Ebullio Capital Management which basically blew up over the past week, due to some unpleasant experiences in the London tin market, has some relatively wise (as much as one who loses nearly 90% of their AUM in one month can be called wise) parting words in the great inflation-deflation debate.
Either we are going to get hyperinflation and all tangible assets will explode 100 pct or more to the upside, gold will be at $5000/oz and paper money is history. Or we are getting Japan in the ‘90s with no chance of inflation because consumers will save, not spend no matter what the politicians do and all markets will be down 50/80 pct from here.
Pay your money and make your choice.
Since our getting long against conviction play early January 2010, we have been doing some thinking and come to the conclusion that the Japan scenario has at least been tried and tested in the real, civilized world, whereas the hyperinflation (discounting Weimar Germany and various kleptocratic African quasi States) has not.
Thus we come firmly down on the Japan scenario and expect these markets to go much, much lower once the diversification-into-commodities-as-aninflation-hedge by the big pension funds and other institutions has been done and people realize that China cannot go it alone (just as Japan couldn’t), and whilst our main focus is on extracting the great value inherent in our physical activity for the foreseeable future, we will be placed to take advantage of the eventual collapse.
Despite our very upbeat view on the future and performance of the Ebullio Commodity Fund, we have obviously had a tough couple of months and have certainly come to realize with Bad Blake(played by Oscar winning Jeff Bridges) in “Crazy Heart”: