Buy Gold, Sell Stocks Is the ‘Trade of Century’ Says One Hedge Fund

Discussion in 'Wall St. News' started by srinir, Mar 24, 2019.

  1. srinir

    srinir

    https://www.bloomberg.com/markets/fixed-income

    One of last year’s best-performing hedge funds says the “trade of the century” is to buy gold and sell stocks as risk assets are due for another meltdown.

    It’s only a matter of time until the bearish bet pays off big, according to Crescat Capital LLC. While the Denver-based firm has only about $50 million under management, it has a history of outperforming the S&P 500 Index -- with its Global Macro Fund returning 41 percent last year alone. Now the investment company says it’s ready to capitalize on an end of the economic cycle as indicators warn that a recession is imminent in the coming quarters.

    The consensus is pointing to a recession in 2020 or 2021, Tavi Costa, a global macro analyst at Crescat, said by phone. “We think it’s a lot closer than that and we have a number of macro timing indicators that we look at.”



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    ..

    U.S. economic data is deteriorating and inversions remain across the Treasury yield curve, the hedge fund pointed out. Measuring multiple yield spreads across the curve from Fed Funds to 30-year Treasury bonds, Crescat found that almost 45 percent of the curve is inverted.

    “The last two times the credit markets had such a high distortion, asset bubbles began to fall apart shortly thereafter,” Crescat wrote.

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    As for the almost 13 percent rebound in global stocks in 2019, Costa said the firm has a high conviction it’s simply a bear-market rally. Just about everything has bounced since the start of the year, accompanied by an abrupt decline in the Cboe Volatility Index, or the VIX -- signs reminiscent of head fakes in such advances.

    “Soon the buy-the-dip mentality and bull-market greed will turn to fear. Selling will beget more selling. That’s how bear markets work,” Crescat wrote. “There is so much more ahead to profit from the short side of the market. The bear-market rally is running out of steam!”

    The firm’s Global Macro Fund has posted an annualized return of near 12 percent since it was created in 2006, according to its website -- greater than the S&P 500’s 8 percent. Crescat’s Long/Short and Large Cap funds have also outperformed.

    “We’re not perma-bears by any means,” Costa said. “This is a very tactical bearish view right now, and hopefully when the market turns, we want to also time the bull market at some point.”
     
    TheBigShort likes this.
  2. Lots of people touting "gold as your savior", but piling into gold didn't work that well in the last recession. Gold lost ~25%, gold mining stocks lost ~70%. Will it be different this time?

    Gold.PNG
     
    murray t turtle and Clubber Lang like this.
  3. sle

    sle

    Prior to the next recession, gold was very expensive, as the inflation fears were rampant (remember the uber-bullish oil forecasts?). You would still have done better from peak to through than you did if you held S&P but then again, you would have missed the rally too. Anyway, my point is that maybe gold is not that expensive this time around if you think in asset-growth adjusted terms. Maybe look at the total gold market cap vs global equity market cap and compare that to history?

    FWIW, I never understood people that buy gold miners to get exposure to gold. These are companies that, on average, are poorly managed and have zero innovation edge.

    It's hard to say, really depends on the reaction of the central banks. I honestly don't think gold is a good all-around safety asset in the modern times. Buying gold makes sense if you think that the CBs around the world will be able to counteract the contraction via some form of easing.
     
    Ayn Rand and nooby_mcnoob like this.
  4. dozu888

    dozu888

    https://www.dailyfx.com/sentiment

    thats exactly what the dumb money has been doing... weekend the gold data is turned off but it's basically the same as the bitcoin right now.

    do you want to join the dumb money?
     
    comagnum likes this.
  5. sle

    sle

    Dumb money is not always wrong, you know. In any case, who do you think was buying equities in the last few months?
     
  6. eurusdzn

    eurusdzn

    That's a nice chart posted regarding percentage of curve inverted.
    Seems fed may look at that and think ....acting fast in 2000 didnt help much ...and acting slow in 2007( still tightening with ongoing inversion?) didnt help much to say the least.
    Maybe this time they will work fast and along more than just fed funds segment of curve.
    Would not selling more than planned of their 10-30 year assets and , not pausing in September , counter this inversion?
    My belief , based on observation is that the fed, and the rest of global CB's , can deter the market in a "dont fight the fed campaign" . Even jawboning initially can help. That's coming.
     
    apdxyk likes this.
  7. dozu888

    dozu888

    dumb money always lose... thats for sure.
     
  8. destriero

    destriero

    Crescat will be down for 2019. This trade is doomed.
     
  9. dozu888

    dozu888

    by the way - 'says one hedge fund' this type of thing adds zero, maybe negative credibility... these guys vastly under perform, as Warren already won a bet on it.
     
    #10     Mar 24, 2019
    comagnum and jl1575 like this.