In our view, there has never been a bigger gulf between underlying economic fundamentals and security prices. We are in a global recession, but equity and credit markets still trading at outrageous valuations.
Markets are trading on a perverse combination of Fed life support and rabid speculative mania. Meanwhile, demand for gold and silver, which is fundamentally cheap, is starting to take off as central banks are engaged in new record easy monetary policies. Ongoing easy monetary policies in the face of today's asset bubbles in stocks and fixed income securities has a high probability of leading to a self-reinforcing cycle that drives investors out of these over-valued asset classes and into under-valued precious metals.
Here are just some of the reasons Crescat is selling richly valued stocks at large and buying undervalued gold and silver including mining companies today:
The economy is now reaching credit exhaustion with record amounts of government and corporate debt relative to GDP worldwide.
The debt burden ensures weak future real economic growth.
Monetary debasement is the only way to reduce the debt burden. Fiat currencies are now engaged in a race to the bottom.
Global monetary base expansion to suppress interest rates creates a supercharged environment for gold and silver.
The global economy is in a severe recession with structural underpinnings beyond Covid-19.
Unemployment has spiked an historic 6.7% in just five months from 3.5% to 10.2% even after settling back from temporary 14.7% Covid-19 lockdown levels.
US equities today trade at truly record valuations, a full-blown mania. Ongoing policy rescue has perverted both free market accountability and price discovery creating a simultaneous zombie economy and stock market bubble which is unsustainable. Speculative asset bubbles are ripe for bursting.