Hugh Hendry on Investing in Chaotic Times

In today’s episode, Jason Hartman is joined by Hugh Hendry, where he shares the preliminary actions he took to position himself during the 2008 recession. They discuss where the market is going, and Hendry gives his thoughts based on actions the Fed took over the last 60 years. Hugh discusses the early signs of chaos that awaits us as we move away from an accepted form of order. Jason and Hugh also talk about how you can profit from chaos instead of order.

Announcer 0:01
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Announcer 0:12
Welcome to the American monetary associations podcast where we explore how monetary policy impacts the real lives of real people and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman 0:29
Hey, it’s my pleasure to welcome Hugh Hendry from St. Barts from his resort, maybe modestly, it’s not a resort in total, but he’ll tell you more. And he was a founding partner and it various times through the years Chief Investment Officer, CEO and Chief Portfolio Manager of eclectica asset management, and that ran for 15 years. And it attracted a lot of attention back in 2008, obviously, during the Great Recession, when he achieved a 31.2% positive return in the depths of really bad times in the Great Recession. And he has a reputation as a contrarian investor. Lately, he’s just been a macro viewer of the economy and the markets. And he’s known for his outspoken Twitter bombs and wisdom of many, many years. In the macro community view, welcome How you doing?

Hugh Hendry 1:24
Judo, I never felt better. And as you say, I I closed down the eclectica hedge fund at the end of 2017. And I think I retreated into a dark, gloomy cave. I know everyone’s just at various stages of coming out of confinement. But I think I went into confinement at the end of 2017. But this year, and I ventured forward, and I’m daring to offer my view on the world. And it feels like the old me, I’m misbehaving. And to be curious, you have to misbehave first. And that was one of the wisdoms that I learned earlier in my career.

Jason Hartman 2:07
Sure. Well, hey, any conformists in person who doesn’t misbehave a little bit doesn’t get any attention, right?

Hugh Hendry 2:13
Well, I don’t know if it was the naivety of youth. I mean, I certainly recall back in the day, so that would be back in 2002. And my seed investor for the macro hedge fund the offshore fund, was Would you believe it was the same patron as George Soros and his fund back in George launched in 1969. And this wonderful sponsor, he was saying, I only have I think, was it three problems, my fault free I could I could name 33 off the bike. But one of his issues was was youth, you know, that I was at the time, I want to say, I think it was 3033. And he was lamenting that he could remember the day that when george soros began, he was 14 or something, but the wisdom of investing in a mind who had survived the vicissitudes of life, and therefore you felt perhaps more comfortable deploying capital with the mind as opposed to a boy, but you know, I am known, who knows well, I am.

Jason Hartman 3:18
Jim Rogers, Soros former partner has been on the show four times now. I just had him on again last week. So but he doesn’t want to talk about Soros at all.

Hugh Hendry 3:29
Jim is a one of a kind. I think, in my last podcast, I was recounting and the evening spent in a private party overlooking Red Square. And I had Jimmy Rogers I had Nassim Taleb. I had mark the legendary kind of strategy smart father and profound deep thinker about a character and I was both the all three of these these geniuses of the of the financial world. And obviously, Kim is just hysterical. He’s always great value. But even in downtime, I clearly the mystique that surrounds him being the founding partner with George, back in the day, young everyone wants a piece of piece of Jeremy and he gave us it and like he has like a gun to his left lapel and come out with a cigarette sugar sachet. I want you to buy sugar. This was back in 2005 2006 when commodities were really ripping another pocket you would have a silver coin and other would be a gold coin and other it would be you whatever. That was Jamie always on. That sounds like him. Yeah, he’s

Jason Hartman 4:35
a great guy. But you know, we’ve had Mark Farber on the show but Nassim to lab. Oh, wow. I mean, just so interesting. I, I have not interviewed him yet. So it’s on the bucket list. Definitely. But hey, you know, tell us what you think about where we’re going. There’s a lot of uncertainty out there. And you people are rightfully, I think very concerned. Take it wherever you want. There’s so What’s going on in the world right now.

Hugh Hendry 5:01
But there’s one stuff, people get concerned by the new, they get concerned by the law of big numbers. And since the crisis of 2008, we have seen new practices developed by central banks around the world, and which kind of come under poorly classified, but they’re willing to go on to the theme of quantitative easing or the printing of money, as though the printing of money absolves all financial sin. And since that emerged really very strongly in March 2009, I want to say, there has been a very strong bull market in fear. And by that and what I’m what and I very specifically actually using the phraseology of another fantastic commentation. In the macro space, Christopher kusa, a great expert on options, and the mechanics and the construction of option strategies, and up until the virus, you and I, and the faux pas watching this, and we’ve been kind of had a sense that everything’s not quite right. And having seen how quickly things could change, in 2007 2008, we’d be very keen to, if you will protect ourselves. And in the financial markets, people have been doing so by buying put options, and in the process of volatility, which is one of these kind of nebulous, kind of ethical concepts, but it’s one of the founding stones, which kind of allows you to create a stock market, a bull market or a bear market, that kind of the living, breathing and exhaling is really volatility and volatility has been too high, which is to say that people have been willing to pay too, too much to protect themselves against bad events, the reality is the events of 2008, I can be uncovered maybe once every 100 years, you know, if left unchecked, and if the financial authorities had not pursued the course of action, if they did, we could have gone back into the analog of the Great Depression. And of course we did, but there’s a fear that the Great Depression is just on our doorstep. So this being a boom market in fear, fear, perhaps, not misplaced, but the ability to profit from fear just has not existed, because the kind of the central banks and what they’ve done, rightly or wrongly, and in doing so will actually be put out of DVD put me out of business, I was your supplier, you know, if you were scared about the war, like you say, I made 31% in 2008. If we look at that, Father, I made 50% in the month of October, I make 21%. on a Monday, taking the kids to school,

Jason Hartman 8:02
give us some context for that, because, you know, I don’t have the numbers off the top of my head, but you were up 31% in 2008, how much was the market down in 2008? I know it was down. I just don’t remember that calendar year, holiday year. Question that delta really shows how skilled you are or lucky?

Hugh Hendry 8:24
Well, I would disagree with that. So I mean, let’s try and answer your question. The Comedy you draw for the s&p, I want to say we would be maybe high 30s percent, in terms of point to point from high to low, would it be much greater possibly is like 58%. In terms of determining skill, it is more a function of the course of how we got from point A to point B. And that was the the truly most difficult aspect to manage. In 2008. You’ve seen the movie, The Big Short, I know most of the participants are that the characters were portrayed in that movie, but necessarily the American managers, but I knew all the sales people and the products because we were all going to be risky with a small community, they could see the future, like happening in front of our very own eyes. And if you remember one of those, that wonderful job from California, he was sitting on the most genius portfolio, he was sitting on nitroglycerin, which was going to blow to the high and make so much money for his clients. And yet he had to get them gets a technical word. But essentially, he had to close the fund to redemptions because the clients wanted their money back. I had the same thing a month, the month before October. My biggest client I was very concentrated in terms of clients. I had a client that would 50% of my income. Positive. And they wanted all of their money by? Yeah, just on the bearish. So the hardest thing is trying to keep people invested.

Jason Hartman 10:08
In other words, they did well, and they wanted to take some cards off the table.

Hugh Hendry 10:12
No, no, no, the event had yet to happen. And they were beginning to give up on it. Oh, God, I like is way too full of interesting anecdotes. I had a conversation in New York with these benefactors, the sponsors of my fund, and I was down 3%. At that point, I’d been all over the place I’d been up 25, I’d been down 10. And no, I was recovering my losses, and I was near flat, but near flight was minus three. And I remember them saying, You’re done minus three. But you don’t get these markets. You don’t understand these markets. We are going to give all of our money to this guy. This guy. He’s don’t fare too, but he gets it. I was just like, What are you talking about? These are? These are amongst the most sophisticated investors in the world. Go figure the world is a crazy place.

Jason Hartman 11:02
Yeah, it is. Well, at the end of the day, everybody’s human, you know, and it doesn’t matter who they are. They’re all just people, you know, at the end of the day,

Hugh Hendry 11:09
yeah. And the date of your boss doesn’t change your genius. You know, if you’re born in 16 1969, or 1769, you’ve still got the same weaknesses.

Jason Hartman 11:21
Yeah, no question about it. Well, you everybody’s wondering, where are we going from here? I mean, this is like what we’re talking about. It’s a crisis time. I’ve been doing this presentation, I called pandemic investing. And I actually got the domain name for that pandemic, investing calm, I kind of couldn’t believe it. Yeah, that was kind of amazing. And I think things are gonna get pretty tough. It’s a lot of businesses are picking up a lot of efficiencies now that they didn’t have before. But at the same time, a whole nother set of businesses losing a lot of efficiencies, businesses that depend on physical space, hotel, restaurant capacity airlines, where people can’t socially distance and they’re going to be forced into lower capacities, that’s going to affect their operational ability dramatically. I think movie theaters, Broadway plays, you know, whatever. So what’s going to happen? It’s hard to make sense of the world nowadays.

Hugh Hendry 12:15
You correct and I typically I am curmudgeonly you typically, I’m a kid of the glasses is half empty, no hospital. And, and it’s feeling half empty. today. The thing is with the virus, three months ago, we had no data. And therefore, it was legitimate to be very fearful, and to go the extra yard, to try and protect our communities, and to try and manage the pressure that it seemed was likely to be felt by our medical infrastructure. Today, and I say this is I’m a fierce guy. I’ve spent the last 30 years analyzing stuff now. And we have so much data and worth the data, it is very hard to reasonably justify this willful destruction or enterprise across the world. It’s easy for me to say that, you know, kind of cozying up in my kind of billionaires Island in St. Barts. The figures speak to another story. And so part of me feels like today is a is a narrative from an an rund book. Has Atlas just shrugged. Where is john? JOHN gold?

Jason Hartman 13:39
Behind gold is in his Valley.

Hugh Hendry 13:41
Yeah. And if you will, that I’m in my island. I’m like, you know, what, have it, take it? And we’re, like, conspiratorial theories, I think are for the fairies. But I can’t understand. It is this this is it feels like a coup d’etat by the state. We’re no all working. We’re no. All in the fate in the hands of the government knew that very, maybe that was the most scary thing. You could say. We’re from the government. We’re here to your house. Right? Yeah. Go to hell. Really? I think you got the wrong house. Like I think you wouldn’t be next door. You

Jason Hartman 14:15
know, right. So Famous last words, Reagan used that line a lot. You know, I’m here from the government. I’m here to help. But you know, and certainly, everybody around the world has become they’ve been forced to become a lot more dependent on government. And the next stage of this is going to be even more scary. And I’m not talking about the economic impact. I’m talking about contact, tracing, the surveillance society, the Orwellian 1984 of this. We ain’t seen nothing yet. We thought it was bad after 911 it’s just going to mushroom after this.

Hugh Hendry 14:51
I feel that’s correct. So but I you know, I think it’s, I think it’s very important that you know, I was using that very powerful slogan. From Reagan from 1980, it’s 40 years ago. Yeah. And I think we’re at the end of a 50 year cycle. So I think the origins of the 50 year cycle began with the US breaking away from Bretton Woods. And from the gold standard up until I want to say August 1971, you know, a US citizen, or, you know, anyone holding $1 bill could exchange it for its equivalent in gold ounces. And I was exposed as a lie by the overseas central banking community, and notably the French and that 50 year cycle. So by the mid 1970s, the the end of the previous session, so that we I want to say we had a cycle, which run from 1930 to 19, to mid 1970s. So again, see the 40 or 50 years, but they kind of they did end marriages with the cycle, which is just concluding No. And at the end of the cycles, chaos, reigns and gorjuss, we’ve had 40 years of order, not chaos. But if this was 1974 chaos, would very much be the accepted belief system. What is chaos, chaos would be the OPEC cartel pushing the oil price from nothing to 12 bucks and traffic around the block to get gasoline. Yeah, chaos would be the Vietnam War. And it would be the vacuum would be the failure. Chaos would be the hippie revolution, chaos would be breaking down. Thankfully, the liberation of the crazy racist legislation, there’s so much chaos would be the central bank, the Federal Reserve having a kind of an income cap on how much you could air chaos would be the government telling you how many dollars you could take out of the country. Chaos was everywhere. And, and we were we elected Reagan and Thatcher. And we were praying for otter. And we got people like Paul Volcker, the chairman of the Federal Reserve, and Paul was spiritually and physically a giant of a man, he’ll think of a central bank that raises interest rates, a recession

Jason Hartman 17:14
he forced, he forced a recession, you know, I mean, he wanted it of course, Volcker just passed away. But you know, his proponents would say that he was willing to make the country take the tough medicine and break the back of inflation. But others would say not so much. I mean, what do you think? What is your Volcker stance? I’m curious,

