Hugh Hendry: Big Macro Fault Lines

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[00:00:00] Pierre Daillie: Hello, and welcome to the Insight is Capital podcast. I’m Pierre Daillie, managing editor of Our COO Joseph Flamana is here as well. [inaudible 00:00:09]. Our extremely special guest today is the one and only Hugh Hendry. Also known as The Acid Capitalist infamous founder of Eclectica Asset Management, the award-winning hedge fund manager, market commentator and in my humble opinion, a thought leader of towering intellect during the last 20 years pre and post the GFC meltdown and since.

Hugh figures very large in the life of as we were actively sharing Hugh’s points of view, outlook and TV interviews, we couldn’t get enough of it during the post 2008 period and when everyone was scrambling for answers to what in the hell was going on, there was Hugh Hendry cutting through all the noise, sharing his profoundly well-informed and well investigated perspective of markets and what he saw was actually going on.

[00:01:02] Speaker 1: This is the Insight is Capital podcast.

[00:01:11] Speaker 2: The views and opinions expressed in this broadcast are those of the individual guests and do not necessarily reflect the official policy or position of or of our guests. This broadcast is meant to be for informational purposes only. Nothing discussed in this podcast is intended to be considered as advice.

[00:01:21] Pierre Daillie: So Hugh, first of all, to say, I’m extremely excited to be chatting with you would be a great understatement. It’s an honor and a privilege. Thank you so much for joining us today on Insight is Capital.

[00:01:36] Hugh Hendry: I’m, what can I say? What an introduction I am humbled beyond belief. [laughs]. But I’ll take it, what the heck, [laughing] I’ll take it. Thank you. And for those perhaps who’re less, less familiar, they, but it comes with a sticker warne- warning, that I wanna say that there had been moments where when I really focused and concentrated I was able to gain albeit a brief, but gain a, an insight into events that might just happen if you will. But in order to exercise that power of foresight, I live a life separate a life, which is in conflict with the conventions that we associate with money managers and commentators. And so please don’t be mistaken or put off by my clownish, [laughs] endeavor. I do everything to push people away it’s, I’m a sh- I’m a shaman and it’s not everyone’s cup of tea, but sometimes just sometimes it pays to listen to the crazy guys. [laughs].

[00:02:53] Pierre Daillie: And listen, we do. Hugh for all those who don’t know you please tell us about your beginnings, how you got into the business of investing, the arc of your career, and last but not least what you’re up to now.

[00:03:10] Hugh Hendry: Why? Yeah. I’m actually plugged, but I’m planning on releasing a, I’m planning on releasing it the Acid Capitalist book, which is that kind of point A, point B story from a, a vicious housing project in the outskirts of Glasgow in Scotland to here, to now living on this beautiful tropical billionaire paradise that we call St. Barts. And boy, yeah, that, that’s a story. And it’s a story of inversion, it’s a story of of a 10 year old kid smarter and wiser than way wiser than his age. Believing that he’d either been held kidnapped or had been orphaned [laughs] but sadly did belong under the gray vistas.

I looked outta my bedroom window, and life was gray, but I didn’t have a longing to stay there. But I had the wisdom to recognize that education perhaps would be my ticket to leave, which was the imperative. And I have to say I just worked, work, worked darn hard. I have to say at the other end of that tunnel, I am I’m Benjamin Button. I’m determined that every day I’m getting younger and I go to absurd lengths. One of these freaks I take all fo- I pop all forms of pills and supplements. I don’t eat for about 22 hours a day. I get high, I get high on my own on my own internal combustion.

When you haven’t eaten for 20 hours and you’re feeding on, or you’re burning fat. You get, stuff, not all of it makes sense, but stuff. Okay. So that’s where I am now, I’m getting younger everyday. You’ll find me on Instagram getting younger every day in an absurd manner. One of the kind of let’s try and not get log jammed there, but one of the key things that happened to me, I found I, in Scotland, you can do a fourth year an honors year is called in the grad- undergraduate program. And I found myself doing a course called financial based accounting research. Which then I, now I’ve gotta tell you all my secrets, I’ve gotta tell you that hey, my father was a truck driver, beep to the guys [laughs] on the streets. But, Yeah.

… So if your father’s a truck driver, my mother was a receptionist. Initially your sets gets, you set your sights on being like an accountant or a lawyer. So I studied accountancy which accountancy in economics. But this final year was revelatory because with this market based accounting research, I got introduced to my first portal to data street, being a pre-runner to now the glorious bloom bear glorious, but hideously expensive bloom bear. And what I was, I, I was testing these thesis, does the market have wisdom if you announce an accounting policy and it and it reduces earnings so it perhaps accelerates the depreciation policy, but of course it has no impact on cash flows and therefore logically the share price, it should have no bearing on the share price, the valuation of the company.

And so we set up these now hypothesis things, and then we had market data and it was like, the genie was revealing itself. I’ve always been something [inaudible 00:07:26] I I spent too long wa- and indeed I’d made a career out of watching other people. Okay. And this was, so this suddenly was my passion. This was the thing that clicked. I am not, the boy servant, I am not the boy entrepreneur in the, I am a child of the Thatcher revolution. My working class parents were liberated by the ability to buy public housing stock. And of course we then had privatizations of of utilities and, we, we transferred ownership from the public sector to the private.

And back then you the marketing campaign for the gas the IPO of the gas company British Gas was, hey, have you seen Sid? Now back when I was a teenager, the only Sid that I was looking for was Sid Vicious. It certainly was not [laughs] Sid for British Gas, okay. So I don’t come from the background that is typical of the leaders on mob street. And I made a career I worked 10 years or so in an outstandingly rigorous pension fund management group in Edinburgh going nowhere, just not succeeding. I was transformed by a chance meeting with one of the first hedge fund managers in Europe, Chris [inaudible 00:09:04].


[00:09:05] Hugh Hendry: And I subsequently joined and became a partner with him for six years. And then I set up the Eclectica Macro Fund within the auspices of Chrispin’s organization. And then since 2005 I parted company I run that fund. I’m very proud to say performance is performance. Making money as a preposterous activity, this charade this fraud that we can see the future. I offered you an insurance contract and when bad things happened, I tended to make a lot of money when bad things did happen I didn’t really make any money. And when you put that all into the melting pot, I protected you protected you during adversity and I paid you 8% per annum returns in my total return for 15 years. Most hedge funds don’t persist.

I persisted for 15 years at the end, I had become joy, passionate but joyless the role of macro had been supplanted by perhaps quantitative leasing by different form of central banking. And I say that without prejudice and I should have walked away in 2013. I lacked the guts, I have to say if I’m honest and it took the clients like four years later “Oh maybe we should leave. It doesn’t seem to be anyone in the shop.” We, and so for the, since 2017 or slightly before I have been on this private island private been on this wonderful island of St. Barts I’ve been making great investments in property here.

So I now have investments where I get to live in them. So it’s a bit like the the Truman Show, and I dunno if the jokes on me or the jokes on everyone else, I’m not sure. But again, in Benjamin Button land here, I’m just 10 years younger. And certainly there was that there was the tyranny of shame. Shame is the most preposterously bad sentiment that can befall you. It’s a, it’s harmful and it’s it’s not productive, but there was a kind of, you wrap your identity around your calmness, your business. And so when it ended, there was a kind of shame if you will. But I’ve recycled that I feel much better. And now I’m here with you.

[00:11:59] Pierre Daillie: You know what Hugh you were I recall you were famously quoted as saying, “I cannot look at myself in the mirror, everything I have believed in, I’ve had to reject.” and I’m just, going back a step, because you did mention that, when you decided to fold up Eclectica, what were you feeling at the time that you said that? I know you said it had something to do with quantitative easing. I know that, that it had something to do with how quantitative easing was warping or distorting the market. But is that, am I correct in that?

[00:12:40] Hugh Hendry: Yes, no. [laughs] oh, okay.

[00:12:44] Pierre Daillie: Good.

[00:12:44] Hugh Hendry: It’s a bit like being in my first visit to Reykjavik and I asked the taxi driver at the airport. “Can you can you take me to town?” And he said, no, I was like I don’t understand. Anyway several things I wanna say to that. So in, in Iceland they have I dunno if it’s true, but I think yes means no, no means yes. I famously or otherwise, but I was, I had the biggest short position on the code to currency which you believe I was the equivalent of 2% of GDP [inaudible 00:13:23] the Iceland.

