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Hugh Hendry Talks The Geopolitics Of Potash, Grains And Other Scarcities On BBC Newsnight
With concerns about surging food prices recently inflamed courtesy of the series of fires in Russia and the halt of grains exports out of the country, several heavy hitters have come out recently to discuss their views. One among them is the man with the best YTD performing macro hedge fund according to Bloomberg, Hugh Hendry, who appeared on BBC's ever-informative Newsnight to discuss potash, food prices, and other scarce resources.
On whether the world is facing a massive food shortage, Hugh's conclusion is that as long as Asia does not have a recession, things are ok, otherwise "in due course there would be great pressure on the food supply." As for Potash, Hendry says that China and Canada "hate each other [in the space]. There has been a profound game of roulette - Chinese consumption of Potash is 35% less than used in Western agriculture. At these prices, the Chinese haven't been consuming in the manner in that they should and they risk an absolute collapse in their yields... China does have a vulnerability in feeding itself which we don't have because we embrace potash at productive levels."
As for geopolitics, the topic arises of what African quid pro quo demands for having the most arable land should be and sending products over to China. The observation is that Africa's bargaining position is negligible (those Goldman offices in Ethiopia, protecting the interests of the locals, are oddly missing).
All this and more in the below clip:
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If They Can’t Afford Wheat Let Them Buy Real Estate? Why the Price of Food Will Guarantee a Chinese Real Estate Crash
Interesting...
I've had your blog bookmarked for a few weeks now. I'm very interested to see how your calls play out.
Somewhere, behind the scenes, Jeffrey Sachs was cowering in a corner, terrified and weeping.
fetal position... wet pants... wanting it to be over... confused as to why people (co-eds) were not fawning over him.
find a happy plaaace... find a haappy pllaaaace....
He was on CNBC last week acting pompous as usual but was also claiming he had long been a critic of govn stimulus and how it wouldnt work. These people are just downright scumbags. I looked upon the "anti-establishment" as crazy radicals who couldnt function in a "normal" society when i was growing up but now im thinking the exact inverse.
There's a big difference between being the innovator standing up against "consensus" Luddites, and simply trying to cast yourself as "different like everyone else".
One of my favorite quotations:
There is a level of cowardice lower than that of the conformist: the fashionable non-conformist.
-- Ayn Rand
Wheat is good but when the run comes POT will go down with the other Yen funded equities
her smart. him smart too, but`smug.
you not smart, because you not capitalize properly, and not use proper syntax.
Apart from the fact that ZH never misses the opportunity to remind us that Hugh's fund is one of the best performing macro funds this year (for disclosure purposes, how much does Mr. Hendry "donate" to ZH?), this is an interesting topic. Lots of hedge funds were long Potash (and now Mosaic). China and Africa are forging long-term strategic alliances, and the politics of food & water are topics that are increasingly important for national security purposes.
Leo, sometimes you are amusing, rarely you enlighten, and every once in a while you come out with a statement worthy of a pure douchebag (with envy issues).
Apart from the fact that ZH never misses the opportunity to remind us that Hugh's fund is one of the best performing macro funds this year (for disclosure purposes, how much does Mr. Hendry "donate" to ZH?),
(obligatory)
http://www.youtube.com/watch?v=VJ2kfyQPfto
riiiiiiiiiiiiiiiiiiiiight
+1
I love Lizzy36!!!
I fail to see the relevance in how much, or whether or not Hendry donates to Zero Hedge.
You may be surprised that there is no remuneration whatsoever from either Hendry or Ecclectica, as we appreciate pure intellectual vigor and a contrarian view for its own sake (and rely on our readers' generosity to cover our infrastructure costs). The same can not be said for a consistently failing broken record "investment" thesis.
Ouch, that was a punch in the solar plexus.
Keyword "Solar" lol. No pun intended right?
Solar has been good to me this year, how are your investments?
How about showing the performance of all non-cherrypicked solar stocks to date? Here is FSLR YTD, here is STP, here is YGE.
Well, he doesn't own those, of course!
Just fine. I don't have nearly as much time to get bashed around here as you do.....
