Hugh Hendry Capitulates: "Can't Look At Himself In The Mirror" As He Throws In The Towel, Turns Bullish

Tyler Durden's picture

"I cannot look at myself in the mirror; everything I have believed in I have had to reject. This environment only makes sense through the prism of trends."

      - Hugh Hendry

First David Rosenberg, then Jeremy Grantham, and now Hugh Hendry: one after another the bears are throwing in the towel.

As Investment Week reports, speaking at Harrington Cooper's 2013 conference this morning, Hugh Hendry said "he is no longer fighting the two-way feedback loop which is continuing to boost risk assets." The reflexive feedback loop envisioned by Hendry is the following and centres on the currency war being played out between the US and China, "in which US QE prompts dollar-denominated investment to head to China, and China fights the resulting upwards pressure on its currency by manufacturing an investment boom. Hendry said this creates a "global supply glut", leading to falling US inflation expectations (as this supply far outweights US domestic demand) - which in turn prompts the Federal Reserve to loosen policy once again." Rinse. Repeat.

Of course, there is a limitation here as we have explained previously, namely the amount of "high-quality collateral" which the Fed and the other central banks can and are rapidly soaking up, in the process destroying bond market liquidity, but that "discovery" will be made by the Fed far too late, despite even the repeated warnings of the Treasury Borrowing Advisory Committee.

And since Hendry is constrained by daily, monthly and annual P&L, he simply does not have luxury of waiting for the "fat tail" event, which incidentally will be quite terminal and thus hardly profitable for anyone exposed to fiat-denominated assets.

So the end result is that Hugh Hendry is merely the latest bear to throw in the towel:

"I can no longer say I am bearish. When markets become parabolic, the people who exist within them are trend followers, because the guys who are qualitative have got taken out," Hendry said.

"I have been prepared to underperform for the fun of being proved right when markets crash. But that could be in three-and-a-half-years' time."

"I cannot look at myself in the mirror; everything I have believed in I have had to reject. This environment only makes sense through the prism of trends."

So what does the newly christened "bull" like?

Though he first began turning more positive on the likes of US and Japanese equities last year, Hendry suggested this morning the current environment created more counter-intuitive opportunities. "This applies to European banks, Greek equities, Spanish equities. You have got to be in things that are trending," he said.


The manager's Eclectica Absolute Macro fund had a 64% value at risk equity allocation in September, up from 45% in August, with December 2013 Japanese TOPIX index futures his biggest single holding on a VaR basis.


Addressing attendees this morning, Hendry said his comments would take on a "confessional" tone, and admitted his performance over the past year had been "at best, mediocre". Hendry's CF Eclectica Absolute Macro fund has lost 2.6% in the nine months to 30 September, according to the firm.

In other words the "dash for trash" mentality, which we predicted in September 2012 when we forecast that the most shorted stocks would outperform the market (and they have), has just won another convert. That, and of course, Fed-balance sheet induced momentum chasing, in which the only thing that matters is one's view how many "assets" the Fed will hold at any point in the future (see from April: "Bernanke & Kuroda Capital LLC: Overweight S&P 500, 2013 Target 1950").

Finally, Hendry's "come to Bernanke" moment does not come easily:

The manager acknowledged his changing stance may be viewed by some investors as a 'top of the market' signal, but said he is not concerned by the prospect of a crash.


"I may be providing a public utility here, as the last bear to capitulate. You are well within your rights to say ‘sell'. The S&P 500 is up 30% over the past year: I wish I had thought this last year."


"Crashing is the least of my concerns. I can deal with that, but I cannot risk my reputation because we are in this virtuous loop where the market is trending."

Sadly, his last statement is just the latest confirmation that in the New Centrally-Planned Normal, FOMO  or Fear of Missing Out (the trend, the media appearance, the herd, the year end bonus, you name it) is indeed the new POMO as we warned in May.

And like that, everyone is now on the same side of the boat.

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GrinandBearit's picture

Good... another contrary indicator.

Mark Carney's picture

Time to go short!


Thanks for the contrarian indicator Mister Henry...actually I will wait for Mister Bass to go bullish, then I'll short.

flacon's picture

Once everybody is on the same side, they will RAMP THE SHIT OUT OF IT just for fun, just before the crash. 

hedgeless_horseman's picture



"Crashing is the least of my concerns. I can deal with that, but I cannot risk my reputation because we are in this virtuous loop where the market is trending."


