Posts Tagged ‘Hedge Fund Manager’
Interview: James Montier, GMO
Tuesday, March 9th, 2010
Two-part interview with the estimable James Montier, ex- of SocGen and now of GMO. Smart guy. Good musings. Worth reading.
“James Montier: We humans have a bizarre bias against a bargain. For instance, my friend Dan Airely has done some great experiments in this field showing some pretty odd findings. Imagine you taste two glasses of wine one you are told comes from a $10 bottle, the other comes from a $90 bottle. You will almost certainly say that the $90 wine tastes much better. The only snag is that the two wines are exactly the same. So never come to dinner at my house, because I’ll give $10 wine, and tell you it costs $90!
The same thing happens with pain killers. It is why branded pain killers exist alongside generic equivalents. They both have exactly the same active ingredient, but people report the branded version works better.
I suspect that something similar happens with stocks. Stocks are the one thing we don’t like to see on sale. So a ‘cheap’ stock must have something wrong with it, and an ‘expensive’ stock must be a sign of quality – at least that’s the way we tend to view things.
The Anginer et al study shows some similar findings in the legal context. Ugly defendants get far worse sentences, than attractive defendants. We have a hard time believing that attractive people could have been bad – a kind of halo effect, if you will.”
“James Montier: Critical thinking is really all about being a contrarian in thought. Learning to be skeptical, to question what you hear, and evaluate it based on merit, rather than emotional appeal. In essence taking a contrarian view point requires us to learn three skills.
The first is highlighted by the legendary hedge fund manager Michael Steinhardt, who urged investors to have the courage to be different. He said, “The hardest thing over the years has been having the courage to go against the dominant wisdom of the time, to have a view that is at variance with the present consensus and bet that view.”
The second element is to be a critical thinker. As Joel Greenblatt has opined, “You can’t be a good value investor without being an independent thinker—you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value.”
Finally, you must have the perseverance and grit to stick to your principles. As Ben Graham noted, “If you believe that the value approach is inherently sound then devote yourself to that principle. Stick to it, and don’t be led astray by Wall Street’s fashions, illusions and its constant chase after the fast dollar. Let me emphasize that it does not take genius to be a successful value analyst, what it needs is, first, reasonably good intelligence; second, sound principles of operation; and third, and most important, firmness of character.”
Only by mastering all three of these elements can you hope to be at ease as a contrarian.
Critical thinking also involves pushing yourself to think in ways that don’t come naturally. For instance, you have to learn to look for the information that shows you are wrong. You have to learn to try and kill the idea, rather than nuture it. This goes against the grain. With practice all of these elements of critical thinking become a little bit easier – but never let your guard down, because that’s when the bad old habits start to creep in again.”
Source: Miguel Barbosa, Simoleon Sense
h/t: Paul Kedrosky
Tags: Cheap Stock, Contrarian View, Critical Thinking, Emotional Appeal, Generic Equivalents, Halo Effect, Hard Time, Hardest Thing, Hedge Fund Manager, James Montier, Legal Context, Michael Steinhardt, Musings, Pain Killers, Same Active Ingredient, Smart Guy, Snag, SocGen, Variance, Worth Reading
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A Magic Bullet for Inflation and Deflation?
Wednesday, February 3rd, 2010
During the better part of the last 18 months, since the financial crisis erupted, the debate over whether we are in store for inflation or deflation has dominated the investment decision making thoughts of all market participants, from retail investors to hedge fund managers.
The burning question – “Are we heading for inflation or deflation?” – is the toughest one to hurdle. Since there is no way of knowing, you have to make a decision based on what you know about each, then, make a decision about how to invest, based on your decision. Its precarious at best. Many investors, however, unable to settle on an outlook, will choose the option that requires the least amount of thought – cash, GICs, and short term bonds – and wait for things to be clarified.
That’s why something hedge fund manager David Einhorn, of Greenlight Capital wrote last year has got my attention again.
