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Hugh Hendry Channels Irony And Paradox In His Latest Financial Outlook

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Thu, 11/03/2011 - 18:16 | 1843368 UP Forester
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He's not bearish on gold anymore, but long CDS on Japanese sectors.

Too bad the first has only been worth something for thousands of years, while the latter was proven last week to be useless last week....

Thu, 11/03/2011 - 18:23 | 1843388 Bananamerican
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"The only environment that makes hyperinflation possible (& gold golden) is “the mother of all depressions” he says."

I think Hugh underestimates western populations impatience with pain...

We've got the embers of unrest now....

How much farther into deflation do we need to go till Argentina? Not as far as he thinks, imho

Thu, 11/03/2011 - 18:36 | 1843432 theMAXILOPEZpsycho
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every month more and more baby boomers retire and expect fat pensions. Goverments might think, oh just a little, just a little bit more easing

meanwhile china says, hmmm like to expand the military and take more control in africa, dollar becoming worth less and less, lets just dump a few more billion

and with the velocity picking up the money supply is already big enough to lead to hyperinflation

Having said that I do think we'll see massive deflation first

Thu, 11/03/2011 - 19:06 | 1843507 agent default
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Depends on the definition of massive, it tends to be very subjective.  Western society mentality seems to be stuck in "entitlement mode" for quite some time.  can really blame them either.  Many people paid contributions to a national insurance/security system that spent their money instead of saving it for them.  They will be righteously angry when financial reality hits and they will have to be satisfied.  Running the printing press seems to be the most efficient means of doing so, so far.  Very few people understand the implications of CB actions.  Most of them are happy with a scape goat like evil commodity speculators, hedge funds shorting bonds etc.

Thu, 11/03/2011 - 19:16 | 1843528 Spitzer
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The countries involved in the Asian financial crisis (400 million people) did not experince "deflation" first.

Thu, 11/03/2011 - 20:42 | 1843647 nick elsworth
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The easiest way to determine what TPTB will do (regarding inflation/deflation) is to indentify which demographic has the most money to lose, then bet that they will suck that money from them.  In my opinion the retirees have the most money to grab, so the easiest way to grab it is to inflate their money into irrelevence.  The majority of retirees are already investing in bank CDs yielding NEGATIVE real returns. 

Thu, 11/03/2011 - 21:19 | 1843684 Spitzer
Spitzer's picture

Unfortunatly allot of people look to be dumb enough to hold these bonds while their capital gets destroyed. Negative returning assets actually destroy capital.

Fri, 11/04/2011 - 07:00 | 1844266 Treason Season
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Spitz, please,

it's  "... a lot of... .

"Allot" has a completely different meaning. Cheers.

Fri, 11/04/2011 - 07:17 | 1844280 twotraps
twotraps's picture

agree, totally overlooked aspect of todays trade.  I also wonder about Deflation, despite all the arguments bla bla bla ....simply because its what they fear the most and if there is Any semblance of a mkt left, it finds a way to punish you in the end.  In this case it may just be deflations.

Fri, 11/04/2011 - 08:31 | 1844523 Bicycle Repairman
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"The easiest way to determine what TPTB will do (regarding inflation/deflation) is to indentify which demographic has the most money to lose, then bet that they will suck that money from them."

Another thing to consider is: what has worked in the past?  Looking to the 1970s inflation is the answer.  If we look to the 1930s we see deflation, but that is the period that is marked as a mistake and a never-to-be-repeated calamity.  The 1970s is just another decade.  So the answer is inflation.  2% to 10% a year until this blows over.  This might take a generation.

Sat, 11/05/2011 - 02:10 | 1847974 mkkby
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Everyone on ZH believes banks rule the world.  So hyperinflation will never happen because that frees everyone from their debt.

The banks already have their perfect setup.  Zero interest rates, which allows them to slowly suck the retirees savings.

If you (wrongly) believe in hyperinflation, don't just buy gold.  Get as heavily into debt as you can.

Thu, 11/03/2011 - 21:49 | 1843731 Voodoo-economist
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but wage inflation, to be fair

Mon, 06/18/2012 - 19:24 | 2537778 hbjork1
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In addition, there is always the destruction of buying power in any savings denomitated in paper money buying power.  I have two fixed pensions granted as a result of corporate acquisitions. One was 1972, the other abouit 1979.   The buying power when granted would be roughly equiviliance to Social Securiy payemts today. 

But I know what it is to dig ditches professionally with a shovel in a southern summer sun.  Life is a terminal condition and I am at an age of entitlement so I might as well enjoy it.  

Thu, 11/03/2011 - 19:46 | 1843575 Citxmech
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It's never been "either/or" it's been whether hyper-inflation would follow the deflation that is looming. 

Deflation is assured at this point.  If loans aren't being made at a rate to pay the interest on the current debt-load - our debt-based system will collapse out of necessity.

Do our "leaders" have the will to idle the printing presses in the face of catastrophic deflation?