[laughing]. Because of that, the experience that the airport I’m like, oh, so yes means no, the biggest banks’ called coup thing and coup is a German verb to buy. And so the inverse of buy is sell. And so I thought let’s sell the land of lava. But so first of all I wanna say three things. I wanna say that I believe one of my super powers was dexterity or the, or a Plasticine mind were to succeed in risk management. I had to excel in the ability to absolutely reject passionately, everything that I told you the day before. But one-


[00:14:17] Hugh Hendry: … I was, I featured in a book and I was described as the plasticine macro trader. I set my risk portfolio up in terms of it, it was many iterations and I, and so I could cut things off. And I was very much against, there was the round about 2012, 2013 as hedge fund returns started to kinda be affected by the quantum of money in the sector. I, what am I saying? The returns and my pla- yes the clients started to say, “Hey, listen, we want you to do focused best fund ideas as a, we want two or three positions.” I didn’t do that because that takes away from the plasticity. It, it creates rigidity because how can you re- it’s the movie where the guy he’s claiming, and he has to cut his arm off to, to survive.


[00:15:23] Hugh Hendry: And you’ve only, it is your best ideas. This is what’s my ha- mind. This is a great idea and this is a great idea. [laughs]. It’s my, I can’t lose them. Yeah. I’ve gotta I die. And I’ve seen risk managers die rather than chop off an idea or so, so that point. Secondly, the I could never bear looking in mirrors, [laughs] the camera is bad enough. But the mirror that I had, so the, something that was very prominent and you, it just, it flared as you said it, but that it, that the fairytale mirror on the wall, who’s the smartest of them all? In my mirror I became a crack addict for the score, we had spreadsheets up on ev- digital spreadsheets up on every wall in the office.

And of course the thing that any young analyst working at a hedge fund working late at night and the phone rings and you’re the only one and you pick it up and it’s the boss, and he’s just landed, he’s been crossing, he’s been London to Tokyo, he’s been out of action for 12 hours he’s “What’s the score?” You’re like, “Oh no.” and and of course information is a function of signal and the signal distorts the more observations, if you will, you’ll get on that. So I was picking up too many idiot idiot, genius idiot, scores, ’cause I asked too much.

And then finally I want to say that I I experienced a Damascian change in how I perceive quantitative easing. I actually, I lost two years, I lost two reputational years, very damaging in terms of opportunity cost in terms of what I could have, what I should have done. In the aftermath of 2008, I became a [inaudible 00:17:35] moralizer, I’d wanted us to parch the system, I remember from about April, 2007, I had become an insider. There was perhaps no more than a 100 people in the world that had come to understand that the world, the financial world was going to come to an end. Like the sun in our sky was gonna blow, was gonna explode that we were dead.


[00:18:06] Hugh Hendry: And and I was, I spent all my time scaring to find my, my, my Charlie Wonka my golden Golden Ticket.

[00:18:20] Pierre Daillie: Yeah. [laughs].

[00:18:20] Hugh Hendry: Not to go to the factory, but to get on a spaceship and get the heck out, and so forewarned the stuff that went down, the right at the end, the ban on short selling of financial stocks in September, the fact that Wells Fargo, there is no sane reason why Wells Fargo survived and let’s say Washington Mutual failed. To, to the outsider if you were to take the name off and then just present their deck in terms of geographical split product split, they were identical.

And yet the months of Lehman’s disappearing, Fargo made its all time high. Just insane. So I had a rage, I was engaged and employed to be a risk manager and not a moralizer. And so I finally accepted that ce- central banks remember Bernanke famously apologized on behalf of his institution on the 90th or 91st birthday of Milton Friedman. And he said, “The great depression is on us. We got it wrong. We hear you and we’ll make other mistakes, but we won’t make that mistake.” and so I have to say that quantitative easing has it’s flaws, but I think that pivot in policy making was essential in preventing a great depression 2.0.

[00:20:07] Pierre Daillie: Absolutely. Those were those were scary times. I think when when you find out after the fact that, the fed was hours away from insolvency or that the banking system was hours away from insolvency, that they were literally out of cash. That revelation def- definitely validates the fear that was happening at the time. So Hugh on a let’s change gears a little bit. [laughs]. What are you, thank you very much for sharing that, by the way, that was I think you’re well known by now for beating yourself up and for for talking openly about your mistakes, which is admirable at le- at the very least, it’s a very admirable quality that you have and your humility about, about your successes and your failures is also a wonderful character trait that we’ve come to love. [affirmative].

… What is it you’re most excited about right now? What and at the same time, the corollary, what are you most disappointed about right now? What’s moving the needle for you?

[00:21:17] Hugh Hendry: Wow. You kn- you know, life is becoming s- so exciting. And again I think it’s just this being high all the time, but I am s- I’m, I dunno, I’m tapping into, I dunno what I’m tapping into, someone is broadcasting brain signals to me in St. Barts because for the longest time opportunities seemed like a golf ball in kinda like trying to hit it was, was 50/50. Whereas now that the ball is e- enormous, it’s just giant.

So where can I take you? Where can I take… So a lot of conjecture here but the, it feels like the 40 year boom market in treasuries is climaxing.


[00:22:15] Hugh Hendry: It feels like it. There’s still an immense amount of intellectual hard work necessary to actually explain or rationalize why that is or could be the case, but let’s use that hypothesis, let’s say that it is and maybe later I can offer some intellectual justification for them. If it is, then again, the nature of how I approach risk is that you should expect yields to go back to the lows if not to go lower. Paradoxical think-

… if not to go lower. Paradoxical thinking. You know so, in January 2006, I wrote to my clients saying that if you believe City Group had just published, all the Wall Street banks having never wanted to touch gold, rightly so for the 25 years or so that it spent, being you know, destroyed on an opportunity cost. I think the SMP rose 10 times and gold lost two thirds of its value, but in late 2005, City Group came out with a $3000 price target and gold back then would have been trading probably $700 and I’d been buying it at $260.

In 2003, I’d been buying as the UK Treasury was selling it but hey listen, if you think the future is inflationary, then you’ve got to buy 10 or 30 year U.S. treasuries. And people like what? Ehhh? And the rationale there was that you know that to get that $3000 price target, you would have to generate a revolution, another revolution in the thinking and modus operandi of central banks. You would have to make them profound risk takers, if you will, and they would only get there because they would be, the challenge, they would be overwhelmed by other fears of, give us a depressionary, a huge deflationary bed. Interest rates would go to zero, this is what I’m writing in 2006 and it would be a revolution. Easy. We’d get and then ultimately you might get to that 3000 level. And if you will, and a lot of that came to pass.

Two years later, Lever Brothers etc. The Fed went to zero, bonds went to all time highs and now gold’s kind of moving back to $2000 again. But with regard to climaxes, so the Treasury bill market is the greatest bill market ever , because of its risk less nature so the, in the advent. Is Ray Dalio a genius? Maybe. He is certainly responsible for cumulatively the greatest bounty of PNL ever for clients, which is 55 billion dollars. Again, genius or context? I would say maybe, let’s be generous, a bit of both, a bit of both. He is running a permanent portfolio which is using a volatility allocator between the quadrants and one quadrant has your duration treasury, one quadrant has cash bills and cash bills yields fall, like from the highest to zero and for the ten year, fall from sixteen to almost zero and the volatility is, up until about five or six years ago , treasury volatility was always like 40% less than equities. So your allocation was always bigger and bigger. So that’s how you make $55 billion dollars. But again I am not getting to the point. It’s Michael Steinhawk who was buying treasuries in 1982, when Pos climaxed.

And he was sued by his clients. They were like, ‘ Stick to equities, you’re really good on the commodities and gold. But, since you did this style drift into… , you’re just printing losses.’ so we are suing you for style drift, you’re beyond your mandate. Yields hit 16 with unambiguous data pointing to lower inflation. And what I want to say to you is, yields will hit new lows with unmistakable evidence of inflation. So I think, where we are, I don’t think many people will disagree. That landmark move in treasury bills marked a return of order and sanity and order if you will into society.