Pierre Daillie (AdvisorAnalyst.com), GlobeAdvisor.com, February 1, 2010.
http://www.globeadvisor.com/advisoranalyst/aa20100201.html
Tags: Burning Question, David Einhorn, Financial Crisis, Fund Managers, Gics, Globeadvisor, Greenlight Capital, Hedge Fund Manager, Inflation And Deflation, Investment Decision, Magic Bullet, Market Participants, Retail Investors, Term Bonds
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Face to Face with Jim Chanos
Thursday, December 17th, 2009
James Chanos, legendary hedge fund manager and president of Kynikos Associates, makes a special appearance on CNBC to discuss financial markets and share his recommendations.
Source: CNBC, December 15, 2009.
Tags: Appearance, Cnbc, Face To Face, Financial Markets, Hedge Fund Manager, Jim Chanos, Kynikos Associates
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WealthTrack: Cliff Asness - Betting on Quants
Monday, December 7th, 2009
This week Consuelo Mack is joined on WealthTrack by Cliff Asness, an outspoken and thought-provoking hedge fund manager. He explains AQR Capital Management’s value-oriented, quantitative computer-driven strategies and why he is making them available in mutual funds.
Note: The transcript of this interview is not available yet, but will be posted here as soon as it arrives.
Source: Wealthtrack, December 4, 2009.
Tags: Advertisement, Aqr Capital Management, Betting, Cliff Asness, Driven Strategies, Hedge Fund Manager, Mack, Mutual Funds, Wealthtrack
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The Collapse of Finance
Thursday, December 3rd, 2009
This post is a guest contribution by Bill Bonner, author of two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Bill is also the driving force behind The Daily Reckoning.
“Dubai sends markets into turmoil,” begins The Financial Times. Dubai is a financial center, built on sand.
Probably a good thing US markets were closed for Thanksgiving when this news came out. In Europe, the Dubai affair caused the biggest drop in 7 months. European banks have lent $40 billion to Dubai.
Jim Chanos, a famous short seller, thinks Dubai is merely the camel’s nose in the tent, so to speak. “China is Dubai times 1,000…if not a million.”
“People are panicking: this whole process counters everything that the rulers have been saying and the way it has been communicated before the holidays is confusing,” said one hedge fund manager.
The ‘rulers’ are the fellows who run “Dubai World,” and incidentally Dubai itself. Whether they are fools, knaves or sly geniuses was what everyone wanted to know. Dubai officials announced that they had raised $5 billion on Tuesday. Two hours later they said they weren’t paying interest on it or on any of the rest of the $80 billion in borrowings. What’s going on? Are they really broke? Or are they playing for some kind of advantage?
“Dubai gambles with its financial reputation,” says one headline at the FT.
Then, on the facing page, the editors think they know how the gamble will turn out:
“A breath-taking blunder in Dubai…Dubai is looking more like Argentina than Singapore - but a lot less predictable,” says the FT editorial.
No on is sure what is going on. Most people take from this story what we knew all along: lending to shady characters in sunny places is not an easy way to make money. Especially when the shady characters own the country.
Trouble is, shady characters run near all the world’s countries. If an investor cannot trust the ruling family of Dubai, how can he trust the commies who run China? Or the hacks who run the United States of America?
To err is human. For a central banker, it is practically a professional requirement. Count on a major ‘error’ to trigger a sell-off in the world’s bond market.
But Dubai’s mistake did not infect all other sovereign debt. German bond yields went down, not up. Investors sought safety from Dubai debt in Deutschland debt.
But what is the real meaning of what is going on in Dubai? It’s the story of the collapse of the financial industry. Dubai has no oil…no natural resources…and no real industry. The rulers tried to turn it into a financial center. Entirely financed by debt. And now finance itself is falling apart.
“The camel put his nose in the tent,” says colleague Simone Wapler. “He saw that there was nothing there.”
What will he think when he gets a closer look at Britain’s finances? Britain, too, relies heavily on the financial industry. And Britain, too, is heavily dependent on debt. Its public finances are among the worst in the world. Japan’s public debt, to add another example, is already 200% of GDP. It’s expected to reach 300% in a few years. And yet, Japan - like the US and Britain - just keeps borrowing. How long can this go on? When will Britain, the US, and Japan announce their own moratoria on debt service payments?
