Hugh Hendry is widely quoted and worth listening to.
Hugh Hendry, CIO of Eclectica Asset Management tells it like it will be. For that reason, he is both extremely rich and opinionated.
Hendry is disliked in equal measure for the way he profits from the economic troubles of others and his ability to analyse global economic issues, then shout out: "The Emperor has no clothes".
Long before most, he judged correctly that the banking crisis had merely been solved at the expense of national government's balance sheets with the bank bailouts.
Moreover, he appears to consistently put his and his clients' money (US$450m of it) where his mouth is. And it is a pretty big mouth. To watch him interviewed on Newsnight is a delight. He appears incredulous at the inability of others to ignore facts that are staring them in their face.
Background
Hendry graduated from Strathclyde University in 1990. He then worked at Baillie Gifford & Co, Edinburgh, managing funds in both the American and British teams. Subsequently he joined Credit Suisse as an Associate Director responsible for UK institutional equities. He joined Odey Asset Management in 1999 where he managed a range of funds.
He founded Eclectica Asset Management in 2005 with former partners of Odey Asset Management. It was established on the premise of performance-driven absolute return investing.
Hendry is the son of a lorry driver and has a hard edge when exasperated or provoked, as clearly demonstrated in umpteen television interviews. No-one is safe from his candour and logic. He metaphorically grabs opponents by the lapels and sneers before delivering an intellectual assault that has left some economists feeling more battered than a Glaswegian Mars bar.
Predictions
Not only is he entertaining, but he is most often right in his assumptions and predictions. There are lots of clips of his interviews on YouTube demonstrating this. He correctly called the global economic downturn in 2008 and the problems being faced by Greece.
His current predictions include:
- Chinese economic growth will slump causing a crash;
- there will consequently be a sudden and dramatic appreciation in the yen that would bankrupt Japan's domestic export base; and
- that we are set for a period of deflation, which will then lead to hyperinflation as governments print money to pay debt.
These predictions have been made a few times, and were reiterated in his May newsletter.
Positions taken
So what's he doing to back up his analysis? Hendry says:
"The investment team and I have carefully constructed a short credit portfolio made up of over 20 single-name industrial, cyclical businesses that have the dubious distinction of suffering from gigantic financial leverage and Asian/commodity overdependence. Without a doubt some of these businesses will not survive, others will have to be radically overhauled and restructured and we will make money."
He also has a lot invested in the tobacco industry as he believes it can expect to survive a consumer depression. For example, the CF Eclectica Europe Fund as of 30 April 2010 held 12% of its assets in Imperial Tobacco (LSE: IMT) and British American Tobacco (LSE: BATS).
At the same date, the CF Eclectica Absolute Macro Fund was betting against the currencies of Estonia and Latvia plus, to a lesser extent, the pound and Aussie dollar.
He's been called a cynic but to my mind he is a realist. I regard him as the Elvis Costello of finance -- his nagging doubts strike a chord with many.
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