Hugh Hendry On Why The World Still Can't Get Enough Dollar Assets

big Klin or something. But with the sanctions, with Russia's loss of it loss of its FX reserves, I feel like this is a This debate has gotten new energy. I distinctly remember my dad sending me articles about Iraq switching to Euros for oil payments from many, many years ago. So yes, this is an ongoing debate, but you're entirely right,

new life has been breathed into it. And you know, most recently we're recording this on March and just yesterday we Sawrussia is saying that it was going to start to demand gas payments in rubles. So there is there are things happening on this front. But even something like that, you see people portray it in two different ways. So on the one hand, there are people out there saying, oh, look this is the end of the petro dollar. Russia

has kicked off this entire process. And then other people are saying, well, no, that's not what it is at all. In fact, this is a sign of you know, Russian weakness. Basically they can't get foreign currency at the moment, so they have to do this. So there's so much debate on this particular topic. Yeah, it's like a big I would say, it's also just a big ideas moment. Earlier in the week, we recorded that interview with Victor's Fantis

talking about the world dividing into two. So it's kind of a moment for big picture sort of reassessments of everything. And the dollar is sort of the key icon of the existing world, the reserve currency, but all kinds of like it's a moment to sort of step back and think about sort of things that we take for granted

and what could change. Yeah, and also I think whenever you get this level of uncertainty, people try to fit their own narratives onto it, and so things that they've been talking about for many, many years suddenly this is the thing that is going to propel those into existence

or into life. But yes, big picture, big moments. So I'm very excited about our guest today, someone who has always had a very provocative ideas in the world of global macro all kinds of things, things related to currencies, China, gold, etcetera. One of the most interesting people in the space for a long time. We're gonna be speaking with Hugh Hendry. He was the founder of Eclectic Asset Management and now he is a luxury hotelier on the island of St. Barts and he seems to be living a life that's

much better and more interesting than ours. His website, Uh, you know, go check it out. Hugh, Thank you so much for coming out. What have you been up to? Because I first became aware of you, you know, probably over a decade ago watching years you made on YouTube about Chinese ghost cities. But what do you what have you been up to? Hey, hey guys, to be on Thank you. I have been I've been recovering. I've been rehabilitating my my weary mind. You know, I had had

many years of active intellectual combat. The Eclectic Macro Fund ran for fifteen years en yere that I achieved. It's not the tenure you get as a professor at some of these Bologna economic universities where you can you can proclaim whatever and never be called for it. But fifteen years. But at the end, and the end was I was exhausted. I mean, the thing you have to remember is we have this amazing organ inside our head, this brain, um. But the thing is it lives in a dark chamber.

There ain't no light getting into that brain, and it relies on the idiot on the on the outside to tell what's going on. And I spent I swear I spent fifteen years thinking I was gonna die. Not every day, not every day, but there are moments in investment campaigns and you think, oh my god, you remember I was I see things, um. And it's a curse because I normally see things before other people. I've got to deal

with other people catching up. Um. And as a consequence, there are days when you're out of sync with the world and your P and l B leads and you can since your brain brain doesn't know, and your brains like, oh my god, we're like you know, this is a flight moment, and you get flooded with all this toxic chemistry to get you out of the hole. So fifteen years of all that nasty chemical reaction I needed. I needed five years to or yeah, five years to recuperate.

And what a what a better place I can't think of any are than this beautiful island in the middle of nowhere, this tiny little volcanic rock where it's a bit like golf clutches where all the successful people come in. They're like peacocks, Like, look at the size of my super yacht. You know, Yeah, I'm making hay And I said, I watch it. I accommodate it. I built beautiful, beautiful

villas for for rental under the brand Long Blue. And then since the body snatching alien invasion, the v in and I don't have access to the dear old beloved Bloomberg terminal, but I tell you it's in the air waves or somewhere because I'm drawing down stuff. And I'm glad to say that. Invigorated, I began shading again. And so I have podcasts. I'm on Instagram in my swimsuit. Um, and what am I doing? Yeah, and doing podcasts, etcetera.