This bubbly bounce must not have much time left. And it is surrounded by 10,000 pins.
On Friday, US markets reacted to the Dubai news. The Dow lost 154 points. Gold lost $14. Oil slipped to $76.
Our crash flag is still flying. But that was not a crash. Just a bad day. And today’s news tells us that other Gulf States are rallying around Dubai, ready to extend a helping hand and lend a buck or two. Oil is rallying on the news.
Does that mean this bubbly trend is stronger than we thought? Is this a bubble made of Kevlar? Will it resist other pins?
We wouldn’t count on it. When China pops, we’ll see US stocks down a lot more than 154 points. In fact, we expect to see the Dow in 5,000-ish territory when this bounce is over. And when that happens, emerging markets will probably be hit even harder.
Dubai was a “wake up call,” for investors in emerging markets, says The New York Times today.
But the pin that pricks recovery hopes won’t necessarily be imported. There are plenty of sharp objects in the homeland too. There is, for example, the growing realization that the recovery is a fraud.
“Half a recovery,” says a New York Times columnist, may be all we get.
Today, the press will concentrate on analyzing Black Friday sales results. Already, The Wall Street Journal has rendered its verdict: more shoppers; fewer sales.
If the initial reports are correct, the traffic wasn’t bad on Friday. But retail outlets were only able to snag sales by offering discounts. It’s a deflationary world, after all. Shoppers want lower prices to make up for the fact that they have less money to spend. And they’ll get lower prices too. Because this is a de-leveraging cycle. The world has too much debt, too many factories and too many workers…at least for the real, available purchasing power. Prices will go down naturally until excesses are absorbed…dismantled…or converted to other uses.
But wait…there are also unnatural forces at work. Governments are bailing out bungled companies. They’re supplying zombie industries with fresh blood from the taxpayers. They’re standing in the way of the de-leveraging progress. They’re creating “money” out of thin air.
It’s this last point that is most explosive. As long as government is just stalling the correction, it doesn’t cause too much distortion or volatility. But when it fiddles with the money…oh la la; that’s where it gets interesting.
Traditionally, people buy gold when they think the monetary authorities are up to something. Throughout the world, investors are getting edgy…they’re wondering how it is possible to add so much cash and credit to the economy without sending prices to the moon.
We’ll tell you how it’s possible: there’s a depression. In a depression, the flow of cash and credit coagulates. Even if you increase the cash in bank vaults, it doesn’t circulate into the real economy. Banks don’t lend. People don’t borrow. Consumers don’t consume.
It just sits there…waiting for the end of the depression…like a teenager waiting for Friday…
Source: Bill Bonner, Daily Reckoning, November 30, 2009.
Tags: 7 Months, Best Selling Books, Bill Bonner, Blunder, Borrowings, China, Daily Reckoning, Driving Force, Easy Way To Make Money, Emerging Markets, Empire Of Debt, European Banks, Financial Reckoning Day, Financial Times, Gambles, Geniuses, Gold, Hedge Fund Manager, Knaves, New York Times, New York Times Best Selling Books, oil, Shady Characters, Sunny Places
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Chanos & Sloan: Lessons from the crisis
Friday, November 13th, 2009
In this video, Jim Chanos, legendary hedge fund manager of Kynikos Associates, and Robert Sloan, managing partner of S3 Partners, discuss lessons learned from the financial crisis. (Also see my recent post “Jim Chanos: Ten lessons from the financial crisis”.)
Source: CNBC, November 12, 2009.
Tags: Chanos, Cnbc, Financial Crisis, Hedge Fund Manager, Kynikos Associates, Lessons Learned, Robert Sloan, S3
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Jim Chanos: Ten lessons from the financial crisis
Friday, November 6th, 2009
Jim Chanos is a legendary American hedge fund manager and president and founder of Kynikos Associates, a New York City investment company focused on short selling. He rose to fame in the 1980s as a short seller who had a knack for spotting stocks what he thought to be overvalued. After working as an analyst in several firms, he founded Kynikos (Greek for “cynic”) as a firm specializing in short selling.
