#6 – The Existentialist

Until 2017, Hugh Hendry was a maverick – an outspoken and highly controversial hedge fund manager. He closed his fund in 2017 after a period of lackustre but far from shocking performance and has become a property developer and landlord of upmarket rentals on the billionaire favourite Caribbean hideaway of St Bart’s. In this episode, he talks about his new life, how he has traded in his Bloomberg for surfing and yoga, why he is still a worrier and why he has chosen this new life as a property magnate.

SUMMARY

Former hedge fund manager Hugh Hendry is best known as the man who made 30% in 2008, when others crashed, including many so-called hedge funds. He described his cockroach mandate as being a survivor no matter what. He closed the fund in 2017 after a period of lackustre but far from shocking performance and has become a property developer and landlord of upmarket rentals on the billionaire favourite Caribbean hideaway of St Barts. But few owners of vacation lets could tell you what the 10 year bill has done in the last month, let alone give a coherent view of how it might move in 2022. Hugh may have retired but he has certainly not let go. He views the world through a different prism – he is like a photographer who only uses a fish-eye lens. We recorded on a cold London day and on St Barts, it was just as windy, as you may hear.

Hendry talks of how he nearly became an accountant (really!), the conceit and arrogance of a well-informed argument, how he had a lot of engagement with James Anderson when he was at Baillie Gifford, the conundrum as we recorded in December, 2021, of high current inflation and lower trending bond yields, how he exploited unexplored corner of the stock markets to profit from tail events and his views on Modern Monetary Theory. Hendry talks of having swapped his past life, a “life spent in the future”, for a rigorous exercise regime, surfing and yoga, but he remains a keen student of markets.

INTRODUCTION

Hendry was born in Castlemilk in Glasgow, Scotland, in 1969. Castlemilk was a scary place. It probably still is. As a 12 year old, I have strong memories of standing at the bus stop outside the swimming pool, fearful of attack. I would never have stood there without friends – a lone schoolboy in a blazer would have been an irresistible target for the local gangs. Hendry’s achievements, including being the first of his family to go to university, should therefore not be under-estimated. And it’s this background which always comes to my mind when he starts quoting French philosopher, Albert Camus.

Hendry was always seen – and sees himself – as a maverick. The hedge fund world is not solely populated by shy retiring quants so this is saying something. But he prospered as a highly original, very opinionated manager who took on complex trades that few others had even thought of, often betting on black swan type events which would afford a highly asymmetric payoff in the event of a financial disaster.

He is definitely a Marmite character whom people either love or hate, but his insights are often unusual and invariably perceptive. He puts together a framework from the world of macro by joining unrelated areas, by picking individual equities as a lever for exposure to macro changes and by assembling a series of apparently unrelated best which have a hidden correlation.

In this interview, we talked about his current life, his investing philosophy and touched on how he sees the future unfolding. I was surprised at how closely he still monitors markets in his new role.

Hendry once said to an interviewer: “To my mind, the three most important principles when it comes to investing are Albert Camus’s principles of ethics: God is dead, life is absurd and there are no rules.”

ST BART’S

Hendry has swapped his Bloomberg for life as a landlord. He now rents out this villa, 6 beds, for $180k per week at peak season.

WRITTEN WORD VS VISUALS

Hendry, as you would expect, is a brilliant writer. Now he enjoys doing the occasional podcast and he also has a highly successful YouTube channel and Instagram account. He explains that he has always been visual, something which he neglected at Baillie Gifford. He didn’t thrive in their environment. But when he joined Odey Asset Management, Crispin used charts and this was a revelation. Crispin taught him to misbehave, to dare to be different and inspired in him greater creativity. Hence the richness of his YouTube videos (some filmed by famous director Dean Freeman) – watch this one with Hendry skateboarding in his Paris apartment – and his Instagram account. The social media presence is a prelude to a book about his life in finance – watch this space.

CHARTS

Hendry used charts extensively. He was always engaged in two things in conflict with one another – the fundamentals and the charts. At Baillie Gifford, without the chart element, he was rich in fundamentals and had great processing power and worked with people he really admired, but didn’t perform that well. He reflects on the “conceit and arrogance of a well-formed argument” and recalls a disastrous foray in Reader’s Digest – he kept buying all the way down until he was taken out of the trade. It went bust. The fundamentals alone are not enough. There is a danger that smart people like him can be over-confident and see things that are not there and there is an honesty in buying things that are going up and selling things that are going down.

His objective was to hold a warehouse, an inventory of rich narratives and smart ideas. Then the market would make them legitimate and he could implement the trade. An example was Weir Group which had gone sideways for 15 years and then moved, which was the signal for him to enter the trade. The stock did extremely well and Hendry can still recall the valuation metrics 15 years later –

PEOPLE

At Baillie Gifford, he clashed with James Anderson whom he acknowledges as one of the great investors of the last 30 years. Crispin Odey was very different and encouraged Hugh to “touch hot plates”. Hendry is also an admirer of Niall Ferguson, another successful Glaswegian, who has produced some excellent video as well as being a brilliant writer. Analysts are conservative. We need to teach people to be brave, to make bold claims and to get things wrong.

CHANGE OF REGIME

We have had 40 years of falling interest rates, but Hendry doesn’t believe that we are on the cusp of a regime change but rather believes that without an intervention, bond yields will trend down; the path will be lower real rates to stabilise the situation.

CHINA

Hendry thinks China’s investments in real estate and fixed assets are lunacy. We discussed the relative values of the US and China real estate pools. IN 2008, Hendry recognised that the stock of US real estate was 3x the flow of GDP; hence any diminution in value would be significant. He correctly recollects that the value of US real estate is $36tn. We discussed the value of China real estate and my Google searches suggest $55tn.

ABOUT HUGH HENDRY

Hendry was born in Glasgow, Scotland, in 1969 and graduated from Strathclyde University in 1990 with a BA in economics and finance. His father worked as a lorry driver and he was the first member of his family to go to university. His mother was a receptionist.

In 1991, Hendry joined the prestigious Edinburgh investment management firm, Baillie Gifford. He claimed that he was hired only because investors had instructed the company to recruit more working-class employees.

Hendry joined Odey Asset Management in 1999. “It was a meeting of minds,” Hendry said. “He checked my references, got the message that I was a troublemaker, and said, ‘You’re one of us, you’re one of the pirates”.

Hendry’s hedge fund was up 30% in 2008. He closed the fund in September 2017, after losing 9% that year; the main fund was down to $30m from a $1.3bn peak and total AUM was $200m.

A journalist described lunch with Hendry as akin to dining simultaneously with a hyperactive child, foul-mouthed chef Gordon Ramsay, and a free market policy wonk. He says “I have always been a heretic and argued against the consensus. I have always been angry.”

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BOOK RECOMMENDATIONS

Hugh thinks reading is really important but advises reading widely, outside finance – inspiration is everywhere. He therefore recommended Gap in the Curtain by John Buchan plus several books on finance:

Edwin Lefevre’s Reminiscences of a Stock Operator about the life of Jesse Livermore

Jack Schwager’s books – there are several.

and Fisher’s Common Stocks and Uncommon Profits and Other Writings

HOW STEVE KNOWS THE GUESTS

Many years ago, I suggested to my then boss that we might copy one of Hugh’s trades, after reading one of Eclectica’s letters. I subscribe to the philosophy that there is no such thing as an original idea in the stock market. I later sent Hugh a message on Bloomberg, explaining our common Glaswegian upbringing and asked if he might spare me time for a coffee. To my surprise, he said yes. That was several years ago, but when I was thinking about the podcast schedule for 2022, I decided that we should explore the issue of regime change with some macro experts. Hugh was an obvious choice.

CHAPTERS

10:07 – Discovering the Thrill of Conversations
30:41 – Analyzing We Group and Regime Change
41:29 – Impact of China on Global Economy
51:48 – The Dark Web of Credit
01:00:10 – Advice for Young Investors

Transcript

AI-produced and lightly edited

STEPHEN CLAPHAM: Hi, welcome to the Behind the Balance Sheet podcast where we meet leading investors and commentators and educate ourselves about the world of investing and the world. Our mission is to remove some of the mystique around investing and improve our understanding of what makes a successful investment or indeed an unsuccessful one. Our goal is to inform, educate and entertain.

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Former hedge fund manager, Hugh Henry is best known as the man who made 30% in 2008 when others crashed in the global Financial crisis, including many so called hedge funds.

STEPHEN CLAPHAM: He described his cockroach mandate as being a survivor no matter what, he closed the fund in 2017 after a period of lackluster but far from shocking performance and has become a property developer and landlord at market rentals on the billionaire favorite Caribbean hideaway of Saint Barts.

STEPHEN CLAPHAM: But few owners of vacation lets could tell you what the 10 year bill did in the last month. Let alone give a coherent view of how it might move in 2022. Hugh may have retired, but he’s certainly not let go. He views the world through a different prism. He’s like a photographer who only uses a fish eye lens. We recorded this episode in a Cold London Day and on some bars, it was just as windy as you may hear.

STEPHEN CLAPHAM: So, Hugh, thanks very much for coming on.

STEPHEN CLAPHAM: Tell us how did you get into investing in the first place?

HUGH HENDRY: Yeah, I can, I can remember it very clearly.

HUGH HENDRY: I may as well say I was at a polytechnic I was at which is very unfair. Actually, I was at Strathclyde University.

STEPHEN CLAPHAM: Fine, a fine university. All the best, all the best Glaswegian hedge fund people graduated from Strathclyde, such a, such a huge population base.

HUGH HENDRY: But to there, well, long and short story, short story, I, in my final year,  I did it the final honors year and actually I’ve been paid or sponsored by KPMG, Pete mcclintock in, in Glasgow to join them after my, my graduation and dedicate my life to the world of Accountancy. If you imagine me.

HUGH HENDRY: So then I was, and I was completing my fourth year and there was a, I was studying market based accounting research, but you actually, you sat down in front of a data stream. The old, the original, if you will, where Bloomberg came from, where Reuters came from, all began with AAA crappy data stream thing.

HUGH HENDRY: And it was like seeing another universe and that what we were studying, we were, we were seeking to determine whether markets reacted to changes in accounting policy.

HUGH HENDRY: So which is to say that markets care for accountancy and you would be testing changes which would have a material impact on the cash flow and therefore the valuation of the business and therefore should really be taken seriously versus changes in depreciation policy which may affect profitability or the reporting of but certainly not the substantive value of the business.

HUGH HENDRY: And I just, it was, it was the hook, it was just you know, it was like David at the wildlife like watching to see if, if there would be, you know, if the mice would come for the cheese or not. And, and so that literally in that final year, I thought, oh, I kind of like I was always watching people.

HUGH HENDRY: I never drank alcohol. I never, I had no vices. My life’s in reverse. I, I seek a vice every day now, but back then, and I, you know, I was in union, I would be sober and terrified, but I recording everything. And so I was a recorder if you will. And so the two came together and I made it happen.

STEPHEN CLAPHAM: That’s very funny.

STEPHEN CLAPHAM: The idea of somebody being sober in the Students Union, that’s, in Glasgow is probably, there’s probably you could get charged if they, if they found you. So, I mean, your, your story is pretty well documented, isn’t it? You know, you went to Bailey Gifford and then you end up at, and then you set up in your own.

STEPHEN CLAPHAM: So you, you quit in 2017? Was it quit?

HUGH HENDRY: I, I closed my hedge fund and at the end of 2017, at the end of 27 I’d been, I had been living, I committed to living in Saint Saint Bars where I am now in March of 2015. And I was kind of managing the fund remotely or advising et cetera and back and forward to London. And then at the end of 17, talk about fate or, or, or whatever, but, you know, this island was struck by one of probably the greatest hurricanes.

HUGH HENDRY: And I had, and at the end of 2015, I completed this like Gin Palace of a, of a, of an investment for, the, the, the rental in Saint Bars and we, we nearly lost that. And I’ve been sitting in London watching, you know, I was watching a camera which was fixated on a palm tree and I thought if that palm tree holds up against this terrible storm, my house will be safe.

HUGH HENDRY: And what I didn’t realize is the batteries had gone, you know, the, the camera had been destroyed hours before, but it had gone back to loop and I was watching the same tree over and over and the house was closed for nine months. We got a red, the same week as the storm. We got a redemption from the largest remaining client. It had been barely profitable and now it was, it was untenable. And so, yes, the end of 2017.

STEPHEN CLAPHAM: And so, what did you decide to do? I mean, I can’t quite, I imagine, you know, I, I think it must be very nice living in some bars, but I can’t quite imagine how you would go from doing that job, which is like, sort of full on all day, every day to lying on the beach. Maybe. Doing a bit of gym in the morning. And, you know, the old yoga class, I mean, how did you transition?

HUGH HENDRY: Well, you know, I, I, I had spent a life, pursuing or spent a life in the future and, and that’s not a healthy activity. And so, you know, there was healing, the necessity of healing and closure, kind of felt like a failure and having to deal with that. And so, yeah, I was, you know, I was in a beautiful cave.

HUGH HENDRY: This island has, has great natural beauty and, and actually they, they say that these kind of factors that emerge from, from nature, they are like like taking magic mushrooms or whatever, they, they kind of heal your, your some of the, the damage, that’s the, the the in the neural pathways and what have you and you’re right.

HUGH HENDRY: I, I certainly not the type to laze around and and I, I have a full on activity here, but, you know, if I, if I thought closing not being actively engaged in the management of other people’s mind would be less stressful. I was deluding myself because it’s just the fact that I was born to worry and, and I’d found a well remunerated activity for worrying.

HUGH HENDRY: And now I find myself worrying almost to the same epic scale, but for the most preposterously mundane reasons, what’s our reasons? My villa manager, the cleaning ladies, the remuneration package you know, we we have been applying the the the sheet that goes around the, the mattress in the, the master and the captain’s bedroom and it has a particularly large mattress bed and we’re using a size that’s too small.

