market folly

Today we've got Hugh Hendry's latest market commentary through his Eclectica Fund November investor letter. We often feel it's pertinent to examine both sides of the argument in any given situation. Not to mention, there are always 'two sides to a trade.' One of the main arguments engulfing financial markets has been the inflation versus deflation debate. Hugh Hendry has been our resident deflationist as we've covered his thoughts numerous times. While many of you may not agree with his thoughts, it's at the very least worth the time to weight the other side of the argument, as Hugh seems to be a contrarian in many of his plays. Not to mention, he is in good company with his deflationary stance as PIMCO's bond king Bill Gross has bet on deflation as well.

Hugh was recently out in the media saying that the market was 'all one trade' and was too crowded for his taste, as we detailed in our hedge fund news update. In his November commentary, Hendry again focuses on the latest market action as a 'rally in inflationary assets.' He notes that it is essentially all one trade: long emerging markets, long commodities, short the US dollar, etc. In the end, they are all tied to inflation. His letter then goes on to focus on why this rally could be a fake and we recommend reading his thoughts in their entirety below.

This is interesting mainly because so many hedge funds we track have been putting on curve cap plays and have been betting on inflation through various instruments. Many funds have even gone long copious amounts of gold, as they seek to hedge themselves from the printing presses of governments that are devaluing fiat currency. As such, Hugh's stance is a departure from the norm we've seen from many hedge fund managers here on the blog.

Embedded below is Hugh Hendry's Eclectica Fund November Commentary. RSS & Email readers come to the blog to view it:



Also, you can download the .pdf here.

For more from Hugh Hendry's Eclectica Fund, definitely check out his past market commentary here, as well as here. As always, we'll cover Hendry's thoughts as he continues to divulge them. Because after all, it's always prudent to examine both sides of the argument. And for those of you continuing to examine this debate, check out this post examining commodity inflation versus asset deflation.