Crescat Capital Celebrates the “Macro Trade of the Century”

August 16, 2019 | Hedge Funds
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This August one couldn’t have called it better: long precious metals, short yuan, and short equities

Crescat Capital claims the “macro trade of the century.”

The three legs of the trade helped it net a 16% gain in the early days of August.

Crescat Capital founder Kevin Smith, therefore, has cause for celebration.

But there’s a note of warning in his latest fund update. He chides investors for their short memories of the tech and housing busts. “Asset bubbles lead to busts that turn into economic recessions,” he says.

The long and short of it

Note that US equities are in the midst of a 10-year old bull run and that precious metals such as gold and silver have been stagnating for years. Stocks plunged early August on trade war jitters.

On the other hand, that same factor forced the Chinese to weaken the Chinese currency, nudging it to 7 yuan per dollar for the first time in over a decade.

No surprises, therefore, that Crescat’s trade is working out so well.

Is the Crescat Capital trade flash in the pan?

On the contrary, Smith is of the view that the trade is in its early stages yet and more profits are in store for his fund as asset bubbles pop.

On the recent rate cut by the Fed: “It’s a sign that our central bank is literally behind the curve. More ominously, it’s an indication that asset bubbles are poised to burst, just like the Fed’s first interest rate cut warned us directly ahead of both the tech bust and global financial crisis.”

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