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Hugh Hendry: "I Believe Central Bankers Are Terrified"

Tyler Durden's picture




 

It was almost a year ago when Hugh Hendry shocked the world when he announced he was, said simply, turning bullish (his full recantation can be found here), even though as he admitted he "Can't Look At Himself In The Mirror." Which was understandable: in a world where markets as many know them (if not the current generation of BTFD and BTFATH traders) no longer exist and have been replaced by centrally-planned "markets" where rising asset levels are not a byproduct of capitalism but a policy tool, Hendry - a person who makes money by managing assets and generating alpha by outperforming the market - did the one thing that would keep his job: he joined the herd of momentum traders to whose lowest common denominator the world's central banks have been pandering ever since 2009.

Some of the pearls of wisdom uttered by Hendry at the time showed just how profound a change in his worldview he was undergoing:

"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."

...

"You have got to be in things that are trending."

...

“We want to believe markets go up because the economy is improving, because corporate cashflows are improving. But when you get monetary disturbances creating loops, it does not really matter.”

As we noted back then, "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" of 2013.

And while Hendry flip-flop was perfectly understandable, sadly his attempts to generate alpha in a "parabolic" market, where he was merely chasing the trend, did anything but succeed. Perhaps that has to do with the fact that he decided to buy 3D printing stocks and Bitcoin...

Hendry has bought 3D printing stocks as a play on trend-driven, QE-fuelled equity markets, and said the rise in the valuation of Bitcoin amounts to “the same thing”.

 

All US-listed 3D printing stocks are trading on at least 50 times earnings, but Hendry said he has little concern over the sector’s sky-high valuations. "We are in 3D printing stocks. I say to my team 'don’t tell me the valuations, it is trending."

... although in retrospect perhaps someone should have told him the valuation because he jumped on the bandwagon just as printers, and Bitcoin, both hit all time highs.

In turn this led to our observations, just a month later that "Hugh Hendry Suffers Biggest Monthly Loss Since Inception" and then, two months ago, that "Hugh Hendry Is Not Having A Good Year."

So where is Hendry now, and has he thrown in the towel on his bullish phase also? Well, after a horrible period for his fund, Eclectica is now up some 2.6% through November, having risen over 7% in September and October. Still, hardly the return a self-respecting, or not as the case may be, "momentum chasing, trending" bull should generate in a market in which all central banks are now all in, and where even a semi-correction launches verbal and CTRL-P interventions by the world's money printers.

For those curious about the nuances of his performance, here is his latest summary exposure:

And his recent VaR, because nothing shouts desperation to outperform a "trending" benchmark, or Sharpe ratio for that matter, than putting one's value at risk into overdrive:

And his most recent letter to investors:

The Fund is now up 2.6% on the year and, despite running a net long equity book that has exceeded 1x NAV for the past few weeks, we succeeded in weathering a particularly volatile October with rather dramatic intra month price declines in the major equity indices to post another gain of 4.0%. We have now made money in each of the last three months. Therefore, contrary to what you may have heard, our spirits are high and our risk taking is increasingly paying off.

My premise hasn’t really changed since I published my paper explaining why I had become more constructive towards risk assets this time last year. That is to say, the structural deficiency of global demand continues to radicalise the central banking community. I believe they are terrified: the system is so leveraged and vulnerable to potentially systemic price reversals that the monetary authorities find themselves beholden to long only investors and obliged to support asset prices.

However, I clearly confused everyone with my choice of language. What I should have said is that investors are perhaps misconstruing rising equity prices as a traditional bull market spurred on by revenue and earnings growth, and becoming fearful of a reversal, when instead the persistent upwards drift in stock markets is more a reflection of the steady erosion of the soundness of the global monetary system and therefore the rise in stock prices is something that is likely to prevail for some time. There is more to it of course, as I will attempt to explain, but not much.

This should be a great time to be a macro manager. It is almost without precedent: the world's monetary authorities are targeting higher risk asset prices as a policy response to restoke economic demand. Whether you agree with such a policy is irrelevant. You need to own stocks. And yet, remarkably, the most contentious thing you can say in the macro world today is “I’m bullish”.

In a world dominated by the existentialist angst of identifying and trading qualitative value, there is profound mistrust of equity values today; macro investors see prices as overvalued and few are willing to capitalise on the opportunities to make money. This angst and fear of big drawdowns in risky assets in part reflects astonishment that policy makers were able to rescue investors from the folly of their misallocations in the years preceding 2008 and that stocks have massively outperformed the modest rise in global nominal GDP. I should know. I, like others, became a moraliser who just couldn’t forgive the Fed for bailing out Wall Street. I read one “death of money” polemic after another and luxuriated in the work of people like Marc Faber, James Grant, Nassim Taleb, Raoul Pal and Albert Edwards. I became a moral curmudgeon rather than a money maker.

As you know, I have sought to overcome this deficiency. However my risk controls, or rather my procedures for dealing with big monthly losses, seemed to anchor me to the bearish camp (against my better wishes). No-one wants to lose more than 5% in any one month (for the record, we have recorded only 9 such months over the Fund's previous 144). But typically this has entailed selling when there has been a spike in volatility; since the end of last year I have  been a bull that had to sell for lower prices. No wonder I couldn’t make you money. But perhaps you don’t need such reactive stop loss policies when the world's central banking community is intent on protecting you; which is to say, I needed to apply greater risk tolerance and intervene less often.

You are not convinced? Japan was down 16% from its highs earlier this year. I was particularly long Japanese equities at the start of the year and so at some point, fearing greater losses, I swallowed my pride and booked a loss. However, the ongoing policy intentions of the BoJ meant that the stock market clawed back all of its losses. Why did I sell?

