Crescat Capital writes….Our macro model is telling us that the bull market has finally topped out for this cycle and that the economy will soon follow. The central bank liquidity tide is going out while equities, fixed income, real estate, and illiquid private assets have all recently reached historic high valuations. We strongly believe there is still ample opportunity to capitalize on the everything bubble meltdown in 2019 through select short positions and “proper” defensive longs. The extreme macro imbalances have only just begun to unwind based on:
- Record global leverage compared to GDP;
- Only-recent record US equity valuations across eight comprehensive measures;
- Recent record financial asset valuations relative to GDP in the US;
- A record currency and credit bubble in China;
- Historic housing bubbles in Canada and Australia;
- Record cheap valuations for precious metals and related mining stocks;
- The second longest economic expansion and second longest bull market in US history;
- Recently historic US market-top indicator levels on Crescat’s 16-factor macro model; and
- Lack of widely recognized global recession with corresponding low equity market valuations, investor despondency, and capitulation necessary to signal a cyclical market bottom.
- Read More https://www.crescat.net/crescat-capital-quarterly-investor-letter-q4-2018/