Incrementum-2024年第一季度-咨询委员会电话记录（英）

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MinutesoftheAdvisoryBoardMeeting

February20th,2024

FindingValueinGoldandMiningStocksviaActiveManagement

CLICKTOWATCHTHEVIDEOONYOUTUBE

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KeyTakeAways:

•MarketSentimentandTiming:Sentimentthegoldandminingindustryareatorclosetoall-timelows.Historically,whensen-timentwasthislowithasbeenagreatentrypointintothese

markets.

•Therearevariousopportunitiesinthegoldminingsector,fromcompaniesyettorealizetheirpotentialtothosewithpromisingassetsbutlackingmarketrecognition,showcasingthepoten-tialforcontrarianinvestmentsintheindustry.

•Therearealsolucrativeresourceopportunitiesinprivatemar-kets,particularlyinacquiringdistressedassetsfrommajor

companiesandimprovingtheirproductionprofiles,highlight-ingthepotentialforstrategicacquisitions.

•Incrementumislaunchinganew,activelymanagedgoldfund.Thefundwillfollowanovelinvestmentapproach,restingonthreepillars:Strategicallocationfromatop-downapproach,markettiming,andbottom-upanalysis.

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Biographyofourspecialguest:TaviCosta

TaviisaMemberandMacroStrategistatCrescatCapitalandhasbeenwiththefirmsince2013.HeisresponsiblefordevelopingCrescat’smacromodelsaspartofourthematicinvestmentpro-cess.HisresearchhasbeenfeaturedinfinancialpublicationssuchasBloomberg,TheWallStreetJournal,Reuters,YahooFinance,RealVision,andothers.TaviisanativeofSãoPaulo,Braziland

isfluentinPortuguese,Spanish,andEnglish.

BeforejoiningCrescat,heworkedwiththeunderwritingoffinancialproductsandininternationalbusinessatBraservice,alargelogisticscompanyinBrazil.TavigraduatedcumlaudefromLinden-

woodUniversityinSt.LouiswithaB.A.degreeinBusinessAdministrationwithanemphasisin

FinanceandaminorinSpanish.TaviplayedNCAADivision1tennisforLibertyUniversity.

FollowTavionTwitter

here.

VisitCrescat’swebsite,

here.

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RonnieStoeferle

Justsomehousekeepingtogetstarted.What'sgoingononourend?Wepublishedacoupleofyourchartbooks.WearepublishingaquarterlyBitcoincompassnow.Wealsohaveourmonthlygoldcompass,whereweshowthemostinterestingchartsfromBitcoin,goldmin-

ers,themacrospace,andsoon;youcandownloadthemfreeofchargeonourwebpage.

We'realsoworkingveryhardontheupcomingInGoldWeTrustreport;May17isthebigdate.We'renowinthepartoftheprocessbetweenprocrastinationandpanic,sowe'regettingintothehotphaseandcrunchtimeofthisyear'sreport.Itwillbelotsofwork,andwe'llallberelievedwhenwecanhitthesendbuttononthe17thofMay.Wegenuinelyenjoycrunchingthenumbers,

researching,thinking,andwritingaboutgold.

Lastweek,welaunchedanewfund,withanactivegoldstrategy.Thesameweek,areallyhotCPIprintcameout,andtreasuryyieldswereupsignificantly,whilegoldwasdownsignificantly,andminersweresoldoff.Soyeah,itwasquiteaquiteacontrarianmove,Iwouldsay.ButthegoodthingisthatStanDruckenmillerboughtquitesignificantstakesinBarrickGold,Ithink1.7millionshares,and500,000sharesinNewmontMining.Still,whencomparedtotherestofhisportfolio,it'snotverysignificant.Buthe'salsobeenreducing,forexample,Nvidia,byroughly30%.Andit

seemsthathe'scontinuingtobuyinfullforceinthefirstquarterofthisyear.

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We'rereallyproudofourstrategyinthenewfund,andwecantalkaboutthatalittlebitlater.Butlet'sjumpintothediscussion.Tavi,awhileagoyouputoutabriefandconcisesummaryofwhat'sgoingoninmacro.Yousaidwe'dgotatrifectaofmicro-macroimbalances.We'vegotadebtprob-lem,reminiscentofthe1940saftertheSecondWorldWar,we'vegotaspeculativeenvironment,likeinthe1920sand1990s,andwe'vegotinflationaryconcerns,similartothe1970s.Youwrotethatquiteawhileago,butitisstillsuperrelevant.What’syourtakeonthatandifyoucouldgive

usabriefoverviewofallthosethreetopics?

