Source: Crescat Capital for Streetwise Reports 09/22/2021
In a Sept. 10, 2021 Crescat Capital broadcast from the Precious Metals Summit in Beaver Creek, the firm's Portfolio Manager, Tavi Costa, and its Chief Investment Officer, Kevin Smith, talked about the current macroeconomic environment and highlighted the opportunity in gold and silver mining equities.
Portfolio Manager, Tavi Costa, noted that his funds firm, Crescat Capital, believes we are in a secular bull market for gold and silver and because we are now amid a pullback, the time is right to be taking advantage of stocks in the space over time. He showed a slide of silver's weekly candles and noted that the precious metal looks technically sound for taking advantage of.
"Cryptocurrency is getting a lot of attention these days, but Crescat Capital likes precious metals."
Looking forward, Costa added, "I think there are a lot of fundamentals behind what could drive gold and silver prices much higher and perhaps really benefit the explorers and a lot of the companies we have in our portfolio," he added.
Costa purported that we could be on the cusp of a new phase of mergers and acquisitions given the high level of liquidity among the mining majors. They have generated free cash flow at a pace never seen before and have lots of net cash available.
"I truly believe that tangible assets continue to be something very important for investors to own in their portfolios," Costa said.The portfolio manager said platinum is also at a good entry point and showed a slide of the metal's quarterly candles.
"Gold, we believe, has intrinsic value."
Also in the broadcast, he presented three slides depicting how various economic metrics are trending. The first metric was the Taylor Rule to the Fed funds rate Spread, and it showed that the spread today is the largest it has been since about 1975. Costa said the spread indicates interest rates should be at around 6 percent, but obviously they are not.
"It's a good reminder of how trapped the Federal Reserve is," he added.
Second, the cost of ride sharing with Uber and Lyft increased 92 percent between January 2018 and July 2021, Costa said. However, the intercity transportation component of the Consumer Price Index (CPI) that takes into account taxi, Uber and Lyft fares is up only 5 percent during the same period.
"This is example of how the CPI is massively understated in regards to the real inflation in the system," added Costa.
Third, the Duke survey of chief financial officers showed that internal company optimism about wages and sales is at a record high.
"The cost of living rising started to create a demand for higher wages and salaries, and we're seeing this in a lot of fronts," Costa said.
Next, Kevin Smith briefly summarized today's economic macroenvironment and with that as the backdrop today, what parts of the market Crescat Capital favors.
Smith reiterated that inflation is rising, growth is slowing and the stock market is in a bubble. Real interest rates are negative, and money printing continues. Deficits are the highest they have ever been.
Thus, cryptocurrency is getting a lot of attention these days, Smith said, but Crescat Capital likes precious metals.
"Cryptocurrencies, they're faith-based currencies," he said. "Gold, we believe, has intrinsic value, and the junior mining industry has been through essentially a 10-year bear market."
Read more about the companies Quinton Hennigh, Crescat's Geologic and Technical Director, discusses in part two of the Sept. 10 briefing.
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