The 1970s was crazy, was cuckoo land, yah? I mean you had the OPEC embargo two times. The Russians invading Afghanistan. You had the Iranians having the audacity to take down the U.S. Embassy and then you had the, it beggars belief, but the US didn’t do anything about it. The Iranians thought, ‘ We’re going to get our arses kicked and the US was like, can we please have them back? There was chaos there and anarchy, but at the end you had the restoration of order which was reflected in equity and other risk being in this multi decade bill market. That feels like it is climaxing and it feels we were saying , off camera, that the amplification of social mood with with these platforms. Like the world has become binary and angry and we are not making logical decisions.

[00:28:43] Speaker 3: Yeah.

[00:28:44] Hugh Hendry: I’m. I’m very passionate but also I despair with the notion of saving the planet. And before I go, I’m putting into my mix that I am mindful of the notion that there is a trade for treasuries to trade back at price highs. I’m mindful that there are dollar contracts which are pricing at 2% and yet the private free intelligent market, is saying to the Fed, ‘We don’t see what you’re seeing.’ Which is to say, you’ve had profound flattening in the curve. So again the optionality convexity that you can get if you get your timing right, on what a 99, a 99.5 strike, Euro dollar contract for December this year, March next year. Let’s be preposterous, but let’s price it up and let’s examine that.

Okay, so trades, I’m now moving into this social mood. I’m saying to you that I, I Really like the carbon permit market in Europe. Like we’ve done many good things. We like our American overseers, I think have been a benevolent empire that have encouraged competitive systems to become richer. We as Americans allowed that. We allowed China to enter the WTO system, despite being run by fascists. So far, we’ve tolerated lad iron up to here. We’ve allowed the blunderer, I’m spending a lot of time here just now on Twitter with my campaign.

If the dictator can build a 1200 km pipe to ship gas into Europe, why can’t, forget liquid, LNG is preposterous. When you liquefy gas, you’re turning gas into the carbon equivalent of coal, right? When you burn gas, it’s half the carbon omissions as coal. That’s why we need gas emissions okay? But the problem with natural gas presently it’s a local market not a global market. The local market gas trades for $4.50. In Europe with LAD, gas is training at $100. In Asia, they can survive paying $200 via LNG. Let’s forget liquid gas, let’s build, let’s reproduce liberty gas. Let’s get a 3600 km pipeline from Newfoundland to Ireland and let’s ship over all of that.

There’s an infinite supply of liberty gas. At a stroke you cut off the balls of dictators like Vladimir and then what happens? Imagine. The thing that Europe lacks is an Independent energy source. It’s dependent on Russia and they don’t have our democracy. Just by changing that, Europe could become phenomenal. So I’m saying to the world, this benevolent overseer with all of this gas, let’s build a pipeline because , so someone might say, ‘ Hey, that will cost.’ The pipeline for North stream, that was 10 billion, and of course with the Ukrainian thing, NATO they say we’re going to trump hey maybe . Maybe that preposterous guy was kinda right. Maybe we got to spend a bit more. When I looked at total NATO spending , it’s 1.2 trillion. Are they going to increase it by 5, more like 10. Rather than spending a 120 Billion.

[00:32:59] Speaker 3: Yeah.

[00:33:00] Hugh Hendry: On weapons, build a dam pipe. So I’m curious anyway about natural gas, carbon emissions. Carbon permitting is too cheap. Carbon permits, the politicians in Europe, I don’t say this often, have created a wonderful market based discovery system that should be copied and should be applauded and celebrated, but transplanted across the world. Us as, I’m a naked capitalist, we get a bad day. Young people, they don’t want to be us and I’m like, guys listen. What if I said to you we can make money and we can save the planet?

The idea that you go and you chain yourself to a fence, the idea that you say, ‘No more.’ If we have this rebellion extinction, environmental anger is good but anger with this form of I call it Dadaism. The insanity that you get around finder seek the end of centuries, it’s like saying the number one global issue is we’re unhealthy and the number one objective is to cure cancer. Okay? And what do we decide? We decide to abolish pharmaceutical companies. That’s where are just now in terms of the carbon and the global warming story, We need smart decisions. The average barrel of oil is responsible for 60 kg of carbon and a lot of that comes from its exploration but also the burning of the oil. Norway today with large oil, the intellect, the expertise of large oil. Is pulling out new barrels of oil with one kg, one kg of carbon. That’s what we need. Anyway, I like, and by the way, I’ll let you continue, I wanted to bring up the fact that I, it’s great how you refer to the great dictator, Vladimir by the french pronunciation of his last name.

It’s no surprise that in French it is a Gros Moet, I’m involved in a lot, I’m in a construction site with French and Portuguese builders and believe me I use that Gros Moet often in my intercourse with this project. And again, this is how my mind worked the first French president of the ECB, Tricher and Tricher is the French word for to cheat. And this guy was a blinking idiot. Yes, a nomen is a nomen, believe me, during the rise in NASDAQ in the late 1990s, I remember shorting a Swiss stock because , you know a text stop, because it was called Miracle. And the only miracle was, its valuation and its presence on the stock market, that was, I use a lot of…

[00:37:00] Speaker 3: Forgive me if I’m wrong, it’s Christine Lagarde now, right?

[00:37:04] Hugh Hendry: Yes.

[00:37:05] Speaker 3: So does the same thing apply for Christine Lagarde?

[00:37:08] Hugh Hendry: Forgive me.

[00:37:08] Speaker 3: The guard.

[00:37:08] Hugh Hendry: Oh, the guard.

[00:37:09] Speaker 3: Yeah.

[00:37:18] Hugh Hendry: I don’t know what to make of Christine actually, I think we are very interested to hear about your thoughts on natural gas. I know you, you’ve been talking about how, you know about this natural gas trade and no one wants to go along with on it.

I don’t have a trade.

[00:37:44] Speaker 3: What.

[00:37:44] Hugh Hendry: I don’t have a trade, yeah.

[00:37:48] Speaker 3: I…

Not the trade but the sentiment, the action.

[00:37:52] Hugh Hendry: Yes, that’s true.

[00:37:53] Speaker 3: Yeah.

[00:37:55] Hugh Hendry: It’s funny, I put a thread out and so I’m back almost, I’m back, I’m definitely back and so in my former life I would be alone. I, would sit at home and I’d listen to music and I’d read abstract things. You know my wife’s magazine, how you excel in something, Roger Federer, that level of skillset, there is a saying that you have to do something 10 000 times tO be really good. So I’ve been in the Caribbean since 2015, so coming on seven years, and I’ve started surfing and I think I’ve done it now 2379 times, which is say less than 10 000 and, how many hours?

I’m competent but I’m …the French word ‘poutine.’ So I’m competent but I’m not excelling. Yah, I’m not excelling. I don’t think I’ve had sex, I know for sure I haven’t had sex for 10 000 times ‘, for sure I’m, not excelling in that either. But I’ve looked at way more than 10 000 charts and I am a horse whisperer, charts, patterns, formations and you marry that with experience, the amount, the times, how I called upon them, how I’ve seen them react. That is my tapestry, that is my engagement for understanding things you know like oil.

Oil had been capped at 40 bucks, for 15, 17 years? And it was 2004 when we lift it. I mean that, that’s just classic sign, I mean that sign repeats, long long plateaus of price highs, revealed to the external world that there is not enough information content available to justify higher prices. The fact that does happen, reveals that information has just been released in to the universe and then I was fortunate that I would have an intel team and I could, then they would be charged with finding out and retrieving that information. So natural gas I do these weekly podcasts and we’ve been recently…

[00:40:56] Speaker 3: Which are amazing.

[00:40:57] Hugh Hendry: Thank you, I mean they’re awesome…

[00:41:03] Speaker 3: They’re awesome.

[00:41:04] Hugh Hendry: And your natural gas, I was looking at, would you believe in March, April 2006 I mean I did everything, and there’s no surprise that I’ve forgotten about this, but I was playing calender spreads with natural gas. The year of Amarod,

[00:41:24] Speaker 3: Yeah.

[00:41:25] Hugh Hendry: That September when, what was his name? Do you know? Do you remember?

