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Hugh Hendry Is Back - Full Eclectica Letter

Tyler Durden's picture


Hugh Hendry is back with a bang after a two year hiatus with what so many have been clamoring for, for so long - another must read letter from one of the true (if completely unsung) visionary investors of our time: "I have not written to you at any great length since the winter of 2010. This is largely because not much has happened to change our views. We still see the global economy as grotesquely distorted by the presence of fixed exchange rates, the unraveling of which is creating financial anarchy, just as it did in the 1920s and 1930s. Back then the relevant fixes were around the gold standard. Today it is the dual fixed pricing regimes of the euro countries and of the dollar/renminbi peg."

In the letter the most surprising insight from the perpetual contrarian is his almost predictable contrary view of the dominant investing meme at the moment. To wit: "We are, as a result, long the debt saddled west and short the vastly over vaunted and over owned BRICs." More on this: "There is a near consensus that China will supplant America this decade. We do not believe this. We are more bullish on US growth than most. The momentous nature of recent advances in shale oil and gas extraction and America's acceptance of the unpleasantness of debt and labour price restructuring looks to us as if it is creating yet another historic turning point. By embracing his inadequacies and leaping on his luck, the strong man may have finally broken the binds that had previously held him back. We are also more pessimistic on Chinese growth than ever. This makes us bearish on most Asian stocks, bearish on industrial commodity prices, interested in some US stocks, a seller of high variance equities and deeply concerned that Japan could become the focal point of the next global leg down. On the plus side we also believe that we are much closer than before to the beginning of a bull market of perhaps 1982, if not 1932, proportions. We just need the last shoe to drop."

We will let readers combs through the narrative that shapes Hendry's most recent outlook, although one chart worth pointing out is The Eclectica boss' visual summary of the "New Economic Order" which presents precisely the tenuous relationship between the Fed and the PBOC we have been decrying for so long, and which so many commentators (ooh, ooh, the PBOC is easing any minute now... oh wait, it isn't) fail to grasp:

Yet one thing we do want to point out is how different compared to your run off the mill 2 and 20 rent collector is the Eclectica M.O. when it comes to generating Alpha (as opposed to everyone else's levered beta):

As you know, I have a proclivity to make money in a bear market. The Fund's ten-year NAV progression demonstrates this survivorship bias; when bad things have happened, we have made money. We are very robust. Last year was no exception. Despite the challenges confronting speculators, I am much relieved that we succeeded in making 12% in a rather disciplined manner, and the Fund has now posted a CAGR of almost 10% for the last nine years.


Maybe that was the easy bit. The question now is just how we can make money in the tough business of global macro investing this year. As I am sure you by now know, I am nothing but a worrier. I have, I think, a soul mate in the prolific but often misunderstood Italian soccer player Pippo Inzaghi, the second highest scorer in all European club competitions. He has 70 goals behind him but he recently noted that, “the tension is always the same...I hoped to become less agitated with time, but this is also my strength”. I suspect he would have made a fine macro manager.


I meet a lot of inquisitive and extremely intelligent people in this business and I have come to think that maybe this is something of a problem. Perhaps they are just too smart. Perhaps they just try too hard. Rightly or wrongly, the highest return on intellectual capital of any endeavour in the world today comes from the management of other people’s money. So it is entirely rational (especially if you have never met a hedge fund manager) to assume the industry attracts the brightest, smartest minds. The beautiful mind, if you will. But I am not aiming to outsmart George, Stan, Julian, Bruce or the others. I do not think it is logical to try and outsmart the smartest people. Instead, my weapons are irony and paradox. The joy of life is partly in the strange and unexpected. It is in the constant exclamation "Who would have thought it?"


Why did ten year treasuries yield 14% under the vice like grip of iron-man Volker but yield just 1.8% under the bookish and most definitely Weimar-like Bernanke? Why does France in 2012 flirt with the notion of electing a socialist president intent on reducing the retirement age, imposing a top rate of tax of 75% and increasing the size of the public sector? Why do we hang on the every word of elected politicians when Luxembourg’s prime minister Jean Claude Junker openly admits, "When it becomes serious, you have to lie"?


You cannot make stuff like this up. It is simply too absurd.


That is perhaps a long way of saying that existentialism is alive and well in the 21st century. For, if the last ten years have taught me anything, it must be that the French philosopher Albert Camus, in his search for an understanding of the principals of ethics that can shape and form our behaviour, may have surreptitiously provided us with three basic principles for macro investing. I am perhaps doing him a gross injustice, but I would summarise as follows: God is dead, life is absurd and there are no rules. In other words, you are on your own and you must take ownership of your own destiny.


For me this has always meant being detached from the sell-side community. It is not a question of respect, it is just that I prefer not to engage in their perpetual dialogue of determining where the “flow" is. I cannot be reached by telephone. I suspect that I am one of the few CIOs who does not maintain daily correspondence with investment bankers and their specialist hedge fund sales teams. Not one buddy, not one phone call, not one instant message. I am not seeking that kind of "edge.” Eclectica occupies an area outside the accepted belief system.


I attempt to cultivate my own insights and to recognise the precarious uncertainty of global macro trends. I attempt to observe such things first hand through my extensive travel (I promise no more YouTube videos), and seek to understand their significance by investigating how previous societies coped under similar circumstances. But first and foremost, I am always preoccupied with the notion that I just do not have the answer. I am not blessed with the notion of certainty. Someone once said we should think of the world as a sentence with no grammar. If we do I see my job as putting in the punctuation. But above all, my job is to make money.


In keeping with this theme, I want define the three ingredients that I believe make for an outstanding macro hedge fund manager. These are, in no stringent order:


1. Successful but contentious macro risk posturing.


2. The need to choose the asset class offering the highest probability of payout should the conviction hold true whilst offering an asymmetric loss profile should the original premise prove unfounded


3. A best in class risk technique that stop losses the narrative and responds early with loss mitigation procedures (i.e. a method of staying solvent, rational and disciplined under pressure).


I have always figured that the first is the real key. That success was simply a matter of contentious macro posturing. In other words, going long very rich risk premium or buying cheap stuff. It is my assertion that what makes a great fund manager first and foremost is the ability to establish a contentious premise outside the existing belief system and have it go on to become adopted by the broader financial community. Bruce Kovner expressed the idea more eloquently when he said, “I have the ability to imagine configurations of the world different from today and really believe it can happen. I can imagine...that the dollar can fall to 100 yen”. I am sure you are nodding in agreement, except Bruce was saying this when the USDJPY was well over 200, not today's rate of 80!


That is the kind of guy I want to be when I grow up. Recall that I have the kind of imagination that can conceive of the yen trading closer to 60. Similarly, if we look back and reminisce about previous years, the Fund's 50% return in 2003 was derived from a legitimate but certainly contentious view that China's WTO entry was set to boost the cyclical "old" economy of the West and that fiat hyper-management of the financial economy could propel gold into a super bull market. To think these views were once contentious; plus ça change!

Who would'a thunk it: one just needs some imagination and creativity, the ability to visualize that which most of the other ones cant or are too lazy to do it, and just wait as the bizarro market takes over and makes the impossible not only probable, but conventionally accepted by the herd.


And a segment that all the Whitney Tilsons of the world should read:

I fear that our no longer small community has been compromised. Funds are neglecting their hard portfolio stop limits. Last year was generally very tough for long/short strategies and I commiserate with all concerned. But last year witnessed too many world class funds lose over 15% in the space of just two months. Of course today they are celebrated once again for making double digit returns in the quarter just ended yet they still languish below high water marks and their Sharpe ratios are busted.


