Yen Carry Trade and Dollar-Yen Momentum

Hugh Hendry, "The Acid Capitalist," returns to the Julia La Roche Show. Hendry breaks down his "macro compass" portfolio framework: 25% equities (overweight Japanese stocks after their 35-year breakout), 25% US treasuries (buying TLT after a 50% decline), 25% alternatives (Bitcoin over gold due to market cap), and 25% strategic cash. His thesis: the treasury market is so large (100% of GDP) that it's prevented inflation despite massive deficit spending, but AI will cause 20% unemployment within 2-3 years. That unemployment will force governments into redistribution mode, finally breaking the system's ability to contain inflation. He discusses why tech valuations are near peak, why the yen carry trade matters, and why sterling may be the first major currency to collapse as the UK's service economy gets hit hardest by AI displacement.

Hendry founded Eclectica Asset Management, a global macro hedge fund that was pretty much uncorrelated to everything in the financial universe. Hugh started Eclectica in 2002 and ran for 15 years before closing in 2017. He made more than 30% in 2008 betting against banks.

This episode is brought to you by VanEck. 

Learn more about the VanEck Rare Earth and Strategic Metals ETF: http://vaneck.com/REMXJulia

Links:

Twitter/X: https://twitter.com/hendry_hugh

Substack: https://hughhendry.substack.com/

Podcast: https://podcasts.apple.com/us/podcast/the-acid-capitalist-podcast/id1511187978

YouTube: https://www.youtube.com/@HughHendryOfficial

00:00 - Intro

00:52 - The macro compass: 4 quadrant portfolio framework

03:52 - Quadrant 1: Equities & why Hugh loves Japanese stocks

06:10 - Pattern recognition: Buying 35-year breakouts

08:32 - Quadrant 2: US treasuries (TLT) after 50% collapse

10:35 - The AI singularity & 20% unemployment prediction

12:48 - Cheap labor is over: The end of the China era

15:07 - Why corporations will shed jobs (but won't admit it yet)

18:37 - Quadrant 3: Gold vs Bitcoin - market cap analysis

22:03 - Why Hugh prefers Bitcoin over gold

25:46 - The currency quadrant: Which currencies to hold

28:15 - Why the dollar may weaken despite being "king"

32:28 - Hugh's trade of the year: Yen carry unwind

38:42 - The reflexivity problem: AI makes everything cheaper

43:15 - Why we didn't get hyperinflation despite massive printing

48:29 - The treasury market as a "fire gap" stopping inflation

53:14 - Tech valuations: Are we in a bubble?

58:36 - Why Hugh thinks we're near peak valuations

1:02:44 - Why the treasury market stopped inflation (100% of GDP)

1:04:31 - The chaos trigger: 20% unemployment will break everything

1:05:00 - Youth unemployment & the rise of socialist politics

1:06:23 - NYC mayor & the "no billionaires" movement

1:07:06 - The UK disaster: Disability spending & currency collapse

1:09:34 - Sterling as first currency casualty of AI