Hugh Hendry 17:34
all of these characters, they are a combination of making it happen and being in the right place at the right time. Okay. Paul Volcker today, would not be the right time to why was Paul Volcker, the right man, at the right time, when he became Fed Chairman, I want to say 1977, he became Fed Chairman and he was potent and powerful, because we were at the end of the previous cycle. We deal every afternoon, the US banking system was bankrupt in 1932. And we parched the economy of its debt and we had a global war in between which slowed that process done. But we typically kind of we went from total debt of three times the American economy, and by 1973 74, that debt figure was one times we d leveraged. When you d leverage when debt is small versus income. You can employ a sheriff like Paul Volcker, and he can raise interest rates. He raised them by 200 basis points, two percentage points on a Saturday morning, you can do that you can purge the system of his rottenness. I was kind of saying the bed that no Volcker fed the Fed. The mission there is to be kind of like Tony Soprano, you can the economy, nothing pimps us because my kind of colorful language. And today, a paul volcker would be at strophe. Or that strategy because of

Jason Hartman 19:06
too much debt is Jerome Powell doing the right thing today. The balance sheet is insane. I don’t think any of us I mean, we thought it was crazy during the Great Recession. But now, this is outlandish what the Fed is doing. And Powell is so bold about it. He makes no bones about it. Buzz Lightyear is this hero to infinity and beyond Greenspan would be talking in code and you’d have to decipher him but Powell is just

Hugh Hendry 19:35
no, I think I think you’re very unfair. I think post Exactly. I take issue with almost everything you said about power and

Jason Hartman 19:42
saying he’s a bad guy or anything. I’m just saying he is what

Hugh Hendry 19:46
he issue with the policies that he is trying to explain to the American public. And of course, he’s explaining and and trying to say that they are worthwhile or they are very much they’re like a medicine which is necessary. And so the actions of the Federal Reserve, the fear is that they are printing money. And eventually, if you print enough dollars, and the price of finite things like property, like so, prime real estate, prime real estate, the other things that are like St. Barts is prime real estate, a, this is a, I want to say 23 kilometer wide. The circumference I think, is 23 kilometers, which is to say is tiny, that building code makes it harder and harder to construct on the island. And so the stock of new housing is not expanding. Okay, so that’s a finite supply, as the argument is, the more and more and more there is no, we talk about trillions of dollars that you produce, then you’re going to push prices higher for these finite assets. That’s the argument in favor of gold. And that’s why gold is beginning to resuscitate and rejuvenate itself when prices look as if they’re set to go higher. And is the Fed, what is the Fed doing wrong? I would say the Fed is pretty much at the limits of what it can do. I think the Fed gets a bad rap. I think that it’s not printing money. The financial markets are watched like hawks by very, very smart and aggressive bond traders. They’re pricing 10 years securities today, at almost zero yield, the problem of the Fed is credibility that no one believes that they have the wherewithal to generate inflation. So I don’t really take issue with what it would be the crisis, the crisis, we saw about a 35%. Peak to trough very rapid decline in the price of risk assets in the month of March. And were it not for the intervention of the Fed, that probably could have been a 50 or 60%. correction.

Jason Hartman 21:59
No, I’m not necessarily being critical. I’m just saying that it’s amazing. I mean, the action has been overwhelming. It’s really

Hugh Hendry 22:11
what it has. So so I’m not trying to kind of say the opposite each time to you. But you

Jason Hartman 22:18
said push your Up button. So here we are.

Hugh Hendry 22:23
I know sometimes I have a tendency to kind of be a little bit too full of myself. But the remarkable aspect of what’s happening with the American central bank view, J was on Jays trying to put it he tries to say, Look, I’m Fed Chairman but call me g I’m like I’m just a regular guy. He’s actually he’s no embarks on a radical PR campaign. Again, it’s been advised to do so because of his credibility problem. The thing is, there’s when they, if you will printed money, which is a nebulous concept, yeah. But they can print it to the equivalent of almost annualized, if they continue printing, or intervening in the manner that he did in one week in March, you’d be talking about something like $60 trillion of dollar creation. To put that in context, that would be like three times the size of the US economy, and that’s enormous. And yet, the bond market went big deal. But what did you do? You didn’t do anything? There’s no if anything, you didn’t do enough. If anything, interest rates are gonna go negative. So on one hand, you’re sitting there going, Wow, I can’t read in the newspaper. The fat is just lost his, his bearings, and we’re printing all this money. And, you know, this must be the advent of higher prices, we’re going to get inflation. I’m going to be in my car, I’m gonna have to queue run the blog, and I was going to be 100 bucks. On the other hand, the smartest people smartest, I know this emotional intelligence, but bond, people who know more about pricing bonds than anyone in the world. They’re sitting there going, mostly. So you it’s kind of hard to be Jay Poe today. Everyone thinks you’re a moron. I had that problem. And don’t be a moron. Be an oxymoron. And that’s the today that’s an oxymoron.