You could probably live with that if you are a pension scheme or a large, sophisticated fund-of-fund because you have a global macro sub-sector that is typically long gamma (just look at our credit tail fund's 46% gain last year). The unfortunate thing is this group exercised its stop losses somewhere between 2009 and 2010. That is to say, they honoured the pact they had with clients. They adhered to the terms of their risk budget. I fear that owing to this nasty experience, today no one in macro is running much risk. I suspect daily VaR budgets are anchored at 50 bps or less. That is to say, I fear the financial world is in danger of harvesting a monoculture of fund returns that could prove less than robust should the global economy suffer another deflationary reversal...

Read the full letter below:



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Sun, 04/29/2012 - 19:28 | 2384039 SilverTree
SilverTree's picture

It will never work.

Sun, 04/29/2012 - 19:54 | 2384067 SilverTree
SilverTree's picture


Barack Obama at WHCA Dinner 2012

Sun, 04/29/2012 - 20:47 | 2384124 markmotive
markmotive's picture

Also check out the Barrons interview with Hendry from a couple weeks ago:

Sun, 04/29/2012 - 23:17 | 2384271 Harbanger
Harbanger's picture

What? you're not going to link Jimmy Kimmel at the WHCA Dinner 2012

 I've never seen a comedian challenge Obama and the establishment on so many issues.  Amazing!

Mon, 04/30/2012 - 01:30 | 2384385 dogbreath
dogbreath's picture

Oh ya, challenge the administration on so many issues...............more like how does he get the taste of the condoms out of his mouth

Tue, 05/01/2012 - 02:03 | 2387496 dogbreath
dogbreath's picture

all you cock suckers that junked me............. go fuck your selves

Sun, 04/29/2012 - 19:35 | 2384045 chump666
chump666's picture

Hendry you are a true chaos trader.  We all await the central banks losing complete control.  Anyday now.

Sun, 04/29/2012 - 20:35 | 2384108 CPL
CPL's picture

He's a canary in a coal mine.

Sun, 04/29/2012 - 19:36 | 2384048 Peter Pan
Peter Pan's picture

Hugh is always worth listening to, but with a performance by him of between 10-12% per annum, one asks why gold and silver achieved even better without the sweat. Answer is simple. These metals despite their manipulation are making a mockery of human meddling in the market.

The only metric that truly matters going forward is jobs and better paying ones at that. All else is window dressing at best.

Sun, 04/29/2012 - 20:19 | 2384081 easypoints
easypoints's picture

"The highest return on intellectual capital of any endeavour in the world today comes from the management of other people’s money."

True, until those people no longer trust you with their money, because they don't trust the money itself. Today's FIAT is created and managed by those with either no intellect, or no regard for the very people who use it. Should confidence in any currency be lost , hedge fund managers will share the penalty with the central banker down the street.

Mon, 04/30/2012 - 00:21 | 2384330 wandstrasse
wandstrasse's picture

Should confidence in any currency be lost

Confidence in any currency has already been lost. Money managers lost it as well as average people. Fiat is NOT about confidence. Fiat will be in use as long as it has purchasing power. And how does counterfeit money get this power? Two components: 1) counterfeiting is law, worldwide, people must obey. 2) Lots of military effort that THE basic necessety - oil - can only be purchased with the mother of all fiat: the dollar. Because the harshest worldwide law would not do if people all over the planet cannot buy something wich is needed all over the planet.

Mon, 04/30/2012 - 06:05 | 2384509 Snidley Whipsnae
Snidley Whipsnae's picture


"2) Lots of military effort that THE basic necessety - oil - can only be purchased with the mother of all fiat: the dollar."

China purchasing oil from Iran with gold and finished goods is one example of many that will end run dollar hegemony. In addition, many countries are already conducting trade in their local currencies or have set up direct barter in their commodities or in finished goods.

If the US continues on it's reckless course of printing, thus destabilizing BRICKS currencies and causing inflation and possible social unrest in their countries, BRICKS efforts to avoid the dollar will be redoubled.

The ability of the US to continue it's currency domination is not at all a sure bet... if it were, central banks around the world would not be loading up on gold as a hedge against the dollar and other paper of all descriptions. 

PMs are slowly reclaiming their rightfull role as the only real money sans counter party risk... manipulation be damned. Why would this be a surprise to anyone that has even a passing knowledge of past fiat history?

Hendry is a very intelligent guy but as he points out there are lots of intelligent guys running hedgies. All of them stumble from time to time. As Hendry pointed out in an earlier interview his worst 'mistake' was having a great year with 50 + % return to his investors. Many of his biggest investors cashed out after the windfall and invested elsewhere or simply retired and placed their big profits in what they perceived as 'safer' investments. Hendry now understands that his funds are better off having a lot of ~12% years and avoiding losing lots of suddenly wealthy clients.


Mon, 04/30/2012 - 02:38 | 2384417 BorisTheBlade
BorisTheBlade's picture

This and ZIRP in perpetuity that diminishes yields and renders achievement of sufficient returns almost impossible. Fund managers of course are going to get screwed when currency collapses, because no matter how hard they sweat they will fail by association with the centrally planned money printing. I bet next agents who will rise from the ashes of currency mayhem will be barter agents or whoever comes up with a convenient (and relatively honest) way to mediate transactions while avoiding FRNs or any other fiduciary moneys.

Mon, 04/30/2012 - 12:29 | 2385282 eatthebanksters
eatthebanksters's picture

There is no penalty, only a termination bonus!

Sun, 04/29/2012 - 22:17 | 2384202 rufusbird
rufusbird's picture

Well, one must consider what to do with the rest of the portfolio. Gold advocate Jim Rickards's recommends 10 to 20 percent of one's portfolio in gold as does most of the Registered Representatives of most brokerage firms. I recognize and understand the arguments for a larger postition, but allowing for diversification, what does someone do with the balance of their portfolio...?


Sun, 04/29/2012 - 23:45 | 2384301 WonderDawg
WonderDawg's picture

Depends on what you believe the future holds and what your objectives are, so you have to look at all options. Just a few: If you think deflation, then cold hard kizzash is going to win the day. If you think inflation, stack PMs and ride the equities markets. If you think biflation or stagflation, again, I think equities or metals. Under anything but deflationary conditions, strong corporate bonds might be okay. I can't see any scenario under which I would invest in munis. Plenty of other strategies, as well. In other words, with the level of uncertainty we have today, there is no easy answer to your question.

Mon, 04/30/2012 - 10:20 | 2384948 FEDbuster
FEDbuster's picture

Long term storage food will always hold it's value, unlike gold (who's value has never gone to zero) you can eat it.  Maybe it's just a small part of your investment portfolio, but it's nice to have when needed.  I would add a battle rifle and 1K rounds to go with it.  A year's supply of food and the means to defend can be bought for under $2K (or about one oz of gold or 3 shares of APPL).

Mon, 04/30/2012 - 00:39 | 2384342 strannick
strannick's picture

with the rest of your folio? buy silver obviously. diversification bitchez

Sun, 04/29/2012 - 23:34 | 2384291 grid-b-gone
grid-b-gone's picture

If we need non-fiat money then it follows that we need our own self-sustaining job. Entrepreneurship, like gold, keeps one in a position to help others rather than looking to be helped in a crisis.

If jobs are the only metric that truly matters going forward, get one (make one, if necessary), and hoard it like it's precious - because it is.

Mon, 04/30/2012 - 08:06 | 2384610 Jack Sheet
Jack Sheet's picture

Hendry s a y s 10-12% but in my experience all fund managers fiddle the results. The last time I looked ( more than a year ago) all his funds were either flat or up/down +/- 5%

Sun, 04/29/2012 - 19:36 | 2384049 Corn1945
Corn1945's picture

"and America's acceptance of the unpleasantness of debt"

Is there another "America" on this planet that I haven't heard about?

There has been very little de-leveraging at the private sector level while government debt levels are spiraling out of control.

Is this guy from another planet?

