Taleb thinks hyperinflation is a strong enough possibility to justify way OTM bets on gold (long) and bonds (short). The one bit I agree with is the long gold / short stocks play (though I think gold is likely to fall with stocks, just not as much), and I suspect that deflationist Hendry would concur.
Hendry thinks that deflation is here to stay, that nations will start to default, and that the market will at least start to worry about sovereign defaults by nations like Germany and the US (even if they don’t actually default, he’ll make money in that situation as the price of insurance goes up).
(The video cuts off when Hendry passes the mic, and I don’t have a link to the rest. If anybody else does, please post it.) (EDIT: http://2010.therussiaforum.com/news/session-video3/ Minute 24:00 and after. Thanks Charles!)
Hendry makes a point I’ve made myself: the euro is like gold for countries like Greece (they can’t print it) so it will have to default.
Hendry says his porfolio is inspired by Nassim, but basically the opposite. He’s fed up with other people’s opinions. The hedge fund guys are “so uncool.” He doesn’t talk to brokers, and he reads nobody else’s research.
Debt loads are bound to squeeze all of the vitality out of the risk takers in the market.
UK interest rates are at the lowest since the Bank of England was established in 1692. He is betting that the central banks won’t raise rates in the next 4 months and he will make 4x his dough if right.
He thinks the sovereign default scenario today is like the mortage bond situation three years ago.
Now, who is the true contrarian? Is hyperinflation really a black swan right now? Every chat board on the net has been buzzing about it for years. When Taleb said every human being should short treasuries, every human being agreed with him!
Yeah, the black swan and fooled by randomness are some of my favorite books. But when it comes to investment, it looks to me that Nassim Taleb really really sucks.
Marc Faber is still an inflationist, but I’m sure he’s clever enough to reverse he’s position in time when the reflation trade ends.
check 24:00 and after
Anyone know what instruments Hendry is using to make that bet and that kind of return?
CDS. I think he mentions his outlook for returns. He’s also just long US Treasury futures I think.
I read that his “next subprime” trade is CDS on heavily leveraged “big name” Japanese corporates, but nothing guaranteed there…