This post, courtesy of Clusterstock, features a slideshow Chanos presented at the annual Virginia Value Investing Conference. The slides highlight in an easy-to-read format ten lessons from the financial crisis - lesson investors might already have forgotten.
Source: John Carney, Clusterstock, November 3, 2009.
Tags: 1980s, American President, Fame, Financial Crisis, Hedge Fund Manager, Investment Company, Investors, Jim Chanos, John Carney, Knack, Kynikos Associates, New York City, Rose, Slides, Slideshow, Stocks, Value Investing
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Jim Chanos in the Spotlight
Thursday, October 1st, 2009
James Chanos is a legendary American hedge-fund manager and president and founder of Kynikos Associates, a New York City investment company focused on short selling. He rose to fame in the 1980s as a short seller who had a knack of spotting stocks he considered to be overvalued. After working as an analyst at several firms, he founded Kynikos (Greek for “cynic”) as a firm specializing in short selling.
This post features Chanos being interviewed by Rob Johnson of New Deal 2.0 - a one-stop shop for current news, fresh insight, and sharp analysis of the country’s fiscal crisis.
This is good stuff - click here for a Verbalink transcript.
Source: New Deal 2.0, August 2009.
Tags: 1980s, Current News, Fame, Fiscal Crisis, Good Stuff, Hedge Fund Manager, Insight, Investment Company, James Chanos, Jim Chanos, Knack, Kynikos Associates, New Deal, New York City, Rose, Sharp, Spotlight, Stocks
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Jim Chanos vs. Ken Fisher on China
Wednesday, September 16th, 2009
Jim Chanos, CEO, Kynikos, the markets’ biggest short seller, says his skepticism about the China miracle is growing, that he is finding the China story harder and harder to believe.
Major investors are starting to question whether Beijing is telling the truth. “I think the story is getting harder and harder to believe,” says widely followed billionaire investor and hedge fund manager Jim Chanos.
“And I’m not the only guy crying about the data coming out of China. You are seeing a lot more articles being written about it, a lot more skeptical voices being heard about just how accurate some of this data showing this Chinese miracle. And the fact of the matter is I don’t think it’s very accurate at all.”
Click play to view:
Chanos’ thoughts are very similar to those of Hugh Hendry, CIO, Eclectica Asset Management, whose China field-trip video describes what is going on in some parts of China. Hendry takes us on a tour of Guangzhou, a tier 2 Chinese city, home to more than a few empty billion-dollar buildings.
This is in sharp contrast to the views of Ken Fisher (one of my investing heroes of days gone by - one of the great and most interesting Forbes columnists), CEO, Fisher Investments, son of Buffett mentor, Phil Fisher, who is currently overweight in Emerging Markets positions in China, India, Brazil.
Fisher predicts Chinese stocks will lead the bull market in global equities, as a 4 trillion yuan ($586 billion) stimulus package and record lending spurs growth in the world’s third- largest economy. Economists anticipate China’s gross domestic product growth will accelerate to 9.5 percent next year from 8.3 percent in 2009, according to a Bloomberg survey conducted the week ended Aug. 28.
“It’s perfectly justified why China has been the best performing market since the Lehman collapse,” Fisher said. “It has a lot of monetary and fiscal stimulus behind it. China is the driver of the V.”