Ouch. It's a good thing bruised egos are not external.
Bitch slap, cubed.
L.K. seems a tad ungrateful for this forum that he uses
quite a bit.
Tyler,
Do what you want, it's your blog, but I find it silly to consistently remind us of how great any hedge fund is. I can list you 30 hedge funds off the top of my head that have long, stellar track records. Who cares??? As for my investment thesis, it's based on what I see the top funds buying, not what the latest scary economic figures are pointing to.
From: The Complete Q2 Hedge Fund Holdings Update (In Which We Discover That 181 HFs Hold Apple Stock)
I do recall stating on many occasions that the majority of hedge funds deliver leveraged beta, so beware paying 2 & 20 for beta. Bridgewater wrote a wonderful research piece on this subject a few years ago. But the key here is to look at what the top funds are buying & selling as an indication of where they are looking for alpha. Since MFFAIS is now charging for their service, I use NASDAQ to look at institutional holdings and get ideas.
From a former VP (contact of mine) in a now disintegrated fund-of-funds business that Madoff took care of: "It's only marketing and leverage". That pretty much says it all (she had nothing to do with it, ha!)
That's certainly one way to lose your money.
surprised as hell Leo can "see" anything from under those solar dips.
Blinded by the light Leo?
So your investment thesis is to buy what the big boys are buying, AFTER they have already bought?
Sounds like a winning strategy......
I declare this as the official end of the Leo the K era on ZH.....
I don't agree with him, but I disagree with your declaration. Censorship sucks. (Besides, I don't think I want to elevate him to having actually had an era).
I agree that censorship sucks, but much of it has been eliminated due to the Internet. It certainly exists at the micro-level since every author has a certain bias and rarely presents both sides of the argument. However, it is extremely difficult to suppress free thought (at least in the West) given the current state of information technology.
Leo will always have Pension Pulse as a vehicle for his missives so no real censorship exists. I have no problem with the other side of any argument as long as it is cogent, well-researched and fact-based. ZH is a fantastic forum, but it will only continue to get better by improving the QUALITY of the content.
You raise a fair point about my declaring this the end of an era. Maybe 15 minutes of fame would have been more appropriate.
Astute Investor,
I'd love to know who you really are, but like other cowards you just hide behind your internet pseudonym. I have a lot of enemies out there, and I get a feeling your one of them. Next time you want to take shots at me here, have the decency and the courage to post your real name.
I have a lot of enemies out there, and I get a feeling your (sic) one of them.
Very Nixonian. Do you have an "enemies list" Leo?
Trust me, I am not your enemy because you don't mean shit to me. You shouldn't criticize me or others for punching holes in your specious arguments. Your comment about having many enemies speaks of your massive insecurity and an obsession to be accepted by others. Once you realize that you are just another Mr. Irrelevant you will be able to move forward.
Typo, I have a feeling you're one of them. I don't "mean shit" to you? Feeling is mutual, pal. And if I'm so irrelevant, why am I still allowed to post here and why do my posts generate so many comments? Seems pretty relevant to me.
And if I'm so irrelevant, why am I still allowed to post here and why do my posts generate so many comments? Seems pretty relevant to me.
Relevant like "Keeping Up With The Kardashians" for the general public? If you want to call that relevance so be it.
Well you're running into relative risk ratios. Like If someone you don't really care that much about tells you your ugly it's not that big of a deal. If someone you deeply love tells you your ugly it's bad. As long as the ponzi system is operating fully opinions and ideas aren't that important. But everyone here knows this is getting raised to the survival level of importance and not just the happiness fullfillment level. I don't like people beating up on leo constantly or taking it to extreme levels. But until the fed and western hedgemony is dead nothings going to make this safe enough to "let it go".
It's like can you be nice when someone is diagreeing with you and it's not that important.
Can you be nice when 12 guys want to rape you.
It's all a contiuum.
You are on the money here. Meanwhile, if 12 guys are trying to rape me, I am already screwed. Principles may go to the wind as I try to figure out how to live through it.
Have you heard the term "useful idiot"?
I junked you - let's see your investment thesis for comparison. Nothing better than a good fight.
