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The revolution isn’t nigh

April 30, 2012

I love it when financiers get philosophical. The academic slaverings; the sense of certainty; the reference to political ideology.

The latest effluvia from Hugh Hendry, ‘contrarian’ Scottish fund manager, has it all:

Why does France in 2012 flirt with the notion of electing a socialist president intent on reducing the retirement age, imposing a top rate of tax of 75% and increasing the size of the public sector? Why do we hang on the every word of elected politicians when Luxembourg’s prime minister Jean Claude Junker openly admits, “When it becomes serious, you have to lie”?

You cannot make stuff like this up. It is simply too absurd.

That is perhaps a long way of saying that existentialism is alive and well in the 21st century. For, if the last ten years have taught me anything, it must be that the French philosopher Albert Camus, in his search for an understanding of the principals of ethics that can shape and form our behaviour, may have surreptitiously provided us with three basic principles for macro investing. I am perhaps doing him a gross injustice, but I would summarise as follows: God is dead, life is absurd and there are no rules. In other words, you are on your own and you must take ownership of your own destiny.

No, no injustice at all. I’m pretty sure I remember that on page 34 of The Outsider, shortly after Meursault discusses the stock market over dinner with Ayn Rand.

Like the best in the business, Hendry can’t wait to talk about himself.

[W]hat makes a great fund manager first and foremost is the ability to establish a contentious premise outside the existing belief system and have it go on to become adopted by the broader financial community. Bruce Kovner [whoever he is] expressed the idea more eloquently when he said, “I have the ability to imagine configurations of the world different from today and really believe it can happen. I can imagine…

Wait for it.

…that the dollar can fall to 100 yen”. I am sure you are nodding in agreement, except Bruce was saying this when the USDJPY was well over 200, not today’s rate of 80.

When it was above 200? Man the barricades! This is the currency-trading equivalent of Lenin arriving in St Petersburg to deliver the April theses. Contrarianism like this has the potential to rock the globe. I’ve long thought that we needed a new Keynes, but maybe he’s among us already, someone who can even conceive of a configuration of the world in which the Japanese exchange rate drops a bit.

Hold on to something stable, for it gets even more unnerving. Hendry himself has “the kind of imagination that can imagine the yen trading closer to 60”. Gosh, that kind of imagination, one that can even guess that the economies of Europe and the United States might grow differently to Asian ones.

You cannot make stuff like this up. It is simply too absurd.

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