Bottom line: Chanos believes that the Chinese are misusing their financial resources in a fashion similar to the former Soviet Union, spending on money losing projects for which there is in some cases no capacity utilization. Fisher believes that China’s 4-trillion yuan ($586-billion) stimulus is keeping the global economy afloat and the driving force behind the V-shaped recovery in stocks (he also believes that this is not a sucker rally)
Sources: CNBC.com | Bloomberg | GreenLightAdvisor.com
Tags: Allowscriptaccess, Billionaire, Cab Version, Cabs, Ceo, China, China Field, Chinese City, Chinese Miracle, Chinese Stocks, Cnbc, Collapse, Eclectica Asset Management, Emerging Markets, Fact Of The Matter, Fiscal Stimulus, Fisher Investments, Global Equities, Gross Domestic Product, Hedge Fund Manager, Hugh Hendry, India, Investments, Jim Chanos, Ken Fisher, Lt, Miracle, Object Id, Param Name, Player Id, Quality Value, Skepticism, Stimulus Package, Telling The Truth, Tier 2, Trillion, Type Application, Value Application, X Shockwave Flash
Posted in Emerging Markets, Markets | No Comments »
Einhorn’s Greenlight Capital: Large S&P500 Puts Position (13F)
Tuesday, August 18th, 2009
MarketFolly.com reports, according to 13F filings, David Einhorn’s $6-billion hedge fund Greenlight Capital (no relationship to us) has loaded up on S&P500 (SPY) PUTS, building a 24.25% position, most likely portfolio insurance, betting the market is due for a big blow-off. Previously, Einhorn reportedly built up large positions in gold, both physical and paper. Now it appears he has opted for physical gold because its cheaper to store and is using GLD (SPDR Gold Trust) PUTS as downside insurance on his physical (long-term) gold.
Hedge Fund managers are worth watching because their directional votes (positions) often constitute stringently researched decisions, that are beyond the grasp and willingness of most investors.
Here is an excerpt:
The following were their long equity, note, and options holdings as of June 30th, 2009 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.
Some New Positions (Brand new positions that they initiated in the last quarter):
SPDR Gold Trust (GLD) Puts
Cardinal Health (CAH)
General Electric (GE) Puts
Transatlantic Holdings (TRH)
ATP Oil & Gas (ATPG) - position is less than 0.45% of their overall portfolio
Endurance Specialty Holdings (ENH) - position is less than 0.30% of their overall portfolio
US Natural Gas Fund (UNG) - position is less than 0.02% of their overall portfolioSome Increased Positions (A few positions they already owned but added shares to)
Everest Re (RE): Increased position by 598%
IPC Holdings (IPCR): Increased position by 132%
Pfizer (PFE): Increased position by 102%
Wyeth (WYE): Increased position by 100%
Aspen Insurance (AHL): Increased position by 74%Some Reduced Positions (Some positions they sold some shares of)
MEMC Electronics (WFR): Reduced by 50%
EMC (EMC): Reduced by 44%
Echostar Corporation (SATS): Reduced by 37%
Helix Energy (HLX): Reduced by 34%
Harman International (HAR): Reduced by 31%
URS (URS): Reduced by 28%Removed Positions (Positions they sold out of completely)
SPDR Gold Trust (GLD)* (there is a big asterisk next to this one, so read our summary below to find out why). Target (TGT), Hess (HES), Commscope (CTV), Dow Chemical (DOW), Conway (CNW), Rohm & Haas (ROH), Discover Financial (DFS), Jones Apparel (JNY), Western Digital (WDC), American Eagle Outfitters (AEO), Patriot Coal (PCX), Cadence Design (CDNS), Williams Sonoma (WSM), JA Solar (JASO), Focus Media (FMCN), Carpenter (CRS), Corning (GLW), Supervalu (SVU), Sunstone Hotel (SHO), Bradywine Realty Trust (BDN)Top 15 Holdings (by % of portfolio)
- SPDR S&P500 (SPY) Puts: 24.25% of portfolio
- Pfizer (PFE): 6.32% of portfolio
- URS (URS): 5.56% of portfolio
- Teradata (TDC): 5.11% of portfolio
- Wyeth (WYE): 4.56% of portfolio
- Cardinal Health (CAH): 4.27% of portfolio
- Market Vectors Gold Miners (GDX): 4.25% of portfolio
- Allegheny Energy (AYE): 3.75% of portfolio
- EMC (EMC): 3.34% of portfolio
- Einstein Noah (BAGL): 3.27% of portfolio
- Aspen Insurance (AHL): 3.25% of portfolio
- Health Management Associates (HMA): 2.49% of portfolio
- McDermott (MDR): 2.33% of portfolio
- MEMC Electronic (WFR): 2.29% of portfolio
- IPC Holdings (IPCR): 1.77% of portfolio
We’ve got a lot of technicalities to cover here so let’s dive right in. Firstly, Einhorn did not get out of gold. Last go-round, we saw Greenlight had amassed a large gold position via the SPDR Gold Trust (GLD). Although GLD no longer is being reported on his 13F filing (they sold out of it), they still own a large gold position. They have started storing physical gold due to cost savings as noted when we looked at Greenlight’s recent investor letter. This is the perfect example of why you can’t blindly follow SEC filings.