European stocks fell almost the same over the summer but again the ECB upped its ante, pushed short term rates negative, tolerated a weaker currency and promised to re-stock its balance sheet with more local risk asset purchases. Lo and behold, European stock prices recovered sharply in August and early September. So why did I reduce my holdings?

October is simply another example. US stocks fell over 10%. I don't really know why. Was it the threat of the end of QE or a global pandemic or more misgivings as to the state of affairs in Greece and Europe's enduringly weak economy? It doesn't really matter. Such is the perceived risk in the financial system that enough investors now anticipate a policy response whenever the S&P falls more than 10%. This ensured that shorts were covered and volatility sold in mid-October. The fixed income market's expectations for hawkish future Fed rate hikes evaporated with stock price weakness and other risk markets soon rallied; the S&P is now back to its all-time high.

Pity the macro manager then who had to stop loss mid-month; that used to be me. But I widened my tolerance for loss. We have no desire to lose money but unless something tangible happens to challenge our narrative we are less willing to automatically reduce our risk taking in response to modest, if rapid, short term market gyrations. Making money requires making the right calls of course but just as importantly it necessitates that we provide trades with enough breathing space to develop and hopefully prosper.

So why all this enthusiasm for upside equity risk?

To my mind the current period is analogous to the Plaza Accord of 1985 when central bankers agreed to intervene in the currency market to drive the value of the dollar lower. The fast moving world of FX was deemed a more expeditious way of correcting for the huge US current account deficit than the laborious and slow process of waiting for the totality of countless micro wage and productivity deals to rectify the yawning trade gap. No one really knew for sure how high the yen or Deutsche Mark should trade back then but this didn’t stop macro managers from being very long such positions.

The FX market tends to take the US Supreme Court view. Overruling an obscenity charge for showing a salacious French movie in Ohio in 1964, Justice Potter Stewart wrote that the Constitution protected all obscenity except hard core pornography. Unwilling to define the latter, the judge maintained that he would know it when he saw it. And likewise currency values; you just know the wrong ones when you see them. This is to say that the market becomes more treacherous once the imbalances of the primary economic transactions (the US current account) show signs of improving from the remedy of the price changes engineered via the relative currency movements.

Which is a rather long preamble to describe what I believe is a very analogous central banking intervention in today's financial markets. It would take just too long for the Fed, ECB or the BoJ to rely on a return of animal spirits in the real economy to lift their flagging economies. They need the remedy of fast  moving risk asset prices. By using QE to promote more risk taking, asset values in the US have risen faster than fundamentals and, with better perceived collateral and more confidence, the demand for risk taking in the real economy has recovered somewhat. At a lag, the theory runs, so will the rate of  expected inflation.

So I think we find ourselves especially in Europe (and Japan) with a situation whereby the central bank has to use all of its powers to engineer higher stock and bond prices. And I think the precarious nature of France and the election timetable in 2017 means that they need higher European stock and bond prices NOW or there will be no economic recovery, budget deficits will continue to overshoot 3% and the Euro area will get trapped in the poisonous and perpetual cycle of having to demand more and more unpopular austerity measures. This is high stakes: boost European stock prices or risk losing France and the euro. To my mind the message is simple: don’t short French bonds, buy European stocks and short the euro.

It will only become a bubble when slow moving price inflation and real wages start moving; we’re obviously nowhere close to that just now in Europe (or in Japan) and hence my large net long.

 

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Tue, 11/18/2014 - 14:26 | 5461884 Colonel Klink
Colonel Klink's picture

You can say that twice!

Notice the article was posted twice.

Try and execute the Central bankers for debasing money as the laws state!!!  Nothing stops until this happens.

Tue, 11/18/2014 - 14:33 | 5461905 thetruthseeker
thetruthseeker's picture

I concur.  The Central Banking jihadis will continue to levitate asset prices.  It will continue to have no impact for 99% of the population but will only exacerbate the divide between the wealthy and everybody else.  This widening gap of inequality will ultimately lead to massive civil unrest.  At that point, you will see executions of bankers and other wealthy individuals in the normal course of literal class warfare.  Unfortunately, the Central Bankers will escape the knife.  Their just desserts, I am afraid, will come in the afterlife.

Tue, 11/18/2014 - 14:42 | 5461953 MalteseFalcon
MalteseFalcon's picture

Are the CBers terrified?

In between the CBers and the "terror" is the entire police state.

In contrast, Hugh Hendry has one foot on a banana peel.  One slip and it's into the abyss with ole Hugh.

Tue, 11/18/2014 - 14:45 | 5461961 linniepar
linniepar's picture

BTFATH! And by that I mean stack/hoard gold and silver!

Tue, 11/18/2014 - 15:00 | 5462003 TheAnalOG
TheAnalOG's picture

We are Zerohedge and we don't get shaken out like little boy Hendry!

DOOM!  DOOM WE SAY!!

Tue, 11/18/2014 - 15:08 | 5462024 outamyeffinway
outamyeffinway's picture

So be it; it's the Age of The End of Morals. Thx Fed!

Tue, 11/18/2014 - 15:13 | 5462031 outamyeffinway
outamyeffinway's picture

"Their just desserts, I am afraid, will come in the afterlife."

 

This idea has made complacent cowards out of many a man.

Tue, 11/18/2014 - 15:48 | 5462135 kliguy38
kliguy38's picture

Foch YOU HENDRY......you chickenshit PONZI PUMPER

Tue, 11/18/2014 - 17:07 | 5462429 Bangalore Equit...
Bangalore Equity Trader's picture

Listen Zero's.

The "PONZI" Pumper is Long EURO Banks!