You must be on the road to recovery. You posted about 100 words without cutting and pasting or mentioning "buy the dips" and chinese solars once.
Keep it up, may be there's still hope for you.
EDIT: ditto on Lizzy's douchebag comment
funny, soo investment advice is not like jazz?
Mediocrity doesn't mean average intelligence, it means an average intelligence that resents and envies its betters.
-Ayn Rand
When you can do better than Hugh Hendry, please feel free to cast stones.
Your douchiness overwhelmed your valid points. Why did you feel the need to accuse ZH of playing favorites to donors?
naked attempt to undermine the credibility / objectivity of his ZH critics
Step up, bitches!!!!!!!!!!
Small.
LOL...
http://www.zerohedge.com/content/zero-hedge-conflictsfull-disclosure-policy
Yeah, it's not like his fund's performance speaks for itself or anything...
LET'S POTASH THOSE CHINESE M*%£@ F1*%?8!!!
No surprise BHP is running so hard at Potash. Food is so central to national strategy, along with energy, it's not surprising it is always going to be a government chess piece (though the Canadian government has no energy policy or reserves). The first step in a shortage is the exporters stop exporting, even before they reach full consumption of their supply. Price controls of essentials are good sparks for wars.
Hugh Hendry is a poncy toff. Up 13% ytd is nothing to write home to mom about. What he should have said is, "POT is a $400/sh corporation that BHP is in the process of stealing for $130. There will be no higher bid, because no private company has the balance sheet, and Saskatchewan will not allow the Chinese Government to steal a Canadian asset as visibly important as this." Buy BHP @mkt and sell all the POT $130/100 put sreads your margin account can handle
BIG point with your commentary Tyler. Hugh says that unless Asia DOES have a recession, the aggressive growth there WILL cause problems. You need to listen to the interview again. IOW, Asia is in dire straits if it keeps growing, as it has limited available arable land to develop for agriculture. China however, does have bargaining power with Africa. Remember, it is not a Chinese company that is bidding for Potash.
It seems like China's "growth" consists largely of building enormous apartment buildings and shopping malls that sit empty. And Chinese RE is largely internal - they buy and sell amongst themselves meaning no foreign capital will flow in to the rescue.
For as much as I appreciate how the BBC provides longer segments of news and opinion with somewhat civil discussion... I don't think what we see in this clip would be seen anywhere in the US outside of News Hour... what's up with the BBC's melodramatic introsand graphics? I'm trying to envision the team coming up with the idea of the shot with the guy behind the spinning globe... "that's it... Perfect". Really?
I agree with many of the comments here, LEO you're a passive/aggressive Canadian used douche water bag.
'Canadian' is not the preferred nomenclature. Greek-Canuck, please.
Shit. Sell the upticks.
Masturbation, Death of free speech, President Walking Eagle.
http://thecivillibertarian.blogspot.com/
Food is the new weapon of mass destruction. You can't eat oil.
Power will come to those that produce food amd weakness will come to those that beg for it.
All those developing nations, all those laborers working with no protections, will only see prices rise at the Company Store. That includes America by the way.
oil = food
Absolutely. Transport, fertilizer, production, packaging, you name it. Any food analysis that excludes oil is extremely short sited. Any country who must exploit far away fields is in for a challenge.
Using hand tools (broad fork) to weed my garden and turn my soil for a 5x20 bed took me almost 4 hours yesterday. I have a pernicious yet fragile weed that has to be traced in the soil and carefully uprooted. If a breakoff remains, it will create more runners. Very backbreaking, intimate work. Fossil fuel would make all of that nothing.
Have you seen this site? http://www.pfaf.org/user/
Have you looked at "Gaia's Garden" or any other book on permaculture? How about "Four Season Harvest?"
I am just starting to build my first greenhouse for the winter. Have started Kale, Arugula, Spinach, Mibuna, Favas, Radish and other winters stuff.