So I'm telling like it is, well, I mean, I gotta say, it's it's raining and cold here in New York, so hearing about um, your very glamorous life in St. Barts UM isn't helping this morning. But I'm glad you've recuperated in terms of what you're seeing right now. I mean, you are still very much paying attention to what's going on in markets and the world more broadly. It seems like just looking at your Twitter feed and your videos and things like that, what are you seeing right now?

You know, lots of people are talking about this as a turning point in world history and possibly in the economic order. As Joe and I were discussing in the intro, what do you see? Oh my goodness, how long do you have speed? Wait? I see confusion. I see talking about what they would like UM and kind of failing to understand um. And that sounds very pompous. And let

me be more even more pompous. Very few people I mean and encourage, I want to say, But like with one hand, I I start to struggle to use digits once I reached the fifth digit. When I nominate the people that actually understand money right, and that includes economists, that includes the biggest hedge fund managers, the bankers, and it's bluff includes the Federal Reserve. So few people understand

the concept of money. And and so when we get these dreadful political moments that we're seeing with the invasion in Ukraine and of course the greatest tragedy, the loss of life, the change of dramatic change and lifestyles being dragged eighty years back into the past. It's horrible, but it's it creates this energy where people kind of dust

off prejudice. And so I'm there on Twitter, as you say, and I'm kind of just trying to bay but a straight ball and just like keep it logical and and take, um, take the narrative kind of closer to I can't say the truth, but just try and kind of educate people. Like this thing about money. So dollar dollar, dollar, dollar doll change, and I think we're within the proximity of change. Changes is sweeping. You know, the kind of description that

you gave it, this pivot in history. Um, it ain't gonna come in a linear manner, and it ain't going to be forecast by the street. Okay, It's gonna come at you from weird angles and it's going to confuse you okay, and I want to put it. If there is going to be changed, we have to put it in historical context. And there have been three previous changes. And and as I say, I think we're close to

a force the changes. And what I'm talking about really how sovereign nations choose to regulate their external affairs, their commerce with each other, you know. And up until the late nineteen twenties, those the affairs of major sovereigns were regulated by the transfer of gold. And then gold acted as high powered money and it allowed for it facilitated the private banking sector to create money or to take

money away. Okay. And no system is perfect, and the flaw of the gold system was exposed, the frailties were exposed. Its lack of kind of flexibility and response function to the near bo to the bankruptcy of the US banking system in the in the nineteen thirties, meant that it ceased to exist. It wasn't a solution, you know, It had created um a depression, and therefore it was rejected

by the many. It was then, and it takes a long time to replace the system, and the system was ultimately replaced about fifteen years later, with bread and wood, which was essentially a kind of Ledger reconciliation of the

Second World War. But and of course it was still it still had gold in its in its lexus and it and it used the dollar as a kind of as the mechanism around gold and then unheralded and unnoticed by the many, but around the Laate the mid nineteen sixties, the bread and woods system came to pass, and it came to be replaced by the euro dollar system. You know, in the run about British banks began to allow customers to borrow in dollars. When you get a loan from

a bank, a bank is creating money. And for the first time run about that date, banks outside the regulation and the domand of the Federal Reserve of America began to create U s dollars um And then that really exploded when we had the petrol crisis, the petrol currency crisis, because effectively that created a huge amount of deposits which were put on the accounts of these overseas banks, and deposits a reliability and those banks needed an asset, which is a loan, and so they really took off in

terms of dollar printing, making loans in US dollars, and that system has prevailed and it reached its apex in the years two thousand and four to two thousand and six, two thousand and seven, but it was mortally wounded with the housing crash in the United States in two thousand

