End of the Cycle? (w/ Kevin Smith) | Trade Ideas

Описание: Kevin Smith, founder & CIO of Crescat Capital, joins Real Vision for his first Trade Ideas interview to discuss his bearish bet on the stock market. He reviews a variety of valuation metrics, highlights the flashing red signals from his macro indicators, and discusses how to make the trade, in this interview with Jake Merl. Filmed on April 24, 2019.

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End of the Cycle? (w/ Kevin Smith) | Trade Ideas
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Transcript:
For the full transcript: https://rvtv.io/2ZDfSwk
Welcome to Trade Ideas. I'm Jake Merl sitting down with Kevin Smith, founder and CIO of Crescat Capital. Kevin, it's great to have you on the show for your very first Real Vision interview.
Thank you, Jake.
So before we get into your actual trade idea for today, can you please go over your background, who you are, and what you do at Crescat Capital?
Sure, I'm the founder and CIO of Crescat Capital. Crescat is a global macro asset management firm headquartered in Denver, Colorado. I have degrees in economics and finance from Stanford, and the University of Chicago. And I'm a CFA charter holder with about 20 years of portfolio management experience.
At Crescat, we are about developing tactical macro themes to time the business cycle. And they derive from our fundamental equity and macro models. Our macro thematic investment process applies to all three of Crescat's strategies. Our Crescat large cap, our Crescat long short, and our flagship global macro hedge fund.
And so with that in mind, today, we'll be talking about the S&P 500. And I want to get your thoughts, Kevin. Are you bullish, bearish? What's your take as we're breaking out to new all time highs?
Well, we really believe what's going on today is really a triple top pattern, if you will, in the S&P 500, that is really retesting all time highs at record valuations and record late in the economic cycle.
So I understand the market is expensive. But how expensive is it, really?
Well, when we look at the market, we look at about eight or nine different valuation factors. And across all of these factors from price to sales, the price to book, EBITDA, free cash flow, the market is at record all time high valuations or very close to it. Really, it peaked out in September of last year across all these valuation metrics. Market cap to GDP is another one.
And at Crescat, we have a 16 factor macro model that we use to time the business cycle and the stock market. And the model really has a great track record of timing the peaks of the tech bubble and the bottom of the tech bust. The peak of the global financial crisis, the housing bubble, and the housing bust, if you will. And today, that model is near the 100th percentile for record late cycle and record overvalued. And so we think that's just another set of indicators that tell us that we're at the top of a business cycle.