Hugh Hendry: The Gravest Financial Disruption in Human Experience
Tom welcomes the fascinating new guest Hugh Hendry to the show. Hugh talks about the challenges of setting up a hedge fund today. He paints a picture of the current markets as fiercely volatile, particularly with unusual events occurring that are supposed to happen once in a century. Additionally, debt and debt expansion shows no signs of ending.
Hugh reviews the implications of China predominantly using domestic financing and the effects of their surplus in global trades. He harkens back to the gold standard when it acted as successful high powered currency on an international level before the US Federal Reserve’s involvement. The US now embraces debt to an unprecedented degree that is leading much of the world to a type of serfdom.
Should a conflict occur between Taiwan and China, markets would suffer a massive increase in volatility with a likely negative outcome. Meanwhile in China, their GDP metrics have failed, and the world’s economies are all in a state of decline. An example of this is the drop in financial sector stocks along with people fleeing banks to get to the 5% offered by the Fed.
Hugh’s view is that the 1934 Federal Reserve Act was made to mend the banking system, however, with current price deflation and reduced capital investment, it has been ineffective. Market stabilizers, such as short selling, also aren’t able to prove as useful as before and capital controls remain a risk.
He highlights the Marxist ideology that has resurfaced recently, as younger generations are no long seeing the promised level of success available to their parents. Hugh states we are in the “Fourth Depression”, and he breaks down how each of the previous three was resolved.
Considering reasonable trades in relation to this environment, Hugh suggests considering Bitcoin as one of the few assets currently undervalued.
Time Stamp References:
0:00 – Introduction
0:57 – Hedge Fund Start
5:57 – Bubbles & Trends
10:32 – Debt Expansion & China
16:07 – China’s Labor Force
22:32 – Taiwan & Conflict Risk
28:30 – Fed Aggressiveness
36:00 – Capital Flight Controls?
40:55 – Feds Usefulness?
48:40 – Foreign Capital & Equities
55:08 – Wealth Protection?
1:06:18 – Trades, Nvidia & Bitcoin
1:10:33 – Thoughts on Gold
1:15:48 – Wrap Up
Talking Points From This Episode
- We are in an unprecedented period of volatility and debt expansion, with growing potential for conflict.
- There has been a lack of counter moves to the overvaluation, as well as financial repression resulting from negative real rates and the possibility of a fourth depression.
- Bitcoin could be one of the few assets currently undervalued and he explains his views on gold.
Acid Capitalist Podcast: https://open.spotify.com/show/5zj3Ox1qRD9GSynCKJIODS
Hugh Hendry was born in 1969 in Glasgow, Scotland, and graduated from Strathclyde University with a degree in Business Administration and Economics and Finance in 1990. His career began at Edinburgh asset management company Baillie Gifford, followed by Credit Suisse and Odey Asset Management. In 2005, he founded Eclectica Asset Management.
Hendry is renowned for his risk-taking and thought-leadership in global capital markets. His prescience in forecasting the Great Financial Crisis of 2008 earned him a reputation as a prophetic iconoclast. He has achieved success on social media, including a successful podcast, viral posts, and appearances on Bloomberg, the Economist, and Institutional Investor. Hendry now resides in St. Barts, where he is a leading investor in luxury real estate. He achieved a 31.2% positive return in 2008 and was featured on Financial News’s list of the 100 most remarkable people in European capital markets.
Often giving interviews, participating in TV programs and conferences, and known for his contrarian views, Hugh Hendry is an influential figure in today’s market makers.