HUGH HENDRY: And that really like detail, detail and everything in life is crucially important and that detail not being right and trying to get it through to people and, and obviously, I’m, I’m working with people on different kind of pay levels and therefore the skill sets that they bring is perhaps not what I’m accustomed to.

HUGH HENDRY: And so you’ve kind of got to be able to, you know, accept that you accept that there’s going to be dumb ass things going on. And I guess that’s why we have the of nature in this beautiful place and we have, I can go surfing and I can do yoga and I can play tennis and you know, whatever to, to help me deal with crazy.

STEPHEN CLAPHAM: And I mean, are you still investing for your own account? You’re not doing that really Fancy stuff anymore, presumably. But you, you are you still sort of active?

HUGH HENDRY: No, no. All of my I mean, my, my, my, my active engagement, active engagement is in, in building these these gin policies in bars, they are notoriously expensive the land to buy and, and then construction.

HUGH HENDRY: I mean, my construction budget on the latest project has, has doubled and in the last year trying to get loans processed through trying to get loans processed by a French bank. In, in the normal course of everyday life is challenging when you have COVID and everything else. It has been torturous. So, you know, the present project is going to end up being about €13 million.

HUGH HENDRY: So almost $15 or $14 I think.

HUGH HENDRY: And, you know, I have a hefty slug of of it doesn’t, you know, and it’s a cash flow. It’s a, it’s a asset price appreciation. Really. There’s a bit of positive carry. But in terms of post of carry allows it’s a positive carry for my lifestyle, but it doesn’t allow enough to reinvest again.

HUGH HENDRY: But, you know, I’m notionally, I’m, I’m, I’m investing 20 year fixed at 1.3%. I’m buying on this tiny tiny island, which is coveted by billionaires.

HUGH HENDRY: And it’s getting harder and harder for permission to, to build these properties. So it’s, you know, it would seem like it’s a macro trade. But regardless of all of that and the, the what I find amazing is my mind in the background is still processing, you know, a year ago I committed, committed.

HUGH HENDRY: I I don’t know if I committed, but I started appearing in platforms like this on my own because the voices in my head are still registering despite this, that I had I, I pushed back and, and yet I was kind of haphazardly meeting people in the industry and this, this person was talking and about what’s going on. I’m like, who is this? It was me and, and, and actually I missed that. I missed the thrill of these conversations.

HUGH HENDRY: I don’t know what you’re gonna ask me next. You know, is it just the wind in the wind and that there’s a, you know, we’ve got the, we’ve got some construction going on. So every now and again, I’m breaking every rule on your cheat sheet. The house is open. You know, there are no carpets there. I did switch the ice machine off that kind.

STEPHEN CLAPHAM: It’s very funny because I’m talking to you from an edit suite and the office I was in was all glass. And so it was like the worst possible environment for recording a podcast. So I was really curious. So I’m slightly jealous of your YouTube and Instagram, both your followers and the content because it’s very visual and it looks, I mean, it looks really good.

STEPHEN CLAPHAM: So I do these YouTube videos but I just, it’s just basically me like this in front of the camera with a few power points. So, and, and I committed to doing one a week for a year and so like on Friday last week, I thought, oh dear, I’ve not done my one for the week. I better think of something and the quality is not quite what it, what it should be.

STEPHEN CLAPHAM: Whereas yours are always very beautiful, very elegant. But what I was curious about was in the past your letters when I was lucky enough to get hold of one were always fantastic. And you, you know, the written word was amazing. Why have you moved to this sort of visual emphasis? Is that, is that something you always wanted to do?

HUGH HENDRY: Or I I always visual, you know, right back to the beginning that the market based accounting research was the visualization of a theory. It was taking the form of a shape of a developing shape and a developing trend. And it was allowing me to, to be an audience to something. And my career really took off.

HUGH HENDRY: I mean, it took off in different stages in Edinburgh with Bailey Gifford, it was a, you know, a remarkably solid and thought and very intellectual review of the world and in a particular way of dissecting the world and a particular style and it was, it was rich and deep and engrossing.

HUGH HENDRY: But I truth be told, I I didn’t thrive in that environment. If anything, I, I was at best, I was going sideways and if they would be less successful, they would have, they would have had the need to fire me. And after eight years, I did leave and I think fate can lend a hand in events.

HUGH HENDRY: And I find myself working with Chris Chris and he was colorful as a person and, and he was using charts and, and, and, and creating a dialogue with these charts. And initially, I was skeptical from going to where I come from. But I found that the the visualization allowed me to then fire up rich narratives in my head. And those papers would be the or the portfolio would be a result.

HUGH HENDRY: But the, the papers as well and you know, the papers always had, they always had reference to, to music or, or literature. You know, there’s an idea that great works of fiction and we should all read. But a great, great friend and professor of English literature, Angus Fraser in, in America who’s teaching creativity to navy seals.

HUGH HENDRY: And, and creativity is something where, where has it gone? We need this thing to change things.

HUGH HENDRY: And, you know, I got taught creativity with Chris and that, you know, to break rules to misbehave, to touch hot plates to dare to be different. And, but also back to Angus and, and the English reading is like it, you don’t have to play these virtual reality games.

HUGH HENDRY: Reading a book is a virtual reality where you are forced, you’re taking the decisions of the principal characters before they take them, then you go, oh no, that’s stupid or, oh, I missed that and whatever. And so for me, I found that I found inspiration. I, I, I was able to unlock and answer some of the riddles in my head with regard to risk positions from coming across pieces of music or magazine articles or books.

HUGH HENDRY: And I still do that. And if you, the Instagram always is the, the, the Touchstone is, is our words. And, and despite that, I paid a lot of money for, you know, a graphic deck of photographs and, and we made some, some videos in, in Paris.

HUGH HENDRY: But on top of that is very word loaded and, and again, it’s words, which these are the words I said to you that I’ve got this back processing engine and it’s still working away because it’s still picking up all of these kind of fiction, password keys or password, password unlocked keys, which are allowing me to say something. So I would say it’s just an extension of what I was always doing.

STEPHEN CLAPHAM: I mean, the videos are, are brilliant. The one with you in the bath, reading the Financial Times is quite, quite, I mean, they’re, they’re great fun and they’re really, really entertaining. But I mean, is there a purpose behind this? Is it just something that you just needed to, to do something?

STEPHEN CLAPHAM: And are you, are you planning on, on becoming a AAA Financial influencer? But I mean, obviously you’re much better at this than I am. But, you know, it, it seems, it seems slightly odd because not many people with your skills are prepared to share your knowledge with Joe Public and I think it’s quite nice. Right.

HUGH HENDRY: That film that you kindly referenced in Paris, almost, almost a screen test. You know, I, I’ve done a lot of TV work, telling you my secrets.

HUGH HENDRY: The, but yeah, I, I wanted to make something. I, I would, I was, I am sure you, you’re the same. Do you remember the, to use the name that he prefers? Neil Ferguson as opposed to Niall Ferguson. But anyway, but Neil Ferguson, when he first came to my attention, he was plugging one of his wonderful books and it was on channel four, the one of the terrestrial channels in the United Kingdom.

HUGH HENDRY: And they gave him a huge budget and I think it was, you know, he was going on going to Turkey and all parts of the world and, and explaining the economic history of how we arrived at where we are today. And I love that.

HUGH HENDRY: Right. And I’d love to, you know, I’d love to do something like that. So my problem is I’m not, I’ve not been able to commit the same amount of time.

HUGH HENDRY: But I’m hoping at some point I need someone actually.

HUGH HENDRY: I, and again, I, I really run cash flow constrained and I, I need someone to, to edit my, my like these, these engagements and things, but I’m hoping on top of that, I’m, I’m, I am planning on releasing a book.

HUGH HENDRY: And what was that?

STEPHEN CLAPHAM: I was gonna ask that when is the book coming out and what’s it going to be about going to be about me?

HUGH HENDRY: So I, I wanted to write a kind of, again, let’s be preposterous, but a kind of a rock star type memoir of investing because they’re all really dull and, and yet I, I remember being a grown adult and, and, and just loving, you know, the Jessie Livermore’s and the, the original Jack Schwager series.

HUGH HENDRY: And it was adventure and it was characters, you know, those guys that had live grenades and they would kind of think about pulling the plug and they would talk about their dreams and how their dreams would come true in the in the US job, jobless data, claims data. And I it was just, it was rock for me.

HUGH HENDRY: It was like rock and roll adventure and I, I, with those letters that you refer to originally, it was to kind of put those letters into a kind of book format and then we kind of moved away because actually when I worked at Bailey Gifford, there was, that’s it.

HUGH HENDRY: Well, my background is actually kind of probably the best part of the story working at Bailey Gifford working, you know, I I had a lot of engagement with what’s he called James Anderson who now, of course, with the Tesla and Amazon and all the rest has really taken on the mantle of probably the most outstanding British investor of the last three decades. I had the the tale of him and me is is kind of rocky.

HUGH HENDRY: It’s kind of funny that, you know, there was a, there was God did we, did we clash and, and that’s kind of funny and interesting and then there’s of course, the story of, of London rocking up and, and well, first of all, working at Credit Suisse and being very dismissive of, of that and then being rescued, being almost fired then and then being rescued by Crispin and, you know, Crispin’s three books in one, etcetera.

HUGH HENDRY: So, i it’s, it’s kind of written, and it needs editing and I think I’m gonna have to self publish because you can imagine, you know, one of the big finance publishers came back.

HUGH HENDRY: So, but we, we published finance books like, but actually because I don’t want, I, I want to cross over, I want, I want people to read it because it’s a, it’s kind of funny and it’s rollicking. It’s one of those things, if it’s done properly and delivered properly, it’s not long, 65,000 words. And you can read it in 2.5 hours or something.

HUGH HENDRY: And it’s one, it’s like, it’s all light and silly but it’s, it’s, it’s pace, it’s a, it’s a story and, you know, the same bars and coming here on speed boats and helicopters and, you know, and, and having a kind of a van which took me to the, on a Friday which was done up like a private jet. And, you know, and my wife was like, you’re just a one.

STEPHEN CLAPHAM: I, I can’t wait, I can’t wait, I can’t wait to read it. But going back to Neil Ferguson, he, he, of course, is a fellow Glaswegian. And I met him at one of the CS S A conferences in Hong Kong and he was speaking and there was a guy in the audience who looked exactly like him and he was very excited about this, the idea of having a doppelganger.

STEPHEN CLAPHAM: And I bumped into the various conferences over the years and he, he’s really amazing guy because he, he’s managed to make himself like a global star doing something which is, you know, you would have thought at a very narrow audience and I imagine that you could do the same, right?

STEPHEN CLAPHAM: Because you can make this stuff come to life and you make it very interesting. So, I mean, I think your book will do brilliantly and, you know, very happy to introduce it. My publisher will, will for sure, will be interested in it.

HUGH HENDRY: Although whether you want to go with a publisher or self publish, that’s and you know, and also now you got, so I’m probably gonna go substack first and then publish and then, and then, you know, the audio is very popular and I am coming to terms with the fact that I sound like this. People like it. I don’t like it but people like it.

STEPHEN CLAPHAM: Well, funnily enough. So I published a book about a year ago and they said, oh, do you want to dictate the audio book? And I said, oh, no, because people would hate my accent and they, the way they do it is they, they, they audition all these people and they send you the, the, the recordings and they do like the forward or something and they were all terrible.

STEPHEN CLAPHAM: And I, I mean, they were, I mean, obviously my book wasn’t very exciting and so I wanted to have somebody that was, you know, not really dull and boring and there was only one person that sounded at all cheerful reading it. And so I picked them and then when they actually recorded the book, they weren’t at all cheerful and I mean, I can’t even bear to listen to it.

STEPHEN CLAPHAM: I should have. So I would recommend you do it yourself actually. Yeah, I will do, I will do. So, look what, it was interesting you were talking about charts because charts were a massive thing for you when you were running your fund. I mean, to what extent were you a chartist? And to what extent were you a fundamental guy?

HUGH HENDRY: A good question.

HUGH HENDRY: You know, I, I forgive me if this rehearsal or sounds rehearse. But I was an oxy moron and I was a great lens for people to like I was happier to be called an oxymoron as opposed to a moron. But I was always engaged in two things which seemed to be in conflict with one another and, and obviously, fundamentals and chartism seems to be like that.

HUGH HENDRY: I recall actually that this, it wasn’t a light bulb moment, a spontaneous light bulb moment. It came many years later.

HUGH HENDRY: But in Edinburgh, who was in my intake, if you will at Bailey Gifford, had had to kind of respond to the, the, the, the global team meeting once a week and she worked in the European team and there was always a kind of you had to come up with something snappy about new stocks that had been purchased for the portfolio and she was a bit unprepared and the partners were always kind of really intense.

HUGH HENDRY: And then like, you know, come on, you know, why did we buy this Danish Chicken company? You know, and, and she went because it keeps going up and we all, I started laughing and it was only years later, I thought that’s genius. She bought it because it is going up and that’s what I was doing. That left so left alone.

HUGH HENDRY: So in my 78 years, catastrophic years at Bay Gifford without the, the, the chart element, I was rich in fundamentals great, processing, processing power work with people I really, really admire and worked in teams where we made no money. Nothing just we were abysmal.

HUGH HENDRY: And it comes back, I don’t know if you’ve ever seen the little clips on YouTube with me and oh my God names the real vision and it is, it’s a little chapter headline, the conceit and arrogance of a well formed argument. And I talk about my first disastrous trade in Scotland and it was a large trade which was Readers Digest.