I'm with M. Faber:  NO.

PMs Bitchez.

Fri, 11/04/2011 - 02:58 | 1844172 Libertarians fo...
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Deflation is assured at this point?  Are you aware that there are individuals at ZH who don't believe in deflation?  They think it's a myth.  


Fri, 11/04/2011 - 08:38 | 1844547 Bicycle Repairman
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Inflation, deflation or hyperinflation are policy decisions, IMHO.  If the economy was left to its own devices there would just be deflation.  Does anyone believe that the economy will be left to its own devices?  Deflation will be tolerated to a point when it is helpful e.g. driving down gas prices in an election year.  The long term solution is inflation and lots of it.  They will not allow hyperinflation.  It's not helpful to TPTB.

Thu, 11/03/2011 - 22:13 | 1843761 Dane Bramage
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"The only environment that makes hyperinflation possible (& gold golden) is “the mother of all depressions” he says."

I think Hugh underestimates western populations impatience with pain...

We've got the embers of unrest now....

How much farther into deflation do we need to go till Argentina? Not as far as he thinks, imho




Zactly!  & yes, we can "forget about Zimbabwe" (maybe?) , but what of the litany of all other inflationary examples throughout the world & history?   Untenable debt is untenable, even in bizarro land where debt = *money*...errr, currency.  Default or Inflate (or do I repeat myself?) ~ those are the only options.  Place yer bets &/or prepare accordingly.


Fri, 11/04/2011 - 02:26 | 1844158 Bwahaha WAGFDSMB
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The 2 leading causes of hyperinflation are, foreign denominated debt, and war.

Thu, 11/03/2011 - 18:30 | 1843413 camaro68ss
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who says you cant have inflation with out wage incresses? why? why cant you have staghyperinflation?

Thu, 11/03/2011 - 18:32 | 1843419 Mike2756
Thu, 11/03/2011 - 18:45 | 1843462 pirea
pirea's picture

Hyperinflation will come when all money on the side, in preservation mode, will start bidding on something real.

Does not have anything in common with wages this time, because is going to be run by a minority.

Thu, 11/03/2011 - 18:49 | 1843472 Mike2756
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Where's Tyler's lampost pick again, lol. We'll see how long the minority lasts.

Thu, 11/03/2011 - 22:26 | 1843775 wisefool
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Someting real? Groupon IPO'ed at $20/share. As explained to me, you are going to take one of these into a local business and have the lost in translation soup nazi negotiation with your local small businessman. That sounds real funny!

Thu, 11/03/2011 - 18:53 | 1843480 hayesy316
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Because inflation is self-limiting unless labour can demand higher nominal wages. In a low-skill, globalised economy obsessed with free trade and a bottomless pit of slave labour (ie, China), it ain't gunna happen. But hey, buy gold, right? You know better than Hugh Hendry.

Thu, 11/03/2011 - 21:04 | 1843667 CapitalistRock
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You could not be more wrong. Ever since the Roman Empire inflations were created by debasing the currency. Higher wages are never necessary if your central bank keeps printing.

Fri, 11/04/2011 - 06:47 | 1844259 Crime of the Century
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But hey, buy gold, right? You know better than Hugh Hendry.

If you are speaking of physical gold, then yes, I guess I do. Hendry likes to tell people his judgement of whether they are true contrarians, but it is still a most accurate assertion that owning bullion is a contrary position. ETFs, shares and rolling futures are something fundamentally different from bullion, the ultimate contrarian position.

Fri, 11/04/2011 - 08:42 | 1844568 Bicycle Repairman
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Inflation without wage inflation means a lower standard of living.  Well we know that could never happen.  LOL.

Thu, 11/03/2011 - 18:54 | 1843481 jcaz
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Yep- Hugh needs to update the value on those CDS's to "when they don't feel like honoring them" on his balance sheet....

Thu, 11/03/2011 - 21:35 | 1843705 Bad Lieutenant
Bad Lieutenant's picture


Hendry obviously has an impressively keen mind.  I think his weakness, however, is that is pride is so wrapped up in identifying with being contrarian that his mind is biased against strategies that happen to be even somewhat widespread (the key of course being to figure things outs before the masses do).  Being a contrarian may pay off well in minor to moderate turning points in history, but when the insolvency of the G8 is becoming increasingly clear to even the most wool-headed financial minds then guess what: we're getting close to the rapids and waterfall.  The sad thing is that most people are still in subconscious denial in what's ahead, so in that way it's still not even contrarian to to be positioning in common-sense trades that will payoff when things start to go nuts.

Zh posted that four part video of Hendry a week ago, and to me it was really apparent how much on the edge of sanity that guy is.  


Thu, 11/03/2011 - 22:31 | 1843789 Bolweevil
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Sanity is overrated. Could it be said that the definition of INsanity is NOT doing something repeatedly and expecting a different outcome (read: sit idly by as fraud and corruption rule the day)? Short ban pfft! ES pump pfft! PM manipulation pfft! Regulatory capture pfft! Moral hazard pfft! Have honesty and transparency always been so elusive?