Sun, 04/29/2012 - 22:08 | 2384186 Harbanger
Harbanger's picture

"The momentous nature of recent advances in shale oil and gas extraction and America's acceptance of the unpleasantness of debt and labour price restructuring looks to us as if it is creating yet another historic turning point."

I was pretty sure he meant Govt. debt when I read it.  Maybe your interp is correct.  One thing I know is he's not betting on Obama's re-election.

Sun, 04/29/2012 - 23:08 | 2384262 Richard Chesler
Richard Chesler's picture

"we also believe that we are much closer than before to the beginning of a bull market of perhaps 1982, if not 1932, proportions. We just need the last shoe to drop."

He's not counting all the legs of the fucking squid.

Mon, 04/30/2012 - 00:46 | 2384348 strannick
strannick's picture

id bet hendry a silver eagle that obbie gets re elected. i dont think the rominator is going to be to big with liberals Christians women blacks hispanics or conservatives. and since all obbie knows how to do is print since hes never had a real big boy job that works for me and my a.g.

Mon, 04/30/2012 - 02:06 | 2384409 Bubble
Bubble's picture

Obama, Romney, it makes no difference. Therefore your point is irrelevant.

Sun, 04/29/2012 - 19:38 | 2384051 Corn1945
Corn1945's picture

Also, our bond yields are low because the Financial Terrorists (Bernanke, et al) are monetizing our bonds.

If he can't get that right, what else is wrong in this letter?

Sun, 04/29/2012 - 19:41 | 2384054 Peter Pan
Peter Pan's picture

Exactly my sentiment. You have the borrower extending his card limit and dictating the interest rate on that card. How twisted can that be given that the borrower is both monetarily and morally broke.

Sun, 04/29/2012 - 19:47 | 2384060 Spitzer
Spitzer's picture

He thinks like a rating agency.

Japan and China own the US but he gives the US a higher credit rating then the creditors.

Sun, 04/29/2012 - 20:36 | 2384111 GMadScientist
GMadScientist's picture

This from the foolio that was talking shit about the Zooro being a reserve currency. LOL

Sun, 04/29/2012 - 21:10 | 2384141 Spitzer
Spitzer's picture

You think this is over ?


Sun, 04/29/2012 - 21:59 | 2384181 Spitzer
Spitzer's picture

Dispite the Euro hate-on orgy, why is it still worth more then the dollar ?

Sun, 04/29/2012 - 22:11 | 2384193 Buzzworthy
Buzzworthy's picture

Chinese buying has put a $1.30 floor under the Euro Dollar trade.  China began pegging the RMB to the Euro last year in response to dollar debasement under QE2.  China plays the Euro against the dollar and vice versa, per Rickards' explanation in Currency wars.  Unless I'm misreading the first paragraph of the Hendry piece, he seems to have missed this.

Sun, 04/29/2012 - 22:11 | 2384194 Buzzworthy
Buzzworthy's picture

Repeat Sorry

Sun, 04/29/2012 - 21:51 | 2384055 The Big Ching-aso
The Big Ching-aso's picture



I don't understand his contrarian optimistic stance when 46M+++ jobless Americans are SNAPping free food up like poor people.

Sun, 04/29/2012 - 19:44 | 2384058 Spitzer
Spitzer's picture

So Hugh Hendry is BULLISH on the US and BEARISH on the US's creditors at the same time ????

That doesn't make very much sense me thinks...

Sun, 04/29/2012 - 19:56 | 2384068 UP Forester
UP Forester's picture

People like contrarians in an environment like this.

Even if they're just hanging on to the dry end of the Titanic.

Sun, 04/29/2012 - 20:16 | 2384086 Spitzer
Spitzer's picture

lol, the dry end of the Titanic.

Sun, 04/29/2012 - 20:05 | 2384079 chump666
chump666's picture

He is a trader.  Right?  Ok, so Asia goes US will be bid. Simple.  You watch the news?  You see Malaysia getting frisky, Indonesia may lose it's rating, Singapore has inflation overkill, Thailand could have social unrest again, China MAJOR PROBLEMS across the board, social, political (re: US embassy in China and Chinese dissent being kept there) and then there is Japan...



Sun, 04/29/2012 - 20:19 | 2384090 Spitzer
Spitzer's picture

He is a trader.  Right?  Ok, so Asia goes US will be bid. Simple. 

You call that contrarian investing ? That is the kind of thing you hear on CNBS's "Fast Money"

Sun, 04/29/2012 - 20:44 | 2384119 chump666
chump666's picture

Yeah well CNBS don't mention that the whole system will collapse in our lifetimes.  The market is dying.  But you get some where you can.  Asia will be first to go , then the world. 

America's bust will be spectatular you can lock that in.  But hey Asia having street protests now while Americans are in sleepy la la land.  Omen baby

Sun, 04/29/2012 - 21:13 | 2384144 Spitzer
Spitzer's picture

Asia will be first to go , then the world. 

Like I said, that is not contrarian at all. It is Fast Money, Wawwen Buffet bullshit.

Sun, 04/29/2012 - 21:51 | 2384157 The Big Ching-aso
The Big Ching-aso's picture




Maybe he's secretly contrarian on his contrarian stance which would be contrary to what everybody else contrarily thinks.

Sun, 04/29/2012 - 20:45 | 2384120 JohnKozac
JohnKozac's picture

China (and Hong Kong) house prices are ridiculous (look online at what they sell for)....unsustainable...Reminds me of those poor deluded folks who stood in line in Las Vegas to buy a condo at $700 a sq ft back in 2006, 2007.....

Sun, 04/29/2012 - 20:59 | 2384132 chump666
chump666's picture

Australia, New Zealand and Canada will be dead zones once their housing busts kick in...brutal

Sun, 04/29/2012 - 22:00 | 2384183 ekm
ekm's picture

Aus and NZ depend on China for exports.

I agree that Canada will suffer huge housing crash, but no dead zone for sure. USA will buy our oil no matter what.

Sun, 04/29/2012 - 22:30 | 2384215 chump666
chump666's picture


But Asia is flipping out:

*Political tensions overshadowing China SED talks May 3-4
*China mkts closed for holiday today and tomorrow
*Traders say PBOC may fix USD/CNY higher in protest, see USD/SGD dragged higher

Nasty and the chaos begins.

Sun, 04/29/2012 - 22:51 | 2384245 Desert Irish
Desert Irish's picture

You say "Canada" but the issue is that all the commodities the world wants is West of Manitoba - Those condo's they are throwing up at an alarming rate in Toronto going up are due to hot Chinese money both mainland, Taiwan and Hong Kong. When the housing crash comes it's going to be devastating for the East but not the West. The dead zone will apply to what province you live in. So for Ontario (downgraded again last week) and Quebec it's not going to be pretty.

Sun, 04/29/2012 - 23:00 | 2384252 chump666
chump666's picture

Whole world will be an economic deadzone.  Maniac leaders and central banker lunatics are going for the last gasp.  Astounding that the offset of the commodity slowdown is property re-inflation.

Yeah deadzone, squats, riots, money system broken beyond repair etc.  Still betting it starts in Asia, they collapse first, sends us into the iceberg.

We had it coming.

Sun, 04/29/2012 - 23:27 | 2384282 Freddie
Freddie's picture

Aus and Canada will be fine as long as they can export commodities. CA has no problems - as EKM says.  Aus should be fine as long as they have commodities.  NZ is a haven for rich people who want to get away to a sane place.  NZ is like the Switzerland of the Pacific Basin.  NZ should hold up fine.

