Valentin Egorov

Dear Ladies and Gentlemen, I hope this message finds you well and I’m glad to present to you my investment strategy. My two main points on which the strategy is based are as follows: First, the 40-year cycle of declining yields ended in 2020. The long-term average for the UST10 is around 5.55% currently. The rates were dislocated too far below the average for too long a time, that’s why I expect them to bounce significantly higher its average for the next couple of years. I would not be surprised to see them at around 8%-9% at some point. The further rise in rates will be driven not only by the reinforce of inflation, but also due to rising concerns over credit deleveraging. That’s why I suggest sticking with 3-5 years usd corporate bonds to maturity as well as shortterm bonds including T-Bills to maintain the liquidity of my portfolio. I’m very comfortable with such bond portfolio composition as in case the yield falls to low of 2024 at 3.6% (though I think currently the probability of this is very low, not much than 10%) the portfolio will significantly appreciate, and I will switch from mid-term to short-term back and take off the table good profit. Otherwise, if rates go higher and this is my base case scenario (the UK 10y government bond yield has made new local high recently and I suppose that the UST-10 will follow it), the impact will be insignificant as I have very short-term duration, and I will be ready to buy bonds at my target yields. That’s my view and strategy on bonds. Second, this is the yield curve. And it’s not the inversion that you need to worry about so much but as when it begins to steep out of it. That’s what precedes a recession. The depth of the inversion tends to give us a sense as to just how bad that recession might be in terms of the depth of the crisis and its duration. So, the US yield curve returned to its (UST10YUST2Y) normal shape last September and from now on you can expect the recession to hit the economy in 12-24 months. What application does it mean for my equity strategy. The indexes will make their new alltime highs. That doesn’t mean there won’t be any corrections, they will be. At this moment, I think it’s still time to play for longs. I prefer to stick with liquidity, meaning to be with most 10 or so on valuable companies. Currently, not the time to chase the market, I will buy equity only if I see the opportunity. Patience is one of the main factors of success equity trading in the current market circumstances. I prefer TSLA over NVDA in the current market. I think that NVDA is currently at the same shoes as TSLA used to be in-. I don’t expect that NVDA’s correction will be as deep as in TSLA, but it may take some time. My view is that the Semiconductor sector as well as NVDA is in a consolidation mood. At this stage I’m not ready to go naked short in NVDA (it’s not reasonable to go short at almost all-time high), but if I see a proper trade-set-up I will consider it via puts. What else? Some part of my funds I will definitely allocate into my favorite Trade finance fund. This is the best fund in the field. In 2024 the fund performed 8%-9% net of fees USD, depending on geography and instruments. The fund specializes in short-term trade finance secured by commodities, with 60% of their investments in Switzerland (a hub for commodity traders seeking working capital). The fund has never had an unprofitable month since the inception in 2012. The liquidity of the fund is maintained for 3-4 months. I’m bullish about Gold and Silver. My bullish view is based on technical junctures. Currently, Gold is looking very strong, but I think that Silver will catch up with Gold at some point in 2025. My target for Gold is 3 000 as minimum but it’s highly likely that reaching 3 000 the gold may face a short squeeze as the investors are significantly underinvested the yellow metal. My Silver’s target is 2011 high at some point. Coffee futures and Sugar #11 futures are at my radar as well as other soft and grain commodities. Coffee futures surged to their nominal peak prices set back in 1977 in late 2024. Coffee futures look very bullish from technical analysis as well from a fundamental perspective. From technical juncture coffee managed to rise above its resistance line dating back to 1977. From a fundamental point of view this year can be the fifth consecutive season where coffee consumption surpasses production while Brazil is facing trouble with crop recovering. Sugar is the only one commodity tradable in the US that has not reached its peak in nominal prices of 1974. Sugar might well be the next Cocoa or Coffee. I will be looking for the right entry point and trade set-up. My view on Oil and Gas. I think both will be significantly lower in a mid- long run (within next 2 – 4 years). That’s why it’s not yet a time to be bullish, at the same time it’s not an easy short at the current price level as there might well be price spikes in both instruments based on geopolitical turbulence. The oil industry will be significantly reshaped under the Trump’s administration as well with rising output in Canada and Brazil. Saudi Arabia definitely will join them in increasing output in order not to lose its market share sometime. It will be a perfect storm on the oil market that will drive oil and gas prices significantly below the current levels. I’m looking that gas futures will update 2024 lows. As for oil, I would not be surprised to see 20ish or 30ish levels in terms of Brent. Some oil majors might well face insolvency then and the industry will see M&A (BP and Shell?). My favorite company is Saudi Aramco as they have the lowest oil production costs. That will be a perfect time to buy Aramco’s long-term usddenominated bonds that highly likely will be trading significantly below the par at that time. Maybe this will be a deal like buying Greek government bonds during the European debt crisis or Soros’s trade in GBP. What’s else? I strongly believe that GGC region and Latin America are going to be the prime beneficiary of the upcoming rising tensions between the US and China. I can’t exclude that China won’t invade Taiwan though following Putin’s failure in Ukraine the odds are significantly lower but not completely. In short-term Brazil and Mexico will be hit by Trump’s policy and that’s why I’m bearish on BRL and particularly MXN vs USD. I think it’s still not late to short MXN vs USD and my target is Peso’s all-time high. The stock markets of these countries will suffer sell-off as well. EWZ (MSCI Brazil) will reach 2016 low as minimum (down 23% from the current level) and EWW (MSCI Mexico) will fall to the level between 2515 or down 45%-65% from the current level. And that’s where I will turn extremely bullish with them. By that time the US economic priorities will be shifted from unpredictable China to Latin America. The American transnational corporations will be transferring their production facilities into the region busting its growth like it was with Chine in early 2000. I prefer debts over equity in GCC region and looking to make investments in equities in Latan America. Summarizing: • • • • • • • • Higher rates are for longer than most expect. That’s why I’m active in managing duration in bonds. I’m sticking with liquidity in the us equities and am ready to cut all my positions if I see a market weakness. But I think the market has still the room to go up as well as the time. I’m bullish about Gold, Silver and some other agricultural commodities. I’m trying to make an additional alpha in the commodities and FX universe. I think GCC and Latan America are the prime beneficiaries of the current geopolitical chaos. I prefer debts over equity in GCC. I’m looking for the right moment to invest in equities in Latan America. Aramco is one of my favorites in oil and gas universe. Currently I prefer Aramco’s short-term usd bonds, while when oil prices suffer significant sell-off I will be hunting for long-term Aramco’s usd bonds. My strategy is based on money management, meaning I always have a capital in reserve or cash-related instruments (money market) enabling me to take additional risk at the proper time. My strategy is based on patience, meaning that there will be always opportunities on the market and my above-mentioned approach allows me to seize quickly emerging opportunities. My strategy is based on unbiasedness, and I don’t fall in love with my ideas or views. I’m flexible in my judgment and ready to change views in case I’m wrong or there is new evidence, facts or data. I’m looking forward to hearing from you and let’s hope that something good might happen. I will be very grateful to you for the trust you have placed in me and the given opportunity. Val Egorov, PhD 13 January 2025