HUGH HENDRY: And I was shoving down my clever narrative into a sharp position which was not only refusing to go up but was clearly going down and to make matters worse. I was buying every tick low and eventually they, they had to pull me out of the, out of the trade. I just kept going and, you know what, it went bankrupt, you know.

HUGH HENDRY: So the, the charts I found and I would, it’s a claim that I would make for others that fundamental alone are not enough. And there is a danger and personalities type a characters like me, it lends itself to being overconfident and arrogant and seeing things which are not there. And there’s a, there’s just an honesty to buying things that are going up and closing positions when they’re going down.

HUGH HENDRY: And it’s also, it’s like this argument I, my, my objective was to have an inventory or warehouse which was full of rich narrative, smart ideas, but they would become legitimate, but the market would make them legitimate. And I’d go, hey, pull that one down. And so that’s, there’s another time we, we bought, we group, I say weir when I was working at, at we bought that, I want to say around about 2005 maybe.

HUGH HENDRY: And we group is based in Glasgow of all places. It’s a manufacturer of pumps, a large percentage of the demand is derived from mining and exploration. And therefore, of course, it is very, very like factor analysis is overloaded by what’s happening in the extractive industries. And of course, what’s happening to the prices of such commodities?

HUGH HENDRY: And I charts and oil prices and gold prices and everything were, were saying to me that I needed representation. The share price of we group was telling me that it was at a point where it could perform explosively to the upside because it was trading, it traded in a range for 15 years and it was trading at the high end of that range.

HUGH HENDRY: And for me, there’s an objectivity from strangers having the confidence to pay a higher price than it traded in 15 years. It kind of reveals some form of knowledge or confidence that they have, which I I may be lacking at that point.

HUGH HENDRY: So I’m very taken by that. But I remember the the analyst, one of my partners and the difficulty that he had because we group, despite kind of having gone sideways for 15 years was an extremely well managed business.

HUGH HENDRY: And it kind of grew GDP and they kind of, you know, their profitability was robust and it was always, therefore highly rated, it was probably on about 1.6 times enterprise value to sales. And his average ebit margins for 12 years had been like 11% fair. And my guy was just like, I, I can’t really see how you get an explosive price reaction.

HUGH HENDRY: And I had to say, well, you know, put in $100 oil price and like we would do it, but, you know, no one’s looking for that. I was like, well, someone is, I can see it and, you know, if you look at we group from 2005, it, it, I don’t know, tripled quadrupled, you know, I did, it did very well.

STEPHEN CLAPHAM: Actually I was, I, I was involved as well. It was fracking that helped because the pumps were used in, in the US shale. And, but that’s a great example. How do you remember what it was trading at? I mean, that’s 15 years ago.

STEPHEN CLAPHAM: Oh, and you, and you’ve done, I mean, you know, you can, you’ve been short the Hungarian Flor and done all these like weird things in between. How can you remember the, the valuation? You just have that sort of mind.

HUGH HENDRY: I don’t have a great mind. I mean, I can’t remember names. But, that was a, that’s a kind of, I guess that’s a go to area. I discussed that in the past because I just felt, I felt for the analyst because it was the pain and the suffering that I had endured in Edinburgh.

HUGH HENDRY: That again, I wish to say that exclusive reliance upon fundamentals is, is hard, you know, and you don’t have to make, you don’t have to like load everything on your shoulders. You can make light of situations, which is what I did. So I just, I felt the animals were really struggling in a manner that I had struggled.

HUGH HENDRY: And of course, and everyone, and what I also revealed was that analysts will not, no one would fact analysts are, are conservative and, and group like, and they’re not, we have to teach people to kind of be brave to be themselves and to, to be brave to be foolish and foolhardy and, and get things wrong but, and, and to make bold claims, you know, we’re getting that beaten out of ourselves.

HUGH HENDRY: And it was one of these things that, you know, to say I was going to 100 bucks, it went to 100 and 50 bucks, but to say it was going to 100 bucks in 2005, 3 years before was, was heresy.

HUGH HENDRY: So for all of those reasons, you know, the, the, the trading trading live ammunition. Definitely registers. The photocopier is still working pretty clear photocopier when I was five years old and my parents had a pet, a vicious pet kangaroo in their bedroom. That kind of memory functions a little bit. The toner is a little bit low.

STEPHEN CLAPHAM: Now, we’re at a very interesting juncture. And so I, I thought, you know, it was interesting to talk to some macro guys because we’ve had sort of 40 years of falling interest rates or just about 40 years. And I think you made the point that, you know, they started at too high a level if we look back in 40 years time, if we live that long, probably not in, in my case.

STEPHEN CLAPHAM: But if we look back and apart from saying, well, we started the interest rate started at two lower level. And what would this regime change bring is I’m slightly, frustrated because I’d assume that the markets would become easier when I had this much experience.

STEPHEN CLAPHAM: And yet all the experience I’ve got, I can just throw it out the window because it doesn’t mean anything right. And, and it’s particularly not because I’m a fundamental guy looking at valuations and nobody cares about evaluations now. But if we look back going, you know, quite a long time in the future, what, what’s gonna happen to you?

HUGH HENDRY: I don’t know.

HUGH HENDRY: I, I find myself quibbling a little bit or reacting because, forgive me if I’m wrong, but you seem to imply that we are now in the throes of regime change, which is we, we certainly can’t have another 40 years of falling interest rates.

STEPHEN CLAPHAM: Or can we, I mean, we just go to interest rates will be negative 5%. I mean, is that what happens?

HUGH HENDRY: I mean, something will have to intervene to stop that happening and I’m not sure what that intervention will be, but without an intervention, then the path will continue to seek out lower real rates to stabilize the situation. I believe.

HUGH HENDRY: The the 40 years of the 50 years, these are, these are long times and, and, and typically 40 50 years, an adult adult lifetime is typically enough to, to, to bring binary change. So we should be anticipating binary change. However, I am very taken by, we, we do like to go back to, to inflation the inflation of the seventies that was 50 years ago.

HUGH HENDRY: You know, when, when I started working in Edinburgh, 50 years ago, would have been the 19 thirties and you know, people were funny clothes and funny cars and here we are and the seventies. Yeah, I was born in 69. I mean, that’s like saying you were born in 1929. It seems such a long time ago anyway.

HUGH HENDRY: You’ve got to go back 100 years to find instances of of society changing bouts of high inflation, hyper inflation.

HUGH HENDRY: And it’s still given great relevance. We always go back to these points.

HUGH HENDRY: China Mainland China suffered.

HUGH HENDRY: The Japanese suffered, the Japanese military executed the bank of Japan governor. His face adorns one of the the the notes in Japan.

HUGH HENDRY: And even, you know, the seventies which wasn’t hyper inflation, but it was 50 years ago.

HUGH HENDRY: And it’s been a, I don’t, I want to say I’m not sure that they are relevant anymore. And I say that can they be relevant when we are so indebted? And therefore, I think it’s a bit like nuclear policy or nuclear war that, you know, if you were to raise rates, you, you obliterate everyone.