and eight. I want to say it died. And we've been operating ever since without a proper and and certainly a well understood means of regulating the affairs of sovereigns, and because we've not had a properly functioning means of exchange ever since two thousand and eight, the global economy has been subject and in operating under the confines of a depression. Not a great depression, it's called it a mild depression, but a depression. It's remarkable how we do

not see that word in print. Now. What is the depression? My definition of a depression is when the recovery in g d P failed to take out the previous trend line in GDP growth. We have failed in a spectacular manner across the world, and I want to say the world is missing, very true and all it's worth of value, if you will, which is why we're creating this animosity. You know, one section of society is fighting the other. The gains are on the even they're not being distributed

as we would hope. The pie is not as big as it should be. And that's because we've not been creating money. And into that, into that theater comes the absurd comes that you know, comes the Wizard of Oz, the Federal Reserve, and it's bombascity. They're like, hey, we're creating money. Hey over yere, Hey you want dollars, We're create Hey seven two we and dollars, No problem. You know, Bank of Japan, same thing, ECB, same thing. Okay, they're

creating laundry, matt tokens. They're not creating money, right the Federals there, it is illegal. It cannot print money. Private sector agents create money through creating loans. US loan growth has been far supedia in the fifteen years or so since two thousand and eight. But for Supedia means like five six compound growth in Europe is like to right, that's the missing module. So I mean, I think you know, the point that you make about the missing money I

think is well put. And and we've seen those charts of the pre two thousand eight trend line continuing to shoot up in this sort of extremely anemic. In the US, as you say, it was better off than many, but globally there's very anemic recovery. Now we're seeing arguably the opposite, and arguably some would say, well, having learned the lessons of two thousand and eight two thousand nine, governments didn't

just rely on central banks this time fiscal expansion. And now we have some trend lines that are breaking the old trend lines, at least the pre trend lines. So talk to us a little bit about this shift, because okay, maybe the old system in a way, per your view, died in two thousand seven or two thousand eight. Now we see this other ship. What is the now? Help me?

Help me, because you know, I it's funny, I I I've always been called a Contranian throughout my career, and yet I'm a trend follow where I seek the legitimacy of market prices, you know, by things going up nicely all things going down. Okay, so trends of any important to me. So it was rather provocative. What what trends

are changing? Well, if you just look at something like US GDP or nominal GDP or nominal spending seemed to be on this sort of mediocre growth but upward to the right going up to February basically, and we got a huge plunge. Obviously it's the world shut down. And then this v that is now seems to at least by some measures, gone the other way and not just returned to trend, but shooting above it. Do you think so?

I just like just some lines I've seen, these are kind of you know, like, yeah, I'm a data junkie.

I can give me more and more, okay, Like so when I when I see one year, I want to see in the context of twenty years, Like, look, we had an alien body invasion, right, you took the economy when we suspended global weekend all make activity for the best part of eighteen months, right um, and then when it switched back on, like on a base of like minus minus minus, the recovery was positive, positive positive, right.

And and then before the supply destructions, that's clearly been a degree of overordering just to kind of get inventories back into situate as chaos as chaos just now, so I see no sign. I see no sign that the economy is doing anything, anything distinct from the trends that we observed post two thousand and eight, except it's just been amplified by this, you know, remarkable intervention from outer space,

if you will. I want to go back to the dollar, but before we do, just one question based on that, what do you think about central banks, specifically the Federal Reserve now getting ready to raise interest rates given your assertion that you know, the economy isn't necessarily as good as it looks because of all the confusion and disruption that we've experienced. Hey, listen, it's not it's not my assertion. I'm simply commenting on the observations that I see daily.

I'm commenting on the genius of the enormous treasury market. Right, this is an unprecedented situation in terms of where the fixed income markets have priced for the Fed to begin raising rates that the treasure markets going. Guys, don't see it, don't see it. Don't see it. You know, And you know what our record is like ten ten better than yours. Like you know, you always get it wrong. We always

get it right. I mean, you do not need First of all, the principle function of the Federal Reserve is as a bank regulator for the for those with a license to operate in the United States. Okay, it's record in terms of being able to see the future, I'm afraid is not very good. And so they require enormous bluster.

