Reflationary Bias for Portfolio King – Hugh Hendry

Featuring Hugh Hendry

Hugh Hendry is a master of portfolio construction, with the ability to limit the downside while positioned for the assymetric payoff. Speaking to Raoul Pal, Hugh explains how his portfolio is set up for reflation and a healing in Europe, as well as how that’s all put together with offsetting trades. Watch Hugh and Raoul debate the potential length of what could be the longest business cycle in history, the art of macro and the opportunities around the world. Filmed on June 27, 2017, in London.

Published on
21 July, 2017
Topic
Hedge fund, Macro, Portfolio Management
Duration
79 minutes
Asset class
Currencies, Equities, Bonds/Rates/Credit
Rating
95

Comments

  • AC

    Alessio C.

    2 5 2018 11:51

    0       0

    I feel he doesn't believe what he said - credits vs debtors. He wants to protect the poor / working class where he came from. However, this conviction about an unfair world of central banks affected his trading strategies/profits.

  • JM

    Jason M.

    30 9 2017 15:13

    1       0

    Sad for Hugh. The problem with all these macro gods is that everything they knew their whole careers (in G7 markets) was essentially lost due to unconventional CB policies. It is much harder to identify "value" in G7 macro trades than in emerging markets (which still have cycles for the most part). Also there is macro vs micro argument (again in G7)....it is simply much easier to find value in micro stories (especially in cyclicals) if you are constructive (but not highly convicted) on the macro. How do macro guys get conviction in this world? There work is tied too closely to an imperfect science with manipulated government numbers. Outside of accounting fraud, you know much much more of what you are dealing with as a micro guy.

  • DC

    Dave C.

    17 9 2017 01:05

    0       1

    The irony of the comment from Hendry regarding Grant Williams being the Black Knight is too great to let slip given the fate of Eclectica. A lesson for all of us.

  • AS

    Andrew S.

    15 9 2017 14:38

    0       1

    "Markets Are Wrong": Hugh Hendry Shuts Down His Hedge Fund"...... Down 9.8% YTD in 2017.......... This is what happens when smart people make things WAY too complicated.....

  • OM

    Omar M.

    13 9 2017 10:41

    0       0

    What is the most effective way for a retail investor to short the Schatz? Thanks!

  • sp

    shashwat p.

    2 8 2017 09:13

    5       1

    Mostly over-complicated garbage. Much rather watch the Russell Clark interview again. Much the same points except made much more simply. These boys are going to get sucker punched in USDJPY.

  • WM

    William M.

    29 7 2017 21:01

    3       0

    mmmmm HH just comes across a little conceited to me. Probably a great guy to have a beer with.

  • AR

    Alex R.

    27 7 2017 02:15

    2       0

    Raoul just said to close long Greece position in his last GMI letter. In this interview, he gives the impression that he is still long and believes it could double. We can play with semantics, but tha

  • LI

    Lorrie I.

    26 7 2017 06:38

    14       2

    The flippant comment that raoul made about it being easier owning a coffee shop than investing agitates me. As a small restaurant / coffee shop owner i dont even want to begin to debate how wrong he i

  • ML

    M L.

    25 7 2017 22:52

    0       0

    Private sector re-leveraging has been evident in non-financial corps in the US and Europe. In the former, it hit pre-crisis levels a while ago, and now debt service has deteriorated. If there has been no re-leveraging, what has all the issuance been about? Banks have de-levered - true.

  • DY

    Dmytro Y.

    25 7 2017 04:35

    6       0

    a comment for fun: this gentleman would have been much better than di Caprio in playing in the movie Wolf on the Wall Street, he'd be so much better than di Caprio, Or maybe in Big Short. Apparently Hollywood did not discover how much actor talent can be found with real money managers! :)) and they would know the script better! :))

  • BC

    Burton C.

    25 7 2017 03:42

    13       0

    I made a comment yesterday, however today it occurred to me what this interview truly represented. If you ever watched interviews of Hugh from 5 plus years ago he was dashingly bold in his macro reach. What I saw today however was a timid currency hedging strategy essentially. I mentioned yesterday that was sad. But here is what is even sadder: this interview is exhibit "A" of how Central Banks have emasculated even the most wild eyed of money managers. They have converted him to simply fall in line with a red hot printing press. No longer can anything be valued on its merits, but instead only on how it will be affected by the sea of liquidity approaching in the form of a total wave. Sad indeed.

    • TS

      Thomas S.

      29 7 2017 02:30

      5       0

      Amazing he thinks the world is healing. Brushes off pensions, autos, never mentions debt-derivatives

    • BC

      Burton C.

      30 7 2017 19:46

      3       0

      Exactly.... forget the real economy, it's only about the money printing

    • JC

      John C.

      7 8 2017 15:23

      0       0

      well it may be healing a bit but the patient is still in the hospital. Does seem to me that Hugh gives the central banks too much credit as if they 'had a plan' when really they created the bubbles and then either made it up as they went along and/or just take pages out of the JCB playbook

  • JC

    Justin C.

