Submitted by QTR's Fringe Finance

As the founder of Rangeley Capital and a seasoned investor who “sifts the world” for asymmetric opportunities, Chris DeMuth Jr. is one of the sharpest people I’ve met in my 15 years in markets.

At my request on Monday, Chris took the time to prepare up-to-the-minute thoughts for Fringe Finance subscribers this week.

For what it’s worth — I agree with every single word of his below analysis.

All information contained herein is opinion only of Chris DeMuth & does not constitute investment recommendations. Nothing is a solicitation to buy or sell securities. Please read disclaimers at the bottom of the post.

The Short-Term is Underrated

Whenever the S&P VIX Index declines beneath 15, I try to scare myself; whenever the VIX is over 30, I try to calm down. But while it is well above 30 today, I’m mostly looking in vain for logical reasons to be reassured. What’s worked so far this year? Gold and gold miners, cash, shorts, and reading QTR. Not much else.

Stocks, bonds, and the dollar have all been hit at the same time. I see no reason for them to revert to the recent mean. That mean was expensive and circular – utterly reliant on low, steady interest rates and a strong, steady dollar. These were the result of a gentleman’s agreement with our trading partners to use the dollar and buy our debt.

We subsidized the international trading system with our defensive umbrella and our maintaining the system while counterparties pretended to not notice our unsustainable debt or profligate fiscal and monetary policies. Then the US abruptly declared World (Trade) War III, driving capital out of our securities and currency back to home markets.

There’s more that can go wrong than right: Trade will suffer. Consumer confidence will suffer. Economic growth will suffer. The good news, if there’s any, will be back loaded, only after tariffs are seen as permanent. Short ideas include public equities generally (especially bubbly sectors), private equities generally, the long bond and the dollar.

Longs? I like that I can get >4% on short duration treasuries. Gold has an unbroken record since ~3000 BC Mesopotamia as a means of exchange. The less markets trust modern alternatives, the more savers will return to gold. The more revolutionary the Trump administration sounds, the more I want cash-like securities and gold.

One more to consider: the leveraged loan market appears precarious. I can see no reason for credit spreads to maintain order if the government bond market stays this volatile. That could slam shut deal making for a while. Potential deals will be put on hold. Strategic reviews will come up empty. Buyers will take any excuse to walk away.

I have a backlog of deal targets that I’m...(READ THIS FULL COLUMN HERE). 

QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author.

This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. I may or may not own names I write about and are watching. Sometimes I’m bullish without owning things, sometimes I’m bearish and do own things. Just assume my positions could be exactly the opposite of what you think they are just in case. If I’m long I could quickly be short and vice versa. I won’t update my positions. All positions can change immediately as soon as I publish this, with or without notice and at any point I can be long, short or neutral on any position. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I’m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.