PROFITING FROM UNPRECEDENTED EVENTS:
TRANSCRIPTION

There's always a lot of crazy things that at any given point in time are taking place around the world in any given market, but nothing quite like what we're looking at right now in global financial markets.

In short, a paradigm shift looks to be taking place.

Today, we're going to dive into what is easily the greatest bubble of all time. And we're gonna take a look at how history has repeatedly shown us a path forward. Which, if we're correct, promises to both decimate a lot of capital while making a small, few, very wealthy.

I'm Chris MacIntosh. I'm the founder of Capitalist Exploits here, and I'm the editor of the flagship research product. I'm also the co-founder and managing partner of Glenorchy Capital, which is a macro focused hedge fund.

Let's get started.

Never before have we seen such an extreme bubble in financial markets, and with it, this pervasive market belief that inflation is in fact dead, and interest rates are never gonna rise again, probably ever. Now, we respectfully disagree... and as a result, we're staring at potential payoffs that will potentially dwarf the subprime crisis.

But first, take some lessons from the past.

Sydney Harris is not a household name. Not even someone that do you often see quotes from. But I think this encapsulates the current situation perfectly.

"History repeats itself, but in such cunning disguise that we never detect the resemblance until the damage is done".

I present to you the front cover of the Business Week from August of 1979.

The death of equities is what they called it. There was this pervasive belief that equities, which had done poorly, would never do well again. Take a look here.

You had an underperformance from running '65 through 1979 where any investors had been handed solid losses. And as a consequence, pretty much everybody who was going to sell had sold. Now, this is what took place thereafter…

Simply by just looking at what was unloved, stripping out the noise and looking purely at the analytical process fundamentals and play, investors who subsequently bought when fear was at its peak, made eight times their money over the next couple of decades without really doing anything else. A $10,000 investment into a simple index turned into about $80,000. You could have done this while sitting on the beach.

Now, I mentioned this not to try and point fingers at people. But today I want to present to you what we're looking at.

This here is the business week from April of this year.

Inflation is dead, is what they're hinting at. Two months later, the July edition no escape from lower rates.

And this is why. Take a look at this. Here's the negative born yield matrix.

It looks like a crime scene, an absolute sea of negative-yielding sovereign bonds. What we have here, folks, is a bond market in which 1/4 of the universe trades and a negative yield, and more than half of the world's bond market is currently trading below the Fed funds rate.

NOWHERE TO HIDE AS AN INVESTOR...

What this means for the average investor is not only is there an incredible bubble in bonds, there is literally nowhere to hide if you're a bond investor. Please also take a look at this:

This here is a bubble quite unlike the housing bubble that brought on the GFC. That really was just largely a US-centric bubble. This one is the big daddy. This is global. Here's the French bond yield curve across all maturities. It's gone negative.

And here's the German bond yield curve across all maturities. It is negative.

The Swiss.

I could keep going. The point that I want to make is that either the laws of mathematics and economics have been suspended, or we're living in the greatest bubble ever experienced.

Now, to top it all off, I want to present to you what I think may well be the bond markets “dot com” moment. This here is the Austrian 100-year bond.

This, too, is trading negative.

For any students of history, you will notice rather quickly that any chart that looks like this has never ended well.

I hear what some people might be saying "Who cares? I'm not invested in Bonds, Chris."

Realize that if you have a pension plan with any of the pension funds out there, you're already heavily invested in some of this garbage.

Realize too, that every single asset on Earth is in some way, shape, or form, priced off of these bond markets.

YOU'RE IN BONDS, AS ALL ASSETS ARE PRICED OFF OF BONDS.

When this implodes, the readjustment in pricing of literally every asset class globally will be off the “holy isht” variety.

Realize also this:

One of our predictions was that we'd see currency wars. These are now playing out.

And this is important to understand, since it's really directly related to the bond bubble. Think about it like this; bonds are simply long-dated currency. In a competitive currency devaluation, you never want to be owning the currency of the devalued currency.