    24 7 2017 17:17

    1       0

    I wonder if Hugh recognizes the perfect negative correlation between USD/JPY and the gold price. He mentions the connection to the S&P, but the more important one might be gold. Paul Mylchreest should come on and break that down for the RV crew.

    Great interview overall - I really enjoyed how Hugh didn't roll over and accept assertions from Raoul at face value (e.g. the coffee shop discussion). I also like their commentary on labor now controlling the creditors. I believe they discussed this last time as well, which made me feel smart for a moment having come to that same conclusion.

  • hg

    henry g.

    24 7 2017 16:20

    3       2

    I actually think the chest adds character to the interview

    • JC

      John C.

      7 8 2017 15:33

      0       0

      Rock 'n roll baby!

  • GM

    Greg M.

    24 7 2017 14:30

    2       0

    They made me go back and watch the black knight skit. : D

  • EH

    Eric H.

    24 7 2017 13:38

    14       2

    hugh is very confident and insightful but im going to need him to button his shirt. your a manager not mick jagger :)

  • TJ

    Terry J.

    24 7 2017 09:17

    1       0

    Wow! Brilliant and I could have listened to this conversation for hours. Two global macro Kings for the price of one. I don't necessarily agree with Hugh on everything especially gold, but I can't argue with his incredible record or his incurable optimism! Priceless!

  • FM

    Federico M.

    24 7 2017 08:31

    3       0

    Always interesting to listen to Hugh. Last 10m or so absolutely excellent; very rare to be able to sit in on this kind of conversation... really refreshing and thought provoking.

  • RA

    Ricardo A.

    24 7 2017 06:35

    0       1

    ...

  • LC

    Liliana C.

    24 7 2017 05:20

    4       7

    Hugh is eclectic which is probably why his fund is named similarly. The manner in which he articulates his thoughts is not out of the norm in the macro world he lives in. His views about the world healing are probably based on his observation of the WORLD. So many people here have such a US-centric view of the world and cannot possibly consider another point of view. All the trade structuring and deep thinking is to make a return while also protecting capital. Actually, it sound like his portfolio is structured to pay off big if shit hits the fan while making a palatable return in the meantime. Why pay him 2/20? You'll find out when shit hits the fan. Until then best to STFU.

    • AS

      Andrew S.

      15 9 2017 14:29

      0       0

      Want to re-think that?? "Markets Are Wrong": Hugh Hendry Shuts Down His Hedge Fund"

    • LC

      Liliana C.

      25 9 2017 00:24

      0       0

      Nope! As Grant pointed out, when investors most need hedge funds to protect their portfolios, they won't be there. As HH put it "gone".

  • BC

    Burton C.

    24 7 2017 04:20

    11       0

    Interesting how Hugh has changed so so much over the past 10 years. I recall a podcast in the fall of 2008 where Hugh was full on anti-FED. He broke his axe so many times betting against CB policies that he finally gave up and just joined them. But now I see nothing bold no sweeping macro bets like he used to pursue. Now he just goes for the little singles---sad.

    • BC

      Burton C.

      24 7 2017 04:24

      4       0

      Oh, and did he really mention that the return for the year just went from beg to "flat". All these complex moving parts and rocket science for this? Quite chasing the FED and CBs and start thinking.

  • DF

    Dominic F.

    23 7 2017 23:59

    5       0

    I must admit I don't understand most of this but if Hugh's portfolio is based on 'The World Is Healing' then I think he needs to hedge pretty well.

  • AN

    Aron N.

    23 7 2017 22:41

    1       0

    Last 10 mins perhaps my RV favourite, in the end who gives a damn if gold is higher or lower

    • AS

      Andrew S.

      23 7 2017 23:58

      4       0

      In the end, we are all dead. Between then and now, those of us who have investments in gold and gold producers give a damn.

  • BL

    Bruce L.

    23 7 2017 21:26

    3       0

    Interesting that Hendry mentioned he thought rates moving up could actual stimulate. Ben Hunt of Salient another very original thinker said the very same thing recently.

  • GG

    Gerald G.

    23 7 2017 17:30

    14       0

    I don't disagree that we have shifted from a creditors environment to a debtors environment. and I don't disagree that, despite all the doomsayers (myself included) the cycle has continued longer than expected but....
    I disagree that this implies that "the world is slowly healing". To me this is shaping up to be worst of all scenarios. where we have artificial growth masking the fact that there is no compelling reason take a bullish AND we have artificial growth making the bearish position untenable. This NOT a world that is healing, it is a world that is stagnating.

    • BC

      Burton C.

      25 7 2017 04:05

      2       1

      Gerald, you must not have gotten the memo:
      Inflation is Growth
      Lies are truth
      war is peace

  • VS

    Victor S.