Sun, 04/29/2012 - 23:42 | 2384300 chump666
chump666's picture

I would be worried if the price drop takes out the terms of trade, appears to be happening in Australia.  Both NZ and Australian run large per capita fiscal deficits.  Like Canada all commodity producing countries are paranoid of mass unemployed form a China crash.  So, in their infinite insanity they are re-inflating credit markets/property.  Canada and Australia's property markets should have crashed three years ago, both goverments are using taxpayer monies to fund RMBS purchases from their banks.

Relying on China to fund the world is like buying shares in the Titanic, and chilling out in first class - hoping for the rosy times ahead.  But instead...f*cking being wiped out.


Mon, 04/30/2012 - 00:18 | 2384329 Doña K
Doña K's picture

New Zealand is indeed a great country. However:

DOCTOR TO MALE PATIENT: You have six months to live.

PATIENT: I want to live longer.

DOCTOR: Marry a Jewish girl and move to New zealand.

PATIENT: Is this gonna make me live longer.

DOCTOR; No! But it's gonna seem longer.


Mon, 04/30/2012 - 00:47 | 2384351 chump666
chump666's picture

hahaha that was good

Sun, 04/29/2012 - 23:08 | 2384261 yourfather
yourfather's picture

plz explain how indonesia will lose its rating considering that it was only just upgraded to investment grade.


if anything, indonesia has a vibrant middle class and has skipped a generation in technological application. i.e. you now have grandmothers using mobile phones to bank who were born in a village with no electricity or running water only a few tens of decades ago.


they have large facebook and twitter populations and they are a prime market for social networking, the way their culture is a group oriented social society.



Sun, 04/29/2012 - 23:47 | 2384307 Lednbrass
Lednbrass's picture

I would like to ask how facebook and twitter mean much of anything. I guess its great that now they can get once a minute updates from grandma in a rapture over her new running water, but what do either of those things really add or do beyond amuse bored people in their leisure time?  What truly productive thing stems from either one?

Can you manufacture goods more cheaply or quickly with either one? Do they make people more productive at work? Will a medical breakthrough come about from relentless updates on the current state of granny's cholesterol level? What actual concrete acheivements do you see coming as the result of either facebook or twitter?

All I see is zombie idiots broadcasting trivialities.

Mon, 04/30/2012 - 00:18 | 2384328 yourfather
yourfather's picture

glad to discuss this with you all...


Regarding the fuel price rise and so on.

The prices of fuel are subsidized by the government and are meant to have an impact on the smaller people. the problem with the reduction in the subsidy was that there were massive protests (although not entirely popular ones) to keep the subsidy as is. 

The reality is that the government is spending more on petroleum subsidies than it is on education etc, and because it's a subsidy that benefits wealthy people more than the regular person on the street, it's really a good policy to follow. Sure they delayed the reduction in the subsidy, but what they have done is ban engines over 1.5 litres from using the subsidized pumps. The national petrol company pertamina has opened non subsidized gas stations. there are substantial campaigns to stop luxury cars from using it. If you look at it from the other side of the coin, filling up your 110cc motorcycle with two or so litres costs less than 20,000 Rp. If you remove the subsidy, it will make the price rise but it's still within the affordable range because you'll see prices around 20,000 rp. 


To put it into perspective, you can get about 100km worth of travel on your motorbike from about 2 bucks of gas. 


Regarding manufacturing goods more cheaply or whatever with facebook and twitter, what I am trying to say is that yes, you can manufacture cheaply in Indonesia, with the average wage of a worker in a factory in Bekasi being about $200 US dollars. The key is that the economy itself is undergoing structural change which is being led by technology. previously you had isolated communities with no access to information, where the society was a relationship based society, where it was not what you knew. Now you are seeing that there's a transition to a more information based society. for example navigating traffic jams in jakarta is done through a website called lewatmana (which way to go) and this has productivity gains for motorcycle taxi's and so on. 


The reality is that the policy of petrol subsidies was delayed only because of the protests. It's not a mature country from a democracy perspective so expecting it to roll out to our eyes as to our standards is a bit unfair. The key is that the SBY Government failed to execute the appropriate PR Campaign, and this has been recognized by some people like Hatta Rajasa who said - "Di samping itu, kebijakan pengaturan BBM bersubsidi memerlukan persiapan dan sosialisasi yang memadai, agar masyarakat tidak panik,"  - next to this, setting up the petrol subsidy issue requires preparation and socialization (i.e. PR) so that the people don't panic.


Remember people that this country is a young one and the levels of education etc are much lower than what you are expecting. There has been a significant effort to eradicate corruption and it is still making decent steps to achieving a more inclusive society. 

Mon, 04/30/2012 - 02:04 | 2384391 chump666
chump666's picture

...also India is about to go.

more on Indonesia:

Local selling in medium to back end IDR bonds seen today
Outflow concerns on BI's bank acquisition plans, weak IDR outlook weigh
Yields are up by 2-3bps so far
10yr FR61 last at 107.75-108.50, yield +3 bps
20- and 30yr yields up 2 bps, bids at 115.75 and 98.0 respectively

USDs should be bid, stocks selling down at least 10% or more correction, USTs bid and nutcase Bernanke hits QE3 end May start June (depending on the correction). that point China is in meltdown as is Asia, Europe just erupts into riot zone (goverments collapse in all directions).  Oil goes bid after Iran goes bonkers again rolls out a nuke.

That's the chaos trade good or bad...

Sun, 04/29/2012 - 20:28 | 2384099 smiler03
smiler03's picture

I'm not familiar with Hugh Hendry but seeing his claims on making 10% yoy I thought I'd look for any UK Funds that I could invest in. There are only two (both Eclectica) and both of them have produced shit returns.

I'd rather invest in horse manure.,-prices--and--factsheets/search-results/c/cf-eclectica-agriculture-class-a-gbp-accumulation/charts,-prices--and--factsheets/search-results/c/cf-eclectica-absolute-macro-accumulation/charts

Mon, 04/30/2012 - 05:47 | 2384503 Hoplite
Hoplite's picture

Those are the retail funds. IIRC you can't invest in the "real" Eclectica funds unless you pass the various FSA tests for being a qualified investor.

Sun, 04/29/2012 - 20:43 | 2384118 fonzannoon
fonzannoon's picture

Spitzer I am a big Jim Rogers guy and he keeps repeating that he is short emerging markets, short technology and does own the USD. It makes no sense to me either but I am certain they both know more than I do.

Sun, 04/29/2012 - 21:30 | 2384148 tu-ne-cede-malis
tu-ne-cede-malis's picture

I'm a Rogers fan as well...isn't he still bullish on China?  Hendry/Faber are bearish, while I think Jim is still bullish long term (look at his reasoning behind moving to Singapore!).

Sun, 04/29/2012 - 21:32 | 2384149 fonzannoon
fonzannoon's picture

From what I hear from him he is bullish big time on China although he admits it won't be a smooth ride. I am just saying Hendry's big call here does not seem that crazy when it's put in this context.

Sun, 04/29/2012 - 21:42 | 2384160 Spitzer
Spitzer's picture

I am a big fan of Rogers too but he does allot of short term trading that he talks about in the media. His long term positions have always been the same. He also admits to being a horrible short term guy.

So where would you rather be ? In Jim Rogers short term position or his long term position ?

Im sticking to his long term position. He is rich enough to gable with short term bets but I am not.

Sun, 04/29/2012 - 22:29 | 2384214 ironsky
ironsky's picture

Would you want to try to collect from the US? They'll either kick your ass, destabilize you, or ask you why you want to mess yourself up by forcing them to make the repayment worth-less. At a point in some battles, your situation is so hopeless that you call in the artillery on your own position. Been done.

Mon, 04/30/2012 - 02:38 | 2384425 grid-b-gone
grid-b-gone's picture

In this environment, BULLISH can mean anything from a small gain to relatively smaller losses.

The BRICs are showing weakness, fiat and debt to be paid back in fiat may find it difficult to find a market in the future, derivatives are a house of cards, etc. 

