Hugh Hendry: Pessimistic about China, Optimistic about the U.S.

From the FT:

At the Milken Institute conference in May, he told the audience that France was just a year away from nationalising its banks and that politicians had still not faced up to the scale of the global debt bubble that was now imploding.

“We have reached a profound point in economic history where the truth is unpalatable to the political class – and that truth is that the scale and magnitude of the problem is larger than their ability to respond – and it terrifies them.”

Three years after Mr Hendry posted videos on YouTube of his visits to Chinese ‘ghost’ towns, he remains pessimistic about the Middle Kingdom. He is shorting the equity of Chinese state-owned enterprises, balanced by a long position in a basket of Asian non-discretionary consumer stocks.

He is also using credit default swaps to bet against the debt of financially leveraged Japanese companies such as Toshiba, which he believes are particularly exposed to a Chinese slowdown.

Mr Hendry insists that his reputation as a “contrarian” investor is wrong, and that his approach is in fact to take advantage of the prevailing momentum in markets. “Our ideas are harshly disciplined by market trends. You will never see us pursue a homegrown idea when it is to the detriment of the prevailing trend.”

For example, he reckons US government bond yields, already at record lows, will continue to fall. And, although he professes not to be a contrarian, he is more optimistic about the US than many investors and is “long the debt-saddled west and short the vastly over-vaunted and over-owned” Bric quartet of Brazil, Russia, India and China.

He believes that financial markets are single-digit years away from a crash that will present investors with opportunities of a lifetime. “Bad things are going to happen and I still think the closest analogy is the 1930s.”

http://www.zerohedge.com/news/hugh-hendry-when-i-speak-tv-it-gives-impression-i-am-full-myself