    23 7 2017 14:28

    8       0

    I like the interview and Hugh . It was mind stimulating. However no mention of Gold???? Raoul i hold you accountable for ignoring questions on gold. Here is one issue for Hugh -you say their is no real yield on debt. But you want the hedge it represents in your portfolio-? Ok from 2004 the 3 year correlation is +43.9 % up from + 1.6% fro, 1993 to date ....I don't have .from 2009 but its much higher? Think about it? Forget debt buy gold.

  • MS

    Matt S.

    23 7 2017 13:37

    0       0

    I like Hugh henry this time; I still don't agree with his "QE was great" thesis but... he's a professional money manager and I am not so, I defer to him in this instance.

  • HR

    Haz R.

    23 7 2017 12:54

    4       6

    Enjoyed listening to different views from henry but i would not give this opened shirt muppett my money to invest

    • MS

      Matt S.

      23 7 2017 13:36

      4       0

      Ohh........... bit rude there, sonny.

  • CH

    Craig H.

    23 7 2017 10:31

    13       0

    This is your typical casino investment scenario. Savers (creditors) loose while debtors (spenders) win with printing of money by central banks. Lets get back to investing in innovation and industries that supply needs not wants. Life is not a game but a journey and the winners should be the contributors to society not the leeches of society.

  • HM

    Hot M.

    23 7 2017 09:38

    3       0

    I appreciate Raoul's (personal) perspective on investing. The long view. Its why I'm here. I'm not a particularly active investor, I have limited access to market variety. So its general perspective I'm interested in, which I'd like to here more of, intermittently (every 2-3 months I guess). More such intermittent views from Raoul, some others, would suffice.

  • hg

    henry g.

    23 7 2017 03:13

    11       0

    As much as I think Grant has developed into quite the interviewer. I really like how Raoul's interviews often end up being more of a discussion. Real Vision is at its best when when get consistent interviews from both of them!

  • ET

    Erik T.

    23 7 2017 01:14

    11       18

    CONTENT: Raoul Pal and Hugh Hendry. Say no more... The content was outstanding, and I expect this to be remembered as one of RealVision's best pieces yet in terms of thought-provoking content. Bravo!

    PRODUCTION QUALITY: This was an outright embarrassment, and frankly you guys should be ashamed of yourselves for doing this to two of the most brilliant minds in the world of finance. The cheesy effect across the bottom of the frame on the wide shots added nothing and subtracted a lot. Attention drawn away from brilliant conversation to pathetic cinematography. The red steel column coming in and out of the right side of frame was distracted and added nothing. It looked like the work of a 2nd year film student desperately (and hopelessly) trying to justify to his professor why he planned and budgeted a dolly shot that not only wasn't needed, but which actually detracted rather than added to production value overall.

    Look, if you want to improve on the 2-camera shoots RealVision was founded on, focus on substantive things like organizing the set to get the brutally distracting reflections from the big widows off of Hugh's glasses, and stop wasting time and energy on cheesy, amateur misuse of dolly shots. You don't even need a wide shot in a production like this. Sure, great to have one if you can. But you obviously haven't yet gotten so far as getting the distracting shadows off of the Camera-Left side of Raoul's face. If you must position him with a massive outdoor window over his left shoulder, then for crying out loud, light him with a 5K so that we can still see his face! That would have been a much better allocation of production budget that the distracting, unnecessary dolly shots.

    The part of all this that blows my mind, though, is the sophomoric effect across the bottom of the screen in the wide shots. The business about the red column distracting our attention away from the discussion at hand was amateur to be sure, but could easily be written off to having chosen the wrong on-site contract crew to shoot the interview. Dealing with contractors has its drawbacks... But the fact that effect survived post can only mean that someone on the RVTV team actually thought it was a good idea! This is pathetic cinematography, guys, and you should be ashamed of yourselves for doing such a poor job showcasing two of the most brilliant minds in Macro today.

    I'm literally going to download the .MP3 right now and listen to this again as a podcast. The video production quality was literally so bad that I was unable to focus on the substantive content of the conversation between Raoul and Hugh. I hope you guys will do better next time.

    • TS

      Thomas S.

      23 7 2017 02:14

      16       2

      LOL...brilliant minds relegated by unjust circumstance to mainly anticipating what a cabal of sociopaths will do next in the drive toward totalitarianism and you're concerned about a distracting red column?

    • KV

      Koen V.

      23 7 2017 09:23

      2       0

      You could also just download the MP3

    • MA

      Mujtaba A.

      23 7 2017 09:45

      2       0

      Some improvement can be done. Overall I like it, I appreciate theyre trying to do BBC Dragon style cinematography. Almost there

    • MS

      Matt S.

      23 7 2017 13:33

      6       4

      Thanks for your pointless observations, Steven Spielberg.

    • DM

      Daniel M.

      24 7 2017 04:04

      5       0

      I agree that the camera work is over the top for this content. It is just an interview, no need for all the weird lighting and effects.

    • M

      Mark .

      24 7 2017 21:43

      2       0

      This isn’t “Gone With the Wind.” It’s an interview.

    • RD

      RP D.

      25 7 2017 00:50

      2       1

      “It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

    • DC

      Dave C.

      25 7 2017 01:43

      0       0

      Err.. what the last peep said.

  • SS

    Steven S.

    23 7 2017 01:01

    2       0

    I humbly post this effective but simple rebuttal to this RV interview by Adam Taggart of Peak Prosperity :

    https://www.peakprosperity.com/blog/109792/what-do-your-cash?utm_source=dlvr.it&utm_medium=facebook

  • PS

    Peter S.

    23 7 2017 00:41

    1       0

    Great interview and good dialogue between Raoul and Hendry.

  • TS

    Thomas S.

    23 7 2017 00:07

    22       4

    HH is an intelligent man, always engaging and interesting to hear. But am I the only one who finds the finance profession's devolution toward being a clique of cartel watchers an embarrassing bore? Global macro is fascinating when real markets are functioning, but the current top down centrally planned synthetic monetary system has taken all the fun out of it. How awesome would it be to see this system of creditism collapse and reset based on real capital investing in real production and real wealth creation? I say bring on the big bang. Reset the muthaphuqqa. Get me out of this living hell.

    • MS

      Matt S.

      23 7 2017 13:29

      4       0

      That's what it feels like...... it's like someone has told a lie in the classroom, the teacher expects the liar to own up but he keeps denying it. The evidence is overwhelming, all the other kids know he's lying too but he's got his heels stuck in so deep and just wont give up. The teacher says everyone has to wait and cant go to lunch until the liar tells the truth but he keeps lying, thinking he can somehow get away with it. The feeling for all the students is excruciating.... "just tell the truth!" they all shout.

      But on he goes, lying and denying............

  • JH

    Jesse H.

    22 7 2017 23:24

    7       2

    Enjoyed this interview, and good to get Hugh's view which is completely different in many respects from other guests. That said, he seems somewhat cut off from what is happening in the world - I do not believe the world is healing right now, contrary to his repeated assertion, and the US has avowedly not experienced a "prolonged and robust recovery." He should come to the US, travel around and talk to everyday people and get a feel for the 2-speed economy that gave rise to Trump (one speed for the very wealthy, and entirely different speed for everyone else). It was also revealing to listen to him describe "investing", which based on Benjamin Graham, is actually speculation. My sense is that Raoul is doing investing, which is long term, patient and strategic, with some occasional tactical moves, while Hugh is in the short-term trading / speculation world. Revealing how few real investors we have today, at least partly a result of our automated, ultra-fast approach to the financial markets and the philosophy of the financiers behind them.

  • PM

    Pebbles M.

    22 7 2017 22:58

    12       7

    I had a hard time following this interview. It wasn't just the accent, but rather the lack of cohesion in sentence structure and tangential thoughts. Add the shirt and the jewelry and I might as well have been watching Brad Pitt in Snatch.

  • AS

    Andrew S.

    22 7 2017 21:10

    24       1

    Let me first say, I enjoyed the interview and think Hugh is an interesting guy. You can see the last 7 1/2 years performance of the Eclectica Absolute Macro Fund here: https://www.eclectica-am.com/reports-eamf/2017-1/734-june-2017-1/file
    Lots of people here, myself included, have outperformed this by a country mile with MUCH less
    complex thought processes. As a matter of fact, in spite of all the gold bashing in this interview, you could have done almost as well just buying gold on Jan. 1, 2010 at $1120 and holding it.
    Point being, this is a whole lot of mental gymnastics for not much gain. Why in the world would anyone pay 1.5% plus 20% performance fees for this kind of return? Is it any wonder AUM has dropped by 90% in the last 3 years??

    • DH

      Dale H.

      22 7 2017 21:26

      1       0

      Bought selected Astralian gold shares 2015/Jan 16 still up $165%. First quarter Aust miner gold sales to China highest ever. U.SD down -Trump effect? ....

    • AS

      Andrew S.

      22 7 2017 23:08

      0       0

      Yep Dale, we are on the same page. Long NST, SBM, CDV, DCN, BRB among others.

    • MS

      Matt S.

      23 7 2017 13:22

      6       1

      Yeah but were your returns "risk adjusted"? How diversified were you? What position sizes did you have? What was your Sharpe ratio? Were you well hedged at all times? Were you answering to investors threatening to pull their money from your fund? All these things are what professionals have to deal with, it's completely different from a retail trader who can do whatever he likes. (I'm assuming you're a retail trader, I could be wrong)

    • AS

      Andrew S.

      23 7 2017 14:35

      11       2

      Use whatever pretzel logic you want but after 7.5 years if your macro fund is underperforming the S&P by 7X your approach is wrong . If you could have simply bought a 10 year US Treasury and done better than you have with endless complex macro trades, your approach is wrong. There was one "macro thought" that mattered since 2010 and that was/is "financial repression". You just listened to an hour of a guy who is a lot smarter than most of us prove that a whole lot of really smart people can't see the forest for the trees.

