The Eclectica Fund: Manager Commentary, May 2010
Hugh Hendry just released the May market commentary from his Eclectica hedge fund. We haven't checked in on Hendry since his March update when we saw he liked Annaly Capital Management (NLY), but his time around we get much more in-depth macro commentary. Hendry has compiled eleven pages worth of insight complete with charts, pictures of Chairman Mao, and even lyrics from the band Gorillaz. The main takeaway from his commentary though is that he sees hyperinflation in store as sovereign entities will need to pay off their overwhelming debts via 'worthless fiat currency.' However, for this to occur, he argues that first we need to see a large deflationary event.
Curiously enough, Nassim Taleb mentioned this sort of scenario at an investment panel where Hendry was a speaker as well. Taleb presented the idea that if you were creating a portfolio today you should allocate a tiny portion to insurance against hyperinflation. If the scenario doesn't unfold, your cheap insurance expires worthless. However, if it does occur, your investment returns an exponential amount. We just yesterday detailed how legendary fund manager Seth Klarman is worried about inflation and has bought insurance to hedge this risk.
Turning back to Hendry's recent commentary, he writes that, "it is now commonly accepted that the magnitude of the financial problems confronting the world economy are so great that in all likelihood we will be confronted by a hyperinflation allowing sovereign debts to be paid off in worthless fiat currency. Just like the Bolsheviks in 1918 and 1919, the machine-gun of the Comissariat of Finance will pour fire into the rear of the bourgeois system. We do not dispute this outcome."
- Hugh Hendry Quote
Found via The Big Picture. “I have resigned from the professional undertaking of coin flipping. I am not here to tell you where gold's gonna be. I have no idea. That’s my existentialism. I am a student of uncertainty. I have no idea where...
- Keeping An Eye On Wealth Creation
Thanks to Will for passing this along. Eclectica's acquired a nice reputation among contrarian investors, thanks to some enviable results. The London-based Eclectica Asset Management saw a 12% return last year in its flagship Eclectica hedge fund,...
- Chinese Slowdown Boosts Hendry’s Fund
A hedge fund designed to profit from a slowdown in the Chinese economy, run by the London hedge fund manager Hugh Hendry, has soared in value over the past two months as global markets have plummeted and industry peers have suffered damaging losses. Mr...
- Eclectica’s Hendry Turns Greece Profit Into China Failure Wager
Found via market folly.Hugh Hendry is a man worried about the future. Although the hedge-fund manager beat more than 80 percent of his peer group rivals in 2010, Hendry laments that he’s part of an oppressed minority -- and likens the threat of hedge-fund...
- An Outspoken Man In A Secretive Trade
Hugh Hendry has a big mouth, as Hugh Hendry will tell you. With a sharp wit and a sharper tongue, Mr. Hendry, a plain-spoken Scot, has positioned himself as the public contrarian thinker of this city’s very private hedge fund community. The euro? It’s...