Tags: Ahl, Aspen Insurance, Atpg, Cah, Cardinal Health, Common Stock, David Einhorn, Endurance Specialty Holdings, ETF, GLD, Greenlight Capital, Hedge Fund Manager, Hedge Fund Managers, Ipc Holdings, Major Moves, Memc Electronics, oil, P500, Pfe, Pfizer, physical gold, Portfolio Insurance, Transatlantic Holdings, Trh
Posted in Gold, Markets | 1 Comment »
Jim Chanos: Reckless Bank Execs Should be Prosecuted
Friday, May 15th, 2009
According to Forbes, Jim Chanos, renowned short seller and the activist hedge fund manager, best known for outing Enron on its accounting practice spoke out at a conference Wednesday night, that bank executives should be prosecuted for their roles in the banking system crisis:
James Chanos, a well-known short seller and hedge fund manager, said banks knowingly booked inflated earnings when selling the financial products that led to their downfall and the government bailout. The earnings wound up in bonus pools and banker’s pockets.
“It’s the heart of one of the greatest heists of all time,” he said, without naming specific banks. Their executives probably won’t be prosecuted because explaining how investment banks created and sold collateralized debt obligations and other structured financial products would test a jury’s attention span. “The jury’s eyes would glaze over.”
The top underwriters of collateralized debt obligations from 2005 to 2007 were Bank of America-Merrill Lynch and Citigroup with $237 billion of the $724 billion sold during that period. Representatives from both banks either didn’t return calls or declined to comment.
Read the rest of this story here.
The fury against the culprits of this decade’s market meltdown is coming to a boil as more and more information about the causes of the credit debacle percolate in the market, and around the judicial system, about who’s to blame. A few days ago, we covered what appears to be an organized comeback by Eliot Spitzer, former governor of New York.
Sptizer appears as a familiar face from the past, but with a fresh new voice, and if you listen and watch closely, you can see that the re-invigorated Spitzer is on a mission, or rather a new crusade, though this time, it is not as a lawmaker. Yet.
So is it any wonder that the N.Y. Fed has been complicit in the single greatest bailout of poorly managed banks in history? Any wonder that it has given—with virtually no strings attached—practically the entire contents of the Treasury to the very banks whose inability to manage risk has brought our economy to its knees? Any wonder that not a single CEO or senior executive of a major bank has been removed as a condition of hundreds of billions of direct cash and guarantees? Any wonder that, despite its fundamental responsibility to preserve the integrity of the banking system, it sat quietly on the sidelines as the leverage beneath the banks exploded and the capital underlying their investments shrank?
Read more here, The Former Sheriff of New York.
Sources:
Forbes.com
Tags: Accounting Practice, Attention Span, Bailout, Bank Executives, Bank Of America, Collateralized Debt Obligations, Culprits, Eliot Spitzer, Enron Accounting, Familiar Face, Former Governor Of New York, Governor Of New York, Greatest Heists, Hedge Fund Manager, Investment Banks, Jim Chanos, Market Meltdown, Merrill Lynch, New Crusade, Rogue Bank, S Market, Structured Financial Products
Posted in Markets | 1 Comment »
Hendry: Markets Assuming Optimism
Wednesday, April 29th, 2009
Hugh Hendry, the outspoken hedge fund manager and founder of Eclectica Asset Management, known for his remarkably accurate call on deflation, and long-duration government bond bets, appeared on CNBC last night to share his controversial outlook on markets. In his usual and cutting way, Hendry dismissed critics of his stance on long bonds, by pointing out that we are in the midst of “a rally of risk”.