[00:41:30] Speaker 3: You’re talking about the Amarod.

[00:41:34] Hugh Hendry: The Amorods, they were multi billion but they really liked natural gas and on the 18th September, they, he had to go oof, oops got to tack, trading’s been tough and we’ve just dropped five yards, we’ve just, we’ve vaporized half of the fund. Sorry about that but of course, blood in the water in the hour after that’s released, the hour of trading, the first hour of trading the next day. They vaporized another half a billion as Wall Street comes in going, dang. Dang. Dang. Dang.

You know it was finally resolved by, we talk about these tighters of Wall Street, that hedge funds don’t exist anymore. Hedge funds to me were George Soros and Endgang in the 70s. Contentious narrative seeking an audience. A white canvas like setting out a view of the future and seeking wealthy patrons to sponsor that. So that view, that’s gone. Hedge funds today are the system right?

[00:42:54] Speaker 3: Yah.

[00:42:54] Hugh Hendry: And the greatest of all of them all is Ken Griffiths, Citadel, because he is, he’s the system. He’s probably worth that {inaudible} right?

[00:43:05] Speaker 3: Yah.

[00:43:05] Hugh Hendry: And so no surprise when Amarod disappeared he takes, so he’s already vaporized 75% of his value and he says I’ll take it off you at 2 billion discount. That’s what the system does. Money rewards the system.

[00:43:20] Speaker 3: Yeah.

[00:43:20] Hugh Hendry: Anyway so it was funny oof, what, really, why was I doing calendars, spread sheets, I was emphatic that the 2011, so I was writing in 2006. I was emphatic that the five year forward price was too low. Eh.

And what had happened was after oil had taken out $40, was that the shape in the Nat gas curve changed. It had almost permanently been in Quantangle and it moved into backwardation. And again remember all of you, you folk that get suckered into buying Vikas contracts, that you’re the abhorrent danger of curves which trade in Quantangle. Has in the 12 years from 1994 to 2006, rose from a dollar, to six bucks. But if you were a pension fund, hopefully not a smart, wise Canadian pension scheme or whatever, but if you were on the front month and just ran the front month, you lost 80%. Market goes up 6% by Quantangle and the price of rolling, you’ve lost 80%. SO I was very intrigued by the backwardation and the cheapness of Nat gas. But of course the answer was the share oil revolution. And so where again I , yeah, I …

[00:44:48] Speaker 3: What do you make of , the oil future as being broken in 2020?

[00:44:53] Hugh Hendry: Ah wist, they were broken in 2020. The Fed’s ability to make a market in treasuries was, , briefly broken I’ll say it again, we had an alien body invasion which was clearly unprecedented and therefore everything was on the table. And briefly, and maybe the oil thing was a, lasted a little bit longer, but, and so maybe, I just want to be as ridiculous as then. I want to say to you, so a revelation I received of late is, there are many billions of us on this planet. I want to say something like 6.7 billion of us consume on average 13 barrels of oil, that’s 13 x 60 kg of CO2 and then there’s 6.3 billion poorer folk and they consume 3 barrels because they’re poor. And, if we…

And if we go 25 years out to that kinda 2050, one of those dates where, tryna bring, bring-


[00:46:11] Hugh Hendry: … Bring order those kind of powerful for sure they’re gonna consume more oil. Say they consume one extra bottle of oil, and let’s say we get our act together and we don’t consume anymore. We just stick at 13. We’re gonna double carbon emissions between now and then, which is to say, and then remember, so that’s the demand function, that’s the demand function. The supply function with the zealotry and the absolute zero oil expansion nonsense.

[00:46:52] Speaker 4: Okay.

[00:46:53] Hugh Hendry: Oil was, oil is not going to a 100, oil is going to 150, 200, 250, 300.

[00:46:59] Speaker 4: Yeah.

[00:47:00] Hugh Hendry: It’s preposterous. And again, we have to find solutions. And one of the s- of the solutions is we gotta wake up, we gotta wake up in the sense that, so the shale gas, the shale discovery effectively, they don’t say this in the stats, but the stats are always nonsense. The stats say that the US has the world’s fourth largest natural gas reserve in the world. The, I’m gonna tell you the US has an infinite supply of gas. Okay. But the problem with gas is it trades locally and not globally because of how you distribute it. There’s the problem is we, I don’t like trades where you need politic. I like trades where politic are pushing in your direction, so carbon-


[00:47:52] Hugh Hendry: … but not gas is effectively dead until politicians wake up and say, “Hey, listen, rather than spending 10% more on defense spending for NATO because of Vlad, why not, you, we put a man on the moon.” Yeah. And the, and gas is hard, it’s hard to move. You can move it by changing pressure from high to low and high to low. Yeah. And you gotta put boosters. That’s why we make it liquid, but LNG is not the answer. But you can do it. And so I’m waiting and we have always succeeded as, this collective gripping of people that we are, because at some point we get it, and there’s a collective spirit to do smart things. And the next smart thing for the world to do is to hook the US onto the European content. Anyway, to much time on that.

[00:48:53] Speaker 4: Yeah, Absolutely. So that Europe isn’t just some peninsula on the-

[00:48:57] Hugh Hendry: Yeah.

[00:48:57] Speaker 4: … on the Asian continent, right? What’s some that’s sort of-

[00:49:01] Hugh Hendry: You lo-

[00:49:01] Speaker 4: … it’s the unfortunate problem, isn’t it, is that they’re stuck there and they’re dependent on Russia for gas.

[00:49:09] Hugh Hendry: It imagine where the north American continent would be, if if it was paying four or five e- four or five, like you 20X the prevailing price of net gas on the continent of America. That’s the burden that in some stupid like political stuff, but, that’s the burden that, that that Europe has. Now in terms of dictators, the other big one is China, of course. And the biggest problem in the world, biggest problem in the world is the China one across the Chinese manage a dirty peg. So really what I transpire and again, I just I’m urging people to think.

So let’s think of this, I wanna say to you we’ve had three systems of contractually managing sovereign relationships with regard to trade. The first being gold where gold would physically ship to, to reflect trade flows which would have a, which was effectively high money, a high powered money. And so you were effectively creating credit cycles or booming bust. It failed in a spectacular manner on to a lack of price rigidity. U- the UK was the first to renege and it had to devalue.

[00:50:48] Speaker 4: Yeah.

[00:50:49] Hugh Hendry: It was replaced by Bretton Woods. And then what people don’t realize and again, Bre- Bretton Woods was kinda dollar gold, like except the o- the oversee or the global overseers currency, but could pro quo we will pay it back to your gold on demand. What people less recognize is that was asserted by the Euro dollar market, roughly 1965, but officially recognized with the closure of the gold window by Nixon in 1971, late 1971. And then I want to say to you that, so since then the world has been governed by a kind of matrix of a dark web of this of private sector determined credit flows, which have influenced the rise of fall of nations. But I want to say to you, that system collapsed in 2008. We, we would be more than briefly mentioned what’s happening in 2008, we’re all aware of the s- the social censorship that’s come with the Asian body invasion. How you can be switched off on Twitter, et cetera.

[00:52:03] Speaker 4: Yeah.

[00:52:03] Hugh Hendry: Something similar has played out in terms of that word depression. You just, you don’t read it. And yet I want to say to you that whilst GDP is globally and in America and elsewhere is higher than the levels obtained in 2008 and we are at about globally we’re about $30 trillion short because we’ve not been able to regain the trend, the projection of prosperity that we had before. Now that is a depression, but you are forbidden from using that term. So we have a creeping depression because there has been a global failure in that third regime to manage and regulate the affairs of so- sovereign nations. Now, the curse that we have just now is that China the Renminbi I believe, should be trading like close to four versus the dollar.

Today it’s 6.3, 6.4. And it’s denied that by s- explicit policies by the Chinese. That rolls the China’s, the Chinese citizen of wealth of income. It makes overseas products more expensive that creates the glut of savings, right? That, that is spreading missport across the world. If you want to regain the trend rate of growth and prosperity that we had pre 2008, you’ve gotta do something with the [inaudible 00:53:51] problem. You’ve got to abolish a dirty peg. Now I think the Chinese are ha- are well on the way to achieving that because they’ve made a spectacular mistake. They have allowed a domestic credit bubble to propel the value of their property to an absurd level.

