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Money managers under the microscope

Saving Hendry? Thanks but no thanks, says Hugh

February 19, 2009

rtr1z9ud1It was always unlikely that a letter of advice was going to change the mind of maverick hedge fund manager Hugh Hendry.


And in his latest letter to investors, Hendry has smartly rebuffed any attempt to ‘save’ him from his bond investments.


The letter in question –’s monthly note, entitled “Saving Hugh Hendry” – praises the Eclectica co-founder and CIO as a “brilliant and colourful” hedge fund manager who saw the coming storm and took cover well in advance.


But it goes on to argue that the 27-year bull market in government debt, in which Hendry is a big investor, is probably coming to an end:


    “Far be it from me to instruct Hugh Hendry but in the last few weeks I’ve started wondering if Hugh is selling his bonds. And frankly, I hope for him he is indeed selling. Over the past eight weeks with a 30 Year Treasury bond auction here, a German Bund auction there, we’ve started to see the flashes of a very extended market. I think we’re seeing the end-game of a 27 year bull market, in government debt. And it comes, apparently, as the world tips over into stealth beggar-thy-neighbor policies, and as questions about solvency are rampant, thus affecting the credit quality of sovereign debt. If this is true it’s time to save Hugh Hendry, and get him out of all his bonds.”


The response from Hendry, one of the few hedge fund managers to come out of 2008 in good shape, is typically emphatic.


“Thanks but no thanks,” he writes. rtr1z1hq3


Quoting Milton Friedman, Robert Prechter, Winston Churchill and the Rolling Stones, plus a quick mention for Toy Story’s Buzz Lightyear, Hendry argues the government bear market is some way off yet.


He believes that the inflation many investors fear may already have come through the system and that a deflationary slump looks more likely, increasing the attractiveness of government debt.


And Hugh’s investment response to the advice?


His net government bond holding has risen from 54 percent at the end of last year to 81 percent.


I’m certainly not feeling inflation. People feel bad even if they’re not in debt. Deflation then inflation. Gold has rightly jumped but my guess is it will fall as people take/profits or get itchy waiting for inflation to hit.

Posted by damiendamien | Report as abusive

There are certainly few signs of inflation at the moment. Hendry makes an interesting point that maybe we’ve already had all that inflation that investors are expecting somewhere down the line. But do you think we could be in for the deflationary slump he talks about?

Posted by Laurence Fletcher | Report as abusive

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