So if you wouldn't own devalued currency, then tell me why anybody would want to own a promise to pay the currency at some later date - for a negative yield?

This is a bug in search of a windshield.

There are two things you need to be acutely aware of.

Firstly, what has been happening as a knock-on effect of the central banks blowing up the balance sheets and taking rates below zero, is what this has done to various asset classes. Some, such as those of the Silicon Valley startup variety and the loss-making "growth companies" (the Ubers, the Weworks, the Teslas of this world)... These guys have benefited from investors going deep, deep down the risk curve, and that has been happening because when central banks drove interest rates down, they simultaneously destroyed returns.

The only place that investors have been able to generate returns has been by taking enormous risk. As things have progressed, they have taken on more and more risk.

This enormous risk-taking has sent these equities screaming higher, thus emboldening others to chase the same gig.

These are massive companies that are absolutely hemorrhaging cash, and they are valued in the tens of billions of dollars. No matter their losses, investors have kept pouring capital into them.

Second: while that's been taking place, a number of sectors have had the exact opposite experience being completely starved of capital.

Yes, this is all rather messed up, but it is also where it gets me excited.

Broadly speaking, without digging into the weeds of this, this relationship is well represented between the Commodities Index and the S&P 500. This chart shows you the value of the commodities in relation to the stock market.

Each green circle represents the beginning of a huge run in commodities, versus the S&P. And each red circle is a crash in the value of commodities versus the S&P.

Folks, we have never experienced the extremes we're at today.

Here's value versus growth in equities.

Once again, extremes never experienced before.

Growth stocks, which almost every investor today owns a boatload of, and which let me remind you don’t produce a profit...  are more oversubscribed relative to value stocks than at any time in history.

Isn't that something?

Now hear it inside HQ, we are instead looking at value sectors. We're looking at the essentials to human civilization, which have been discarded and massively under invested in.

Now you could ask me a question, and it's a good one.

What's changed? Why now?

Remember during and after the global financial crisis, every major central bank in the world coordinated policy and swap lines were opened, allowing for a free flow of capital. If you don't know much about how this all works, don't worry -  what you need to understand is, quite simply, that the extraordinary measures taken at a global level helped drive interest rates through the floor.

But… this was done in an environment of cooperation, not one of antagonism and distrust.

So once again, what's changed?

Well, the post GFC world - which saw central bank coordination never experienced outside global wartime - that took place with a clutch of political leaders quite unlike those we have now, which we accurately predicted would happen many years ago.

Ray Dalio, founder of the world's largest hedge fund, Bridgewater, authored an article last month warning of the coming paradigm shift. I'm quoting a couple of texts from his article cause I think it's worth understanding

“At the end of each decade, most investors expected the next decade to be similar to the prior decade, but because of the previously described process of excesses leading to excesses and undulations, the subsequent decades were more opposite than similar to the ones that preceded them. As a result, market movements due to these paradigm shifts typically were very large and unexpected and caused great shifts in wealth.”

Now, this all makes sense. The other thing that he goes on to say is this:

“Every major asset class had great and terrible decades, so much so that any investor who had most of their wealth concentrated in any one investment would have lost almost all of it at one time or another.”

Let me show you something else that backs this up.

The top ten stocks by market cap. These very rarely make it through a decade. In the eighties, for example, energy names met up almost 1/3 of the MSCI World Index and six of the world's top 10 companies.

Now, if you're being brave enough in the late 1980s to own no energy stocks at all - which people would have thought you were mad for - you'd have handsomely outperformed the market over the following decade simply by not owning them.

Remember the Japan miracle, the 1990s... Americans, in fact Westerners in general, were getting their kids private lessons in Japanese because, well, hey, remember the Japanese and the swish bang amazing techniques of management and credit financings were set to take over the world...

Each decade has repeated the very same mistake, and with the regularity of fibbing politicians. And here we are today with the infamous Silicon Valley led growth companies that not a single person thinks will not take over the world is this religious-like belief that deflation is here as a permanent fixture, much like the sun itself.

