1. The housing crisis in the US is deflationary
2. It will be met with unparalleled monetary and fiscal stimulus
3. The end result will be another round of reflation
4. This will eventually lead to an even more inflationary environment
5. Supply constraints on most commodities will keep long-term prices higher than consensus estimates
6. Hard assets will eventually get a re-rating as their earnings power relative to the overall market is recognized and as investors buy them as an inflation hedge.
-- Courtesy Salida Capital Commentary For July 2008
The guys over at Salida Capital have returned a compound annual rate of return of 51.50% since inception in 2004 in their Multi Strategy Hedge Fund and those kinds of numbers make me pay attention. As for the summarized version of their macro view quoted above, I shall take the easy way out and say that I agree wholeheartedly.
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