Crescat Capital Here Is "a sign that China truly is facing a crisis"VW Staff
Crescat Capital performance estimates and commentary for the month ended April 30, 2016.
We’re pleased to report April net monthly performance estimates for all three Crescat strategies:
Crescat Capital – April Month-End Net Estimates
Crescat Global Macro: +0.9%
Crescat Equity Long/Short: +0.1%
Crescat Large Cap: +2.8%
S&P 500: +0.4%
Crescat Capital – 2016 YTD Net Estimates (through 04/29/2016)
Crescat Global Macro: +2.7%
Crescat Equity Long/Short: +2.7%
Crescat Large Cap: +7.5%
S&P 500: +1.7%
Crescat Capital Commentary
Our best performing theme in April across all three strategies was Global Fiat Debasement with gains in our long precious metals-related positions. The Broadcast Auction theme was also a significant winner across all three strategies with gains in long television broadcasters who are likely beneficiaries of the FCC reverse spectrum auction currently underway. Gains in our hedge fund strategies were held in check by losses on short positions related to our New Oil and Gas Resources theme, the worst performing theme in April, which we believe is poised to turn back in our favor.
One of our highest conviction themes, China Currency and Credit Bubble, delivered small gains in our hedge funds for the month from several of our China-related short positions. This theme is of note right now because China just reported a world record $330 billion money printing in April alone. China has been attempting to prop up the value of its currency by selling foreign reserves and entering into currency swap transactions amidst capital outflows that should otherwise be driving the yuan down. Its methods to defend its currency represent tight monetary policy. All else equal, this tight money would hasten a banking crisis. Chinese banks have become the largest and most leveraged in the world. They have the largest non-performing loan problem in the world. To avoid a crisis, China has been forced to inject more than $1 trillion of cash into the banking system in 2016, a sign that China truly is facing a crisis. These record injections are more than offsetting the central bank’s tightening measures to defend the currency.
China’s contradictory monetary policy reinforces our view that China is indeed spiraling toward a twin banking crisis and currency crisis that is all the more inevitable and possibly imminent. An impending twin crisis in China remains one of the biggest risks and opportunities in the global financial markets today.
On a different note, this is the time of year that we invite all of our clients to participate in an annual review. It is not required, but we appreciate the opportunity to discuss any general investment concerns that you may have, as well as review our prior year’s performance, our investment outlook and our macroeconomic themes. We can meet in person at our office in Denver or by phone and/or web conference. If you are interested in an annual review, please contact Kevin Ludolph at [email protected] or (303) 271-9997 and notify him of your availability in the coming weeks to have it set up.