Summary
Phil Anderson reviews the Mexican Pete model portfolio’s commodity-heavy positioning and explains the holdings through the lens of the second half of the real estate cycle, where construction booms, fiscal stimulus, and currency debasement historically drive outperformance in gold, silver, natural gas, and related equities. The email also notes a potential 20-year repeat rally in natural gas echoing spring 2005, and highlights insurance stocks as a leading indicator of rising long-term interest rates. Readers are directed to read this alongside subscriber email #21 on possible end-of-cycle movements.
Key Claims
- Commodities historically outperform in the second half of the real estate cycle due to supply constraints from the construction boom — confidence: high
- The falling US Dollar Index (DXY), breaking below key support at 100, is evidence of monetary and fiscal stimulus-driven currency debasement — confidence: high
- DXY made its most recent cycle high in September 2022 and may be beginning its next sustained down move — confidence: medium
- Gold price strength is driven by cycle dynamics (second half stimulus/debasement), not merely central bank buying stories — confidence: high
- Silver is lagging gold but is approaching a key breakout level at $34/oz and should perform well at this stage of the cycle — confidence: medium
- Natural gas saw a major multi-month rally beginning spring 2005 (prices more than doubled); a 20-year repeat pattern may be setting up in 2025 — confidence: low
- Rising long-term US interest rates are a headwind for the broader market but a tailwind for insurance stocks, which earn higher investment income — confidence: high
- Insurance stock price action (e.g. SKWD breakout) can be used as a leading indicator of moves in long-term interest rates — confidence: medium
- War spending (Ukraine/Russia, US budget bill, German infrastructure/defence, China military build-up) is supporting energy and armaments demand — confidence: high
Mex Pete References
- Genesis Minerals (GMD): Held as a Mexican Pete position in the model portfolio; sold after hitting stop level for a large gain.
- Range Resources (RRC): Added to US Watchlist in February; noted as holding near prior highs, consistent with a strong Mexican Pete-type setup in the natural gas sector.
- Comstock Resources (CRK): Watched as a natural gas sector candidate; stock moved above the level of interest but was not a typical Mexican Pete setup. Being kept on watch for “two days down” before potential re-entry consideration.
- iShares Silver Trust (SLV): Added to US Watchlist; described as “not exactly a Mexican Pete pattern” but worth monitoring for a breakout in silver.
Stock Picks / Signals
| Ticker | Name | Action / Status | Notes |
|---|---|---|---|
| GMD | Genesis Minerals (ASX) | Sold — stop hit | Large gain realised; Australian gold miner |
| EVN | Evolution Mining (ASX) | Hold | Still in model portfolio; Australian gold miner |
| RRC | Range Resources (NYSE) | Hold | Added February 2025; large US natural gas producer; holding near prior highs |
| CRK | Comstock Resources (NYSE) | Watch | Natural gas; moved above level of interest but not a clean Mex Pete; watching for two days down |
| SLV | iShares Silver Trust (NYSE) | Watch / Added to US Watchlist | Play on silver breakout above ~$34/oz |
| TLC | Lottery Corporation (ASX) | Hold | Still in model portfolio |
| SKWD | Skyward Specialty Insurance Group (NASDAQ) | Hold | Broke to new highs; property & casualty insurer benefiting from rising rates |
Predictions / Forecasts
- US Dollar Index (DXY): Break below 100 support level likely marks the beginning of the next sustained down move; cycle high already set in September 2022 — confidence: medium
- Silver: Approaching breakout above ~$34/oz; expected to outperform at this stage of the real estate cycle — confidence: medium
- Natural Gas: Potential for a significant multi-month rally in 2025 echoing the spring 2005 move (prices more than doubled over ~3 months); 20-year repeat pattern being watched — confidence: low
- Long-term US Interest Rates: Expected to continue rising based on leading signal from insurance stock relative strength and breakouts — confidence: medium
- Gold: Continued upside supported by DXY weakness and second-half cycle dynamics — confidence: high
Notable Quotes
“There are all sorts of stories made up about why commodities have been doing well recently… Whatever the ‘news’ might come up with, we know that it’s simply the second half of the real estate cycle playing out like it did in the past.”
“These are all examples of how you can use price action in sectors like commodities and insurers to make educated forecasts about our place in the cycle and what could happen next.”