They invest in immensely in the almighty posturing of their institution. Okay, it's nothing versus the majesty of thousands, if not hundreds of thousands of small are and maybe not so smart people engaging with each other. And and it gets more and more interesting as you go out in time where people are kind of thinking about themselves, their businesses and how to protect themselves, how to prosper, and that brings

in the role of hedging. And and it's the hedging, and it's the thousands of decisions taking which aligne and create market prices, and they create interest rate levels, They create expectations of where we will be, and those expectations are distinct and at odds with the federal result. Let's talk about the dollar. You sort of describe the sort of post Briton Wood system is having been broken since uh since two thousand seven or since two thousand eight,

but nothing has clearly replaced it. There's no obvious new regime. As I said in intro and his lot, you know, people are like, okay, this is the end, this is the start. People are going to find some alternative because they don't like seeing that FX reserves can suddenly disappear. What is Is there something new? I mean, what is is is there a threat to the existing order? Is

something new? You're going to replace it? Okay? So classification bread and woods, I said, began to be the unwound in a kind of somewhat private like undisclosed manner, by the emergence of the euro dollar market. Yes, yes, the end of the year. Yes, sorry, the end of the euro dollar regime, as you say, began to break in

two thousand and seven. But what we can say is we can say that you know, originally we had a gold system and then we kind of dialed that back after the mass of the nineteen thirties that we have increasingly deployed U S dollars, So it was U S dollars with gold, you know, with the ability to redeem and receive gold um and then it became essentially a dollar based collap That is what the eury dollar system is. It's a dollar based collateral. So it's a dollar it's

a dollar system, so whatnot. And it's and that is still the prevailing system. The problem, however, is profound conservatism on the part of banks, right because they messed up, right, they took too much juice from the fountain in the early two thousand's and they kind of they went busted. It wasn't for the extreme financial intervention, which I welcome by the Federal Reserve, we would have been talking great depression too. As it is, we're talking about a mild depression.

So the problem you have is that that facility is still there, but it's encumbered by profound conservatism. And let me take that in. Let me take that into this weird tangent. I believe ext markets are not in a bubble, or if I was to caveat, i'd say, I want to say, like of listed stocks are not in a bubble, and even those which have profoundly high valuations, and there are not many, but the pinnacle of it would be Apple.

You know, two and a half trillion dollars. You know, a few weeks ago was three trillion dollars, which is to say, was capitalized greater than the market capitalization of all German stocks, you know, the the notion that we have those kind of five fang stocks, you know, without the Ali Baba greater than the value of Japan, So stock single US corporations trading greater than the value of

the stock markets of great sovereigns. And even then, I still want to say, I struggle to say that that's a bubble, and I want to relate that to the euro dollar market, because what it's saying is it is the pinnacle of this conservatism. Um. Like I say, a mild oppression. Commercial risk it's scary if you're a banker, is something that can bite you in the proverbio's you can it can affect your career. And so there is a crowding in two businesses which are perceived to be

devoid of commercial risk, and now nothing is devoid. But then we have again, we have this remarkable incident of the virus where we have, you know, an unprecedented plunge in economic activity. And so that reveals again it's like the tide goes down and you're like, wow, these guys, their their profits were intact, their profits were up, Like

all that happens. These guys just don't have risk. So what happens where is when when you can conceive of a business as being risk less, it becomes price less. You know, there is no upper bound to the valuation of such businesses. And it's the same phenomena when we had treasuries yielding forty basis points and of course negative basis points with the European sovereigns that I'm really really going to hack all for your listeners because again I'm

going to go against all the propaganda. They get stuff done on every single day that is not a cause of the Federal Reserve or central banks buying treasuries. Okay, Um, there's there's no need for them to buy. The private sector can't get enough of those damned treasuries. And why does it need the treasuries because it needs the treasuries for the collateral to support and to create money. So that's why there's been a log jam. No, no, no,

