Tuesday, June 30, 2009

Hugh Hendry: Print More Money to Avoid Bigger Slump

Hat tip to reader Johan for the Hugh Hendry CNBC Europe catch... I have not yet listened to the whole video but I am sure I will enjoy it once I do, no matter if I agree or not - first 4 minutes alone covers Madoff, hedge funds as "respected institutions" rather than their old role swash bucklers, China, regulatory failure of financials, oil et al. 9 Minutes.

Fears about inflation and hyperinflation could create another economic downturn, bigger than the one the world went through, Hugh Hendry, chief investment officer at hedge fund Eclectica, told CNBC Tuesday.

Some text
  • People who invested with Bernard Madoff were greedy and happy to accept high returns without probing too much in the way these were achieved, Hugh Hendry, chief investment officer at hedge fund Eclectica, told CNBC Tuesday. "I'm sympathetic for people losing money but I think this pejorative term of being greedy still applies," Hendry told CNBC.com. "There was an implicit greed in not questioning and just accepting unnatural returns."
  • "They didn't show the requisite amount of fear that would have generated the curiosity to investigate," he said, adding that for every one Madoff investor, there were ten who stayed on the sidelines.
  • Regarding the indirect victims of Madoff, those who didn't know that their money was put in the Ponzi scheme, "shame on their advisors," Hendry said. "Did you invest with Madoff?" is the first question investors ask their advisors nowadays, and the market is already "de-selecting" the investment advisors who did from those who didn't, he said.
  • Besides the lack of scrutiny over the numbers, a reliance on respectability is the other facet of the problem, according to Hendry. "The problem that we had, and Bernie typifies it, is he was respectable," Hendry told "Squawk Box Europe". "I can't raise money. People say 'look at that crazy guy'." Sometimes, it is the "crazy guy" who makes clients money when others lose it, he added.
  • "This is a speculative excess and the excess is a lack of scrutiny. And we see a lack of scrutiny across the board in the pricing of assets," Hendry added. "There will be more regulation," Hendry said. "I don't think that's necessarily the answer. The banking sector is the most tightly regulated sector, apart from nuclear, in the world. "

[Jun 18, 2009: Hugh Hendry Eclectica Fund Letter to Investors]
[Apr 28, 2009: The Latest Hugh Hendry]
[Apr 16, 2009: Hugh Hendry, Citiwire Interview]
[Mar 20, 2009: Hugh Hendry of Eclectica Asset Management is Wickedly Good]

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