TaviCosta

Well,Ithinkthat'sanimportantconstraintforpolicymakingingeneral.Itcreatesthebullishnessandlikelihoodofcommoditiesandhardassetstodoverywell.Lookingatthepositioningofinves-torsintermsofnotonlythetraditionalportfoliosbutalsolargecapitalallocators,suchascentralbanks,itisnotinlinewiththoseconstraints,meaning,it'shighlylikelythatbecausewehaveaproblemwiththedebt,whichcausesmoremonetarydilutionovertime,thisbecomesalmostinev-itable.Atthesametime,Ithinkthegenieisoutofthebottlewhenitcomestoinflation.Certainly,we'reseeingtheconsumerandbusinessesbeingimpactedbyinflationindifferentways.Regard-

lessifitisthroughsheltercostorautocost,or,healthinsurance,andsoforth.Allthatisverydeeply

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ingrainedintheeconomy,andit'schangingthewayconsumersbehave.It'scausingconsumerstoaskforhigherwagesandsalaries.We'renowunleashingalaborcosttrendthattendstobevery

secularatitsnature.

Then,ontopofitall,wehavethisvaluationproblemthatyourefertothatisverysimilartowhatwesaw,especiallyinthetechbubbleenvironment,anditcanbemeasuredindifferentways.IthinkthecyclicallyadjustedP/Eratioisprobablyoneofthemostinterestingwaystomeasurethatleveloffrothinessinequitymarkets.Ithinkthattherearesomegreatopportunities,butplacesthatIwouldavoidaltogether,whichareUSequitymarketstoday.Theylookveryfrothyoverall.Ithinkthattheoutcomeofthistrifectaofmacroimbalanceswillbethatcommoditieswilloutperformespeciallyfinancialassets,long-durationassetsliketreasuries,andespeciallythetech-nologyspace.Andemergingmarketscoulddoverywellonthebackofthosetrendsaswell.Therearegoingtobelotsofopportunitiesandsomebigchangesincapitalflowsandmarketleadership,andIhaveverystrongviewsonhowtoexpressthatinthemarketsaswell.Butit'sdefinitelyabigchangeinthescenariothatwe'vehadoverthelasttwotothreedecades,whatwe're

facingnow.

MarkValek

MayIjumpinhere?Iwouldliketodissectthisalittlebit.Goingintothetopicofdebt.We'vebeenwritingalotaboutdebt,it'salittlebitofanelephantintheroom.Whataretheindicatorsthatyouarelookingatwhichtendtoitnotbeingsustainable?Weallknowit'snotsustainable,butnowthemarketviewsitdifferentlythanafewyearsago.Arewetherealready?Orwhatareyoulookingat?Whatwouldhavetohappen?Wouldyoutosaythere'sreallyachangeintheviewonthedebt

situation?

TaviCosta

Thedebtsituationhasbeenthemajorshiftinassetcorrelations,whichIbelievebeganaftertheCOVIDrecessionandthesubsequentstimulus.Thisledtosignificantchangesinmarketbehavior.Forme,we'realreadyinanewera,whereinterestratesbehavedifferentlyinrelationtoequitymarkets.Thisposesasignificantquestionfor60/40portfoliosandtraditionalportfoliohedgingmethods.We'recertainlyobservingthisphenomenonalready,withthecostofcapitalremaining

higherforlonger.

Toaddressyourquestionspecificallyaboutgovernmentdebt,whatcaughtmyattentionafewyears

ago,andwhatI'vebeenfocusingonextensively,istheissuanceofdebt.Themagnitudeofthis

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issuanceisunprecedented,comparableonlytoperiodslikeWorldWarIIwhenadjustedforinflationandGDPlevels.Thislargeissuanceexertsdownwardpressureontreasuriesoverallandcreates

aninterestingenvironmentregardingthecostofcapital.

Theissueofdeglobalizationalsocontributestotheweaknessintreasuriesovertime.Centralbanks'increasingpurchasesofgoldreducethedemandfortreasuries.Althoughcentralbanksarenotyetsignificantsellersoftreasuriesonanetbasisglobally,theirbuyingisnotproportionaltotheincreasingissuances.Ultimately,theresolutionmayliewiththeFed,especiallyintheU.S.,which

mayhavetostepintoabsorbtheexcessdebt.

OneobservationworthnotingistherecentriseintheU.S.monetarybase,reminiscentoflevelsseenduringpreviousquantitativeeasing(QE)periodsandCOVIDstimulusmeasures.Thisresur-genceinthemonetarybase,tome,indicatesinflationarypressures,whichmightnotbeimmedi-atelyevidenttoeveryone.Monetarydilutionisaconcern,drivennotbyincreasedmoneycirculationbutbyrisingbankingreserves.Thisincreaseinthemonetarybase,approximately$400billionannually,isasignificantaspectoftheoverallstoryofhowgovernmentswillfinancetheirdebts,

withtheultimateburdenlikelyfallingbackontheFed.

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MarkValek

Okay,thanksforthat.Perhapsonthetopicofinflation.Currently,accordingtoofficialstatistics,we'veseeninflationnumberscomingdownsubstantially.InthemindsoftheaverageWallStreetinvestor,atleast,theinflationproblemisn'tasimminentanymore.IthinkifyoutalktopeopleonMainStreet,you'llprobablygetadifferentreactionanddifferentanswers,simplybecausepriceshaven'tcomedown,whichtheyprobablywon't.Everythingisstillcostly,sopricesarestillaproblem.They'rejustnotrisingasfastanymore.Nevertheless,ifonelooksattraditionalinfla-

tionnumbers,Iguessyouwouldexpectthesetogoupsoonerratherthanlater.AmIcorrect?

TaviCosta

Iholdtheviewthatare-accelerationofinflationislikelytooccur,basedonthestudieswe'veconductedontheinflationwavesofthe1970s,1940s,andeventhe1910s.It'sintriguingtoobservehowinflationtendstomanifestinwaves.ThishappenedintheUS,aswellasinotherdevelopedandemergingeconomies.Despitethedecelerationyoupointedout,nominalPCEre-mainsat5.9%,whichisnotafavorablesign.Onefactorthathascapturedmyrecentattention,andIwouldliketoemphasizehere,isthesurgeinimmigrationintheUS.Academicpapersonillegalimmigrationtypicallycategorizeitsimpactsintothreebuckets:technologicaladvancements,popu-lationgrowth,andtheabundanceofnaturalresources.InthecaseoftheUS,thesignificantgrowthinpopulation,predominantlydrivenbyillegalimmigration,islikelytohaveaninflationaryimpact,particularlyonsheltercosts.Wemaybeenteringaninflationarydecadeonthatfront.Still,it'sdifficulttobelievethatsuchatrendwouldn'talsobehighlyinflationaryforconsumers,especially

consideringthatsheltercostsheavilyinfluenceconsumerexpenditures.

Therearenoticeablesignsacrossthemarkets,suchasrisingbreak-evens,particularlyontheshortend,indicatingexpectationsforCPIrisingacrossdifferentdurations.Additionally,factorslikethede-globalizedenvironment,conflictssuchastheRedSeaconflicts,andincreasingfreightcostsgloballyareallcontributingtoinflationarypressures.Therisingcostsofagriculturalcommodities,divergingfromoverallfoodprices,arealsoexpectedtoimpactfoodpricesworldwide.

Allthesefactorsarelikelytocontributetocreatingabottomforinflationovertime.

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Moreover,whileattentionisoftenfocusedonquantitativetightening(QT)andinterestratepolicies,it'scrucialtoacknowledgeotherpolicieshappeningundertheradarthatoffsettherestrictivemon-etarypoliciesimplementedbytheFed.Theincreaseinmonetarybaseandothermeasuresofmonetarydilution,alongsidesignificantfiscalspending,areallcontributingtoinflationarypres-sures.Additionally,thereshoringtrend,drivenbyeffortstoreducerelianceonauthoritarianregimesandaddressgeopoliticalconcerns,isexpectedtodrivereindustrializationandbolstermanufactur-

ingcapabilities,furtherinfluencingtheinflationarylandscape.

