This is where you need to invest your money before traders start rotating if they do not break out of stocks, according to one student of Warren Buffett.

Earlier this year, Berkshire Hathaway threw its heavyweight name behind Barrick Gold GOLD.
+ 0.31%
with an investment that flew in the face of Warren Buffett’s years of disgust at gold. The news was ‘earthquake in the gold market’, said one strategist at the time.

Kevin Smith, chief investment officer of Crescat Capital, now says that others are following suit by giving exposure to gold GC00,
+ 0.24%
and making a profit from some of these high suppliers will be richly rewarded when the bull market turns. Smith, who spoke earlier this year about learning the ropes from a pile of Berkshire shareholders BRK.A,
+ 1.06%
letters his father gave him a long time ago used this chart to show how investors could be at an important time.

Basically, stocks trade at record highs, while commodities, on the other hand, have never been so undervalued. “The essay is in place for a macro pivot in the relative performance of these two asset classes,” Smith wrote in a note to clients. “Similar conditions were present with the Nifty Fifty and 2000 Dotcom bubbles in 1972.”

He explained that investors will soon be looking for their money for the highest growth and lowest valuation opportunities, and this will lead to a major move away from the top-heavy stocks that have led this bull market to a record high.

“Analytically minded investors will soon, if they do not stumble, rotate out of expensive growth stocks in the deflationary era and fixed income and into cheap fixed assets, which will create a reversal in the 30-year declining trend of money velocity, “Smith wrote. Some popular ways to play the rotation would be Smith’s prediction to take a long Newmont Corp NEM,
+ 1.17%
and Barrick Gold, or in ETFs such as GDX GDX,
+ 0.31%
+ 0.13%.
Then the even greater opportunity lies in choosing the winners on the exploration side.

“To be honest, buying gold or silver today is not a controversial investment position,” Smith wrote. “There are enough people who agree with the idea that all fiat currencies backed by the government are doomed to some degree of devaluation by inflation due to the level of fiscal and monetary negligence and unsustainable debt imbalances in the financial system. ”

No sign of rotation yet, with futures on the Dow Jones Industrial Average YM00,
+ 0.22%,
Nasdaq NQ00,
+ 0.41%
and S&P ES00,
everyone leaned higher before Monday’s session.