The recent rise in stocks and talk about green shoots in the markets are optimistic assumptions, as the world downturn “still has a way to run,” said Hugh Hendry, CIO at Eclectica.
Here are the accompanying notes from CNBC.
The recent rise in stocks and talk about green shoots in the markets are optimistic assumptions, as the world downturn “still has a way to run,” Hugh Hendry, Chief Investment Officer at Eclectica, told CNBC Tuesday.
World gross domestic product looks overestimated, because global consumption has been based on debt, and this cannot continue, Hendry told “Squawk Box Europe.”
“In the last five weeks we had a rally in risk. Big deal,” he said.
“I am fearful of the surplus countries, like China and Germany. I think GDP has been overstated,” Hendry added.
“My notion was, you had Bernie Madoff doing US GDP accounting.” China “built capacity to serve a world that doesn’t exist. We’re drowning in capacity. The idea to propose we build more… that ain’t a remedy,” he explained.
Although companies’ results beat forecasts, this is mainly because they marked their expectations too low, but their outlook is grim, according to Hendry.
“I believe the downturn in the global economy still has a way to run. We’ve only been given evidence of further deterioration,” he said.
The rise in bond yields shows that the yield curve is flattening, pointing to more economic weakness ahead.
“What it reveals is that it’s terrifying. This rise in bond yields shows… the private sector is countering the Fed and is tightening policy,” Hendry said.
During the Great Depression, there had been rallies in the stock market, but stocks generally fell, Hendry reminded, explaining his bearish stance on stocks. He added that nobody can predict where the bottom was for the stock market.
“Monkeys spend all their time picking bottoms. I refuse to pick bottoms as I don’t live in trees,” he said.
Hendry also shared his thoughts on Tobacco stocks, commodities, bonds, and gold.
Tobacco stocks, especially in the US, are among the few assets that Hugh Hendry, chief investment officer at hedge fund Eclectica, said he likes Tuesday, but he added investors should be prudent as world economies are still in the middle of a deleveraging trend.
Altria and Philip Morris are interesting choices as they are “priced in dollars,” Hendry said, adding “I like dollars.”
“One of the things we know with certainty is that people smoke, they’re addicted to it,” Hendry added.
He said he was getting a 9 percent yield on the stock, but, because of the fragile economic situation, was thinking of buying senior debt, which would give the same yield but offers more security in case of bankruptcy.
“As a society, we have taken debt… to almost four times greater than the economy. That’s unprecedented. And it’s a turning point,” Hendry said. “Governments around the world want some inflation, and they are targeting inflation. It’s one thing to target it and another to achieve it. Who wants to take on debt today?”
Because of this, the economy will continue to contract and commodities such as oil are not a good bet either, according to Hendry.
Bonds are not a good buy for the summer, as they are usually an investment for the second half of the year, and investors should be “patient and scared” and, at the end of debt deflation, may get “fantastic values”.
Gold has behaved as a risk-free asset, but Hendry said he hopes for a correction in the price of gold to around $600 to $700 per ounce, from the current level of $898, to start buying.
“I’m not saying it will happen, but stranger things have happened,” he said. “Gold investors have had it easy. I expect gold to get a bit more uncomfortable for the people who hold it in the short term.”
“The intellectual case for gold is very strong. Governments are printing money, but only God prints gold and that takes billions of years.”
Tags: Accompanying Notes, Assumptions, Bernie Madoff, Bond Yields, Chief Investment Officer, Cnbc, Deflation, Depressio, Deterioration, Duration Government, Economic Weakness, ETF, Global Consumption, Global Economy, Government Bond, Great Depression, Gross Domestic Product, Hedge Fund Manager, Hugh Hendry, Optimism, Rallies, Squawk Box, Stock Market, World Downturn, Yield Curve
Posted in Bonds, Commodities, Economy, Gold, Markets, Oil and Gas, Outlook | No Comments »
