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Foreign exchange

Hugh Hendry, OG Contrarian (Szn 4, Ep21)

Published August 9, 2022

Hugh Hendry is a man who needs no introduction to contrarians. Over the course of this 90-minute conversation, he provided many views on markets, the economy, the Federal Reserve, China, and a lot more. Of particular interest to investors are his bullish views on commodities, oil producers, and luxury goods makers…

Content Highlights

  • Hendry’s most contrarian opinion right off the bat: The Fed is not responsible for the asset price bubble (2:40);
  • “We find ourselves in the fourth depression of the last 200 years” after “les miserables” period of 1830 to ~1855, 1870 to the late 1890s, and the 1930s (8:11);
  • “I don’t think we have inflation.” Sales of non-discretionary items are not increasing (13:53);
  • Very few people understand money and money creation. What are they missing? (28:56);
  • What’s behind the stock market rally this summer? It may be commodities, at least in part… (39:49);
  • Markets are ‘bucking broncos.’ Volatility can be a major distraction and nothing happens in a straight line. But commodity producers and uranium should be in good shape over the long term (46:55);
  • Background on the guest. As an ‘OG contrarian’ Hendry joins an exclusive list (54:58);
  • A little insight into Hendry’s current life and psychology (1:10:40);
  • Betting on the Chinese yuan weakening (1:14:37);
  • The odds of the 10-year treasury making new lows (1:22:44);
  • China invading Taiwan? Hendry sets the odds at 20% and says China will never have a stronger bargaining positioning vis-a-vis the U.S (1:24:16).

More Information on the Guest

Quick Highlights From Our YouTube Channel

MoreHugh Hendry, OG Contrarian (Szn 4, Ep21)
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Szn 4, Ep 4: The Case for the Turkish Lira, With Dave Fishwick, M&G Investments

Published February 3, 2022

Dave Fishwick joins the podcast to make the argument for investing in the Turkish lira after it dropped half its value versus major currencies.

The appeal is not just the value but the carry, resulting in the equivalent of 30% to 40% annual interest income. To Fishwick and his team, the trade is not only contrarian but an example of the type of idiosyncratic idea that has no correlation to other parts of the portfolio.

The conversation is not limited to Turkey but expands to the U.S., China, and other emerging markets during the second half of the episode.

(This podcast was recorded in person at the iConnections conference in Miami. The acoustics were not ideal and there is some background noise as a result. Apologies for the inconvenience.)

Content Highlights

  • The macroeconomic policy experiment in Turkey, where the country’s central bank took the highly unorthodox step of combating a sovereign crisis by reducing interest rates. The Turkish lira went into freefall as a result (2:24);
  • The lira looks attractive on a real basis, but the real appeal comes in the so-called carry, an often-forgotten part of foreign exchange markets. How this works (3:29);
  • Some background on the strategy by the Central Bank of the Republic of Turkey, which is on the surface frightening. But therein lies the appeal (5:22);
  • Why buy the Turkish lira when the CBRT is cutting rates while the Fed is raising rates? (11:07);
  • If the CBRT succeeds with this experiment, could other emerging market countries follow its example? The strategy is not unprecedented… (13:15);
  • Background on the guest (16:19);
  • Fishwick’s view on current markets. The market has re-rated asset classes, despite upbeat economic news (18:43);
  • The present situation may appear bizarre, but it not without parallel. Why it’s hard to be bearish for the longer-term (21:48);
  • Other areas of the world that are interesting for investors, especially contrarians (24:11);
  • There are “some similarities” with what happened the last time the Fed entered on a sustained interest hiking campaign (2004 to 2007), but many differences. The key? Watch the inflation data, though the Fed’s record on engineering soft landings is poor (27:05).
MoreSzn 4, Ep 4: The Case for the Turkish Lira, With Dave Fishwick, M&G Investments
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