We're told that owning physical real assets, such a ship's oil rigs, are just plain silly.

We respectfully disagree.

Remember, at the end of that decade, everyone is loaded to the eyeballs in a particular asset class. That, my friends, is human nature.

It ain't gonna change.

And since it won't, we're very grateful, because this is precisely where we're focused. Now, we accurately predicted the changes would come with a change in the geopolitical environment.

And here we are today, with these taking effect.

Trade wars, currency wars mentioned previously and another thing that we promised is coming. Is the coming resource nationalism. You could call it resource wars if you like.

The opportunities are quite mouthwatering.

Having successfully tracked capital flows and macro trends all my life, I have never been as excited as I am right now, especially given our ability to share these with our members of Insider, a membership program that gives you all my team’s analysis and our actual investments, as we make them.

Currently, our members have access to specific investments in 12 different sectors that stand to benefit from the extraordinary, asymmetry created as a result of everything discussed here.

This research is the same data we use for our hedge fund Glenorchy Capital, and we provide our specific trades - currently around 70 open positions - to Insider members so they can pick and choose opportunities to suit their own portfolios.

Let's take a look at a few of these sectors.

This is a proprietary industry built here. It is one of the sectors it's trading at historical lows. The sector is absolutely critical to civilization. It has been decimated and by the aforementioned central bank interventions and misallocations of capital. This sector has seen over 80% of supply destroyed. The remaining businesses now carry low or no debt, trade for absolutely absurd valuations and are primed to explode. due to simple demand and supply variables

And this one is one of my favorites. Thanks to that Swedish teenager Greta, the world's gone all doolally over the idea that we're all going to put away our toys, eat lettuce, buy bicycles and live in the woods. And yet, without this sector, you won't have much of the technology that we all take for granted, including the iPhones that spread Greta’s message around the world. The looming supply deficits here boggles the mind and the entire sector has been starved of capital for a decade. It leaves us with one of the most asymmetric profiles I've ever seen.

In all of these above-mentioned sectors and others recover a simple reversion to the mean would entail five, ten and even 50 to 1 returns.

Given what's preceded this mind-boggling buildup, what were the quantitative easing pushing right below negative... I think it's fair to say that the resulting consequences may well push markets well beyond previous means.

We don't really need that to take place in order to profit.

Now what I want to mention is that the service may not be for you.

Here's why.

We're not a “get-rich-quick” newsletter... we’re not about to lie to you to get you to buy. You're not gonna receive monthly hot investment picks. We don't do that.

(In fact, I don't know any professional money managers to get to the end of every month and say "Oh, by golly, it's the 30th. I better buy something". That's ridiculous, and we don't do it).

There's another major issue here that most people have, and that's one of time horizon.

Let me show you something here.

The average holding period for investment in the sixties was eight years.

Just over two years ago, it was 8.3 months. Do you know where this is today?

About four months.

Pretty crazy, huh?

This means that the very types of investments they require longer lead times and more patience are, also the investments discarded and left for dead.

When everyone's chasing the last news bite. Well, we all know what comes next. History has shown us.

So what we're doing here requires going against the herd. It requires a fortitude, and it requires a deeper understanding of how real fortunes are made.

Our time frames are years, not months.

We invest in high probability outcomes, confident in our ability to ride out short term volatility.

Many investors can't or don't want to do this.

If that's you, then the service is not for you.

On the other hand, if you understand that true fortunes are made taking advantage of massive paradigm shifts...

...and you have the fortitude to stomach with volatility we will inevitably go through…

(and the ability to be derided and snubbed at social gatherings)

then you've come to the right place. This is exactly what we do here.

Who am I investing with? That's myself and Brad were both seasoned professionals, and we've been entrenched in financial markets, all of our professional lives.

As you might guess, neither of us are going to make it into any beauty pageant. But that's okay. We're not here to make friends, we're here to make money.

Thanks for watching. And if you're interested in what we're doing then go here to join Insider at an amazing price.

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