MarkValek

Consideringyourremarksoninflation,let'saddressthefinalaspectofthetrifecta:speculativema-nia,exuberance,orhoweveronemaywishtocharacterizeit.Frommyperspective,ifwedoex-perienceanunexpectedsurgeininflation,itwouldlikelysetusonacollisioncoursewiththisspeculativefervor.I'munsureaboutyourperspective,butI'mcuriousabouthowmonetarypolicywouldrespondtosuchascenario.Inmyview,itcouldposeasignificantchallengeforrisk

assets.Howdoyouforeseethissituationresolvingitself?

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TaviCosta

Ibelievetheissueliesinriskassetsbecauseonecouldarguethatduringinflationaryperiods,inwhatcouldresembleabananarepublicenvironment,equitiesmightsoarevenhigher,leadingtoanevenmoreseveremarketconcentration.However,IholdadifferentviewbecauseIseethecostofcapitalultimatelyincreasing.It'scrucialtorecognizethatasyieldsrise,itfundamen-tallyaltersthemacroeconomiclandscape.Considerrecentannouncementsofdividendsbynu-merouscompanies;itsignalsacompetitionamonginvestorsseekingyields.This,inturn,willdriveupthecostofcapital,notonlyonthedebtside,influencedbyinterestrates,butalsoduetocom-

panieshavingtoallocatemoretodividends.

Reflectonthe1970s,wherethemajorityofreturns—about80%—camefromdividendsra-therthanpriceappreciation.Thisrealityispoisedtomanifestonceagain.We'rewitnessingair-lines,despitefacingsomeoftheworstmargins,announcingdividendpayments.Thistrend,cou-pledwithshareholderpressureoncompaniesacrossindustries,suggestsabroadershifttowardsdividendpayouts.Additionally,there'saperplexingskepticismtowardsnaturalresourceindustriesfromaninflationperspective,alongsideanoverlyconservativeapproach,hinderingcapitalex-penditureonsupply.Thisreluctanceposesarisk;withoutsignificantcapitalallocationtowards

supplynow,wewon'tseesubstantialchangesinsupplyforthenextfivetotenyears.

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Whilethesedevelopmentsmayseemdaunting,theyalsopresentopportunities.Idon'tsubscribetoadoom-and-gloomoutlook.Instead,Iseetremendouspotentialtoexpressmarketviewsandcapitalizeonthesetrends.Theresourcespace,inparticular,holdspromiseasonesuch

avenue.

RonnieStoeferle

Thanks,Tavi.What'sintriguingaboutcentralbankpolicy,especiallyconsideringyourperspectivefromBrazil,isthecomparisonbetweencentralbankandfiscalpoliciesinemergingmarketcoun-trieslikeMexicoandBrazilversusthoseinmostWesternnations.Inemergingmarkets,policiestendtobemoreorthodox.Reflectingon2021,centralbankswereinitiallypleasedtoseethereturnofinflation,dismissingitastransitoryandtemporary.Theywerenotablyslowtorespondbyraisingrates,unliketheBrazilianCentralBank,whichincreasedinterestratesbyover12percentagepoints.Theyhaveexperiencedinflationfirst-hand,whichisavaluablelesson.So,howdoyouperceivethedifferencesbetweenindustrializeddevelopedecono-miesandemergingmarkets?Iknowyou'vebeenfavoringemergingmarketslately.Doyouan-

ticipatethemrepeatingpastmistakes,eventually?

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TaviCosta

Let'sbeginwiththeoriginsofemergingmarketpolicies.Traditionally,theirfocushasbeenonachievingatradesurplus,oftenbydepreciatingtheircurrencytoboostexportsrelativetoimports.Thispatternpersistsdespitechangesinpoliticalleadershipeveryfouryears,especiallyinnon-authoritariancountrieslikeBrazil.Theoverarchingstrategyremainscurrencydepreciation,leadingtolong-termcycleswherecommoditypriceincreasesarecrucialforimprovingtradesurplusesovertime.Tome,beingrightaboutinflationandcommoditiesiskeytounderstandingemergingmarkets.Whatdrawsmeinistheirundervaluation,particularlyincomparisontodevelopedecon-omies.I'vesharedachartillustratingthemarketcap-to-GDPratiosacrossdifferentmarkets,highlightingSouthAmericaandotheremergingmarketsassignificantlycheaperrelativetoUSmarkets.ThisvaluationdisparityextendstometricslikeCAPEratiosandotherindicators,indicating

thatemergingmarketcompaniesappearinexpensive.

