? Lingering Asset Bubbles …

In our view, we stand on the cusp of a major transformation in the foreign exchange (FX) markets: a likely significant depreciation of the US dollar relative to other currencies over the next several years. Allow us to elaborate. The Federal Reserve’s current interest rate policy is entirely misaligned with the magnitude of the debt problem, putting the US economy …

Cisco Systems was the most valuable company in the world at the peak of the dot-com bubble in March 2000. Its stock price had reached a high of $80.06 per share giving the company an enterprise value (EV) of $548 billion or 5.5% of US GDP and 37 times sales. Investor exuberance over tech stocks was high. The future economic …

In essence, our investment approach focuses on identifying significant macro trends and strategically positioning ourselves to capitalize on them, primarily by targeting highly inefficient market segments that have historically been mispriced relative to the potential economic shifts we anticipate. Given the current context of one of the most undisciplined monetary and fiscal environments in history, we firmly believe that the …

There are three supporting themes driving our conviction that the timing for investing in gold, silver, copper, and other metal exploration stocks has never been more compelling: In our analysis, the unsustainable debt and government deficits in developed economies make inflationary pressures intractable and fiat currencies more susceptible to debasement than they have been since the 1970s. We believe there …

Valuation extremes combined with macro inflection signals provide generational opportunities to position opposite the crowd for potentially large gains. At Crescat, we live for such times. We continue to believe we are on the cusp of a rare macroeconomic shift, like in 1972 and 2000, where a monumental investment setup exists on both the long and short sides of the …

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, …

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 …

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 …

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 …

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 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, …

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 …

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. …

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. …