HUGH HENDRY: And so it’s lost its, its potency. So, I, I think the course, like when you look at this year with the undeniably the US main line boom, people definitely have spent a lot of money now. They, they were given a lot of money to spend, you know, they were, it’s the first time where we’ve closed the world, but actually paid people to sit there and do nothing, nothing morally.

HUGH HENDRY: No, no moral judgment there. I’m just saying that’s, that’s unique. Savings were high and then some of those savings have been drawn down and, you know, services clearly are still under the cash with COVID. And so there’s been a lot of demand but happen as far as I go with that.

HUGH HENDRY: So the oh yeah. So and so, you know, like, especially up until, especially the first quarter where us yields were really going, looks as if they’re going to go up to 2%. They flare from about 1 80 10 year bond yields from, from lows of 40 basis points.

HUGH HENDRY: Despite all of that, the banks have just haven’t stepped up to the plate and lent. There’s not, there’s either not been the willingness from their credit committees, committees to to go for it or there’s not been the demand. And at the same time, they’ve been accumulating huge, huge bundles of cash on their accounts.

HUGH HENDRY: And they have been, they’re, they’re terrified about collateral and losing money and willing to almost negative rate. So I’m saying to you that the private banking sector in America seems to be willing to tolerate negative rates would pay negative rates if the fed didn’t intervene in day to day money markets. So I think it’s there.

HUGH HENDRY: And finally, I think the culprit and the thing that has to change is, is China that and China works with your 40 year time cycle because what else happened in the last 40 years, China went from its citizens on average earning like a dollar a day to now thankfully earning much more $10,000 a year.

HUGH HENDRY: And the way that they have organized their affairs has meant that they have taken demand from the West and, and given us deflation back and they show no sign of and not just them, forgive me, not just them because actually Germany within the wider Europe is doing the same in any of the persistent current account surplus or trade trade surplus.

HUGH HENDRY: Nations of the world are responsible for the deflationary kind of cold shower that we’re forced to take every day. And, and the principal mechanism of that is that they, I managed, they either managed their exchange rates whereby they, they prevent the market from going to where it wants to go to take out that advantage and, and, and create equilibrium. China of course, has a, you know, has a dirty float.

HUGH HENDRY: Europe, Germany, you know, has the Euro, which is, you know, not a dirty float but something else. And then on another thing is the domestic labor pool never enjoys food or never captures fully the productivity that it brings to the table.

HUGH HENDRY: And so that’s why in China, this, the consumption is always way below our levels because they don’t get rewarded in the manner their productivity would dictate. And so there’s a deficiency in their own domestic demand, which is made up for by, you know, lunacy investments in property and, and, and fixed asset investments.

STEPHEN CLAPHAM: But you, I mean, do you think looking at China that all that could change now?

STEPHEN CLAPHAM: Because if ever Grand goes bust, maybe it won’t go completely you know.

HUGH HENDRY: Yeah.

STEPHEN CLAPHAM: No, no. But I mean, obviously, but the, I mean, there’s a, a potential knock on effect on the Chinese, the rich Chinese willingness to buy properties that they leave empty. The whole thing seems crazy to us in the West, but it seems perfectly natural there.

STEPHEN CLAPHAM: But if you no longer believe that buying an apartment will be a guaranteed gain. If you no longer believe that when you put the deposit down, there’s a guarantee that the developer will deliver the apartment, the psychology could change.

STEPHEN CLAPHAM: And this is a market, it’s not being, it’s not a real market. I mean, it’s a, you know, it’s a market which is like the market in tulips or whatever. So, I mean, could that take quite a lot of the Chinese growth away? I mean, is that, I mean, what do you think will happen in China?

HUGH HENDRY: Yeah, so yes to all of that. So one of the riddles just now, is that very much? There is in the political economy, there is an acceptance of a of a new regime that we have, we have price inflation.

HUGH HENDRY: And I I want to quibble about that but whatever we have price inflation. But the great riddle is that as we, you know, 6% plus inflation in Germany in the US, these are rates of price gain we haven’t seen in 15, 20 years, if not longer and yet those duration, government bonds are, the prices are trending higher and they look as if that trend is going to be taking you to lower yields.

HUGH HENDRY: You know, the US yield has come down from 1 80 to 1 35 in the last, you know, three weeks and chart wise, it looks like it could go below one.

HUGH HENDRY: Is there another reason for that, is that, is it the shadow cast by what’s going on in China? And these are questions that you have to ask yourself now to put things in perspective. So, you know, I I kind of got a 2008 I I monetized 2008 for the world 2008 was a big deal because you were talking about an overvaluation in an asset where, where the stock was two or three, the flow of GDP.

HUGH HENDRY: And so any dimunition in in its value was going to be magnified three X, you know, and was therefore going to be a huge deal and contrast that in the last 10 years, I’ve heard their cases us is going to crash because of student loan forgiveness or because, you know, car loans are out of control, they’re just not big enough.

HUGH HENDRY: Ok. Now us real estate is I want to say $36 trillion I say that actually, I don’t believe it must be more than that, but I’m going to check again and maybe you can check if I’m way off, you put a label on, on top, China, I believe is more like $90 trillion. And that is just, well, again, that’s something that, that you think, oh, ok.

HUGH HENDRY: To, to be reflected upon and then what I’ve been toying with is a great source of intelligence for me has been another of my partners from Eclectic Tom Rod and he’s been working on this idea of the Confucius calendar, you know, the year of the pig and the year of what, what have you that their time system is, is actually ra ra radically different and, and slower if you will think of it, them being on a trajectory around the sun which is wider, let’s say it takes longer for them to pass around one revolution of the sun.

HUGH HENDRY: Whereas we’re whizzing around it in a year, they’re whizzing around it in 12 years is the analogy that he makes. And so 12 years ago, I found myself, I lo I raised about $100 million and it was leveraged to the and, and I would have made a billion dollars for the clients, literally a billion dollars in the event of mainland China, like reversing and having a steep recession within, you know, two or three year price window.

HUGH HENDRY: And we bought remarkably cheap volatility via corporate default swaps in Japanese steel companies that were whose business was operationally and financially leveraged. And, and very vulnerable to what the activity is going on in mainland China.

HUGH HENDRY: And that didn’t come to pass, obviously, I didn’t make a billion dollars for my clients. But the, the thing that sticks in my mind is it was 12 years ago and 2015 was when Kyle Bass was in with, you know, the, the currency is going to devolve the Chinese currency just now is about 6 30 versus the dollar And back then it was about 7 20 maybe.

HUGH HENDRY: And Kyle was saying he was going to trade through nine, if not, you know, higher or lower varied levels. And again, that didn’t work and for all of the reasons stacked up the thing, but the critical variable that wasn’t right was a question of time and the 12 years have now kind of come through.

HUGH HENDRY: China’s got a 90 tri has, has 90 trillion of value dollar value attributed to property. Like you say, people do not live in them that you don’t furnish them lights do not go on. They are an investment.