Tue, 11/18/2014 - 16:19 | 5462236 Remington IV
Remington IV's picture

Hugh = zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

Tue, 11/18/2014 - 17:24 | 5462504 Bangalore Equit...
Bangalore Equity Trader's picture

Listen.

Fuck: david, kyle, hugh!

Wed, 11/19/2014 - 05:35 | 5464445 Mountainview
Mountainview's picture

Who is Hugh?

Tue, 11/18/2014 - 15:45 | 5462120 August
August's picture

NCHSTC!

Nobody.

Tue, 11/18/2014 - 16:29 | 5462275 LooseLee
LooseLee's picture

Their death will be their 'afterlife'....They will not escape the guillotine. It is written.

Tue, 11/18/2014 - 17:58 | 5462635 Escrava Isaura
Escrava Isaura's picture

 

 

So, the decapitation (guillotine), do you think we should use the Wahhabi, the Taliban, or the Old Testament interpretation?

 

Because I don’t want a lot blood spilling around, you know?

 

So, I am open for suggestions that minimize the mess.

 

 

Tue, 11/18/2014 - 19:53 | 5463017 eddiebe
eddiebe's picture

Don't worry about it, the elite will beat you to it. With something like ebola.

Tue, 11/18/2014 - 17:38 | 5462562 Escrava Isaura
Escrava Isaura's picture

 

 

thetruthseeker

You wrote: At that point, you will see executions of bankers and other wealthy individuals

 

Where?

Tue, 11/18/2014 - 20:16 | 5463071 acetinker
acetinker's picture

Maybe not, tts.  I apologize for the bold font in advance- for some reason, I can't turn it off.

Thank the Gods, I'm back to normal.  Anyway, all this wealth is notional, and the players don't trust each other any more than we trust any of the cocksuckers, ourselves.

When she blows, it's gonna be a deusy.  Gonna need a miracle, but it ain't likely.

Tue, 11/18/2014 - 14:34 | 5461910 Aeternus
Aeternus's picture

Looks like it's time to buy a satellite phone than.

https://www.youtube.com/watch?v=Ppd3HMc52ic

Tue, 11/18/2014 - 14:38 | 5461914 TruthInSunshine
TruthInSunshine's picture

Hendry is a contrainDICKtator - seriously, look at his long term record.

This dumb motherfucker has earned 2.6% in nominal sums over a one-year period while playing a widow maker and black widow game.

All these assholes FREEly speaking up lately, whether Hendry, iCon, or whomever, should have a slice of STFU, because they're talking their book and out their asses.

Tue, 11/18/2014 - 14:41 | 5461939 Richard Chesler
Richard Chesler's picture

Fools and their money...

 

Tue, 11/18/2014 - 15:10 | 5462027 Dr. Engali
Dr. Engali's picture

Unless you're talking about silver or gold, it's not money...

Tue, 11/18/2014 - 15:22 | 5462050 Eyeroller
Eyeroller's picture

... are damned lucky to get together in the first place.

Tue, 11/18/2014 - 18:11 | 5462682 SAT 800
SAT 800's picture

LOL. that's a real eyeroller.

Tue, 11/18/2014 - 15:46 | 5462122 QQQBall
QQQBall's picture

I agree with the analysis but not the conclusion to get long risk in a grossly over-leveraged climate. Yeah the guy is smarter than me, but +<3%; I'll sit and spectate rather than speculating. If its 2/20 fund; I'll buy a mattress versus +/-1% net of charges.

Tue, 11/18/2014 - 16:24 | 5462252 Kirk2NCC1701
Kirk2NCC1701's picture
"I Believe Central Bankers Are Terrified"

As they SHOULD be.

Tue, 11/18/2014 - 14:32 | 5461903 Kaiser Sousa
Kaiser Sousa's picture

"tell me Mr. Anderson - what good is a phone call if you are unable to speak..."
Agent Smith

"and therefore the rise in stock prices is something that is likely to prevail for some time."
Hugh hendry

"what does it matter if the dow is a 20,000 if the debt coupon dollar is at ZERO..."
Kaiser Sousa

Tue, 11/18/2014 - 17:11 | 5462451 Bangalore Equit...
Bangalore Equity Trader's picture

Listen.

What good are my breadcrumbs of wisdom if you are unable to hear?
--Bangalore

Tue, 11/18/2014 - 14:32 | 5461904 Sick
Sick's picture

Perfect time for the USG to invest all the Social Security Trust Funds in the Market.  They will point to how it has performed so well.

Tue, 11/18/2014 - 14:33 | 5461912 ZoroAustrian
ZoroAustrian's picture

Sad, just sad.  Just another pig with his snout in the trough.

The monetary feedback loop he is talking about isn't really a loop, it's a one-way street enriching financial playas at everyone else's expense.

No wonder he can't look in the mirror.

Tue, 11/18/2014 - 14:36 | 5461920 Bell's 2 hearted
Bell&#039;s 2 hearted's picture

gosh, what a dope

 

not a word on corporate profits (sky high) and stock buybacks (sky high)

 

the oncoming recession will put an end to both ... and high stock prices

Tue, 11/18/2014 - 15:22 | 5462049 dracos_ghost
dracos_ghost's picture

Nope, bailins for everyone not just the rich are coming. We will be paying for the privilege of loaning d-Bag corporations money so they can buyback stock and layoff workers. In fact, I betcha there will be clauses for employment of holding a percentage of stocks in lieu of wages. Used to be called 401(k) matching but there are too many regulations around that.

Tue, 11/18/2014 - 17:01 | 5462394 Bell's 2 hearted
Bell&#039;s 2 hearted's picture

disagree

 

BUT if we get any of that "Shock Doctrine" stuff ... stocks will have to be lower first ... a lot lower

Tue, 11/18/2014 - 14:37 | 5461928 disabledvet
disabledvet's picture

What he should have said is "bwhahahahahahaha" and left it that.

