The Great Rotation

Crescat argues that a major rotation from overvalued US large-cap equities into gold and critical-metal miners is still ahead.

• The firm sees a historic US equity valuation bubble driven by AI enthusiasm, circular financing arrangements and record brokerage-account leverage, while small-cap precious- and critical-metal miners remain historically cheap.
• Rising interest rates in US CCC-rated credit and deeply depressed University of Michigan consumer sentiment are presented as recession warnings; Crescat expects the Federal Reserve to resume monetary accommodation sooner than markets anticipate.
• The firm considers silver’s area around $49 a key technical support level, corresponding to the breakout from a 45-year cup-and-handle pattern, and expects wars and AI infrastructure spending to sustain inflation and pressure the dollar.
• Gartner estimates a cumulative $4.9 trillion revenue shortfall for AI data-center owners through 2030, while circular financing could magnify losses if AI demand fails to meet expectations; Crescat nevertheless expects resource demand from the buildout to remain strong.
• Gold demand is portrayed as structurally supported: precious-metals ETFs are receiving inflows despite gold revisiting its June-August range, central banks bought 39 tonnes in August, and Goldman Sachs reports that China may be buying more than official data show.
• Crescat values its activist exploration portfolio at 0.4% of its internal estimate of discovered metal, versus an average 17% acquisition value paid for gold explorers; it believes selected holdings could reach 3%-5%, while warning about dilution and the failure risk of its targets.

Takeaway: Crescat recommends buying the dip in gold, silver, critical-metal miners and yen while selling or reducing the S&P 500, but the portfolio targets depend on a continued metals bull market, successful discoveries and assumptions that are not guaranteed.