Anotherfactorworthconsideringistheroleofartificialintelligence(AI)inclosingthegapinlabor

qualitybetweenemergingmarketsanddevelopedeconomiesliketheUS.TheUSstandsoutas

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atruemeltingpot,fosteringcompetitiondrivenbyadiverselaborforce.IbelieveAIwillenhancecapabilitiesinemergingmarkets,therebyimprovinglaborqualityandpotentially

impactingmultiples.

SpeakingspecificallyaboutBrazilianmarkets,theyappearexceptionallycheapintermsoffreecashflowyield,reminiscentofthedepthsoftheglobalfinancialcrisis.Thesemarketsofferattrac-tivedividendsandgrowthprospects,particularlyinsectorslikebanking,historicallyundervalued

comparedtootherregions.

Ascommoditymarketsseeincreasedcapitaldeployment,emergingmarketsarelikelytobenefit.However,it'sessentialtodifferentiatebetweenmarkets.WhileI'mcautiousaboutChineseequitiesduetomoralconsiderations,Irecognizethepotentialimpactofstimulativepoliciesontheirmarketdynamics.ThePBoCjustinflatedtheirbalancesheetby$850b.Despitepastbearishviews,thecurrentenvironmentsuggestsashiftinperspective,withstimulativepoliciespotentiallyinfluencing

inflationandcommoditymarkets.

RonnieStoeferle

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Let'sshiftourfocustogoldnow.Manypeoplehavebeensomewhatdisappointedwithitsperformance.Despitereachingnewall-timehighsinUSdollartermslastyear,peakingaround$2150,itdidn'tsustainthebreakoutasexpected.We'veconsistentlyhighlightedtheimpactofop-portunitycostsandrealrates,whichhaveposedsignificantheadwindsforgoldprices.IfyouhadtoldmetwoyearsagothatinterestratesintheUSwouldexceed5%whileexperiencingsignificantdisinflation,andthepriceofgoldwouldsurpass$2000,Iwouldn'thavebelievedit.So,fromourperspective,thebestisyettocomeforgold.OncetheFedbeginsloweringrates,althoughwiththerecentCPIprintandstrongeconomicindicators,it'schallengingtogauge.TheGDPforecastbytheAtlantaFedisaround2.7-2.9%,suggestingwe'restillfarfromarecession.However,wemain-

tainourrecessioncall.

Lookingatthesentimentshiftoverthepastyear,fromanticipatingahardlandingtonowaGoldi-locksenvironment,I'mskeptical.Howdoyouseegoldperforminginthisenvironmentofhighopportunitycostsandaresilienteconomy?Doyoubelievegoldisalreadysignalingthatthe

Fedwilleventuallypanicandlowerrates,asthey'vedonebefore?

TaviCosta

Yeah,youhadagreatchartshowingthechangeinFedinterestratesandthecorrespondingap-preciationofgold.Ithinkyou'reontosomethingwiththatbecausethat'sprobablywhatwillulti-matelyhappen.Theproblemhereiscertainlythechangeincorrelationsthatwe'reseeing.IwasatadinnerrecentlywithaJPMorganroundtableevent,andthisguywaspoundingthetableonBitcoin,whichIhavenothingagainst,bytheway.Hewassayingthatgoldislosingitsvalueandstatusasareservecurrency.I'veheardthissomanytimes,yettheverynextday,goldmadenew

highsinsixdifferentmajorcurrencies.