- Hugh Hendry

kliguy38's picture

hehehehehheheheeh.......watta putz.....bend over Hugh and prepare for your masters to double butt rape you when this ends............

sixsigma cygnusatratus's picture

So this is what we've come to.  In the land of the blind, the blindest man is king...

Colonel Klink's picture

Or a president who THINKS he's king!

0b1knob's picture

"Throws In The Towel..."

If we learned only one thing from Hitchhickers Guide to the Universe it is this, NEVER GIVE UP YOUR TOWEL.

Scarlett's picture

HYPERINFLATION is what's trending

0b1knob's picture

Perversely, he throws in the towel just before he gets soaked.

fuu's picture

Aww Hugh you are no longer so sexy.

Herd Redirection Committee's picture

Exactly.  Its an either/or. 

Either the market crashes, or the currency continues to be devalued.   If the currency devaluation continues, then the market will crash in terms of purchasing power, but not in nominal terms.

eatthebanksters's picture

After years of watching ridiculous loans being made in the real estate market and watching the bubble grow, I let my guard down and said, wow - what do I really know, maybe THIS IS the new normal.  That was n 2006.  By the end of 2008 I lost 75% of my net worth and the only reason I had anything left is because I utilized very low leverage.

Hugh Hendry's words worry is after we are lulled into a false sense of confidence that the lightning bolt comes out of nowhere and knocks the shit out of us.  Its coming kids...just like Michael Burri had to hang onto his RMBS CDS for a few extra years, the writing is on the wall....there is no if, its only when.  My best guess is they will print to infinity and the distribution of wealth will be skewed in a way that Soros, Dimon, Blankfein and the rest of Obama's masters want.

AldousHuxley's picture
"The market can stay irrational longer than you can stay solvent."
- John Maynard Keynes
"Don't fight the Fed"
"Doesn't matter who is right when Fed has the capacity to print trillions and you have only millions"
AldousHuxley's picture

You think this U turn has anythign to do with Yellen being confirmed?

Super elite families have decided to pump more and gave the printing press to the Dove. Don't fight super elite families. They outlast governments, booms, industries....


Catholicism was proven wrong by Martin Luther 600 years ago and guess what, the Church is still in control with separate bank, separate soverignty, etc. 


600 years from now, half of the world would have moved on from printing presses, but the other half (current communist countries) will be engaging in QE for the first time as they mature through capitalism.

FearLess_FLY's picture

to Aldous H  ; I always look forward to your comments. Keeping a fresh mind on principles and goals are good. I try not toget swept up in the emotionalism so prevalent here (though I do appreciate the unadulterated rantings here) . . Being economically endeared to my progenyand theirs does guide me.  God help us all.


Divided States of America's picture

Hugh has been wrong the past few years for thinking rationally and with common he will continue his wrong ways because hes basically herding into the markets with the retail investors. If i were invested in his fund...i will Gtfo asap...but the better thing for hugh to do now is to close his fund and return the capital back to investors...i though hugh was smart but not anymore.

FEDbuster's picture

First Kyle Bass buying 5% of JCP, now Hugh Hendry throwing in the towel.....

Just remember the Zimbabwe stock market had many 200%+ up DAYS, 30% up in a year is just the beginning.  More beans, bullets and bullion getting ahead of the curve day by day, pail by pail, troy oz by troy oz.  Worrying about how much paper you have in an account is for for fools, unless it's toilet paper.  "If you can't stand in front of it and defend it with an AR-15, you don't own it." Ann Barnhardt

Supernova Born's picture

The buck stopped with Truman. The buck Ends with Ben.

BigJim's picture

 but the better thing for hugh to do now is to close his fund and return the capital back to investors...i though hugh was smart but not anymore.

Hugh is smart. So I guess he just doesn't feel ready to retire yet.

Jendrzejczyk's picture

I got a pocket full of $1's.