HUGH HENDRY: George Soros, the greatest like investor of all time. He is going, it’s a disaster and everyone’s like, no, you don’t understand China. And I’m thinking actually it’s the clock, it’s the clock, it’s the 12 year clock and it’s ringing and George recognizes it and it’s ringing in his head and everyone’s like, No George George, you’re such too old for this business.

HUGH HENDRY: And I’m like, that’s why I think the US Treasury is 1 35 today, 10 year. And I think it’s, it’s going to head to lower yields, I think, because again, we’re back into Japan, man. They, they’re bureaucrats, bureaucrats who govern the bull market are geniuses.

HUGH HENDRY: I do. There’s no longer a bull market and then they’re kind of human, you know, just now they’re geniuses and I was like, they’ll, they’ll sort it out. No problem. I’m like, well, you know, I’m watching the 10 year that, $90 trillion figure.

STEPHEN CLAPHAM: I’ve never heard that before.

STEPHEN CLAPHAM: I mean, it doesn’t seem possible. I mean, it’s possible, obviously.

HUGH HENDRY: And the 30 36 36 trillion for us doesn’t sound right because it does GDP is 21. And so it’s got to be, I, I, I think it’s going to be at least three X GDP.

HUGH HENDRY: But, but, but, but, you know, regardless, it’s, it’s still kind of valid. What we’re doing is we’re kind of driving. We’re having a micro conversation and we don’t keep all these numbers in our heads.

STEPHEN CLAPHAM: We have, we have Google them, you know, we, we search these things and you’ll find as soon as we’re finished, I’m going to, I’m going to look, but I don’t know that you’ll be able to Google that I have.

HUGH HENDRY: I’ve got a note somewhere.

STEPHEN CLAPHAM: Oh, don’t worry. I can, I mean, I’ve got an ipad but let’s, let’s continue the conversation.

HUGH HENDRY: But anyway, Yeah, let’s continue.

STEPHEN CLAPHAM: I’ll do this, I’ll look it up after, but just to think about it, the China has roughly three times the population of the US, but it’s obviously got a much lower GDP per head and a large percentage of those people will be living in very basic casting.

STEPHEN CLAPHAM: So for it to be 50% more. So, if China was 90 and US was 60 we kind of make kind of makes sense. But what I’ll do is I’ll do a little web, I do a little web page for each episode. So I’ll do a little bit of analysis and I’ll send it to you before I remember.

HUGH HENDRY: You’re going to find you in Japan, the Empress Palace. This, you know, like a park. No, no bigger than Hyde Park in London was, was the value of California the seventh. Yeah, I remember. Yeah, you get, you get a sort.

HUGH HENDRY: But the other interesting thing is the, the model is very reminiscent of 2007, 2008 because property companies in their in China, their model was very, very similar to the Washington Mutual and the countrywide Financial and indeed the, the US mortgage bank lenders and, and the thing that was similar was you could, you could, you could get the originator, could get rid of the risk rapidly, you could pass it on.

HUGH HENDRY: And so it was a fantastic, these businesses were like, like that until, until they went bust, right? And they went because they changed the model and you had to own the risk longer and it kills you.

HUGH HENDRY: As long as you could pass the hot potato on, you were fine. And China, what, what I didn’t realize until very recently was that as long as you could demonstrate one third completion, you got all of the money, the, the the developer got all of the money and therefore could begin on the next project.

HUGH HENDRY: And the next project which in terms of profitability made these guys probably the best business for incremental profit growth for the last 10 years. These have been the best and they, you know, the heights of their valuation reflect that that has now changed.

STEPHEN CLAPHAM: Yeah. No, I I think that’s the, that’s the issue and if the confidence of the Chinese public was has changed, then the whole thing doesn’t work. And I mean, what, you know, when I look at it, I just think well, a quarter of the China Chinese economy is founded on this because you’ve got all the construction and all the steel and everything else.

STEPHEN CLAPHAM: So and the mu local municipalities. So if you fundamentally pop the bubble of people’s belief that property prices can only go up and that when they put their deposit down, they will get an apartment within a reasonable period, then you know, that would be very, very severe for the Chinese economy.

STEPHEN CLAPHAM: And that’s the one thing that the authorities couldn’t control. I imagine so. I don’t know. I mean, I’ve got no idea if it’s going to happen. I don’t know if you’ve got any strong views on it.

HUGH HENDRY: I think, I think I, I, again, I would tie it up and say, I think the 10 year US Treasury is probably going to go back to the lows if not lower, over the course of next year. And I I think one of the head head winds or whatever will be that situation in China.

HUGH HENDRY: And I think the omnipotence of the Chinese bureaucrat will be put to test by the fact that so much of credit these days is conducted in this kind of dark web that we call the the Eurodollar market, which is dollars, which are created by banks outside America. And that’s collateral lending. And it doesn’t all the kind of macro textbook analysis of when countries default or they have, you know, macro issues.

HUGH HENDRY: It kind of it doesn’t look at, you know, the dark web and all all of this data and bureaucrats don’t help you in that because it’s, it’s, it’s the confidence of banks between themselves and I reckon Overseas are gonna like the risk premium associated with their Chinese brand is going to get high and high.

HUGH HENDRY: That’s exactly how the the Asian crisis 97 began. It was actually Japanese, the C DS on the biggest bank in in Japan went to 2 50 and, and the banks in London, the guys who were, who were, who could trade that stuff were making, like, who were actually, extending overnight, loans to the banks at 250 basis points.

HUGH HENDRY: They were making like a year’s worth of money in, in a week until the risk department came in and said it’s trading there for a reason. You know, I’m cutting your line, don’t do it, you know that. So I’m, we, we got to one of the signs would be corporate C DS markets and probably in, in the Chinese I would imagine would be a probably a bit heavy and controlling on market prices.

HUGH HENDRY: But, you know, Japanese banks, Korean Banks, anyone with a, with a footprint that overlaps China, I think, you know, should, it’s for, for, for what we’ve just discussed to be legitimate, we should start to see again footprints in those governments of, of some misgiving.

STEPHEN CLAPHAM: Tell me I’ve been listening to podcasts with Stephanie Kelton and I was on AAA show in Asia with Steve keen who told me not to be so stupid.

STEPHEN CLAPHAM: I mean, I just don’t get this modern monetary theory. Do you? I mean, what, what’s your take on it?

HUGH HENDRY: Oh is, is just that, is, it’s just another name and another is another club, you know, I’m not really a club member. But it is, it’s more important to have an open mind and to, to accept the life is absurd. You know, Albert s life is absurd. Silly things happen.

HUGH HENDRY: And so, why, like le let’s, let’s be, let’s take into the UK white, the ruling conservative party who’ve got a reputation for fiscal conservatism and U UK sovereign debt. Gdp I want to say is about 8 80% and they’re desperate to get it lower.