[00:54:15] Speaker 4: Yeah.

[00:54:15] Hugh Hendry: And absurdity is just a word, but when it reaches four times GDP, there are very few instances of that happening, but we know what happens and it’s not good. The last time was Tokyo in the 1980s.

So just now there’s a comfort that the bureaucrats have got this. That’s just the conceit of every generation that comes next, that long boom markets bestow false wisdom on regulators and that will be shown to be wrong. And actually I think in this world as we look at prices falling all over us this mer- and I talked about the horrors of contango with natural gas, and I refer to volatility. You can never buy spot volatility, you always have to buy forwarded bulls always expensive. I wanna buy dollar Renminbi volatility. The realizes has been very low and so the applied has been pulled down. So like full or something. And so being kinda at the money one year forward strikes either calls or puts just feels like a good thing. I would actually I think the Renminbi will weak- I don’t think it should weaken.

And I fear that the final turning point will be caused again by anarchy. The world is full of anarchy. Again, banning big oils, anarchy and is destructive. And I think the Chinese and this is ironic, but I think the Chinese may take the same path if the property market really creates a savage credit contraction, I think the Chinese will choose to devalue the Renminbi which is preposterous because they don’t have over substantial overseas debts. They’re already super competitive. So it choosing to devalue, it would be if I’m going down I’m taking all of you. [laughing].

[00:56:28] Speaker 4: Boom. You’re all coming with me.

[00:56:29] Hugh Hendry: And that’s what I think will ultimately prove to be the catalyst for heads of state getting together to say [negative]. We need a new system to, to regulate how we engage age with each other.” so that’s going on.

[00:56:44] Speaker 4: Yeah. And if, if the Chinese domestically get become, and they’re getting increasingly unhappy with with Xi, they may even choose to discontinue his leadership. I hope so. But, Yeah.

… I doubt it. You know-

[00:57:05] Speaker 4: Is that a possibility or is that remote?

[00:57:08] Hugh Hendry: When you’re staring down the barrel of a gun that only it only, it’s, he’s more vulner- he is more vulnerable. He’s been in power for, I wanna say eight years. And so the error that he made was eight years ago, it was his predecessor. He had the opportunity to come in and blame the predecessor and take pain. And now he would be, yeah, now even I would support him for like his lifetime shot at being, dictator for life. I am a time investor, I am not a value investor, I am not a growth investor, I’m not a pharmaceutical investor, I’m not whatever. I’m a time investor. I lost China blow up fund about 12 years ago. I was wrong, but I had a fund. So I ran it for two years. Okay.

I returned two thirds of the capital. I chose to return, I chose to close it. I could have ran it to zero. I chose to return two thirds of the capital. If I had succe- if I had succeeded, I’ve made 10 X, I’d made a billion dollars. It didn’t happen. China did not have an economic reversal. Why? Because, and again, what is an economic reversal? An economic reversal was accepting that long term GDP, GDP like growth, but not at the expense of wealth. ’cause you could generate GDP, but at the expense of wealth. Would mean accepting like maybe 3%, 4% GDP rates all as opposed to 7%, 8%. And they were unwilling. And so implicitly, they allowed the credit genie to create the count of property ownership. And that’s where they are. Now I did not know.

[00:59:12] Speaker 4: You sorry to interrupt you, but you did such a great job of going around. I remember your visit to China, your visits where, you were showing building after building, office complexes, high ri- you know, skyscrapers that were empty. And I think that was in Wuhan, right?

[00:59:29] Hugh Hendry: Yeah. I, I-

[00:59:30] Speaker 4: One of the places.

[00:59:31] Hugh Hendry: … I discovered the joys of otherwise of the wet market. I remember being horrified by what was going on there. And I traveled, I flew into Hong Kong. I walked over the border and I traveled on small trains. And in the, I had a, my sleeping ca- shared sleeping carriage. And in the morning you step over people in the corridor and they’ve got a hot brew, they’re brewing up for breakfast. God, they’re different. It’s a different culture. And, [laughs] eating the heads off of lizards. I tell you, I had a killed for a cappuccino, killed for a cappuccino. [laughs]. But so yeah, so I was there.


[01:00:21] Hugh Hendry: I, but I, what I did not know was that the Chinese horoscope. It has the same 12 characters as we have, but the pursuit of heavenly travel a, across the universe, it takes 12 years and not one year. Our system is one year as the revolution of the earth around the sun. I don’t understand that medieval or otherwise system, but the Chinese measure time using the units of 12 years. So I want to say to you that the logic that I was pursuing 12 years ago was buying on, but today, not only is it buying on, but it is, don’t tell me how to make money, tell me when. Now is the time.

So China, again, I think those, the vault embedded in the FX option market and being long Chinese sovereign bond funds hard to find at the retail level, but they should be there. And of course you could take it if you’re in institutional fund they are trending prices, su- supporting and legitimizing, everything I’m saying. The Chinese will be cutting and cutting interest rates, I believe. So that’s, and then again, probably that’s why treasuries could have the absurdity of making new price highs in the face of I mistake evidence of inflation. And I did promise that I would try and have a go at saying, where’s the source of inflation, ’cause it’s not today.

[01:02:10] Speaker 4: Yeah.

Today is, we clo- I mean let, we closed.

That’s what I was gonna… It’s funny I was gonna ask you, is it, are we inflationary or are we inflation? So now you’re actually answering the question I already had-

[01:02:27] Hugh Hendry: [laughs]. Yeah. Well-

[01:02:28] Speaker 4: … planned to ask you. But-

[01:02:29] Hugh Hendry: Because that is the distinct in- inflation is when people can spend more money, the same or more money on both discretionary and nondiscretionary items. And this is why Friedman was saying, it’s a monetary phenomenon because if the price of all items is accelerating then you need more money to accommodate that. And if you don’t, then what happens is the more that you spend on discretionary items means you have less to spend on a meal or, a trip to the Caribbean or an upgrade in your car or whatever. And so it’s still feels like a redux of that. The hardest thing just now that it’s almost impossible just now to prove that we’re not ground hogging the 2009, 2011 experience in the commodity complex and the boy who cried wolf, the inflation wolf.

I will say that the one difference is energy and social mood. And this is why I’ve spoken too long about Europe and natural gas, but that’s where it, I, that’s where I see a threat an inflationary threat getting into the system because at the energy price levels pertaining to Europe today, governments are having to come in and subsidize and pay energy bills. And if those energy prices are going to continue to escalate, which I think they will, owing to the anarchy of how society wishes to regulate the e- exploration of resources, then governments are increasingly going to be subsidizing household bills. And that begins to sound like helicopter money where the subsidy check gets bigger.

[01:04:58] Speaker 4: Yeah.

[01:04:58] Hugh Hendry: So the US had in the midst of COVID Trump and Biden they, they had, what did we call ’em? We called ’em those checks to everyone. Hey, it’s all on Uncle Sal.


[01:05:09] Hugh Hendry: Go and spend. Again, necessary, but-

[01:05:15] Speaker 4: Pandemic protection.

[01:05:16] Hugh Hendry: Pande- yeah. But-

[01:05:18] Speaker 4: Yeah. But now it’s universal, [laughs] now it’s a universal income, right? Universal basic income.

It’s called save your-

[01:05:26] Speaker 4: They’re toying with it.

[01:05:27] Hugh Hendry: It’s called save your ass.

[01:05:28] Speaker 4: Yeah. [laughs].

[01:05:29] Hugh Hendry: But the pressure to save your ass intense in Europe, just now a you, if the US is just a port, a safe harbor in a world that’s going bankers. The world outside the American continent is fearf- is fearful. But that, I think that, that could borrow its way into the system whereby that government implicit, implicit government subsidy will allow you to spend more on discretionary nondiscretionary. But presently that’s a big ask that, like you said, that’s a specul- that’s a speculation. It’s a big ask. And mostly what we’re seeing is we closed every factory in the world for 18 months and then we sent a check to every household in the world’s most prosperous nation say, “Hey, go buy things.” at the same time that the service economy, which is two thirds of the economy was closed.

