Earlier this year, Berkshire Hathaway launched its heavyweight name behind Barrick Gold GOLD,
with an investment that flew in the face of Warren Buffett’s longstanding aversion to gold. The news “shook the gold market,” said a strategist at the time.
Now Kevin Smith, chief investment officer at Crescat Capital, says others are following suit by adding exposure to GC00 gold,
and taking profits from some of those big flights will be richly rewarded when the bull market turns. Smith, who earlier this year talked about learning the ropes with a stack of Berkshire BRK.A shareholders,
letters your father gave you a long time ago used this chart to show how investors could be at a crucial moment.
Basically, stocks are trading at record highs, while commodities, on the other hand, have never been so undervalued. “The setup is ready for a macro pivot on the relative performance of these two asset classes,” wrote Smith in a note to customers. “Comparable conditions were present with the 1972 Nifty Fifty and 2000 Dotcom bubbles.”
He explained that soon investors will seek to put their money in the opportunities for greater growth and lesser appreciation, and this will result in a major departure from the heavier stocks that have driven this bull market into record territory.
“Analytical-minded investors will soon be turning, if not bursting, from expensive deflationary growth stocks and fixed-income securities to cheap tangible assets, creating a reversal in the 30-year downward trend in the speed of money,” he wrote. Smith. Some popular ways to play the spin on Smith’s prediction would be to buy Newmont Corp. NOR,
and Barrick Gold, or try ETFs like GDX GDX,
and GDXJ GDXJ,
So the biggest opportunity, he says, is to choose the winners on the exploration side.
“To be frank, buying gold or silver is not an opposing investment position today,” wrote Smith. “There are enough people according to the idea that all government-backed fiat currencies are doomed to some degree of devaluation through inflation due to the level of fiscal and monetary recklessness and unsustainable debt imbalances in the financial system. . ”
No sign of that rotation yet, with the futures at the Dow Jones Industrial Average YM00,
Nasdaq NQ00,
and S&P ES00,
everyone leaning higher up before Monday’s session.