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So,weknowthatcentralbanksarebuyinggold,especiallyinEasternsocieties,asyouguyscover

verywell.It'shardtobelievethatthiswillchange,giventheimbalancesweseeinthetreasury

marketwithissuancesandinflation.Whatwehaven'tseenyetisthismovementtowardshardassets.Withinflationproblemspersisting,I'vealwaysbeenoftheviewthatinsteadofinterestratesstayinghigherforlonger,it'sactuallyinflationstayinghigherforlonger,andthat'syettobethecase.Whenwelookathowmuchfinancialadvisorsownofgold,therewasasurveyfromBankofAmericathatwasreallyinteresting.About71%ofthemactuallyownzeroto1%allocationto-wardsgold.So,that60/40portfolioallocation,whenyouthinkabouthowexpensiveithasbeenhistorically,it'soneofthemostexpensivelevelswe'veseen.Ithinkthat'salsoinlinewiththefactthatmostofthoseinstitutionsaregoingtohavetodiversifyawayfromthe40%thathasbeenultimatelyalltreasuriesintosomeotherthingslikegold.Evenifit'sa5%allocation,itwouldbeabigchangeintermsofthedriversforthedemandforgoldoverall.Soyeah,Ithinkthat'sthe

bigstorythat'slikelytocome.

MarkValek

Talkingaboutnegativesentiment,wehadaninternalmeeting,andRonniecameupwithacom-parisonofuraniuminvestments,whichwasabigdarlingofcommodityinvestorsforyears,butnothingmuchhappenedforyearsandyears,andthesituationgotworseandworse.Now,finally,Ithinkpeoplewhohaveinvestedinuraniumstocksarefinallyseeingsomekindofpayoff.That'soneofthefewsectorsinthecommoditysectorwhichiscurrentlyperformingprettynicely.So,isgold,orperhapssilver,thenewuranium?Andifso,whichpocketsnowareperhapspotentiallythe

cheapest?Whereareyoulookingatwhenitcomestogoldandsilvermining?

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TaviCosta

Well,theoverallmetalsandminingindustryiswhereIseetherealopportunity.WhenIbe-camemorebullishoncommodities,Ibrokeitdownacrossallcommoditiesandtriedtounderstandnotonlyfromavaluationperspectivebutalsofromagrowthstandpoint,andhowthosecyclestendtounfold.Myunderstandingisthatyes,youwanttobelongallcommoditiesessentially,andpeopletendtooveranalyzethings.WhatIfindinterestingisthereshoringofeconomies,especiallydevel-

opedones,whichwe'reseeingasarealtrend.

Theamountoffiscalstimulusgoingtowardsinfrastructuredevelopmentisdefinitelyhappening.Youcanseeitfrommanyfronts,particularlyfromexportsofsteelproducersoutsideoftheUStotheUS,whichisreallyinterestingaswell.It'shardtobelievethatweregoingtoseeallthesetrendsongoing,especiallytheGreenRevolution.ButIwouldsaythattherevampingofmanufacturingisevenmoreimportantthanthegreenrevolutionitself.Itwilldrivethesizeofthemarketinmetals

andminingmuchhigher.ImadeapointrecentlyabouthowMicrosoftaloneistwicethesize,in

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termsofmarketcap,oftheentireenergyspace.TheenergyspacetodaygeneratestwicethesizeoffreecashflowthanMicrosoftdoes.Ifyouextrapolatethattotheminingspace,asyouguyshave

done,it'sperplexing,almost.Buttome,itjustspeakstotheopportunityhere.

Intermsofunderstandingthemicrodevelopmentsinthemetalsandminingspace,Igetreallybullishonpreciousmetals,especiallybecauseIthinkthey'reoutoffavorwithinthesector.Speak-ingwithpeoplewhousedtobebigproponentsofthegoldspace,they'vethrowninthetowelandaregettingintocopper,lithium,anduranium.ButIdon'twanttolosefocus.IthinkthatthesilverchartandthelikelihoodofanexplosivemoveinsilverishigherthananythingIcanseeinthecommodityspace.ThelastthingIwantistomissthat.SoI'mlookingforassetsthatarehigh

qualitytoprovideleveragetosilverpricesasofnow.Ithinkit'sbeenthecaseformeforthelast

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twotothreeyears.Now,I'mbuildingaportfolioofthoseideas.It'snoteasy,andittakestime,but

Ithinkthere'salotmoretodoonthatfront.

I'mextremelybullish.NowlookattheGold-Silverratio,whichisatabout87orso.Imean,whenwasthelasttimewe'veseenthosenumbers?Thosenumbersusuallycomewhenweareattheveryb