Tavi Costa: The Interest Rate Wrecking Ball
Tom welcomes back Tavi Costa of Crescat Capital to the show.
Tavi discusses how debt is squeezing the margins of companies and earnings are becoming increasingly problematic. Many believe the issues have been resolved, but mis-marking of balance sheets is affecting numerous sectors, such as banking, commercial real estate, and junk bonds. Yields are rising due to excessive debt issuance over recent years and the most aggressive fiscal policy relative to unemployment. With conflicting policies, it’s hard to see gold not doing well in this environment. Oil markets and energy remain tight due to a dearth of capital spending and the use of strategic reserves by governments.
Everyone is now worrying about liquidity, and it appears likely the Fed will have to intervene at some point. Commodity businesses related to precious metals, particularly exploration and development, are trading at historically undervalued levels. This is setting up what might well be one of the best times to invest in the gold space, as the market is yet to understand the resource sector. Numerous companies with major discoveries are still trading at suppressed levels, offering a great opportunity.
Time Stamp References:
0:00 – Introduction
0:45 – Rates, Debt & Consequences
6:50 – Factors to Consider
14:30 – Central Bank Reserves
18:30 – Bond Performance
26:00 – Energy & Investment Themes
33:00 – Explorers & Producers
40:00 – Capital Positioning
45:30 – Other Metals
52:00 – Wrap Up
Guest Links:
► Twitter: https://twitter.com/TaviCosta
► Twitter: https://twitter.com/Crescat_Capital
► Website https://crescat.net
► Instagram: https://www.instagram.com/tavicostamacro/
Talking Points From This Episode:
► Outlook for the economy in an ever increasing debt system.
► Lack of capital expenditures in resources will exacerbate problems in energy and metals.
► Resource companies with solid fundamentals continue to trade at historic undervaluations.
Otavio (“Tavi”) Costa is a Member and Portfolio Manager at Crescat Capital and has been with the firm since 2013. He built Crescat’s macro model that identifies the current stage of the U.S. economic cycle through a combination of 16 factors.
His research is regularly featured in financial publications such as Bloomberg, The Wall Street Journal, CCN, Financial Post, The Globe and Mail, Real Vision, and Reuters. Tavi is a native of São Paulo, Brazil, and fluent in Portuguese, Spanish, and English. Before joining Crescat, he worked with the underwriting of financial products and international business at Braservice, a large logistics company in Brazil.
Tavi graduated cum laude from Lindenwood University in St. Louis with a B.A. degree in Business Administration with an emphasis in Finance and a minor in Spanish. Tavi played NCAA Division 1 tennis for Liberty University.