Hendry: Short Selling Ban a Fiasco

Hugh Hendry, the eloquent, brash, and outspoken CIO at UK-based Eclectica Asset Management, comments on the today's worsening selloff in markets, appearing this morning on CNBC European Squawk Box with Geoff Cutmore.

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"It feels like the blackest morning," Hugh Hendry, CIO & partner at Eclectica said Friday (today). "We've never really experienced a matter as grave as this."

Conditions like these are unmatched, except with 1930-32. He "slakes" regulators for this, making the following points.

  • The short selling ban has been a fiasco, as it has removed an entire constituency of buyers from the market, so that on weak days there is no profit incentive to buy the market.
  • The tremedous slide of the last two weeks has made the market completely oversold, therefore nobody is willing short sell the market.
  • The VIX index is very high, so one can't (afford to) buy puts to protect their holdings
  • Fundamentals have become an intellectual curiosity, and an outrageous luxury
  • The only defense left to investors is to sell their assets, this is a liquidation
  • People watch the market all day and are averaging their trades,
  • and that's why in the final hour of trading you see a cascading of orders, and the market runs out in panic trying to fulfill those orders.

So far in the month of October, Hendry's hedge fund is up 40% on account of his levered positions in long-term government bonds.

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