Gold and other PMs, oil and energy, some art and collectibles, land, especially ag land, fertilizer and fertilizer components, stock of solvent companies, income-producing RE, and some residential RE where its price exceeds current replacement cost, are on the short list of stores of wealth likely to partially survive eroding fiat currencies.

The U.S., as the largest economy, has the most choices. As long as the Fed does not print the dollar much faster than the euro and yen, it is TBTF and has power over its creditors. If this holds, Hendry is correct to be bullish on the U.S. and U.S. markets on a relative basis, even if U.S. debt gets priced with an increasing amount of doubt.  

Sun, 04/29/2012 - 19:46 | 2384061 Cassandra Syndrome
Cassandra Syndrome's picture

Hugh Hendry rocks! Watch this video clip from BBC's current affairs program Newsnight from over 2 years ago where the Keynesian Nobel Laureate Professor Joseph Stiglitz was completely outclassed and particularly retrospectively by Hendry over their polarised views on Greece and its fate. Enjoy!

Sun, 04/29/2012 - 19:53 | 2384065 CvlDobd
CvlDobd's picture

Odd letter. I guess it makes as much sense as anything else I have read recently on various trading thesis'.

Sun, 04/29/2012 - 21:09 | 2384138 hamurobby
hamurobby's picture

Huge Henry is probably as confused and cautious about investing as you are when riding (by your avitar pic) your motorcycle on a racetrack.

Sun, 04/29/2012 - 22:36 | 2384222 CvlDobd
CvlDobd's picture

Lol. Which one of these lever Doo hickeys makes it go faster?

Mon, 04/30/2012 - 06:17 | 2384520 hamurobby
hamurobby's picture

Motorcycle roadracing is way more fun than golf, and it takes two balls to play.

Sun, 04/29/2012 - 23:30 | 2384287 Freddie
Freddie's picture

I loved the bit about Hugh having a soul mate in the outstanding Italian striker Pippo Inghazi.   They both worrry which motivates both of them to excel.  

Sun, 04/29/2012 - 21:55 | 2384178 junkyardjack
junkyardjack's picture

Stop Losses bitchez!

Sun, 04/29/2012 - 22:35 | 2384220 Assetman
Assetman's picture

Actually, I think Hendry's views have changed markedly since the end of 2010.

What he is saying now is that the US policy of exporting inflation to inflict damage on China has finally had its intended effect.  It means over the next liquidity tightening cycle, that China... and the countries tied most closely to China... are going to feel a lot of hurt.  The tightening of liquidity has already begun in China.

It doesn't mean that the US isn't vulnerable-- these markets will take their hit once the liquidity leaves as well.  But it appears this time around, the USD will likely gain in strengh against everything... except the yuan.



Sun, 04/29/2012 - 20:03 | 2384075 Cabreado
Cabreado's picture

Not to offend anyone, but there comes a time, eventually, when "sociopolitical" (and other fun stuff) usurps "markets."

Sun, 04/29/2012 - 20:07 | 2384080 yourfather
yourfather's picture

would someone post the letter on something else than scribd - ftp whatever - pdf format preferrably?

Sun, 04/29/2012 - 21:38 | 2384156 neidermeyer
neidermeyer's picture

Sorry , NO CAN DO on the request ... however here's the direct link to it on Scribd so you can download it in .pdf format ... or go to and search for April 2012 TEF Commentary .

Sun, 04/29/2012 - 21:51 | 2384171 junkyardjack
junkyardjack's picture

You can't download it from there

Sun, 04/29/2012 - 23:05 | 2384257 yourfather
yourfather's picture

hey thanks but for some reason it's blocked or not working here...



Sun, 04/29/2012 - 20:17 | 2384089 bugs_
bugs_'s picture


"US rejects globalization"

"the death of Asian mercantilism".....will the death of Euro mercantilism happen before or after the death of Asian mercantilism?

This was hugh!


Sun, 04/29/2012 - 20:22 | 2384093 pain_and_soros
pain_and_soros's picture

He's so contrarian that he's become mainstream...

Read the fine print...Past performance is no guarantee of future results....

Sun, 04/29/2012 - 20:24 | 2384094 GS-DickinDaMuppets
GS-DickinDaMuppets's picture

Hendry is right to be a contrarian, especially with all the government "MAGIC" that abounds in the U.S. financial system (Corzine not being in jail comes to mind). I have invested as a Bull up until the "Paulson Crash" of September 2008 and NEVER even considered owning PM's (Ag & Au), but not any longer - you better know that since that time I have been buying PM's as often and as much as I can afford, and like Hendry "I'm a BELIEVER"!!


...doing GOD's work...GS-DickinDaMuppetts

Sun, 04/29/2012 - 20:25 | 2384098 Pairadimes
Pairadimes's picture

Yes, but how is he with an AR-15?

Sun, 04/29/2012 - 20:39 | 2384102 dick cheneys ghost
dick cheneys ghost's picture

His recent Barons interview was quite good.........


Question........Can the petrodollar system survive without The Fed?


and Can The Fed survive without the petrodollar system?


sorry for the questions, but i come here to learn...

Sun, 04/29/2012 - 20:32 | 2384104 francis_sawyer
francis_sawyer's picture

So ~ He's saying if the VIX hits 80 again then that bodes well for certain US equities...

Well if the VIX hits 80 again, you're probably looking at 'official QE3' again (how many trillions this time) with an S&P of 1,000... Sure, what the hey? Go long equities... All that's really saying is that we'd be due for a 'half life' version of March 2009 or August 2010...

In the end, it's all just money printing that makes the world go round...

Wed, 05/02/2012 - 14:37 | 2391819 kalasend
kalasend's picture

What's your point? Hate the high-probability but short-term profits? 

Sun, 04/29/2012 - 20:32 | 2384105 JohnKozac
JohnKozac's picture
No end in sight to global jobs crisis, ILO says


GENEVA (Reuters) - Fiscal austerity and tough labor reforms have failed to create jobs, leading to an "alarming" situation in the global employment market that shows no sign of recovering, the International Labour Organization said on Sunday.;_y...

Sun, 04/29/2012 - 20:34 | 2384107 vote_libertaria...
vote_libertarian_party's picture

"labor price restructuring" in the US???  When did the manufacturing cogs take a 95% paycut to be competitive with the Chinese mfg cogs?

Wed, 05/02/2012 - 14:39 | 2391829 kalasend
kalasend's picture

No, US mfg don't need 95% cut to compete with China counterparts. If you used to think so, you are ____(insert words that hurt your ego)___

Sun, 04/29/2012 - 20:36 | 2384112 fonzannoon
fonzannoon's picture

we also believe that we are much closer than before to the beginning of a bull market of perhaps 1982, if not 1932, proportions. We just need the last shoe to drop."

But it's a big shoe...right?

Sun, 04/29/2012 - 21:09 | 2384139 WmMcK
WmMcK's picture

Right, too large to throw and even hard to kick.

Sun, 04/29/2012 - 21:53 | 2384174 harleyjohn45
harleyjohn45's picture

Hendry talks in circles, he says he is bullish on America.  Does he believe the regulators are going to let companys operate here.  Does he believe Americans can compete with the $40.00 per week chinese labor.  Anyway good luck to him.

Sun, 04/29/2012 - 20:41 | 2384114 reader2010
reader2010's picture

I had anticipated the same outcome back in 2009. But, the results had been terrible. Will it work this time around?

Sun, 04/29/2012 - 20:43 | 2384116 q99x2
q99x2's picture

Thankful for the posting.

Sun, 04/29/2012 - 20:46 | 2384122 erg
erg's picture

I try to identify the most ironic of outcomes in life because it seems to happen way more that it should.

My little portal to the future.