So we gave everyone happy money and then we said, “Go buy things.” And they couldn’t go to restaurants and whatever, and they couldn’t leave their house. So they went on Amazon and the guy with the factories like, I don’t just turn the lights off, this, I gotta configure this thing. [laughs] And yeah. [laughs] And prices have come in, they’ve said there’s a log jam, give me 18 months, but I’m gonna have to rush in demand. So price is here. That feels like where we are. But the oil thing-

[01:07:10] Speaker 4: Yeah.

[01:07:10] Hugh Hendry: … I lied. I wrote a paper. If you visit my website, it’ll pop up in a wall for you, a free paper, the Dawn of Chaos. And I was claiming that not only is inflation monetary phenomenon, but it’s a psychological phenomenon. It requires a kind of, it requires anarchy and it requires break breakdown. And again, remember we were talking about the 70’s and we said it was-

[01:07:36] Speaker 4: Yeah.

[01:07:36] Hugh Hendry: … it was the sex pistols, it was, it was anarchy, it was inflationary. I’ve been trying to dispel the link with Weimar I, I think Weimar linkagage, linkages are cheap and lazy because they ignore there’s no president of a modern, liberal democracy generating high rates of inflation. Does, it doesn’t happen? Why does it not happen because of the, this sheer magnitude of public debt markets? So Weimar, that didn’t happen. But if you wanna make a comparison, the most valid Weimar comparison is that after the war, it was a profoundly divided society. It was a society that turned in on itself and tragically there was a po- populous is a loaded term these days, there was a unifying politician that could have brought them together and he was assassinated. And that’s what, that was the ascent into chaos. And that’s my biggest fear, when I look at the US today, when I s- when I look at Canada today and I see these divisions where citizens ta- when I hate you, and you hate me.



[01:09:05] Hugh Hendry: … where I hate you and you hate me.


[01:09:06] Hugh Hendry: That’s ultimately… That’s a contractual form of inflation. That anarchy will result in a price response. I just hope to God we don’t get assassinations.

[01:09:18] Speaker 4: Yeah. I don’t know if you saw it, but Darius Dale from 42 Macro had a really great chart, which which showed how the US, in terms of its wealth inequality, was placed among emerging markets in terms of its measures. And so in one chart, you get a sense of, what’s the outcome of this case shape recovery that we had following the pandemic-

[01:09:47] Hugh Hendry: Yeah.

[01:09:47] Speaker 4: … shutdowns where, one cla- one, one cohort of society got wealthier and busier and, an- and more, p- pr- prosperous which we all know has happened-

[01:10:09] Hugh Hendry: Yeah.

[01:10:09] Speaker 4: … and then the other cohort, which is the other 50, 60, 70% of the population are worse off.

[01:10:23] Hugh Hendry: I wanna challenge-

[01:10:23] Speaker 4: Much worse off.

[01:10:23] Hugh Hendry: … yeah, I wanna challenge your use of prosperous. R- one section of society, I think, got richer.



[01:10:24] Speaker 4: Yeah.

[01:10:24] Hugh Hendry: … when the assets that you own revalue higher. Pr- prosperous means that you were rewarded for a risk undertaking for an endeavor, and it paid off. E- I’ll take it. I’ll-


[01:10:37] Speaker 4: … I’ll take it.


[01:10:38] Hugh Hendry: A- and that, and again that’s the malign-

[01:10:41] Speaker 4: Yeah.

… function in society.


[01:10:43] Hugh Hendry: That’s the malign underbelly of quantitative easing is that-

[01:10:46] Speaker 4: That’s the division though, isn’t it?

[01:10:48] Hugh Hendry: It’s the division. But, statistics. Damned statistics, lies, statistics. US has always featured poorly. I wanna say those Gini coefficient tables. And yet you travel around the world and the only line outside an embassy seeking a visa is the US embassy. And the most enthusiastic people for Trump [laughs] were the Mexican immigrants. They wanna-

[01:11:14] Speaker 4: Yeah.

[01:11:14] Hugh Hendry: … they wanna p- hose down on th- on the this is a country where you can become prosperous. That doesn’t pertain to the rest of the world. Now flaws and all. Flaws and [crosstalk 01:11:28]-

[01:11:28] Speaker 4: But the… I guess I was just trying to make a point about how the inequality is leading to… What’s happening in Ottawa here with the trucks. The y- the convoy and what’s happening in other parts of the world in Europe, when something goes wrong in Europe, socially they take to the streets.



I mean-

With the-

[01:11:51] Speaker 4: … Paris being-

[01:11:52] Hugh Hendry: Yes. Oh, I lived in Paris.

[01:11:55] Speaker 4: Yeah.

[01:11:55] Hugh Hendry: Heavens. I moved to Paris, August, 2018, which was three months before the emergence of the Gilets jaunes demonstration. Which again shows you how hard it is to solve-

[01:12:08] Speaker 4: Yeah.

[01:12:09] Hugh Hendry: … for the climate, because the French… Their diesel levy was way below European average, and so for the Paris accord, they agreed that they would… Clearly, they would seek to rectify that anomaly. But the folk without stock market gains, the folk that live in rented accommodation, the folk that live in the countryside and use their car a lot, that excise tax meant the difference between spending on s- on something that they valued and not. Hard. But… And I found myself… [laughs] I lived in a fancy part of town, near Avenue Hoche by the Arc de Triomphe-


[01:12:50] Hugh Hendry: … and the, P- Parc Monceau. And now I know what tear gas smells like. I ca- I can smell napalm in the morning-

[01:13:00] Speaker 4: [laughs]

… baby. [crosstalk 01:13:01].

[01:13:01] Hugh Hendry: Saturday mornings were-

[01:13:02] Speaker 4: [crosstalk 01:13:02].

[01:13:02] Hugh Hendry: I had tanks… I had a tank ou-… I had a water t- can and whatever, but [inaudible 01:13:07] France. Wow! But-

[01:13:10] Speaker 4: Smells like victory. [laughs]

[01:13:12] Hugh Hendry: Ha!




[01:13:15] Hugh Hendry: But something grave, something truly grave, did happen as a function of the Ottawa demonstrations. The the… Using finance as a weapon, ag- against those folk. And without a due process and invoking emergency measures. I feel like we just nuked a communi- a part of our community. We just we inflicted a profound human wrong on members of our society. And when, the genie’s out of the bottle, once it’s happened, it’s gonna happen again. It’s it’s bad. So let’s try and make the world better. Is crypto to the answer? [inaudible 01:14:06].


[01:14:09] Hugh Hendry: Okay, what… What, [inaudible 01:14:11] what can-

[01:14:09] Speaker 4: [laughs]

[01:14:09] Hugh Hendry: … what c- what can you s-


[01:14:11] Hugh Hendry: All I can say is nothing. I… Oh I have an opinion on most things. I speak too much. I feel like I… I know I’m prejudicial on where prices should be. I have no idea where… Let’s call it Bitcoin. I… Bitcoin trades at round about 40,000 today. I have no idea where it should or where it could trade. F- to my mind, i- it, it has very, it’s very, even wides. It could trade at 10,000. It could trade at 100,000. So the allocation I wanna make to those wides … Is nothing. [laughs] Frankly, it’s nothing.

But again, if we are to try and find a n-… Let’s, again, be constructive i- rather than talk about nuking parts of our community. The NFT thing intrigues me. And I’m working on launching an NFT, because I am the prophet of absurdity, so I feel like I should be there.


[01:15:21] Hugh Hendry: But also I want to be there because there are literally millions of smart, young, creative people, and they are just… They’re devoting their lives to this thing, and ignore that at your peril. Yeah.

But what I like about what I’m drawn to is this notion that you could create an asset for other people. So yeah. I think I’m… I’m still a bit of a secret. I think I’m gonna be… I think I’m gonna be a superstar in the next three years. Yeah. I’ve got 9,000 followers on YouTube. Why can’t that be a million? My book’s a success. I start getting TV gigs. I’m on Joe Rogan. Boom. I’ve got a million.