Jason Hartman 24:16
Give us some predictions, gold, Bitcoin, the dollar asset prices, consumer prices.

Hugh Hendry 24:23
Okay, so predict predictions for the birth. Okay. Until the embed Time Machine. Oh, yeah. You know, we’ll have to get Elon Musk on. Once he has conquered Mars. We must reroute his intelligence to designing a time machine. They don’t exist, aren’t they? And so I have not been to the future. And and predictions. I just higher predictions are from morons. And I’m an oxymoron as I stated earlier, but what can I say? I feel as though the I’m guessing the majority of your listeners are based in America or Canada. have an affinity to calling themselves the American majority. I

Jason Hartman 25:03
mean, we have listeners in 189 countries. So I’m waiting. You know who I’m waiting to get North Korea and Cuba online, but Oh, well.

Hugh Hendry 25:12
Well, they’re probably using a proxy server with their VPN. And they’re probably listening right now. Yeah. So I want to say that I feel as though actually America has been taken hostage. And that if you’re a US citizen, you are a serf. You’re almost like a slave to external forces, the external forces being other economies, I want to say China’s kind of one that China has pinned to America. And secondly, financial speculators have pimped America.

Jason Hartman 25:45
Yeah. speculators for sure. No question about that.

Jason Hartman 25:50
China? I don’t know. So you’re bullish on China, then? Hmm.

Hugh Hendry 25:52
didn’t say that. Okay. Let’s say that I said that the US by its own admission, it had an ambition to have the dollar serve as the reserve currency answerable to no one. The currency of commerce is the US dollar. And through a whole series of crisis in Southeast Asia, in the late 1990s, they really reinforced the point, if you’re going to run the Thai economy or the Malaysian economy, the Chinese economy is run effectively on US dollars. That’s amazing, you know, and for them to grow. prosperity creates a desire for more and more dollars. And it’s the Federal Reserve that has to produce those dollars, right. And when there’s a crisis that emanates a crisis that begins, like a hurricane that begins offshore, offshore to the United States, is the US that has to react is the US that has to print those $60 trillion of annualized dollar bill issuance in one weekend March, because of a crisis that began in Wuhan. Yeah. I not in Detroit, if you will. Okay. So partly, you get what you want. And so the US policymakers have a load, they’ve each step along the road, the twisted road of history, decisions have gotten tougher, and tougher. And tougher, though, back in the 19. In the late 1920s, policymakers were zealots. Okay. And so you’ve got a choice. Okay, your choices this, you can have policymakers, like we had in 1930, at the US Federal Reserve, and kind of like Paul Volcker at the Federal Reserve in the late 1970s. And they are, they have an ideology, which is hard money. Yeah, the dollar has to be strong, and it has to protect the purchasing power of the US citizenship, right? At all costs. And if we use the language, kind of which was there around the US elections in the 1890s, effectively, those policymakers were willing to sacrifice the US household and to crucify an on across a gold on the, on the ideology of hard money.

Jason Hartman 28:16
Yeah, I agree. That goes too far. It doesn’t seem practical nowadays. And

Hugh Hendry 28:20
I at its peak, you had Andrew Mellon, the Treasury minister, treasury secretary for the US 1930 and his famous thing, let’s raise interest rates and purge the system of its rottenness. Let’s clean the stables. Yeah. And what happened? You had 20% unemployment. Yeah, you are the generation deeply psychologically scarred by the human tragedy. Okay, multiple generations actually. Yeah, that end so or you can have today and really today be done. I mean, it kind of began in the cloud with Greenspan, like you said he, he was a smoke and mirrors guy. He didn’t reveal himself. There was there was a lack of democratic check on him because he refused to reveal what he was doing. And Bernanke, he really is the architect. And really the person who marks the beginning of the polar opposite, and there’s nothing in between. and the polar opposite is Frankie, I want to say, at the bottom of the bear market after the TMT crush, but Bernanke, he put his hands up, he said, I am here on behalf of the Federal Reserve to apologize to the US household. I’m here to apologize to your grandparents, to your families that were made to suffer for generations, because my three assessors pursued a hard money doctrine at the expense of everything.

Jason Hartman 29:45
of their depression to Yeah, no, that was his thing.

Hugh Hendry 29:47
Absolutely. And he says if it happened, or into an ideology, it wasn’t necessarily so here we are now and we’re in another world. And you can do fair and fair and fair. And the notion of the Great Depression and that human tragedy, and that’s what the Federal Reserve are doing. And they’re getting it, they’re getting a bad rap for it.

Jason Hartman 30:10
And they’re getting a bad rap from is that sort of from the Peter Schiff type camp of the hard money, the ron paul Peter Schiff type of camp.

Hugh Hendry 30:19
It is an a and a huge contingent of the financial base, those owning Bitcoin and gold shares are very much older. I know, like passing judgment. I’m simply saying that this is ideology. And the and it’s like this kind of strategic game. And what people forget is that it’s not checkers on a board is real people. Yeah. Okay. And the proponents are the fiercest critics of the Federal Reserve can’t really offer a solution they can go, they can offer an alternative, or if I’m to put words in their mouth, because they don’t really offer the alternative. But if you’re just part of the system of the rottenness, that means enormous bankruptcy. And again, it means it means a Redux of the 1930s. That’s what it means.

Jason Hartman 31:12
And the thing about it is all of those sort of hard money crowd, they’ve been saying that stuff since Well, I mean, probably forever, but Howard Ruff, if you know that name from back in the 70s, I remember and through the 80s 90s 2000s, and he was on my show, and they’re just always wrong. These guys are just always wrong. They make like really interesting arguments. I love listening to them. But it just seems like we are actually in a new world. And when you have the reserve currency, when you have the biggest military, you can kind of defy the laws of math and physics, at least for a long time.

Hugh Hendry 31:53
I am not here to cast judgment on who is right and who is wrong. And I think, actually, that when people form opinions, and then people are people are entitled to their opinions, I’m not expressing your opinion in terms of the veracity, or smartness of anyone else’s argument, I have my own problems. But what I want to say is that we make geniuses of people going mostly owing to circumstance and and the time in the cycle. And these cycles, kind of the almost the run as long as an adult life, which is to say 40 or 50 years, and we spent 2025 years being kids and being just stupid rough. And then we spend 4040 to 50 years kind of trying to wizened up. And so that’s a that’s like one of the one of the outer planets going round, I think, is it I said this before someone correct me is it soft on us only if it takes it takes us one year to grow in the sun, some planets, CNC took you 200 years, you might never see snow, if you saw snow, you’d be like, Oh, my God, what is this stuff? You know? So we’re conditioned by the very slow passage of time, the thoughts with regard to hard money and you name some people like Peter Schiff, they’re kind of relevant today in the sense that gold has got a pulse Gold’s been trending gold, change this behavior in the year 2000 to 2003. It exited a bear market, and it kind of has heralded and told you that the Federal Reserve was changing from this hard money ideology to we will do, we will go to the old Lance to save the American household. And there will be consequences, the consequences are being failed at the political economy level, where again, when you feel you’re being taken hostage by the overseas sector, then the great fear is that we get closer and closer to conflict. Just know the conflict seems to be over over trade nature, but God forbid that would like carry or into military conflict. But that becomes a potent risk at times like this. This is one of the unpleasant side effects of the Federal Reserve’s policies. The other one is, again, when you are when you’re being pimped by the financial community, then, again, it’s the 1% get to own the economy, that will that is fermenting political revolution. You have Donald Trump today, we have Brexit in Europe, we probably have the inevitable breakdown and failure of the European project because of the Federal Reserve at the Federal Reserve and other central banks ideology of avoiding oil crisis. Again, I’m I think you should try and avoid all crisis. But let’s understand the pitfalls are really, really hard. And one of those pitfalls It

Jason Hartman 34:47
sounds like you’re saying his concentration of wealth, because you know what seems to happen and it’s so hard to work out. I mean, you know more about it than I do for sure but is that whenever you have all of these things stimulus plans, just the people that are just kind of closest to the money, you know, the people that are in that system, they get most of it. And, you know, the little guy gets a couple of shekels, and that’s about it

Hugh Hendry 35:13
with this thought. And it’s just not free enterprise. I, I struggle. And I hesitate, because this is, this is a global pandemic, you know, where the statistics kind of say that really, I know, it’s not influenza. But you know, we have developed a mindset where just one life is worth sacrificing the US or the global economy. And we’re kind of the wrong way round. And so are our thinking, what I’m, what I’m struggling to say is that 50 years ago, we were on the transition point from chaos into order. And the hardest thing about our life today, 50 years later, is that we’re at another pivot point. But sadly, we are pivoting from order the accepted belief system today is one of order, right? And we are pivoting into a world of chaos. That’s the challenge. Okay. So

Jason Hartman 36:10
before you go, just enlighten us a little more as to what that chaos looks like, if you can I know we got to wrap up here. But

Hugh Hendry 36:18
let’s answer that in the in the inverse. What was chaos? or less? What? What did we do to reimpose order, we gave central bank’s independence. And we said hey, look, you know, bring on a recession to you, we are central banks, to control and to constrain the creation of dollars. That’s just two examples of what we did. Another example would be we liberated the world, we use the great poster of the American dream. And we projected that onto this blank canvas of the rest of the world, we said, Look how wonderful this is. And in doing so we brought down the Berlin Wall. And we liberated literally billions of people from tyranny into a world more recognizable as our water, okay, and, and then let’s think of where we’re heading, we’re heading into a world where the central bank is less and less independent, the central bank works for the mind and works for the chief of state, right, we’re looking at a world with its the central bank is not trying to reduce inflation is trying to increase inflation. We live in a world where rather than reducing the money supply, they are desperate to increase the money supply. And we’re living in a world where that whole liberation of liberation from tyranny is being rolled by and this awful virus thing is perhaps going to make us less of a connected world and more of a disconnected world. And so that’s, that’s what I call the early signs of the chaos, which awaits us. And that chaos within the Euro, this burden of time, which has no weighing upon us a flight path, like a chaotic war that I could see is that, you know, the, like the boy in, put his finger in the down, the Fed put their finger in the dam in March, and they start the cascade this this stops the prices from falling. But the pressure is I think, gonna mount and mount because, you know, it’s so bad for commerce. I mean, here I am in sin boss, do I go forward and invest in my, my boat? You’re gonna make a decision in the next two weeks whether to go forward with a $4 million construction project. And I don’t know if there’s going to be any airline to bring my American clients from New York to say, boss, it’s

Jason Hartman 38:41
a fair question. Yeah.

Hugh Hendry 38:42
So and if I don’t spend that $4 million, I’m just one guy. Yeah. Okay. One kind of rich guy by just one guy. Yeah, I think what you could see when let me like, I’m not saying this is gonna happen. But this is the chaotic world, the Fed and his finger the pressure against the s&p, which is rally to where’s the s&p today, like 2750, let’s say the s&p, it could plunge again. And then the 2000, or less than 2029 5529 50 goes under estimated 2950. And the high was 30 to 50. So we’ve almost gone back to the high,

Jason Hartman 39:21
you got the biggest investor in the world, you’re buying up assets. The Federal Reserve,

Hugh Hendry 39:27
the biggest investor in the world, is when you and I become fearful. There is a central bank that could hold us back because you and I and our resources and our access to leverage and when we have fear, nothing can take us on. Okay, this is all just a game of confidence. Yeah. So anyway, I can I can see the world. I could see financial markets, getting slammed and falling again. And then the Federal Reserve and the US government come in with another package. And then everyone gets loans from the government and then they say, you don’t have to pay us and then we start really printing money and no One goes, holy cow, I can’t own 10 year treasuries at zero and interest rates start moving and all along. So I can see a world I the chaotic world that I could see would entail the s&p trading at five or 6000 in the next five years 10,000 in the next seven or eight years, and then that would not be pretty, that would be a tragedy.