Tue, 11/18/2014 - 14:39 | 5461932 Jack Burton
Jack Burton's picture

"he joined the herd of momentum traders to whose lowest common denominator the world's central banks have been pandering ever since 2009."

I followed Hendry a long time, and for a long time he was right. But of course he got burned by the extent to which Central Banks would plan and manipulate markets totally, without regard to economic fundamentals. Hendry talked Fundamentals and traded on fundamentals back in the day. When it came to the 2008 crisis and aftermath, he was often right when others bought the lies.

Now, I saw him recant and join the herd, this does not make him wrong and a failure, it just says that he was honest too long! He needed to forget the real economy , market fundamentals and join the "wealth effect" centrally manipulated markets. Who in their right minds would believe that those claiming to be capitalists, would ditch capitalism totally, and move into centrally planned wealth effect communists?

SO Hendry was taken down a peg or two! His experience took some arrogance off his personality. But fundamentally, in a real capitalist world, Hendry was right all along. Communism is a strange thing, when it takes over in a new form of "1%'er dictatorship" using the "communist central planning" to aid the 1%, who could really see that coming? I studied Soviet communism for many years, I saw it fail and fall. Now I have lived to see the 1% adopt Lenin's and Stalin's dictates, only this time to make a revolution from above, and 1%'er dictatorship. And MY, have they transfered some wealth from workers and savers into the Bankers hands!!!!!!!!

Tue, 11/18/2014 - 14:38 | 5461933 Glass Seagull
Glass Seagull's picture

 

Here's who is proclaiming market upside this week, interestingly enough...coming out of the woodwork here:

Grantham (bear)

Lee (bull)

Siegel (bull)

Hendry (bear)

Tue, 11/18/2014 - 14:40 | 5461941 Fast Eddie
Fast Eddie's picture

This guy is a real d bag

Tue, 11/18/2014 - 14:47 | 5461967 Bell's 2 hearted
Bell&#039;s 2 hearted's picture

i do agree with his point central bankers are terrified

 

i don't think they have near the power many think ... and they know it

 

he's babbling about ecb printing ... i'll believe it when germany says OK (personally, i think they'll leave before large scale PRINT) ... had recent word 7 or 8 euro bankers not happy with draghi ... kuroda's move came on 5 - 4 vote ... ain't no slam dunk going forward

Tue, 11/18/2014 - 14:45 | 5461962 suckerfishzilla
suckerfishzilla's picture

Yeah whatever. Moar Silver.

Tue, 11/18/2014 - 14:47 | 5461964 Bryan
Bryan's picture

When you throw fundamental and even technical analysis out the window, you might as well throw darts at the WSJ for your stock picks.  3-D printing?  Sure.  Biotechs?  Why not.  Fuel Cells?  Of course.  Gold alchemists, perpetual motionists... what the heck. 

 

Tue, 11/18/2014 - 14:54 | 5461965 Dr. Engali
Dr. Engali's picture

I think what Hugh failed to recognize was that all the central banks were willing to kill their respective currencies in tandum. All fiat is dying, some of them just happen to be dying faster than others.For those of us who understood this fact and accepted it for what it is (even though we don't like it), it's been a very profitable few years.   

Tue, 11/18/2014 - 15:32 | 5462078 Osmium
Osmium's picture

I don't think the bankers are scared at all.  They have held this shit show together for 6 years now, pushed the markets to all time highs, suppressed gold, silver and oil.

I can't see anything that will be able to stop them.

Tue, 11/18/2014 - 16:04 | 5462186 espirit
espirit's picture

Try pitchforks, flaming torches, hot oil, garrotes, guillotines, knives, swords, ropes, stakes thru hearts, & pathogen laden bodies tossed over walls.

If those don't work try Pu210, Mercedes prom mods, slips, falls, & nailguns.

...and sunlight.

Tue, 11/18/2014 - 16:35 | 5462295 LooseLee
LooseLee's picture

You're obviously blind. Move to North Korea where your ideas have merit.

Wed, 11/19/2014 - 01:38 | 5464192 bid the soldier...
bid the soldiers shoot's picture

 

Say what?

I can't see anything that will be able to stop them.

How about REALITY?

Tue, 11/18/2014 - 14:49 | 5461972 limacon
limacon's picture

Bankers , Financial Authorities and Investment advisors have lost Respect .

 

They are quite right to fear their future .

 

See

https://www.academia.edu/9354151/The_Economics_of_Disrespect_

or

http://andreswhy.blogspot.com/2014/11/economics-of-disrespect.html

Tue, 11/18/2014 - 14:52 | 5461975 sbenard
sbenard's picture

SO he capitulated. That itself is a sign of imminent reversal!

Tue, 11/18/2014 - 16:16 | 5462207 SickDollar
SickDollar's picture

exactly, it show you how bad the economic system is broken tor non existent, and there is no going back

 

Tue, 11/18/2014 - 17:38 | 5462561 css1971
css1971's picture

He capitulated a year ago.

Tue, 11/18/2014 - 14:51 | 5461979 SheepDog-One
SheepDog-One's picture

Hugh Hendry says 'Don't tell me about valuations, 3D stawks are 'trending'.
Why should I listen to anything this hipster douchebag says?

Tue, 11/18/2014 - 15:00 | 5462004 Gaius Frakkin' ...
Gaius Frakkin&#039; Baltar's picture

Besides the fact that buying stawks is stupid, to buy 3D printing stocks is to grossly misunderstand the technology and how it could transform the world.

