Macro Market Comment - Salida Capital

“The Fed is determined to "win" their war on deflation and reflate asset values, and has the conventional and unconventional fiscal and monetary tools to win, although timing of a global economic bottom is difficult given the unique extremes in policy and the global nature of this deep recession. And there is no free lunch for throwing trillions of stimulus at these problems but it de-risks the economy in the short and medium terms. We believe there is risk in treasuries and the US dollar and have positioned the fund accordingly.

With a weakening Fed balance sheet, low rates, a lower US dollar on the horizon and competitive currency devaluation, we believe hard assets are preferable, gold primarily at this stage of the weakened economic cycle. Energy and base metals to follow in that order. Gold has performed below its potential during the drastic deleveraging of Q4/08 (the last I checked the bank isn't taking gold to settle margin calls...yet). Deleveraging has peaked and is starting to decline, which will both independently weaken the US dollar and remove the overhang on gold.”

Source: Salida Capital Multi Strategy Fund December Performance Report

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