Photo: screen shot from you tube
There’s a great interview with the eccentric hedge fund manager Hugh Hendry of Eclectica Capital in Investment Week.Here’s the short version of what he said:
On the China “bubble”: “China has not demonstrated an ability to create wealth. It has demonstrated an ability to create GDP growth, which is a function of spending money…Infrastructure projects and steel plants that are publicly commissioned…If you build a high-speed rail link and anticipate it improving the productivity of the economy over the next 10 years, but actually it does not, it means you will have to raise Government borrowing or tax the population to sustain the negative cashflow.” More on China from Hendry.
On what’s wrong with the investment world: “We have created a hunger just to make money, speculative money and damn the consequences almost – we are either all investing in houses or stocks, soon to be Chinese stocks with Anthony Bolton. But, it has also created a Pavlovian response where every crisis was an opportunity to buy more. I think time is receding, it is passing, it is leaving us behind. My difficulty is that I do not sell dreams. I live in the real world.”
On his investment strategy: “We are concerned about the world being profoundly deflationary and therefore are reluctant to take a lot of economic risk. So the businesses we select to buy today are large-cap names, so I can sell them and not be trapped in them. They are businesses that have a lack of economic sensitivity. I have a tremendous amount invested in the tobacco industry. I think it could survive a consumer depression.”
On inflation: It could reside in the future [especially if you ban short-selling]. “If you want to create inflation, what you will see is that we will have a ban on short selling. We will have a ban on naked credit default swaps.” Watch Hendry vigorously defend short selling.
The full interview is on Investment Week.
And for more from Hendry, read an article he penned in the Telegraph.
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