How To Invest $100 Million in 2010 Debate: Faber, Taleb, Hendry, & Others

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How To Invest $100 Million in 2010 Debate: Faber, Taleb, Hendry, & Others

Here is a great video that I ran across featuring a debate between Marc Faber, Hugh Hendry, Taleb, and others for investing in 2010. Its great to see the big boys throw down. Be sure to click the english button ( "ENG") in the lower right corner of the video player.

It starts off slow, but Hugh Hendry gets it going about 15 minutes in.

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Ultimate Fighting Championship- Faber vs Hendry

Holy cow that was a good debate! I think Hugh Hendry wiped the floor with the "talking heads" panel, but only because Faber is focused 10 years out. I would love to hear Faber and Hendry debate over beers.

Maybe "Two Beers with Steve" can get them on his show....Laughing

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Re: How To Invest $100 Million in 2010 Debate: Faber, ...

Great watch!  Thanks for posting.

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Zerohedge Chimes In

Hugh Hendry Recreates ABX, Discloses Mystery Trade With 1.5% Downside, 75% Upside

Hugh Hendry, always beautifully opinionated, nails it at the Russia 2010 forum with the following oneliner: "Who cares about anyone's opinion. You pay money for what they do with that opinion." We are in complete agreement as this conforms precisely with what one of our former legendary, multi-billionaire, corpulent superiors once said "nobody gives a fuck about your opinion." On the other hand presenting amusing observations coupled with engrossing narrative, that nobody seems to have an issue with.

The following clip from the Russia Forum pits one against another Marc Faber, Hugh Hendry, Nassim Taleb, PIMCO's Michael Gomez, Investec's Michael Power, resulting in a memorable debate. A few blogs caught this clip and posted it yet few actually watched it, as the biggest news from the panel was not Taleb's admonition that "every single human being should be short treasuries", an opinion which Hugh Hendry squashes through the groupthink meatgrinder, but Hugh Hendry's cryptic disclosure that he has uncovered the ABX trade for the next decade, which has "1.5% downside and 75% upside." Hendry teases, but until the end refuses to disclose what the specific trade is. And while we realize the futility of recreating others' opinions, here is the money quote from the Scottish contrarian:

 

 

"The problem with the bailout of 2008 and the first quarter of 2009, is that it did nothing to eliminate the debt. The debt is just unprecedented in the western world... We've had a tripling in leverage for the last 30 years. That tripling in leverage has produced unprecedented gains. The British stock market up 43 times in nominal terms, the S&P up 25 times. This has left many people still hungry for risk. I have a portfolio today... In the UK we have interest rates which are at a 300 year low, since the bank of England was conceived in 1692. I get paid money every day underwriting the risk that the BOE will cut rates further. I use that to cheapen an option which say "I don't think the Bank of England, and ECB, is going to raise rates in the next 4 months." And if nothing happens i make 5 times my money. If they raise rates, I lose my premium. My premium is not a lot. I'll survive that. On the other side of my book, I have discovered something which is close to the Paulson trade in CDOs in US mortgages in 2005 and 2006. Can you believe that a trade with that kind of dynamic exists today. Can you believe if nothing happens and I am just wrong than again I will lose 1.5% but if I am right I will make 75%. That trade exists today and maybe later on I will tell you about it."

And continuing with opinions, here is the former GSAM and Odey executive on Treasuries:

 

 

"I am hugely intellectually bullish on Treasuries. I am long. I fear the end of QE, the money funds are making on the [curve], I am aware of the issuance, I am aware that the States is going to have to sell $2.5 trillion of this stuff. But that's the marketplace - the marketplace disseminates the bad stuff. I think there is a lesson in Japan. You think they are going to succeed - Mark [Faber] thinks they are going to create inflation. The precedent of Japan suggest that if you allow leverage in your society to breach a certain level, let's call it 200 or 230% of GDP, then what happens is monetary policy doesn't work, fiscal policy doesn't work. They've had helicopters, they have distributed free money to their citizens, they have built bridges to nowhere and prices are falling and look set to fall further. My fear just now is that the community of risk is very short treasuries, and is very long risk: risk assets are the hedge against inflation. Now if something untoward happens, the gamma on that trade bankrupts you."


Bravo!

 

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Re: How To Invest $100 Million in 2010 Debate: Faber, ...

From the Zerohedge post: A relevant point.

A few blogs caught this clip and posted it yet few actually watched it.....

Hint...Hint....

 

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Re: How To Invest $100 Million in 2010 Debate: Faber, ...

I uploaded a part of this debate to youtube.

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Re: How To Invest $100 Million in 2010 Debate: Faber, ...

I give up...what's Hugh's trade?

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Re: How To Invest $100 Million in 2010 Debate: Faber, ...
strabes wrote:

I give up...what's Hugh's trade?

He never says in the debate. Typically, a low risk trade like he describes, means it is a trade that nearly every trader in the world absolutely hates. What trade does groupthink hate?

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Re: How To Invest $100 Million in 2010 Debate: Faber, ...
JAG wrote:

A few blogs caught this clip and posted it yet few actually watched it.....

Some of us actually did watch it.  Thanks for that post Jeff ... very informative.  I assume you're long Treasuries?

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Mish Chimes In: No White Swans

When I first came across this video, I immediately emailed the link to Mish. Today he had a post on it and here is what he had to say:

Are There Any White Swans?

No White Swans?

The ultimate irony in Taleb's suggestion is that his book rails against the hubris of predictions and models, instead speaks of the "impact of the highly improbable". In his book and at the conference, Taleb encourages people to bet on the highly improbable because in his view the highly improbable happens far more often than anyone thinks.

He recommends one-way bets on hyper-inflation, not just inflation. I have a question: Why is "swan theory" so one sided? Is a further deflationary collapse impossible?

By telling “every single human being” that betting against treasuries is the right thing to do, Taleb is effectively predicting a 100% certainty "there are no white swans".

Finally, Taleb suggests playing it safe with 80% of one capital and rolling the dice on long shots with the other 20. However, at 20% a crack, if the bets do not come in, one is going to quickly run out of funds.

I believe Hugh Hendry got the better of this debate on a number of issues. Hendry was the sole panel member taking the deflation side of the bet and the sole panel member not bullish on China.

Bulls-eye!

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