Scottish hedge fund manager Hugh Hendry, the CIO Eclectica Asset Management who is known for his spirited interviews, spoke at the Buttonwood Gathering hosted by The Economist in Manhattan’s Financial District today.
About 10 or twelve years ago, Hendry said he became a gold bug. In 2006, he changed and became a Treasury bond bug.
Today Hendry said that he owns gold, but wouldn’t own gold on its own, and is short the S&P.
“I’ll tell you my thinking. That was a wonderful trade for five years leading to the end of 2008. It’s been a profitable, but less predictable trade since the intervention of Quantitative Easing in March 2009. So there is an argument for market observations that Quantitative Easing has fortified the S&P versus the performance of gold, but that also may be from the beginning of 2009, gold was so fantastically ahead of itself,” he explained.
Hendry added that he’s long gold and short gold mining equities.
“There is no rationale for owning a gold mining equity. It is as close as you get to insanity,” he said.
The reasons, he explained, is the risk premium goes up when the gold prices go up, ore precarious societies across the world are more envious of your gold assets, and there is no valuation argument against the risk of confiscation, he said.
That being said, Hendry doesn’t know where gold will go in the future.
“My only point to you is that I have resigned from the profession of undertaking of coin flipping. I’m not going to tell you where gold is going to be. I have no idea. I’m a student of existentialism….I just want to enhance the probability that I make money come what may.”