(Originally published February 1, 2020)

On this exclusive Macro Matters Series, guest Host Kevin Kelly talks to Octavio “Tavi” Costa, Global Macro Analyst at Crescat Capital. Tavi discusses Crescat’s top investment themes, the favorable backdrop for precious metals, how the macro environment could impact Bitcoin, and much more.

Key Points

Crestcat is focused on China due to statistics predictive of major currency devaluation moving forward. Alongside Bitcoin, gold and other precious metals are poised to grow in value. Looking at the US job market, including unemployment rates, Tavi and his team believe we are at the peak of the U.S. business cycle.

Quotes

“The entire global financial market is addicted to cheap money and monetary and fiscal intervention. There’s no doubt about that. And what we see here today is that higher and higher units of debt are generating less and less growth.” –Tavi Costa

“The reason I don’t mess with other cryptocurrencies is because I just don’t fully understand—I barely understand Bitcoin itself, to be honest, so it’s been hard for me to get my arms around the other ones.” –Tavi Costa

“I believe that modern monetary theory is a total fallacy.” –Tavi Costa

Episode Highlights

What was Tavi’s upbringing like and how did he find his way to becoming a global macro analyst & portfolio manager?

Crestcat is focused on the US business cycle, the China credit bubble, and precious metals.

There are clear cracks in the US economy that lead Crestcat to be cautious.

Several metrics indicate that we’re going to see a deceleration in economic growth.

Countries like China are engaging in monetary experimentation aimed at driving inflation, which lowers debt burdens.

Over the next ten years, Tavi predicts we will see higher commodity prices.

Tavi is starting to see a correlation between Bitcoin and gold, partly because both assets are supply-constrained.

We’re at a peak level of reliance on central banks.

Bitcoin provides a huge opportunity for investors in terms of asset allocation while the likelihood of fiat currency debasement rises.

These hypotheses are based on looking at the most overvalued currencies in the world, like in China where there’s unprecedented debt levels, economic slowdown, and signs of inflation.

China is poised to see a major devaluation of its currency.

Historically, when emerging markets collapse, gold tends to rise.

For Tavi to reevaluate these predictions, there would have to be a fulfillment of the George Soros theory of reflexivity where the economy feeds on its own to improve itself.

The next trends to look for are with the jobs market in the US.


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