We will all be farmers soon
you've got it right my fellow growers. having gardened obsessively for the past two decades, I can assure you that particularly in an urban setting, many small plots of earth when taken collectively amount to one vast tract of common arable land. with many hands about and (still) abundant water in widespread city taps, an unprecedented flowering of urban agriculture must take place. the sour faced and petulant Hendry with his archaic macro agribusiness models suggests dependence on the supply lines of a deteriorating and soon to be defunct economic paradigm(and its soon to be extinct hedge fund managers) are our salvation. Rather in sustainable cooperative and community agriculture with an organic basis is the future of food to be realized. Your old world is rapidly fading Mr. Hendry and along with it all the insensible greed and self interest which has led to the destruction of precious top soil with rampant and unsustainable NPK petrochemical agribusiness and the poisoning of our environment and food supply. Get your lily white Irish fingers in the dirt, Hendry. Compost bitchez!
Looks like the collapse of the economic models is moving Detroit in that exact direction. Aparently it was very fertile land before FORD
http://www.cityfarmer.info/
Bookmarked both links. I have the permaculture books but have not spent the time I need to with them. Honestly, they are intimidating.
Gaia's Garden is an easy read and my favorite. "Edible Forest Gardens" by Jacke and Toensmeier are also fantastic reference pieces. I just ordered them. I have to laugh realizing that in order to evolve and survive, we will have to grow food like "the primitives."
This is amazing too. Geoff Lawton does great stuff.
http://www.youtube.com/watch?v=4S6kTlz6Mk4&feature=related
Also recommend "A Farm for the Future". Great farming / peak oil / permaculture piece. Beautifully done
http://www.youtube.com/watch?v=xShCEKL-mQ8
+1. There are plenty of unemployed hands available to work the land and create something that is a requirement for life.
http://www.motherearthnews.com/
Bright Lights Chard and Brussels Sprouts going in soon.
In the world as we know it yes, but food does not naturally require oil. At some point, we return to this paradigm.
so true, there is nothing natural in our current food production and unless we get moving, the transition is gonna hurt
What a lot of readers don't appreciate about LK's commentary is that it deals with the sum of economic activity, rather than the marginal rates of change. A lot of financial market activity is based on those rates of change, but the depth of the financial industry, it's loan capacity and balance sheet strength. depends on the absolute sizes of items. Leo is monitoring the forests for us- by nature it is a guesswork of averages.. individual occurances are minor effects by comparison.
Sometimes I wonder how many who find LK's trawling disingenuous actually understand the currents of which he speaks.
Tyler - I believe the conclusion is wrong after watching the video:
Hugh's conclusion is that if Asia does not have a recession, we could face a food shortage.
His point is that it takes a lot of grain to produce meat, so with increasing demand from China (increasing middle class members changing their eating patterns) we could have a problem.
Not sure I agree -- Food is the lowest common denominator. A recession will certainly make demand for goods drop, but aggregate demand for food would be the last to go. Factor that social programs like food stamps, and similar international derivatives, governments will spend/create money to feed its citizens; this will cause food expenditure to be subsidized which will sustain (or grow) demand for food, which will in turn cause an influx in the price of food. I think we're seeing that already.
The problem sentence Tyler Durden should edit:
Should read:
If they cool the growth engine they will be okay. If they don't they won't.
Well said, the competition for meat consumption is a major challenge. It can not be sustained. The current return of calories /energy spent for calories gained is a poor comparison to a vegetarian diet. Like Rusty's point, energy resource and energy efficiency can not be separated from a food analysis.
It's not a one size fits all thing. Blood type 0's use fucose as the major identification element of self and other in their immune system. They have to eat meat and alot of it. They have to eat vegetables also but not much fruit.
Blood type A's use n-galactosamine as thier identifying element of self and other. They shouldn't eat meat or much at all. They should stay away from milk products as it makes them snotty and it's a real load forcibly removing the lactose sugars in milk.
Blood type b's should get a cow and chugalug and if they eat meat stick to lamb. Chicken is not your food.
Mankind is not omnivorous.
http://www.acu-cell.com/btd.html
The leaders of this planet don't even know how to feed us. They just know how to sell us snacks.
