In this week’s episode of Hidden Forces, Demetri Kofinas speaks with Kevin Smith and Otavio Costa of Crescat Capital, in a continuation of our recent markets coverage, with a particular focus on specific indicators that could validate a bear market hypothesis.

It has been difficult not to feel anxiety and trepidation while looking out across the Value-Price Continuum during the last few years. Many of us understand that our economy no longer functions as advertised. Financialization of the US economy over the past four decades has skewed the relationship between price and value in favor of price, specifically in favor of higher prices. The unprecedented support that monetary authorities provided financial intermediaries and asset holders during the last bear market has created noticeable price distortions and has raised serious questions about the usefulness of traditional indicators in assessing asset values. It is also unclear how meaningful traditional economic data like GDP and unemployment are in the face of ever-higher nominal public/private debt levels and aging populations.

We have experienced three intermediate corrections during this secular bull market. Most notably, the periods between the summers of 2011 – 2012 and 2015 – 2016, which proved to be head-fakes for investors who were expecting the market to enter bear territory. With the S&P 500 and Nasdaq Composite climbing above their all-time closing highs last week, will this last year’s declines prove similarly inconsequential, leading us ever higher in an unusually prolonged bull-market?

Kevin Smith and Otavio Costa make their case for why this market rally is different and how they are positioning Crescat Capital and its investors for the bear market to come.

Producer & Host: Demetri Kofinas

Editor & Engineer: Stylianos Nicolaou

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Kevin C. Smith, CFA Chief Executive Officer & Portfolio Manager Mr. Smith is the owner and founder of Crescat. He is the chief investment officer and has been the portfolio manager of Crescat’s investment strategies since inception in 1999. He holds the Chartered Financial Analyst designation. Prior to Crescat, he worked as an auditor at Ernst and Young, an equity analyst at Zacks Investment Research, and an investment executive at Kidder Peabody. He earned an MBA from the University of Chicago, Booth School of Business with a specialization in finance and concentration in statistics. He holds an undergraduate degree in economics and German studies from Stanford University.

Otavio Costa has been an analyst on Crescat’s investment team for more than five years with a focus on global cross-asset research and built Crescat’s macro model that identifies the current stage of the US economic cycle through a combination of 16 factors. His research has been featured multiple times in financial publications such as Bloomberg, The Wall Street Journal. Tavi is a native of São Paulo, Brazil and is fluent in Portuguese, Spanish, and English. Before joining Crescat, he worked with the underwriting of financial products and in international business at Braservice, a large logistics company in Brazil. Tavi graduated cum laude from Lindenwood University in St. Louis with a B.A. degree in Business Administration with an emphasis in finance and a minor in Spanish. Tavi played NCAA Division 1 tennis for Liberty University.