Sun, 04/29/2012 - 20:49 | 2384125 Thorny Xi
Thorny Xi's picture

"establish a contentious premise outside the existing belief system and have it go on to become adopted by the broader financial community"  Or, as Calvin once told Hobbes, "Since nobody knows when the right time will be, just go to the right place and hang around."

Sun, 04/29/2012 - 20:52 | 2384126 BeetleBailey
BeetleBailey's picture

Great post.


I watch CNBC world (muted, only for the data), and missed Hendry (one of the few that I will listen to).

Hugh is better in person/on camera, as his bile is viseral. The financial markets need more of people like Hendry.

Sun, 04/29/2012 - 21:08 | 2384137 WmMcK
WmMcK's picture

And I watch Russia Today (muted, only for the eye candy). That Lauren Lyster is addictive, if not visceral.

Sun, 04/29/2012 - 22:05 | 2384187 ThisIsBob
ThisIsBob's picture

Yea, I watch, muted, just for the headlines.

Sun, 04/29/2012 - 20:52 | 2384127 ExploitTheMarket
ExploitTheMarket's picture

Is there any way to print this thing out? even when I log in to scribd I can't do it.....

Sun, 04/29/2012 - 21:21 | 2384145 Irrational number
Irrational number's picture


Sun, 04/29/2012 - 21:43 | 2384159 neidermeyer
neidermeyer's picture

go to download/save as a .pdf and print one for every cubicle in your department.

Sun, 04/29/2012 - 22:25 | 2384212 ExploitTheMarket
ExploitTheMarket's picture

Just did a scrolling screen capture then printed.... I like to read the real good stuff away from the computer. 

Sun, 04/29/2012 - 20:52 | 2384128 disabledvet
disabledvet's picture

I feel like I get better information here actually. the "macro stuff" is now pretty straightforward: revolution in Syria, the possible collapse of the Communist Government in China, Fukushima, the Arab Spring/Revolt, the EU on the brink. Quite breathtaking really. And as reported in the New York Times today "Barak Obama's foreign policy is the most aggressive in memory." Surprisingly so actually.

Sun, 04/29/2012 - 20:55 | 2384129 Platinum_Investor
Platinum_Investor's picture

So is this positive for Gold and Silver or not?  Sounds like deflation.

Sun, 04/29/2012 - 21:12 | 2384143 junkyardjack
junkyardjack's picture

Bullish, better get your orders in now.  Biggest bull market in 30 years is about to start up according to Henry

Sun, 04/29/2012 - 21:25 | 2384146 Sathington Willougby
Sathington Willougby's picture


It takes a lot of stamina to sit around and contemplate why oneself is so, or a lot of pot.

Sun, 04/29/2012 - 21:33 | 2384151 aerial view
aerial view's picture

HH, I don't know if you talk to everyday working people (who still read) anymore but they will tell you:

The Big Banks have become even bigger while borrowing all the money they want at near 0 interest rates to leverage again into risky derivatives knowing that broke Uncle Sam will bail them out again if necessary.

U.S. corporations are doing great by escaping U.S. taxes, creating jobs and selling products oversees.

And the middle class is being crushed, with little savings, a few paychecks away from losing their house if they lose their job, working harder for alot less money while most college graduates will be paying off debts for the next 30 year to fund a broke health care, social security, federal and state pension system while while acccumulating a 16 trillion dollar debt and counting. Have a nice day!

Sun, 04/29/2012 - 21:42 | 2384158 moskov
moskov's picture

Can't believe people believes this shit. Bullish on US. Give me fucking break

Sun, 04/29/2012 - 22:14 | 2384197 gjp
gjp's picture

Pompous dick prattling on about how smart HF managers are, being oh-so-contrarian by betting on the continuation of the status quo of anglosaxon fiancial domination / repression on which he and his HF buddies depend.

Sun, 04/29/2012 - 21:44 | 2384163 A_S
A_S's picture

even Hugh Hendry makes spelling mistakes


'Individual mortgage borrowings wHere growing 6x faster'

Sun, 04/29/2012 - 22:02 | 2384185 silverdragon
silverdragon's picture

China makes everything and has lots of gold and silver it will continue to do fine.  It does business in almost every country. Exports more than it imports. It is flatlining its own property market to reduce inflation.

Sun, 04/29/2012 - 22:50 | 2384244 LongBallsShortBrains
LongBallsShortBrains's picture

But china doesn't have millions of snap recipients! How are they supposed to compete with us when we have millions of people who eat for free? How could they?


Sun, 04/29/2012 - 23:55 | 2384313 jonjon831983
jonjon831983's picture

But what are the reasons why China makes everything and currently at what currency and price are the input costs?  Are the property prices the cause or the effect of inflation.

Mon, 04/30/2012 - 00:38 | 2384340 silverdragon
silverdragon's picture


China makes everything, as whomever makes everything gets to charge a premium for those goods. It makes a lot more sense than being the cuntry that buys everything off the country that makes everything. They export goods to other countries and a lot of those profits ended up in China property as it is a cultural requirement to own property asap. As soon as someone makes it in China they have to gift property to their large extended families. This caused inflation. Debt to equity ratios for property in China are quite low and they don't sell.  They buy and hold. As China continues to expand trade with all the 200+ countries they will be in a much better position than most other countries.  Their continual investment in infrastructure/rail is a positive thing for the future especially increased trade with the rest of Asia/Europe and Africa. As commodity prices increase as they have done Chinese businesses pass those costs on to customers. As customers have little alternative they pass those costs on to end consumers.

Mon, 04/30/2012 - 01:25 | 2384377 jonjon831983
jonjon831983's picture

In principle I do agree, but I really think the true premium comes at the retail end depending on supply and demand of the good being sold.

The manufacturer (mfg) is just another cog in the supply chain wheel.  No demand means no mfg.  The money that is made in this part of the chain is dependent upon the downstream customer.  The mfg'r of course gets a premium, but they are dependent upon the willingness of the retail distributor/wholesaler to pay that price.  If the mfg'r wants to charge that premium, it is fine, but the customer will look for cheaper prices wherever they may be ie. Vietnam, Indonesia, Bangladesh, Mexico, Honduras, etc.

The cuntry that has been buying all of these goods from China via defacto vendor financing which is probably the reason why China is holding a Trillion something in USD Debt.  Now China may be in a very awkward position because of this.  The adage of it is better to owe $100MM to a bank than $1MM appears to becoming true.


What will be very interesting is what happens when/if property taxes are eventually introduced throughout Mainland China.

Mon, 04/30/2012 - 02:24 | 2384418 silverdragon
silverdragon's picture


One country has accumulated a couple of trillion in fiat from an assortment of countries which it should be able to turn into commodities which will do OK long term. The other country has accumulated 18 trillion in debt. Working out the winner aint that hard.

Industries going from China to South East Asia were booted out, many were dirty industries, shoes etc with high petro chemical usage.

It is always better to owe a million than a hundred million. This is something that is not that well understood in the west. Over here in Asia we do almost everything with cash and not much debt.  This is a good thing. Using profits to grow is natural and good.  Using debt to grow is why the west is so screwed at the moment.

Property tax in China is just one of many levers they have at their disposal and have not yet used.


Sun, 04/29/2012 - 22:13 | 2384191 bob_dabolina
bob_dabolina's picture

Let's assume the US debt ceiling goes up another 2 trillion in October, which I suspect it will:

I'm just gona' do some back of napkin here and call it 18 trillion in total.

Assuming 3% interest that puts us at 540,000,000,000 in interest payments alone.

Now let us assume interest rates go to...8% as the US economy picks up like Mr. Hendry States. That puts us at a whopper of a number of $1,440,000,000,000 (1.44 trillion) in interest payments. The CURRENT U.S budget deficit is currently 1.32 trillion.