    • GS

      Gordon S.

      20 8 2017 13:35

      0       1

      A rising (central bank) tide turns (almost) everyone into a genius... (?)

  • LN

    Lucy N.

    22 7 2017 17:59

    0       0

    really

  • JM

    James M.

    22 7 2017 17:04

    9       4

    Excellent interview. Jeremy Corbyn as PM seems to scare the lads a bit? Why? Yes maybe labor gets a break and re-balances things a little as lets face it labor has been fucked since Thatcher/Reagan and the other sicko fan neocons completely fucked up the entire global economy IMO. This wasn't via capital formation and efficiency progression as capitalism (as defined by Adam Smith) is meant to produce. It was via Corporate criminality and monopolist cartels, barriers to entry etc, which is the enemy of capitalism. IMO we dont have capitalism and the endless pursuit of growth as Hugh suggests for the sake of growth isn't capitalism it consumerism a very different animal and ultimately extremely destructive to the human race and all other living things who require the ecosystem of planet earth to survive and thrive. I,m a capitalist and its by far not a perfect system but it seems the best of a bad bunch of options at the moment until we find something better. So the sooner we get back to capitalism which can only happen if labor get put on a somewhat of an even keel to capital can we achieve true capitalism. Otherwise where is the Capital going to come from to fuel capitalism if not from human labor?

    • DH

      Dale H.

      22 7 2017 21:16

      2       0

      Enjoyed you comment. Good points.

    • JM

      James M.

      23 7 2017 08:18

      0       1

      Cheers Dale.

    • GH

      Gloria H.

      8 8 2017 17:23

      0       0

      Hear, hear.

  • PU

    Peter U.

    22 7 2017 16:42

    1       0

    Love the comment on the whereabouts of Hugh's jeweler! Thanks Mark M.

  • ME

    Mark E.

    22 7 2017 16:32

    5       0

    Great interview, lots of good stuff in there. Next time, I'd like to see both Raoul and Grant interview Hugh together. That would be a very interesting three way conversation I'd love to eavesdrop on.

  • PB

    Pieter B.

    22 7 2017 14:46

    3       0

    Ps did Hugh start to meditate? He seems so much calmer and in control than before! Thanks a lot Hugh for sharing trades so openly!

  • PB

    Pieter B.

    22 7 2017 13:32

    1       1

    So much fun to hear this interview. Great conversation!

  • SK

    Shravan K.

    22 7 2017 13:32

    0       2

    Very valuable conversation... hedging methodology n discussion on managing fund n personal money were valuable... discussion on creditor/debtor one was ambiguous (I may not hub got it)

  • JV

    Justin V.

    22 7 2017 08:37

    0       0

    "Shorting the Shats" What's Shats? Can anyone explain to me please?

    • JV

      Justin V.

      22 7 2017 08:53

      3       0

      Woops. Spoke too soon. German Schatz.

    • LM

      Lawrence M.

      23 7 2017 15:37

      0       0

      Thanks for answering, simple, I just paused the video to check the same.

    • EF

      E F.

      24 7 2017 00:37

      0       0

      German 2 year bond, Julian Brigden has been on the same page saying it is mispriced, futures tradeable

    • OB

      Olivier B.

      24 7 2017 03:34

      0       0

      Can someone explain why he gets paid to short schatz. Is it because they yield negative?

    • EF

      E F.

      24 7 2017 10:56

      0       0

      yes because of the negative yield

  • US

    Usman S.

    22 7 2017 07:17

    6       0

    The last 10 minutes of this conversation is gold.

  • JV

    Jens V.

    22 7 2017 07:06

    6       0

    Awesome interview. Thanks to Hugh for talking so openly about his positions and thought process. And thanks to Raoul for making it happen. Again.

  • AE

    Alex E.

    22 7 2017 05:12

    5       0

    I owe Mr. Hendry a long overdue apology. The first time I listened to him, I thought him an Irish Madman. After this interview, I humbly acknowledge that Mr. Hendry, while bold and irreverent, actually understands the state in which we all find ourselves. This state of dynamics, however, does not preclude him from making some money before the Big Correction, given that he probably makes about 25 mil for every 1/4% move in Treasuries or Equities or whatever happens to catch his fancy that particular day. (That is a really rough guess...) Regardless, I want to Thank Raoul for the interview. Hopefully, we could get Grant to do one interview with Mr. Hendry and see what transpires...:)

    • TM

      The-First-James M.

      22 7 2017 09:58

      8       0

      He's Scottish, not Irish...

    • MS

      Matt S.

      23 7 2017 13:15

      2       0

      Yes Alex, I really disliked him from his first interview but this time, I felt he was calmer and I withheld my judgement too. I still really don't understand the QE was great and worked argument but....... I'm also not running a successful hedge fund, so... what the hell do I know? :)

  • dn

    david n.

