On the edge of a precipice
Views of Hugh Hendry, 10 October 2006
China is the Frankenstein child of US monetary
The US is a consumer and China is a
producer. If the US consumer stops buying, the effect on Chinese production
is magnified. And by the way, China and India are boring stories. They are
boom or bust economies and just happen to be going through boom times at the
These are some of the controversial
opinions from Glaswegian Eclectica hedge fund manager Hugh Hendry.
When asked whether one should buy retail
stocks — well, that’s just a dumb question.
On a CNBC discussion panel, the fund
manager recommended buying gold at $450, holding until $3000 if you’re
conservative. But the truth is, he sees it long term going all the way to
His outlook for next year is one of
continued volatility and for institutional investors, his recommendation is
But for the small retail guy, he says
it’s difficult to find some value. Perhaps some asymmetrical bets on a stock
like UK Vodafone where the dividend is seriously pleasing at a 6% yield,
hedged by an “out the money” put option. The telecoms are remarkably cash
flush at the moment.
He believes the equities market is for
“herders” and the sophisticated investor should be in bonds and currencies.
The controversial figure acknowledges
that other market players see him as mad and bonkers, but his job is to be
ahead of the trends.
He sees a hard landing for global
economies and warns we are on the edge of a precipice. The CRB Index, which
has tripled recently, is well on its way to halving.
And this is from a man who wears cream
suits, brown shoes and leaves the top shirt button undone. He also listens
to the voices in his head instead of following established research.