So Russia reserves okay, so reserves Okay. And again, if I haven't annoyed or aggravated your listeners enough, hey, I'm going to stay. I feel like you have a low opinion of our listeners. They're gonna yeah, keep going. People on Twitter. And when I say the B words, the screw light up. Now what is the B word? Don't worry? Don't worry. Uh. Let so let's preface it. The US

makes lots, makes a ton of damn stupid mistakes. It gets careless, um it has you know, hey, like we all have dumb as politicians, um and and they make some you know, dumb unwise decisions and and sometimes that's militarily and it's overreach um and and wrong. Okay, But despite all of that, I'm gonna say that the US is like an empire, and it's a benevolent empire. The empires that have duration that persist, they persist owing to

a form of benevolence. Right now, it's a self interesting you know that, it's a you know, it's we can keep in all of our Scottish economists and whatever in our invisible hand. Um is benevolence, which is on the basis that we will possiper from this. But for us to prosper we have to invest and encourage prosperity with our neighbors. So priming you know. The prime example, you know, the Second World War. We have the Marshall Plan and the US funds direct and guess the region back on

his beat. That's benevolent, sure, But of course the US has has won that deal like many times over by having this prosperous, peaceful European neighbor that it trades with. Right done, great, wonderful. Same thing with Japan. You know, we had a problem. We fixed it, we paid it, we we we got it sorted. Great trading partner, another

prosperous region in the world. And then China finally seeks a moment where it gets an avenue to kind of kind come out of the cloud of his political theology and it says, hey, listen, you know we want to be rich. And you know, and back in two thousand and one Clinton Clinton Science Offices, you know what, why not you join our club, joined the w T o trade with us. We're taking a bit the A rich China is a better China, China that wants to trade and get rich with us. Is is it China that

enriches America? So I call that, I call that benevolence. Like was the Iraq invasion a mistake? Yeah? Okay, But you know when it comes to when I I traveled the world, I'm not all the time on this little volcanic rock. But I tell you, the only line outside embassies when people are seeking visas, the only line is the US embassy. Okay, So the US reigns supreme, and

the dollar reigns supreme because it radiates freedom. You know, like people write songs about living in America, you know, like the Rolling Stones are incredible because it's the sound of l A in the nineties seven. You know, I mean, they're not writing songs about downtown Moscow. They're not talking about not writing songs about bag Dad, Okay, Right, as wonderful as these places culturally enormously rich, all right, but but there's no ing and zang, Right, they don't they

don't offer what. They don't offer freedom assets. So you can trade, you can kind of prosper. But if you're not willing to create a free structure where you've got law, you've got order, you've got contracts, that things work right, where you don't have to seek permission to get married, blah blah blah, Okay, where you can't get confiscated, Okay, then you've got a big problem because you can't create

the assets that foreign people like. The only countries that have consistently demonstrated this freedom access of the United States the United Kingdom, which is kind of small and irrelevant increasingly so, but in terms of that motivation, in terms of if you wanted to anoint triple A status in terms of political economy, the United States, the United Kingdom, and let's throw in Australia. You know, people want to buy their their sovereign bonds. Um, they've got big reservations elsewhere.

So so the argument here is that banks are conservative, investors are conservative. They're looking for safe assets at the moment, that's mostly dollar denominated assets, maybe some things for Europe or maybe Japan or something like that. Is there any chance that the definition of a safe asset starts to change in the current geopolitical situation? You know, maybe there are countries out there who decide, well, freedom isn't actually that important to me, and I would rather align myself

with someone like a Russia or China something like that. Okay, I mean really really so, like the wild GDPs a hundred tilling dollars approximately, right, Russia was one point seven rapidly heading to one trailing Okay, China fifteen, but you know, massively upstated you know, they they've they've reached fifteen without the ability to create wealth. You know, the stock market has gone nowhere for decades, right, be is they don't create wealth, they create GDP? Right, Okay, So I I'm

I'm undecided. Um, So I've just I've said to you fifteen plus what's going to be one? So sixteen I can throw in my way with sixteen trill in dollars, or I can choose to trade, you know, with the happy clappy guys who actually create wealth and have GDP of avery four troy. Okay, what am I gonna do? Really? I mean, you you help me? What am I missing? No?

