The last bear turns bullish – Hugh Hendry. Eclectica hedge fund manager Hugh Hendry has said he has been forced to leave his bearish outlook behind as he faces up to a market “which only makes sense through the prism of trends.” So Hugh has picked up on a new strategy, he is seeing trends? Let me see, the SP500 was at 666 in 2009, it is now near 1800. Yes that would constitute as a trend. So does this mean he has closed out all his shorts from 666 and reversed and now is ready to going long?
For those that do not know Hugh Hendry, he has been a perennial super bear going around as a financial TV pundit scaring the living “ba-jesus” out of anyone that is remotely bullish since the crash in 2009 – click here and here for some of Hugh Hendry’s “Greatest Hits.” Actually, you have to like this guy, he is quite entertaining.
Addressing attendees at a recent investor’s conference, Hugh said his comments would take on a “confessional” tone, and admitted his performance over the past year had been “at best, mediocre”. Hugh’s CF Eclectica Absolute Macro Fund has had a whopping 3.8% total return over the last 3 years. I would not call this mediocre, I would call this dismal returned. Most of the time Hugh has been hiding in Bonds and short plays that have not yielded much.
Hugh acknowledged that his changing stance may be viewed by some investors as a “top of the market” signal, but said he is not concerned by the prospect of a crash. “Crashing is the least of my concerns. I can deal with that, but I cannot risk my reputation because we are in this virtuous loop where the market is trending.” In other-wards his clients are getting angry with him. This is why the market goes up often, even though it may not make sense. Fund managers chasing performance, to keep their clients.
So is Hugh’s throwing in the towel as the last bear standing the sign of the top in equities? Not necessarily. So long as central banks continue to flood the market with liquidity the direction is still up – though perhaps grinding up. It is a bit surreal, as this does not mean the economy on the ground on main street will get better for the average person. It is mere financial engineering that will work to keep up asset prices while central planners scratch their heads to understand why it does not help the economy. Will it crash one day, sure, but in the mean time in can still go higher from here. Do you want to wait around another three years for the crash? If you are a long term investor perhaps one needs to be concerned. But as day to day traders, ride the trend up.
Blue Point Trading, William Thompson