Hugh Hendry, CIO, Eclectica Asset Management, hosted CNBC Asia's Squawk Box, while on a visit to Hong Kong, and shared his thoughts on AIG and the revelation of its record-breaking writedown.
The thing about Hugh Hendry is that while he has been one of the most outspoken and brutally honest practitioners in the hedge fund sphere, he has also openly shared his calls on global television, and in articles, sounding the deflation call firmly well ahead of the present. We hitched our trailer to just about everything Hendry, and it has been with enormous common sense, and an unwavering passion for his art that Hendry has called it right.
Hendry sticks by his long-duration bond investments in 30-year US Treasuries, German Bunds and UK Perpetual Gilts firmly, even today, as the market has been consensus on what has been described as a bond bubble. By Hendry's estimates, (and his money is where his mouth is) there is far more delevering in store for the market, that debt levels are still far too high.
Click play to watch here:
"American International Group is being kept alive on artificial support from the government, and many other financial companies are in the same situation"
"I think it's rather a series of redundant thoughts, because AIG is really no longer with us," Hendry said when asked about the chances of success of a new bailout for the insurer. "AIG is a ward of the US government, AIG's executives were naughty. They wrote naked (credit default swaps) and in the process they bankrupted the business."
"We live in a very strange, twilight period where we pretend that a lot of these financial companies are still with us. I think the reality is they left the business last year," Hendry added.
Banks' stock prices show that the markets think many financial institutions are bankrupt and the big debate is really how we bring down the debt supporting these companies, he said.
"Nationalization really provides for an orderly liquidation for what are insolvent institutions and I think we have to be willing to have that discussion," Hendry said.
"If we had governments actually saying listen, the financial sector is insolvent, we would be on the first positive step to moving way from that situation," Hendry said.