Jason Hartman 40:24
Yeah. Wow. That’s something Yeah. Who knows? Well,

Hugh Hendry 40:27
I don’t know. For sure. I don’t know. Okay. But my franchise for the last 30 years was life is capricious. There’s always like weird things happening, not just the financial markets, in day to day life, your work, you always hear that expression. Who would have thought, you know, who thought well, kind of my own little world, I’d be like, I kind of thought that in 2008, I kind of thought the gold actually could embark on like three decades of a dramatic bull market back in 2002. Back in 2012, I said my role was no longer to be this moral comergence commentator on the moral philosophy of the US Central Bank. And so my role was just to be contentious. I am not claiming any ability to see the future. But I would want my I would counsel your audience. And I’d ask them just one thing in terms of preparation, think of the most chaotic events and begin to think of them becoming normalized. And then time think how you can profit from chaos as opposed to order. And that’s going to be very difficult. Because for 50 years, we’ve trained our thing our minds to think orderly. Yeah, and now you and that’s fine. Look at me, like people want to hear me Look at me. You know, I look like a financial dilute like Jimmy Rogers. No,

Jason Hartman 41:51
you don’t, don’t I botai.

Hugh Hendry 41:54
This is the face of the future. This is chaos, my friends. You have to hear first.

Jason Hartman 42:02
That’s pretty good.

Hugh Hendry 42:03
Sammy that 20 seconds.

Jason Hartman 42:06
That’s a good clip right there. I love it. That’s perfect for your Twitter feed. Just this is chaos. So the last chaos decade was the 60s or into the mid.

Hugh Hendry 42:17
Chaos comes is the transition between 40 and 50 year cycles. So I’m saying that we had a cycle of excess, a cycle of exuberance, which facilitated and enabled the US economy to leverage up and typically the ratio is up to buy the debt three times incomes. Yeah. And that concluded spectacularly with the crash, right? The crash was made worse by the ideology of the Federal Reserve. I then say to you, we spent 40 years de leveraging at the bottom of a deleveraging cycle. Everything is cheap. So here I am the Caribbean, as you know, Richard Branson, the virgin entrepreneur, he buys an island. Yeah, I’ve been there twice, once a billion dollars, but at the bottom of a deleveraging cycle, he says, I’ll give you 100,000 the guy says thank you very much.

Jason Hartman 43:11
I think Necker Island he paid $177,000 400

Hugh Hendry 43:15
but he wanted a new one. And he agreed on 177. Yeah, that’s what happens at the bottom of the cycle. Okay, and you get the chaos. The Chaos is the UK goes bust it has to call in the IMF. The Chaos is the Latin American crisis. The Chaos is the Petro dollar currency crisis is queuing for oil. The Chaos is inflation. The Chaos is the debacle of the American hostages. Or suddenly you think we used to be America we used to be great. What happened? Yeah, that’s the chaos right? Then you say well give me chant Let’s kick these morons kick Carter right let’s bring in Reagan. Let’s bring in Volcker give me order. Right. That’s 7980 but today is 2020 right and today’s like I’m so rich that I don’t punish me with higher interest rates. So you know what, we’re going to punish you with chaos. Buckle up the right is gone. He is going to be torturous.

Jason Hartman 44:14
Interesting don’t punish me with higher interest rates. So the pressure to leave these negative interest rates or you know real negative interest rates so you probably agree out there it’s a funny time you agree it really is.

Hugh Hendry 44:27
Well, it’s the Chinese curse May you live in interesting time that Santa we may be imposing or you may be imposing trade restrictions on on their products entering their states but they have imposed interesting times on us so

Jason Hartman 44:42
no question in that quote used to circulate a lot around in 2008. May you live in interesting times and in here it’s back again. So you have some good stuff out there on Twitter etc. share link or wherever you want people to find you.

Hugh Hendry 44:55
I am defying convention because I know financial flows. Don’t like Instagram I don’t wear a bikini and I may have to depend on desperate I become

Jason Hartman 45:06
Are you a social influencer I think a lot of those guys went out of business and Instagram

Hugh Hendry 45:10
but like i said i i’m going to rescale so everyone I want people to be training people to think chaotically My passion is my Instagram account which is huge Hendry official and but really my fault my followers my tribe if you will like to be found on on Twitter and it would be the inverse of my name to be at Hendry underscore huge and you will find me there to come is I’m soon to come is my my YouTube but my YouTube page is not finished.

Jason Hartman 45:42
Yeah, good stuff. But folks think about how chaotic what he just said is how many hedge fund managers do you find on Instagram? That’s for 20 something girls in bikinis, you know, and social influencers right. So yeah, very interesting. You thanks so much for joining us today. It’s really been fun talking to you.

Hugh Hendry 46:01
No, thank you. Always a pleasure.

Jason Hartman 46:08
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