The blood type diet is not without its critics. Not sure what I think of it, need to do more research and see more peer review. B12 is definitely a challenge for vegetarians. Animals are definitely part of the agriculture picture. In fact, land treated with manure can contain the B12 necessary and pass it along to the plants. We just can not sustain the current production methods and amount of meat production per person. Permaculture methods along with local free ranging animals seem to be the only sustainable system. It is also more productive per acre and does not exhaust or poison the land or water.
Sounds like the African nations better watch out for the Chinese land grab of fertile agricultural land.
My take from the clip was that going forward into the future countries had better get self-sufficient in food production. If you're in a country that depends on the market to feed its people, you are most likely screwed.
Why should the Chinese get their knickers in a twist about getting their hands on Potash or meat or anything else when they can swap it for the 90% + share of rare earths they enjoy and have limited exports of to the extent that the US is crying no fair at the WTO?
Besides which, more dosh to the US balance of trade if they start importing more. Let Them Eat Beef.
As for food/land deals:
http://farmlandgrab.org/10562
On water:
http://www.atimes.com/atimes/Front_Page/LH24Aa01.html
On hendry
Love to see him discourse w/ hitchens/pepe escobar (see article above)
The underlying problem that is obvious if you look, is Popullution. We simply have far too many people on the planet for it to support as far as food and water is concerned. The continuing exponential growth is overwhelming our planets resource base.
I look to see either a genocidial event(s) in the next 20 years or a major pandemic that will hit those who would be most susceptible to genocide-that is 3rd world populations.
It would appear that the best case, all things considered, would be a population of 2-3 Billion that would allow for a restoration of species now endangered, both plant and animal as well as land and oceans to restore themselves.
We are past the stage of being able to salvage our economic system and quite probably our current so called civil structures. We are now just dimmly becomming aware that maybe our very survival may be coming into question. Milestones
Wed Aug 25 2010
“When I first went to China in 1979, we were eating monkeys’ brains, crickets and sea urchins,” Doyle, 60, said in an interview. “Today you go to China and they ask you if you want to split a beef tenderloin.”
As China’s prosperity booms so too does its appetite for meat, adding to demand for global crops as animal feed. Use of nutrients to boost crop yields has made Potash Corp. the fifth- largest company in Canada by market capitalization. That demand also spurred BHP Billiton Ltd., the world’s biggest mining company, to make a $39 billion (U.S.) hostile bid last week."
http://www.thestar.com/business/article/852227
The Japanese have more arable land per capita than the Chinese....meaning China can't grow shit. Why do you think they buy all our soybeans? And no there aren't too many people on the planet...just too many central banks printing money for destructive wars.
I couldn't help being struck by their reluctance to admit that food shortages are coming, but they did discuss the high likelihood that supply "pressures" are highly probable. This is the stuff of wars! We'd better take this threat seriously!
The "indirect land use" provision in the Cap and Trade bill passed by the US House would also remove up to 59 million acres of cropland from agriculture use, converting it back into forest. This is 14.5% of the US cropland. Gee, I wonder what impact hat woulde have on US ag production!
The leading grain analyst in the US told me the impact. He said the US will change from the world's leading exporter of ag products to a net IMPORTER of food!
sorry to sound like a broken record but I've met Hugh a few times and want to reiterate to ZH members that he told me he wouldnt buy Gold until it came back to $650/oz.....so either he is totally unaware of the biggest picture of all (currency collapse) or he just likes to make bandstanding comments in order to get a reaction.
It depends on how you believe events will play out and what you believe will be the central catalyst in the global economy. I would guess that Hendry believes that money will go into agriculture because he most certainly belives that China is going to go into a big recession. So money flows into agriculture and out of gold during deflaion, price goes to $650/oz, while an eventual increase in global economic output after the argiculture is taken care of means big time inflation. He could be wrong. Alot of people that call it correctly do not get every facet of their strategy correct.
Doesn't Hendry believe that China is due for a huge recession due to massive overcapacity? He certainly doesn't tip his hand in this interview but he does have this attitude as if he is positioned to make money byu the fistfull when China does have an extended recession.
Leo, Are these the same big funds that were buying late '07 and holding??
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