    22 7 2017 02:50

    8       0

    Excellent interview. Was really intrigued by
    Hugh's comment:"One of the factors that I'm
    more scared about Treasuries as a portfolio
    diversifier is I don't know if they would diversify
    your portfolio in the future...I fear it I fear it."
    If this were to really happen, it would drive a stake
    through the heart of Modern Portfolio Theory
    (MPT). This would have enormous implications
    for investors worldwide.

    • DS

      David S.

      24 7 2017 00:59

      0       0

      What would happen if everyone feared the worse and put all their money in cash until the smoke cleared. DLS

  • JV

    Jason V.

    22 7 2017 02:27

    2       0

    A privilege to listen in on a conversation between two great investing minds.

  • SS

    Stephen S.

    22 7 2017 02:21

    3       0

    The last 20min was amazing. Thanks guys.

  • DS

    David S.

    21 7 2017 22:08

    3       0

    Hugh and Raoul always enjoyable. Best quote for me "Well I'm always just looking for confirmation." DLS

  • MF

    Michael F.

    21 7 2017 21:04

    9       0

    Grant as the Black Knight? That makes me go hmmmm...

    • DS

      David S.

      21 7 2017 22:26

      5       0

      Grant is the Golden Knight. Gold has been and will be a good investment. It should, however, not be your only investment. DLS

    • KS

      Kim S.

      22 7 2017 02:14

      3       0

      good friendly, well delineated contrast in views :)

    • DS

      Dan S.

      22 7 2017 07:17

      0       0

      Tis only a flesh wound when you have the time horizon for the thesis to play out.

  • DS

    David S.

    21 7 2017 21:01

    1       0

    "Ghosts in the machine" refers to Ryle's criticism of Cartesian Dualism. It has been used elsewhere, but not in this context. The macro world does, however, have many ghosts. DLS

  • WS

    William S.

    21 7 2017 19:14

    36       6

    I regard Hugh Hendry as a quasi-prototypical specimen of his generation of money managers -- the clever boys whose investing careers have fortuitously coincided with the "golden age" of global US dollar hegemony. Raoul also falls into this category, and it is clear to me that, by and large, Hugh and Raoul see the current state of the financial world through a common lens -- a lens ground and polished over the course of the past fifty years, and then radically tinted since the advent of unrestrained QE in 2008.

    However, I have become utterly convinced that this lens through which they are viewing the world has effectively blinded them to the sea-change that is now upon us (albeit not yet discerned, except by very few). What is that sea-change? Quite simply, it is the demise of global USD hegemony. It has already begun; indeed, it is actually well into its advanced stages, although its primary agents have gone to great lengths to obfuscate or otherwise camouflage its progress. Consequently, people like Hendry, if they recognized the trend at all, are failing to appreciate how far advanced the process is. They believe the USD hegemon will continue well into the foreseeable future, whereas I (and others, like Grant Williams) are thoroughly convinced that it is merely following the pattern typified by the Hemingway character's now-almost-cliché description of how he went bankrupt: "Gradually, and then suddenly."

    It is this crucially important factor that is being excluded from the calculations of people like Hendry, and it is the reason why none of their hedges are going to operate as envisioned when they awaken some morning not many months hence and discover that "gradually" turned to "suddenly" literally overnight. And when that happens, people like Grant and myself are going to finally realize the vindication of our long-derided convictions, whereas people like Hugh Hendry are going to be pondering a very uncertain future through eyes no longer occluded by a lens fashioned in and for a world that will no longer exist.

    • DS

      David S.

      21 7 2017 19:56

      4       3

      Purple prose? Your prediction may be correct, but I bet both Raoul and Hugh will make money either way. DLS

    • WS

      William S.

      21 7 2017 21:11

      6       0

      Purple?!

      Hardly.

      It's lavender at most ... perhaps borderline pinkish plum ... with just a hint of ultraviolet around the edges.

    • DS

      David S.

      21 7 2017 22:11

      0       1

      Cute! I like pinkish plum. DLS

    • KS

      Kim S.

      22 7 2017 02:16

      6       0

      I pretty much agree with William but I feel my own premises always need to be questioned. And these guys do a great job.

    • KB

      Kreso B.

      22 7 2017 12:05

      0       8

      US will remain the biggest innovator for the access to human and material resources, education, legal framework, culture and security. US hegemony is constantly increasing... funny you can't see that through your glasses.

    • DS

      David S.

      22 7 2017 20:17

      1       0

      All things change. Funny you can't see that. Read Montesquieu's "The Persian Letters" and just look at history. DLS

    • KB

      Kreso B.

      23 7 2017 00:30

      0       0

      @David S.
      Montesquieu is included in education and culture argument above.
      Regarding economy, check the earnings of top US companies, the rate of innovation. And try to asses the impact of new technologies.
      Plus ça change, plus c'est la meme chose.
      I won't read Persian letters.

    • DS

      David S.

      24 7 2017 06:58

      5       0

      Dear Kreao B. Sorry back from a few too many brews. It is up to you as to what is worth reading. Persian letters may have no affect on your opinion. I am a many generational American and proud of my ancestry from before the Colonial War on both sides. It is with deep regret that I believe that our day is over. It is not our principals that failed us, but we failed our principles. The USA will continue to develop great companies, but so will the rest of the world. I am happily old. When you are are also old you will tell your grandchildren about American as Camelot - which in many respects is was - but they will not understand anymore than an old Englishman when discuss the empire with his grandchildren. In my heart I hope your are correct! Sorry for such a personal post. Viva. DLS

  • BJ

    Brent J.

    21 7 2017 19:11

    4       0

    I agree with Hugh on rates. Raise rates. its stimulative. Low and negative rates are deflationary

    • WS

      William S.

      21 7 2017 20:43

      16       1

      It is fascinating to see how "received wisdom" has been turned on its head: against all expectations, QE proved to be extraordinarily deflationary; QT (as Ben Hunt has recently argued in his eloquent way) will correspondingly prove inflationary and jump-start the velocity that inexplicably eluded Bernanke and now Yellen.

      What other seemingly paradoxical developments will we see in coming months as the profound distortions of central bank monetary experimentation finally "come home to roost"? I, for one, am beginning to develop a thesis wherein BOTH US equities and bonds suffer a pronounced collapse from their current bubble highs; the surviving capital then fleeing into commodities, their producers, and their currencies. Either way, I see a future fraught with chaos as the vacuum left by the demise of the USD hegemon initiates a global scramble to fill the void.

    • PN

      Paul N.

      22 7 2017 11:15

      9       0

      I agree that higher rates are positive from growth long term. It will force capital to start allocating and investing properly instead of doing financial engineering. However all of the damage done by low rates will reveal itself before that happens. Zombie businesses will need to go under. People who have jobs they shouldn't have need to lose them. Pensions need to blow up. Everyone will again realize how poor they are.

      I don't see how the transition from one phase to another doesn't cause enormous disruption, pain and panic first. Nor do I see the Central Banks sticking to higher rates when that disruption comes.

  • DM

    Daniel M.

    21 7 2017 19:05

    16       0

    Great interview. Hugh is legit.
    Showing off a shaved chest is weird though.

  • T~

    Tshort63 ~.

    21 7 2017 17:03

    6       0

    My favorite -other than Jim Grant- RV interviewee. Love great minds thinking together, I feel like I am in the room and learning amazing concepts as the dialogue unfolds. Within a few excellent discussion RV pays for itself several times over. Keep it coming!

  • RM

    Richard M.

    21 7 2017 16:22

    10       0

    What a marvelously entertaining conversation - really, really enjoyed it! Two brilliant minds having fun with each other and we get to sit in on it. And great indepth discussion of various trades and more importantly trade construction! Fantastic!!!

  • FA

    Frank A.

    21 7 2017 16:12

    14       0

    Seems just credit market debt alone since Q2 2009 has risen by $11.8T while nominal GDP by only $4.2T...."not being fueled by exaggerated debt"...?? You just want to stop there.

  • RM

    R M.

    21 7 2017 16:01

    21       1

    IMO, way too many negative comments here, so here is a offsetting one: I enjoyed the diversity of views, the trade construction thinking, and the hedge thinking. Very Valuable! Thanks.

  • .

         
    • IF

      Ian F.

      21 7 2017 15:36

      2       0

      You must have not met many money managers... I meet with these guys all the time, Hendry is refreshing because he at least has modest social skills. Most of the time these guys' egos are only eclipsed by their ignorance of how commerce actually takes place from a business perspective.

  • DM

    Daniel M.

    21 7 2017 15:34

    2       0

    The black knight and the fish slapping dance are my two monty python favs. For those who haven't seen:
    https://www.youtube.com/watch?v=lefP0_ZM-Lw
    https://www.youtube.com/watch?v=dhRUe-gz690

  • IF

    Ian F.

    21 7 2017 15:22

    5       1

    I do not get the long German asset trade. Creditor nations (and in Germany's case a current account running north of 8% of GDP is lunacy) get crushed when the rebalancing finally takes place. This seems closer to me than ever with Greece's consumption as a share of GDP at higher levels than 2012 (i.e. savings are at the lowest level). When these debtor nations eventually reduce consumption (as they inevitably will have to because debt cannot grow forever) this means savings will have to rise and as a result German growth will be negatively effected. The world cannot import any more German, Japanese, or Chinese savings.

  • PU

    Peter U.

    21 7 2017 14:05

    13       1

    The more I listen to this, the less helpful it could be. Math matters guys. DO THE MATH vis-a-vis interest rates and debt service. "A beautiful interest rate tightening" . . . . WTF --- three 1/4 basis point moves. Ok, Libor has gone up a lot more, but it is still extremely low. We are not pushing back hard enough in these interviews. Take it deeper than a second derivative discussion on a forecast or an opinion.

    • EM

      Elvijs M.

      21 7 2017 22:15

      0       0

      For a moment there I thought that was Peter S. Nevertheless I agree with your comment, although I find it very hard to see an "eminent" collapse of the financial system just yet simply because so many seem to hold on with one arm close to the chair and be ready if the music would suddenly stop. History doesn't necessarily repeat but it sure rhymes.

  • FC

    Fractal C.

    21 7 2017 13:14

    10       8

    Nahhhh. Raou enjoys this conversation with HH because of his personal connection. Other than that, this is a bunch of blah.

  • PU

    Peter U.

    21 7 2017 13:10

    25       4

    "The world is healing from QE" . . . come on, QE has lowered the cost of capital. The world is more levered now, considerably more, and the world could not service the debt at market interest rates. Be honest Henry. Without central bank suppressing interest rates, consumers, corporations and governments would be choking on debt service. Question: How can we ever normalize interest rates from these low (even negative levels). Mr. Henry, just calculate a simple principal and interest payment on the median price level in any major Western market. A 100 basis point increase in 30 yr mortgage rate, caused by any attempt to normalize interest rates, causes the principal and interest to increase by 32.67%. Please see the data table below showing the change in the monthly payment (principal and interest) on servicing a 30yr mortgage from 3.88% to 6.88% (a rate still below the long run rate for a 30 year mortgage for a high credit worthy borrower).

    Median Price of US House $310,000
    Leverage or LTV (10% down payment) 0.9 $18,600

    Mortgage Amount $279,000
    Current 30 Mortgage Rate 3.88%

    Mortgage Rate P&I Payment Change in Payment

    3.88% $1,311.96
    4.13% $1,352.17 3.06%
    4.38% $1,434.45 9.34%
    4.63% $1,562.32 19.08%
    4.88% $1,740.60 32.67%
    5.13% $1,974.74 50.52%
    5.38% $2,270.04 73.03%
    5.63% $2,630.66 100.51%
    5.88% $3,059.06 133.17%
    6.13% $3,555.70 171.02%
    6.38% $4,119.45 213.99%
    6.63% $4,748.26 261.92%
    6.88% $5,439.93 314.64%

    Ok, Mr. Henry, the World is now fully addicted to manufactured low interest rates. I can do this analysis for auto loans (notwithstanding the fact that we have extended the duration of auto loans from 48 months to 68 months, just to keep the monthly payment affordable). So I have only addressed housing and autos (two big components of GDP). But I can go extend the analysis to corporate leverage as well. Corporate leverage is near all time highs. Debt service on corporate leverage is at all time lows (same scenario applies to the US Government). So with any return to historical interest rate levels, earnings and deficits get crushed. Ditto for commercial real estate. I can go on with pensions as well but I have to get back to Willy Wonka's chocolate covered view of the world. Too bad Grant didn't get to push back on Hugh.

    • MP

      Mayank P.

      21 7 2017 15:04

      3       1

      Sir, your PMI calculations are wrong. At 6.88% mortgage, PMI would be $1834.

    • PU

      Peter U.

      21 7 2017 18:39

      3       0

      Corrected data table below. Thank you Mayank.

      Median Price of US House $310,000
      Leverage or LTV (10% down payment) 0.9 $18,600

      Mortgage Amount $279,000
      Current 30 Mortgate Rate 3.88%

      Mortgage Rate P&I Payment Change in Payment
      $1,311.96
      3.88% $1,311.96
      4.13% $1,352.17 3.06%
      4.38% $1,393.01 6.18%
      4.63% $1,434.45 9.34%
      4.88% $1,476.49 12.54%
      5.13% $1,519.12 15.79%
      5.38% $1,562.32 19.08%
      5.63% $1,606.08 22.42%
      5.88% $1,650.39 25.80%
      6.13% $1,695.23 29.21%
      6.38% $1,740.60 32.67%
      6.63% $1,786.47 36.17%
      6.88% $1,832.83 39.70%

  • lD

    lance D.

    21 7 2017 13:10

    5       1

    Raoul want to be involved with a drainage and repair business that easily returns 20% then come and see me I'm the kiddy on the block when it comes to drains your brains and chicness and my 'shit moving' team could make home run year after year .

  • NR

    Niall R.

    21 7 2017 12:12

    46       0

    Not even watched it fully yet, but blown away by the number of buttons undone.

    • PU

      Peter U.

      21 7 2017 13:45

      1       1

      A passionate Irishman ;-)

    • TM

      The-First-James M.

      21 7 2017 15:08

      9       0

      You mean Scotsman. ;)

    • MM

      Mark M.

      22 7 2017 06:48

      1       1

      Hugh Hendry jewellery. Is there a website?