Below you'll find a list of all posts that have been categorized as “Quarterly Letter”
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. …
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 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 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 …
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 …
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 …
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 …
Crescat just finished a strong turnaround month. We are so excited about what we have going on in our portfolios that we wanted to deliver this important update to those investors who might want to take advantage of the August investment window while there is still time over the weekend. Thanks to the macro setup today, we have never been …
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, …
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 …
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 …
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 …
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 …
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 …
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 …
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 …
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 …
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 …
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 …
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 …
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 …
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 …
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 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 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 …
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 …
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 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 …
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 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 …