So imagine I launch an NFT today and basically it’s a club, and it’s my club. I’m offering proximity to me if you get a digital contract. Proxi-… If I… And I am playing with words. If I become a superstar, right? Then proximity to me, that market is a bull market. And the people cl- who are, who get me now, the pioneers, they get me. So that’s like property ownership. And it’s not just me. Any kid in the world has that convex opportunity. Anyone could be Mark Zuckerberg. And here’s a means of actually doing it without needing Peter Thiel or whatever, to get you going.

So that’s interesting. And then I thought, again, I could, we could s-, we could… Again, if we were super smart and not anarchists on the planet, we could take that… We could take that crypto understanding. So what the… The greatest thing about crypto is that it demonstrated that if you want to encourage conversion, create a bull market. Make people money and you’ve got cult followers. Okay? They’ll change their behavior. So what if we, what if we measured your, a household’s carbon footprint. Typical carbon footprint. Easy to measure. Easy to measure, right? And we went to Europe, which has a functioning market, and we said, okay the price for emitting one ton of carbon, presently, is almost a hundred bu-… It’s a hundred bucks. Okay.

I said, one person emits 13 barrows of… Not emits, but consumes 13 barrows. 13 times 60, 600… is 780. So it’s almost a ton. Let’s say the average household. What is the average household now? Let’s say it’s three. Somewhere between two and four.


[01:18:16] Hugh Hendry: And that’s, that’s 3000. So okay. Yep. The value of that [inaudible 01:18:23] is 300 bucks. Okay? And what I’m gonna do is, I’m gonna give you 10 years’ worth of it. I’m gonna give you 10 years. Cost me nothing, just like quantitative easing. I’m gonna give you a virtual [crosstalk 01:18:37] voucher. I’m gonna say, I’m gonna say that this is the end of communism in Russia. Remember at the end of communism in Russia, they went round with tokens to all the households. They said, “Hey, this certificate is ownership of Gazprom. Keep it. It’s gonna be worthwhile.

And then unfortunately, the the oligarchs sent guys round with bottles of, vodka. “Hey I’ll trade you this for the token.”

[01:19:07] Speaker 4: Yes.

[01:19:07] Hugh Hendry: They’re like-

[01:19:08] Speaker 4: For that.

[01:19:09] Hugh Hendry: “Oh yeah. Okay.” yeah. [laughs] [laughs]

So what I’m saying is, fr- actually, we could send… I’m sure I’ve got the maths wrong. I think it’s more than $300. We could send a couple of thousand dollars of environmental permits, and we could say, “Hey, listen. We’re being very generous and we’re giving you this asset. Okay? And you’ve got a choice. You’ve got… You own this thing. Not us. You own this thing. Okay?” If you… We’re gonna make them scarce, so we’re gonna be… So each year you’re gonna need, let’s say, a hundred of these permits, right? To pay off your carbon emission. We’re only gonna be giving you, incrementally. We’re go- only be going gi- giving you 50, and then 20, and then 10, and then we’re giving you none. Okay.

So if you are responsible and you change your practices, and your carbon… If your carbon… What your, it’s like doing your tax return. Your carbon return will be, will reflect that. And we will ask less and less of you to offer these vouchers. Which means you, you will keep more and more of these vouchers, and these vouchers have value because they reflect the price of polluting the atmosphere. And that is only going one way. It’s why you should own carbon permits in Europe. The price is only going-

[01:20:33] Speaker 4: Yeah.

[01:20:34] Hugh Hendry: … one way. It’s scarce, and getting scarcer. Okay? So suddenly, s- ’cause the problem with quantitative easing is that was the enrichment of the class of people fortunate to own assets. So the p- principal, number one objective for governments today is how to put assets into the hands of those who don’t have them. And what quantitative easing r- reveals is, it’s so easy. We can do it virtually. I can give you… I can digitally give you a wallet. It costs me nothing. And then you can enrich yourself by changing your behavior or not. It’s a- it’s actually j- it’s just a progression from Thatcherism in the 1980s. So I, yeah, [inaudible 01:21:14] the-

[01:21:14] Speaker 4: This is all, this is wha-… This is already starting to happen in r- in real, right? We’re starting to see the democratization of carbon credit ownership, right? There’s al- there’s already a number of new vehicles that are allowing investors to get into the carbon credit market.

[01:21:33] Hugh Hendry: Yeah. I have an ambition to, to h- to launch one of them. Because we need more public participation and knowledge of these schemes-

[01:21:46] Speaker 4: Yeah.

[01:21:47] Hugh Hendry: … so that people will reject chaining themselves to fences and insisting on the abolition of exploration. And we need public knowledge to push back, because at some point the price is way, way cheap. But then it’s gonna become cheap, and then it’s gonna become a little bit cheap, and then it’s gonna become kinda not really that cheap, really. And so in Europe, the power generators have got it and they’ve changed. Changed their behavior. They’ve been punished by it. But the corporates, the industrialists, have not. BASS-


… saying, “Hey look, the price would have to go up another 30, 50% before we [crosstalk 01:22:27] recognize it.” Which is, be careful what you ask for, kind of thing, ’cause boom! But but when it gets to that level, you know what they’re gonna do? they’re gonna le- [crosstalk 01:22:38] lobby like hell to make changes. And when they come to lobby, we need a $50 billion fund. If Cathie Wood and the absurdity of ARK can have 60, 60 yards in th- in their, preposterous fund. Doing speculating just for the art of speculat-… Want… Imagine we had 60 yards and we speculated to save the planet, and we had 60 billion eyeballs saying, “Don’t you dare listen to these corporate guys, or we’re gonna boot you out.” You kn-… And that’s where it requires dem- democratization, and it needs kinda crazy people like me rather than gray guys in suits to kinda get that me-… I gotta, I gotta-

[01:23:20] Speaker 4: [laughs]

[01:23:20] Hugh Hendry: Team up with Leonardo DiCaprio, if you’re watching, Leo. And and put it together-


But dream on.

[01:23:27] Speaker 4: I- it gives a whole new… I think what you’re suggesting, Hugh, gives a whole new meaning to impact investing.

[01:23:34] Hugh Hendry: Yeah. But boy, we-

… We gotta stop being passive. One of the… I was the only person fighting back… Not the only person, but, was one of the more vocal. The… Again, I said to you. 2008, the politicians… I was such a r- a shock that the scale, the magnitude of the tsunami, the events were… It was bigger than them. And they’re like… And so they, they did that politician thing. It’s let’s find escape column. Hey, hedge funds. Secretive. Rich. Ooh, perfect. And then hedge funds were like-

[01:24:12] Speaker 4: [laughs]

[01:24:13] Hugh Hendry: … just not taking the bait. And if you allow the politician to stigmatize you, then you have no hold in society. So we can sit there, just say… And there’s a bit of that, hey. This is hy- this a p- hypocrisy for me, because I am in St. Barts, paying no tax, in a perfect community with no crime and no public debt, and eternal sunshine. So for the most part, people should just say, “Screw you.” [laughs] there you have it.

A good way to end.

[01:24:51] Speaker 4: Yeah.

[01:24:51] Hugh Hendry: Screw you, Hendry.

[01:24:57] Speaker 4: [laughs]

[01:24:57] Hugh Hendry: [laughs]

[01:24:57] Pierre Daillie: [laughs] Love it. Love it.

[01:24:58] Speaker 4: Wow.

[01:24:59] Pierre Daillie: Hugh, we took a l- we took a l- we took a great deal of your time, but it was very informative. [crosstalk 01:25:05]-

[01:25:05] Speaker 4: Yeah. And Hugh I’m I’m blown away. I’m looking forward already to the next time we get to chat. Th- this was very exciting. [crosstalk 01:25:14] It was very exciting to talk to you today.

[01:25:15] Hugh Hendry: T- c- I’m on here because you guys have done such an exceptional job in building this franchise. So my congratulations to you for that, because it’s not easy. But I’m [crosstalk 01:25:29] here to address your franchise. I’ve had five years, like Rocky. I’ve been getting into condition and I’m ready to take on everyone.

[01:25:38] Speaker 4: [laughs]

[01:25:39] Hugh Hendry: I’m not only ready to make money. I’m ready to try and positively nudge society. I cannot do it alone. I need everyone watching this… If any ne- if any h- if a-

[01:25:53] Speaker 4: Yeah.