Tue, 11/18/2014 - 14:53 | 5461981 Hamm Jamm
Hamm Jamm's picture

BANKERS are the root of all evil !

your time is short

 

RUN fuckers, run !!!!!!!!

Tue, 11/18/2014 - 14:54 | 5461982 Yen Cross
Yen Cross's picture

  If I had a silver eagle for everytime I've heard a bankster or politician say, "What I really meant was", I'd be a quadrillionaire in yen terms.

Tue, 11/18/2014 - 14:54 | 5461983 Soldfinger
Soldfinger's picture

Is this the same Hugh Hendry who understands markets so well that his Eclectica Fund returned 5% over the past five years and the same Hugh Hendry who lost three quarters of his investors? Yes? 

Tue, 11/18/2014 - 14:54 | 5461987 CreditcalMass
CreditcalMass's picture

Bass > Hendry

Will be sad to see someone, who once got it so right, get carried out on his shield like the rest of the lemmings.

Tue, 11/18/2014 - 14:55 | 5461989 DadzMad
DadzMad's picture

The only guy I can stomach is Kyle Bass.  Not afraid to admit he doesn't know shit sometimes, free dives and spear fishes, and takes his kids out the pond to blow up beaver dams.

Tue, 11/18/2014 - 22:04 | 5463367 Guerrero Latino
Guerrero Latino's picture

DadzMad

Doenst every shmo spearfish now. Been doing it for forty years. It's its far easier than hunting.

Tue, 11/18/2014 - 15:09 | 5461992 lakecity55
lakecity55's picture

The "Markets" have been absorbed by the International Central Banks, controlled by the B for IS.

Each day, more control of true market forces is absorbed by this international monopoly.

Until the control of fractional currency creation is destroyed, these banksters will control all economic activity: currencies, price controls, PM valuation, theft of personal wealth.

They have established a system of communism and fascism merged into one combined force of control over the peoples of the Earth.

They live comfortably in The City of London and in their Middle Eastern enclave, Rothslandia.

The 19th Century was once dubbed by the NYTs as 'The Century of the Rothschild's.' They aim to make it a Millennium. A Thousand-Year Reich.

The antidote is "not to play."
Tune in, drop out and refuse their notes when possible. Pay your 'legal' debts in their currency and avoid using them for any other transaction.

Do the best of that with what you can.

 

Carry On.

Tue, 11/18/2014 - 14:59 | 5461998 Ariadne
Ariadne's picture

Global Fascism continues apace. Next up: Global Genocide.

Tue, 11/18/2014 - 15:02 | 5462008 John Wilmot
John Wilmot's picture

"the structural deficiency of global demand"

= Keynesian spittle

The problem is not, and has never been, anywhere at any time, a "deficiency of demand." The problem we're facing today is, to put it in the most general terms, a massive misallocation of resources wrought by state intervention in the markets, especially via the central bank. Taking from the productive to pay people to dig ditches and then fill them back in - that is the essence of all economic intervention, only the details differ. Of course, Keynes himself said this, this is what he was advocating. Keynesians are either genuine retards, or it is their intent to degrade the productive capability of our civilization: perhaps for ideological purposes ("post-industrial" greenerific paradise ruled by Al Gore?) or simply to feather the nests of their plutocratic paymasters no matter the costs. It's probably some combination of the three.

Tue, 11/18/2014 - 15:14 | 5462034 Peter Pan
Peter Pan's picture

I agree and might I add that the misallocation of resources is not just at the investment end but also at the consumption end of the spectrum. Excess capacity at one end and storage places, mountains of rubbish and clutter at the other. 

Wed, 11/19/2014 - 00:37 | 5464024 rex-lacrymarum
rex-lacrymarum's picture

100% correct. There can never be a "deficiency of demand" as long as there are unsatisfied consumer wants. The problem is not on the consumption, but on the production side. The capital structure has become distorted due to central bank machinations, and the pool of real funding that supports production activities is shrinking. While stock prices are soaring and companies report what are mostly illusory profits, more and more capital is consumed. 

Tue, 11/18/2014 - 15:10 | 5462026 Peter Pan
Peter Pan's picture

Not so long ago Hugh had given up being a doomsayer and had hitched a ride with the frenzy induced stock market.

As far as I am concerned it takes courage and pain to stick to your principles and the reward in the end is the satisfaction of having been vindicated and more importantly not being destroyed when the avalanche triggers.

Waiting for me however is not so bad because when I contemplate what the system is in for I feel a strange sense of relief to not be caught up in the religious fervor of our current central bank high priests.

Tue, 11/18/2014 - 22:27 | 5463440 Guerrero Latino
Guerrero Latino's picture

In todays berserk world, where virtually everyone is in it for themselves. Weighing yourself against the tide won't help. Were doomed. Might as well make as much cash as humanly possible. Go Hugh! Contribute to Corporate Globalism, contribute to the destruction. Why not. Send mankind to the grave faster....makes no difference on a long enough time line. (where have I heard that before?)

Except that our children will live in hell. Doesn't matter. Because it would be their children, or their children's children.

The most brilliant person that I know, finally and patiently drilled it into me. There is no point in all of this. When the SHTF, its all gonna look like "The Road". None of us will survive. He jsut waits to see it happen, armed with a 50caliber. Don't mistake him for a lunatic, he's just extremely practical. He dropped off Wall Street in 2007 on principle alone. Only the random lucky few. Random. Train, prep, and hoard all you want. Your'e just just bidding time when its goes down. 

Like Hugh, just enjoy your time as much as humanly possible. The tide won't permit you to swim up current. Don't grieve about contributing to the mess. There is no Hell.

Still...I hang onto hope that a reset will take place. In fact, I know that it will.                                                                        Only problem with that, is that the sociopaths will rise up again.

I'll always do what is virtuous, but that will get me nowhere.

The central bankers don't like the idea of being hung from a light pole. But it's a quick enough death.

 

Tue, 11/18/2014 - 15:14 | 5462038 madcows
madcows's picture

he could have done a lot better than 2% by just buying a market ETF.

Why think or try to outgain the market?  During this "Rally" utilities have outperformed, and many stocks are down.  Yet, the S&P is in record territory.  Fuck it.  just dump all your money into the ETF and watch it go up.  or down, like its number went up,but it's value went down, cuz of all the printing and stuff.

Give me a P.

Give me an R

Give me an I

Give me and N

Give me a T.

What's that spell?  Fuckt.  What's the spell Fuckt.  in the end, we're all fuckt.

Tue, 11/18/2014 - 15:16 | 5462040 Peter Pan
Peter Pan's picture

True. But some more than others.

Tue, 11/18/2014 - 15:26 | 5462057 Atomizer
Atomizer's picture

Speculative overleveraging and the Tulip bulb bust sequel.

We know, you'll get right next time around... LOL

Tue, 11/18/2014 - 15:28 | 5462063 bnbdnb
bnbdnb's picture

Now all I need is a net long recommendation from Tyler, and I'm good to go balls out short.

Tue, 11/18/2014 - 16:07 | 5462190 In.Sip.ient
In.Sip.ient's picture

You'd be scared too, if the spectre of

having to bail out the "too big to fail"

came to pass.

 

And if a derivatives blowup courtesy

of the current US$ bull continues,

THAT is exactly where the CBs,

starting with the FED will be!

 

Tue, 11/18/2014 - 16:20 | 5462239 yogibear
yogibear's picture

It goes on until the US dollar dies. Expect QE 4 soon.Their policy is to inflate out of debt.

Tue, 11/18/2014 - 16:25 | 5462254 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

The EU's manifest destiny is to fail. The EU was built to fail and the EU leaders know it all too well by now. When the EU fails and the bank runs

manifest the American banks will follow suit in short order. Risk is spread

liberally all over the current system and risk is not a conservative way of doing business in contemporary society. The implosion is set to destroy central banksters en masse along with the Investment Banks that created this chaos. Hugh Hendry and his assets will follow the trend into the financial sewer because he is not adhering to safe logical investment strategy by going long on the EU. Everyone worth their salt knows the entire system is going down for the count by Q2 2015. Watch Hendry change his tune when that happens.

Tue, 11/18/2014 - 16:27 | 5462264 LooseLee
LooseLee's picture

Hendry: Now just a PINKO COMMIE convert who has sold his soul to the 'Devil'---much like everyone else 'long' the USSA

Tue, 11/18/2014 - 16:28 | 5462266 Meremortal
Meremortal's picture

Terrified!!! 

No, it's not CBs that are terrified.

Who can  it be?

 

 

 

 

Tue, 11/18/2014 - 16:59 | 5462383 Bear
Bear's picture

As The Bear, I am terrified with a 2250 call.

Tue, 11/18/2014 - 16:28 | 5462267 tommylicious
tommylicious's picture

This is the archetypal short capitulation.  SELL NOW!

Tue, 11/18/2014 - 16:29 | 5462273 GodHelpAmerica
GodHelpAmerica's picture

There is no positive correlation between rising equity and bond prices and general price inflation and REAL economic growth. The currency being pumped into WS isn't making it into the general economy, as evidenced by the cratering velocity of money. Hendry uses the U.S. as an example for why the EU and JCB must do whatever it takes to raise equity and debt prices, yet the data in the U.S., Japan and EU clearly indicates that it IS NOT WORKING. Hendry is talking his book, as the data doesn't support his thesis.

 

Tue, 11/18/2014 - 16:51 | 5462347 Sub MOA
Sub MOA's picture

yeah they're terrified alright ...terrified that they get to start all over agin doing the same old shit with the possibility of a new and improved plan on how to steal wealth and assets ...what a fucking joke

 

Tue, 11/18/2014 - 16:53 | 5462353 TheRideNeverEnds
TheRideNeverEnds's picture

Yes the 40 degree incline of the S&P monthly chart for the last few years must have them shaking in their boots.  The fact that there is nothing but bids below the market and we are making new all time highs on a weekly if not daily basis is super bearish...

Tue, 11/18/2014 - 17:12 | 5462455 El Hosel
El Hosel's picture

The nail gun Vigilantes are watching

Tue, 11/18/2014 - 17:26 | 5462506 devo
devo's picture

Fear of missing out on what, a crash?

Tue, 11/18/2014 - 17:26 | 5462512 devo
devo's picture

This poor guy is going to kill himself when he's finally right and left holding Home Depot at $95. Japan printed for 30 straight years and their stock market and economy were both shit. Printing means nothing unless you get hyperinflation, which is rare.

Tue, 11/18/2014 - 17:29 | 5462519 devo
devo's picture

Smart money probably got into European stocks or some other under performning asset. Dumb money is in u.s. stocks buying hand over fist at all time highs. Deserve the face melt they're going to get.

Tue, 11/18/2014 - 17:45 | 5462594 Magooo
Magooo's picture

And this is what terrifies them:

 

THE PERFECT STORM (see p. 59 onwards)

The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy.  

 

But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel.  

