Crescat Capital is a global macro asset management company that utilizes three investment strategies – Crescat Global Macro, Crescat Long/Short, and Crescat Large Cap. The fund was founded by its current CIO, Kevin Smith. Before launching his own fund, Mr. Smith, a Chartered Financial Analyst, worked at Kidder Peabody as a financial advisor. He graduated with a bachelor’s degree in Economics from Stanford University. The fund just released its first quarterly research letter for 2019, which you can track down below. In the letter, it talked about late-cycle euphoria and explained the three faulty narratives that are driving it. Also, the fund disclosed a YTD loss of 21.9% and 17.6% for its Global Macro Hedge Fund and Long/Short Hedge Fund, respectively, and a YTD gain of 1.9% for its Large Cap SMA.
The year-to-date rally in global risk assets after the Fed flip appears to us to be a last gasp of speculative mania for the current economic cycle. In our view, three flawed narratives are driving late-cycle euphoria in financial markets today:
1.“Central banks can always prevent a downturn in financial markets and the business cycle”;
2.“US stocks valuations remain attractive”;and
3.“Chinesestimulus anda US-China trade deal will reignite growth in the second half of 2019.”
We believe that the first two story lines are simply wrong. We show why herein.Regarding the third,in our view, China is much more likely to tank the world economy over the next several quarters than rescue it given the historic credit imbalances there.
You can download a complete copy of Crescat Capital’s Q1 2019 Research Letter here: