Hugh Hendry CNBC Europe Appearance on October 16, 2009

Thanks to AdvisorAnalyst.com for bringing to my attention the following Hugh Hendry CNBC Europe segment (dated October 16th of 2009.) The following videos essentially cover the material in his November 2009 fundholder letter (topics include deflation, US$, China, Russia, metals, central bank policies, world economics, and Japan.) I'm not going to summarize the videos since I went over the fund manager letter in extensive detail.



Part I


Part II


Part III


Part IV


Part V


Part VI


Part VII


Part VIII




I'm becoming a fan of Hugh Hendry—hopefully it's because he is insightful and not because his views agree with mine :| —but I notice that he dodges questions about his performance. As one may expect of anyone skewed towards deflation, his portfolio has performed poorly this year (he is posting around -7.5% YTD vs +22.4% for MSCI World, as of last published info.) Someone challenging your poor performance is always difficult to tackle in public but I'm curious to see how humble he is. I respect those who admit mistakes and, although Hendry does say he can't predict the future and can be wrong, I wish he was a bit firmer about his incorrect calls. Anyway, great contrarian thinker and we'll see if he can post good results going forward.

Comments

  1. vlad0November 24, 2009 at 12:56 PM

    Exellent interview..
    What have you done to position yourself to capitalize on a deflation stance? 
    i've been jumping into long dated options on bear etfs.

    ReplyDelete
  2. Sivaram VelauthapillaiNovember 24, 2009 at 1:51 PM

    I haven't done anything yet because I am still not confident with the deflation call. The problem is that, even if the deflation call is right, the market can be irrational and run up the inflation assets. The risk with the bear ETFs is that they will get crushed if there is a rally (sort of like how oil ran up to $147 within a few months.) Given how returns are geometric, if you lose a lot initially, it will take a while to recoup that. Using options means that you need to get the timing perfectly too. What time period are your options?

    What are you actually shorting (via the inverse ETFs)? Which indexes? I think shorting large-cap high-quality (say the S&P 500) is a bit riskier than shorting Russell 2000 or a commodity index or something.


    The only things I have thought hard about are the US Treasury bond (via the TLT ETF), and buying 2012 call options on the TLT ETF. One won't make much with this but it appears safer. Posting +5% to +20% will look great if everything else is posting massive losses. The big risk here is the US$. I need to get some sense of how far the US$ can fall before betting on bonds.

    ReplyDelete
  3. vladoNovember 24, 2009 at 3:41 PM

    I am still testing the waters and factoring in the timing issue.. as the saying goes, the market can remain irrational longer than you can stay solvent.

    Not looking to make a killing, but rather to hedge against a down turn.

    Picked up FAZ JAN 2011 CALLs as my main hedge.

    Then after realising how inexpensive the JAN 2010 CALLs were I picked up some EDZ JAN 2010 @ $0.05.  At this price, a $200.00 investment controls 4000 shares.  Very small percentage of my portfolio.

    I have my eye on SRS, DRV.

    ReplyDelete
  4. Sivaram VelauthapillaiNovember 24, 2009 at 8:00 PM

    I have never used derivatives before so I am not sure how to price any of them. Furthermore, I'm attempting to make a directional bet whereas you are hedging part of your portfolio. So our strategies are quite different. I'm willing to put up a lot more money but don't want to lose it all if things don't work out (which is basically the case if the option expires worthless.)

    Regardless of what happens, it's interesting to think about all this. Good luck with your positions.

    ReplyDelete
  5. vladoNovember 25, 2009 at 4:42 AM

    yes hedging is my main concern, but would also be nice to make a real directional bet as you call it - just difficult to make one with great certainty given the factors that you mentioned.

    keep me posted.. i am interested in seeing what you come up with.

    ReplyDelete
  6. vladoDecember 9, 2009 at 7:28 PM

    Not sure if you've seen this:

    Hugh Hendry to launch retail version of hedge fund
    http://www.citywire.co.uk/adviser/-/news/collective-investments/content.aspx?ID=370661

    ReplyDelete
  7. sunnyDecember 9, 2009 at 8:51 PM

    Hendy's views are quite contrarian since he basically is shunning all risk assets. I am interested to see if he is willing to put at least some of his capital into severly depressed commodities (ag's and nat gas) which he liked prior to the bust in 2008. Either way, his record has been quite good over the past years.

    ReplyDelete
  8. Sivaram VelauthapillaiDecember 10, 2009 at 7:09 PM

    Yep... Hugh Hendry is extremely contrarian. He reminds me of Marc Faber when I first encountered him in 2004. Interestingly, Faber is not very contrarian these days, given how his views, especially on gold and commodities, align with the mainstream views.

    However, Hendry's agricultural call over the last 2 years was a total disaster. I still don't see his thesis for it. You have to be very bullish on metals (like copper) if you bullish on soft comodities (Hendry AFAIK is NOT bullish on the commodity complex in general.) It's hard for me to see a day when, say, wheat or rice is doing well while copper or zinc is falling off a cliff.

    Agricultural commodities are also heavily manipulated by governments because people can actually starve to death. So, it would not surprise me if there are worldwide price caps if they rise too much.



    Hendry's retail fund makes no sense to me. I hope this isn't some lame attempt to grow his asset base or something. Yes, it does open up his investing to small investors like us but there is no way anyone can figure out what these guys are doing or how much risk is involved in their strategies. The reason hedge funds work is because people with "too much money" (i.e. wealthy investors and institutional investors) are willing to blindly give their money to these funds--often for long periods of time. Mutual funds are never like that. If investors get scared there will be mass redemptions very quickly.

    ReplyDelete

Post a Comment

Popular Posts

Thoughts on the stock market - March 2020

Image
Right now, DJIA has a P/E of 16.8 and forwand P/E of 15.1, whereas S&P 500 is at 20.1 with forward P/E of 15.8. Source: WSJ market Data If you ignore interest rates and inflation expectations--both of these influence valuations but depends on your macro call-- the market is not cheap. Long-term P/E is around 15. Trailing P/E is around 20% (Dow) to 40% (S&P500) higher than average. Forward P/E is in line with long term average but that assumes a strong V recovery. Consensus forecast is for profits to drop 1.2% in 2020. In 2008, it dropped 25.4% so current forecast is a very mild recession. Covid-19 coronavirus is not going to last more than a few months but these forecasts are still too rosy in my opinion. So I wouldn't rely on forward P/E. The richly valued (mostly tech or high quality) have not fallen much but the distressed ones have. So if you want to outperform in the long run, I think one’s choice right now is to: • Wait for market to fall another, say...
✖ READ MORE >>>

Warren Buffett's Evolution and his Three Investment Styles

Image
A Young Warren Buffett In a comment to one of my posts , Mark Carter, who incidentally appears to have a  good blog worth checking out , asked: "Buffett Prime is 1970's to early 1990's" Could you elaborate? I have vaguely indicated how I view Warren Buffett in the past, but I thought I would detail my view of his investing behaviour. This is more of an opinion piece and many others would disagree with me (if you do, I'm curious to hear your thoughts). I don't follow Warren Buffett as closely as many value investors so I may get some facts wrong. My view is that Warren Buffett went through three different phases, with each consisting of different investment techniques. The overall investment theory remained the same—what people call value investing—but his execution, tactics, and strategy differs across the three phases. Some people may break up his career into additional periods but my feeling is that the three I will describe essentially capt...
✖ READ MORE >>>

Hugh Hendry discussion at the Alternative Investment Conference

Thanks to Value Investing World for bringing this Hugh Hendry interview to my attention. I may not agree with all the things—short-term orientation of hedge funds is actually worse IMO; the sharp pencil effect doesn't always work—but Hendry is a true contrarian and worth listening. Like Marc Faber or Jim Rogers, you also can't take everything Hugh Hendry says seriously. I had always felt Hugh Hendry was firmly in the deflation camp but I get the feeling that he is now opening up to high-inflation possibilities. Otherwise, his stance appears to be similar to past opinions.
✖ READ MORE >>>