Oldwood's picture

Gamblers cannot keep folding in fear of whatthey believe to be the bad hand they are holding. Eventually they all have to raise, its in their blood.

logically possible's picture

Oldwood, key word in your comment "gamblers"

AldousHuxley's picture

Here is a simple trading (aka. gambler) desk interview question:

1) Should you pay $1 to play a game where you have 50/50 chance of winning $10?

Yes, risk/reward is worth it. $10 x 50% = $5 expected reward > $1 loss risk


2) Should you pay $1 to play a game where you have 50/50 chance of winning $2?

No, because at best it is 50/50 at worst you have consecutive losses where you can't recover and house always have deeper pockets than you. 


Fed is the house who can print money at will. You are the gambler in the game. Banks are dealers who get commission of total volume of traffic, but sometimes and recently they saw bunch of lucky pro gamblers (hedge funds) have a winning streak, so they decided to play the game as well. And they failed and got bailed out because casino owner needs dealers working to operate.

willwork4food's picture

I'm with ya. I experienced the same. But I disagree on your premise they will simply 'hyper', before interludes of massive 'corrections', if only to trim more cream of the pie..while they hyper. It's called letting the little peeps die off and beg.

The Big Ching-aso's picture

I guess I might have trouble believing him next time.     Assuming there is a next time.

Stackers's picture

"The market can stay irrational longer than anyone can stay solvent"


egads, I just quoted Keynes on the ZH




please dont ban me Tyler.

fonzannoon's picture

Now Batting....High Hendry

On deck......Kyle Bass

disabledvet's picture

if he's stuck with his yen trade then he's knocked the ball out of the park. Plus nothing says "railroads" like Texas...let alone the port facility in Houston, Texas which is truly massive. Can silver go down even further here? Absolutely. it still looks far undervalued relative to gold. no counter party risk in that asset class either.

NoDebt's picture

Probably why he's down only 2.6% YTD and not more.

"To really screw things up, it takes the government."  This is the mother of all bubbles because it's not just the government looking away as the banks do bad things, it's the Fed and all of government doing it themselves, on purpose, by design with the cooperation of those self-same banks.  When this one goes, there will be nothing but wasteland.  But it could take a very long time.

asteroids's picture

To Hugh, "Illegitimi non carborundum"

Deacon Frost's picture

Literally translated, it means 'Don't let the bastards grind you down' :-)

Goyim Sheep's picture

He should ban you for saying egads.

Uncle Sugar's picture

He should ban you for your horrific avatar.

Stackers's picture

triple G in the manzere. Jealous ?

CCanuck's picture

WAIT....MANZERE!!!  I thought your avatar was a Chunky Russian Broad trolling for her Boris...

Holy Fuck...Triple G really????

Fuck I need my eyes washed out!!!

FEDbuster's picture

Manzere or the Bro?   Either way it looks like you beat anorexia. 

s2man's picture

+1 for the Seinfeld reference.

Incubus's picture

I can't picture a grown man saying "egads."

Al Gorerhythm's picture

I looked at his avatar and uttered the same exclamation, saw yours and doubled down.  It is a versatile word.

CCanuck's picture

Incubus you could say that again, and again,,,,and again,

Your avatar is helping wash my mind and eyes please say it again...and again


BigJim's picture

Given that the name is 'incubus'... you may get a bit of a surprise when 'she' turns around.

CCanuck's picture

Thanks Jim....Back to the Bottle...need more washing now

Offthebeach's picture

First its a towel,
A type of sheet.
Then a gag.
To wipe the blood, jizz and ass.
So out the car door you go.
Ripped and alone
On the wet of dark street.

Yes We Can. But Lets Not.'s picture

Is there a term for a bear who finally capitulates like Hendry now has?

How about 'honey bear' - like Pooh, sitting there with his face in a pot-o-honey provided by someone else, mumbling 'I know this isn't right, I know I shouldn't, I know this won't end well for me, but 'mmm mmmm mmmmmm'' ...

Hugh 'Honey Bear' Hendry

Pegasus Muse's picture

Quick. Somebody send old Hugh the Pater Tenebrarum article.

     Circular Bubble Logic 

Bananamerican's picture

it grieves me to see HughGoLong...but he seems to have learned the Bananamerican dictum: "In the land of the Blind, the One-eyed man is LAME"

Colonel Klink's picture

I'll pray to god everyday that someone puts a bullet in that smug face.