 

http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf

Tue, 11/18/2014 - 20:38 | 5463128 Radical Marijuana
Radical Marijuana's picture

Indeed, Magoo, and this is how they have been preparing to resolve that:

http://www.conspiracyarchive.com/NWO/silent_weapons_quiet_wars.htm

Silent Weapons for Quiet Wars

"Energy is recognized as the key to all activity on earth. Natural science is the study of the sources and control of natural energy, and social science, theoretically expressed as economics, is the study of the sources and control of social energy. Both are bookkeeping systems: mathematics. Therefore, mathematics is the primary energy science. And the bookkeeper can be king if the public can be kept ignorant of the methodology of the bookkeeping. ... In this structure, credit, presented as a pure element called "currency," has the appearance of capital, but is in effect negative capital. Hence, it has the appearance of service, but is in fact, indebtedness or debt. ... if balanced in no other way, will be balanced by the negation of population (war, genocide)... They must eventually resort to war to balance the account, because war ultimately is merely the act of destroying the creditor ... War is therefore the balancing of the system by killing the true creditors (the public ...) the economy has been transformed into a guided missile on target."

THERE IS NOTHING ELSE THAT THE RULING CLASSES HAVE ACTUALLY PREPARED TO DO THAN START MORE GENOCIDAL WARS, AND IMPOSE DEMOCIDAL MARTIAL LAW.

Wed, 11/19/2014 - 01:31 | 5464173 bid the soldier...
bid the soldiers shoot's picture

 

You're even better when you're concise and to the point.  

+100

Wed, 11/19/2014 - 00:38 | 5464031 Livermore Legend
Livermore Legend's picture

Indeed....

Tue, 11/18/2014 - 17:51 | 5462606 css1971
css1971's picture

Here is an algorithm for modern US markets. It's a hedge fund killer.

 

If ( the average S&P price for the last week ) is greater than ( the average of the previous 4 weeks prices )

then

     buy or remain in the S&P stock index.

else

     Sell stocks and buy 10y US Treasuries.

 

Why pay hedge funds when you can implement this in Excel or Python in about 20 minutes?

Tue, 11/18/2014 - 19:13 | 5462894 luna_man
luna_man's picture

 

 

Clientele heading for the exits!

 

too funny

Tue, 11/18/2014 - 19:24 | 5462941 eddiebe
eddiebe's picture

A sell-out by default is still a sell-out. No different than Greenspan really, even though not as glaring an offender.These are the types of people that by 'playing along to get along' and sharing in the whole stinking mess for profit are ruining true capitalism and any chance of actual wealth a free market system can bring to all. 

Tue, 11/18/2014 - 20:48 | 5462984 Radical Marijuana
Radical Marijuana's picture

"I became a moral curmudgeon rather than a money maker."

That summarizes my own attitude since I was a teenager, and first learned that the established money systems amounted to runaway criminal insanities. For several decades since then I have been working on the goal of real, radical, revolution in the money system, while regarding any "monetary reforms" as being inadequate, since they would still be built on the same old rotten foundations of government enforced frauds by the bankers, who have become the biggest gangsters, that dominated the world through applying the methods of organized crime to the political processes.

The central banks are the national Kings of Fraud, with the Bank of International Settlements being the King of Kings of Fraud. The way that the world is controlled by their systems of legalized lies backed by legalized violence is driving irreconcilable social polarization, and much worse irreparable destruction of the natural world. Human beings always operated as robbers within their environment, however, the industrial revolution enabled them to do that to a degree that became runaway criminal insanity. Nothing about technologies becoming trillions of times more powerful and capable prevented civilization from still being dominated by sophisticated social slavery systems, which could continue to operate through backing up lies with violence, except on a scale many orders of magnitude greater than ever before.

Being a "money maker" inside of the established monetary system is to more effectively participate inside a criminally insane system, based on the ability to back up lies with violence, which has become globalized electronic fiat money frauds, backed by weapons of mass destruction, or electronic monkey money, backed by apes with atomic bombs. However, since those are the established social systems, whereby "success" is based on individually taking advantage of operating within those enforced frauds getting worse, faster, at an exponential rate for several decades, the past several decades of my efforts to resist that could also be described as merely being a "moral curmudgeon."

It is therefore arguable that I originally made, continued to make, the wrong decision, over and over again, when I repeatedly decided to try to resist the established systems. From a practical point of view, I have been forced to accept the conclusion that our society is terminally sick and insane. There are no good reasons to believe that being controlled by systems of debt slavery, backed by wars based on deceits, is going to get better within my life time. On the other hand, there are an abundance of good reasons to expect that the established debt slavery systems will continue driving their numbers to generate debt insanities, which are going to finally result in provoking death insanities.

Those death insanities are not merely going to be more genocidal wars, along with democidal martial law, those death insanities are also going to be much more of the 6th great extinction of life on planet Earth, caused by human beings, whose activities were controlled by systems of enforced frauds, which enabled attitudes of evil deliberate ignorance towards rational evidence and logical arguments, since any genuine critical thinking about the systems of private banks making the public "money" supply out of nothing as debts reveals that those systems are based on government enforced frauds. Those individuals who are most successful within those systems have to deliberately ignore that the most.

AS THOSE ESTABLISHED SYSTEMS BECOME MORE BLATANT CRIMINAL INSANITIES, IT IS SUBLIMELY AMUSING TO A MACABRE SENSE OF HUMOUR, TO READ HOW PEOPLE WHO WERE PREVIOUSLY SUCCESSFUL WITHIN THOSE SYSTEMS, LIKE HUGH HENDRY, ARE ATTEMPTING TO RATIONALIZE THAT, AND JUSTIFY HOW THEY SHOULD RESPOND TO THAT ...

After thinking about this more and more, for several decades, I have dug deeper and deeper into the attempts to understand that money is measurement backed by murder, which has developed that combined money/murder system to be based on the maximum possible frauds and deceits. However, pointing out that the human species is collectively preparing to commit suicide because of Neolithic Civilization having developed technologies which are trillions of times more capable and powerful than ever before in human history (i.e. electronic monkey money backed by apes with atomic bombs), actually amounts to merely being a relatively useless "moral curmudgeon," while a "money maker" jumps in with both feet through the infinite tunnels of deceits and frauds, and maximizes their own ability to take personal advantage operating within a society which has become based on a runaway criminally insane political economy, inside of an even more insane human ecology.