[01:25:53] Hugh Hendry: … anything resonates, right? Reach out to me. I’m sure you’ll be putting up my details, reach out to me. Because I can’t do it alone-

[01:26:01] Speaker 4: Yeah.

[01:26:02] Hugh Hendry: … but I want… I had disengaged, and I think you can tell I’m now engaging with the world. I’m seeing it-


… light my… I’m switched on. I’m lit up.

[01:26:14] Pierre Daillie: Yeah. I, w- I think we echo the sentiment that, you know we share the same or similar agenda to you in terms of, wanting to affect change an- and wanting to inform and educate. And I’ll add that, I, for one, we were… W- [laughs] We were quite saddened when you decided to become a pirate.

[01:26:41] Speaker 4: [laughs] [inaudible 01:26:42].

Remember, I-

[01:26:42] Hugh Hendry: … I was always a pirate. I was persuaded to join the Royal Navy-

[01:26:46] Speaker 4: Yeah.

[01:26:47] Hugh Hendry: … to grow my AUM which I did. I went from-


[01:26:51] Hugh Hendry: … 50 million to one and a half billion. And I ended up taking antidepressants.

[01:26:56] Speaker 4: [laughs]

[01:26:59] Hugh Hendry: Because the quid pro quo was-

[01:27:01] Speaker 4: Yeah.

[01:27:02] Hugh Hendry: … we’ll give you 1.5 billion if you get rid of that crazy guy. I was the man in the mask for three years.

[01:27:11] Speaker 4: Yeah.

[01:27:14] Hugh Hendry: Now I’m, a-


[01:27:14] Hugh Hendry: … so I wa- I was always born a pirate. But you’re right. I d- I, you [inaudible 01:27:20] listen. Between 2017 and 2020, I had disengaged. March 2020, a little light bulb went on. It was like the return of the last Jedi. I, I’m on that, that rock outcrop in the middle of nowhere. But with my lightsaber, I’ve been getting into training and I’m ready to come back.

[01:27:38] Pierre Daillie: Did you ever, did you ever relate to Ragnar Danneskjöld?


[01:27:46] Pierre Daillie: [laughs]

[01:27:48] Speaker 4: [laughs]

[01:27:48] Hugh Hendry: Don’t! Don’t get me started!

[01:27:50] Speaker 4: [laughs] [laughs]

[01:27:51] Hugh Hendry: I, [crosstalk 01:27:54] The, in December I… And, you need at least one month. P- probably two months. I reread Ayn Rand. And it’s a little bit like-


… the… My seed investor seeded Soros. And one of i-… His reservation with me was that I was too young, soros was 40 when he launched Quantum, and he was saying that you, there’s something about being a risk-taker that, you need the tenure of manhood. You’ve gotta have lived a life. And he looked to me as a 32-year-old, which was the age [laughs] when the [Amaranth 01:28:31] kid blew up, so he was quite right.

And he looked at me. He said, “Gee you’re younger than I’d prefer.” and so I gotta say, I read the genius of Ayn Rand, as a curious late teenager. But you’ve gotta go back and you’ve g- you’ve gotta read it again a- as a man-

[01:28:56] Speaker 4: Absolutely.

[01:28:56] Pierre Daillie: … as a, as a person-


[01:28:57] Hugh Hendry: … who’s spent time being a citizen of this earth… And especially having experienced the last two years, you have to read it again. So my, my, my Twitters, my Twitter and my Instagram, are dedicated to ripping off Ayn Rand [laughs] [inaudible 01:29:13] almost-

[01:29:14] Speaker 4: [laughs]

[01:29:14] Hugh Hendry: … and pretending that it’s my wisdom. So relevant.

[01:29:19] Speaker 4: Yeah. I just I always remember the, the spot where Ragnar meets up with Hank Rearden in the [inaudible 01:29:26].



[01:29:28] Speaker 4: And gives him the bar of gold as a repayment for all of his pain. [laughs] It’s such a, r- influential story. But certainly try to read it once a decade.

[01:29:44] Hugh Hendry: And Hank throws-

[01:29:45] Speaker 4: Again [crosstalk 01:29:46]-

[01:29:46] Hugh Hendry: … down, and “Get outta here. I don’t, I don’t-“

[01:29:47] Speaker 4: Yeah.

[01:29:47] Hugh Hendry: “I don’t need-“

[01:29:47] Speaker 4: That’s right.

[01:29:48] Hugh Hendry: “I don’t need your charity.” [laughs]

Hank gets it eventually. Hey.


St. Barts is my Galt’s Glitch. Is it glitch? G-

[01:29:58] Speaker 4: Yeah.

[01:29:59] Hugh Hendry: Galt’s whatever it’s called. Galt’s Glitch?


[01:30:00] Speaker 4: [crosstalk 01:30:01].

[01:30:01] Pierre Daillie: Galt’s Gulch.

[01:30:02] Speaker 4: Yeah.

[01:30:03] Hugh Hendry: Galt’s Gulch. This is my Galt’s Gulch. This is, this… I… Becau- I’ve literally… I talk, I s- I, I said to you, my hypocrisy. I have withdrawn. I saw early that-

[01:30:18] Speaker 4: Yeah.

[01:30:18] Hugh Hendry: … this was a s- a society intent on destroying itself. And I’ve chosen to withdraw from that process, but virtually, and using these portals, I’m willing to be a kinda, a beacon of… Try and attempt to be a beacon and tr- and be the Ragnar and try and take down some of those [inaudible 01:30:43] vessels that, that can only do us more and more harm. But again-

[01:30:48] Speaker 4: Love it.

[01:30:48] Hugh Hendry: … it’s a campaign, an- and-

[01:30:49] Speaker 4: I love it.

[01:30:50] Hugh Hendry: … and I I keep making clay. I f- I, I listen to myself. I, I’m an narcissist, don’t you? Ev-… The major critique of any single girl about a guy is they only wanna talk about themself. Guilty as charged. [laughs]

But I hear myself and I’m making lots of bold intentions, but I can’t do it without other people. People gotta reach out to me.

[01:31:19] Speaker 4: Neither can we, an- and we hope to do this much more with you.

[01:31:23] Hugh Hendry: Okay. Yeah. I’ve enjoyed it. I’ve gotta go and edit my loony podcast try and make sense of that.

[01:31:30] Speaker 4: [laughs]

[01:31:30] Hugh Hendry: I’ve now gotta listen to myself for the next three hours, [laughs]

[01:31:33] Speaker 4: Anyway, that’s painful, isn’t it? [laughs]

[01:31:37] Pierre Daillie: Th- this wa- this was supposed to be a 30-minute show-

[01:31:40] Speaker 4: [laughs]

[01:31:40] Pierre Daillie: … [crosstalk 01:31:41] to 90 minutes, but you know what? Hugh, this is great insight-

[01:31:45] Hugh Hendry: Yeah.

[01:31:45] Pierre Daillie: … and we are looking forward to sharing this with our audience. We’re gonna share your message.

[01:31:50] Hugh Hendry: Thank you very much, gents. Thank you.

Recorded February 18, 2022

Hugh Hendry, a.k.a. The Acid Capitalist, and Founder of the award winning hedge fund management firm, Eclectica Asset Management, joins Pierre Daillie and Joseph Lamanna for over 90 minutes, in a hot-take filled and hilarious-at-times conversation deep in critical and paradoxical thinking about the past and current geo-politics of Russia and China, the QE and disinflation-fueled equity and bond bull markets, the dynamics of oil and natural gas in the context of both pre-inflation concerns and the ultimate exogenous energy threat to Europe, his unique perspective on the impact and opportunity presented by the carbon permit/credit market, as well as his take on the now flaring Russia/Ukraine conflict we are witnessing.

Our conversation is an exploratory journey around the geo-political world. Hendry identifies the chasms that are opening up the fault lines between Russia and the Western World, China and the U.S., the shift from Quantitative Easing to Quantitative Tightening, and what that all means.


Where to find and reach Hugh Hendry

Hugh Hendry Official on Youtube
[Download]  Hugh Hendry's 'Dawn of Chaos' Report
Hugh Hendry on Instagram
Hugh Hendry on Twitter
Hugh Hendry on Linkedin
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