The commerce of the century: buying gold, selling shares – Crescat Capital

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(Kitco News) – Buying gold and selling stocks is the "Commerce of the Century" board that one of 2018's most successful hedge funds gives to its clients.

"We believe that today, long gold in CNY relative to short world stocks could be the macro trade of the century!" Said Crescat Capital LLC.

One of the main reasons for holding gold at the moment is the growing risk of a possible fall in stocks, said Crescat's investment director, Kevin Smith, and the world macroeconomic badyst Tavi Costa, in a note published Friday.

The Denver-based company is forecasting a recession and the beginning of a bear market in equities this year.

"Soon, the buy-the-dip mentality and the greed of the bull market will turn to fear. The sale will generate more sales. This is how bear markets work. There is still a lot of work to be done to take advantage of the short side of the market, "said Smith and Costa.

The recession could be much closer than the markets are anticipating for the moment, the note said.

"Crescat's macroeconomic models show that the expansion is about to turn into a recession in the next few quarters, because of the abundance of indicators," said Smith and Costa. "How can we get to the recession? The stock market and corporate credit bubble in the United States must begin to burst. This is how the business cycle works. It started in the fourth quarter, but it was only the beginning. "

Analysts also cited many "insiders" selling stocks heavily in early 2019, while the majority of investors were still in risky buying mode.

And the signs indicating a recession are already very visible, according to the firm.

"The double fiscal and trade deficit of the United States departs from the S & P 500, a sign of the likely spike in the stock market and economic cycle after tax cuts. Doubtful economic data from the United States shows a sharp deterioration of GDP in the current quarter … The percentage of inversion of the yield curve of the US Treasury is now close to 45% according to our model. The last two times, credit markets have experienced such a distortion that badet bubbles began to collapse shortly after, "wrote Smith and Costa.

Crescat Capital LLC manages about $ 50 million and has a record of outperforming the S & P 500 Index. In 2018, the company's Global Macro fund returned 41%.

Spring has come and the gold will feel the heat – Analyst https://t.co/lQDMSaLSmC #kitconews #gold #money #economy #finance #metals #invest #mining

– NEWS Kitco (@KitcoNewsNOW) March 22, 2019

At the moment, Crescat is very optimistic about the yellow metal, choosing to steer gold as yuan, while lowering the prices of the global stock market.

"Given our negative views on the Chinese yuan and because we believe that gold is historically cheap relative to all fiduciary currencies, including the US dollar, we are extremely optimistic about gold. But we are the most bullish against gold against the CNY … We continue to think that gold in CNY is an incredibly bullish configuration! "Explains the note. "In the bull markets of gold, silver tends to be even better than gold, and gold and silver stocks do even better than gold. We all currently own them, including gold in the heart. "

Crescat added that this transaction accounts for approximately 75% of the company's Global Macro fund positioning. "This is a value-based macroeconomic trade that is expected to materialize over the next three to three years of the global economic downturn caused by China's implosion," said Smith and Costa. "Our net and firm net positioning [will be] maintain[ed] until a US recession is widely recognized. "