HUGH HENDRY: Like why not have it at 100 and 20 and like be the governing class, you know, Japan has taken the eighth level from those levels to like over twice GDP and hasn’t done anything. So I’m not. So on the one hand, I’m with M M T, I’m not on that. I’m not on the side of M M T in that, it seems to offer a palliative how to spend more and we’ll get out of it.

HUGH HENDRY: I’m saying that spend more or don’t spend more, it won’t make any difference.

HUGH HENDRY: And if I was a politician, I probably would spend more because people like you and actually one of the great quantities, is there something about our social democracy in the US and, and especially the kind of Anglo Saxon culture doesn’t seem to like fixed asset investments, you know, the infrastructure in the UK and the US is terrible, you know, and they’ve just downscaled a big important rail upgrade in, in England to save money.

HUGH HENDRY: It’s like, why are you trying to save money when you can borrow 30 year money at, at negative levels. You know, that is stupidity. So there’s that argument, I would just do those projects. Why does it, why is it not the answer? And here, as in many things, I, I, you mentioned podcast and I do a lot of I, the one I listen more often than not to is Jeff Snyder making sense with, with the one I, whatever it is called.

HUGH HENDRY: And Jeff Jeff’s reasoning, which is unscientific in, in, in this regard. But, and that’s probably why I like it. But, spending by, again, by governments, entrepreneurs don’t get it. They’re like, yeah, really big deal. You know, it’s a bit like what’s going on just now.

HUGH HENDRY: The wages for, in the service sector for waiters, for kitchen staff for, for the guys to do the logistics, the truck drivers.

HUGH HENDRY: We, we, we’re being heard there’s huge wage inflation but at the same time there’s huge shortages because actually the entrepreneurs are going, yeah, business is, I could use them just now. But if I commit, if I take them I’ve got to kind of, it’s like buying a footballer is going to change my wage structure across my, my business going to be disruptive.

HUGH HENDRY: I’m sure in six months time we’re going to be as strong as we are today. I, I’m kind of skeptical and there’s a, so there’s the skepticism. So the, the M M T, I think it’s psychology which undermines M M T. The US could double its spending in the next year. And the private sector with the private sector rush to make investments in capacity, I think is uncertain now for M M T to, to really seem to work.

HUGH HENDRY: It would be, you know, without a doubt, giving those checks to people who are not billionaires, it would seem that non billionaires spend money sent from the government on flat screen TV. S and, and whatever and to keep that going, of course, you got to do it every year.

HUGH HENDRY: You’ve got to do it, you got to send those checks in shorter and shorter cycles of time and you’ve got to send more and more money and, and again, I, I don’t think there is, I don’t think we’ll ever, ever in terms of ever being the next five years. I don’t think we’ll reach a political consensus or political naivety that where anyone would adopt that policy.

STEPHEN CLAPHAM: No. Listen. It’s been really fun and interesting talking to you. Just tell me before we finish. I mean, what does your average day look like? You spend all your time on construction sites now, or do you have this sort of very luxurious lifestyle where you get up and go surfing and do yoga every morning?

HUGH HENDRY: So, I, I do yoga. Hot yoga would you believe? Three mornings a week and you know, again, we were talking about, I, I, I over spent time in the future and that brought on a lot of kind of psychosis. And the way I deal with that is I, I still can’t meditate but the voices I get a clearing in the path of my head, via rigorous exercise.

HUGH HENDRY: And I’m very fortunate, rigorous exercise requires a time window of about three, going on four hours, just like preparation, doing it, getting back, showering, having breakfast, you know, being, you know, being ready and, and so I do, I spent about four hours being greedy and looking after myself with those activities.

HUGH HENDRY: And then, you know, I’m staying in a, in a buddy’s house this week, which is beautiful and my house is beautiful. Same bars is beautiful. So no, no quibbles.

HUGH HENDRY: See, yeah, I, I have a, it, you know, it superficially, it looks pretty cool but, you know, like I say I get, oh my God, you know, look at those. We don’t have enough beach towels for the clients. We don’t have enough, you know, and people like come, come, come, please calm down.

STEPHEN CLAPHAM: Well, I, I mean, I, I have that sort of neurotic attitude as well and if you are a worrier it, it doesn’t matter what there is out there, you’ll find something to worry about. I mean, I completely, I completely get that. Just before we go, I wonder if you could just share. I’d like to finish off by asking guests. Do you have some advice or a book suggestion for somebody young who’s thinking of entering our industry?

STEPHEN CLAPHAM: What book would you recommend a youngster read or another practice or training or reading is very important?

HUGH HENDRY: I believe I’ve had that conversation with you. You know, you should be reading a lot.

HUGH HENDRY: I think there’s an error in, having your reading list to pres subscribed for like the the the silo of finance. And so there’s just particular books that, that you are master of, you should read. Wide inspiration is everywhere for entering this domain today is really, really hard. And, and I, what I say to people is you got a glimmer, you know, you’ve got a glimmering glow.

HUGH HENDRY: You got to be the most enthusiastic person because it makes, you know, my, my gig on the, you know, on on screens is I’m passionate and it’s a secret energy that kind of comes out the volume speaker and it passes over people. It’s a glue and, and so you imagine these hedge fund partners and big banks they inundated with like like being smart is not the answer, right? Smart people are 10 a penny, right?

HUGH HENDRY: Smart is not the answer, right? It is a smart plus like you leave an impression. So by all means and indeed there are titles that you have to be on top of and I for me, it was Jessie Livermore and all the Jessie Livermore books, and Jack Swagger and countless others. You know, the one, the great one for me was Fisher and Super Stocks which and I, when we talked about, I said it was on 1.6 times E B to sales.

HUGH HENDRY: The and that’s a book about E V to sales like and why you shouldn’t use price earning ratios that was very powerful. But you know, read John Buchanan, the Gap, the Gap in the curtain and read, read fiction. And because I mentioned Gap in the carton just because I read that and I thought that’s a tale about what I do again. I used this as a mechanism to as, as therapy for myself.

STEPHEN CLAPHAM: You recommended that book to me about 10 years ago and I went out and bought it. I was really quite, I was really quite surprised, very clever. So I’ll put that in, in the show notes, Hugh. Thank you so much for taking the time out of I hope I haven’t kept you from the beach or the yoga class.

HUGH HENDRY: I, I have the architect, I’m late so I’m gonna go to them.

STEPHEN CLAPHAM: Well, I’m sorry to keep you, but I have to tell you and if it’s any consolation in London, it’s a cold wet day. It is, it feels like Glasgow on a bad day, you know. So thank you so much. Well, apologies for the sand Henry, my brilliant sound engineer has done his best, but at times, the sound quality was a bit patchy.

STEPHEN CLAPHAM: My apologies, but hopefully the content more than made up for it, as I said at the start, Hugh has not entirely given up his Bloomberg. He may be embarked in a very different business and a different lifestyle. But I would be amazed if he didn’t turn up as a macro investor in some capacity before too long.

STEPHEN CLAPHAM: I hope you enjoyed this episode. Don’t forget, visit the website, sign up for our free newsletter and we’ll let you know about upcoming podcasts.

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