I mean we have to ask the question. I mean, I've thought about this recently with the number of companies voluntarily leaving Russia even though the sanctions don't require it. Which is that ultimately, Yes, I'm sure there's a moral element. I'm sure there's a pr element in many cases, but also in many cases, I just don't think they're walking away from that much money. Yeah, absolutely, well, they're exactly, They're not walking away from much. And if they don't

walk away, they jeopardize a lot, right, Okay? And and where where I thought you were going. Also is I want to say the sanctions that were introduced by the by the U. S side and elsewhere, we're t it like they were like like we're scared, like these guys, these guys crazy. You know, he's got a nuclear bomb and you know, and so we're gonna go slow. You

remember the sanctions. You can, maybe you have to fact check this, but I'm pretty sure most of the U. S. Sanctions were announced at the start of the month with the notion that they be implemented, like on the twenty seven. You know, it's like really it's like, oh, we're gonna gonna go slow this guy. You know, it was the

private sector. Private sector picked her up when too right, right, morally, we're outrage and and and secondly to your point, you know these countries because they're not free, they're they're they're down irrelevant, right, I'm not going to jeopardize like there's just no optionality in staying here, especially with the suicide policies they're pursuing. I'm not going to jeopardize training, like with the free world, to carry on in this theater

of the absurd boom done. So this is not a Biden Victories is a of its sector Victory saying, like making choices a point emergement history, and you were asked to make a choice. History will judge you in the future in terms of those choice that you made. There's something that I wanted to ask you. Um and it sort of goes back to your experience um at Eclectica

and also the way you think about things now. So you're known as a contrarian investor or a contrarian thinker, but at the same time, it feels like you're very a tune to trends in the market, to momentum. I think Eclectica was described as a momentum um hedge fund at one point. But how do you sort of square those two things? So thinking differently two what everyone else is thinking about at the moment. Yeah, so I have to point at ecliptic. What's called many things something on

on a on a family radio show. Um. So yeah, people like, hey, well let me let you know. And I'm doing my questionnaires. So you're contraining. Okay, take the box you follow trends. Take the box really that these things are inconsistent, like you know, and I usually I have I always have to remind people that I I sound like a modon, but in fact I'm an oxymordon. Okay, so it sounds like you've learned that you've usually outlined before you think, so keep going. I got a lot

of spare time. So hey, you know I read I learned from the master, you know, the George George Suros. You know, this is all sorts like you take understanding from the genius to the marketplace. You know, if I'm in a foreign city, I will go and eat in a busy restaurant, and nine times out of ten that's a wise decision. I won't past. I won't walk past like an empty restaurant going wow, yeah, I really got to eat there, right, you know, so there's a little

bit of that. The biggest mistake, right, you see it with Tesla, Right, people put narrative. It's let me let me even let me take on another well rehearsed term from my lexicon. It is the conceiqu It is the arrogance of a well conceived argument. Okay. Your job as a speculator is to stop pile well conceived ideas. Okay, then your second job is to be an infantory manager and to remember that you have stopped this larger full

of wonderful ideas. But you only get to play with those ideas when you get confirmation from strangers, when people say, yeah, yeah, this thing is going up, Yeah we got a trend, or the inverse, Okay, you know that's that's what I So, it's a humbling believe. I began with arrogance. I began with conceit. I began with with with like well formulated arguments, and I sat with a career going nowhere for the best part of eight years super education. But I was

