Hugh Hendry: “I Believe Central Bankers Are Terrified”

It was almost a year ago when Hugh Hendry shocked the world when he announced he was, said simply, turning bullish (his full recantation can be found here), even though as he admitted he “Can’t Look At Himself In The Mirror.” Which was understandable: in a world where markets as many know them (if not the current generation of BTFD and BTFATH traders) no longer exist and have been replaced by centrally-planned “markets” where rising asset levels are not a byproduct of capitalism but a policy tool, Hendry – a person who makes money by managing assets and generating alpha by outperforming the market – did the one thing that would keep his job: he joined the herd of momentum traders to whose lowest common denominator the world’s central banks have been pandering ever since 2009.

Some of the pearls of wisdom Can’t Look At Himself In The Mirrorthe time showed just how profound a change in his worldview he was undergoing:

“I can no longer say I am bearish. When markets become parabolic, the people who exist within them are trend followers, because the guys who are qualitative have got taken out,” Hendry said.

“I have been prepared to underperform for the fun of being proved right when markets crash. But that could be in three-and-a-half-years’ time.”

“I cannot look at myself in the mirror; everything I have believed in I have had to reject. This environment only makes sense through the prism of trends.”

“You have got to be in things that are trending.”

“We want to believe markets go up because the economy is improving, because corporate cashflows are improving. But when you get monetary disturbances creating loops, it does not really matter.”

As we noted back then, “Sadly, his last statement is just the latest confirmation that in the New Centrally-Planned Normal, FOMO  or Fear of Missing Out (the trend, the media appearance, the herd, the year end bonus, you name it) is indeed the new POMO as we warned in May” of 2013.

And while Hendry flip-flop was perfectly understandable, sadly his attempts to generate alpha in a “parabolic” market, where he was merely chasing the trend, did anything but succeed. Perhaps that has to do with the fact that he decided to buy 3D printing stocks and Bitcoin…

Hendry has bought 3D printing stocks as a play on trend-driven, QE-fuelled equity markets, and said the rise in the valuation of Bitcoin amounts to “the same thing”.

All US-listed 3D printing stocks are trading on at least 50 times earnings, but Hendry said he has little concern over the sector’s sky-high valuations. “We are in 3D printing stocks. I say to my team ‘don’t tell me the valuations, it is trending.”

… although in retrospect perhaps someone should have told him the valuation because he jumped on the bandwagon just as printers, and Bitcoin, both hit all time highs.

In turn this led to our observations, just a month later that “Hugh Hendry Suffers Biggest Monthly Loss Since Inception” and then, two months ago, that “Hugh Hendry Is Not Having A Good Year.”