Ideally, in theory, human beings should understand themselves better, however, all of the dominate social systems are based on the triumphs of the wars against consciousness, which were related to the historical development of the ability for the basic human systems of organized lies, operating robberies, to be amplified to more and more astronomical SIZES. Pretty well nobody within those established systems is interested in understanding that, since that would tend to make them become even more of a "moral curmudgeon" rather than a "money maker."

It is practically impossible, and therefore, practically a waste of time, to attempt to persuade enough people to think differently about the basic nature of the money system being actually based on backing up measurements with murders, since the established systems were based on those enforced frauds being triumphantly able to dominate society to the degree that almost nobody understood that, nor wanted to understand that, since understanding better overall evolutionary ecologies turns one into more of "moral curmudgeon," in ways which interfere with one's ability to be a "money maker" within the established systems.

DUE TO THE VICIOUS FEEDBACK SPIRALS OF THE ROLES OF MONEY THROUGH THE POLITICAL PROCESSES, MAKING MONEY IN THE ESTABLISHED SYSTEMS OF ENFORCED FRAUDS THEN FURTHER REINFORCES THOSE SYSTEMS OF ENFORCED FRAUDS. Therefore, from a practical political point of view someone who is a "money maker" has way more ability to continue to dominate the established political processes, while someone who is merely a "moral curmudgeon" has nothing to offer other than more rational evidence, and logical arguments, which are relatively useless, since the established systems are already based on well-developed attitudes of evil deliberate ignorance.

In the end, we are all trapped in the paradox of final failure from too much success at controlling civilization with systems of lies backed by violence. There is no feasible way to have any better public debates about how human beings (operating their realities as systems of organized lies and robberies) ought to develop better dynamic equilibria between those systems. Instead, there is still the same old exponential growth of those systems, in ways which have become criminally insane ... Pointing that out continues to be the relatively useless role of "moral curmudgeon" while a "money maker" gets on with the business of taking as much personal advantage as possible from the established systems of enforced frauds, regardless of the ways that they are thereby assisting the human species to prepare to commit collective suicide.

Wed, 11/19/2014 - 02:52 | 5464291 bid the soldier...
bid the soldiers shoot's picture

 

Your brilliant prose is the pinnacle here at zerohedge.

 

I, too, have a macabre sense of humor.  

We should prolly get together for a latte. 

 

 

Tue, 11/18/2014 - 19:51 | 5463011 eddiebe
eddiebe's picture

Good riddance.

Tue, 11/18/2014 - 19:57 | 5463026 q99x2
q99x2's picture

I like Hugh Hendry.

Bankers should be afraid. Not even other criminals respect FRAUDsters when they commit it against everyone including themselves. They criminally insane and it is only time that prevents them from being locked up and/or worse.

Tue, 11/18/2014 - 20:15 | 5463060 q99x2
q99x2's picture

Hope he makes a little more than 3%.

Tue, 11/18/2014 - 22:00 | 5463356 Guerrero Latino
Guerrero Latino's picture

First article ever to get two of five points. 

Mad at Hugh?

Wed, 11/19/2014 - 00:34 | 5464021 Livermore Legend
Livermore Legend's picture

".....When markets become parabolic, the people who exist within them are trend followers......."

"......luxuriated in the work of people like...... Nassim Taleb...."

"...... I swallowed my pride and booked a loss......"

"But perhaps you don’t need such reactive stop loss policies when the world's central banking community is intent on protecting you..."

".....only become a bubble when slow moving price inflation and real wages start moving......"

......"hence my large net long".......

All Wrong, and Way Wrong......

Read this Hugh. 

 

 

 

 

Wed, 11/19/2014 - 02:53 | 5464264 bid the soldier...
bid the soldiers shoot's picture

 

Agreed.

I EASE, NOT JUMP INTO POSITION

But I will jump into a rumour.
Wed, 11/19/2014 - 02:08 | 5464239 bid the soldier...
bid the soldiers shoot's picture

Anybody interested (off topic)?

A Bid The Soldiers Shoot Prediction

(touches a plastic jaw bone of Victoria Nuland to silk mauve turban)

The Great BTSS predicts that the price of petrol and/or oil will continue to fall during the holy Christmas shopping season until a day or two before or after Mary's Blessed Event, when it will have achieved it's goal of making retail Christmas sales blacker than Obama's heart.

The price of petrol should turn around in 2015 to repay the oil companies for having generously lowered petrol prices for the last wo months 2014.

By saving $10 on every fill up, and spending those savings on little Jimmy and Sally, this will be the best Christmas ever and the Dow could break 19,000. 

That is all.

Wed, 11/19/2014 - 21:00 | 5467825 honestann
honestann's picture

What Hugh will eventually discover is... rational thought cannot predict what will happen when blatantly irrational predators have almost total control of an utterly fiat financial system and economy.

Hugh went from trying to be rational about market forces... to realizing that market forces are overwhelmed by central bank manipulators... to then trying to be rational about central bank manipulations...

And eventually he will realize that you cannot predict what direction fruit will fly in a room full of fruit baskets and insane monkeys high on LSD.  You can only be sure, the fruit will fly.  But that doesn't much help Hugh, does it?

We should probably pity of Hugh.  But he is a lot better off than all his fellow rationalizers who have been swallowing up junk bonds for the past year or so.  Just wait until the fruit starts flying in their room!

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