Fri, 11/04/2011 - 01:28 | 1844122 Bad Lieutenant
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Yeah, you're totally right, plus I'd be the first to agree with the fine line between genius and insanity augment.  I suppose my criticism should have been more thought out.  Now that I'm putting my finger on it (and I thank you for your comment), I suppose that it was comment about his long term return figure written on a piece of paper that he said what he was most interested in.  It made me think that although being right in trades can feel good and do amazing things to a life, I'm pretty sure it's not healthy for that to be the most important thing.  It's the same affliction as any of these bankers have, except that Hugh runs his own show.

Fri, 11/04/2011 - 06:27 | 1844251 Bolweevil
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Some of them are full on pathological. How else could they sleep at night with their shenanigans? And we only know about the few things that get reported...

Thu, 11/03/2011 - 21:33 | 1843706 Bad Lieutenant
Bad Lieutenant's picture




Thu, 11/03/2011 - 18:23 | 1843385 kaiserhoff
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Bad moons, and facials, and money shots, oh my!

Thu, 11/03/2011 - 18:24 | 1843389 wisefool
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I generally dont like low humor, but man, that was funny. On the more up and up side of humor, bloomberg had a "Formal Federal Prosecutor" on the phone today around 15:00 EST re: MF Global.

Maybe my eyes are bad, but for the entire telephone conversation segment they had the guys portrait on the screen and his title was "Formal Federal Prosecutor" what woud an "informal" federal prosecutor be?

Thu, 11/03/2011 - 19:00 | 1843496 Strom
Strom's picture

Probably was a "former federal prosecutor" and the person typing it in heard it wrong.

Thu, 11/03/2011 - 19:03 | 1843500 wisefool
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Ohh I know. I was just kinda wishful thinking that there is a shadow government that catches the bad guys like corzine. (legally, without violence)

Thu, 11/03/2011 - 19:30 | 1843551 Strom
Strom's picture

Likely a shadow government, but they do not catch bad guys like corzine (unfortunately).

Thu, 11/03/2011 - 18:21 | 1843372 moskov
moskov's picture



So dollar is not currency of capital, but fake confidence without manufacturing production backing with it.

Nuclear Bombs? Plenty of countries have them these days. Not a big deal.


Hugh Hendry Long CDS? good luck with him. Hope you can dress them AS underwear in the bedroom and put your food on the table
Thu, 11/03/2011 - 18:47 | 1843445 Bumblebee Tuna
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I reckon that Fort Knox is stuffed full of gold, 'however' it's probably mostly illegally looted gold from post WWII Germany and Japan, and more recent exploits in Iraq and Libya.  

All the gold that the US doesn't want the rest of the world to know it has in its possession.

Thu, 11/03/2011 - 19:19 | 1843533 wisefool
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What exactly could they do about it? The world pulled more gold out of the western hemisphere than is still there (above or below ground) regardless of who "owns" what chunk.

Thu, 11/03/2011 - 19:30 | 1843550 iDealMeat
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Even if you can "prove" or at least provide a compelling argument that there is no god, the blind faithful will still go to church.


Thu, 11/03/2011 - 19:39 | 1843565 donsluck
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Yes, we are a faith based economy. Geitner et al have been complaining about the loss of faith, and what to do about it. So, the question is, what happens to a society who has lost it's faith. Your argument is that we will "still go to church" ie use this instrument we have lost faith in and I agree. But this site is not for those who want to get by. This site interests those whos' persuit is profit.

Thu, 11/03/2011 - 18:20 | 1843374 Mike2756
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Let them print some more, real incomes will fall even faster.

Thu, 11/03/2011 - 18:20 | 1843375 smoked
smoked's picture

Engaging site.  Happy surf & turf all you can Heat branding.

Thu, 11/03/2011 - 18:20 | 1843376 knight99
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HH is Legendary

Thu, 11/03/2011 - 18:33 | 1843422 centerline
centerline's picture

HH is legenday - no doubt.  He is right on the fucking money.  The only thing he doesn't do (because it would be moot in his position) is outright connect the dots a little further outside the economic spectrum.  What I am talking about is the obvious unsustainable, silly notion of perpetual exponential growth based on a monetary system that generates malinvestment on the basis of pure profit (serving those closest to the creation of various fiat currencies most) over what is best for society as whole.  "Checkmate" alludes to this though - so I have to give another favorable nod to HH.

Thu, 11/03/2011 - 19:47 | 1843577 Bruin4
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I like Hugh a lot, but his timing has been absolutely fuking awful these past 2 years, then again so has mine....it does not mean he is wrong - just early, which is wrong no?

Thu, 11/03/2011 - 20:18 | 1843615 WonderDawg
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When it comes to trading, yep, early is wrong. When it comes to preparation for a cataclysmic event, early is genius.

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