missing I was missing the Jesse Littlemore. Jesse Jesse Littlemore effectively, was the first real head fund manager operating at the turn of the previous century who actually, you like this

ability to see around corners, he felt. He sends the San Francisco earthquake in what nineteen o way I want to say, um, Now, he didn't know what's going to happen, but he was so closely attuned to markets and how they were trading and trends that he had a sense that something was gonna give and you know something game that's that's that's the world that I'm talking about. Keeping

keeping your thoughts pure to trend. Now again, that's not easy because just now, if you look at the US thy year, thirty year or ten year treasury bond, you um trends against you. So I mean I had a simple rule, you know, I would I would take the market CDs if if treasury ten years went went above two, their trading above two, I think that goes closer to to forty. Looks like they might go to three. But you know they can go all the way from forty

basis points the three basis points. Heck, they might even markets are mendacious, right, they might even push the three twenty forty right, probably and I think most likely will mean revert back to the prevailing trend um. So you can get wide ranges. And so Marcus A. Humbling. You've always got to be listening, and you've always got to be able to take positions on and unfortunately take them off.

So we just have a few minutes left. You're you're on this volcanic rock, the gorgeous island in St. Barts. The people you must interact with who stay at your properties hotels, some of the most successful people of all time in the history of the world. Um, you must interact what do you learn from them? Like you must like you know, in addition to running properties and of course you're amazing, uh you know, you're surfing life. You must learn a lot from just hearing and talking to

the people that come through your properties. What do you what are you learning these days? They're really rich, a really really and they wanted to spend money, you know, like the pent up demand. Obviously the two years. I mean when I look at my reservations, when we're just we are you know, bling bling full full is stretching into next year. But given the precious preciousness of the time I really wanted because we were talking about the dollars.

So if there's going to be a further turning point, I fear the further turning point. So like this, if you go this death that I prescribed to the euro dollars system from two thousand and eight, it first rolled through America, like you know, with Lehman's at all. Two years three years later it rolled through Europe. We had the European sovereign debt crisis. And back then I was sure that the final domino, this this system will end

when the Chinese domino drops. And so back then twelve years ago, I had had a month, I had a special sits fund. I raised a hundred million dollars. I'd have made a billion dollars if I was right proved. It turned out my timing was off, and so I burned forty million dollars and I gave sixty walked away from it. Yeah, why was it? Why was I off? And again to shocking in terms of my mind works. I'm not a volue investor. I'm not a momentum investor. Yeah,

I want to say, can training ensure? What else am I? I'm a time investor Chinese system and I didn't know this. I've only recently gained this. So I didn't gain this from my my customers, but I gain it from you know.

I engaged with the smallest minds on the planet and and the Chinese hottest, the Chinese HOTTORSCOO, which they used the same like twelve characters and all that notices, But they used twelve characters, different characters, but they don't measure the heavily bodies and their movement and over the course of one year, but it's over the course of twelve years. If only I had known not like thing time moves

that are different cardins in China. Now you had twelve onto when I launched that fund, and that takes you into today. This is the best, This is the best. I was right. I was right just early. I've ever heard that. Actually, you got the twelve years cycle right when you were making those videos of Chinese ghost cities, the real estate emplosion. Actually was right. You called it. You were just off the wrong cycle of the Chinese horse. It's the best best I've ever heard. I blame the

dumb hortschool U, but you right. Listen, Remember I think I charged fifty basis points management fee. I couldn't charge it. I could not charge a performance fye until you successfully redeemed right. I do not know why the world has not gone that way, but there you go. So yeah, Horoscoo takes you to today. Why is the day relevant

when when it's so? There's been two profound sovereign failures of late Europe sold its energy short like the number one role of a sovereign is to secure energy resources. Europe has five years left. Right, So dollar versus the Euro, I think the dollar breaks the buck, if you will, which to say, I think the dollar trades much much higher versus the Europe owing to the shame and the

