Tavi Costa: Precious Metals Offer Tremendous Value for Investors
Tavi sees the current business cycle as being almost over and is waiting on an overall downturn in equities. Two-year yields reveal that we are near the top of the cycle. In the US, manufacturing reports are trending lower, and non-farm payrolls have had a sizeable downward reversion. Ninety percent of the yield curves in Canada have already inverted, and many other countries are similar.
Copper has started to fall apart, and the gold to oil ratio has been surging recently. This action tends to coincide with market peaks. The US has structural problems, and we are nearing a moment where prices head back to fundamentals.
Precious metals are an area of today’s market that still has tremendous value. Awareness of global dollar debasement is still early, and it seems that we are just beginning the lunacy period of monetary policy. Gold will test and surpass the 2016 highs and silver still has quite a ways to go. Gold is in the very early stages of a bull market.
He has a negative outlook for China’s economy as they are hitting a wall of debt. They are approaching a banking and currency crisis in part from large outstanding loan issues. The Further currency dilution of the Yuan remains likely, and eighty percent of the yield curve in Hong Kong is now inverted.
Tavi reads a lot of diverse material, including books on machine learning. He likes “The Alchemy of Finance” by George Soros, who he says is probably the most successful macro thinker in history. In terms of history, Tavi relies on market cycle data instead of just historical interpretations.
Time Stamp References:
0:40 – Recession outlook and two-year yields.
2:40 – Many countries rates are inverting.
5:20 – Outlook for gold and silver.
7:20 – Funds not invested in gold yet.
9:40 – China and Hong Kong negative outlook.
13:00 – Books on macro investing.
15:10 – Hedging and managing risks.
18:30 – There current three main themes.
Talking Points From This Week’s Episode
• Overall equity markets are the next to drop along with bonds.
• China’s debt bomb is ticking faster.
• Housing markets in China are in a bubble.
• The gold bull market is still very early.
Otavio (“Tavi”) Costa is Global Macro Analyst for Crescat Capital. He has been an analyst on Crescat’s investment team for more than five years with a focus on global cross-asset research. “Tavi” built Crescat’s macro model that identifies the current stage of the US economic cycle through a combination of 16 factors. His research has been featured multiple times in financial publications such as Bloomberg, The Wall Street Journal. Tavi is a native of São Paulo, Brazil and is fluent in Portuguese, Spanish, and English. Before joining Crescat, he worked with the underwriting of financial products and in international business at Braservice, a large logistics company in Brazil. Tavi graduated cum laude from Lindenwood University in St. Louis with a BA degree in Business Administration with an emphasis in finance and a minor in Spanish. Tavi played NCAA Division 1 tennis for Liberty University.