Trade of the Century is to Sell Stocks, says one Hedge Fund, Time to Hoard in Gold & Bitcoin
The “trade of the century” according to one of the last year’s best-performing hedge funds is to sell stocks as risk assets are due for another meltdown and start buying gold.
According to Denver-based Crescat Capital LLC, it’s only a matter of time until this bearish bet pays off big. The firm has only about $50 million under management but has a history of outperforming the S&P 500 Index, as reported Bloomberg, with the firm’s Global Macro Fund returning about 41 percent in last year alone.
Now, as the indicators warn of a recession that is imminent in the coming quarters, the investment company says it is ready to capitalize on the end of this economic cycle. Though the global consensus is that the recession will be coming in 2020 or 2021, the global macro analyst at Crescat, Tavi Costa said,
“We think it’s a lot closer than that and we have a number of macro timing indicators that we look at.”
The current three-quarter strategy of the hedge fund is shorting global equities while going long on gold in yuan terms. In its short positions, the firm selects individual stocks and exchange-traded funds (ETFs) to trade against.
Crescat cites corporate insiders who are currently selling stocks at a rapid pace, one of the warning signs as this indicates a potential stock bubble burst. Back in early 2017, these investor sold shares heavily that times as well while the S&P 200 continued its way upwards which happened again in 2018.
This selling of smart money would mean as Crescat wrote to its clients,
“the third time should be the charm for the stubborn U.S. market.”
It’s Not A Bull But Bear Rally That Is Running Out Of Steam
We already know the US economic data is deteriorating that the hedge fund pointed out further stating that measuring the multiple yields spread from Fed Funds in respect to 30-year Treasury bonds has the curve about 45 percent inverted.
“The last two times the credit markets had such a high distortion, asset bubbles began to fall apart shortly thereafter,”
As for the 13 percent rebound in global stock this year, the firm has a high conviction that it is just a bear market rally.
“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. There is so much more ahead to profit from the short side of the market. The bear-market rally is running out of steam!”
According to the firm’s website, it's Global Macro Fund has posted an annualized return of about 12 percent since its creation in 2006 which is higher than 8 percent return of S&P 500’s.
“We’re not perma-bears by any means. 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,”
In this case, the yellow metal is usually the preferred choice along with other metals such as silver and uranium. However, 10-years old, Bitcoin has also been emerging as a store of value given the fact that it can’t be censored and is further expected to climb to its new peak after 2017’s $20,000, it makes sense to give BTC a place in your portfolio.