If we used 14% going back to the Volker ref. we would get 2.5 trillion in INTEREST PAYMENTS ALONE.

So if we used the most provocative assumption (14%), which historically has occurred, our interest payments will roughly equal if not surpass our entire budget deficit for the year. 

For some reason that just doesn't make me bullish, though I suppose, if you take the side that the FED will print the money to keep the rates low, than I suppose it is possible we see an epic 30 yr bull run due to inflation. It should be noted that one of the most epic stock market bull runs of the last 15 years was the ZSE (the Zimbabwe stock exchange) which also happens to be a country notorious for it's desire to hit CTRL P.

Def. a good post, and good missive/analysis by Hugh Hendry.

Mon, 04/30/2012 - 07:56 | 2384595 jerry_theking_lawler
jerry_theking_lawler's picture

rates will NEVER go above 4% ever, ever, ever again under the current system.....the FED will make certain of this.

Sun, 04/29/2012 - 22:32 | 2384198 Monedas
Monedas's picture

Sydney Greenstreet to Humphrey Bogart : "Remind me that I owe myself two cartons of American cigarettes !" !   They can't take away all our fond fiat memories !  We are the Jon Corzine of the world and we deserve all the perks we stole !  Just kidding !  The world owes us a living for all we've done....and all the debt we peddled was our way getting paid first !  We are the brain in the glass ball with electrodes in a science fiction movie.....we are the worlds central nervous system....we are essential....we came through the Great Depression....we will come through this more dominant than ever !  Hendry's right on about that ! Semper Fi Pax Americana !       Jesus ran off the money lenders from the temple steps !  I would have let them set up shop in the back, unused pews of the temple....for a small fee !  Jesus was a Socialist ! Socialism is a religion for enslaving people !      Monedas  1929     Comedy Jihad Opiate Of The People   

Sun, 04/29/2012 - 22:23 | 2384200 Ramboy
Ramboy's picture

Upgrading the debtor and downgrading the creditor.  Sounds like obvious selective indignation off his western roots.   This is Donald Trump & Chanos's thesis.  Nothing new.  And not contrarian.  Lot of asia haters out there.



Sun, 04/29/2012 - 22:57 | 2384249 silverdragon
silverdragon's picture


It is not just that there are a lot of Asia haters, its more that there are a lot of ignorant people commenting on subjects of which they have no knowledge.

Sun, 04/29/2012 - 22:16 | 2384201 Smokey1
Smokey1's picture

Hendry is a fucking idiot.

Getting near 1982 or 1932 bull market levels, my ass. Why people pay these goddamn fools to talk is astonishing.

My 6 yr old niece knows more about the global economy than that fucking imbecile.

Sun, 04/29/2012 - 22:39 | 2384225 silverdragon
silverdragon's picture

Smokey 1

Great comment.

Sun, 04/29/2012 - 22:24 | 2384210 devo
devo's picture

This guy loves talking about himself.

Mon, 04/30/2012 - 11:45 | 2385182 Ramboy
Ramboy's picture

He will crash and burn like all PM's who overindulge in self-hubris

Sun, 04/29/2012 - 22:34 | 2384218 silverdragon
silverdragon's picture

10% return per year, wow! I guess that explains his inaccurate perceptions of Asia and China. 10% return in Asia means you are retarded. Time for him to disappear for another couple of years.

Sun, 04/29/2012 - 22:44 | 2384230 rosiescenario
rosiescenario's picture

OT.....but anyone look at the silver chart just now? Weird spike.....

Sun, 04/29/2012 - 23:07 | 2384259 bnbdnb
bnbdnb's picture

Same kind of spike in JPY. Maybe Japan trying to kill some shorts. I really wonder if they will start doing that on a regular basis.

Sun, 04/29/2012 - 23:40 | 2384297 Crumbles
Crumbles's picture

Holding hands with gold, too. WTF


Sun, 04/29/2012 - 22:52 | 2384246 the grateful un...
the grateful unemployed's picture

2. The need to choose the asset class offering the highest probability of payout should the conviction hold true whilst offering an asymmetric loss profile should the original premise prove unfounded


this is the reason behind the housing market. truth: we're in a fifty year bear market in housing asset values, a house is no different than an automobile, it has a useful life, but eventually the money invested disappears (note the commerical real estate business is doing a lot better, even while asset values fall, the landlord manages to extract more rent ) why? why would anyone buy a home in this environment? so at the end of your time you sell it for less? why do buyers prefer to lease cars? why do autmakers charge so much to lease a car? because a 20k investment in a car is zero after ten years?

i think i get it, its all about cash flow, borrow for ZIRP and rent for something more. who gets the best rate on credit? wall street? why not main street? maybe next election somebody will bring this problem up for a vote.

Sun, 04/29/2012 - 23:10 | 2384264 silverdragon
silverdragon's picture

The thing about China and South East Asia is we are all about the cash over here. There is not much debt and we make everything. Companies pay nice dividends especially in HK. Cuntries that are heavily indebted are screwed and will be the dead zones. OZ, Canada and Kiwiland will do fine as will South East Asia as we are all useful to the Dragon.

Sun, 04/29/2012 - 23:39 | 2384296 silverdragon
silverdragon's picture


Absolutely correct about entrepreneurship as the way to ride out the coming reset. You have direct control over your future. It is also a great way to generate a surplus to get more physical silver as well.

Sun, 04/29/2012 - 23:48 | 2384308 web bot
web bot's picture

Mr. Hedry should also note that in the last 6 months of Camus' life, he came to believe in God and was remorseful of his stance and how it had poisoned the minds of millions in academia. That's a fact. Check it out....

Mon, 04/30/2012 - 02:10 | 2384413 hustler etiquette
hustler etiquette's picture

This is keeping me up at night. Camus believes in a God. No evidence found on Bing nor the Goog. Perhaps you can point me in a better direction.

Sun, 04/29/2012 - 23:55 | 2384314 hustler etiquette
hustler etiquette's picture

Hugh says God is dead and life is absurd.  I disagree.  God is dying and life is a bitch.


I was here.


Mon, 04/30/2012 - 00:10 | 2384324 WallowaMountainMan
WallowaMountainMan's picture

"The momentous nature of recent advances in shale oil and gas extraction..."

Cited as a bullish reason for US , once the distribution system is in place, nat gas will become fungible and the cost to us poor folk here in the homeland will rise to meet the global price. (why sell local to make a buck when you can ship it to Timbuktu for an additional cost of 'x', but make 4$?. t just happens that North America is point of origin, not point of sale.)

i looked at the jpg chart. Thought i saw we were at zero lower bound restricts monetary policy, and high sovereign debt restricts fiscal stimulus. Do i skip over CRASH to get to QE? Just curious to see if i started in the wrong place.

p.s. i do think raising the walls and rejecting 'globalization' would work. sure it would be a shock, as would all other 'solutions', but we know we can grow food and if we got energy....we live in a nice place. doesn't work so well for other places, but what the heck.

Mon, 04/30/2012 - 00:26 | 2384332 strannick
strannick's picture

What to  do owith the rest of the portfolio with 10% in gold?

Isnt it obvious?

Spend the rest on silver

Diversification bitchez



Mon, 04/30/2012 - 00:31 | 2384336 jonjon831983
jonjon831983's picture

Quite a few bashing HH here.  Interesting...

Just read the first couple pages of the actual letter for the reasoning.  The breaking of fixed currency is what will cause the final shoe to drop.  China has also printed to "infinity" due to the CNYUSD peg.  For every USD that is printed the equivalent CNY must exist as well.  As the argument goes against the US Fed, printing should be causing inflation across the board, but why did this not ocurr in the early days?


