Livermore’s David Neuhauser in an interview with CNBC discusses why gold is a “massive buying opportunity” right now.
Q2 2021 hedge fund letters, conferences and more
To Partners and Friends,
August is setting up to be a wicked month. The market indices are touching new highs all the while we've witnessed a sell-off affecting small cap commodity producers. The Federal Reserve comments from the latest minutes revealed they may soon begin tapering their massive $120B a month bond buying program. This was processed as hawkish and thus, the Fed is out to fan the flames of inflation. Causing the US dollar to rally hard, and value plays tied to inflation to be liquidated.
I have serious doubts on what the Federal Reserve's actions (a true unwind) would have on markets and the economy as a whole and believe any weakness in metals is a true buying opportunity. Especially as it pertains to some very select companies given the carnage of the month.
The fact is, liquidity that poured into markets has been phenomenal and caused much disparity to equity values. Plus, technology stocks and meme stocks, the big winners of the pandemic, have all benefited from this dynamic and as liquidity is drained, they should begin to witness real downside. As with indexes, they are trading at peak historical valuations and given today's inflation rate, are causing real FCF yields ex-CPI to be negative. The only sector with positive FCF yields after inflation are metals.
For further on the subject, below is our latest interview on CNBC. Discussing all these dynamics and the massive opportunity today in gold. The first link is the written interview directly from CNBC.
There are also links to a short clip now on CNBC PRO.
The last link is the MediaSilo link which plays the interview in its entirely. No password required there.
Why Gold Is A ‘Massive Buying Opportunity’ Right Now, According To One Hedge Fund Manager
Vicky McKeever@VMCKEEVERCNBC
Pure 1,000-gram gold bars produced by South Korea’s LS-Nikko are stacked in a dealers room in Seoul on January 9, 2009.
Hedge fund manager David Neuhauser said the recent fall in gold prices offers investors a massive buying opportunity — and suggests an alternative way of gaining exposure to the precious metal.
Neuhauser, chief investment officer at alternative asset management firm Livermore Partners, told CNBC Monday that he believed gold had “a lot [of] further upside” from its current price range.
The spot gold price stood at around $1,794 per troy ounce on Tuesday, after falling more than 3% to lows of around $1,729 per ounce earlier this month, according to Refinitiv data. The metal’s price has fluctuated since hitting an all-time high of $2,063 per ounce in Aug. 2020.
In a note Friday, Neuhauser said the recent move lower in gold had “not been helpful for our returns in August” but added: “I view the situation as short term and one to buy.”
The fund manager said he has exposure to gold through owning smaller mining stocks.
“Gold weakness is a massive buying opportunity especially select miners now generating teens FCF [free cash flow] with upside as USD falls,” Neuhauser said in an email to CNBC Monday.
″[The miners] are the cheapest part of the market as you search for true value,” he said in the Friday note.
Speaking to “Squawk Box Europe” Monday, Neuhauser gave a number of reasons for his bullish outlook on gold.
Firstly, he said he saw the precious metal as a simple “safety trade,” whereas other investors might be more focused on its relationship with interest rates given that the Federal Reserve is looking to pare back its quantitative easing program and hike rates amid rising inflation.
Gold is often viewed by investors as a hedge against rising inflation. July’s consumer price index, published Aug. 11, showed that while core inflation (which excludes energy and food) rose less than expected, prices overall rose 5.4% from a year earlier. In addition, the latest producer price index marked a 7.8% jump in the 12 months to July, its biggest annual increase in over a decade.
Neuhauser also said that China had started to build up its own investment in gold bullion again, having historically been one of the world’s biggest consumers of the precious metal. And he argued that gold would likely be in shorter supply going forward, given a lack of new mines opening in the next few years.
https://www.cnbc.com/2021/08/17/why-gold-is-a-massive-buying-opportunity-right-now.html?&qsearchterm=livermore%20partners
In addition, Neuhauser said that the possibility of “stagflation,” where prices remain high but economic growth slows, would also bode well for gold prices. He warned that the threat of stagflation could be “pretty scary” for markets and consumers, if the effects of sluggish growth and higher prices start to be felt, which also supports the idea of investing in gold as a safe-haven asset. Neuhauser suggested there were already signs of stagflation, given a pullback in consumer activity despite prices continuing to rise.
Indeed, data released by the Census Bureau on Tuesday showed U.S. retail sales dropped 1.1% in July, worse than a forecasted fall of 0.3%.
“I think even on a pullback in economic data and economic activity, you’re gonna see those prices remain pretty robust, and … at least my view is that we have a real potential stagflation in future years,” Neuhauser said.
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Looking beyond gold, Neuhauser said he also holds mining stocks to gain exposure to silver, oil and gas, adding that he expects these investments to be “very buoyant for some time to come.”
Once again, he argued that these sectors would likely benefit from increased demand but a lack of supply from fewer new mines and oil fields. Neuhauser explained that there were “more and more opportunities within the miners in terms of consolidation and even activism.”
Other investors are also eyeing stocks in the commodity space.
In a JPMorgan note from Monday, analysts led by Mislav Matejka said they had turned “tactically bullish” on commodity equities in Europe specifically.
“We remain constructive on stocks, and have recently taken advantage of the poor performance of commodities in Q2 to upgrade both Miners and Energy,” they wrote in the note.
“European Mining and Energy have each lost 15-20% relative since March and we believe this to be an opportunity to add,” they added.
- Why Gold Has Further Upside, According To One Hedge Fund Manager
- A New QuickLink Through MediaSilo.com
David Neuhauser
CIO
Livermore Partners
5 Revere Drive
One Northbrook Place
Suite 200
Northbrook, Illinois 60062
