Here is an excellent interview at The Economist Buttonwood Conference featuring Hugh Hendry. You may have to enter your email address to play, but I doubt it has to be accurate as there was no verification process.
The interview is well worth a play in entirety, covering Gold, Hyperinflation, Treasuries, Stocks, Japan, China, and Real Assets. It’s the best interview I have seen lately.
Here you can see the video : Buttonwood Gathering Part 5.
On US Treasuries: “Don’t tell me China will sell their US treasuries. If they sell their treasuries, the renminbi goes higher and higher and higher. And their companies that export go bust.”
That is something I have been saying for years. Indeed, the Fed and the US Treasury would be pleased to have China dump treasuries.
On Chinese GDP: “We have a roadmap from the 1920’s. The UK played the role of the US and the US played the role of China. With the leverage of the creditor cycle, UK GPP peak to trough fell 8%. One year, in America, in real terms, GDP fell 23%. That’s the leverage. Now am I sitting here with video cameras saying the Chinese economy will contract 23%? Of course I’m not. But if we have a coffee later I might say something different.”
That last sentence above generated tremendous laughter at the conference .
Negative 23% is excessively negative, but we are in the same general camp. China is going to surprise way to the downside. China will not economically pass the US as The Economist expects.
For further discussion, please see The Dating Game: Michael Pettis Challenges The Economist to a Bet on China.
There was an interesting comment on gold at the end. Hendry had been long gold and short the S&P in a paired trade since 2006. That trade worked exceptionally well through 2008. He still likes gold but not as enthusiastically as he did, and he does not like the miners.
Regarding miners, I disagree.
Mike “Mish” Shedlock