Hugh Hendry on BBC Hardtalk pt1

21 Sept 2010
BBC Hardtalk interviews Hugh Hendry, CEO of hedge fund Eclectica Asset management.

(Presenter)
You are a risk-taker at a time when regulators are trying to de-risk financial markets. Does that make life difficult for you?

(Hugh Hendry)
Yes it does. And by implication it makes life difficult for everyone. And risk is used commonly and I don't know if it's fully understood. Is risk truth? Is what I do the pursuit of truth? And therefore have we reached a point in society where the truth is unpalatable?

(Presenter)
Another way of putting it is that it is a form of gambling or betting?

(Hugh Hendry)
Well I think the objection is the lack of symmetry. It's when it goes the other way and it evokes the notion of a subsidy or a bailout. I think that is what rankles in the mind. And that's what is causing this much needed debate. What we've seen in the last 3 years that is not capitalism. I promise you my risk-taking is not underwritten by the public purse.
I guess I am drawing a distinction between the banking community and the hedge fund community.

(Presenter)
You make a lot of your money by taking a negative view, by ruthlessly exposing what you see as the overvaluation of certain assets, or currencies, or even national economies. And that makes you enemies doesn't it?

(Hugh Hendry)
(Laughs) I'm kind of gasping for air. If only I was ruthless I tell you...
I get something right, well done me. I get something wrong I get the consequences. I've capitalised upon my propensity to worry about things. So I take risk and I am full of fear of getting things wrong. So that makes me a good risk-taker.

(Presenter)
There are politicians who say these guys (hedge funds) are like vultures or hunting dogs.

(Hugh Hendry)
Indeed. I had a diatribe with the central bank of Hungary which stood by idly as their population took mortgages denominated in Swiss francs and in Japanese yen. And they did that because the cost of borrowing in those currencies seemed very modest when compared to borrowing in Hungarian Forint. But they were taking on an enormous financial risk. And it was called to bear.
I am a guard dog of capitalism. My role is to preserve capitalism.

(Presenter)
Whether we're talking about Hungary or the Greek financial crisis, we're talking about democratic governments who see their currencies and their economies under fire from hedge funds such as yours. You and the hedge funds undermine their economic strength!

(Hugh Hendry)
You grossly exaggerate the size and significance of the hedge fund community. In terms of AUM they are fleas compared to pension funds and insurance companies.

(Presenter)
But the hedge funds have more information. They have more clout. It is not just about size.

(Hugh Hendry)
I think that could be applicable to George Soros. When he raises an opinion people listen. I can assure you that if I do that I will be run over.

(Presenter)
Shouldn't we all know about when short-selling occurs (and leverage)? Isn't the problem that the hedge funds are not transparent?

(Hugh Hendry)
I agree. I've got no problem with transparency. Some hedge funds have very huge positions in gold. Paulson though is not guaranteed to get money from his positions.

(Presenter)
If the German government wants to ban certain forms of short-selling they're entitled to do that aren't they?

(Hugh Hendry)
Of course, but you are banning behaviour.

(Presenter)
But that behaviour is dangerous to their economy?

(Hugh Hendry)
That is a value judgement taken by them. And that may be inspired by the fact that it reveals either inconsistencies or mistakes that they are responsible for and that they don't wish to come to light.

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[theH0UNDSofD00M]

Hey Hendry, how would you like if I bet that your house is going to be on fire in the next year? Do you think that would increase the risk of your lovely house to go up in flames? That would be a shame, hey?!?

[MrNChoudhury]

@theH0UNDSofD00M

You've made a valid point. CDS is a flawed insurance product as it increases your desire to destroy the very thing somebody else wishes to protect. The same argument could be made to a degree regarding short-selling. However to be fair Mr Hendry has been critical on short-selling. See the video "Hugh Hendry - on deflation and short-selling" elsewhere on this channel. (I'll update that video in a minute).

Could you please try to cut down on the language. Thanks.

[MrNChoudhury]

Whereas the government can take everything you own, there may be a handful of private entrepreneurs who can play the same game in reverse. These are the people who are the true outperformers. That's not to say they can consistently do it year after year. But they do deserve recognition. 

[zentonil]

This guy has a great perspective!

[ytartapo]

@theH0UNDSofD00M - That depends on whether you are an arsonist as well as a better.

[optionsupdate]

@theH0UNDSofD00M I think the chap is a brilliant market analyst, followed him for about 11 years

[theH0UNDSofD00M]

@optionsupdate AHAHAHAHAHA , what a wanker! Would you like to suck is cock??? fuckin hell, you don't have any self respect, do you lad?

[rayomans]

Hugh should have told this moronic self-righteous idiot that ALL business is risk-taking. There is no economy without it.

Looks like Europe has become completely unhinged from even basic realities.

[optionsupdate]

Hendry is god, awesome intellect