According to HH, China was able to keep inflation from spiking because of "financial repression of a gigantic scale".  If anybody recalls previous china bear attacks - Chinese citizens were getting negative returns if they held cash.  "By the first half of 2008, inflation was running at 7.9% and the real rate of return of demand deposits had fallen to -7.2%"  They had no choice but to place their money into different assets (a la housing, commodities, foreign assets, Macau casinos) and as prices increased their risk has grown as well.  Hugh goes on to say that "annual returns from residential investments beat term deposits by a whopping 5% p.a. in real terms", cheap borrowing costs, and no property taxes all made this asset class a "no-brainer".  Hmm... this whole cheap funding thing sounds somewhat familiar...


It is more revealing to read the rest of the actual newsletter (goes further than just housing) than the summary posted by ZH.  The cycle chart is also quite helpful.  There is more to bearishness on China than one may think.  The bullishness of US I don't really get that well as of yet, but the reasoning can be gleaned from pages 5 and 6.


If what HH foresees does come to pass, it is quite chilling to think of the psychological impact ... not just in China, but across the globe for those who think or take China to be the great hope to pull us out of the quagmire or path to riches.

Mon, 04/30/2012 - 00:52 | 2384354 dolph9
dolph9's picture

Hugh Hendry has lost his mind.  And I've lost respect for him.

The only thing he knows how to be now is a contrarian.

The big thing that Hendry misses, that zerohedge has picked up on, is that a larger portion of the sheeple are now starting to "get it" which means that, if most people in America are now pessimistic, you cannot automatically take the opposite stance.

The poor conditions are based on reality, not just perception.  The ability of the oligarchs and media to manage perception is going away.

Mon, 04/30/2012 - 00:57 | 2384360 Tao 4 the Show
Tao 4 the Show's picture

Hendry's view will be fun to think about going forward. There are a couple of ways he can be correct, the primary one being inflation as others have mentioned. But I note a speck too much self congratulation here, the usual sign that one is in fact past the point of being able to do what they excelled at in the past and are bragging about now.

The biggest problem for financial contrarians, IMO, is that contrary thinking involves a reflexive exploration of the opposite side of a dialectic construct. It is a good exercise for stretching the mind and pulling away from the herd. But by itself, it does not offer a way to escape the dialectic. I find those in the financial world, partly because they are so well paid, to be unable to venture beyond the bounds of "the world as they know it". To do so would be to consider the possibility of their own irrelevance.

The few that do, are more of the Tyler style. One has to be willing to consider that they may be only a character in a make-believe story. That would be far closer to a fresh Camus perspective: Money making by spinning nothings inside fairy tales (investment manager's version of god) is dead, it never was real, and there is no rule that says life as you have known it will continue. The new existentialism for money managers.

The original existentialists (for whom I have some respect but no love) were venturing into the unthinkable to experience and look at the world from a position of being stripped naked of meaning. Changing playing positions from midfield to outfield (because you think the usually bunting pitcher may hit a long ball) while referring to Camus is only another indicator of the depths of inanity to which we have sunk.

Mon, 04/30/2012 - 00:57 | 2384361 rumblefish
rumblefish's picture

anyone been able to get the  newsletter. it s gibberish on scribd


Mon, 04/30/2012 - 01:04 | 2384363 dolph9
dolph9's picture

Hugh Hendry is a money junkie.  Probably a kinder, gentler, wiser money junkie, but a money junkie nonetheless.

What these guys never want to admit is that in a world of 7 billion people and declining real resources, there's very little genuine money to be made.  If you make alot of money, it'll just be confetti, meaningless unless you actually spend it, convert it...the quantum effect.  But if you do so, you shoot yourself in the foot because you will acquire a deflating asset.  But if you don't spend it, what is it for?

A conundrum that has always plagued them.

Hendry just about admits as such...his job is to "make money."  In other words acquire more fiat for people who are already loaded with fiat.

Hendry is a whore for the rich, basically.  Not too noble, folks.  And he pretends to be a philosopher to make himself feel better, to make up for the fact that he knows he creates nothing of value.

Mon, 04/30/2012 - 01:41 | 2384396 LarryDavis
LarryDavis's picture

Yes. That psychology is like a broadsword attached to a 50 cal fired at close range right as the knife simultaneously pierces the fucking skull nanoseconds after the large shell explodes into the brain causing irrevocable damage and terrible stains to the Hermes tie. This is a game and nothing more. This jerkoff has some hypothesis which is based on what? Is he running the numbers through SAS? WHERE IS THIS INTELLIGENCE COMING FROM HUGH? GET THE FUCK OUT OF HERE. DUDE'S LAST LINE OF BLOW PROBABLY ENDED RIGHT ON A WSJ ARTICLE TALKING ABOUT US REBOUNDING. DO YOU KNOW WHAT HEDGE FUND MANAGER'S REALLY DO? DO YOU THINK THIS ASSHOLE IS PORING OVER DATA? THEY RAISE FUNDS WHICH MEANS FLY TO HAVE DINNER WITH REALLY RICH PEOPLE, ENDOWMENTS, FUND OF FUNDS, ETC. FROM WHERE HAS THIS OPINION BEEN WHITTLED? SOMEONE MAKING 100-300K WROTE THIS. MAYBE THERE WERE TWO OR THREE PEOPLE INVOLVED. YOU DIG?

Mon, 04/30/2012 - 04:28 | 2384470 Seer
Seer's picture


Economics is the practice of lying for the rich.  Nothing like being a liar disparaging other lairs.

HH is great when he's pummeling other liars, but then he gets caught up in his own sense of self-importance and forgets that he too is a liar.  He's just another man behind the curtain...

Humans are an odd lot.

Mon, 04/30/2012 - 01:34 | 2384388 jonjon831983
jonjon831983's picture

Regarding the "US Rejects Globalization" stage in the cycle picture.  Here is a small story about returning manufacturing to the US.

June 20, 2011.

"Is Chinese Manufacturing Coming Back To The U.S.?"


To what scale this would happen, no clue, but the vaunted Chinese manufacturing is subject to the same economic rules like any other manufacturing business.  It is just whether than can hold it up for long enough.


The key really does seem to be currency.  Not just the CNYUSD peg, but the dollar reserve status.  If the reserve status goes or if material sourcing can be done increasingly without USD then I think HH's letter is less valid.

Mon, 04/30/2012 - 03:51 | 2384458 Seer
Seer's picture

As the late great George Carlin would say- "It's ALL Bullshit, folks!"

It's no more than a clarion call by the rich industrialists to, after they've bilked the US taxpayers by shifting overseas, "bring back jobs," a euphemism for "get [yet more] tax breaks."

Who will be the consumers?

It ONLY works on GROWTH, and growth is dead!

Mon, 04/30/2012 - 01:55 | 2384403 Lost Wages
Lost Wages's picture

In a world where everything is falling apart, what will be first to go?

Who the hell knows.

Mon, 04/30/2012 - 03:28 | 2384443 Seer
Seer's picture

Actually, it's quite simple.  Guard for the TRUE fundamentals: Food, Shelter and Water.  Leverage and power are from energy, this is where the seams start to split (as if the ME wars haven't been a big enough clue).  Check out your pocketbook, then check out the prices at the pumps...

Mon, 04/30/2012 - 03:02 | 2384431 Seer
Seer's picture

In other words, you are on your own and you must take ownership of your own destiny.

Aye!  And this is why I have NO "money managers!," sorry Hugh.

Eclectica occupies an area outside the accepted belief system.

And yet it's measuring itself based on that very system?

If we were like the majority of people on the planet, earning the equivalent of $3/day or less, then what use would there be for Hugh?

Hugh is starting to wear on my nerves just like Roubini once did (and then I got better, I started to ignore him).

It's best to just state the obvious and then run along: the System is fucked and is going to go down in a heap of flames; in the face of this it's up to YOU to figure out what is best for YOU to do.



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