errors of European politicians a generation ago. Secondly, China, China facilitated a credit boom in order to satisfy the political desire for GDP growth, because when they have GDP growth, their citizens are willing to put up with a heck of a lot of civil dis liberty or whatever. Right, but when you allow domestic real estate assets to be four x g d P, you're gone. I don't I do not care how clever your bureaucrats are. They were never clever in the first place. Boomarkets make dumb people

look intelligence. Okay, So I fear China And then you know again this lacking the democracy gene, and so they could not embrace our technology with the boosters and the vaccines, and they had to go like with their own thing, which hasn't worked. And so there's zero tallerance campaign on top of the Russia confloration, et cetera, et cetera. And

with this property thing like GDP is going down. So in terms of the fourth turning, I fear in the next three years that things could really get so weak in China and and a flight of capital that you might see a mad max reaction from the Chinese. I fear they may replicate what the Taiwanese ironically did back

in seven, which say they might devalue. It would be an economic crime, but they might do that, and at that point the US would have to intervene and we'd have to have a global conference of leaders and decide on a new monetary order. Well, he it was fantastic to talk to you. We will absolutely have you back in three years is the time, or maybe twelve years, or maybe twenty four years, but at some point we would love to have you back. Um. I hope you

have a great day surfing in St. Bart's. Thank you so much for coming on odd lots, Thanks so much here, Thank you. I love talking to you. It was so clear, like you know, years ago he like mastered media obviously with those YouTube videos of the Chinese ghost cities, and you could hear instantly why talking to him, why he was so compelling. There's a lot of I feel like there's a lot of quotes in that conversation that I'm probably gonna use going forward. But yeah, I mean I

thought a number of really interesting points. I did think what he said about the private sector, the sort of triumph of the private sector when it comes to sanctions in Russia and people making you know, maybe moral decisions. Of course, they don't want to be associated with a regime that is invading another country. But on the other hand, these are also very practical decisions tied to the size of the market and the feasibility of actually leaving it.

There were so many interesting points. I mean, just like I thought, it's a point about the endurance of dollar and dollar assets was really powerful that ultimately like what the US can manufacture in droves and the scale that others can't our assets that are tied to freedom and a stable legal system and the rule of law basically, and that no one else is the capacity to manufacture the As you put it, I think the term users freedom assets at a scale the U S can and

how powerful that is is one reason to sort of bet on the over of like when people do the demise of the dollar so forth. To bet on the over is simply that point. Yeah, I mean, I agree with that, and the idea of a safe asset shortage is something that's come up again and again. But I would also say there are probably a few countries out there who aren't necessarily as interested in freedom assets and

may look at alternatives. But again, the question for them is whether or not they sacrifice economic growth in order to secure You know, I guess security from this idea of the dollar being weaponized, But overall I agree with that thesis. And I just to say that I wasn't wrong. I was early, but I wasn't even early because I was at the right calendar I was. I was right that it was going to be the year of the tiger,

it was just two instead. Has got to be one of the best lines I've ever heard from an investor. I mean, I know it's mostly a joke, but there is also a kernel to that, right, because when you have a centralized economy like China, there are all these different lovers that they're able to pull in order to lengthen, yeah, the cycle, and we've seen that over and over and over again. You know, people have been calling for a massive crash for for years and it never seems to happen,

or it didn't seem to happen until last year. And it's not going away. I mean, nothing I've seen in any news reports suggests this is the thing. This thing is stabilizing, so we're gonna have to revisit that specifically against it. Yeah, for sure. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe Why Isn't All. You can follow me on Twitter at the Stall. Follow our guest Hugh Hendry. He's on Twitter

at Henry Underscore Hugh Big. Thanks to our producers Collin Tipton and Magnus hum Rickson. Be sure to follow the Bloomberg had a podcast Francesca Levi at Francesca Today and check out all of our podcasts Bloomberg under the handle at podcasts. Thanks for listening.