What Dwight Anderson Is Buying Ahead Of The Next Crisis H/T ZeroHedge
When a commodity trading guru like Dwight Anderson, founder of the iconic Ospraie Management, has something to say on the market outlook, people tend to listen, especially when he’s consigning the last great commodity bull run to the dustbin of history and buying gold and farmland for the next crisis.
Anderson is the former Tiger Cub, whose Ospraie Management at one time ran the world’s biggest commodity hedge fund, with close to $4 billion at the peak. In what’s billed as a MasterClass of commodity investing, Dwight granted Real Vision a rare ‘one-on-one’ interview. Hosted by macro heavyweight Dan Tapiero, the former Tiger, Duquesne and SAC industry veteran, the interview showcases the factors influencing markets across the commodities spectrum through the perspective of a commodity trading giant.
Below we present a highlight clip of some of Anderson’s key insights, but we urge readers to see the full interview, not just for the astonishing market insights, but to hear Anderson lift the lid on his incredible backstory in the hedge fund business. Dwight relives his early days at Tiger, guided by Julian Robertson and explains why he partnered with Paul Tudor Jones, who would go on to seed Ospraie.
Here is a summary of Dwight Anderson’s key talking points:
Dwight Anderson – The China Driven Bull Market Can’t be Recreated
It is the sheer scale of the last commodity bull market that will probably again never be repeated, as Anderson said the massive tailwind from China from 2003 through 2009, combined with the overly stimulative backdrop created a cocktail of conditions that had never been seen before.
“And probably, from an aggregate of variables, we won’t see again, in that the pace and scale of China’s growth and how that could be so unfettered, there’s no other economy, both of size and of flexibility, where I can see that being possible,” he said. “We’ve had bull markets over the centuries, and always have, but I’m talking the scale of where crude went from sub-10 at the end of last decade to 150.”
While India does have a large population and provides hope for the future, Anderson said it could never recreate the scale and pace that would drive the volume growth which China was able to, without huge changes to the way the government and corporations work together within the legal system.
Buy Gold for Protection from Central Bank Policy Environment
Practically everyone these days has a view on gold at present and although Dwight is pretty torn on price expectations – he’s not short on the yellow metal, which is going to deliver some important advantages when the next crisis comes.
“Gold is a Tier 1. It’s a level one asset for banks. So they can actually pay you in a negative interest rate environment to hold that, because they can turn around and monetize that. That’s not true for platinum or silver. So when a negative central bank interest rate environment is, I think it’s incredibly difficult for you to be short gold.”
“I struggle with what the proper paradigm is for gold, and that we would not be short it in absolute basis here,” Anderson said. “And I believe that it will keep its purchasing power, but in real terms, is that a strong dollar environment? In that case, gold is 1,000 or 1,200 or whatever. Or is it the paper currencies have no value and its 2,000? I am not convinced of either one at the moment.”
“I’d probably be more convinced that there is value in platinum group metals relative to gold. You take a look at a $260 discount of platinum versus gold, and that’s something that, over the next four or five years, I don’t think is sustainable. But I also don’t think that’s something that is correctable the next 18 months. Platinum is in surplus, and it lacks a lot of the monetary advantages that gold has. In Europe and Switzerland, the VAT for gold is zero. If you take physical delivery of platinum, you have to pay a VAT in the gains.”
Read the full article here.