Photo: Milken Institute
Eclectica Asset Management CIO and co-founder Hugh Hendry told a panel at the Milken Institute’s 2012 Global Conference yesterday that his biggest fear in Europe was confiscation of his and his client’s assets.The poor health of the banking sector amid tepid growth and concerns about the future of the monetary union, he said, could ultimately result in the nationalization of the financial sector. That’s driving his unwillingness to be invested in Europe right now.
“The thing that I fear is confiscation. Confiscation of my assets, confiscation of my clients’ assets. I fear that this thing could get out of [control]. I think we’re a year away from the French fully nationalizing their banking system…
You know when you show banking assets of $62 trillion? Do you know what the other side of a banking asset is? A liability. A liability supported by a GDP, an income of only $15 to $18. OK? So yeah, there’s going to be great opportunities, but if you get your timing out, and you’re buying at $0.30? I want to buy it at $0.05. But that’s the market.”
Despite his trepidation with investments right now, Hendry outlines his investment strategy for Europe:
“The trade really is you want to be short the financial sector and you want to be long the export sector, because i think we all agree that where we’re heading for is probably euro parity with the dollar if not going below that, which is a profound economic advantage to what are already super-competitive businesses. And of course that only happens if we get more financial anarchy and of course that’s going to help your short position.”
Hendry confided that he has little faith in the ability of EU leaders to halt this “financial anarchy” in the near future, saying, “The greatest source of inspiration I have is fiction.”
Watch Hendry participate in the panel “Is It Time To Invest In Europe?” at the Milken 2012 Global Conference yesterday: